FEDERAL COURT OF AUSTRALIA

Boensch v Somerville Legal Pty Ltd [2019] FCA 1752

ORDERS

THE COURT ORDERS THAT:

1.    The appeal is incompetent.

2.    Leave to appeal is refused.

3.    The appellant to pay the costs of the respondent to be agreed or taxed.

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

REASONS FOR JUDGMENT

ABRAHAM J:

1    On 4 April 2019, a judge of the Federal Circuit Court of Australia dismissed with costs, an application by the appellant in respect to a bankruptcy notice issued on 7 February 2019. The creditor is the respondent in this matter, Somerville Legal Pty Ltd. The total debt amount stated in that bankruptcy notice is $109,956.75.

2    The appellant applied to this Court for interlocutory orders seeking that the time for compliance with the bankruptcy notice be extended until the final determination of the appeal in this proceeding, and an order staying the creditor’s petition which was filed as a consequence of the dismissal of his application by the Federal Circuit Court. On 11 April 2019 this Court dismissed that application: Boensch v Somerville Legal Pty Ltd [2019] FCA 590.

3    On 26 April 2019, the appellant filed a notice of appeal pursuant to s 24(1)(d) of the Federal Court of Australia Act 1976 (Cth) (FCA Act), challenging the decision of the Federal Circuit Court. The respondent challenged the competency of the appeal, arguing that the decision of the Court below was an interlocutory decision, and therefore there is no right to appeal, rather leave to appeal is required pursuant to s 24(1A) of the FCA Act.

4    The appellant disputed the respondent’s contention as to competency, but filed an application for leave to appeal and argued if leave was required, that it ought to be granted. The hearing of those two matters was heard together.

5    This judgment addresses both issues; the challenge to the competency of the appeal and, if leave is required, whether it ought to be granted. Needless to say the respondent opposed the grant of leave to appeal, if it is required.

6    The appellant’s notice of appeal alleges seven grounds of appeal as follows:

1. The primary judge (Street FCCJ) erred by refusing to uphold the appellant's contention that the bankruptcy notice issued by the Official Receiver on 7 February 2019 upon the application of the respondent (the relevant bankruptcy notice) to him constituted an abuse of process and could not support, or give rise to, an act of bankruptcy being committed by the appellant within the meaning of s. 40(1)(g)(i) of the Bankruptcy Act.

2. The primary judge (Street FCCJ) erred by refusing to uphold the appellant's contention that the relevant bankruptcy notice was served upon him on 8 February 2019 by express post rather than, as the respondent had contended, by email on 7 February 2019.

3. The primary judge (Street FCCJ) erred by refusing to uphold the appellant's contention that the appellant's application to set aside the relevant bankruptcy notice filed on 4 March 2019 was filed within time for the purposes of s. 41(6A) of the Bankruptcy Act.

4. The primary judge (Street FCCJ) erred by dismissing the appellant's application to set aside the relevant bankruptcy notice filed on 4 March 2019 on the ground that the Federal Circuit Court of Australia had no jurisdiction to entertain the application pursuant to s. 41(6A) of the Bankruptcy Act because an act of bankruptcy had been committed.

5. The primary judge (Street FCCJ) erred by denying the appellant procedural fairness during the hearing on 4 April 2019 of the appellant's application to set aside the relevant bankruptcy notice filed on 4 March 2019, and, in particular, by failing to permit the appellant's solicitor from addressing oral argument to his Honour in support of the written submissions filed in Court on behalf of the appellant during the hearing on 4 April 2019, with particular reference to the appellant's contention concerning abuse of process.

6. The primary judge (Street FCCJ) erred by failing to give any reasons or, alternatively, adequate reasons for his extempore decision given on 4 April 2019 to dismiss the appellant's application to set aside the relevant bankruptcy notice filed on 4 March 2019.

7. The primary judge (Street FCCJ) erred by failing to give any reasons or, alternatively, adequate reasons for his extempore decision given on 4 April 2019 to order the appellant to pay the respondent's costs of the application to set aside the relevant bankruptcy notice filed on 4 March 2019.

