Infa-Secure Pty Ltd v Crocker

1. The application for review of the sequestration order is dismissed.
2. The respondent (the applicant to the application for review of the sequestration order) is to pay the applicant's (the respondent to the application for review of the sequestration order) costs of and incidental to the review, to be taxed if not agreed.
3. The written submissions filed by the respondent (the applicant to the application for review of the sequestration order) not be available for inspection by a non-party without leave of the Court or a Judge. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

LOGAN J: 1 On 22 July 2016, a Registrar made a sequestration order under the Bankruptcy Act 1966 (Cth) against the estate of Ms Debra Ann Crocker. Ms Crocker has applied, pursuant to r 7.05 of the Federal Court (Bankruptcy) Rules 2016 (Cth) (Bankruptcy Rules), for the review of the Registrar's decision. The sequestration order was made upon a creditor's petition filed by Infa-Secure Pty Ltd ACN 149 173 660 (Infa-Secure). Prior to the making of the sequestration order Ms Crocker had filed a notice of opposition in which she specified as the ground of opposition to sequestration: There is no order for costs or judgment in relation to costs against me in favour of the applicant [Infa-Secure] by the Federal Court of Australia. 2 That ground of opposition, as expressed prior to the sequestration order, contains the essence of the basis upon which Ms Crocker contended that upon the review the Court should set aside the Registrar's sequestration order. That is so even though, prior to today's hearing, there was a plethora of written submissions filed by Ms Crocker. There had been interlocutory directions for the prior filing of submissions by each party with a page limit of 10 pages. Ms Crocker's submissions, either individually or collectively, as filed, were greatly in excess of this. But it proved possible upon the hearing, and notwithstanding the diffuseness of the content in her written submissions, to come to the essence of her complaint. It is, truly, that the applicant petitioning creditor was not entitled to the benefit of the operation of the rules of the Court and a consequential estimate of its costs and a further consequential operation of the rules to have in its favour a debt grounded in costs against her. In turn, Ms Crocker's submission was that because of this there was, in truth, no debt and that her estate was wrongly sequestrated. 3 It is necessary to outline in a little detail the background facts in order to understand how this particular point is said to arise. The only evidence tendered by Ms Crocker was the originating application in a proceeding which she instituted in this Court in 2014, Debra Crocker v Infa Secure Pty Ltd (Infa Secure) and other named respondents (QUD647/2014). That originating application became exhibit 1 in the present proceeding. 4 An inspection of the title of that originating application discloses that it does not assign discrete respondent party numbers to any of the named respondents. Indeed, the other named respondents do not contain any indication on their face that any one of them is a body corporate. It is only Infa Secure that has the addition, "Pty Ltd". The named respondents are, in the title of the originating application, merely grouped together as, "Respondents". The originating application was filed in the Court on 3 December 2014. On the face of the notice of filing and hearing 5 February 2015 at 9.30am has been designated as the date of the first directions hearing in the matter. 5 In hindsight at least, it may well be unfortunate that the originating application in the form in which it was entitled was accepted for filing in the registry, but it was. 6 In between 3 December 2014 and 5 February 2015 two key events in light of the issues of this review occurred. On 19 December 2014 a notice of acting-appointment of lawyer was filed on behalf of Infa-Secure. The notice is in these terms: [Infa-Secure], the first respondent, has appointed Andros Chrysiliou of Chrysiliou Lawyers to represent the first respondent in the proceeding. 7 The notice bears a title for the proceedings in which Infa-Secure, with its designated Australian Company Number, is expressly named as, "First Respondent". An additional feature of the title of the notice is the resort to the practice, authorised under the rules of referring to multiple respondents as "others named in a schedule". Orthodox though the methodology employed may be, the notice, nonetheless, assigns to the proceeding a different title to that employed by Ms Crocker when the originating application was drawn by her and subsequently filed in Court. By that I mean that the originating application does not in terms refer either as first respondent or otherwise to a corporation by the name Infa-Secure. Rather, a corporation with the name Infa Secure is named as one of a number of persons collectively grouped as respondents. 8 There was, in the interval between 3 December 2014 and 19 December 2014, no order of the Court authorising a change in the title of the proceedings. It may very well be, of course, that it was anticipated that the regularising of the title of the proceedings would occur as a matter of course at the first directions hearing. As it happened, so far as Infa Secure, or if it be any different Infa-Secure, was concerned, there was no need to attend at the nominated first directions hearing. That is because, on 30 December 2014, Ms Crocker filed a notice of discontinuance. That notice of discontinuance is in evidence. She has entitled it, and it was accepted for filing, in a form which shows, "Respondents", and then designates, "Infa Secure and others". By that notice, Ms Crocker discontinued the proceeding against, "The first respondent Infa Secure Pty Ltd". 