FEDERAL COURT OF AUSTRALIA Cirillo v Consolidated Press Property Pty Ltd (formerly known as Citicorp Australia Limited) [2007] FCAFC 167 BANKRUPTCY – creditor's petition – application by debtor for adjournment to allow further proceedings to be taken in another court in relation to judgment on which debt claimed by petitioning creditor was based – alternatively debtor proposed to seek pre-action discovery with a view to setting aside same judgment – refusal by primary judge to stay sequestration order – nature of discretion to grant adjournment – whether favourable exercise entailed by assumption of a genuine arguable case in the other court – whether short adjournment should have been granted to enable debtor to file further affidavits and written submissions – relevance of capacity of trustee in bankruptcy to pursue relief in the other court – whether assumption of existence of an arguable case in other court continued to be made when primary judge exercised discretion whether or not to make a sequestration order – matters relevant to the exercise of that discretion – evidence required to establish prior legal assignment by petitioning creditor of chose in action which gave rise to judgment debt. Bankruptcy Act 1966 (Cth) ss 41(6A), 41(6C), 43 and 52(3) Law of Property Act 1936 (SA) s 15 Murdaca v Acounts Control Management Services Pty Ltd [2007] FCA 964 de Robillard v Carver [2007] FCAFC 73 State of Queensland & Another v JL Holdings Pty Limited (1997) 189 CLR 146 Cirillo v Citicorp [2001] SASC 349 Durham Brothers v Robertson [1898] 1 QB 765 Bloch v Bloch (1981) 180 CLR 390 EG & H Nominees v General Mutual Insurance Co (In Liquidation) (1976) 50 ALJR 460 Heath v Tang [1993] 4 All ER 694 Cummings v Claremont Petroleum NL (1996) 185 CLR 124 Evans v Hi Fert Pty Ltd [2003] SASC 186 Williams v Official Trustee in Bankruptcy (1994) 122 ALR 585 Joosse v Deputy Commissioner of Taxation (2004) 13 FCAFC 245 Wren v Mahony (1972) 126 CLR 212 NRMA Insurance Limited v Vale [2001] FCA 511 Bryant v Commonwealth Bank of Australia (1991) 134 ALR 460 Chamberlain v Deputy Federal Commissioner of Taxation (1991) 28 FCR 21 Port of Melbourne Authority v Anshun Pty Ltd (1981) 147 CLR 589 Wolff v Donovan (1991) 29 FCR 480 Re Skaff Ex Parte Farrow Mortgage Services Pty Ltd (19993) 41 FCR 331 Amos v Brisbane TV Ltd (2000) 100 FCR 82 Holt v Heatherfield Trust Ltd (1942) 2 KB 1 Holwell Securities Ltd v Hughes (1973) 2 All ER 477 Huddersfield Banking Co Limited v Henry Lister & Son Limited [1895] 2 Ch 273 Chamberlain v Deputy Federal Commissioner of Taxation (1991) 28 FCR 21 National Australia Bank v Zollo [2000] FCA 972 House v The King (1936) 55 CLR 499 Bryant v Commonwealth Bank of Australia (1996) 134 ALR 460 VINCENZO GIOVANNI CIRILLO v CONSOLIDATED PRESS PROPERTY PTY LTD (FORMERLY KNOWN AS CITICORP AUSTRALIA LIMITED), C W CONSTRUCTION PTY LTD (RECEIVERS & MANAGERS APPOINTED) (IN LIQUIDATION), JOHN HAROLD HEARD and STEPHEN ELLIOT YOUNG SAD 57 OF 2007 RYAN, MOORE, and TAMBERLIN JJ 2 November 2007 MELBOURNE (HEARD IN SYDNEY) IN THE FEDERAL COURT OF AUSTRALIA VICTORIA DISTRICT REGISTRY SAD 57 OF 2007 ON APPEAL FROM A SINGLE JUDGE OF THE FEDERAL COURT OF AUSTRALIA BETWEEN: VINCENZO GIOVANNI CIRILLO Appellant AND: CONSOLIDATED PRESS PROPERTY PTY LTD (FORMERLY KNOWN AS CITICORP AUSTRALIA LIMITED) First Respondent C W CONSTRUCTION PTY LTD (RECEIVERS & MANAGERS APPOINTED) (IN LIQUIDATION) Second Respondent JOHN HAROLD HEARD Third Respondent STEPHEN ELLIOT YOUNG Fourth Respondent JUDGES: RYAN, MOORE, and TAMBERLIN JJ DATE OF ORDER: 2 NOVEMBER 2007 WHERE MADE: MELBOURNE (HEARD IN SYDNEY) THE COURT ORDERS THAT: 1. The appeal be dismissed. 2. The appellant pay the respondents' costs, to be taxed in default of agreement. Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules. IN THE FEDERAL COURT OF AUSTRALIA VICTORIA DISTRICT REGISTRY SAD 57 OF 2007 ON APPEAL FROM A SINGLE JUDGE OF THE FEDERAL COURT OF AUSTRALIA BETWEEN: VINCENZO GIOVANNI CIRILLO Appellant AND: CONSOLIDATED PRESS PROPERTY PTY LTD (FORMERLY KNOWN AS CITICORP AUSTRALIA LIMITED) First Respondent C W CONSTRUCTION PTY LTD (RECEIVERS & MANAGERS APPOINTED) (IN LIQUIDATION) Second Respondent JOHN HAROLD HEARD Third Respondent STEPHEN ELLIOT YOUNG Fourth Respondent JUDGES: RYAN, MOORE, and TAMBERLIN JJ DATE: 2 november 2007 PLACE: MELBOURNE (HEARD IN SYDNEY) REASONS FOR JUDGMENT THE COURT: 1 By notice of appeal filed on 29 March 2007, the appellant appeals from the whole of the orders made by Mansfield J on 23 March 2007 in proceeding number SAD 30 of 2007; see Consolidated Press Property Pty Ltd v Cirillo [2007] FCA 561. On 24 May 2007 the appellant filed an amended notice of appeal. Background to the appeal 2 On 23 February 2007 the respondents sought, under s 43 of the Bankruptcy Act 1966 (Cth) ("the Act"), a sequestration order against the estate of the appellant. The petition was based on a judgment in favour of the respondents against the appellant, entered by consent on 28 July 2005, in proceeding numbered 1481 in 1985 of the Supreme Court of South Australia. The judgment included an order for the payment by the appellant to the respondents of an amount of $500,000 ("the judgment debt"). The judgment debt was for costs awarded against the appellant in proceedings in which he had unsuccessfully sought to recover from the respondents losses which he had allegedly sustained by reason of an injunction granted against him which had been accompanied by an undertaking as to damages given by the respondents. Essentially, the appellant's claim in the Supreme Court of South Australia was to enforce the undertaking as to damages, after the injunction had been dissolved. 3 The petition for a sequestration order was based on the appellant's act of bankruptcy in failing to comply with a bankruptcy notice served on him in respect of the judgement debt. The bankruptcy notice had been served on the appellant on 22 June 2006, and the appellant applied to have it set aside claiming that he had a counter-claim, set-off or cross demand against the respondents that was equal to, or greater than, the amount of the judgment debt. That application was dismissed by Finn J on 16 February 2007; see Cirillo v Consolidated Press Property (formerly known as Citicorp Australia Ltd) [2007] FCA 139. 