FEDERAL COURT OF AUSTRALIA

Hussein v Kubica [2014] FCA 695

THE COURT ORDERS THAT:

1.    The appeal be dismissed.

2.    The appellant pay the respondent’s costs as agreed or taxed.

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

THE COURT ORDERS THAT:

1.     The application for an extension of time under Rule 36.05 of the Federal Court Rules 2011 (Cth) be dismissed.

2.    The applicant pay the first respondent’s costs as agreed or taxed.

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

REASONS FOR JUDGMENT

The proceedings

1        These reasons for judgment concern an appeal and application for extension of time to file a notice of appeal in respect of orders made by the Federal Circuit Court of Australia (FCC) in two related proceedings.

2        In proceeding NSD 2460 of 2013 the appellant, Mohamed Hussein, appeals from the orders made by the FCC sequestrating his estate (Kubica v Hussein [2013] FCCA 1957; Kubica v Hussein (No 2) [2013] FCCA 2092). The FCC proceeding to which those orders relate (the sequestration proceeding) was commenced by way of creditor’s petition by the respondent, Ms Kubica.

3        Proceeding NSD 164 of 2014 is an application by Mr Hussein under rule 36.05 of the Federal Court Rules 2011 (Cth) (the Rules) for an extension of time to file a notice of appeal (the extension application) from orders of the FCC dismissing his application to set aside the bankruptcy notice upon which the creditor’s petition in the sequestration proceeding was founded (the bankruptcy notice) (Hussein v Kubica [2013] FCCA 1817). The second respondent in the extension application, Mr Hussein’s official trustee in bankruptcy, has filed a submitting appearance and has taken no further part in the proceeding.

Background

4        The procedural and factual history of the dispute to which these proceedings relate is set out below insofar as relevant.

5        Mr Hussein and Ms Kubica were formerly married. On 17 July 2009, in proceedings which are not the subject of this appeal or the extension application, the Federal Magistrates Court of Australia made consent orders for a property settlement between Mr Hussein and Ms Kubica (the Family Law proceedings). Later that year, Mr Hussein filed an application under s 79A of the Family Law Act 1975 (Cth) (Family Law Act) seeking to have the property settlement orders set aside on the basis of non-disclosure of certain matters by Ms Kubica during the settlement negotiations. The s 79A application was resolved by the making of consent orders on 12 August 2010 (the 2010 consent orders).

6        On 2 March 2011, Mr Hussein filed a second s 79A application in respect of the property settlement orders, this time in the Family Court of Australia (Family Court). In the same proceeding, Mr Hussein also sought orders pursuant to s 109A of the Family Law Act for the enforcement of the 2010 consent orders. In May 2012, the Family Court dismissed the second s 79A application by consent. However, Mr Hussein pressed his s 109A application, which was heard and summarily dismissed with costs ordered against Mr Hussein as agreed or assessed on an indemnity basis. On appeal, the Full Court of the Family Court upheld the indemnity costs order. It is from this and another costs order in the Family Court proceedings that the bankruptcy notice arose.

7        In April 2013, Ms Kubica caused a bankruptcy notice to be served upon Mr Hussein in respect of the unsatisfied costs orders (which had been fixed as a judgment debt, by then amounting to $77,445.85 including interest). On 12 August 2013, Ms Kubica commenced the sequestration proceeding by way of creditor’s petition founded upon the bankruptcy notice.

8        Between service of the bankruptcy notice upon Mr Hussein and commencement of the sequestration proceeding, Mr Hussein filed a third application under s 79A of the Family Law Act (the third s 79A application). As with his previous applications, Mr Hussein asserted non-disclosure by Ms Kubica in relation to the property settlement and subsequent consent orders. The third s 79A application was transferred to the Family Court where it is presently pending.

9        On 9 September 2013, Mr Hussein filed his opposition to the creditor’s petition. He also sought an adjournment of the sequestration proceeding until the third s 79A application had been dealt with by the Family Court.

