FEDERAL COURT OF AUSTRALIA

Guss v Deputy Commissioner of Taxation [2015] FCA 841

THE COURT ORDERS THAT:

1.    The appellant’s appeal and his application for a stay be dismissed.

2.    The appellant pay the respondent’s costs of and incidental to the appeal and such application, such costs to be treated as costs and expenses in the administration of the appellant’s bankruptcy.

3.    Liberty to apply be granted to the appellant to make any further application for a stay as he thinks fit or to vary any such costs order, such application to be filed and served within 14 days.

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

REASONS FOR JUDGMENT

1    The appellant has appealed a decision of his Honour Judge Riethmuller of the Federal Circuit Court of Australia made on 25 July 2014 wherein his Honour dismissed an application for review of a sequestration order made on 4 March 2014 by Registrar Burns in respect of the appellant’s estate.

2    The appeal comes before me in the exercise of the Court’s appellate jurisdiction under s 25(1AA)(a) of the Federal Court of Australia Act 1976 (Cth).

3    In my view, for the reasons that follow, the appeal should be dismissed.

BACKGROUND

4    It is convenient to begin by summarizing the evidence that was before his Honour on the application for review. The question of the characterisation and legal significance of that evidence can be put to one side for the moment.

(a)    Judgment debt

5    In July 2004, the respondent filed proceedings against the appellant in the Magistrates’ Court of Victoria at Melbourne claiming an amount of $39,839. The claim was based upon penalties equal to the unpaid amounts of estimates of amounts withheld by Gerandu Pty Ltd and Bongania Pty Ltd for the purposes of Division 12, Schedule 1 to the Taxation Administration Act 1953 (Cth) (TA Act); Bongania Pty Ltd is occasionally misdescribed in some of the material as “Bogania Pty Ltd”. Pursuant to s 222AGA of the Income Tax Assessment Act 1936 (Cth) (ITA Act) the respondent made estimates of the unpaid amounts of Gerandu’s and Bongania’s liabilities under subsection 16-70(1) of Schedule 1 to the TA Act to pay to the respondent amounts equal to the amounts withheld by those companies for the purposes of Division 12 to that Schedule. Notices of such estimates were sent to Gerandu and Bongania under s 222AGB of the ITA Act. Those companies were liable to pay those estimates under s 222AHA of the ITA Act. Such notices were not complied with. Moreover, no steps were taken of the type described in s 222APB of the ITA Act. The appellant was a director of these companies at the relevant time. By force of s 222APC of the ITA Act it was alleged that the appellant was liable to pay the respondent a penalty equal to the unpaid amount of each of the estimates. The penalty in respect of Gerandu was $15,215. The penalty in respect of Bongania was $24,624. Hence the claim made for such penalties was $39,839, together with interest and costs.

6    On 28 January 2005, the respondent filed an application for a summary order, in essence judgment on his claim. It appears that at this time at least, the appellant was represented by Joseph Guss, solicitor, the appellant’s father. The respondent filed an affidavit in support of the application by Aris Zafiriou of 28 January 2005. The claim concerning the penalty for Gerandu was not proceeded with. The claim concerning the penalty for Bongania was reduced to $18,534.77 by reason of the application of an income tax refund credit on another account. Accordingly the amount claimed was reduced to $18,534.77. A further affidavit was filed by Aris Zafiriou of 12 April 2005. There is little doubt that this material was served; there is in evidence affidavits of service of 6 April 2005 of Christopher Hallinan and of 14 April 2005 of Frank Rebechi. Moreover, this application was defended at this time.

7    On 3 May 2005, the appellant filed an affidavit deposing that he had a good defence to the whole of the respondent’s claim. On 11 May 2005 the appellant filed “amended particulars of defence” challenging the estimates and the elements underpinning the statutory claims. At this time, the appellant was represented by Poulton Elliott & Grey, solicitors.

8    Various other affidavits were also filed by the parties around this time including the appellant’s affidavit of 18 May 2005 and a further affidavit of Aris Zafiriou sworn 25 May 2005. Assertions and counter assertions were made concerning the merits of the respondent’s claim. As at 25 May 2005, according to the respondent, the debt due and payable was $16,294.27; the further reduction was due to other credits. It would appear that the application for a summary order was not pressed at this time.

9    During 2005 and 2006, as his Honour sets out in his reasons at [7] to [10], the various notices were the subject of unsuccessful collateral challenges by the appellant.

10    On 11 December 2006, judgment was entered against the appellant in the proceeding in favour of the respondent in an amount of $21,181.77, being $16,255.27 on the principal claim and $4,926.50 in interest. In evidence is a copy of a certified extract from the Register of the Magistrates’ Court setting out such details. The extract noted that the order was made on a “Summary Order Application” which had been granted, the application having been made by the respondent.

11    It would appear that the respondent re-listed the summary judgment application referred to earlier. Upon that application being re-listed, the judgment referred to above was made and entered. I will refer later to evidence surrounding the entry of this judgment. In essence, the appellant has alleged that the judgment was entered irregularly. It was said that neither the appellant nor his legal representatives had received notice of such re-listing.

12    From the time of the entry of that judgment until the issue of a warrant to seize the appellant’s property, which I will describe in a moment, little occurred.

13    It would appear from the evidence filed by the appellant in the Federal Circuit Court that during the period 2006 to 2010 the appellant was for the most part working overseas as an international marketing consultant and that during the period 2010 to 2014 he had for the most part lived in China and the United Arab Emirates.

(b)    Execution of warrant

14    On 11 December 2012, a warrant was issued out of the Magistrates’ Court to seize the appellant’s property. The warrant was issued at the request of the respondent and directed to the Sheriff to seize the appellant’s property to recover the sum of $35,205.39. The amount was based upon the judgment debt of $21,181.77, additional interest of $13,836.82 and costs of $186.80. It was stated in the warrant that it was believed that the personal property of the appellant could be found at 6 Cloverdale Rd, Glen Iris, Victoria. Apparently, the warrant was sent to the Sheriff’s Office in March 2013 for execution.

15    Steps were taken to execute the warrant from April 2013 to October 2013. There were handwritten records from the Sheriff’s Office in evidence suggesting various attempts on 2 April 2013, 12 April 2013, 19 April 2013, 5 August 2013, 6 August 2013 and also in October 2013, the detail of which I will address shortly. These records seem to have been treated as “business records” and tendered accordingly; no objection seems to have been raised concerning any possible issue under s 69(3) of the Evidence Act 1995 (Cth). But the details of the October 2013 attempts were separately deposed to in any event.

16    There was evidence before his Honour from Justin O’Donnell, a senior Sheriff’s officer (affidavit sworn 31 October 2013) of the following:

(a)    He attended the Glen Iris premises on 25 October 2013 at 11.14 am and again on 28 October 2013 at 7.30 pm, but was informed that the appellant was not at the premises.

