James v Australian and New Zealand Banking Group Limited

1. The applicant's application for leave to amend the Amended Statement of Grounds in Support of the Application and the consequential application to adjourn the hearing is dismissed. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

JAGOT J: 1 These reasons for judgment concern a renewed application made at the completion of the hearing by the applicant, who seeks to set aside a bankruptcy notice, to further amend his Amended Statement of Grounds in Support of the Application (the Amended Statement of Grounds) which was filed on 21 April 2020 to add in new grounds to reflect information contained within documents annexed to various affidavits filed by the respondent (the Bank) on 6 May 2020. 2 The context of this matter is that the applicant filed and served his original Statement of Grounds in Support of the Application to set aside the bankruptcy notice on 19 December 2017. Due to a multiplicity of other proceedings, which it is not necessary for me to describe in these reasons but the details of which are comprehensively set out in both the written submissions for the applicant and the respondent, the time for compliance with the bankruptcy notice has been repeatedly adjourned to enable resolution of that other litigation. However, by April 2020 the Bank was concerned about a looming end date to a limitation period of 16 May 2020 after which if the bankruptcy notice were to be set aside, the Bank would have no opportunity to serve a fresh bankruptcy notice based on the relevant judgment debt because a period of more than six years from the date of the judgment debt would have passed. 3 As a result, the Bank sought to have the applicant identify precisely what grounds the applicant relied upon to set aside the bankruptcy notice. This led to the making of an order in respect of which the applicant served the Amended Statement of Grounds identifying one additional ground, being a ground of misstatement specified in terms as follows: 36. Prior to the issuing of the Bankruptcy Notice the creditor received amounts from: a. the sale of a property previously owned by [Print National Nominees Pty Ltd (In Liquidation) (Receivers and Manager Appointed)] at Broadmeadow; b. the sale of a property previously owned by [James Australia Group Pty Ltd (In Liquidation) (Receivers and Manager Appointed) (JAG)] at Rutherford; and c. part-payment of a judgment debt due to JAG. 37. The amount of the receipts paid by the Receivers to the creditor in paragraph 36 above, total approximately $2.4 million. 38. By reason of the receipts in paragraphs 36 and 37 above, the amount of the debt claimed to be owing by the debtor to the creditor in the Bankruptcy Notice is overstated by approximately $2.4 million. 4 On 23 April 2020, the Bank sought particulars of the alleged misstatement ground and confirmation that there were no other grounds to be relied upon. There was no substantive response to this request. The matter was fixed for hearing at the Bank's request and a timetable was ordered to enable the affidavit evidence to be served so that the hearing could proceed. 5 The hearing proceeded without any application being made at the commencement of the hearing either to adjourn the hearing or for leave to amend the Amended Statement of Grounds. 6 During the course of the hearing, counsel for the applicant sought to cross-examine the witnesses for the Bank on the basis of certain entries shown as credits in an account which had been, amongst other things, produced pursuant to a notice to produce with the documents being made available to the applicant at 9.30am yesterday, 6 May 2020, and had also been annexed to affidavits on which the Bank relied which were served yesterday evening. It was apparent that the questions which were sought to be asked in cross-examination did not relate to the amounts alleged to have been received as set out in paragraphs 36(a)-(c) of the Amended Statement of Grounds. Accordingly, I disallowed those questions. An application to amend the Amended Statement of Grounds was made and rejected. 7 The cross-examination was then completed and the hearing was at the stage of final submissions when counsel for the applicant sought to introduce into his final submissions a submission to the effect that the applicant's case was now that credits in the account into which payments had been made exceeded the allowance made by the Bank for receipts from the receiver and had not been explained by the Bank's witnesses. When asked whether the submission related to the matters alleged in paragraph 36 and 37 of the Amended Statement of Grounds, the answer given was no. Counsel for the applicant stated that the submission related to a case which the applicant now wished to run based on the information contained in the documents which the applicant had first seen at 9.30 am on 6 May 2020, being yesterday. 8 I indicated to counsel for the applicant that I did not consider submissions to that effect could be made given that I had refused leave to amend the Amended Statement of Grounds. Counsel for the applicant then sought an adjournment after which he renewed his application for both leave to amend the Amended Statement of Grounds and to adjourn the hearing to enable this to occur. According to the applicant, fairness demanded that he be given this opportunity in circumstances where he had only seen the relevant documents for the first time at 9.30am yesterday. The hearing had been accelerated due to the Bank's concern about the limitation issue and, as the applicant put it, the document showed that there was a case for the Bank to answer and the applicant should be entitled to an explanation for the unaccounted for credits. Further, there would be, it was said, no prejudice to the Bank as this hearing was dealing only with the misstatement ground and I had adjourned the applicant's ground relating to an alleged cross-claim or set off. It is important to understand that the alleged cross-claim or set off is a contingent claim which is dependent upon the outcome of an appeal in relation to which judgment is currently reserved before the Supreme Court of New South Wales Court of Appeal (the Court of Appeal). 9 I asked counsel for the applicant whether it was the case that, if the appeal was unsuccessful, the first ground of the application to set aside the bankruptcy notice (the alleged cross-claim or set off) would fall away with the inevitable consequence that if the misstatement ground was unsuccessful, the application to set aside the bankruptcy notice would have to be dismissed. Counsel for the applicant confirmed that this was the case. Accordingly, depending on the outcome in the Court of Appeal there may be no need for any further hearing in relation to the first ground of the Amended Statement of Grounds. 10 For its part, the Bank opposed the applicant being granted leave to amend the Amended Statement of Grounds and pointed to the long history of the matter and the fact that there would be clear and irreparable prejudice to the Bank if the hearing was adjourned, not least, because of the end of the limitation period but also because this hearing was, in effect, complete before the application to amend was renewed. 