Turco v Mortgage Ezy Australia Pty Ltd

Extension of time for appeal 5 Mr Turco accepts that the appeal was commenced one day after the expiry of the time period required under the Federal Court Rules 2011 (Cth). He applies for an extension of time. Mortgage Ezy did not oppose the grant of such a short extension, and it will be granted.

Background to the appeal 6 The reasons for decision of the Family Court were admitted into evidence, but in this court Mr Turco submitted that s 91 of the Evidence Act 1995 (Cth) means that those reasons cannot be relied on to prove the truth of the findings the Family Court made. But the Federal Circuit Court's decision did not rely on those findings, and it is not necessary for this court to rely on them. So there is no need to determine the correctness of that submission, including whether it is open to Mr Turco to seek to confine the use that can be made of the material on appeal, when at first instance it was admitted into evidence without qualification and no appeal from that determination has been brought. 7 The following background was uncontentious. Mr Turco is an accountant by profession. In November 2003, he and his then wife, Suellen Turco, now Suellen Williams, borrowed $644,000 from Mortgage Ezy. The loan was secured by a mortgage over a property in East Fremantle. 8 In February 2005, Turco & Co Pty Ltd, an entity associated with Mr Turco and his brother, Vitorio Turco, obtained a $1.65 million facility from Bank of Western Australia Ltd. One of the purposes of the facility was to refinance the loan from Mortgage Ezy. The loan from Bankwest was to be secured by a mortgage over the East Fremantle property. 9 Due to a mistake made by Mortgage Ezy's representative at settlement, Mortgage Ezy discharged the mortgage without obtaining payment of the debt. The funds from Bankwest for the discharge of the debt owed to Mortgage Ezy were not paid to Mortgage Ezy. They were paid to Turco & Co. The result was that the debt to Mortgage Ezy, much of which remained outstanding, was still owing but became unsecured, and Turco & Co had access to substantial funds provided by Bankwest which had been intended to repay Mortgage Ezy. 10 Turco & Co disbursed those funds. It then continued the payments that were due under the loan agreement with Mortgage Ezy. Mr Turco was involved in the ongoing repayments. But Mortgage Ezy did not become aware of the mistake until September 2013, over eight years after it occurred. 11 In the meantime, on 19 March 2010, a sequestration order was made against Mr Turco's estate on the petition of a different creditor. On 20 June 2012, the creditors of the estate passed a special resolution accepting a proposal pursuant to s 73(1) of the Bankruptcy Act for a composition in satisfaction of Mr Turco's debts. So by force of s 74(1) of the Act, the bankruptcy was annulled. 12 Mortgage Ezy claims that it was not aware of the bankruptcy or the composition until at least 2014, when those things were referred to in documents served in Family Court proceedings between Mr Turco and Ms Williams. In the same year, Mortgage Ezy commenced proceedings in the Supreme Court of Western Australia against Mr Turco and Ms Williams for recovery of the debt. Orders were made cross-vesting that claim to the Family Court of Western Australia. It was tried in April 2015 and on 3 November 2017 the Family Court gave judgment in Mortgage Ezy's favour. 13 Mortgage Ezy commenced the bankruptcy proceedings against Mr Turco in the Federal Circuit Court on 9 August 2018 and the primary judge made the sequestration order on 19 June 2019.

The primary judge's decision 14 The primary judge delivered brief, ex tempore reasons. The greater part of the written reasons are under the heading of an application for an adjournment which Mr Turco's counsel made. It appears that the application was based on the fact that Mr Turco had applied, some 18 months out of time, for an extension of time to appeal from the Family Court judgment. Mr Turco's counsel submitted that the bankruptcy proceeding should be adjourned pending the proposed appeal. 15 The primary judge considered that the application for an extension of time to appeal and the proposed appeal had no real prospect of success, and so refused to grant an adjournment pending the outcome of the appellate proceeding. A ground of appeal from this aspect of his Honour's decision has been abandoned. 16 In the course of determining the adjournment application, the primary judge also made comments and findings in relation to a submission made on behalf of Mr Turco which his Honour recorded as being that 'no real judgment debt existed and the Court should go behind the judgment debt'. His Honour also recorded a submission that Mortgage Ezy's debt had been extinguished by reason of s 74, s 82 and s 153 of the Bankruptcy Act. That appears to be a reference to the previous bankruptcy. 17 In the primary judge's view, those submissions did 'not identify circumstances which the Court regards as special circumstances justifying going behind the judgment or justifying an adjournment of these proceedings …': at [5]. The primary judge went on to say: [6] The purported grounds advanced in the respondent's notice of appeal arise in circumstances where there was a contested proceeding before a learned Judge in the Family Court of Western Australia. Whilst the respondent may have ultimately been unrepresented in those proceedings, that does not give rise to circumstances which the Court regards as warranting the Court going behind the judgment debt in the present case. The Court does not regard any of the purported grounds identified in the notice of appeal as having any realistic prospect of success or being the subject of a grant of leave given the inordinate delay by the respondent in seeking to challenge the judgment debt and the lack of merit in the purported grounds. [7] The Court is not satisfied that the proceedings the subject of the notice of appeal have any real prospect of success. The Court does not regard those proceedings as identifying a proper basis to go behind the judgment debt obtained in the Family Court of Western Australia. 