10        On 12 September 2013, Mr Hussein filed an application in the High Court of Australia for special leave to appeal, among other things, the Full Court’s decision to uphold the Family Court costs order.

11        On 2 October 2013, Mr Hussein commenced a second FCC proceeding (to which the application for an extension of time to file a notice of appeal relates) seeking to set aside or extend time for compliance with the bankruptcy notice.

12        On 29 October 2013, the FCC dismissed the application to set aside the bankruptcy notice on the basis that it lacked jurisdiction, Mr Hussein having failed to bring his application within the time for compliance with the bankruptcy notice.

13        On 19 November 2013, the primary judge heard Mr Hussein’s adjournment application and, after hearing from Mr Hussein, decided not to grant the adjournment and instead to allow the creditor’s petition. The primary judge characterised Mr Hussein’s case both in respect of the adjournment application and his opposition to the creditor’s petition as being based on three grounds: - (a) the third s 79A application pending in the Family Court, (b) the pending special leave application in the High Court, and (c) that Ms Kubica owed Mr Hussein $35,000.

14        In respect of the first ground, the primary judge said ([2013] FCCA 1957):

[5]     It should be noted at the outset that this is not the first application under s.79A that Mr Hussein has made. It is the third. … In July 2011 Mr Hussein commenced a second s.79A proceeding asserting non-disclosure. As part of those proceedings he demanded access to documents relating to his wife’s financial affairs and in particular to documents relating to a business which his wife had run at all material times, a travel agency known as “Greece and Mediterranean Travel Centre Pty Limited”. It seems clear to the court, in particular from a letter sent by Ms Kubica’s first solicitors to Mr Hussein’s solicitors dated 9 March 2012 that there were a very large number of documents that might not have been available to Mr Hussein in the original proceedings. However, these were made available to him in that month and they were the subject of another detailed letter this time from his solicitors to his former wife’s setting out what was then considered to be the inconsistency between financial statements filed on her behalf previously and the information that had come to light by the production of those documents. …

[6]    On 17 May 2012, the parties, both of whom were represented by senior counsel and solicitors, came to an agreement consenting to the dismissal of the s.79A application which agreement was reduced to Orders of Murphy J which recorded inter alia that:◦

“All applications in respect to financial matters filed by the Applicant Husband since 12 August 2010 be withdrawn and dismissed, including but not limited to ... initiating application filed 2 March 2011 seeking orders under s.79A.”

…

[7]    Notwithstanding those orders Mr Hussein, this time unrepresented, seeks to re-agitate by way of application under s.79A the financial arrangements between himself and his wife. …

15        The primary judge referred to a number of decisions in respect of s 79A and continued (at [10]):

I take from these authorities that the Family Court, being anxious to ensure that persons appearing before it do provide the fullest disclosure, adopts a pragmatic approach to the notion of miscarriage of justice depending upon the evidence provided in each case. For this reason, if I was to be satisfied by Mr Hussein that matters had not been disclosed to him at the time he entered into the agreement evidenced by the consent orders of Murphy J, there would be reasonable prospects that the court would entertain a further application from him.

16        The primary judge’s reasons then set out the matters which Mr Hussein had asserted to be the basis for his third s 79A application, all instances of alleged non-disclosure in relation to the Family Court proceedings, which may be summarised as follows: - (i) when disclosing her income, Ms Kubica included retained profits of approximately $624,938 in her travel agency business which were paid out to her as a dividend after the financial agreements between the parties and which increased her taxable income considerably; (ii) Ms Kubica failed to disclose the retained profits of the travel agency in her valuation of the business; (iii) Ms Kubica severely underestimated her income from the travel agency, even leaving aside the issue of payment of dividends from retained profits; (iv) Ms Kubica redrew $97,000 from a mortgage account jointly held by her and Mr Hussein which she then placed in an account in her own name so that, at the time the property was divided, the liabilities against the matrimonial house were $97,000 more than they should have been and Ms Kubica’s assets correspondingly higher; (v) non-disclosure of or in relation to an insurance policy taken out by Ms Kubica; and (vi) non-disclosure of a superannuation account with ING.

