Federal Court of Australia

Nida v BKA Practice Co Pty Ltd [2022] FCA 1257

ORDERS

THE COURT ORDERS THAT:

1.    The appeal be dismissed.

2.    The Appellant pay the Respondent’s costs.

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

REASONS FOR JUDGMENT

ANDERSON J:

introduction

1    The Appellant appeals a decision of a judge of the Federal Circuit Court of Australia made 25 February 2021: BKA Practice Co Pty Ltd v Nida [2021] FCCA 334 (Reasons).

2    The application brought below by the Appellant concerned a review of a Registrar’s decision to order a sequestration of the Appellant’s estate under the Bankruptcy Act 1966 (Cth) (Act). The sequestration occurred on 3 December 2020. The primary judge dismissed the Appellant’s application for review.

3    The Appellant seeks orders setting aside the primary judge’s decision and, accordingly, that the sequestration order made against the Appellant be set aside.

4    The Appellant, by a Notice of Appeal dated 12 March 2021, raises three grounds of appeal:

(1)    Ground 1 - the primary judge erred in law by failing and/or refusing to consider relevant and important evidence available in the proceeding.

(2)    Ground 2 - the primary judge erred in law by failing to consider the established authority to “go behind” the judgment resulting in the bankruptcy order.

(3)    Ground 3 - the primary judge erred in law by failing to make an appropriate assessment of the procedural history of the proceedings in considering the cause of delays and estimating the time of delays.

BACKGROUND AND PROCEDURAL HISTORY

5    The background and procedural history was summarised by the primary judge at Reasons [3]-[38]. It is sufficient for the purposes of this appeal to note the following:

(1)    On 4 September 2018, the Respondent obtained default judgment against the Appellant in the Magistrates’ Court of Victoria in the amount of $22,682.14 (Default Judgment).

(2)    On 25 September 2018, the Respondent issued a bankruptcy notice against the Appellant, relying upon the Default Judgment (Bankruptcy Notice).

(3)    On 18 October 2018, the Appellant initiated a proceeding in the Federal Circuit Court of Australia to set aside the Bankruptcy Notice.

(4)    On 31 January 2019, a Judicial Registrar of the Federal Circuit Court dismissed the Appellant’s application to set aside the Bankruptcy Notice and, accordingly, the Appellant was deemed to have committed an act of bankruptcy on that day.

(5)    On 13 March 2019, the Respondent presented its creditors petition to the Federal Circuit Court seeking an order for the sequestration of the Appellant’s estate due to her failure to comply with the Bankruptcy Notice.

(6)    There were multiple hearings in this matter in the Federal Circuit Court, culminating on 3 December 2020 when a Judicial Registrar made an order for the sequestration of the Appellant’s estate (Sequestration Decision).

(7)    On 12 January 2021 the Appellant filed an application to review the Sequestration Decision.

(8)    The application was dismissed by the primary judge on 25 February 2021.

APPELLANT'S SUBMISSIONS

6    The Appellant submitted that the primary issue to be determined on this appeal is “in what circumstances can, and should, a bankruptcy court determining proof of debt under s 52(1)(c) of the Act exercise its discretion to go behind a judgment?”.

7    The Appellant submits that the starting point is to consider s 52(1)(c) of the Act which provides as follows:

At the hearing of a creditor’s petition, the Court shall require proof of:

…

the fact that the debt or debts on which the petitioning creditor relies is or are still owing;

and, if it is satisfied with the proof of those matters, may make a sequestration order against the estate of the debtor.

(Emphasis added.)

8    The Appellant submits that the ultimate question for the Court is whether it is persuaded by the petitioning creditor that the debt on which the creditor relies is still owing, in circumstances where “the emphasis is upon the paramount need to have satisfactory proof of the petitioning creditor's debt”: Wren v Mahony (1972) 126 CLR 212 (Wren), at 224.

