Commonwealth Bank of Australia v Muirhead, Stephanie Susan [1997] FCA 748

FEDERAL COURT OF AUSTRALIA BANKRUPTCY - whether there was a final judgment or order for the purposes of s 40(1)(g) Bankruptcy Act - whether reasons of the Court should be considered when interpreting the orders Property Law Act 1974 s 85(3) Bankruptcy Act 1966 s 52, s 40(1)(g) Repatriation Commission v Nation (1995) 57 FCR 25 Australian Consolidated Press Ltd v Morgan (1965) 112 CLR 483 McNair Anderson Associates Pty Ltd v Hinch [1985] VR 309 Commonwealth Bank of Australia v Stephanie Susan Muirhead No QG 59 of 1997 Cooper, Kiefel, Finn JJ Brisbane 11 August 1997

IN THE FEDERAL COURT OF AUSTRALIA ) ) QUEENSLAND DISTRICT REGISTRY ) QG 59 of 1997 ) GENERAL DIVISION )

ON APPEAL FROM THE HONOURABLE JUSTICE DRUMMOND

BETWEEN: COMMONWEALTH BANK OF AUSTRALIA

Appellant

AND: STEPHANIE SUSAN MUIRHEAD

Respondent

JUDGE(S): COOPER, KIEFEL, FINN JJ PLACE: BRISBANE DATED: 11 AUGUST 1997

MINUTES OF ORDER

THE COURT ORDERS THAT:

1. The Appeal is dismissed with costs. Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

IN THE FEDERAL COURT OF AUSTRALIA ) ) QUEENSLAND DISTRICT REGISTRY ) QG 59 of 1997 ) GENERAL DIVISION )

