Shannon v Commonwealth Bank of Australia [2014] FCAFC 108 | Case summary

Shannon v Commonwealth Bank of Australia [2014] FCAFC 108 | Case summary | Zoe

[13]

INTRODUCTION 1 There is in our society a popular phobia about a Friday which falls on the 13th day of a month. The origins of that phobia may well be rooted in Ancient History (J Roach, National Geographic News, 12 August 2004: http://news.nationalgeographic.com.au/news/2004/02/0212_040212_friday13.html, accessed 29 May 2014). The appellant, Mr Geoffrey Anthony Shannon, claims that he suffered more than just bad luck on Friday, 13 December 2013 but rather a wrongful dismissal of his application to vacate the trial date set down for the following Monday, 16 December 2013. 2 The trial accordingly proceeded on 16 December 2013 and, by a judgment delivered that day, the Court made orders on the application of the Commonwealth Bank of Australia (the CBA) setting aside a personal insolvency agreement entered into between the appellant, Mr Geoffrey Shannon, and the second respondent, Mr William Robson. The CBA was a creditor to whom Mr Shannon was substantially in debt when the personal insolvency agreement was voted upon at a creditors' meeting. However, its vote against the resolution was effectively rendered nugatory by reason of it having been admitted to vote in the amount only of $1 and the votes cast by creditors personally related to Mr Shannon. A sequestration order was also made against Mr Shannon's estate and the third respondent, Mr Maxwell Prentice, was appointed as the trustee in bankruptcy. 3 Mr Shannon appeals against the whole of the orders on the ground of an alleged denial of procedural fairness. The denial is said to arise from the primary judge's decision to refuse Mr Shannon's application on 13 December 2013 to adjourn the trial. As a result, Mr Shannon alleges that he was not afforded a proper opportunity to instruct new solicitors and was denied the opportunity to address certain matters ultimately taken into account. He also contends that the primary judge erred in failing to allow time for Mr Robson to give evidence. 4 For the reasons below, I am satisfied that there was no denial of procedural fairness and the notice of appeal otherwise exposes no appealable error. It follows that Mr Shannon's appeal must be dismissed.

[14]

The creditors' meeting on 26 June 2013 and execution of the personal insolvency agreement 5 A meeting of Mr Shannon's creditors was held under Pt X of the Bankruptcy Act 1966 (Cth) (the Act) on 26 June 2013. It was attended by creditors claiming to prove debts which amounted to a cumulative total of about $46 million. 6 A majority of Mr Shannon's creditors, by number and value, voted to require him to execute a draft personal insolvency agreement which had been circulated before the meeting. A debtor may only be required to execute a personal insolvency agreement by special resolution of his creditors: s 204(1)(b) of the Act. Section 5 of the Act defines a 'special resolution' to mean "a resolution passed by a majority in number and at least three-fourths in value of the creditors present personally, by telephone, by attorney or by proxy at a meeting of creditors and voting on the resolution". 7 Notwithstanding the value of debts claimed, Mr Shannon offered to contribute only $200,000 towards the payment of his debts under the draft agreement. That contribution was to be made with the assistance of a third party. A further $50,000 was to be paid to the second respondent, Mr Robson, who was then the "controlling trustee" for the purposes of s 188 of the Act. 8 The CBA had lodged two proofs of debt. The first claimed a debt owed to Bankwest, a division of the CBA, in the sum of $8,508,963.55. The second claimed a separate debt owing to the CBA for $755,546.46. While the second debt was admitted for voting purposes in the amount claimed, Mr Robson chose to value the proof of debt of Bankwest for voting purposes at only $1.00. 9 The CBA opposed the resolution to require Mr Shannon to execute the draft personal insolvency agreement. After taking into account the results of other proof valuation decisions made by Mr Robson, none of which were later challenged, the requisite vote of at least three-fourths in value was able to be achieved because of Mr Robson's decision as to the value for voting purposes of the Bankwest proof of debt. Moreover, by far and away, in value terms, those creditors who voted in favour of requiring Mr Shannon to execute the personal insolvency agreement were creditors personally related to him. 10 Mr Shannon executed a version of the personal insolvency agreement on 5 July 2013. It is necessary to state "a version" because the version executed by him differed somewhat from that which had been approved by special majority at the creditors' meeting.

[19]

Capacity to found an appeal against the final orders on an interlocutory decision 17 The order made on 13 December 2013 dismissing Mr Shannon's application was interlocutory. However, that does not mean that the only means open to him to challenge the correctness of that order was forthwith to have sought leave to appeal and a related stay. To the contrary, s 24(1E) of the Federal Court of Australia Act 1976 (Cth) (Federal Court Act) provides that: The fact that there has been, or can be, no appeal from an interlocutory judgment of the Court in a proceeding does not prevent: (a) a party from founding an appeal from a final judgment in the proceeding on the interlocutory judgment; or (b) the Court from taking account of the interlocutory judgment in determining an appeal from a final judgment in the proceeding. 18 The sequestration order was a final judgment and requires no grant of leave to appeal. Even so, as his appeal is grounded in a challenge to an interlocutory order, Mr Shannon must show that any error in that interlocutory order affected the final result: Michael Wilson & Partners Ltd v Nicholls (2011) 244 CLR 427 at [78]; Gerlach v Clifton Bricks Pty Ltd (2002) 209 CLR 478 at [4]-[7] (Gerlach v Clifton Bricks). In particular, in Gerlach v Clifton Bricks at [6]-[7], Gaudron, McHugh and Hayne JJ stated: 6 The proposition that any interlocutory order can be challenged in an appeal against the final judgment in the matter is often stated in unqualified terms. The better view, however, is reflected in the formulation adopted in Spencer Bower, Turner and Handley where it is said that "on an appeal from the final order an appellate court can correct any interlocutory order which affected the final result". (emphasis added). 7 It is necessary to make the qualification, "which affected the final result'', at least to reflect the well-established principle that a new trial is not ordered where an error of law, fact, misdirection or other wrong has not resulted in any miscarriage of justice. [Footnote references omitted] 19 The principle referred to in Gerlach v Clifton Bricks is a common law principle but nothing in s 24(1E) of the Federal Court Act evidences an intention to displace that principle. Neither Mr Shannon nor the CBA submitted otherwise.

[20]

