FEDERAL COURT OF AUSTRALIA Ramsay Health Care Australia Pty Ltd v Compton [2017] FCA 612 File number: NSD 660 of 2015 Judge: FLICK J Date of judgment: 30 May 2017 Catchwords: BANKRUPTCY – making of sequestration order – application for adjournment week before Creditor's Petition expires – application refused PRACTICE AND PROCEDURE – application for adjournment – adequate time in which to prepare – failure to take adequate steps immediately prior to hearing Legislation: Bankruptcy Act 1966 (Cth), s 43 Cases cited: Compton v Ramsay Health Care Australia Pty Ltd [2016] FCAFC 106 Ramsay Health Care Australia Pty Ltd v Compton [2015] FCA 1207 Ramsay Health Care Australia Pty Ltd v Compton [2015] NSWSC 163 Date of hearing: 30 May 2017 Registry: New South Wales Division: General Division National Practice Area: Commercial and Corporations Sub-area: General and Personal Insolvency Category: Catchwords Number of paragraphs: 36 Counsel for the Applicant: Mr J Hynes Solicitor for the Applicant: Minter Ellison Counsel for the Respondent: Mr J Baird Solicitor for the Respondent: Pure Legal ORDERS NSD 660 of 2015 BETWEEN: RAMSAY HEALTH CARE AUSTRALIA PTY LTD (ACN 003 184 889) Applicant AND: ADRIAN JOHN COMPTON Respondent JUDGE: FLICK J DATE OF ORDER: 30 MAY 2017 THE COURT ORDERS THAT: 1. The adjournment of the final hearing as sought in the Interim Application filed on 26 May 2017 is dismissed. 2. Costs reserved. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011. REASONS FOR JUDGMENT 1 The present proceeding has had a somewhat extended litigious history. 2 The background to the litigation relevantly commenced with the filing in this Court in June 2015 of a Creditor's Petition. The petitioning creditor is Ramsay Health Care Australia Pty Ltd ("Ramsay Health Care"). The Respondent is Mr Adrian John Compton. Ramsay Health Care originally maintained that Mr Compton owed it $9,810,312.33, that amount being the amount of a judgment entered pursuant to orders of the Supreme Court of New South Wales on 6 March 2015: Ramsay Health Care Australia Pty Ltd v Compton [2015] NSWSC 163. 3 Mr Compton's liability had arisen by reason of his acting as a guarantor to the liabilities of Compton Fells Pty Limited (trading as MediChoice). Ramsay Health Care, MediChoice and Mr Compton had executed a Distribution and Group Purchasing Agreement in September 2012. Mr Compton provided a Guarantee and Indemnity to Ramsay Health Care in respect to the Distribution and Group Purchasing Agreement in November 2012. MediChoice went into liquidation in July 2014. 4 In July 2015 Mr Compton filed an Interim Application seeking (inter alia) an order that this Court "go behind" the Supreme Court judgment. That order was resisted. Part of the evidence then relied upon by Mr Compton was an affidavit sworn by Ms Anna Stevis on 4 September 2015 setting forth a detailed account of the monies she claimed were owing by Ramsay Health Care to MediChoice. Ms Stevis was the former General Manager and a Director of MediChoice. 5 In November 2015 it was concluded that the circumstances presented did not enliven the power to "go behind" the judgment and, even if they had, the discretion should be exercised to decline to do so: Ramsay Health Care Australia Pty Ltd v Compton [2015] FCA 1207. Leave to appeal from that decision was granted and the appeal was allowed in August 2016: Compton v Ramsay Health Care Australia Pty Ltd [2016] FCAFC 106. Special leave to appeal from the decision of the Full Court was granted on 10 March 2017: Ramsay Health Care Australia Pty Ltd v Compton [2017] HCA Trans 055. The hearing was expedited and on 4 May 2017, by "[a]t least a majority", the High Court of Australia dismissed the appeal: Ramsay Health Care Australia Pty Ltd v Compton [2017] HCA Trans 095. The reasons for decision were reserved. 6 Thereafter the matter was relisted before this Court as a matter of some urgency. The urgency arose by reason of the fact that the Creditor's Petition expires on 5 June 2017. 7 At least from the time the matter came before this Court, but in reality going back much earlier than that, Mr Compton has been claiming that rather than MediChoice being indebted to Ramsay Health Care it is Ramsay Health Care that owes MediChoice money. 8 That dispute still remains to be resolved. 