9    The Appellant submits that the “debt” referred to in s 52(1)(c) of the Act is the debt underlying the judgment and the petitioning creditor cannot rely upon the judgment concerning the debt as a res judicata (i.e., as a given): Wren at 224.

10    The Appellant submits that while the Court has a “discretion” to “accept the judgment as satisfactory proof of the petitioning creditor's debt”, this discretion ought to be used reasonably as the Court has a statutory duty to be “satisfied” as to the existence of the petitioning creditor’s debt and a creditor should not be able to make a person bankrupt on a debt which may not be provable: Ahern v Deputy Commissioner of Taxation (Qld) [1987] FCA 504 at 146; Ex Parte Lennox (1885) 16 QBD 315 at 324, 328.

11    The Appellant relies upon the following statement of principle by Lee and Hill JJ in Wolff v Donovan (1991) 22 FCR 480 at [20]:

… Once the judgement is proved, and it is prima facie evidence of the existence of the underlying debt there is a tactical onus on the debtor to show that there are circumstances which make it appropriate to go behind the debt to see whether the judgement was in truth and reality a true debt. The overall onus of proof of the existence of a real debt underlying a judgment, however, remains with the petitioning creditor.

12    The Appellant also relies upon the following statement of Barwick CJ in Wren at 223 and 224:

… Circumstances tending to show fraud or collusion or miscarriage of justice or that a compromise was not a fair and reasonable one… offer occasions for the exercise by the Court of Bankruptcy of its power to inquire into the consideration for the judgment.

… But it has been made quite clear by the decisions of the past that where reason is shown for questioning whether behind the judgement or as it is said, as the consideration for it, there was in truth and reality a debt due to the petitioning creditor, the Court of Bankruptcy can no longer accept the judgement as such satisfactory proof. It must then exercise its power, or if you will, its discretion to look at what is behind the judgement: to what is its consideration.

13    The Appellant also relies upon the following statement by Kiefel CJ, Keane and Nettle JJ in Ramsay Health Care Australia Pty Ltd v Compton (2017) 261 CLR 123 (Ramsay) at [67] and [68]:

[67]    … As has been seen, the notion that a party is bound by the conduct of his or her case has never been a sufficient reason not to look behind a consent judgment or a default judgment. That is because a Bankruptcy Court is concerned, not to discipline litigants or to protect finality in the administration of justice as between parties to litigation, but to protect the interests of third parties who were not participants in the litigation which led to the judgment in question.

[68]    For the purposes of s 52 of the Act, a judgment may usually be taken to be sufficient evidence of a debt in that a judgment against a debtor in favour of a creditor obtained after a trial is, generally speaking, a reliable indication of the true state of indebtedness as between creditor and debtor…. But where the merits of a claim and counterclaim have not been tested in adversarial litigation, a judgment debt will not have this practical guarantee of reliability.

14    The Appellant submits that in Ramsay the High Court relied on the decision in Wren as authority for the proposition that the absence of fraud, collusion, or miscarriage of justice, did not preclude the possibility of there being sufficient reason for questioning the underlying debt. The Appellant submits that Ramsay is authority for the principle that a judgment debt is not always sufficient evidence to support a sequestration order against the estate of a judgment debtor: Ramsay at [67] and [68].

15    The Appellant submits that in her affidavit dated 24 December 2020, she provided credible evidence to show that there are circumstances which make it appropriate to “go behind” the judgment to ascertain whether there was, in truth and reality, a debt. The Appellant submits that the primary judge erred in failing to read her evidence and erred in failing to properly determine both matters of fact and law. The Appellant submits that if the Court was to “go behind” the Default Judgment debt it would find that in reality there was no debt owing to the Respondent by the Appellant whatsoever. The Appellant submits that this is because:

(1)    the description of the evidence provided by the Respondent in justifying the bankruptcy proceedings omits a number of important features which were the subject of the Appellant’s affidavit dated 24 December 2020. The Appellant submits that the only evidence as to any debt owing by the Appellant to the Respondent was a disputed legal costs agreement which was adduced in the Magistrates’ Court in support of obtaining judgment;

