FEDERAL COURT OF AUSTRALIA

Easton v Kostov [2018] FCA 2002

ORDERS

THE COURT ORDERS THAT:

1.    The respondent debtor’s application for an extension of time and review of the orders of Registrar Wall made on 18 July 2018 is dismissed.

2.    The applicant creditor’s costs of the application be paid from the estate of the respondent debtor in accordance with the Bankruptcy Act 1966 (Cth).

3.    Pursuant to r 39.03(2) of the Federal Court Rules 2011 (Cth), any further proceedings brought by the respondent debtor against the applicant creditor for the same or substantially the same relief be stayed until the costs the subject of order 2 have been paid.

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

REASONS FOR JUDGMENT

ROBERTSON J:

1    In the circumstances which I shall set out, there was no appearance for the respondent, the moving party on this application for review, when the matter was called this morning.

2    On 18 July 2018, the District Registrar made an order that the estate of the respondent be sequestrated under the Bankruptcy Act 1966 (Cth). It was noted that the date of the act of bankruptcy was 2 January 2018. It was ordered that the applicant creditor’s costs fixed in the sum of $5968.13 be paid from the estate of the respondent debtor in accordance with the Bankruptcy Act.

3    The bankruptcy proceedings arise out of costs orders against the respondent in proceedings in the Supreme Court of New South Wales. The certificate of the relevant judgment of that Court is in the total amount of $24,447.96.

4    The time limit for an application to review the exercise of power by the Registrar is 21 days: s 35A of the Federal Court of Australia Act 1976 (Cth) and r 3.11 of the Federal Court Rules 2011 (Cth), as follows:

35A    Powers of Registrars

...

(5)    A party to proceedings in which a Registrar has exercised any of the powers of the Court under subsection (1) may, within the time prescribed by the Rules of Court, or within any further time allowed in accordance with the Rules of Court, apply to the Court to review that exercise of power.

…

3.11    Application for review of the Registrar’s exercise of power

(1)    A party may apply to the Court under section 35A(5) of the Act for review of the exercise of a power of the Court by a Registrar.

(2)    The application must be made within 21 days after the day on which the power was exercised.

5    On 13 September 2018, the respondent filed an application “to set aside bankruptcy”. That application was therefore 36 days out of time.

6    The respondent filed an affidavit on 13 September 2018 in support of her application. That affidavit was not read before me.

7    On 7 November 2018, I made the following orders:

1.    The respondent file and serve any further affidavit evidence on or before 13 November 2018.

2.    The applicant file and serve his affidavit evidence on or before 27 November 2018.

3.    The respondent file and serve any affidavit evidence in reply on or before 6 December 2018.

4.    The respondent file and serve an outline of written submissions, limited to 4 pages, on or before 6 December 2018.

5.    The applicant file and serve an outline of written submissions, limited to 4 pages, on or before 10 December 2018.

6.    The matter be listed for hearing at 10:15am on 12 December 2018.

8    The respondent filed an affidavit dated 13 November 2018, in further support of her application. That affidavit was not read before me.

9    The applicant filed an affidavit dated 27 November 2018 affirmed by Mr Paul Springthorpe, solicitor on the record for the applicant. He exhibited a bundle of documents to his affidavit, marked Exhibit PS-1. That affidavit was read into evidence and the exhibit was admitted.

10    The applicant also filed an affidavit sworn 27 November 2018 by Ms Victoria Louise Caldwell, a solicitor in the employ of Mr Springthorpe. She exhibited to her affidavit a bundle of documents marked Exhibit VLC-1. She had reviewed the electronic Court file maintained in relation to these proceedings. Ms Caldwell deposed, amongst other things, to the respondent being served with the Creditor’s Petition and accompanying documents and also dealt with issues surrounding the personal service of the respondent. That affidavit was read into evidence and the exhibit was admitted.

11    On 7 December 2018, the respondent filed an outline of written submissions. In summary, the respondent contended that she did not participate in the costs assessment process or the case dismissal due to medical or legal incapacity; and she was not present when the sequestration order was made. The respondent also stated that she had, in effect, serious issues to attend to in July 2018 with final orders in another matter not related to her bankruptcy being made on 8 August 2018, although, she submitted, she did make it known to the Court that she wished to make an application for review of the Registrar’s decision.

12    On 10 December 2018, the applicant filed an outline of written submissions. The applicant’s position was that time ought not be extended because: there was a public interest in the expeditious determination of bankruptcy matters and the respondent had not acted with sufficient alacrity to justify the indulgence of an extension; any extension of time would prejudice not only the applicant, but other creditors of the respondent; the explanation for the delay was not sufficiently proved by the affidavits in support; and the application for an extension of time was without merit as it did not foreshadow any serious challenge to the existence or validity of the judgment debt founding the petition, nor any argument that the respondent was solvent, or able to pay her debts.

13    The applicant submitted the Court should not accept the respondent’s explanation for her delay for two principal reasons; first, her medical evidence was not in admissible form. Second, it was clear that during the period 2016-2018 she had commenced and participated in a wide range of proceedings in New South Wales Courts and Tribunals. This evidence was at odds with her claim that she has suffered from a debilitating medical condition.

14    The applicant also submitted that despite the respondent’s submission to the contrary, the Court would be able to infer that she had creditors other than those named in the Australian Financial Security Authority report of 5 October 2018. She had conducted numerous proceedings in New South Wales Courts and Tribunals, many of which had resulted in costs orders being made against her.

15    The applicant also submitted that there was little merit to the review application, principally because the respondent had not demonstrated solvency, for which she bore the onus: at no stage in these proceedings had the respondent proffered any positive evidence regarding her solvency. Section 52 of the Bankruptcy Act placed the onus on the debtor to satisfy the Court that he or she is able to pay her debts. The applicant submitted there was no likelihood that the respondent would be found to be solvent on any hearing de novo. Nor had she adduced evidence that would enliven the Court’s discretion to go behind the judgment debt.