17        In respect of (i) and (ii), the primary judge said (at [11]):

True it is that in the financial reports delivered to the court Ms Kubica’s income was understated. But by the time the matter came to be agitated for the second time in the Family Court, Mr Hussein or his solicitors would have been well aware of the true position. Ms Kubica produced to the court as Exhibit 1 a bundle of documents known as the “Tender Bundle” containing some 133 pages of documents which were made available to Mr Hussein either through subpoenae that had been issued or elsewhere in the correspondence passing between the solicitors that I have previously referred to. These documents were in the hands of Mr Hussein or his legal advisors not less than a month before the s.79A hearing was due to commence. They include detailed financial statements of the company which clearly indicate that by 2010, which is the relevant date of these proceedings, there were accumulated profits of $549,938.00. The documentation also indicates that reference to these retained profits was made by the Valuers, Merrill Associates Pty Limited, whose report of 4 August 2010 is produced by Mr Hussein himself. As Mr Hussein correctly points out any valuation of the business would not take into account the retained profits, it would be based upon the year on year profit and tangible assets and so the figures of between $600,000.00 odd produced by Ms Kubica and $800,000.00 odd produced by Mr Hussein were probably correct.

18        In respect of (iii), the primary judge similarly found that the information was known to Mr Hussein because the documents which were made available to Mr Hussein prior to the making of the second s 79A included tax returns for the relevant years clearly stating Ms Kubica’s income. In respect of (iv), the primary judge noted that Mr Hussein accepted that he was aware of the transfer of $97,000 by the time of the second s 79A application and, accordingly, this matter could have been raised during the negotiations which led to the withdrawal of that application by consent. In respect of (v), the primary judge noted that the insurance policy had no surrender value and was only available upon Ms Kubica’s death and the superannuation account linked to the policy had no funds in it. Further, Mr Hussein conceded that he was aware that the policy had no value. As to a collateral point raised by Mr Hussein that the declaration made by Ms Kubica as to her earnings when she took out the policy, the primary judge said (at [14]):

It does not seem that he had a copy of this document in May 2012 but the income that she declared is in the general range of her actual income as indicated on her tax returns. The court has no reason to believe that her actual income was anything other than as declared and so it matters not what figure she might have put to the insurance company. Mr Hussein had those income tax returns at all material times.

19        In respect of (vi), the primary judge noted that the existence of the superannuation account was recorded in an asset statement given to the Family Court on 30 July 2010. Accordingly, the primary judge found that the third s 79A application had no prospects of success.

20        As to the second ground, relating to the special leave application, the primary judge said (at [19]):

Mr Hussein has not addressed the court in any detail as to why he is likely to succeed in this appeal and the court finds it difficult to obtain the degree of satisfaction required that the High Court would entertain an appeal against a costs order of a single Judge that had already been considered by a Full Bench.

21        In respect of Mr Hussein’s third ground, the primary judge noted that Mr Hussein’s claim was at a maximum $35,000, while the petition was for more than $70,000. Thus, even if Mr Hussein’s claim was made out, the balance of the debt underlying the creditor’s petition still exceeded $5,000, so that there was no reasonable prospect of Mr Hussein resisting the petition on this basis.

22        In respect of the creditor’s petition itself, the primary judge found that he was satisfied that Mr Hussein committed the act of bankruptcy alleged in the creditor’s petition and was satisfied as to proof of the other matters required by s 52 of the Bankruptcy Act 1966 (Cth), and accordingly that the order should be made.

