FEDERAL COURT OF AUSTRALIA Heinrich v Commonwealth Bank of Australia [2003] FCA 539 BANKRUPTCY – application to annul sequestration order – application dismissed. Bankruptcy Act 1966 (Cth), s 153B Commonwealth Bank of Australia v Heinrich [2000] SASC 20 referred to Re Deriu (1970) 16 FLR 420 cited Re Frank; Ex parte Piliszky (1987) 16 FCR 396 cited Stankiewicz v Plata [2000] FCA 1185 applied Re Williams (1968) 13 FLR 10 followed Cook (1946) 13 ABC 245 cited Re Ditfort; Ex parte Deputy Commissioner of Taxation (1988) 19 FCR 347 followed Re Scott [1975] Qd R 125 cited Re McCollom; Ex parte The Bankrupt (1987) 71 ALR 626 cited Heinrich v Commonwealth Bank of Australia [1999] SASC 210 cited Bank SA v Ferguson (1998) 151 ALR 729 cited Re Papps; Ex parte Tapp (1997) 78 FCR 524 cited STEPHEN GLENN HEINRICH v COMMONWEALTH BANK OF AUSTRALIA S 7015 of 2002 MANSFIELD J 6 JUNE 2003 ADELAIDE IN THE FEDERAL COURT OF AUSTRALIA SOUTH AUSTRALIA DISTRICT REGISTRY S 7015 OF 2002 BETWEEN: STEPHEN GLENN HEINRICH APPLICANT AND: COMMONWEALTH BANK OF AUSTRALIA RESPONDENT JUDGE: MANSFIELD J DATE OF ORDER: 6 JUNE 2003 WHERE MADE: ADELAIDE THE COURT ORDERS THAT: 1. The application is dismissed. Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules. IN THE FEDERAL COURT OF AUSTRALIA SOUTH AUSTRALIA DISTRICT REGISTRY S 7015 OF 2002 BETWEEN: STEPHEN GLENN HEINRICH APPLICANT AND: COMMONWEALTH BANK OF AUSTRALIA RESPONDENT JUDGE: MANSFIELD J DATE: 6 JUNE 2003 PLACE: ADELAIDE REASONS FOR JUDGMENT introduction 1 The applicant Stephen Glenn Heinrich (Mr Heinrich) was made bankrupt by sequestration order made on 6 September 2000 on the petition of the respondent Commonwealth Bank of Australia (CBA). He now seeks an order under s 153B of the Bankruptcy Act 1966 (Cth) (the Act) annulling the bankruptcy. Section 153B empowers the Court to make such an order if it is satisfied that the sequestration order ought not to have been made. 2 The sequestration order was based upon the indebtedness of Mr Heinrich to the CBA determined by a judgment of the Supreme Court of South Australia on 24 February 2000 (the judgment) in Supreme Court Action No.1648 of 1993 (the debt action): Commonwealth Bank of Australia v Heinrich [2000] SASC 20. It determined that, as at 11 January 2000, Mr Heinrich was indebted to the CBA in the sum of $673,358.81 together with interest from that date. 3 Mr Heinrich contends that the sequestration order ought not to have been made because: (1) he is not, and at no material time has been, indebted to the CBA as it claims; and (2) the judgment was wrongly procured, based upon a certificate of indebtedness from an officer of the CBA Eric Hampton (Mr Hampton) dated 1 November 1999 (the certificate) when in fact he was not so indebted to the CBA. 4 The certificate certified the amounts due and owing by Mr Heinrich to the CBA at 1 November 1999 as $660,643.08. The increase in that sum to 11 January 2000 simply reflects interest accrued for the period between the certificate and 11 January 2000. The certificate was prepared from a ledger of the CBA, which was called in evidence and in submissions 'the shadow ledger'. The shadow ledger showed: Balance at 15 June 1998 $322,352.24 Interest written back on 15 June 1998 $253,648.06 Interest calculated monthly thereafter to 1 November 1999 $84,642.78 5 In support of his contentions, Mr Heinrich claims that: (1) the judgment was procured upon 'fraudulent documents claiming a false account indebtedness'; (2) a further certificate of indebtedness presented in support of the sequestration order was fraudulent because it was not based upon the true records of the CBA, but upon a certificate prepared from the shadow ledger (that certificate is not the certificate of 1 November 1999, but a later certificate of 8 June 2000 provided by an officer of the CBA Neil Smith) (Mr Smith); and (3) the judgment was procured upon inadmissible evidence, namely the certificate. 6 Counsel appearing for Mr Heinrich at the hearing refined the submission. He said that the facts proposed to be proved by Mr Heinrich on the application would show that the sequestration order ought not to have been made because: (1) the judgment was based upon inadmissible evidence, namely the certificate, because it reflected fraudulently false evidence as to the indebtedness of Mr Heinrich to the CBA; and (2) Mr Heinrich was not insolvent because he had assets sufficient to have paid the amount of his actual indebtedness to the CBA at the time of the sequestration order. Contrary to the assertion of Mr Heinrich in certain documents that at no material time was he indebted to the CBA at all, through counsel at the hearing he did not dispute that he has some ongoing indebtedness to the CBA, but was unable to identify what it was. He asserted nevertheless that he had sufficient assets to pay whatever real indebtedness he may have had to the CBA. the principles 7 Under s 153B of the