Shaw, George Thomas & Anor v Crichton, John & Anor [1998] FCA 922

IN THE FEDERAL COURT OF AUSTRALIA

NEW SOUTH WALES DISTRICT REGISTRY NG 927 of 1997

BETWEEN: george thomas shaw

First Applicant

leila shaw

Second Applicant

AND: john crichton

First Respondent

neil crichton

Second Respondent

JUDGES: EINFELD, LINDGREN AND FINKLESTEIN JJ

DATE: 9 july 1998

PLACE: SYDNEY

REASONS FOR JUDGMENT (ex tempore)

THE COURT: This is an appeal from sequestration orders made by Branson J against the debtors George Thomas Shaw and Leila Shaw on 23 October 1997. It is not in dispute that the debtors were indebted to the petitioning creditors in the sum of $10,046.73 on account of costs of litigation that was unsuccessfully maintained by the debtors, nor is there any question whether the debtors committed an act of bankruptcy. Here the complaint is that the trial judge should have exercised her discretion to refuse to make the sequestration orders and that we should now do so in her place. The debtors appeared for themselves before this Court. With their consent and in their presence, their son spoke for them. With the leave of Justice Branson he had also spoken on their behalf in the Court below. It has therefore not been easy for the Court to articulate with precision the grounds upon which it is said that the trial judge's discretion miscarried. The absence of evidence makes it even more difficult to understand the basis upon which the debtors say that the sequestration orders should not have been made. Perhaps impermissibly taking into account statements of alleged fact made during the course of the hearing but doing the best we can, the position seems to be as follows. Ramza Crichton made a will naming the debtors as beneficiaries. Upon her death the debtors sought a grant of probate of the will. The petitioning creditors opposed the grant on the basis that when the testatrix had made her will she lacked testamentary capacity. The debtors were unsuccessful in obtaining a grant of probate at trial and on appeal. Special leave to appeal to the High Court was refused. The debt owed to the petitioning creditors is the taxed costs of the application for special leave which the debtors were ordered to pay. Today we have been informed that they have also not paid the costs of the earlier hearings and that the amount involved is now substantial. Once a petitioning creditor has established the commission of an act of bankruptcy and the existence of the required debt and the other matters referred to in s52(1) of the Bankruptcy Act 1966, there is a prima facie right to a sequestration order. The burden then lies on the debtor to establish circumstances why such an order should not be made: Re Hissink; Ex parte Deputy Commissioner of Taxation [1970] ArgLR 580 at 582 per Gibbs J citing Rozenbes v Kronhill (1956) 95 CLR 407 at 414, 419. In Cain v Whyte (1933) 48 CLR 639 the High Court approved the statement of Henchman J at first instance, fully set out at 645 of the report of the High Court's judgment, concerning s56 of the Bankruptcy Act 1924 (Cth), the predecessor of s52 of the present Act, pursuant to which the orders here were made. Henchman J said: I agree that the sections do leave a certain amount of discretion in the bankruptcy judge and I do not agree with the argument put forward by Mr Graham that the words "other sufficient cause" should be limited to the one case where the court is satisfied that the petition is put forward solely for some collateral illegitimate end and not for the purpose of securing the equal distribution of the available assets amongst the creditors. To my mind the High Court of Australia did not intend to put a limit on the meaning of the words "other sufficient cause" in Dowling v Colonial Mutual Life Assurance Society and I do not propose to be the first to say that such words as "other sufficient cause" are necessarily limited to meaning a cause in the nature of fraud or abuse of the provisions of the bankruptcy law. I can well conceive that other sufficient cause might arise in connection with any particular case. To my mind it is the duty of the bankruptcy judge to examine in each case if the question is raised whether there is other sufficient cause than the fact that the debtor is able to pay his debts in full for refusing to make an order. The law imposes on the person propounding a will the obligation to establish that the will is the last will of a capable testator. The law imposes on the person propounding a will the obligation to establish that the will is the last will of a capable testator: Williams, Mortimer and Sunnucks, Executors, Administrators and Probate (17th ed) at 432-433; R Sundberg, Griffith's Probate Law & Practice in Victoria (3rd ed) at 107. In the absence of suspicious circumstances, proof of the making of the will and of its execution and attestation will satisfy the onus: Harris v Knight (1890) 15 PD 170. If there are suspicious circumstances, further evidence will be required before the Court will grant probate: In the Estate of Musgrove [1927] P 264. It has sometimes been said that the burden of proving lack of testamentary capacity lies on those who allege it: Williams, Mortimer and Sunnucks at 169. But the true position is that unless it is established that the deceased was of sound mind when the will was made, there will be no grant of probate: Symes v Green (1859) 1 Sw & Tr 401 (160 ER 785); Sutton v Sadler (1857) 3 CB(NS) 87 (140 ER 671). The debtors say that the law is unjust when it imposes on those who propound a will the burden of establishing that the deceased was of sound mind when the will was made. Their submission is that justice requires that the onus be on the person who opposes the grant of probate to make out a case why probate should not be granted. Hence they say that because the order for costs flowed from allegedly unjust legal principles, it follows that it is also unjust to use that order for costs to found a sequestration order against them. They say that if the sequestration order is maintained, they will lose their worldly possessions. Unlike Branson J we have now had the opportunity of reading the judgment of Bryson J on the original probate application. His Honour only briefly discussed the question of onus of proof, although he found that the case failed because the present debtors were unable to prove that the testatrix was of sound mind when she made the will of which they were the sole beneficiaries. However, in fact, the case was decided entirely on the facts and his Honour's assessment of the debtors' lack of credibility in relevant respects. In those circumstances, even if the onus had been different, the result of the proceeding would have been same. Even if we agreed that the principles of law about which complaint is made are unjust, we could do nothing to change it. For the law on this matter has been unchanged for almost 150 years, a fact that was no doubt well known to the debtors at least on 15 April 1996 at the time of their application to the High Court for special leave to appeal the decision that had been given against them. Although the onus question was apparently not specifically raised before the High Court, their Honours would have been alive to the matter and their refusal of special leave indicates that they were unwilling to disturb or review that position at this time. We are in turn not in a position to do so. As the learned primary judge found, the fact that the debtors failed to satisfy the onus of proof demanded by the law and as a consequence were unsuccessful in litigation and incurred a liability in costs is not a reason to displace the petitioning creditors' prima facie right to a sequestration order. Her Honour's discretion did not miscarry, as asserted here by the debtors. On the contrary, we think that her Honour's decision was plainly correct. 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.