Hubner v Australia & New Zealand Banking Group Ltd

REASONS FOR JUDGMENT 1 This is an appeal from a judgment of Dowsett J delivered on 7 December 1998. 2 The hearing took place over two days on 9 and 10 November 1998. At the conclusion of the hearing on 10 November his Honour dismissed Mr Hubner's application. On 11 November 1998 a notice of appeal was filed by Mr Hubner against the decision of his Honour. On 7 December 1998 his Honour also dismissed Mrs Hubner's applications and published his reasons with respect to both applications. Mrs Hubner filed a notice of appeal on 14 January 1999. 3 Before his Honour at the November hearing there were six applications to set aside bankruptcy notices. In each of these the applicant had moved for discovery, and in each case the respondent bank gave notice of intention to move to strike out the application on the ground of irregularity in the process adopted by each of the applicants. 4 The relevant debts which are the subject of the bankruptcy notices arose in connection with Supreme Court proceedings in Queensland between Australia and New Zealand Banking Group Ltd ("the Bank") as plaintiff and the appellants as defendants. The writ sought recovery of possession of land in Cairns by the Bank as mortgagee on the basis of alleged default by Mr and Mrs Hubner. The mortgage had been granted by Mr and Mrs Hubner to support guarantees given by them to secure advances made by the Bank to companies controlled by the Hubners or by Mr Hubner. 5 Mr and Mrs Hubner appeared in those proceedings but they did not file a defence within time whereupon the Bank entered judgment by default in the Registry. Mr and Mrs Hubner applied to set aside the judgment by default on the basis they had a meritorious defence. This application was dismissed by Byrne J of the Queensland Supreme Court on 15 September 1997 and they were ordered to pay the costs of the application. These costs are the subject of a bankruptcy notice against Mr and Mrs Hubner which they sought to set aside by two of the six applications. The amount of the debt claimed is $8,907. 6 On 14 October 1998 Mr Hubner commenced proceedings against the Bank in the Federal Court seeking restitution and damages together with loss of profits. On 16 October 1997 Mr and Mrs Hubner applied to the Supreme Court for a stay of execution of the writ of possession pending determination of proceedings in the Federal Court. This was dismissed with costs and a bankruptcy notice concerning this order, taxed in the amount of $7,956.15, is the subject of two more of the applications to set aside. 7 On 27 November 1997, a further application was made by Mr and Mrs Hubner to restrain the Bank from dealing with the land pending the hearing of a proposed application to the High Court. On 10 December 1997, this application was also dismissed with costs and bankruptcy notices concerning those costs taxed at $5,123.76 is the subject of two further applications to set aside. Mr and Mrs Hubner also filed a further application in the Supreme Court to set aside the default judgment on the basis that it had been entered irregularly, but that was dismissed with costs and they have appealed. That appeal had not been determined at the time of the hearing before Dowsett J. 8 Joint bankruptcy notices were issued against both Mr and Mrs Hubner on 4 June 1998 in connection with each of the three costs orders against which there has been no appeal. They were served on Mr Hubner on 5 June 1998 and on Mrs Hubner on 11 June 1998. The applications to set them aside were filed on 30 June 1998. It is contended by Mr and Mrs Hubner that the notices are vexatious, malicious and an abuse of process. On 15 July 1998, the Bank gave notice of intention to oppose the Hubners' applications. Mr and Mrs Hubner sought discovery in connection with each of the applications. All these matters were listed before Dowsett J for hearing in November 1998. 9 In relation to the applications to set aside the bankruptcy notices, his Honour considered that there would be no point in setting aside the notices after expiry of the time for compliance, in the absence of a power to extend time. He pointed out that once time has expired, the bankruptcy notice is spent because the act of bankruptcy has been committed and is available for use by all creditors for the purpose of presenting a petition. His Honour held Mr Hubner's applications to be incompetent because they were made outside the prescribed time. His Honour noted that no attempt had been made to set aside the relevant costs orders made which provided the basis for the bankruptcy notices, although Mr and Mrs Hubner had, at the time of the hearing before his Honour, appealed against the refusal to set aside the substantive judgment on the ground of irregularity. In accordance with Full Court authority, his Honour pointed out in his reasons that the orders for costs are orders of a superior court of record and as such they operate unless there is an appeal. Because there had been no appeal against the costs orders, his Honour found that they could not be set aside. 10 His Honour also held that the proceedings were defective in that the applications to set aside the bankruptcy notice were not accompanied by appropriate affidavits as required by O 77 r 13 of the Federal Court Rules ("FCR"). He considered that although the Court had a discretion to entertain the applications, notwithstanding the failure to file the appropriate accompanying affidavit, it would be futile to do so because in the case of Mrs Hubner the applicant had no proper basis for setting aside the notice and therefore the affidavit could serve no useful purpose. His Honour noted that there was no such discretion to be exercised concerning Mr Hubner's applications because they must fail for the reasons given above. 11 His Honour also gave consideration to the submission of Mrs Hubner that she did not understand the papers which the Bank asked her to sign and that no explanation had been offered. His Honour concluded, however, that even if she were to be relieved of liability under the guarantee leading to the setting aside of the substantive judgment in the Supreme Court action, her liability under the orders as to costs which are the subject matter of the bankruptcy notices would not be affected. These orders are independent of the litigation on the substantive claim. In these circumstances, his Honour did not accept that Mrs Hubner had any valid basis for attacking the bankruptcy notices. 12 We are not satisfied that any error has been shown in the reasons of his Honour. We consider that the reasoning was correct in relation to the above matters and we deal with more specific issues later in this judgment.