Russo v CHEP Australia Ltd [2022] FCA 949 | Case summary

Consideration 39 It is elementary that upon this appeal by way of rehearing pursuant to s 24(1)(d) of the Federal Court of Australia Act 1976 (Cth), in order to succeed the appellant must demonstrate error of law, of fact or in the exercise of discretion by the primary judge. The present appeal is not an invitation for this Court to approach the discretion afresh absent demonstration of error. 40 What is sought to be attacked by the appeal grounds is error which infects the exercise of the discretion by the primary judge not to "go behind" the default judgment for the reasons identified at PJ [33]. Before turning to how the discretion was exercised in this matter, it is important to understand the nature of the discretion, the favourable exercise of which was sought by Mr Russo. The plurality reasons of Kiefel CJ, Keane and Nettle JJ in Ramsay addressed the existence and scope of the discretion in the following passages: 54. In point of principle, scrutiny by a Bankruptcy Court of the debt propounded by a judgment creditor seeking a sequestration order in no sense involves an attempt to impeach the judgment. A Bankruptcy Court is not concerned with whether the judgment should be set aside as upon an appeal, or even as a default judgment or a judgment obtained by fraud may be set aside; nor is a Bankruptcy Court concerned to deny the effect of the judgment as "res judicata" between the parties to it. A Bankruptcy Court is not concerned to prevent the judgment creditor from invoking the ordinary processes of execution available under the general law. Rather, a Bankruptcy Court is concerned with whether the debt on which it is based is truly a basis for the making of a sequestration order . A Bankruptcy Court has a statutory duty to be "satisfied" as to the existence of the petitioning creditor's debt; a creditor should not be able to make a person bankrupt on a debt which is not provable. 55. The scrutiny required by s 52 as to whether there is, in truth and reality, a debt owing to the petitioning creditor serves to protect the interests of third parties, particularly other creditors of the debtor. It is of critical importance to appreciate that such persons were not parties to the proceedings that resulted in the judgment debt. It has long been recognised that their interest in being paid their debts in full should not be prejudiced by the making of a sequestration order in reliance on a judgment debt which does not reflect the true indebtedness of the debtor to the petitioning creditor…. … 72. The Full Court was correct to conclude that there was a substantial question as to whether the debt on which Ramsay relied was owing. That being so, the Bankruptcy Court should proceed to investigate this question in order to decide whether it was open to it to make a sequestration order. (Footnotes omitted.) 41 In separate concurring reasons, Edelman J at [110] and [111] said in part; …The circumstances which enliven the discretion to go behind the judgment are not constrained to any categories, even when the judgment debt was obtained after a contested hearing. As for the exercise of the discretion to go behind the judgment and to conduct a hearing into whether the underlying debt existed (which was not in issue on this appeal), Barwick CJ said in Wren v Mahony that the discretion to accept a judgment as satisfactory proof of a debt "is not well exercised where substantial reasons are given for questioning whether behind that judgment there was in truth and reality a debt due to the petitioner". The reference to "substantial reasons" echoed the language of earlier cases including a reference to "a prima facie case impeaching the judgment", by which the courts meant that there were prima facie grounds upon which a court of equity would choose to intervene. Whether a matter will amount to substantial reasons so as to permit the exercise of the discretion will depend upon the particular circumstances. But, as history shows, where a judgment debt has been obtained after the testing of the merits in adversarial litigation, then in the absence of some evidence of fraud, collusion, or miscarriage of justice, a court exercising bankruptcy jurisdiction will rarely have substantial reasons to investigate whether the debt which merged in the judgment was truly owed (Original emphasis. Footnotes omitted.) 