IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY NG7787 of 1997, NG 7788 of 1997 and NG 757 of 1997 BETWEEN: KEITH MALCOLM CAMPBELL NG757 of 1997 First Applicant And LOIS AUDREY CAMPBELL Second Applicant AND: METWAY LEASING LIMITED First Respondent ANTHONY GAVAN and 7 ORS trading as PIGOTT STINSON STUART THOM, Solicitors Second Respondent ARONYA HOLDINGS PTY LIMITED (IN LIQUIDATION) Third Respondent INSOLVENCY AND TRUSTEE SERVICE OF AUSTRALIA Fourth Respondent and METWAY BANK LIMITED Fifth Respondent BETWEEN: KEITH MALCOLM CAMPBELL NG7787 of 1997 Applicant AND: THE OFFICIAL TRUSTEE IN BANKRUPTCY First Respondent and metway leasing limited Second Respondent BETWEEN: LOIS AUDREY CAMPBELL NG7788 of 1997 Applicant AND: THE OFFICIAL TRUSTEE IN BANKRUPTCY First Respondent and METWAY LEASING LIMITED Second Respondent JUDGE: WILCOX J DATE: 1 September 1998 PLACE: SYDNEY EXTEMPORE REASONS FOR JUDGMENT WILCOX J: On 29 January last three matters came before me. They consisted of two applications for annulment of sequestration orders, being applications by Keith Malcolm Campbell and Lois Audrey Campbell respectively, and a separate proceeding, NG 757 of 1997, which was commenced by Mr and Mrs Campbell and named various respondents. The respondents included Metway Leasing Limited and Metway Bank Limited, apparently associated companies who were financiers of Mr and Mrs Campbell and Aronya Holdings Pty Ltd (in liquidation) a company controlled by them. The respondents also include the members of a firm of solicitors (Pigott Stinson Stuart Thom) who acted for the Metway interests in litigation between those interests and Mr and Mrs Campbell. I do not propose to recount the history of the earlier litigation. There has been considerable litigation in the Supreme Court of New South Wales. A notable feature of this litigation was a hearing by Barr AJ, as he then was, that culminated in a judgment delivered on 26 April 1995. As I understand the position, at least two separate proceedings were consolidated for the purposes of that hearing. I have been informed it extended over some 24 days. Numerous issues were raised and investigated at length. Barr AJ gave judgment in favour of Metway Leasing against Mr and Mrs Campbell and a company controlled by them, Baystan Pty Limited, in the sum of $104,569, plus costs. Apparently costs were subsequently assessed in the sum of $212,000. Mr and Mrs Campbell and Arnoya Holdings Pty Limited, another defendant before Barr AJ, filed a notice of appeal against his judgment. They made application for a stay of his orders pending determination of the appeal. This was considered by Sheller JA on 17 July 1995. The stay was refused. Subsequently, there was an application before Newman J in the Supreme Court, being for the appointment of a receiver to certain strata units known as "Metro Units" at Chippendale. The application was made by Metway Leasing and it appears Newman J acted on the basis that Metway Leasing was the holder of a second mortgage over those units. In bankruptcy proceedings in this Court, an officer of Metway Leasing conceded this was not so; he said the basis of the application for the appointment of a receiver was the issue of a Writ of Execution. If that is so, I can only say it appears from Newman J's reasons for judgment that he had a different understanding of the situation. Metway Leasing filed a bankruptcy petition against Mr Campbell on 4 April 1996. On 6 June 1996 Hill J made a sequestration order. It is not clear to me what happened on that occasion. Mr Campbell, who appears for himself and his wife today, said he was not present before Hill J but his son and daughter represented him. It seems evidence was taken by Hill J. Nonetheless, his Honour made a sequestration order. Subsequently Metway Leasing filed a petition against Mrs Campbell. This resulted in a sequestration order being made against her. In the meantime Arnoya Holdings Pty Limited was ordered to be wound up and a second Supreme Court action was commenced by Mr and Mrs Campbell. This action was based on s 55 of the Fair Trading Act (NSW) which provides as follows: "A person shall not use physical force or undue harassment or coercion in connection with the supply or possible supply of goods or services to a consumer or the payment for goods or services by a consumer." Application was made to Master Malpass, in the Supreme Court, for an order striking out the Statement of Claim filed in the second Supreme Court proceeding. The Master acceded to the application but, on 9 April 1997, his order was set aside by McInerney J. I have read his Honour's reasons. It