Ozer v Australian Liquor Marketers Pty Ltd

The reasoning of the primary judge 5 His Honour first examined whether the sequestration order made on 12 April 1999 ought to have been made. He accepted the evidence of Ms Ozer to the effect that her brother, Mr Hakan Ozer, had forged her signature on the written guarantee given to ALM. The primary judge was accordingly satisfied that the sequestration order ought not to have been made. 6 The primary judge then examined, whether, in the circumstances, he should exercise his discretion to grant the annulment. In doing so, his Honour referred to Marek v Tregenza (1963) 109 CLR 1. In Marek's case the High Court held that the conduct of a bankrupt can be considered in determining whether or not the Court should exercise its discretion to grant an annulment. 7 In considering the exercise of his discretion, the primary judge referred to the conduct of Ms Ozer in applying for the loan and to her conduct in initially refusing to co-operate with Mr Pascoe. He held that the last mentioned conduct amounted to a breach of s54(1) of the Act but said that: "…if it were the only offence committed by the debtor in relation to the bankruptcy, I would not have exercised against her the discretion which is conferred on me by s153B of the Act." 8 His Honour took a different approach to the relevance of the attempt to obtain a loan from the bank. Having earlier in his reasons observed that, being an attempt to commit an offence against s269(1)(a) of the Act, such conduct constituted an offence against s7(1) of the Crimes Act 1914 (Cth), the primary judge said at para 40: "…I take an entirely different attitude to the debtor's conduct of having attempted to obtain credit from the St George Bank without disclosing her status as an undischarged bankrupt than I do to her breach of subs 54(1) of the Act. The offence involved is a much more serious one than the offence against subs 54(1) of the Act (as appears from their respective maximum penalties). It is significant that the debtor did not seek to deny before me that she had engaged in the relevant conduct. Indeed, her tendering in her own case of the trustee's report in which it was asserted that she had engaged in the relevant conduct appears to me to have amounted in effect to an acknowledgment by her that she had engaged in the relevant conduct. Further, unlike her attempt to excuse herself as to the trustee's complaint about her statement of affairs by relying, in effect, on her ignorance, she made no attempt whatever to offer an excuse to the Court for the conduct presently under discussion, nonetheless though the creditor made that conduct part of its case for my refusing her an annulment. In the circumstances, I do not consider that it would be a sound exercise of my discretion to annul her bankruptcy." 9 It is important to note that the primary judge's attention was not drawn to the fact that notice of the annulment application had been served on the bank prior to 12 July 1999.

The s269 point 10 Counsel for Ms Ozer referred to the finding of the primary judge that: "On 12 July 1999, the debtor sought to borrow $20,000 from the St George Bank Limited, but without disclosing to it that she was an undischarged bankrupt. Her attempt failed, however, when the bank, in the course of processing her loan application, conducted a search revealing that she had that status."

11 In consequence of leave to amend the grounds of appeal granted at the hearing, counsel for Ms Ozer took issue with his Honour's conclusion that Ms Ozer's attempt to borrow $20,000 from the bank was an attempt to "obtain credit to the extent of $3,000 or more" from the bank. See s269(1)(a) of the Act. We would emphasise that this was not put in issue before his Honour. 12 Counsel contended that if the loan sought by Ms Ozer had been obtained it would have been immediately repayable. There would be no point of time, so the argument ran, at which Ms Ozer would have obtained credit. Counsel distinguished that situation from the following circumstances: · where a loan was only repayable on demand, or · where terms of repayment had been specified. In each of those cases credit would be extended respectively until: · a demand was made for repayment, or · the terms of repayment were being complied with.

13 We see no reason why we should infer that the loan which Ms Ozer attempted to obtain, or which would have been obtained had the attempt succeeded, was or would have been immediately repayable. Having regard to the inadequate state of the evidence on this matter, it is not an inference we are prepared to draw from the finding of the primary judge that "the debtor sought to borrow $20,000 from the St George Bank Limited". Given our later conclusion that the appeal must be allowed, we express no concluded view on the true character and effect of the loan applied for, be it for $20,000 or some lesser sum. That will be a matter for the primary judge on such evidence as may then be before him.

