FEDERAL COURT OF AUSTRALIA

Burgess v Permanent Custodians Ltd [2010] FCA 986

THE COURT ORDERS THAT:

1.                  The Notice of Motion as filed on 21 April 2010 is dismissed.

2.                  The Notice of Motion as filed on 3 August 2010 is dismissed.

3.                  The Notice of Appeal as filed on 6 April 2010 is dismissed.

4.                  The Appellant is to pay the costs of the Respondent of and incidental to the proceeding, as agreed or taxed, including the costs of the interim applications dated 21 April 2010 and 3 August 2010 (together with any reserved costs), with such costs to be paid in priority in accordance with s 109(1) of the Bankruptcy Act 1966 (Cth).

Note:Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
The text of entered orders can be located using Federal Law Search on the Court’s website.

REASONS FOR JUDGMENT

1                                             On 19 March 2010 a Federal Magistrate refused the present Appellant an adjournment of the hearing of an amended creditor’s petition and made a sequestration order against her estate: Permanent Custodians Ltd v Burgess [2010] FMCA 258. The amended petition had been filed on 3 February 2010.

2                                             In doing so, the Federal Magistrate noted that two judgments had previously been obtained by the petitioning creditor against Mr and Mrs Burgess in the Supreme Court of New South Wales and a bankruptcy notice then issued. An application to set aside the bankruptcy notice was apparently filed and directions were made for the filing of evidence. No evidence was filed by either Mr or Mrs Burgess. A creditor’s petition was then filed in October 2009. Again, directions were made for the filing of evidence and again no evidence was filed by either Mr or Mrs Burgess.

3                                             The Federal Magistrate was satisfied that an act of bankruptcy had been committed by Mrs Burgess. He was further satisfied as to the matters addressed in s 52 of the Bankruptcy Act 1966 (Cth).

4                                             A Notice of Appeal was filed in this Court by Mrs Burgess alone on 6 April 2010. On 21 April 2010 the appeal was set down for hearing in the August Full Court sittings.

5                                             Also on 21 April 2010, Mrs Burgess filed a Notice of Motion seeking a stay of proceedings. The Notice of Motion came before a Judge of this Court, Bennett J, on 12 May 2010. On that occasion Mrs Burgess gave an undertaking to the Court “to file a statement of affairs by 16 June 2010”. Her Honour also then made directions for Mrs Burgess to provide “the respondent’s solicitor with any correspondence relating to the status of her application for legal assistance within 48 hours of receipt”. The Notice of Motion was stood over to 23 June 2010.

6                                             When the matter again came before Bennett J on 23 June 2010, Her Honour noted that Mrs Burgess had failed to comply with her undertaking given to the Court. She stood the hearing of the Motion over to 24 August 2010 to be heard together with the appeal.

7                                             The proceeding then came before the Court as presently constituted on 23 July 2010. A facsimile had been received by the Registrar of this Court on 15 July 2010 requesting (inter alia) a deferral of the hearing of the appeal. On that occasion Mrs Burgess did attend. She appeared to present her position clearly. But no Notice of Motion had been filed seeking any such relief and the proceeding was then simply stood over to 24 August 2010 for hearing. Mrs Burgess was informed that no application for an adjournment would be entertained in the absence of a Notice of Motion and an affidavit in support. In accordance with the order made by Bennett J on 23 June 2010, also to be heard on the same day in August was the Notice of Motion filed on 21 April 2010.

8                                             Thereafter, on 3 August 2010 a Notice of Motion was filed seeking an adjournment of “todays hearing 3/8/2010 and also hearing of 23/8/2010 for 2 months”. The affidavit in support sworn by Mrs Burgess stated that she was “ill and need[ed] to defer entire proceeding of 3^rd August + 23^rd August for 2 months”. The affidavit further stated that she had to “submit Further information to the Law Society to enable me to be Represented”. Due to her illness she stated that “it is all I can do to cope …”. Annexed was a medical certificate and two statements from Dr June Wayne, a clinical psychologist. In her statement dated 22 July 2010, Dr Wayne expressed the view that “pressure will otherwise cause her to have a psychotic episode”.

9                                             The Motion filed on 3 August 2010 came on for hearing on 6 August 2010. But on 6 August 2010 Mrs Burgess failed to appear and the hearing of her Notice of Motion of 3 August 2010 was also stood over to 24 August 2010. The Appellant was notified of the orders made on that day.

