FEDERAL COURT OF AUSTRALIA

Komba trading as Bora Homes Australia v AIM Site Hire Pty Ltd [2013] FCA 23

THE COURT ORDERS THAT:

1.    The appeal be dismissed.

2.    The appellant pay the first respondent’s costs of and incidental to the appeal.

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

REASONS FOR JUDGMENT

Introduction

1    This is an appeal from a judgment of the Federal Magistrates Court delivered on 30 May 2011, which dismissed the appellant’s application for review of a decision to grant a sequestration order against him: see Komba v AIM Site Hire Pty Ltd [2011] FMCA 401.

2    An appeal from the Federal Magistrates Court pursuant to s 24(1)(d) of the Federal Court of Australia Act 1976 (Cth) is conducted as a rehearing in which it is necessary to show appellable error in the judgment under appeal: see Frost v Sheahan [2012] FCAFC 46 at [14] per Finn, Cowdroy and Flick JJ and the authorities there cited. That is, whilst the appellate court must make up its own mind on the facts, the court does not proceed as if it were trying the case at first instance. There is a need for the appellant to show error on the appeal, since the task of the appellate court is to correct error.

3    For the reasons set out below, the appellant failed to show appellable error in the judgment of the Federal Magistrates Court and, accordingly, I would dismiss the appeal. The appellant did not establish any bona fide allegation that no real debt lay behind the default judgment.

4    The factual background to the appeal is important. Unless one understands it, the issues on the appeal are incomprehensible.

factual background

5    This appeal arose out of a debt of $2,576.60 that the appellant, Emerald Komba, was said to owe the first respondent, AIM Site Hire Pty Ltd (“AIM”). The alleged debt was the outstanding balance on an account with AIM in the name of “Bora Homes” for the hire of building site equipment, principally portable toilets. “Bora Homes” or “Bora Homes Australia” was the trading name of Mr Komba and his partner, Rashid Ismail Mpota, at least until 30 August 2009. The Federal Magistrate evidently accepted that AIM had never been given notice that the partnership was at an end: see Komba v AIM Site Hire Pty Ltd [2011] FMCA 401 (“FMC reasons”) at [26].

6    The Federal Magistrate set out the facts in some detail. It is unnecessary to repeat his Honour’s detailed account: see FMC reasons at [2]–[22]. The key facts relevant to this appeal are as follows:

    On 3 March 2008, AIM instituted a proceeding against Mr Komba in the Magistrates’ Court of Victoria (“state Magistrates Court”) demanding payment of the sum of $2,576.60.

    On 13 May 2008, the state Magistrates Court entered a default judgment (“the default judgment”) for the claim of $2,576.60 together with interest of $60.99 and costs of $1,565.50, being a total of $4,203.09 against Mr Komba in favour of AIM, after Mr Komba failed to attend a pre-hearing conference in that Court.

    On 22 December 2008, a warrant to seize property was returned unsatisfied.

    On 15 January 2009, bankruptcy notice VN 72/2009 was issued against Mr Komba, relying on the default judgment. The notice was served on him on 27 April 2009.

    On 8 July 2009, AIM filed creditor’s petition MLG 846/2009 in the Federal Magistrates Court, asserting the “following acts of Bankruptcy”:

The Respondent Debtor failed, on or before 17 May 2009, either to comply with the requirements of the Bankruptcy Notice served on the Respondent Debtor individually on 27 April 2009 or to satisfy the Court that she [sic] had a counterclaim, set off or cross demand equal to or more than the sum claimed in the Bankruptcy Notice, being a counterclaim, set off or cross demand that she [sic] could not have set up in the action in which the Judgment referred to in the Bankruptcy Notice was obtained.

    On 21 September 2009, terms of settlement were purportedly executed between AIM and Mr Komba in relation to the sum due under the default judgment (“the terms of settlement”).

    Creditor’s petition MLG 846/2009 was not pursued. AIM received the first instalment of payments due under the terms of settlement but no further instalments.

    On 23 December 2009, bankruptcy notice VN 2660/2009 (“the second bankruptcy notice”) was issued against Mr Komba, relying on the default judgment and, on 25 February 2010, the notice was served on him.

    On 29 March 2010, AIM filed creditor’s petition MLG 449/2010 in the Federal Magistrates Court asserting the “following acts of Bankruptcy”:

The Respondent Debtor Emerald Komba failed, on or before 18 March 2010, either to comply with the requirements of the Bankruptcy Notice served on the Respondent Debtor Emerald Komba individually on [sic] or to satisfy the Court that he had a counterclaim, set off or cross demand equal to or more than the sum claimed in the Bankruptcy Notice, being a counterclaim, set off or cross demand that he could not have set up in the action in which the Judgment referred to in the Bankruptcy Notice was obtained.

    On 20 May 2010, Mr Komba filed a notice of opposition to the creditor’s petition. Numerous affidavits were filed in support of, and in opposition to, the creditor’s petition (discussed in detail in the Federal Magistrate’s reasons).

    On 9 July 2010, Mr Komba filed a Form 30A application in the state Magistrates Court appropriate for an application under s 110 of the Magistrates’ Court Act 1989 (Vic) for an order that the default judgment be set aside and the proceeding be re-heard. Elsewhere, in written submissions, the appellant described this application as an application for review under r 5(1) of the Magistrates’ Court (Judicial Registrars) Rules 2005 (Vic), which prescribes the form for requests for review under s 16K of the Magistrates’ Court Act 1989 (Vic). Nothing apparently turns on this discrepancy.

    On 30 July 2010, Mr Komba was given an affidavit of AIM’s solicitor, Donald Ward Taylor, sworn on 29 July 2010 alleging that Mr Komba had agreed to the terms of settlement. The terms of settlement were an exhibit to the affidavit.

    On 2 August 2010, Mr Komba’s application to set aside the default judgment came before Mr Braun, Magistrate, in the state Magistrates Court. At that hearing, Mr Komba raised for the first time his opposition to the terms of settlement. Magistrate Braun adjourned the matter until 6 August 2010 to allow the parties to file further affidavits concerning the terms of settlement. Mr Komba made and filed an affidavit dated 4 August 2010 and AIM successfully sought the issue of a witness summons to Irina Watson, a solicitor from the firm of Hassall’s Litigation Services (“Hassall’s”), who had witnessed the signature on the terms of settlement.

    On 6 August 2010, after hearing Ms Watson’s evidence, Magistrate Braun held that Mr Komba had no arguable defence to AIM’s claim and dismissed Mr Komba’s application to set aside the default judgment. Magistrate Braun found that: (1) Ms Watson had Mr Komba’s authority to take instructions from him or from Mr Mpota (the partners in the Bora Homes Australia partnership); (2) Ms Watson took her instructions from Mr Komba in relation to the terms of settlement; (3) in accordance with these arrangements, Mr Mpota signed the terms of settlement binding Mr Komba; and (4) Mr Mpota paid the initial sum of $1,669.37 to AIM on Mr Komba’s behalf to Mr Komba’s knowledge. Magistrate Braun rejected Mr Komba’s claim that “he had no knowledge of these things at all”. Accordingly, Magistrate Braun held that Mr Komba’s application to set aside the default judgment did not justify further inquiry.

    On 3 September 2010, Mr Komba filed a notice of appeal in the Supreme Court of Victoria under s 109 of the Magistrates’ Court Act 1989 (Vic). This appeal was dismissed for non-appearance on 21 September 2010. Possibly Mr Komba’s then legal advisers realised that the s 109 appeal would be held incompetent on the basis that an appeal under s 109 lies only against a final order (which Magistrate Braun’s order was not).

    On 24 September 2010, Mr Komba filed a second application in the state Magistrates Court under s 110 of the Magistrates’ Court Act 1989 (Vic) for an order that the default judgment be set aside and the proceeding be re-heard. Apparently, the focus of this second application was an argument that the judgment was no longer available as a basis for the second bankruptcy notice because of the existence of the terms of settlement and partial performance on Mr Komba’s part.

    On 11 October 2010, Mr Komba filed a notice in the Federal Magistrates Court stating that the grounds of his opposition to the creditor’s petition were that: (1) he did not owe the underlying debt to AIM; (2) he had paid any monies owing to AIM and “in the premises it is [AIM] which is indebted to [him]”; and (3) he was solvent.

