Yap v Granich & Associates

Introduction 8 This is an appeal from a decision of a judge of this Court who, on 30 July 1999, dismissed the appellant's motion to review a sequestration order, made against her estate on 10 December 1998, and to annul her bankruptcy.

Factual Background 9 The following factual background is taken largely from the reasons of the learned trial judge: 10 On 15 March 1989 a company named P. Vivante & Co Pty Ltd sued the appellant in the District Court of Western Australia for the recovery of a debt of $39,034.17, said to have been owing pursuant to a deed of acknowledgment of debt. The appellant failed to enter an appearance and, on 10 April 1989, a default judgment was obtained against her. A writ of fi fa was issued on 26 April 1989 and some of the appellant's property was seized. The appellant approached Messrs Melsom Robson & Co, Chartered Accountants for help, and the processes of Part X of the Bankruptcy Act 1966 (Cth) were invoked on her behalf. The Part X proceedings were later abandoned. 11 In February 1992 a bailiff called and left his card at the appellant's front door informing her that her house would be sold to satisfy the District Court default judgment. 12 On 10 April 1992, three years after the default judgment had been obtained against her, the appellant made an application, in person, to have the default judgment set aside. 13 On 29 May 1992 the appellant's application to set aside the default judgment was dismissed on the basis of her non-appearance at court. A further application to have the default judgment set aside was made by her on the same day. The application was heard before Registrar Kingsley on 23 June 1992. The default judgment was set aside and the appellant was granted leave to defend the action. However, leave was conditioned upon the appellant being required to pay $39,000 into court by 7 July 1992, failing which the plaintiff would again be able to enter default judgment against her. 14 The appellant failed to comply with the condition imposed by Registrar Kingsley, but sought to appeal against Registrar Kingsley's order. On 3, 10 and 21 August 1992 Judge Viol heard the appellant's application for leave to appeal out of time against Registrar Kingsley's order. 15 By then the appellant had engaged the respondent, Messrs Granich & Associates, barristers and solicitors, to act on her behalf. Judge Viol observed that the application for leave to appeal was made broadly on two grounds: 1. That the appellant was unrepresented at the time the proceedings originally took place and that, had she been represented, a different order might have been made; 2. That there was fresh evidence available suggesting an overpayment by her to P Vivante & Co Pty Ltd, and therefore that the sum originally claimed was not owing and that it would be unfair in the circumstances for the condition imposed by Registrar Kingsley to continue to exist. 16 Judge Viol, however, dismissed the application, concluding that there was no sufficient basis for leave to be granted to the appellant to file and serve a notice of appeal out of time against the orders and, in particular, the condition imposed by Registrar Kingsley. 17 In an ex tempore judgment on 10 June 1993 the Full Court of the Supreme Court of Western Australia refused an application on behalf of the appellant for leave to appeal against the decision of Judge Viol. 18 Subsequently, the appellant instituted proceedings against the respondent alleging that the firm had been negligent in representing her. 19 On 7 May 1996 Commissioner K Martin QC in the District Court heard the appellant's action against the respondent. The appellant had identified five grievances against the respondent. However, she abandoned two of the grounds during the hearing. The remaining complaints against the respondent were that: · The circumstances surrounding her contention that the deed of acknowledgment of debt was not to be treated as valid or binding upon her, had not been adequately dealt with in the three affidavits prepared on her behalf by the respondent; · Mr Smallbone, the solicitor in the respondent's firm who represented her, had not used his professional skills to explain adequately her reasons for the time lapse between the obtaining of a default judgment against her on 10 April 1989 and her application precisely three years later to set it aside; · The circumstances surrounding the appellant's abandonment of the proposed Part X Bankruptcy Act arrangements, in early 1990, had not been satisfactorily explained. 