FEDERAL COURT OF AUSTRALIA

Blake v Lion Finance Pty Ltd [2014] FCA 1416

THE COURT ORDERS THAT:

1.    The appeal is dismissed.

2.    The appellant is to pay the respondent’s costs.

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

REASONS FOR JUDGMENT

1    On 15 December 2014, I dismissed the appeal brought by the appellant, Mr John Blake, against the decision of a judge in the Federal Circuit Court of Australia and said that I would publish my reasons later. These are the reasons.

2    On 29 September 2011, the respondent, Lion Finance Pty Ltd, obtained judgment against Mr Blake in the Magistrates Court of Western Australia in the sum of $16,000.

3    On 21 October 2013, Lion Finance issued a bankruptcy notice based upon the judgment debt and interest. That notice was served on Mr Blake. Mr Blake failed in his attempt to have the bankruptcy notice set aside. Mr Blake failed to comply with the bankruptcy notice.

4    On 10 January 2014, Lion Finance filed an application for a sequestration order in the Queensland Registry of the Federal Circuit Court. On 13 February 2014, Registrar Baldwin of the Federal Circuit Court made a sequestration order in respect of Mr Blake’s bankrupt estate.

5    On 24 March 2014, Mr Blake filed an application in the Queensland Registry of the Federal Circuit Court for review of the order made by Registrar Baldwin.

6    On 7 May 2014, the primary judge gave directions to the effect that Mr Blake file and serve any further material in support of his application by 4.00 pm on 16 May 2014, that the respondent file and serve any further material by 4.00 pm on 21 May 2014 and that the matter be listed for hearing at 10.00 am on 22 May 2014.

7    Mr Blake who is, and was in May 2014, resident in Western Australia, did not comply with the direction to file and serve any material by 16 May 2014. On the day before the hearing, Lion Finance served three affidavits on Mr Blake.

8    At the hearing, which Mr Blake attended by telephone, before the primary judge on 22 May 2014, Mr Blake was given leave to rely on an affidavit he had sworn on 16 May 2014.

9    At that hearing, Mr Blake also complained that he had not had sufficient time to consider and respond to the affidavits which had been filed by Lion Finance. The primary judge stood the matter down until later in the day to permit Mr Blake the opportunity to review the material. When the matter resumed later in the day, Mr Blake asked for the matter to be adjourned so that he could have an opportunity to file further material in support of his application. The primary judge then adjourned the hearing to 27 May 2014 and gave Mr Blake leave to file further material.

10    Mr Blake did not, however, file any further material in support of his application prior to the resumption of the hearing of the application on 27 May 2014.

11    At the commencement of the resumed hearing on 27 May 2014, Mr Blake asked for an adjournment for 14 days to file “written submissions”, and to file an affidavit from a creditor, Mr Mann, which, said Mr Blake, would oppose the making of the sequestration order.

12    The primary judge refused the adjournment and dismissed Mr Blake’s application for a review of the sequestration order made by Registrar Baldwin. In short, the primary judge found that Mr Blake was hopelessly insolvent and there would be no utility in granting an adjournment to permit Mr Blake to file the written submissions he had foreshadowed or to file an affidavit from the creditor, Mr Mann, in opposition to the making of the sequestration order.

13    Accordingly, the primary judge ordered that the sequestration order made by Registrar Baldwin on 13 February 2014, be affirmed (Lion Finance Pty Ltd v Blake [2014] FCCA 1404).

the appeal

14    On 17 June 2014, Mr Blake filed a notice of appeal in the Queensland District Registry of this Court.

15    The notice of appeal is in the following terms:

1.    Due process and procedural fairness was not afforded to the Appellant.

2.    Insufficient notice was given to the Appellant to seek legal advice and attend hearing on 13 February 2014.

3.    Venue for hearings heard in Queensland put the Appellant at an unfair disadvantage by the Appellant not being allowed to appear in person.

4.    The Appellant was not given the opportunity to have his hearing heard by a Judge instead of a registrar on 13 February 2014.