7    For the reasons given below the Federal Circuit Court decision is interlocutory, the appeal is incompetent and leave to appeal is refused.

Federal Circuit Court

8    The primary judge concluded that the “Court has no power to extend time for compliance with the bankruptcy notice and no power to set the same aside”. The reasons given, which were very brief, were as follows:

1. These are proceedings within the Court’s jurisdiction under s 27 of the Bankruptcy Act 1966 (Cth) (“the Act”) in which the applicant is seeking to have set aside a bankruptcy notice which on the evidence before the Court was served on 7 February 2019. The 21-day period for compliance under the bankruptcy notice expired on Thursday, 28 February 2019. The proceedings are ones in respect of which the applicant seeks to have the bankruptcy notice set aside. Those proceedings are ones that must be brought before the act of bankruptcy occurs.

2. There is no power under s 41(6A) of the Act to extend time after the act of bankruptcy has occurred. These proceedings were not commenced within the time for the setting aside of the bankruptcy notice. Accordingly, it is not necessary for the Court to deal with the other arguments advanced by the applicant as to why the bankruptcy notice should have been set aside.

3. On the evidence before the Court, the Court finds that an act of bankruptcy occurred on 28 February 2019 and these proceedings were not commenced until 4 March 2019. Accordingly, the Court has no power to extend time for compliance with the bankruptcy notice and no power to set the same aside.

Dismissal of interlocutory application

9    As noted above at [2], this Court heard and dismissed an interlocutory application in relation to the Federal Circuit Court judgment. While this Court had limited material before it when deciding the interlocutory application, many of the matters the appellant there relied on are those in issue in this application. Most obviously, the grounds of appeal. As the respondent correctly notes, the appellant has made his submission in this Court without any argument as to why some of those conclusions in relation to the grounds are incorrect. Indeed, the appellant’s submission has been made without any reference to or consideration of the conclusions reached in that judgment.

Final or interlocutory order

10    The appellant accepted that the refusal to extend the time for compliance with a bankruptcy notice is interlocutory: see Sharpe v W H Bailey & Sons Pty Ltd [2014] FCA 921; (2014) 317 ALR 738 at [36]. However, the appellant submitted that he applied for interlocutory and final relief in the Court below. In that context the appellant submitted that because the judgment he is seeking to appeal from also dismissed his application for final relief, that is, his application to set aside the bankruptcy notice, leave to appeal is not required. The appellant submitted that the primary judge dismissed the application for final relief, and in doing so dismissed the interlocutory relief on that same basis. The appellant submitted that the judgment of the primary judge “was a decision on a final hearing on the merits which resulted in the dismissal of the proceedings following a defended hearing”. The appellant submitted that the primary judge dismissed the substantive application to set aside the bankruptcy notice as an abuse of process. He submitted that it was a final judgment made for interlocutory reasons. In oral submissions the appellant relied on Thai v Deputy Commissioner of Taxation (1994) 28 ATR 418 (Thai v DCT) and Thai v Commissioner of Taxation (1994) 53 FCR 252 (Thai v CT) (decisions not referred to in his written submission) to support his argument.

11    The respondent submitted that the appellant’s argument is no more than a bare assertion that the decision is a final one with no authority cited in support of the proposition. The respondent submitted that the appellant proceeds on the assumption that because the primary judge dismissed his application for final relief, the decision was “final” in the relevant sense. The respondent submitted that s 24 of the FCA directs attention to the nature of the judgment made by the primary judge and not to the nature of the relief sought by the appellant.

12    The respondent provided examples to illustrate that point: a decision to summarily dismiss a claim for disclosing no reasonable cause of action is interlocutory: Rana v University of South Australia [2004] FCA 559; (2004) 136 FCR 344 at [10]-[15]; a decision to dismiss proceedings for want of prosecution is interlocutory: National Mutual Life Association of Australasia Ltd v Grosvenor Hill (Qld) Pty Ltd [2001] FCA 237; (2001) 183 ALR 700 at [8]-[9] and a decision to dismiss a claim as incompetent is interlocutory: SZAJB v Minister for Immigration and Citizenship [2008] FCAFC 75; (2008) 168 FCR 410 at [15]-[23].