ON APPEAL FROM THE HONOURABLE JUSTICE DRUMMOND

BETWEEN: COMMONWEALTH BANK OF AUSTRALIA

Appellant

AND: STEPHANIE SUSAN MUIRHEAD

Respondent

JUDGE(S): COOPER, KIEFEL, FINN JJ PLACE: BRISBANE DATED: 11 AUGUST 1997

REASONS FOR JUDGMENT THE COURT: On 5 June 1995 in proceedings in the Supreme Court of Queensland, Thomas J gave judgment for the Commonwealth Bank of Australia against Mr and Mrs Muirhead. The action brought by the bank was one to recover the balance of monies due to it after accounting for the proceeds of sale, by a receiver, of grazing properties, stock and equipment owned by the Mr and Mrs Muirhead. The judgment was one granted summarily, on an application brought by the bank under O 18 r 1(1A) of the Rules of that Court. Order 18 r 1(1A) provides that upon such an application and "unless the defendant satisfies the Judge with respect to the claim, or part of the claim, to which the application relates that there is a question in dispute which ought to be tried or that there ought for some other reason to be a trial of that claim or part, …" the Judge may give judgment for the plaintiff for the whole, or part, of the claim. Mr and Mrs Muirhead brought an appeal from that decision to the Court of Appeal. The arguments which had been raised before Thomas J were considered again by McPherson JA. His Honour's reasons were the subject of substantial agreement by the other members of the Court of Appeal. His Honour also considered an aspect of the defence which had not been fully argued at first instance. The defence contained a bare allegation of sale, by the receiver, at a substantial undervalue, but it did not appear to disclose a complete cause of action. After commenting upon its deficiencies, his Honour turned to the evidence which had been before Thomas J, and which evidence was to the effect that prior offers made for the property had been much higher than the price achieved at the auction; that there had not been proper advertisement of the sale; and that what were described as key features to the saleability of a grazing property - dams and irrigation systems - had, in the case of the former, not been completed prior to sale, and in the case of the latter had been sold separately, prior to auction. There was also evidence that the market value of the property was almost $2M more than what had been achieved on sale, and that there had been expressions of interest in a purchase at that figure. At this point his Honour observed that no application for leave to amend had been made, either before the Judge below or upon appeal, although it was possible under O 18 r 3 Rules of the Supreme Court ("RSC") for Mr and Mrs Muirhead to "show cause" by affidavit or otherwise. His Honour then noted that a question appeared to be raised as to whether an action for damages under s 85(3) Property Law Act (Qld) 1974 might lie by reason of sale at an undervalue for, if it were, the amount of the damages might extinguish or at least substantially reduce the deficiency in repayment of the loan the subject of the action. It is not necessary to recount in detail his Honour's reasons which followed. His Honour concluded that, by reason of a term of the mortgage appointing the receiver the Muirheads' agent and provisions of the Property Law Act, Mr and Mrs Muirhead could not sustain a claim for damages for breach of statutory duty, on the part of the bank, in connection with the sale. Importantly, for the purposes of this appeal, his Honour went on to say: "For these reasons I have come to the conclusion that the prospective claim of the appellant Muirheads as mortgagors against the respondent Bank as mortgagee for damages for alleged breach by Harris of the duty imposed by s. 85(1) … (if that is what is intended to be pleaded) is not one that is in law capable of prevailing over the express provisions of cl.4 of the Bills of Mortgage that the receiver 'shall be the agent of the mortgagor, and the mortgagor alone shall be responsible for his acts and defaults.' The learned Judge was therefore correct in holding that no triable defence or issue was disclosed on the application for summary judgment. The appeal should be dismissed with costs. The appellants should have leave to amend their defence as they may be advised but are ordered to pay the costs of and incidental to any such amendment." The Chief Justice agreed not only that the appeal ought to be dismissed, but in the "further orders proposed" by McPherson JA. Following the terms proposed by his Honour, the Order of the Court was in these terms: "IT IS ORDERED that: 1. The appeal is dismissed with costs. 2. The appellants have leave to amend their defence as they may be advised but are ordered to pay the costs of and incidental to any such amendment." Perceiving an inconsistency between the reasons of McPherson JA and the order emanating from the Court, the solicitors for the Bank corresponded with the Court but were subsequently informed by the Registrar that the members of the Court did not consider any error appears in the court's order and that it remains as it presently stands. This Court was told that an amended defence has been delivered by Mr and Mrs Muirhead, although it may not be in its final form. On 25 August 1995 the Bank served a Bankruptcy Notice on Mrs Muirhead founded upon the judgment of Thomas J. The petition for the making of a sequestration order was heard by Drummond J. His Honour dismissed the petition upon the ground that the Bank had not shown that the judgment of Thomas J was a final one for the purpose of the Bankruptcy Act 1966 (Cth). Section 52 requires, before any sequestration order can be made, proof of all of the matters stated in the petition. They include the allegation that Mrs Muirhead committed an act of bankruptcy. In this case, pursuant to s 40(1)(g), an act of bankruptcy would only have been committed if Mrs Muirhead had not complied with a bankruptcy notice based upon a "final judgment or final order, being a judgment or order the execution of which has not been stayed …". In his Honour's view, because the Court of Appeal had granted leave to amend the defence the Order of the Court of Appeal did not involve a final command that the Muirheads should pay the amount of the judgment