18 The proposed notice of appeal was in the evidence provided to this court. It claimed that the Family Court erred in failing to consider the effect of the previous bankruptcy and composition. It raised, among other things, the absence of any finding by the Family Court that the debt was one of which forbearance had been obtained by fraud. While the primary judge does not say at this point why that ground lacked merit, as will be seen the reasons appear with sufficient clarity from the rest of the judgment. 19 The primary judge's reasons then refer to 'an earlier bankruptcy of the respondent': at [8]. A submission made on behalf of Mr Turco is recorded (at [8]) as being 'the issue of inclusion of the debt in the earlier bankruptcy, so as now to be extinguished, was not an issue raised before Watson J [sic Walters J of the Family Court]'. 20 The primary judge made no finding about whether that alleged extinguishment was indeed raised with or determined by Walters J, but at no stage in the appeal did Mortgage Ezy contend that it had been raised with the Family Court. The primary judge went on to say: [9] The parties are bound by the conduct of their proceedings. There is no basis why the Court should permit the re-agitation of a matter such as this in circumstances where the respondent [i.e. Mr Turco], even though unrepresented, participated in contested proceedings and the matter could be the subject of substantial answer by reason of s 153(2)(b) of the [Bankruptcy] Act. [10] Section 153(2)(b) of the Act relates to the release of a bankrupt from a debt incurred by means of fraud or fraudulent breach of trust to which the respondent was a party or a debt of which the respondent has obtained forbearance by fraud. It is apparent in the circumstances of the present case that the petitioning creditor identifies forbearance by fraud where, at the time of the act of bankruptcy, the respondent failed to disclose the loan to the petitioning creditor. The respondent subsequently entered into a compromise and, on the evidence before the Court, continued to fail to disclose the existence of the loan to the trustee in bankruptcy or the trustee in relation to the proposed compromise. [11] Whilst it is not necessary for the Court to do so, there is no basis to support the respondent's submission in the affidavit of Mario Turco sworn 13 December 2018 at [29] that he believed a related company had assumed responsibility for the debt in relation to the petitioning creditor. There is no material before the Court to support any such novation or any basis for such assumption. On the face of the evidence before the Court, it is apparent that the respondent deliberately remained silent in circumstances where he was required to identify his creditors. [12] On the face of the evidence before the Court, the Court finds that there was an intentional failure to disclose the existence of the loan to the earlier trustee. Had the respondent included the loan in the statement of affairs, there might be substance in the respondent's submission that there are special circumstances warranting going behind the judgment debt. In the circumstances of the present case, however, there is a strong case that meets the requirements of the last limb of s 153(2)(b) of the Act. Any purported release of the debt was obtained by forbearance on the fraud of the respondent. [13] It is not necessary for the Court to deal with the whole of the facts in respect of the background, as invited to by the respondent. It is sufficient to identify that the statement of affairs is not a document in respect of which it could be said that the conduct of the respondent was one of mere omission. There was a statutory obligation on the respondent to identify his unsecured creditors. The fact that there was a company continuing to make payments in respect of the loan means it is patent that the respondent must have been aware of the loan. [14] The real explanation advanced by the respondent in relation to the circumstances of the present case is that he was allegedly unaware of the argument he might have had available to him at the time of the hearing before Watson J [sic Walters J] as to the impact of the provisions of the Act. The respondent's submission that he believed the company had assumed responsibility for the debt is not the subject of any identified basis to support such a belief. The respondent knew there was a loan and knew there was a proposed transaction where it was intended that the existing security continue, which did not occur, and which must have also been known by the respondent. 21 The primary judge then went on to say that there were 'no special circumstances in the present case that warrant the Court going behind the judgment debt': at [15]. His Honour then at [15]-[17] dismissed the application for an adjournment based on the existence of the proposed appeal from the judgment of the Family Court. 22 His Honour then found (under a new heading, 'Application for a sequestration order'), that Mr Turco had committed an act of bankruptcy on 14 June 2018 at a time when he was present in Australia so that the jurisdiction of the Federal Circuit Court to make a sequestration order was attracted: at [18]. His Honour found that the formal requirements for the making of the order, such as service of the bankruptcy notice and of the petition, had been established: at [19]. He found (at [19]) that he was 'satisfied that this is an appropriate matter in which the applicant established proof of the requirements of s 52(1) of the Act'. I interpolate that this includes s 52(1)(c), under which, at the hearing of a bankruptcy petition, the court must require proof of the fact that the debt on which the petitioning creditor relies is still owing. 