FEDERAL COURT OF AUSTRALIA Bhagat v Global Custodians Ltd [2001] FCA 984 HARI BHAGAT v GLOBAL CUSTODIANS LIMITED NO. N 7253 OF 2001 JUDGE: BEAUMONT J DATE: 24 JULY 2001 PLACE; SYDNEY IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY N 7253 OF 2001 BETWEEN: HARI BHAGAT APPLICANT AND: GLOBAL CUSTODIANS LIMITED RESPONDENT JUDGE: BEAUMONT J DATE OF ORDER: 24 JULY 2001 WHERE MADE: SYDNEY THE COURT ORDERS THAT: 1. An extension of time be granted to the judgment debtor for compliance with the bankruptcy notice up to and including 14 August 2001. 2. Liberty be reserved for the judgment debtor to apply to the Full Court, or to a single Judge exercising appellate jurisdiction, for any further extension of time in connection with any appeal. 3. The judgment debtor pay the judgment creditor's costs of the application to extend time and/or to set aside the bankruptcy notice. Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules. IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY N 7253 OF 2001 BETWEEN: HARI BHAGAT APPLICANT AND: GLOBAL CUSTODIANS LIMITED RESPONDENT JUDGE: BEAUMONT J DATE: 24 JULY 2001 PLACE: SYDNEY REASONS FOR JUDGMENT BEAUMONT J: 1 Before the Court is an application by an unrepresented judgment debtor for an order setting aside a bankruptcy notice or, alternatively, extending the time for compliance with its requirements. 2 The litigious history by way of background to the circumstances leading up to the issue of the bankruptcy notice is lengthy and complicated and need not, for present purposes, be described. It is sufficient to state that the bankruptcy notice requires the judgment debtor to pay the sum of $64,689.93 being the amount of costs ordered to be paid under a judgment of Young J dated 13 April 2000 in proceedings in the Supreme Court of New South Wales. The order for costs was made consequent upon the summary dismissal of proceedings brought by the judgment debtor against the judgment creditor in the Supreme Court arising out of the collapse of the Estate Mortgage Trusts. In the proceedings before Young J, the judgment debtor, as plaintiff, again appeared unrepresented. It appears that the plaintiff made a number of attempts, all ultimately unsuccessful, to frame a cause of action against the judgment creditor. As has been noted, Young J dismissed the proceedings summarily and ordered that the judgment debtor pay the judgment creditor's costs on an indemnity basis. Those costs were taxed at the sum mentioned, namely $64,689.93. 3 The judgment of Young J ordering summary dismissal was given on 17 March 2000 and, as has been noted, the consequential order for costs was made on 13 April 2000. By summons filed on 11 August 2000 the judgment debtor sought from the Court of Appeal of the Supreme Court of New South Wales, leave to appeal from both judgments of Young J. However, that leave was refused on 16 July 2001. In the meantime, the subject bankruptcy notice had been served upon the judgment debtor. By consent of the parties, on 12 June 2001 a Registrar of the Court ordered that the application to set aside the bankruptcy notice be fixed for hearing today (24 July 2001), and consequentially that the time for compliance with the requirements of the notice be extended up to and including today. This was done by consent upon the sensible footing that the application for leave to appeal was fixed for hearing by the Court of Appeal on 16 July 2001. 4 The matter being the application to set aside the bankruptcy notice, or alternatively to extend time for its compliance, is thus before the Court today for the first time on a contentious footing. As has been said, the judgment debtor again appears in person. He has sought to read two affidavits before me and those affidavits purport to explain many aspects of the collapse of the Estate Mortgage Trusts in considerable detail. I will not attempt, and need not attempt, to summarise those claims. 5 However, I should refer to a further development in the forensic history of the matter in the Supreme Court of New South Wales Equity Division. In May and June 2001, the judgment debtor filed a series of notices of motion seeking orders setting aside the judgments given by Young J in March and April 2000, upon the footing that those judgments had been obtained by fraud. The judgment creditor moved for the summary dismissal of these notices of motion. That application was heard by Young J as Chief Judge in Equity on 2 July 2001. For the reasons his Honour then gave, his Honour ordered the summary dismissal of several of those notices of motion and noted that the remaining motions were withdrawn. Amongst other matters relied upon by Young J, his Honour stated that even if the judgments in question could be attacked by fraud, the present suit in those proceedings was not the appropriate vehicle for making the allegation. However, his Honour went on to refer to other substantive difficulties confronting the judgment debtor in pursuing that claim. 6 Nonetheless, by statement of claim in separate proceedings in the Equity Division of the Supreme Court (No. 3406/2001) dated 5 July 2001, the judgment debtor has sued a number of parties including the judgment creditor. For ease of reference, I annex a copy of that statement of claim to these reasons. Again, I will not attempt, nor is it necessary that I do attempt, to summarise the allegations made in that pleading. However, it will be seen that in the pleading the judgment debtor appears to be relying, in his claim of fraud, upon the circumstance that the Speights were never beneficiaries of the trust. The judgment debtor attempted to develop this contention in argument before me but, on my present understanding of the matter, it is not at all apparent how any failure, if there was a failure, by the Speights to make the contribution of $100 can be relied upon as fraud on the part of the judgment creditor. 