seems he shared the Master's view that the Statement of Claim, as pleaded, was unsatisfactory; but he differed with the Master's refusal to allow the filing of an Amended Statement of Claim. His Honour gave leave to file an Amended Statement of Claim. This was done on 17 April 1997. For some reason, of which I am not aware, no defence was immediately filed. Mr and Mrs Campbell entered default judgment; however, after a contested hearing, this was set aside. In September 1997, Master Malpass stayed further proceedings on that action; I gather because of the applications which had by then been made in this Court for annulment of the sequestration orders. The Supreme Court seems to have adopted the position of waiting for the litigation in this Court to be resolved before allowing any further action in that Court. Not only was this the attitude of Master Malpass in respect of the second Supreme Court action. Appeal books have been filed in relation to the appeal against the decision of Barr AJ. However, the Registrar of the Court of Appeal recently determined to take no action to list the appeal pending the outcome of proceedings in this Court. Having regard to the fact (as I now know) that the Supreme Court proceedings were being held up pending determination of the applications before this Court, it is perhaps unfortunate that I decided, on 29 January 1998, to refer the matters for mediation. I did so because there then seemed some prospect that mediation would resolve the litigation engulfing the parties. Unfortunately, the mediation took longer than I expected. Even more unfortunately, it failed to achieve any agreement. I am therefore back where I was on 29 January. I must determine the applications before me. Mr Campbell has taken me through the history of the matter with great care and in considerable detail. He raised many matters which are not for me to determine. One matter he emphasised is that incorrect information was apparently given to Newman J, on which he relied in deciding to appoint a receiver to the assets of Arnoya Holdings Pty Limited. As I have indicated, the documents do suggest Newman J proceeded on a misapprehension. However, I make no findings about the matter because it is not something that calls for findings in this Court. The two questions I have to decide are, first, whether it is appropriate to annul the sequestration orders, and second, whether I should yield to Mr Campbell's submissions that his action NG 757 of 1997, which effectively repeats the claims made in the second Supreme Court action, should be heard in this Court. As to the first question, the relevant provision is section 153B of the Bankruptcy Act 1966. That section reads: "If the court is satisfied that a sequestration order ought not to have been made or in the case of a debtors petition that the petition ought not to have been presented or ought not to have been accepted by the official receiver the court may make an order annulling the bankruptcy." In the present case, I am not concerned with a debtor's petition. The question is whether I am satisfied the sequestration order ought not to have been made. I emphasis I am not dealing with a situation of annulment on payment of debts. That situation is separately dealt with in the Act: see s 163A. Nor am I talking about an application for discharge from bankruptcy. That, also, is dealt with by a separate provision of the Bankruptcy Act. One situation in which the Court can be satisfied a sequestration order ought not to have been made would be where it is demonstrated that relevant documents were not served on the person subsequently made bankrupt, so there was a denial of procedural fairness. Another situation would be where it is demonstrated there was not a debt of the requisite minimum amount ($2,000) at the date of the hearing of the petition. No doubt there are many other situations to which s 153B may have application. When I asked Mr Campbell to identify the basis upon which he said that these sequestration orders, or either of them, ought not to have been made, he mentioned two matters. First, he said there was a dispute as to the quantum of the debt owed by himself and his wife to Metway Leasing, the petitioning creditor. However, he conceded the debt was not less than $2,000. As to this matter I make two observations. First, it is open to a person on whom a bankruptcy petition is served to raise grounds of opposition. One available ground of opposition is that there is not the requisite minimum debt. If that ground of opposition is raised, the Court must inquire into the position and, unless it is satisfied there