Yap v Granich & Associates

Federal Court of Australia|1998-06-09|Before: Sundberg J, French J, Nicholson J

REASONS FOR JUDGMENT 1 These reasons concern a motion brought for the respondent to strike out an application by the applicant for annulment of her bankruptcy and portions of a notice of opposition to that application. 2 By her application the applicant seeks to annul a sequestration order made against her estate on 10 December 1998. The sequestration order resulted from a creditor's petition presented by the respondent. 3 The application for annulment was lodged on 6 October 2000. On 20 November 2000 the respondent filed the notice of motion seeking that the application be struck out. On 4 December 2000 a creditor, Lim & Associates, filed a notice of opposition to the application. 4 On 24 November 2000 the applicant filed an amended application for annulment of her bankruptcy. On 30 November 2000 the respondent filed a notice of opposition to that application in which the following four grounds were stated: "1 the applicant seeks in this application to review the decision of Registrar Jan made on 10 December 1998 in action no WG 7047 of 1998, which decision has already been reviewed by Justice French on 30 July 1999 and the Full Court of the Federal Court on 29 December 1999; 2 the amended application for annulment, which contains irrelevant material relating to previous proceedings in other courts, fails to identify the grounds for the annulment of her bankruptcy as contemplated in section 153B of the Bankruptcy Act; 3 the applicant fails to identify the circumstances relevant to the exercise of the Court's discretion to annul the sequestration order made against the applicant; and 4 the application seeks to reopen and re-litigate issues which have already been decided in prior proceedings in this and other courts and for which there are no further avenues of appeal." 5 As the consequence of a direction given by the Court on 7 December 2000 it was ordered that the respondent file and serve written submissions on the following two matters: "(a) whether either or both of the doctrines of res judicata or issue estoppel apply to support ground 4 of the respondent's notice of opposition to the application date 29 November 2000, and (b) a response to the applicant's submission that her application falls within the exception of fraud permitting a Court to go behind a judgment, the fraud relied upon being the concealment or unavailability to the applicant of the transcript in matter 1536 of 1989 in the District Court of Western Australia before Viol DCJ in P Vivante & Co Pty Ltd v CS Yap (the applicant) as pressed in para 71 on pg 19 and item 10 of pg 31 of the applicant's affidavit sworn 28 September 2000." 6 To facilitate that it was also directed that the applicant be referred to the Registrar for referral to a legal practitioner pursuant to O 80 r 4 of the Federal Court Rules for the purpose of a legal practitioner responding to the above written submission on behalf of the applicant. These reasons address the matters the subject of such written submissions supported by short oral submissions.

Relevant statutory provisions 7 The power of the Court to annul a bankruptcy arises relevantly from s 153B of the Bankruptcy Act 1966 (Cth) ("the Act"). That section provides that the Court may make an order annulling a bankruptcy if it is satisfied "that a sequestration order ought not to have been made". There are further powers arising in the case of a debtor's petition which are not relevant here. The effect of an annulment is provided for in s 154 of the Act. 8 Those statutory provisions are supported by rules in Div 8 of the Bankruptcy Rules. O 77 r 41 requires the application set out the grounds on which the annulment is sought and that notice be given to creditors and that the trustee prepare reports. There is no suggestion on behalf of the respondent that these rules have not been complied with.

