FEDERAL COURT OF AUSTRALIA
Owen v Sandhu [2024] FCA 198
ORDERS
Applicant | ||
AND: | Respondent | |
DATE OF ORDER: |
THE COURT ORDERS THAT:
1. The orders of Registrar Parkyn of 5 December 2023 be affirmed except as to the extension of time for compliance with the bankruptcy notice made by orders of 21 December 2023 and 8 February 2024, as varied in paragraph 3 of these orders, and otherwise, the applicant’s application for review of the Registrar’s orders filed 20 December 2023 be dismissed.
2. Pursuant to s 309(2) of the Bankruptcy Act 1966 (Cth), service of Bankruptcy Notice Number BN 260906 may be effected by sending an electronic copy of the Bankruptcy Notice to the email address of the applicant provided as the address for service in these proceedings.
3. If the bankruptcy notice be served in accordance with paragraph 2 of these orders, then time to comply with the terms of Bankruptcy Notice Number BN 260906 issued on 25 July 2023 be the later of 4.15 pm (AWST) on 2 April 2024 or the date that is 21 days after the date of that service.
4. The applicant pay the respondent’s costs of the application for review of the Registrar’s orders to be assessed on a lump sum basis by a Registrar in accordance with the Federal Court of Australia’s costs practice note (GPN-COSTS) or as agreed.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
FEUTRILL J:
Introduction
1 The applicant (Mr Owen) filed an originating process dated 22 August 2023 by which he sought an order setting aside bankruptcy notice BN 260906 issued by the Official Receiver on 25 July 2023. The originating process was accompanied by an affidavit of Mr Owen sworn 22 August 2023. The applicant later filed a further affidavit sworn 17 September 2023.
2 The originating process was heard by a Registrar in the exercise of the power of the Court to set aside a bankruptcy notice under the Bankruptcy Act 1966 (Cth) delegated to the Registrar in accordance with s 35A(1)(h) of the Federal Court of Australia Act 1976 (Cth) and r 2.02(1) and Sch 1 of the Federal Court (Bankruptcy) Rules 2016 (Cth). On 5 December 2023 the Registrar made orders, amongst others, dismissing the application to set aside the bankruptcy notice. On 20 December 2023 Mr Owen applied, in accordance with s 35A(5) of the Federal Court Act and r 2.02(3) of the Bankruptcy Rules, for review of the Registrar’s exercise of the Court’s power.
3 For the reasons that follow, I am of the view that the application to set aside the bankruptcy notice must be dismissed. Therefore, the Registrar’s order dismissing that application was correct and that order will not be revoked or set aside and should be affirmed. However, the order extending the time for compliance with the bankruptcy notice will be varied to accommodate a further extension and to allow for service of the notice to be effected electronically so as to remove any doubt in that regard.
Materials and nature of review
4 The applicant relied on his affidavits sworn 22 August 2023 and 17 September 2023. On the day of hearing the review, the applicant filed a further affidavit sworn 8 February 2024. The respondent objected to the applicant relying on that affidavit on the ground that his original application was defective and the applicant was not permitted to rely on the further affidavit to supplement or ‘fix’ the defective application. The respondent also objected to the applicant relying on his affidavit of 17 September 2023 on the same ground. Subject to those objections, the further affidavits of 8 February 2024 and 17 September 2023 were read on the review. The respondent filed and relied on an affidavit of Mr Timothy Joseph Kavenagh sworn 12 September 2023. The applicant’s affidavit of 22 August 2023 and the affidavit of Mr Kavenagh were also read on the review.
5 A review of a Registrar’s exercise of power involves a rehearing de novo: Bechara v Bates [2021] FCAFC 34; (2021) 286 FCR 166 at [1]-[8] (Allsop CJ, Markovic and Colvin JJ). As it is a rehearing de novo, the Court may admit and make its decision on review based on additional or different evidence to that upon which the Registrar’s exercise of power was founded: West International Pty Ltd v Ultradrilling Pty Ltd [2008] FCA 1443; (2008) 68 ACSR 108 at [6]; G & J Gears Australia Pty Ltd v Brobo Group Pty Ltd [2006] FCA 330; (2006) 229 ALR 638 at [55]. However, the ability to admit additional evidence remains subject to normal rules of evidence and any limitations on its relevance to the exercise of power under review. Therefore, while the applicant’s further affidavit of 8 February 2024 was read, if the respondent’s submission to the effect that he was not permitted to rely on it to cure a defective application is correct, then the further affidavit cannot be relied upon in support of the application to set aside the bankruptcy notice.
Background facts and evidence
6 In October 2018 the applicant made applications under s 98 the Mining Act 1978 (WA) for the forfeiture of four mining tenements issued under that Act of which the respondent was then the legal owner. In December 2019 the applicant made further applications for the forfeiture of three other mining tenements of which the respondent was the legal owner.
7 A mining Warden heard the applications for forfeiture of the four tenements on 9, 10 and 11 June 2020. On 10 July 2020 that Warden recused himself apparently because he had made adverse findings of credit against the respondent in other proceedings.
8 In October 2020 another Warden, on the application of the respondent, determined that the applications for forfeiture of the four tenements and the further applications for forfeiture of the three tenements be heard together. Directions were made to program all seven applications towards a ‘substantive hearing’ within the meaning of that expression in the Mining Regulations 1981 (WA). Although a Warden determines an application for forfeiture in the exercise of administrative and not judicial power, there may be a substantive hearing on such applications involving a trial and oral evidence, cross-examination and extensive legal submissions. The seven applications were listed for a five-day substantive hearing commencing on 12 July 2021.
9 On 1 July 2021, following an oversight of the applicant’s solicitors to summon two witnesses, a Warden made orders that had the effect of vacating the substantive hearing that was to commence on 12 July 2021 for all seven applications, maintaining the listing of the three applications on 12 July 2021, re-listing the hearing of the four applications on 11 October 2021 and reserving the costs thrown away consequent on vacating the hearing of the four applications. The hearing of the three applications then took place over five days between 12 and 16 July 2021.
10 On 17 September 2021 Warden Wilson made an order dismissing the three applications and published reasons for so doing: Owen v Sandhu [2021] WAMW 15. On 27 October 2021 Warden Wilson made an order to the effect that the applicant pay the respondent’s costs of the three applications. On 31 May 2022 a mining Registrar assessed the respondent’s costs in the sum of $103,820.31. On 25 October 2022 a Warden reviewed the mining Registrar’s assessment and allowed costs in the revised sum of $98,123.89. On 10 July 2023 the Warden’s costs assessment was registered as a judgment of the District Court of Western Australia under r 168 of the Mining Regulations. On 25 July 2023 the bankruptcy notice (BN 260906) was issued under s 41(1) on the basis of the District Court judgment.
11 In the meantime, the applicant applied for judicial review of the Warden’s order dismissing the three applications in the Supreme Court of Western Australia in which he asserted that Warden Wilson’s decision was founded on jurisdictional error. On 26 May 2023 Smith J dismissed that application: Owen v Wilson [2023] WASC 178. There was no appeal from that judgment.
12 The four applications listed for hearing on 11 October 2021 were not heard and determined. The hearing was vacated after the respondent made an interlocutory application in which he sought security for costs. On 18 October 2021 that application was dismissed: Owen v Sandhu [2021] WAMW 18.
13 The applicant deposes in his affidavit of 22 August 2023 that he had sought to have the four applications re-listed before a Warden to obtain an order for costs. He deposes that he has been advised and believes that in all the circumstances a costs order should be made against the respondent. He deposes that he is informed by his solicitor and believes that she will be seeking costs in relation to the proceedings in an amount in excess of $103,000. In his affidavit of 17 September 2023 he deposes that the costs of the respondent’s unsuccessful application for security for costs have not been agreed and have not been taxed. He deposes that he is informed by his solicitor that the costs of that application exceed $15,000.
14 The applicant deposes in his affidavit of 8 February 2024 that the four applications were listed for hearing on 17 January 2022. However, on 10 December 2021 the tenements were surrendered. The applicant deposes that he has requested a re-listing of the four applications for the purpose of making an application for his costs. The applicant’s affidavits of 17 September 2023 and 8 February 2024 exhibit a copy of a letter from his solicitors to the Western Australian Department of Mines, Industry Regulation and Safety dated 6 October 2022 in which he requested that the four applications be re-listed before a Warden for directions. It is evident that the four applications have not been re-listed and no order has been made concerning the costs of those applications.