is the minimum debt, there can be no sequestration order. There is no evidence before me as to the submissions that were put on behalf of Mr Campbell to Hill J at the time of the hearing of the petition against him. Either a submission as to absence of debt was put but rejected by his Honour, or no submission was put. If the former situation applies, his Honour's determination is binding on Mr Campbell, subject to any appeal. No appeal has been filed. If the latter situation applies, this is a case where a relevant submission was not put to the Judge who made the sequestration order. In a clear case, no doubt, this would not prevent a debtor subsequently demonstrating there was no debt at the time of the petition. But there is no evidence of absence of debt before me; as I have indicated, the opposite is conceded. I have even less information about the hearing of the petition against Mrs Campbell but the Court must have been satisfied of the existence of a debt. I have no evidence to the contrary. I would not be justified in annulling either of the sequestration orders on the first ground advanced by Mr Campbell. Mr Campbell's second contention is that Metway Leasing commenced the bankruptcy proceedings for an illegitimate purpose, namely, for the purpose of stopping the appeal brought against the decision of Barr AJ to the Court of Appeal. I am prepared to accept it would be open to this Court to find a sequestration order ought not to have been made in a case where it is satisfied the petitioning creditor took bankruptcy proceedings for an improper purpose. This would be a valid ground of opposition and, if the evidence comes to light after a sequestration order is made, I see no reason in principle why it should not be able to be raised as a ground of annulment. However, in this case there is no evidence of improper purpose. The only basis of the claim of illegitimate purpose is that it is said, no doubt correctly, that the Court of Appeal Registrar was informed that Mr and Mrs Campbell were now bankrupt. Metway Leasing may have asserted this meant the appeal could not proceed, something that is conceded by Mr Wheelhouse, who appears for Metway before me, to be an incorrect understanding of the position. However, even if that statement was made, this falls far short of showing the possession of an improper purpose. In order to make good that claim, it would be necessary to show Metway Leasing was actuated by the improper purpose when it decided to commence, or to continue, the bankruptcy proceedings. There is no evidence along those lines and, therefore, no basis upon which the Court can reach the satisfaction which is a necessary precondition to an annulment under s 153B of the Bankruptcy Act. The applications for annulment must be dismissed. In relation to proceeding NG 757 of 1997, I should mention that the relevant Application includes a prayer for an order annulling the bankruptcies. For the reasons I have mentioned, it is inappropriate to take that course and, to that extent, the claim must be rejected. More significant, I think, is the question whether the Court should entertain the complaints made in the Application and the Statement of Claim filed in that proceeding. In its present form, the Statement of Claim is obviously unsatisfactory. It would need to be revised, if the action is to proceed in this Court. The orders presently sought, on behalf of the respondents, in proceeding NG 757 of 1997 are that the Statement of Claim filed on 17 October 1997 be dismissed, as disclosing no reasonable cause of action and/or constituting an abuse of process and the applicants pay their costs of the motion. There is no present application for the summary dismissal of the action itself. As I regard the statement as being defective in form, I accede to the application to strike out the present Statement of Claim. That order leaves open the possibility of amendment and the orders sought from me today do not preclude that possibility. However, I should say it seems to me highly inappropriate for the matters sought to be raised in this action to be litigated in this Court. I say that for two reasons. First, they are already the subject of a proceeding earlier commenced in the Supreme Court of New South Wales. Although there is no fixed rule, where there is a question whether a particular dispute will be dealt with in one Court rather than another and there is no special convenience in handling the matter in a particular Court, the ordinary approach is that the action first commenced should be allowed to proceed and determine the dispute. Mr and Mrs Campbell have