5.    The Appellant was not afforded procedural fairness by the registrar on 13 February 2014 for the Appellant’s liberty to seek leave for legal advice.

6.    Dispute Resolution was not delivered by a court mediator at any time or ordered by the court on either 13 February 2014 or 27 May 2014.

7.    Due process was not given to the Appellant whereby Discovery was not sought by the court for both parties to provide copies of all documents filed in these proceedings and be exchanged with each other.

8.    A comprehensive list of disclosure documents was not provided to the Appellant.

9.    The Registrar on 13 February 2014 formed an early view thus disallowing natural justice.

10.    The Reviewer on 27 May 2014 formed an early view thus disallowing natural justice.

16    On the application of Mr Blake, on 24 August 2014, Rangiah J ordered that the appeal be transferred to the Western Australian District Registry of the Court.

17    On 9 December 2014, Lion Finance filed an application for the appeal to be dismissed on the grounds that Mr Blake had failed to comply with the directions previously made by the Court for the filing of, inter alia, the appeal books and his written submissions by the due dates.

18    Mr Blake’s appeal was listed for hearing at 10.15 am on 15 December 2014. On the morning of 15 December 2014, my Associate received an emailed letter from Mr Blake saying that he would not be attending the hearing of the appeal because he was too sick to drive from his Perth suburban home to the Court.

19    When the appeal was called on for hearing, Lion Finance was present by its counsel by telephone link from Brisbane. However, Mr Blake was not present in Court. I then asked for the Court officer to call the matter outside the Court. Mr Blake did not appear in response to that call.

20    Counsel for the respondent contended that the appeal should be dismissed on the basis that Mr Blake had failed to comply with the orders of the Court and that Mr Blake was not present at the hearing of the appeal. In support of its application, the respondent relied upon the affidavit of Mr Joseph Basson dated 9 December 2014. That affidavit annexed a copy of the written submissions dated 21 November 2014 in support of Mr Blake’s appeal which he had served on Lion Finance. Those submissions had been defective in form and had not, however, been accepted for filing by the Registry of the Court.

21    Lion Finance, also, contended that the appeal should be dismissed because it was devoid of merit and Lion Finance supported the judgment and orders made by the primary judge on the basis of the reasons which the primary judge gave.

22    In my view, it is not necessary to dismiss the appeal on the basis of the failure of the appellant to appear in Court for the hearing of the appeal, or on the basis of the failure to comply with orders as alleged in the application made by Lion Finance. This is because the appeal has no merit and should be dismissed for that reason.

23    In considering his appeal, I have taken Mr Blake’s written submissions dated 21 November 2014 into account insofar as they relate to the grounds of appeal.

grounds 1 and 10 of the grounds of appeal

24    Ground 1 of the appeal makes a general complaint about lack of procedural fairness, and no specific complaint about the hearing before the primary judge is identified. However, in ground 10 of the appeal, Mr Blake specifically complains that the primary judge came to an early view and, therefore, denied him natural justice.

25    I will consider both of these grounds of appeal together. In order to do so, it is necessary to have some regard to the proceedings before the primary judge on 22 May 2014 and 27 May 2014 and his reasons for decision.

26    As mentioned, three affidavits were served on Mr Blake on the day before the hearing on 22 May 2014. These affidavits were made by Mr Jason Shane Cronan, the trustee in bankruptcy of the bankrupt estate of Mr Blake, Mr Paul Robinson, a manager of Lion Finance and Ms Alessandro Navarro, a solicitor employed by the solicitors for Lion Finance.

27    The affidavit of Mr Cronan gave evidence of the financial position of Mr Blake. Mr Cronan attached to his affidavit the statement of affairs which Mr Blake had completed and submitted to him. Mr Cronan also attached correspondence from the Bank of Western Australia Limited (BankWest) in relation to the monies owed by Mr Blake to BankWest. The correspondence revealed that Mr Blake owned two properties and that BankWest had mortgages over each of the properties which secured loans in the sum of $154,114.01 and $539,645.57 and that the loans were in arrears. The correspondence also revealed that Mr Blake had a debt of $4,235,000 to BankWest arising from his liability as a guarantor of the obligations to the bank of a company of which he was a director.