    On 22 November 2010, the state Magistrates Court, again constituted by Magistrate Braun, dismissed Mr Komba’s application for a re-hearing, but granted Mr Komba leave to amend his application to include an application for a permanent stay of the default judgment.

    On 3 December 2010, Magistrate Braun dismissed Mr Komba’s application as amended after a contested hearing at which Mr Komba was represented. On that occasion, Magistrate Braun said:

[T]he fact [is] that your client entered into terms of settlement which acknowledged the judgment as being properly entered and the amount of the judgment as being properly entered. That amounted to an acknowledgment of the cause of action as well that gave rise to the judgment. Even though it’s merged, it’s evidence of his acceptance that the cause of action before it merged was properly and accurately asserted against him.

The terms of settlement provided the evidence; they don’t create any basis at law, any point at law which affects the judgment one way or another. But what they do is to provide evidence in so far as any question of an arguable defence is concerned —and it’s evidence against him.

…

The judgment as I’ve already said was regularly entered. There is no possible arguable defence to be considered by the court. I have ruled on that twice now. So not only was the judgment regularly entered, there is no basis on which to set it aside and, of course, that’s recognised by the fact that now an application to stay its execution is being made instead, but, it would not be proper, in my view, for a court to stay the execution of its process simply and for no other reason than to enable a person to avoid bankruptcy, especially when that person argues that he ought to be permitted to do that because he has entered into a side agreement to pay the judgment and has breached that agreement.

…

That settlement agreement has not been performed by the judgment debtor, and what he is attempting to do is to avoid the need to perform it by taking these various defences to these legitimate proceedings that have been launched against him at various times.

There is really no merit whatsoever in his application.

    On 22 December 2010, a Registrar of the Federal Magistrates Court made a sequestration order against Mr Komba’s estate.

    On 12 January 2011, pursuant to s 104(2) of the Federal Magistrates Act 1999 (Cth), Mr Komba filed an application for review in proceeding MLG 449/2010 in the Federal Magistrates Court against the sequestration order made by the Registrar.

    On 13 May 2011, Mr Komba filed an interim application in the Federal Magistrates Court against the National Australia Bank Ltd (“NAB”).

    On 30 May 2011, the learned Federal Magistrate dismissed both the interim application against the NAB and the application for review of the sequestration order.

    On 20 June 2011, Mr Komba filed a notice of appeal in this Court against the judgment of the Federal Magistrate. Pursuant to orders, an amended notice of appeal was filed on 29 July 2011 and a further amended notice of appeal was filed on 25 November 2011.

7    In order to understand the grounds of appeal, it is necessary to refer briefly to the Federal Magistrate’s decision.

THE FEDERAL MAGISTRATE’S DECISION

8    In support of his application for review, Mr Komba claimed that he was not liable for the debt founding the default judgment. The Federal Magistrate described part of his argument in the following terms (FMC reasons at [24]–[26]):

In his affidavit filed the same day, the applicant again insists that he was not liable for the goods provided to Copeland Crescent, Point Cook, or Woodland Rise, West Melton, adding claims that the respondent had placed undue pressure upon him to collect money and that the lawyer involved had not properly fulfilled her professional duties. The applicant also stated that the partnership with Mr Mpota ended on 30 August 2009.

The apparent mystery as to the applicant’s connection to Lot 1007 Copeland Crescent, Point Cook, is explained by a contract annexed to the applicant’s affidavit of 12 January 2011. The contract describes Mr Mpota as the owner of that property, when entering into a building contract with Advanced Building and Engineering Proprietary Limited. The builder’s signature on the contract was witnessed by the applicant. The contract was entered into on 19 September 2006. On 14 February 2011 the [applicant] provided a further affidavit, disputing invoices relating to Fetlock Drive, Truganina and Lot 78 Saddle Wynd, Truganina, and a further property at Wyndham Vale. These are fresh disputes in the affidavit material. In the most recent affidavit the complaints with respect to [the] Point Cook property have not been repeated, but the complaints, with respect to Woodland Rise, West Melton, were repeated, along with annexed documents from the Melton Shire Council to evidence that Bora Homes (Australia) did not appear to have a certificate for building work at that site, at the relevant time.

The only evidence the applicant annexes to show that the partnership came to an end, was the de-registration date on a partial extract from the Consumer Affairs Register and Business Name Extract. No evidence was provided of notice to the respondent that the partnership ended or indeed notice to anyone.

9    In the Federal Magistrates Court, Mr Komba again argued that he did not authorise the terms of settlement. In an affidavit filed in the Federal Magistrates Court on 6 August 2010, Mr Komba claimed that he did not become aware that the settlement agreement existed or was said to have been signed on his behalf before July 2010 and denied authorising any person to sign the deed on his behalf.

10    As the Federal Magistrate said (FMC reasons at [30]), the terms of settlement in terms “is described as a deed executed ‘by, for and on behalf of the [Applicant]’”, although his Honour accepted that it was “not his signature that appears upon the deed”: at [31]. The Federal Magistrate stated that “[i]t appears that the agreement was signed by Mr Mpota, the applicant’s business partner and witnessed by the solicitor, Ms Irina Watson”. The Federal Magistrate noted (FMC reasons at [31]) that “[t]he payments described in the deed of settlement were not made, save for the first payment”.

11    The Federal Magistrate ultimately rejected Mr Komba’s claims with respect to the terms of settlement; and in so doing took account of the transcript of the proceeding in the state Magistrates Court on 6 August 2010, when Mr Komba first applied to set aside the default judgment: see FMC reasons at [36]–[41]. His Honour also referred to the hearing in the state Magistrates Court on 3 December 2010, as a result of which Mr Komba’s application for a permanent stay of the default judgment was dismissed: see FMC reasons at [43]–[44].

12    The Federal Magistrate held (FMC reasons at [45]) that the settlement agreement was “an accord executory … in that it was not intended to discharge the rights and obligations until such time as its conditions were fulfilled.” In consequence, his Honour held that “the respondent [AIM] was entitled to either sue upon the accord agreement or repudiate in reliance upon the breach”; and it “chose the latter”. The Federal Magistrate held (at [45]) that:

In these circumstances the rights to pursue the claim under the judgment continued. This was also the view that the applicant took until today, as he brought proceedings to set aside the underlying judgment after the deed of settlement was entered into.

13    The Federal Magistrate concluded (FMC reasons at [46]–[48]) as follows:

The question of whether or not the applicant gave his authority for the deed of settlement to be entered into is one that was the subject of a full hearing, with evidence before the state Magistrate and the subject of findings of fact. I am not persuaded that the applicant has shown a case for the proposition that the settlement agreement was entered into without his consent or knowledge having regard to the findings of fact, based on a hearing on the evidence by the state Magistrate. The matter has been the subject of proceedings before a court, evidence and cross-examination, and a judgment dealing with those factual issues. There is an issue estoppel between these parties on that question of fact, namely, that a settlement agreement was entered into with the applicant’s authority and in accordance with his instructions.

In light of that factual finding it is difficult to accept that the underlying debt is not due and owing. To the extent that the applicant sets out his disputes as to the amounts, the fact that Mr Mpota had entered into building contracts for one of the sites, albeit in his own name rather than the partnership name, is significant. The applicant and Mr Mpota were partners. The fact that his partner was building on the site shows that the invoice for hire for that site is not completely unrelated to the partners. He would be liable for debts incurred on the partnership account by his partner. On the material before me I am not persuaded that the applicant has shown an arguable defence.

The applicant also maintained that he was solvent. However, in submissions he stated that if he were made bankrupt then there would be no money received by the respondent, as there was nothing to obtain. This is inconsistent with solvency. Similarly, the outstanding judgments against him in VCAT, and the proceedings by the NAB stand against the proposition that he is presently solvent. The applicant has not set out any details of his financial affairs, nor alleged he has met the outstanding judgment.

14    For these reasons, the Federal Magistrate dismissed the appellant’s application for review of the sequestration order made by the Registrar, on the basis that he was “satisfied that a sequestration order ought to be made, and ought to have been made at the time the order was made by the Registrar”.

15    As already noted, the present proceeding is an appeal against the judgment of the Federal Magistrates Court, which upheld the sequestration order made against the appellant.

