Federal Court of Australia

A&S Powerseller Pty Ltd v Kovacic (No 2) [2022] FCA 1073

ORDERS

THE COURT ORDERS THAT:

1.    The respondent be referred for pro bono legal assistance pursuant to rule 4.12 of the Federal Court Rules 2011 (Cth).

2.    The time for the respondent to file and serve any further affidavits, including those of any medical practitioners or psychologists, for the purposes of the review be extended to 31 October 2022.

3.    The time for the applicant (petitioning creditor) to file and serve any affidavits in reply be extended to 14 November 2022.

4.    The time for the respondent to file and serve an outline of written submissions, not exceeding ten pages be extended to 12 December 2022.

5.    The time for the applicant (petitioning creditor) to file and serve any written submissions in reply, not exceeding five pages be extended to 19 December 2022.

6.    The proceeding be listed for a case management hearing at 9.30 am on 31 January 2022.

7.    The costs of today, and the costs occasioned by the adjournment, are reserved.

OTHER MATTERS

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

REASONS FOR JUDGMENT

(Ex tempore)

WHEELAHAN J:

Introduction

1    On 6 February 2020, a registrar of this Court made a sequestration order against the respondent’s estate. Twenty-one days later, on 27 February 2020, the respondent initiated an application under s 35A of the Federal Court of Australia Act 1976 (Cth) to have the Court review the exercise of power by the registrar.

2    The review is listed for hearing today. By an interlocutory application filed yesterday, 8 September 2022, the respondent seeks an adjournment of the hearing on medical grounds.

Background

3    In Bechara v Bates [2021] FCAFC 34; 286 FCR 166 at [5], the Full Court emphasised that a review by a judge of the exercise of delegated judicial power by a registrar should be undertaken promptly. It is necessary to set out what has occurred in this case to explain the extensive passage of time between the filing of the application for review on 27 February 2020, and the hearing of the review before me more than two and a half years later.

4    On 28 November 2019, the petitioning creditor presented the creditor’s petition seeking a sequestration order against the estate of the respondent. The petitioning creditor claimed that the respondent was indebted to it in the sum of $17,362.93. That amount was the subject of a default judgment in the Magistrates’ Court of Victoria at Dandenong that was entered on 25 January 2019 in a proceeding between the petitioning creditor and the respondent, comprising a claim of $15,499, interest of $250.53, and costs of $1,613.40.

5    The claim that resulted in the default judgment related to the alleged unpaid purchase price of a camper trailer delivered by the petitioning creditor allegedly to the respondent. The petitioning creditor claimed that the respondent was the purchaser of the camper trailer, and that a cheque that was delivered in satisfaction of the purchase price was dishonoured. The drawer of the cheque was not the respondent, but a company of which he was the sole director, ZNR Transport Pty Ltd. The act of bankruptcy that was relied upon by the petitioning creditor was the failure by the respondent within 21 days after service of a bankruptcy notice to pay the debt, or otherwise to make arrangements for payment of the debt.

6    The hearing of the creditor’s petition was initially listed before a registrar of the court on 23 January 2020. Shortly prior to the hearing, the respondent tendered a cheque in the sum of $23,000 to the petitioning creditor’s solicitors. The hearing of the petition was adjourned on the application of the petitioning creditor to 6 February 2020 to allow the cheque to clear. The cheque that was tendered by the respondent to the petitioning creditor’s solicitors was dishonoured.

7    On 27 January 2020, the respondent sent an email to the petitioning creditor’s solicitors seeking an adjournment of the hearing of the creditor’s petition fixed for 6 February 2020 on the ground that he had another hearing at the Magistrates’ Court at Sunshine on the same day. In relation to the payment of $23,000, which had been dishonoured, the respondent stated in his email to the solicitors (set out verbatim) –

also there was a problem with the last payment the account was blocked by bank also i have documents to proof

an we please come to some sort of arrangement to pay this off please i can take another pressure i health is getting worse and worse as the days are going by.

I would really like to come to some sort of payment option and get this sorted please

if you guys give me few months ill have the full funds to pay the $23,000.

it is in the best interest for both parties to come to some sort of payment arrangement ruther then going to court

8    On 4 February 2020, Mr Craig Fitzgerald, who has been assisting the respondent with this matter, wrote to the petitioning creditor’s solicitors by email proposing a settlement. The offer was rejected by the petitioning creditor by return email on the same day.

9    On 5 February 2020, the respondent wrote to the court requesting an adjournment of the hearing on the ground that he had a contest mention at the Magistrates’ Court at Sunshine, and provided a copy of the notice of hearing. In response, an officer of this Court wrote to the respondent stating that in the absence of consent orders the matter could not be adjourned prior to the hearing, and suggested that the respondent might appear by telephone. In response, the respondent stated that in the absence of the petitioning creditor’s consent to an adjournment he was agreeable to appearing by telephone.

