Federal Court of Australia

Ghosh v Newton (Trial Judgment) [2024] FCA 898

ORDERS

THE COURT ORDERS THAT:

1.    The application be dismissed.

2.    The interlocutory application dated 6 May 2024 be dismissed.

3.    The applicant pay the respondent’s costs of the proceedings, including the costs of the interlocutory applications.

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

REASONS FOR JUDGMENT

Delivered ex tempore, revised from transcript

JACKMAN J:

1    By application filed on 10 April 2024, the applicant, Dr Ghosh, seeks an order pursuant to s 153B of the Bankruptcy Act 1966 (Cth) (the Act) annulling her bankruptcy, an extension of time to set aside a notice issued pursuant to the s 139ZQ of the Act dated 4 June 2020 together with an order setting aside that notice, and costs and damages.

2    In addition, Dr Ghosh seeks interlocutory relief pursuant to orders 2 to 6 of an interlocutory application dated 6 May 2024. Some of that interlocutory relief concerns a property at 49 Patricia Avenue, Charlestown, New South Wales, which is listed for auction to be held this Saturday, 3 August 2024. The interlocutory relief is sought pending final determination of the annulment application. The efficient course is to determine the annulment application today in order to give certainty to the parties.

3    Dr Ghosh was made bankrupt by order of Manousaridis J on 30 September 2016: Miller v Ghosh [2016] FCCA 2491. In the course of argument in those proceedings, Dr Ghosh relied on an allegation that she was solvent and, in particular, Dr Ghosh has argued before me today that she relies on what she describes as “a tender of payment” to her creditors. However, the transcript of the argument before Manousaridis J reveals that Dr Ghosh made an offer to pay funds into court as security, rather than paying the creditors themselves. While the transcript is somewhat equivocal, I read the transcript as not including an offer to pay any of the debts which Dr Ghosh was at the time disputing.

4    Judge Manousaridis found, among other things, that the circumstances relied upon by Dr Ghosh at the hearing did not afford a reason for not making a sequestration order, but in fact demonstrated that Dr Ghosh was not in a position to pay her debts as and when they fell due: at [52]. On the same day, the respondent (the Trustee) was appointed as the Trustee of Dr Ghosh’s bankrupt estate.

5    Dr Ghosh later brought an application that her bankruptcy be annulled pursuant to s 153B of the Act, which was dismissed on 2 November 2016: Miller v Ghosh (No 3) [2016] FCA 1293. In the course of argument before Markovic J, Dr Ghosh raised the issue of her solvency, among other matters: see [77] and [40]–[55]. Justice Markovic said that her Honour was not satisfied that Dr Ghosh had placed before the Court all relevant material relating to her financial affairs, and that, given the gaps in the information provided, and in some cases acknowledged, her Honour was not satisfied that Dr Ghosh had discharged her heavy burden, or that there had been full disclosure: [75]–[76].

6    Dr Ghosh also brought an appeal from the sequestration order, which was dismissed by Farrell J on 8 August 2017: Ghosh v Miller (No 2) [2017] FCA 890. The grounds of appeal included the question of solvency at the time the sequestration order had been made: see [88]–[93]. At [131], Farrell J said that Dr Ghosh had not discharged her onus of proof to demonstrate that she was solvent as at 20 July or 30 September 2016. And while saying that it may be that Dr Ghosh has access to assets and income through trust arrangements or otherwise, Dr Ghosh had provided insufficient and inconsistent evidence of her true financial position. Justice Farrell said that Dr Ghosh’s evidence does not support a finding that she could meet in a timely way the crystallised debts identified by the Trustee as they fell due, either from her own assets or with borrowed funds, and accordingly, did not accept that the sequestration order should be set aside.

7    An application by Dr Ghosh for special leave to appeal from the decision of Farrell J was dismissed on 15 February 2018. Dr Ghosh’s bankruptcy has been extended by eight years, so that in the ordinary course of events, Dr Ghosh will be discharged from bankruptcy on 19 October 2024.