The appeal

23        Mr Hussein’s notice of appeal in respect of the sequestration proceeding traverses a range of matters. The essence of his appeal is that the primary judge erred in declining to grant a stay of the sequestration proceeding for the following reasons: - (i) the primary judge failed properly to consider or take account of Mr Hussein’s third s 79A application pending in the Family Court and his special leave application to the High Court in respect of the Family Court costs order; (ii) the primary judge placed reliance upon Mr Hussein having been represented by senior counsel during the 2009 property settlement when, in fact, he was only represented by solicitors; (iii) the primary judge ought to have found that Ms Kubica did not disclose relevant information in respect of the property settlement and subsequent consent orders in relation to the Family Law proceedings; and (iv) the primary judge wrongly held that Mr Hussein was in possession of certain information which addressed any deficiencies in Ms Kubica’s disclosure. Although not raised to in the notice of appeal, Mr Hussein’s submissions also seek to re-agitate his contention that Ms Kubica owes him $35,000.

24        As an appeal from an interlocutory decision involving the exercise of a discretion, Mr Hussein has a high bar to meet. It is not enough that the appellate Court would have reached a different decision. The appellant must show the existence of error in the exercise of the discretion: House v The King (1936) 55 CLR 499. Further, as was correctly submitted by Ms Kubica, leave is required for Mr Hussein to proceed with the appeal (Federal Court of Australia Act 1976 (Cth) s 24(1A)) which engages the considerations in DÉcor Corp Pty Ltd v Dart Industries Inc (1991) 104 ALR 621 (DÉcor Corp); namely, whether in all the circumstances the decision is attended by sufficient doubt to warrant reconsideration by the appellate court and whether, assuming the decision to be wrong, substantial injustice would be occasioned to the appellant were leave refused. I am prepared to assume that substantial injustice would be occasioned were leave refused. However, for the reasons that follow, I am not satisfied that the correctness of the primary judge’s decision is attended by any doubt.

25        No error is asserted by Mr Hussein, and nor is one apparent, in the primary judge’s statement of the tests to be applied in respect of whether to stay the proceedings on account of the third s 79A application (that Mr Hussein would need to establish “to the court’s satisfaction that he had a claim based on, at the least, genuine and arguable grounds”: [2013] FCCA 1957 at [4], citing Ahearn v Deputy Commissioner of Taxation (1987) 76 ALR 137 at [148] and Re Schmidt; Ex parte Anglewood Pty Ltd (1968) 13 FLR 111 at [116]) or the special leave application (that Mr Hussein would need to establish that “there was a genuine dispute that had real prospects of success”: [2013] FCCA 1957 at [19], citing DCT v Cummins (2008) 70 ATR 855 at [18]; Westpac Banking Corporation v Carver [2003] 126 FCR at [17]-[18]). In substance, each of Mr Hussein’s contentions is directed to the question whether the primary judge correctly assessed his prospects of success in the outstanding Family Court and High Court applications.

26        Regarding the third s 79A application, Mr Hussein contends that there was deliberate non-disclosure by Ms Kubica, and various other persons, of relevant information which disadvantaged Mr Hussein with respect to the 2009 property settlement and subsequent consent orders disposing of his first and second s 79A applications and that Mr Hussein’s lawyers did not follow his instructions and advised him to withdraw his previous s 79A applications. Mr Hussein’s points to various examples of Ms Kubica’s alleged non-disclosure, each of which was dealt with by the primary judge in detail as set out above. There is nothing in any of Mr Hussein’s submissions to suggest error, legal or otherwise, on the part of the primary judge. To the contrary, it is clear from the evidence at trial that to the extent Ms Kubica had failed to disclose any information during the negotiations in relation to the 2009 property settlement, this had been remedied by Ms Kubica by the time Mr Hussein entered into consent orders resolving his second s 79A application. To the extent that Mr Hussein entered into the consent orders on the basis of any failure by his own legal representatives to pass on certain documents, or otherwise as a result of poor advice, it is a matter between him and his legal representatives. It has nothing to do with Ms Kubica. Whether Mr Hussein was represented by counsel or by a solicitor is not to the point. He was legally represented and had all of the material available to him. Mr Hussein bore the onus of establishing that his s 79A application had at least genuine and arguable grounds. He did not do so. Accordingly, it was open to his Honour to reject this basis for granting an adjournment.

