Tov-Lev v Lowbeer

Federal Court of Australia|2014-07-30|Before: Wigney J, Rares J, Nicholas J

REASONS FOR JUDGMENT 1 In June 2011, the applicants commenced proceedings in the Supreme Court of New South Wales in relation to a dispute concerning the affairs of Strathfield and District Hebrew Congregation (SDHC). The defendants named in those proceedings were the directors, or at least former directors, of SDHC and the respondent, Mr Lowbeer. 2 The applicants had no success in the Supreme Court. Various costs orders were made against them in favour of SDHC and Mr Lowbeer. On 23 April 2013, Mr Lowbeer's costs were assessed at $48,212.62. 3 Mr Lowbeer applied for a bankruptcy notice which was issued and served on the applicants in May 2013. An application made by the applicants to have the bankruptcy notice set aside or to extend the time for compliance was refused by Judge Raphael of the Federal Circuit Court. 4 On 20 December 2013, Judge Driver of the Federal Circuit Court made sequestration orders against the applicants' estates. His Honour stayed the sequestration orders for a period of 21 days: see Lowbeer v Tov-Lev [2013] FCCA 1813. 5 The applicants appealed Judge Driver's orders of 20 December 2013. On 5 February 2014, in aid of their appeal, the applicants obtained a further stay of the sequestration orders from Wigney J. 6 The applicants' appeal was heard by Rares J who delivered judgment on 11 March 2014: see Tov-Lev v Lowbeer (No 2) [2014] FCA 379. His Honour dismissed the applicants' appeal. The applicants then lodged an application for special leave to appeal to the High Court which is yet to be determined. 7 On 30 May 2014, the applicants filed an interlocutory application seeking the following orders: 1. An order that all proceedings under the sequestration orders against each of the Applicants be stayed pending the determination of the High Court Appeal commenced by the Notice of Appeal filed on 5 May 2014 in proceedings No. S79 of 2014. 2. An order that the nominated Australian Financial Security Authority be re-instated to act as the Official Trustee replacing PPB Advisory the registered Trustee on the grounds set out in the supporting Affidavit of the Applicant Rabbi Samuel Tov-Lev dated 30 May 2014. 3. An order for the court to review the sequestration orders made by Judge Driver on 20 December 2013 and the bankruptcy on the grounds that the payment was made to the Respondent in the amount of $48,212.62 on 12 July 2013 within the court extended time for compliance. 4. An order imposing pecuniary penalties on the Respondent and his solicitor Mr David Austin for failing to disclose to the court that they were provided with the cheque for $48,212.62 equal to the amount shown on the Bankruptcy Notices and within the court extended time for compliance but failed to bank the cheque to improperly enforce bankruptcy to procure additional funds through a private registered trustee. The Applicants should not be penalised for the Respondent's failure to bank the cheque. 5. An order imposing pecuniary damages on the Respondent and his solicitor Mr David Austin for the abuse of court process. 8 The interlocutory application came before Robertson J on 30 May 2014. On that occasion his Honour dealt with paragraph 1 by refusing the stay sought by the applicants (see Tov-Lev v Lowbeer (No 3) [2014] FCA 699). The balance of the interlocutory application was stood over to a date to be fixed. It was heard by me yesterday. At the conclusion of the hearing I made orders dismissing the balance of the interlocutory application with costs. These are my reasons for making those orders. 9 The applicants were not legally represented before me. Their submissions were highly discursive and often wandered into territory that was quite distant from the legal issues raised by their interlocutory application. It is convenient to deal with the various matters raised by the applicants in the order in which they appear in the interlocutory application.

Paragraph 2 10 On 7 April 2014, Andrew John Scott was appointed trustee in place of the Official Trustee. It is not clear to me whether Mr Scott was appointed pursuant to s 181 or s 181A of the Bankruptcy Act 1966 (Cth) (the Act). However, neither provision gives the bankrupt standing to apply for the removal of his or her trustee. In order for a bankrupt to obtain the removal of the trustee, it is necessary for him or her to make application under s 179 of the Act. 11 Even if paragraph 2 in the interlocutory application is to be understood as an application for an order under s 179 of the Act, there is no justification apparent from the evidence to which I was referred for any order to be made under that section. In particular, the affidavit referred to in paragraph 2 of the interlocutory application (to the extent that it is in any way relevant to the application to remove Mr Scott) does not identify any proper basis for making such an order.

Paragraph 3 12 The next paragraph in the interlocutory application invites the Court to conduct a review of the sequestration orders made against each of the applicants. As already explained, the sequestration orders were the subject of an appeal to Justice Rares, who in detailed reasons for judgment, rejected all of the grounds of appeal relied upon by the applicants. As I have also mentioned, his Honour's judgment is still the subject of an application for special leave to appeal to the High Court. 13 The interlocutory application, in so far as it seeks in paragraph 3 an order for the review of Judge Driver's judgment of 20 December 2013, amounts to an abuse of process. This is because the process of the Court is being used by the applicants for purposes which it is not intended to serve and which it is incapable of serving, viz. in order to "go behind" the final judgment of 20 December 2013: see Jago v District Court (NSW) (1989) 168 CLR 23 at 47 per Brennan J.

