FEDERAL COURT OF AUSTRALIA

Burnett v Browne [2019] FCA 1233

ORDERS

THE COURT ORDERS THAT:

1.    The appeal is dismissed.

2.    The respondents’ costs on appeal be taxed and paid out of the estate of the appellant in accordance with s 109(1)(a) of the Bankruptcy Act 1966 (Cth).

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

REASONS FOR JUDGMENT

O’CALLAGHAN J:

1    On 24 July 2019 I heard an interlocutory application filed by the respondents seeking to dismiss an appeal against a decision of a judge of the Federal Circuit Court of Australia dismissing Ms Burnett’s application to review a decision and sequestration order made by a Registrar of that Court. See Fitzgerald & Anor v Burnett [2018] FCCA 2866. Ms Burnett also applied to amend her notice of appeal.

2    The relevant history of the matter can be derived from the detailed reasons of the learned primary judge.

3    The matter has a lengthy history of litigation in the State courts of Tasmania. The catalyst to the proceedings was an action by the petitioning creditor for unpaid professional fees for work done as the debtor’s solicitor in the Magistrates Court. After a hearing spanning four days, Magistrate Mollard gave judgment against Ms Burnett on 20 November 2014 for $4,559.42. See Fitzgerald and Browne v Burnett [2014] TASMC (20 November 2014). Ms Burnett’s counter claim was dismissed. Orders were later made that she pay the debtors’ costs on a solicitor and client basis.

4    Ms Burnett has never accepted the outcome in that proceeding.

5    On 15 December 2014, she filed an appeal in the Supreme Court of Tasmania against the orders of the Magistrate. The appeal was listed for hearing on 30 July 2015, but the day before the hearing her solicitors filed a Notice of Discontinuance of the appeal (after being unable to negotiate to settle the appeal on the basis that each party bear their own costs).

6    Ms Burnett later applied to set aside the Notice of Discontinuance. The application to do so was heard by Pearce J on 30 October 2015. See Burnett v FitzGerald and Browne [2015] TASSC 51.  In support of the application, Ms Burnett alleged that her by then former solicitors were not instructed to lodge the Notice of Discontinuance. Pearce J considered the claims in detail and rejected her claim that the solicitors had acted without instructions. His Honour also considered the merits of Ms Burnett’s proposed appeal as part of the relevant considerations in determining whether to set aside the Notice of Discontinuance.

7    His Honour concluded that the appeal had little merit. The primary contention was that the Magistrate had erred in finding that the retainer of the solicitor was not for a fixed fee (alleged by the debtor, in the Magistrate’s Court proceedings, to be $1,000). Ms Burnett said that she had subsequently located a recording of a telephone call she had with the solicitor, and alleged that it demonstrated that the Magistrate’s determination was erroneous. His Honour concluded that the recording was not fresh evidence because it was a recording made by the debtor prior to the proceeding being issued. Ms Burnett’s claims that she simply “forgot” about the existence of the recording provided no basis for considering the evidence as fresh evidence for the purpose of an appeal.

8    As to the costs order, Pearce J concluded:

55.    The merit of the appeal ground concerning the magistrate’s costs order has caused me greater hesitation. The Magistrates Court (Civil Division) Act provides, by s 31AF(1), that in a minor civil claim, costs for getting the action up to trial, or by way of counsel fees, are not to be awarded unless:

“(a)    all parties to the action were represented by counsel; or

(b)    the Court is of the opinion that there are special circumstances justifying the award of costs.”

56.    In that jurisdiction the learned magistrate’s order was an unusual one. He must have been satisfied that there were special circumstances to justify the special costs order he made. Appeal from that determination faces significant hurdles. First, it requires the grant of leave to which I have already referred. Secondly, it faces all of the usual difficulties faced by parties to litigation who challenge discretionary costs orders. I detect no obvious error of principle in the learned magistrate’s determination.

9    His Honour dismissed the application and made costs orders against Ms Burnett on 4 December 2015. On 24 August 2016 a Certificate of Taxation was issued by the taxing officer allowing the costs in the sum of $87,080.21.

10    On 7 June 2016, Ms Burnett applied for an extension of the time within which to appeal from the decision of Pearce J to the Full Court, and with a stay on the enforcement of the costs orders. This application was heard by Brett J, who dismissed it. See Burnett v FitzGerald and Browne [2017] TASSC 31.