15 The applicant deposes in his affidavit of 8 February 2024 that he is informed by his solicitor and believes that she will be seeking costs on the applicant’s behalf for the four applications in an amount in excess of $68,000. He deposes that there are multiple other matters in which he has obtained costs orders against the respondent or a company related to the respondent (Gold Tiger Holdings (Australia) Pty Ltd) and those costs exceed $50,000. The applicant exhibits what he describes as a letter from his solicitor outlining those costs.
16 The applicant exhibited to his affidavits of 17 September 2023 and 8 February 2024 a copy of a sale of mining tenements agreement between the respondent, as vendor, and Gold Tiger Holdings, as purchaser, dated 6 February 2019. The effect of that sale agreement is that, amongst other tenements, the respondent sold the tenements the subject of the four applications to Gold Tiger Holdings. The settlement date was two business days after 6 February 2019. Mr Kavenagh deposes that the transfers of the tenements to Gold Tiger Holdings were registered on 23 April 2020 and on 10 December 2021 Gold Tiger Holdings surrendered the tenements.
17 In the applicant’s affidavit of 22 August 2023, he deposes that on 1 August 2023 while he was attending court in Kalgoorlie a male person unknown to him approached him and attempted to serve the bankruptcy notice on the applicant while he was in the courtyard of the Kalgoorlie courthouse. The applicant informed the person that he could not serve him at the courthouse and the person then left the bankruptcy notice on a seat at the doors to the court house. Later, the applicant observed that the notice had been removed. The applicant then received an email from Mr Andrew Hawker with the bankruptcy notice. The email was not in evidence, but the bankruptcy notice was an exhibit to the applicant’s affidavit. Therefore, I infer that the applicant received the bankruptcy notice by email on or about 1 August 2023.
18 The applicant also deposes in his affidavit of 8 February 2024 that on 21 August 2023 he made an interlocutory application against the respondent in the Warden’s Court seeking orders that the Warden refer the subject of the costs order (which underpins the District Court judgment and the bankruptcy notice) to the Western Australian Police Force for investigation into perjury, perversion of the course of justice and stock and securities fraud on the part of the respondent. The interlocutory application is an exhibit to the affidavit.
Summary of parties’ submissions
19 The applicant filed an outline of written submissions dated 2 October 2023. He also made oral submissions at the hearing on 8 February 2024. The substance of the applicant’s submissions is as follows:
(1) The bankruptcy notice was not properly served on him and, therefore, the time for the applicant to comply with the notice has not commenced. It was not served on him personally and service electronically by email was not permissible because the Court had not ordered that the notice could be served electronically under s 309(2) of the Bankruptcy Act.
(2) The bankruptcy notice is invalid because it is not in accordance with the form prescribed by reg 9 and Sch 1 of the Bankruptcy Regulations 2021 (Cth), contrary to s 41(2) of the Bankruptcy Act. It was not in accordance with the form because there was no description of the manner in which the applicant could make payment. The bankruptcy notice merely provided the address of the respondent’s solicitors.
(3) The bankruptcy notice was not issued in good faith. The applicant contends that it is Gold Tiger Holdings, and not the respondent, which applied for the issue of the bankruptcy notice. The applicant relies on Mr Hawker’s email by which the bankruptcy notice was sent (he is apparently an officer of Gold Tiger Holdings) and that the respondent’s name is misspelt on the execution page of the sale agreement. The applicant appeared to rely on Xu v Wan Ze Property Development (Aust) Pty Ltd (in Liquidation) [2014] FCA 461; (2014) 315 ALR 523 at [131] as authority for the proposition that a bankruptcy notice may be set aside where it is not issued in good faith.
(4) The District Court judgment was based on an assessment of costs on a cost order that, in turn, was founded on an unfair decision in Owen v Sandhu [2021] WAMW 15. The applicant contends that the Warden’s findings of fact are erroneous and, while the Supreme Court dismissed the application for judicial review, this Court should go behind the judgment debt because the Warden’s findings on the facts was unsound due to the manner in which the Warden dealt with the evidence of two witnesses.
(5) The applicant has counter-claims, set-offs or cross-demands for costs orders that exceed the amount of the District Court judgment debt that could not have been set up in the proceeding in which that judgment was obtained. Here, the applicant relies on the assertion that he has claims for costs in excess of the judgment debt in respect of the four applications and other proceedings in the Warden’s Court. The bankruptcy notice should be set aside on these grounds or, at least, the time for compliance with it extended until the applications for costs orders have been determined and any costs awarded assessed.
(6) Further, and in any event, time for compliance with the bankruptcy notice should be extended pending the investigation into the applicant’s complaint about the respondent for perjury, perverting the course of justice and fraud. The applicant has requested the Warden to refer those complaints to the Police for investigation. The applicant contends that if that investigation takes place, the respondent will be charged and convicted of criminal offences that, ultimately, will result in an unwinding of the Warden’s decision on the three applications and the costs order upon which the District Court judgment was founded.
20 The respondent filed a written outline of submissions dated 13 October 2023. The respondent also made oral submissions. The substance of the respondent’s submissions is as follows:
(1) The application should be dismissed because it was not made in accordance with r 3.02 of the Bankruptcy Rules. The applicant’s affidavit of 22 August 2023 contained no more than assertion and failed to state the grounds (through facts) in support of the application and failed to attach a copy of any application to set aside the judgment or order in respect of which the bankruptcy notice was issued. The applicant’s affidavits of 17 September 2023 and 8 February 2024 should not be received on the application because the applicant is not permitted to supplement a defective application with evidence outside the 21-day period within which the applicant was required to make an application to set aside the notice. Even if received in evidence the applicant’s claims in his affidavits are no more than assertion and he has not demonstrated that his off-setting cost claims could not have been set up against the judgment debt. Further, the claimed amounts which are in the same right (against the respondent) are less than the judgment debt.
(2) Service was properly effected on the applicant by email in accordance with the provisions of reg 102 of the Bankruptcy Regulations, s 28A of the Acts Interpretation Act 1901 (Cth) and ss 9(1)(d) and 9(2)(d) of the Electronic Transactions Act 1999 (Cth).
(3) The bankruptcy notice was not invalid by indicating the payment could be made at the address of the respondent’s solicitor. Payment could be made at that place by cash or cheque or by contacting the solicitors at that address and making arrangement for some other form of payment.
(4) There is no foundation for the assertion of a lack of good faith.
(5) There is no basis to go behind the judgment. The applicant sought to set aside the Warden’s orders in the Supreme Court and failed. The applicant’s claims of criminal conduct are bare assertion.
(6) There is no basis for extending the bankruptcy notice on the grounds that the judgment debt may be set aside or that the applicant has off-setting claims.
Defective application and supplementary evidence
21 There are deficiencies in the contents of the applicant’s affidavit of 22 August 2023 to the extent that it is intended to be relied upon in support of the application to set aside the bankruptcy notice. However, it is not necessary to resolve the issue of whether the application should be dismissed at the threshold or whether the applicant should be permitted to rely on his affidavits of 17 February 2023 and of 8 February 2024 to supplement and (or) cure the deficiencies in his affidavit of 22 August 2023 for two reasons.
22 First, all of the affidavit material is relied upon in support of the application for an order extending the time for compliance with the bankruptcy notice. Therefore, the affidavits are, at least, available for that purpose. Second, and in any event, even if these affidavits were considered to be part of the materials before the Court on the application to set aside the bankruptcy notice, for the reasons that follow, the application must be dismissed. That is, taking the applicant’s evidence at its highest, there are no grounds for setting aside the bankruptcy notice.
Legislative framework
23 Section 41 of the Bankruptcy Act relevantly provides:
41 Bankruptcy notices
(1) An Official Receiver may issue a bankruptcy notice on the application of a creditor who has obtained against a debtor:
(a) a final judgment or final order that:
(i) is of the kind described in paragraph 40(1)(g); and
(ii) is for an amount of at least the statutory minimum;
…
(2) The notice must be in accordance with the form prescribed by the regulations.