42 On the evidence that was before the primary judge, the substantial reason or issue that Mr Russo agitated in order to enliven the discretion to inquire into the existence of the underlying debt concerned the authority of Mr Singh to place orders for pallets on behalf of the company. If the primary judge had been satisfied that the circumstances as presented to him justified the exercise of his discretion to inquire into whether he should accept the default judgment as satisfactory proof of the debt relied upon by CHEP, then, as the second step, his Honour was obliged to conduct a hearing into that issue (although in appropriate cases the steps may be combined): Cristovao v Tan & Tan Lawyers Pty Ltd [2018] FCAFC 41 at [34], Bromberg, Mortimer and Lee JJ. 43 On the first question Mr Russo carried the initial or tactical onus: Ali v Retail Decisions Pty Ltd [2012] FCA 1130 at [20], Bromberg J. Further, as has been frequently remarked, where the judgment relied upon was obtained by default "the court in bankruptcy will more readily look behind" it: Wolff v Donovan (1991) 29 FCR 480 at 486, Lee and Hill JJ. 44 The primary thrust of the submissions put to me by counsel for the appellant is that Mr Russo put in issue the question whether Mr Singh had actual or ostensible authority to bind the company by placing the orders that resulted in the delivery of the disputed pallets in January and February 2020, and, despite the extensive affidavit and documentary evidence that Mr Russo relied upon, he was not cross-examined upon his evidence, none of it was referred to in the reasons of the primary judge and "the disconnect between the manner in which approved orders had been placed in 2019 and the disputed orders had been placed in 2020 was not referred to or discussed." As further submitted, it is telling in favour of the case of Mr Russo, that CHEP did not lead evidence from any person who actually had dealings with Mr Russo or Mr Singh in relation to the disputed orders. 45 In oral submissions before me, counsel emphasised the well-known decision of the Privy Council in Russo-Chinese Bank v Li Yau Sam [1910] AC 174 delivered by Lord Atkinson, who at 184 said: It is undoubted that a person who deals with an agent, whose authority he knows to be limited, as the plaintiff knew in this case, does so at his peril, in this sense, that should the agent be found to have exceeded his authority his principal cannot be made responsible. While the several authorities cited… establish, in their Lordships' opinion, the proposition that, in order that the principle of "holding out" should in any given case of agency apply, the act done by the agent, and relied upon to bind the principal, must be an act of that particular class of act which the agent is held out as having a general authority on behalf of his principal to do; and, of course, the party prejudiced must have believed in the existence of that general authority and been thereby misled. In other words, if the agent be held out as having only a limited authority to do on behalf of his principal acts of a particular class, then the principal is not bound by an act done outside that authority, even though it be an act of that particular class, because, the authority being thus represented to be limited, the party prejudiced has notice, and should ascertain whether or not the act is authorised. 46 On the facts of this matter, counsel for Mr Russo emphasised that the authority of Mr Singh was limited. First, reliance was placed upon the terms of the credit application which only references Mr Russo as the contact person. Whilst that is so, as correctly observed by counsel for CHEP, the historic fact is that between October and at least November 2019, Mr Singh, with the knowledge of Mr Russo, is the person who placed orders for pallets which orders are not in dispute. 47 Secondly, it was submitted that the authority of Mr Singh was limited to the placement of orders by use, and use only, of the authorised email account. That submission was then sought to be tied to the terms document of which it was said "make[s] it clear that orders may only be placed with the Respondent by the company, Baby Blue Group, or its lawfully authorised agents or representatives." The terms document is not as clear as that, but in any event it does not assist me for the reason that the question that was put in issue before the primary judge was the authority of Mr Singh to place orders on behalf of the company as its agent or authorised representative. 48 Thirdly, the evidence did not justify the conclusion of the primary judge that Mr Singh was always held out as an employee of the company such that no representation about any usual authority that may attach to an employee of a corporation was made by the company to CHEP. On this submission, CHEP was not entitled to make the statutory assumption at s 129 (3) of the Corporations Act 2001 (Cth) because Mr Singh was only held out as authorised to place orders by use of the authorised email account. At no point did the company hold out Mr Singh as having its authority to place orders by use of the Gmail address. 