Moran v Lydiard Financial Services Pty Ltd - [2007] FCA 872 - FCA 2007 case summary — Zoe

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Moran v Lydiard Financial Services Pty Ltd

[2007] FCA 872

Federal Court of Australia|2007-06-08|Before: Gordon J

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Source facts

Court

Federal Court of Australia

Decision date

2007-06-08

Before

Gordon J

Source

Original judgment source is linked above.

Judgment (26 paragraphs)

[1]

INTRODUCTION 1 This is an appeal against the decision of Riley FM made on 19 October 2006 dismissing an application of the appellant, Mr Moran, to set aside the sequestration order made on 15 June 2006 on the creditor's petition presented by the respondent. 2 The Chief Justice has directed that the appellate jurisdiction of the Court in relation to this appeal be exercised by a single judge: s 25(1A) of the Federal Court of Australia Act 1976 (Cth). 3 For the reasons that follow, the appeal should be dismissed. These reasons are structured as follows: (1) Factual Background to the Appeal: para [4] to [15]; (2) Relevant Legislation and Rules: para [16] to [21]; (3) Grounds of Appeal: para [22] to [86].

[2]

FACTUAL BACKGROUND TO THE APPEAL 4 The facts giving rise to this appeal have a long history. It is not necessary to trace it all in detail. Set out below is a summary of the factual background. 5 On 28 February 2003, the Court of Appeal of the Supreme Court of Victoria ordered that the appellant "do pay on an indemnity basis the costs of [the respondent]" ("the Costs Order"). 6 On 23 September 2005, a bankruptcy notice addressed to the appellant was issued on the application of the respondent in respect of a debt of $14,228.75 pursuant to the Costs Order ("the Bankruptcy Notice"). The Bankruptcy Notice was served on the respondent by Karen Elliot on 29 September 2005. On 3 October 2005, Ms Elliot swore an affidavit in which she deposed to her conversation with the person she served on 29 September 2005. Ms Elliot deposed that at the time she asked the person served, "What is your full name?" and the person replied "I am the authorised representative of the person named on this document" In addition, Ms Elliot asked the same person, "Are you the person referred to as the debtor in these proceedings?". The person replied "I am the authorised representative of the person named on this document". The identity of the person served on 29 September 2005 is a matter to which I will need to return later in these reasons. 7 On 17 October 2005, the appellant applied to set aside the Bankruptcy Notice. On 31 October 2005, Phipps FM heard the application and dismissed it. His Honour's reasons for decision are to be found in Moran v Lydiard Financial Services Pty Ltd [2005] FMCA 1821. 8 On 10 November 2005, a creditor's petition was presented against the appellant ("the Petition"). On 26 November 2005, the appellant was served with the Petition and associated documents. On 28 November 2005, Ms Elliot swore another affidavit deposing to service of the Petition and associated documents on the appellant. In this affidavit, Ms Elliot deposed that at the time of service, she asked the person served the same questions that she had asked on 29 September 2005 when she served the Bankruptcy Notice and received the same answers. The Petition was returnable on 24 January 2006. The hearing of the Petition was adjourned by consent to a date to be fixed after determination of the appeal against the decision of Phipps FM was heard by Sundberg J, on the giving of five days notice in writing by either party. 9 On 21 November 2005, the appellant served a notice of appeal in respect of the decision of Phipps FM. The appeal against the decision of Phipps FM was heard by Sundberg J on 28 April 2006. On 26 May 2006, Sundberg J dismissed the appeal. His Honour's reasons for decision are to be found in Moran v Lydiard Financial Services Pty Ltd [2006] FCA 631. 10 On 14 June 2006, Ms Elliot swore another affidavit in relation to service of the Bankruptcy Notice on the appellant. Significantly, Ms Elliot deposed that she knew that the person she served with the Bankruptcy Notice on 29 September 2005 was the appellant because she had previously served that person with other court documents and he had identified himself as John Gerard Moran. 11 The Petition was ultimately heard by Registrar Agnew on 15 June 2006. The appellant did not attend. Registrar Agnew made the following orders: "1. Leave be granted to amend paragraph 4 of the petition to substitute 31 October 2005 for 20 October 2005 as the date of commission of the act of bankruptcy. 2. Re-verification and re-service be dispensed with. 3. A Sequestration Order be made against the estate of JOHN GERARD MORAN. ["the Sequestration Order"] 4. …" (Original emphasis) 12 On 23 June 2006, the appellant filed an application in the High Court of Australia for special leave to appeal against the orders of Sundberg J on 26 May 2006 ("the Special Leave Application"). 13 On 4 July 2006, the appellant filed an application for review against the Sequestration Order ("the Review Application"). The Review Application was heard by Riley FM on 28 August and 8 September 2006. On 19 October 2006, Riley FM dismissed the Review Application. Her Honour's reasons for decision are to be found in Moran v Lydiard Financial Services Pty Ltd (previously Cuthberts Nominees Pty Ltd) [2006] FMCA 1341. After setting out the affidavit material filed in support of the Petition, Riley FM described the course the Review Application took before her in the following terms: "11. The present application for review was filed on 4 July 2006 and was supported with an affidavit affirmed by Mr Moran on that date, a further affidavit affirmed by Mr Moran on 31 July 2006 and a notice of the grounds of opposition to the petition dated 31 July 2006. When the application for review was being heard, Mr Moran indicated that he had mistakenly understood that an affidavit that he had filed in relation to his application to set aside the bankruptcy notice was before the court. He was given leave to file in this proceeding an affidavit dealing with the material that he had understood was already before the court, as well as material indicating that he was a beneficiary of his mother's estate. That material was included in an affidavit affirmed by Mr Moran on 30 August 2006. 12. Mr Moran also handed up late in the hearing a photocopy of an order of the District Court of Queensland dated 1 December 1995 which provided that a debt of $80,000 owing to Mr Moran's uncle's estate by Mr Moran's mother ("Mrs Moran") be transferred to Mr Moran, Mrs Moran and two other relatives in equal shares. The provenance of that document was not established before this court. [Nor] was any evidence given about whether the debt mentioned in the order had been discharged in the 10 years or so since the order was apparently made. Mr Moran did not satisfactorily explain how the order had a bearing on the present review. Accordingly, I am unable to take it into account." 14 On 8 November 2006, the appellant filed this appeal against the orders made by Riley FM dismissing the Review Application. 15 Finally, on 8 February 2007, the High Court dismissed the appellant's application for special leave to appeal from the orders made by Sundberg J on 26 May 2006.