7 It is relevant to note in this connection that the judgment creditor has already moved for the summary dismissal of these Supreme Court proceedings, that is No. 3406/2001. This application for summary dismissal is listed before Young J on 17 August next. 8 As a Court of bankruptcy, both at the stage of considering the validity of a bankruptcy notice (and in that connection, considering an application to extend time for its compliance) and in the hearing of the petition for a sequestration order itself, this Court clearly has jurisdiction to go behind a judgment in appropriate circumstances. The settled course of authority teaches that this discretion in the Court of bankruptcy will be enlivened (if otherwise appropriate) where there has been no contest on the merits of the claim, or where, for example, the judgment has been obtained by default of taking a step in litigation. In the present case, it is true that the judgment for costs arose as a consequence of an order for summary dismissal. However, the order for indemnity costs was made because the judgment debtor was unable to frame an appropriate cause of action and, in that sense, the proceedings were frivolous and called for instant dismissal. Moreover, and this is, in my view, a most significant circumstance, the Court of Appeal has refused leave to appeal from that summary dismissal. In those circumstances, it seems to me that a Court of bankruptcy should not attempt to go behind the judgments of Young J given in March and April 2000. 9 This is not, of course, the end of the present matter. What is now put by the judgment debtor is that this Court should have regard to the claims made in the fresh statement of claim in proceedings No. 3406/2001. It would not be appropriate, and I do not seek, to pre-empt any decision that Young J may make on 17 August 2001 on the judgment creditor's application for summary dismissal of this proceeding. However, the judgment debtor does bear an onus of satisfying me that there is at least some reasonable prospect of his establishing at least an arguable case that he will make out one or other of several possible causes of action. 10 One such possible cause of action would be that the judgments given by Young J in March and April 2000 were obtained by the fraud of the judgment creditor. The second possible cause of action (and of course there would be an overlap in terms of their factual context) would be a claim for damages at common law for fraudulent misrepresentation or perhaps for some kind of malicious abuse of process. 11 As I have mentioned, the judgment debtor bears the onus in this connection, either by way of establishing a reasonable basis for undermining the order for costs made in April 2000 or, alternatively, as a basis for satisfying the Court that he has a cross-claim for damages in an amount equal to or exceeding the sum specified in the bankruptcy notice, which cross-claim could not have been set up in the proceedings leading to the judgment for costs. 12 I am not persuaded that the judgment debtor has discharged the onus he must bear to obtain an order for a further extension of time for compliance or an order to set aside the bankruptcy notice itself. The claim pleaded is as stated in the statement of claim annexed. I take into account the circumstance that the judgment debtor does not have the benefit of professional assistance. Doing the best I can to interpret his pleading, with the benefit of his oral explanation before me today, it seems to me that the focus of the judgment debtor's claim is concentrated upon his assertion that the contribution by the Speights was not received by the Trust as alleged in par 11(a) of the statement of claim (annexed). However, as I have previously indicated, whether or not that fact be established, it by no means follows that this circumstance, even arguably, may be sheeted home to the judgment creditor in terms of legal responsibility. 13 Once more I emphasise that I am not pre-empting (nor would it be appropriate that I attempt to pre-empt) any decision that Young J may make on the summary dismissal application which his Honour will hear next month. I am merely dealing with this matter, as the Court of bankruptcy, at the stage of the issue of the bankruptcy notice. I would further wish to emphasise that, not only am I expressing no view on what order may appropriately be made by the Supreme Court of New South Wales next month, but also I am expressing no view on the circumstances that might guide the exercise of the discretion of this Court if it were to arise for exercise upon application for a sequestration order itself. If there is an act of bankruptcy committed and if an application is made by way of petition for sequestration order, the judicial discretion then to be exercised will naturally fall to be exercised in the light of the circumstances at that stage. 14 The judgment debtor has indicated that he wishes to seek leave to appeal from my refusal to extend time. In those circumstances it is appropriate that I grant an extension of time for this purpose only, and I am therefore proposing to extend time for compliance with the bankruptcy notice up to and including 14 August 2001. So time is extended accordingly. 15 I reserve liberty for Mr Bhagat to apply to the Full Court, or to a single Judge exercising appellate jurisdiction for any further extension of time in connection with any appeal. 16 I order that the judgment debtor pay the judgment creditor's costs of the application to extend time and/or to set aside the bankruptcy notice. I certify that the preceding sixteen (16) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Beaumont. Acting Associate: Dated: 27 July 2001 Solicitor for the Applicant: The judgment debtor appeared in person Counsel for the Respondent: Mr A P Spencer Solicitor for the Respondent: Holding Redlich Date of Hearing: 24 July 2001 Date of Judgment: 24 July 2001