(b)    On 31 October 2013 at 9.20 am, Mr O’Donnell was able to locate the appellant on the ground floor at the Melbourne Magistrates’ Court. He deposed as to the following conversations:

“I said ‘Mr Guss, my name is Justin O’Donnell and I am with the Sheriff’s Office. I would like to talk to you about a Magistrate’s Court Warrant to Seize Property that has been issued against you for a debt to The Deputy Commissioner of Taxation’ and I handed him the Notice of Judgment Debt slip. I then said ‘the debt is for $36,718.53, can you pay me that money’ and Antony GUSS replied ‘I’ll wait for my solicitor’ and I said ‘will you give me entry to 6 Cloverdale Road, Glen Iris to search for seizable assets’ and he said ‘I say again, I’ll wait for my solicitor’ and I then said ‘do you have any seizable goods or assets’ and Antony GUSS replied ‘I’ll wait for my solicitor’.

Antony GUSS then made his way to a nearby elevator and entered it and I followed him. Once inside the elevator I said to him ‘Who is the solicitor representing you today’ and he replied ‘on which matter’ and I said ‘as I understand it, you’re only here on 1 matter’ and he replied ‘mmm’. We then exited the lift on level three and he made his way towards courtroom 3 and entered. I did not enter the courtroom.

On the same day at 10.13am I had a further conversation with Antony GUSS. I said ‘Antony, as I mentioned earlier, I have a Magistrate’s Court Warrant to Seize Property that has been issued against you for a debt to The Deputy Commissioner of Taxation. The debt is for $36,718.53, can you pay me that money’ and he replied ‘no I can’t pay’ and I said ‘will you give me access to 6 Cloverdale Road Glen Iris to search for seizable assets’ and Antony GUSS replied ‘no, I don’t have a key’.

I then said to him ‘do you have any seizable assets’ and he replied ‘No, I don’t have any assets’ and I said ‘you don’t have any assets at all’ and Antony GUSS replied ‘No, not even a car, but you would of checked that’. I then said ‘Thanks Antony, we’re finished now’ and we left the room we were in.

A moment or so later Antony GUSS came out of the court room and said to me ‘Oh, I just thought I should mention that I only have $80 in the bank’ and I said ‘that’s fine we wouldn’t be interested in that, but thanks for letting me know’ and the conversation ended and Antony GUSS went back into the court room.”

17    It appears that in the records of the Sheriff the execution of the warrant was shown as being unsuccessful and the warrant was returned to the Magistrates’ Court on 1 November 2013 marked “unsatisfied”.

18    Lyn Middling, Deputy Sheriff, swore (affidavit of 1 November 2013) that the warrant “was returned to Court unsatisfied on 01/11/13”. There was also, apparently, a notation made on the warrant that was returned which stated:

“By virtue of this Warrant to me directed and delivered my Bailiffs were unable to find any personal or real estate upon which to make a levy”.

19    None of this evidence was the subject of any challenge before his Honour. Rather the question was how one should characterise such material.

20    It is this act of the return of the warrant unsatisfied that was subsequently used as the relevant act of bankruptcy for the purposes of the respondent’s creditor’s petition.

(c)    Creditor’s petition

21    On 7 November 2013, the respondent filed a creditor’s petition seeking a sequestration order against the appellant and his estate.

22    The respondent justified its position as a creditor (with the sum owing said to be $59,625.42) on two bases:

(a)    First, its position as a judgment creditor in respect of the Magistrates’ Court judgment in the sum of $35,205.39, being the principal judgment of $21,181.77, interest of $13,836.82 from 12 December 2006 to 10 December 2012 and costs of $186.80 claimed on the warrant.

(b)    Second, the sum of $26,478.57 described as a “Running Balance Account deficit debt” as at 1 November 2013 in respect of amounts due under the BAS provisions (goods and services tax, PAYG withholding provisions, instalment provisions etc).

23    The respondent recognized that a credit had to be given of some $2,058. The petition was later amended to increase the credit to $3,051.70. This reduced the sum owing to $58,632.26.

24    The sole act of bankruptcy relied upon was described as:

“Execution was issued against the respondent debtor under process of the Magistrates’ Court of Victoria at Melbourne on 12 December 2012 and was returned unsatisfied on 1 November 2013”.

25    For completeness, an earlier bankruptcy notice had been issued in June 2009 against the appellant relying upon the judgment of the Magistrates’ Court. Apparently that notice had been served under an order for substituted service. On 16 August 2010, the appellant applied to set aside that bankruptcy notice. That application was filed in the then Federal Magistrates’ Court. By consent, on 15 September 2010 orders were made setting aside the bankruptcy notice. This explains why the act of bankruptcy relied upon for the creditor’s petition is in the form referred to above. But this application has another significance. The appellant swore an affidavit in that proceeding on 13 August 2010 which clearly indicated that he then at least had knowledge of the Magistrates’ Court judgment, yet nothing was done at this time to apply to set it aside. Indeed, at the time the Registrar made the sequestration order, no such application had been made. An application was made for the first time on 16 April 2014 which I will discuss later. Interestingly, the appellant’s affidavit did not say that he did not then have knowledge of the judgment or the circumstances of its entry. Rather, he relied upon other deficiencies with the bankruptcy notice.

26    In the creditor’s petition proceedings, the appellant filed a notice setting out the grounds of opposition to the petition supported by an affidavit sworn on 5 December 2013; his address was stated to be Guangdon, China, although it later shifted to Dubai by the time an application came before me for the return of his passport on 22 January 2015.

27    His principal grounds of opposition:

(a)    challenged the debts alleged to be owing;

(b)    asserted that the alleged running balance account statement for one of the debts had never been served on him;

(c)    disputed the debt in respect of (b) in any event;

(d)    challenged the act of bankruptcy by asserting that “the alleged execution referred to therein was not issued or otherwise dealt with according to law and should be dismissed”.

28    Various affidavits verifying the creditor’s petition were sworn by Michelle Clark, an employee of the Australian Taxation Office. In essence they deposed to the judgment debt being still owed. They also confirmed the Running Balance Account deficit debt, which as at 16 July 2014 was $19,205.64.

29    In evidence, there were various statements produced by the respondent showing the appellant’s “running account” transactions as disclosed from the records of the respondent. These statements, which were produced at various dates (for example 31 October 2013, 6 November 2013, 27 February 2014, 14 July 2014), set out transactions for some years up to each particular statement date.

30    The affidavit material filed by the respondent clearly verified the accuracy of the running accounts transactions and statements from the computer systems and electronic records of the respondent.

31    The appellant’s affidavit material sought to take issue with the accuracy of such statements. But most of the evidence was merely assertion and hearsay in the form of affidavits of Joseph Guss sworn 2 April 2014, 16 April 2014 and 30 June 2014. There was one affidavit of the appellant sworn 9 July 2014 which deposed to the appellant not being aware of or having received notice of the re-instatement of the Magistrates’ Court application and the hearing on 11 December 2006. It was also asserted by the appellant that he had a good defence to that claim. In relation to the accuracy of the running account transactions and the Running Balance Account deficit debt, it was asserted that there were deficiencies in the various statements, including that further credits ought to have been allowed. The appellant’s conclusion was that:

“In the premises it is apparent that the respondent is indebted to me in respect to the RBA rather than I being indebted to it.”

