Tarrant v Statewide Secured Investments Pty Ltd

The proceeding below 18 His Honour first heard argument on the adjournment. The adjournment was ostensibly sought to enable Ms Tarrant to finalise her proposed appeal to the High Court, although his Honour also considered whether he should adjourn the hearing of the petition to enable her to litigate the counter-claim she had brought against Statewide in the Supreme Court. His Honour refused the application in substance because he was not persuaded that either proceeding had any real prospect of success. He was sceptical about the prospects of success of the special leave application. He noted that Ms Tarrant's solicitor, Mr Pope, said he could not say anything about the matter. As for the other proceedings he said he had not made "any detailed analysis of the statement of claim", he thought Ms Tarrant would be estopped from relying on matters that could have been raised in the earlier Statewide proceeding and he doubted damages for loss of reputation and hurt feelings could amount to $2.6 million under any circumstances. 19 In the substantive judgment, which dealt with the creditor's petition, his Honour noted there were seven grounds in the notice of grounds of opposition to the petition, only three of which were relied upon. In fact the notice contained 11 grounds but Mr Pope only addressed three of them (grounds 1, 4 and 7). He expressly abandoned grounds 2, 3, 5 and 6 and made no mention of the remaining grounds. On appeal Ms Tarrant did not complain that his Honour failed to consider them. Mr Pope told his Honour that he recognised that the notice "recounts a number of things which are not relevant". In all the circumstances, it is reasonable to infer that they were not pressed. 20 Despite the way in which the first ground was framed, his Honour said that it was "being put" as an error in the date of the judgment, which, he observed both parties agree was entered on 17 June 2010 (sic). Statewide sought leave to amend the petition to substitute the correct date. After referring at length to the Court of Appeal's judgment and considering whether there was a possibility that Ms Tarrant might be confused or prejudiced, his Honour granted the amendment. His Honour was unable to see any room for confusion or to conceive of any possible prejudice. 21 His Honour then turned to consider ground 4. Ground 4 was overtaken by events. As his Honour observed, the summons for leave to appeal had been dismissed. No application was made to amend the notice. His Honour said that Mr Pope wanted to "relate" this ground to the special leave application. His Honour then referred to his reasons for refusing the adjournment and said that he was not convinced that the existence of the appeal (in fact, of course, there was no appeal, only an application for special leave to appeal) constitutes any "other sufficient cause" under s 52(2) of the Bankruptcy Act 1966 (Cth) ("the Act"). Section 52(2) relevantly provides that the Court may dismiss the petition if it is not satisfied with the proof of the matters stated in the petition, service of the petition and the fact that the debt or debts on which the petitioning creditor relies is or are still owing, or if it is satisfied by the debtor that: (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. 22 As for ground 7, his Honour inspected the petition, made certain observations about what it contained, and did not accept that Ms Tarrant would have been confused. 23 His Honour then referred to the affidavits of final debt and final search. He said he was satisfied that Ms Tarrant had committed the act of bankruptcy alleged in the amended petition and was satisfied with the proof of the other matters required by s 52. He formally dispensed with service of the amended petition.

The appeal 24 The notice of appeal contained seven grounds in which the following errors were alleged to have been made by the federal magistrate: (1) allowing Statewide to amend the creditor's petition "and by so doing created an inconsistency with the original formulation in the Creditor's petition"; (2) disregarding as a sufficient cause for not making a sequestration order the "appeal" to the High Court; (3) disregarding as a sufficient cause for not making a sequestration order the pending Supreme Court proceeding for an amount equal to or greater than claim set out in the creditor's petition; (4) disregarding as a sufficient cause for not making a sequestration order the pending Supreme Court proceedings where Ms Tarrant might be entitled to default judgment in an amount equal to or greater than the amount in the creditor's petition; (5) concluding that part of the pending Supreme Court proceeding did not amount to a sum equal to or greater than the amount claimed in the creditor's petition; (6) allowing the petitioning creditor to proceed with the amended creditor's petition without a period of notice of the amendment; (7) dispensing with service of the amended creditor's petition. 25 Although none of these grounds expressly referred to the refusal of the adjournment application, Ms Tarrant's written submissions first embarked on an attack on that decision. Mr Catlin of counsel, who appeared pro bono for Ms Tarrant on the appeal and who did not appear in the court below or prepare the submissions, applied to amend the notice of appeal to add a further ground that the federal magistrate fell into error by refusing the adjournment application. Statewide opposed the application, although it had been served with the written submissions. In the circumstances, I allowed the amendment. 26 I propose to deal first with the attack on his Honour's refusal to grant the adjournment.