Grounds of Appeal

16    In the further amended notice of appeal filed on 25 November 2011, four grounds of appeal are set out. Common to all grounds is a claim that the Federal Magistrate erred by failing to go behind the default judgment of 13 May 2008. This claim is put in a number of ways. It is said that there was error in:

(1)    not finding that the order of the state Magistrates Court of 6 August 2010 dismissing the appellant’s application for a rehearing “tended to show a miscarriage of justice” (“Ground 1”);

(2)    finding that the appellant authorised the terms of settlement (“Ground 2”);

(3)    not finding that the order of the state Magistrates Court of 22 November 2010 dismissing the appellant’s application for a rehearing “[tended] to show a miscarriage of justice” (“Ground 3”); and

(4)    impermissibly inferring the sufficiency of the judgment debt by reason of:

(a)    the fact that the appellant had witnessed the signature of Advanced Building and Engineering Pty Ltd (“Advanced Building”) to a contract between Mr Mpota and Advanced Building of 19 September 2006;

(b)    the fact that the appellant had not given notice to AIM of the termination of his partnership with Mr Mpota on 30 August 2006; and

(c)    the fact that Mr Mpota was undertaking building works on a site in respect of which AIM delivered an invoice relating to the hire of chattels allegedly used at that site (collectively, “Ground 4”).

the Parties’ submissions

Mr Komba’s submissions

17    In this case, the status of the default judgment as the foundation of the bankruptcy proceedings was clouded by both the settlement agreement and the failed attempts to have the initial proceeding giving rise to the default judgment re-heard. Although Mr Komba’s position differed in the earlier proceedings in the state Magistrates Court in December 2010, before this Court the parties agreed that the second bankruptcy notice (and ultimately the sequestration order) relied on the default judgment. At the hearing Mr Komba’s counsel explained that since Mr Komba maintained that the terms of settlement were not executed with his authority, he also maintained that the relevant question was whether there was error in treating the default judgment as a sound basis for the sequestration order.

Ground 1: Federal Magistrate erred in not going behind the default judgment — miscarriage of justice on 6 August 2010

18    Mr Komba’s case commenced with the proposition, which I accept, that, in bankruptcy proceedings, a default judgment is not conclusive proof of debt. In substance, his argument under Ground 1 was that the state Magistrate’s refusal on 6 August 2010 to set aside the default judgment involved a miscarriage of justice; and, in this circumstance, the Federal Magistrate should have exercised his discretion to go behind the default judgment and find that the sequestration order had no basis. The miscarriage of justice was said to lie in the fact that, in the state Magistrates Court, no consideration was given to the grounds advanced by Mr Komba for setting aside the default judgment (namely: (1) he had not received notice of the relevant pre-hearing conference; (2) he did not owe a debt to AIM; (3) he had paid any debt to AIM in full; and (4) AIM had contravened the Fair Trading Act 1999 (Vic)). Instead, as Mr Komba’s counsel put it, the state Magistrate focussed on “the narrow question” of whether Mr Komba authorised the terms of settlement. On Mr Komba’s submission, the result was that he was treated unfairly since whether he was in truth indebted to AIM was never determined.

19    Further, citing Tomasevic v Travaglini (2007) 17 VR 100 (“Tomasevic”), Mr Komba, through his counsel, argued that this unfairness had been exacerbated by Mr Komba’s lack of representation. Counsel for Mr Komba elaborated on this at the hearing, submitting that Mr Komba did not understand what would be made of the terms of settlement and that he should have been put on notice of what he was required to show. Counsel submitted that the state Magistrate should have told Mr Komba that Mr Mpota would be an important witness. Counsel for Mr Komba noted that, on the second rehearing application in the state Magistrates Court in November 2010, Mr Komba filed an affidavit sworn by Mr Mpota on 19 October 2010. In written submissions, Mr Komba concluded that “[t]he error of the Victorian Magistrate to adopt the fair and usual course, ought to have been plain to the Federal Magistrate who reviewed the Transcript and relied on it in his judgment”.

Ground 2: The Federal Magistrate erred in finding that Mr Komba authorised the terms of settlement

20    Although the default judgment was the basis of the sequestration order, the terms of settlement were critical to the history of the matter. In the state Magistrates Court, the state Magistrate had inferred from the terms of settlement that Mr Komba owed the underlying debt to AIM and concluded that there was no arguable basis on which the default judgment could be set aside. The Federal Magistrate adopted essentially the same reasoning to hold that there was insufficient reason to go behind the default judgment. The Federal Magistrate also held that, as between AIM and Mr Komba, on account of the state Magistrate’s finding on 6 August 2010, Mr Komba was estopped from denying that he had authorised the terms of settlement.

21    In this Court, as in the Federal Magistrates Court, Mr Komba challenged the state Magistrate’s finding that the terms of settlement were entered into with his authority and in accordance with his instructions. Mr Komba argued that the circumstances on which the state Magistrate relied “cannot give rise to a reasonable and definite inference that [he] authorised the terms of settlement”. Mr Komba submitted that the findings of fact made by the state Magistrate did not justify the inference that he authorised the terms of settlement. Further, in written submissions, Mr Komba contended that:

[T]he “inference that [he] authorised the terms of settlement was drawn in spite of the following conflicting evidence: (1) that [Mr Komba] had seen the terms of settlement in draft, but did not authorise them; (2) that Mr Mpota had paid the first instalment under the terms of settlement; and (3) that [Mr Komba] had no knowledge that Mr Mpota signed the terms of settlement or paid the first instalment under the terms of settlement. …

The inference was drawn that [Mr Komba] authorised the terms of settlement in spite of the fact that there was no evidence at all: (1) of any discussions between [Mr Komba] and Mr Mpota as to Mr Mpota’s authority; (2) of any discussions between [Mr Komba] and his solicitor that Mr Mpota had authority to bind [Mr Komba] in personal matters; and (3) that [Mr Komba] had agreed to all of the terms contained in the terms of settlement except for the amount of the instalments to be paid. …

22    Mr Komba argued that, in the state Magistrates Court, “[his] application for review was treated as a trial on [the settlement authorisation] issue”, with the result that the state Magistrate ignored his contentions both as to whether there was any underlying debt and, if so, as to its amount; and deprived him of the opportunity to adduce evidence on those issues.

23    Mr Komba’s counsel made two further points at the hearing in this Court. The first was that Mr Komba’s claim that he did not owe the debt was itself at odds with a finding that he had authorised the settlement agreement. The second was that it was not open to the state Magistrate to infer that Mr Komba had authorised the terms of settlement because there was no evidence from Mr Mpota. As already noted, on the subsequent rehearing application, Mr Komba in fact filed an affidavit by Mr Mpota.

24    At this point, I note that, at one stage, counsel for Mr Komba stated that, if Mr Mpota’s affidavit was not before the Federal Magistrate, then he would not argue that he “should now be permitted to have it before” this Court. The affidavit of Mr Mpota was not apparently before the Federal Magistrate. In closing submissions, however, counsel for Mr Komba apparently pressed his application to have this Court receive Mr Mpota’s affidavit. Accordingly, I return to this matter below.

25    All of these problems were said to demonstrate that the state Magistrate’s authorisation finding was unsound; and that this deficiency infected the judgment of the Federal Magistrate, who relied on the facts as found by the state Magistrate.

26    Counsel for Mr Komba did not address the Federal Magistrate’s finding that Mr Komba was estopped from contesting that the settlement “was entered into with [his] authority and in accordance with his instructions”: FMC reasons at [46]. At the hearing, counsel stated that he was unable to deal with the estoppel issue; rather, the thrust of his argument was that the sequestration order should be set aside if the circumstances in which the default judgment was entered and maintained were unfair to Mr Komba. The alleged unfairness was that asserted in the grounds of appeal. I return to the matter of issue estoppel below.

Ground 3: Federal Magistrate erred in not going behind the judgment debt — miscarriage of justice on 22 November 2010

27    In relation to this ground, Mr Komba relied on the fact that the second rehearing application, filed on 24 September 2010, was heard and determined by the same state Magistrate who determined the first rehearing application in August that year. In Mr Komba’s submission, given the fact that the state Magistrate had conducted a trial on an important issue in the case and refused to hear the defences advanced by him at that time, “a fair minded observer might entertain an apprehension of bias” on the state Magistrate’s part due to “prejudgment of the issues” that would need to be determined on the second rehearing application.

28    Mr Komba submitted that the Federal Magistrate had these facts before him and ought to have found that the dismissal of his second rehearing application tended to show a miscarriage of justice and, accordingly, his Honour ought to have gone behind the default judgment and set aside the sequestration order.