9 Subsequent to the decision of the High Court, the matter came back before this Court on the following dates: 10 May 2017: a timetable was then set for evidence and written submissions to be filed and served and the matter was set down for hearing on 29 May 2017; 23 May 2017: the manner in which Mr Compton proposed to question the judgment debt was then canvassed in a preliminary manner; the matter being stood over to 26 May 2017; and 26 May 2017: for the hearing of the Interim Application filed on the same day. An Order was then made appointing Mrs Amy Compton, the wife of Mr Compton, as his litigation representative. The application for an adjournment was stood over part-heard to 30 May 2017 to permit a further opportunity to adduce evidence in respect to the adjournment application; the 29 May 2017 hearing date was vacated and the matter was tentatively listed for final hearing on 1 June 2017. The adjournment application 10 The interlocutory matter presently before the Court is the application initially made on behalf of Mr Compton, but now pursued on behalf of Mrs Compton as his litigation representative, to adjourn the hearing scheduled for Thursday, 1 June 2017. 11 The evidence relied upon in support of the application advanced on behalf of Mr Compton included: two affidavits of Christine Louise Perry – one sworn on 25 May 2017 and the other on 29 May 2017; and an email forwarded on 29 May 2017 evidencing the commitment of Mr Compton's present legal representative in respect of a criminal proceeding on 1 June 2017. The evidence relied upon by Ramsay Health Care included: an affidavit of Ms Caitlin Murray sworn on 26 May 2017; and three letters from the legal representatives retained by Ramsay Health Care to the then legal representative of Mr Compton dated between October and December 2015 (which it is said evidence steps taken in respect to the proceeding during that period of time). An affidavit sworn by Mr Paul Fitzmaurice on 26 May 2017 had been served on those representing Mr Compton but was not read on the adjournment application. Given the detail provided in that affidavit as to the challenges to be mounted to the evidence of Ms Stevis, Counsel for Mr Compton sought to read the affidavit in his own case to prove or to give content to: the nature of the factual issues in respect to which Ms Stevis and/or Mr Baker may need to consider and possibly prepare further evidence; and the nature of the instructions to be obtained from Ms Stevis and/or Mr Baker in order to prepare for cross-examination. 12 In summary form, the adjournment application is founded upon: a change in Mr Compton's legal representation. His former solicitor, who appeared for him throughout the proceedings at first instance and on appeal to the Full Court of this Court and the High Court and before this Court on 10 May 2017, filed a Notice of Ceasing to Act on 25 May 2017. a failure on the part of the former solicitor to make available to Mr Compton's newly retained solicitors relevant materials, that material being variously described in submissions as being 7 lever-arch folders; the intervening ill-health of Mr Compton, including his stay at a mental health facility in the United States for a period of five days from 8 May 2017, and his present condition being described as anxiety and depression; and the need to hold conferences and prepare further evidence, including (possibly) further affidavits from Ms Stevis and Mr Baker, and to prepare a response to a "reconciliation" set forth in the affidavit of Mr Fitzmaurice. It is the last of these considerations which was quite properly placed at the forefront of the submissions advanced in support of the adjournment application, the emphasis being placed upon the extensive preparation now required to be undertaken if the true position as between Ramsay Health Care and MediChoice is to be finally unravelled. Also assuming some relevance were submissions founded upon: the perceived vacillation in the amount now claimed to be owing to Ramsay Health Care; and the greater prejudice that would be suffered by Mr Compton should a sequestration order be made as opposed to the prejudice to be suffered by Ramsay Health Care in the event that it were forced to serve a fresh Bankruptcy Notice. 13 Mr and Mrs Compton, together with their two children, it should be further noted: presently reside in Lynchburg Virginia, in the United States. Presently left to one side is the potential relevance of the present residence of Mr Compton to the question as to the application of s 43 of the Bankruptcy Act 1966 (Cth) and any need to prove a fresh act of bankruptcy in the event that a further Bankruptcy Notice is to be served. 14 Underlying the application for the adjournment remain the important consequences that flow from a sequestration order being made. Each of the considerations relied upon in support of this application necessarily have to be given considerable weight. If a sequestration order is not made, Ramsay Health Care remains of course free to file a fresh Bankruptcy Notice and to start proceedings afresh. That may not be the most desirable outcome as far as it is concerned, but it may be the price that inevitably has to be paid if Mr Compton is to be given a proper opportunity to "go behind" the Supreme Court judgment and have a proper opportunity to put in issue the amount (if any) owing to Ramsay Health Care. 15 Without being able to unequivocally state how any hearing would proceed on 1 June 2017, Counsel for Mr Compton helpfully indicated that it was presently anticipated that evidence would be called from: • Ms Stevis; • Mr Baker; • Mr McIntosh; and • one of the former administrators and liquidators of MediChoice, Mr Albarran. Given this indication, the adjournment application proceeded upon the basis that preparation for the hearing would involve considerable preparation involving these persons (or at least some of them). 