4 On 19 March 2007, shortly before the petition was due to be heard, the appellant applied on short notice for an adjournment of the hearing. He filed no affidavit material substantially supporting his request for an adjournment. Nor was any notice in opposition to the petition filed on behalf of the appellant. The application for an adjournment was stood over to the day which had been fixed for the commencement of the hearing of the petition, 22 March 2007. 5 At the outset of the hearing on 22 March 2007, counsel for the appellant renewed the application for an adjournment of the hearing of the petition to a date to be fixed. The adjournment was said to be to enable the appellant to prosecute further proceedings in the Supreme Court of South Australia in relation to the judgment debt. Alternatively, it was submitted that, on the material before the Court, the existence of proceedings seeking pre-action discovery, either alone, or in conjunction with the claims of the appellant about his prospects of setting aside the judgment in the Supreme Court of South Australia, provided sufficient reason to dismiss the petition. The respondents, in anticipation of the application, filed further material illustrating the general history of the matter. The learned primary Judge, thereupon adjourned the hearing to the following day to enable counsel for the appellant to consider fully the additional material which the respondents had filed. 6 On 23 March 2007, after hearing the appellant's submissions in support of the application for an adjournment, his Honour refused an adjournment and proceeded to consider the petition, as to which no matters were raised in opposition, other than those which had been urged in support of the adjournment. His Honour then made the following orders; '1. Application for adjournment refused. 2. A Sequestration Order be made against the estate of the debtor Vincenzo Giovanni Cirillo. 3. The petitioning creditor's costs be taxed pursuant to the Federal Court Rules and paid in accordance with the Bankruptcy Act. 4. Application for stay refused.' 7 The appellant had applied under s 52(3) of the Act for the sequestration order to be stayed for a period of 21 days. As the fourth order recounted above indicates, that application was also refused. As Branson J recently pointed out, the appropriate order to be sought in such circumstances would be a stay of proceedings under the sequestration order: Murdaca v Acounts Control Management Services Pty Ltd [2007] FCA 964 at [2]. See also de Robillard v Carver [2007] FCAFC 73 at [125]. Appended to the reasons published on 18 April 2007, explaining the orders of 23 March was a further order that the time in which to appeal from the making of the sequestration order should run from 18 April 2007. The appellant's submissions 8 By his amended notice of appeal, the appellant recited that he appeals against the whole of the decision below. The grounds of appeal in the amended notice are as follows: '1. The learned primary judge erred in applying the criteria relevant to the exercise of the discretion to adjourn a creditor's petition to the facts of the present matter. (a) Although his Honour correctly drew from his own decision in National Australia Bank Ltd v Zollo [2000] FCA 972 ("Zollo") @ [18] the proposition that the Court "should determine whether to grant the adjournment sought in part by asking whether the debtors have a 'genuine arguable case' that judgment in the [relevant] action will be set aside"("the principal criterion for adjournment"; (b) Unlike Zollo, where His Honour had found ([2000] FCA 972 @ [27] and [32]) no such "genuine arguable case", in the present matter His Honour assumed ([2007] FCA 561 @ [17], and ought to have found – see paragraph 4a below) that the Appellant Debtor has a genuine arguable case to have the costs order (viz. the only debt relied upon by the Respondent Creditors) set aside; and (c) On the grounds set out below, His Honour's discretion miscarried in respect of the other relevant criteria apart from the principal criterion for adjournment ("other criteria for adjournment"). 2. The learned primary judge placed insufficient weight upon the principal criterion for adjournment. 3. The learned primary judge placed undue weight upon other criteria for adjournment in that. (a) Delay on part of the debtor (cf. Zollo @ [33] and [34]); and (b) The capacity of a trustee in bankruptcy to pursue a debtor's case (cf. Zollo @ [35]) ought to have been, but were not, evaluated in light of the strength of the Appellant Debtor's "genuine arguable case" to have the costs order set aside in the Supreme Court of South Australia. 4. Further and alternatively, to the extent that the learned primary judge evaluated other criteria for adjournment in light of the strength of the Appellant Debtor's "genuine arguable case" to have the costs order set aside, His Honour: a. ought to have found that the Appellant has a strong "genuine and arguable case"; b. placed (@ [18]) undue weight upon the finding of Finn J ([2007] FCA 139 @ [8]) that the Appellant Debtor had "steadfastly refused to entertain the prospect of an application to set aside the costs orders", when there was no evidence of a conscious refusal on the part of the Appellant Debtor and the only available inference was that Appellant Debtor had received erroneous legal advice as to the proper way to challenge the costs order; c. placed (@ [22]) undue weight upon the affidavit evidence of the Appellant Debtor that he was yet to "determine whether [he had] any cause of action" to set aside the costs order, when other evidence (reviewed @ [11] – [16]) warranted the finding that the "genuine arguable case" was strong, or alternatively that the Appellant Debtor regarded it as strong, subject only to the discovery of documents in the custody or power of the Respondent Creditors very likely to exist and make good that case; d. took into account (@ [22]) an irrelevant matter, namely the prospect that a claim to set aside the costs order might be met with an argument that the claim could or should have been set up in [2007] FCA 60, when that matter was dismissed by Finn J because the nature of the proceeding was misconceived; and e. appears to have taken into account (@ [22]) a further irrelevant matter, namely the fact that there has been no appeal in SASC 1481/1985, when only the subsequent costs order is now the subject of challenge and then only on the basis of information discovered since the Appellant Debtor agreed to that order being made against him. 5. Further to paragraph 3 above: a. Having regard to the history and nature of the disputes between the parties, the learned primary judge ought to have found that there has been no significant delay on the part of the Appellant Debtor; b. Notwithstanding the capacity of a trustee in bankruptcy to pursue a debtor's case, the learned primary judge ought to have inferred that there is very little likelihood that the Appellant Debtor's genuine arguable case will be pursued by his trustee in bankruptcy, when the only creditors appear to be the Respondent Creditors and a trustee's decision to impugn their proof of debt based on the costs order would appear inconsistent with the implicit finding that the Respondent Creditors are owed a genuine petitioning creditor's debt; and c. The learned primary judge placed (@ [19] undue weight upon perceived prejudice to the Respondent Creditors, when the petition could be extended by 12 months and the financial position of the Appellant Debtor preserved during the period up to final hearing of the petition, if adjourned. 