CONSIDERATION
20 The nature of this appeal was recently described accurately, with respect, by Wheelahan J in Whiteman v Deputy Commissioner of Taxation [2022] FCA 975 (Whiteman) at [61]-[63] as follows:
[61] This appeal comes before me as a single judge exercising appellate jurisdiction pursuant to the Federal Court of Australia Act 1976 (Cth), s 25(1AA)(a). The appeal is by way of re-hearing, in which the primary judge enjoyed no relevant advantage over this court. However, unlike the review that was before the primary judge, the appeal to this court is not a re-hearing de novo. The court's powers on appeal are engaged only if, upon this court considering for itself the evidence and other material that was before the primary judge, some legal, factual, or discretionary error is demonstrated in the orders that were made: Allesch v Maunz [2000] HCA 40; 203 CLR 172 at [23] (Gaudron, McHugh, Gummow and Hayne JJ).
[62] For the purposes of the demonstration of error on appeal, the engagement of s 52(2)(b) of the Bankruptcy Act involves two related levels of decision-making. The first is whether the primary judge was satisfied that there was some "other sufficient cause" for which a sequestration order ought not be made. This does not involve the evaluation of facts and circumstances against some legal norm:
cf, Dwyer v Calco Timbers Pty Ltd [2008] HCA 13; 234 CLR 124 at [40] (Gleeson CJ, Gummow, Kirby, Hayne and Heydon JJ); Templeton v Australian Securities and Investments Commission [2015] FCAFC 137; 108 ACSR 545 at [23] (Besanko, Middleton and Beach JJ). Rather, it is the type of decision to which Mason and Deane JJ referred in Norbis v Norbis [1986] HCA 17; (1986) 161 CLR 513 at 518, which calls for value judgments in respect of which there may be room for reasonable differences of opinion, no particular opinion being uniquely correct. See also, Minister for Immigration and Border Protection v SZVFW [2018] HCA 30; 264 CLR 541 at [43]-[49] (Gageler J). Because the powers on appeal are exercisable only upon the demonstration of error, the primary judge's evaluation of whether there was "other sufficient cause" for the purposes of s 52(2)(b) must be shown to have been wrong. Error is not shown merely by persuading an appellate court to make a different evaluation, which may be no better than the first: see, Singer v Berghouse [1994] HCA 40; (1994) 181 CLR 201 at 211-212 (Mason CJ, Deane and McHugh JJ), and the approval of the comments of Kirby P in Golosky v Golosky (unreported, NSW Court of Appeal, 5 October 1993). The second and related level of decision- making is whether upon the judge being satisfied of some "other sufficient cause", the court should in the exercise of its discretion dismiss the petition: Endresz v Australian Securities and Investments Commission (No 2) [2015] FCAFC 33; 228 FCR 334 (Endresz) at [34], [37] (Edmonds, Gordon and Beach JJ).
[63] Therefore, in relation to this appeal from the decision of the primary judge to the extent that it challenges the judge's rejection of the appellant's claim that the power under s 52(2)(b) should have been exercised to dismiss the petition, the principles essayed in House v The King [1936] HCA 40; 55 CLR 499 at 504-505 apply, such that it must be demonstrated that the decision miscarried. Within those principles, the correctness standard applies to any challenge on appeal to the legal principles that were applied, or to findings of material fact upon which the evaluation took place, but not to the primary judge's evaluation, or to the exercise of the statutory discretion. The principles in House v The King also apply to the appellant's challenge to the primary judge's discretionary decision to fix the review for hearing. If the court is satisfied that error is established, then in a case such as the present where the primary judge enjoyed no relevant advantage over this court, the court may proceed to make its own findings and evaluative conclusions, and formulate its own reasoning: Robinson Helicopter Company Inc v McDermott [2016] HCA 22; 331 ALR 550 at [43] (French CJ, Bell, Keane, Nettle and Gordon JJ).
21 I respectfully adopt the above statements of principle by Wheelahan J.
22 The primary judge summarised his reasons for dismissing the application at Reasons [2] as follows:
For the reasons that follow, the application should be dismissed. In short, I am satisfied that the applicant has committed an act of bankruptcy and that she did so at a time when she was personally present or ordinarily resident in Australia. Despite the bankrupt's submissions to the contrary, I am satisfied that the petitioning creditor has established by judgment that there is a debt owing to it by the bankrupt in an amount greater than the statutory minimum, being a debt for a liquidated sum which was immediately payable within a period of six months before the presentation of the creditors petition. I reject the bankrupt's submissions: that such judgment was obtained by fraud; that the bankruptcy notice upon which reliance was placed was defective, or; that she is owed monies by the petitioning creditor. Finally, I am not satisfied by the bankrupt of any other sufficient cause why the court should exercise its discretion to dismiss the petition including the existence of any genuine dispute as to her liability for the debt relied upon in this case or of any viable cross-demand, set-off or counterclaim.