The primary judge's reasons for exercising his discretion to refuse the adjournment application 20 The decision to refuse of Mr Shannon's application to adjourn the trial involved the exercise of a discretion. His Honour incorporated his reasons for that refusal in his reasons delivered on 16 December 2013. Given the nature of the challenge made by Mr Shannon, it would do less than justice to a consideration of the merits of that challenge and, I add, to the CBA or, indeed, the primary judge, not to set out in full his Honour's reasons for refusing the adjournment: The adjournment application on 13 December 2013 28 Last Friday, 13 December 2013, I refused the debtor's application for an adjournment of the two day final hearing that, on 31 October 2013, I had fixed to commence today. 29 On 25 September 2013, the registrar ordered that the debtor file and serve any affidavits upon which he sought, in these proceedings to rely by 25 October 2013. The matter came before me on 31 October 2013 and on the debtor's application, I ordered that he file and serve all the evidence on which he proposed to rely on before 14 November 2013. 30 On 14 November 2013, the then solicitors acting for the debtor wrote to the Bank referring to the orders that I had made on 31 October 2013, asserting that they had formed the view that these proceedings should be cross-vested with the other Supreme Court proceedings and that it was inappropriate for me to proceed to determine this application until such time as the Bank's proceedings in the Supreme Court were finally determined. Those solicitors asserted that they had been instructed to approach my associate to seek leave to bring an application to have the hearing of the matter fixed for 16 and 17 December 2013 vacated and, that accordingly, they would not be in a position to file the debtor's evidence on 14 November 2013. No such application was made. 31 The debtor said in an affidavit he swore on 12 December 2013 that the first time he had seen or heard of the orders made on 31 October 2013 was when he looked at them on the Federal Court eSearch service on the Court's website on 29 November 2013. He said he did the search after he had received calls from creditors who had received a letter dated 27 November 2013 from the Bank's solicitors notifying them of today's hearing under rr 9.04 and 10.04 of the Federal Court (Bankruptcy) Rules 2005 (Cth). 32 During the adjournment application the debtor and his former solicitor, Samuel Pitt, who had been present in court on 31 October 2013, gave oral evidence. It emerged from that evidence that Mr Pitt had not told or otherwise timeously informed the debtor of the orders that had been made on 31 October 2013. However, by 22 November 2013 the debtor knew of the two day hearing fixed to begin today and was present for meetings with Mr Pitt in Sydney during the week beginning 25 November 2013 to prepare for his various litigious matters. The debtor gave no satisfactory explanation as to why he did not take any steps either to seek to prepare his evidence late, or seek an adjournment of the hearing promptly. 33 Even after 29 November 2013, when he asserted he was shocked to learn of the hearing date of today still being in place, he did nothing to prepare to be ready and claimed this was because he had changed solicitors and then instructed his new solicitors who went on the record by 5 December 2013. On 9 December 2013 the debtor's new solicitors wrote to the Bank's solicitors seeking agreement to vacate the hearing date. That was unsurprisingly rejected. The new solicitors wrote an email on 10 December 2013 at about 4 pm to my associate and the Bank's solicitors recording their instructions to seek an adjournment and notifying that they were in the stages of finalising an affidavit in support. An interlocutory application and two affidavits by the debtor were made on 12 December 2013 and the interlocutory application for the adjournment was made returnable the next day. 34 When I inquired on 13 December 2013, of the debtor's counsel, what evidence his client would wish to prepare to oppose the Bank's claim, he listed the following: (1) material to answer the assertions in the affidavit of Onno Hornstra made on 28 August 2013 relating to the debtor's failures to disclose that he disposed of several interests in real and personal property in the five years preceding his statement of affairs made on 21 May 2013 to which I have referred above; (2) answers to matters in the affidavits of Mr Bates made on 22 August 2013 and 30 October 2013; (3) the trustee's having informed the debtor that he acted on legal advice in admitting Bankwest's proof of debt at the meeting for $1 and that the debtor may wish to call the trustee to give evidence concerning that matter; (4) explaining inconsistencies between his statement of affairs dated 21 May 2013 and his affidavit sworn on 5 February 2013 verifying his assets and liabilities in the Federal Magistrates Court proceeding; (5) explaining that the Bank or Bankwest had taken six unsuccessful proceedings against him before the one that was taken before Sackar J; and … (7) calling evidence from his father who, with DWS, were his major creditors. 35 I considered that the material that the debtor could rely on would be largely documentary and readily accessible to him through Court documents or property searches. The medical evidence that the debtor tendered included a report prepared by Dr Jacinta Guthridge dated 2 December 2013. She was a consultant physician geriatric specialist. Dr Guthridge diagnosed his father with dementia as well as other conditions. She stated that the father was not capable of making informed decisions about the decline in his health, accommodation needs, had a history of cognitive decline and he had global deficits on his mini mental state examination, particularly with recall, orientation as well as attention. She said that he had not managed his finances for the prior two years. 36 Accordingly, I was of opinion that the debtor's father would not have been a competent witness or capable of giving any reliable evidence. The debtor had had since late August 2013 to begin preparation to oppose the Bank's application. After learning of the hearing on 22 November 2013 he had done nothing to prepare while in Sydney the next week. More seriously, even after he said, falsely, that he had only learnt on 29 November 2013, of the orders for preparation of his evidence and the hearing today, he did nothing promptly to seek an adjournment or to prepare for the hearing. 37 The debtor and his lawyers owed duties to the court to co-operate under Pt VB of the Federal Court of Australia Act 1976 (Cth) in achieving the overarching purpose of the civil practice and procedure provisions, namely to facilitate the just resolution of disputes according to law as quickly, inexpensively and efficiently as possible. They owed those duties expressly pursuant to s 37N of the Act. The hearing dates had been fixed six weeks before the adjournment application was brought and therefore those dates were no longer available for other litigants who may have had urgent cases for hearing in the Court. 38 In Sali v SPC Ltd (1993) 116 ALR 625 at 629, Brennan, Deane, and McHugh JJ said: "In determining whether to grant an adjournment, the judge of a busy court is entitled to consider the effect of an adjournment on court resources and the competing claims by litigants in other cases awaiting hearing in the court as well as the interests of the parties. As Deane J pointed out in Squire v Rogers this "may require knowledge of the working of the listing system of the particular court or judge and the importance in the proper working of that system of adherence to dates fixed for hearing". What might be perceived as an injustice to a party when considered only in the context of an action between parties may not be so when considered in a context which includes the claims of other litigants and the public interest in achieving the most efficient use of court resources." (citation omitted) 39 Those considerations have only been reinforced by the enactment of Pt VB of the Federal Court Act, which expressly provides in s 37M(2) that considerations in the overarching purpose include the efficient disposal of the Court's overall workload and the disposal of all proceedings in a timely manner: see too Aon Risk Services Australia Limited v Australia National University (2009) 239 CLR 175 at 213 [97]-[98], 217-218 [113]-[114] per Gummow, Hayne, Crennan, Kiefel and Bell JJ and Expense Reduction Analysts Group Pty Ltd v Armstrong Strategic Management Marketing Pty Ltd (2013) 303 ALR 199 at 210-213 [51]-[57] where French CJ, Kiefel, Bell, Gageler and Keane JJ said at [51]: "Speed and efficiency, in the sense of minimum delay and expense, are essential to a just resolution of proceedings. The achievement of a just but timely and cost-effective resolution of a dispute has effects not only upon the parties to the dispute but upon the court and other litigants. The decision in Aon Risk was concerned with the Court Procedures Rules 2006 (ACT) as they applied to amendments to pleadings. However, the decision confirmed as correct an approach to interlocutory proceedings which has regard to the wider objects of the administration of justice." 40 I considered that the debtor would be able to provide from Court documents and property searches the substantive material necessary to answer any matters that arose for the purposes of the just resolution of these proceedings. Accordingly, I made directions that he provide any of the evidence upon which he proposed to rely, to the Bank by noon yesterday. 41 In all the circumstances, I was not persuaded that it was in the interests of justice to grant the adjournment. Although the debtor said he was devoted to caring for his father, he had come to Sydney for several days in late November 2013 to deal with his various litigious matters. He had access to his computer, internet and telephone services with which to communicate with his lawyers from no later than 22 November 2013 when he acknowledged that he learnt of the fixture for the hearing today. I did not accept his explanations. For all those reasons I was satisfied that I should refuse the application for an adjournment. 21 The abbreviation "DWS" in this excerpt refers to 'D and W Shannon Pty Ltd', a company controlled by Mr Shannon's parents. 22 These reasons reveal a closely considered exercise of a judicial discretion, with deliberate reference to pertinent authority, both in case law (Sali v SPC Ltd (1993) 116 ALR 625; Aon Risk Services Australia Limited v Australian National University (2009) 239 CLR 175 (Aon Risk); and Expense Reduction Analysts Group Pty Ltd v Armstrong Strategic Management and Marketing Pty Ltd (2013) 303 ALR 199) and statute (s 37M(2), Federal Court Act). This does not mean that the exercise of discretion is immune from challenge. However, it does mean, as Mr Shannon correctly accepted, that it is incumbent upon him to demonstrate that the exercise of discretion was attended with one or more of the errors notably described in House v R (1936) 55 CLR 499 at 505 (House v R). 23 The kinds of errors referred to in House v R are where the primary judge acts on a wrong principle, allows extraneous or irrelevant matters to guide or affect him or her, mistakes the facts, or fails to take into account a material consideration. Where there is no identifiable error of fact or law, the appellant court must consider that the decision stands outside the limits of a sound discretionary judgment before it will intervene: Norbis v Norbis (1986) 161 CLR 513 at 520 (Mason and Deane JJ). In any event, the Court will not intervene merely because it would have exercised the discretion differently. 24 While any formulation of rigid and exhaustive criteria as to the circumstances in which an appellate court will intervene would be undesirable, "the question of injustice flowing from the order appealed from will generally be a relevant and necessary consideration": Adam P Brown Male Fashions Pty Ltd v Philip Morris Inc (1981) 148 CLR 170 at 177 (Gibbs CJ, Aickin, Wilson and Brennan JJ) (Adam P Brown). Furthermore, the character of the decision on which the appeal is founded is relevant as an appellate court will exercise greater caution before interfering with an exercise of discretion on a point of practice and procedure (Adam P Brown at 177). 25 The grounds of appeal allege in effect a misapprehension of a matter of fact, thereby putting in issue particular findings below which were taken into account in the exercise of discretion. These are said to have led the primary judge to deny Mr Shannon procedural fairness. Such is the nature of the challenge that it is necessary to examine in detail not only the interlocutory court events, but also the knowledge and conduct of Mr Shannon and his legal advisers in respect of the progression of the case to trial.

[21]

Events leading to the adjournment application 26 The primary judge recites in his reasons a case management chronology following the filing on 22 August 2013 of the CBA's s 222 application and related s 178 appeal. No issue is taken with the accuracy of the chronology. 27 Importantly, on 25 September 2013 the registrar directed that Mr Shannon file the evidence upon which he proposed to rely by 25 October 2013. As per the normal course, a copy of those directions made that day would have been made publically available on the Court's website. The directions hearing on 25 September 2013 was a sequel to an adjournment consensually granted at the first directions hearing on 11 September 2013. 28 Mr Shannon was legally represented throughout the proceedings, albeit, by his choice, by different firms of solicitors. 29 When the proceedings came before the primary judge on 31 October 2013 for directions, his Honour varied the registrar's direction of 25 September 2013 so as, materially, to extend the time for the filing of Mr Shannon's evidence to 14 November 2013. His Honour also ordered that, "7. The matter be listed for hearing on 16 and 17 December 2013". Counsel who appeared for Mr Shannon that day, Mr McQuillan, was the same counsel who appeared for him on 13 December 2013, albeit by that time instructed by a different firm of solicitors. 30 Part of Mr Shannon's case on 13 December 2013 for an adjournment was that he was not aware until he carried out a Federal Law Search on 29 November 2013 of the terms or existence of orders of 31 October 2013 fixing dates for hearing and requiring him to file his evidence by 14 November 2013. In his affidavit sworn on 12 December 2013, he deposed that "This was the first time I had seen the Orders or knew of their existence" (emphasis added). 31 Other bases upon which Mr Shannon relied on 13 December 2013 in seeking an adjournment were: 1. insufficiency of preparation time on the part of his new solicitors, who were only retained on 4 December 2013; and 2. his residence principally at his parents' home at Tuncurry in New South Wales from 30 November 2013 so as to care for his ailing father and related difficulties in providing instructions to his new solicitors.