Paragraph 4 14 This brings me to the fourth paragraph of the interlocutory application. Wrapped up in paragraph 4 are a number of propositions to which I should refer in a little detail. 15 The sum of $48,212.62 referred to in paragraphs 4 and 5 represents the amount claimed in the bankruptcy notice served on the applicants in or about the middle of 2013. The applicants failed to comply with the bankruptcy notice and thereby committed acts of bankruptcy upon which the creditor's petitions were founded. 16 The applicants submitted that at a time when the time for payment stipulated in the bankruptcy notice was still to expire, they proffered to Mr Lowbeer's solicitor, Mr David Austin, a cheque for $48,212.62 in full payment of the debt the subject of the bankruptcy notice. The applicants submitted that Mr Austin refused to accept the payment, and instead requested that the applicants pay a much larger sum. 17 Mr McGrath, who appeared for Mr Lowbeer, indicated that Mr Austin denied having had any such dealings with the applicants until February 2014, at around the time of the hearing before Wigney J, when the applicants sought to make a payment to Mr Lowbeer in the amount of $48,212.62. To this end, Mr Joseph de Varda, the third applicant, proffered a cheque drawn by the second applicant, Mr David Cliffe. 18 This matter was dealt with by Rares J. His Honour said at [84]: As the trial judge noted, the appellants did not seek to put on any evidence of their solvency before him, nor have they done so before me, despite my having raised expressly with them the fact that such evidence was missing, and that it would be a necessary pre-condition to making an order for an annulment. They relied on having sought to tender a cheque for the judgment sum the subject of the bankruptcy notice. The latest attempt to tender such a document occurred before Wigney J when the proceedings were first before his Honour in early February 2014. However, the time for compliance with the bankruptcy notice had long since expired and the late tender of the cheque did not, and does not, affect Mr Lowbeer's right to proceed with the petition: McIntosh v Shashoua (1931) 46 CLR 494 at 505 per Gavan Duffy CJ and Dixon J, 508 per Starke J, 521 per McTiernan J. 19 The applicants contend that both Judge Driver and Rares J failed to address their submission to the effect that they had proffered a cheque for $48,212.62 to Mr Austin prior to the expiration of the bankruptcy notice and that this was met with a refusal coupled with a request for a much larger sum. 20 The first point to make is that the applicants did not explain the legal basis upon which the Court might impose pecuniary penalties on either Mr Lowbeer or Mr Austin even if it is assumed (contrary to Mr McGrath's instructions) that any cheque was proffered or handed over in or about July 2013 as the applicants contend. It is apparent that the claim for pecuniary penalties in paragraph 4 of the interlocutory application is legally misconceived because the Court does not have jurisdiction to impose pecuniary penalties in such circumstances. 21 In any event, the argument raised by the applicants should have been raised at the hearing of the creditor's petitions or, if not then, with the leave of Rares J, at the hearing of the appeal against the sequestration orders. If, as the applicants contend, the matter was raised before Rares J, but not dealt with according to law, they were entitled to raise it in their application for special leave to appeal. But the applicants cannot raise this issue by way of a collateral attack upon the sequestration orders as they have sought to do here.

Paragraph 5 22 Rares J stated at [87] of his reasons: There is nothing before me to suggest that the sequestration orders ought not to have been made by the trial judge against the appellants. Indeed, I am satisfied that those orders were properly made. Nor is there any reason to suggest that the appellants are entitled to the exercise of the discretion to annul the bankruptcy order in their favour. 23 The applicants' contention (as reflected in paragraph 5 of the interlocutory application) that the bankruptcy proceedings were an abuse of process takes as its starting point the proposition that Mr Austin refused to accept a payment on behalf of Mr Lowbeer at a time when the bankruptcy notice was yet to expire. The argument seems to be that the bankruptcy notice, or at least each creditor's petition, was issued for an improper purpose related to the dispute the subject of the Supreme Court proceedings or perhaps some related controversy concerning the administration of the SDHC. The events underpinning this contention (assuming they occurred) were matters known to the applicants well before the creditors petitions were heard by Judge Driver. It follows that this was a matter that, if not raised before Judge Driver or Rares J, could and should have been raised before the sequestration orders were made and the appeal was dismissed. In my view, it is no longer open to the applicants to assert that the bankruptcy proceedings brought against them amounted to an abuse of process except, of course, in so far as they might be permitted to do so in support of their application for special leave. 24 The balance of the interlocutory application (consisting of paragraphs 2-7 thereof) will be dismissed with costs. I certify that the preceding twenty-four (24) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Nicholas.

Bankruptcy Act 1966(Cth)ss 179, 181, 181A

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