Prior litigation elsewhere Original proceedings 9 In 1989 the applicant was sued by P Vivante & Co Pty Ltd ("the Company") in District Court proceedings no 1536 of 1989. The Company claimed against the applicant essentially in respect of two amounts of money. The first was that it was alleged a company associated with the applicant named Akibilt Pty Ltd ("Akibilt") was indebted to the Company in the amount of $25,000.00 in respect of concreting works performed at Curtin University. Secondly, an amount of $42,000.00 was claimed to be due by the applicant personally to the Company in respect of loans made to her. Although it was accepted that the Company's writ had been properly served upon the applicant, no memorandum of appearance was entered on her behalf. Consequently, the Company obtained default judgment against her on 10 April 1989. Thereafter a writ of fi fa was issued on 26 April 1989. Subsequently some of the applicant's property was seized. Application to set aside default judgment 10 On 10 April 1992 the applicant, unrepresented, brought an application to set aside the default judgment which she had allowed to stand for some 3 years. The application was heard before Registrar Kingsley in the District Court who made an order setting aside the default judgment and granted the applicant leave to defend the original proceeding. However, his order was on condition that the applicant paid the sum of $39,000.00 into court by 7 July 1992, failing which the Company was granted the liberty to once again enter judgment against her. That day the applicant engaged the respondent to act on her behalf. The applicant was unable to make the payment into court. Application for leave to appeal Registrar's order 11 The applicant then made an application for leave to appeal the Registrar's order to a judge of the District Court. Her right of appeal had been lost because the appeal had not been lodged within the specified time limits. The appeal, a hearing de nova, was listed before Viol J in the District Court. He declined to interfere with the orders made by the Registrar. Entry of judgment 12 The application before Viol J having been unsuccessful, judgment pursuant to the orders of the Registrar was then obtained against the applicant on 25 August 1992 by reason of the fact that she had not paid $39,000.00 into court by that time. The judgment amount was $54,990.17 plus costs. Application to Full Court 13 On 11 September 1992 there was filed on behalf of the applicant an application for leave to appeal to the Full Court and a supporting notice of motion. The matter came before the Full Court (Rowland, Seaman and Murray JJ) on 10 June 1993. Again the applicant represented herself. In an extempore judgment the Full Court refused her application for leave to appeal. Negligence proceeding 14 The applicant then issued proceedings in the District Court in matter no 6202 of 1993 against the respondent for professional negligence. The negligence was said to be a failure on the part of the respondent through its employee (a Mr Smallbone) to secure a result whereby the condition imposed by the Registrar as to the payment of $39,000.00 in to court was removed. Commissioner Martin QC found that the claims by the applicant against the respondent were without foundation. He dismissed her action on 7 May 1996. Application for special leave 15 On 22 October 1998 the High Court dismissed the appellant's application for special leave to appeal stating that her application was " entirely devoid of merit".

Prior proceedings in Federal Court Bankruptcy Notice 16 A bankruptcy notice was served on the applicant by the respondent on 11 October 1997. That notice made demand for payment of $33,184.11 comprising $29,790.45 by way of taxed costs which the applicant had been ordered to pay upon the dismissal of her claim for damages for professional negligence against the respondent. The balance was for post-judgment interest. Application to Registrar re Notice 17 On 17 October 1997 the applicant filed an application to set aside the bankruptcy notice on the basis that she had a counter-claim based upon the negligence of the creditor respondent. On 1 December 1997 the Registrar dismissed the application and ordered the applicant to pay the creditor's costs. No review was sought of that decision. Sequestration order 18 On 1 May 1998 the respondent filed a creditor's petition in this Court seeking a sequestration order against the applicant. The basis of the petition was the failure by the applicant to comply with the bankruptcy notice of 3 November 1997. On 10 December 1998 the Registrar made the order of sequestration against her estate based on his allowance of the petition. Application to set aside sequestration order 19 On 16 December 1998 the applicant filed a motion seeking an order that the judgment of the Registrar be set aside and seeking an order that the sequestration order be annulled. The matter came before French J whose reasons for judgment were delivered on 30 July 1999. They contain a detailed history of the abovementioned proceedings. French J found contentions by the applicant that the action brought against her by the Company was "void" because of the alleged invalidity and unenforceability of the deed of acknowledgment of debt, were "simply unsustainable". He also found the allegation that the judgment obtained on 7 May 1996 was obtained by fraud was an assertion that the judgment was obtained on perjured evidence and misleading statements by counsel. He said that the Court would not reopen the matter unless a prima facie case of fraud or collusion or miscarriage of justice is made out: Miles v The Shell Co of Australia (Sundberg J, 9 June 1998, unreported). He held that the applicant's was not a case in which it could be said that the sequestration order "ought not to have been made" as those words are used in s 153B of the Act. Her motion was therefore dismissed. Appeal to Federal Court 20 On 29 November 1999 the applicant appealed to the Full Court of the Federal Court (Spender, Whitlam and Carr JJ). The grounds of appeal relied upon to the Full Court were as follows: "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 215/93pursuant 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:7.7.97 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:sw7.7.92 to deceive the Trial Judge in order to procure a Judgment in the Respondent's favour." 21 Carr J held that the applicant's grounds of appeal disclosed no appealable error and French J was quite right to refuse to go behind the judgment. Spender J agreed with those reasons as did Whitlam J. Each added that a court of bankruptcy will be astute to see that behind a judgment which founds a creditor's petition there is "in truth and reality" a debt owing by the debtor to the petitioner: Wren v Mahony (1972) 126 CLR 212 at 224. They considered that having regard to the curial history of the order of Commissioner Martin QC made on 7 May 1996 it was quite impossible to conclude that French J was in error in the conclusion which he reached. They considered this was not a case in which it could be said that the sequestration order "ought not to have been made".