[22]

Evidence on the application 32 In support of his adjournment application on 13 December 2013, Mr Shannon also gave oral evidence by telephone from Tuncurry on the New South Wales Central Coast. Mr Pitt, a solicitor in the employ of Mr Shannon's former solicitors, Levitt Robinson, was called by the CBA and gave evidence in chief but was not cross-examined. 33 Also in evidence was an email sent by Mr Shannon to Mr Pitt on 22 November 2013. That email responded to an email forwarded to him by Mr Pitt earlier that day from Mr McQuillan which had been sent on the same day. For reasons that will become apparent, the terms of Mr Shannon's email are important. He stated that: Hi Sam [Mr Pitt], this is the first I have seen anything. I have a monthly arrangement with Tony, another instalment is due Monday. I am not happy about his comments to you and think we need the best in any event. What is required to be done as I am not aware. I was of the view that I am there in your office on Monday to finalise my affidavit for my conflict case that we are to run. I have assembled all the material being the annexures and have a base to start with. The idea on this new conflict motion was to cause a stay on all matters including the overturning of my part 10 application and also to any previous judgement etc. If you think that this new conflict motion won't cause a stay of an adjournment of the current matters please advise. I have spent all week virtually building this document with annexures. By the way we need the best barrister Stewart has as well for this. [sic] 34 The references to "Tony" and "Stewart" are, inferentially, to Mr McQuillan and to the principal of Levitt Robinson, Mr Stewart Levitt. 35 The text of Mr McQuillan's email was read out in the course of Mr Shannon's oral evidence by telephone. However, it was never finally resolved as to whether privilege in respect of that email was waived. That question arose in the course of Mr Shannon's oral evidence and it is evident even from a cursory study of the transcript that Mr Shannon's evidence was somewhat stilted, perhaps by reason of the fact that he appeared via telephone link. What Mr Shannon did say, in the course of the exchanges concerning his email of 22 November and Mr McQuillan's email forwarded to him by Mr Pitt that day, was this: His Honour … I wonder if you could answer the question Mr McLure [counsel for the CBA] asked you? ___ Sorry Whether you had any written or oral communication with any lawyer acting for you in which you had been told prior to 29 November 2013 that these proceedings were set down for hearing on 16 and 17 December this year? ___ Yes, The 16th and - I got - I got a communication on 22 November - and that wasn't from - that was forwarded to me from Mr Pitt from the barrister, Mr McQuillen [sic] [Emphasis added] 36 Mr Shannon's oral evidence also contains a distinct admission by him that he was aware by 22 November 2013 that he would have to give oral evidence at the hearing of the CBA's application. Earlier in his evidence he had admitted that he knew that it was ordinary in litigation in this Court for the Court to make directions in relation to the preparation of evidence for the hearing of a matter. His point, at its highest, was only that he was not aware of the precise terms of the Court's orders until 29 November 2013. 37 He was pressed in cross-examination about his statement in his affidavit that the first time he knew of the existence of the orders was on 29 November and stated in response: Look, I've sworn it, but the problem I've had is that I've checked off on the affidavit that I have here everything and when this final version come through, I've printed out and we were racing to get everything to - you know. I've been looking after dad and racing to get it back to file yesterday afternoon. I hadn't picked up on that last three/four words, "or knew of their existence". I didn't realise that was put in until now. 38 It was then directly put to Mr Shannon that the sentence was wrong. He denied this and evidently after some hesitation said: I hadn't seen the orders and it's the first time I knew of their existence and that's in relation to - the way I interpret that, that's in relation to being - orders to comply with and that is to put on evidence by 14 November [2013]. That's what this - that's the issue I have. The issue I have is not knowing that I had to put evidence on by 14 November [2013]. 39 Mr Shannon was further pressed about the accuracy of his statement in his affidavit. His answer again focused on it coming to his attention on 29 November that the date fixed for the filing of his evidence was 14 November. Thereafter, the cross-examination topic changed so as distinctly to put to him that, after the directions hearing of 31 October 2013, he had a conversation with Mr Pitt in which he had been informed of the hearing date which had been fixed. He denied that he had such a conversation. 40 Mr Pitt gave evidence that he had told Mr Shannon by 14 November 2013 that the Bank's application was fixed for hearing on 16 and 17 December 2013 and had told him this both at a meeting at the firm's office (in Sydney) and by telephone. He also said that he had never told Mr Shannon of the need to file his evidence by 14 November or spoken to him about the filing of evidence.

[23]

No mistake demonstrated in the findings below as to the state of Mr Shannon's knowledge 41 There was ample evidence upon which the primary judge was entitled to find that Mr Shannon was, by 22 November 2013, aware that the CBA's application was fixed for a hearing commencing on 16 December 2013 and that this was a final hearing. Indeed, the finding was favourable to Mr Shannon. His Honour has not rejected Mr Pitt's unchallenged evidence that Mr Shannon was informed of the hearing date by 14 November (which the CBA put as the date by which Mr Shannon knew). Instead, his Honour has fixed the date of Mr Shannon's knowledge as not later than the date he himself conceded in cross-examination. 42 As to the question of Mr Shannon's knowledge of interlocutory orders made in respect of the hearing on 16 December 2013, there were two issues at large: 1. first, whether he knew of the existence of any such orders at all; and 2. secondly, whether he knew, before his search on 29 November, of the requirement in those orders for the filing of his evidence by 14 November. 43 His Honour's finding of falsity in Mr Shannon's evidence goes only to the former. Reading the transcript of Mr Shannon's evidence as a whole and bearing in mind the distinct advantage enjoyed by the primary judge in hearing, albeit not seeing, the ebb and flow of cross-examination, I have no doubt that that finding was reasonably open to him. This is especially so having regard to the fact that Mr Shannon effectively conceded that his statement in his affidavit, that the first time he knew of the existence of the orders was on 29 November, was in error. 44 It is noteworthy that his Honour does not take the further step to find that Mr Shannon knew that he had to file his evidence by 14 November. It was on that point that Mr Shannon was insistent. This is consistent with his Honour's express finding, based on Mr Pitt's evidence, that he had "not told or otherwise timeously informed the debtor of the orders that had been made on 31 October 2013". I understand this finding to refer to the detail of the orders, not as a rejection of Mr Pitt's testimony that he had mentioned the date of hearing to Mr Shannon by 14 November 2013. 45 There were two findings which were made and open in respect of Mr Shannon: (a) knowledge by 22 November that the CBA's application was set down for hearing on 16 December 2013; and (b) knowledge by then that there had been orders in relation to preparation for that hearing (albeit not the detail of those orders). 46 I reject Mr Shannon's submission that there was any error of fact in either finding. 47 Even if, contrary to my view, his Honour erred in finding that Mr Shannon knew of the orders for the preparation of the matter for the hearing, his Honour's finding that he knew by 22 November 2013 that "the" hearing, not merely "a" hearing, had been fixed to commence on 16 December would remain open on Mr Pitt's unchallenged evidence. What would also remain would be his finding that Mr Shannon was in Sydney during the week commencing 22 November conferring with Mr Pitt. Mr Shannon had stated in evidence that "I visited Levitt Robinson most days that week." He explained that the purpose of his attendances on Mr Pitt and his earlier work that month done at his parents' home related to the preparation of material for what he described as "a new conflict matter" related to the existence of proceedings in this Court and the Supreme Court of New South Wales. However, his explanation was not corroborated by Mr Pitt, who gave his oral evidence before Mr Shannon. Mr Shannon chose not to mention in his affidavit of 12 December his attendances at Levitt Robinson's offices during the week commencing 22 November. That fact emerged only in his cross-examination. 48 In the course of his cross-examination, a letter sent by Levitt Robinson to the CBA's solicitors was also put to Mr Shannon. The following excerpt was read to him: We have been instructed to approach his Honour's associate to seek leave to bring an application to have the hearing of this matter currently fixed for 16 and 17 December 2013 vacated. 49 Mr Shannon stated that the first time he had seen the letter was earlier in the week. This drew a question as to whether he had given instructions on or before 14 November to Levitt Robinson to have the hearing of the CBA's application vacated. In response, M Shannon again referred to the first time he had knowledge of the communication and then, having so done, stated: Secondly, when - with the two matters, I was advised that there was a Supreme Court matter and the Federal Court matter and I was advised that the two should be merged into one because they're related to the same issue, apparently, and, "Don't worry about anything. It's right. It's under control and there will be no hearing this year. It will be next year. 50 Whatever was the occasion for the application referred to in Levitt Robinson's letter of 14 November 2013, it did not manifest itself in an adjournment application while that firm acted for Mr Shannon. Nor did Mr Shannon's time with Mr Pitt in the week commencing 25 November, or his own time in the week beforehand, result in the preparation of any affidavit which came to be filed and read on his behalf in the trial of the CBA's application. 51 His Honour was plainly entitled to find that Mr Shannon had given no "satisfactory" explanation "as to why he did not take any steps either to seek to prepare his evidence late, or seek an adjournment of the hearing promptly". Among other things: (a) Mr Shannon was aware by 22 November of the hearing date in respect of the Bank's application, that pre-trial orders had been made and of Court's practice of making orders in respect of the filing of evidence; (b) Mr Pitt was aware not just of the hearing date but also of the 14 November filing deadline for the evidence upon which Mr Shannon proposed to rely, even if that matter had not been communicated to Mr Shannon. 52 In the circumstances, that finding was, with respect, restrained. It was a highly unsatisfactory state of affairs when both solicitor and client knew of an imminent hearing date for the subject of the precise filing times not to be raised, especially given that they were then spending so much time together. It was equally unsatisfactory for Mr Shannon to act on a bland assurance that the hearing would be postponed, particularly when he was aware of the need to provide a satisfactory explanation to the Court for any variation to Court orders by reason of the preparation for the directions hearing in October. 53 Furthermore, the time which Mr Shannon had for preparation for the trial did not start on 22 November or even on 29 November 2013 but from the time when the CBA's application was served on him. Mr Shannon's account of a break-in which had impacted on preparation and which had moved the Court on 31 October 2013 to allow him further time, did not explain his claimed inability to secure evidence from Mr Robson in the time allowed. And it was Mr Robson's impugned decision to value the CBA's proof of debt at $1.00 which was a critical feature of the case which Mr Shannon always had to meet. 54 Finally, it was Mr Shannon's evidence that he changed solicitors "on or about 2 December 2013" [affidavit of 12 December 2013]. They became solicitors on the record on 5 December. On any view, Mr Shannon was aware by then, and had been since 29 November 2013, of the precise terms of the orders made by the Court on 31 October 2013. Even so, no sense of urgency attended his actions or those then newly engaged to act for him. It was not until 9 December that his new solicitors wrote to the CBA's solicitors seeking agreement for an adjournment which was declined. Only on 10 December 2013, at approximately 4:00 pm, was there communication with the primary judge's associate in which Mr Shannon's solicitors sought a date for the hearing of an adjournment application.