Act, on an application such as the present, the Court must first consider whether the sequestration order should have been made, and then whether in the exercise of its discretion the bankruptcy should be annulled: see Re Deriu (1970) 16 FLR 420. Later evidence of previously unknown facts may disclose matters which show that the sequestration order ought not to have been made: Re Frank; Ex parte Piliszky (1987) 16 FCR 396. In Stankiewicz v Plata [2000] FCA 1185 at [19] (Stankiewicz), the Full Court (Drummond, Sackville and Dowsett JJ) followed Gibbs J (as he then was) in Re Williams (1968) 13 FLR 10 at 23 where he said: ' … the Court is entitled to consider not only the case as disclosed at the time the sequestration order was made, but also as it would have been disclosed had all the true facts been before the Court on the making of the order. If the Court is satisfied that the order ought not to have been made, it is not bound as a matter of course to annul the order, but must consider in light of all the circumstances of the case whether the order ought to be annulled.' The Full Court at [20] also cited with approval Gummow J in Re Ditfort; Ex parte Deputy Commissioner of Taxation (1988) 19 FCR 347 at 350 where his Honour said that: 'The "true facts" to be considered in deciding whether the sequestration order ought not to have been made include those now known then to have existed, but exclude those facts which have occurred since the order was made.' Mr Heinrich through counsel did not submit that the Court should not follow those principles. In a matter such as the present, if the allegation is made out that the judgment was in effect fraudulently procured by the CBA, the Court has the power to, and would, go behind it: see e.g. Re McCollum; Ex parte Bankrupt (1987) 71 ALR 626. It is trite to observe that such an allegation should be supported by cogent evidence. THE EVIDENCE AND FINDINGS 8 The evidence comprised mainly affidavits of Mr Heinrich, which included numerous annexures from which he sought to argue or present his claims. The evidence in Mr Heinrich's several affidavits was discursive and somewhat hard to follow. As that material was prepared whilst Mr Heinrich was self-represented, it is readily understandable why it should not have the clarity and focus which is ideal. 9 However, at this point, it is possible to make some observations about certain parts of the evidence. It included some selected pages of the evidence of officers of the CBA in the transcript of the hearing of the debt action. It is not apparent to me that such material advances any of Mr Heinrich's claims. He also produced certain selected pages of transcript of officers of the CBA apparently to the 'Parliamentary Joint Committee on Corporations and Securities Proof Committee'. Again, I do not consider that material advances Mr Heinrich's claims. Apart from not presenting any clear picture in support of any of his claims, it also refers to documents which are not in evidence and so the material is simply not readily followed. Moreover, the report of the committee, to the extent it deals with the relationship between Mr Heinrich and the CBA, does not itself give rise to any issue estoppel between Mr Heinrich and the CBA. The material also refers extensively to, and exhibits, communications between Mr Heinrich and the CBA, and between Mr Heinrich and the solicitors for the CBA, and between Mr Heinrich and the trustee of his estate. The communications include (inter alia) many demands by Mr Heinrich that certain matters be acknowledged by the CBA or by its solicitors, in some instances by reference to material which is not itself in evidence on this application. They also contain many assertions by Mr Heinrich, again in some instances by reference to materials which are not themselves in evidence. Such documents are not evidence of the truth of the assertions of fact made in them by Mr Heinrich. For example, the fact that Mr Heinrich has commenced proceedings against the CBA (as he asserts) in the 'South Australian State Magistrates Court' is of no moment. It does not tend to prove the truth of what is alleged in those proceedings. 10 Those communications also deal with the progress of the debt action, the adequacy of discovery given by the CBA in the debt action, the accuracy of certain affidavit evidence given in the debt action and concerning the pleadings in the debt action. I have regarded that material only as evidence of the fact of the communications, assuming the fact of the communications is itself relevant, except where it is proof in admissible form of the accuracy of what is asserted. In some instances, the material includes statements by or on behalf of the CBA or its officers which Mr Heinrich sought to rely upon as admissions against interest, or to prove as business records of the CBA. To the extent that the material has that character, I have treated it as probative material. 