27        As to the application for special leave in the High Court, the primary judge’s observations apply with added force. Mr Hussein has not made any attempt to identify why his application for special leave has any prospect of success. The application for special leave itself sheds no light on the issue. Nor is it without significance that he seeks to appeal from a unanimous decision of the Full Court upholding a discretionary judgment in relation to costs. As the party bearing the onus of proof, it was for Mr Hussein to establish that he had real prospects of success. At no time has he done so. The contention that the primary judge failed properly to consider his special leave application must fail.

28        As to Mr Hussein’s submission with respect to the $35,000, not only is this not dealt with in his notice of appeal, but no attempt has been made to identify how the primary judge is said to have fallen into error. In light of his Honour’s findings that no reasonable prospects of success had been established in relation to the pending Family Court and High Court applications, this point takes Mr Hussein nowhere. Even taken at face value, the amount claimed falls well short of the offset required to reduce the debt upon which the creditor’s petition was founded to below $5,000. Regardless of whether Mr Hussein’s cross-claim was made out, his Honour would have been bound to make the sequestration order. Accordingly, nothing was to be gained by adjourning the proceeding.

29        It should also be noted that in his written and oral submissions Mr Hussein made reference to various other amounts to which he claimed to be entitled, including an alleged cross demand or set off in the Family Court for $700,000. This appears to be based upon the alleged non-disclosure of the various matters referred to above amounting to some $1,000,000 in value and which, once allowance is made for interest, Mr Hussein contends, comes to about $1,400,000, Mr Hussein allegedly being entitled to half of that amount. As I have already held above, no error is apparent in the primary judge’s treatment of Mr Hussein’s case as to non-disclosure.

30        As no error is apparent in the primary judge’s exercise of discretion not to adjourn the hearing of the sequestration proceeding, the appeal must fail.

The extension of time application

31        The question whether to grant an extension of time pursuant to Rule 36.05 of the Rules, involves a consideration of the merits of the prospective appeal (Luck v The University of Southern Queensland [2011] FCA 1335 (“Luck”) at [23]; SZQBI v Minister for Immigration and Citizenship [2011] FCA 1388 at [17]-[18]; Franich v Secretary, Department of Families, Housing Community Services and Indigenous Affairs [2011] FCA 1362 at [20]) and whether there is an acceptable reason for the delay (Luck at [23]).

32        As with the appeal in respect of the sequestration proceeding, the proposed notice of appeal annexed to Mr Hussein’s extension of time application is wide-ranging in the matters it raises, most of which relate to whether there were grounds for setting aside or extending the bankruptcy notice. However, the primary judge did not dismiss Mr Hussein’s application on its merits. Rather, his Honour found that he had no jurisdiction to consider the application because the time for compliance with the bankruptcy notice had expired both as at the time Mr Hussein brought the FCC application and at the time he applied for special leave to appeal to the High Court in respect of the Family Court costs orders.

33        Mr Hussein has not challenged the primary judge’s finding that the time for complying with the bankruptcy notice had expired. Accordingly, his only basis for challenging the primary judge’s decision is to show that his Honour was wrong to find that the Court lacked jurisdiction to consider Mr Hussein’s application. Mr Hussein has not pointed to any such error. The primary judge dealt with the application on the basis that it had been brought under either section 41(6A) or 41(7) of the Bankruptcy Act. It is clear, not only from the authorities and commentary set out in the primary judge’s reasons ([2013] FCA 1817 at [9]-[10]) but also from the text of the provisions themselves (“Where, before the expiration of the time fixed for compliance with the requirements of a bankruptcy notice…”), that once the time for compliance had expired the Court had no jurisdiction to grant any relief pursuant to those provisions. Mr Hussein has not identified any other basis upon which he was entitled to seek the same relief. Accordingly, I am not satisfied that Mr Hussein’s proposed appeal would enjoy any prospects of success. It is therefore unnecessary to consider the adequacy of Mr Hussein’s explanation for his delay in filing the notice of appeal. The application for an extension of time should be refused.

Conclusion

34        The appeal and application for an extension of time should both be dismissed with costs.

Associate:

Dated:    30 June 2014