Moss v Nationwide News Pty Ltd

DECISION OF THE FEDERAL MAGISTRATE 13 The Federal Magistrate was satisfied on the basis of the Creditor's Petition and affidavits supporting it that the formal requirements of making a Creditor's Petition were met. His Honour was also satisfied that the appellant was unable to pay his debts as and when they became due or within a reasonable time. 14 The Federal Magistrate then considered whether the Supreme Court proceedings were a reason not to make the sequestration order. His Honour did not consider that such proceedings constituted a reason not to make the sequestration order. His Honour noted that Registrar Morgan was aware of such proceedings at the time when he made the sequestration order. The Federal Magistrate found that, 'the outcome of his [the appellant's] claim against his former solicitors is at best uncertain and the duration of the proceedings is also uncertain'. Further, his Honour noted, 'Mr Miller tells me, and I have no reason to disbelieve him, that the trustee [of the appellant's bankrupt estate] who he has consulted today will not oppose him continuing with that action [the Supreme Court proceedings]'. His Honour concluded, 'In the circumstances I am not persuaded that the proceedings against Mr Miller's former solicitors provide any reason for the Court not to make a sequestration order'.

SUBMISSIONS OF THE APPELLANT 15 In the original Notice of Appeal the single ground of appeal raised by the appellant was as follows: 1 My Trustee doesn't have power to allow me to carry on my Supreme Court case 11999/09, as to Judgement of Driver FM No7 as i [sic] said to Magistrate, i [sic] ask to set aside the sequestration order, in case my trustee back flips on me, he hasn't done it but the rules don't see financial loss as personal injury, i [sic] do and ask the Appeal Court to set aside the sequestration order now so i [sic] can continue the case 11999/09 in the Supreme Court of NSW to recover my lose's [sic] and remove cost [sic] that are the reason for the sequestration order, in the first place.

16 The proceedings came before the Court on 29 July 2009 for directions. In such directions hearing the appellant made clear that the basis of his appeal was that the Federal Magistrate had lied to him or deceived him arising from the discussion during the hearing before the Federal Magistrate and the following observation of his Honour which was made during the hearing of the application for review of the making of the sequestration order: Mr Miller tells me, and I have no reason to disbelieve him, that the trustee who he has consulted today will not oppose him continuing with that action.

17 This statement will be referred to hereafter as 'his Honour's observation'. 18 The Court made orders at the conclusion of the directions hearing on 29 July 2009 directing the appellant to file an amended appeal making clear his ground of appeal. 19 By Amended Notice of Appeal filed on 6 August 2009, the appellant provides one ground of appeal which in substance raises the same ground set out in [15] above, namely that Driver FM mislead him or lied to him: 1 I believe that Magistrate Driver mislead or lied to me in his order of 16/6/2009 as he would know that me being a Bankrupt that i [sic] had no standing to carry on in any court case, and he should have removed the sequestration order, para 7 of the order where he knew that even if my trustee did not oppose me continuing, still left me with no standing to carry on my NSW Supreme Court case 11999/09. Even if Nationwide News P/L don't want to, i [sic] draw your attention to letter dated 16/7/09 to my trustee, where Nationwide News willn't [sic] provide any funding or indemnity, for my case to recover their costs.it [sic] shouldn't matter how long it takes justice must be seen to be servered [sic], it doesn't matter when i'm [sic] made bankrupt it only effects me and i can wait. I must be given a fair go, to try and recover the damages and cost to stopp [sic] this bankruptcy.

20 In such Notice the appellant seeks an order quashing the sequestration order so he can continue the proceedings against his former solicitors. 21 In his oral submissions the appellant repeated his claim and submitted that his Honour should have quashed the sequestration order or otherwise permitted the respondent to apply again 'without prejudice' after the appellant had had the opportunity of pursuing the Supreme Court proceedings. 22 The appellant claimed that two witnesses in the District Court proceedings before Delaney J had perjured themselves and that he wished to have the opportunity of demonstrating that; that they should be prosecuted and that the Director of Public Prosecutions would institute such proceedings once their perjury became known. The appellant claimed that the Supreme Court proceedings would be successful and that the award of damages in his favour would be sufficient to liquidate the debt owning to the respondent.