succeeded in overturning the decision of Master Malpass that, in effect, precluded them proceeding with the second Supreme Court action. They have amended their Statement of Claim. The further prosecution of the action has been stayed, but apparently only because of the proceedings in this Court. Once it is clear this Court will not intervene, the appropriate course would be for the Supreme Court to deal with the action in the usual way. This Court ought not take a course that would interfere with the prosecution in another superior Court of an earlier commenced proceeding. This is said on the supposition there is no strong case, in terms of convenience, in dealing with the dispute in this Court. I do not see any such case; indeed, the contrary. Most of the matters about which complaint is made relate to events that occurred earlier than the hearing before Barr AJ. Some relate to events said to have occurred during the course of that hearing. To the extent the complaints relate to matters that occurred before the hearing, I expect they would have been raised in the 24 days hearing by Barr AJ. It may become necessary for somebody to analyse exactly what were the issues before Barr AJ, in order to determine whether his decision precludes litigation about the earlier events. To the extent that complaints arise about things that occurred during the hearing before Barr AJ, it is important, as a matter of principle, that they be dealt with by the Court in which that hearing was conducted. For example, it is said that an intimidatory statement was made to Mr Campbell by a representative of Metway Leasing during the course of the hearing. If this allegation is made good, and I emphasise it is merely an allegation at this stage, it would seem to raise a question whether there has been a contempt of the Supreme Court. It is preferable for such a matter to be considered by the Supreme Court rather than this Court. Similarly, there is an allegation against the solicitors who acted for Metway Leasing of alleged intimidation of the solicitors then acting for Mr and Mrs Campbell. Once again, I say nothing about whether there is any merit in the allegation; but, if there is merit, it should be considered by the Court that was handling that litigation and whose processes may, and I emphasise the word "may", have been held in contempt. In short, in this case I see no advantage whatever in the Federal Court becoming involved in the merits of the conduct of Metway Leasing in relation to Mr and Mrs Campbell, and every reason why the Court should not become involved. I propose to make an order striking out the existing Statement of Claim. I am not asked to do more at this stage, and I will not do more. I will give leave to amend, in case Mr and Mrs Campbell wish to do so; but I indicate to them that, in my view, it is inappropriate for this Court to be invited to review matters that were raised in the Supreme Court. If any amendment seeks to re-agitate those matters, it may lead to my deciding to make an order striking out the proceeding generally. It is doubtful whether Mr and Mrs Campbell can frame a fresh Statement of Claim that avoids the situation I have mentioned; but I will give them the opportunity, for what it may be worth. The orders I make are as follows: (1) In relation to the applications for annulment of the sequestration orders made against Keith Malcolm Campbell and Lois Audrey Campbell, I refuse both applications; (2) In relation to proceeding NG 757 of 1977, I strike out the Statement of Claim filed on 17 October 1997. I give leave to the applicants to file an Amended Statement of Claim, if so advised, within 14 days. (3) I order Keith Malcolm Campbell and Lois Audrey Campbell to pay the costs of the applications incurred by Metway Leasing Limited, Anthony G. Gavin and others trading as Pigott Stinson Stuart Thom and Metway Bank Limited. I certify that this and the preceding eight (8) pages are a true copy of the Reasons for Judgment herein of the Honourable Justice Wilcox Associate: Dated: 1 September 1998 First Applicant in NG757 of 1997 and NG7787 of 1997 appears in person and on behalf of the Second Applicant in NG757 of 1997 and the Applicant in NG7788 of 1997 Counsel for the First, Second and Fifth Respondents in NG757 of 1997: J S Wheelhouse Solicitor for the First and Fifth Respondent in NG757 of 1997: Lincoln Smith Solicitor for the Second Respondent in NG757 of 1997: Blake Dawson Waldron Solicitor for the Fourth Respondent in NG757 of 1997 and the First Respondent in NG7787 of 1997 and 7788 of 1997: S M Freidman of Freidman Reeves Date of Hearing: 1 September 1998