11 Overall, however, the general assertions by Mr Heinrich of 'fraudulent evidence', 'deliberate withholding of evidence' and the like have been treated by me as argumentative assertions or claims. I have sought to carefully consider the material referred to by Mr Heinrich to identify what admissible evidence there is in that material to prove those claims. With the assistance of his counsel at the hearing, I am confident that the significant material which has probative weight, and upon which he relies, has been identified. 12 It is apparent that the foundation of the dispute between Mr Heinrich and the CBA is the extent of his indebtedness (if any) at and shortly prior to October 1992. The CBA claims the indebtedness then was $322,352.24. Mr Heinrich at the time expressed his concerns that the claimed indebtedness was incorrect, and asked the CBA for full details of how the figure was arrived at. His requests were made over a period of months. However, it is desirable to refer briefly to the initial relationship between Mr Heinrich and the CBA before addressing that particular point in time. 13 Mr Heinrich ran a farm near Maitland in South Australia. In 1985 he became dissatisfied with his then banker, and became a customer of the CBA. At the commencement of the banking relationship he signed a mortgage over the farm land, securing amounts advanced and to be advanced to him by the CBA. Thereafter, over a period of several years he received moneys advanced to him by the CBA under various accounts. It was a time when interest rates were increasing and were at very high levels. Towards the end of September 1992, the relationship between Mr Heinrich and the CBA dramatically deteriorated. 14 On 12 October 1992 Mr Heinrich wrote to the CBA directing it to close all his accounts. He requested the CBA to account to him for the moneys then standing to his credit or debit. Subsequent correspondence indicated that he asserted that he was not indebted to the CBA at all, and that the mortgage was 'a fabrication'. 15 On 26 March 1993 the CBA served upon Mr Heinrich notice of demand of moneys which it claimed to be owing to it under the various advances. He did not pay the demanded sum. He continued then to dispute that he was indebted to the CBA at all, and to seek a full accounting from it. 16 Mr Heinrich explains his view of his position in the following way. Up to 30 June 1991, he says that he deposited $1,159,263 into his trading account with the CBA (compared to $784,000 said by the CBA to have been paid to it). Whatever the extent of his indebtedness in 1992, he sold two properties other than the farm property and paid the net proceeds of $249,000 to the CBA in reduction of the indebtedness. As his initial indebtedness to the CBA, as arranged in 1985, was for $140,000, but with an accommodation up to $170,000, he claims that even allowing for interest at 17% on the sum of $170,000, the amount received by the CBA from the sale of the two properties would have been sufficient to repay any amounts owing by him to the CBA on 30 June 1992. 17 Those issues were litigated in the debt action. 18 In the debt action, the CBA initially sought possession of the farm land under the mortgage. In the course of the hearing, the CBA did not pursue that claim, but pursued only its claim for repayment of the unpaid loans or advances. Its claim against Mr Heinrich was described by the trial judge in her judgment: Commonwealth Bank of Australia v Heinrich [2000] SASC 20 at [36] in the following terms: 'It was a claim for moneys loaned and not repaid, together with interest and charges thereon in accordance with an agreement made with Mr Heinrich in mid-1985. The evidence contained in P114 and P115 established that the indebtedness of Mr Heinrich to the Bank as at 1 November 1999 was $660,643.08.' Exhibit P114 was the certificate. Mr Hampton certified to the effect that, from the books of the CBA, the amount due and owing of moneys advanced by the CBA to Mr Heinrich from time to time and still outstanding was in that amount. The certificate is headed as a statement for the purposes of cl D20 of the mortgage. Exhibit P115 was the shadow ledger. It also showed the indebtedness in the amount of the certificate to 1 November 1999. 