23 The primary judge at Reasons [3]-[38] identified the procedural background to the proceeding and at Reasons [42] and [43] identified the evidence and submissions on which the Appellant relied.
24 The primary judge then stated his conclusions as to jurisdiction to make a sequestration order under s 43 of the Act at Reasons [44]-[46] as follows:
[44] Jurisdiction to make a sequestration order is conferred by s 43 of the Bankruptcy Act. Subject to the Act, where a debtor has committed an act of bankruptcy and, relevantly, at the time when that act was committed, the debtor was personally present in Australia, the court may, on a petition presented by a creditor, make a sequestration order against the debtor's estate.
[45] The circumstances leading to the issue of a bankruptcy notice for a sum in excess of the statutory minimum have been set out above. I am satisfied that bankrupt committed an act of bankruptcy in failing to comply with the bankruptcy notice: Bankruptcy Act, s 40(1)(g). The bankruptcy notice was served on the respondent on 26 September 2018. While an extension of time was initially granted to 29 November 2018, and then to 31 January 2019, on the latter date a registrar of the Federal Court dismissed the application with costs.
[46] Upon expiry of the time for compliance with the bankruptcy notice, the bankrupt's failure to comply with its requirements constituted an act of bankruptcy on 31 January 2019.
25 The primary judge considered whether the conditions set out in s 44 had been satisfied at Reasons [47] and [48] as follows:
[47] The conditions on which a creditor may seek the sequestration of a debtor's estate proscribe that no petition may be presented unless, as material to the present application: (a) the debtor owed the petitioning creditor an amount greater than $10,000; (b) such debt is for a liquidated sum which is immediately payable; (c) the act of bankruptcy upon which the petition is founded was committed within six months before the presentation of the petition: Bankruptcy Act, s 44.
[48] On the evidence adduced on this review, on 4 September 2018 a judgment was entered in favour of the petitioning creditor against the bankrupt in the sum of $22,682.14. The debt as established by that judgment was for a liquidated sum that was immediately payable. The petitioning creditor issued its bankruptcy notice on 26 September 2018 and the act of bankruptcy was committed on 31 January 2019 upon the dismissal by a registrar of the Federal Court of Australia of the application for a further extension of time. As it had been presented on 14 March 2019, such petition was presented within 6 months of that act of bankruptcy.
26 The primary judge then turned to consider s 52 of the Act and whether the Respondent had proved the matters required by s 52(1)(a)-(c) of the Act. The primary judge at Reasons [49]-[53] stated:
[49] The Court may, at any time before the expiration of the period of 12 months commencing on the date of presentation of a creditor's petition, order that the period at the expiration of which the petition will lapse, be such period, relevantly, being a period not exceeding 24 months commencing on the date of presentation of the petition and as specified in the order. The power to extend such period is conditioned upon the court being satisfied that it is just and equitable to do so, including that conditions may also be imposed: Bankruptcy Act, s 52(5).
[50] As noted, on 20 February 2020, a registrar made an order that the life of the creditors petition be extended for a period of 24 months from the date of its presentation. Such petition had been presented in this proceeding on 14 March 2019.
[51] At the hearing of a creditor's petition, the court shall require proof of the matters in s 52(1)(a)-(c) of the Bankruptcy Act. In the present case, I am satisfied of each of those matters. I am further satisfied that the creditor has complied with the requirements of the Federal Circuit Court (Bankruptcy) Rules 2016 (Cth) by exhibiting a search of the National Personal Insolvency Index conducted in respect of the respondent on 5 February 2021.
[52] It follows that the petitioning creditor has established a prima facie entitlement to the making of a sequestration order against the bankrupt's estate.
[53] As was common ground, the power to make a sequestration order is framed in permissive terms. Where it is satisfied of the matters of which proof is required at the hearing, the Court may make a sequestration order against the estate of the debtor: Bankruptcy Act, s 53(1).
27 The primary judge was satisfied that the Respondent had established a prima facie entitlement to the making of a sequestration order.
28 The primary judge then turned to consider whether the Appellant had established that she was solvent for the purposes of s 52(2)(a) of the Act. The primary judge characterised the financial statement on which the Appellant relied as "noticeable for its incompleteness" and found that the material did not disclose any ability of the Appellant to realise, within the relevant short period, the sums required to repay the judgment or her liabilities. A consideration of the primary judge's Reasons at [57]-[60] reveals that the primary judge undertook a detailed analysis of the Appellant's financial statement and the evidence as to solvency and he was not satisfied that the Appellant had established her solvency.
