Re Hunter, Lindsay v Ex Parte Webb, Luci Mary [1996] FCA 701

CATCHWORDS BANKRUPTCY - application to review sequestration order made by Registrar - whether bankruptcy petition should have been dismissed "for other sufficient cause" - consideration of complex of conflicting evidence. Bankruptcy Act 1966, ss.31A(6), 52(2)(b). LINDSAY HUNTER v LUCI MARY WEBB No. P515 of 1995, No. WB994 of 1995 CORAM: SHEPPARD J PLACE: PERTH DATE: 19 JULY 1996

IN THE FEDERAL COURT OF AUSTRALIA ) ) No. P515 of 1995 WESTERN AUSTRALIAN DISTRICT REGISTRY ) No. WB994 of 1995 ) BANKRUPTCY DIVISION ) RE: LINDSAY HUNTER Debtor

EX PARTE:LUCI MARY WEBB Petitioning Creditor MINUTES OF ORDER CORAM: SHEPPARD J PLACE: PERTH DATE: 19 JULY 1996 THE COURT ORDERS THAT: 1. The notice of motion filed by the applicant on 8 September 1995 as amended by the notice of motion filed on 6 October 1995 be dismissed. 2. The petitioning creditor's costs of the notice of motion be paid out of the assets of the bankrupt, the debtor, Lindsay Hunter. 3. The application made by Lindsay Hunter for a stay of proceedings be refused. 4. Direct that Lindsay Hunter not be permitted to file in this Court any application or other document including any subpoena or summons to witness whether in this or any other matter without the leave of a judge of this Court. NOTE: Settlement and entry of orders is dealt with in Rule 124 of the Bankruptcy Rules.

IN THE FEDERAL COURT OF AUSTRALIA) No. P515 of 1995 WESTERN AUSTRALIAN ) No. WB994 of 1995 DISTRICT REGISTRY ) BANKRUPTCY DIVISION ) RE: LINDSAY HUNTER Debtor EX PARTE:LUCI MARY WEBB Petitioning Creditor CORAM: SHEPPARD J PLACE: PERTH DATE: 19 JULY 1996