[24]

Consideration of the adjournment application 55 The primary judge's findings as to this course of events after 29 November 2013 are not challenged. What is put is that there was insufficient time for Mr Shannon and his new legal representatives to prepare. In the face of it emerging only in cross-examination that Mr Shannon had spent an entire week in Sydney in late November with his then lawyers, the primary judge was entitled to be sceptical about the impact of Mr Shannon's father's illness and his need to care for his father on Mr Shannon's ability to prepare for the hearing on 16 December 2013. That is not to say that his Honour ignored, as Mr Shannon's submissions suggested, Mr Shannon's father's medical condition. Quite the reverse. His Honour expressly took that into account. It proved decisive in his Honour's conclusion that Mr Shannon's father would not be able to give evidence in the proceeding, notwithstanding Mr Shannon's submission in support of the adjournment that he was to be called. Further, apart from the legitimate scepticism grounded in Mr Shannon's extended absence from his father while in Sydney, the primary judge expressly adverted, as he was entitled to do on the evidence, to the fact that, despite his contention that he had to remain in Tuncurry to care for his father, Mr Shannon had ready access there to a computer, an internet connection and a telephone. 56 There was also said to be error of fact in his Honour's observation that the case for Mr Shannon in respect of the CBA's application would be "largely documentary" and "readily accessible to him through Court documents or property searches". There are a number of reasons why I reject this asserted error of fact. 57 Firstly, a threshold issue for Mr Shannon on the s 222 application was to persuade the Court that the s 178 challenge to the valuation of the CBA's proof should not be upheld. The CBA's proof was based on guarantees of corporate indebtedness in respect of loans made by the Bank to two companies controlled by him. The guarantees themselves must have been in writing. Secondly, the primary judge was entitled to exclude on the medical evidence the prospect that Mr Shannon's father could ever give evidence. Thirdly, when the list of material identified on behalf of Mr Shannon (set out at [34] below and quoted above) as the material on which he proposed to rely at a hearing, the description of that material as "largely documentary" is not inapt. It is also an apt description of the substantive content of the further affidavit evidence which the Court was asked to admit. 58 Moreover, it was not put to the primary judge that Mr Robson would be called but only that Mr Shannon "may" wish to call him. Nor was it put to his Honour that, because M Robson was in Queensland, it was not possible to have contact with him before 16 or perhaps 17 December. In any event, I have already remarked on the artificiality in regarding preparation time with respect to Mr Robson's possible evidence as running from 29 or even 22 November 2013. Even before 31 October when the directions were varied so as to extend the time within which Mr Shannon was required to file his evidence, he had ample time within which to investigate whether Mr Robson had taken legal advice in relation to the valuation of the CBA's proof at $1.00. Further, his Honour was entitled to assume, that legal advice, if taken, on as significant a subject as valuing the $8.5 million proof of a major bank at $1.00, would have been reduced to writing and so fall within the rubric of "documentary" evidence. 59 Further, contrary to what might legitimately be expected on so late an adjournment application, no evidence was relied upon in support of that application which set out the evidence that Mr Shannon proposed to call at the hearing and why it could not be led on 16 December. Instead, the transcript of submissions made that day discloses that it was only after his Honour queried counsel about the issue that any information on it was volunteered on behalf of Mr Shannon. And, even then, counsel could not immediately respond meaningfully to the questions posed by his Honour. The detail his Honour set out at [34] of his reasons came only after counsel sought, and his Honour agreed, to stand the application down so as to allow Mr Shannon's legal representatives time to confer by telephone with him. The summary of evidence ultimately identified by counsel after obtaining instructions was as abbreviated as the summary in his Honour's reasons. 60 The description of that material as "largely documentary" was raised specifically with counsel after hearing that summary, when his Honour explained "I'm just trying to work out what on earth the evidence is going to be called that requires anything other than documents." In this regard, his Honour specifically drew attention to a discrepancy between an affidavit as to assets and liabilities which Mr Shannon had filed in Federal Circuit Court sequestration proceedings (the giving of judgment in which had been forestalled by Mr Shannon's signing of the s 188 authority that was the precursor to the creditors' meeting on 26 June 2013), on the one hand, and the statement of affairs which he had signed for the purposes of that meeting, on the other hand. As his Honour put it to counsel in arguendo upon counsel submitting that there was an explanation for the discrepancy, if Mr Shannon had given full disclosure of his assets and liability to his creditors, there would be objective evidence of this. There was no meaningful response by counsel to that issue. 61 All in all, what emerges from the transcript on 13 December 2013 is that the appellant's criticism of the description of the evidence he proposed to call as "largely documentary" is unwarranted. His Honour could have refused the adjournment application simply on the basis that Mr Shannon had failed to demonstrate any prejudice to the conduct of his defence in the absence of the adjournment by reference to any identified body of evidence upon which he wished to rely but could not lead in the time available for identified reasons. Instead, his Honour fairly took it upon himself to try and find out at least some information on the subject before ruling on the application. 62 Moreover, given the answers that his Honour's questions elicited, the primary judge might permissibly have concluded that the subject of evidence had not been given due and urgent attention by Mr Shannon's new solicitors, despite continuity in counsel retained by him (including, notably, at the directions hearing on 31 October). Instead, his Honour gave a description of the nature of the proposed case as best he could from the paucity of information provided in response to his questions and was a description open for him to apply in the circumstances. The criticism made of the primary judge by this ground is unwarranted. 63 That Mr Shannon's father was on 13 December 2013, in the face of the medical evidence concerning his physical and mental condition led that day, put forward as a proposed witness confirms how little thought must by then have been given to the composition of Mr Shannon's evidentiary case, in the period of more than 3 months since the first directions hearing. That impression of inattention remains even when considering the period of about 7 weeks before 31 October and from 22 November 2013. On 31 October, when he was represented by counsel, no more than an additional fortnight was considered necessary for Mr Shannon to put on his evidence in chief.

[25]

