FEDERAL COURT OF AUSTRALIA Amos v Brisbane TV Ltd [2000] FCA 825 BANKRUPTCY - whether discretion to set aside bankruptcy on debtor's solvency - whether non-compliance with Rules of the Court in which the judgment was given invalidates the bankruptcy notice founded on judgment. Bankruptcy Act 1966 (Cth) s 30 and s 40(1)(g) Re Athans; Ex parte Athans (1991) 29 FCR 302 cited Re Briggs; Ex parte Briggs v Deputy Commissioner of Taxation (WA) (1986) 12 FCR 310 cited Re Hutchins; Ex parte Wall (Spender J, unreported, 6 May 1998) referred to Re Stubberfield; Ex parte Paradise Grove Pty Ltd (1994) 134 ALR 169 followed Zantiotis v Andrew (1987) 80 ALR 23 referred to Re Lamb; Ex parte Melsom (1980) 42 FLR 399 cited Re Dingle; Westpac Banking Corporation v Worrell (1993) 119 ALR 265 referred to Re Gibbs; Ex parte Triscott (1995) 65 FCR 80 referred to Re Skaff; Ex parte Farrow Mortgage Services Pty Ltd (1993) 41 FCR 331 referred to Re Ferguson; Ex parte EN Thorne & Co Pty Ltd (1969) 14 FLR 311 referred to McIntosh v Shashoua (1931) 46 CLR 494 referred to EDWARD AMOS v BRISBANE TV LIMITED Q 7321 OF 1999 DRUMMOND J 19 JUNE 2000 BRISBANE IN THE FEDERAL COURT OF AUSTRALIA QUEENSLAND DISTRICT REGISTRY Q 7321 OF 1999 BETWEEN: EDWARD AMOS APPLICANT AND: BRISBANE TV LIMITED RESPONDENT JUDGE: DRUMMOND J DATE OF ORDER: 19 JUNE 2000 WHERE MADE: BRISBANE THE COURT ORDERS THAT: 1. The application be dismissed with costs, including reserved 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 Q 7321 OF 1999 BETWEEN: EDWARD AMOS APPLICANT AND: BRISBANE TV LIMITED RESPONDENT JUDGE: DRUMMOND J DATE: 19 JUNE 2000 PLACE: BRISBANE REASONS FOR JUDGMENT 1 Mr Edward Amos applies to set aside a bankruptcy notice served on him. The notice is based upon an order of the Supreme Court that he pay the creditor's costs of an action which he brought against the creditor in the Supreme Court; the taxing officer has certified that these costs "have been allowed in the sum of $50,000 pursuant to the settlement agreement between the parties a copy of which is attached to the certificate". 2 Mr Amos asks that the bankruptcy notice be set aside on a number of grounds. He alleges the settlement agreement the subject of the taxing officer's certificate, though signed by him on 23 March 1998, was procured by the legal representatives of the creditor fraudulently misrepresenting that his own solicitor had approved the settlement deed and by also misrepresenting that the deed incorporated the parties' earlier oral agreement when they gave it to him for his signature. Secondly, Mr Amos relies upon a number of what I will call technical deficiencies in the notice. Finally, he asserts that the notice should be set aside because he is solvent. 3 As to the first ground, an oral settlement later reduced to writing was arrived at between the parties in respect of the quantification of the costs part way through what had all the hallmarks of becoming a very protracted hearing before the Supreme Court taxing officer. Mr Amos represented himself at this hearing, although from time to time he utilised the services of his solicitor and counsel for advice. He has worked in the past as a law clerk and is an experienced real estate agent. 4 The relevant provisions of the settlement document executed on 23 March 1998 are as follows: "Agreement 1 Amos agrees to consent to the Bill of Costs being taxed in the amount of $50,000.00. 2 BTV agrees to consent to the Bill of Costs being taxed in the amount of $50,000.00. Consideration 3 In consideration of the promises by Amos and BTV in paragraphs 1 and 2 above: (a) Amos agrees to pay the amount of $50,000.00 to BTV by 5.00pm on Wednesday 20 May 1998; (b) BTV agrees not to take any steps to enforce its rights pursuant to the certificate of taxation which issues following the consents referred to in paragraphs 1 and 2 above before 5.00pm on Wednesday 20 May 1998; (c) Amos agrees to pay the taxing fee in relation to the taxation of the Bill of Costs which occurred between 16 March 1998 and 23 March 1998 by any applicable time limit; and (d) Amos agrees not to enforce any costs orders against BTV made in the Proceedings." 5 Mr Amos says that on Friday afternoon, 20 March 1998, he reached an oral agreement with Mr Deshon (one of the solicitors representing the creditor at the taxation) that was confined to the matters set out in pars 1, 2 and 3(a) and (b) of the deed. He says that, after reaching that oral agreement, Mr Deshon later that same afternoon unsuccessfully sought to vary it to include, among other things, the restraint on Mr Amos appearing in par 3(d) of the deed. He says the $50,000 he then undertook to pay was expressed to include the taxing fee, the liability for which par 3(c) of the deed wrongly casts on to him. Mr Amos also says that it was orally agreed that his obligations in respect of the creditor's costs were limited to paying $50,000 to the creditor within two months, out of the proceeds of sale of a New Farm property which he held as trustee for his adult children. It can be seen that there is no mention in the deed of Mr Amos' deferred obligation to pay the $50,000 being dependent on the sale of the New Farm property. 