10    The hearing of the creditor’s petition proceeded on 6 February 2020. The respondent appeared by telephone. On that occasion, the registrar ordered that the estate of the respondent be sequestrated under the Bankruptcy Act 1966 (Cth), noting the date of the act of bankruptcy as 23 September 2019.

11    On 11 February 2020, the respondent filed an application for re-hearing with the Magistrates’ Court at Dandenong, with a supporting affidavit, seeking to have the default judgment set aside. The ground stated in the application was that the respondent claimed he had not been served with the claim.

12    As I stated at the outset, on 27 February 2020 the respondent applied to the Court to have the sequestration order of the registrar set aside, and for a stay of proceedings under the order. The respondent filed an affidavit in support by which he claimed that he had not been served with the proceedings in the Magistrates’ Court in which the default judgment was obtained.

13    On 6 March 2020, a Magistrate heard the respondent’s application for a re-hearing of the proceeding, which the petitioning creditor opposed, and dismissed the application.

14    In relation to the review of the sequestration order, at an interlocutory hearing on 13 March 2020 Kerr J stayed proceedings under the sequestration order, and fixed the hearing of the review for 30 March 2020.

15    At the hearing before Kerr J on 30 March 2020, the respondent was given leave to file further affidavit material, and the matter was adjourned to 6 April 2020.

16    The hearing of the respondent’s application for review of the sequestration order proceeded on 6 April 2020, and owing to Covid-19 related restrictions in Victoria, it proceeded by telephone. On the following day, Kerr J dismissed the application: A&S Powerseller Pty Ltd v Kovacic [2020] FCA 459.

17    On 29 April 2020, the respondent filed a second application in the Magistrates’ Court at Dandenong seeking to have the default judgment in that Court set aside, again disputing that he was served with the claim.

18    On 6 May 2020, the respondent filed a notice of appeal to the Full Court of this Court seeking to have the orders of Kerr J made 6 April 2020 set aside.

19    On 17 July 2020, a Magistrate refused the respondent’s second application for a rehearing.

20    On 15 September 2020, the respondent commenced a proceeding in the Supreme Court of Victoria under Order 56 of the Supreme Court (General Civil Procedure) Rules 2015 (Vic) seeking judicial review of the orders of the Magistrates’ Court made on 6 March 2020 and 17 July 2020 that dismissed the respondent’s applications for re-hearing.

21    On 30 September 2020, O’Bryan J ordered that proceedings under the sequestration order be stayed pending the hearing and determination of the appeal to the Full Court: A&S Powerseller Pty Ltd v Kovacic [2020] FCA 1406; cf, Ritson v Commissioner of Police (NSW) [2021] FCAFC 208 at [57]-[66] (Allsop CJ, Lee and Downes JJ).

22    On 11 November 2020, a judicial registrar of the Supreme Court of Victoria ordered that the default judgment of the Magistrates’ Court of Victoria made 25 January 2019 be stayed until the determination of the judicial review proceeding in the Supreme Court, or until further order. The judicial review proceeding was listed for hearing on 23 September 2021 upon an estimate of one day, and timetabling orders were made.

23    On 3 August 2021, O’Bryan J, exercising the powers of the Full Court pursuant to s 25(2B)(b) of the Federal Court of Australia Act 1976 (Cth), made orders by consent, that the appeal from the orders of Kerr J be allowed, that the orders made 7 April 2020 be set aside, and that the application for review be remitted for re-hearing as soon as reasonably possible. The stay of proceedings under the sequestration order the subject of the orders of 30 September 2020 was extended until the hearing and determination on review of the creditor’s petition. The orders recorded that the petitioning creditor conceded that Kerr J had erred by failing to consider whether the matters referred to in s 52(1) of the Bankruptcy Act were satisfied as at the date of the hearing of the review, as opposed to the date of the hearing before the registrar: see, Bechara v Bates at [17].

24    At a case management hearing on 27 August 2021, I fixed the application for review for hearing at 10.15am on 12 October 2021. I also made orders that the respondent file and serve any affidavit material by 17 September 2021, and that the petitioning creditor file and serve any material in reply by 1 October 2021. No party who appeared before the Court at the case management hearing mentioned the existence of the judicial review proceeding in the Supreme Court of Victoria, or of the fact that it was listed for hearing on 23 September 2021.

25    The respondent did not file any affidavit material by 17 September 2021, as ordered.

26    On 20 September 2021, the respondent filed an interlocutory application by summons in the Supreme Court proceeding seeking summary judgment on the ground that the petitioning creditor had failed to file a notice of appearance. On 5 October 2021, an Associate Justice of the Supreme Court of Victoria ordered that the summary judgment application be listed concurrently with the trial of the proceeding, which later took place on 11 November 2021.