and that the Court of Appeal must be taken to have intended that the judgment of Thomas J was provisional or defeasible. It followed that there was no merger of the cause of action sued upon by the Bank which resulted in that judgment. His Honour went on to deal with arguments which required regard being had to the reasons of McPherson JA. In essence it was then, and now, contended that there was nothing in his Honour's reasons which disclosed any basis for amendment, given that his Honour had specifically rejected the possibility of the cause of action for breach of statutory duty as sustainable and his Honour had attended to no other cause. For reasons which we shall shortly outline, we do not think it a necessary or proper approach to have regard to the reasons for judgment. Nevertheless we consider that an answer to the Bank's argument is that, for the very reason that his Honour had rejected the possibility of an action brought in breach of statutory duty under the Property Law Act, but nevertheless granted leave to amend in wide terms ("as they may be advised"), one might conclude that his Honour considered that there might nevertheless be something in the nature of a defence which might be open to the Muirheads on the basis of the evidence concerning the conduct of the receiver in the sale, and the allegation of the bank's complicity in it. It was submitted by senior counsel for the Bank that this could not be so as Mr and Mrs Muirhead could not be taken to have "shown cause by affidavit or otherwise" within the meaning of O 18 RSC, since McPherson JA did not point to a particular cause of action which was open to them to pursue. It may however be noted that, although a defendant may show cause under O 18 r 3, pursuant to O 18 r 1(1A) a defendant may satisfy a Judge hearing an application for summary judgment that there is a question which ought to be tried or that, for some other reason, there ought to be a trial of the claim. His Honour must be taken to have considered that, claims for breach of statutory duty apart, there may nevertheless be a claim arising out of the facts disclosed. Drummond J was of the same view. The foregoing discussion, concerning what might have given rise to the Order for leave to amend the defence, has been undertaken out of deference to argument on the appeal. In our view, however, it is unnecessary to do so. In Repatriation Commission v Nation (1995) 57 FCR 25, 33-4 Beaumont J discussed the approach taken by the English and Australian cases to the interpretation of orders and judgments. Amongst the cases referred to by his Honour were Australian Consolidated Press Ltd v Morgan (1965) 112 CLR 483, and McNair Anderson Associates Pty Ltd v Hinch [1985] VR 309. In accordance with ordinary rules of construction resort may be had to the reasons for judgment (which do not however form part of the judgment itself) to resolve ambiguity arising from the terms of the Order. On one view however the use that is here sought to be made of the reasons of McPherson JA are not to render more clear the terms of the Order that the "the appellants have leave to amend as they may be advised …", but to attempt to deny it any effect. It seems to us that if that point were reached one would be obliged to the conclusion that the order was either made in error (which the Court has however confirmed was not the case) or is meaningless. The latter is a result which is sought to be avoided under ordinary principles of construction. It must especially be so where orders of a Court are concerned, the presumption being that they are intended to have some consequence, either for the parties or in their litigation. By O 70 r 11(1) RSC the Supreme Court, on appeal, may make any order which it considers ought to have been given or made in the first instance and to make any further orders the case requires. Senior Counsel for the Bank did not contend that, having ordered dismissal of the appeal, the Court of Appeal was then without power to make the following order, giving leave to amend. The question now posed is what that latter order means, given the absence of any order expressed to set aside the judgment below. It was submitted, on behalf of the Bank, that the order giving leave to amend ought to be understood as one having no practical consequence save that it might require the defendants to put the pleadings in order, so as to reflect the argument before the Court of Appeal. The use to which they might then be put, it was submitted, was in any following application for special leave to the High Court. We would not think such a procedure was necessary for that purpose. Further, such a narrow view of the operation of the orders makes no sense of the terms of the order which, it will be recalled, permits amendment not merely confined to what had been argued, but "as they may be advised". What was clearly permitted by the Order of the Court of Appeal was amendment of the defence, and arguably in wide terms. It must mean that the defendants, Mr and Mrs Muirhead, are to be at liberty to take their defence, as amended, forward for determination, subject of course to any attacks upon it as reformulated. That course must necessarily deny to the judgment of Thomas J any final effect, as one determining the rights of the parties. The practical effect of the Order of the Court of Appeal was to set aside the judgment, whether or not, as a matter of procedure, an order was made to that effect. The Order of the Court of Appeal was, in terms of O 70 r 11, to be taken as that which it considered ought to have been made. It is not, in its terms, capable of simply varying the Order of Thomas J. It replaces it. We should add that Mr Jackson QC, for the Bank, properly conceded that, were this Court to reach the point that the order giving leave to amend was seen to have effect, the finality which the Bankruptcy Act requires of a judgment or order could not be said to have been present. For the reasons stated, we are of that view. It follows that his Honour, Drummond J, was right in holding that the petition must be dismissed. The appeal is dismissed with costs. I certify that this and the preceding three (3) pages are a true copy of the Reasons for Judgment herein of the Court.