(2A) The notice must specify a period for compliance with the notice. That period must be:
(a) if the notice is to be served in Australia—the statutory period after the debtor is served with the notice;
…
(3) A bankruptcy notice shall not be issued in relation to a debtor:
(a) except on the application of a creditor who has obtained against the debtor a final judgment or final order within the meaning of paragraph 40(1)(g) or a person who, by virtue of paragraph 40(3)(d), is to be deemed to be such a creditor;
(b) if, at the time of the application for the issue of the bankruptcy notice, execution of a judgment or order to which it relates has been stayed;
…
(6A) Where, before the expiration of the time fixed for compliance with a bankruptcy notice:
(a) proceedings to set aside a judgment or order in respect of which the bankruptcy notice was issued have been instituted by the debtor; or
(b) an application has been made to the Court to set aside the bankruptcy notice;
the Court may, subject to subsection (6C), extend the time for compliance with the bankruptcy notice.
(6C) Where:
(a) a debtor applies to the Court for an extension of the time for complying with a bankruptcy notice on the ground that proceedings to set aside a judgment or order in respect of which the bankruptcy notice was issued have been instituted by the debtor; and
(b) the Court is of the opinion that the proceedings to set aside the judgment or order:
(i) have not been instituted bona fide; or
(ii) are not being prosecuted with due diligence;
the Court shall not extend the time for compliance with the bankruptcy notice.
(7) Where, before the expiration of the time fixed for compliance with a bankruptcy notice, the debtor has applied to the Court for an order setting aside the bankruptcy notice on the ground that the debtor has such a counter claim, set off or cross demand as is referred to in paragraph 40(1)(g), and the Court has not, before the expiration of that time, determined whether it is satisfied that the debtor has such a counter claim, set off or cross demand, that time shall be deemed to have been extended, immediately before its expiration, until and including the day on which the Court determines whether it is so satisfied.
The statutory period for the purposes of s 41(2A)(a) is 21 days, or the prescribed period, where the prescribed period is a period longer than 21 days: s 5 of the Bankruptcy Act. In this case, the statutory period was 21 days.
24 Section 40(1)(g) of the Bankruptcy Act provides:
40 Acts of bankruptcy
(1) A debtor commits an act of bankruptcy in each of the following cases:
…
(g) if a creditor who has obtained against the debtor a final judgment or final order, being a judgment or order the execution of which has not been stayed, has served on the debtor in Australia or, by leave of the Court, elsewhere, a bankruptcy notice under this Act and the debtor does not:
(i) where the notice was served in Australia—within the time fixed for compliance with the notice; or
(ii) where the notice was served elsewhere—within the time specified by the order giving leave to effect the service;
comply with the requirements of the notice or satisfy the Court that he or she has a counter claim, set off or cross demand equal to or exceeding the amount of the judgment debt or sum payable under the final order, as the case may be, being a counter claim, set off or cross demand that he or she could not have set up in the action or proceeding in which the judgment or order was obtained;
…
25 Section 30(1) of the Bankruptcy Act provides:
30 General powers of Courts in bankruptcy
(1) The Court:
(a) has full power to decide all questions, whether of law or of fact, in any case of bankruptcy or any matter under Part IX, X or XI coming within the cognizance of the Court; and
(b) may make such orders (including declaratory orders and orders granting injunctions or other equitable remedies) as the Court considers necessary for the purposes of carrying out or giving effect to this Act in any such case or matter.
26 While there is no express power conferred on the Court to set aside a bankruptcy notice, it is well-established that the Court has implicit power, derived from s 30(1), to do so: Australian Securities and Investments Commission v Forge [2003] FCAFC 274; (2003) 133 FCR 487 at [26] (Emmett J). The express power to extend time in s 41(6A) is in aid of the implicit power to set aside the notice: Re Sterling; Ex Parte Esanda Ltd [1980] FCA 61; (1980) 44 FLR 125 at 129-130, 132 (Lockhart J).
Service and regularity of bankruptcy notice
Service of the bankruptcy notice
27 Section 40(1)(g) of the Bankruptcy Act describes a circumstance in which a debtor commits an act of bankruptcy. Where a debtor has committed an act of bankruptcy the Court may, on a petition presented by a creditor, make a sequestration order against the estate of the debtor in accordance with the provisions of Pt IV Div 2 of the Bankruptcy Act. Therefore, the issue and service of a bankruptcy notice and non-compliance with that notice provides a mechanism through which a creditor may demonstrate an act of bankruptcy and petition the Court for a sequestration order to be made against the estate of the debtor.
28 Regulation 102 of the Bankruptcy Regulations provides:
102 Service of documents
(1) Unless the contrary intention appears, if a document is required or permitted by the Act or this instrument to be given or sent to, or served on, a person (other than the Inspector-General, the Official Receiver or the Official Trustee), the document may be:
(a) sent by a courier service to the person at the address of the person last known to the person serving the document; or
(b) left, in an envelope or similar packaging marked with the person’s name and any relevant document exchange number, at a document exchange where the person maintains a document exchange facility.
Note 1 See also section 28A of the Acts Interpretation Act 1901.
Note 2: The Electronic Transactions Act 1999 deals with giving information in writing by means of an electronic communication.
(2) In the absence of proof to the contrary, the document is taken to have been received by, or served on, the person when the document would, in the due course of business practice, be delivered to that address or document exchange.
(3) Paragraphs 9(1)(d) and (2)(d) of the Electronic Transactions Act 1999 do not apply to documents that are required or permitted by the Act or this instrument to be given or sent to, or served on, a person.
Note: Paragraphs 9(1)(d) and (2)(d) of the Electronic Transactions Act 1999 deal with the consent of the recipient of information to the information being given by way of electronic communication.
29 Section 28A of the Interpretation Act provides that for the purposes of any Act that requires or permits a document to be served on a person, the document may be served on a natural person by delivering it to the person personally or by leaving it at, or by sending by pre-paid post to, the address of the place of residence or business of the person last known to the person serving the document.
30 Section 9 of the Electronic Transactions Act provides:
9 Writing
Requirement to give information in writing
(1) If, under a law of the Commonwealth, a person is required to give information in writing, that requirement is taken to have been met if the person gives the information by means of an electronic communication, where:
(a) in all cases—at the time the information was given, it was reasonable to expect that the information would be readily accessible so as to be useable for subsequent reference; and
…
(d) if the information is required to be given to a person who is neither a Commonwealth entity nor a person acting on behalf of a Commonwealth entity—the person to whom the information is required to be given consents to the information being given by way of electronic communication.
Permission to give information in writing
(2) If, under a law of the Commonwealth, a person is permitted to give information in writing, the person may give the information by means of an electronic communication, where:
(a) in all cases—at the time the information was given, it was reasonable to expect that the information would be readily accessible so as to be useable for subsequent reference; and
…
(d) if the information is permitted to be given to a person who is neither a Commonwealth entity nor a person acting on behalf of a Commonwealth entity—the person to whom the information is permitted to be given consents to the information being given by way of electronic communication.
Certain other laws not affected
(3) This section does not affect the operation of any other law of the Commonwealth that makes provision for or in relation to requiring or permitting information to be given, in accordance with particular information technology requirements:
(a) on a particular kind of data storage device; or
(b) by means of a particular kind of electronic communication.
Giving information
(4) This section applies to a requirement or permission to give information, whether the expression give, send or serve, or any other expression, is used.
(5) For the purposes of this section, giving information includes, but is not limited to, the following:
…
(c) giving, sending or serving a notification;
…
31 The expression electronic communication is defined in s 5 to mean:
(a) a communication of information in the form of data, text or images by means of guided and/or unguided electromagnetic energy; or
(b) a communication of information in the form of speech by means of guided and/or unguided electromagnetic energy, where the speech is processed at its destination by an automated voice recognition system.
32 A bankruptcy notice is a document that is, at least, permitted by the Bankruptcy Act to be given, sent or served on a person within the meaning of reg 102 of the Bankruptcy Regulations and s 28A of the Interpretation Act. Service of a bankruptcy notice also falls within the meaning of giving information in s 9(5)(c) of the Electronic Transactions Act. Therefore, a bankruptcy notice may be served (given) to a person by means of an electronic communication without the person to whom the information is given consenting to service by electronic communication because s 9(1)(d) and s 9(2)(d) of the Electronic Transactions Act do not apply to service of a bankruptcy notice by operation of reg 102(3) of the Bankruptcy Regulations.