13    The respondent relied on the observations of Pagone J in Avetmiss Easy Pty Ltd v Australian Skills Qualifications Authority [2014] FCA 507 at [4] that:

It may seem curious to a litigant who is not trained in law to describe as ‘interlocutory’ a decision which effectively brings an end to a proceeding, but such a decision is interlocutory, and not final, within the meaning of s 24(1A), because the judgment from which the appeal is sought was not made on the merits of the case.

14    The respondent also relied on the observations of French J (as he then was) in SZAJB v Minister for Immigration and Citizenship [2008] FCAFC 75; (2008) 168 FCR 410 at [23]:

Where a court holds that it lacks jurisdiction to entertain an application and that the application is to be dismissed as incompetent, the dismissal order effectively disposes of the proceedings in the court in which the application is brought. The order does not ‘finally dispose of the rights of the parties’ in the sense necessary to characterise it as a final judgment.

15    The respondent submitted, based on those authorities, that the primary judge did not entertain the merits of the appellant’s application to set aside the bankruptcy notice, which the respondent contends appears to be the appellant’s complaint.

16    At the hearing of this application the transcript of the proceeding below, in so far as it related to his ground of appeal alleging a denial of procedural fairness, was raised with the appellant. This is in the context where there was no evidence of the events that occurred in the Court below which were said to have resulted in a denial of procedural fairness. Nor had the transcript of those proceedings been provided by the appellant. The appellant accepted that the transcript was required to prove that ground but informed the Court that he “was in the course of applying for the transcript but didn’t take it any further”. Unsatisfactory as the appellant’s position was, and contrary to the objection of the respondent, a further opportunity was provided to the appellant to obtain that transcript and in relation to that ground, to put further written submissions in light of the transcript. The respondent also had the opportunity to file submissions in reply to those written submissions.

17     Suffice to say that the transcript was obtained and the appellant put on further written submissions. However, those submissions do not address the ground on which the opportunity was provided, but rather, based on the transcript, attempted to reargue that which already had been addressed in the hearing of this application. The appellant made further submissions in relation to Thai v CT based on the transcript of the hearing, and submitted that the primary judge considered that the hearing was a final hearing. The appellant argued that Thai v CT was on all fours with this case and that the decision of the primary judge was a final order, although for interlocutory reasoning. The respondent replied, taking issue with that argument. The respondent pointed out that the appellant did not address the issue of procedural fairness in his submission, and that the transcript supports his submission that there was no merit in the ground.

Consideration

Final v Interlocutory

18    The appellant’s initial submission focussed entirely on the result; that as the bankruptcy notice was not set aside, the decision is a final one. However, that approach does not address the principles relevant to determining whether a decision was a final one. Moreover, the appellant’s submission which he used to illustrate that the decision was a final one, that the primary judge dismissed his substantive application to set aside the bankruptcy notice as an abuse of process, is not borne out by the reasons.

19    The test for determining whether a judgment is final or interlocutory is whether the judgment finally determines the rights of the parties: Bienstein v Bienstein [2003] HCA 7; (2003) 195 ALR 225 at [25]; Johnson Tiles Pty Ltd v Esso Australia Pty Ltd [2000] FCA 1572; (2000) 104 FCR 564 (Johnson Tiles) at [42]; Plaintiff S164/2018 v Minister for Home Affairs [2018] HCA 51; (2018) 361 ALR 8 (Plaintiff S164/2018) at [11]. This depends upon the legal and not the practical effect of the judgment: Carr v Finance Corporation of Australia Ltd (No 1) (1981) 147 CLR 246 at 248, 256; Plaintiff S164/2018 at [11]. The legal effect of a judgment is not final, where it would be open to a party to bring a second application, even if it would be doomed to fail: Carr v Finance Corporation of Australia Ltd (No 1) (1981) 147 CLR 246 at 248, 256; Plaintiff S164/2018 at [11].

