Consideration and resolution of the appeal
50 I accept the Bank's submission that Adrian's argument on the appeal essentially distils to the following propositions: because Antonio was successful in his arguments, which are not available to Adrian, and because Antonio had a separate and distinct claim for damages in the CBA Proceedings, and despite the unassailable judgment debt owed by Adrian to the Bank, the Court should have adjourned the creditor's petition to allow Adrian to progress his Proposed Cross-Claim, which he had not done for several years and which, even if successful, would not satisfy his liability to the Bank arising from the Bankwest Proceedings.
51 The primary judge was exercising a discretion in both refusing to adjourn the hearing of the creditor's petition and in making the sequestration order (Barton v Malcolm Johns Legal Pty Ltd (No 2) [2015] FCA 166 at [34] per Gleeson J). Mr McDonald accepted that this meant that, for Adrian's appeal to succeed, he needed to establish an error on the part of the primary judge within the ambit of the principles in House v R (1936) 55 CLR 499 at 504-505. This requires him to demonstrate that the primary judge acted upon a wrong principle, or allowed extraneous or irrelevant matters to guide or affect him, or took a mistaken view of the facts, or did not take into account some material consideration. If it does not appear how the primary judge reached the result embodied in the Court's orders, Adrian needs to establish that, on the facts, the primary judge's decision is unreasonable or plainly unjust, such that the appeal Court may infer that in some way there has been a failure by the primary judge to exercise his discretion properly.
52 As Beach J concluded in Liang v LV Property Investments Pty Ltd [2015] FCA 1057 at [59], there is an important distinction between a cross-claim which is likely to succeed and a cross-claim which is bona fide and reasonably arguable, but where it is not established by the judgment debtor that it is likely to succeed. Where it is established that a cross-claim is likely to succeed, such a claim may warrant the refusal of a sequestration order whereas, in the latter case, the appropriate course may be to adjourn the creditor's petition and not refuse a sequestration order at that time.
53 A similar distinction was drawn by Lehane J in Re Ling; Ex parte Enrobook Pty Ltd (1996) 142 ALR 87 and, more recently, by Jackson J in Williams (formerly Turco) v Mortgage Ezy Australia Pty Ltd [2020] FCA 1567 at [28].
54 It is also relevant to note what Beach J said in Liang at [61] and [62]:
61. It is important to emphasise that a judgment debtor does not establish a bona fide and reasonably arguable claim by merely producing a statement of claim in a separate proceeding or by pointing to such litigation or indeed by bare assertion; Ms Liang's position falls into that last category. There must be sufficient evidence or other material to show that it is reasonably arguable or of substance. This may require prima facie verification of the key factual elements as well as demonstrating legal tenability.
62. Finally and separately, a decision to adjourn a hearing constitutes an exercise of a court's discretion. An appellant bears a heavy onus in establishing that the exercise of such a discretion has miscarried. A court will be reluctant to interfere with the exercise of such a discretion.
55 Mr McDonald did not contend that the primary judge had erred in his identification and understanding of the relevant principles. The appeal was said to relate to the application of those principles. For the following reasons, the appeal should be dismissed.
56 First, no error has been demonstrated in relation to the primary judge taking a different view as to the strength of Adrian's Proposed Cross-Claim as opposed to that of Antonio. The primary judge's favourable assessment of the strength of Antonio's trespass/conversion claim under his Proposed Cross-Claim ultimately related to the two mortgages which Antonio had given to the Bank over the Queens Road Properties and the implied terms of the guarantees Antonio had given. The primary judge found that, upon the proper construction of those mortgages and two guarantees given by Antonio, there was an implied term that the Bank had to make a demand before it could appoint receivers under either mortgage. In the absence of any demand, the appointment of the Receivers would be invalid, Antonio would be discharged from his obligations under the guarantees and the Receivers would not have been entitled to sell the Queens Road Properties. In these circumstances, the primary judge said that it was likely that Antonio would be entitled to an order that the Bank account to him for the proceeds of the sale of the mortgaged properties, less just expenses of sale. Antonio's legal rights as mortgagor were critical to the primary judge's reasoning in respect of his case.
57 As the primary judge made clear at [90] of the primary judgment relating to Adrian, his position was very different. That is because Adrian's contention that he was discharged from his obligations under the guarantees he had given was not reasonably arguable in circumstances where the appointment of the Receivers was directed not to any property owned by Adrian, but to properties owned and mortgaged by Antonio.