23 The primary judge then returned to the question of 'going behind' the judgment debt as follows: [20] The respondent has submitted that the Court should go behind the judgment debt. For the reasons already given, the Court is not satisfied that this is an appropriate matter in which to go behind the judgment debt and declines to do so. [21] The respondent submitted that the existence of the appeal proceedings and the contentions raised in respect of the Act are other sufficient causes why a sequestration order ought not be made. On the evidence before the Court, the respondent is unable to pay his debts. The Court is not satisfied that other sufficient cause not to make a sequestration order has been made out. For the reasons given, there is no substance in the contention that the Court should go behind the judgment debt. [22] The Court finds that, even if it did go behind the judgment debt, the Court would find that the applicant had made out the requirements of s 153(2)(b) of the Act in respect of the respondent obtaining forbearance by fraud. The Court takes into account that this is not a case of mere silence, but one where the respondent had a positive duty to disclose who his unsecured creditors were. The submission advanced by [counsel for Mr Turco] that the statement of affairs could be added to does not in any way detract from the proposition that it is open to the Court to find, and the Court does find, that there was a deliberate failure by the respondent to disclose the loan to the former trustee which gave rise to a forbearance obtained by fraud upon the petitioning creditor. [23] The Court also finds that there was an ongoing and deliberate failure by the respondent to disclose the existence of the loan up to and including the time of composition, all of which gave rise to forbearance of steps being taken for the recovery of the loan by the petitioning creditor. The Court regards the intentional conduct as amounting to fraud within s 153(2)(b) of the Act and to forbearance by the petitioning creditor to pursue the loan and/or, at that time, an assertion in equity that the petitioning creditor had an equitable lien or charge in respect to the property that had been the subject of the original loan. That forbearance was obtained by the fraud of the respondent. No sufficient cause has been made out. [24] Accordingly, the Court is satisfied that this is an appropriate matter in which there should be made a sequestration order. 24 His Honour then went on to refuse an application for a stay of the sequestration order. A ground of appeal from that refusal is no longer pressed.

Overview of the notice of appeal and the notice of contention 25 The notice of appeal is broken up into ten grounds. However only three of the grounds require separate determination. First, ground 1 and ground 10 contain general and conclusory claims of error and were not the subject of any separate argument. They do not require separate consideration. Second, grounds 3 and 9 were not pressed. Third, in my view grounds 4 and 6 attacked findings that the primary judge did not actually make. In their terms or in the way they were advanced in submissions, what they attacked was 'any finding' (words used in grounds 4 and 6) that Mr Turco's failure to disclose Mortgage Ezy's mistake in discharging the mortgage without receiving payment, or his subsequent conduct in light of that mistake, amounted to obtaining forbearance by fraud. While ground 6 could also be read as asserting error in relation to the primary judge's finding that the non-disclosure of the debt to Mortgage Ezy in the first bankruptcy amounted to obtaining forbearance by fraud, in the outline of written submissions it was only relied on in relation to non-disclosure of the mistaken discharge of the security. It was similarly confined to that argument in oral submissions. 26 But, as is apparent from the account of his Honour's reasons set out above, he did not make or base his decision on any such finding. The closest his Honour approached that issue was in [14] (quoted at [20] above) where he said that Mr Turco 'knew there was a proposed transaction where it was intended that the existing security continue, which did not occur, and which must have also been known by the respondent'. But this was said in the course of finding that by his non-disclosure in the first bankruptcy, Mr Turco obtained forbearance by fraud. While counsel for Mr Turco submitted that [22] and [23] of the judgment (quoted at [23] above) were findings of fraud in relation to the non-disclosure of the mistake, I do not read them that way. They refer to the non-disclosure of who Mr Turco's unsecured creditors were, and a failure to disclose the existence of the loan. That is not about the mistaken discharge of the security. The primary judge simply did not deal with the argument that the failure to tell Mortgage Ezy about its mistake in discharging the security itself led to forbearance by fraud. So that argument was properly the subject of the notice of contention, grounds 2(a) and 2(b). 27 There remain four grounds of appeal which require substantive determination. They are: 2. The learned primary Judge erred in finding that the circumstances of the appellant's first bankruptcy (19 March 2010) and its effect on the alleged debt of the petitioning creditor were not special circumstances to warrant the Court to go behind the judgment of the Family Court of Western Australia made 3 November 2017 (FCWA Judgment), being the subject debt of the creditor's petition. … 5. The learned primary Judge erred in refusing to go behind the FCWA Judgment and consider whether in truth and reality there was a debt owing to the respondent. … 7. The learned primary Judge erred in allowing the applicant's statement of affairs from his previous bankruptcy into evidence or, alternatively, erred in not allowing the applicant time to respond to the evidence by way of an adjournment of the hearing. 8. The learned primary Judge erred in finding that any failure of the applicant to record the respondent's debt in the statement of affairs prepared in his previous bankruptcy was grounds to not go behind the judgment debt or grounds to make the sequestration order. 28 Even these do not all require separate consideration. Counsel for Mr Turco described grounds 2, 7 and 8 as substantially being particulars to what appeared to be the principal ground advanced, ground 5. So ground 5 stands or falls with the other grounds. 29 Finally, the notice of contention also claims (in ground 2(c)) that s 153(1) of the Bankruptcy Act did not release Mr Turco from his obligation to pay any enforcement expenses arising as a result of a default under the loan agreement with Mortgage Ezy. 30 For the reasons that follow I consider that Mr Turco has not established error in the Federal Circuit Court's refusal to go behind the Family Court judgment for the reasons the primary judge in fact adopted. That makes it unnecessary to consider the other issues raised, in substance, by way of contention.

