Storry v Weir

Bankruptcy 22 On 29 September 2021, the respondent served a bankruptcy notice on the appellant. As at the date of service of that notice, the appellant had not filed her appeal against the Court of Appeal's civil decision. 23 Following service of the bankruptcy notice, the appellant proceeded to file a series of stay applications (outlined above in [16]-[21]). 24 On 14 December 2021, a creditor's petition was filed against the appellant seeking a sequestration order against her estate. On 17 March 2022, the creditor's petition was heard in the Federal Circuit and Family Court of Australia before Judge Egan. On 18 March 2022 at approximately 2.00 pm, his Honour made a sequestration order against the appellant's estate. It is this decision which is the subject of the present appeal.

LEGISLATIVE PROVISIONS 25 Sections 52(1) and 60(1)(b)(ii) of the Bankruptcy Act provide: 52 Proceedings and order on creditor's petition (1) At the hearing of a creditor's petition, the Court shall require proof of: (a) the matters stated in the petition (for which purpose the Court may accept the affidavit verifying the petition as sufficient); (b) service of the petition; and (c) the fact that the debt or debts on which the petitioning creditor relies is or are still owing; and, if it is satisfied with the proof of those matters, may make a sequestration order against the estate of the debtor. … 60 Stay of legal proceedings (1) The Court may, at any time after the presentation of a petition, upon such terms and conditions as it thinks fit: … (b) stay any legal process, whether civil or criminal and whether instituted before or after the commencement of this subsection, against the person or property of the debtor: … (ii) in consequence of his or her refusal or failure to comply with an order of a court, whether made in civil or criminal proceedings, for the payment of a provable debt; …

DECISION - FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 2) 26 After referring to the "relevant litigation history", the primary judge noted that the appellant had conceded, at the time of the hearing, that she had not paid the judgment sum but had made submissions to the Court that the Court should stay the further hearing of the sequestration application pending the hearing and determination of a notice of appeal and stay application "yet to be filed" in the District Court of Queensland. 27 Having reviewed a bundle of documents tendered by the appellant, which were submitted, did show a good basis for the making of such a stay order, the primary judge concluded that he could not identify any document or transcript which could constitute the basis for any reasonable argument that a stay order ought to be made in the present proceedings. He concluded that the appellant had exhausted her avenues of appeal against the Magistrate's civil decision and that any further appeal proceedings filed by or on behalf of the appellant "have no prospects of success". 28 The primary judge noted the issue and service (in accordance with the relevant regulations) of the bankruptcy notice, the appellant's failure to comply with the requirements of the bankruptcy notice within the prescribed time, and the fact that the appellant otherwise failed to satisfy the Court that the appellant had a counterclaim, set-off or cross demand equal to, or more than, the sum claimed in the bankruptcy notice, being a counterclaim, set-off or cross demand the appellant could have set up in the action in which the judgment referred to in the bankruptcy notice was obtained. 29 The primary judge further noted the filing of the creditor's petition on 14 December 2021, service on the appellant on 29 January 2022, and that the debt was, at the time, still owing. 30 The primary judge referred to the fact that the appellant had failed to provide evidence as to her solvency as at the date of hearing before the court, or that the sequestration order ought not to be made for any other reason. 31 His Honour concluded that 11. The Court is satisfied that the judgment sum remains unpaid, and that the [appellant] is unable to pay her debts as and when they fall due. 12. … the [appellant] was duly served with all relevant documents, and that the [respondent] has otherwise established that all procedural matters required to be attended to by him have been duly carried out. 32 As a result, a sequestration order was made against the appellant's estate.