[3]

RELEVANT LEGISLATION AND RULES 16 Section 103 of the Federal Magistrates Act 1999 (Cth) ("the FM Act") provides (relevantly): "(1) The Rules of Court may delegate to the Registrars any of the powers of the Federal Magistrates Court, including (but not limited to) all or any of the powers mentioned in subsection 102(2). (2) A power delegated by Rules of Court under subsection (1), when exercised by a Registrar, is taken, for all purposes, to have been exercised by the Federal Magistrates Court or a Federal Magistrate, as the case requires. (3) The delegation of a power by Rules of Court under subsection (1) does not prevent the exercise of the power by the Federal Magistrates Court or a Federal Magistrate." 17 In addition, r 2.02 of the Federal Magistrates Court (Bankruptcy) Rules 2006 (Cth) provides: "For the purposes of paragraph 102(2)(i) of the [Federal Magistrates' Court] Act, if the Court so directs, a Registrar may exercise a power of the Court under a provision of the Bankruptcy Act mentioned in Schedule 2." 18 Schedule 2 of the Federal Magistrates Court (Bankruptcy) Rules 2006 (Cth) includes, so far as is relevant, references to s 33 of the Bankruptcy Act 1966 (Cth) ("the Bankruptcy Act") (in relation to adjournment, amendment of process and extension and abridgement of time) and s 52(1) of the Bankruptcy Act (in relation to power to make a sequestration order against the estate of the debtor). Section 33(1)(b) of the Bankruptcy Act provides that a Court may, inter alia, "at any time allow the amendment of any written process, proceeding or notice under this Act". 19 Section 52 provides (relevantly): "(1) At the hearing of a creditor's petition, the Court shall require proof of: (a) the matters stated in the petition (for which purpose the Court may accept the affidavit verifying the petition as sufficient). (b) service of the petition; and (c) the fact that the debt or debts on which the petitioning creditor relies is or are still owing; and, if it is satisfied with the proof of those matters, may make a sequestration order against the estate of the debtor. (1A) … (2) If the Court is not satisfied with the proof of any of those matters, or is satisfied by the debtor: (a) that he or she is able to pay his or her debts; or (b) that for other sufficient cause a sequestration order ought not to be made; it may dismiss the petition." 20 Sections 104(2) and (3) of the FM Act provide for review of the exercise of the Registrar's powers by the Federal Magistrates Court. Those sections provide: "(2) A party to proceedings in which a Registrar has exercised any of the powers of the Federal Magistrates Court under subsection 102(2) or under a delegation under subsection 103(1) may: (a) within the time prescribed by the Rules of Court; or (b) within any further time allowed in accordance with the Rules of Court; apply to the Federal Magistrates Court for review of that exercise of power. (3) The Federal Magistrates Court may, on application under subsection (2) or on its own initiative, review an exercise of power by a Registrar under subsection 102(2) or under a delegation under subsection 103(1), and may make any order or orders it thinks fit in relation to the matter in respect of which the power was exercised." 21 Finally, Rule 7.01 of the Federal Magistrates Court Rules 2001 (Cth) provides that: "(1) At any stage in a proceeding, the Court or a Registrar may allow or direct a party to amend a document (other than an affidavit) in the way and on the conditions the Court or the Registrar thinks fit. (2) Subject to rule 7.03, the Court or a Registrar may allow an amendment even if the effect would be to include a cause of action arising after the proceeding was started."