20    The appellant’s reliance on Thai v DCT and Thai v CT is misplaced. In that case an issue arose as to whether a decision of Davies J, and a later decision of Einfeld J, were interlocutory or final. The Full Court accepted, and it did not appear to be challenged, that the decision of Einfeld J in which he made a sequestration order, was a final order, and as such a right of appeal lay from that order. The appellant’s submission appears to be that Einfeld J made the sequestration order for “interlocutory reasons” rather than determining the basis of the creditor’s petition. From that the appellant submitted that the reasons of the primary judge in this case were interlocutory reasons for a final order. It follows, the appellant submitted, that Thai v CT is “on all fours” with this case, and that I am bound by that decision. The appellant submitted the consequence is that the primary judge’s decision is final. That reasoning is flawed. The order made by Einfeld J was a sequestration order, which was a final order. I observe that the orders made by Davies J, were held to be interlocutory orders. Davies J determined some, but not all matters which were relevant to satisfying the criteria for a sequestration order. Those matters preceded the making of a sequestration order. In this case, that the bankruptcy notice was not set aside is but one aspect to the making of the sequestration order. As explained below, the appellant accepts that his arguments in relation to the bankruptcy notice which are the subject of this appeal can be made during the hearing of the creditor’s petition.

21    The appellant’s submission that the transcript reflects that the primary judge referred to the hearing as a final hearing and therefore it was a final order, is also misplaced. First, it is clear from the transcript that the primary judge’s reference to a final hearing was referring to the fact that the hearing was listed to proceed on that day and it would not be adjourned to a later occasion. Second, in any event, whatever meaning is to be given to the reference by the primary judge to final hearing, it does not assist in determining the nature of the hearing for the purposes of the appeal provisions under consideration.

22    Indeed, aspects of the appellant’s further written submission undercut his earlier arguments. For example, the appellant submitted based on the transcript that the primary judge was careful not to comment on the merits of the argument. However, that tells against the appellant’s argument that it is a final order. As is apparent from the transcript, the primary judge considered that those matters could relevantly be addressed at the hearing of the creditor’s petition. As the appellant submitted, the primary judge did not want to prejudge the issue. That is inconsistent with the argument advanced by the appellant in his primary written submission.

23    The decision of the Court below in this case, is an interlocutory decision. The Court did not assess the appellant’s arguments challenging the bankruptcy notice on their merits because it concluded that it had no jurisdiction to do so. The Court concluded that it had no power to extend the time for compliance after the act of bankruptcy had occurred. On that basis, the primary judge considered it was not necessary to deal with the other arguments that were advanced. There was no final determination of the issues between the parties.

24    As the appellant now appears to accept, the order made by the primary judge does not preclude a further application in relation to his argument that the notice of bankruptcy is an abuse of process. During the previous interlocutory application in this Court, and in the current proceedings, he accepted that he could make his application that the notice is an abuse of process in the argument as to the creditor’s petition: see Boensch v Somerville Legal Pty Ltd [2019] FCA 590 at [38]. The respondent accepted that such an application could be made, and that there was nothing in the judgment of the primary judge which would prevent that.

25    Similarly, the appellant accepted that he could make his argument as to when he was served with the notice of bankruptcy, during the creditor’s petition proceedings. Again, the respondent does not challenge that proposition.

26    The appellant has not established that the appeal is competent. It follows that the appeal is incompetent. The appellant must obtain leave to appeal to proceed. As noted above, an application for leave to appeal had been filed for this eventuality. It was filed out of time, and an extension of time would be needed. However, if there were grounds to grant leave, it is likely the extension would be granted.

Leave to appeal

27    The discretion to grant leave to appeal is an unfettered one, with each case being determined on its merits. Nonetheless the discretion is informed by well-established principles including that generally an applicant must establish: (1) that, in all the circumstances of the case, the decision is attended by sufficient doubt to warrant it being reconsidered; and (2) that substantial injustice would result if leave were refused, supposing the decision to be wrong: Décor Corporation Pty Ltd v Dart Industries Inc [1991] FCA 844; (1991) 33 FCR 397 (Décor Corporation) at 398-400; Johnson Tiles at [44]; Samsung Electronics Co. Ltd v Apple Inc [2011] FCAFC 156; (2011) 217 FCR 238 at [26]-[30]. When considering the grant of leave a distinction has been recognised between a “common interlocutory decision on a point of procedure”, and a decision determining a substantive right, where leave will more readily be granted: Décor Corporation at 400.