11 My attention was also drawn by the Bank to observations of Bromwich J in the matter of Coshott v Prentice, in the matter of Coshott (No 2) [2016] FCA 1531 at [48]-[50] as set out in paragraph 68 of the Bank's outline of submissions: 48 The burden of authority as to enlarging grounds does not support any freestanding right or entitlement to litigate later advanced additional grounds in support of an application to set aside a bankruptcy notice, assuming a valid application was made within the time for compliance with that notice. Moreover, there is a public interest in ensuring that the enforcement of debts by way of bankruptcy notices does not become mired in the sort of litigation that often gave rise to a judgment debt in the first place. In part that is because bankruptcy notices are an important part of the means by which civil laws are enforced and the orders of courts are thereby given real substance and meaning. While bankruptcy is a dire consequence of not paying debts arising from enforceable orders of the court, it is a vitally important ultimate remedy that helps to enhance the overall integrity of civil justice. 49 Even if leave may be given to amend an otherwise valid application to set aside a bankruptcy notice and even if leave may be given to supplement the grounds in support of such an amendment such as by way of a further accompanying affidavit, that should be treated in the same manner as final pleadings, with such amendments and supplements not lightly countenanced. The now well-established principles in relation to amending pleadings in Aon Risk Services Australia Ltd v Australian National University [2009] HCA 27 ; (2009) 239 CLR 175 at 211-213 [93]-[98] and since reflected in ss 37M, 37N and 37P of the Federal Court of Australia Act 1976 (Cth) should apply to any power to amend the effective pleadings constituted by the affidavit accompanying an application to set aside a bankruptcy notice. An application for leave to enlarge the grounds upon which a bankruptcy notice is sought to be set aside should be closely scrutinised. Leave, assuming there is power to grant it, should not be given to rely upon additional unmeritorious or otherwise questionable claims, especially if they have the effect of inordinately delaying determination of the application. 50 The focus in considering any permissible application to enlarge the grounds sought to be relied upon in an application to set aside a bankruptcy notice must at all times remain on the dictates of justice and not merely on individualistic ideas of what is fair in a given case, as mandated by Expense Reduction Analysts Group Pty Ltd v Armstrong Strategic Management and Marketing Pty Ltd [2013] HCA 46 ; (2013) 250 CLR 303 at 323 [57]. At the same time, considerable weight should be given to the modern view of bankruptcy notices, namely that any alleged defects sought to be relied upon to set them aside should truly involve the debtor being misled as to what he or she must do in order to comply with the notice: see Adams v Lambert [2006] HCA 10 ; (2006) 228 CLR 409, discussed in some detail below. That is not to say that some defects in a bankruptcy notice cannot be so fundamental that it cannot survive even without such a capacity to mislead, but that is now a very narrow category that ordinarily should be apparent if so misleading or fundamental as to be identified at the outset. The reasoning in Adams v Lambert, both in relation to s 306(1) of the Bankruptcy Act and more generally, discourages unduly technical and pedantic objections to bankruptcy notices, and should discourage the exercise of any power by the Court to grant leave to run additional grounds of that nature. 12 The Bank also said that it was clearly contrary to the overarching purpose of civil litigation as set out in ss 37M and 37N of the Federal Court of Australia Act 1976 (Cth) that the applicant be permitted to raise a new ground of misstatement in circumstances where the applicant was first ordered to serve his Statement of Grounds in Support of the Application to set aside the bankruptcy notice on 30 December 2017. In this regard, the Bank referred to the proposition as established in Walsh v Deputy Commissioner of Taxation [1984] HCA 33; (1984) 156 CLR 337 that a ground of setting aside a bankruptcy notice on the basis of misstatement must be given in a timely manner. 13 I accept the Bank's submissions. Procedural fairness does not require that a party in the position of the applicant be entitled, in effect, to go on a fishing expedition in relation to documents in order to attempt to find a case which might be able to be made against the Bank. The applicant had been ordered to identify all grounds on which he relied in support of his application to set aside the bankruptcy notice. He filed his Amended Statement of Grounds on 21 April 2020 which specifically identified the single additional ground upon which he relied. It should have been no surprise to the applicant that he would be held to the grounds notified. The fact that the hearing has been accelerated due to the Bank's concern about the limitation period needs to be understood and seen in the context of the proceedings as a whole in respect of which the applicant has had more than ample opportunity to identify grounds upon which he might seek to set aside the bankruptcy notice. 14 In this regard, the fact that the applicant says that he can act to further amend his Amended Statement of Grounds by 5pm today, 7 May 2020, is insufficient because it does not take into account any of the steps that will need to be taken for another hearing to take place. In particular, there is no certainty that such a hearing could take place before 16 May 2020, the date of expiry of the limitation period for the Bank to rely upon a fresh bankruptcy notice. The applicant had the opportunity to make the case that the applicant saw fit and also took that opportunity by conducting the hearing today without, as I have said, making an application at the commencement of the hearing to adjourn the hearing for leave to rely upon an additional statement of grounds based on the recently produced information. 15 As it is, the whole of the hearing has now taken place, including cross-examination of two of the Bank's witnesses. In circumstances where the whole of the hearing has taken place, I am not satisfied that the order for costs that I could make against the applicant would be one that would deal with the kind of prejudice which would be imposed upon the Bank were I to permit the applicant to further amend his Amended Statement of Grounds and to adjourn the hearing in order to enable that to occur. I accept the submission of the Bank that acceding to the applicant's request would be entirely contrary to the overarching purpose of civil litigation and would wreak such unfairness on the Bank as to be irreparable. Accordingly, the application for leave to amend the Amended Statement of Grounds and the consequential application to adjourn the hearing is dismissed. I certify that the preceding fifteen (15) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Jagot.