28    There was also attached to Mr Cronan’s affidavit a proof of debt filed by the Australian Taxation Office in the sum of $1,118,302.83, in respect of unpaid income tax and director penalties in relation to three companies associated with Mr Blake.

29    Mr Cronan said that Mr Blake disclosed in his statement of affairs that his income consisted of wages in relation to part-time employment as a disc jockey/entertainer of approximately $18,200 per annum and rent in relation to each property estimated at $16,640 and $15,600 per annum.

30    Based on the information available to him, Mr Cronan had prepared a first report to creditors, which reported Mr Blake’s position as follows:

Total assets - $764,000.44

Total liabilities - $7,233,287

Secured creditors - $723,855

Unsecured creditors - $6,509,402

Total deficiency of $6,469,243.

31    Mr Cronan deposed that he had received notification that Mr Blake had brought proceedings to challenge the tax debt. However, those proceedings had been stayed pursuant to s 60(2) of the Bankruptcy Act 1966 (Cth).

32    The affidavit from Mr Robinson deposed to the circumstances of Mr Blake’s liability to Lion Finance. Mr Robinson said that Lion Finance had taken an assignment of a credit card debt due by Mr Blake to GE Capital Finance Australia Limited, trading as GE Money.

33    The affidavit of Ms Navarro dealt with the question of the service of the bankruptcy proceedings on Mr Blake and correspondence with Mr Blake before the hearing of the application for the sequestration order before Registrar Baldwin.

34    As previously mentioned, at the hearing on 22 May 2014, the primary judge gave Mr Blake leave to file an affidavit dated 16 May 2104, and granted an adjournment until 27 May 2014 to give Mr Blake an opportunity to consider and respond to the affidavit material served on Mr Blake by Lion Finance. Mr Blake did not avail himself of that opportunity.

35    Accordingly, when the review application resumed before the primary judge on 27 May, the primary judge had before him the three affidavits filed by Lion Finance and Mr Blake’s affidavit of 16 May 2014.

36    The content of Mr Blake’s affidavit was not confined to evidence of facts, but included assertions and submissions. In his affidavit, Mr Blake sought to divide his debts into three categories, namely, disputed debts, debts associated with the companies with which he was associated and personal debts. The debts, which Mr Blake categorised as “personal debts” totalled, in his view, $812,142.29 and he said that he had in place a repayment programme with each of his personal creditors. The “disputed debts” totalled about $1,310,718 and included, inter alia, the debt of over $1 million due to the Australian Tax Office, and, curiously, the debt of $92,000 due to Mr Mann, the creditor who Mr Blake said would make an affidavit opposing the making of the sequestration order. The “company debts” totalled about $5,076,155 and included the $4,250,000 which Mr Blake, as a guarantor, owed to BankWest.

37    Ignoring the “disputed” and “company” debts, Mr Blake contended that the sequestration order made by Registrar Baldwin should be set aside so that he could trade his way out of his financial difficulties and repay his personal debts.

38    In rejecting Mr Blake’s application for the adjournment, and in dismissing his review application, the primary judge had regard to Mr Blake’s case for the setting aside of the sequestration order as set out in his affidavit of 16 May 2014, as well as the contentions which Mr Blake foreshadowed that he would make if given an opportunity to file his written submissions, and to Mr Blake’s claim that he intended to file an affidavit from Mr Mann.

39    In summary, the primary judge found granting an adjournment would be futile because the evidence revealed that Mr Blake was hopelessly insolvent, that he had wilfully ignored debts in very large amounts in advancing his proposition that he would be able to trade his way out of his debts if his bankruptcy was set aside, and that, in the circumstances, that proposition was “fanciful”. Also, the primary judge found that the objections which Mr Blake foreshadowed he would make in his proposed written submissions, were inconsequential. The primary judge also found, in effect, that the opposition of Mr Mann, a creditor for a relatively small amount who was prepared to wait for his money, would, in light of the overwhelming evidence of Mr Blake’s hopelessly insolvent positon, and the support of other creditors for the sequestration order, make no difference to the outcome. Further, said the primary judge, Mr Blake had had sufficient opportunity to put forward his materials.