16 Whatever may be the fate of the final hearing on 1 June 2017, the application for an adjournment of that hearing is refused. The refusal of the application 17 Notwithstanding the considerable merit of the factual foundation upon which the adjournment application proceeded, the application is refused for a number of reasons. 18 First, and most fundamentally, it is considered that Mr Compton has already been given an adequate amount of time in which to prepare for the final hearing. 19 Although it may be accepted that after the decision in November 2015 refusing to "go behind" the Supreme Court judgment and prior to the decision of the Full Court in August 2016 there may have been a natural reluctance to commit further legal resources to the preparation of the evidence necessary to perhaps more fully expose the true state of indebtedness between Ramsay Health Care and MediChoice, there remains substantially unexplained why resources were in fact expended in about April 2016 to explore that very question. The fact is that Mr Graham Baker, a person experienced in forensic accounting, provided a Report dated 21 April 2016 setting forth his opinion as to the state of indebtedness. No reference was apparently made to the existence of that report when the matter was before the Full Court a couple of weeks later in May 2016, notwithstanding the fact that the Full Court was then told that there would be a need for "further evidence" if the Court was to "go behind" the Supreme Court judgment: [2016] FCAFC 106 at [13]. Nor was any reference to the existence of that Report disclosed on 10 or 23 May 2017, the latter date being the occasion on which the manner in which Mr Compton was seeking to advance his case was sought to be explored, albeit in a very preliminary manner. 20 But by April 2016 Mr Compton, in any event, had available to him: the detailed affidavit of Ms Stevis affirmed on 4 September 2015; and the report of Mr Baker dated 21 April 2016. 21 Preparation of the case that he sought to advance as to Ramsay Health Care in fact owing him money was well underway and being actively progressed even after the November 2015 judgment. 22 Whatever may have been the supervening events after November 2015 and the work carried out in securing the Baker Report, however, the time that has expired has been more than adequate for Mr Compton to obtain any such "further evidence" as he may have wished to rely upon. 23 The most recent affidavit of Ms Perry, being that sworn on 29 May 2017, sets forth the very considerable efforts undertaken to ready the case for hearing. But all such efforts were taken after 26 May 2017. Whether it be the responsibility of Mr Compton's former legal representatives or his current legal representatives, it remained unexplained why such steps were not taken prior to 26 May 2017. All that Ms Perry's affidavit demonstrates is that anything becomes urgent if left unaddressed for long enough. 24 The submission founded upon the extent of the preparation required in advance of the hearing on 1 June 2017 was nevertheless given considerable impetus when regard was had to the affidavit of Mr Fitzmaurice served by Ramsay Health Care upon the legal representatives of Mr Compton on 26 May 2017. For the first time, those representing Mr Compton were given a detailed account as to the challenge to be mounted to the evidence of Ms Stevis. Now being advised of the challenge to be mounted, Ms Perry maintains that it will be necessary for Ms Stevis to go back and access detailed financial records in order to properly respond to the details provided by Mr Fitzmaurice. It is regrettable that that detailed account was not provided much earlier. Notwithstanding the fact that further analysis will now have to be undertaken by Ms Stevis, and possibly Mr Baker, the reliance sought to be placed upon what was characterised as the belated notice of the grounds of challenge does not ultimately lead to an adjournment being granted because: there was no necessity for those representing Ramsay Health Care to provide advance notice as to the grounds of challenge – that part of Mr Fitzmaurice's affidavit which gave strength to the adjournment application could all have been put without prior notice by way of cross-examination of Ms Stevis or put by way of submission rather than evidence; it