The adjournment application 27 The Court's discretion to adjourn proceedings is extremely broad. Section 33(1)(a) of the Act permits the Court at any time to adjourn any proceeding before it. 28 To succeed on an appeal from the exercise of a discretion an appellant must show error of the kind referred to in House v The King (1936) 55 CLR 499 at 504-5. 29 Ms Tarrant made a number of complaints about the federal magistrate's decision. Many of them misrepresent what his Honour actually said. Others have no bearing on the decision. None is meritorious. 30 In many cases where the claim is less than the amount of the judgment debt it is convenient to adjourn the proceeding to enable that litigation to proceed, provided the debtor has shown that she has "a real claim" to litigate: Re Schmidt; Ex parte Anglewood Pty Ltd (1968) 13 FLR 111 per Gibbs J at 116. "A real claim" is one of "sufficient integrity to warrant the debtor being given the opportunity to have it litigated": Re James; Ex parte Carter Holt Harvey Roofing (Australia) Pty Ltd (No 2) (1994) 51 FCR 14 at 22E. The fundamental problem Ms Tarrant faced is that no material was put to the federal magistrate to show that she had such a claim. 31 The argument advanced by Mr Catlin was that his Honour erred by failing to have regard Ms Tarrants affidavits, at least the one filed on 22 July 2011 in opposition to the petition. A failure to take into account relevant evidence is a House v The King error. The problem with the argument is that the affidavits were not in evidence. 32 Section 64(4) of the Federal Magistrates Act 1999 (Cth) ("FM Act") provides that, if a person makes an affidavit and a party proposes to adduce evidence by the affidavit, a party may request the person to appear as a witness to be cross-examined. There is no dispute that a request was made in this case and reasonable notice given. On 6 September 2011 the parties appeared before a registrar of the Court. Ms Tarrant was present on that occasion. The registrar made consent orders relating to the filing and service of evidence and submissions. The short minutes of order appearing on the Court file contain a note to the effect that Ms Tarrant would be required for cross-examination. No evidence was called to explain Ms Tarrant's absence. Her solicitor gave an explanation from the bar table. In substance, he said she was not able to get away from work. Nothing was said about the efforts, if any, she had made to do so but the date for hearing had been specially fixed and she knew her attendance was required. It is not clear from his Honour's reasons whether he accepted the explanation. 33 Section 64(6) of the FM Act provides that if a request is made under subs (4) and the person who made the affidavit does not appear for cross-examination, the Court is to give the matters in the matter such weight as the Court thinks fit in the circumstances. Neither of the lawyers appearing for the two parties drew the federal magistrate's attention to this section. In not allowing Ms Tarrant's affidavits to be read his Honour treated them as inadmissible. To this extent it may be argued that his Honour fell into error, but in circumstances where the deponent had been required for cross-examination, yet did not appear, the material would be entitled to little, if any, weight. In the circumstances, the outcome is likely to have been the same. 34 At common law there was no "right" to cross-examine a witness: see, for example, GPI Leisure Corp Ltd v Herdsman Investments Pty Ltd (No 3) (1990) 20 NSWLR 15 ("GPI Leisure") at 18, 22 per Young J in Eq; NMFM Property Pty Ltd v Citibank Ltd (No 8) (1999) 161 ALR 581; [1999] FCA 266 at [16] per Lindgren J (following Young J in GPI Leisure); LGM v CAM [2008] FamCA 185 at [207]-[208] per O'Ryan J. As Young J put it in GPI Leisure at 22, the only right was the right to a fair trial. But s 27 of the Evidence Act 1995 (Cth) provides that a party may question any witness, except as provided by the Act. That suggests that the Parliament's intention was to legislate for such a right: cf. Moore v Wilson [2006] FCA 79 at [76] where Mansfield J queried whether the common law position had been removed by s 27. 35 The right, of course, is not unfettered. But if a party wishes to cross-examine a witness on matters in dispute in the proceeding and gives reasonable notice of its intention to do so, it is an incident of the court's duty to provide a fair trial that, in general, that wish be respected. The right to cross-examine a witness has been described as "a fundamental element of litigation when conducted on affidavits or witness statements, not lightly to be set aside", all the more so when the witness is a party: Alexander v Jansson [2010] NSWCA 176 at [11]. There is old authority that evidence given by a party affecting another party is not admissible against that other party unless there is a right to cross-examine: Allen v Allen [1894] P 248 at 253. Nevertheless, courts have a discretion to admit affidavit evidence where the deponent is not available for cross-examination, even over objection. That discretion is incorporated into r 15.29A of the Federal Magistrates Court Rules 2001 (Cth) ("FMCR"). But no application was made in this case for the discretion to be exercised. 