Notice of Motion 23 It is convenient to deal first with the Notice of Motion seeking summary judgment. The Court has two mechanisms by which summary judgment may be made. The first is s 31A(2) of the Act. Pursuant to such provision, the Court may give summary judgment where: (a) the first party is defending the proceeding…; and

(b) the Court is satisfied that the other party has no reasonable prospect of successfully prosecuting the proceeding…

Pursuant to s 31A(3) a proceeding need not be hopeless or bound to fail for it to have no reasonable prospect of success. The Court notes that it may have similar powers to dismiss the proceedings under O 20 r 5 of the Rules, however, such mechanism is not invoked by the respondent. 24 The alternative mechanism sought by the respondent is O 52 r 18 of the Rules. Such provision provides that: (1) A respondent may move on notice at any time for an order dismissing an appeal as incompetent.

(2) Upon the hearing of the motion, the burden of establishing the competency of the appeal is on the appellant.

25 In the circumstances it is preferable to consider the ground of appeal on its merits, rather than consider the criteria for summary dismissal or incompetence. Such approach is consistent with the approach of French J in Zoia v Commonwealth Ombudsman Department (2007) 240 ALR 624. In such proceedings his Honour said at [26], 'I question the utility of using s 31A of the Federal Court Act 1976 (Cth) in a case in which the argument and evidence in the substantive proceeding is not more extensive than the argument and evidence on the question whether there is a reasonable prospect of success for the purposes of s 31 A'.

The Appellant's ground of appeal - The Federal Magistrate's Conduct 26 The only ground of appeal which the appellant has raised suggests that the Federal Magistrate lied or deceived the appellant. For the reasons outlined hereunder, the Court rejects the ground of appeal. 27 Section 60(2) of the Bankruptcy Act 1966 (Cth) ('Bankruptcy Act') provides that 'An action commenced by a person who subsequently becomes a bankrupt is, upon his or her becoming a bankrupt, stayed until the trustee makes election, in writing, to prosecute or discontinue the action'. Section 60(3) of the Bankruptcy Act provides: If the trustee does not make such an election within 28 days after notice of the action is served upon him or her by a defendant or other party to the action, he or she shall be deemed to have abandoned the action.

28 Section 60(4) of the Bankruptcy Act relevantly provides: Notwithstanding anything contained in this section, a bankrupt may continue, in his or her own name, an action commenced by him or her before he or she became bankrupt in respect of:

(a) Any personal injury or wrong done to the bankrupt, his or her spouse or defacto partner, or a member of his or her family;…

29 The appellant claims that because of s 60(2) of the Bankruptcy Act he is unable to continue the Supreme Court proceedings. Such section allows the Trustee to continue proceedings on behalf of the bankrupt, but a bankrupt himself cannot continue such proceedings. 30 During the hearing before the Federal Magistrate, the appellant's claim for a postponement of any order was considered. His Honour then stated: There are a few problems. One is that this case in the Supreme Court has really only just begun and it could take years. We don't know what the outcome of it is going to be. You might successful, you might be unsuccessful.

31 After debate concerning the possible length of time before the Supreme Court proceedings would be resolved, the following exchange occurred: FEDERAL MAGISTRATE: The other problem is that if your trustee-in-bankruptcy thought that you had a good case, the trustee could run it for you.

MR MILLER: Well, I went and seen him today. He is not going to oppose it but I thought I better come back here just in case he changes his mind.

FEDERAL MAGISTRATE: When he says he is not going to oppose it, he is not going to oppose what?

FEDERAL MAGISTRATE: I see. So he is not going to run it himself but he will let you run it.

FEDERAL MAGISTRATE: I see. But if he is going to let you run it, why do I need to disturb the sequestration order?

32 His Honour, having referred to the fact that there was sufficient evidence to justify the making of the sequestration order, addressed the question whether the Supreme Court proceedings provided sufficient reason for the Court not to make the sequestration order and said: And the problems are that we don't know how long it's going to take. We don't know what the outcome is going to be, and according to what the trustee told you today, he is not going to stand in the way of it.