20 The following passage is taken from the reasons of the trial judge at first instance in this matter: "Commissioner Martin referred to the background circumstances particularly the substantial period of delay in seeking to set aside the default judgment, the fact that she was seeking to resile from the clear terms of the deed acknowledging her indebtedness and that she was seeking to resile from an express acknowledgment in her statement of affairs in the Part X proceedings of the existence of a debt to P. Vivante for $33,000. On the basis of those circumstances, Commissioner Martin concluded that Mrs Yap's defences, accepting that they were arguable, would be regarded by a court with knowledge of the circumstances as "weak and shadowy". She faced "an almost insurmountable task … in persuading a court that a routine protective condition imposed by way of security by Registrar Kingsley in the exercise of his discretion should be removed". Commissioner Martin concluded, having heard what she now said about those matters and given the fact that no amount of explanation in her affidavits could have persuaded a court that her defences were anything other than shadowy, that it was appropriate to remove the protective condition." In a finding strongly adverse to the appellant's credibility Commissioner Martin said: "In summary, I do not regard Mrs Yap's evidence as reliable, where it is not corroborated independently." 21 The Commissioner referred to the circumstances "as a set of circumstances which cried out for the imposition of the security condition imposed by Registrar Kingsley against Mrs Yap …". He accepted Mr Smallbone's statement in evidence: "I always acted on your instructions. That's the way I did things and I believe I did the best I could. It was very difficult to deal with at times. Your instructions were very, very confused…". 22 Having regard to this background, Commissioner Martin found that the three remaining complaints or grievances of Mrs Yap against Mr Smallbone and Granich & Associates were all "completely without merit". The matters raised were not causative of any loss to Mrs Yap and it was inevitable that the prudent security condition imposed by Registrar Kingsley would remain in place. 23 Commissioner Martin gave an ex tempore judgment dismissing the appellant's action for professional negligence against the respondent, with costs. 24 On 17 May 1996 the appellant filed an appeal to the Full Court of the Supreme Court of Western Australia against the decision of Commissioner Martin. The respondent filed a motion to strike out the appeal. On 16 April 1997 the Full Court of the Supreme Court adjourned that motion and directed the appellant to apply to the Master for leave to amend the grounds of appeal. 25 On 2 May 1997 the application to amend the notice of appeal in terms of the minute submitted was dismissed by Master Bredmeyer on the basis that the minute of substituted notice of appeal was "wholly defective". The application was adjourned to 12 May 1997. On 12 May 1997 the appellant did not attend court and no new document was before the court. Her application was dismissed. On 23 May 1997 the matter came on again before Master Bredmeyer. However, the notice was still considered to be defective. He dismissed the appellant's application to amend the notice of appeal and did not give her leave to bring in another minute. 26 On 21 July 1997 the appellant's appeal against the decision of Commissioner Martin to the Full Court of the Supreme Court was dismissed for want of prosecution and because there were no grounds of appeal which complied with the Rules. 27 On 11 October 1997 the respondent caused a bankruptcy notice to be served on the appellant. The notice required payment of $33,184.11. The debt comprised taxed costs of $29,790.45 which the appellant had been ordered to pay to the respondent upon the dismissal of her claim by Commissioner Martin on 7 May 1996, and post-judgment interest of $3,393.66. The costs had been taxed on 12 August 1996. 28 On 17 October 1997 the appellant filed an application to set aside the bankruptcy notice on the basis that she had a counterclaim based upon the negligence of the respondent. On 1 December 1997 the District Registrar of the Federal Court dismissed that application. The appellant did not seek review of or appeal from that order. 29 On 1 May 1998 the respondent filed a creditor's petition seeking sequestration of the appellant's estate. The act of bankruptcy relied upon was non-compliance with the bankruptcy notice served on 11 October 1997. 30 On 13 May 1998 the appellant filed a notice of intention to oppose the petition based on a pending application for special leave to appeal to the High Court of Australia in relation to her unsuccessful professional negligence action against the respondent. She also alleged: "Deliberate concealment of facts relating to the debtor's cause of action to conceal the petitioner's breach of duty to the debtor pursuant to the petitioner's retainer/contract to the debtor." 31 The High Court dismissed the appellant's application for special leave to appeal on 22 October 1998, stating amongst other things that her application was "entirely devoid of merit". 32 Between the filing of the notice of intention to oppose the petition and 10 December 1998, the hearing of the petition was adjourned five times and the appellant filed six affidavits. On 10 December 1998 the Registrar made a sequestration order against the appellant's estate. 33 The matter came before the trial judge as a result of a motion filed by the appellant on 16 December 1998 seeking an order that the judgment of the Registrar be set aside, the sequestration order be annulled, and that the respondent pay damages and costs. 34 The motion to review and set aside the sequestration order was dismissed by French J on 30 July 1999. The appellant filed this appeal on 18 August 1999.