(2)    the potential liability of the Appellant under the alleged costs agreement that led to the Default Judgment depended on the state of the account between the Appellant and the Respondent which was never determined on the merits by way of adversarial litigation, because her defence was struck out on 15 June 2018. The Appellant’s affidavit evidence demonstrated that the Appellant was not party to any costs agreement nor did the Appellant obtain legal advice. The Appellant’s affidavit deposed to the legal advice being given to her son in relation to the purchase of a Sportsco franchise and negotiations with the landlord of the relevant property with the Appellant acting as a guarantor.

(3)    the Appellant also points to irregularities in the manner in which proceedings were conducted in the Magistrates’ Court as identified in her written submissions at [20].

16    The Appellant submits that there has been no trial on the merits and that unchallenged evidence and concessions made before the Magistrates’ Court disclose substantial reasons for questioning whether the Appellant was indebted to the Respondent and for this reason the primary judge should have decided to “go behind” the Default Judgment.

RESPONDENT'S SUBMISSIONS

17    The Respondent submits that the Appellant has not established that the primary judge committed some legal, factual or discretionary error when the primary judge expressed satisfaction that the debt remained owing under s 52(1)(c) and/or refusing to “go behind” the judgment for the purposes of s 52(2)(b) of the Act.

18    The Respondent submits that the Appellant appears to be abandoning the three grounds of appeal and substituting a different and single ground of appeal by stating “the primary issue to be determined by the Court is in what circumstances can and should a bankruptcy court determining proof of debt under s 52(1)(c) of the Act exercise its discretion to go behind a judgment?” (Proposed Ground).

19    The Respondent submits that the Proposed Ground is defective in that:

(1)    the Appellant does not identify any legal, factual or discretionary error made by the primary judge;

(2)    there is no dispute as to the principles applicable to “go behind” the judgment: Corney v Brien (1951) 84 CLR 343 at 357-358; Wren at 222; Compton v Ramsay Health Care Australia Pty Ltd (2016) 246 FCR 508 at [64] and [67]; and Ramsay at [65] and [72];

(3)    the Appellant does not suggest that the primary judge erred in applying the legal principles to the facts of the case; and

(4)    accordingly, the Proposed Ground is arid in the absence of further grounds on appeal.

CONSIDERATION

20    The nature of this appeal was recently described accurately, with respect, by Wheelahan J in Whiteman v Deputy Commissioner of Taxation [2022] FCA 975 (Whiteman) at [61]-[63] as follows:

[61]    This appeal comes before me as a single judge exercising appellate jurisdiction pursuant to the Federal Court of Australia Act 1976 (Cth), s 25(1AA)(a). The appeal is by way of re-hearing, in which the primary judge enjoyed no relevant advantage over this court. However, unlike the review that was before the primary judge, the appeal to this court is not a re-hearing de novo. The court's powers on appeal are engaged only if, upon this court considering for itself the evidence and other material that was before the primary judge, some legal, factual, or discretionary error is demonstrated in the orders that were made: Allesch v Maunz [2000] HCA 40; 203 CLR 172 at [23] (Gaudron, McHugh, Gummow and Hayne JJ).

[62]    For the purposes of the demonstration of error on appeal, the engagement of s 52(2)(b) of the Bankruptcy Act involves two related levels of decision-making. The first is whether the primary judge was satisfied that there was some "other sufficient cause" for which a sequestration order ought not be made. This does not involve the evaluation of facts and circumstances against some legal norm:

cf, Dwyer v Calco Timbers Pty Ltd [2008] HCA 13; 234 CLR 124 at [40] (Gleeson CJ, Gummow, Kirby, Hayne and Heydon JJ); Templeton v Australian Securities and Investments Commission [2015] FCAFC 137; 108 ACSR 545 at [23] (Besanko, Middleton and Beach JJ). Rather, it is the type of decision to which Mason and Deane JJ referred in Norbis v Norbis [1986] HCA 17; (1986) 161 CLR 513 at 518, which calls for value judgments in respect of which there may be room for reasonable differences of opinion, no particular opinion being uniquely correct. See also, Minister for Immigration and Border Protection v SZVFW [2018] HCA 30; 264 CLR 541 at [43]-[49] (Gageler J). Because the powers on appeal are exercisable only upon the demonstration of error, the primary judge's evaluation of whether there was "other sufficient cause" for the purposes of s 52(2)(b) must be shown to have been wrong. Error is not shown merely by persuading an appellate court to make a different evaluation, which may be no better than the first: see, Singer v Berghouse [1994] HCA 40; (1994) 181 CLR 201 at 211-212 (Mason CJ, Deane and McHugh JJ), and the approval of the comments of Kirby P in Golosky v Golosky (unreported, NSW Court of Appeal, 5 October 1993). The second and related level of decision- making is whether upon the judge being satisfied of some "other sufficient cause", the court should in the exercise of its discretion dismiss the petition: Endresz v Australian Securities and Investments Commission (No 2) [2015] FCAFC 33; 228 FCR 334 (Endresz) at [34], [37] (Edmonds, Gordon and Beach JJ).

[63]    Therefore, in relation to this appeal from the decision of the primary judge to the extent that it challenges the judge's rejection of the appellant's claim that the power under s 52(2)(b) should have been exercised to dismiss the petition, the principles essayed in House v The King [1936] HCA 40; 55 CLR 499 at 504-505 apply, such that it must be demonstrated that the decision miscarried. Within those principles, the correctness standard applies to any challenge on appeal to the legal principles that were applied, or to findings of material fact upon which the evaluation took place, but not to the primary judge's evaluation, or to the exercise of the statutory discretion. The principles in House v The King also apply to the appellant's challenge to the primary judge's discretionary decision to fix the review for hearing. If the court is satisfied that error is established, then in a case such as the present where the primary judge enjoyed no relevant advantage over this court, the court may proceed to make its own findings and evaluative conclusions, and formulate its own reasoning: Robinson Helicopter Company Inc v McDermott [2016] HCA 22; 331 ALR 550 at [43] (French CJ, Bell, Keane, Nettle and Gordon JJ).

21    I respectfully adopt the above statements of principle by Wheelahan J.

22    The primary judge summarised his reasons for dismissing the application at Reasons [2] as follows:

For the reasons that follow, the application should be dismissed. In short, I am satisfied that the applicant has committed an act of bankruptcy and that she did so at a time when she was personally present or ordinarily resident in Australia. Despite the bankrupt's submissions to the contrary, I am satisfied that the petitioning creditor has established by judgment that there is a debt owing to it by the bankrupt in an amount greater than the statutory minimum, being a debt for a liquidated sum which was immediately payable within a period of six months before the presentation of the creditors petition. I reject the bankrupt's submissions: that such judgment was obtained by fraud; that the bankruptcy notice upon which reliance was placed was defective, or; that she is owed monies by the petitioning creditor. Finally, I am not satisfied by the bankrupt of any other sufficient cause why the court should exercise its discretion to dismiss the petition including the existence of any genuine dispute as to her liability for the debt relied upon in this case or of any viable cross-demand, set-off or counterclaim.

23    The primary judge at Reasons [3]-[38] identified the procedural background to the proceeding and at Reasons [42] and [43] identified the evidence and submissions on which the Appellant relied.

24    The primary judge then stated his conclusions as to jurisdiction to make a sequestration order under s 43 of the Act at Reasons [44]-[46] as follows:

[44]    Jurisdiction to make a sequestration order is conferred by s 43 of the Bankruptcy Act. Subject to the Act, where a debtor has committed an act of bankruptcy and, relevantly, at the time when that act was committed, the debtor was personally present in Australia, the court may, on a petition presented by a creditor, make a sequestration order against the debtor's estate.