36 Mr Catlin did not argue that the affidavit should have been read in those circumstances, merely that his Honour should have considered the material because it was relevant and it had been filed. 37 The difficulty for Ms Tarrant, however, is that on the adjournment application Mr Pope not only did not read the affidavit, he did not invite the federal magistrate to have regard to it. He did not even tell his Honour what it contained. Indeed, he said (at T2/45): There are, as I said your Honour, a number of affidavits but I don't think your Honour needs to look at those in relation to my application….we would only ask your Honour to read the affidavits if there's some factual mater that I put to you that is in dispute between myself and my opponent. 38 No such factual dispute was identified and later, after Statewide's counsel, Mr Cutler, addressed his Honour on the factual background, Mr Pope said: I don't cavil with my friend's description of the facts. 39 A challenge to a judgment on the ground that the primary judge failed to take into account material in an affidavit that was not read and that he was not asked to read must inevitably fail. 40 Still, in spite of the way the case was run, Mr Catlin valiantly argued that his Honour should have taken it upon himself to read the affidavit. While that course was certainly open to his Honour, I fail to see how in not doing so it could be said that he fell into appealable error, particularly when objection would certainly have been taken. Mr Catlin also argued that, after he had refused the adjournment, his Honour should have reconsidered whether he should accede to it, although he was never asked to do so. Once again, while he might have done so of his own motion, he did not fall into error by not doing so. 41 Although he said nothing in support of them, Mr Catlin did not abandon Ms Tarrant's written submissions. It therefore remains necessary for me to deal with them. Ms Tarrant alleged there were 10 alleged errors in his Honour's 10 paragraph judgment. Each of them is misconceived. 42 The first alleged error is that in para 3 of his reasons the federal magistrate referred to the wrong date of the judgment upon which the petition was founded. That is quite true. He said there that the judgment was signed on 19 June 2009, when it was in fact signed on 17 June 2009. But the error is obviously a typographical one and it is of no consequence. 43 Secondly, Ms Tarrant submitted that his Honour's statement (in the same paragraph of his reasons) that the applicant filed her notice of motion to set aside the judgment 15 months after the judgment was given was an error because there was no evidence that she knew about the judgment until she was served with the bankruptcy notice on 21 October 2010. The fact is that the application was filed 15 months after the judgment. That she may not have known the judgment until much later does not invalidate the statement. In any event, Mr Pope made no such submission. And the only evidence to support the proposition was in Ms Tarrant's affidavit of 22 July 2011 to which his Honour was not taken. As it happens, however, it is untrue that Ms Tarrant did not know about the judgment until service of the bankruptcy notice. As Garling J pointed out in his reasons at [2011] NSWSC 144 at [5], she had solicitor and counsel appear for her before Adams J a week after the judgment to seek an extension of the stay. 44 Thirdly, Ms Tarrant contended that the federal magistrate was in error in not referring to the fact that Ms Tarrant was not present at the hearing of the application for leave to appeal and "unable to present her case". The failure to refer to Ms Tarrant's absence was not an appealable error. The federal magistrate was never told that the Court of Appeal dealt with her application in her absence. She had an opportunity to be heard and, as I have already mentioned, she had invited the Court of Appeal to deal with the matter in her absence. 45 Fourthly, Ms Tarrant asserted that the federal magistrate erred by noting that she had abandoned the application in the High Court and not referring to the fact that she had filed a summons for its reinstatement. This was no appealable error. His Honour did not, as Ms Tarrant implied, proceed on the basis that her application had been abandoned. He considered the application at [9] of his reasons. 46 Fifthly, Ms Tarrant submitted that the federal magistrate erred in not referring to the fact that on 12 July 2011 she had applied for the entry of judgment on her claim against Statewide. That submission must be rejected. The evidence about that was in her 22 July 2011 affidavit which, as I have said, was not read. Ms Tarrant's solicitor did not ask his Honour to even look at it. Further, no-one informed his Honour that Ms Tarrant had applied for the entry of judgment so his Honour can scarcely be criticised for failing to take that circumstance into account. 