32    The appellant’s assertions were answered in detail by an affidavit of Aris Zafiriou sworn 14 July 2014. Mr Zafiriou gave oral evidence before his Honour. Mr Joseph Guss cross-examined Mr Zafiriou on the running account transactions and the Running Balance Account deficit debt. I have reviewed the transcript of his cross-examination (T 66 to 100). In my view it went nowhere.

33    His Honour rejected all grounds of opposition advanced by the appellant. I will deal with the detail shortly. It should be said at this point that the appellant at no stage has sought to demonstrate his solvency. It does not appear to be in dispute and nor has it been in dispute that the appellant since at least the time of the issue of the warrant has been insolvent.

34    Before addressing the various grounds of appeal, there are two other matters that should be dealt with.

(d)    Re-opening of Magistrates’ Court proceeding

35    On 16 April 2014, after the Registrar had made the sequestration order but before the hearing before his Honour, the appellant applied to the Magistrates’ Court to set aside the 11 December 2006 judgment. The application stated that “I did not appear at the hearing of the above complaint”. It was asserted in the application that the reason why the appellant did not appear was that “I received no notice of the hearing”.

36    An affidavit in support was filed by his solicitor Joseph Guss of 16 April 2014. Much of it was hearsay if not compounded hearsay. The affidavit and associated material disclosed the following:

(a)    The Magistrates’ Court case log disclosed that on 29 November 2006, the respondent had made a request to the Court that its proceeding be re-listed. The case log then showed that a notice of hearing was “reprinted” on 29 November 2006 and again on 6 December 2006. The solicitor asserted that no notice of such re-listing was served on or received by the appellant, and nor did the appellant receive any advice to that effect from his then solicitors Poulton Elliott and Grey. Enquiry with those former solicitors indicated that they had no relevant records or recollection.

(b)    Further, it was said that no notice of the orders made was given to the appellant by the Court or the respondent.

(c)    Further, enquiries with the Magistrates’ Court indicated that they had no other records. The solicitor was informed by one of the clerks that “the file was destroyed after 5 years, as was customary in the registry”.

(d)    The solicitor asserted that the appellant had a good defence on the merits.

(e)    As for the delay in making the application (7 ½ years), it was asserted:

“In respect to any question of delay in applying for a re-hearing on behalf of the plaintiff, I say that having regard to the defendant having been living and working overseas for the past several years, and substantially being away from Australia in his work for several years prior thereto, the laches of the plaintiff in respect thereto, the fact that the defendant was not advised of the said hearing of 11 December 2006, the fact that in the premises no prejudice has been suffered by the plaintiff, generally in the premises, the fact that the plaintiff is required to be a model litigant which it is contended that it has not displayed in this case, and on the basis of authority, that any such delay should be excused”.

37    Subsequently an affidavit from the appellant’s former solicitor Michael Grey was filed on 16 June 2014 in support of that application stating that he never received notice of the re-listing; however expressed, what he could credibly say 7 ½ years after the relevant events was only that he did not recall receiving notice at the earlier time.

38    The application to set aside the 11 December 2006 judgment was heard and refused by Magistrate Holzer on 25 June 2014. Apparently the learned magistrate found inter-alia that the judgment was not irregular and that the appellant was not entitled to have it set aside ex debito justitiae. It would also appear that the appellant did not establish a good defence on the merits. I do not have details of that ruling as the material before me did not have either a copy of any written ruling or a transcript of any oral reasons; it appears that there was no written ruling.

39    By an originating motion filed on 27 June 2014 in the Supreme Court of Victoria, the appellant sought judicial review of Holzer M’s ruling.

40    By order made on 22 December 2014 by the Honourable Associate Justice Daly, that proceeding has been stayed pending the outcome of the present appeal. The outcome of the present appeal may affect the appellant’s standing to pursue that challenge.

(e)    Application to adjourn

41    Before his Honour Judge Riethmuller, the appellant sought to adjourn the hearing of the application for review until after the hearing and determination of the application for judicial review in the Supreme Court. This would have left the Registrar’s sequestration order in place in the interim; this on one view would have been a counter-intuitive result for the appellant unless there was also a stay granted in relation to action or proceedings under the sequestration order pending the outcome of that application. At all events, his Honour refused the adjournment; in my view that refusal has not been shown to be an erroneous exercise of discretion.

42    At one stage, the appellant floated such an application before me, but ultimately no such application for an adjournment or a stay was persisted with at the time the appeal was heard. And indeed, given the Supreme Court’s order of 22 December 2014, it is necessary that his appeal before me now be disposed of first.

GROUNDS OF APPEAL

43    It is now convenient to turn to the grounds of appeal. It is convenient to address them in the following re-ordered sequence.

(a)    Ground 1

44    It is said that his Honour erred in deciding that the Magistrates’ Court judgment “should not have been set aside as irregularly made, ex debito justitiae”.

45    In my view, this assertion fails at a number of levels.

46    First, even if it be assumed that the judgment was irregularly made, that does not entail that it was not a valid judgment:

(a)    at the time it was made;

(b)    at the time of the sequestration order;

(c)    at the time the matter came before his Honour.

47    The judgment of the Magistrates’ Court, apparently entered on an application for summary judgment and in part based upon the appellant’s non-appearance, had not been set aside at the time:

(a)    the warrant was issued or at the time when it was sought to be executed;

(b)    when the sequestration order was made;

(c)    when his Honour disposed of the application for review.

48    Subject to the question of “looking behind” the judgment debt, as I will discuss shortly, the judgment was valid and efficacious for all purposes, including providing the foundation for the warrant. The fact that the appellant had sought judicial review of Holzer M’s decision not to set aside the judgment, which application is still pending, does not affect that conclusion; see Re Hanby; Ex parte Flemington Central Spares Pty Ltd (1967) 10 FLR 378 at 380 and 381 per Gibbs J and Re Hayes; Ex parte Thomas Borthwick & Sons (Australasia) Ltd (1970) 18 FLR 216 at 218 per Street J.

49    Even if the judgment was irregularly entered, that did not make it void or a nullity. True it is that the appellant may have been entitled to have it set aside ex debito justitiae. In such circumstances the appellant would not then have needed to have shown a good defence on the merits (see Chitty v Mason [1926] VLR 419 at 423 per Dixon AJ). But that would be the only consequence. Authorities of this Court such as Re Zagoridis; Ex parte Q’plas Group Pty Ltd (1990) 27 FCR 108 and Emerson v Wreckair Pty Ltd (1992) 33 FCR 581 do not suggest otherwise.

50    Second, at the time of the hearing before his Honour Judge Riethmuller, Magistrate Holzer had refused an application of the appellant to set aside that judgment. His Honour would have been quite entitled not to look further behind the judgment. Nevertheless, and in the appellant’s favour, he proceeded to investigate the circumstances under which the judgment had been entered.