49 Counsel developed these arguments in order to attack as unsupported by the evidence critical findings of fact that were apparently made by the primary judge at PJ [33] which, it should be inferred, are each founded upon uncritical acceptance of the evidence of Ms Tadros at paragraph [6] of the Tadros affidavit. The subparagraphs in the affidavit that were focused upon are (a) and (b), set out above, together with (h) and (i) as follows: h. On 30 March 2020 Chantelle Dixon (National Security Manager of the Applicant) emailed the Respondent, informing him that: i. Mr Singh ordered pallets of the Company, using Mr Singh's Email Address and she had seen an email from Mr Singh dated 5 November 2019 ordering CHEP equipment on behalf of the company and understood that the email address has been utilised to hire CHEP equipment since the account was opened; and ii. Mr Singh signed for the pallets at the Company's address upon their delivery. Set out at pages 2 to 19 of the Bundle is a copy of the email sent by Chantelle Dixon to the Respondent and the attachments therein, which Chantelle Dixon forwarded to me on 27 April 2020. i. Lindsay Transport Australia provides services for the Applicant, including receipt of orders and delivery in response to those orders. On 27 April 2020, Chantelle Dixon forwarded me an email chain between Chantelle Dixon and Marie Livingston (sic) of Lindsey Transport Australia in relation to the alleged fraudulent hires. Ms Livingstone informed the Applicant that "[Lindsey Transport] - Coffs Harbour have only dealt with [the Gmail address]". Set out at pages 20 to 22 of the Bundle is a true copy of the email chain forwarded to me on 27 April 2020, with the irrelevant parts redacted. (Original emphasis.) 50 The difficulty with paragraph (h) is that when one turns to pages 2-19 of the attached bundle, only two emails from Mr Singh are exhibited. Each is from the Gmail address. One is dated 5 November 2019 and (as explained above) cannot be reconciled with the delivery dockets and the other is dated 6 February 2020, which is an order for 60 of the disputed pallets. A further difficulty is that the statement attributed to Ms Livingstone at paragraph (i) was directly contradicted by the affidavit evidence of Mr Russo of 16 August 2021, where he attached numerous copies of email correspondence between Mr Singh and Lindsay Transport within the period 3 October until 26 November 2019, all of which was sent from or to the authorised email account. The primary judge did not reference these matters in his decision. 51 Counsel for CHEP commenced her submissions by emphasising inconsistencies in the affidavit evidence of Mr Russo. In particular, the statement made in the credit application that the company had three employees, in contrast with his later claims that it did not have any; inconsistencies in the dates given by Mr Russo as to when the company ceased to trade at the Coffs Harbour premises; the statement that Mr Russo was the only person authorised to place orders on the account of the company, when it is plain that for a considerable period Mr Singh did so; and whether Mr Singh was an employee or simply a person who "assisted" the company in the placement of orders. Drawing upon those inconsistencies, it was submitted that Mr Russo had contradicted himself in his evidence upon material questions, being who was authorised to place orders on behalf of the company, whether the orders could only be placed by use of the authorised email account and the date of cessation of trading at the Coffs Harbour premises. That there were contradictions may be accepted, but their existence was not adverted to by the primary judge in his apparent resolution of contested evidence adversely to Mr Russo. 52 It was further submitted that the credit application did not, on its face, provide that Mr Russo was the only person authorised to place orders, nor did it limit the method by which orders may be placed to exclusive use of the authorised email account. The course of dealing between the company and CHEP for the ordering and delivery of pallets that were not in dispute, whereby Mr Singh placed orders by email and by reference to the account number of the company, amounted to a representation that he had its authority to place orders. On that analysis, it does not matter that he used, for the placement of some orders, the Gmail address. Additionally, CHEP is entitled to rely on the statutory assumption of authority provided at s 129(3) of the Corporations Act. In response to the submission that the primary judge erred in receiving inadmissible evidence (where there was no opportunity to object) and further erred in not adverting to the need to allow cross-examination of witnesses on disputed questions of fact, counsel submitted that the unilateral attack that is now mounted by Mr Russo, if permitted, will cause prejudice to CHEP in that, if these matters had been raised at the trial, CHEP could have responded by adducing further evidence or by testing the evidence of Mr Russo by cross-examination. In summary, it was put to me that "strategic decisions were made. The egg cannot be unscrambled." 