6 Although Mr Amos' evidence was that a binding oral compromise was reached on 20 March 1998, Mr Amos accepted that on the morning of 23 March 1998 there was a further discussion about settlement, which he instigated. Mr Amos says he instigated the further discussion to try (without success) to persuade the creditor to reduce the $50,000 he had earlier agreed to pay it. This discussion took place in the course of a telephone conversation between Mr Collins, another of the creditor's solicitors, and Mr Robinson, Mr Amos' barrister. Mr Amos was present with Mr Robinson in his chambers during this telephone conversation and privy to the discussions. 7 I reject the first challenge Mr Amos makes to the bankruptcy notice. Mr Amos asserts that an oral compromise was reached on the afternoon of 20 March 1998 with Mr Deshon; the latter denies that. Though I am inclined to think that no compromise agreement was concluded on 20 March 1998, it is unnecessary to express any final opinion on the dispute between Mr Amos and Mr Deshon about the events of 20 March 1998. It is common ground that there were further settlement discussions between Mr Robinson and Mr Collins on 23 March 1998. On the view I take of the evidence, they resulted in a concluded agreement. This was either the first and only settlement agreement ever reached or it must have replaced any anterior agreement that may have been reached on 20 March 1998. 8 I accept Mr Collins' evidence that a compromise was concluded in the course of this telephone conversation, in preference to that of Mr Amos. In my opinion, the deed of settlement accurately records the settlement orally agreed upon on Monday, 23 March 1998 in the telephone conversation between Mr Robinson and Mr Collins. 9 Mr Collins says that his discussion with Mr Robinson revolved around the facsimile he had sent on 20 March 1998 to Mr Amos' solicitor. Mr Amos acknowledges that he did see it on the morning of 23 March 1998 and prior to the telephone conversation between Mr Robinson and Mr Collins. This facsimile takes the form of an offer by the creditor to consent to the bill of costs being taxed in the amount of $50,000 on the same four conditions later recorded in section 3 of the deed of settlement signed on 23 March 1998 by Mr Amos. Mr Amos did not expressly assert that, though he saw the facsimile, he did not read it. But that was the impression I gathered he sought to create. I think the probabilities are that he would have read this short important communication when he saw it at his solicitor's office on the morning of 23 March 1998. It may well have been the receipt of this offer that caused Mr Amos to have Mr Robinson contact Mr Collins. Mr Robinson put a counter proposal to Mr Collins that, in effect, Mr Amos would agree to settle the matter in terms of the offer contained in the facsimile subject only to the date for payment by him of the $50,000 being altered from 20 May 1998 to 20 June 1998. Mr Collins says that, after obtaining instructions, he rejected Mr Robinson's proposal, whereupon Mr Robinson responded with advice that he had instructions from Mr Amos to settle the matter on the basis of the facsimile. 10 As I have said Mr Amos, in his oral evidence dealing with this discussion between Mr Robinson and Mr Collins, contradicts Mr Collins' evidence. But I prefer the latter's testimony for the following reasons: it is supported in material respects by contemporaneous file notes made by Mr Collins. Moreover, although Mr Amos by his counsel at the start of the hearing stated that he wanted leave to file and read an affidavit by Mr Robinson, he then, without explanation, withdrew that request. This unexplained failure to adduce evidence from Mr Robinson suggests that he could not assist the case made by Mr Amos about what took place between him and Mr Collins on 23 March 1998. 