11    Ms Burnett then appealed to the Full Court. The primary judge’s reasons state that on 6 July 2017 Estcourt J stayed the appeal pending the debtor providing security for costs of $15,000, noting as follows:

The lack of any reasonable prospect of success on the appellant’s appeal against the decision of Brett J (and thus, rationally, of any ultimate reasonable prospect of success in her hoped for appeal against the decision of Pearce J and in turn in her abandoned appeal against the original decision of Magistrate Mollard were it reinstated), is to my mind dispositive of the respondent’s application against the appellant. The competing principles to which I have referred are designed only to avoid the possible frustration of an apparently genuine appeal, and have no real application in a case where the proceedings from which the appeal has been brought were misconceived and the appeal itself hopeless.

12    No security for costs has been provided by the debtor, and the appeal remains stayed.

13    The original judgment sum and costs as ordered by Magistrate Mollard were eventually paid. However, part of the costs orders for the further proceedings in the Supreme Court of Tasmania remained, and remain, outstanding. The outstanding sum was the subject of the Bankruptcy Notice.

14    The amount claimed on the face of the Bankruptcy Notice was $28,353.38.

15    The primary judge dismissed Ms Burnett’s application to review the decision of the Registrar to make a sequestration order.

16    Ms Burnett had argued three grounds.

17    First, that the interest component was overstated by about $17. The judge rejected that ground because as a result of s 41(5) of the Bankruptcy Act 1966 (Cth), the Bankruptcy Notice was not invalid as a result of the overstatement of the interest amount.

18    Secondly, Ms Burnett contended that the debt was not owing. The learned judge dealt with that contention as follows, at [30] – [44]:

30.    The most significant issue, from the debtor’s perspective, is her claim that the underlying debt created by the orders of Magistrate Mollard is not just and truly owing.

31.    The first difficulty with this argument is that the debts upon which the Bankruptcy Notice is founded are costs orders made by the Supreme Court in applications with respect to appeals.

32.    The evidence that the debtor seeks to place before the Court is said to show that the debt ordered by the Magistrate was not truly owing. The evidence is a telephone recording that she made of a conversation with her solicitor (the claimant in those proceedings).

33.    In determining whether the debtor has shown a basis for looking behind the Supreme Court costs orders, I have considered whether the decision of the Supreme Court shows an arguable basis for error. The test for admitting fresh evidence on an appeal requires that ‘reasonable diligence must have been exercised to procure the evidence which the defeated party failed to adduce at the first trial’: see Wollongong Corporation v Cowan [1955] HCA 16; (1955) 93 CLR 435 at [12]. The evidence that the debtor relies upon was not led by her in the original proceedings, yet it is obvious that it existed at the time, and was in her possession. The fact that she may have forgotten that she had that recording is insufficient to satisfy the test. For this reason, the decisions of the Supreme Court appear to be without any error.

34.    The second part of the test for admitting ‘fresh evidence’ is that it is evidence of such significance that, ‘an opposite result would have been produced or ... it must have been so highly likely as to make it unreasonable to suppose the contrary’: see Wollongong Corporation.

35.    As will be seen below I am of the view that the recorded conversation would not be likely to result in a contrary result if the recording were admitted into evidence. The debtor’s dispute with her solicitors who withdrew the appeal appears to have distracted the Supreme Court from dealing squarely with this second issue in detail.

36.    Whether or not the debtor can demonstrate that the underlying debt owing on the Magistrate’s order (which she has since paid) was just and truly owing does not affect the validity of the costs orders in the Supreme Court with respect to the appeals. For this reason, it may not be appropriate to look behind the judgment given by Magistrate Mollard. However, given that the Magistrate’s judgment is the catalyst for the entire unfortunate litigation in this case I turn to consider the debtor’s claims with respect to the underlying debt in any event.

37.    The claim by the creditors against the debtor in the Magistrates’ Court was for legal fees incurred when she instructed them to investigate the viability of a personal injuries claim. It was hoped that if the claim were found viable, the solicitors would act on a speculative basis from that point forward and that legal aid may provide some funding. The dispute centred upon whether a fixed fee had been quoted of $1,000 as alleged by the debtor, or whether a general retainer had been given.

38.    SM Mollard noted a letter written by the solicitors on 19 July 2012 where the solicitor’s hourly rates are set out and an informally worded estimate of the costs was given as ‘I guess you are looking at $1,500, plus the costs of medical and other experts’: see Fitzgerald and Browne v Burnett [2014] TASMC 34 (unreported) at [9]. Mollard SM found that ‘there was never a quote’ (at [33]) and after reviewing the evidence Mollard SM said that:

28.    The excess in professional charges over and above the “guess” was brought about by the defendant continuing to consult and instruct, the work extending beyond the initial legal research and opinion, the adverse medical reports and the rapidly approaching time limitation issue.