19 At the trial of the debt action, counsel then appearing for Mr Heinrich (not the same counsel as appeared on this application) did not contest the arithmetical accuracy of the calculations of interest, or that the calculations of interest were made at the applicable rate as agreed in 1985 when the relationship of borrower and lender commenced. Nor did counsel for Mr Heinrich dispute that it was appropriate to 'write back' interest to 15 June 1998 as the shadow ledger disclosed had been done. In fact, each of Exhibits P114 and P115 were admitted by consent. Each of those exhibits was supported by an affidavit of Mr Hampton as to the records to which he referred in identifying and producing the certificate and the shadow ledger, and as to the accuracy of the material. The affidavit of Mr Hampton was to meet the requirements of ss 46 and 59 of the Evidence Act 1929 (SA) (the Evidence Act). Counsel for the CBA offered to tender Mr Hampton's affidavit (and for him to be available for cross-examination) to establish those criteria for admissibility. Counsel for Mr Heinrich at the time said that he did not request that to be done, as it was not necessary. Consequently, neither the certificate nor the shadow ledger was admitted under the provisions of the Evidence Act because it was not necessary to do so. Each of those documents was admitted by the consent of counsel for Mr Heinrich, in circumstances where there was no challenge to what they disclosed, or as to the authenticity of the shadow ledgers or as to the accuracy of the figures which they contained. 20 It is hardly surprising in those circumstances that the learned trial judge in the debt action found the claim of the CBA to have been proved. 21 In argument on this application, it was submitted that the consent then given was of no significance because the consent was uninformed due to a failure on the part of the CBA to have given proper discovery, and because the shadow ledger and hence the certificate were fraudulent. I will refer to those claims later in these reasons for decision. 22 In fact, it appears that ultimately the gravamen of the dispute in the debt action was that presented by Mr Heinrich through his defence and counterclaim. The defence and counterclaim evolved from time to time, and the learned judge in the debt action described in considerable detail the evolution of those pleadings and the issues which remained as a result of them. In substance, Mr Heinrich sought declaratory relief that he was not indebted to the CBA at all, and that any financial accommodation provided to him by the CBA and the agreement by which he had received that accommodation, including the mortgage, were either void ab initio or had been rescinded by him. He made consequential claims for refund of the sum of $388,213.55 interest paid by him from time to time up to 1992 on the accommodation actually provided by the CBA, together with amounts which he claimed to have lost from the sale of the two properties referred to above. He alleged that the CBA had altered the mortgage after he had signed it without his consent, and that the financial arrangements into which he had entered with the CBA (including the mortgage) had been procured through duress or undue influence by officers of the CBA, and had been procured by fraudulent misrepresentations by officers of the CBA. 23 The issues raised by way of defence also included challenging the method of accounting by the CBA and the validity of certain bills of exchange upon which moneys had been advanced by the CBA to Mr Heinrich from time to time, or had been continued to be made available as bills were rolled over. In effect, Mr Heinrich sought to allege that the CBA had engaged in criminal behaviour and avoidance of taxation in the way it maintained the shadow ledgers. 24 The shadow ledger, on the evidence, is a record of the legal debt outstanding by Mr Heinrich to the CBA, as distinct from its 'mainframe computer ledger' which apparently records the taxation accounts of the CBA, having regard to its prospects of recovery from debtors including persons such as Mr Heinrich. Mr Heinrich's allegations against the CBA of unlawful behaviour relating to the maintenance of the shadow ledger were struck out by an interlocutory ruling made on 9 March 1999. Mr Heinrich by leave appealed from the ruling. The Full Court of the Supreme Court of South Australia dismissed the appeal: Heinrich v Commonwealth Bank of Australia [1999] SASC 210. In his judgment, Perry J (with whom Prior and Mullighan JJ agreed) said that the proposed pleadings did not raise any facts which could give rise to a finding of fraud of a kind which could either extinguish the entitlement of the CBA to recover its loan with interest, or which otherwise could support a cause of action for damages on the part of Mr Heinrich. His Honour also made the point that, even if Mr Heinrich were to have been successful in obtaining rescission of the mortgage (an issue which, it transpired, was not necessary to address because the CBA did not rely on the mortgage as providing it with security over the farm property), such relief could only be granted on the condition that Mr Heinrich brought into account in the process, and paid, the money which was due following advances made to him by the CBA: see e.g. Bank of South Australia v Ferguson (1998) 151 ALR 729. 