33 Irrespective of whether or not service of the bankruptcy notice could be made within the Kalgoorlie court precinct, on the facts deposed in the applicant’s affidavit of 22 August 2023, the notice was not delivered to him personally. However, he received the notice by means of an electronic email from Mr Hawker. In the absence of any evidence to the contrary, I infer that Mr Hawker had the authority of the creditor (the respondent) to send the bankruptcy notice to the applicant. Therefore, I accept that the bankruptcy notice was served on the applicant because it was reasonable to expect that the notice so served would be readily accessible so as to be usable for subsequent reference. The precise date of that service is not in the evidence, but I infer from the chronology in the applicant’s affidavit of 22 August 2023 and that the application to set aside the bankruptcy notice was filed on 22 August 2023 (21 days after 1 August 2023) that the email was received on or about 1 August 2023 and no later than 22 August 2023.
Regularity of the bankruptcy notice
34 Section 40(2) of the Bankruptcy Act provides that a bankruptcy notice issued under s 40(1) must be in accordance with the form prescribed in the Bankruptcy Regulations. Regulation 9(1) prescribes the form of bankruptcy notice set out in Sch 1 of the Bankruptcy Regulations. The bankruptcy notice, in this case, is in that form. The prescribed form contains certain blanks that are to be completed by the creditor such as the names of the debtor and creditor, the amount of the debt and interest and the number of days within which the debtor is to either pay the creditor the amount of the debt claimed or make arrangements to the creditor’s satisfaction for settlement of the debt. There is also a blank box under para 2 of the form which commences ‘Payment of the debt can be made to:’. The applicant contends that the bankruptcy notice in this case is defective because it merely identifies the name and address of solicitors (who are not the creditor) and does not provide the applicant with sufficient information or instruction as to the manner in which he is to ‘comply’ with the notice within the 21-day period specified under para 1 of the notice. That is, the notice does not specify a method by which payment can be made to the solicitors or the creditor.
35 Perry J identified the applicable principles governing the validity of a bankruptcy notice in circumstances in which a debtor contends that the notice does not comply with the form prescribed in the Bankruptcy Regulations in Fuller v Alford [2017] FCA 782; (2017) 252 FCR 168 at [54]-[64], [81]-[84]. In Alford the relevant issue was whether the bankruptcy notice was defective because the level of the building of the address at which payment of the debt could be made was omitted from the notice. The applicable principles may be summarised as follows.
(1) Section 306(1) of the Bankruptcy Act provides:
306 Formal defect not to invalidate proceedings
(1) Proceedings under this Act are not invalidated by a formal defect or an irregularity, unless the court before which the objection on that ground is made is of opinion that substantial injustice has been caused by the defect or irregularity and that the injustice cannot be remedied by an order of that court.
(2) A bankruptcy notice is a ‘proceeding’ for the purposes of s 306. A failure to comply with a requirement to furnish information in a bankruptcy notice is a defect or irregularity of the kind referred to in s 306: Alford at [56]; Adams v Lambert [2006] HCA 10; (2006) 228 CLR 409 at [17], [24].
(3) Only formal defects or irregularities are ‘remedied’ under s 306(1). It does not cure defects or irregularities that render the bankruptcy notice a ‘nullity’. That is, defects or irregularities that deprive the document of its character as a ‘bankruptcy notice’ issued under s 41(1) of the Bankruptcy Act. Where a defect or irregularity is within the scope of s 306(1) it is also necessary to consider whether substantial injustice has been caused by the defect or irregularity and, if so, whether that injustice is not able to be remedied by an order of the Court: Alford at [57]-[59]; Adams at [18].
(4) Where a defect or irregularity is substantive the bankruptcy notice is ‘invalid’ or a ‘nullity’ s 306(1) has no application to it: Alford at [60]; Kleinwort Benson Australia Ltd v Crowl [1988] HCA 34; (1988) 165 CLR 71 at 81-82. Conversely, where the bankruptcy notice is valid and not an abuse of process, there is no discretion to set it aside: Alford at [61]; Forge at [27].
(5) A bankruptcy notice is invalid or a nullity ‘if it fails to meet a requirement made essential by the Bankruptcy Act, or if it could reasonably mislead a debtor as to what is necessary to comply with the notice’: Alford at [62]; Kleinwort Benson at 79. The test as to whether the debtor could reasonably be misled is objective although regard may be had to extraneous facts including the surrounding circumstances for the purposes of determining whether objectively a debtor in those circumstances would be misled: Alford at [62]-[64] and the authorities there cited.
36 I do not consider that the provision of the address of the respondent’s solicitor as the place at which payment could be made could reasonably mislead a debtor as to what is necessary to comply with the notice. Paragraph 1 of the notice requires the debtor to pay to the creditor the amount of the debt claimed or make arrangements to the creditor’s satisfaction for settlement of the debt. That is clear and is in the form of the bankruptcy notice as prescribed. Paragraph 2 of the notice is in the following form:
2. Payment of the debt can be made to:
Kavanagh Legal
U 8 40 Victory Tce, East Perth, WA 6004, Australia
Phone: +61 04 00908275
Email: tim@kavenaghlegal.com.au
37 Section 41(2) of the Bankruptcy Act provides that the bankruptcy notice must be ‘in accordance with’ the form prescribed by the Bankruptcy Regulations and not that the notice must be ‘in’ the prescribed form. Therefore, there must be substantial rather than strict compliance with the prescribed form in terms of format, layout and content: Alford at [81]; Farrugia v Farrugia [2000] FCA 385; (2000) 99 FCR 16 at [64], [67] (Katz J). Otherwise, the essential information that is to be conveyed by a bankruptcy notice is that which is identified in the prescribed form. Aside from identification of the creditor, the judgment or order and the amount of the debt which appears on the first page of the form, the essential information deals with compliance with the notice by payment or settlement of the debt (para 1) and the consequences of non-compliance (para 3). Other information in the notice is permissive or facilitative of certain steps the debtor may take in relation to the notice: that payment of the debt can be made to a nominated person (para 2) and applying to extend the time for compliance (paras 4 and 6), applying to set aside the notice (paras 5 and 6) and an address for service of applications to the Court (para 7). Even if nomination of a person to whom payment of the debt can be made were regarded as essential information, the identification of that person and a physical address for that person would be sufficient to convey that information to a debtor.
38 Otherwise, it is not evident that the prescribed form requires a description of a specific method of payment rather than identification of the person to whom payment can be made. In any event, the phrase: ‘Payment of the debt can be made to’ (emphasis added) forms part of the prescribed form. That phrase is permissive not mandatory. It is not descriptive of the only manner in which the debtor can pay the creditor. In my view, a description of the specific method by which payment can be made is not essential information the absence of which would render the notice invalid. At most, the absence of that information might be a formal defect or irregularity in the notice. It follows that the bankruptcy notice in this case complies or substantially complies with the prescribed form.
39 Even if the absence of a description of a specific method of payment were considered a formal defect or irregularity in the bankruptcy notice, I am not of the opinion that defect or irregularity has caused any substantial injustice. It is self-evident that payment could be made to Kavanagh Legal by delivering cash or a cheque made out to Kavanagh Legal or the creditor to the physical address nominated in the notice. Otherwise, the provision of the physical address, email address and telephone number gave sufficient information to the applicant (debtor) to allow him to contact Kavanagh Legal (as the creditor’s nominee to receive payment) or the creditor and ascertain a method of payment acceptable to Kavanagh Legal within the time stipulated for compliance with the notice. Therefore, there was no substantial injustice caused by the absence of a description of the specific method by which payment can be made to Kavanagh Legal.
Good faith
40 Although the applicant sought to invoke the notion of ‘lack of good faith’ drawn from the reasons of Robertson J in Xu (at [131]), the sense in which his Honour was referring to the absence of good faith in that case was directed to the circumstances in which the judgment (upon which the bankruptcy notice was based) was obtained, not the circumstances in which the bankruptcy notice was issued. Nonetheless, an absence of good faith in issuing a bankruptcy notice may, depending on the circumstances, involve an abuse of the bankruptcy process.