39.    In cross-examination in the Magistrates’ Court, the debtor’s evidence on the fee agreement was (at p.162.36):

I rang you [the creditor] up and told you I did not have that – the $1500. I would – Could you do it for$1000? You said-No. I will do if for $15000 plus you pay the reports-medical reports.

40.    The debtor argues that the contents of the audio recording of her telephone call to the solicitor demonstrate that there was an agreement for a fixed fee. The transcript of the telephone call runs for eight pages, however there appears to be two particularly relevant passages. The first passage is where the debtor seeks to engage the solicitor for a fixed fee of $1,000, which he appears prepared to do, subject to the qualification about how much work would be done for that amount. In this exchange the following is said:

•    [Debtor] GB: ... So If I give you 1,000.00 cash... can you find out whether there is a case?

•    [Solicitor] RB; Um, yea, yes with one qualification when I’m talking about this initial issue

•    GB; yep

•    RB; what I’m talking about is looking at whether um.. It’s like the reverse; I’m looking at whether K&D can wriggle out of liability because of the EPN and the deeds and, all of the other documents [Lines 188-193]

41.    Later the conversation returns to the terms of the retainer, and the obvious difficulty of capping the amount to be spent if it is insufficient to enable the solicitor to make an assessment of the viability of the claim. At this point the debtor clearly rejects the suggestion that the solicitor limit his enquiries to 3 to 4 hours work:

•    GB; So look I don’t mind if you set, I would rather it was set as a lump sum for you to do investigations etc. so I know where I’m going with it

•    RB; Yea

•    [GB:] Rather than just an endless whatever it is, 300.oo and something dollars

•    RB; per hour.

•    GB; Yea

•    RB; Yep well set a figure, but you know I recon 3-4 hours will cover it. I’m mean I’m happy to say I won’t go beyond that if you want

•    GB; well there’s no point doing it if it’s not enough then.

•    RB; [um] ... [um]...

•    GB; You know what I mean ...

•    RB; [Um]... Well look the way it works is like this if I start looking into it, if I start to conclude early on that it’s not going anywhere I’ll just tell you.

•    GB; Right

•    RB; you know after an hour but on the other hand if I’m still working on it it’s because I’m trying to make sure I’ve covered off every base and. [Lines 316-331] (emphasis added)

42.    The transcript appears to confirm the findings of Magistrate Mollard, rather than undermine those findings. There is nothing about this evidence that would lead me to conclude that the debtor has cast sufficient doubt over the magistrate’s judgment to exercise the discretion to go behind that judgment to investigate whether the debt is or was ‘in truth and reality’ owing: see Wren v Mahony [1972] HCA 5; (1972) 126 CLR 212 and Ramsay Health Care Australia Pty Ltd v Compton [2017] HCA 28.

Settlement negotiations

43.    The debtor complains that the creditors would not agree to settle the matters in issue between them, on the basis of a payment from monies she received from a personal injuries settlement. The essence of her complaint is that the creditors were unreasonable in placing a condition upon any settlement; that it would be an entire settlement of all issues between the parties. It is not put that the debtor tendered the full amount owing.

44.    The settlement negotiations do not appear to be admissible in these proceedings as they were negotiations to attempt to settle that matter. In any event, I am not persuaded that creditors placing a condition upon settlement in the terms alleged is unreasonable or improper. I have no doubt that any creditor dealing with the debtor would seek to make any settlement an overall settlement to attempt to ensure that all of the proceedings came to an end.

(Emphasis in original; errors in transcript in original).

19    The third ground of appeal was that she was in fact solvent. The learned judge did not accept her evidence in that regard, and found as a fact that Ms Burnett was not in a position to pay her debts as they fell due because she had no capacity to pay the debts the subject of the bankruptcy notice.

20    In this court, Ms Burnett’s notice of appeal suffers from many deficiencies.

21    Among the chief difficulties identified by the respondents are:

(a)    the appellant cannot articulate clear errors by the primary judge; and

(b)    the appellant is requiring the appeal to be determined on the basis of inadequately drafted grounds.

22    The respondents further submitted that Ms Burnett had not served an appeal book on them, which Ms Burnett disputed. I do not consider that a question that is necessary to resolve, given the nature of the issues already identified.

23    In SZJJC v Minister for Immigration & Citizenship [2008] FCA 614 Flick J said the following in respect of a litigant’s responsibilities in their drafting of grounds of appeal:

13.    [I]t remains the responsibility of a litigant – including even an unrepresented litigant – to identify the grounds upon which the intervention of this Court is sought. Whatever other deficiencies may be exposed by the purported Grounds of Appeal in the present proceedings, being but broad generalisations as to alleged breaches of statutory provisions, it is considered that a Ground expressed as it is currently drafted does little to advance the interests of a litigant and certainly provides no assistance to this Court.