40    In his 21 November 2014 written submissions, Mr Blake contended that the primary judge was in error in not granting the adjournment which he sought at the hearing on 27 May 2014.

41    Further, in those submissions, Mr Blake complained that the primary judge’s error was that he:

[F]ocused too much on my credit worthiness rather than the law of whether or not the imposition of a sequestration order by Registrar Baldwin was a true justifiable decision according to the entire case circumstances according to the Act.

42    Mr Blake also contended that the primary judge erred in concluding that his financial position was “tragic or hopeless” and that the primary judge ignored his evidence that he was able to trade his way out of his financial difficulties.

43    These errors by the primary judge, said Mr Blake, were indicative of the fact that he had already made up his mind at the hearing of 27 May 2014.

44    In my view, Mr Blake has not demonstrated any error on the part of the primary judge, nor that the primary judge had made up his mind against Mr Blake’s case, so as to deny Mr Blake a fair hearing on 27 May 2014.

45    First, the primary judge did not err in refusing Mr Blake’s application for an adjournment on 27 May 2014. By that date, Mr Blake had already had the opportunity to file any affidavits and submissions on which he sought to rely pursuant to the directions which were made by the primary judge on 7 May 2014. Albeit that Mr Blake did not file any affidavit material by 16 May 2014, his affidavit dated 16 May 2014, was received into evidence at the hearing on 22 May 2014. As I have mentioned, that affidavit contained a blend of assertions and submissions as well as some evidential material and presented the case which Mr Blake wished to make for the setting aside of the sequestration order.

46    Further, on 22 May 2014, the primary judge did grant an adjournment to permit Mr Blake to file any further material in answer to the evidence which had been filed by Lion Finance. However, Mr Blake did not avail himself of the opportunity to do so.

47    In dealing with Mr Blake’s adjournment application on 27 May 2014, the primary judge had regard to the matters which Mr Blake foreshadowed that he wished to contest in relation to the affidavit evidence of the witnesses for Lion Finance and the utility of permitting a creditor of Mr Blakes’, Mr Mann, to make an affidavit in opposition to the sequestration order. The primary judge also had regard to the evidence and submissions made in Mr Blake’s affidavit dated 16 May 2014. In addition, of course, the primary judge also took into account the evidence of Mr Cronan, and on that basis, rejected Mr Blake’s application for the adjournment and the application for review.

48    In my view, there is simply no merit in Mr Blake’s contention that the primary judge was biased or approached the matter with a closed mind. Mr Blake was given every opportunity to put evidence before the primary judge and to advance his case. However, the evidence of Mr Cronan showed that Mr Blake was hopelessly insolvent. In light of the evidence before the primary judge, and in view of the opportunities that Mr Blake was given to put material before the court, it was entirely open to the primary judge to dismiss the application for the adjournment and to dismiss Mr Blake’s review application, for the reasons which he gave. The primary judge did not err in doing so.

49    Further, contrary to Mr Blake’s contention, the primary judge did not misunderstand Mr Blake’s claim, nor did the primary judge ignore his “evidence” in support of his claim that he could trade out of his difficulties. In fact, the primary judge included in his reasons for decision the following paragraphs of Mr Blake’s affidavit of 16 May 2014:

[65]    My total actual personal debts as stated in the above table [$802,817] have been managed every month by way of payment arrangements firmly in place as it always has been prior to 13 February 2014.

[66]    The actual personal debts with payment arrangements in place may continue to be managed every month beginning 31 May 2014 once my Bankruptcy is overturned on 22 May 2014.

[67]    There is also a chance that all my debts could be consolidated under the one loan for a low interest rate.