8    Section 153B(1) provides that if the Court is satisfied that a sequestration order ought not to have been made, the Court may make an order annulling the bankruptcy. In Bulic v Commonwealth Bank of Australia Ltd [2007] FCA 307 at [12], Tracey J set out the following summary of relevant propositions, which was cited with approval by the Full Court in Francis v Eggleston Mitchell Lawyers Pty Ltd [2014] FCAFC 18 at [16] (Rares, Flick and Bromberg JJ):

(1)    An order can be made under s 153B(1) of the Act notwithstanding that the applicant has been discharged from bankruptcy: Re Oates; ex parte Deputy Commissioner of Taxation (1987) 17 FCR 402.

(2)    An applicant who seeks an annulment of his or her bankruptcy “carries a heavy burden”. It is incumbent on an applicant “to place before the Court all relevant material with respect to his or her financial affairs so that the Court may be properly informed and may make a judgment that is based on the actual circumstances of the applicant”: Re Papps; ex parte Tapp (1997) 78 FCR 524 at 531.

(3)    In determining whether or not a sequestration order “ought not to have been made” the Court is not confined to a consideration of whether the order should have been made on the facts known to the Court at the time at which it was made. The Court must take account of facts, known at the time at which the sequestration order was made and at which it determines an annulment application, even if those facts were not before the Court at the time at which the sequestration order was made: Boles v Official Trustee in Bankruptcy (2001) 183 ALR 239 at 243; Re Raymond; ex parte Raymond (1992) 36 FCR 424 at 426.

(4)    A sequestration order “ought not to have been made” if, on the facts known at the time of the annulment application, the Court would have been bound not to make the sequestration order: Re Frank; ex parte Piliszky (1987) 16 FCR 396.

(5)    The Court will be so satisfied if it is established that the debtor was not, at the time the sequestration order was made, indebted to the petitioning creditor: Re Deriu (1970) 16 FLR 420 at 422.

(6)    If the Court is so satisfied, it is not precluded from annulling the bankruptcy because the bankrupt had not sought to have the default judgment set aside or failed to oppose the creditor’s petition or failed to seek a review of the sequestration order: Re Raymond; ex parte Raymond (1992) 36 FCR 424 at 426.

(7)    The power conferred on the Court by s 153B(1) is discretionary in nature. Even if persuaded that the sequestration order ought not to have been made, the Court can, in appropriate circumstances, decline to annul the bankruptcy: Boles v Official Trustee in Bankruptcy (2001) 183 ALR 239 at 243.

(8)    Considerations which may have a bearing on the exercise of discretion include unexplained delay in the making of the application, whether or not the applicant is solvent, whether or not the applicant has made full disclosure of his or her financial affairs and a failure by the bankrupt to oppose the creditor’s petition and attend the hearing at which the sequestration order was made: Re Williams (1968) 13 FLR 10 at 24–5; Boles at 247; Re Papps at 531; Rigg v Baker [2006] FCAFC 179 at [79]; Cottrell v Wilcox [2002] FCA 1115 at [7]. Additional considerations are collected in DA Hassall, “Annulment of Bankruptcy and Review of Sequestration Orders” (1993) 67 ALJ 761 at 766.

9    In Yang v L & H Group (a limited partnership) [2015] FCA 932, Beach J said at [28]–[31]:

[28]    The trigger for the exercise of discretion under s 153B(1) is that the Court is “satisfied that a sequestration order ought not to have been made”. If that condition is satisfied then the Court’s power is enlivened and its discretion may be exercised to annul. Section 153B is to be contrasted with s 153A where annulment can occur automatically if and when all the bankrupt’s debts have been paid.

[29]    The principles applicable to s 153B(1) are not in doubt:

(a)    First, the applicant carries a heavy burden. He is required to place before the Court all relevant material concerning his financial affairs.

(b)    Second, in determining whether “a sequestration order ought not to have been made”, the Court should not confine its attention only to whether the order should have been made on the facts then known to the court making the earlier order. The Court must consider other facts existing at the earlier time, even if those facts were not placed before the court making the sequestration order. Those facts and whether they were known at the earlier time are to be ascertained by the Court in considering the annulment application. But facts that have occurred since the sequestration order was made should be excluded in considering the condition, although they are relevant to the exercise of the discretion to annul if the condition is satisfied.