27    On 7 October 2021, the respondent lodged with this Court an interlocutory application seeking an adjournment of the review of the sequestration order fixed for 12 October 2021. Subsequently, the respondent furnished copies of the orders of the Supreme Court of Victoria made 11 November 2020, and 5 October 2021 (which was authenticated on 8 October 2021). I fixed the interlocutory application seeking an adjournment at the same time as the hearing of the review, namely 12 October 2021.

28    On 11 October 2021, the parties submitted a proposed consent order that the hearing of the review fixed for 12 October 2021 be adjourned to a date after 11 November 2021. I made orders in chambers adjourning the hearing to a date to be fixed, and fixing a case management hearing for 19 November 2021. It later became necessary to adjourn the case management hearing pending judgment in the judicial review proceeding in the Supreme Court of Victoria.

29    By orders made on 24 February 2022, the Supreme Court of Victoria granted the respondent an extension of time within which to seek review of the orders of the Magistrates’ Court made on 6 March 2020 by which the respondent’s first application was dismissed, as the application was filed outside the applicable 60 day limit. The respondent’s application was within time in relation to the dismissal on 17 July 2020 of the respondent’s second application to the Magistrates’ Court for rehearing. Otherwise, the Supreme Court dismissed the respondent’s applications for judicial review, holding that the grounds relied on by the respondent were not established: Kovacic v A&S Powersellers Pty Ltd [2022] VSC 77 (Irving AsJ).

30    On 25 March 2022, I conducted a further case management hearing. The petitioning creditor appeared by counsel by video, and the respondent appeared in person by audio link. Mr Fitzgerald, who as I mentioned earlier has been assisting the respondent, also participated in the hearing by audio link. I indicated to the parties my intention to fix the hearing of the review for 26 July 2022, and I proposed timetabling orders. I invited submissions from the respondent and Mr Fitzgerald about the orders that were proposed, and there were no relevant matters put in opposition to the proposal. I confirmed that I proposed that the hearing would take place in open court in Melbourne, and in response to a request from Mr Fitzgerald I informed him that I would allow him to observe the proceeding by video link, and that he would be permitted to assist the respondent. I made orders in chambers later on 25 March 2022, providing for the filing of affidavit material and written submissions, and noting the Court’s intention to permit Mr Fitzgerald to attend the hearing remotely. The orders provided, as far as is relevant to the respondent, for the filing of any further affidavits by him by 1 June 2022, and for the filing of an outline of submissions by 19 July 2022.

31    The respondent did not file any further affidavit material, or written submissions as permitted by the orders of 25 March 2022. Instead, on 19 July 2022, the respondent lodged with the court an interlocutory application seeking, amongst other things, an adjournment of the hearing of the review, and extensions of time for compliance with the orders for further affidavits and submissions. The respondent also sought an order that upon completion of those steps a further case management hearing take place. In support of the application the respondent filed an affidavit dated 18 July 2022 in which he stated that he was suffering from poor health, and had been unable to meet the timetable set by the Court, and annexed some medical certificates and reports from his general practitioner and a treating psychologist. The respondent filed a further affidavit on 24 July 2022, which was the day before the hearing. The tenor of that further affidavit was that the respondent stated that he was not fit to attend court on 26 July 2022, and he annexed further historical reports from a treating psychologist, and a brief letter from his general practitioner addressed to the Court dated 24 July 2022.

32    At the hearing fixed for 26 July 2022, the respondent did not attend. However, with leave of the Court Mr Fitzgerald made submissions on the respondent’s behalf, seeking an adjournment of the hearing. I permitted this course as part of the discharge of the Court’s obligation to assist unrepresented litigants. In the course of the exchanges during the hearing, I expressed in the following terms my provisional view that the hearing of the review should be adjourned –

… I think there are real questions about what weight is to be given to the evidence of the treating general practitioner, and on the other hand, the Court is faced with a situation where perhaps the medical practitioner has not written the reports with a forensic eye and to questions of admissibility. And so I’m minded, I think, to give some leeway to the medical practitioner in that regard. I’m faced with the situation where I have a medical practitioner’s opinion that Mr Kovacic will be unable to attend court today and it’s not a case like those we see from time to time where we just get a medical certificate. This is the treating medical practitioner whom Mr Kovacic has consulted since 2010 on the evidence. In those circumstances, my preliminary view, subject to any further submissions you might wish to make, is to adjourn today’s hearing for a reasonably short period.