41 The Court has a wide discretion to set aside a bankruptcy notice where it is satisfied that the interests of justice require it to do so and that includes setting aside a bankruptcy notice as an abuse of process: Seller v Deputy Commissioner of Taxation [2011] FCA 865; (2011) 282 ALR 80 at [15]-[20] (Flick J). The circumstances in which the Court may set aside a bankruptcy notice as an abuse of process ‘are not governed by rigid rules and do not fall into fixed categories’: Clyne v Deputy Commissioner of Taxation [1982] FCA 166; (1982) 42 ALR 703 at 708 (Lockhart J). It is not possible to describe exhaustively what will constitute an abuse of process. However, one well-established category of abuse of process is where the Court’s procedures are invoked for an illegitimate or collateral purpose: Victoria International Container Terminal Ltd v Lunt [2021] HCA 11; (2021) 271 CLR 132 at [14].
42 As Flick J observed in Seller (at [16]), one instance of abuse of process is where the purpose in issuing a bankruptcy notice is to put pressure on a debtor to pay the debt rather than to genuinely invoke the Court’s jurisdiction in relation to insolvency. Such circumstances may also be described as lacking bona fides or good faith in instigating the bankruptcy proceedings.
43 For the purposes of this application, it may also be accepted that if a bankruptcy notice is issued as a consequence of a third party giving unjustified assistance or encouragement to the judgment creditor so as to constitute maintenance that may, depending on the circumstances, involve an abuse of process. In such a case, the ‘basal enquiry’ is whether the role of the third party has corrupted, or is likely to corrupt, the processes of the Court to a degree that attracts the extraordinary jurisdiction to dismiss or stay the proceedings as an abuse of process. However, mere maintenance does not in and of itself amount to an abuse of process: Deloitte Touche Tohmatsu v JP Morgan Portfolio Services Ltd [2007] FCAFC 52; (2007) 158 FCR 417 at [37]-[39], [42], [55] (Tamberlin and Jacobson JJ) citing Fostif Pty Ltd v Campbells Cash & Carry Pty Ltd [2005] NSWCA 83; (2005) 63 NSWLR 203 at [114], [132] (Mason P); Campbells Cash & Carry Pty Ltd v Fostif Pty Ltd [2006] HCA 41; (2006) 229 CLR 386 at [1] (Gleeson CJ), [63], [65], [91], [93], [95] (Gummow, Hayne and Crennan JJ) and [147] (Kirby J).
44 There was no evidence from which a finding or conclusion could be made that Gold Tiger Holdings was assisting or encouraging the respondent to issue the bankruptcy notice. I do not infer from the alleged misspelling of the respondent’s name in the agreement for the sale of the mining tenements that the respondent was not a genuine party to that agreement. Nor do I infer from that alleged misspelling and that the bankruptcy notice was served by email from Mr Hawker that Gold Tiger Holdings is behind the issue of the bankruptcy notice and, in substance, the true moving party in the bankruptcy proceedings.
45 The applicant deposes in his affidavit of 8 February 2024 that the respondent is a non-managing director and majority shareholder of Gold Tiger Holdings. Although there was no direct evidence of Mr Hawker’s relationship to Gold Tiger Holdings or the respondent, in Owen v Sandhu [2021] WAMW 15 at [1] and [119], the Warden records that there was evidence in those proceedings to the effect that Mr Hawker was the managing director of Gold Tiger Resources (Australia) Ltd and Gold Tiger Holdings was a subsidiary of that company. It is evident that there is some form of business connection or association between Gold Tiger Holdings and the respondent. As already mentioned, in the absence of any evidence to the contrary, the inference I draw is that Mr Hawker was appointed the respondent’s agent for the purpose of serving the bankruptcy notice on the applicant electronically. There is no basis for the applicant’s assertion that the bankruptcy notice was not issued in good faith.
Going behind warden’s decision
Applicable principles
46 The Court should go behind a judgment where sufficient reason is shown for questioning whether there is in truth and reality a debt due to the creditor: Ramsay Health Care Australia Pty Ltd v Compton [2017] HCA 28; (2017) 261 CLR 132 at [37]-[38] (Kiefel CJ, Keane and Nettle JJ). The circumstances in which sufficient reason may be shown are not closed, but the Court will not inquire as a matter of course. Circumstances tending to show fraud, collusion, miscarriage of justice or that a compromise was not fair and reasonable are the most frequent examples. Courts are reluctant to exercise the jurisdiction where the judgment was entered after a full investigation of the issues at a trial where both parties appeared and had ample opportunity to put their cases: Ramsay at [39]-[51]. Nonetheless, the Full Court and High Court considered that the primary judge was in error in Ramsay for not considering that there was sufficient reason to inquire even though the judgment had been obtained after a contested trial.
47 Ramsay concerned proceedings for a sequestration order under s 52 of the Bankruptcy Act. In proceedings in the Supreme Court of New South Wales the creditor obtained judgment against the debtor for a debt due under a guarantee. The debtor had not contested the quantum of the alleged indebtedness and had raised a non est factum defence to the claim under the guarantee. The defence was not successful and judgment was entered for the undisputed amount of the debt. The debtor failed to comply with a bankruptcy notice based on the judgment debt. In the bankruptcy proceedings the debtor opposed the petition on the ground that the judgment was founded on a debt that was not in truth and reality owed. There was evidence that ‘might tend towards a different result from that reflected in the Judgment’ and ‘there was on the face of things a real question as to whether [the debtor] had failed to present his case on the merits at the trial in the Supreme Court [of New South Wales]’. After concluding that the circumstances in which the Court will inquire into the validity of a judgment debt are not closed, the majority in Ramsay made the following observations about the exercise of the power when a judgment has been made after a contested hearing or trial:
67 It is no answer to [the point that there was a real question as to whether the debtor had failed to present his case on the merits at the trial] to say, as the primary judge did that [the debtor] is bound by the conduct of his case on his behalf at the trial in the Supreme Court. 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 [Ex parte Lennox; In re Lennox (1885) 16 QBD 315 at 323; In re Flatau; Ex parte Scotch Whisky Distillers Ltd (1888) 22 QBD 83 at 85; Corney v Brien (1951) 84 CLR 343 at 353] 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. Indeed, such a judgment can usually be expected to provide the most reliable statement of the debt humanly attainable because the ordinary processes of the adversarial system provide a practical guarantee of reliability. The testing of the relative merits of a claim and counterclaim under the rigours of adversarial litigation will usually establish the true state of accounts as between the parties to the proceedings. Accordingly, a Bankruptcy Court will usually have no occasion to investigate whether the judgment debt is a true reflection of the real debt. 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.
69 In Petrie v Redmond [[1943] St R Qd 71 at 75-76], Latham CJ, with whom Rich and McTiernan JJ agreed, said that the Bankruptcy Court:
“is entitled to go behind the judgment and inquire into the validity of the debt where there has been fraud, collusion or miscarriage of justice. … Also the court looks with suspicion on consent judgments and default judgments. … The Bankruptcy Court does not examine every judgment debt. Special circumstances must be established before it will do so. It is impossible to lay down any general rule.”
70 The first two sentences of that passage were cited with evident approval by Dixon, Williams, Webb and Kitto JJ in Corney v Brien [(1951) 84 CLR 343 at 348]. The passage was explicitly concerned with consent judgments and default judgments. As a matter of practical experience, these are the sorts of cases in which third parties can be expected to be disadvantaged by the making of a sequestration order based on a judgment which was not the outcome of the rigorous processes of adversarial litigation. The same concern may also arise in a case where the judgment was obtained in circumstances which suggest a failure on the part of the judgment debtor to present his or her case on its merits in the litigation that led to the judgment.
48 The power to set aside a bankruptcy notice also extends to circumstances in which, in truth, no debt lies behind the judgment: Olivieri v Stafford [1989] FCA 731; (1989) 24 FCR 413 at 430 (Gummow J) and the authorities there cited. Thus, it has been accepted that the power to go behind a judgment may be exercised on an application to set aside a bankruptcy notice: Xu at [55] (Robertson J).
49 In Re Briggs; Ex parte Briggs v Deputy Commissioner of Taxation [1986] FCA 512; (1986) 12 FCR 310 (at 312), Toohey J said, relevantly:
… It seems to me that, however formulated, the grounds upon which a bankruptcy notice may be set aside must relate to the form or content of the notice itself, service of the notice or the existence of the debt upon which the judgment and in turn the notice is founded. Having regard to the language of s 40(1)(g), reference to the existence of a debt must include the existence of a counter-claim, set-off or cross demand equal to or exceeding the amount of the debt.