[6]

GROUND (b) 27 Ground (b) is that: "As a hearing De novo, Riley FM failed to grant leave to amend paragraph 4 of the petition to substitute 31 October 2005 for 20 October 2005 as the date of the commission of the act of bankruptcy. This order was not sought." 28 This ground of appeal misunderstands Riley FM's reasons for decision and, again, proceeds upon a misunderstanding of the nature of the review provided for in s 104(2) of the FM Act. In relation to the second matter, the analysis under ground (a) is relevant. 29 As the reasons for decision make clear, her Honour considered and determined that: (1) an act of bankruptcy was committed on 31 October 2005 when Phipps FM handed down his decision dismissing the appellant's application to set aside the Bankruptcy Notice; (2) the Petition, incorrectly, specified the date of the act of bankruptcy as 20 October 2005, not 31 October 2005; (3) on 15 June 2006, pursuant to Rule 7.01 of the Federal Magistrates Court Rules 2001 (Cth), the Registrar had power to, and did, grant leave to amend the Petition to alter the date of the act of bankruptcy from 20 October 2005 to 31 October 2005. Unsurprisingly, Riley FM decided that "the amendment permitted by the Registrar was within the rules and there [was] no deficiency in the ...[P]etition relating to the date of the act of bankruptcy." 30 Contrary to the appellant's submissions, a misstatement of the date of the commission of the act of bankruptcy in a creditor's petition is not necessarily fatal. First, the misstatement of the date of the act of bankruptcy in the Petition did not alter the fact that there was an act of bankruptcy. The appellant's submissions appeared to proceed upon a misunderstanding about the bases for making a sequestration order. Sections 43, 44 and 52 of the Bankruptcy Act are predicated on the fact that a debtor has committed an act of bankruptcy. In the present case, an act of bankruptcy was established. In addition, an affidavit sworn by Catherine Amy Dwyer on 11 November 2005 verifying para 4 of the Petition accurately recorded the date of the act of bankruptcy as 31 October 2005. It, together with a copy of the Petition, was served on the appellant on 26 November 2005. 31 Secondly, the fact that the Registrar granted leave for the Petition to be amended was consistent with s 33(1)(b) of the Bankruptcy Act. In MacDonald v Official Trustee in Bankruptcy (2001) 107 FCR 72 at [25], the Full Court stated: "There is extensive authority for the proposition that the power of amendment in s 33(1)(b) extends to authorising the amendment of petitions to cure omissions of allegations made mandatory by the various provisions of the Bankruptcy Act and Bankruptcy Rules, that is, to cure what can be accepted to be more serious deficiencies in petitions than "formal defects or irregularities" within s 306." 32 The date of the commission of the act of bankruptcy is an allegation made mandatory in a petition: s 47(1A) of the Bankruptcy Act and Form 150 in Sch 1 to the Federal Court Rules 1979 (Cth). The discretion to amend in s 33(1)(b) is exercisable in all cases according to the circumstances of the particular case: MacDonald v Official Trustee in Bankruptcy (2001) 107 FCR 72 at [24]. In the present case, the appellant could not have been left in any doubt by what was stated in the Petition - the appellant had committed an act of bankruptcy within six months before presentation of the Petition by failing to comply with a bankruptcy notice dated 23 September 2005 (personally served on him on 29 September 2005), by failing to pay or secure the amount specified in the bankruptcy notice or by failing to satisfy the court that there was a valid ground for dismissing the notice: MacDonald v Official Trustee in Bankruptcy (2001) 107 FCR 72 at 82. Unsurprisingly, the appellant did not suggest that he was left in any doubt that he had committed an act of bankruptcy and the Petition had been issued on that basis. 33 This ground of appeal should be dismissed.