Conclusion: no appealable error exposed on the adjournment application 64 There was an ample basis before the primary judge on which he would legitimately conclude that Mr Shannon had enough time to prepare for the hearing. That is so even taking into account the vicissitudes that had persuaded his Honour on 31 October to extend the time and the failing health of Mr Shannon's father. 65 It was for Mr Shannon to persuade the Court that the interests of justice favoured the granting of an adjournment. His Honour was entitled to conclude, for the reasons he gave, that no such case had been made out. 66 The authorities to which the primary judge referred in refusing the adjournment were pertinent. There is no point in rehearsing them here. His Honour's findings on the facts were open. No error of principle is present. There has been no error in the application of principle to the facts. The weight which he gave to the facts which he found was a matter for his Honour. The exercise of the discretion did not miscarry. 67 I add the following in relation to the challenge made by Mr Shannon. 68 It is trite that the exercise of Commonwealth judicial power in deciding whether to grant the CBA's s 222 application and allow its s 178 appeal obliged the Court to afford procedural fairness to the parties and therefore a reasonable opportunity to be heard. That obligation was heightened because Mr Shannon was in jeopardy of being made bankrupt which, under the Act, entails particular restrictions and obligations being placed on him. The affording of a reasonable opportunity to be heard undoubtedly includes the allowing of a reasonable opportunity to prepare for trial. It is not and never has been the case that this mandates allowing an unlimited opportunity or even just a further opportunity where a reasonable time for preparation has already passed. In short, the obligation is to afford a reasonable opportunity to the parties to be heard; it does not mean that the person in fact take advantage of the opportunity: see, eg, Sullivan v Department of Transport (1978) 1 ALD 383 at 403 (Deane J). 69 Mr Shannon sought to rely upon the passage in the Full Court's decision in Cement Australia Pty Ltd v Australian Competition and Consumer Commission (2010) 187 FCR 261 at [68] (Cement Australia v ACCC), that, "There is nothing in Aon Risk or ss 37M and 37N [of the Federal Court of Australia Act] which would suggest that the consideration that it is desirable that the case be decided on its merits, so as to preserve public confidence in the administration of justice, is a consideration irrelevant to the exercise of his discretion." However, the passage is not apt. The denial of the adjournment did not deprive Mr Shannon of a trial on its merits. Both parties had an opportunity to lead evidence and make submissions. Directions given in accordance with the usual practice of the Court had required that the parties file their evidence in chief in advance. As I have explained, it was for the parties to take advantage of that opportunity. The case was decided on the merits on the evidence that the parties chose to lead having been given a reasonable opportunity to assemble and present that evidence. 70 It is an imprudent solicitor who does not ensure that his client is aware of case management directions. Once again, such imprudence (or worse) on the part of a solicitor does not, in itself, mean that an adjournment must be refused to a client but it is to be remembered that a litigant has a duty to acquaint himself or herself with the progress of litigation to which he or she is a party. It is an imprudent person who does not do this. 71 The learned primary judge was the docket judge in respect of the proceeding. His Honour was therefore peculiarly in a position to know the opportunity cost to the administration of justice by the granting of an adjournment. A Full Court should be "slow to second guess" a primary judge on that subject: Cement Australia Pty Ltd v ACCC at [69]. That there was, unsurprisingly in a busy court, such a cost, did not and could not necessarily preclude an adjournment from being granted, even at such a late stage. Case management directions, including those by which a trial date is fixed, are a handmaiden of justice and cannot therefore be immutable. But they are court orders, not aspirational statements. There must be a reasonable basis shown for their variation and it is for the Court, and not the parties, to decide to vary them. In deciding what is reasonable, it is always legitimate to take into account the competing claims of others on this Court for their disputes to be resolved and the need for public funds invested in the Judicature to be deployed as efficiently as possible. 72 Parties to litigation and their legal representatives have always owed a duty to co-operate with the Court in the administration of justice. The learned primary judge correctly observed that Pt VB of the Federal Court of Australia Act reinforced these considerations. 73 That the proceedings were brought under the Bankruptcy Act and entailed the prospect of the making of a sequestration order was the unarticulated premise upon which the adjournment application was heard and determined. The nature of the proceedings was a consideration which might, without error, have been taken overtly into account. By s 222(11) of the Act, an application under s 222 for a sequestration order is, subject to that section, assimilated with the presentation of a creditor's petition. While certain provisions of the Act applicable to a creditor's petition are, excluded by s 222(11) from applying to an application for sequestration, s 52(4) is not among those excluded. Section 52(4) provides that, unless an order for extension is made or a sequestration order or an order of dismissal is made in the meantime, a creditor's petition will lapse 12 months after its presentation. Added to this, there is always a public interest in the prompt resolution of any proceeding by which sequestration is sought. In this case, Mr Shannon had, by his statements of affairs prepared for the creditors' meeting confessed to a spectacular insolvency. That lent its own urgency to deciding whether or not there was merit in the CBA's application that he should be made bankrupt. 74 My conclusion that the exercise of the adjournment discretion did not miscarry means that the appeal must be dismissed. There was no miscarriage of justice arising from a denial of procedural fairness.

[27]

The principles governing the exercise of discretion to admit further evidence 77 The Court has power to receive further evidence on an appeal, including evidence on affidavit, under s 27 of the Federal Court Act. That discretion is not confined by express limitations. The principles which guide the Court in the exercise of that discretion are well established. In particular, as McHugh, Gummow and Callinan JJ observed in CDJ v VAJ (1998) 197 CLR 172 at 200 (CDJ) (with respect to the equivalent provision in the Family Law Act) the subsection "…contains no requirement, comparable with that often found in statutes conferring power on an appellate court to receive further evidence, that 'special grounds' or 'special leave' be shown before the evidence can be adduced." As their Honours then continued at 201: Its principal purpose is to give to the Full Court discretionary power to admit further evidence where that evidence, if accepted, would demonstrate that the order under appeal is erroneous. The power exists to facilitate the avoidance of areas which cannot be otherwise remedied by the application of the conventional appellate procedures. A further, but in practice subsidiary, purpose is to give the Full Court a discretion to admit further evidence to buttress the findings already made. 78 Section 27 of the Federal Court Act is to similar effect and serves the same purpose: Freeman v National Australia Bank Ltd (2003) 2 ABC(NS) 32; [2003] FCAFC 200 at [66] (French, Cooper and Nicholson JJ) (Freeman). Importantly, however, neither provision has been construed in a way so as to destroy the distinction between original and appellate jurisdiction and, therefore, ordinarily it is the trial which affords the parties the opportunity to lead all relevant evidence on which they rely: CDJ at 202; Freeman at [66]. Thus good reason must be demonstrated as to why further evidence should be received on appeal. Furthermore, as Sackville J (Drummond and Dowsett JJ agreeing) held in Guss v Johnstone [2000] FCA 1455 at [30]: It is ordinarily necessary to the party seeking to adduce further evidence to demonstrate that the evidence relied on his cogent; that is, the court exercising appellate jurisdiction needs to be satisfied that the proffered evidence would be likely to have produced a different result has it been available at the trial. 79 These principles are reinforced by ss 37M and 37N of the Federal Court Act obliging the parties and their legal representatives to conduct civil proceedings in a manner consistent with the just resolution of disputes according to law and as quickly, inexpensively and efficiently as possible. 80 Thus, under r 36.57 of the Federal Court Rules 2011 (Cth), an application for the Court to receive further evidence on appeal must be accompanied by an affidavit explaining the grounds of appeal to which the application relates, the further evidence sought to be received and the reasons why the evidence was not adduced at trial. 81 The further evidence comprises affidavits of Messrs Shannon, Davidson, Robson and McClelland. As a general observation, none of the evidence in these affidavits has the character of not being able to have been obtained, with the exercise of due diligence, prior to 16 December 2013. That is always a relevant consideration in deciding whether or not to admit further evidence but it is not determinative. If a miscarriage of justice would result, the evidence will be admitted.

[29]