10                                          On 24 August 2010 Mrs Burgess again failed to appear. She had been notified of that hearing date and was aware that the matter was listed for hearing. No question can arise as to the Appellant not being aware of the hearing on 24 August 2010 as she telephoned the Registry of the Court that morning to inform them that she had again sent an affidavit through via facsimile advising that she would not be attending and attaching a medical certificate.This affidavit was received in the Registry that morning.

11                                          It was considered that the appropriate course to pursue on 24 August 2010 was to proceed to hear the appeal in the absence of Mrs Burgess.

An Adjournment?

12                                          Both of the Notices of Motion as filed on 21 April 2010 and 3 August 2010 sought orders staying or adjourning the hearing of the present appeal. The communication between Mrs Burgess and the Registry on the morning of 24 August 2010 also unquestionably sought an adjournment of the hearing of her appeal. 

13                                          The further affidavit as filed by Mrs Burgess on 24 August 2010 again stated that she was “unwell and unable to attend court…”. The affidavit also stated that she had “continually requested a pause or adjournment of proceedings …”. A medical certificate was annexed and simply stated that Mrs Burgess was “suffering from viral illness” and was “unfit to attend Court hearing …”. Also annexed was an appointment card confirming that Mrs Burgess had a further appointment with a consultant psychiatrist on 25 August 2010. No further detail was provided other than the fact that there was a scheduled appointment.

14                                          It was decided not to adjourn the hearing. Brief reasons should be provided for that decision.

15                                          Those reasons included:

·                    the failure of Mrs Burgess to attend the hearing of her Notice of Motion on 6 August 2010;

·                    the failure of Mrs Burgess to comply with the undertaking given to the Court on 12 May 2010 and the absence of any explanation for that failure;

·                    the manner in which she presented her case on 23 July 2010;

·                    the absence of any real basis that could be tested for concluding that she would have been incapable of presenting her appeal in person on 24 August 2010;

·                    the fact that an Appeal Book had been prepared and the fact that the issues to be resolved in the appeal were within a limited compass; and

·                    the interest of the Respondent in having the appeal resolved.

Whatever may have been the situation had the appeal presented lengthy or complex legal or factual issues, the present appeal raised comparatively simple issues and, accordingly, would have only required the Appellant’s attendance for a brief period of time in order for it to be resolved. Although it is accepted that Mrs Burgess was suffering from a “viral illness” (as stated in the medical certificate) and was continuing to seek psychiatric assistance, it was not considered that such matters would have precluded her attending the hearing for the limited amount of time that was necessary to resolve her claims.

Dismissal for Failure To Attend — A Discretionary Power

16                                          It was also decided on 24 August 2010 that the appropriate course to pursue was to hear Mrs Burgess’ appeal in her absence rather than to dismiss the appeal. Again, brief reasons should be provided for that decision.

17                                          Section 25(2B)(bb)(ii) of the Federal Court of Australia Act 1976 (Cth) confers power upon the Court to dismiss an appeal if an appellant fails to appear. Section 25(2B) provides in part as follows:

A single Judge (sitting in Chambers or in open court) or a Full Court may:

(a)       …; or

(aa)     …; or

(ab)     …; or

(b)       …; or

(ba)     make an order that an appeal to the Court be dismissed for want of prosecution; or

(bb)     make an order that an appeal to the Court be dismissed for:

(i)      failure to comply with a direction of the Court; or

(ii)     failure of the appellant to attend a hearing relating to the appeal; or

(bc)     vary or set aside an order under paragraph (ab), (ba) or (bb); or

…

18                                          Order 52 r 38A further provides as follows:

Absence of party

(1)    If a party is absent when an appeal is called on for hearing, the Court may:

(a)     order that the hearing not proceed unless the appeal is again set down for hearing or such other steps are taken as the Court directs; or

(b)    adjourn the hearing; or

(d)    proceed with the hearing, either generally or in relation to any claim for relief in the appeal.

(2)    If the Court proceeds with the hearing under paragraph (1)(d), the Court may:

(a)     set aside or vary any order made after so proceeding; and

(b)    give directions for the further conduct of the appeal.