General principles 31 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. 32 Section 52(2) provides: 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. 33 While a judgment may usually be taken to establish the existence of a debt for the purposes of s 52, that will not always be the case. In Ramsay Health Care Australia Pty Ltd v Compton [2017] HCA 28; (2017) 261 CLR 132 the High Court considered the discretion to 'go behind' a judgment which, under s 52, is afforded to the court hearing the petition, so that it may satisfy itself that there is an extant petitioning creditor's debt. A majority (Kiefel CJ, Keane, Nettle and Edelman JJ) held that the discretion is not confined to cases where the judgment is affected by fraud, collusion or miscarriage of justice, even where the judgment was obtained after a contested hearing. The majority held that the court may go behind the judgment where sufficient reason is shown for questioning whether behind it there is in truth and reality a debt due to the petitioning creditor: see Kiefel CJ, Keane and Nettle JJ at [1], [33], [37]-[38] and Edelman J at [97]. 34 Here, Mr Turco says that both the principal debt owing to Mortgage Ezy and the liability for enforcement costs were released when the first bankruptcy was annulled. The annulment followed the acceptance of a composition under Part IV Division 6 of the Bankruptcy Act. Section 75(2)(a) relevantly provides that the acceptance of a composition does not, except with the consent of the creditor to whom the debt is due, release the bankrupt from a provable debt that would not be released by his or her discharge from bankruptcy. That directs attention to s 153, which relevantly provides: (1) Subject to this section, where a bankrupt is discharged from a bankruptcy, the discharge operates to release him or her from all debts (including secured debts) provable in the bankruptcy, whether or not, in the case of a secured debt, the secured creditor has surrendered his or her security for the benefit of creditors generally. (2) The discharge of a bankrupt from a bankruptcy does not: … (b) release the bankrupt from a debt incurred by means of fraud or a fraudulent breach of trust to which he or she was a party or a debt of which he or she has obtained forbearance by fraud … 35 Mortgage Ezy contends that it had a complete answer to the claimed release because the debt is one of which Mr Turco has obtained forbearance by fraud.

Did the primary judge err in refusing to go behind the Family Court judgment? 36 One preliminary matter worth mentioning is that there were submissions to the effect that the key question may be dealt with in two stages. The first is to decide whether to look behind the judgment, that is, embark on the inquiry. The second is to conduct the inquiry and decide whether to accept that the debt is still owing. In Ramsay Health Care at [20], the plurality suggested that this approach may be unduly complicated. But in any event, nothing turns on the distinction here. His Honour expressed himself in terms of a determination not to embark on the inquiry, albeit after, or at least as well as, making firm findings on the question of forbearance by fraud. To the extent that his Honour combined the two stages of the inquiry (if there are two stages), Mr Turco's counsel did not submit that was an error. His attack was on the merits of the finding of forbearance by fraud and an alleged lack of procedural fairness in arriving at it.

Ground 2 - the primary judge's reliance on the fact that there had been a contested trial 37 The first error identified in Mr Turco's submissions which requires substantive determination stems from a written submission advanced on his behalf that the primary judge found that there was no basis 'to look behind the judgment in circumstances that [sic] he was represented [sic]' at the Family Court hearing. That submission is incorrect, because Mr Turco was not legally represented at the Family Court hearing, and the primary judge was aware of this. Nevertheless, it seems that the challenge is to the finding that there was no reason to look behind the judgment in circumstances where Mr Turco contested Mortgage Ezy's claim in the Family Court and did not raise the alleged effect of the annulment of the first bankruptcy. This, it is said, was inconsistent with the approach approved in Ramsay Health Care. That was principally advanced under ground 2. 38 I accept that the primary judge did make an error of that kind. I have set out above paragraphs from his Honour's judgment in which he referred to the fact that the Family Court judgment followed a contested hearing. At [6] (quoted at [17] above), his Honour found that while the appellant was unrepresented in those proceedings, 'that does not give rise to circumstances which the Court regards as warranting the Court going behind the judgment debt in the present case'. And at [9] (quoted at [20] above), his Honour clearly held the view that the court should not permit re-agitation of the matter where the appellant had participated in contested proceedings. 39 That was an error because it is clear from Ramsay Health Care that if there is a real question as to whether the debtor failed to present his case on the merits in the trial which led to the judgment debt, it is no answer to say that the debtor is bound by the conduct of his case: see [66]-[67]. Kiefel CJ, Keane and Nettle JJ went on to say (at [67]-[68], citations removed): As has been seen, the notion that a party is bound by the conduct of his or her case has never been a sufficient reason not to look behind a consent judgment or a default judgment. That is because a Bankruptcy Court is concerned, not to discipline litigants or to protect finality in the administration of justice as between parties to litigation, but to protect the interests of third parties who were not participants in the litigation which led to the judgment in question. For the purposes of s 52 of the Act, a 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 a 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 a 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. See also at [70]. 