…

15.    But this Court should not be left to speculate. Grounds of Appeal should be drafted in such a manner as to expose to both the respondents and to this Court the errors alleged to have been committed. An unrepresented party has no licence to not comply with O 52, r 13(2)(b) of the Federal Court Rules 1979 (Cth).

24    The cognate provision to O 52, r 13(2)(b) in the Federal Court Rules 1979 (Cth) in the Federal Court Rules 2011 (Cth) (the Rules) is r 33.12(2)(e), which provides:

(2)    The notice of appeal must state:

…

(e)    briefly but specifically, the grounds relied on in support of the relief or variation sought.

25    As Branson J observed in Sydneywide Distributors Pty Ltd v Red Bull Australia Pty Ltd (2002) 234 FCR 549 at 551 (in respect of O 52, r 13(2)(b)):

4.    A ground of appeal is a basis upon which the appellant will contend that the judgment, or a part of the judgment, should be set aside or varied by the Court in the exercise of its appellate jurisdiction. Not every grievance entertained by a party, or its legal advisors, in respect of the factual findings or legal reasoning of the primary judge will constitute a ground of appeal. Findings as to subordinate or basic facts will rarely, if ever, found a ground of appeal. Even were the Full Court to be persuaded that different factual findings of this kind should have been made, this would not of itself lead to the judgment, or part of the judgment, being set aside or varied. This result would be achieved, if at all, only if the Full Court were persuaded that an ultimate fact in issue had been wrongly determined. The same applies with respect to steps in the primary judge’s process of legal reasoning. Although alleged errors with respect to findings as to subordinate or basic facts, and as to steps in a process of legal reasoning leading to an ultimate conclusion of law, may be relied upon to support a ground of appeal, they do not themselves constitute a ground of appeal.

5.    A useful practical guide is that a notice of appeal which cannot be used to provide a sensible framework for the appellant’s submissions to the Full Court is almost certainly a notice of appeal which fails to comply with the requirements of O 52, r 13(2)(b). Neither the notice of appeal nor the document containing the revised grounds of appeal was, or could have been, so utilised in this case.

26    I do not consider that Ms Burnett’s drafting of her notice of appeal or proposed amended notice of appeal has satisfied her responsibilities as a litigant.

27    The respondents have, in spite of the manifest difficulties involved in doing so but as a matter of fairness to Ms Burnett, identified ten arguable complaints about the reasons of the learned primary judge which may be said to arise from the appellant’s notice of appeal and her proposed amended notice of appeal. They are as follows:

(1)    the appellant was solvent at the relevant time;

(2)    the Bankruptcy Notice was for an incorrect amount of money;

(3)    the appellant was prevented from cross-examining Mr Browne;

(4)    there was a denial of procedural fairness;

(5)    the primary judge did not conduct a hearing de novo;

(6)    there was an error in how the primary judge received and dealt with a Notice to Admit Facts;

(7)    there was a failure in finding the debts underlying the Sequestration Order were justly and truly owing;

(8)    there was a failure to grant an adjournment.

(9)    some or all of the money the appellant claimed to possess was exempt money; and

(10)    there was a refusal to receive affidavit evidence.

28    The application by the respondents was made under r 36.74 of the Rules, which allows for an application to dismiss an appeal for a failure to comply with the Rules. The appellant’s failure to comply with r 33.12(2)(e) is, of course, also a valid basis for the exercise of the court’s power to dismiss the appeal.

29    Further, and in any event, I do not consider that any of the complaints (either in the notice of appeal or the proposed amended notice of appeal) identified can found a reasonable prospect of success. The court’s power to give summary judgment under s 31A(2) of the Federal Court of Australia Act 1976 (Cth) is therefore also enlivened. Taking each in turn:

Solvency

30    The issue of whether Ms Burnett was solvent turned on the credibility of her evidence. The primary judge found her evidence in this regard, which included her having buried cash in a friend’s grave, as “quite incredible” (at [46]) and “quite unconvincing” (at [48]).

31    Mr Browne submitted that even were Ms Burnett “notionally solvent”, the sequestration order was appropriately made because “the Court could not be and was not satisfied as to the true state of the Appellant’s financial affairs”, including because of Ms Burnett’s failure to cooperate with the trustee, her failure to file a Statement of Affairs and because of her significant debts to other people.