47 Sixthly, Ms Tarrant submitted that his Honour erred in relying on Mr Cutler's submission on the Anshun estoppel point "when that is not the case and no order to that effect had been made". Yet, no argument was advanced against the submission. It is immaterial that there has been no finding on the matter in the Supreme Court. In deciding whether there should be an adjournment, his Honour was entitled to consider whether there was merit in the pending Supreme Court proceeding. 48 Seventhly, Ms Tarrant submitted that his Honour erred in accepting Mr Cutler's submission that she had no actionable claim for loss of reputation. She said there was no evidence to support the finding. But his Honour made no such finding. He merely observed that it was unlikely she could recover $2.6 million for loss of reputation and hurt feelings, which was all that remained of the claim if the Anshun estoppel argument was right. 49 Eighthly, Ms Tarrant stated that his Honour erred in finding that she had made multiple applications to adjourn the hearing of the creditor's petition. He made no such finding. 50 Ninthly, Ms Tarrant submitted that his Honour erred by finding that the Court was entitled to be sceptical about the prospects of success of the "appeal" to the High Court when he had no evidence to support his scepticism. This submission must also be rejected. There was very good reason for scepticism. Mr Pope told his Honour he was "not in a position to go into the merits of the appeal" (T2/30) and did not do so. There is no appeal. Ms Tarrant first requires special leave. The special leave application seeks to overturn a discretionary judgment refusing leave to appeal. Mr Pope did not address his Honour on the errors, if any, in the Court of Appeal judgment. Neither did Mr Catlin on the appeal. The special leave point eludes me. 51 Finally, Ms Tarrant argued that the federal magistrate erred in finding that the pending Supreme Court proceeding would not be successful when she was already entitled to judgment and there was no evidence that the judgment would not be enforceable. His Honour did not find that the proceeding would not be successful. But in substance, it is fair to say, he doubted whether it had merit. As I said earlier, however, there was no evidence that Ms Tarrant was entitled to judgment. 52 Ms Tarrant's concluding plea was that the federal magistrate should have adjourned the proceeding to enable her to conclude her appeal in the High Court. In circumstances where the basis of the proposed appeal was never identified and no argument was put to suggest it had any merit, his Honour's decision to refuse the adjournment was neither unreasonable nor plainly unjust. 53 Ms Tarrant has not established that the federal magistrate's decision to refuse the adjournment was affected by appealable error. His Honour's discretion did not miscarry.

Grounds 1, 6 and 7: The amendment to the petition 54 Three grounds of appeal (grounds 1, 6 and 7) are concerned with the federal magistrate's decision to allow Statewide to amend its petition. It is convenient to consider them together. 55 The first ground alleges that the federal magistrate erred by allowing the amendment. Ground 6 alleges error in allowing Statewide to proceed with the petition without a period of notice. Ground 7 alleges error in allowing Statewide to proceed with the amended petition by dispensing with service. Each of these grounds must be rejected. 56 The Court undoubtedly had the power to allow an amendment to the creditor's petition. An amendment may be made even where the petition in its unamended form does not specify an act of bankruptcy: MacDonald, in the matter of MacDonald v Official Trustee in Bankruptcy [1999] FCA 1303 at [8]-[13]. 57 Section 33(1)(b) of the Act provides that the Court may at any time allow the amendment of any written process, proceeding or notice under the Act. Rule 7.01(1) of the FMCR gives the Court power at any stage in a proceeding to allow a party to amend any document apart from an affidavit. Although the rules require that the creditor's petition be served at least five days before the date fixed for hearing, the Court also has the power to order otherwise: FMCR, r 4.05. 58 These decisions, then, concern procedural matters made in the exercise of the court's discretion. Appellate courts are notoriously reluctant to interfere where the decisions relate to matters of practice or procedure: Brambles Holdings Ltd v Trade Practices Commission (1979) 40 FLR 364 at 365. Ms Tarrant did not point to any House v The King error. 59 Mr Catlin submitted that the federal magistrate should have had regard to the potential prejudice or confusion the amendment "caused" his client. When pressed, however, he could not identify what that might be and, like his Honour, I am at a loss to see it. She knew the date the judgment was entered; she named that date in her application to set aside the bankruptcy petition. She was also well aware of the Court of Appeal's decision. She could not have been in any doubt as to the basis of the petition. 