Affidavit of William Roland Robson sworn on 4 April 2014 84 It is Mr Robson's evidence that is of particular interest in relation to the s 178 appeal. 85 As at 26 June 2013, proceedings in respect of that claimed debt were at an advanced stage of trial before Sakar J in the Supreme Court of New South Wales. What emerges from his affidavit is that Mr Robson took no legal advice at all before deciding to value the Bankwest proof at $1.00. He states that he adopted this course because: (a) the debt related to personal guarantees that Mr Shannon had given to loans to various of his companies; (b) the Bank's statement of claim had been amended on numerous occasions; (c) the debt was complex and involved complicated historical dealings between the Bank and Mr Shannon; and (d) Mr Shannon was vigorously defending the proceeding in the Supreme Court. 86 In the circumstances in which Mr Robson found himself, the authority referred to by the learned primary judge (at [46]), Re Dingle; Westpac Banking Corporation v Worrell (1993) 47 FCR 478 is exactly apposite (Re Dingle). In that case, at p 489G-490B, the Full Court emphasised the duty of the trustee (in that case, Mr Worrell) when adjudicating on a creditor's proof of debt to form a judgment about the creditor's prospects of success of a creditor, even in a complex proceeding and in the face of conflicting legal opinions: Mr Worrell was placed in a most difficult position, being required to assess the prospects of success of a complex proceeding in the face of conflicting legal opinions. Nonetheless, we have to agree with Drummond J that it was his duty to make a judgment about those prospects. It should have been obvious to him that Westpac would seek to vote in opposition to the composition and that its vote (if allowed) would probably be critical to the result. In that situation, we think that, before coming to the meeting, Mr Worrell should have obtained a considered opinion from a suitably qualified lawyer briefed with all available information about the case, including the foreshadowed defences. 87 This same obligation fell on Mr Robson in his role as a controlling trustee for the purposes of Pt X of the Act. That office may only be held by a registered trustee such as Mr Robson, a solicitor or the Official Trustee. That Parliament has provided that the office of controlling trustee can be held only by such persons is indicative of the expectation that the discharge of the office requires particular knowledge and integrity. Public confidence, particularly within the commercial community, in the operation of Pt X of the Act is dependent upon each of these traits being brought to bear in the discharge of the office of controlling trustee. 88 Mr Robson must have known that his valuation of the proof in respect of the Bankwest debt was absolutely critical to the fate of any resolution for the acceptance of Mr Shannon's draft personal insolvency agreement. He had in his possession correspondence from the CBA in relation to the Bankwest debt. He did not have to accept the assertions in that at face value. To value that debt at $1.00 was effectively to treat it as worthless. The very fact that the CBA was prosecuting its claim in respect of the Bankwest debt to trial in the Supreme Court, with all of the costs to it attendant in so doing, ought to have given pause for thought about the wisdom or reasonableness of valuing that debt as worthless. In the circumstances, Mr Robson was obliged to do rather more than he did. He ought, as in Re Dingle, to have obtained considered legal advice about prospects from a practitioner briefed with the pleadings in the case and as much other information concerning it as possible. 89 On 12 August 2013, Sakar J gave judgment for the CBA for the full amount of its claim: Commonwealth Bank of Australia v Geoffrey Anthony Shannon [2013] NSWSC 1076. On the evidence before him, the learned primary judge observed (at [47]) that the outcome in that case supported the inference that there was no reasonable basis for Mr Robson to value the Bankwest proof at $1.00. Mr Robson's affidavit evidence serves to confirm this but it is also something of a distraction. That is because, as the Full Court also observed in Re Dingle, at 488G: The Court must decide, for itself, the question of Westpac's entitlement to vote; and it must do so on the material before it. … In short, proof that Westpac was a creditor is an essential element to establish both its standing to bring the application and its entitlement to the relief sought. These observations are applicable by analogy to the CBA's appeal under s 178 of the Act against Mr Robson's decision to value the Bankwest debt at $1.00. It was for the CBA to prove that it was a creditor and that its proof ought to have been valued in the amount claimed. The judgment of the New South Wales Supreme Court did each of these things (as the primary judge, at [48], recognised). Strictly, it would have been open for this Court, as a court of bankruptcy, to go behind that judgment if there were cause so to do. On the evidence before the primary judge, there was no such cause. And there still is not, having regard to the further evidence proposed to be led from Mr Robson or from Messrs Shannon, McClelland and Davidson for that matter. 90 Had the further evidence been available and admitted, it could not have affected the allowing of the CBA's s 178 appeal. 91 Allowance of the CBA's s 178 appeal did not have the effect that Mr Shannon inevitably had to be made bankrupt, as the learned primary judge correctly recognised. 92 The history of the present s 222 of the Act was canvassed by Flick J in Moran v Robertson (2012) 10 ABC(NS) 84 at [13]-[14]. Following a survey of authorities under the earlier regime, Flick J observed (at [23]) that the position under the present s 222(1)(d) of the Act was the same, "The comparatively modest - or derisory - amount that may be recovered pursuant to a personal insolvency agreement is thus a consideration which the Court has repeatedly relied on." His Honour added that, "Nevertheless, it is but one consideration to be taken into account. There may well, however, be circumstances in which informed creditors may consider it in their best interests to approve a personal insolvency agreement and accept comparatively little in return." I agree with these observations. 93 Here, the CBA's considered commercial value judgment was (and remains) against acceptance of the personal insolvency agreement and that, correctly valued, its vote would have been decisive is relevant. Nothing in the further affidavit of Mr Shannon or those of Mr Robson, McClelland and Davidson would be likely to alter this. 94 As noted already, the sum offered via a contribution from a third party (confirmed by Mr Davidson's evidence to be FNQCC) is derisory and remains so even if creditors related to Mr Shannon stood outside the distribution pool. Leaving aside related party debts, the sum of $200,000 was offered to discharge liabilities of about $20 million. Further, whether it can be contributed at all is problematic. 95 Whether creditors related to Mr Shannon did indeed stand outside the distribution pool under the personal insolvency agreement as presented to the creditors meeting was and remains moot. In the draft agreement presented to the meeting, clauses 3(b) and (f) provided: (b) In addition, the Debtor will contribute $200,000 over the course of 12 months, comprised of payment of $100,000 within 6 months after the execution of this Deed following acceptance of creditors, and a further payment of $100,000 within 12 months after the execution of this Deed following acceptance by creditors. Such funds to be available for the purposes of payment of a dividend to the admitted creditors of the debtor. (f) A major creditor of the Estate, being Mr & Mrs D & W Shannon will agree to waive their rights to participate in any distribution out of the funds referred to at paragraph 3(b) above. The reference in cl 3(f) to "creditor" in the singular and, consistently with that reference to but one joint creditor, Mr & Mrs D & W Shannon, will be noted. 96 As executed by Mr Shannon on 5 July 2013, cl 3(f) provided: (f) D & W Shannon Pty Ltd, Mr Dallas Shannon and Mrs [sic] Kerri Shannon, will agree to waive their rights to participate in any distribution out of the funds referred to at paragraph 3(b) above. Such parties will provide written notice to this effect in which this Deed is reliant upon receipt of same. 97 The change in the text of the personal insolvency agreement did not come to the attention of creditors until 11 December 2013. In response to correspondence from the CBA querying the difference in the terms of cl 3(f), Mr Robson expressed the view that it was, "… considered a minor procedural change, which has the effect of strengthening the mechanics of the proposal for the benefit of creditors." With respect, the variation was anything but that. To Mr Shannon's father alone have been added the creditors DWS and his sister, Kerri Shannon. Further, and though the meaning of cl 3(f) was the subject of some debate on the hearing of the appeal, in our view the learned primary judge was correct in expressing the view (at [54]) that the varied clause "added a conditional element to the agreement so that it was able to be frustrated by a lack of consent from the debtor's family members". By virtue of the prescription, "in which this Deed is reliant", the further sentence added to cl 3(f) was more than a mechanism for the formal recording of a consent to waiver of a right to participate in a distribution. The change was substantive. That was why I observed above that there may have been an alternative basis under s 222(2) of the Act for the CBA's application. The further evidence could not alter the existence of this variation. As varied, cl 3(f) does not provide an assurance that the named creditors cannot participate in a distribution of the $200,000 contribution. Were they to participate, the return to creditors would be even more derisory than if they stood out. The unsatisfactory nature of cl 3(f) in the executed personal insolvency agreement is another factor telling against any exercise of a discretion not to uphold the sequestration.

[30]