A court hearing an application to set aside a bankruptcy notice is not hearing a petition for sequestration and the provisions of s 52(2), whereby a court may dismiss a petition if satisfied that the debtor is able to pay his debts or that for other sufficient cause a sequestration order ought not be made, cannot be imported into such an application. In my view a court faced with an application to set aside a bankruptcy notice is constrained to look only at the regularity of the notice itself (including service) and otherwise at the circumstances surrounding the existence of the judgment debt and any demand which the debtor may have against the creditor for a comparable amount.
50 In Xu at [131], Robertson J said:
Except in a clear case, questions of fraud, collusion, lack of good faith and miscarriage of justice, or whether substantial reasons have been shown for questioning whether behind the judgment there was in truth and reality a debt due to the judgment creditor, are more apt to be dealt with after the exhaustion of those remedies and where the Court is dealing with an application to make a sequestration order against the estate of the debtor. No doubt the circumstances in which the Court will go behind a judgment cannot be formulated precisely.
51 The correctness of these principles drawn from Briggs and Xu was accepted by the Full Court in Rafidi v Commonwealth Bank of Australia [2020] FCAFC 26 at [13] and [14] and Singh v Fobupu Pty Ltd, in the matter of Singh [2021] FCAFC 14 at [25].
Mining Act and Regulations
52 Part IV of the Mining Act deals with mining tenements. Section 98(1) of the Mining Act provides that where the requirements of that Act are not being complied with in respect of the expenditure conditions applicable to an exploration licence or a mining lease, any person may apply for forfeiture of that licence or lease as provided in the balance of s 98.
53 Part VIII of the Mining Regulations contain provisions relating to proceedings before the Warden under Pt IV of the Mining Act. Regulation 165(1) provides that, in general, each party is to bear its own costs in respect of proceedings under Pt IV of the Mining Act. However, a Warden hearing and determining proceedings under Div 2 (which deals with applications under s 98), including interlocutory applications related to those proceedings, may make an order for a party’s costs to be paid by another party. Regulation 168(1) provides that a person may enforce a costs determination under Pt VIII by lodging a certificate of the assessment of the costs given by the mining registrar, and an affidavit stating to what extent it has not be complied with, with a court of competent jurisdiction. Regulation 168(2) provides that a certificate so lodged with a court is taken to be a judgment of that court and may be enforced accordingly.
54 The Mining Act confers both judicial and administrative powers and functions upon Wardens and maintains a clear distinction between those powers and functions. Although the procedure set out in Pt VIII of the Mining Regulations resembles the procedure of a court, a Warden hearing an application for forfeiture under s 98 of the Mining Act does so in the exercise of administrative, not judicial, power: Strother v Warden Tavener [2016] WASC 85 at [34] (Pritchard J) and the authorities there cited.
55 It follows that, in point of detail, the ‘judgment’ that is the subject of the bankruptcy notice is a deemed judgment of the District Court by operation of reg 168 of the Mining Regulations. Further, the foundation for that deemed judgment is a certificate of the assessment of costs given by the mining Registrar and an affidavit stating to what extent there has not been compliance with that certificate. The foundation, in turn, for the certificate of assessment is the exercise of a Warden of an administrative power in administrative proceedings to order one party to those administrative proceedings to pay the costs of another party under reg 165. Nonetheless, there is no doubt that the District Court judgment is a final judgment of the kind referred to in s 40(1)(g) of the Bankruptcy Act: see, s 40(3)(b); Sarks v Cassegrain [2015] FCAFC 38; (2015) 321 ALR 28 at [39]-[41] (Edmonds and Gleeson JJ, Pagone J agreeing). A final judgment is any judgment upon which the creditor is in a position to execute: Abigroup Ltd v Abignano [1992] FCA 871; (1992) 39 FCR 74 at 80 (Lockhart, Morling and Gummow JJ).
56 However, the nature of the District Court judgment and proceedings before the Warden has implications for the application to set aside the bankruptcy notice on the ground that the Court may go behind the judgment. First, the applicant has not sought to impeach the process by which the deemed judgment was obtained. That is, there is no suggestion that the certificate of assessment or affidavit lodged in the District Court was irregular. Second, the applicant has not sought to impeach the process by which the certificate of assessment was produced. That is, there is no suggestion that the certificate should be set aside on any ground relating to the process by which the costs were assessed. Third, there is no direct attack on the exercise of the Warden’s discretionary power to order the applicant to pay the respondent’s costs of the proceedings concerning the three forfeiture applications. While it may be inferred that the dismissal of the applications for forfeiture was a foundation for the Warden’s decision to award the respondent costs, the Warden’s reasons for ordering costs were not in evidence on the application. Therefore, the applicant’s attack on the District Court judgment is indirect. In effect, he submits that the debt underlying the bankruptcy notice does not exist because the foundation for the Warden’s costs order is a flawed decision to dismiss the forfeiture applications. Last, the decision to dismiss the forfeiture applications was a decision made in the exercise of administrative power. While proceedings under Pt VIII of the Mining Regulations may be described as a substantive hearing of the matter on the merits, it is not a determination of the merits as to whether a debt is owed nor is a determination of a court subject to rules of evidence. It was a determination of an administrative body as to whether there should be a forfeiture of mining tenements. In that context, the Warden had jurisdiction to determine the facts relevant to the forfeiture applications and, subject to any applicable jurisdictional error in fact finding, to make erroneous findings of fact: Owen v Wilson at [26]-[31].
Unfairness of the Warden’s decision
57 Quite apart from the indirect nature of the applicant’s attack on the District Court judgment, he has already unsuccessfully sought to have the decision upon which the costs assessment and District Court judgment was founded set aside for jurisdictional error. In the applicant’s judicial review proceedings in the Supreme Court, he contended that the Warden fell into jurisdictional error on the grounds that: (1) the Warden misapprehended the limits of his functions and powers under the Mining Act; (2) the Warden failed to afford the applicant procedural fairness; (3) the Warden’s path of reasoning was legally unreasonable; and (4) the Warden’s reasons on certain issues were inadequate. As part of the contentions he raised concerning misapprehension of law, the applicant claimed that the Warden erroneously had regard to certain expenditure on the mining tenements by relying on the oral and documentary evidence of Mr Hawker and Mr McCarty. The same points were raised with respect to procedural fairness and legal unreasonableness: Owen v Wilson at [163]-[165], [177].
58 As to Mr McCarty’s evidence, the applicant alleged that he was denied procedural fairness by the Warden relying on Mr McCarty’s evidence in circumstances in which Mr McCarty, whose evidence was being taken via audio link, unilaterally terminated the link during his cross-examination. Smith J rejected the applicant’s allegations because the applicant was given an opportunity to make submissions and made submission to the Warden regarding the extent to which the Warden could and should rely on Mr McCarty’s evidence. Further, if there had been any denial of procedural fairness it was not material because the Warden had a substantial body of other evidence consistent with that part of the evidence of Mr McCarty upon which the Warden had relied. Accordingly, the applicant was not denied a realistic possibility of a different outcome: Owen v Wilson at [193]-[212].
59 As to Mr Hawker’s evidence, the applicant alleged that there was no evident justification or rational foundation in the Warden’s finding that he accepted certain evidence of Mr Hawker to the effect that a drilling program was conducted in 2018. The applicant identified discrepancies and inconsistencies in Mr Hawker’s evidence which the Warden had accepted and yet the Warden nevertheless accepted parts of Mr Hawker’s evidence. Smith J rejected the applicant’s allegations. Amongst other things, Smith J was satisfied that it was open to the Warden to accept the explanations Mr Hawker had given in his cross-examination concerning the discrepancies and inconsistencies. Further, there was documentary evidence that supported a finding that the drilling program was conducted in 2018. It was open to the Warden to give such weight as he considered appropriate to that documentary evidence and that aspect of his reasoning was not open to challenge: Owen v Wilson at [233]-[247], [260]-[261].
60 The applicant sought to raise essentially the same complaints as those he made in the judicial review proceedings concerning the evidence of Mr McCarty and Mr Hawker as grounds for contending that the decision upon which the cost assessment was based was unfair and this Court should go behind the decision of the Warden, in effect, to consider the correctness of the process and the Warden’s conclusions. In substance, the applicant has already unsuccessfully sought to have the judgment set aside on these grounds. There has been no appeal from the judgment of Smith J in Owen v Wilson. Thus, there is no reason for considering that there is any substance in the applicant’s assertion that the judgment debt was indirectly obtained through a decision that was not made according to law.