[45]    The circumstances leading to the issue of a bankruptcy notice for a sum in excess of the statutory minimum have been set out above. I am satisfied that bankrupt committed an act of bankruptcy in failing to comply with the bankruptcy notice: Bankruptcy Act, s 40(1)(g). The bankruptcy notice was served on the respondent on 26 September 2018. While an extension of time was initially granted to 29 November 2018, and then to 31 January 2019, on the latter date a registrar of the Federal Court dismissed the application with costs.

[46]    Upon expiry of the time for compliance with the bankruptcy notice, the bankrupt’s failure to comply with its requirements constituted an act of bankruptcy on 31 January 2019.

25    The primary judge considered whether the conditions set out in s 44 had been satisfied at Reasons [47] and [48] as follows:

[47]    The conditions on which a creditor may seek the sequestration of a debtor's estate proscribe that no petition may be presented unless, as material to the present application: (a) the debtor owed the petitioning creditor an amount greater than $10,000; (b) such debt is for a liquidated sum which is immediately payable; (c) the act of bankruptcy upon which the petition is founded was committed within six months before the presentation of the petition: Bankruptcy Act, s 44.

[48]    On the evidence adduced on this review, on 4 September 2018 a judgment was entered in favour of the petitioning creditor against the bankrupt in the sum of $22,682.14. The debt as established by that judgment was for a liquidated sum that was immediately payable. The petitioning creditor issued its bankruptcy notice on 26 September 2018 and the act of bankruptcy was committed on 31 January 2019 upon the dismissal by a registrar of the Federal Court of Australia of the application for a further extension of time. As it had been presented on 14 March 2019, such petition was presented within 6 months of that act of bankruptcy.

26    The primary judge then turned to consider s 52 of the Act and whether the Respondent had proved the matters required by s 52(1)(a)-(c) of the Act. The primary judge at Reasons [49]-[53] stated:

[49]    The Court may, at any time before the expiration of the period of 12 months commencing on the date of presentation of a creditor's petition, order that the period at the expiration of which the petition will lapse, be such period, relevantly, being a period not exceeding 24 months commencing on the date of presentation of the petition and as specified in the order. The power to extend such period is conditioned upon the court being satisfied that it is just and equitable to do so, including that conditions may also be imposed: Bankruptcy Act, s 52(5).

[50]    As noted, on 20 February 2020, a registrar made an order that the life of the creditors petition be extended for a period of 24 months from the date of its presentation. Such petition had been presented in this proceeding on 14 March 2019.

[51]    At the hearing of a creditor's petition, the court shall require proof of the matters in s 52(1)(a)-(c) of the Bankruptcy Act. In the present case, I am satisfied of each of those matters. I am further satisfied that the creditor has complied with the requirements of the Federal Circuit Court (Bankruptcy) Rules 2016 (Cth) by exhibiting a search of the National Personal Insolvency Index conducted in respect of the respondent on 5 February 2021.

[52]    It follows that the petitioning creditor has established a prima facie entitlement to the making of a sequestration order against the bankrupt's estate.

[53]    As was common ground, the power to make a sequestration order is framed in permissive terms. Where it is satisfied of the matters of which proof is required at the hearing, the Court may make a sequestration order against the estate of the debtor: Bankruptcy Act, s 53(1).

27    The primary judge was satisfied that the Respondent had established a prima facie entitlement to the making of a sequestration order.

28    The primary judge then turned to consider whether the Appellant had established that she was solvent for the purposes of s 52(2)(a) of the Act. The primary judge characterised the financial statement on which the Appellant relied as “noticeable for its incompleteness” and found that the material did not disclose any ability of the Appellant to realise, within the relevant short period, the sums required to repay the judgment or her liabilities. A consideration of the primary judge’s Reasons at [57]-[60] reveals that the primary judge undertook a detailed analysis of the Appellant’s financial statement and the evidence as to solvency and he was not satisfied that the Appellant had established her solvency.