11 Further, an important assertion made by Mr Amos is his allegation that the written settlement agreement does not record the earlier oral agreement set up by Mr Amos whereby payment by him of the $50,000 was to be dependent on the sale of his New Farm property. There are material inconsistencies in Mr Amos' testimony with respect to what he claims was said about New Farm. In his oral evidence, he said it was agreed between he and Mr Deshon that payment was to be made within two months of the sale of the New Farm property. In his affidavit, Mr Amos said that, when in the course of negotiations before oral agreement was reached, he told Mr Deshon that he did not have the funds available to settle forthwith and needed time, Mr Deshon suggested that he borrow the $50,000 against the New Farm property, a suggestion he rejected because it was held in trust for his children. There was then some discussion about him possibly being able to borrow funds from his children if the property was sold. But there the matter rested. Mr Deshon then offered to settle the matter on the basis of his consenting to the bill being certified by the taxing officer at $50,000, inclusive of the taxing fee, with the creditor undertaking to withhold enforcement proceedings for two months. Mr Amos says he accepted this offer. Mr Amos says that New Farm was next referred to when, on the afternoon of 23 March 1998, Mr Deshon presented him with the deed for his signature, representing that it had been approved by his solicitor and that it incorporated the earlier oral agreement. He says he "queried the time frame as the money had to come from the sale of the New Farm house", although his position is that he signed the deed without reading it. He says that Mr Deshon, at this point, told him that if he signed the deed, the creditor would extend the time for payment until the New Farm property was sold, that this was a "collateral oral agreement" and that he could "have all the time in the world" to sell New Farm. His affidavit evidence with respect to New Farm does not sit well with his oral evidence. 12 Moreover, it is apparent from Mr Amos' evidence before me that he is solvent and it is probable that he had ample access to cash to pay $50,000 forthwith if he had to, back in 1998. The statements he made in the course of negotiations about being financially straitened and, at one stage, needing to rely on the sale of the New Farm property to raise the $50,000 were pretty plainly negotiating ploys by him to defer having to pay. I think the probabilities are that once Mr Collins made it clear to Mr Robinson on 23 March 1998 that the creditor was not interested in settling on terms that would give Mr Amos an extended time to pay the $50,000, the latter was prepared to agree to settlement in accordance with the facsimile of 20 March 1998: whether or not he ever sold the New Farm property was of no moment to his capacity to pay $50,000. It is highly unlikely it ever had the significance for him that Mr Amos now suggests that it had at the time. 13 I also have difficulty accepting that Mr Amos, whom Mr Deshon describes as "a skilled and experienced negotiator", signed the settlement agreement document without reading it. On his own evidence he negotiated a compromise with Mr Deshon. Mr Amos, not his solicitor, ran the litigation before the taxing master which was the subject of that document. The document is not a lengthy one. I doubt that he even asked his solicitor to check it for him. The solicitor does not say he was so instructed by Mr Amos. 14 Mr Amos also contends that the notice should be set aside because he is solvent. Though he only raised the issue of his solvency on the eve of the hearing, the creditor elected to proceed with the case and not seek an adjournment to check this claim. Mr Amos' evidence as to his assets, including his having unencumbered real estate and chattels which he values at about $800,000 and to his having cash totalling $190,000 on short term deposit, is supported by documentary corroboration. I accept his evidence that he has minimal debts. He is embroiled in a dispute involving about $300,000 with the National Australia Bank; but he says, and I accept, that that bank holds extensive security over a number of his properties, other than those at Wynnum and Albion referred to in his affidavit. I have no doubt that Mr Amos is now, and has for long been, solvent. 