6. Alternatively (even if the creditors petition should not have been adjourned), the Learned primary Judge should have found there was 'other sufficient cause' within the meaning of Section 52(2)(b) of the Bankruptcy Act for dismissing the Creditors Petition as a consequence of the matters set out in paragraphs 1b and 4a above. In support of the contention that the learned primary judge ought to have adjourned the further hearing of the creditors petition, the Appellant Debtor relies upon the following additional grounds: - 7. The Learned primary Judge failed to have adequate regard to the conduct of the Respondents in not disclosing relevant facts and documents in the course of the Supreme Court Action. 8. The Learned primary Judge failed to agree with the request made by counsel for the Appellant Debtor at the hearing on Friday, 23 March 2007 that he be allowed a reasonable opportunity to prepare, file and serve written submissions on the issue whether, and to what extent, it was appropriate to assume that if a sequestration order was made against the Appellant the trustee of his estate in bankruptcy would pursue the Appellant Debtor's legal right to set aside the Costs Order. 9. The Learned primary Judge failed to have adequate regard to the following circumstances: a. The affidavits filed and served on behalf of the Appellant Debtor on Wednesday, 21 March 2007 were: i. Intended to show that sufficient reasons existed for the creditors petition to be adjourned to allow the Appellant a reasonable time to prepare, file and serve further affidavits which would provide further and better evidence in support of his position that he had a strong genuine arguable case in relation to having the creditors' petition dismissed; ii. not intended to be comprehensive and all of the affidavit material and/or evidence that the Appellant wished to rely upon in support of his application that the creditors petition be dismissed; b. The Respondent Creditors' written submissions in support of the creditors petition were first provided to the Appellant Debtor after Wednesday, 21 March 2007; c. During the hearing on Friday, 23 March 2007 the Learned primary Judge said to the Appellant's counsel that he did not need to continue with certain submissions relating to the issue whether the Appellant had a genuine arguable case to set aside the Costs Order because the Learned primary Judge would assume the validity of those submissions.' 9 The appellant relied upon the grounds of appeal set out above and, in relation to grounds 1, 2 and 4a submitted that, his Honour had erred in not finding, despite the evidence before him, that the appellant had a genuine arguable case to have the consent orders set aside. He further contended that his Honour, at [17] of the reasons below, had assumed, for the purposes of the adjournment application that the appellant had a "genuine and arguable case to have the costs order set aside by appropriate proceeding in the SASC". However, at [22] of his reasons, his Honour had declined to give full force and effect to that assumption. 10 The appellant next submitted that his Honour should have adjourned the hearing of the application to permit a proper investigation of the existence of the debt, and to allow the appellant to proceed with his application in the South Australian Supreme Court for pre-action discovery, which would have provided further evidence to support the genuine arguable case to have the costs order set aside. 11 The appellant then imputed to the primary Judge an error in accepting, at [14], [18] and [22] of his reasons, that, in the South Australian Supreme Court, it had been decided on the merits to award costs against the appellant, and that the consent order related only to the amount of the costs payable, but not to the liability of the appellant to pay the costs. 12 The appellant next contended that, once it had been established that he had a "genuine arguable case", he was entitled either to an adjournment or to have the petition dismissed. Referring to State of Queensland & Another v JL Holdings Pty Limited (1997) 189 CLR 146 and Cirillo v Citicorp [2001] SASC 349, per Gray J at [32], he submitted that the primary Judge had been wrong to refuse the adjournment and to make a sequestration order in reliance on perceived delay or previous conduct of the appellant in relation to the proceedings. 13 In relation to grounds 1, 4 and 7 of the amended notice of appeal, the appellant argued that the consent order made on 28 July 2005 was vitiated by fraud, concealment and misrepresentation by the respondents as disclosed by the facts and circumstances set out in his affidavit sworn 21 March 2007. He further contended that, in the proceedings in the South Australian Supreme Court, the respondents had raised a set-off which introduced into those proceedings substantial factual and legal issues and significantly increased the costs and time taken in the interlocutory steps. On 19 May 1997, Citicorp Australia Limited changed its name to Consolidated Press Property Pty Limited. From May 1997, the appellant said, Consolidated Press Property Pty Ltd did not have any standing or rights in relation to the subject matter of the proceedings in the South Australian Supreme Court and lacked standing to maintain the set-off on which it relied in those proceedings. The appellant further argued that the respondents had concealed the name change to Consolidated Press Property Pty Limited and the sale and transfer of assets in 1997, which only became known to the appellant when his solicitors received correspondence from the solicitors for the respondents in February 2006. Further, it was said, the assets and liabilities of Citicorp Australia Limited had been transferred to Citibank Limited, and Consolidated Press Property Pty Limited itself had no longer any right or interest in the subject matter of the proceeding. 