Affidavit of Geoffrey Anthony Shannon sworn on 11 April 2014 98 In the statement of affairs he verified in February 2013 for the purposes of sequestration proceedings in the Federal Circuit Court, Mr Shannon stated that he had net assets of $2,909,000 and gross assets of about $6.2 million, with liabilities of $3,287,000. In his May 2013 statement of affairs prepared for the purposes of the Part X meeting, Mr Shannon ascribed negligible worth to his assets and recorded his creditors at $26,739,922. In neither statement did he make any reference to any liabilities to the CBA. 99 In his further affidavit, Mr Shannon endeavours at some length to explain the discrepancy and also, in respect of the Part X statement of affairs, his failure to disclose a disposal within the last five years of three assets. One of these was a cause of action that Mr Shannon and a company then controlled by him, 33 Electra Pty Limited (later placed in liquidation) (33 Electra) had transferred to Mr McClelland for an alleged consideration of $1.5 million. 100 Of course, inferentially, one reason for the discrepancy might be that the two statements of affairs were prepared for different reasons. In respect of the sequestration proceeding in the Federal Circuit Court, it was in his interest for Mr Shannon to present himself as solvent. For the purposes of the Part X meeting, it was in his interest to maximise the worth of friendly creditors so as to signal the prospect that they would control the vote at the creditors meeting in respect of the draft personal insolvency agreement. 101 It is not necessary to reach a concluded view on whether such an inference ought to be drawn and I deliberately refrain from so doing. As it is, because the appeal must in any event be dismissed it is not necessary to do that. However, what I do observe of Mr Shannon's further affidavit is that, for all of its explanations, what remains is a serious concern, voiced first by Mr Robson in his report to the creditor's meeting, as to the availability and reliability of information concerning Mr Shannon's financial affairs. Mr Robson was, in my opinion, right to voice such a concern and, despite all that has passed since, that concern remains. Mr Robson sought further time to investigate the position. That was denied to him by a vote at the creditor's meeting. A trustee in bankruptcy cannot be so denied and will have all of the powers conferred by the Act to call in aid. 102 The further and surely consequential course of events was accurately related by the learned primary judge in this way (at [11] to [16]): 11 A lot happened on 21 May 2013. First, the hearing of the Bank's proceedings against the debtor, 33 Electra, and the second of his companies, C2C Investments Pty Limited, began before Sackar J. Secondly, Davies J in the Supreme Court gave judgment in favour of the plaintiffs in two proceedings that had been commenced the previous month: Shannon v Shannon [2013] NSWSC 608. The debtor's father was the plaintiff in one of those proceedings in which he claimed $12,885,383 and interest. In the second, a company of his father and mother, D & W Shannon Pty Limited (DWS), claimed $8,916,052.74 plus interest. The father's proceedings had been commenced on 16 April 2013, and DWS's on 22 April 2013 and both were, to say the least, unusual. The debtor was most diligent in filing his defences. The defences were verified not by the debtor but by Mr McClelland on 29 April 2013, contrary to the Uniform Civil Procedure Rules in force in New South Wales Courts. Those defences admitted the loans claimed, the debtor's failures to repay but pleaded that they were not repayable because, in the father's case, they were gifts, and, in DWS's case, because the interest rate of 20% was allegedly a penalty. In addition, Mr McClelland, as the debtor's solicitor, signed certificates for those defences under s 347 of the Legal Profession Act 2004 (NSW) that Davies J described in his reasons, were in a form (at [7]): "… so extraordinary it first prompted a telephone call from the solicitor for the Plaintiff to the solicitor for the Defendant, Mr McClelland, where the solicitor for the Plaintiff asked Mr McClelland, 'Did you mean to sign the certificate as it reads or is there a typographical error…?'" 12 The certificates read that Mr McClelland certified under s 347 that there were "reasonable grounds for believing on the basis of provable facts and a reasonably arguable view of the law, that the defence to the claim for damages in these proceedings has no reasonable prospects of success" (his Honour's emphasis). That is, Mr McClelland, on his client's behalf, had verified a defence which Mr McClelland viewed had no prospects of success. 13 Davies J recorded that, in those circumstances, and because the debtor's father was elderly and in ill health, motions had been brought seeking urgent summary judgment for the claims in each statement of claim. He said that the debtor had appeared by his solicitor who offered no opposition to the matters. His Honour entered judgments for the full amounts claimed on the same day having given ex tempore reasons. In consequence, the debtor's indebtedness to his parents increased by about $19 million above what he had sworn was his indebtedness to them on 5 February 2013. There was no explanation before me of any reason for that change. 14 The third thing that happened on 21 May 2013, was the debtor executed the draft personal insolvency agreement as a deed and completed his statement of affairs. The latter included the very recent judgment debts owed to his father and DWS entered by Davies J. 15 On 3 June 2013, after the Bank learnt of the judgments in favour of the debtor's father and DWS in late May 2013, it applied, in the Supreme Court proceedings to set those judgments aside as not having been obtained in good faith. Subsequently, Rothman J in the Supreme Court ordered that the Bank bring separate proceedings to make that challenge, and it promptly did so, filing a statement of claim on 17 July 2013 that explained the bases on which that claim was made 16 The Bank asserted, in effect, that all the alleged debts were statute barred at the time at which the Supreme Court proceedings were commenced by each of the debtor's father and DWS, the loan agreements were all shams and the debtor's parents, on behalf of DWS, had applied on 16 December 2011 to the Australian Securities and Investments Commission for DWS to be deregistered with the father and mother declaring that, as at 16 December 2011, its assets were less than $1000. The Bank's statement of claim also alleged that the first loan agreement on which the father claimed in his proceedings was for a principal sum of $150,000 entered into on 1 July 1995, providing for payments of $3,750 per month for interest at only 10% per annum for two years with the principal repayable by 30 September 2005. The purpose of that loan was said to be for land supplied for the family home at 8 Fleeting Court, Tuncurry. (Curiously, that Bank alleged there was no "Fleeting Court" at Tuncurry. That is one of the properties the Bank alleged that the debtor failed to disclose in his statement of affairs of 21 May 2013.) Clause 6.3 of that loan agreement referred to Goods and Services Tax and to a 1999 Commonwealth statute relating to that tax, despite the fact that that tax only commenced to be payable on 1 July 2000 and was not provided for in any legislation in 1995, being the time of the alleged agreement. Suffice to say that the claim by the Bank to challenge the default judgments is not colourable. 103 The two New South Wales Supreme Court proceedings commenced against Mr Shannon in April 2013, referred to in the passage quoted, must, inferentially, have been commenced while judgment in the Federal Circuit Court in respect of the creditor's petition was reserved. Their unusual nature, remarked upon by the learned primary judge, is only underscored when regard is had to the medical evidence concerning Mr Shannon's father which was led in support of the adjournment application. A consultant in geriatric medicine (Dr Guthridge, report of 4 December 2013 in respect of examination on 2 December 2013) described him as "an 83 year old man who has a history of cognitive decline". It is stated in the report that Mr Shannon's father's wife has his power of attorney and has "managed his finances for the last two years." Mr Shannon and his mother are recorded as having accompanied the father to the examination and to have assisted in the provision of the history recorded in the report. A medical certificate from the father's treating general practitioner (Dr Abm Shahidullah) of 11 December 2013 refers to "significant mental problems with cognitive decline requiring frequent hospital admissions". 104 The debts claimed by Mr Shannon's father and DWS were, in total, about $21.8 million. That claimed total represented almost half of the total debts submitted to proof for the purposes of the Part X meeting. These same related party debts provided the overwhelming support by value by which the special resolution in favour of the acceptance of the personal insolvency agreement was carried by the vote of debts admitted to proof. Neither a trustee in bankruptcy nor this Court is bound by the judgments obtained against Mr Shannon by related party creditors in the New South Wales Supreme Court. As the Full Court stated in Hingston v Westpac Banking Corporation (2012) 200 FCR 493 at [91], of the factors which the Court takes into account in deciding whether an alternative to bankruptcy offered by the Act should be set aside as not in the interests of all creditors and whether further investigation under the auspices of bankruptcy is warranted is "whether some particular creditors may have dominated the vote in circumstances where there may be questions about the relationship between the debtor and those creditors". When the impact of the related party debts is taken into account and all of the reasons mentioned by the learned primary judge in the passage quoted for regarding the proceedings in respect of them as unusual and by us as underscoring that view, the further evidence does nothing to make it likely that a conclusion that these are debts which warrant investigation by a trustee in bankruptcy would be displaced.

[31]

Affidavit of Douglas McClelland sworn on 4 April 2014 105 Mr McClelland is a solicitor and principal of Platinum Lawyers. His firm has acted for Mr Shannon in a range of proceedings, thereby becoming one of his creditors. He is the sole director of a company named Unhappy Customers Litigation Pty Ltd (UCL). He states that it was incorporated in 2012 with the intention that it would become a legal practice but that it never traded and, effectively, has no assets. UCL does though have a bank account. This, Mr McClelland states in his affidavit (paragraph 33) is operated by UCL, "in its capacity as trustee for the Unhappy Banking Group". There is no trust deed in respect of this trust Mr McClelland states. Rather, the trust is grounded on "a verbal arrangement between Mr Gilroy and myself". It emerges from elsewhere in Mr McClelland's affidavit that Mr Gilroy is also a solicitor. Mr Gilroy is the principal of a firm known as GWM Lawyers whose task it once was "to prosecute [Mr Shannon's multi-million claim against [the Bank of Western Australian Australia, which became, as Bankwest]". Mr McClelland also refers to this trust as an "implied and/or resulting trust" of which, prior to his bankruptcy, Mr Shannon was a beneficiary. He further states that the trust does not have any assets but "distributes fees via [UCL]". 106 On 4 February 2013, Mr Shannon transferred 100 shares in UCL to his daughter, Paige. This was the day before the resumption of the Federal Circuit Court proceeding on 5 February 2013, the day on which Mr Shannon prepared his statement of affairs for the purposes of that proceeding. The primary judge noted (at [55]) that Mr Shannon had disclosed to Mr Robson but that UCL "had not traded and the shares had no value" and then observed, "[b]ut that hardly explained why the transfer occurred." Mr McClelland's account hardly explains it either. Indeed, his account, with its reference to Mr Shannon as a beneficiary of a most unusual trust through which fees are distributed raises more questions than it answers about the timing of the share transfer and the reason for it. Mr McClelland's evidence on this subject is not likely to have led to a different result. 107 Mr McClelland was also, so he maintained, the assignee of a cause of action which Mr Shannon and 33 Electra had against Dealquip Pty Ltd and its directors (Dealquip proceedings). He further states that, since the time when he took over the conduct of the Dealquip proceedings, "there is a real possibility of success" such that "some monetary damages" may be recovered either via a final judgment or a settlement of those proceedings. 108 Mr McClelland states that, in early 2013, he became concerned that either or each of Mr Shannon and 33 Electra would become bankrupt or, as the case may be, be placed in liquidation and, as a result, he would recover nothing in respect of fees for professional services provided to Mr Shannon. He further states (at [43]): On 27 March 2013, by agreement with [Mr Shannon] in his personal capacity and/or in his capacity as director of 33 Electra, I caused a deed of assignment to be drawn up which purported to assign the litigation rights in the Dealquip proceedings to Platinum Lawyers. Curiously, the deed of assignment is dated not 27 March 2013 but 27 March 2012. Mr McClelland does not advert to this difference in his affidavit. The recorded consideration for the assignment is $1.5 million. 109 Mr McClelland relates that, after the receipt of correspondence from the Bank's solicitors drawing his attention to the fact that the CBA was a party to a general security agreement with 33 Electra under the terms of which that company was not permitted to deal with, including assign its property without the CBA's prior written consent. On behalf of the CBA, the solicitors pointed out that the CBA did not consent to the assignment of the Dealquip proceedings. Mr McClelland states that, after the receipt of this correspondence, he decided to waive whatever rights he had under the deed of assignment. 110 Mr McClelland's account of this transaction does not explain why it was omitted from the statement of affairs prepared by Mr Shannon for the purposes of the Part X meeting. Even if one regards the deed as a contrivance explanatory of the absence of any payment of $1.5 million and why Mr McClelland came to lodge a proof for his fees, it does not explain why an asset (the cause of action in the Dealquip proceedings), apparently owned not just by 33 Electra but also by Mr Shannon and thought by their lawyer to have some worth, was omitted from his Part X statement of affairs. Mr Shannon states in his further affidavit that, when he signed this and the earlier statement of affairs, he "did not realise I had any personal claim in the Dealquip proceedings". His lawyer obviously thought otherwise. Mr Shannon also claims in this affidavit that he did not "fully understand or appreciate" the nature of the deed of assignment when he signed it. 111 All in all, the further evidence about the assignment does nothing to displace the likelihood that, if admitted, sequestration would nonetheless follow. Instead, it serves to confirm the primary judge's conclusion that this assignment, too, warranted investigation by a trustee in bankruptcy. 112 Mr Shannon admits in his further affidavit that he sold a home in Tuncurry in 2009 for $950,000. He concedes that this was omitted from his Part X statement of affairs and that it should have been disclosed as it was a disposal of an asset which had occurred within the previous five years. He attributes the non-disclosure to a belief on his part that the sale had occurred in 2008 outside the five year period. He further states that he did later disclose this sale to Mr Robson's firm by email in June 2013, prior to the Part X meeting on 26 June. Mr Shannon's evidence is that the proceeds of this sale were either used to pay out creditors or, to the extent that there was any surplus, consumed in litigation. On the evidence before the learned primary judge, which included no such explanation, his Honour, quite reasonably, considered that, given the omission of reference to it in the statement of affairs and the lack of an explanation from Mr Shannon that this disposal, too, warranted investigation by a bankruptcy trustee. Considered in isolation, the further evidence from Mr Shannon concerning the disposal of the Tuncurry home, if accepted, does cast the omission in a less sinister light. It is evident from the exchange of emails which he had with Mr Robson's office in June 2013 that he was not trying to disguise the disposal of the Tuncurry home. The difficulty is that this evidence is not to be considered in isolation from the other evidence.