33    After hearing from the counsel for the petitioning creditor, I adjourned the review to 9 September 2022, stating that it was in the interests of justice to give the respondent another opportunity to file affidavit evidence and submissions. Counsel for the petitioning creditor informed the Court that formal reasons for this decision were not required. In my remarks during the hearing, I stated to Mr Fitzgerald –

HIS HONOUR:    …Can I say, Mr Fitzgerald, or perhaps reinforce the fact that many litigants feel stress and anxiety at the prospect of facing a court hearing.

MR FITZGERALD:    Yes, your Honour.

HIS HONOUR:     - - - and the court can’t simply adjourn hearings off because parties are apprehensive about the hearing process. So the purpose of these orders is to give Mr Kovacic another opportunity to prepare any affidavits or submission and another opportunity to attend court, and you’ve heard my proposal that if there has been – if there’s going to be any further application for an adjournment on medical grounds, then that medical evidence may well be tested.

34    I made an order that any further application by the respondent for an adjournment on medical grounds should be supported by an affidavit of a medical practitioner, who would have to be available for cross-examination. Similar orders were made by Beach J, that are recorded in the reasons for judgment dismissing an application for leave to appeal those orders in Kanakaridis v Westpac Banking Corporation [2015] FCA 1034 at [7] (Murphy J). I ordered that any further application for an adjournment should be filed and served by 29 August 2022. In addition, I extended the times within which the respondent could file further affidavit material to 8 August 2022, and extended the time for the respondent to file an outline of submissions to 22 August 2022.

35    By the interlocutory application filed 19 July 2022, the respondent sought a number of additional orders. Those orders included that the respondent’s application for review of the sequestration order be adjourned until such time as the respondent’s health has sufficiently recovered, and the respondent is deemed able to give evidence as determined by his treating doctor. In ruling on the application for adjournment, I stated that I was not persuaded that this course was justified on the evidence before me, referring to the fact that the medical evidence was untested, and that the respondent’s evidence in support of the interlocutory orders could not be tested, because he had not attended court. I stated that the only adjournment being granted was to 9 September 2022, which Mr Fitzgerald confirmed was acceptable.

36    The respondent also sought an order that he have leave to file and serve additional evidence relating to his long term mental health, and sought an order that the court receive such evidence on the review. That application was based in part on leave being given under s 27 of the Federal Court of Australia Act 1976 (Cth), which relates to the court’s power to receive further evidence on appeals. I did not make an order directly responding to this application, but stated to Mr Fitzgerald that if the respondent wished to file any such evidence, then my order extending time to file affidavits covered the position, and the question whether such evidence would be admissible would have to be determined at the hearing if objection were made. Later in the hearing, I confirmed to Mr Fitzgerald that I was not locking the respondent out of filing evidence in relation to his medical condition, stating –

HIS HONOUR:    So I’m not locking Mr Kovacic out of filing evidence in relation to his medical condition, but I’m seeking to ensure that it’s understood that I’m not ruling, at the moment, that such evidence would be admissible, that would have to be determined at the hearing.

MR FITZGERALD:     Yes, your Honour

37    I also stated to Mr Fitzgerald that the respondent did not need an order under s 27 of the Federal Court of Australia Act –

HIS HONOUR:    … Mr Kovacic does not need an order in the terms of paragraph 10. Section 27 of the Federal Court of Australia Act is concerned with appeals, and this is not an appeal, it’s a review, and the review is a fresh hearing.

38    Finally, during the course of the hearing I made a comment to Mr Fitzgerald in relation to the issues in the review as follows –

HIS HONOUR:    Now, there’s an allegation made in one of the affidavits that the Magistrates Court’s order in default of the notice of defence is invalid. Now, can I just indicate, you might have trouble with that submission because the judicial review proceeding was unsuccessful. It might be that the real question is whether the underlying debt was owing or remains owing.

39    It goes without saying that this was a provisional view, which was calculated to draw attention to the existence of the underlying debt as an issue to be addressed.

40    The respondent did not file any further affidavit material by 8 August 2022, or file any written submissions by 22 August 2022. Nor did the respondent file a further application for adjournment of the petition by 29 August 2022, as I had ordered. Instead, the respondent filed an interlocutory application yesterday, 8 September 2022, seeking a further adjournment of the hearing of the review. The application was made on the basis that the respondent is in poor mental health, and as a result, has not been able to comply with the extended timetable fixed by the orders of 26 July 2022. The respondent seeks further extensions of time, with all steps being completed by 19 December 2022. The respondent proposes that a case management hearing then take place to fix a hearing date for the review after receiving advice from the respondent’s treating doctor in relation to his health and his ability to give evidence. The respondent again seeks leave to file and serve additional evidence relating to his mental health, and seeks an order that the court receive such evidence on the review.