REASONS FOR JUDGMENT

HIS HONOUR: The critical application to be dealt with is an amended notice of motion which was filed on 6 October 1995 on behalf of Mr Hunter in which there is sought an order that the sequestration order made by Registrar Jan on 21 August against Mr Hunter be set aside and declared a nullity or, alternatively, that there be a permanent stay of that sequestration order. Other relief is sought, but I do not find it necessary to refer to it. The primary relief sought is that which I have indicated. The amended notice of motion replaced an earlier notice of motion which was filed on 6 September 1995. It had sought similar relief. Both the notice of motion and the amended notice of motion were filed in matter no. P515 of 1995 but the proceedings to which they gave rise were subsequently given the number no. WB994 of 1995. That is why I have included both numbers in the heading to this judgment and in the Court's formal orders. On 17 May last directions were given by French J so that this matter might be got ready for hearing. On that day his Honour set down the application for hearing on 15 and 16 July. He directed that any further affidavits in support of the application be filed and served by 17 June, that any affidavit in reply be filed and served by 28 June and that outlines of submissions be filed and served by 12 July. It is clear, in my view, that his Honour, by making those directions, was making a comprehensive set of directions to ensure that the matter would be ready for hearing on 15 July on the basis of what the parties did pursuant to those directions. They related to no matters other than the filing of further affidavits and outlines of submissions. Furthermore, it is clear that his Honour had in mind that the usual practice of this Court would be followed, namely that the trial would be on affidavit evidence and not upon completely oral evidence. The sequestration order, which is referred to in the amended notice of motion, was made, as I have indicated, on 21 August 1995. It was made by Registrar Jan in the absence of the applicant, Mr Hunter, in circumstances to which I shall refer later on. The fact that it was made in his absence, however, is one of the matters upon which he relies in support of his application. The act of bankruptcy upon which the bankruptcy petition was based was failure to comply with a bankruptcy notice. The bankruptcy notice was based on an order of the Supreme Court of Western Australia made in proceedings no. CIV 1654 of 1993 brought by the applicant against Mrs Webb. In those proceedings the applicant had sought injunctive relief, interlocutory I think, and had indeed obtained an ex parte injunction which had been granted by the Chief Justice. The matter came on for hearing before Anderson J who, apparently on the ground that full disclosure had not been made to the Chief Justice, ordered that the application be dismissed. His Honour's order was made on 16 July 1993. He ordered that the costs of it were to be paid by the applicant, Mr Hunter. These were subsequently taxed in the sum of approximately $2400. The proceedings in which the order for costs was recovered were not the only proceedings between Mr Hunter and Mrs Webb in the Supreme Court of Western Australia. The other proceedings, no. CIV 1731 of 1993, were an action by the petitioning creditor, Mrs Webb, for specific performance of a contract for the purchase of property 114 Empire Avenue, Wembley Downs. These proceedings originally came before Master Bredmeyer of the Supreme Court on an application for summary judgment. Mrs Webb was successful before the Master who, on 20 September 1993, made an order for specific performance. The contract, specific performance of which was ordered, was said to be a contract between the parties dated 17 July 1992. There was an appeal to the Full Court that was dismissed on 5 August 1994. The principal judgment was delivered by Nicholson J. His judgment was agreed in by the Chief Justice and Rowland J. There was an application for leave to appeal to the High Court from this judgment. It was dismissed on 30 May 1995, the High Court saying, amongst other things, that an appeal would not enjoy sufficient prospects of success to justify a grant of leave. The essential matters raised by Mr Hunter in support of his application to set aside the sequestration order arise out of transactions referred to and discussed in the judgments delivered in the Supreme Court of Western Australia. But Mr Hunter says that essential facts which were relevant to the outcome of those proceedings, and indeed to a counter-claim which he wishes to bring in the Supreme Court, were not before the Court with the consequence that the Court proceeded on an erroneous assumption as to the facts. This he claims was due to fraudulent conduct on the part of Mrs Webb and others. He has said that the fraud was, to use his language, "a concealed fraud." The application for review of the Registrar's order is made pursuant to subsec. 31A(6) of the Bankruptcy Act 1966 ("the Act"). The application is a re-hearing. I refer to the judgment of Northrop J in Re Kwiatek; Ex parte Big J Limited v Pattison, (1989) 89 ALR 631 where his Honour held that under s.31A of the Act, a Registrar of the Court is exercising powers conferred by the Act initially on the Court itself. In consequence an application under subsec. 31A(6) to review the exercise of a power by a Registrar of the Court is by way of re-hearing based upon the evidence before the Registrar supplemented by any evidence the parties desire to produce. It needs to be said at the outset that this is, at least not primarily, a case more commonly found in this Court of a debtor endeavouring to go behind the judgment on which the act of bankruptcy is founded. It involves wider considerations and raises questions concerning the ambit of the Court's discretion under subsec. 52(2) of the Act. That subsection provides that, if the Court is not satisfied with the proof of matters which are provided for in subsec. 52(1) or is satisfied by the debtor that he is able to pay his debts, or -and this is the important part - that "for other sufficient cause" a sequestration order ought not be made, it may dismiss the petition. The question is whether Mr Hunter has shown "other sufficient cause" within the meaning of the expression used in para. 52(2)(b) of the Act so as to warrant the conclusion, notwithstanding the decision of the Registrar, that the sequestration order either ought not to have been made at all, or ought at least now be set aside or stayed. The provisions of subsec. 52(2) of the Act were discussed by a Full Court of this Court in Bourke v Beneficial Finance Corporation Limited (1993) 47 FCR 264. Under a heading, "Setting Aside a Judgment on the Ground of Fraud", the Court said (at 271): "Some guidance upon the approach to be taken in determining whether a court sitting in bankruptcy should go behind a judgment is to be found in the principles relating to the circumstances in which a court in which a judgment has been obtained will set it aside. A reference to those principles is helpful in the present case because a classic example of the circumstances in which a court will go behind a judgment is where the judgment has been obtained by fraud. 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." The Court went on to discuss those principles and referred to a number of authorities, particularly the then recent decision of the Full Court of this Court in Monroe Schneider Associates (Inc) v No 1 Raberem Pty Limited (No 2) (1992) 37 FCR 234. Other authorities were referred to. The Court eventually said (at 272) that fresh evidence which was relied upon to establish fraud need not be admissible evidence in the action in which the judgment was sought to be impugned, and also that, although fraud might be constituted by the giving of perjured evidence doubts had been expressed whether perjury was a sufficient ground to set aside a judgment on the ground of fraud.