Applicant's case here 22 The applicant's case here is that the prima facie application of issue estoppel against her is displaced by the existence of special circumstances: Arnold v National Westminster Bank plc [1991] 2 AC 93. In that case the special circumstances were the existence of further material which had become available since the earlier decision being material relevant to the correct determination of a point involved in the earlier decision which could not have, by reasonable diligence, been brought forward in the earlier proceeding. In Arnold's case it was held the material might relate to matters of either law or fact but that was in circumstances where there was no right of appeal in relation to a question of law: cf Tiufino v Warland [2000] 50 NSWLR 104. 23 The new material relied on for the applicant here to exclude issue estoppel is the presence of the transcript of the hearing before Viol J. It is said the existence of that transcript only became known to the applicant just before the start of the appeal to the Federal Court in 1999 and that no copy had been discovered or previously made available to her: see also Pollnow v Armstrong [2000] NSWCA 245. 24 Here the applicant claims there was fraud and collusion by the defendant and its counsel in action 6202/93 in not making available to the applicant the transcript in action 1536/89 until just before the hearing in the Federal Court. It is submitted that the transcript was "relevant to the correct determination of a point involved in the earlier proceedings whether or not that point was specifically raised and decided, being material which could not by reasonable diligence have been adduced in those proceedings.": Pollnow at par [10] per Meagher JA. 25 The applicant also made a claim that she has not exhausted all avenues of appeal in action 1536/89 because Viol J on 23 November 1998 had directed that a special appointment be held in regard to her application to set aside the default judgment against her arising from the orders made by Registrar Kingsley. That special appointment was never heard because the applicant was made bankrupt. In the circumstances there is no continuing right to a special appointment. No reliance was placed on this submission in counsel for the applicant's final submissions and in my view correctly so.