Ground 4: The Federal Magistrate erred in inferring the sufficiency of the judgment debt

29    Mr Komba submitted that the Federal Magistrate erred in inferring the sufficiency of the judgment debt from the extraneous evidence. This evidence was said to be of three types.

30    First, Mr Komba submitted that the fact that he “had witnessed the signature of a third party building company to a contract with [his] former business partner, Mr Mpota, d[id] not reasonably and definitely lead to the probable conclusion that [he was] indebted to Aim for hire charges in relation to goods supplied to the site the subject of those building works”. I infer here that this matter related to the site at Lot 1007 Copeland Crescent, Point Cook.

31    Secondly, Mr Komba submitted that the fact that he had not given notice to AIM of the termination of his partnership with Mr Mpota did “not irresistibly lead … to the conclusion that [he] was liable to Aim for charges incurred by Mr Mpota”. Mr Komba submitted that his failure to give AIM notice did not alter Mr Mpota’s “underlying liability” for charges Mr Mpota incurred.

32    Thirdly, Mr Komba submitted that the fact that Mr Mpota was working on a site in respect of which AIM issued an invoice did not support the inference that the charges on that invoice were incurred by Mr Komba, without a finding that Mr Komba and Mr Mpota were partners at the time of the invoice.

AIM’s submissions

AIM’s response to Mr Komba’s Ground 1

33    AIM submitted that, in all the circumstances, Mr Komba had received sufficient assistance from the state Magistrate. According to Mr Komba’s own affidavit of 4 August 2010, he had been on notice that AIM claimed that the terms of settlement were binding on him since 15 July 2010 and “saw first hand … the Settlement Agreement” on 30 July 2010. AIM also referred to other documents that indicated that Mr Komba was on notice of AIM’s claim from around this time.

34    At the hearing in this Court, AIM also sought to tender evidence that Mr Komba had been advised of the pre-hearing conference by way of a letter from its solicitor, Mr Taylor, dated 1 April 2008. Mr Komba objected to this evidence on the basis that it was not before the Federal Magistrate. Although the Court has power to receive “further evidence” on an appeal pursuant to s 27 of the Federal Court of Australia Act 1976 (Cth), I would not receive the letters tendered by AIM: for one thing, they are not addressed to Mr Komba but to his partner, Mr Mpota, and would not establish without more that Mr Komba himself was made aware of the pre-hearing conference; and for this and other reasons the test generally applied before further evidence is admitted is not satisfied in this instance: see Watson v Australian Community Pharmacy Authority [2012] FCAFC 142 (“Watson”) at [109]–[110].

35    AIM also submitted that there was no miscarriage of justice in the state Magistrate proceeding to determine whether Mr Komba had authorised the terms of settlement as a threshold issue, referring to the state Magistrate’s explanation as to why he adopted this course. AIM argued that it was clear that Mr Komba was on notice of the issues and given an opportunity to file appropriate material. AIM contended that it “had no choice but to subpoena Ms Watson, as she and her firm refused to provide information to [AIM] on the grounds of legal professional privilege”.

AIM’s response to Mr Komba’s Ground 2

36    AIM contended that it was open to the state Magistrate to find that Mr Komba had authorised the terms of settlement. AIM submitted that this finding and the findings on which it depended were open to the state Magistrate on the evidence before him. AIM submitted that, contrary to Mr Komba’s assertion, there was no evidence that he had seen a draft of the settlement agreement and refused to sign it; rather, there was evidence of Mr Komba having first seen the signed agreement himself in the week prior to the August 2010 proceedings. AIM submitted that this evidence was not incompatible with Mr Komba having authorised Mr Mpota to sign the settlement agreement at an earlier time.

37    Further, AIM also drew the Court’s attention to the fact that the cheque paying the first instalment of the settlement sum, apparently signed by Mr Mpota, was from the account of “Bora Homes Australia” — a fact which AIM submitted undermined Mr Komba’s claim that he had no knowledge of the settlement.

38    On AIM’s argument, the state Magistrate conducted a fair, “summary trial” of this issue, considering evidence on the point presented by each party, with the consequence that Mr Komba was estopped from having that issue revisited.

AIM’s response to Mr Komba’s Ground 3

39    AIM submitted that it was appropriate for Mr Braun to hear the renewed application for rehearing on the basis of Guss v Magistrates’ Court of Victoria [1998] 2 VR 113 (“Guss v Magistrates’ Court”) and Stragan & Co Pty Ltd v Christodolou [2002] VSC 78 (“Stragan”) — a submission disputed by counsel for Mr Komba in reply. AIM argued that Mr Braun was well placed to hear the second rehearing application because he could readily determine whether material was new, since he was acquainted with the history of the litigation. AIM added that, to the extent that Mr Komba wished to challenge the finding that he had authorised the terms of settlement, such a challenge needed to be done by way of judicial review in the Supreme Court.

40    Further, AIM submitted that there had been no application made to the state Magistrate at the hearing of the second rehearing application to disqualify himself and, in consequence, Mr Komba could not now be heard to object to Mr Braun hearing that application. In any case, AIM submitted that reasonable apprehension of bias by reason of prejudgment must be “firmly established” and that this threshold was not met in the instant case.

AIM’s response to Mr Komba’s Ground 4

41    AIM argued that there was ample evidence of the debt on which the default judgment was founded. In addition to the matters already mentioned, AIM made a number of other points. First, AIM submitted that, by reason of s 40 of the Partnership Act 1958 (Vic) (“the Partnership Act”), the fact that AIM had no notice of the termination of the partnership between Mr Komba and Mr Mpota meant that Mr Komba could be held liable for transactions entered into by Mr Mpota with AIM. AIM also submitted that it was open to the Federal Magistrate to find that Mr Komba was liable for debts incurred by Mr Mpota, due to the operation of s 13 of the Partnership Act. AIM argued that this explained the Federal Magistrate’s findings as to Mr Komba’s liability for the hire of goods from AIM for a site subject to a building contract in Mr Mpota’s own name. AIM submitted that, having regard to partnership law, there was no error in inferring the sufficiency of the judgment debt because the invoices were sent to the partnership at Mr Komba’s residential address.

42    AIM noted that, at the hearing on 3 December 2010, Mr Komba’s legal representative indicated that Mr Komba was by that stage prepared to pay the settlement sum but sought to avoid being made bankrupt. This was, so AIM said, an “unambiguous representation” conceding an obligation to pay. Furthermore, AIM submitted that Mr Komba’s attempt to argue that he did not owe the debt was undermined by his concurrent attempt to argue that he had paid the debt, from which one could infer that he acknowledged an obligation to pay it.

CONSIDERATION

43    AIM presented its petition for the sequestration of Mr Komba’s estate on 29 March 2010. The petition was supported by the requisite affidavits and other documentation. From Mr Komba’s side, there were Notices of Opposition, a Defence and affidavits in opposition. As already noted, the Registrar having found the relevant matters proved in accordance with s 52(1) of the Bankruptcy Act 1966 (Cth) (“Bankruptcy Act”), made an order for sequestration on 22 December 2010. Of course, the Registrar had a discretion whether to make the sequestration order or not. If the Registrar had not been satisfied with the proof of the matters referred to in s 52(1) or considered that for other sufficient cause an order ought not be made, then he may have dismissed the petition: see s 52(2). The onus was on Mr Komba to establish sufficient cause to avoid the making of the order. Whilst the circumstances that may constitute “other sufficient cause” cannot be exhaustively stated, they clearly include a circumstance in which the judgment on which the creditor relies is shown not to be founded on a real debt.

44    Since the existence of a judgment is prima facie evidence of a debt (see, e.g., Re Longo; Ex parte Longo (1995) 57 FCR 523 at 527), the alleged debtor, here Mr Komba, was bound to satisfy the Registrar and, on review, the Federal Magistrate, that there was sufficient reason to question that judgment before an inquiry into the judgment would be made: cf Wren v Mahony (1972) 126 CLR 212 (“Wren”) and Simon v Vincent J O’Gorman Pty Ltd (1979) 41 FLR 95 (“Simon”), discussed hereafter. Because Mr Komba’s challenge was to a default judgment, the relevant question for the Registrar and, on review, the Federal Magistrate was whether there was a bona fide allegation that no real debt “lay behind” the default judgment. If there were such an allegation, then the Court might “go behind” the default judgment. So much is established by the authorities, briefly discussed hereafter.