40 The point that Mr Turco sought to raise before the primary judge was that the merits of the claim had not been tested in the litigation in the Family Court, because the effect of the previous bankruptcy was not raised. On the authority of Ramsay Health Care it was no answer to that to say that Mr Turco was bound by the conduct of the previous litigation. The primary judge thought that it was an answer. With respect, his Honour therefore fell into error. 41 But that was not the sole basis on which his Honour refused to 'go behind the judgment'. An appeal is from orders, not reasons, and an error in the reasons will not justify allowing the appeal if the error is not operative: see Jadwan Pty Ltd v Rae & Partners (A Firm) (No 2) [2020] FCAFC 95 at [8]; and Townsville City Council v McIntyre [2013] QCA 173; (2013) 231 A Crim R 116 at [62]-[64]. It is not enough to demonstrate that the judge made an error along the way; his or her conclusions must be shown to be wrong. 42 It is apparent from the account of his Honour's decision given above that his grounds for refusing to go behind the judgment went beyond the fact that there had been a contested hearing before the Family Court. He found that the debt to Mortgage Ezy was not released, because forbearance had been obtained by fraud. On a fair reading of his Honour's reasons, he considered that the case of forbearance by fraud was so strong that there was no need to inquire further. 43 I uphold ground 2 on the limited basis on which it was advanced in submissions, but that by itself will not dispose of the appeal. It is therefore necessary to consider whether Mr Turco has established that the primary judge's conclusion as to forbearance by fraud was in error. If it was not, no occasion for this court to exercise the discretion for itself, or to remit it to the Federal Circuit Court to be exercised afresh, will arise.

Ground 7 - procedural fairness 44 In written submissions, Mr Turco's attack on the finding of forbearance obtained by fraud was confined to ground 7, namely that the primary judge should not have allowed Mr Turco's statement of affairs from the first bankruptcy into evidence or that, having done so, he should have granted an adjournment to give Mr Turco time to respond to the evidence. 45 In fact, the attack was confined even further than ground 7 might suggest, as Mr Turco did not allege that the statement of affairs was not relevant or was otherwise subject to any exclusionary rule of evidence. The complaint, rather, was this. Mortgage Ezy tendered the statement of affairs at trial. Counsel for Mr Turco objected 'just to the lateness of the tender.' He disputed 'the late notice' because 'we could have potentially tendered documents in response to it'. The primary judge indicated that he did not regard that as a proper ground for not receiving the document into evidence, and accepted it as an exhibit. 46 When the primary judge asked counsel for Mr Turco whether he had any further submissions, counsel said that his client had not had an opportunity to obtain evidence to put before the primary judge. His Honour said 'You have had ample opportunity. This court made orders to put on affidavits. I don't accept that proposition.' Counsel persisted, saying that Mortgage Ezy did not rely on the statement of affairs as a ground to support its application, and its submissions focussed on Mr Turco's conduct in relation to the mistaken discharge of the security and the question of the enforcement costs. He claimed that if Mr Turco had known that Mortgage Ezy was relying on his failure to disclose the debt in his statement of affairs, he could have put on evidence about a debt that was listed on the statement as in fact including the Mortgage Ezy debt, because it was reflected in a proof of debt which Mr Turco's former wife had included in her proof of debt against him, because she stood as co-guarantor of the debt. Counsel also referred to an explanation which Mr Turco gave in an affidavit of why the debt does not appear in 'the list of creditors'. Although counsel was unsure whether Mr Turco was referring to the statement of affairs specifically, he did appear to concede that Mr Turco was giving an explanation of why the debt to Mortgage Ezy did not appear in 'the list of creditors that were part of the composition'. 47 Then, as is plain from his reasons, the primary judge relied to a significant degree on the non-disclosure of the debt in the statement of affairs as supporting his conclusion that it was a debt of which forbearance was obtained by fraud. 48 In short, Mr Turco complains of a denial of procedural fairness. An exercise of judicial power is conditioned by an obligation to afford procedural fairness to the parties who are the subject of that exercise of power, which is an incident of the exercise of the judicial power of the Commonwealth. Mr Turco was entitled to a hearing that afforded him procedural fairness: SZRUR v Minister for Immigration and Border Protection [2013] FCAFC 146; (2013) 216 FCR 445 at [55]; and AAM17 v Minister for Immigration, Citizenship, Migrant Services and Multicultural Affairs [2019] FCA 1951 at [34]. 49 The particular requirements of compliance with the rules of natural justice will depend upon the circumstances: Kioa v West (1985) 159 CLR 550 at 612. The concern of the law is to avoid practical injustice: Re Minister for Immigration and Multicultural Affairs; Ex parte Lam [2003] HCA 6; (2003) 214 CLR 1 at [37]. 