Res judicata, issue estoppel and Anshun estoppel 26 The submissions for the respondent have set out the respondent's understandings of the doctrines of res judicata, issue estoppel and Anshun estoppel. These are accepted on behalf of the applicant. Res judicata 27 The principle in relation to res judicata is that where an action is brought and judgment has been entered in that action, it is the end of the matter and no other proceedings can be maintained on the same cause of action as the right or cause of action has merged into the judgement: Jackson v Goldsmith (1950) 81 CLR 446 at 466 per Fullagar J; Port of Melbourne Authority v Anshun Pty Ltd (1981) 147 CLR 589 at 597 per Gibbs CJ, Mason and Aickin JJ. The cause of action in the current proceedings must be the same as that which was litigated in the prior proceedings: Jackson at 467; Trawl Industries of Australia Pty Ltd (in liq) v Effem Foods Pty Ltd (1992) 36 FCR 406 at 418 - 19; Macquarie Bank Ltd v National Mutual Life Assn of Australasia Ltd (1996) 40 NSWLR 543 at 558 per Clarke; Onerati v Phillips Construction Pty Ltd (in liq) (1989) 16 NSWLR 730. "Cause of action" may refer to: (i) the series of facts which the plaintiff must allege and prove to substantiate a right to judgment; (ii) the legal right which has been infringed; and (iii) the substance of the action as distinct from its form: Port of Melbourne Authority at 6112 per Brennan J; cited in Chamberlain v Deputy Commissioner of Taxation (1988) 164 CLR 502 at 508 per Deane, Toohey and Gaudron JJ. The identity of the causes of action is determined by matters of substance rather than the technical identity of forms of action: Jackson at 467; Maganja v Arthur [1984] 3 NSWLR 561 at 563; Trawl Industries of Australia at 418 - 19 (affirmed Effem Foods Pty Ltd v Trawl Industries of Australia Pty Ltd (recs and mgrs apptd) (in liq) (1993) 43 FCR 510); Macquarie at 559; Brunsden v Humphrey (1884) 14 QBD 141 at 148; [1881 - 85] All ER Rep 357 per Bowen LJ (followed Van Amstel v Country Roads Board [1961] VR 780; Onerati v Phillips Construction Pty Ltd (in liq) (1989) 16 NSWLR 730. Issue estoppel 28 Issue estoppel is based on the principle that a judgment of the court conclusively determines, not only the ultimate finding in the case, but also all of the issues necessary to that decision: Blair v Curran (1939) 62 CLR 464 at 531 per Dixon J; Jackson at 466 per Fullagar J (dissenting); Queensland Trustees Ltd v Cmr of Stamp Duties (Qld) (1956) 96 CLR 131; Ramsay v Pigram (1968) 118 CLR 271 at 276 per Barwick CJ; Port of Melbourne Authority at 597; Egri v DRG Australia Ltd (1988) 19 NSWLR 600, CA (NSW); Heid v Connell Investments Pty Ltd (1989) 16 NSWLR 629, CA (NSW). The precise issue decided by the first proceedings must be identical with what the party is seeking to litigate in the second proceedings: Blair at 510 per Starker J, at 532 per Dixon J, at 541 per McTiernan J; Ramsay at 276; O'Donel v Cmr for Road Transport and Tramways (NSW) (1938) 59 CLR 744; New Brunswick Railway Co v British and French Trust Corp Ltd [1939] AC 1. Anshun estoppel 29 Anshun estoppel extends res judicata and issue estoppel to matters which were not raised in the prior proceedings, but which could and should have been raised. It is based on the principle that parties to litigation should bring forward their whole case and not seek to reopen the issues in subsequent litigation: Henderson v Henderson [1843 - 60] All ER Rep 378 at 115 per Sir Wigram VC; [1843 - 60] All ER Rep 378; Port of Melbourne Authority v Anshun Pty Ltd (1981) 147 CLR 589. The estoppel arises where the matter relied upon in the second action was so relevant to the subject matter of the first action that it was unreasonable not to rely on it in the first action: Port of Melbourne Authority v Anshun Pty Ltd (1981) 147 CLR 589 per Gibbs CJ, Mason and Aickin JJ. It is insufficient that the matter could have been raised in the earlier proceedings; it must have been unreasonable not to have done so: Port of Melbourne Authority at 601 - 2; 36 ALR; 55 ALJR 621 per Gibbs CJ, Mason and Aickin JJ. Fraud 30 An allegation of the presence of fraud in the judgment obtained is relevant to both the doctrines of res judicata and issue estoppel. The defence of res judicata can be defeated by proof that the judgment was obtained by fraud as to the very matter litigated: Ebber v Isager [1995] 1 Qd R 150 at 157; Duchess of Kingston's Case [1775] All ER Rep 263 at 629 per De Grey CJ, (HL). The allegation of fraud must be pleaded with precision and certainty: Meddowcroft v Huguenin (1844) 4 Moo PCC 386; 13 ER 352. Surmise and inference as to fraud is not sufficient: Perry v Meddowcroft (1846) 10 Beav 122; 50 ER 529. Issue estoppel does not apply to judgments obtained by fraud: Weaver v Law Society of New South Wales (1979) 142 CLR 201; Director of Public Prosecutions v Humphrys [1977] AC 1 at 21 per Viscount Dilhorne.