16    The applicant also submitted, in the alternative, that the Court would be satisfied with the proof of: the matters stated in the petition; the service of the petition; and the fact that the debt on which the petitioning creditor relied was still owing.

17    I should also note that the date of the final hearing, 12 December 2018, was arrived at with the consent of the respondent at the Case Management Hearing on 7 November 2018. She identified that date as the only date she “could do that week”.

18    That notwithstanding, a number of emails, the first being on 3 December 2018, were sent by the respondent to the effect that if the hearing could not be adjourned and if she were not granted leave to appear by telephone, she could not appear. There were also communications as to whether pro bono counsel could be found to run the respondent’s case so that she need not appear at the hearing. This was against the background of a letter from the solicitors for the applicant to the respondent dated 20 November 2018 giving her notice that she was required to attend at the final hearing for cross-examination.

19    On 10 December 2018 the respondent sent by email to the solicitors for the applicant and the Court a document titled “Notice of Discontinuance”, stating, in part, as follows:

… the Applicant, discontinues the Application to Set Aside the Sequestration Order of 18 July 2018, in so far, as it relates to the Respondent.

20    That document was not in conformity with the prescribed form, Form 48 referred to in r 26.12 of the Federal Court Rules, in that it did not state, at least in terms, whether the respondent discontinued the whole of the proceeding or a specified part of the proceeding. It also did not state whether the applicant consented to the discontinuance and neither did it seek the leave of the Court.

21    The relevant provisions of the Federal Court Rules were as follows:

26.12    Discontinuance

(1)    A party claiming relief may discontinue a proceeding in whole or in part by filing a notice of discontinuance, in accordance with Form 48.

(2)    The party may file the notice of discontinuance:

(a)    without the leave of the Court or the other party’s consent:

(i)    at any time before the return date fixed in the originating application; or

(ii)    if the proceeding is continuing on pleadings—at any time before the pleadings have closed; or

(b)    with the opposing party’s consent—before judgment has been entered in the proceeding; or

(c)    with the leave of the Court—at any time.

Note 1:    For when pleadings close, see rule 16.12.

Note 2:    The Court may give leave subject to conditions including costs—see rule 1.33.

(3)    The notice of discontinuance must:

(a)    state the extent of the discontinuance; and

(b)    if the discontinuance is by consent—be signed by each consenting party.

…

(6)    A notice of discontinuance filed by one party does not affect any other party to the proceeding.

(7)    Unless the terms of a consent or an order of the Court provide otherwise, a party who files a notice of discontinuance under subrule (2) is liable to pay the costs of each other party to the proceeding in relation to the claim, or part of the claim, that is discontinued.

26.13    Service of notice

A party who files a notice under rule 26.11 or 26.12 must, as soon as reasonably practicable, serve a copy of the notice on each other party to the proceeding.

26.14    Effect of discontinuance

Discontinuance under this Division cannot be pleaded as a defence to a proceeding in relation to the same, or substantially the same, cause of action.

Note:    The Court may permit a party to discontinue on terms inconsistent with this rule—see rule 1.35.

26.15    Stay of proceeding until costs paid

An opposing party may apply to the Court for an order that a subsequent proceeding be stayed until the costs are paid if:

(a)    a party (the first party) discontinues a proceeding, whether in relation to the whole, or a part, of a claim for relief; and

(b)    the first party therefore becomes liable to pay the costs of an opposing party to the proceeding; and

(c)    before paying those costs, the first party starts another proceeding against the opposing party on the basis of the same, or substantially the same, cause of action as the cause of action on which the discontinued proceeding was based.

22    The applicant has not consented to the discontinuance. The Court has not granted leave.

23    On 11 December 2018, the respondent notified the Court and the solicitors for the applicant that she would not be appearing in Court today. When the matter was called outside the Court, there was no appearance by the respondent.

24    The applicant applies for orders dismissing the proceeding, with costs. I propose to take that course, there being no appearance by the respondent and no evidence in support of her application for an extension of time and review of the orders of Registrar Wall made on 18 July 2018.

25    The applicant also applied for an order that the respondent not be permitted to bring any application seeking the same, or substantially the same, relief against the applicant until such time as she has paid the costs of this application.

26    The relevant rule is in the following terms:

39.03    Dismissal of proceedings and stay of further proceedings

(1)    If the Court makes an order dismissing a proceeding or part of a proceeding, the applicant may apply to the Court:

(a)    for an order that the dismissal be without prejudice to any right of the applicant to bring fresh proceedings; or

(b)    for leave to claim the same relief in a new proceeding.

(2)    If:

(a)    a proceeding has been dismissed in whole or in part; and

(b)    the Court has ordered the applicant to pay another party’s (the second party’s) costs;

the second party may apply to the Court for an order staying any further proceedings brought by the applicant against the second party on the same or substantially the same cause of action or relief, until the costs have been paid.

27    In my opinion, in the present circumstances it is appropriate to make such an order. There is no basis for granting the respondent an extension of time or for making an order on de novo review different from the order made by Registrar Wall.

28    The orders I propose to make are:

1.    The respondent debtor’s application for an extension of time and review of the orders of Registrar Wall made on 18 July 2018 is dismissed.

2.    The applicant creditor’s costs of the application be paid from the estate of the respondent debtor in accordance with the Bankruptcy Act 1966 (Cth).

3.    Pursuant to r 39.03(2) of the Federal Court Rules 2011 (Cth), any further proceedings brought by the respondent debtor against the applicant creditor for the same or substantially the same relief be stayed until the costs the subject of order 2 have been paid.

Associate:

Dated:    12 December 2018