61 Further, and in any event, in substance, the applicant is inviting the Court to impeach the decision underpinning the costs assessment. Impeachment is not a proper basis for going behind the judgment. In Ramsay Kiefel CJ, Keane and Nettle JJ said:
54 In point of principle, scrutiny by a Bankruptcy Court of the debt propounded by a judgment creditor seeking a sequestration order in no sense involves an attempt to impeach the judgment. A Bankruptcy Court is not concerned with whether the judgment should be set aside as upon an appeal, or even as a default judgment or a judgment obtained by fraud may be set aside; nor is a Bankruptcy Court concerned to deny the effect of the judgment as “res judicata” between the parties to it. A Bankruptcy Court is not concerned to prevent the judgment creditor from invoking the ordinary processes of execution available under the general law. Rather, a Bankruptcy Court is concerned with whether the debt on which it is based is truly a basis for the making of a sequestration order. A Bankruptcy Court has a statutory duty to be “satisfied” as to the existence of the petitioning creditor’s debt; a creditor should not be able to make a person bankrupt on a debt which is not provable.
(Citation omitted.)
Perjury, perversion of justice and fraud
62 In the applicant’s affidavit of 22 August 2023, he deposes that he has made an interlocutory application requesting the Warden to refer the matters the subject of the costs assessment (and District Court judgment) to the Western Australian Police Force for investigation into perjury, perversion of the course of justice and stock and securities fraud on the part of the respondent. An exhibit to the applicant’s affidavit of 8 February 2024 is an interlocutory application in which the applicant has apparently made such an application.
63 The applicant has not identified by what power under the Mining Act the Warden could refer such matters to the police. The applicant has not identified nor deposes any facts in support of the assertions of criminal offences. Further, the applicant has not identified the manner in which it is alleged that there is any connection between the asserted criminal offences and the decision of the Warden upon which the cost assessment was founded. As matters stand the allegations are bare assertions without particulars; namely, they are scandalous and should be disregarded. In any event, there is no evidence of any steps having been taken towards conducting any investigation into the asserted offences. There is no basis for considering that there is any prospect of the District Court judgment being set aside consequent on the outcome of a criminal prosecution of the respondent.
Conclusion on going behind judgment
64 The applicant has not raised by evidence or other means any reason for the Court to consider that there is not, in truth and reality, a debt owed to the respondent as set out in the bankruptcy notice.
Set-off
65 The applicant bears the onus of satisfying the Court that he has a counter-claim, set-off or cross-demand equal to or exceeding the amount of the judgment debt or sum payable under the final order and that it could not have been set up in the action or proceeding in which the judgment or order was obtained. McKerracher J conveniently summarised the applicable principles for the discharge of that onus in Wilson v Arwon Finance Pty Ltd [2021] FCA 1052 as follows:
29 [The applicant] must show a counter-claim, set-off or cross-demand which sounds in money (Re Brink; Ex parte Commercial Banking Co of Sydney Ltd [1980] FCA 78; (1980) 44 FLR 135 per Lockhart J (at 138)), and which exists at the time the application to set aside is heard: Patane v Asteron Life Ltd [2004] FCA 232; (2004) 2 ABC(NS) 85 (at [74]). A claim for an unliquidated demand for a tort can be a cross-demand: Re Judd; Ex parte Pike (1924) 24 SR (NSW) 537 (at 539-540) and Massih v Esber [2008] FCA 1452; (2008) 250 ALR 648 (at [24]).
30 As Markovic J observed more recently in Blair v Owners of Strata Plan No 71656 [2016] FCA 1522 (at [20]):
The terms “counter-claim”, “set-off” and “cross demand” in s 40(1)(g) of the Bankruptcy Act are not subject to limits. The word “counter-claim” likely refers to claims in equity and the word “set-off” likely refers to those claims the subject of a set-off at common law while “cross demand” refers to claims other than those encompassed in the expressions “counter-claim” or “set-off” and can include a claim for unliquidated damages for a tort or damages for breach of contract: see Re Brink; Ex parte Commercial Banking Company of Sydney Ltd (1980) 44 FLR 135 (Re Brink) (per Lockhart J) at 138-139.
(Emphasis in original.)
31 Although few limits are placed on the nature of the off-setting claim, the Court must be satisfied that the applicant ‘has’ such a claim (that equals or exceeds the judgment debt). This limb requires the applicant to demonstrate a prima facie case by producing evidence of the off-setting claim, though such evidence does not need to be admissible as it would need to be before a court trying the issue; the Court on an application under s 40(1)(g) and s 41(7) does not conduct a ‘mini-trial’ of the off-setting claim contended for: Ebert v Union Trustee Co of Australia Ltd [1960] HCA 50; (1960) 104 CLR 346 (at 350) and Re Brink (at 141). The standard as formulated by Lindgren J in Glew v Harrowell [2003] FCA 373 (at [11]) is whether the Court can be satisfied the debtor has a claim deserving to be finally determined. In CFB18 v Reader Lawyers & Mediators [2018] FCA 611; (2018) 16 ABC(NS) 26, Colvin J summarised the relevant principles (at [33]-[34]):
33 Where an application is made to set aside a bankruptcy notice on the basis of such an offsetting claim, the Court must weigh up considerations as to the legal and factual merit of the claim relied upon by the debtor and the justice of allowing the bankruptcy proceedings to go ahead or requiring them to await the determination of the claim: Guss v Johnstone (2000) 74 ALJR 884 at [40]. The offsetting claim must sound in money and it must be a claim that it is proper and reasonable for the debtor to litigate: Vogwell v Vogwell (1939) 11 ABC 83, 85. It must be raised in the same right as the claim the subject of the bankruptcy notice: Ebert v Union Trustee Company of Australia Ltd (1960) 104 CLR 346, 351-352 . So, for example, a claim made in a trustee capacity can only be met by an offsetting claim against the debtor in the same trustee capacity.
34 The various formulations in the cases as to what must be established by the party seeking to set aside the notice were summarised by Lindgren J in Glew v Harrowell (2003) 198 ALR 331 at [9]. They include, the existence of a “prima facie case”, “a fair chance of success” or the party is “fairly entitled to litigate” the claim and that the party is advancing a “genuine” or “bona fide” claim. However, it is not simply a matter of evaluating whether there is a claim with the requisite strength. Rather, the question is whether the claim is of a kind that, in all the circumstances (including the Court’s view of the strength of the offsetting claim), it is just to allow the party to pursue rather than face bankruptcy. One aspect of the claim to consider is its strength. A weak claim will not suffice. Otherwise, an assessment of strength is to be considered in the context of other considerations that bear upon the justice of allowing the bankruptcy proceedings to continue without the claim first being determined.
32 Further useful guidance is found in Lewis’ Australian Bankruptcy Law (11th ed) (at 70-73).
33 As to whether an off-setting claim ‘could not have been set up’ in the proceeding where judgement was obtained, the policy reason that underlies this threshold in s 40(1)(g) is to ensure that a debtor cannot simply stand by (as the respondents argue [the applicant] has done) while judgment is obtained, and later seek to use a counter-claim, set-off or cross-demand to set aside a bankruptcy notice founded upon that judgment: Re Ling; Ex parte Ling v Commonwealth (1995) 58 FCR 129 per Hill J (at 137). As noted, it is this particular consideration that is the focus of the present case.
34 On this crucial point, [the applicant] particularly relies on the following passage from the judgment of Lukin J in Re Stokvis (1934) 7 ABC 53 (at 57):
I take a counter claim, set off or cross demand which could not be set up as one which, from point of time, or from its nature, or from absence of empowering provisions, or from positive inhibition so to do, could not be set up in the particular case in which judgment was obtained… Mere failure to take advantage of the opportunity can hardly be said to be inability.
(Emphasis added.)