29    The primary judge then considered whether the Appellant had established that for “other sufficient cause” a sequestration order ought not be made under s 53(2)(b) of the Act. The primary judge noting at Reasons [61] and [62] that:

[61]    The court may also dismiss the petition where it is satisfied by the debtor that for other sufficient cause a sequestration order ought not to be made: Bankruptcy Act, par 53(2)(b). As material to this application, the power to dismiss the petition for other sufficient cause should be read with par 40(1)(g) of the Bankruptcy Act which provides that a debtor commits an act of bankruptcy where, a creditor who has obtained a final judgment (being a judgment or order, the execution of which has not been stayed), has served on the debtor a bankruptcy notice and the debtor does not comply with the requirements of such notice within the specified time or satisfy the court that he or she has a counter-claim, set-off or cross demand, equal to or exceeding the amount of such judgment or order.

[62]    It is an essential obligation in the bankruptcy jurisdiction for the Court to be satisfied that there is a debt upon which a sequestration order can be made: Ramsay Health Care Australia Pty Ltd v Compton (2017) 261 CLR 132, [39] (Kiefel CJ Keane and Nettle JJ). In that context, where the debt is established by final judgment, the court will usually have no occasion to investigate whether the judgment debt is a true reflection of indebtedness. However, where "the merits of a claim and counterclaim have not been tested in adversarial litigation, a judgment debt will not have this practical guarantee of reliability:" Ramsay Health Care (2017) 261 CLR 132, [54], [68] (Kiefel CJ Keane and Nettle JJ). As the plurality held, where a substantial question is demonstrated as to whether a debt is owing, the court should proceed to investigate that question in order to decide whether it is open to it to make a sequestration order.

30    The primary judge then rejected the Appellant’s submission that she did not owe the money claimed by the Respondent or that the judgment was obtained by fraud at Reasons [63]. The primary judge also rejected the Appellant’s contention that the Bankruptcy Notice was defective and her complaints about service at Reasons [63].

31    The primary judge then concluded that the Appellant did not demonstrate a bona fide or reasonably arguable claim at Reasons [65].

32    The primary judge then set out the relevant principles concerning going behind a judgment at Reasons [66] as follows:

Accepting that the court may go behind a judgment and enquire into the validity of a debt in cases of fraud, collusion or a miscarriage of justice, (particularly in the case of consent or default judgements), the court will not examine every judgment that is sought to be impugned. Special circumstances must be established before it will do so: Ramsay Health Care Australia (2017) 261 CLR 132, [69], [92], [111]. This does not in any way detract from the court's undoubted jurisdiction to go behind a judgment. In appropriate cases, it will scrutinise the circumstances leading to a judgment, including one obtained by consent or default. Indeed, it may also do so where the parties have been legally represented. Equally, it is clear that the court will not embark upon this process as a matter of course. Critically, as a sequestration order effects a change in status for the bankrupt, entails quasi-criminal consequences, and directly affects the rights of third parties (vis, other creditors to sue for and recover debts by ordinary execution), where it is satisfied by the debtor that it should do so, the court will investigate whether a genuine dispute exists as to the debtor's liability to the petitioning creditor in its consideration of whether other sufficient cause is made out why a petition ought to be dismissed: Ramsay Health Care Australia (2017) 261 CLR 132, [48]-[60].

33    The primary judge correctly observed that the Court will not examine every judgment that is sought to be impugned and that special circumstances must be established.