15 The creditor meets this argument by submitting that the Court has no discretion under s 30 the Bankruptcy Act 1966 (Cth) to set aside a bankruptcy notice on the ground that the judgment debtor is solvent. The creditor relies on a decision of Hill J in Re Athans; Ex parte Athans (1991) 29 FCR 302 where his Honour said at 310: "… The mere fact that the debtor is solvent is not a ground for the court to set aside a bankruptcy notice. The Act gives no general discretion to the court to set aside bankruptcy notices valid in form which are not an abuse of the process and I know of no case where a bankruptcy notice has in such circumstances been set aside. The Act permits the issue of a bankruptcy notice and if valid in form prescribes the consequences to the bankrupt of non-compliance. The court's jurisdiction to set aside a defective notice stems from s 30 of the Act but it is not a general discretionary jurisdiction. In this sense, it differs from, for example, the jurisdiction to make a sequestration order under s 52(1) which is expressly discretionary. Where a debtor is solvent, notwithstanding that an act of bankruptcy has been committed, the court may in the exercise of discretion refuse to proceed to make a sequestration order: see Sarina v Wollondilly Shire Council (1980) 48 FLR 372; Trojan v Corporation of Hindmarsh (1987) 16 FCR 37. If the applicant's appeal be ultimately unsuccessful and, an act of bankruptcy having been committed, a petition be presented against him then the court will consider at that time whether a sequestration order ought to be made having regard, inter alia, to the applicant's financial situation. That time has not yet come." 16 To similar effect is the statement of Toohey J in Re Briggs; Ex parte Briggs v Deputy Commissioner of Taxation (WA) (1986) 12 FCR 310 at 312. Though his Honour was not dealing with an application to set aside a bankruptcy notice on the ground of solvency, he rejected a submission that the Court had a general discretion to set aside a notice, saying: "… It seems to me that, however formulated, the grounds upon which a bankruptcy notice may be set aside must relate to the form or content of the notice itself, service of the notice or the existence of the debt upon which the judgment and in turn the notice is founded. … A court hearing an application to set aside a bankruptcy notice is not hearing a petition for sequestration and the provisions of s 52(2), whereby a court may dismiss a petition if satisfied that the debtor is able to pay his debts or that for other sufficient cause a sequestration order ought not be made, cannot be imported into such an application. In my view a court faced with an application to set aside a bankruptcy notice is constrained to look only at the regularity of the notice itself (including service) and otherwise at the circumstances surrounding the existence of the judgment debt and any demand which the debtor may have against the creditor for a comparable amount." 17 In Re Hutchins; Ex parte Wall (unreported, 6 May 1998), Spender J cited with approval the statement of Hill J in Re Athans to the effect that the Act gives no general discretion to the Court to set aside bankruptcy notices valid in form which are not an abuse of process. 18 In Re Stubberfield; Ex parte Paradise Grove Pty Ltd (1994) 134 ALR 169, I dismissed a bankruptcy petition founded on non-compliance with a notice demanding payment of a judgment debt on the ground of the solvency of the debtor. I said at 172: "I take what was said by the Full Court in Re Sarina [another case involving dismissal of a petition on the ground of the debtor's solvency] to be a clear statement that proceedings in bankruptcy are not an alternative means of enforcing a money judgment, convenient though they may be for putting pressure on a reluctant but solvent debtor to pay, and inconvenient though ordinary methods of execution may be for the creditor." 19 This, I think, is a basic principle of bankruptcy law. The Court's power to set aside a bankruptcy notice comes from s 30 the Bankruptcy Act 1966 (Cth). The section has been liberally construed: Zantiotis v Andrew (1987) 80 ALR 23 at 26. It has been described as conferring on the Court "the widest powers" in matters of bankruptcy: Re Lamb; Ex parte Melsom (1980) 42 FLR 399 at 402. It has also been described as conferring a discretionary power: Re Dingle; Westpac Banking Corporation v Worrell (1993) 119 ALR 265 at 272. If there is no discretion to set aside a bankruptcy notice for the reason that the debtor is solvent, though recalcitrant in refusing to pay, a question arises as to what purpose could be served by allowing the bankruptcy notice to stand in such circumstances. It seems odd that a solvent debtor can be put in the position of committing an act of bankruptcy by failing to comply with the notice when there is no basis for anyone to sequestrate his estate or to take any further action in bankruptcy against such a debtor. It might be thought odd that, despite the width of the powers conferred by s 30 the Court's hands are tied in such a case and it must allow a notice to stand. 