Ground one 33 Ground 1 was as follows: His Honour erred acted outside his jurisdiction in saying the [appellant] exhausted her rights of appeal of the Magistrates Decision which was the basis for the Sequestration Order when an appeal existed in the District Court and the prospects of success are not within his jurisdiction to make, nor did he have all the material, nor was this judgment asked of him to make. 34 In relation to this ground, at the hearing, the appellant submitted that the Court has "discretionary and also statutory obligations" if there is a dispute as to the debt's existence. The appellant submitted that "the debt was not a valid debt, that it was not based on fair equitable reasons". 35 The appellant submitted that "everything turns on whether I swerved" (for example, transcript p 38 ll 12-14). 36 The appellant submitted that the Magistrate "hadn't considered relevant evidence and had considered other evidence". She continued: "if I had the time to actually have my witnesses and to view the material of the respondent, I would have had a fair opportunity, but I believe that I was prejudiced" (transcript p 11 ll 37-40). 37 The appellant submitted that the primary judge was aware of this, including the appellant's intention to appeal to the District Court from the Magistrate's civil decision. 38 The appellant referred to Ramsay Health Care Australia Pty Ltd v Compton (2017) 261 CLR 132; [2017] HCA 28 (Ramsay Health) applying Wren v Mahony (1972) 126 CLR 212 (Wren). The appellant submitted that the focus of the High Court was on "whether reason was shown for questioning whether behind the judgment there was in truth and reality a debt due to the petitioning creditor" and that the High Court held "while a judgment usually constitutes a reliable indication of true indebtedness, failing to test the merits of the claim and counterclaim in adversarial litigation erodes the practical reliability of the judgment". 39 The appellant also referred to Tu v Chang (No 2) [2016] FCA 1568, submitting it is clear that the Court can, and sometimes must, go behind a judgment upon which a bankruptcy notice is issued. 40 The respondent submitted that the appellant had not put any evidence before the primary judge to indicate what was wrong to then justify the grounds to look behind the judgment and, where a party is "simply dissatisfied with the judgment", that is not enough (Wanstall v Burke [1925] St R Qd 295). 41 It is well-established that, by reason of the provisions of s 52(1) of the Bankruptcy Act, the Court has power to "go behind" a judgment upon which a petitioning creditor relies to determine whether there is "in truth and reality" a debt owing. 42 In the case of Wren, Barwick CJ (with whom Windeyer and Owen JJ agreed) said (at 224): [I]t has been made quite clear by the decisions of the past that where reason is shown for questioning whether behind the judgment or as it is said, as consideration for it, there was in truth and reality a debt due to the petitioning creditor, the Court of Bankruptcy can no longer accept the judgment as such satisfactory proof. 43 In the High Court, Kiefel CJ, Keane and Nettle JJ observed (Ramsay Health at [68]): For the purposes of s 52 of the [Bankruptcy] Act, judgment may usually be taken to be sufficient evidence of a debt in that a judgment against a debtor in favour of a creditor obtained after trial is, generally speaking, a reliable indication of the true state of indebtedness as between creditor and debtor. Indeed, such a judgment can usually be expected to provide the most reliable statement of the debt humanly attainable because the ordinary processes of the adversarial system provide a practical guarantee of reliability. The testing of the relative merits of the claim and counterclaim under the rigours of adversarial litigation will usually establish the true state of accounts as between the parties to the proceedings. Accordingly, a Bankruptcy Court will usually have no occasion to investigate whether the judgment debt is a true reflection of the real debt. But where the merits of a claim and counterclaim have not been tested in adversarial litigation, a judgment debt will not have this practical guarantee of reliability. 44 As is said, the Bankruptcy Court will not usually exercise this power, which occurs only where reason is shown for questioning whether behind the judgment there was in truth and reality a debt due. 45 The particular wording of this ground focuses on an asserted error relating to the primary judge acting "outside his jurisdiction in saying the [appellant] exhausted her rights of appeal of the Magistrate's decision … when an appeal existed in the District Court and the prospects are not within his jurisdiction to make, nor did he have all the material asked of him to make". 46 The relevant aspect of the decision was the conclusion outlined in [27] above that the appellant had exhausted her avenues of appeal against the Magistrate's civil decision and that any further appeal proceedings filed by or on behalf of the appellant "have no prospects of success". 47 The underlying facts (details of the traffic accident) were the same in both the criminal proceedings and civil proceedings. 48 In the criminal proceedings, appeals were made to the District Court and ultimately the Queensland Court of Appeal. In each of those courts, there was a comprehensive analysis of the evidence and the conclusions. Bond J (as he then was) published reasons with which Sofronoff P and McMurdo JA agreed. 49 Bond J described the principles which applied to appeals to the Court of Appeal from the District Court in its appellate jurisdiction (Storry v Commissioner of Police at [6]). Those included: (a) "leave will usually be granted only where an appeal is necessary to correct a substantial injustice to the applicant and there is a reasonable argument that there is an error to be corrected"; (b) a factual finding of a District Court judge on appeal to that Court (which may be different from, or additional to those made by the Magistrate at first instance, or which may confirm the findings of the Magistrate at first instance, since the appeal to the District Court is by way of rehearing) may only be reviewed on appeal to this Court if there is no evidence to support it, or it is shown to be unreasonable"; and (c) "the appeal to this Court is not limited to errors of law". 50 Bond J observed that, whilst the appellant was represented by counsel at the hearing before the Magistrate and at the appeal before the District Court, the appellant appeared herself before the Court of Appeal. 51 Justice Bond observed that there were preliminary grounds on the basis of which the application for leave could be dismissed without extensive analysis. 52 However, His Honour observed (at [11): However, I have not taken that course. Bearing in mind that the [appellant] appears for herself, I have examined the reasons of the learned District Court Judge and have had regard to the evidence adduced at trial - so far as it was contained in the appeal record - and have considered whether any of the matters raised by the [appellant] suggest the existence of any reasonable argument that there was any factual error in the requisite sense. 53 What follows in the reasons ([12]-[26]) is a very comprehensive analysis of the evidence and the conclusions reached by the District Court judge. 54 In relation to the evidence, Bond J quoted the summary prepared by the District Court Judge and observed "[t]here was evidence at trial from which all of those conclusions could be supported rationally by the evidence. Nothing emanating from the [appellant] before this Court gainsaid that proposition" (Storry v Commissioner of Police at [19]). 55 Justice Bond referred to the appellant's complaints (including regarding the application to adduce fresh evidence) and analysed each. In each instance, his conclusion was "no error demonstrated". 56 The conclusion was: For the foregoing reasons, I conclude that the [appellant] has not identified any reasonable argument that there was a factual error which should be corrected. There being no reasonable argument as to the existence of such error, the [appellant] cannot establish her contention that there was a substantial injustice. 57 The underlying factual matrix has been considered in detail at contested hearings in the Magistrates Court (twice), the District Court and the Queensland Court of Appeal. There are comprehensive reasons, which were available to the primary judge, which analyse the evidence including the complaints made by the appellant. 58 In all the circumstances, on the basis of the information available, no reason was shown for questioning whether behind the judgment there may be in truth and reality a debt due so that the Court could no longer accept the judgment as satisfactory proof. In fact, the contrary was the case. 59 As to the possible appeal to the District Court in relation to the civil matter of which the appellant submitted she made the primary judge aware, the judgment debt which was the subject of the decision of Acting Magistrate Smith (the Magistrate's civil decision) was for the sum of $13,396.06 plus costs. This quantum is below the minor civil dispute limit for the purposes of s 45 of the Magistrates Courts Act 1921 (Qld). While s 45 of that Act contemplates appeals to the District Court from the Magistrates Court where the judgment debt is below the minor civil dispute limit, s 45(2) provides that an appeal shall only lie by leave of the District Court or a District Court judge who shall not grant such leave to appeal unless the Court or a judge is satisfied that some important principle of law or justice is involved. 60 Based on the information available (including the conclusions of the Queensland Court of Appeal), such an appeal would have no prospects of success. 61 The Magistrate's civil decision was made on 4 December 2020. Any appeal against the decision would be required to be made within 28 days, pursuant to the Uniform Civil Procedure Rules 1999 (Qld) (the UCPR). By that time, the appeal period had long expired. The appellant would also need to obtain an extension. 62 Given the matters raised by the appellant, it was necessary for the primary judge to consider whether it was necessary for him to "go behind" the judgment. An aspect of that was considering the appellant's submissions regarding the existence of the possible right to appeal to the District Court and the merits of those submissions. In doing that, it would be necessary for the primary judge to consider the prospects based upon all information available. The primary judge was not in error in taking that course and his conclusions regarding the prospects of success were consistent with the evidence then available. 63 In other respects, the primary judge considered all of the relevant requirements of the Bankruptcy Act which were necessary as prerequisites to making a sequestration order as against the evidence and submissions. 64 As to Ground 1, there is no error evident in the reasons and this ground must fail.

Ground two His honour erred in considering the lawyer's fees that was the basis for the sequestration order are not standard magistrate fees but indemnity fees that were never cost assessed and the application to bankruptcy occurred with stay applications on foot and a yet to be decided High Court appeal. (Errors in original)

Ground three The lawyer's fees were double the amount of the time spent in court and the [appellant] had attempted to settle the car costs before a civil trial began. 65 Grounds 2 and 3 seem to be related. They focus on the question of costs. 66 There is no requirement to assess costs in a Magistrates Court matter. Pursuant to r 683 of the UCPR, the Magistrate may fix costs and order payment of the amount. The respondent submits that this is what occurred in this matter. 67 The intention of Magistrates Court Practice Direction 18 of 2010 (Practice Direction) is to signal the authority of the Court, in the appropriate case, to fix costs and to ensure that the parties are in a position to inform that process. The Court has a broad discretion to fix costs (Practice Direction at [4]) 68 The Practice Direction at [5] requires that at all relevant times in the course of the hearing of a matter, parties should be in a position to inform the Court of their realistic estimate of the amount of the recoverable costs, on a standard or indemnity basis, should that party be the beneficiary of a costs order. Where practicable, the estimate should be verified on affidavit. Preferably parties should not, for this purpose, be put to the expense and suffer the delay of preparing a cost statement complying with UCPR. 69 It was submitted that, in accordance with the Practice Direction, the then plaintiff, Mr Weir, sought to have the costs fixed and provided a schedule of all costs that were sought. According to the transcript, there was a brief legal argument and following that, the Magistrate ordered the costs to be fixed as per the schedule. 70 In those circumstances, as the Magistrate fixes the costs, the costs are not assessed in any other way. There is nothing irregular about this process. 71 The respondent referred to Doggett v Commonwealth Bank of Australia [2019] FCAFC 19 at [49] as authority for the proposition that "the question for the court is whether a debt has been proved not whether there should be some review of the exercise of discretion to make the costs order in the first place or a reconsideration of the cost assessment that led to the order" (transcript p 34 ll 20-25). 72 This aspect of the appeal also fails. 73 The words "[a]n application for bankruptcy occurred with stay applications on foot and yet to be decided High Court appeal" do not seem to be related to the point regarding lawyer's fees. These words appear to relate to the issue which has been dealt with under ground one. 74 In ground 3, apart from the lawyer's fee issue, reference is made to an attempt to settle before the civil trial began. In submissions, the appellant submitted that the matter might have been concluded more effectively had the offer been accepted. In response, counsel for the respondent submitted that an offer had also been made by the respondent, but not accepted by the appellant. Whether a matter is settled depends on the approach of each party. 75 No error is evident from grounds 2 or 3. These grounds must fail.

Ground four His honour failed to consider the time in the hospital period and that the [appellant] had provided to him that the matter was before the court of appeal with a stay, hours before his hearing and that he knew that a District Court appeal was being filed the day of the hearing which wold of impacted on the quantum that cased the decision and that the appellant did not provide evidence of not being bankrupt as the whole matter was part of a jurisdiction appeal being challenged through another court. (Errors in original) 76 Ground 4 appears to cover a number of issues. The ground is not at all clear. 77 The first aspect seems to relate to the fact that the primary judge was made aware of the District Court appeal which "was being filed the day of the hearing". The primary judge did not ignore this point. The primary judge took this into account and made findings regarding prospects of success of further appeal which are dealt with in ground 1. 78 No error is evident. 79 What seems to have been filed on that day was an application for an extension of time regarding a further stay application which was ultimately unsuccessful. 80 The second part of ground 4 refers to a proposition that "the appellant did not provide evidence of not being bankrupt as a whole matter was part of a jurisdiction appeal being challenges through another court". 81 As to whether the appellant could pay her debts as and when they fell due, the appellant made the following submissions. 82 The appellant submitted that "I was never coming before Egan J to say that I could or couldn't pay the debt financially; I was coming before him saying the matter was still to be decided, had been decided on jurisdiction and was yet to be decided on the merit" (see transcript p 11 ll 25-30). 83 The appellant submitted that the appellant "could get a loan if I really needed to" and referred to Sandell v Porter (1966) 115 CLR 666 at 670 where Barwick CJ said: Insolvency is expressed in s. 95 as an inability to pay debts as they fall due out of the debtor's own money. But the debtor's own moneys are not limited to his cash resources immediately available. 84 The appellant submitted that, in light of this authority, the primary judge should have "gone behind the debt rather than assume I hadn't paid the debt" (transcript p 21 ll 3-5). The appellant referred, in addition, to moneys she expected to be paid in commission, but had not been paid. 85 The appellant did not provide any evidence as to solvency. 86 This issue cannot give rise to a reason being shown for questioning whether behind the judgment there is in truth and reality debt due to the petitioning creditor. 87 Requirements which must be adhered to, regarding the making of a sequestration order, are set out in the Bankruptcy Act. The matter to which this ground relates is one such requirement. 88 It was necessary for the primary judge to be satisfied that the requirements of the legislation were fulfilled. 89 This ground must also fail.

CONCLUSION 90 The appeal is dismissed with costs. 91 The appellant's interlocutory application filed on 26 May 2022 is dismissed with costs. The appellant's oral application to join the Chief Executive of the OFT as the second respondent to the interlocutory application is dismissed. I certify that the preceding ninety-one (91) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Thomas.