Statutory Framework 35 The power to annul a sequestration order is found in s 153B of the Bankruptcy Act which provides: "153B. If the Court is satisfied that a sequestration order ought not to have been made or, in the case of a debtor's petition, that the petition ought not to have been presented or ought not to have been accepted by the Official Receiver, the Court may make an order annulling the bankruptcy."

The Decision at First Instance 36 The trial judge said that the core question was whether the Court could go behind the judgment debt upon which the bankruptcy notice and the creditor's petition were based. 37 His Honour said that the affidavit filed by the appellant (sworn on 11 May 1998) in opposition to the creditor's petition, focussed on the conduct of the respondent in the application before Judge Viol in the District Court for leave to appeal out of time against the order made by Registrar Kingsley. In that affidavit the appellant asserted the negligence of the respondent in various respects. The appellant also went into the background of dealings between Akibilt Pty Ltd (a company of which the appellant was a director) and P. Vivante & Co Pty Ltd, including alleged loans made to the latter company or to a Mr Vivante. The appellant repeatedly asserted that the action brought against her by P Vivante & Co Pty Ltd was "void" and referred to the alleged invalidity and unenforceability of the deed of acknowledgment of debt. 38 The trial judge found that the issues raised by the appellant of the alleged negligence of the respondent and the underlying issues of the dealings with Vivante had been canvassed by Commissioner Martin in his reasons for judgment in the unsuccessful action brought by the appellant against the respondent. His Honour said that in her affidavit the appellant had sought to re-agitate before the District Registrar, issues which had been decided adversely to her in those proceedings and the question of her liability to P Vivante & Co Pty Ltd. 39 His Honour said that these issues were further agitated in her affidavit dated 2 November 1998 in opposition to the creditor's petition, which endeavoured to assert that the judgment adverse to her in the proceedings against the respondent had been obtained by fraud. In that affidavit the appellant canvassed the issues between herself and P Vivante & Co Pty Ltd and, in particular, loans allegedly made to Mr P Vivante or his company. She asserted that counsel for the respondent had deliberately concealed facts involving the respondent's breach of duty and had deliberately misrepresented a concession by the respondent that one cheque for $4,170 had been left out of the schedule to her affidavit prepared by the respondent in the earlier proceedings, when in fact seven cheques amounting to $62,490 had been left out. She accused counsel for the respondent of having "deliberately and artfully misrepresented the facts". She accused Mr Smallbone of deliberately lying in the proceedings in connection with a decision she had taken to abort the Part X proceedings. At the end of her affidavit the appellant said: "I have shown that Mr Smallbone lied, Mr Vivante lied and Mr Ainslie QC deliberately misrepresented facts to concealed (sic) the J Creditor's breach of duty to me/my cause of action. Therefore, the Judgment it obtained on 7.5.96 was obtained by fraud" The trial judge held that: "The assertion that the judgment was obtained by fraud is, in truth, an assertion that the judgment was obtained on perjured evidence and misleading statements by counsel. The allegations are, on the face of it, highly implausible. The fact is her own credibility was found wanting by the Commissioner. The remedy for the asserted injustice was by way of appeal and her pursuit and the outcome of the appeal process has already been outlined. It is not now open to Mrs Yap to use these proceedings to endeavour to impugn the judgment upon which the judgment debt is based. It is to be noted also that in this case no question arises about the existence of any antecedent debt to found the judgment. The debt arose directly out of the order of the Commissioner in the District Court that Mrs Yap pay the legal costs of her unsuccessful action against Granich & Associates. Where a judgment has followed a full investigation at trial in which both parties participated, the Court will not reopen the matter unless a prima facie case of fraud or collusion or miscarriage of justice is made out - see Miles v The Shelf Companyof Australia (unrep, Fed Court, Sundberg J, VG7674 of 1997) [sic]. In a case in which the relevant judgment flows from a trial before another court and the appeal process has been exhausted, it is a rare case in which the Court will go behind the judgment. The position is not quite as restrictive in the case of a default judgment. In my opinion this is not a case in which it can be said that the sequestration order ought not to have been made. On the materials before the Registrar and before me it ought to have been made. All the conditions necessary for the making of the order had been satisfied at the time that it was made and whether Mrs Yap's motion is taken to be relying upon O 77 or s 153B or both, the motion will be dismissed"