14 The appellant referred to s 15 of the Law of Property Act 1936 (SA) in support of the contention that it is likely that, as part of the sale and transfer transaction in 1997, a valid assignment had occurred. The lack of notice in writing of the assignment was said not to be critical, as s 15 does not require that any such notice be received and, in any event, a valid equitable assignment of a debt or chose in action can occur without any particular form of words or notice; see Durham Brothers v Robertson [1898] 1 QB 765. 15 The appellant next submitted that, if there had been an effectual assignment of the relevant chose in action from Consolidated Press Property Pty Limited to Citibank Limited, then Consolidated Press Property Pty Limited should never have asserted the set-off in the South Australian Supreme Court proceeding, and an order for costs should have been made against that company in relation to all of the steps in the proceeding related to the set-off. 16 In support of ground 6 of the amended notice of appeal, the appellant pointed to the assumption by his Honour at [17] of the reasons below that there was "a genuine and arguable case to have the costs order set aside." Further, the appellant referred to [24] of the reasons below, where his Honour said that; 'there was no cogent evidence to establish that the order should not be made. Counsel for the respondent acknowledged that there would have to have been further evidence to even get to the point of making up any sort of case on that score. For the reasons which I have given, on the material presently before me, I do not consider that the respondent has made out any other reason existing for not making the sequestration order.' The appellant submitted however, that, at the hearing on 23 March 2007, counsel had made submissions to be found at p 30 of the transcript of that hearing that "having regard to what we have put to you, it is likely that the costs order should be set aside" and "that in those circumstances that the debt isn't owing or otherwise the petition should be dismissed." 17 The orders sought by the appellant are as follows: '1. The sequestration order and other orders made by the Honourable Justice Mansfield on 23 March 2007 be set aside. 2. The Creditors Petition be dismissed, alternatively listed for further hearing before a single judge of the Court on a date not earlier than {three months after the decision on appeal}. 3. The Respondent Creditors pay the Appellant Debtor's costs of the appeal. 4. Such further and other orders as this Honourable Court deems fit and proper.' The respondents' submissions 18 The respondents have addressed the appellant's grounds of appeal raised in the amended notice of appeal, by dividing them into four categories. 19 The first category is related to grounds 8, 9(a), 9(b) of the amended notice of appeal, which essentially contend that his Honour should have granted the appellant a short adjournment to enable him to prepare and file further affidavits and written submissions. The failure to afford him that opportunity was said to be sufficiently prejudicial to warrant upholding the appeal. The respondents have first pointed to the obstacle in the way of that submission which was identified in these terms by the High Court in Bloch v Bloch (1981) 180 CLR 390, at 395; 'The decision whether to grant or refuse an adjournment lies in the discretion of the trial judge, and it is indeed seldom that an appellate court will feel justified in review such a decision.' 20 According to the respondents, the appellant has not indicated, either on affidavit or in submissions, any evidence which would have been adduced in support of his case for dismissal of the creditors' petition had he been granted an adjournment. The need for such an indication of relevant evidence in order to justify an adjournment was said to be illustrated by EG & H Nominees v General Mutual Insurance Co (In Liquidation) (1976) 50 ALJR 460. 21 In relation to the allegation that counsel for the appellant had not been given an opportunity to file written submissions as to the validity of the assumption that, if a sequestration order were made against the estate of the appellant, his trustee in bankruptcy would not pursue the claim to set aside the costs order, the respondents contended that his Honour had made no findings that such a claim would be pursued, but had merely noted at [22] of his reasons, as relevant to his exercise of discretion, that there was a capacity to pursue it. The respondents further submitted that there was no basis for assuming that the trustee would not pursue the claim, as the appellant appeared to have substantial assets having deposed to being able to pay all costs orders against him in all litigation other than the costs order on which the creditors' petition was founded. 22 The respondents next argued that, in any event, it was not essential for the creditors' petition to be adjourned to enable the appellant's counsel to make written submissions, as the authorities make clear that a trustee in bankruptcy may appeal against, or seek to set aside, a judgment on which a sequestration order has been based; see Heath v Tang [1993] 4 All ER 694, Cummings v Claremont Petroleum NL (1996) 185 CLR 124, and Evans v Hi Fert Pty Ltd [2003] SASC 186. 23 The second category of grounds of appeal erected by the respondents was said to be exemplified by ground 9(c) of the amended notice of appeal, which asserts that the learned primary Judge had misled the appellant's counsel by indicating that he did not need to proceed with certain submissions. This ground, according to the respondents, is misconceived. The assumption at [17] of the reasons below, that the appellant had an arguable case, they say, was made solely for the purpose of considering the application to adjourn the creditors' petition. Once the application for the adjournment had been refused, his Honour specifically sought further submissions from counsel for the appellant, who then advanced further brief argument adopting his previous submissions in support of the adjournment. Accordingly, any omission to address the existence of an arguable case for the appellant, if made in the mistaken belief that his Honour had accepted the existence of such an arguable case for the purpose of considering whether to make a sequestration order as well as for determining the adjournment application, was a forensic error by counsel, which did not invalidate the judgment; see Williams v Official Trustee in Bankruptcy (1994) 122 ALR 585. 