41    In support of his interlocutory application, the respondent swore an affidavit dated 7 September 2022. In his affidavit, the respondent deposed to the following –

(a)    he is suffering severely with poor mental health, and as a result has been unable to comply with the timetable set by the orders of the Court of 26 July 2022;

(b)    he has not been able or well enough to give clear or concise instructions in the preparation of his affidavit material or outline of submissions, and for that reason seeks a further extension of time;

(c)    he seeks to have Mr Fitzgerald continue to assist him by speaking on his behalf at any hearing or case management hearing;

(d)    he stated that while at the hearing on 26 July 2022 I noted that I understood that many people, in particular self-represented litigants, can suffer great stress and anxiety when participating in a court hearing, I had failed to grasp or to take into account the substantial material relating to the respondent’s health that was before the Court in the respondent’s affidavits of 18 and 24 July 2022;

(e)    the respondent claimed that I had not granted or dismissed his application for leave to put further evidence before the Court relating to his mental health, and claimed that there was thereby a great injustice, and that the respondent had been denied his right to procedural fairness and consequently to a fair and impartial hearing;

(f)    in relation to the requirement that I had imposed that any further application for adjournment on medical grounds should be supported by an affidavit of a medical practitioner who should be available for cross-examination, the respondent deposed (set out verbatim) –

… I have requested for my Doctor, Dr Peter Andrianankis, M.B.B.S, Ph.d, F.R.A.C.G.P. who is a highly qualified and respected General Practitioner who has provided a number of letters to the Court and sees me generally on a weekly basis, was most “exasperated” by this request and simply said he was not prepared to do this that this was an unreasonable request given the extreme demands placed upon him daily and the sheer volume of patients he must deal with every day he considered this a most onerous and unreasonable request and said he wouldn’t be doing this.

(g)    the respondent pointed to the medical reports and reports of psychologists that had been before the court at the hearing on 26 July 2022, and claimed that the diagnoses by these practitioners had been disregarded, thereby denying the respondent procedural fairness and a right to a fair and impartial hearing, including by not granting leave to have these reports put into evidence;

(h)    the respondent asserted that questions of bias arose concerning the comments that I made at the hearing concerning the validity of the orders of the Magistrates’ Court, which I have set out at [38] above;

(i)    the respondent stated that his general practitioner had referred him to a psychiatrist on 5 August 2022, and produced a copy of the referral; and

(j)    the respondent stated that he had attended his first consultation with the psychiatrist, and was due for a second appointment in two weeks’ time.

Consideration

42    I commence by addressing the medical and psychological evidence that has been adduced by the respondent in support of his application for an adjournment. The written reports are extensive, and I will refer to the key points that those reports reveal –

(1)    There are some historic reports which speak to post-traumatic stress disorder that the respondent suffered as a result of his experiences in war-torn Serbia, and then fleeing Bosnia as a seven year old child. Those reports include two reports of a psychologist, George Tsironis dated respectively 6 February 2007 and 28 February 2014. In the latter report Mr Tsironis stated that the respondent had been a client of his since he was 17 years of age. Mr Tsironis expressed the opinion that the respondent has difficulty comprehending the English language. He also referred to diagnoses of depression as a result of psychological testing, and post-traumatic stress disorder. Mr Tsironis referred to a previous bankruptcy of the respondent as a result of which he lost his marital home leading to homelessness. Mr Tsironis diagnosed the respondent as experiencing –

… Chronic PTSD, Chronic Adjustment Disorder with Mixed Anxiety and Depression and Sleep Deprivation, which appears to derive directly from the circumstances of his experience of a traumatic event and his homelessness.

(2)    Dr Helen Kalaboukas, a treating psychologist, prepared a report dated 21 February 2022. Dr Kalaboukas stated that the respondent had attended eight counselling sessions with her. On the cover page of the report Dr Kalaboukas stated that ongoing sessions were being provided “under TAC”, which I take to mean were being funded by the Transport Accident Commission as a consequence of an accepted injury arising out of a transport accident. I will not summarise the entire history in the report. The main points are that Dr Kalaboukas reported that the respondent suffered with severe PTSD as a child during the war in Serbia, and then as a refugee, but was not given any specialised treatment. Dr Kalaboukas expressed the opinion that the transport accident had exacerbated the respondent’s condition and further deteriorated his health. The respondent was suffering with severe depression, suicidal ideation, anxiety, and complex post-traumatic stress. Dr Kalaboukas stated that the court cases with which the respondent is faced have further declined his overall mental health.