50 It will usually be fundamental to the discharge of any duty to observe procedural fairness that the persons potentially affected by the decision - in the curial context, the parties to the litigation - are apprised of the issues likely to be critical to the outcome in sufficient time to give them a fair opportunity to be heard on those issues. A fair opportunity usually means notice with sufficient time to enable the party to marshal its case and put on any such additional material as the party may wish to put on: see e.g. Shaw v Yarranova Pty Ltd [2014] VSCA 48 at [27]. 51 Mr Turco's complaint here is that he did not receive notice that Mortgage Ezy would rely on the statement of affairs until the hearing and then was not given an opportunity to put on responsive material and so was denied a fair hearing. But while Mr Turco may not have been aware that the statement of affairs would be tendered, on the limited material that has been provided to this court I am not satisfied that he was denied the opportunity to respond to the substance of the allegation, and thus denied a fair hearing. 52 It appears from the content of Part A of the appeal book that the application for the sequestration order did not proceed by pleadings. Observations by the primary judge in the course of argument confirm that it 'proceeded by affidavit'. There was a limited joinder of issue in that Mr Turco filed a notice of the grounds on which he resisted the sequestration order, including that the Federal Circuit Court should go behind the Family Court judgment. But it can be assumed that the parties first notified each other of the issues in detail by means of filing affidavits. The material the parties have chosen to place before this court in the Appeal Book is very selective, but such of it as there is suggests that in fact Mr Turco was on notice of the key issue. 53 Importantly, there is a three page excerpt from an affidavit of Mr Turco sworn on 13 December 2018 and filed in the Federal Circuit Court proceeding. It was admitted into evidence at the hearing of the bankruptcy petition. It states that he was made bankrupt in March 2010. It says that there was in-bankruptcy composition by resolution of creditors in June 2012. It says (para 27): Prior to that my former wife Suellen was making claim [sic] against my bankrupt estate for more than $2 million that included her liability to the Petitioning Creditor. The debt to the petitioning creditor had been an unsecured debt since 2005. The debt was called up in June 2013. 54 It goes on to say (para 29): My best explanation for why the debt claimed by the petitioning creditor does not appear on my list of creditors is because I believed at the time that Turco & Co Pty Ltd had assumed responsibility for the debt as it was Turco & Co Pty Ltd that continued to make the payments even after I ceased to be a director of Turco & Co Pty Ltd by reason of my 2010 Bankruptcy. The petitioning creditor only called up the debt against my former wife and I about a year after I had come out of bankruptcy in June 2012. 55 That part of the affidavit (the only part before this court) concludes by saying that for 'all those reasons', no sequestration order should be made based on the Family Court judgment (para 31). 56 It is relevant to note that, save for the concluding paragraph I have just mentioned, Mr Turco provided almost identical evidence in an affidavit sworn in support of his application of leave to appeal in the Family Court. That was sworn on 24 May 2019 to support a proposed appeal on grounds including the one I have described at [18] above. 57 The Appeal Book contains a two page excerpt of an affidavit of one Celia Powell, who seems to be an employee of Mortgage Ezy, sworn on 11 April 2019. One paragraph of that affidavit says that Ms Powell has not seen any documents from which Mortgage Ezy could have known that Mr Turco became bankrupt on 19 March 2010 until 2014 (after the annulment), when it was served with documents in the Family Court proceeding which contained references to the earlier bankruptcy. 58 There are also two pages from a different affidavit of Ms Powell, sworn 17 March 2015. The two pages refer to the history of the loan to Mr Turco and Ms Williams, including the mistaken discharge of the security. Those two pages do not touch on the first bankruptcy. 59 It appears from the excerpts of the transcript of the trial that other affidavits were admitted into evidence at the trial but this court does not know what they say. 60 There is also an outline of written submissions of Mortgage Ezy in the Federal Circuit Court dated 23 May 2019. It is true that the outline devotes much attention to the argument about non-disclosure of Mortgage Ezy's mistake which is now the subject of the notice of contention. But the submissions also say that following the mistaken discharge of the security, Mr Turco 'continued to obtain forbearance by fraud' by, among other things (para 40(c) (footnotes omitted)): failing to inform Mortgage Ezy when he was made bankrupt in 2010. Mr Turco's bankruptcy constituted a further default by Mr Turco under the Loan Agreement, entitling Mortgage Ezy to call up the loan and require payment of the entire balance owing under the Loan Agreement. 