24 Counsel for the respondents next submitted that, even if the primary judge ought to have found, on the basis of his earlier assumption or the evidence before him, that there was an arguable case to set aside the judgment, that did not entail that the petition should be dismissed. That was because the onus on a debtor seeking dismissal of a petition because of a doubt that a debt in truth and reality underlies the foundational judgement is higher than that borne by an applicant for an adjournment to enable a challenge to the judgment. To dismiss a petition, it was said, there must be a "substantial reason for doubting whether there is … a debt"; Joosse v Deputy Commissioner of Taxation (2004) 13 FCAFC 245 at [6]; see also Wren v Mahony (1972) 126 CLR 212, at 224-5. 25 Collected in the respondents' third category were grounds 1, 2, 3, 4, 5 and 7 of the amended notice of appeal, which contended that the creditors' petition should have been adjourned for a lengthy period, first, to enable the appellant to bring on for hearing his recently filed application for pre-action discovery, and, secondly, if he were to obtain an order for pre-action discovery resulting in his obtaining some helpful evidence, to allow him to use it in seeking to set aside the foundational judgment. 26 Counsel for the respondents imputed as a major premise of the appellant's argument that, once it is found or assumed that a debtor has a genuine arguable case to set aside a judgment supporting a petition, the petition should be adjourned without regard to other factors militating against an adjournment. This premise was said to be contrary to the policy of the Act in favour of prompt resolution of issues of insolvency; see ss 41(6A) and 41(6C) of the Act. Moreover, even an arguable challenge to a judgment does not, of itself, warrant an adjournment of a petition where the challenge has not been pursued with due diligence; see NRMA Insurance Limited v Vale [2001] FCA 511, at [18], Bryant v Commonwealth Bank of Australia (1991) 134 ALR 460. 27 It was noted in this context that the adjournment had been sought to pursue, in the Supreme Court of South Australia, pre-action discovery in aid of a claim to set aside a costs order made by Olsson J in Supreme Court action No 1481 of 1985. It was further submitted on behalf of the respondents that the application for pre-action discovery was doomed to be dismissed on technical grounds. In the first place, a prerequisite for pre-action discovery under Rule 32 of the Supreme Court Rules was that the Court be satisfied "that the plaintiff may have a good cause of action". The respondents submitted that the appellant could not satisfy this requirement, because his application for pre-action discovery would be in aid of seeking the exercise by the Supreme Court of its discretion to set aside an existing costs order, and not to support a substantive cause of action. 28 In relation to ground 5(c) of the amended notice of appeal, alleging that the learned primary Judge had failed to pay due regard to the fact that the creditors' petition could have been extended by 12 months, the respondents claimed that the steps foreshadowed by the applicant to resolve the validity of the foundational judgment could not be taken within a further twelve months. 29 Counsel for the respondents next claimed that the point raised by ground at 4(b) of the amended notice of appeal, that his Honour had improperly refused to find that the appellant had received erroneous legal advice as to how to challenge the costs order, had been raised with counsel on 22 March 2007. Nevertheless, at the final hearing on 23 March 2007, the appellant's counsel was still unable to adduce evidence in relation to it. Accordingly, it was said, the appellant is bound by the conduct of his counsel at first instance. 30 In relation to ground 4(c) of the amended notice of appeal, asserting that the primary Judge had given undue weight to the appellant's sworn evidence that he did not believe that he had sufficient material to set aside the costs order, counsel for the respondents submitted that there was no reason for his Honour not to have accepted that evidence as to the appellant's state of mind, which was not disputed by the respondents. 31 Ground 4(d) of the amended notice of appeal, it will be recalled, claimed that the learned primary Judge had caused his discretion to miscarry by taking into account an irrelevant matter, namely that the application to set aside the costs order should have been made in the proceedings previously dismissed by Finn J; see [2007] FCA 60. Counsel for the respondents argued that this ground was misconceived, referring to Chamberlain v Deputy Federal Commissioner of Taxation (1991) 28 FCR 21. In that case, a Full Court of this Court held that the Commissioner of Taxation, who was moving to set aside a consent judgment, should have raised it in proceedings in the High Court after which the Commissioner had been precluded by res judicata from seeking to recover the balance of a debt which had not merged in the consent judgment. That result flowed, the Full Court held, from the application of the principle enunciated in Port of Melbourne Authority v Anshun Pty Ltd (1981) 147 CLR 589. The same principle, which had been invoked in the petitioning creditors' written submissions at first instance, was, it was submitted on behalf of the present respondents, fatal to the appellant's prospects of setting aside the consent costs order or, at least, was a relevant matter weighing against the discretionary grant of an adjournment. 32 In relation to ground 4(e) of the amended notice of appeal which complains that account was taken of the fact that no appeal had been brought from the judgment of Olsson J in the Supreme Court of Australia, the respondents did not accept that the primary Judge had taken that issue into account, but contended that, if he had, it was relevant. According to the respondents, the fact that the appellant is not seeking to challenge the primary findings in the Supreme Court action No 1481 of 1985, removes any doubt that the general costs of that action would be payable by the appellant. It follows, so the argument went, that the appellant is therefore precluded from raising a doubt as to the true existence of a debt sufficient to support the making of a sequestration order. 