33 Having considered those matters, the Federal Magistrate delivered his judgment including his Honour's observation. 34 Subsequent correspondence suggests that any final arrangement between the Trustee and the appellant had not then been concluded. In a letter dated 29 June 2009, about two weeks after the Federal Magistrate's decision, the Trustee wrote to the appellant, relevantly stating as follows: I refer to the above and advise as you are aware I have been contacted by Colin Biggers Paisley, the Lawyers for Reimer Winter Williamson requiring me to make an election under Section 60 (3) of the Bankruptcy Act 1966 as to whether I am going to continue or discontinue the claim against Reimer Winter Williamson.

The period within which I must make this election is 28 days (i.e.: by the 1st July 2009 in this instance) or my failing to do so deems the action abandoned.

Having read both your Statement of Claim and amended Statement of Claim and obtained an advice as to whether in fact your claim may have been for 'personal injury and wrong doing' which if it was then you would be able to continue with this claim yourself as it would not vest in me as your Trustee.

My advice though does not support this to be the case and accordingly as this Administration is without funds and unlikely to come into funds it is my intention to do nothing and that will deem the matter abandoned at the expiration of the period.

The next step for Colin Biggers Paisley is to make application to the Court for the matter to be struck out and at that point in time if you dispute my determination you could attend before the Court to plead that in fact the matter is in respect to 'personal injury and wrong doing' and that you should be entitled to continue with it in your own right. That though, is a matter for you to consider.

35 In a subsequent letter from the Trustee to the appellant dated 17 July 2009 the Trustee reported that although a request was made of the respondent whether the respondent would consider 'funding this Estate or providing an indemnity to run those proceedings in question' no such funding would be provided. 36 The Court does not accept that the Federal Magistrate lied or deceived the applicant. The Amended Statement of Claim relating to the Supreme Court proceedings and the above correspondence shows that the appellant was asserting that he suffered a 'personal injury and wrong doing'. Since s 60(4) of the Bankruptcy Act permits such action to be continued by a bankrupt personally, his Honour's statement that the Trustee 'is not going to run it but he will let you run it' is not erroneous. But even if it were not, there is no appellable error arising from his Honour's remark since the necessary facts for the making of a sequestration order had been established. 37 The appellant was asked how he had been misled as he claimed. He responded that he would have argued more strenuously in his application before the Federal Magistrate had he known that he could not continue such action personally. However, this possibility cannot overcome the fact that, based on Rigg v Baker (2006) 155 FCR 531, which will be discussed later in this judgment, there was no basis for his Honour concluding that the sequestration order 'ought not to have been made'. His Honour observed that Registrar Morgan was aware of the Supreme Court proceedings at the time the sequestration order was made and noted that the Registrar found 'the outcome of his claim against his former solicitors is at best uncertain and the duration of the proceedings is also uncertain'. 38 The Court does not consider that any error in the exercise of discretion of the Federal Magistrate exists of the kind referred to in House v The King (1936) 55 CLR 499, and his Honour's observation, even if incorrect, does not detract from the correctness of his decision. The Court rejects the appellant's ground of appeal.

Annulment of sequestration order? 39 Despite the Court's rejection of the appellant's single ground of appeal, the Court considers that there is utility in considering the Federal Magistrate's decision against the criteria of s 153B of the Bankruptcy Act. Such section provides that the Court may annul a bankruptcy if the Court is satisfied that a sequestration order 'ought not to have been made'. 40 An appeal from a decision to make a sequestration order (or in this case upholding the making of a sequestration order) and an application for the annulment of a bankruptcy under s 153B of the Bankruptcy Act are distinct: see Hudson v Whalan [1999] FCA 189 at [7]. However, the Court considers that as the appellant has challenged the making of the sequestration order it is useful to analyse whether the Federal Magistrate should have upheld the sequestration order. 41 In Re Frank; Ex parte Piliszky (1987) 16 FCR 396 at 403 Fisher J (referring to s 154(1)(a) of the Bankruptcy Act which is relevantly the same as s 153B) said: In my opinion "ought" in s 154(1)(a) is of imperative significance and an order should not be annulled unless the judge was in the circumstances bound not to make it and even then there is a residual discretion not to annul.