34    The primary judge then concluded his analysis at Reasons [68] and [69] as follows:

[68]    Standing back from the matter and having regard to the history of all of the proceedings above, I am not satisfied by the bankrupt that there is a genuine dispute about her liability under the BKA Practice Co Pty Ltd v Nida [2021] FCCA 334 15 judgment that ought to be further investigated further before the making of a sequestration order. Nor am I satisfied that that the matters relied upon by the bankrupt would suffice to demonstrate a viable factual or legal basis for any counter-claim, set-off or cross demand for a sum equal to or exceeding the amount of the judgment in this case. The bankrupt has accordingly not satisfied me of the existence of a claim against the petitioning creditor of the kind required to engage the discretion conferred by par 52(2)(b) of the Bankruptcy Act. Nor has she otherwise demonstrated there is some other sufficient cause why the order should not be made: cf Re Sarina (1980) 30 ALR 266, 267-268 (Deane J).

[69]    For the avoidance of doubt, had I otherwise been satisfied by the bankrupt that there was other sufficient cause why a sequestration order ought not to be made, I would not in all of the circumstances of this case have been persuaded to exercise the discretion conferred by s 52(2) of the Bankruptcy Act to make an order to dismiss the petition.

35    Having considered the evidence and other material that was before the primary judge, I am not satisfied that the Appellant has established any legal, factual or discretionary error demonstrated in the orders that were made by the primary judge: Whiteman at [61]. I am of this view for the reasons that follow.

GROUND 1

36    I reject the argument that the primary judge failed and/or refused to consider relevant and important evidence available in the proceeding. The above analysis of the primary judge’s Reasons demonstrates that the primary judge undertook a detailed consideration of the available evidence, weighed that evidence as he saw fit and was satisfied that the Respondent had established by judgment that there was a debt owing to it by the Appellant. The primary judge rejected the Appellant’s submission that the judgment was obtained by fraud; rejected the Appellant’s submission that she is owed money by the Respondent; and finally, the primary judge was not satisfied of any other sufficient cause why the Court should exercise its discretion to dismiss the petition. The primary judge also carefully weighed the evidence as to the Appellant’s solvency and found that the Appellant was not solvent.

37    I see no error in the analysis, reasoning and findings made by the primary judge on the available evidence. It follows that Ground 1 must be rejected.

GROUND 2

38    Ground 2, and related to it, what the Appellant described as the primary issue being “in what circumstances can, and should, a bankruptcy court determining proof of debt under s 52(1)(c) of the Act exercise its discretion to go behind a judgment?” and the submissions advanced by the Appellant in support must be rejected for the reasons that follow.

39    The primary judge identified correctly that the overarching proposition from Ramsay, being that it is an essential obligation for the Court to be satisfied that there is a debt upon which a sequestration order can be made: Reasons [62].

40    The primary judge correctly stated the relevant principles “to go behind” the judgment and after referring to Ramsay, the primary judge stated at Reasons [62]: “… where a substantial question is demonstrated as to whether a debt is owing, the Court should proceed to investigate that question in order to decide whether it is open to it to make the sequestration order”.

41    The primary judge accepted that the Court may go behind a judgment and enquire into the validity of a debt. The primary judge observed that the Court will not examine every judgment that is sought to be impugned noting – “Special circumstances must be established before it will do so”. The primary judge then referred to the need for the debtor to satisfy the Court before it will undertake the investigation: Reasons [66].

42    The primary judge resolved not to “go behind” the judgment at Reasons [68] finding that “I am not satisfied by the Bankrupt that there is a genuine dispute about her liability under the judgment that ought to be further investigated further before the making of a sequestration order”. The primary judge came to that conclusion after giving detailed consideration to whether he should exercise his discretion but decided not to.

43    The primary judge having carefully considered the evidence was not satisfied that there was any question which required further investigation. The primary judge’s Reasons do not demonstrate any legal, factual or discretionary error in the manner in which the primary judge decided not to go behind the judgment. It follows that Ground 2 and the related “primary issue” described by the Appellant must be rejected.

GROUND 3

44    There is no substance to Ground 3. The Appellant’s own submissions at [6] acknowledge that the primary judge summarised, very well, the background and procedural history of the matter. Ground 3 must be rejected.

DISPOSITION

45    The appeal will be dismissed. The Appellant will pay the Respondent’s costs.

Associate:

Dated:    25 October 2022