33 In relation to ground 5(a) of the amended notice of appeal, the respondents contended that the appellant's argument that there has been no significant delay is hopeless, once it is realised that he has acknowledged that the material on which he now seeks to challenge the judgment in the Supreme Court of South Australia was known to him in early 2006. 34 The respondents' fourth category focused on ground 6 of the amended notice of appeal, which asserted that, if it had been correct to refuse an adjournment, the primary Judge should nevertheless have gone behind the judgment on which the creditors' petition was predicated and found that there was no debt in truth and reality and thus dismissed the petition altogether. On the respondents' analysis, if that argument were correct, it would always be open to procure the dismissal of a creditor's petition by showing an arguable basis for challenging the foundational judgment. The respondents contended that a factor against going behind the judgment is that the debtor has made no attempt to set aside the judgement; see Wolff v Donovan (1991) 29 FCR 480 per Lee and Hill JJ, at 486. Accordingly, when a court is considering whether to go behind a judgment, it has to make a finding that there are "substantial reasons" for doubting that there is a debt. The purpose of that inquiry, it was said, is not to investigate whether there has been any irregularity in the conduct of the proceedings below, but to ascertain whether there is actually an enforceable debt. Deficiency in proof or procedure in the court in which the judgment has been entered will not cause the petition to be dismissed if it is clear that, despite such deficiency, there is an amount owing which would justify the petition; see Re Skaff Ex Parte Farrow Mortgage Services Pty Ltd (19993) 41 FCR 331, Amos v Brisbane TV Ltd (2000) 100 FCR 82, at 88-89. 35 The respondents submitted that, even if the learned primary Judge had considered going behind Olsson J's judgment, he could not properly have done so as there was insufficient evidence to show a failure to make proper discovery of the alleged assignment. The evidence of the appellant, at its highest, showed only that there had been discussions about possible arrangements in the future which might have produced documents of the relevant kind, not that such arrangements had actually occurred. 36 The respondents next criticised the appellant's submissions invoking the history of ultimate holding companies of Consolidated Press Property Pty Limited as that history did not disclose any assignment of assets. Similarly, it was said that a letter of 14 May 1999 from Consolidated Press Holdings Limited to Citibank Limited about the issuing of instructions in relation to claims involving the appellant did not give rise to an inference that Consolidated Press Pty Limited no longer had any right in relation to the subject matter of the proceedings. It was not uncommon for one company to authorise officers of another company to give instructions in proceedings pursued on behalf of the first company. The minutes of the meeting of the Board of Directors of 13 December 1996 do not disclose a commitment to the sale of Citicorp Australia Limited to a third party. They show no more than musings about future possibilities. 37 In the same context, the respondents submitted that, even if there were documents tending to show an assignment, they would have been neither relevant nor discoverable. Any assignment alleged to have occurred in 1997 could not have affected the substantive right of the appellant to enforce the undertaking as to damages in the Supreme Court action No 1481 of 1985. That claim was for a defined period, ending on 4 February 1993 when the action was discontinued and the injunction dissolved, and any subsequent assignment of rights could not have affected it. 38 In relation to the appellant's claim that Citicorp Australia Limited could not, by virtue of the alleged assignment, have raised in the Supreme Court of South Australia an argument based upon the appellant's guarantee, the respondents contended that it was common ground that no notice of any assignment had been received by the appellant or C W Construction Pty Ltd. Accordingly, even if an assignment had occurred, it would only have been an equitable assignment and so would not have altered Citicorp Australia Limited's rights against the appellant. 39 The appellant's contention that there had been a valid legal assignment because the relevant notice had been given although never received was impugned as deficient because of the absence of evidence that notice was ever given. Further, in Holt v Heatherfield Trust Ltd (1942) 2 KB 1 and Holwell Securities Ltd v Hughes (1973) 2 All ER 477 it was held that a notice of assignment under the UK equivalent of the Law of Property Act 1936 (SA) does not take effect until it has been physically delivered to the debtor. 40 Counsel for the respondents next pointed to the fact that the set-off was never determined by the Supreme Court of South Australia which precluded the appellant from properly contending that, had he been made aware of the existence of the alleged assignment, he would have argued that the costs of the unresolved set-off should have been awarded to him. 41 The respondents contend that the appellant's written submissions did not support ground 6 of the amended notice of appeal. The assumption that "there was a genuine and arguable case to have the costs order set aside" was, the respondents said, expressly stated to have been an assumption only "for the purposes of the adjournment application". It did not continue to be made, once the primary Judge had refused the adjournment and embarked on the substantive hearing of the petition. Further, the respondents submitted, his Honour at [24] of his reasons, fairly summarised the statement by the appellant's counsel, that discovery was needed to plead accurately, and to substantiate appropriately, allegations of serious fraud. Appellant's written submissions in reply 42 On 19 August 2007 the appellant filed a reply to the respondents' written submissions contending, essentially, that the assignment of the set-off entitlement could be inferred from the facts as outlined in the written outline of submissions, and that the respondents had intentionally concealed the assignment from the Supreme Court of South Australia. Further, it was said, the concealment had been intentional giving rise to a prima facie inference of dishonesty, which, the appellant submitted, may be supported or disproved by documents capable of production from the respondents' possession. The appellant contended that, on an application for an adjournment, that inference is enough to show likely fraud, concealment and misrepresentation, but, out of an abundance of caution, he has elected to seek pre-action discovery before pleading fraud against the respondents. 