45    Thus, whilst the court in bankruptcy generally accepts a judgment debt as sufficient proof of debt, particularly where it results from a contested hearing between the parties, it always has a discretion to go behind a judgment and must do so in the proper case: Wren at 224. As Barwick CJ said in that case (at 224–225):

The Court’s discretion in my opinion is a discretion to accept the judgment as satisfactory proof of that debt. That discretion is not well exercised where substantial reasons are given for questioning whether behind that judgment there was in truth and reality a debt due to the petitioner.

See also Simon at 111 per Lockhart J.

46    Whether or not the court will inquire into a judgment depends partly on the circumstances in which the judgment was obtained. If the judgment arose from a trial in which the parties appeared to contest the matters in issue, the court “will not re-open the matter unless a prima-facie case of fraud or collusion or miscarriage of justice is made out”: Corney v Brien (1951) 84 CLR 343 (“Corney”) at 356–357 per Fullagar J. Where judgment has been obtained in pursuance of a compromise, there must be a ground shown for challenging the compromise as such before the judgment will be re-opened: Corney at 357. Relevantly for Mr Komba’s case:

[W]herever the judgment in question is a judgment by default, it appears that the court will always “go behind” the judgment if there is what it regards as a bona-fide allegation that no real debt “lay behind” the judgment.

See Corney at 357–358 per Fullagar J. Deciding this latter question “will, of course, often involve some preliminary investigation of the merits of the attack on the judgment”: at 358.

47    In the Federal Magistrates Court, Mr Komba and AIM supported their respective positions chiefly by evidence on affidavit. Mr Komba’s affidavits and the grounds of Mr Komba’s appeal disclosed specific allegations of unfairness in the state Magistrates Court where the default judgment was entered and the applications for rehearing refused. They also challenged the various factual findings made by the state Magistrate as a basis for inferring that Mr Komba owed the underlying debt. The key findings on the terms of settlement fall into both categories.

48    I discuss each appeal ground in turn below. As will appear, none of these grounds establish that there was a bona-fide allegation that no real debt lay behind the default judgment. Accordingly, Mr Komba failed to show that the Federal Magistrate erred in declining to go behind the default judgment.

Ground 1

49    For the reasons I am about to state, there is no substance in Ground 1 of Mr Komba’s appeal. The proposition that the order of 6 August 2010 tended to show a miscarriage of justice should be rejected.

50    First, there is no substance in Mr Komba’s submission that the state Magistrate failed to provide proper assistance to him. It may be accepted that, generally speaking, self-represented litigants are at a disadvantage in the courts as compared with represented litigants, since self-represented litigants generally lack professional knowledge and experience. It may be accepted that, as part of their obligation to ensure a fair trial, the courts have particular duties to assist them: see Abram v Bank of New Zealand [1996] ATPR 41-507, at 42,347; Tomasevic at [98]–[132] and the authorities there cited. However, what a judge or magistrate must do to assist a self-represented litigant necessarily depends on the circumstances of the case, including the circumstances of the litigant, the nature of the issues and the demands of the case.

51    There is no reason to believe that Mr Komba was in any sense ambushed by AIM’s claim that he was bound by the terms of settlement. The evidence before the Federal Magistrate established that Mr Komba was on notice of AIM’s claim that he was bound by the terms of settlement from at least 30 July 2010, if not 15 July 2010. This was clear from Mr Komba’s affidavit of 4 August 2010. Moreover, in his affidavit of 29 July 2010 filed in the state Magistrates Court and given to Mr Komba the next day, AIM’s solicitor, Mr Taylor, deposed to the history of the matter in that Court and exhibited the correspondence between him and Hassall’s, the solicitors then acting for Mr Komba and Mr Mpota, as well as a copy of the terms of settlement. Mr Komba was therefore on notice of AIM’s reliance on the terms of settlement well before he attended the state Magistrates Court on 2 August 2010.

52    However, Mr Komba’s claim that he was not bound by the terms of settlement was not made clear until 2 August 2010, when the rehearing application first came before the state Magistrate. It needs to be borne in mind that, as at 2 August 2010, having regard to Hassall’s covering letter dated 18 September 2009, AIM was unaware that Mr Komba had not signed the terms of settlement. In this letter, Hassall’s had written to Mr Taylor, advising that they enclosed “Terms of Settlement executed by our client for your client’s consideration and … [o]ur client’s cheque in the amount of $1,669.37 being the first instalment pursuant to the agreement”. AIM only became aware that the signature was not that of Mr Komba when Ms Watson, from Hassall’s, gave evidence after Mr Komba’s counsel unsuccessfully claimed legal professional privilege. (Counsel for Mr Komba withdrew from the case after the state Magistrate rejected the privilege submission.)

53    According to the state Magistrate, Ms Watson (who attended on a subpoena sought by AIM)

said in her evidence that Mr Komba was not the signatory which appears besides the words or the word, “Executed as a deed”. Those words are executed as a deed by the word — the letters RIM appear and a signature beside it, for and on behalf of the defendant, struck out “respondent”, in the presence of Irina Watson.

The state Magistrate found subsequently, on 6 August 2010, that:

When one reads the execution clause carefully, one can see that it contains the words suggestive of an authority of the signatory to sign on behalf of the respondent, rather than suggesting that it is signed itself by the respondent.

…

It’s a document, as I say, which reads, “Executed as a deed by RIM for and on behalf of the respondent”. There is no doubt that the respondent referred to is Mr Komba and, in the circumstances, the evidence by Ms Watson that it is not his signature but rather Mr Mpota’s, reconciles with the apparent meaning of the document and indicates that she — Ms Watson — has really done nothing untoward by offering this document.

54    The events in court on 2 August 2010 gave rise to the question whether Mr Komba had authorised Mr Mpota to execute the terms of settlement on his behalf or not. The rehearing application was therefore adjourned from 2 August 2010 to 6 August 2010 on the claims of Mr Komba that, as the state Magistrate put it, “he did not sign the terms of settlement acknowledging his indebtedness, he did not authorise them to be signed on his behalf, he did not authorise any payment of moneys”.

55    At the hearing on 2 August 2010, the state Magistrate specifically identified for Mr Komba the issues concerning the terms of settlement that would fall for determination on the adjourned hearing on 6 August 2010 and explained the need for him to prepare and present affidavits setting out evidence on these issues.

56    In all the circumstances, it is improbable that Mr Komba did not understand the effect of his own claim and what was in issue; and it would appear that the state Magistrate’s explanation was adequate because Mr Komba in fact filed the affidavit of 4 August 2010 deposing to relevant matters to support his position.

57    I reject the submission that, in the circumstances, the state Magistrate was obliged to advise Mr Komba that Mr Mpota was an important witness. Mr Mpota’s involvement in the execution of the terms of settlement was obvious. It is most unlikely that Mr Komba did not appreciate this since it was Mr Komba’s claim that Mr Mpota had acted without his authority in executing the terms of settlement. Mr Mpota was the obvious person to confirm Mr Komba’s claim, but whether Mr Komba chose to call Mr Mpota was a matter for Mr Komba. Had the state Magistrate indicated that Mr Mpota should be called, Mr Komba may have found himself having to explain why he chose not to do so, itself a circumstance that may have unfairly prejudiced Mr Komba’s case. Even if Mr Komba later chose to file an affidavit by Mr Mpota (as he apparently did), this does not alter the fact that, for whatever reason, Mr Komba chose not to do so prior to the hearing on 6 August 2010. He cannot, however, make the state Magistrate responsible for his choice.

58    Further, there was no unfairness in determining Mr Komba’s claim that he had not authorised the terms of settlement before determining Mr Komba’s other claims. On 6 August 2010, the state Magistrate explained that he adopted this course because the point was a “narrow” one, the resolution of which would avoid “a lengthy process and a costly one”. There is no reason to doubt this explanation. If Mr Komba’s claim that he did not authorise the terms of settlement was rejected, then, so the state Magistrate explained at the subsequent hearing on 3 December 2010, the terms of settlement were “evidence of his acceptance that the cause of action before it merged [in the default judgment] was properly and accurately asserted against him”. In this circumstance, Mr Komba’s challenge to the default judgment became baseless; and there was nothing to be gained by examining the other issues that Mr Komba had raised.