61 The outline expands on this as follows (paras 43-45, footnotes omitted): Further, during his previous bankruptcy, Mr Turco failed to inform his trustee in bankruptcy about the debt he owed to Mortgage Ezy, and failed to inform Mortgage Ezy that he had become a bankrupt. By those omissions, Mr Turco obtained further forbearance from Mortgage Ezy, in that it could not exercise its legal right to call up the loan, prove in the bankruptcy (or oppose the composition), and seek repayment of the loan from Ms Williams. In those circumstances, the debt which Mr Turco contends was released upon acceptance of his composition proposal is tainted by Mr Turco's actual dishonesty, and section 153(2)(b) operates to protect Mortgage Ezy's rights by excluding it from the debts discharged. For these reasons, the debt owed by Mr Turco under the Loan Agreement, being the debt the subject of the Judgment Debt and on which Mortgage Ezy petitions for a sequestration order, was not released when Mr Turco's composition proposal was accepted in June 2012. 62 The day after receipt of these submissions, 24 May 2019, Mr Turco swore a two page affidavit which says: 5. The Applicants [sic] submissions make allegations of fraud against me. I deny the allegations and will seek to contest them. I wish to engage senior counsel. I am at a disadvantage in having to leave Australia for business reasons and not knowing whether I will be back before the hearing on 19 June 2019 in respect of which I have received a notice to attend for cross examination. 6. In view of the seriousness of the allegations that have been made against me, I have instructed my lawyers to institute fresh appeal proceedings in the Family Court. 7. Annexed and marked MT1 is a copy of my Notice fresh [sic] of Appeal, Form 21 Application in an Appeal and supporting affidavit evidence that I have today given instructions to be filed. 63 There is also an affidavit by Mr Turco's solicitor dated 18 June 2019 which annexes the application for leave to appeal and notice of appeal in the Family Court. 64 This material indicates that Mr Turco was on notice that Mortgage Ezy would rely on his failure to disclose its debt in his first bankruptcy, and his failure to tell Mortgage Ezy about that bankruptcy, to submit that he obtained forbearance by fraud. It shows that as early as his affidavit of 13 December 2018, he was aware that he would need to give an explanation of his omission of Mortgage Ezy from his 'list of creditors' in the first bankruptcy. It was submitted that there was ambiguity about whether he was referring to the statement of affairs but there is no doubt that he was acknowledging that the debt owed by him to Mortgage Ezy was not disclosed in the first bankruptcy. That would necessarily encompass a failure to disclose in his statement of affairs. Further consciousness of the need for an explanation is demonstrated by the reference to the debt as being included in the liability which Ms Williams claimed against him. That is the explanation in relation to which his counsel at trial said he wanted time to put on more evidence. 65 Further consciousness of the relevance of those matters to the question of whether the Federal Circuit Court should go behind the debt is indicated by the fact that the same matters were in an affidavit filed in the Family Court in support of an application for leave to appeal on the basis that there was no finding of forbearance by fraud. Mr Turco was also on notice from at least the time of Ms Powell's affidavit of 11 April 2019 that Mortgage Ezy would claim it did not know about the first bankruptcy. 66 Then, the outline of submissions filed on behalf of Mortgage Ezy in the Federal Circuit Court confirmed that it would be relying on those matters. Mr Turco's affidavit of the following day suggests that he was well aware of the 'allegations of fraud'. The affidavit did not, however, say he wanted time to put more evidence on. It said he wanted to brief senior counsel and that he (Mr Turco) might not be in Australia for the trial. It did not indicate that he would apply for an adjournment to adduce more evidence or provide a further explanation. It indicated that he would apply for an adjournment to permit the Family Court application for leave to appeal to run its course. And that is the basis on which he in fact sought an adjournment. Mr Turco was represented throughout the course of the first bankruptcy proceedings and that course of action must be taken to be an informed choice that he made. 67 It may be that Mr Turco and his advisers were not aware that the statement of affairs would be relied on to prove that he did not disclose the debt to Mortgage Ezy to his trustee in the first bankruptcy. The transcript of the proceedings in the Federal Circuit Court reveals that the document was only tendered after an invitation to do so from the primary judge. But in all the above context, that is of no moment. Mr Turco knew, or should have known, that the non-disclosure would be raised against him. He scarcely contested the fact that he did not disclose the debt owed to Mortgage Ezy to his first trustee in bankruptcy. When the primary judge asked his counsel whether the debt to Mortgage Ezy was identified in the statement of affairs as a debt, counsel conceded 'no, it wasn't specifically identified'. Later on, counsel said he thought that Mr Turco acknowledged that the statement of affairs did not 'specifically refer to Mortgage Ezy'. The production of the statement of affairs simply confirmed that apparently uncontested fact. 68 Mr Turco's counsel submitted that 'what he was denied was the opportunity to adduce evidence which would better explain his subjective state of mind in not putting the document - not putting Mortgage Ezy on the list of creditors in the statement of affairs' (ts 21). But it appears on the face of the material available to this court that Mr Turco had ample opportunity in the Federal Circuit Court to explain his non-disclosure of the debt, and that he did in fact put on evidence which tried to explain it. I do not accept that Mr Turco was denied a fair opportunity to respond on the issue that was found to be decisive against him, or that he was otherwise denied practical justice. I do not uphold ground of appeal 7.