53 It must not be overlooked that the appeal grounds challenge the exercise of the discretion of the primary judge not to "go behind" the default judgment. The Act does not set out criteria for the exercise of that discretion, such as by listing permissible, mandatory or prohibited criteria. The exercise of the discretion falls to be determined in accordance with the particular facts and circumstances that were before the primary judge. To succeed, Mr Russo must establish error in the exercise of the discretion: House v The King (1936) 55 CLR 499 (House) at 504-505, Dixon, Evatt and McTiernan JJ. More recently the House principles were addressed by Leeming JA in Park Trent Properties group Pty Ltd v ASIC (2016) 116 ACRS 473; [2016] NSWCA 298 at [51]- [53]: 51. Two things of present importance emerge from the reasons of Gummow ACJ, Kirby, Hayne and Heydon JJ in Macedonian Orthodox Community Church St Petka Inc v His Eminence Petar The Diocesan Bishop of The Macedonian Orthodox Diocese of Australia and New Zealand (2008) 237 CLR 66; 249 ALR 250; [2008] HCA 42 (His Eminence Petar). The first is the proposition accepted at [120] that: "when a court is invited to make a discretionary decision, to which many factors may be relevant, it is incumbent on parties who contend on appeal that attention was not given to particular matters to demonstrate that the primary judge's attention was drawn to those matters, at least unless they are fundamental and obvious." 52. The second is the explanation of the nature of the "orthodox approach to appellate intervention in relation to discretionary decisions" described at [137]-[138]. There it was pointed out that the expression "balancing exercise" is one to be employed with care, and that where (as in the present case) no statute mandates that particular weight be given to any one factor: "[T]he question of what weight the relevant factors should be given or what balance should be struck among them is for the person on whom the discretion is conferred, provided no error of law is made, no error of fact is made, all material considerations are taken into account and no irrelevant considerations are taken into account, subject to the possibility of appellate intervention if there is a plain injustice suggesting the existence of one of the four errors just described even though its nature may not be discoverable, or if there is present what has come to be known as 'Wednesbury unreasonableness'." 53. The same passage confirms that it is wrong to apply the words from House v R in isolation, as if they were not qualified by an absence of reasons explaining how the decision was reached. Park Trent's selective statement of the principle upon which it relied has a tendency to dilute the test. The entire relevant passage from House v R, which was restated in the passage from His Eminence Petar, was as follows: "It may not appear how the primary judge has reached the result embodied in his order, but, if upon the facts it is unreasonable or plainly unjust, the appellate court may infer that in some way there has been a failure properly to exercise the discretion which the law reposes in the court of first instance. In such a case, although the nature of the error may not be discoverable, the exercise of the discretion is reviewed on the ground that a substantial wrong has in fact occurred." Of course, that is not the present case, where the reasons of the primary judge are elaborate. 54 Ground 2 of the appeal grounds is narrowly focused. It is concerned first with whether the findings of the primary judge at [33] were supported by the evidence, secondly whether those findings were based on inadmissible evidence, thirdly that the primary judge ought to have found that Mr Singh did not have authority to place orders on behalf of the company otherwise than by use of the authorised email account and fourthly the absence of a positive finding that Mr Singh had authority to bind the company in placing the disputed orders. It is not sufficient for Mr Russo to contend that upon my review of the evidence, I should arrive at a different factual conclusion to that of the primary judge on the question of the authority of Mr Singh: Gronow v Gronow (1979) 144 CLR 513 at 519-520, Stephen J; Qantas Airways Ltd v Transport Workers' Union of Australia (2022) 402 ALR 1; [2022] FCAFC 71 at [359], Bromberg, Rangiah and Bromwich JJ. 55 Further what must be acknowledged is that even if it is accepted that Mr Singh fraudulently placed the disputed orders on the account of the company, the difficulty faced by the appellant is that nonetheless the company is liable to CHEP if it acted in good faith upon those orders, without notice of the fraud or absence of authority and if placed within the scope of Mr Singh's apparent authority: NIML Ltd v Man Financial Australia Ltd (2006) 15 VR 156; [2006] VSCA 128 at [27]-[35], Nettle JA; International Paper Co v Spicer (1906) 4 CLR 739; Bowstead & Reynolds on Agency (22nd ed, Sweet and Maxwell, 2021) at [8-062]-[8-064]; 56 There is no dispute in the evidence, and the primary judge did not misunderstand, that Mr Singh was clothed by the company with authority to use the authorised email account, was authorised by it to place orders for pallets, placed orders between June and November 2019 which orders were invoiced to and paid by the company with the combined consequence that there was a holding out by the company to CHEP that Mr Singh acted with its authority. So viewed, it is simply not to the point that the primary judge found, contrary to the evidence, that Mr Singh was an employee of the company. Rather, the question is whether he was held out by the company to CHEP as having its authority to order pallets on its behalf for delivery to the Coffs Harbour premises, either generally or limited to the placement of orders by use, and use only, of the authorised email account. It is the scope of the apparent authority, examined through the lens of the representation and conduct of the principal, which is determinative of the estoppel which binds a principal to honour unauthorised acts of the agent: Freeman and Lockyer (a firm) v Buckhurst Park Properties (Mangal) Ltd [1964] 2 QB 480 at 503, Diplock LJ. 57 It may be the case that ultimately upon investigation of the claimed limitation of authority, that Mr Russo may not be able to make good his central contention, but that is not to the point: the issue is whether Mr Russo identified a sufficient or substantial reason to engage the exercise of the discretion of the primary judge to interrogate that question and, correspondingly, whether the discretion miscarried (as based on the apparent factual findings of the primary judge at [33]) because the facts which were found were not open on the evidence or were based on evidence that ought to have been rejected as inadmissible. 58 Although each subparagraph at PJ [33] is premised with the words "as the evidence shows" I infer that this paragraph sets out the findings of fact made by the primary judge upon his consideration of the evidence. It must also be the case that the primary judge accepted as correct, and found in accordance with, the evidence that he summarised at PJ [27], which was, critically, to the effect that Mr Singh "had only ever placed orders" by use of the Gmail address which orders were "paid for by Baby Blue and where it is not suggested that they were ordered fraudulently". The structure of the reasons of the primary judge leads me to conclude that the finding at PJ [33(3)] must be based upon acceptance of the evidence at PJ [27] and inferentially that was sufficient for the primary judge to be satisfied that placement of the disputed orders was at least within the ostensible authority of Mr Singh. 59 For several reasons, in my view, the primary judge erred in so finding. First, the finding that the company "sought and received pallets" between June 2019 and February 2020 does not accord with the evidence of Ms Tadros in the Tadros affidavit where she stated at paragraph [5] that the debt relied upon relates to the provision of pallets to the company between December 2019 and April 2020. 60 Secondly, implicitly the finding that the company "sought and received" pallets must be based upon acceptance by the primary judge of the evidence summarised at PJ [27] that the company, by Mr Singh, "had only ever" placed orders by use of the Gmail address. As I have explained, that fact is not supported by the bundle of documents attached to the Tadros affidavit and was directly contradicted by documentary evidence being the multiple emails sent and received between Mr Singh and Lindsay Transport within the period 3 October and 26 November 2019. 