29 The primary judge then considered whether the Appellant had established that for "other sufficient cause" a sequestration order ought not be made under s 53(2)(b) of the Act. The primary judge noting at Reasons [61] and [62] that:
[61] The court may also dismiss the petition where it is satisfied by the debtor that for other sufficient cause a sequestration order ought not to be made: Bankruptcy Act, par 53(2)(b). As material to this application, the power to dismiss the petition for other sufficient cause should be read with par 40(1)(g) of the Bankruptcy Act which provides that a debtor commits an act of bankruptcy where, a creditor who has obtained a final judgment (being a judgment or order, the execution of which has not been stayed), has served on the debtor a bankruptcy notice and the debtor does not comply with the requirements of such notice within the specified time or satisfy the court that he or she has a counter-claim, set-off or cross demand, equal to or exceeding the amount of such judgment or order.
[62] It is an essential obligation in the bankruptcy jurisdiction for the Court to be satisfied that there is a debt upon which a sequestration order can be made: Ramsay Health Care Australia Pty Ltd v Compton (2017) 261 CLR 132, [39] (Kiefel CJ Keane and Nettle JJ). In that context, where the debt is established by final judgment, the court will usually have no occasion to investigate whether the judgment debt is a true reflection of indebtedness. However, where "the merits of a claim and counterclaim have not been tested in adversarial litigation, a judgment debt will not have this practical guarantee of reliability:" Ramsay Health Care (2017) 261 CLR 132, [54], [68] (Kiefel CJ Keane and Nettle JJ). As the plurality held, where a substantial question is demonstrated as to whether a debt is owing, the court should proceed to investigate that question in order to decide whether it is open to it to make a sequestration order.
30 The primary judge then rejected the Appellant's submission that she did not owe the money claimed by the Respondent or that the judgment was obtained by fraud at Reasons [63]. The primary judge also rejected the Appellant's contention that the Bankruptcy Notice was defective and her complaints about service at Reasons [63].
31 The primary judge then concluded that the Appellant did not demonstrate a bona fide or reasonably arguable claim at Reasons [65].
32 The primary judge then set out the relevant principles concerning going behind a judgment at Reasons [66] as follows:
Accepting that the court may go behind a judgment and enquire into the validity of a debt in cases of fraud, collusion or a miscarriage of justice, (particularly in the case of consent or default judgements), the court will not examine every judgment that is sought to be impugned. Special circumstances must be established before it will do so: Ramsay Health Care Australia (2017) 261 CLR 132, [69], [92], [111]. This does not in any way detract from the court's undoubted jurisdiction to go behind a judgment. In appropriate cases, it will scrutinise the circumstances leading to a judgment, including one obtained by consent or default. Indeed, it may also do so where the parties have been legally represented. Equally, it is clear that the court will not embark upon this process as a matter of course. Critically, as a sequestration order effects a change in status for the bankrupt, entails quasi-criminal consequences, and directly affects the rights of third parties (vis, other creditors to sue for and recover debts by ordinary execution), where it is satisfied by the debtor that it should do so, the court will investigate whether a genuine dispute exists as to the debtor's liability to the petitioning creditor in its consideration of whether other sufficient cause is made out why a petition ought to be dismissed: Ramsay Health Care Australia (2017) 261 CLR 132, [48]-[60].
33 The primary judge correctly observed that the Court will not examine every judgment that is sought to be impugned and that special circumstances must be established.
34 The primary judge then concluded his analysis at Reasons [68] and [69] as follows:
[68] Standing back from the matter and having regard to the history of all of the proceedings above, I am not satisfied by the bankrupt that there is a genuine dispute about her liability under the BKA Practice Co Pty Ltd v Nida [2021] FCCA 334 15 judgment that ought to be further investigated further before the making of a sequestration order. Nor am I satisfied that that the matters relied upon by the bankrupt would suffice to demonstrate a viable factual or legal basis for any counter-claim, set-off or cross demand for a sum equal to or exceeding the amount of the judgment in this case. The bankrupt has accordingly not satisfied me of the existence of a claim against the petitioning creditor of the kind required to engage the discretion conferred by par 52(2)(b) of the Bankruptcy Act. Nor has she otherwise demonstrated there is some other sufficient cause why the order should not be made: cf Re Sarina (1980) 30 ALR 266, 267-268 (Deane J).
[69] For the avoidance of doubt, had I otherwise been satisfied by the bankrupt that there was other sufficient cause why a sequestration order ought not to be made, I would not in all of the circumstances of this case have been persuaded to exercise the discretion conferred by s 52(2) of the Bankruptcy Act to make an order to dismiss the petition.
35 Having considered the evidence and other material that was before the primary judge, I am not satisfied that the Appellant has established any legal, factual or discretionary error demonstrated in the orders that were made by the primary judge: Whiteman at [61]. I am of this view for the reasons that follow.