25 After considering the various issues raised in the defence and counterclaim, and making such findings of fact as were necessary in the light of all the evidence, the learned judge in the debt action rejected the allegations of fraudulent behaviour made against the CBA and its officers. Her Honour rejected the various claims that the CBA had procured the execution of the mortgage through fraudulent behaviour, or had fraudulently charged or failed to disclose or had misled Mr Heinrich about the interest rates which would be charged from time to time on his account, or about the nature of the securities which he had given, or about the extent and nature of his indebtedness to the CBA, or about fees which it proposed to charge or did charge Mr Heinrich, or about the amount of the funds advanced pursuant to certain bills of exchange from time to time. Her Honour concluded with the following remark at [17]: 'I have considerable sympathy for Mr Heinrich and the predicament in which he found himself. He, as did many others, borrowed money at a time of escalating interest rates which clearly exacerbated his overall financial situation and left him with the debt with which he is now confronted.' Her Honour concluded that the indebtedness of Mr Heinrich as at October 1992 was accurately reflected in CBA's accounts, and that neither the initial arrangements by which he had been provided with financial facilities or the subsequent increase of those facilities from time to time up to October 1992 involved any duress or unconscionability on the part of the CBA. She rejected the matters raised in the defence of Mr Heinrich, and dismissed his counterclaim. 26 Her Honour found that Mr Heinrich did reach an agreement with the CBA in June 1985 to repay to CBA any moneys advanced to him from time to time. She was satisfied in accordance with Exhibit P114 that the amount due and owing to the bank as at 1 November 1999 was $660,643.08. She entered judgment for $673,358.81, being that sum with interest calculated to 11 January 2000. 27 There was no appeal by Mr Heinrich from the judgment in the debt action. 28 Nevertheless, on this application, counsel for Mr Heinrich contended, and identified the evidence said to demonstrate, that the judgment in the debt action was fraudulently procured. In my view, the evidence of fraud is flimsy. The assertion is not made out. I shall deal with each of the items of evidence so identified. 29 The first is a diary note discovered by the CBA, one of its many records, which is a handwritten 'facilities in default action sheet'. It includes entries to the following effect (the date is not apparent): 'Note His [History] card - DO NOT post statements "IN RED".' 'Note His card – Customer is never to be told A/C is a Loan A/C.' It has not been shown that the diary note was not discovered by the CBA in the course of the debt action in a timely manner. There is no explanation as to why it was not a focus of cross-examination of any of the witnesses called by the CBA in the debt action, or why in particular counsel for Mr Heinrich did not at the time seek to cross-examine Mr Hampton. 30 It is otherwise unclear as to why the diary note was recorded in that way. It appears to relate to a particular account of Mr Heinrich numbered 5503 1000 8661. All pages of that account were adduced in evidence, and there is nothing upon which I can conclude that they were not generally discovered in the course of preparation for the debt action. Even if that were not so, there is nothing to indicate that they were concealed by the CBA. There was ample opportunity for Mr Heinrich, either himself or through his legal representatives, to identify the number of that account and to seek the records relating to it and to insist upon discovery of those records before completing the hearing of the debt action. 31 It also appears from the diary note and subsequent statements of account that on 14 October 1992, the address of the statements of account for Mr Heinrich changed. They were 'sent' to Mr Heinrich at care of the CBA. He was not therefore specifically informed by periodical statements that the debit balance was increasing from time to time with the accumulation of interest. Ultimately, as noted, on 15 June 1998 the debit balance was reduced to $322,352.24 (the indebtedness at October 1992) when for taxation purposes the CBA wrote off the potential recovery of the interest accumulated. It was readjusted in the circumstances described above in the shadow ledger. 