51    In an appropriate case, a court can go behind a judgment.

52    As I said in Stratton v Bowles (No 2) [2015] FCA 43 at [32] and Tran v Pu (2015) 228 FCR 562 at [25] and [26], a court has a discretion to go behind a judgment. This may be exercised where:

(a)    the judgment has been obtained by default or compromise; or

(b)    the judgment has been obtained following an adjudication on the merits where both parties appeared, but where there are substantial reasons for questioning whether there is in substance a debt, including whether the judgment is tainted with fraud, collusion or a miscarriage of justice.

53    In such a case a court may go behind the judgment to ascertain whether the judgment was founded on a real debt (Corney v Brien (1951) 84 CLR 343 at 347 per Dixon, Williams, Webb and Kitto JJ; Wren v Mahony (1972) 126 CLR 212 at 221 to 224 per Barwick CJ; Ahern v Deputy Commissioner of Taxation (Qld) (1987) 76 ALR 137 at 147 to 8 per Davies, Lockhart and Neaves JJ; Joossé v Commissioner of Taxation (2004) 137 FCR 576 at [3] per North and Finkelstein JJ). This is a question under s 52(1)(c) of the Bankruptcy Act 1966 (Cth) and see generally Ali v Retail Decisions Pty Ltd [2012] FCA 1130 at [17] to [20] per Bromberg J and Yarranova Pty Ltd v Shaw (No 2) [2014] FCA 616 at [69] per Gordon J (endorsed by the Full Court in Shaw v Yarranova Pty Ltd [2014] FCAFC 171 at [27] per Bennett, Flick and Yates JJ), although some authorities have also brought this within s 52(2)(b).

54    In this context, there are two separate steps to be considered:

(a)    First, is there a basis for going behind the judgment? Alternatively expressed, is there a substantial reason for questioning whether there is a debt?

(b)    Second, if the first question is answered in the affirmative, then a full investigation of whether there is a debt should be undertaken.

55    Now in the present case, his Honour enquired as to the substance of how the judgment was entered. So he said at [10] to [13] and [17] the following:

10.    It appears clear that the Deputy Commissioner of Taxation, through relevant officers, requested a relisting of the case that was then pending in the Magistrates’ Court of Victoria immediately following the dismissal of the special leave application, so that the Commissioner could seek summary judgment. The Court records show that the notice of listing was issued. The evidence is that it would have been posted to the parties on 28 November 2006. It seems that the notice was re-issued on 6 December, which, from the evidence given by the Registrar of that Court, indicates that one of the parties must have attended at Court to seek another copy of the notice, although it’s not clear which party that was.

11.    I pause here to say that, having seen the Registrar of the Magistrates Court in the witness box and heard his evidence, I have no hesitation in accepting the evidence that he gave in this case.

12.    The notice of listing issued as a result of a letter unilaterally sent to the Court by the officers of the Deputy Commissioner. It seems to me nothing turns on that for the purposes of this case, as it is clear from the Court records that a notice of listing was issued, and in the ordinary course of business which I accept on the balance of probabilities was sent to the parties by ordinary post to their addresses for service.

13.    There was no appearance on the listing date and summary judgment was granted by the State Magistrates’ Court. The judgment must have been known to the debtor, at least by 2010, if not 2009, as there was a bankruptcy notice at this time and an application to set aside that bankruptcy notice which relied upon the judgment in this case. Despite this, the debtor appears to have done nothing about the judgment that had been entered against him in the State Magistrates’ Court back in 2006 until the creditors’ petition was brought in this Court to seek a sequestration order.

…

17.    The basis of the application was simply that the debtor had not received notice of the listing and, therefore, should have an absolute right to have the judgment set aside. The argument, whilst it sounds simple on its face, is more difficult in this case. I accept the Registrar’s evidence about the business processes and the usual practices of the State Magistrates Court. In these circumstances I am persuaded, on the balance of probabilities that the notice of listing would have been sent out by post. The only evidence to overcome the provisions with respect to posted material being received or delivered, is evidence from a solicitor by way of affidavit some seven years later, simply saying that he does not recall ever having received it. The debtor also says that he did not get the notice. It seems to me that this is merely evidence of non-receipt and not evidence of non-delivery: see Fancourt v Mercantile Credits Ltd [1983] HCA 25; (1983) 154 CLR 87 (11 August 1983). I am not persuaded that there is sufficient evidence to overcome the presumptions in s.49 of the Interpretation of Legislation Act 1984 (Vic) and s.160 of the Evidence Act 2008 (Vic).

56    In my view, none of these findings have been successfully impugned by the appellant. His Honour enquired into the substance, and rightly concluded that a basis had not been shown that the judgment was irregular or that the appellant had a right to have it set aside ex debito justitiae. In my view, this ground of appeal fails. I will deal separately with his Honour’s analysis of the underlying debt the subject of the judgment when I address ground 4 later.

(b)    Ground 6

57    It is convenient to next deal with ground 6 as it relates to ground 1.

58    The appellant asserts that his Honour erred in not adjourning the application for review until the hearing and determination of the application for judicial review filed in the Supreme Court of Victoria.

59    The decision whether to adjourn the hearing of the petition was an exercise of discretion by and for his Honour. The appellant has a heavy onus in demonstrating that the exercise of the discretion miscarried (see Endresz v Australian Securities and Investments Commission (No 2) (2015) 228 FCR 334 at [41] per Edmonds, Gordon and Beach JJ). In my view, the appellant has not established any error of the type discussed in House v The King (1936) 55 CLR 499 at 504 and 505 per Dixon, Evatt and McTiernan JJ.

60    As I said in Stratton at [34] to [37], normally a court should not proceed to sequestrate the estate of a debtor where an appeal is pending against the judgment relied on as the foundation for the bankruptcy proceedings, provided that the appeal is based on genuine and arguable grounds (Ahern at 148 per Davies, Lockhart and Neaves JJ; Rigg v Baker (2006) 155 FCR 531 at [67] per French J; Adamopoulos v Olympic Airways SA (1990) 95 ALR 525 at 532 per Burchett and Gummow JJ; Council of the City of Sydney v Obeid [2013] FCA 149 at [37] to [39] per Robertson J). At the least, the existence of an appeal or leave to appeal application based upon genuine and arguable grounds may provide a basis for adjourning the hearing of the creditor’s petition, even if it does not provide a basis for ultimately refusing a sequestration order. But the mere fact that an appeal has been lodged does not without more give rise to a duty to postpone the hearing of a petition (Deputy Commissioner of Taxation v Cumins (2008) 101 ALD 78 at [17] per Gilmour J).

61    The judgment debtor must point to grounds having “a real chance of success on appeal” (Re Lewin; Ex parte Milner (1986) 11 FCR 312 at 318 per Pincus J). Mere assertion is not sufficient. The onus is on the judgment debtor to establish the substantial nature of the grounds of challenge (Re Verma; Ex parte Deputy Commissioner of Taxation (1984) 4 FCR 181 at 187 to 188 per Beaumont J; Cumins at [18] per Gilmour J).