9 Inferentially, for there is no direct evidence, the originating application in QUD647/2014 came to the attention of Infa-Secure because its nominated lawyers also acted for other named respondents. Be this as it may, and irrespective of whether Ms Crocker served Infa-Secure, it was that company which gave instructions to Mr Chrysiliou to give notice of his acting for it in QUD647/2014. The effect of the giving of that notice under the rules was that, by operation of r 10.11, it was deemed to have been served with the originating application. In turn, the discontinuance being non-consensual, the first named of the respondent parties in QUD647/2014 was entitled to the benefit of the operation of r 26.12(7) of the Bankruptcy Rules which provides: Unless the terms of a consent or an order of the Court provide otherwise, a party who files a notice of discontinuance under sub-rule (2) is liable to pay the costs of each other party to the proceeding in relation to the claim; or part of the claim; that is discontinued. 10 Infa-Secure obtained from a Registrar on 23 February 2016, and as a sequel to Ms Crocker's filing of the notice of discontinuance and the operation of r 26.12(7), a certificate of taxation. That certificate, given pursuant to r 40.20 of the Federal Court Rules 2011 (Cth), attested to Infa-Secure's costs as between party and party being deemed to be $34,925.55. That deeming was a sequel to the absence of a filed notice of opposition in respect of an estimate of costs of which the Registrar had given notice to Ms Crocker and Infa-Secure. It is this costs liability upon which Infa-Secure relied to obtain a bankruptcy notice and, upon that not being complied with, to petition for Ms Crocker's sequestration. 11 It is put on behalf of Infa-Secure that the operation of the rules mentioned in conjunction with the certificate of taxation yielded for it an order sufficient to ground a bankruptcy notice. That is not contested, in terms of the assimilation of the effect of the rules in conjunction with that certificate with a judgment debt. I am prepared to assume that that is the effect of the operation of the rules in conjunction with that certificate. Prima facie, that appears to me to be so. 12 Even so, it is a principle of bankruptcy law that the Court is not obliged to accept a creditor's judgment as proof of the debt relied upon to ground the creditor's petition: Wren v Mahony (1972) 126 CLR 212 at p 225, per Barwick CJ, with whom Windeyer and Owen JJ agreed. If, in truth, no debt was owed by Ms Crocker to Infa-Secure that would, in my view, provide a basis for going behind the certificate. 13 In the circumstances of this case, it is something of a moot point as to whether it is appropriate further to explore that issue. I say that for these reasons; last year in proceeding QUD647/2014, Ms Crocker made an application to the Court which was treated as an application for relief against the operation of r 26.12(7). That application was dismissed after a hearing on the merits: see Crocker v Toys R Us (Australia) Pty Ltd (No 2) [2015] FCA 727, (Reeves J, 11 June 2015). An application with an extension of time within which to apply for leave to appeal and a related application for leave to appeal made by Ms Crocker was subsequently dismissed by Collier J: see Crocker v Toys R Us (Australia) Pty Ltd [2016] FCA 1103. 14 If it were the case that there was a fraud perpetrated upon Ms Crocker by Infa-Secure pursuing her to sequestration on the strength of the events which had transpired it would, in my view, be appropriate to go behind the position prima facie disclosed and, in the event that a fraud were shown, to set aside the sequestration order. Ms Crocker did not in terms allege a fraud as opposed to an absence of entitlement. 15 It does appear to me, in the exercise of bankruptcy jurisdiction, to be in the interests of justice to explore whether there was an entitlement on the part of Infa-Secure to institute the proceeding for sequestration. As it happens, that explanation does not involve any great journey. That is because on the evidence, which materially includes a number of searches of the records of the Australian Securities and Investments Commission, it is apparent that there is no legal entity by the name Infa Secure. More particularly, there is no corporate entity of that name. There is a corporate entity, Infa-Secure, with the Australian Company Number mentioned. 16 Given the imprecision of description which Ms Crocker chose in entitling her originating application, it does not appear to me to be unreasonable for Infa-Secure to have regarded itself as the party intended to be named. That being so, Ms Crocker is, with respect, in many ways the author or her own misfortune. Infa-Secure gave notice of a lawyer acting for it and what followed thereafter in terms of the costs debt which arose occurred by operation of the rules and as a sequel to Ms Crocker's notice of discontinuance. 17 The amount of the cost's debt, as a matter of first impression, appears large but that is a subject for exploration in the first instance before a Registrar as a sequel to being given notification of a costs estimate. That objection not having occurred, the rules have a particular operation, which I have already described. What follows from all of this is that a particular respondent against whom proceedings were discontinued has done nothing more than secure an estimate of its costs and the benefit of provisions of the rules assimilating a resultant costs debt with an order for the payment of money. I certify that the preceding seventeen (17) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Logan.