[9]

GROUND (e) 37 Ground (e) is that: "Riley FM failed to make a ruling that until the High Court of Australia brings down a decision in the Application for Leave to Appeal Sundberg J, the Application to set aside the bankruptcy notice in matter No. MLG 1291/2005, has not been finally dealt with and as such prevents a Creditor's Petition from being filed and heard." 38 There are two answers to this ground of appeal. First, the trial judge considered that the application for special leave to appeal to the High Court was not irrelevant to the hearing of the application. (Whether the application for special leave to appeal was not irrelevant is not a matter I need to decide.) The trial judge then summarised the appellant's argument at [25] of her reasons for decision. After considering the merits of the Special Leave Application, Riley FM stated at [40] that: "Taking into account all of the matters set out in Mr Moran's application for special leave to appeal to the High Court, I am not satisfied that there is any reasonable prospect of special leave being granted. Accordingly, I am not satisfied that the existence of the outstanding special leave application constitutes a discretionary basis for refusing a sequestration order in the circumstances of this case." 39 The appellant did not, and cannot, identify any basis for interfering with her Honour's exercise of her discretion. 40 Secondly, consistent with the decision of the Full Court in Guss v Johnstone [2000] FCA 1455 at [16] to [20] even if the trial judge's discretion miscarried (which it did not), the loss of any advantage to the appellant in the trial judge hearing the Petition, or her failure to adjourn the hearing of the Petition, did not amount to an injustice in the relevant sense. That there was no injustice is made clear from the terms on which the High Court dismissed the appellant's application for special leave to appeal: [2007] HCATrans 40 (8 February 2007). The disposition was in the following terms: "The respondent obtained a bankruptcy notice against the [appellant] on 23 September 2005. The [appellant] sought in the Federal Magistrates Court an order that a bankruptcy notice based on a taxation of costs be set aside. He argued that the costs in question had been paid by promissory note; that he had a valid cross-claim for an amount far in excess of the amount claimed in the bankruptcy notice; and that the issuing of the bankruptcy notice was an abuse of court process. Phipps FM ruled that the promissory note did not constitute payment of the debt; there was no genuine prospect of success on the cross-claim; and no abuse of process had occurred. In the Federal Court, Sundberg J upheld the decision of Phipps FM, and dismissed the appeal. His Honour gave comprehensive reasons for judgment. Before this Court, the [appellant] seeks to challenge the validity of Sundberg J's exercise of appellate jurisdiction, and to press his contentions regarding the promissory note. The [appellant's] case before this Court discloses no error on the part of Sundberg J, and his contentions regarding jurisdiction are without substance. No question of law has been raised that would justify a grant of special leave. There would be no prospects of success on any appeal to this Court from the Federal Court, and consequently special leave is refused." 41 This ground of appeal should be dismissed.

[11]

GROUND (g) (GROUND OF OPPOSITION 1) 46 Ground (g) is that: "Riley FM erred in paragraph 5 of the Reasons for Judgment when she relied on a perjured affidavit of Karen Elliot. The transcript will show that I always described myself as per paragraph 4 and any other interpretation by Karen Elliot is pure speculation and conjecture. Karen Elliot is now facing criminal charges being brought against her." 47 During the hearing of the appeal, the appellant submitted that: "I'm saying, your Honour, that that affidavit [of 14 June 2006] is a perjured affidavit in the sense - I suppose using that term "perjured affidavit" is fairly strong, but is incorrect. It's incorrect because on previous occasions that she refers to there I identified myself - because I made sure that she wrote it down and she wrote it on her hand I am the authorised representative of the person named on that document, whatever she was serving. Every single time I've been very careful to say that I was the authorised representative of the person named on that document. You know, you have juristic people and distraught people and flesh and blood people. This is where Riley FM - and she mentions it in her reasons for judgment, "Well, I had a conversation with Mr Moran at the bar table and he virtually said, 'Well, it's the same person'," or something along those lines. Now, it gets very confusing when we're having, like, a conversation at each point to say, "Well, the flesh and blood person of me is me, but the juristic person is the one that's on the birth certificate." The other thing, Karen Elliot has not - it's only hearsay, so until she shows a photographed - tied to a birth certificate, the Court can't take any notice of it. …" 48 The appellant's complaint is that the affidavit of Ms Elliot of 14 June 2006 referred to in para [5] of the Reasons for Decision of Riley FM was "perjured". There is no basis in fact or in law for such a contention. The appellant was served with the Petition by Ms Elliot on 23 September 2005. The ground of appeal should be dismissed.