62    Of course, a court is not bound to postpone the hearing of a petition or to refuse to make a sequestration order to enable the judgment debtor to invoke all possible avenues of appeal. One ought not underestimate the capacity of judgment debtors to innovatively invoke new grounds of challenge and proceedings in an attempt to overturn judgments against them. Nevertheless, the court in a particular case should, where an appeal or an application for leave to appeal has been lodged against a judgment, properly inquire into the grounds of challenge and its substance.

63    In the present case, no error has been established in his Honour’s failure to adjourn over the application for review.

64    First, the appellant had sought to set aside the judgment and had failed before Holzer M. The proceedings in the Supreme Court were in essence a review upon a review. In these circumstances, his Honour was quite entitled to proceed to determine the application for review.

65    Second, at the time of the hearing before his Honour, the appellant had not prosecuted that application with due expedition in any event.

66    Third, as I will discuss shortly, whatever the outcome of that hearing, it would not have affected the conclusion that at the time of the hearing before his Honour, there was a valid act of bankruptcy based upon the return of the warrant unsatisfied.

67    Fourth, whatever the outcome of that hearing, it would not have affected the conclusion that at the time of the hearing before his Honour, there was an independent debt owing being the Running Balance Account deficit debt upon which the respondent also relied.

68    Fifth, whatever the outcome of that hearing, it would not have affected the conclusion that at the time of the hearing before his Honour, the appellant was insolvent or at the least had not attempted to establish his solvency.

69    Sixth, it was not established on the material before his Honour that the Supreme Court challenge had any sufficient prospects of success in any event.

70    In summary, in my view this ground of appeal lacks substance.

71    Allied to this ground is also the potential operation of s 52(2)(b).

72    In relation to s 52(2)(b), a number of principles may be distilled as I discussed in Stratton at [27] and as discussed by the Full Court in Endresz at [36] and [37] per Edmonds, Gordon and Beach JJ, viz:

(a)    First, although a petitioning creditor has a “prima facie right” to a sequestration order once proof of the matters required by s 52(1) has been satisfied, nevertheless there is a discretion to refuse such an order for, inter-alia, “other sufficient cause” (s 52(2)(b)).

(b)    Second, the circumstances which may constitute “other sufficient cause” are extremely variable, and it is inappropriate to catalogue or circumscribe them.

(c)    Third, even if “other sufficient cause” has been shown, that merely enlivens the Court’s discretion to refuse to make a sequestration order. The power in s 52(2) is permissive, not mandatory.

(d)    Fourth, for completeness, and as explained in Endresz at [38]:

But the question of whether the hearing of a petition should be adjourned falls more for consideration under s 33(1) of the Act and generally, rather than under s 52(2)(b). If “other sufficient cause” is not made out under s 52(2)(b), then the exercise of any discretion under s 52(2) simply does not arise. Alternatively, if “other sufficient cause” is made out, then the discretion that arises under s 52(2) is a discretion whether to dismiss the petition. If the discretion is exercised not to dismiss the petition, then the question of whether to proceed to make a sequestration order then and there or to adjourn the petition arises under s 33(1) or more generally. But it does not strictly arise under s 52(2), which is only a discretion whether to dismiss the petition. This distinction ought to be kept in mind and has sometimes not been clearly made.

73    For the reasons that I have set out above, it also follows, in my view, that “other sufficient cause” was not established for the purposes of s 52(2)(b). There was no error made by his Honour on this aspect.

(c)    Ground 4

74    Allied to grounds 1 and 6 is ground 4.

75    Ground 4 asserts that his Honour erred in “holding that the debt claimed by the respondent in the petition pursuant to the Magistrates’ Court order was owing by the appellant”.

76    I have discussed earlier the principles applicable to a court going behind a judgment in the context of discussing whether the judgment was irregular. This ground separately addresses whether the Court should have gone behind the judgment and looked at the merits of whether the debt underlying the Magistrates’ Court judgment was owed.

77    In a sense, this ground arguably may not take the appellant far in any event even if established. I say this because, in any event, there was an independent debt owing at the time of the presentation of the petition (and earlier) in relation to the Running Balance Account deficit debt (RBA debt). Moreover, as I have said:

(a)    there was a valid act of bankruptcy in any event (being the return of the warrant unsatisfied); and

(b)    the appellant did not seek to establish solvency.

78    But in my view, this ground fails in any event. No error has been established in his Honour’s approach. His Honour proceeded in accordance with the second step (see earlier at [54(b)]), which was in the appellant’s favour, and in doing so committed no error. As I say, proceeding to the second step was in the appellant’s favour because on one view of the matter, his Honour would have been quite entitled not to proceed at all to the second step.

79    The appellant asserted many reasons why the underlying debt did not exist and that his Honour was in error in his analysis, but the appellant’s arguments fail.

80    First, it was said that valid service of the relevant penalty notice was disputed and had not been effected. But what the appellant asserted was non-receipt. As the respondent rightly contended, assertion of non-receipt does not displace the presumption of service in the absence of evidence of non-delivery. His Honour also accepted that the notice had been duly posted (see also s 29 of the Acts Interpretation Act 1901 (Cth) and s 160(1) of the Evidence Act).

81    Second, it was said that the notice was invalid or the appellant had a good defence to non-compliance with the notice by reason of a statement in the covering letter “we would be reluctant to enter into any payment agreement to pay an estimate”. But such a statement did not impugn the validity of the notice or give rise to an arguable defence under s 222APB(1)(b) of the ITA Act (see Miller v Deputy Commissioner of Taxation (1997) 26 ACSR 533 at 540 per Mason P).

82    Third, it was not established in the evidence before his Honour that any of the matters listed in paragraphs (a) to (d) of s 222APB(1) had been attended to within the relevant 14 days.

83    Fourth, there was no basis in the evidence before his Honour to establish the s 222API(2) defence that there had been a failure to take part in the management of the relevant company(s) for good reason. There was evidence before his Honour that the business of the relevant company(s) had been managed by an employee manager and not the appellant, but that did not establish a “good reason” (see Deputy Commissioner of Taxation v Clark (2003) 57 NSWLR 113 at [121] to [137] per Spigelman CJ concerning such a phrase in s 588FGB of the Corporations Act 2001 (Cth) and Deputy Commissioner of Taxation v Robertson (2009) 234 FLR 35 at [99] to [113] per Harrison J).

84    Fifth, there was no basis in the evidence before his Honour to establish the s 222API(3) defence that the appellant had taken all reasonable steps in relation to any of the four options under s 222APB(1) or that there were no such steps that could have been taken (see Miller at 538 per Mason P). As the respondent points out, the appellant was the sole director. Moreover, the appellant’s focus on one aspect, namely the assertion that it was impossible to wind up the company within the relevant 14 days, was bare assertion; in any event see Re Scobie; Ex parte Commissioner of Taxation (1995) 59 FCR 177 at 184 to 186 per Cooper J.