Consideration of other issues 14 The judgment of the primary judge was a discretionary decision such that it is necessary for Ms Ozer to demonstrate an error of the kind referred to by Dixon, Evatt and McTiernan JJ in House v The King (1936) 55 CLR 499, at 504-505 where their Honours said: "It is not enough that the judges composing the appellate court consider that, if they had been in the position of the primary judge, they would have taken a different course. It must appear that some error has been made in exercising the discretion. If the judge acts upon a wrong principle, if he allows extraneous or irrelevant matters to guide or affect him, if he mistakes the facts, if he does not take into account some material consideration, then his determination should be reviewed and the appellate court may exercise its own discretion in substitution for his if it has the materials for doing so." 15 In exercising his discretion, it was clearly open to the primary judge to take into account what might be termed "adverse conduct" of Ms Ozer. So much was well established after Marek (supra). Ms Ozer's complaint, nonetheless, is that excessive reliance was placed on that conduct notwithstanding that sequestration should never have occurred. The first step for the primary judge was to consider whether sequestration should not have occurred. Having so found it was not automatic that his discretion would be exercised in favour of Ms Ozer. Her "adverse conduct" was relevant and his Honour was entitled to give it considerable weight. A complaint that there was "excessive reliance" on that conduct by his Honour is not an appropriate attack on the exercise of a discretion. However, it remains a significant matter that his Honour's attention was not drawn to the notice of annulment having been served on the bank by her solicitor prior to Ms Ozer's loan application. 16 The authorities establish that it is an offence not to disclose one's bankruptcy at each dealing with another person when credit in excess of $3,000 is sought to be obtained. (See for example R v Scott (1996) 137 ALR 347 at 353 per Doyle CJ, with whom Cox and Matheson JJ agreed). The severity of that offence may be lessened when one considers the circumstances in which the bank had been informed of Ms Ozer's bankruptcy in the previous month. The evidence, though, does not reveal whether Ms Ozer was aware prior to her loan application that her solicitor had served notice of the annulment application on the bank and, if she was so aware, what belief she entertained as to the bank's knowledge of her bankruptcy at the time of the application. 17 Given the significance the primary judge attributed to Ms Ozer's making of the loan application, we consider that were his Honour alerted to the solicitor's notice, further inquiry would probably have been suggested before his Honour was prepared to characterise her conduct in the manner that he did and, hence, exercise his discretion as he did. The lack of consideration of the service of the notice and of any examination of Ms Ozer's state of mind concerning the notice and its effects at the time, makes it necessary for the matter to be remitted to the trial judge. Such is the possible materiality we attribute to the notice. We would emphasise, though, that we regard this course as unfortunate. Its need arises for reasons unrelated to his Honour's treatment of the issues raised before him.

18 Additionally it should be borne in mind that his Honour specifically referred to other submissions having been put to him to urge him to exercise his discretion against the annulment. Were his Honour to have regarded the loan application in a somewhat different light having been alerted to, and examined, the service of the notice and its significance in the circumstances, his Honour may well have taken a different view of the need to deal with those other submissions.

Costs 19 Having regard to the way the case before the primary judge was conducted on behalf of Ms Ozer, including the failure to highlight all relevant material, we make no order as to costs. We do so notwithstanding that we have allowed the appeal. Indeed counsel for each party agreed that such a result would be a fair one in the event that the matter was remitted to the primary judge for reconsideration of the exercise of his discretion.

Order 20 The order of the Court is: 1. The appeal be allowed 2. The matter be remitted to the primary judge for reconsideration. 3. There be no order as to costs. I certify that the preceding twenty (20) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justices Finn, Marshall & Goldberg.

Solicitor for the 1st Respondent: P A Somerset & Co

Solicitor for the 2nd Respondent: Gordon and Johnstone