19                                          When speaking of the provisions in s 25(2B) in SZISM v Minister for Immigration and Citizenship [2007] FCAFC 61, 158 FCR 292, Black CJ, Weinberg and Allsop JJ said:

[18] The clear purpose of s 25(2B)(ba), (bb) and (bc) is the efficient dispatch of Court business. Parties who do not prosecute an appeal, who fail to comply with a direction of the Court or who fail to attend relevant hearings face dismissal of their appeal for such conduct, without a hearing. Section 25(2B)(bc) can be seen as providing a safeguard to ensure that any injustice resulting from the invocation of s 25(2B)(bb) can be rectified. …

When exercising the discretion, it was also considered to be of importance to recognise the desirability of ensuring that a party has an adequate opportunity to attend a hearing and to present that party’s case in such manner as is considered appropriate. An unrepresented party, albeit a party lacking the skills of an experienced lawyer, may nevertheless provide some assistance to the Court. The “efficient dispatch of Court business” should never be permitted to override the immediate interests of the parties themselves (and, more broadly, the interests of the general public) in the Court dispatching justice and being seen to dispatch justice.

20                                          The powers conferred by s 25(2B) remain, however, discretionary powers. No order need necessarily be made dismissing an appeal if an appellant fails to appear.

21                                          In the present proceeding no application was made by the Respondent to have the appeal dismissed for want of appearance. The preferred course of the Respondent was to have the appeal resolved on its merits, albeit in the absence of Mrs Burgess.

22                                          Given the circumstances of the present proceeding, that course was considered to be appropriate. The issues to be resolved were within a narrow compass. In contrast to the position confronting the Court (for example) in Knight v Beyond Properties Pty Ltd [2010] FCA 337, the issues to be resolved were sufficiently set forth in the Notice of Appeal so as to be capable of resolution even in the absence of the Appellant. Mrs Burgess had been given the opportunity to attend on both 6 and 24 August 2010 and present such submissions as she considered appropriate. A resolution of the appeal on its merits at least provides her some assurance that her appeal has been carefully considered and resolved.

The Grounds of Appeal

23                                          The Notice of Appeal as filed on 6 April 2010 set forth the Grounds of Appeal (without alteration) as follows:

1.      I have been denied Natural Justice in not being permitted to have Legal Representation by allowing A + B to finalise

(A)   Law Society Application

Pro Bono Application to Finalise.

(B)    BAR Association Application to Finalise

2.      To Allow a full examination of Facts in relation to my health in Relation to more than one psychologists report + GP. Report (and length time of disability) in Relation to my being disadvantaged throughout the entire proceedings of SYG 2271 + SYG 2555 (not having solicitor)

3.      To be willing to allow me Representation to show Proof of having solvency by several methods

(A)   awaiting A/CS Receivable

(b)    cross claims

(c)     Fraud claim.

24                                          It is not considered that any of these Grounds have any merit.

A Denial of Natural Justice?

25                                          It is not considered that the manner in which the Federal Magistrate proceeded on 19 March 2010 denied Mrs Burgess natural justice or any procedural fairness.

26                                          The bases upon which Mrs Burgess advanced her application for an adjournment in the Federal Magistrates Court were essentially her claims that:

·                    she was suffering from a medical disability;

·                    she was pursuing avenues to obtain legal assistance; and that

·                    such assistance was necessary in order to pursue what she regarded as available “cross claims”.

The submission was that the hearing should be adjourned so that these claims could be resolved.

27                                          The relevant evidence before the Federal Magistrate in that proceeding included medical evidence and two affidavits filed by Mrs Burgess in February and March 2010. The affidavits stated that she had “request[ed] assistance of a Pro Bono Lawyer” and set forth a number of unsuccessful approaches she had made to legal service providers.  

28                                          The reasons given by the Federal Magistrate for refusing the adjournment application were expressed briefly as follows:

[5] On 2 February 2010, Raphael FM dismissed the review applications. Mr and Mrs Burgess did not appear in court on that day. On 3 February 2010, the creditor’s petition was amended by order of the Court and on 10 February 2010, the amended petition was served upon Mr and Mrs Burgess. On 23 February 2010, Mrs Burgess filed an interim application and affidavit seeking an adjournment. The matter came before me and I adjourned the interim application and the creditor’s petition until 2 March 2010. On that day I made orders for the filing of further material and adjourned the matter for hearing until today.

[6] Today Mrs Burgess appeared in person and sought an adjournment for the purposes of obtaining legal representation. Having regard to the history of the proceedings, I refused that request because I did not think that further delay would be productive. I took into account a letter tendered by Mrs Burgess from June Wayne, a psychologist, dated 18 March 2010, which I accepted as an exhibit. That letter refers to stress that Mrs Burgess is suffering but does not, on its face, point to a disability warranting an adjournment, or impairing Mrs Burgess’ capacity to conduct the proceedings on her own behalf.