59    Indeed, these considerations led the state Magistrate to say on 6 August 2010 that:

Ordinarily the court would, if the matter remained open for further evidence, simply grant leave to defend to have the matter determined at trial. In my view of the matter I have heard all the evidence and I have decided this case in circumstances very similar to a trial. I have heard all the relevant evidence dealing with these terms of settlement and there would be no point therefore in having the matter rehearsed again; indeed, it would be improper. It would be a complete waste of the court’s time and the public’s resources. Having heard the evidence, I therefore find against Mr Komba and in so finding I find that he has no arguable defence to this claim. His application is refused.

60    In the Federal Magistrates Court, Mr Komba did not contest the state Magistrate’s understanding of the effect of the terms of settlement. In this Court, his counsel conceded that “if Mr Komba authorised those terms of settlement, then he is bound by them, and quite rightly, he would be estopped by his deed, and he would be estopped procedurally from seeking to reagitate that question.”

61    The state Magistrate’s view of the effect of the terms of settlement may be best understood if they are set out. Omitting formal parts, the terms of settlement were as follows:

1.    The Applicant issued proceedings in the Federal Magistrates’ Court of Australia at Melbourne, being proceedings No. MLG846/2009 (“the bankruptcy proceedings”).

2.    The Applicant’s claim is for a debt due and payable by the Respondent for the hire of goods and chattels.

4[sic].    The Respondent [Emerald Komba t/as Bora Homes Australia] agrees to pay the Applicant [AIM Site Hire Pty Ltd … trading as AIM Hire] the sum of $6,677.47 inclusive of costs (hereinafter “the settlement sum”).

5.    The Respondent shall pay the Applicant the settlement sum by instalments, of the sum of $1,669.37, the first instalment on the 22nd day of September 2009 and by further instalments of $1,669.37 on the 22nd day of each month thereafter commencing on the 22nd day of October 2009 until payment of the settlement sum in full.

6.    All monies, i.e. the settlement sum is to be forwarded to Ward Taylor Solicitors payable to the Applicant as advised to the Respondent in writing by Ward Taylor Solicitors.

7.    In the event that the Respondent defaults in payment of the settlement sum or any of the instalments or any part thereof referred to above, the Applicant shall be at liberty to re-instate the proceedings against the Respondent on the day of that default for the following amounts:

i)    $6,677.47 for the Applicant’s claim or such lesser amount as is then due after taking into account any payments made by the Respondent;

ii)    Interest on the sum of $6,677.47 or the balance outstanding from time to time from the date of issue of the proceedings herein until entry of judgment at the rate for the time being fixed under S.2 of the Penalty Interest Rates Act 1983.

iii)    legal costs of and incidental to the Application consequent upon the default of the payment of an instalment or any part thereof.

8.    These Terms of Settlement may be produced to the Court as conclusive evidence of the Respondent’s consent to the reinstatement against him for all amounts then claimed by the Applicant, in accordance with these Terms.

9.    An Affidavit by the Applicant that it has not received the whole or part of the sum due shall be sufficient proof of non-payment of the said sum.

…

11.    Upon the execution of the Terms the Applicant shall do all things and sign all documents necessary to:

    a)    Withdraw from the proceeding with [sic]

    b)    No order as to costs

    and forward a copy of such document [sic] to the Respondent’s legal representative, Hassall’s Litigation Services.

12.    The parties acknowledge that before signing these Terms of Settlement the parties have each sought and received their own, separate independent legal advice.

13.    Save should there be a default by the Respondent in the performance of these Terms, upon payment in full of the settlement sum the Applicant shall thereupon release and forever discharge the Respondent from all actions, claims, liabilities, demands of every description, costs and expenses of any kind arising out of or in connection with the claim and the proceedings, which the Applicant may now have or has had or may hereafter have against or in respect to the claim and the proceedings but for these Terms and this conditional Release.

62    Since there was no dispute between the parties as to the effect of the terms of settlement, it is unnecessary to give any detailed consideration to the matter, save to observe that it was apparently open to the state Magistrate to treat them as evidence of Mr Komba’s acceptance that the underlying debt was his to discharge. Whilst the terms of settlement did not expressly acknowledge the underlying debt, the debtor’s acknowledgment that the debt was due and owing to AIM can be inferred from them. The terms of agreement clearly state the nature of AIM’s claim — which was the subject of the settlement — as a claim “for a debt due and payable by [Mr Komba] for the hire of goods and chattels”. This was the debt that founded the default judgment. The settlement sum itself was made up of that debt and associated costs. The terms contain no denial or reservation of admission by Mr Komba of his liability to pay the debt. On the contrary, the terms make it plain that, in consideration of Mr Komba discharging his debt to AIM, he would avoid AIM’s pursuit of bankruptcy proceedings against him, based on the default judgment itself based on the debt.

63    It is also convenient to note here that counsel for Mr Komba did not suggest that his Honour erred in characterising the terms of settlement (at [45]) as “an accord executory” entitling AIM on non-performance to “repudiate in reliance upon the breach” and to rely on the default judgment: see also McDermott v Black (1940) 63 CLR 161 at 183–184; Osborn v McDermott [1998] 3 VR 1 at 7–10.

64    For the reasons stated, there was no error on the Federal Magistrate’s part in failing to discern a miscarriage of justice in the order that eventuated on 6 August 2010.

65    In any case, Mr Komba had a number of opportunities to contest the state Magistrate’s order. In an affidavit of 25 August 2010 filed in the Federal Magistrates Court, Mr Komba deposed that he had engaged a lawyer to appeal the state Magistrate’s decision of 6 August 2010. As noted above, an appeal was subsequently filed in the state Supreme Court and later abandoned. Mr Komba’s lawyers undertook the filing of the second rehearing application (discussed above). This application was also unsuccessful, as was a subsequent application for a permanent stay of the default judgment.

66    As counsel for AIM observed, it would apparently have been open to seek judicial review of the state Magistrate’s order in the state Supreme Court, but Mr Komba, though legally represented, did not take this course.

67    Accordingly, I would reject Ground 1.

Ground 2

68    For the reasons stated below, I would also reject Mr Komba’s claim that the state Magistrate’s finding that he had authorised the terms of settlement was unsound.

69    The state Magistrate found that, while Mr Komba personally did not execute the terms of settlement, Mr Mpota was authorised to sign the terms of settlement on his behalf. In reaching this conclusion, the state Magistrate accepted that Mr Komba and Mr Mpota were partners in the business of Bora Homes Australia or Bora Homes, as it was also called. Indeed, this was not apparently disputed. Significantly for the outcome of the principal issue, in making this and other findings, the state Magistrate accepted and relied on the evidence of Ms Watson, a solicitor at Hassall’s.

70    Ms Watson’s evidence was that: (1) Mr Komba and Mr Mpota engaged her to act for them in the business of Bora Homes Australia; (2) specifically, they consulted her for the purpose of obtaining legal advice in respect of a prosecution in relation to their business and in respect of a bankruptcy notice that Mr Komba had received; (3) when she was asked to act, “each of these men told her that she would be entitled to take her instructions from either one of them in respect of both matters, that she would be entitled to contact either one of them in respect of both matters and that she found it difficult and that she had been told that one of the best ways of contacting them was through the email address of Mr Mpota”; and (4) “apart from that actual meeting and conversation there was a phone conversation later on with Mr Komba personally in which he gave her instructions as to the amount of money he could or was willing to pay, an amount of money that she should negotiate, a settlement for him”.

71    The state Magistrate held that, on the balance of probabilities, “by that time she well knew the voice[s] of her clients and she could distinguish between them”, noting that:

[S]he being a legal practitioner, had noted these things down in her file. She was keeping notes of these events. For her to have kept notes which indicate these things happened, which are not true, means that she would have had to go to the extent of falsifying a record.

The state Magistrate was satisfied that Ms Watson “did have the authority of Mr Komba to take instructions from him or Mr Mpota” and “she took her instructions from Mr Komba in relation to the preparation of the terms of settlement”. He was also satisfied that:

[A]lthough she did not ask specifically, she saw it within her authority — and I think it was — to have Mr Mpota, Mr Komba’s business partner in the firm of Bora Homes, sign these terms of settlement. The evidence does not tell me who provided the sum of $1669.37 cents, but I am satisfied that it was Mr Mpota. There is more reason to believe that Mr Komba was well aware of the circumstances, as otherwise Mr Mpota would be paying money not on his own behalf, but on Mr Komba’s behalf without Mr Komba knowing it.