Application of the above doctrines 31 In this proceeding the applicant is seeking to have the Court look behind the judgment of the District Court in action no 1536 of 1989 and the judgment of the same court in action no 6202 of 1993. It is apparent from the history of that litigation set out above that the applicant has exhausted all her avenues of appeal against each of the judgments in those actions. Hence, there is no basis for the Court to look behind those judgments for the purpose deciding whether or not the sequestration order made against the applicant should be set aside unless the applicant can satisfy the Court that the judgment was obtained by fraud. 32 In connection with the ground relied upon by the applicant to annul her bankruptcy that the judgment obtained in action no 6202 of 1993 was procured by fraud, the applicant alleges that counsel for the respondent in action 6202/93 "… concealed the evidence … to pervert the course of justice as he knew well the very significant evidence lurking in the transcript of [action 1536/89]" (Applicant's affidavit of 28 September 2000). Additionally, it is alleged by the applicant that counsel was aware of a fraud facilitated by counsel for the respondent in action 1536/89 and perpetrated with others. 33 It appears from the applicant's same affidavit that the fraud which is alleged to have occurred in action 1536/89 had the following elements: (a) counsel for the respondent misrepresented facts relating to Akibilt's payments to the applicant in that Akibilt had fully paid the respondent; (b) respondent's counsel misrepresented the situation as to the alleged overpayment of the respondent by Akibilt; (c) a deed of 9 September 1988 was entered into in reliance on misrepresentations by the respondent's solicitor and director; (d) the same deed was executed unilaterally in the applicant's absence and consequently was illegal and void; (e) the amount of debt was deliberately misrepresented in the statement of claim; (f) counsel for the respondent in the action deliberately misrepresented the applicant's lack of legal representation as being due to insufficient funds on the applicant's part; (g) there was a deliberate misrepresentation of facts to pervert the course of justice in relation to Akibilt's debt; and (h) counsel for the respondent misrepresented the reason for the applicant's failure to procure evidence that payment was made. 34 These issues of alleged fraud and misrepresentation were raised before the High Court on the special leave application in relation to action no 6202 of 1993. They were also raised before French J on the application to set aside the sequestration order. He found that the applicant's assertions that the deed acknowledging the debt was invalid and unenforceable, which were fundamental to her argument, were "simply unsustainable". Additionally, he held that her allegation that the judgment was obtained by fraud perpetuated by either of the counsel for the respondent or Mr Vivante to be "highly implausible". In her appeal from the judgment of French J the applicant made the same allegations as are now made here. 35 I therefore accept the submission for the respondent that as the allegations of fraud have already been considered by a competent Tribunal, by reason of the application of the doctrines of res judicata and of issue estoppel, they cannot be reconsidered by this Court. In the absence of the existence of fresh evidence which was not available at the time of the earlier trials: Bourke v Beneficial Finance (1993) 124 ALR 716 at 724 where it is said that "the fraud must be proved by fresh evidence which was not available and could not have been discovered with reasonable diligence before the judgment was delivered.": Monroe Schneider Associates (Inc) v No 1 Raberem Pty Ltd (No 2) (1992) 37 FCR 234. 36 The applicant has not put forward evidence of fraud. In her affidavit she has made statements which are her view of the matter and which are unsubstantiated by proper evidence. Her allegations of fraud founded on the concealment and unavailability of the transcript of action 1536/89 could have been raised in the many previous proceedings. In her notice of appeal from the judgment of French J the applicant quotes from the transcript so that it was in her possession in 1998. Her failure to raise her allegation of fraud is therefore unreasonable so that she is prevented by the principle of Anshun estoppel of raising the issue in this proceeding. 37 Additionally, I accept the submission for the respondent that the applicant's case has not shown how the alleged concealment of the transcript from her has resulted in the judgment given in action 1536/89 being obtained fraudulently.

Conclusion 38 For these reasons I consider that there is no basis for the Court looking behind the judgments obtained in the prior proceedings. The applicant's application therefore fails. I certify that the preceding thirty-eight (38) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice RD Nicholson.

Solicitor for the Respondent: Mallesons Stephen Jaques

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