28    As is apparent from the grounds above, they relate to the abuse of process argument (ground 1); the service of the notice (grounds 2, 3); an asserted error in finding there was no jurisdiction (ground 4); the denial of procedural fairness (ground 5); and the adequacy of the reasons given (grounds 6, 7).

29    Leave to appeal ought not to be granted in this case. The decision of the primary judge is not attended with sufficient doubt to warrant reconsideration, nor would a substantial injustice result from the refusal of leave to appeal. The matters the appellant seeks to agitate can, as he accepted, be argued during the hearing in relation to the creditor’s petition.

30    The appellant’s argument in support of the grounds, in many respects was limited. In relation to some grounds it related to little more than an assertion as to his position (premised on the basis it was correct). As noted above, the appellant did not address any of the conclusions as to the grounds of appeal referred to in the first interlocutory judgment. Moreover, a number of matters raised by the appellant were not relevant to the issue being argued.

Ground 1

31    There is a dispute between the parties as to the status of the submission that the bankruptcy notice was an abuse of process and therefore not valid, which forms the basis of ground 1.

32    The appellant submitted that during the course of his submission in the Court below he handed to the primary judge a written submission in support of his application. He submitted that the primary judge accepted the document and placed it on the Court file. That document does address the abuse of process argument.

33    The respondent submitted that this is irrelevant, as the contents of the written submissions said nothing about whether the primary judge made a determination on the merits of the issues raised. The respondent submitted that the written submissions did not address the merits of the appellant’s application. The respondent submitted that he would have been taken by surprise if the merits of the abuse application were heard on that day.

34    Contrary to the respondent’s submission, the appellant’s written submission did raise the issue of the bankruptcy notice being an abuse of process. The respondent’s position as to its belief about what was before the Court is of little assistance. If he was not in a position to address this matter, an application for an adjournment could have been sought. It was raised as the primary argument, which on the appellant’s argument, if correct resulted in the notice being invalid and therefore no issue arising as to compliance with a time limit. The respondent submitted that the conclusion by the primary judge was a rejection that he had the power to consider that. That is apparent from the transcript of the proceedings below.

35    None of the authorities referred to by the appellant in his written submission in support of his case of an abuse of process, assisted him in establishing he had an arguable case. While not referred to in the appellant’s written submission, the first interlocutory judgment of this Court noted that, although not fully argued, Seller v Deputy Commissioner of Taxation [2011] FCA 865; (2011) 282 ALR 80 at [15] may support the correctness of the appellant’s submission to the extent it relates to his application to have the notice set aside: Boensch v Somerville Legal Pty Ltd [2019] FCA 590 at [36]. The respondent submits that is not so.

36    However, more problematic for the appellant is that the factual matters underlying the abuse of process claim appear not to be reasonably arguable.

37    First, as noted above at [22], the appellant in his further written submission contended that the abuse of process argument had deliberately not been determined by the primary judge. That submission is inconsistent with this ground of appeal.

38    Second, in any event the argument is dependent on the interpretation of statements made to the registrar on 3 October 2017 by the respondent’s legal representative when a previous bankruptcy notice had been withdrawn. It is submitted that the statements amounted to a concession on the part of the respondent that no further bankruptcy notices would be filed until all substantive proceedings are completed. I do not consider that there is a reasonable prospect of establishing that fact.

39    Third, there is no reasonable argument that there were proceedings on foot at the date the bankruptcy notice was issued. What had been filed in the District Court had been struck out by the time the notice was issued. The appellant’s submission that while the summons had been struck out, the proceedings were not dismissed, does not assist his case. Nor do the various attempts to re-enliven those proceedings, after the hearing of the matter before the primary judge. I note that I have been informed those attempts have been unsuccessful.