20 But, there is, in addition to Re Athans, two other judgments by single judges of the Court which are inconsistent with reading s 30 as conferring a discretion sufficiently wide to set aside a bankruptcy notice on grounds unrelated to matters such as form, content and service of the notice and existence of the debt upon which the judgment and, in turn, the notice is founded, (in the absence of abuse of process). Notwithstanding the reservation I have expressed, I am not satisfied, as presently advised, that it would be proper for me to depart from the view stated in Re Athans. 21 Accepting that the Court can only set aside a valid bankruptcy notice on the ground that the debtor is solvent, if the creditor's use of the notice can in all the circumstances of the particular case be characterised as an abuse of process, I am not prepared to so characterise the creditor's conduct in issuing the notice here in question. Although there is nothing to suggest that the creditor made any check to ascertain whether Mr Amos might have assets to which it could look for satisfaction of its judgment before invoking the bankruptcy process, I do not consider in the circumstances of this case that the creditor's action in issuing a bankruptcy notice amounts to an abuse of the process of the bankruptcy court. Mr Amos' statements in the course of negotiations about his poor financial circumstances (though untrue) are, I think, sufficient, in the absence of any evidence suggesting that the creditor well knew when it issued the notice that Mr Amos was quite a wealthy man, to prevent such a view being taken of the creditor's actions. 22 I therefore decline to set aside the notice even though the evidence before me satisfies me that Mr Amos is solvent and was solvent when the notice was issued. 23 There remain for consideration what I have called Mr Amos' challenges on technical grounds to the bankruptcy notice. I reject the submission that the notice which incorporates the costs order made by the Supreme Court and the certificate of taxation quantifying those costs is not a sufficient judgment for the purposes of s 40(1)(g) the Bankruptcy Act 1966 (Cth), for the reasons I gave in Re Gibbs; Ex parte Triscott (1995) 65 FCR 80 at 83 - 84. I also reject the contention that the notice is bad because the certificate of taxation has not been served on Mr Amos and the creditor cannot execute on it, for the reasons I gave in Re Gibbs at 86 and 87. It was said that the bankruptcy notice is bad because the certificate of taxation does not comply with O 91 r 116 the Supreme Court Rules in that the certificate contains alterations which have not been initialled by the taxing officer. There is no doubt that the judgment on which the notice is founded, constituted by the order for costs and the certificate of taxation based on the agreement of Mr Amos and the creditor as to the quantum of those costs, is in respect of a debt truly owing by Mr Amos. This defect in the certificate is not sufficient to deprive it of its effectiveness to quantify the amount of Mr Amos' liability that was imposed by the judge's order that he pay the creditor's costs of his action. Mr Amos does not dispute the accuracy of the information in the certificate; he also swears that a photocopy of the certificate of taxation annexed to the bankruptcy notice is "a true office copy of the certificate of taxation". 24 When the question is whether there is a judgment sufficient for the purposes of s 40(1)(g) the Bankruptcy Act 1966 (Cth), the Bankruptcy Court is not concerned with technicalities, eg, with whether it has been obtained in accordance with the procedural requirements of the court which pronounced it, or whether it has been given in the wrong form: Re Skaff; Ex parte Farrow Mortgage Services Pty Ltd (1993) 41 FCR 331 at 336 and Re Ferguson; Ex parte EN Thorne & Co Pty Ltd (1969) 14 FLR 311 at 320 and cf McIntosh v Shashoua (1931) 46 CLR 494 at 520. It was also said that in breach of Supreme Court O 91 the certificate of taxation was issued before the fees payable in the Registry of that Court for the taxation were not paid provides another ground for holding that there is no such judgment sufficient to support the notice. The relevant rule may be O 94 r 2 and item 22 of Sch 3, rather than O 91. But for the same reasons that non-compliance with O 91 r 116(2) does not invalidate the notice, non-compliance with this other rule cannot have that effect either. 25 Mr Amos' application is therefore dismissed with costs, including reserved costs. I certify that the preceding twenty-five (25) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Drummond. Associate: Dated: 19 June 2000 Counsel for the Applicant: A Taylor Counsel for the Respondent: A Duffy Solicitor for the Respondent: Freehill Hollingdale & Page Date of Hearing: 15 June 2000 Date of Judgment: 19 June 2000