That is not only illogical, it is unlikely. There must have been discussions, I think, on the balance of probabilities, not only between Mr Komba and Ms Watson, but also between Mr Komba and Mr Mpota about these matters. So that when Mr Komba tells me that he had no knowledge of these things at all, I cannot accept that to be the case.

72    The evidence concerning the first rehearing application before the Federal Magistrate showed that it was clearly open to the state Magistrate to make these findings on the evidence before him. It is true, as Mr Komba’s counsel said, that Mr Komba’s claim that he did not owe the debt is itself at odds with a finding that he had authorised the settlement agreement. This inconsistency was, however, resolved against him in the state Magistrates Court. As already stated, Mr Komba might have called Mr Mpota on 6 August 2010 to support his account but he did not do so. In this circumstance, the state Magistrate’s finding that Mr Komba had authorised the terms of settlement was not to be impugned upon the basis that there was no evidence from Mr Mpota.

73    Furthermore, there was other evidence before the Federal Magistrate that also tended to confirm the state Magistrate’s finding that Mr Komba had authorised the terms of settlement. As AIM submitted, the evidence indicated that the cheque for the first instalment of the settlement sum (being $1,669.37), apparently signed by Mr Mpota, was drawn on the account of “Bora Homes Australia” — that is, on the partnership account. This fact, as AIM submitted, tended to undermine Mr Komba’s claim that he had no knowledge of the settlement and had not authorised Mr Mpota to execute the terms of settlement on his behalf. Moreover, Mr Komba apparently regarded the amount of $1,669.37 as being paid on his behalf when he made his affidavit in support of the second rehearing application on 17 September 2010. There was also the statement made in the state Magistrates Court on 3 December 2010 by Mr Komba’s legal representative that his client “is prepared, now, to pay the amount that he owes under the terms of settlement but … he wants to avoid to be made bankrupt” and hence sought a retrospective stay of execution.

74    At this stage, it is convenient to comment briefly on the Federal Magistrate’s holding that the doctrine of issue estoppel applied to prevent Mr Komba from contesting the state Magistrate’s finding that he authorised the terms of settlement and their execution. The principles are well established. To raise an issue estoppel, it must be shown:

(1) that the same question has been decided; (2) that the judicial decision which is said to create the estoppel was final; and (3) that the parties to the judicial decision or their privies were the same persons as the parties to the proceedings in which the estoppel is raised or their privies.

See Kuligowski v Metrobus (2004) 220 CLR 363 (“Kuligowski”) at 369 per Gleeson CJ, McHugh, Gummow, Kirby, Hayne, Callinan and Heydon JJ, quoting Lord Guest in Carl Zeiss Stiftung v Rayner & Keeler Ltd (No 2) [1967] 1 AC 853 at 935.

75    In this case, neither party addressed any real argument as to the Federal Magistrate’s holding that the issue estoppel doctrine applied. Nor did either party address the requirements of the doctrine. Whilst requirements (1) and (3) were apparently satisfied, it may be doubted that requirement (2) was met.

76    For an issue estoppel to exist, it is necessary that the decision from which the estoppel arises was a final decision: see Maurice Blackburn Cashman v Brown (2011) 242 CLR 647 at 662 [40] per French CJ, Hayne, Crennan, Kiefel and Bell JJ and the authorities there cited. As the High Court said in Kuligowski at 371 [25]: “[a] “final”decision … is one which is not of an interlocutory character, but is completely effective unless and until rescinded, altered or amended”. The decided cases establish that an order refusing an application that judgment be set aside and the matter reheard is not a final order but an order in the nature of an interlocutory order: see Kinex Exploration Pty Ltd v Tasco Pty Ltd [1995] 2 VR 318 at 320; Lucas v Transport Corp Victoria [2000] 1 VR 156 at 158; Hannan v Binns (unreported, Supreme Court of Victoria, Gobbo J, No 6926/1993, 15 November 1993); Guss v Johnstone (unreported, Supreme Court of Victoria, Beach J, No 4038/1994, 23 March 1994). Accordingly, it appears unlikely that the doctrine of issue estoppel applied so as to prevent Mr Komba from seeking a finding in another court that he had not authorised the terms of settlement. Since this point was not argued, however, I make no definitive ruling on it.

77    If there was error in this regard in the Federal Magistrate’s reasoning, however, it would not show appellable error, because no error was shown in his Honour’s conclusion that Mr Komba had not shown that the state Magistrate’s authorisation finding was unsound. This meant, of course, that in so far as Mr Komba relied on this matter to establish a bona fide allegation that no real debt lay behind the default judgment, he failed.

78    For the reasons stated, I would reject Ground 2.

Ground 3

79    There is also no substance in Mr Komba’s contention as to reasonable apprehension of bias. In determining whether a judge or magistrate is disqualified by reason of the appearance of bias (in this case, by prejudgment) the test is “whether a fair-minded lay observer might reasonably apprehend that the judge [or magistrate] might not bring an impartial and unprejudiced mind to the resolution of the question [that she or he] is required to decide”: see Michael Wilson & Partners Limited v Nicholls (2011) 244 CLR 427 at 437 [31] per Gummow ACJ, Hayne, Crennan and Bell JJ. At 446 [67], their Honours added:

[A]n allegation of apprehended bias requires an objective assessment of the connection between the facts and circumstances said to give rise to the apprehension and the asserted conclusion that the judge might not bring an impartial mind to bear upon the issues that are to be decided. An allegation of apprehended bias does not direct attention to, or permit consideration of, whether the judge had in fact prejudged an issue.

80    As already noted, AIM relied on Guss v Magistrates’ Court and Stragan in support of its submission that, far from giving rise to any apprehension of bias, it was appropriate for Magistrate Braun to determine Mr Komba’s second rehearing application. These two authorities establish that, except where an initial rehearing application has been dismissed for a technicality, or where there is fraud or where new evidence becomes available after dismissal of the first application, a second rehearing application is an abuse of process and doomed to fail: see Guss v Magistrates’ Court at 123. As Batt J there said:

But in my view the second defendant was also correct in his submission that the magistrate was not bound to consider the whole of the material and in particular the material which he and Mr Myers had previously considered. In my view, that conclusion is required by the judgments of Brooking JA and Hayne JA in DA Christie Pty Ltd v Baker [1996] 2 VR 582 at 595–8 and 601–6 … Further, on the view of Hayne JA and, I think, of Brooking JA, the magistrate was probably only bound to consider material that was not available at the time of the previous application.

Their Honours relied on the principle relating to abuse of process, holding that a second application is an abuse of process unless there is proof of fraud or it is sought to adduce ‘fresh’ evidence, in the sense used in relation to admission of evidence in appeals. If the evidence was available at the time of the first application and there is no explanation of why it was not then put forward, then, at least, the second application will constitute an abuse of process.

81    As counsel for Mr Komba submitted, Guss v Magistrates’ Court and Stragan are not authorities as such for the proposition that the same magistrate can hear a second rehearing application. Properly understood, however, AIM’s point was that, since the test required consideration of the ‘freshness’ of any ‘new’ evidence, there was some practical advantage in Mr Braun hearing and determining the second rehearing application. Magistrate Braun had a greater familiarity than other magistrates with the evidence adduced on the first rehearing application — which apparently he was not required to reconsider save to ascertain whether the proposed additional evidence was ‘new’ and, more particularly, ‘fresh’ in the sense referred to by Batt J in the passage from Guss v Magistrates’ Court set out above. Furthermore, in Guss v Magistrates’ Court the same state Magistrate heard the second and third of Mr Guss’s three rehearing applications — a fact that did not occasion any censure from Batt J in his careful judgment.

82    Further, applying the test in Guss v Magistrates’ Court and Stragan, it seems tolerably clear that the affidavit of Mr Mpota, which Mr Komba apparently filed in support of the second rehearing application, was not ‘fresh’ evidence in the relevant sense. There is no reason to believe that it was not available to Mr Komba at the time of the hearing of the first application and Mr Komba has not referred to any explanation as to why it was not available to him on the earlier occasion: see also Stragan at [19]. This, then, would explain the state Magistrate’s claimed treatment of that affidavit. Accordingly, I would reject Mr Komba’s submission in reply that the state Magistrate’s treatment of Mr Mpota’s affidavit “cement[s] the apprehensions [of bias] of a fair minded observer”.