61 Thirdly, the internal investigation undertaken by Ms Dixon, which concluded that Mr Singh only used the Gmail address to place orders, accepted at face value the statement to that effect made by Ms Livingstone in her email to Ms Dixon of 31 March 2020, which was plainly contradicted by the various emails that Mr Russo attached to his affidavit of 16 August 2021. CHEP made no attempt to reconcile this inconsistency by placing further evidence before the primary judge. 62 Fourthly, Ms Tadros stated in her affidavit at paragraph [6(b)] that between 5 November and 29 November 2019 orders that were placed by Mr Singh using the Gmail address were invoiced to the company, which invoices were duly paid, evidenced by the recipient created tax invoice at page 1 of the documents attached to the affidavit. As I have explained, that tax invoice cannot be reconciled to the placement of any particular orders, let alone multiple orders that were said to have been placed within that period by Mr Singh. 63 Fifthly, the disputed orders as evidenced by the delivery documents relate to the period 3 January 2019 to 12 February 2020. It is not in dispute that Mr Russo advised CHEP in writing on 10 February 2020 that he wished to close the company account which resulted in advice from CHEP to Mr Russo on that day that "YOUR CHEP ACCOUNT HAS BEEN SUSPENDED". Ms Tadros did not explain in her affidavit how suspension of the account is to be reconciled with her statement at paragraph [5] that the debt relates to the provision of pallets to the company between December 2019 and April 2020 nor why pallets were delivered after 10 February 2020. 64 Sixthly, Ms Tadros did not attach to her affidavit copies of the emails said to have been sent by Mr Singh by use of his personal email address for all of the disputed deliveries of pallets between 3 January and 12 February 2020. There were only two emails sent by Mr Singh for pallet orders on the Gmail address that were in evidence before the primary judge. One is dated 5 November 2019 and is for 60 pallets. The other is dated 6 February 2020 and is also for 60 pallets. Ms Tadros stated in her affidavit that all invoices rendered to the company in 2019 had been paid. But, as I have explained, the one document that she attached as evidence of that statement, being the recipient created tax invoice of 6 December 2019, cannot be reconciled as payment of any particular order or invoice. And plainly it is not an invoice for multiple orders. That evidence does not support the apparent acceptance by the primary judge of the evidence that he summarised at PJ [27] that all previous orders that had been placed by Mr Singh by using the Gmail address were duly paid by the company. 65 Seventhly, the primary judge apparently found at [33(6)] that the pallets received by the company had not been returned. The claim was for 586 pallets. In contrast, the delivery dockets for the disputed pallets were for 570 and the evidence of CHEP failed to reconcile that discrepancy. 66 With respect to the primary judge, his finding at PJ [33(3)] that the disputed pallet deliveries were "sought and received" by the company is not supported by the evidence that CHEP placed before his Honour. That finding implicitly proceeds upon acceptance by the primary judge that either Mr Singh had express authority to place the disputed orders or that the company represented to CHEP that the placement of the disputed orders was within the scope of his authority such that the company is estopped from denying authority. Express authority was directly contradicted by the evidence of Mr Russo. His Honour did not make an express finding of apparent authority but he must have resolved that issue adversely to Mr Russo based on the evidence which he summarised at PJ [27]. That summary in a critical respect was not supported by all of the evidence before his Honour in that the claim by Lindsay Transport that it "only ever" dealt with Mr Singh through the Gmail address directly conflicted with the copy emails that were attached to the affidavit evidence of Mr Russo. That was contemporaneous documentary evidence which clearly had far greater probative weight than the hearsay statement made by Ms Livingstone to Ms Dixon. 67 On this analysis resort to the assumption that may be made pursuant to s129(3) of the Corporations Act does not assist CHEP as it begs the question whether Mr Singh was "held out by the company" as its agent with the "authority to exercise the powers and to perform the duties customarily exercised or performed" by an agent of a similar company. If the holding out was limited, in the manner contended by Mr Russo to use only of the authorised email account, it follows that reliance on the assumption does not resolve the issue before the primary judge. 