85    It is also appropriate to observe the following. The appellant has disputed his liability in relation to these penalties and the corresponding debt since 2004. He had ample opportunity to put before his Honour appropriate material to establish that such a debt did not exist or that he had one or more available defences. He did not do so. As the respondent notes, the creditor’s petition was served on 8 November 2013, the application for review was filed on 11 March 2014 and the hearing before his Honour proceeded on 16 July 2014. The appellant had more than adequate opportunity to file such material as he thought fit. The appellant’s solicitor’s assertions that “His Honour should not have required the appellant to go into evidence”, that the appellant should have been given “the opportunity to provide further evidence in support of those defences” and that there was a lack of procedural fairness have no substance and border on the disingenuous.

86    Further, it was not good enough for the appellant to assert that he somehow had “arguable defences”, given that his Honour was addressing the second step referred to earlier and with the Magistrates’ Court judgment still being in place. But in any event, none of the material before his Honour established that any of these “arguable defences” had any or any sufficient prospects of success.

87    Finally, I cannot leave this aspect of the matter without observing that the appellant sought to have the best of both worlds. On the one hand, the appellant sought to have his Honour look behind the Magistrates’ Court judgment to see whether there was an underlying debt. On the other hand, the appellant then wanted his Honour to proceed to assess the appellant’s flimsy material only to the level of establishing that the appellant had an arguable defence.

88    In accordance with the authorities discussed earlier, his Honour was quite entitled to proceed to consider and make the findings set out in [43] to [58] of his reasons. There is no substance to any of the appellant’s complaints set out in his written submissions in chief at [35] to [38]. His Honour was quite entitled to proceed in the manner discussed in Re Skaff; Ex parte Farrow Mortgage Services Pty Ltd (1993) 41 FCR 331 at 336 per Drummond J.

(d)    Ground 5

89    The appellant asserts that his Honour “erred in finding that the amount claimed in the petition in respect to the Running Balance Account claimed by the respondent was owing”. In my view this ground has no substance either. No error has been established in his Honour’s considered and thorough analysis at [34] to [42] of his reasons.

90    As stated earlier, the RBA debt on the Running Balance Account was separate to the judgment debt. Whatever be the position on the judgment debt, but assuming a valid act of bankruptcy, the respondent was entitled to proceed on the RBA debt alone with respect to his petition. Such a debt at all relevant times exceeded $5000 (see s 44(1)(a) of the Bankruptcy Act). Further, it also existed at the time of the act of bankruptcy (see McCracken v Phoenix Constructions (Queensland) Pty Ltd (2013) 210 FCR 149 at [63] and [64] per Lander J). Moreover, that debt was a “liquidated sum” (see s 44(1)(b)).

91    The appellant has challenged that the RBA debt was owing at the relevant time(s). Further, the appellant has challenged the “liquidated sum” requirement. I reject both of the appellant’s assertions for the following reasons.

92    In relation to the relevant statutory framework the following may be noted. Section 8AAZH(1) of the TA Act provides:

“If there is an RBA deficit debt on an RBA at the end of a day, the tax debtor is liable to pay to the Commonwealth the amount of the debt. The amount is due and payable at the end of that day.”

93    The concept of “RBA” is defined in s 8AAZA of the TA Act to mean a “running balance account established under section 8AAZC”. The concept of “RBA deficit debt” is defined in the following terms:

RBA deficit debt, in relation to an RBA of an entity, means a balance in favour of the Commissioner, based on:

(a)    primary tax debts that have been allocated to the RBA and that are currently payable; and

(b)    payments made in respect of current or anticipated primary tax debts of the entity, and credits to which the entity is entitled under a taxation law, that have been allocated to the RBA.

94    In terms of the relevant proof of any amount owing, s 8AAZI provides as follows:

(1)    The production of an RBA statement:

(a)    is prima facie evidence that the RBA was duly kept; and

(b)    is prima facie evidence that the amounts and particulars in the statement are correct.

(2)    In this section:

RBA statement includes a document that purports to be a copy of an RBA statement and is signed by the Commissioner or a delegate of the Commissioner or by a Second Commissioner or Deputy Commissioner.

95    Before his Honour there were various proofs put forward by the respondent in the affidavits of Michelle Clark and Aris Zafiriou which proved the RBA debt from time to time. Such proofs included the tender of various running account statements, their source and their veracity. As at the filing of the petition, the RBA debt was $26,478.57. At the time of the hearing before his Honour, it was $19,190.36.

96    The appellant challenged the accuracy of some of the entries and whether certain credits had been taken into account. But this was appropriately answered, first, in an affidavit of Mr Zafiriou of 14 July 2014 and, second, by answers given by Mr Zafiriou under cross-examination. The appellant’s solicitor cross-examined Mr Zafiriou on the accuracy thereof, but his cross-examination did not assist the appellant’s case. His evidence demonstrated that the appellant had been allowed all relevant credits and that the RBA debt as at 14 July 2014 was $19,190.36. I specifically requested Mr Guss, solicitor, to point to me where in the cross-examination there were concessions or evidence demonstrating the inaccuracy or incompleteness of the relevant running account or its entries. I also asked him to provide me with details of payments or credits allegedly not taken into account which would enable me to assess whether there was any error in the primary judge’s analysis. Mr Guss did not avail himself of either opportunity, preferring instead to assert unhelpful generalities. I should also say that there was no substance to the appellant’s complaint concerning the service of an up to date statement on 14 July 2014 with the hearing fixed for 16 July 2014. In any event, even at the time of the hearing before me, there was no specific identification of any error or omission in the relevant statement or debt, let alone one that took it under the statutory threshold.

97    In my opinion, no error has been established in the primary judge’s consideration of the evidence or his approach, let alone an error that if corrected would reduce the RBA debt below $5000.

98    Further, the appellant has asserted that the relevant sum owing on the RBA debt was not a “liquidated sum”. Given the statutory provisions that I have set out earlier and the quantified entries set out on the running account, themselves ascertained and fixed amounts leading to a net balance in favour of the respondent through simple arithmetic, this argument has no substance. The fact that the appellant challenges the accuracy of, or legal entitlement of the respondent to, the net balance is one thing. But such assertions do not establish that the relevant debt was not a “liquidated sum”.

99    Finally, there were a number of other misconceived points made by the appellant.

100    First, it was asserted that “the RBA debt does not constitute an act of bankruptcy”. Whether that is true or not is not to the point. The act of bankruptcy was not based on the RBA debt, but rather the return of the warrant unsatisfied based upon the Magistrates’ Court judgment.

101    Second, it was asserted that the RBA debt could not “constitute a debt for which a bankruptcy notice could issue”. But again, that is not really to the point. The act of bankruptcy ultimately relied upon was not non-compliance with a bankruptcy notice. In any event, the assertion is not made good.

(e)    Ground 2 — The warrant (timing of issue)

102    It is said that his Honour “was in error in deciding that the warrant issued out of the Magistrates’ Court on 12 December 2012 … was validly issued”.