(3)    The respondent’s general practitioner, Dr Andrianakis, addressed a three-page letter to the Court dated 17 July 2022. Dr Andrianakis stated that the respondent had been attending his clinic since March 2010. The letter set out a recent history, which commenced with the effects of a transport accident on 20 January 2018 in which the respondent was involved as a passenger. The injuries that were sustained were ongoing left shoulder pain, lower back pain and stiffness, as well as anxiety and depression related to the accident. An ultrasound performed on 7 October 2018 confirmed sub-acromial bursitis with bursal impingement. The Transport Accident Commission certified that the respondent was unfit for work. Dr Andrianakis stated that in September 2019 the respondent deteriorated emotionally and psychologically with worsening depression and anxiety and commenced medication. In May 2020, his depression and anxiety had become quite severe, and he was referred to a psychiatrist for further treatment, which he did not seek on account of the cost. Dr Andrianakis stated that in February 2021 the respondent was referred to a clinical psychologist, Dr Kalaboukas, for further review and management. Dr Andrianakis stated that the respondent had made little progress in his recovery, with much of his treatment having been delayed and interrupted by issues with Covid restrictions which has complicated his recovery. Relevant to his mental health, Dr Andrianakis stated that the respondent remained emotional, with quite severe depression and anxiety. Dr Andrianakis concluded with the following –

It is my opinion he would struggle to give reliable, effective evidence in a court of law.

(4)    Dr Andrianakis signed a certificate dated 24 July 2022 which was addressed to the Court, and which was in the following terms –

This is to certify that Mr Zoran Kovacic attended the clinic today feeling very unwell. He has not slept for days, remains anxious and stressed, struggling to breathe and getting heart palpitations.

He is not feeling well and is very emotional with generalised aches and pains.

His neck and shoulder pains are quite severe at the moment.

He will not be fit to attend court Tuesday 26/7/2022.

(5)    It is relevant to note the terms of Dr Andrianakis’s referral of the respondent to a psychiatrist dated 5 August 2022. Of particular note is the list of the respondent’s current medications, including Aropax, Endep, Losec, Olmetec, Panadeine Extra, Panadeine Forte, and Temazepam.

(6)    Finally, the respondent tendered a letter dated 8 September 2022 from the psychologist George Tsironis in support of the application for an adjournment, which asserted that the respondent would need approximately six months of intense therapy before he would be able to attend to this matter.

43    Bankruptcy proceedings can be challenging for all concerned. This can be compounded when a litigant is without legal assistance. These features are well recognised by appellate authority. In Robson v Body Corporate for Sanderling at Kings Beach CTS 2942 [2021] FCAFC 143; 286 FCR 494 (Robson) Allsop CJ, with whose reasons Markovic J at [39] and Derrington J at [40] agreed, spoke at [7] of the human reality of the jurisdiction –

… There is, and always has been in the history of bankruptcy, a human reality to the jurisdiction. The sequestration order can affect the lives of ordinary people very deeply, as lucidly explained by Deane J in Kleinwort Benson Australia Ltd v Crowl (1988) 165 CLR 71 at 82. Whilst the process of bankruptcy administration may alleviate the position of the insolvent debtor allowing a return to normal life without the burden and oppression of creditors beyond his or her capacity to pay, if a solvent person is made bankrupt the costs and expenses of the administration may turn a solvent debtor into a financially diminished, if not penniless, person. The jurisdiction of bankruptcy is concerned with insolvency and its consequences, not mere debt collection: Culleton v Balwyn Nominees Pty Ltd (2017) 14 ABC(NS) 516; 343 ALR 632 at [44]. The importance of the status of being a bankrupt, or having been a bankrupt is, for many, if not most, people, not possible to overstate. It may be the price for the future freedom from oppression of past creditors which circumstances, ill fortune or naivety brought about, but it nevertheless remains to many, as Deane J said in Kleinwort Benson 165 CLR at 82, “a pronouncement of failure and humiliation attended by the fear of unknown consequences and the susceptibility to criminal punishment from what would otherwise be innocent conduct”. For the future, it can mark, if not necessarily to all, a social stain, certainly it marks a commercial stain on the credit history of the person. To call becoming a bankrupt an “ignominy” as Madgwick J did in Udowenko v Rasevi Pty Ltd [2006] FCA 1217 at [3] is to many no exaggeration. These are not merely passing considerations that the profession and trustees should bear in mind in how they invoke and administer the jurisdiction, they can be taken as implicit in Parliament’s understanding of the jurisdiction and as matters relevant to the amplitude of provisions enacted to empower a court to correct or adjust the position of parties (in particular the debtor) affected by a sequestration order that for some reason should not be seen as operative.

44    The considerations to which Allsop CJ referred in the above passage will also be implicit in Parliament’s understanding of general powers of a remedial nature in the Bankruptcy Act, such as the power of adjournment in s 33(1)(a) of the Act. The consideration of the exercise of the power of adjournment involves the exercise of Chapter III judicial power, in respect of which Allsop CJ stated in SZRUR v Minister for Immigration and Border Protection [2013] FCAFC 146; 216 FCR 445 at [55], in a different context –

The appellant is entitled, and was entitled, to a hearing reflecting the indicia of the exercise of the judicial power of the Commonwealth. He may well have lost his case, but he is entitled to lose his case after a hearing which has afforded him procedural fairness as an incident of the exercise of the judicial power of the Commonwealth.