32 The second piece of evidence relied upon to show fraud was said to be a letter from the CBA to Mr Heinrich of 9 January 1992 informing Mr Heinrich that a bills discount facility for $80,000 drawn on 10 October 1991 had matured, and had been repaid by a debit to a cash management call account in the name of Mr Heinrich for the full amount then standing to the credit of that account, and the balance being debited to his cheque account, leaving it significantly overdrawn. I do not think that material has any significance in demonstrating fraud on the part of the CBA in any way relevant to these proceedings, or at all. The evidence shows that progressively from 1985, the indebtedness of Mr Heinrich to the CBA increased not simply by the accumulation of unpaid interest, but by him increasing the amount he drew under the facilities made available to him. It did not increase on the one account, but was met by bills drawn from time to time, sometimes for periods as short as three months, and some of which were rolled over. On occasions a bill was repaid by a further freshly drawn bill in a larger sum. In my view the transaction disclosed by the letter of 9 January 1992 is simply a step at that point in time in the process of adjusting the nature and extent of the indebtedness of Mr Heinrich to the CBA from time to time. 33 The third document relied upon to demonstrate fraud was said to be a paragraph in a letter of 24 July 2002 from solicitors for the CBA to Mr Heinrich. The letter generally dealt with allegations that the CBA had failed to give proper discovery to Mr Heinrich in the debt action and subsequently. It asserted the contrary, namely that the CBA had given full and proper discovery as required. The particular paragraph focused upon by counsel for Mr Heinrich was as follows: 'The closing balance in account No.5503 1000 8661 in the books of the bank remains at $322,352.24 at the moment but does not fully state your legal debt to the bank which was established by the [judgment].' 34 That paragraph simply records that which was recorded in the shadow ledger as at 28 September 1999, following which for the purposes of the debt action the interest written off for taxation purposes was written back for the purposes of the claim against Mr Heinrich. With the knowledge of the circumstances in which that occurred, in my judgment it does not tend to show any fraud on the part of the CBA in relation to this matter. Mr Hampton's affidavit, which did not need to be tendered in the course of the debt action, but which was in evidence on this application, annexed the shadow ledger. Despite the write-back of interest, bank statements issued periodically up to the date of the certificate and subsequently ('sent' to Mr Heinrich care of the CBA) have continued to record the outstanding balance of the account as $322,352.24. 35 The next document relied upon was identified as an assertion by Mr Heinrich in his letter of 14 July 1997 to the solicitors for the CBA that its then discovery in the debt action was inadequate. As an assertion, that has no significance at all. In this matter, moreover, I am not persuaded that the CBA in the debt action failed to give proper discovery to Mr Heinrich. I do not need, therefore, to take the additional step of determining whether any failure to do so on its part involved any contumelious conduct, or was simply the result of oversight. There are assertions variously by Mr Heinrich in the materials that the CBA did not give proper discovery to him in the debt action, and equally there are opposing assertions by the CBA in the materials. The list or lists of documents filed in the debt action were not in evidence. It is therefore not possible to move from the assertions and the counter assertions about the adequacy of the CBA's discovery. There is no evidence, either by acknowledgment of the CBA or by any appropriate forms of proof, that a particular document or categories of documents were not discovered by the CBA in the debt action. It is impossible therefore to make a determination that any particular document or categories of documents should have been discovered and were not discovered. As I have said, it is not therefore necessary to address whether there was non-discovery through contumelious behaviour on the part of the CBA. What is apparent is that significant documents were discovered including the shadow ledger. Its contents were clear. Counsel for Mr Heinrich did not protest when the last page of the shadow ledger was produced in conjunction with the affidavit of Mr Hampton, but consented to the tender of the certificate and of the last page of the shadow ledger as evidence of the truth of what they asserted. 36 The next evidence of 'fraud' was the contents of an 'affidavit' of Mr Heinrich sworn on 3 October 2002 (not in any identified proceeding, according to its heading) requiring the CBA to admit: 'You admit that the Bank has in its possession pages 16-23 of account No.5503 1000 8661 and that these have been deliberately withheld from Heinrich by changing the address of the statements to that of Bank, C/- Allan Bennett, an employee of the bank at 5th Floor, 100 King William Street, Adelaide.' 37 That document is no more than an assertion as to facts which are not acknowledged by the CBA, and are not themselves proof of the truth of the assertion. Moreover, as I have discussed in the immediately proceeding paragraph, I do not have the evidence before me in an appropriate form to demonstrate that the CBA failed to give discovery to Mr Heinrich as he has asserted in the 'notice to admit'. 