[14]

GROUND (j) 54 Ground (j) is that "Riley FM erred when she decided not to take into account the evidence referred to in paragraph 12 of the reasons." Paragraph [12] of the reasons for decision of Riley FM are set out in para [14] above. 55 The 'evidence' referred to was, in fact, a photocopy of an order of the District Court of Queensland dated 1 December 1995 which provided that a debt of $80,000 owing to the estate of Mr Moran's uncle's by Mr Moran's mother be transferred to Mr Moran, his mother and two other relatives in equal shares. The trial judge records in para [12] of her reasons for decision that: (1) the document was handed up late in the hearing; (2) the provenance of the document was not established before the court; (3) no evidence was given about whether the debt mentioned in the order had been discharged in the 10 years since the order was apparently made; and (4) the appellant did not satisfactorily explain how the order had a bearing on the Application for Review. On that basis, Riley FM decided that she was unable to take that 'evidence' into account. 56 On the hearing of the appeal, the appellant sought to rely upon the order as 'evidence' of capacity to pay the debt identified in the Bankruptcy Notice the subject of these proceedings. Even if the evidentiary status of the 'order' was capable of being addressed by the appellant, that 'evidence' does not assist the appellant. First, on the hearing of the Petition, the debt the subject of the Bankruptcy Notice was not paid: s 52(1)(c) of the Bankruptcy Act. Secondly, the document did not and could not establish a capacity to pay the debt the subject of the Bankruptcy Notice: s 52(2)(a) of the Bankruptcy Act. As the appellant himself noted during the course of argument, receipt of any money as a result of the terms of the order was based upon at least two assumptions - that the respondent had lost its priority as first ranking mortgagee in favour of the second mortgagees (which allegedly included Mr Moran's uncle) and that the property the subject of the mortgages had been sold (presumably realising sufficient proceeds to pay out Mr Moran's uncle). The assumptions identified by the appellant were no more than mere conjecture. Each raised more questions than it answered. 57 No error is identified in the reasons for decision. This ground of appeal should be dismissed.

[22]

GROUND (z) (GROUND OF OPPOSITION 8) 75 Ground (z) is that: "Riley FM erred in her interpretations in paragraphs 64, 65 and 66. Her interpretations indicate that she either hasn't read the material or she has decided to ignore the material for whatever reasons." 76 Ground of opposition 8 was that: "A damages claim is before the Supreme Court claiming damages and costs, including the Cost orders in this matter." 77 Before Riley FM, the appellant suggested that he had a cross claim against the respondent. The cross claim was said to arise from proceeding No.27 of 2004 in the Supreme Court of Victoria where Patrick Francis Moran (the appellant's uncle) asserted that the respondent acted fraudulently in asserting its priority as mortgagee of a farm owned by the appellant's mother. It is unnecessary to examine Supreme Court proceeding No.27 of 2004 in any detail. Mr Moran told her Honour that: (1) he would conduct the proceeding pursuant to a power of attorney or as an executor of his mother's estate; and (2) he would soon join in the proceeding in his own right on the basis that he was a beneficiary of his mother's estate. 78 As the trial judge held, none of these facts assist the appellant. On the first basis, the appellant would not have a cross claim for the purposes of s 40(1)(g) of the Bankruptcy Act. The appellant would not be conducting the proceeding in his own name and even if he were successful, no damages would flow to him personally. On the second basis, the appellant is in no better position. Being a beneficiary of his mother's estate would not give him standing to bring the damages claim. On appeal, the appellant submitted that he had a right as an individual to bring the claim. The legal basis for such a claim was not identified. 79 Riley FM was correct to conclude that there did not appear to be any basis upon which Supreme Court proceeding No.27 of 2004 could constitute a cross claim for the purposes of s 40(1)(g) of the Bankruptcy Act. This ground of appeal should be dismissed.

Moran v Lydiard Financial Services Pty Ltd

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