FEDERAL COURT OF AUSTRALIA Toumazou v Housing Guarantee Fund Ltd [2006] FCA 1292 BANKRUPTCY – appeal from decision of Federal Magistrate – nullity of bankruptcy notice – going behind judgment to prove alleged fraud and collision Bankruptcy Act 1996 (Cth): s 24 KYRIACOS TOUMAZOU v HOUSING GUARANTEE FUND LTD VID 143 OF 2006 JESSUP J 13 SEPTEMBER 2006 MELBOURNE IN THE FEDERAL COURT OF AUSTRALIA VICTORIA DISTRICT REGISTRY VID 143 OF 2006 ON APPEAL FROM THE FEDERAL MAGISTRATES COURT OF AUSTRALIA BETWEEN: KYRIACOS TOUMAZOU Appellant AND: HOUSING GUARANTEE FUND LTD Respondent JUDGE: JESSUP J DATE OF ORDER: 13 SEPTEMBER 2006 WHERE MADE: MELBOURNE THE COURT ORDERS THAT: 1. The appeal be dismissed. 2. The costs of the respondent be taxed, and when taxed, be paid out of the estate of the applicant as costs of the petitioning creditor in accordance with the Bankruptcy Act 1996 (Cth). IN THE FEDERAL COURT OF AUSTRALIA VICTORIA DISTRICT REGISTRY VID 143 OF 2006 ON APPEAL FROM THE FEDERAL MAGISTRATES COURT OF AUSTRALIA BETWEEN: KYRIACOS TOUMAZOU Appellant AND: HOUSING GUARANTEE FUND LTD Respondent JUDGE: JESSUP J DATE: 13 SEPTEMBER 2006 PLACE: MELBOURNE REASONS FOR JUDGMENT 1 This is an appeal pursuant to s 24 of the Federal Court of Australia Act 1976 (Cth) from a judgment of the Federal Magistrates Court of Australia given on 31 January 2006 in which the court ordered that a sequestration order be made against the estate of the appellant. An appeal under s 24 is an appeal by way of re-hearing in which the court looks at all the material which was before the court below for the purpose of determining whether there was any error which attended the judgment appealed from. The appellant has represented himself this morning and has made a submission which appears to involve a lengthy complaint about a wide range of circumstances which led to the proceedings before the Federal Magistrate. However, the question for me is not whether, having regard to all of those circumstances, I would come to a different conclusion from that reached by the Magistrate, but whether the Magistrate, was in error. 2 The Federal Magistrate expressed comprehensive reasons for his judgment in which he made it clear that there were two issues which had been debated before him. The first issue was a submission made by the then respondent, the now appellant, that the bankruptcy notice was a nullity. His Honour had a contest on the evidence before him in that regard, and his reasons of 31 January 2006 comprehensively canvass that contest and explain why he decided the matter in the way that he did. At par 31 of his judgment the Federal Magistrate said: "In my view, on the balance of probabilities, I prefer the evidence of the applicant's witnesses. The affidavit of the process server combined with his evidence tested in cross-examination, though at times appearing to be unsatisfactory from the extract referred to earlier in this judgment, nevertheless persuades me, on the balance of probabilities, that the complete bankruptcy notice was served upon the debtor as claimed." At par 33 of his reasons his Honour said: "I accept the applicant's evidence in relation to service of the complete bankruptcy notice in the circumstances particularly where, in support of his application to set aside the bankruptcy notice in earlier proceedings, the debtor failed to refer to the alleged incomplete bankruptcy notice at a time when, at the very least, he was receiving assistance from a solicitor." In the light of these and other findings, the Federal Magistrate concluded that the bankruptcy notice was properly served and was complete and should not be regarded as a nullity. Nothing which the appellant has said to me this morning persuades me that there was any error in the Federal Magistrate's factual conclusions or in his application of the relevant law to the facts as so found in relation to the alleged nullity of the bankruptcy notice. 3 The second issue agitated before the Federal Magistrate related to a submission by the then respondent, the now appellant, that the judgment upon which the debt which gave rise to the bankruptcy notice was founded was affected by fraud and collusion. The Federal Magistrate explained the nature of the appellant's case in par 40 and par 41 of his reasons in the following terms: "In this instance it is noted that there has been an assertion of fraud and collusion. The debtor gave evidence that he did not consent to the terms of settlement and had never signed or seen an original copy of a guarantee and indemnity relied upon. He further asserts that there was a conspiracy between the applicant and his former business partner to establish the liability. It was submitted that accordingly it was open to the Court to exercise its discretion and go behind the judgment given that the debtor has raised issues that the judgment was obtained through fraud and collusion." The Federal Magistrate referred to a proposition of law which he extracted from McDonald v McDonald (1965) 113 CLR 529 at 540 to the effect that, in a situation such as that which confronted him, fraud must not simply be alleged, but should be proved. 4 In addition to that, I have had the benefit this morning of a judgment of Hely J in this court given on 18 July 2005 in Commonwealth Bank of Australia v Jens [2005] FCA 978, in which Fullagar J's observations in Corney v Brien (1951) 84 CLR 343 at 356-357 are referred to. His Honour in that case said that: "If the judgment in question followed a full investigation at a trial on which both parties appeared the Court will not reopen the matter unless a prima facie case of fraud or collusion or miscarriage of justice is made out." I am not entirely clear why the appellant referred me to Hely J's judgment this morning, since the judgment which he sought to go behind in the Federal Magistrates Court was not one which resulted from a full trial, but which was apparently obtained by consent. 5 It was the legitimacy of that consent which the appellant sought to put in issue before the Federal Magistrate. That matter was investigated by the Federal Magistrate, or at least the appellant had an opportunity to establish the facts necessary to persuade the Federal Magistrate that the judgment on which the debt was based had been obtained by fraud or collusion. The Federal Magistrate said that there had been no more than a mere assertion in relation to the judgment and attempts that had been made unsuccessfully by the appellant to set aside the order of the Magistrates Court of Victoria, being the court in which the order was registered which became the judgment giving rise to the debt. At par 44 of his reasons the Federal Magistrate said: "It is not appropriate in the absence of any cogent evidence for this Court to go behind the judgment and the exercise of a discretion it undoubtedly has upon the hearing of a creditor's petition. In my view there is no reason why the Court should not accept the judgment as satisfactory proof of the debt in this instance. There is no sufficient reason in this instance not to exercise a discretion to treat the judgment as satisfactory proof of the debt." At par 45 his Honour continued: "The mere assertion by the debtor in this instance, having regard to the failure of the debtor in earlier proceedings to set aside the order and/or the registered judgment lead me to conclude that it would be inappropriate for this Court, in the exercise of its discretion, to go behind the judgment." 6 In my view the approach which the Federal Magistrate took to this question was wholly appropriate and is quite free from any error. Nothing which the appellant has put to me this morning would persuade me to question either the Federal Magistrate's approach or his conclusion. 7 In the result I shall order that the appeal be dismissed. I certify that the preceding seven (7) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Jessup. Associate: Dated: 13 September 2006 Counsel for the Appellant: In Person Counsel for the Respondent: M Black Solicitor for the Respondent: Michael Sandor & Associates Date of Hearing: 13 September 2006 Date of Judgment: 13 September 2006