38 Finally, counsel for Mr Heinrich identified two parts of the outline of argument of counsel for the CBA in a separate action in the Supreme Court of South Australia (Action 1266 of 1998) in which Mr Heinrich alleged that the CBA had breached its taxation and statutory obligations as a banker, and so was not entitled to rely upon the shadow ledger in its claim against Mr Heinrich. Mr Heinrich sought interlocutory relief, in effect to restrain the CBA from accruing any further debt against him in its ledgers. The outline of argument of counsel for the CBA on the interlocutory application, dated 16 October 1998, refers to the balance of convenience and contends first that there is no substantial inconvenience to Mr Heinrich if the injunction sought were not granted, and secondly that the public interest in the accuracy of banking records, which might become evidence under the Evidence Act should support the refusal of the injunction. 39 I do not see how those parts of the outline of the CBA's contention on that matter, as identified by counsel for Mr Heinrich on this application, are of any significance to the allegation of fraud. If it is sought to tie that material to the integrity of the certificate, it does not do so in any way which supports any inference of fraud on the part of the CBA. Counsel for Mr Heinrich referred in the course of argument to a transcript of a case management conference in the debt action where counsel for the CBA acknowledged that the CBA had made intra-bank book entries to reflect adjustments between its Kadina branch and its head office for accounting purposes, but that did not advance or illustrate any attempt on the part of the bank to defraud Mr Heinrich or to secure in the debt action a judgment by fraudulent means. 40 I am also not persuaded that any later certificate of Mr Smith of 8 June 2000 was fraudulent. The reference to Mr Smith's certificate is contained in an affidavit of David Leydon confirming the indebtedness of Mr Heinrich for the purposes of complying with O 77 r 19(4) of the Federal Court Rules. There is no evidence to support the assertion that Mr Smith acted fraudulently. He relied on the CBA's records. The allegation really depends upon showing that Mr Heinrich was not indebted to the CBA at October 1992, or at the time of the judgment in the debt action, for the amounts which the CBA claimed were owing at those times. That in turn depends upon showing that the shadow ledger was a contrived and falsified record, or was not a record, of the CBA. I do not accept that to be the case. It also follows that I do not accept the claim that the consent of counsel for Mr Heinrich during the hearing of the debt action to the admission of the certificate and the shadow ledger was either uninformed because the CBA had not given proper discovery in that action or because its shadow ledger was false. Indeed, on its face, the shadow ledger invited attention to the questions which Mr Heinrich now asks but which were not asked at the time. Indeed, it was tendered by consent as a record of the bank, and Mr Hampton who was available for cross-examination was not required for that purpose. 41 In addition, the sequestration order was not made upon the basis of a certification of indebtedness by Mr Smith. It was made upon the basis of the act of bankruptcy committed on 19 April 2000, namely failure to comply with a bankruptcy notice served on Mr Heinrich on 29 March 2000. The bankruptcy notice was in turn based upon the judgment in the debt action. 42 There may be circumstances in which the Court would, on an application such as the present, go behind a regularly entered judgment, even after full trial of the issues in that separate proceeding. Those occasions will be rare. In this matter, I have carefully considered each of the items of evidence relied upon and identified by counsel for Mr Heinrich as demonstrating, or as said to demonstrate, that the judgment in the debt action was procured in some way by fraudulent conduct on the part of the CBA. In my view the evidence gets nowhere near such a conclusion. In a number of respects, I simply do not see how the allegation can be maintained. 