Ground 8 - the correctness of the finding of forbearance obtained by fraud 69 In oral submissions, counsel for Mr Turco went further than his written submissions and, under the rubric of ground 8, argued that it was incorrect for the primary judge to conclude that the non-disclosure of the debt to Mortgage Ezy meant that Mr Turco had obtained forbearance by fraud. 70 Counsel for Mr Turco conceded that at the time of the first bankruptcy, Mr Turco had a statutory obligation to disclose the existence of the debt to Mortgage Ezy. That arose under s 54 of the Bankruptcy Act. But counsel nevertheless submitted that on the material before the court, the primary judge should not have reached the conclusion that he did. 71 Counsel submitted that what was not squarely put anywhere was that the omission to disclose the debt owed to Mortgage Ezy in the course of the first bankruptcy was fraudulent. But, as I have explained, it was put in Mortgage Ezy's written submissions in the Federal Circuit Court. While counsel referred to Browne v Dunn (1893) 6 R 67, that appeared to be in relation to the alleged fraud which is the subject of the notice of contention. In any event, Mr Turco was a party to the proceeding and I have found that he was aware of the allegation of fraudulent non-disclosure of the debt, so the rule in Browne v Dunn does not preclude findings based on the allegation: see e.g. Burke v Corruption and Crime Commission [2012] WASCA 49; (2012) 289 ALR 150 at [180]-[183]; and BNMB Transport Pty Ltd v Mercedes-Benz Australia/Pacific Pty Ltd [2018] FCA 223 at [83]-[84]. Mr Turco had the opportunity to say what he wanted to say about the omission, and in his own words the relevant passage from his affidavit of 13 December 2018 was the 'best explanation' he could give. 72 The real question is whether, in light of that explanation and all the other evidence, the primary judge made an error of fact in determining that by omitting to disclose the debt in the bankruptcy, Mr Turco did obtain forbearance by fraud. 73 The key findings by the primary judge appear above. Mr Turco failed to disclose the existence of the debt owed to Mortgage Ezy to his trustee in bankruptcy at any time during the first bankruptcy including up to the time of the composition: at [10]. There was no independent basis in the evidence to support the assertion by Mr Turco in his affidavit that he believed that Turco & Co had assumed liability for the debt, including that there was no material establishing that the debt had in fact been novated or otherwise assumed: at [11], [14]. Since Turco & Co was continuing to make payments in respect of the loan, Mr Turco must have been aware of the existence of the loan: at [13]. His Honour inferred that Mr Turco deliberately remained silent in circumstances were there was a positive obligation to identify his creditors: at [11], [13], [22]. 74 On the face of the material which is before this court, those findings were open to his Honour. Mr Turco had a positive duty to disclose the existence of the loan to his trustee in bankruptcy. Mr Turco did not do so. The evidence that the primary judge relied on permitted the inference that Mr Turco knew about the loan, which in turn led to the inference that his failure to disclose it was deliberate. The bankruptcy gave Mortgage Ezy a right to call on the loan and it may readily be inferred that had it known of the bankruptcy, it would have done so. 75 There is nothing wrong with this process of reasoning and the evidence which the primary judge relied on in his judgment supported it. That is so even when one allows for the requirement under s 140 of the Evidence Act that the court, when deciding whether it is satisfied that the case has been proved on the balance of probabilities, must take into account the gravity of the matters alleged. 76 There was other evidence before the primary judge, to which his Honour did not refer. It can be inferred from the background matters set out at [7]-[10] above that Mr Turco knew that his debt to Mortgage Ezy continued in existence after the refinancing which miscarried in 2005. There were also records from Mortgage Ezy in evidence which showed that Mr Turco made contact with Mortgage Ezy in the period leading up to and after his bankruptcy about the loan. Mr Turco is an accountant and it can be inferred that he was aware of the obligation to disclose all his debts to his trustee in bankruptcy. And yet he did not. While, in my view, no error has been demonstrated in his Honour's conclusions even if those matters are excluded from consideration, they provide further support for those conclusions. 77 The material which counsel for Mr Turco pointed to in order to contradict the key inferences the primary judge made was confined to the affidavit of Mr Turco of 13 December 2018 which I have quoted above. That material is less than compelling. 78 The evidence that Ms Williams was making a claim against the bankrupt estate for an amount of money that included her liability to Mortgage Ezy hardly absolves Mr Turco of the obligation to make full disclosure to his trustee in bankruptcy. The idea that he did not disclose it because he thought that the trustee would find out through that avenue is patently thin. That claim by Ms Williams was not in fact enough to alert the trustee in the first bankruptcy to the existence of the debt, as Mortgage Ezy was not notified of that bankruptcy until 2014, after it had already been annulled. Also, the primary judge was right to find Mr Turco's self-described 'best explanation' of why he did not disclose the debt to be unconvincing, in the absence of some basis in objective fact for his asserted belief that Turco & Co 'had assumed responsibility for the debt'. I am not persuaded that Mr Turco has provided sufficient reason to depart from the factual conclusions reached by the primary judge. 79 A deliberate failure to disclose the existence of a debt leading to the creditor not calling up the debt means the debt falls within the description 'a debt of which he or she has obtained forbearance by fraud' in s 153(2)(b). Counsel for Mr Turco did not submit to the contrary, and he accepted that 'fraud' in that provision includes conduct that would be fraudulent in the eyes of equity, and so potentially wider than fraud in the sense of common law deceit: see e.g. Re Bosun Pty Ltd (in liq); Makris v Sheahan [2000] SASC 180; (2000) 34 ACSR 597 at [18] (Debelle J). 80 I do not uphold ground of appeal 8.

Disposition of the appeal 81 The conclusion I have reached about grounds 7 and 8 also disposes of ground 5, and it means that the error identified under ground 2 was not operative. For completeness, I dismiss the remaining grounds of appeal for the reasons set out at [25]-[26] above. It is not necessary to determine the notice of contention. 82 The appeal will be dismissed, with costs. I certify that the preceding eighty-two (82) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Jackson.