103    There were various dimensions to this assertion and I will deal with each in turn.

104    First, the appellant asserts that because the Magistrates’ Court judgment was irregular and liable to be set aside ex debito justitiae that this somehow infected the warrant and its validity. But the fact is that at the time the warrant was issued, the judgment was in place and had not been set aside; and as I have said, the appellant has failed in an application to set it aside in any event. This assertion provides no basis for impugning the warrant.

105    Second, it was said that the warrant was invalid as no leave had been obtained to issue it given that the relevant judgment was more than six years old. But there was no requirement for such leave. Mr Conway, a Registrar of the Magistrates’ Court, gave evidence before the primary judge that so far as he was concerned, no such leave requirement existed in 2012. More importantly, at that time, Order 68 of the Magistrates’ Court General Civil Procedure Rules 2010 governed the issue of warrants, including in relation to a proceeding commenced before the commencement of the 2010 Rules; rule 68.10 only adopted the practices and procedures of the Supreme Court which applied to or were adopted by the sheriff in the execution of warrants. There was no such leave requirement in Order 68. Rule 68.02(1) of the Supreme Court (General Civil Procedure) Rules 2005 was inapplicable.

106    The appellant asserted that the relevant Magistrates’ Court Civil Procedure Rules 1999 applied to the issue of the warrant rather than the 2010 Rules and on that foundation asserted that the Supreme Court’s leave requirement was incorporated therein. In my view, neither that foundation nor its asserted consequence was accurate.

107    The above two arguments were raised before the primary judge. Neither of them had substance for the reasons that I have set out.

108    During the hearing before me and later in written submissions, the appellant sought to raise new arguments that were not put to the primary judge. It is convenient to deal with them at this point.

109    The appellant has raised a number of arguments relating to the asserted operation of the Limitation of Actions Act 1958 (Vic). He asserts that various statutory limitation periods applied to the issue of the warrant and that the warrant had been issued out of time. Accordingly, he asserted that the warrant was a nullity. As I say, these arguments were not raised before the primary judge. They were raised before me for the first time on the hearing of the appeal and substantially developed in further written submissions that later followed. Over the objection of the respondent, I will grant leave to the appellant to raise such new grounds, but for the reasons that follow, they should be dismissed; I have so proceeded notwithstanding the absence of any s 78B notices (if otherwise required).

110    Before proceeding to the detail, I should deal with an argument that the respondent has raised as a threshold question, which he asserts is a complete answer to the appellant’s arguments.

111    Generally, State statutory limitation provisions do not operate in respect of taxation or taxation related recovery proceedings brought by the respondent under a comprehensive Commonwealth legislative regime for the recovery of tax and tax related debts (see Deputy Commissioner of Taxation v Moorebank Pty Ltd (1988) 165 CLR 55 at 64 to 68; MUC v Deputy Commissioner of Taxation (2008) 73 NSWLR 378 at [58] per Mason P; Deputy Commissioner of Taxation v Meakes [2014] NSWSC 1001 at [61] per Hulme J).

112    The respondent has contended that a director’s penalty debt is a “tax-related liability”. I accept that characterisation. So much appears from s 250-10 and s 255-1 of Schedule 1 to the TA Act; s 250-10(1) of Schedule 1 (current at June 2004) listed a director’s penalty under s 222APE of the ITA Act in item 80 (the current item 139 of s 250-10(2) of Schedule 1 includes a director’s penalty).

113    The respondent, relying upon the above principle, then concludes that the Limitation of Actions Act does not apply to such a debt, any judgment based thereon or any execution proceedings on such a judgment. Accordingly, the respondent contends that any limitation under the Limitation of Actions Act on the time for the issue of warrants (if any) does not apply to the warrant in question.

114    I have a difficulty with this argument. The appellant’s argument concerns time limits for the issue of the warrant relative to the time when judgment was entered in the Magistrates’ Court. True it is that the judgment was originally based upon a tax related debt or liability. But on one view that claim may have merged with the judgment. In any event, the question is whether the Limitation of Actions Act imposes a time limit on the State based execution step (the issue of the warrant) relative to the time when the State based judgment (the Magistrates’ Court order in this case) was entered.

115    The Moorebank type scenario is not the present case. In Moorebank the question was whether a State limitation provision applied directly to an action brought by the Deputy Commissioner to recover income tax and “additional tax”; the question was not whether a State limitation provision applied to a judgment of a State court, even though what merged in that judgment was a Commonwealth tax related claim. In Moorebank, the Court held that s 64 of the Judiciary Act 1903 (Cth) did not operate to apply the State limitation provision to the federal claim. The relevant provisions of the ITA Act had effectively covered the field and left no room for the direct or indirect intrusion of State limitation provisions (see at 64 and 66 to 68). MUC v Deputy Commissioner of Taxation (2008) 73 NSWLR 378 applied Moorebank (see at [16] and [58] per Mason P); again it was dealing with a similar case as to whether tax related recovery proceedings (not enforcement of a judgment) were affected by a State limitation provision. My attention has been drawn to Deputy Commissioner of Taxation v Meakes [2014] NSWSC 1001 and Pollack v Commissioner of Taxation (1991) 32 FCR 40, which discussed the scenario of State provisions dealing with the payment of a judgment debt by instalments, where the Moorebank principle was applied such that ss 64 and 79 of the Judiciary Act 1903 (Cth) were held not to “pick up” the State provisions. But in that scenario there were also relevant Commonwealth legislative provisions dealing with instalment arrangements (see Pollack at 62 per Gummow J). But that is not my case dealing with the issue of warrants. It was not suggested that there were analogous Commonwealth statutory execution provisions that relevantly covered the field, assuming for the sake of the argument that the statutory claim had not merged with the judgment; if it had so merged, a fortiori the Moorebank principle would have little to attach to.

116    Not without some hesitation, and if it is necessary to do so, I would reject the respondent’s threshold argument. But I would dispose of the appellant’s principal arguments on other grounds in any event. Accordingly, it is not strictly necessary to decide this point.

Section 5(5)

117    The appellant has asserted that s 5(5)(a) of the Limitation of Actions Act 1958 (Vic) had the effect that the warrant could not be issued more than two years after the judgment. This argument is misconceived.

118    Section 5(5)(a) of that Act relevant provided:

“An action to recover any penalty or forfeiture or sum by way of penalty or forfeiture recoverable by virtue of any enactment shall not be brought after the expiration of two years from the date on which the cause of action accrued.”

119    Section 3(1) provided:

“In this Act unless inconsistent with the context or subject-matter —

action includes any proceeding in a court of law;”

120    The appellant’s argument involves the following steps. First, it is said that the issue of the warrant was a “proceeding” within the meaning of s 3 of the Magistrates’ Court Act 1989 (Vic). That definition is in terms “proceeding means any matter in the Court …” Accordingly, it was therefore said to be an “action” under s 3(1) of the Limitation of Actions Act 1958. Second, building upon this foundation, it was said that the underlying basis for the Magistrates’ Court judgment was a claim in respect of a penalty being in respect of the director’s penalty notice. Third, in conclusion it was said that:

“[t]he warrant was issued more than two years after the ‘cause of action’ arose, in this case the date of entitlement to issue a warrant pursuant to the magistrate’s court orders, and accordingly was out of time and invalid”.