[37]

Flick & Perry JJ 119 The trial below took place on 16 December 2013. That was a proceeding in which the Commonwealth Bank of Australia sought to set aside a Personal Insolvency Agreement executed on 5 July 2013 by Mr William Robson and Mr Geoffrey Shannon who were the Respondents. There were many disturbing aspects to the manner in which the creditors' meeting proceeded at which the Agreement was approved. One such aspect was that a debt of $8,508,963.55 owed to the Commonwealth Bank of Australia had been valued at $1. 120 An earlier application made by the present Appellant, Mr Shannon, on 13 December 2013 for an adjournment of the hearing on 16 December 2013 was unsuccessful. 121 The primary Judge set aside the Personal Insolvency Agreement and made a sequestration order against the estate of Mr Shannon. 122 Mr Shannon now appeals. Only the First Respondent, the Commonwealth Bank of Australia, took an active part in the appeal. The Second and Third Respondents were Mr Robson and the Trustee, Mr Maxwell Prentice. 123 The Notice of Appeal filed on 6 January 2014 set forth four Grounds of Appeal, each alleging a denial of procedural fairness arising in summary form from: the refusal of an adjournment of the substantive hearing; the failure "to allow the Appellant to be properly represented at the substantive hearing"; taking into account a matter only put to the Court on 16 December 2013 (and thereby denying a reasonable opportunity to address that matter), namely the fact that the Personal Insolvency Agreement as finally executed was different from an earlier version; and the failure to require Mr Robson "to provide evidence in relation to the substantive issues in the proceeding". An Amended Interlocutory Application was also filed on 22 April 2014 seeking leave to adduce "fresh evidence" pursuant to s 27 of the Federal Court of Australia Act 1976 (Cth). The facts surrounding each of these Grounds are set out in the reasons for decision of the presiding Judge and need not be repeated. Gratitude is extended to his Honour for his detailed exposition of those facts. The primary emphasis in the written and oral submissions was upon the first Ground of Appeal and the application to adduce "fresh evidence". 124 As the primary Judge held, none of these Grounds have any merit. To a considerable extent they overlap - it being variously said, for example, that the refusal to grant an adjournment denied Mr Shannon an opportunity to be "properly represented". 125 The decision to grant or refuse the adjournment was an interlocutory decision going to a matter of practice and procedure. The December hearing dates were initially fixed on 31 October 2013. Mr Shannon had knowledge of those hearing dates by 22 November 2013. The primary Judge made detailed findings and gave detailed reasons for refusing the adjournment application: Commonwealth Bank of Australia v Robson [2013] FCA 1430 at [28] to [42]. In order to successfully challenge the interlocutory decision of the primary Judge, the Appellant had to bring himself within the principles long-established in House v R (1936) 55 CLR 499 at 505. In this endeavour he failed. No error is shown in the manner in which the primary Judge exercised his discretion. In particular, no appellable error has been demonstrated in respect to his Honour's assessment that the evidence which Mr Shannon was claiming should be considered was "largely documentary and readily accessible to him": [2013] FCA 1430 at [35]. Such evidence could well have been collated prior to the hearing on 16 December 2014. The conclusion of the primary Judge is only reinforced by his Honour's proper reliance upon ss 37M and 37N of the Federal Court of Australia Act 1976 (Cth). 126 It was in support of the first Ground of Appeal that the application was made on behalf of Mr Shannon to lead "fresh evidence…, such evidence being limited to the type that the Appellant could and would have been able to lead at a final hearing in the proceedings below…". The Court, unquestionably, has power to admit "further evidence" on appeal: Federal Court of Australia Act 1976 (Cth) s 27. The circumstances in which the discretion to do so are well-established: e.g., NASB v Minister for Immigration and Multicultural and Indigenous Affairs [2004] FCAFC 24 at [42], (2011) 192 FCR 254 at 260 to 261 per Beaumont, Lindgren and Tamberlin JJ; Reece v Webber [2011] FCAFC 33 at [15] per Jacobson, Flick and Reeves JJ. Whether the evidence sought to be now adduced is properly to be characterised as "fresh" or "further" evidence - as opposed to simply evidence of prejudice consequential upon a denial of procedural fairness (cf. Stead v State Government Insurance Commission (1986) 161 CLR 141 at 147 per Mason, Wilson, Brennan, Deane and Dawson JJ) - can presently be left to one side. 127 Even if such evidence as is now sought to be relied upon were to be admitted, it would not have led to any different orders from those made by the primary Judge. The application to adduce "further" evidence, however that evidence be characterised, is to be rejected. The present proceeding, it is to be recalled, is an appeal; albeit an appeal in the nature of a rehearing: Branir Pty Ltd v Owston Nominees (No 2) Pty Ltd [2001] FCA 1833 at [20], (2001) 117 FCR 424 at 434 to 435 per Allsop J (Drummond and Mansfield JJ agreeing). The application to adduce "further" evidence was tantamount to an invitation to this Court to revisit the findings of fact made by the primary Judge, not upon the evidence before that Judge, but upon the basis of the "further" evidence. To accede to such an application too readily would be tantamount to impermissibly shifting the arena of dispute from a primary judge to an appellate court: cf. CDJ v VAJ (1998) 197 CLR 172 at 202; Freeman v National Australia Bank Ltd (2003) 2 ABC (NS) 32 at 48; [2003] FCAFC 200 at [66] per French, Cooper, Rd Nicholson JJ. 128 The essential fact of relevance to the second Ground of Appeal is that Mr Shannon changed the solicitors appearing for him on or about 4 December 2013. His Counsel remained the same. The choice of solicitors was a matter exclusively for Mr Shannon. A party cannot change solicitors and thereby invariably secure an adjournment. No such broad proposition was put. On the facts presented, Mr Shannon failed in any event to establish that he had been denied an opportunity to be properly and adequately represented. He failed to establish, for example, that the situation he confronted in December 2013 "was largely the fault of his former solicitors, or, at the very least, unavoidable human error on the part of Mr Shannon", as contended in his written submissions. Mr Shannon had not been denied "a proper opportunity to instruct his new solicitors on the substantive issues in the Original Proceeding…". 129 The third Ground of Appeal refers to a difference between the Personal Insolvency Agreement as put to the meeting of creditors in June 2013 and as executed in July 2013. The difference was that the Agreement as executed included a clause 3(f) providing that: f. D & W Shannon Pty Ltd, Mr Dallas Shannon and Mrs Kerri Shannon, will agree to waive their rights to participate in any distribution out of the funds referred to at paragraph 3(b) above. Such parties will provide written notice to this effect in which this Deed is reliant upon the receipt of same. The overlap in the Grounds of Appeal was further exposed by this Ground. Part of the "fresh" evidence sought to be adduced was an explanation from Mr Shannon as to the manner in which this amendment had been included. The amendment to clause 3(f) was significant. But the further evidence, even if admitted, would not lead to any different outcome. Amongst other things, clause 3(f) did not provide any assurance that the named creditors would participate in the distribution of funds referred to in clause 3(b). And the primary Judge had, in any event, considered the circumstances surrounding the amendment - or at least some of those circumstances: [2013] FCA 1430 at [22] to [27]. 130 The final Ground of Appeal is without merit. The source of the obligation "to require" Mr Robson to provide evidence remained elusive. 131 The primary Judge, it is respectfully concluded, was correct in holding that the Personal Insolvency Agreement as executed in July 2013 should be set aside and that a sequestration order should be made in respect to the estate of Mr Shannon. There has been no denial of procedural fairness in the refusal of the adjournment. Such further evidence as is sought to be relied upon now, even if admitted, would not affect the decision to set aside the Agreement as executed. The disturbing circumstances surrounding the manner in which the Agreement came to be executed remain. 132 Concurrence is thus expressed with the conclusions of the presiding Judge. The Notice of Appeal should be dismissed together with the Amended Interlocutory Application seeking leave to adduce further evidence. The Appellant should pay the costs of the Commonwealth Bank of Australia. I certify that the preceding fourteen (14) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justices Flick & Perry.

Shannon v Commonwealth Bank of Australia

At a glance

Court

Decision date

Before

Source

Judgment (37 paragraphs)

Parties

Legislation Cited (7)

Cases Cited (23)

Cited By (22)