45    The order that I made on 26 July 2022 requiring that any further application for an adjournment be supported by an affidavit of a medical practitioner has made the respondent dependent upon the willingness of his treating general practitioner to make an affidavit and to submit to cross-examination. The respondent’s evidence is that Dr Andrianakis has refused to do this, expressing exasperation at the terms of the order. The terms of the order that I made have had the consequential effect that the respondent has probably been diverted from obtaining medical evidence in any other form to support his further application for an adjournment. A medical practitioner reading the orders of 26 July 2022 would reasonably understand that anything less than an affidavit, with the requirement to be available for cross examination, would be an insufficient basis on which the respondent could seek an adjournment of the hearing of the review.

46    In these circumstances, I have looked to objective indicators of the respondent’s position, and whether his claim that he has been unable to prepare affidavit material is supported. The main objective indicators to which I have had regard are as follows –

(a)    the lengthy history of diagnoses of psychological or psychiatric conditions;

(b)    the fact that Dr Andrianakis has been seen by the respondent as a treating general practitioner since 2010 which, as I remarked at the hearing on 26 July 2022, leads me to give some weight to the contents of his report;

(c)    the respondent’s claim that he has a psychiatric injury that was caused or aggravated by a transport accident in 2018 appears to have been accepted by the Transport Accident Commission, because it has funded the respondent’s treatment by Dr Kalaboukas;

(d)    significantly, the recent referral of the respondent by Dr Andrianakis to a psychiatrist on 5 August 2022, which was three days before the affidavit material was due; and

(e)    the record of current medications listed in the referral to the psychiatrist.

47    I accept on the evidence before me for the purposes of the respondent’s interlocutory application that the respondent is likely to be suffering from diagnosed depression and anxiety, and probably to a serious degree. The seriousness is supported by the prescription medications that are listed in the referral of 5 August 2022.

48    The respondent’s application is to review the exercise of the registrar’s power pursuant to s 35A(5) and (6) of the Federal Court of Australia Act 1976 (Cth). The review is a hearing de novo of the creditor’s petition, to be approached afresh on the evidence and the law at the time of the review: Bechara v Bates at [17] (Allsop CJ, Markovic and Colvin JJ).

49    To make a sequestration order, the Court has to be satisfied of the ongoing existence of the petitioning creditor’s debt as one of the elements of proof under s 52(1) of the Bankruptcy Act: Ramsay Health Care Australia Pty Ltd v Compton [2017] HCA 28; 261 CLR 132 (Ramsay Health Care) at [54] (Kiefel CJ, Keane and Nettle JJ). There are some circumstances where the question whether the petitioning creditor has proven the debt involves a full examination of the evidence and the parties’ arguments. That may occur for instance where the bankruptcy court determines that there is a sufficient reason to go behind a judgment debt to examine the “truth and reality” of the alleged indebtedness to the petitioning creditor. In cases where that has occurred there has been a comprehensive examination of the position: see, Corney v Brien [1951] HCA 31; (1951) 84 CLR 343; Wren v Mahony [1972] HCA 5; (1972) 126 CLR 212.

50    The respondent, who is unrepresented save for the assistance of Mr Fitzgerald, did not file a notice of opposition to the petition either prior to the hearing before the registrar, or prior to the hearing of the review: see Federal Court (Bankruptcy) Rules 2016 (Cth), r 2.06. No procedural point has been taken by the petitioning creditor in this regard. It is clear enough from the respondent’s affidavits that he disputes the debt on which the bankruptcy notice was founded, and disputes that any debt is owing by him to the petitioning creditor. In this respect, it is clear that the respondent disputes both the validity of the default judgment in the Magistrates’ Court on the ground that he was not served with the complaint filed in that Court, and also disputes the underlying debt. It therefore appears that a principal issue in this review is whether for the purposes of s 52(1)(c) of the Bankruptcy Act the debt was truly owed: see, Ramsay Health Care at [111]. That issue will likely turn on the evidence given on behalf of the petitioning creditor and by the respondent, in respect of which cross-examination has been foreshadowed by counsel for the petitioning creditor. In addition, I would likely advise the respondent of his right to cross-examine the petitioning creditor’s witnesses, and of the forensic consequences of not doing so. It does not appear to be any part of the respondent’s case that he is able to pay his debts: see, Bankruptcy Act, s 52(2)(a).