121    The ground is misconceived and fails at a number of levels.

122    First, the issue of a warrant is not an action for the purposes of either s 5(5) or s 5(7) of the Limitation of Actions Act. It is a step in the enforcement of a judgment; see the discussion of Finkelstein J in Dennehy v Reasonable Endeavours Pty Ltd (2003) 130 FCR 494 at [18] (with whom Madgwick and Dowsett JJ agreed), albeit discussing ss 5(4) and 5(7), but applying to my context by parity of reasoning. It also follows that the appellant’s dubious linkage between the definition of “proceeding” in the Magistrates’ Court Act and “action” in the Limitation of Actions Act does not work. The appellant has now sought to challenge the reasoning in Dennehy; I might say that he did so for the first time more than five weeks after the oral argument had been completed. But I am bound by Dennehy. In any event, the appellant’s challenge to the reasoning in Dennehy is not persuasive. In any event, the appellant’s argument is not sustainable for other reasons as I will now explain.

123    Second, the argument fails for another reason. The word “enactment” in s 5(5)(a) refers to an Act of the Victorian Parliament; see Fair Work Ombudsman v Toyota Material Handling (NSW) Pty Ltd (2012) 209 FCR 428 at [55] to [61] per North and Flick JJ, albeit discussing the Limitation Act 1969 (NSW), but applying to my context by parity of reasoning. It does not refer to any penalty imposed under a Commonwealth Act. It also follows, on that construction, that neither s 64 nor s 79 of the Judiciary Act 1903 (Cth), even if operable in the present context, could modify that meaning of “enactment” to apply it to a Commonwealth law.

124    Third, the argument fails for yet another reason. The action for the penalty (i.e. the original Magistrates’ Court proceeding) proceeded to judgment. The warrant is a step taken to enforce the judgment debt. It is not strictly an action to recover any penalty or sum by way of penalty. Rather, it is a step to enforce a judgment debt, whatever the initial underlying cause of action.

125    Finally, on this aspect, the appellant referred to s 3(7). But s 3(7) refers to Part II references, not Part I references. But in any event, s 3(7)(b) takes the matter nowhere if one accepts what I have said earlier as to the ambit of the expression “action” (see also Dennehy).

Section 5(7)

126    The appellant also asserted that s 5(7) of the Limitation of Actions Act had the effect that the warrant could not be issued more than six years after the judgment.

127    Section 5(7) provides:

Save as otherwise expressly provided an action shall not be brought to recover any arrears of interest in respect of any sum of money whether payable in respect of a specialty, judgment, legacy, mortgage or otherwise, or any damages in respect of such arrears, after the expiration of six years after they became due.

128    For the reasons given in Dennehy, this argument must also fail.

Section 5(4)

129    Further, let it be assumed, contrary to what I have said and contrary to the authority of Dennehy, that the issue of execution, such as a warrant, on a judgment is an “action” for the purposes of s 5 of the Limitation of Actions Act. Then, on that hypothesis, s 5(4) makes it plain that the statutory limitation period is 15 years. The warrant was, of course, issued well within that time.

Other matters

130    Finally, the appellant has contended that the respondent’s creditor’s petition was an action on a judgment and subject to the limitation provisions of s 5 of the Limitation of Actions Act. The Full Court authority of O’Mara Constructions Pty Ltd v Avery (2006) 151 FCR 196 at [53] and [57] per Heerey, Dowsett and Conti JJ is against that proposition. Some weeks after the oral hearing before me, the appellant has now sought to say that this authority is wrong as well. But I am bound to apply it. In any event, the appellant’s arguments querying its force lack substance. Moreover, even if the appellant was correct, the limitation provision would be that set out in s 5(4), which is 15 years.

(f)    Ground 3 — Return of warrant unsatisfied

131    As I have said earlier, the sole act of bankruptcy relied upon by the respondent was that provided for in s 40(1)(d)(ii) of the Bankruptcy Act. That provision provides that a debtor commits an act of bankruptcy if:

“execution has been issued against him or her under process of a court and has been returned unsatisfied”.

132    In relation to the phrase “returned unsatisfied” there are several points to make.

133    First, the concept of “returned” does not simply embrace being sent back. In form there should be a documentary endorsement or certificate from the sheriff (or associated report) as to what in fact had been done under the warrant and how far the sheriff had been able to carry out his instructions. Further, that warrant and the endorsement (or associated report) are to be returned to the court of issue, in this case the Magistrates’ Court. That is what is envisaged by the concept of return (see Re Johnson; Ex parte Greendale Engineering & Cables Pty Ltd (1967) 11 FLR 335 at 339 per Gibbs J; Re Hunter; Ex parte Dowell Industries (Aust) Pty Ltd (1968) 11 FLR 265 at 266 per Gibbs J; Re Ousley; Ex parte Commissioner of Taxation (1994) 48 FCR 131 at 135 per Heerey J and Re Greenland; Ex parte National Westminster Finance Australia Ltd (1989) 21 FCR 247 at 249 and 250 per Pincus J).

134    Second, the expression “unsatisfied” has to be demonstrated. It must be demonstrated that endeavours have been made to execute the warrant in its terms. There must be a genuine but unsatisfied attempt to levy execution against the debtor and his property.

135    In the present case, and on the uncontested evidence before his Honour, there were genuine but unsatisfied attempts to levy execution against the debtor and his property (see the evidence discussed at [14] to [18] above); the facts in the present case are to be distinguished from the circumstances dealt with in Lewis v Lamb [2012] FMCA 392. It is apparent that the warrant was returned unsatisfied in both a formal and substantive sense. This is apparent whether one considers either just the face of the warrant or the broader material concerning the attempts to execute the warrant. The present case does not turn on the question of the narrowness or breadth of the material that can be considered in order to determine whether the warrant has been returned unsatisfied (cf King v Commercial Bank of Australia Ltd (1921) 29 CLR 141 at 153 per Knox CJ and Re Johnson; Ex parte Atkins (WA) Ltd [1969] WAR 53 at 54 and 55 per Nevile J).

136    Earlier in these reasons I set out the evidence of Ms Middling and Mr O’Donnell that was before the primary judge. That evidence was not challenged. His Honour’s findings and analysis at [32] and [33] are not shown to be in error.

137    For completeness, I should say that there is nothing in ss 73 or 74 of the Magistrates’ Court Act 1989 (Vic) or s 13 of the Sheriff Act 2009 (Vic) that affects the above analysis; the latter Act refers to execution and return of warrants and also sets out permissible delegations, but otherwise does not add to what I have set out; for completeness, the appellant sought to raise a new point concerning a delegation question that I did not permit given that it was not raised before his Honour and may have changed the evidentiary landscape.

CONCLUSION

138    None of the appellant’s grounds of appeal have been established. His appeal will be dismissed.

Associate:

Dated:    14 August 2015