[68]    The prospect put forward that I could trade my way out of financial difficulty is within the realms of possibilities.

[69]    With my bankruptcy being overturned, I will be able to increase my combined real estate kerb side valuations from the guesstimated fire sale figures of 740,000 – 800,000, to properly saleable properties for the longer term in the vicinity of 850,000 – 900,000 and above.

50    The difficulty for Mr Blake was that the evidence of Mr Cronan demonstrated that he was hopelessly insolvent; and, as the primary judge found, Mr Blake had simply ignored debts amounting to more than $5 million, in seeking to put forward his contention that he could trade his way out of his financial difficulties.

51    Nor did the primary judge err in having regard to Mr Blake’s “creditworthiness” as Mr Blake contended. Mr Blake’s financial position or more specifically, his solvency, was a highly relevant matter which fell for consideration by the primary judge.

52    Grounds 1 and 10 of the grounds of appeal are dismissed.

ground 2 of the grounds of appeal

53    Ground 2 of the appeal complains about the process before Registrar Baldwin. That ground of appeal identifies no error on the part of the primary judge and on that basis the ground should be dismissed.

54    The hearing before the primary judge was a review of the decision made by Registrar Baldwin and Mr Blake was given sufficient notice of that hearing and participated in that hearing.

55    Accordingly, ground 2 of the grounds of appeal is dismissed.

ground 3 of the grounds of appeal

56    Mr Blake complained that Lion Finance was given an “unfair advantage” by reason of him not being physically present at the hearing.

57    Mr Blake appeared by telephone. The question of procedural fairness has to be considered by reference to practical injustice. Mr Blake has not pointed to any practical injustice which he suffered by reason of appearing at the hearings before the primary judge by telephone.

58    It is clear that the primary judge accepted into evidence on 22 May 2014, the affidavit which Mr Blake had sought to file. As mentioned, that affidavit set out the case that Mr Blake sought to make.

59    It is evident from his reasons for decision that the primary judge understood and considered the claims made by Mr Blake in that affidavit.

60    Accordingly, ground 3 of the grounds of appeal is dismissed.

ground 4 of the grounds of appeal

61    Mr Blake complains that he was not given the opportunity of having the creditor’s petition heard on 13 February 2014 by a judge instead of a registrar of the Federal Circuit Court. This complaint does not demonstrate error by the primary judge.

62    Further, and in any event, the review of Registrar Baldwin’s decision of 13 February 2014 was undertaken by a judge.

63    This ground of appeal is dismissed.

ground 5 of the grounds of appeal

64    In this ground of appeal, Mr Blake complains of procedural unfairness before Registrar Baldwin on the basis that Mr Blake had not obtained legal advice.

65    This ground of appeal also does not demonstrate error by the primary judge. This ground of appeal is dismissed.

ground 6 of the grounds of appeal

66    In this ground of appeal, Mr Blake complains that there was no court ordered mediation. Mr Blake has no entitlement to a court order for mediation.

67    This ground of appeal also does not demonstrate error on the part of the primary judge.

68    This ground of appeal is dismissed.

grounds 7 and 8 of the grounds of appeal

69    In these grounds of appeal, Mr Blake complains that no orders for discovery were made and no discovery was given.

70    Mr Blake has not demonstrated that there were any grounds for making orders for discovery or that there was any error in failing to make orders for discovery. Further, Mr Blake has not demonstrated any prejudice by reason of the absence of discovery.

71    This ground of appeal is dismissed.

ground 9 of the grounds of appeal

72    This ground of appeal complains that Registrar Baldwin came to an early view in relation to the creditor’s petition and thereby denied Mr Blake natural justice.

73    This ground of appeal does not demonstrate error by the primary judge.

74    In any event, by reason of the application for review which Mr Blake filed, Mr Blake had the benefit of a further hearing before the primary judge.

75    This ground of appeal is dismissed.

76    It follows that Mr Blake’s appeal is dismissed with costs.

Associate:

Dated:    22 December 2014