is far from certain that the detail to which Mr Fitzmaurice at times descends in his affidavit will prove of any immediate relevance to the final hearing – the understanding at this stage being that any challenge to the evidence of Ms Stevis may well be advanced more in terms of a challenge to the general approach taken by Ms Stevis rather than the detailed factual result thereafter emerging from the approach which it may be said was mistaken from the outset; and if this understanding proves to be erroneous, then it may well be that the final hearing as to the competing claims as to indebtedness will conclude with an inability to find that the claims advanced by Ms Stevis and/or Mr Baker are so without substance that any state of satisfaction can be reached that MediChoice in fact owes Ramsay Health Care a sum greater than $5,000. An attempt by Counsel on behalf of Ramsay Health Care to characterise the Fitzmaurice affidavit as truly an affidavit in reply and an affidavit served merely in accordance with the timetable set on 10 May 2017 fails (with respect) to properly take into account the desirability of that detailed account having been previously provided. 25 At no point of time has Ramsay Health Care ever presented anything other than an unqualified commitment to press ahead with its claims. The response of Mr Compton was a matter for him to address and to constantly reassess. His procrastination, or on another view of it his delay, in preparing his case at a far earlier point of time is a matter for which he now alone has to pay the price. 26 Second, the present mental incapacity of Mr Compton – and the very basis upon which an order was made on 26 May 2017 appointing his wife, Mrs Compton, as his litigation representative – assumes less relevance given the fact that at no point of time has it ever been contemplated that Mr Compton was to give evidence himself. Although it may possibly be inferred that Mr Compton has a greater familiarity with the affairs of MediChoice than his wife, no submission has been made that Mrs Compton lacks the necessary familiarity to give all such instructions as may be necessary for the conduct of the present proceeding. The reason to qualify the freedom with which an inference may otherwise have been drawn arises from the fact that Mr Compton has been unwell for some considerable period of time. However, it may equally be inferred that Mrs Compton has in the meantime been gaining greater familiarity with the issues than may otherwise have been the case. But the end result is that no submission has been advanced, placing reliance upon any lack of familiarity of Mrs Compton with the legal and factual issues, that she is unable to give fully informed instructions as to the future conduct of the present litigation. Although there is an accepted difficulty in communicating between the legal representatives in Australia and Mrs Compton in the United States, the length of time that has expired since 4 May 2017 and even after 26 May 2017 has permitted more than adequate time for meaningful communications. Counsel for Mr Compton quite properly accepted that any reliance upon difficulties of communication was minimal. 27 Third, although there is correspondence exposing the claims made by the former solicitor to retain materials pending the receipt of moneys in respect of outstanding fees, the inference being that in the absence of access to those materials further preparation could not proceed, there is an absence of explanation as to whether: Ms Stevis; and/or Mr Baker retained copies of the materials upon which they had previously expressed their views. Indeed, Mr Baker's April 2016 report sets forth the extent of the apparently voluminous material he had available to him, including Ms Stevis' affidavit, "the detailed bank account information of Medichoice, the MYOB file of Medichoice, invoices relating to the transactions over the 3 year period of the contract between Medichoice and Ramsay and [Hall Chadwick's] own detailed analysis of financial transactions over the period of the Agreement between the parties". No inference can be drawn that at any point of time since November 2015 that those appearing for Mr Compton, including his current legal representatives, confronted any insurmountable difficulty occasioned by a lack of access to documents or financial records. 28 Counsel for Mr Compton further quite properly accepted that: no reliance could be placed upon any difficult in securing funding; and that: any difficulty in securing access to documents was greatly removed when the solicitors for Ramsay Health Care made available extensive materials last Friday, 26 May 2017. 