40    Leave to appeal is not granted on this ground.

Grounds 2, 3 and 4

41    These grounds are based on the appellant’s submission that service of the bankruptcy notice was not effected until 8 February 2019 which, on his argument, resulted in the period in which he was to file an application to set aside that notice being Monday 4 March 2019. On that basis he claimed his application in the Federal Circuit Court was within time.

42    However, the bankruptcy notice was served by email on 7 February 2019, and by express post on 8 February 2019. If the service was effected on 7 February 2019 the application to set aside the bankruptcy notice had to be filed by 1 March 2019, and therefore the application in this case was out of time.

43    The appellant relied on r 16.01(2) of the Bankruptcy Regulations 1996 (Cth) which relevantly states in the “absence of proof to the contrary” a document sent or served is taken to have been received by or served on the person when the “document is left sent or transmitted”. The appellant’s argument is that he has proof to the contrary, namely that he did not read the email serving the bankruptcy notice until 8 February 2019. The appellant cited no authority in support of this proposition. The appellant relied on s 36(2) of the Acts Interpretation Act 1901 (Cth) to submit that as 8 February 2019 was a Friday, the counting of the 21 days within which the notice had to be complied with, did not start until the Monday.

44    However, the “proof to the contrary” referred to in r 16.01(2) is not concerned with whether the person has read the document but with proof that the document has not been received or served on that person either at all or as at a specified date: Boensch v Somerville Legal Pty Ltd [2019] FCA 590 at [19]. Further, it seems clear that s 36(2) of the Acts Interpretation Act 1901 (Cth) does not apply to the facts of this case as argued by the appellant: see Boensch v Somerville Legal Pty Ltd [2019] FCA 590 at [20]. The appellant’s argument on this point is not sufficiently arguable to warrant the grant of leave.

45    In relation to this argument the appellant attempted to rely on evidence not before the primary judge. That evidence would not be relevant to the determination of this ground of appeal. Indeed, the fact that there is an additional basis for the argument, which requires an evidential foundation (which has not been established as yet) tells in favour of the refusal of leave to appeal. Rather, the appellant can, as he accepted, raise this argument during the creditor’s petition proceedings.

Ground 5

46    The appellant alleged in this ground that the primary judge denied him procedural fairness by failing to allow him to present oral argument in support of his written submission, in particular with reference to the abuse of process argument. On the other hand, the respondent submitted there was no denial of procedural fairness.

47    As noted above, at the time of the hearing there was no material before this Court in support of this ground. The transcript of the hearing before the primary judge has since been provided, although the appellant has not advanced any submission in support of this ground based on that transcript. It is clear from the transcript that the appellant did raise the issue of an abuse of process before the primary judge. His Honour expressed the view that the argument could not get the appellant anywhere in the proceedings before him at that stage because the application was not within the time limit, and therefore he could not set it aside. Although, as noted above, the primary judge stated that he was not expressing a view on the merits of the argument in relation to whether it would constitute “other sufficient cause” within the meaning of s 52 of the Bankruptcy Act 1966 (Cth) in respect to the creditor’s petition.

48    The respondent submitted that the transcript supported his argument that there was no denial of procedural fairness.

49    The appellant does not rely on any aspect of the transcript in support of his argument in relation to procedural fairness. This does not provide a proper foundation to grant leave to appeal, particularly in circumstances where the appellant has an opportunity to argue the underlying matter in the creditor’s petition proceedings.

Grounds 6 and 7

50    These grounds relate to the failure to give adequate reasons. There is no doubt that the reasons given by the primary judge were very brief. However, as the appellant submitted in his supplementary written submission, this was carefully done to ensure there was no prejudgment of the merits of the issues. This was relied on by the appellant in support of his argument that the order was a final one. These grounds are inconsistent with that submission. The transcript of the proceedings before the primary judge reflects that this was done because the matters raised by the appellant were to be considered in the creditor’s petition proceedings.

51    In the particular circumstance of this case, these grounds do not provide a sufficient basis to grant leave to appeal.

Conclusion

52    The appeal is incompetent. Leave to appeal is required but refused.

Associate:

Dated:    25 October 2019