43 Whether or not a prima facie case of fraud, concealment or misrepresentation, has been established, the clear inference remains available that the order as to costs of the Supreme Court of South Australia was based upon a serious or common mistake which, the appellant submitted, can suffice for setting aside a consent order; see Huddersfield Banking Co Limited v Henry Lister & Son Limited [1895] 2 Ch 273 per Lindley LJ at 280, per Vaughan Williams J at 275–276. 44 In response to the respondents' reliance on Anshun estoppel, the appellant argued that, unlike what happened in Chamberlain v Deputy Federal Commissioner of Taxation (1991) 28 FCR 21, the intervening proceedings in the present case had been brought in the wrong Court, so that the setting aside of the consent order could not have been sought in the intervening proceedings. 45 Finally, the appellant submitted in reply, the obvious explanation for his delay in moving the Supreme Court of South Australia to set aside the costs order is that his legal advisers mistakenly thought that the costs order should be challenged in this Court. The misconception was so obvious, and, of its nature, so clearly the result of faulty legal reasoning, that it must be imputed to the appellant's legal advisers and not to him personally. The appellant's steadfast refusal to apply to the Supreme Court to set aside the costs order was readily explicable as a mistake by the legal advisers who had appeared in opposition to the making of the sequestration order which also explains why it was not the subject of evidence before the primary Judge. Disposition of the appeal 46 The appellant had sought an adjournment of the creditors' petition for the purpose of enabling pre-trial discovery to be obtained in the Supreme Court of South Australia. In the reasons at first instance, it was noted at [3] that the application for an adjournment of the hearing of the petition had been on short notice, and unsupported by substantive evidence. 47 The learned primary Judge observed, at [10], that an adjournment of the petition; 'may be appropriate if the debtor can demonstrate a genuine and arguable case that in circumstances such as those he confronts, the costs order might be set aside so that there is a real prospect of achieving a different result in that action. See generally National Australia Bank v Zollo [2000] FCA 972.' In National Australia Bank v Zollo [2000] FCA 972, the respondents opposed the making of a sequestration order and sought an adjournment of the petition to enable them to pursue an application to set aside a judgment in the Supreme Court of South Australia in order to have the case in that Court reopened. Mansfield J held, at [25], that it was unlikely that the respondents would be given leave to reopen their case in the Supreme Court, as "there was no cogent material to demonstrate any arguable case". 48 The grant or refusal of an adjournment of a creditor's petition is clearly an exercise of discretion by a court. Although his Honour was prepared, in the present case, for the purposes of the adjournment application, "to assume that the respondent had a genuine and arguable case to have the costs order set aside by appropriate proceedings in the Supreme Court of Australia", that assumption did not entail that he was bound to exercise the discretion by granting the adjournment. The factors which weighed against exercising the discretion in that way were that the appellant had not yet commenced proceedings to set aside the costs order, there was a risk of significant delay to the respondents and, to the date of the order, the appellant had not acted reasonably or expeditiously. Most significantly, no evidence had been adduced by the appellant either to support his application for an adjournment, or, more specifically, to show that his application for pre-action discovery in the Supreme Court was likely to succeed. At first instance, the appellant did not depose to anything tending to substantiate the claim for pre-action discovery which, in turn, could have gone some way to persuading the primary Judge that the appellant had a genuine and arguable case. Most revealingly, the appellant himself deposed at par 74 of his affidavit of 21 March 2007 filed in the Supreme Court of South Australia that he was seeking pre-action discovery because; 'I wish to have the opportunity to see and consider such documentary material to: 74.1 determine whether I have any causes of action against the defendants to set aside the Costs Agreement; 74.2 adequately formulate the pleading of a statement of claim in relation to any such causes of action; and 74.3 to determine against whom any such causes of action lie.' 49 That led Mansfield J to conclude, at [24] of the reasons below; 'The evidence in support of the making of the sequestration order with respect to the respondent's estate was quite straightforward. There was no cogent evidence to establish that that order should not be made. Counsel for the respondent acknowledged that there would have to have been further evidence to even get to the point of making up any sort of case on that score. For the reasons which I have given, on the material presently before me, I do not consider that the respondent has made out any other reason existing for not making the sequestration order.' 