29 Fourth, there is in any event considered to be a more recent failure on the part of Mr Compton to promptly progress the present matter for hearing. But for the fact that Mr Baker provided his report in April 2016, some reservation may have been expressed at the prospect of incurring further legal fees after November 2015. However, it may have been expected that if "further evidence" was sought to be secured, steps to do so would have been put in train after the favourable decision of the Full Court in August 2016. Even if some further reservation may have been expressed at the prospect of incurring legal fees after August 2016 and prior to the orders made by the High Court on 4 May 2017, there has after that date been a failure to explain: why the question of whether it was necessary to appoint a litigation representative was first raised with the Court on 10 May 2017, but no application made until 26 May 2017; and why steps were not taken shortly after 4 May 2017 to approach Ms Stevis and/or Mr Baker to understand what further steps (if any) had to be pursued to ready for final hearing the competing claims as to whether it was Ramsay Health Care that was owed money or whether that company owed monies to MediChoice. 30 No affidavit, it may further be noted, has been filed by either Ms Stevis or Mr Baker as to the steps they consider necessary to prepare for the forthcoming hearing. Although it can readily be understood that such preparation may be extensive, there is not only the lack of explanation as to why such preparation was not started earlier, there is also a lack of explanation provided by either Ms Stevis or Mr Baker as to what steps they perceive now have to be taken. General statements made by the solicitor for Mr Compton, presumably on instructions, as to the need to properly consider (for example) the challenges mounted in the Fitzmaurice affidavit fall short, with respect, of an account from those who will have to undertake that task. 31 Assuming far less importance, but nevertheless a factor to be taken into account is the fact that even after Mr Compton secured the services of his current legal representative: there has been a failure to promptly attend to those steps necessary to secure the effective hearing. Those appearing for Ramsay Health Care thus repeatedly emailed Mr Compton's current legal representative immediately upon receipt of Ms Perry's affidavit on 25 May 2017 requesting a copy of the Baker report which had not been served. But that request went unanswered until the following day. It is, accordingly, not only Mr Compton who has been denied the benefit of the Fitzmaurice affidavit not being provided earlier; those appearing for Ramsay Health Care were only provided with the Baker Report at the very last minute. 32 Fifth, other than the Supreme Court judgment and the failure to pay monies owing pursuant to that judgment, there is no other evidence to suggest that Mr Compton has had at any point of time a lack of access to sufficient monies to fund properly prepared litigation. Indeed, in the absence of such evidence, the inference is to the contrary. He was represented before the Full Court of this Court and the High Court by both experienced and eminent Senior and Junior Counsel. 33 The conclusion that is ultimately reached is that Mr Compton has been given more than adequate time in which to prepare his case for final hearing. It is further concluded that he has been given more than an adequate opportunity and time in which to prepare the evidence necessary to found his adjournment application. 34 In reaching that conclusion, entirely placed to one side have been such matters as judicial management including: the expedition granted by the High Court to the hearing of the appeal; the steps taken by this Court in vacating a date for hearing in another proceeding to accommodate the convenience of at least some of Mr Compton's previous legal representatives, albeit not his former Senior Counsel who was due to return to Australia on 5 June 2017; and the vacation of the first date set aside for the final hearing and the adjournment of the interlocutory application set down for hearing on 26 May 2017 to 30 May 2017 to permit further evidence to be obtained. 35 The final hearing will proceed on 1 June 2017 in anticipation of publishing reasons and making orders (if at all possible) on Friday 2 June 2017. If necessary, the hearing will thereafter continue – if necessary over the weekend – to ensure (if at all possible) that a decision can be reached and orders made prior to Monday 5 June 2017. 36 A belated offer on behalf of Mr Compton to agree to be bound by an independent arbitration of the competing amounts said to be owing was rejected. THE ORDERS OF THE COURT ARE: 1. The adjournment of the final hearing as sought in the Interim Application filed on 26 May 2017 is dismissed. 2. Costs reserved. I certify that the preceding thirty-six (36) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Flick. Associate: Dated: 30 May 2017