58 Moreover, his Honour correctly found at [90] that the appointment of the Receivers could not reasonably be viewed as the purported enforcement of the guarantees Adrian had granted. This was so because, even on Adrian's own case as pleaded in the Proposed Cross-Claim, no demand had ever been given to him in respect of the guarantees. No error has been identified in respect of the primary judge's finding at [90] that, on the evidence before the FCCA, it was not reasonably arguable that the Bank took any action under Adrian's guarantees.
59 Secondly, I do not accept that the primary judge fell into appealable error within the House principles by not applying the same reasoning to Adrian as he did to Antonio regarding the alleged implied terms. Mr McDonald spent some time in oral address taking the Court to various parts of Adrian's Proposed Cross-Claim which pleaded implied terms in the guarantees Adrian had given. He submitted that the primary judge's error was to not take into account relevant parts of the Proposed Cross-Claim relating to Adrian's implied terms argument. After drawing the Court's attention to the implied pleaded terms at [70] and [72] of the Proposed Cross-Claim, Mr McDonald took the Court to [162] in which it was pleaded that when the Bank appointed the Receivers, it did so without making any demand upon either Antonio or Adrian and that the mortgages had not become enforceable. It was claimed in [163] that this involved the Bank breaching the Conditions Precedent as referred to in [60] and [61]. At [164] it was pleaded that, in the circumstances referred to in [162] and [163], the Receivers were not validly appointed or entitled to take possession of the Queens Road Properties. Paragraph 165 of the Proposed Cross-Claim addressed the alleged breach of the implied terms in the mortgages. It is in the following terms:
Adrian repeats the facts and matters referred to in paragraphs 162 and 163 above and says further that, in the circumstances there referred to, the Bank breached the Implied Terms of the Mortgages referred to in paragraph 69 above.
Particulars
Adrian repeats and relies upon the particulars referred to in paragraph 162 and 163 above.
60 As the Bank pointed out, it is difficult to see any sound legal basis for the pleading in [165], which relates to mortgages involving Antonio and the Bank and not Adrian.
61 When asked by the Court to point to any material which indicated that the implied terms argument now advanced by Mr McDonald had been put to the primary judge in Adrian's case, Mr McDonald frankly acknowledged that there was no such material and he was not in a position to say that the point had been run below. The outline of written submissions which had been filed in the proceeding below on behalf of both Antonio and Adrian (a copy of which was in evidence in the appeal) contains no reference to any such argument having been put to the primary judge in Adrian's case. In the events that occurred, Adrian represented himself at the hearing before the primary judge commencing on 19 June 2020. A transcript of any closing oral submissions made by him was not included in the appeal papers. Accordingly, there is no evidence to suggest that the implied terms argument was ever put to the primary judge in Adrian's case.
62 It is not easy to understand how the primary judge could commit a House error in not addressing a case which evidently was never put. Ground 4 is rejected.
63 Thirdly, ground 3 of the further amended notice of appeal must be dismissed. As Beach J pointed out in Liang at [61] (see [54] above), a judgment debtor does not establish a reasonably arguable claim merely by producing a pleading in a separate proceeding and, in order to show that a claim is reasonably arguable and is one of substance, verification of the key factual elements may be required. It was plainly open to the primary judge to adopt a similar approach.
64 Fourthly, I reject grounds 6 and 7 of the further amended notice of appeal, which focuses upon the issue of damages. As to ground 6, which contends that the primary judge erred in concluding at [85]-[89] of the primary judgment that Adrian's claim for damages was based on nothing more that bare assertions, Mr McDonald frankly and correctly acknowledged that this indeed was the case. He then added, however, that there was no need for Adrian to adduce evidence of his loss or damages because it was open to him simply to rely on his entitlement to share in any damages obtained by Antonio because of their business relationship. That contention must be rejected. Nothing in the evidence indicated that Adrian had a legal right to any part of damages which Antonio might obtain as a result of his claim in trespass. A document dated 8 August 2009 and entitled "Separation - Term Sheet" fell far short of providing such evidence. In particular, the statement in paragraph 5 of that document that Adrian and Antonio had agreed that "profits and or loss incurred from [the Queens Road Projects] and the group of Remo Corporation to be shared 50% /50% between Adrian and Antonio" could scarcely apply to any damages Antonio obtained under his Proposed Cross-Claim.
65 Moreover, the primary judge did not err when he found at [91] of the primary judgment that if the appointment of Receivers had the effect of discharging Adrian from his obligations under the two guarantees he had granted, this would not give rise to any claim for damages by him against the Bank. Even if it did, as Mr McDonald frankly acknowledged, there was simply no evidence which established any damages on Adrian's part.