68 For these reasons I have concluded that ground 2(a) is made out. The primary judge declined to exercise his discretion to go behind the judgment debt based on findings of fact that were not supported by the evidence, were contrary to certain evidence that was before him and in circumstances where he made no attempt to reconcile the inconsistencies. 69 I turn next to ground 2(b). The reference to evidence that was "obviously inadmissible" is to paragraph 6 of the Tadros Affidavit where she deposes that in the course of her employment she has access to "the books and records" of CHEP, that she makes the affidavit "from my own knowledge and belief" and where she refers to information "given to me by another" she identifies its source and states her belief as to its truthfulness. The subparagraphs in question are (a), (b), (h) and (i), each of which are set out above. In summary, senior counsel for Mr Russo submitted that: (a) is inadmissible in that it purports to summarise the effect of documents which were inspected but not produced, (b) is to the same effect as (a) and should have been rejected as hearsay, (h) contains a hearsay summary of the results of an investigation by third person and (i) is also a hearsay summary of information supplied by third person who did not make an affidavit and was not available for cross-examination. 70 Counsel for CHEP submitted that it is open to a petitioning creditor to verify a petition by relying upon affidavit evidence that is strictly hearsay. That is so for verification to comply with s 47(1) of the Act where the deponent is an authorised person with sufficient knowledge of the facts: Daly v Watson (1994) 50 FCR 544 (Daly), Davies Beaumont and Gummow JJ; Re Cirillo; Ex parte Commissioner of Taxation (1992) 36 FCR 279, von Doussa J and ACW v Du Bray (No 2) [2020] FCA 994, Wigney J. However, as explained in Daly "strict proof" may be required on the hearing of a contested application where s 52 (1) requires proof of the matters stated in the petition, its service and the fact that the debt relied upon is still owing: Davies J at 546 and Beaumont and Gummow JJ at 542-543. In my view, each of the admissibility submissions that I have summarised is of merit and if objection had been taken at the hearing, it is likely that all (or substantial portions) of these paragraphs would not have been received in evidence. The primary judge in the particular circumstances should have at least informed Mr Russo of his right to object to inadmissible evidence (Johnson v Johnson (1997) 139 FLR 384 at 407, proposition 5), it was an error not to do so which was productive of the further error that this evidence was relied upon to make findings of fact critical to the unfavourable exercise of the discretion. 71 Counsel for CHEP further submits that if admissibility objections had been taken at the hearing, then the petitioning creditor would have had a fair opportunity to respond "or otherwise address the matters raised", which I infer includes an adjournment in order to prepare, file and serve affidavits in admissible form. The difficulty with this submission is the anterior error committed by the primary judge: he did not, with respect, adopt an orthodox approach to the receipt of evidence upon the hearing. He did not identify the affidavits sought to be relied upon by the parties, those affidavits were not formally read, no opportunity was afforded to either party to take objection to the content of opposing affidavits and no opportunity was afforded to cross-examine. If Mr Russo had been legally represented at the hearing it may be (indeed there is a realistic possibility) that objections would have been taken to inadmissible portions of the Tadros affidavit on each of the grounds now identified. 72 The Full Court in Boensch ,recently summarised the obligations of a primary judge (in a bankruptcy case) to conduct a procedurally fair trial where a party does not have legal representation at [85]- [88] and concluded at [104] as follows: There is a general duty to ensure that a litigant in person does not suffer any disadvantage from exercising his or her right to be self-represented. This includes an obligation to ensure that the litigant does not remain ignorant of a fundamental principle which, if invoked, might prove advantageous to his or her case. It has been recognised that in providing assistance the court should be concerned not to place the litigant in person in a position of advantage over his or her represented opponent. The assistance is to be limited to diminishing the disadvantage in which the litigant in person might otherwise find him or herself. That includes taking appropriate steps to ensure that the litigant in person has sufficient information about the practice and procedure of the court to enable the litigant to make effective choices about the conduct of his or her case. 73 And as further observed by the Court at [88] by reference to Culleton v Balwyn Nominees Pty Ltd (2017) 343 ALR 632; [2017] FCAFC 8 (Allsop CJ, Dowsett and Besanko JJ) particular care must be taken upon an application for sequestration of an estate as it is not simple inter partes litigation. 