83    It is convenient to note here that I would not receive the affidavit of Mr Mpota as further evidence on this appeal because the proposed evidence would not satisfy the test generally applied before further evidence is admitted: see Watson at [109]–[110]. Moreover, I note that AIM submitted that the receipt of the affidavit would be unfairly prejudicial to AIM since it would open a further inquiry. Another way of putting this submission would be to say that the case would have been conducted differently had the evidence been led before the Federal Magistrate. I am inclined to accept AIM’s submissions in this regard.

84    As already indicated, I accept that there was a practical advantage in Mr Braun hearing and determining the second rehearing application. In any case, the mere fact that Mr Braun heard and determined both rehearing applications was insufficient to “firmly establish” a reasonable apprehension of bias in the form of prejudgment. As Mason J stated in Re JRL; Ex parte CJL (1986) 161 CLR 342 at 352:

There may be many situations in which previous decisions of a judicial officer on issues of fact and law may generate an expectation that he is likely to decide issues in a particular case adversely to one of the parties. But this does not mean either that he will approach the issues in that case otherwise than with an impartial and unprejudiced mind in the sense in which that expression is used in the authorities or that his previous decisions provide an acceptable basis for inferring that there is a reasonable apprehension that he will approach the issues in this way. In cases of this kind, disqualification is only made out by showing that there is a reasonable apprehension of bias by reason of prejudgment and this must be “firmly established”: R v. Commonwealth Conciliation and Arbitration Commission; Ex parte Angliss Group [(1969) 122 CLR 546, at 553–554]; [R v Watson; Ex parte Armstrong (1976) 136 CLR 248, at 262]; Re Lusink; Ex parte Shaw [(1980) 32 ALR 47 at 50–51].

85    Furthermore, I accept that, as AIM submitted, it was in the circumstances of this case not open to Mr Komba to complain that there was a reasonable apprehension of bias created by Magistrate Braun hearing and resolving Mr Komba’s second rehearing application, because this claim should have been raised, if raised at all by Mr Komba (then apparently advised or represented by lawyers), before Mr Braun on the hearing of the second application on 22 November 2010. This is the effect of Vakauta v Kelly (1989) 167 CLR 568 (“Vakauta”) at 572 and Smits v Roach (2006) 227 CLR 423 (“Smits”) at 439–440 per Gleeson CJ, Heydon and Crennan JJ.

86    In Vakauta at 572, Brennan, Deane and Gaudron JJ said:

Where … comments which are likely to convey to a reasonable and intelligent lay observer an impression of bias have been made, a party who has legal representation is not entitled to stand by until the contents of the final judgment are known and then, if those contents prove unpalatable, attack the judgment on the ground that, by reason of those earlier comments, there has been a failure to observe the requirement of the appearance of impartial judgment. By standing by, such a party has waived the right subsequently to object. The reason why that is so is obvious. In such a case, if clear objection had been taken to the comments at the time when they were made or the judge had then been asked to refrain from further hearing the matter, the judge may have been able to correct the wrong impression of bias which had been given or alternatively may have refrained from further hearing. It would be unfair and wrong if failure to object until the contents of the final judgment were known were to give the party in default the advantage of an effective choice between acceptance and rejection of the judgment and to subject the other party to a situation in which it was likely that the judgment would be allowed to stand only if it proved to be unfavourable to him or her.

87    Whilst Vakauta concerned remarks made by a trial judge in the course of a hearing, the principle outlined in the above passage has equal force in such a case as Mr Komba alleges here, as indeed Smits confirms. Accordingly, by not raising the matter of apprehended bias before Mr Braun on 22 November 2010, Mr Komba waived the right to object at a later date.

88    In closing submissions, counsel for Mr Komba sought to argue that without the transcript of 22 November 2010 one could not be sure that the point was not taken by Mr Komba. If, however, Mr Komba wished to assert he had taken the point, he could have sought to do so. He did not seek to do so on oath or otherwise. Had the point been taken, then no doubt the state Magistrate would have ruled on it. There is no evidence that he did. This argument must be rejected.

89    Ground 3 therefore fails.

Ground 4

90    Ground 4 was not well developed. Under this ground, Mr Komba apparently challenged the Federal Magistrate’s reasoning at three points: (1) regarding the significance of a contract between Mr Mpota and Advanced Building and Engineering Pty Ltd (“Advanced Building”) of 19 September 2006; (2) the effect of Mr Komba’s failure to give notice to AIM of the termination of his partnership with Mr Mpota; and (3) the significance of Mr Mpota’s building work at a site in respect of which AIM delivered a chattel hire invoice or invoices. Points (1) and (3) were largely subsumed within point (2). As best I can discern, each of these points largely depended on Mr Komba’s assertion that his partnership with Mr Mpota in the business of Bora Homes Australia had been terminated — an assertion that was made for the first time before the Federal Magistrate.

91    There is no merit in any of these assertions. Under s 13 of the Partnership Act, Mr Komba was liable jointly with Mr Mpota “for all debts and obligations of the firm incurred while he is a partner”. I accept that, as AIM submitted, by virtue of s 40(1) of the Partnership Act, AIM was entitled to treat Mr Komba and Mr Mpota as partners in the business of Bora Homes until AIM had notice that the partnership had been brought to an end. Mr Komba did not challenge the Federal Magistrate’s finding that there was no evidence that notice was given to AIM that the partnership had ended. It was for Mr Komba to establish that this notice had been given and he did not do so. There was therefore no need for a positive finding that Mr Komba and Mr Mpota were still partners in the partnership at the time the chattel hire charges were incurred. It was enough that there was a finding as to their partnership and that he failed to establish that notice had been given to AIM of its termination.

92    Mr Komba’s claims that he was not liable for debts incurred by Mr Mpota fail for much the same reason. The charges relied on by AIM as giving rise to the underlying debts were all incurred whilst Mr Komba and Mr Mpota were in partnership, or alternatively, without notice to AIM that the partnership had terminated. Accordingly, I accept that, as AIM submitted, no error is shown in the Federal Magistrate’s findings as to Mr Komba’s liability for the hire of goods from AIM for a site subject to a building contract in Mr Mpota’s own name (FMC reasons at [47]) or in relation to Mr Mpota’s building work: see points (1) and (3) above. The evidence before the Federal Magistrate showed that the chattel hire invoices were to Bora Homes, indicating the name of the business of the partnership of Mr Komba and Mr Mpota. For the reasons stated, Mr Komba has failed to show that he has a bona fide claim that he was not jointly liable with Mr Mpota for the relevant charges.

93    In his brief closing, Mr Komba’s counsel also referred to properties, in relation to which chattel hire charges were invoiced, which were said not to appear on Mr Komba’s insurance schedule. The Federal Magistrate was not persuaded that this was sufficient reason to go behind the default judgment; and this was not a matter raised in Mr Komba’s grounds of appeal, in written submissions filed prior to the appeal, or at any time during the hearing prior to closing. It was not open to counsel to raise this further issue by a side-wind in closing. In any event, there is no apparent error in the Federal Magistrate’s treatment of the point.

DISPOSITION

94    In the Federal Magistrates Court, Mr Komba challenged the making of the sequestration order chiefly on the basis that the Court should be satisfied that it was proper to go behind the default judgment on which the sequestration order relied. On appeal, he has argued in substance that the Federal Magistrate erred in not accepting this. Further, both in the Federal Magistrates Court and on appeal, Mr Komba’s case was conducted on the basis that whether the court should “go behind” the default judgment and whether Mr Komba should have been found to have authorised the terms of settlement were interlinked questions.

95    Mr Komba had an opportunity on 6 August 2010 in the state Magistrates Court to argue that he did not authorise the terms of settlement. He made his argument and it did not succeed. He sought to contest the issue of authorisation a second time in the state Magistrates Court, again unsuccessfully. The state Magistrate found that, although he did not sign the terms of settlement himself, Mr Komba authorised their execution; and that the terms of settlement were evidence that he had accepted the underlying debt, indicating that the default judgment was not baseless. Mr Komba never sought judicial review in the Supreme Court. Whilst instituting another kind of proceeding in the Supreme Court, he did not pursue it.

96    In the circumstances of the case, the Federal Magistrate was not satisfied that there was any bona-fide allegation that no real debt “lay behind” the judgment. The Federal Magistrate was satisfied that the sequestration order was properly made. For the reasons set out above, none of Mr Komba’s grounds of appeal were made out. Mr Komba failed to show relevant error in the Federal Magistrate’s judgment. Accordingly, the appeal should be dismissed, with costs.

Associate:

Dated:    25 January 2013