60 As his Honour observed (at [9]), the act of bankruptcy relied upon was the failure to comply with a bankruptcy notice based on a judgment for the sum referred to in paragraph 1 of the petition. The date was not the only way the judgment was identified in the petition. His Honour said he was unable to see what possible prejudice arose when the debtor herself declined an opportunity to make any point about it when she consented to the dismissal of her application to set aside the bankruptcy notice and was, after 18 August 2011, made aware of the reason for entering the judgment upon a date later than the date on which it was originally given. I respectfully agree. There is nothing to suggest that the amendment caused her any prejudice or resulted in any injustice. Had service of the amended petition not been dispensed with she would have been in no different position. 61 In her written submissions Ms Tarrant pointed to the federal magistrate's error in para 3 of his judgment where he said that the parties agreed that judgment was entered on 17 June 2010. Again, this is plainly a typographical error. His Honour refers to the correct date in para 15, when he granted the amendment. 62 In her written submissions Ms Tarrant also complained that without evidence the Court of Appeal had regard to the orders entered on Justicelink. The complaint is unjustified. The Court is entitled to take judicial notice of the orders made by it or any other court. UCPR r 36.6. Justicelink is no more than a computerised database which includes those orders. 63 Ms Tarrant further submitted that the federal magistrate erred in finding in para 8 of his reasons that she did not press the issue of the wrong date of judgment. But the submission misstates what his Honour said and takes it completely out of context. His Honour was referring to the application to set aside the bankruptcy notice in which she had stated: The judgment upon which the bankruptcy notice is based, dated 17 June 2009, was granted in error and is therefore defective. 64 I am not satisfied that the discretion to grant the amendment miscarried.

Grounds 2, 3, 4 and 5: The appellant's evidence 65 These four grounds allege that the federal magistrate erred by disregarding certain matters. Each of these grounds should also be rejected. 66 First, his Honour did not disregard the High Court proceedings. He referred to them. In her written submissions Ms Tarrant effectively acknowledged as much, noting that his Honour had said there was no indication about whether the (proposed) appeal had merit. Her submission was that "the Court did not avail itself of the opportunity to determine this issue as it refused the adjournment application that would have provided the material upon which to base an assessment". I do not accept this submission. If there were an available argument that there was a real prospect that special leave would be granted and an appeal to the High Court would succeed, I would expect that Ms Tarrant's solicitor would have advanced it. 67 Once again Ms Tarrant's written submissions contain errors of fact. His Honour did not find in para 11 of his reasons, as she submitted, that she had not attempted to reinstate the High Court "appeal". Indeed, he said quite the opposite. 68 It is true that the federal magistrate did not refer to the pending Supreme Court proceeding in his judgment on the sequestration order. But that does not mean he fell into error. 69 In the first place, he had already considered the claim in the context of his decision on the adjournment. If the claim did not justify an adjournment, it would not defeat the creditor's prima facie entitlement to a sequestration order. It is likely that Mr Pope recognised as much. Perhaps that is why he did not rely on the ground of opposition that raised it. Another explanation is that the evidence on which he sought to rely was not admitted. Yet, Mr Catlin submitted that here, too, his Honour was in error in failing to consider the evidence in Ms Tarrant's affidavits. Based on this material, Mr Catlin argued that Ms Tarrant was not in fact indebted to Statewide because she had been released from her obligations under the mortgage over the Bardo Road property. The argument is without merit. This was the very issue raised in ground 2 of the notice of grounds of opposition to the creditor's petition which Mr Pope expressly abandoned. I note parenthetically that Garling J considered the same argument and the evidence relied upon to support it and emphatically rejected it.

Conclusion 70 None of the grounds of appeal is made out. Accordingly, the appeal must be dismissed. Costs should follow the event. I certify that the preceding seventy (70) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Katzmann.