50 Had this Full Court been persuaded that the learned primary Judge's discretion had miscarried as a result of one of the vices identified in House v The King (1936) 55 CLR 499 at 505, namely, the adoption of some wrong principle, the taking account of an irrelevant matter, a failure to take account of a material consideration or some mistake of fact, it would have been open to us to exercise the discretion afresh for ourselves. However, we have been totally unable to find that his Honour has been guilty of any error or oversight of the requisite kind. 51 The evidence does not demonstrate that the appellant has a reasonably arguable case for setting aside the order for costs made by the Supreme Court of South Australia. Moreover, even if his Honour is to be taken to have assumed, for all purposes, the existence of such an arguable case, that was only one consideration capable of bearing on his exercise of discretion. In our view, it was open to allow other considerations, including the appellant's long delay in moving the Supreme Court of South Australia and his previous conduct, to outweigh the existence of an arguable prospect of setting aside the judgment if that had been assumed for all purposes. A related consideration militating against the grant of what would necessarily have been a lengthy adjournment was the public interest in the expeditious determinations of alleged insolvencies; see eg Bryant v Commonwealth Bank of Australia (1996) 134 ALR 460. 52 We also consider that the learned primary Judge was correct in regarding as extremely tenuous the appellant's claim that his consent to the costs order had been induced by fraud, misrepresentation or common mistake. As we understand it, that claim depends on a chain of events which commenced, at some time after 18 April 1993, when Citicorp Australia Limited, the recipient of the appellant's guarantee of repayment of moneys due from C W Construction Pty Ltd, had changed its name to Consolidated Press Property Pty Ltd. On 22 February 2006 Consolidated Press Property Pty Ltd had executed a deed poll abandoning its rights to a piece of earthmoving equipment known as "the Poclain". Earlier, at a meeting on 13 December 1996 of directors of Citibank Limited, which we take to have been the parent company of Citicorp Australia Limited, later Consolidated Press Property Pty Ltd, reference was made to a: 'proposal … whereby any remaining debentures issued by Citicorp Australia Limited would be defeased to Perpetual Trustees. All assets would be transferred within the group and the company sold to a third party with the consequent advantage of eliminating the costs of administration in relation to a public borrowing corporation and compliance with the Debenture Trust Deed.' 53 The appellant's contention depends, in the first place, on making good the inference that the chose in action constituted by the rights conferred by the appellant's guarantee of the payment by C W Construction Pty Ltd had been assigned before 28 July 2005 to Citibank Limited or some other entity within the Citibank group. In the second place, for Citicorp Australia Limited or, as it later became, Consolidated Press Property Pty Ltd, to lose its right to sue in its own name to enforce the guarantee it would have been necessary for express notice in writing of the assignment to have been given to the appellant; see s 15 of the Law of Property Act 1936 (SA), which provides; 'An absolute assignment by writing under the hand of the assignor (not purporting to be by way of charge only) of any debt or other legal chose in action, of which express notice in writing has been given to the debtor, trustee, or other person from whom the assignor would have been entitled to receive or claim such debt or chose in action, shall be effectual in law (subject to equities having priority over the right of the assignee), to pass and transfer from the date of such notice – (a) the legal right to such debt or chose in action; (b) all legal and other remedies for the same; and (c) the power to give a good discharge for the same, without the concurrence of the assignor: Provided that, if the debtor, trustee, or other person liable in respect of such debt or chose in action has notice – (a) that such assignment is disputed by the assignor, or any person claiming under him; or (b) of any other opposing or conflicting claims, to such debt or chose in action, he may, if he thinks fit, either call upon the persons making claim thereto to interplead concerning the same, or pay the debt or other chose in action into court, under the provisions of the Trustee Act, 1936 (Now Trustee Act, 1936-1974).' 54 Without such a notice any assignment of the chose in action would have been effective only in equity so that Citicorp Australia Limited or Consolidated Press Pty Ltd would have remained entitled to raise a counterclaim or set-off in its own name although holding the benefit thereof for the equitable assignee. The minutes of the meeting of directors of Citibank Limited of 13 December 1996 suggest no more than that the "shell" of Citicorp Australia Limited would be sold to a third party. On that basis, the beneficial ownership of the chose in action against the appellant would have remained within the group. In any event, the minutes disclose no more than consideration of a proposal for implementation in the future. 55 The fact that the solicitors for Consolidated Press Property Pty Ltd found it appropriate on 22 February 2006 to disclaim any entitlement in the "Poclain" which was related to the chose in action against the appellant, suggests that, at least until that date, the chose in action was regarded as legally vested in Consolidated Press Property Pty Ltd. Moreover, there is no evidence to suggest that any notice of assignment of the chose in action was ever prepared, let alone served on the appellant. 56 For these reasons, we regard it as inherently improbable that the appellant could ever establish, even with the aid of pre-action discovery, that his consent to the costs order of 28 July 2005 had been due to the mistaken or fraudulently induced belief that there had been no legal assignment of the chose in action originally vested in Citicorp Australia Limited. 57 It follows that we can discern no error of fact or adoption of a wrong principle of law which has vitiated the primary Judge's exercise of discretion to refuse an adjournment and to make a sequestration order against the estate of the appellant. The appeal must therefore be dismissed with costs. I certify that the preceding fifty-seven (57) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justices Ryan, Moore and Tamberlin. Associate: Dated: 2 November 2007 Counsel for the Appellant: Mr G Bigmore QC Solicitor for the Appellant: Commercial and General Law Counsel for the Respondents: Mr W Ericson Solicitor for the Respondents: Finlaysons Date of Hearing: 20 August 2007 Date of Judgment: 2 November 2007