The Federal Magistrate went on to say:

[7] I am satisfied on the basis of the material relied upon by Permanent Custodians that prima facie they are entitled to the making of a sequestration order against Mrs Burgess. Mrs Burgess filed in court by leave today a notice stating grounds of opposition to the petition and a supporting affidavit. In her grounds of opposition and submissions in support of it, Mrs Burgess says that she has been denied justice because she only recently found out about the possibility of pro bono assistance being made available. I note that when the matter was last before me on 2 March 2010, I declined an application for the Court to facilitate the provision of pro bono assistance because I did not consider that such assistance was warranted in the matter. I maintain that view.

29                                          It may be accepted that these reasons do not as clearly – as they perhaps should – separately address the bases upon which the application for an adjournment was being advanced. But it is apparent that the Federal Magistrate addressed attention to both the medical evidence and the desirability of affording Mrs Burgess an opportunity to obtain “pro bono assistance”. His decision to refuse an adjournment, of course, was a decision as to a matter of practice and procedure. The constraints imposed when entertaining an appeal against such a decision are well-recognised: National Mutual Holdings Pty Ltd v Sentry Corp (1988) 19 FCR 155.

30                                          No error is discernible in the refusal of the adjournment. Whether or not another Federal Magistrate may or may not have refused a further adjournment of the hearing is beside the point. No error is discernible in the manner in which the Federal Magistrate in the present proceeding exercised the discretion.

31                                          Ground 2of the Notice of Appeal, it should be further noted, refers to two proceedings – proceeding SYG 2271 is a reference to the proceeding before Federal Magistrate Raphael; SYG 2555 is a reference to the decision of Federal Magistrate Driver. It is the decision of the latter Federal Magistrate that resolved the amended creditor’s petition and which made the sequestration order. And it is that decision which is the subject of the present appeal.

32                                          Grounds 1 and 2 of the Notice of Appeal, it is considered, are without merit.

The Making of the Sequestration Order

33                                          The Federal Magistrate was satisfied that an act of bankruptcy had been committed by Mrs Burgess and was not satisfied that the grounds of opposition she advanced provided “any reason” not to make the sequestration order as sought.

34                                          Following such reasons as were provided in paragraph [7] of his reasons for decision, the Federal Magistrate continued on to conclude as follows:

[8] Mrs Burgess also asserts that she has potential claims against the petitioning creditor and others in relation to the sale of three properties which, in Mrs Burgess’s view, were sold for substantially less than their true value. Mrs Burgess asserts fault on the part of the petitioning creditor, solicitors acting in relation to the sale, and a real estate agent acting in relation to the sale. It is not unusual for properties, in circumstances such as the present, where sales are, in effect, forced by secured creditors in possession, to be sold for less than they would fetch where there is a willing but not over anxious vendor. I am not persuaded that the concerns Mrs Burgess has support an argument that those concerns are a reason for the Court not to make a sequestration order. I am not persuaded that the grounds of opposition advanced by Mrs Burgess provide any reason for the Court not to make that order.

[9] I am satisfied that Mrs Burgess committed the act of bankruptcy alleged in the petition. I am satisfied with the proof of the other matters of which s.52(1) of the Bankruptcy Act 1966 (Cth) requires proof. I note that the date of the act of bankruptcy is 20 October 2009. I further note that a consent to act as trustee has been signed by Scott Pascoe and has been lodged with the official receiver in Sydney.

35                                          Although s 52(2) was not expressly referred to by the Federal Magistrate in paragraph [8] of his reasons for decision, it would appear that the matters there addressed were directed to that subsection.

36                                          The “claims” referred to by the Federal Magistrate, and further addressed in the affidavit evidence of Mrs Burgess, were clearly considered by the Federal Magistrate to fall short of providing “sufficient cause” within the meaning of s 52(2)(b) not to make the sequestration order.