35 That passage was quoted with approval in Re Brink (at 139) and Palaniappan v Westpac Banking Corporation [2017] FCAFC 121; (2017) 252 FCR 486 (at [32]). Often quoted also is the dictum of Avory J in Re Jocumsen (1929) 1 ABC 82 (at 85):
I think that upon the true interpretation of the section a debtor is entitled to set up in answer to a bankruptcy notice a counter-claim which rebus sic stantibus he could not in law have set up in the action in which the judgment was obtained, even though he could, if he had chosen, have taken steps which would have rendered the counterclaim available to him in the action.
I think it means a counter-claim which as things then stood the debtor could not set up in the action.
(Emphasis added.)
36 Latin expressions are less frequently adopted these days to explain plain English words but the expression means ‘things standing thus’. It is applicable to refer to a fundamental change of circumstances.
37 These circumstances are frequently characterised ‘as a matter of law’. In Massih, Flick J said (at [28]):
Consistent with the legislative objective sought to be achieved by s 40(1)(g), it has been held that the phrase “could not have been set up” refers to a “cross-claim, set-off or cross demand” which could not have been set up as a matter of law; a mere failure to take advantage of an opportunity to do so does not fall within s 40(1)(g) …
(Emphasis added.)
38 Each of the respondents also relies upon the Full Court decision in Palaniappan per Gilmour J (McKerracher and Charlesworth JJ relevantly agreeing), setting out the principles applicable to the proper construction of s 40(1)(g) of the Bankruptcy Act as follows (at [32]):
The principles applicable to the proper construction of s 40(1)(g) of the Act, which the parties accept, correctly, are relatively well settled. They are relevantly:
(1) The question of whether or not a counterclaim or cross-demand “could not have been set up” is a question to be determined with reference to legal inability, not practical or personal considerations: Re Brink at 434, 437.
(2) “[A] counter-claim, set-off or cross demand which could not be set up [is] one which, from point of time, or from its nature, or from absence of empowering provisions, or from positive inhibition so to do, could not be set up in the particular case in which judgment was obtained. … Mere failure to take advantage of the opportunity can hardly be said to be inability”: Re Stokvis at 57.
(3) The debtor bears the onus of satisfying the Court that he/she was legally incapable of setting up his/her counterclaim in the proceedings in which the judgment was obtained: Re Ling; Ex parte Ling v Commonwealth (1995) 58 FCR 129 at 130 and 137.
(Emphasis added.)
66 There are a number of difficulties with the evidence upon which the applicant relies to demonstrate that he has a set-off exceeding the amount of the District Court judgment.
67 First, the evidence does not rise above bare assertion. Assertion is not sufficient to establish a prima facie claim: Re James; Ex parte Carter Holt Harvey Roofing (Australia) Pty Ltd [1993] FCA 917; (1993) 46 FCR 183 at 188-189 (Hill J). The applicant deposes that he is informed by his solicitor and believes that he ‘will be seeking’ costs in excess of $103,000 or $68,000. The so-called letter setting out those costs refers to costs ‘being sought’ in the sum of $68,000 in respect of the four tenements and $7,500 in respect of another matter. There is no order of the Warden under reg 168 of the Mining Regulations awarding costs in the applicant’s favour. There is no opinion expressed by a legal practitioner as to the likelihood of the applicant obtaining such an order or as the likely quantum of a costs assessment in respect of that order.
68 Second, the letter identifies that costs are sought in other matters against Gold Tiger Resources by the applicant and Mr Carboon in the sum of $27,631 and by the applicant in the sum of $8,000. These are not alleged debts owed by the respondent to the applicant. Therefore, they are not in the same right as the claim the subject of the bankruptcy notice.
69 Third, taking the asserted off-setting claims at their highest, the amount claimed in the same right is $75,500 ($68,000 plus $7,500). Therefore, the asserted set-off is not equal to or greater than the judgment debt.
70 For these reasons, I am not satisfied that the applicant has a set-off in an amount equal to or exceeding the judgment debt. Therefore, it is unnecessary to consider if the applicant’s claims could not have been set up in the proceedings in which the judgment was obtained.
Extension of time for compliance with bankruptcy notice
71 Subject to s 41(6C), the discretion to extend time conferred by s 41(6A) of the Bankruptcy Act is not fettered and should be exercised based upon the facts and circumstances of the particular case: Sharpe v W H Bailey & Sons Pty Ltd [2014] FCA 921; (2014) 317 ALR 738 at [26] and the authorities there cited. Further, the power to extend time under s 41(6A)(b) does not depend on the existence of a valid application to set aside the bankruptcy notice of the kind that is necessary for there to be an automatic extension under s 41(7): Coshott v Prentice, in the matter of Coshott (No 2) [2016] FCA 1531 at [165]-[166] (Bromwich J). The discretion is ‘at large’: Re Taylor; Ex parte Deputy Commissioner of Taxation (1983) 74 FLR 377 at 379. Nonetheless, in the exercise of the discretion the Court will be guided by matters identified in authorities as relevant to the exercise of the discretion. Factors considered relevant include the following.
(1) Whether proceedings to set aside the judgment or order have been instituted (including proceedings of that nature such as an appeal).
(2) Whether a stay of the judgment or order has been sought or obtained.
(3) That failure to comply with a bankruptcy notice is ‘an act of bankruptcy that is a different order of gravity for the change of status brought about by the making of a sequestration order’.
(4) The interests of the judgment creditor and other creditors of the judgment debtor in ensuring that, if ultimately a sequestration order is made, the relevant act of bankruptcy occurs earlier rather than later.
(5) In the absence of a stay of the judgment or order, the extent to which there is evidence of the means of the debtor to satisfy the judgment debt and, in any event, whether it would be appropriate to order security for the debt as a condition of any extension of the time for compliance.
(6) While, in general, it is undesirable to undertake a provisional review to determine the correctness of the judgment or order, the merits may be relevant at least where it is apparent that prospects of success are either ‘slight’ or ‘unusually strong’. In this regard, if an appeal has already been dismissed and the proceeding in question is an application for special leave to make a further appeal, that would be a relevant consideration reinforcing the Court’s reluctance to extend time in the absence of a stay.
See, e.g., Re Geard; Ex parte Reid [1994] FCA 45; (1994) 217 ALR 191 at 193-194 (Sheppard J); Byron v Southern Star Group Pty Ltd [1997] FCA 151; (1997) 73 FCR 264 at 270-271 (Lehane J); Kakavas v Paradise Enterprises Limited [2010] FCA 915 at [8] (Tracey J); Sharpe at [26]-[29] (Gleeson J)
72 Even though the discretion is at large and a valid application is not necessary to enliven the discretion, I am not satisfied that the applicant has any viable counterclaim, set-off or cross-demand against the respondent that could or is likely to result in the discharge of the judgment debt. Nor am I satisfied that the applicant has any reasonable prospect of obtaining an order setting aside the decision of the Warden upon which the costs assessment and judgment debt is founded. I also take into account that the applicant has unsuccessfully sought to have the Warden’s decision set aside for jurisdictional error and there has been no appeal from the judgment dismissing that application. I take into account that an act of bankruptcy is not of the same gravity as a sequestration order and that it is in the interests of all creditors that, if a sequestration order is ultimately to be made, it is desirable that the relevant act of bankruptcy occur earlier rather than later. I also take into account that the applicant has proffered to give an undertaking in a form that would secure payment of the judgment debt. However, that is not a sufficient factor to overcome the overwhelming weight of other factors that are against any further extension of the time for compliance with the notice.
73 As matters stand the time for compliance with the bankruptcy notice has been extended to 4.15 pm (AWST) on 2 April 2024. That is more than 21 days from the date of this judgment.
Conclusion
74 The application for orders setting aside the bankruptcy notice and for other orders should be dismissed. The Registrar’s orders of 5 December 2023 will be affirmed except for the further extension of the time for compliance with the bankruptcy notice to 2 April 2024.
75 For the avoidance of any doubt, I will make an order under s 309(2) of the Bankruptcy Act permitting the respondent to re-serve the bankruptcy notice on the applicant by email at the applicant’s email address given as his address for service in these proceedings. If the notice is then re-served more than 21 days before 2 April 2024, the time for compliance with the notice will remain 2 April 2024. If it is served less than 21 days before or after 2 April 2024, the time for compliance following service will be 21 days after that service.
76 There will be an order that the applicant pay the respondent’s costs of the review of the Registrar’s orders to be assessed by a Registrar on a lump sum basis.
I certify that the preceding seventy-six (76) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Feutrill. |
Associate:
