this application
25 I should also observe for completeness, that at the commencement of a case management hearing on 9 February 2017, Mr Cristovao made an application that I recuse myself from hearing this petition on the basis that I was in 2013 a member of a Full Court which had found against Mr Cristovao (Cristovao v Registrar Scott [2013] FCAFC 92). However, later during the case management hearing, Mr Cristovao agreed to me hearing the petition.
26 In support of the applicant's petition, the applicant read the affidavits of Ms Phylicia Elizabeth Fenwick, dated 18 November 2016, 31 March 2017 and two affidavits, dated 18 April 2017, and the affidavit of service of Mr David John Mackay, dated 8 December 2016.
27 The affidavits of Ms Fenwick, dated 18 April 2017, deposed to the matters referred to in r 4.06(3) and r 4.06(4) of the Federal Court (Bankruptcy) Rules 2016 (Cth).
28 Mr Cristovao read an affidavit, dated 20 March 2017. Mr Cristovao also relied on detailed written submissions, dated 5 February 2017 and 13 April 2017 respectively.
29 Section 52(1) of the Bankruptcy Act provides:
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.
30 Section 52(2) of the Bankruptcy Act states:
If the Court is not satisfied with the proof of any of those matters, or is satisfied by the debtor:
(a) that he or she is able to pay his or her debts; or
(b) that for other sufficient cause a sequestration order ought not to be made;
it may dismiss the petition.
31 Tan & Tan has satisfied the requirements of s 52(1) by the reading of the affidavit of Ms Fenwick, dated 18 November 2016, the affidavit of Mr Mackay, dated 8 December 2016, and the relevant affidavit of Ms Fenwick, dated 18 April 2017.
32 The petitioning creditor has a prima facie right to a sequestration order once proof of the matters required by s 52(1) have been satisfied (Deputy Commissioner of Taxation v Cumins (2008) 101 ALD 78 at [14] per Gilmour J).
33 Mr Cristovao bears the onus of satisfying the Court of the matters referred to in s 52(2). Mr Cristovao relies upon s 52(2)(b), namely, that there was a "sufficient cause" why the sequestration order ought not be made.
34 Mr Cristovao opposed the making of the sequestration order on the grounds that the costs order made against him by Magistrate Boon on 2 July 2014, and the subsequent costs assessment order made by Registrar Miles on 14 January 2016, were invalidly made.
35 Mr Cristovao's contention is founded on the fact that the defence of Mr Cristovao's claim in the Magistrates Court against Tan & Tan for professional negligence had been funded by Tan & Tan's professional indemnity insurers, Law Mutual (WA). As a consequence, contended Mr Cristovao, O 9A of the Rules of the Supreme Court 1971 (WA) (the RSC) applied to his action in the Magistrates Court, and that rule had been breached by Tan & Tan.
36 Order 9A of the RSC is in the following terms:
1. Term used: interested non-party
In this Order -
interested non-party, in relation to a party to a case, means a person, other than a practitioner for the party, who -
(a) provides funding or other financial assistance to the party for the purposes of conducting the case; and
(b) exercises direct or indirect control or influence over the way in which the party conducts the case.
2. Parties to advise identity of interested non-parties
(1) A party to a case must notify the Principal Registrar and each other party to the case of the identity of any person who is an interested non-party in relation to the party to the case.
(2) The notice is to be given in writing as soon as is reasonably practicable after the person becomes an interested non-party in relation to the party to the case.
3. Duties of interested non-party
The duties to the Court of an interested non-party in relation to a party to a case are the following -
(a) not to engage in conduct which is misleading or deceptive, or to aid, abet or induce such conduct, in connection with the conduct of the case;
(b) to cooperate with the parties and the Court in connection with the conduct of the case;
(c) to use reasonable endeavours to ensure that the goal in Order 1 rule 4A and the objects in Order 1 rule 4B are attained.
37 Mr Cristovao's contention is that neither Tan & Tan, nor the solicitors who represented Tan & Tan in the Magistrates Court proceedings, disclosed the fact that Law Mutual (WA) was an "interested third party" or, as he put it, the "secret third party funder", and, therefore, Tan & Tan had failed to comply with O 9A r 2 of the RSC.
38 This is not a new contention by Mr Cristovao. Mr Cristovao has raised this contention in his appeals before each of Magistrate Temby, Parry DCJ, the Court of Appeal on appeal from the decision of Parry DCJ and in his application to extend time to appeal before Schoombee DCJ.
39 Parry DCJ rejected this contention in Mr Cristovao's appeal from the orders of Magistrate Temby on the basis that O 9A did not apply to proceedings in the Magistrates Court.
40 Before the Court of Appeal in CACV 90 of 2016, Mr Cristovao contended that s 34 of the Supreme Court Act 1935 (WA) extended the reach of O 9A of the RSC to the Magistrates Court. The Court of Appeal rejected that contention.
41 At [23]-[24], the Court of Appeal (Newnes and Murphy JJA) observed:
23 The appellant's contention that s 34 of the Supreme Court Act 1935 (WA) extends the reach of O 9A to the Magistrates Court is without merit. Section 34 provides:
The several rules of law enacted and declared by this Act shall be in force and take effect in all courts whatsoever in Western Australia so far as the matters to which such rules relate shall be respectively cognizable by such courts.
24 Order 9A is not a "rule of law enacted and declared by [the Supreme Court Act]", but a provision of rules of court made pursuant to s 167 of the Supreme Court Act for the purpose of prescribing the practice and procedure to be followed in proceedings in the Supreme Court.
42 Mr Cristovao raised the same contention before Schoombee DCJ as he had before the Court of Appeal. Her Honour rejected Mr Cristovao's contention, and held that O 9A of the RSC did not apply to proceedings in the Magistrates Court.
43 At [26]-[27], Schoombee DCJ observed:
26 This means that Tan & Tan had no obligation to disclose to Mr Cristovao whether any other party provided funding or financial assistance to it in conducting the defence of Mr Cristovao's case before Magistrate Boon.
27 The decision of Parry DCJ was upheld in the Court of Appeal. A District Court judge is bound by a decision of the Court of Appeal. Having had four judges come to the conclusion that O 9A of the RSC does not apply in the Magistrates Court, Mr Cristovao will simply have to accept this.
44 Schoombee DCJ also went on to consider a different point, namely, whether the costs order made in favour of Tan & Tan was a nullity on the grounds that Tan & Tan had been indemnified by its insurer, Law Mutual (WA). Schoombee DCJ, having examined a number of authorities, including Marsh v Baxter [No 2] [2016] WASCA 51, concluded at [34]:
Accordingly, even if Tan & Tan was indemnified by Law Mutual for the costs of its defence of the proceedings instituted by Mr Cristovao in the Magistrates Court, Tan & Tan is still entitled to a costs order in its name against Mr Cristovao. No evidence has been placed before this court to indicate that Tan & Tan had no legal liability to its legal representatives.
45 The gravamen of Mr Cristovao's contention before this Court was that the creditor's petition should be adjourned until after the determination of his appeal to the Court of Appeal (CACV 28 of 2017) against the orders of Schoombee DCJ.
46 In Ahern v Deputy Commissioner of Taxation (Qld) (1987) 76 ALR 137 at 148, the Full Court observed as follows:
It is also well established that in general a court exercising jurisdiction in bankruptcy should not proceed to sequestrate the estate of a debtor where an appeal is pending against the judgment relied on as the foundation of the bankruptcy proceedings provided that the appeal is based on genuine and arguable grounds: Re Rhodes; Ex parte Heyworth (1884) 14 QBD 49; Bayne v Baillieu (1907) 5 CLR 64 and Re Verma; Ex parte DCT (1985) 4 FCR 181.
These cases rest on the broad principle that before a person can be made bankrupt the court must be satisfied that the debt on which the petitioning creditor relies is due by the debtor and that if any genuine dispute exists as to the liability of the debtor to the petitioning creditor it ought to be investigated before he is made bankrupt. Bankruptcy is not mere inter partes litigation. It involves change of status and has quasi-penal consequences.
47 Accordingly, in determining whether to exercise the discretion to adjourn the petition, the question is whether Mr Cristovao's pending appeal is to be characterised as being "based on genuine and arguable grounds".
48 In my view, the appeal which Mr Cristovao has commenced against the orders of Schoombee DCJ cannot be described as being based on genuine and arguable grounds. This is because the argument which Mr Cristovao has raised in his notice of appeal is, in essence, the same argument which has been considered and dismissed by the Court of Appeal (see [18]-[19] above) as not having any reasonable prospect of success.
49 In his submissions to this Court, Mr Cristovao contended that the question of whether O 9A of the RSC applied to Magistrates Court proceedings had not yet been conclusively determined against him. Mr Cristovao argued that until there had been a pronouncement by the High Court of Australia on his contention, then it could not be said that there had been a determination of that point and he contended that the rejection of his argument by the Court of Appeal was no more than the expression of an "opinion" and was not binding.
50 Further, said Mr Cristovao, his second appeal to the Court of Appeal was different because he had cast the appeal in the form of a request for the determination of six questions of law. An example of the questions for determination in Mr Cristovao's notice of appeal is the following:
(3) Whether, the State Courts Making New Laws is "judicial activism" which is proscribed by the apex court (the High Court of Australia) and only the latter has that authority to do so in law?
3.1 If the Answer is yes, explain why?
3.2 If the Answer is No, explain why not?
51 I do not accept Mr Cristovao's characterisation of the status of the decision of the Court of Appeal as a non-binding "opinion". In my view, in the absence of a High Court of Australia determination to the contrary, the decision of the Court of Appeal in CACV 90 of 2016, stands as an authoritative determination that O 9A of the RSC does not apply to proceedings before the Magistrates Court of Western Australia.
52 Further, I do not accept that the casting by Mr Cristovao of his second appeal in the form of six questions of law alters the substance or merit of the proceeding he has brought in the Court of Appeal in any material respect.
53 Accordingly, in my view, in light of the existing determination by the Court of Appeal in respect of the same point, which Mr Cristovao seeks to raise in his second appeal, I am of the view that Mr Cristovao's pending appeal in the Court of Appeal is not based on genuine and arguable grounds.
54 Accordingly, I reject Mr Cristovao's application to adjourn the creditor's petition. Further, Mr Cristovao has not established any sufficient cause why the sequestration order ought not be made.
55 I will grant the relief sought in the creditor's petition brought by Tan & Tan.
I certify that the preceding fifty-five (55) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Siopis.