74 Although this ground of the appeal is not framed as a denial of procedural fairness (or failure to conduct the trial according to law), I am of the view that in the particular circumstances the primary judge ought not have acted upon the paragraphs in the Tadros affidavit which were objectionable as hearsay and where each went to the critical question of whether his Honour was satisfied that he had satisfactory proof of the contested debt, and if not, whether he should have exercised his discretion to go behind the default judgment debt. What is clear from PJ [33] is that his Honour's expressed state of satisfaction that "there is no proper basis to go behind" the petitioning creditor's claimed debt is based on acceptance of the hearsay evidence at paragraph 6 of the Tadros affidavit. In the circumstances of this case, his Honour with respect was wrong to do so. He ought to have appreciated that this evidence was not admissible and even in the absence of objection by Mr Russo (where no opportunity to do so was afforded) it was an error to rely upon it. 75 For these reasons ground 2(b) is made out. 76 Ground 2(c) raises a contestable question on the assumption that if the primary judge had exercised his discretion favourably to Mr Russo, then he "ought to have found" that Mr Singh did not have actual or ostensible authority to place the contested orders and then ought to have concluded that the debt was not one of the company as guaranteed by Mr Russo. It is not possible for me to determine that ground on this appeal which is limited to the correction of error by the primary judge and, in any event, the primary judge did not make that error because he did not proceed to the second stage. 77 Having determined that grounds 2(a) and (b) are made out, the proper course is to allow the appeal and remit the matter to the Federal Circuit and Family Court of Australia (Division 2) for that Court to rehear the creditor's petition and in doing so to decide whether the discretion to go behind the default judgment is to be exercised. If the answer is that it should, then it will be a matter for that Court to determine how it will proceed in the conduct of the investigation. For these reasons, ground 2(c) is dismissed. 78 That leaves ground 3. It too is speculative and does not differ in substance to ground 2(c). I dismiss it for the same reasons. Outcome 79 For these reasons, I allow the appeal and I set aside the sequestration order made on 10 September 2021. The hearing of the creditor's petition upon the application to review of Mr Russo filed 21 May 2021 will be remitted to the Federal Circuit and Family Court of Australia (Division 2). Remittal for rehearing is not inutile. Although the creditor's petition was presented on 12 March 2021, it did not expire 12 months thereafter by operation of s 52 (4) of the Act for the reason that the sequestration order made by Judicial Registrar Ryan on 6 May 2021 still stands and Mr Russo's application for de novo review remains to be determined as explained by the Full Court in Bechara v Bates (2021) 286 FCR 166; [2021] FCAFC 34; at [144]- [156], Allsop CJ, Markovic and Colvin JJ. 80 It is appropriate that I hear from the parties and the Trustee before making consequential orders, including as to costs. I order as follows: (1) Leave is granted for the appellant to file the amended notice of appeal in the form handed to the Court on 26 July 2022. (2) The appeal is allowed. (3) The orders made by the Federal Circuit and Family Court of Australia (Division 2) on 10 September 2021 are set aside. (4) The hearing of the creditor's petition upon the review application of the appellant filed on 21 May 2021 is remitted to the Federal Circuit and Family Court of Australia (Division 2) for hearing. (5) The parties and the Trustee (should she wish to be heard) are to provide short written submissions, not to exceed 3 pages on the question of consequential orders and costs by not later than 4.00pm on 22 August 2022. (6) Subject to any further order or application by the parties or the Trustee, the determination of all consequential orders will be made on the papers. I certify that the preceding eighty (80) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice McElwaine.

Russo v CHEP Australia Ltd

At a glance

Court

Decision date

Before

Source

Judgment (6 paragraphs)

Parties

Legislation Cited (4)

Cases Cited (32)

Cited By (1)