51    Upon the review, the Court will likely have to weigh the evidence adduced by the parties. In the present state of the evidence, the Court may be called upon to consider a submission that the respondent has not filed any evidence in response to the most recent affidavit evidence filed on behalf of the petitioning creditor upon the review. That recent evidence is an affidavit of Kan Lau, the general manager of the petitioning creditor, affirmed 20 May 2022. Mr Lau states that he was the representative of the petitioning creditor who dealt with the sale of the camper trailer to the respondent. Mr Lau’s affidavit was not before the registrar who made the sequestration order, and it was not before Kerr J on the first review. It appears that apart from formal affidavits, the principal affidavits that were relied on by the petitioning creditor before Kerr J were two affidavits that had been affirmed by the petitioning creditor’s solicitor, who also appeared for the petitioning creditor before the registrar and before Kerr J. This was not an orthodox situation. The solicitor’s affidavits do not appear to contain any direct evidence going to the circumstances of the purchase of the camper trailer. Hence, the relatively recent affidavit of Mr Lau takes on some significance. At present, a potential disadvantage to the respondent is that he has not filed any affidavit material in response to Mr Lau’s affidavit.

52    The above matters all favour granting the respondent’s further application for an adjournment. On the other hand, there are matters that tell against the granting of an adjournment.

53    The first is that the respondent has sworn detailed and largely coherent affidavits in support of his applications for adjournment. His most recent affidavit, which refers to many features of the hearing on 26 July 2022 has likely been prepared with the assistance of Mr Fitzgerald, who participated in the hearing in circumstances where the respondent did not attend. On balance, I find that the respondent did not himself draft the affidavit, but that it was prepared with the substantial assistance of Mr Fitzgerald.

54    The second matter militating against an adjournment is the requirement that applications for review should be heard promptly, as stated by the Full Court in Bechara v Bates. It is possible to view the history of this matter in this Court as one plagued by delay. However, the picture is more complex. The cause of most of the delay is neutral. Much of it is as a consequence of the respondent pursuing applications that he was entitled to pursue, such as his application for judicial review in the Supreme Court of Victoria. There was a considerable delay in the hearing of that application. The orders of Kerr J upon the first review were attended by admitted error with the consequence that the orders on the first review were set aside on appeal and the matter remitted for re-hearing. An order on appeal for a re-hearing is always an unfortunate outcome. But it is an unavoidable incident of justice under the rule of law. To put things into perspective, the first occasion on which the respondent sought an adjournment on medical grounds was at the hearing on 26 July 2022. The present application made on 9 September 2022 is the second occasion. The applications have not been made on generic medical certificates, but on the basis of detailed opinions, with some objective support which I have carefully considered.

55    The third matter militating against a further adjournment is the prejudice to the petitioning creditor. Of course the position of the petitioning creditor, and the costs that it has likely incurred as a consequence of two adjournments, which it may not recover, are relevant considerations. However, in the circumstances of this case, I do not give it much weight. The petitioning creditor, which is a trading corporation, is to be taken to have assumed the risks attending personal insolvency litigation, including those resulting from the factors referred to by Allsop CJ in Robson to which I referred above, which also carry weight.

56    The fourth matter is the question whether a further delay in a hearing of the review will prejudice third parties. There is no evidence that the respondent is trading, and the medical evidence would suggest otherwise. The position of the trustee and other creditors is protected to the extent that the sequestration order of the registrar remains in place as a valid order of the court pending the outcome of the review, albeit that proceedings under the order have been stayed.

57    The question whether the hearing should be further adjourned is difficult. On balance, and based on the evidence of the respondent’s medical conditions to the extent that I have accepted it, I have decided to exercise my discretion under s 33(1)(a) of the Bankruptcy Act to adjourn the hearing of the review. I do so for the purpose of giving the respondent an opportunity to have some pro bono assistance in the preparation and presentation of his case. I will issue a referral certificate under r 4.12 of the Federal Court Rules. Whether the respondent accepts that assistance will be a matter for him. I will make orders substantially in accordance with those sought by Mr Fitzgerald on behalf of the respondent.

58    Finally, I should address the respondent’s renewed application to adduce evidence relating to his mental health situation at the actual hearing of the review. It appears to me that the respondent and Mr Fitzgerald have misinterpreted my ruling at the hearing on 26 July 2022. As I have sought to recount earlier in these reasons, I did not preclude the filing or reliance on such evidence. What I rejected was the respondent’s application for leave to adduce the evidence, principally on the ground that leave under s 27 of the Federal Court of Australia Act was unnecessary, because this is not an appeal, and on review the petition is to be heard afresh. Further, I explained to Mr Fitzgerald that any questions of admissibility of such evidence would be determined at the hearing of the review. My orders today will make express provision for the filing of evidence of medical practitioners or psychologists on which the respondent wishes to rely at the review.

Associate:

Dated:    9 September 2022