37                                          The onus, it will be recalled, lies upon the debtor to satisfy the Court that a sequestration order should not be made: Re Verma; Ex parte Deputy Commissioner of Taxation (NSW) (1984) 4 FCR 181. On proof of the matters mentioned in s 52(1), a petitioning creditor has a prima facie right to the making of a sequestration order and the Court will proceed to make a sequestration order unless the Court is satisfied that for other sufficient cause a sequestration order should not be made: s 52(2)(b). See Commissioner of Taxation v Cumins [2008] FCA 353 at [14]; 101 ALD 78 at 81 per Gilmour J. And, to the extent that a debtor maintains that there are “claims” that may be pursued, the debtor must establish that any such claim is “a real claim against the creditor that is likely to succeed”: St George Bank Limited v Helfenbaum [1999] FCA 1337. Sundberg J there set forth the text of s 52(2) and continued on to summarise the relevant principles as follows:

[13] … The existence of a cross-claim may be a “sufficient cause” within s52(2)(b) for declining to make a sequestration order: … It is for the debtor to establish the existence of “sufficient cause”: Cain v Whyte (1933) 48 CLR 639 at 645-646; … He must establish that he has a real claim against the creditor that is likely to succeed. If the Court is satisfied that there is such a claim, and that its quantum is likely to equal or exceed the creditor’s claim, it will not make a sequestration order. If the claim is likely to be less than the creditor’s claim, the Court will require the debtor, if he is to avoid a sequestration order, to pay the difference between the judgment debt and the amount he is likely to recover on his claim. … A debtor does not establish a real claim that is likely to succeed merely by producing a statement of claim in an action against the creditor … or by pointing to the existence of current litigation against the creditor: … While the Court does not try the cross-claim in advance, the debtor must adduce sufficient evidence to show that it is a real claim which is likely to succeed: …

The evidence before the Federal Magistrate in the present proceeding did not satisfy him that the “claims” identified by Mrs Burgess provided any reason not to make a sequestration order.

38                                          There is no reason to question the decision of the Federal Magistrate and even now there is no reason to reach any contrary conclusion. No “statement of affairs” was filed either on or before 16 June 2010 or by 24 August 2010.

The Undertaking

39                                          The failure of a party to comply with an undertaking given to the Court is a serious matter.

40                                          It potentially exposes the party in default to sanctions for a contempt of the Court: Bryant v Keith Harris & Co Ltd (1980) 49 FLR 137.

41                                          Although there has been a failure on the part of Mrs Burgess to comply with the undertaking given to the Court on 12 May 2010, it is not considered appropriate in the present proceeding to pursue that matter further. It is not considered that the failure on the part of Mrs Burgess to comply with the undertaking was any deliberate act taken in defiance of an order of the Court. In all probability it was but a product of the difficult circumstances in which she found herself.

Conclusions

42                                          Irrespective of any personal difficulty being experienced by Mrs Burgess, it is considered that her appeal is without merit and should be dismissed.

43                                          Notwithstanding the failure of Mrs Burgess to appear at the hearing of her appeal, the opportunity was then taken to revisit afresh the circumstances in which the sequestration order had been made. Each of the requirements of s 52 of the Bankruptcy Act 1966 (Cth) were revisited, as was the appropriateness of the exercise of the discretion there conferred. That reconsideration of those circumstances only affirmed the correctness of the decision of the Federal Magistrate in making the sequestration order.

44                                          Whatever may be the extent of her difficulties, Mrs Burgess was provided the opportunity on 6 August 2010 to advance any such application as she saw fit in support of an adjournment of the hearing on 24 August 2010. She did not then avail herself of that opportunity. Nor did she avail herself of the opportunity to again seek such relief before the hearing of the appeal itself commenced on 24 August 2010. If she wished to advance any claim in support of a deferral of the hearing of the appeal, those were the appropriate opportunities when such claims should have been made. Telephone communications and correspondence with the Registry of this Court maintaining the difficulties she was experiencing are not a substitute for seeking an order in the appropriate manner. Litigation is to be conducted in open Court. That is the forum in which facts and submissions may be advanced, tested and resolved. Litigation is not to be conducted by a party unilaterally telephoning and otherwise communicating with Registry officers. 

45                                          In proceeding to dismiss the appeal, it is considered that Mrs Burgess has been given an adequate opportunity to establish her solvency both before the Federal Magistrate and, again, in this Court. 

ORDERS

46                                          The Orders of the Court are:

1.                  The Notice of Motion as filed on 21 April 2010 is dismissed.

2.                  The Notice of Motion as filed on 3 August 2010 is dismissed.

3.                  The Notice of Appeal as filed on 6 April 2010 is dismissed.

4.                  The Appellant is to pay the costs of the Respondent of and incidental to the proceeding, as agreed or taxed, including the costs of the interim applications dated 21 April 2010 and 3 August 2010 (together with any reserved costs), with such costs to be paid in priority in accordance with s 109(1) of the Bankruptcy Act 1966 (Cth).

Associate:

Dated:         8 September 2010