42 In Rigg v Baker the Full Court considered whether a bankruptcy should be annulled in proceedings where the bankrupt had, at the date of the sequestration order, an appeal pending in the Court of Appeal. Such proceedings had been instituted by the bankrupt against her solicitors for negligence as well as against other parties for reasons relating to financial arrangements which lead to her bankruptcy. It is important to note that the judgment debt which grounded the sequestration order did not arise from the decision which was subject to the appeal. French J at [63] said: In Pollock v Deputy Federal Commissioner of Taxation (Cth) (1994) 94 ATC 4148, Carr J set out five propositions relevant to applications for annulment. They were derived from the judgment of Riley J in Re Calderon (unreported, Federal Court of Australia, Riley J, No NSW 573 of 1967, 31 May 1977) as follows (at 4153-4154):

It is for the applicant for annulment who alleges, and it is therefore for him to bring himself within the section and satisfy the Court, that the sequestration order ought not to have been made.

The Court to whom the application is made seeks to ascertain the actual state of affairs at the time when the sequestration order is made.

In order to ascertain that actual state of affairs the Court hearing the application for annulment looks at the facts that were before the Court which made the sequestration order and at any other facts that were not before that Court but are shown on the hearing of the application for annulment to have been in existence when the sequestration order was made.

Having considered all the facts so looked at, the Court determines whether on those facts the applicant has satisfied it that the sequestration order ought not to have been made.

If it is so satisfied, the Court is not bound to annul the sequestration order but must consider in all the circumstances of the case whether it ought to be annulled.'

43 French J considered at [59]-[72] the general principles relating to the annulment of a sequestration order. His Honour noted in such discussion the decision of Ahern v Deputy Commissioner of Taxation (Qld) (1987) 76 ALR 137 which suggests that a pending appeal against a judgment, which was relied upon to make the sequestration order, may be a ground for adjourning an application for sequestration. 44 French J concluded that an appeal pending before the Court of Appeal was not sufficient for the Court to conclude that a sequestration order ought not to have been made, even though the Court of Appeal proceedings were pending and assumed to be 'arguable' (see [74]). 45 The decision in Rigg v Baker was given by majority. An application for special leave to appeal against the majority's decision to the High Court of Australia was refused: see Baker v Rigg [2007] HCATrans 594. 46 In the instant proceedings the Federal Magistrate had all the evidence before him necessary to make a sequestration order. The appellant was insolvent, he had failed to comply with a Bankruptcy Notice and there had been compliance with the formalities of a Creditor's Petition. In the circumstances the Federal Magistrate was unable to conclude that the sequestration ought not to have been made and therefore was bound to uphold the sequestration order. 47 The Supreme Court proceedings are not like those mentioned in Ahern: that is, they do not appeal the judgment which created the debt which founded the bankruptcy. The proceedings grounding the judgment debt cannot be further appealed, given that the High Court refused leave to appeal. The present circumstances are akin to those in Rigg v Baker, in which the Full Court refused to annul the bankruptcy because of the existence of proceedings in another Court. In the current proceedings the Federal Magistrate found that the Supreme Court proceedings were uncertain in both length and likelihood of success. In short, Rigg v Baker provided a more meritorious basis for annulment yet the Full Court considered that the appeal proceedings were not a reason to annul the bankruptcy. 48 Consequently, the existence of Supreme Court proceedings did not require the Federal Magistrate to set aside the sequestration order. No error exists because his Honour upheld the sequestration order.

Could the applicant continue the Supreme Court proceedings pursuant to s 60(4)(a) of the Bankruptcy Act? 49 There is no utility in entering into a discussion of whether the Supreme Court proceedings fall within the scope of s 60(4)(a), as appears to be advanced in the appellant's original ground of appeal and in correspondence with his Trustee, as this is not an issue for determination by this Court.

CONCLUSION 50 The appellant has appeared before this Court as a self-represented litigant. The Court understands the appellant's assertions which arise from his disappointment in losing his District Court claim and from his belief that witnesses in those proceedings committed perjury. However, the appellant has exhausted all avenues of appeal of that decision. Once the High Court refused leave to appeal, such matter was conclusively determined. 51 The current proceedings, as with the proceedings heard before Edmonds J of this Court, relate only to bankruptcy. They provide no opportunity for the Court to investigate the decision of Delaney J. 52 The appeal must be dismissed with costs. I certify that the preceding fifty-two (52) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Cowdroy.

Associate: Dated: 11 September 2009 Counsel for the Appellant: The appellant appeared in person