Grounds of Appeal 40 The notice of appeal filed by the appellant in these proceedings outlines two grounds upon which she asks this Court to set aside the decision of French J. They were expressed in the following terms: "There was uncontroverted evidence that Mr Smallbone of Respondent has recklessly misrepresented facts knowingly at the hearing held before Judge Viol on 10 August 1992 that caused His Honour to dismiss the Applicant's application which facilitated the plaintiff's fraud in D.C Action 1536/89 that resulted in the loss of the Applicant (defendant)'s home, worth more than $400,000 sold for $142,000 at sham bailiff's auction held on 5.11.93 pursuant to Writ of Fi Fa 215/93 pursuant to D.C Action 1536/89 whilst the plaintiff and Mr Vivante still owe the Applicant and her company Akibilt Pty Ltd ("Akibilt") the sum of $60,650 since 9.9.88. There was uncontroverted evidence that Mr Smallbone of Respondent has deliberately omitted seven Akibilt's cheques paid to the plaintiff amounting to $62,490 in the Schedule "CSY-1" of the Applicant's Aff:sw:7.7.92 in D.C Action 1536/89 that caused: (a) Mr Vivante to lie at the Trial of D.C Action 6202/93 held in May 1996 before Commissioner Martin in respect of repayments made by him and the plaintiff toward reduction of Akibilt's loans to them to be termed as "Loans to C.S.Yap" (b) The Respondent's Counsel, Mr Ainslie Q.C to knowingly conceal the fact by artfully conceded the Respondent has omitted one cheque for $4,170 in the Schedule "CSY-1" of the Applicant's Aff:sw:7.7.92 to deceive the Trial Judge in order to procure a Judgment in the Respondent's favour." My Reasoning 41 I have read the very lengthy submissions filed by the appellant. I have also listened to her oral submissions this afternoon. Nothing in those submissions or in the appeal book leads me to think that the learned primary judge erred in the manner contended by the appellant or at all. 42 In my respectful view, his Honour applied the correct principles of law to the facts of this matter. The District Registrar, in turn, had done the same. The appellant's grounds of appeal disclose no appellable error. It must be remembered that the judgment debt upon which the bankruptcy notice was founded, (non-compliance with which in turn founded the petition), was a judgment for costs. That judgment is the relevant debt. The appellant appealed against that judgment to the Full Court of the Supreme Court of Western Australia. That appeal, as I have mentioned, was dismissed. As I have also mentioned, when the High Court of Australia dismissed the appellant's application for special leave to appeal from the judgment of the Full Court of the Supreme Court of Western Australia, it described her application as being "entirely devoid of merit". The learned primary judge was quite right to refuse to go behind the judgment. I would dismiss the appeal.

I certify that the preceding forty-two (42) numbered paragraphs are a true copy of the Reasons for Judgment of the Court.

Solicitor for the Respondent: Messrs Mallesons Stephen Jaques