Defect in Bankruptcy Notice

32    Section 41(5) of the Bankruptcy Act 1966 (Cth) provides as follows:

A bankruptcy notice is not invalidated by reason only that the sum specified in the notice as the amount due to the creditor exceeds the amount in fact due, unless the debtor, within the time allowed for payment, gives notice to the creditor that he or she disputes the validity of the notice on the ground of the misstatement.

33    Section 306 provides as follows:

306  Formal defect not to invalidate proceedings

(1)    Proceedings under this Act are not invalidated by a formal defect or an irregularity, unless the court before which the objection on that ground is made is of opinion that substantial injustice has been caused by the defect or irregularity and that the injustice cannot be remedied by an order of that court.

(2)    A defect or irregularity in the appointment of any person exercising, or purporting to exercise, a power or function under this Act or under a personal insolvency agreement entered into under this Act does not invalidate an act done by him or her in good faith.

34    Mr Browne submitted that “[t]here was no evidence before the FCCA that any s. 41(5) Notice was given. Accordingly, any challenge to the validity of the Bankruptcy Notice fails. Moreover, s. 306 of the Act is a complete answer to the Appellant’s claims.”

35    I accept this submission.

Appellant not allowed to question Browne

36    Mr Browne did not give evidence at the hearing before the primary judge, or before the Court Registrar, and so there was no possibility of cross-examination.

37    As Mr Browne submitted, the “Appellant’s belief in her right to question another party who gives no oral evidence is misplaced.”

Denial of procedural fairness

38    Mr Browne submitted that Ms Burnett’s allegations that the primary judge was not impartial and not unbiased are “not expressed in a way that articulates any specific or comprehensible general error. It is not possible to respond to these complaints. There is no evidence in the way of transcript or otherwise to support the allegations.”

39    I accept this submission.

Primary judge failed to conduct a hearing de novo

40    As Mr Browne submitted, “[t]he Appellant must identify from the record, transcript, reasons for judgment or other material that the judge has failed to exercise his jurisdiction”, and “[t]here is nothing in the Appellant’s affidavit filed 5 July 2019 supporting this contention. The Appellant was put on notice there was a need for this material.”

41    A hearing de novo requires a judge to perform an “evaluative consideration of the requirements of ss 52(1) and (2) of the [Bankruptcy Act 1966 (Cth)] necessary for a de novo hearing of the question whether a sequestration order should be made based on the creditor’s petition”. See Zdrilic v Hickie [2016] FCAFC 101 at [85].

42    Mr Browne identified the following indicators of the primary judge’s reasoning which suggested a hearing de novo. He submitted that the primary judge:

(a)    Identified in [1] that he was conducting a hearing de novo;

(b)    Outlined the relevant history of the matter;

(c)    Identified the 5 relevant issues that were raised by the Appellant in the hearing before him;

(d)    Dealt with those issues;

(e)    Acknowledged the formal matters (ie the s. 52(1) matters) were the subject of evidence before him in the form of affidavits [50];

(f)    Exercised the s. 52(2) discretions relating to solvency and whether cause existed against a sequestration order being made, based upon the issues he understood to have been raised by the Appellant.

43    I accept that the primary judge conducted a hearing de novo.

There was an error in how the primary judge received and dealt with the Notice to Admit Facts

44    Mr Browne submitted at [54] that “[t]he grounds relating to the Notice to Admit Facts are relied upon by the Appellant because it appears she believes the Notice was capable of giving rise to a conclusion she was solvent at the time the Notice was delivered.”

45    I do not consider that Ms Burnett’s Notice to Admit Facts can possibly give rise to a conclusion that she was solvent at that time. Even if it could, the question of Ms Burnett’s solvency was to be determined at the time of hearing.

The underlying debts

46    I accept Mr Browne’s submission (at [55]) that “[t]hese issues were dealt with by the primary judge in appropriate terms”.

Failure to grant an adjournment

47    Mr Browne submitted (at [56]) that “[t]he Appellant has failed to identify from the record, transcript, reasons for judgment or other material that the primary judge has erred in his decision to refuse to grant an adjournment.”

48    I accept this submission.

Exempt or protected money

49    As Mr Browne submitted, this issue “is only relevant if the Appellant was solvent”, and was acknowledged by the primary judge at [46] of his reasons. As noted above, the primary judge did not find Ms Burnett a credible witness when giving evidence about quantities of money she claimed to have buried or given to an accountant.

Refusal to receive further affidavit evidence

50    This ground arises in the proposed amended notice of appeal. As Mr Browne submitted, the appellant has not identified any error in the refusal to grant leave or in the exercise of the discretion to refuse to receive this evidence.

conclusion

51    For the reasons given above, the appeal must be dismissed, with costs to be paid from the bankrupt’s estate.

Associate:

Dated:    8 August 2019