Shortall v Keily [2005] FCA 1930

FEDERAL COURT OF AUSTRALIA

Shortall v Keily [2005] FCA 1930

BANKRUPTCY – sequestration order – review of registrar's order – nature of proceeding for review before federal magistrate – whether federal magistrate carried out function – further evidence on appeal – whether debt was judgment debtor's or his brother's

Federal Court of Australia Act 1976 (Cth) s 27 Federal Court Rules O 80

Keily & Anor v Shortall [2004] FMCA 609 affirmed

MARK ANTHONY SHORTALL v KRISTIAN KEILY AND SAMANTHA HILL VID 1231 of 2004 GRAY J 1 DECEMBER 2005 MELBOURNE

IN THE FEDERAL COURT OF AUSTRALIA

VICTORIA DISTRICT REGISTRY VID 1231 of 2004

ON APPEAL FROM THE FEDERAL MAGISTRATES COURT OF AUSTRALIA

BETWEEN: MARK ANTHONY SHORTALL

APPELLANT

AND: KRISTIAN KEILY

FIRST RESPONDENT

SAMANTHA HILL

SECOND RESPONDENT

JUDGE: GRAY J

DATE OF ORDER: 1 DECEMBER 2005

WHERE MADE: MELBOURNE

THE COURT ORDERS THAT: 1. The appeal be dismissed. 2. The respondents' costs of the appeal be taxed and, when taxed, be paid out of the bankrupt estate of the appellant as costs of the petitioning creditors. Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

IN THE FEDERAL COURT OF AUSTRALIA

VICTORIA DISTRICT REGISTRY VID 1231 of 2004

ON APPEAL FROM THE FEDERAL MAGISTRATES COURT OF AUSTRALIA

BETWEEN: MARK ANTHONY SHORTALL

APPELLANT

AND: KRISTIAN KEILY

FIRST RESPONDENT

SAMANTHA HILL

SECOND RESPONDENT

JUDGE: GRAY J

DATE: 1 DECEMBER 2005

PLACE: MELBOURNE

REASONS FOR JUDGMENT 1 This appeal is from a judgment of the Federal Magistrates Court given on 6 September 2004. See Keily & Anor v Shortall [2004] FMCA 609. The federal magistrate dismissed an application for review of a decision of a registrar, who made a sequestration order against the estate of the appellant, Mark Anthony Shortall. 2 The foundation for the sequestration order was a judgment of the Melbourne Magistrates' Court in a proceeding in which Kristian Keily and Samantha Hill, the respondents to this appeal, sued the appellant seeking to recover what they alleged was a debt. The judgment was entered on 10 May 2004, in the sum of $9007.90, plus interest of $538.62 and costs of $2166.20. In turn, the judgment of the Melbourne Magistrates' Court was the foundation for a bankruptcy notice, served on the appellant on 23 May 2004. The appellant did not pay the amount of the judgment in response to the bankruptcy notice, and thereby committed an act of bankruptcy on the expiration of the period specified in the bankruptcy notice. 3 On 27 June 2004, a creditors' petition was served on the appellant. That came before Registrar Bardsley on 22 July 2004. The registrar adjourned the hearing of the creditors' petition until 24 August 2004, and ordered that the appellant pay the costs of the adjournment. The appellant himself says that the purpose of the adjournment was to enable him to apply to the Melbourne Magistrates' Court to have the default judgment set aside. 4 On 24 August 2004, the registrar made the sequestration order against him. On 30 August 2004, the appellant filed in the Federal Magistrates Court an application for review, which came before McInnis FM on 6 September 2004. On that date, the federal magistrate dismissed the application for review and ordered that the respondent pay the creditors' costs out of the bankrupt estate. 5 I have examined the reasons for judgment of the federal magistrate, to determine for myself whether there is error in them, because the parties have all appeared before me today without representation. I have some concern as to whether the federal magistrate understood his function in dealing with a review of this nature. It is widely understood that the basis on which a registrar of a court created under ch III of the Constitution exercises the delegated power to do things such as making sequestration orders, is that there must always be open to a person affected adversely by such an order a right to have a review, and consequently to the exercise of the judicial power of the Commonwealth. The review is to be by what the High Court of Australia has described as a 'hearing de novo'. It is true, as the federal magistrate pointed out, that the application for review that was lodged did not give any details as to the order that had been made, or as to the orders that were sought on review. Nevertheless, it seems to me to be clear enough that the function of the federal magistrate was to deal with the creditors' petition as if he were dealing with it for the first time, and to determine whether he should make a sequestration order, without regard to what the registrar had done. 6 The federal magistrate certainly acknowledged that this was a possible view of the proceeding before him, although he also suggested that it was possible to regard the application as an application for annulment of the bankruptcy. It is also unclear, from his Honour's reasons for judgment, whether he was dismissing the application for review summarily or on the merits, but it appears sufficiently clear from [9] of those reasons that his Honour dealt briefly with the merits. Somewhat disturbingly, he said that there was 'no material' before him which would justify the court going behind the judgment of the Melbourne Magistrates' Court, despite concerns raised by the debtor in relation to the judgment. In fact, the appellant had sworn an affidavit, which had been filed in the Federal Magistrates Court, in which he swore that the debt in question was not his debt, but was a matter between Mr Keily, Ms Hill and the appellant's brother, Jason Shortall. The debt was for parking fines paid by Mr Keily and Ms Hill for Jason Shortall and the appellant swore that he was in no way responsible for it. It must be said that there was some material before the federal magistrate that might have assisted him in the exercise of what is undoubtedly a discretion to determine whether to go behind the judgment of the Melbourne Magistrates' Court. 7 After the appellant appealed to this Court, because he wished to agitate matters of fact before me, I made orders allowing for the filing of affidavits, on the assumption that an application might be made for the Court to exercise the power given to it by s 27 of the Federal Court of Australia Act 1976 (Cth) to receive further evidence on appeal. As a result, there were affidavits filed of the appellant, his brother Jason Shortall, and his father Hugh Shortall. Affidavits of Mr Keily and Ms Hill were filed as well. 8 In addition to making those orders, I granted a certificate under O 80 of the Federal Court Rules, to enable the appellant to receive advice and assistance from a barrister without charge. It is apparent from the affidavits filed on behalf of the appellant that he did receive assistance from counsel, appointed under O 80, in the preparation of those affidavits. Subsequently, the counsel to whom the referral was made sought to discharge the referral, on the ground that he was unable to contact the appellant further, and a registrar of the Court gave him leave to discharge his referral. Mr Keily and Ms Hill had legal representation for a time but, because of the expense of that, they have appeared before me in person today.