43 The debt action was tried at length, over a period of time, and involved substantial evidence. It was given very careful and thorough consideration by the learned judge to determine the matter, as appears from her reasons for decision. There is nothing shown in the material before me to indicate that the CBA did not discover in the debt action documents which it ought to have discovered, far less that it withheld discoverable documents in an endeavour to secure a judgment in the debt action to which it was not entitled. I have myself considered the miscellany of documents produced by Mr Heinrich showing some transactions between the CBA and Mr Heinrich in the period from 1985 to 1992. They are not complete. It is not possible to trace with any accuracy all transactions from one step to the next. That is because the material presented by Mr Heinrich does not enable that to be done. However, in my judgment the material, far from giving any foundation for suspecting that the CBA, as at October 1992, misstated the extent of the indebtedness of Mr Heinrich to it, tends to support that at least from the period 1991 – 1992 it accounted to him in a way which demonstrates the amount of the indebtedness was as it asserted. It is understandable that he may have been confused, given the range of the accounts which were available to him, the varying amounts of the bills which were offered and the periods which they covered or were rolled over and from time to time and the significant interest rates applicable at the time. However, to the extent that such evidence can be useful without a full picture, in my judgment it tends to support the conclusion reached by the learned judge in the debt action that, as at October 1992, Mr Heinrich was indebted to the CBA for $322,352.24 or a sum substantially in that order. My conclusion reflects my analysis of the present evidence, putting aside the submission that the CBA fraudulently made or supported its claim against Mr Heinrich. I have already rejected that claim. 44 Consequently I conclude that the judgment was not based upon inadmissible evidence and was not procured by any fraudulent conduct on the part of the CBA either in relation to the certificate or in relation to Mr Heinrich's indebtedness. Mr Heinrich has not shown that he was not indebted to the CBA as it claimed in the debt action. I do not accept his claims that the judgment was procured by fraudulent documents or false accounting, or that the certificate was not based upon the records of the CBA. 45 The alternative claim of Mr Heinrich is that, in any event, he was at the time of the sequestration order able to meet his debts as and when they fell due from his assets. He did not seek to prove that by demonstrating the nature and extent of his assets and liabilities as at the time of the sequestration order. What he sought to show, as I understood it, was that his assets were such that he could satisfactorily have met his liabilities (adjusting his liability to the bank to a zero figure or to a small but unspecified figure – that being the extent of the indebtedness which he acknowledged) as at October 1992. He then through counsel invited the Court somehow to extrapolate the value of his assets to the present time. In my judgment that argument must fail. In the first place, the onus is clearly upon Mr Heinrich to demonstrate that, at the time of the sequestration order, his financial affairs were such that he had sufficient assets to enable him to meet his liabilities at that time. See e.g. Re Papps; Ex parte Tapp (1997) 78 FCR 524. He did not really seek to discharge that onus. Moreover, the assumption upon which that assertion is made, namely that his indebtedness as at October 1992 was significantly less than that which was found to have been the case in the debt action is also not established to my satisfaction. Finally, there is no firm evidentiary basis upon which I can reach any firm view about the nature or value of Mr Heinrich's assets at October 1992. Far less can I use that information to reach any view about the nature and value of his assets at the date of the sequestration order. 46 One submission put by counsel for Mr Heinrich was that his solvency at October 1992 or thereabouts could be shown by reference to the value of the farm property. The evidence did not include any expert valuation evidence of the value of the farm property, either at 1992 or at the present. The CBA was not in a position to realise the farm property under the mortgage, as its validity was under challenge. Mr Heinrich has not presented any evidence to indicate that he sought to realise the farm property, either in co-operation with the CBA as a putative mortgagee or on his own behalf, to discharge his indebtedness to the CBA. The evidence did not address his present capacity to realise the farm property. I do not consider the submission is supported by the evidence. As I have said, there was in fact no attempt in any coherent way to demonstrate Mr Heinrich's assets and liabilities as at the date of the sequestration order. conclusion 47 Consequently, in my judgment, the grounds upon which Mr Heinrich seeks to set aside the sequestration order are simply not made out. The application must be dismissed. I so order. I certify that the preceding forty-seven (47) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Mansfield. Associate: Dated: 3 June 2003 Counsel for the Applicant: Mr A Wrenn Counsel for the Respondent: Mr J Lunn Solicitor for the Respondent: Mr A Burdett Date of Hearing: 5 February 2003 Date of Judgment: 6 June 2003