(c)    Third, the phrase “ought not to have been made” requires some clarification. The question is whether on the facts at the time, now known to have existed at the time, the court making the sequestration order would have been bound not to make the sequestration order. The test is not whether such a court might not have made the order or that it was likely that the court would not have made the order. The question is whether that court was bound not to make the order.

(d)    Fourth, even if the condition is satisfied, nevertheless the Court may still refuse to exercise its discretion to order an annulment. The Court may consider in the exercise of its discretion:

•    whether the applicant is solvent at the time of the annulment application;

•    whether the applicant has made full disclosure of his financial affairs;

•    any failure by the applicant not to attend the hearing concerning the making of the sequestration order or to oppose such an order, and the explanation for such conduct;

•    any failure by the applicant to put before the earlier court facts then known to the applicant and the explanation for that failure;

•    whether the applicant has delayed in making the annulment application and the time that has elapsed since the making of the sequestration order;

•    the preparedness of the applicant to pay the costs thrown away by reason of the annulment application and the trustee’s costs and expenses of the bankruptcy to the extent that they have not otherwise been recovered from the bankrupt’s estate;

•    the rights and interests of the creditors, including the applicant’s preparedness to pay any outstanding debts as an alternative arrangement to the continuation of the bankruptcy;

•    the conduct of the applicant during the period of the bankruptcy, including the applicant’s co-operation with the trustee and also whether there has been any conduct that may give rise to bankruptcy offences;

•    the steps taken by the trustee to investigate and realise the estate and whether there has been any impediment due to the conduct of the applicant or a third party;

•    whether it is fair or just to the applicant or the creditors to grant the annulment;

•    the public interest.

[30]    See Bulic v Commonwealth Bank of Australia Ltd (2007) 5 ABC(NS) 122 at [12] per Tracey J, Francis v Eggleston Mitchell Lawyers Pty Ltd (2014) 12 ABC(NS) 25 at [16] per Rares, Flick and Bromberg JJ, Boles v Official Trustee in Bankruptcy (2001) 183 ALR 239 at [16] per Emmett J, Re Raymond; Ex parte Raymond (1992) 36 FCR 424 at 426 per Spender J, Re Frank; Ex parte Piliszky (1987) 16 FCR 396 at 402 and 403 per Fisher J, Hudson v Whalan [1999] FCA 189 at [7] to [14] per Sackville, North and Hely JJ, Rigg v Baker (2006) 155 FCR 531 at [62] per French J and at [109] per Cowdroy J and Heinrich v Commonwealth Bank of Australia [2003] FCAFC 315 at [20] per Carr, Finn and Sundberg JJ.

[31]    Finally, in granting an annulment application, the Court may do so on terms, including that:

•    the trustee’s costs and expenses to the date of the annulment be paid or secured;

•    any outstanding debt be paid or secured.

10    The point made by Beach J in Yang at [29(b)] reflects what was said by French J in Rigg v Baker [2006] FCAFC 179; [2006] 155 FCR 531 at [61] that facts which have come into existence since the making of the order are not relevant to the question whether it ought to have been made.

11    Many of the matters which Dr Ghosh sought to rely upon on the question of annulment came into existence after the making of the sequestration order. Accordingly, they are not relevant to the question whether the sequestration order ought to have been made. Dr Ghosh does rely on the issue of her solvency at the time of the sequestration order, including her proposition, which I have already rejected, that she made a tender of payment to her creditors in the course of the hearing before Manousaridis J. Dr Ghosh has had ample opportunity to argue the issue of her solvency at the time of the sequestration order and has failed on that issue before Judge Manousaridis and Markovic and Farrell JJ. I do not regard the matters which she has relied upon before me as being any more cogent or persuasive than the matters she relied upon in those earlier proceedings. There is no other clear basis upon which I could be satisfied that the sequestration order ought not to have been made. Accordingly, I do not regard the threshold condition of the exercise of discretion under s 153B as having been satisfied.

12    Even if that threshold condition could be satisfied, the respondent submits, and I accept, that the following considerations would weigh heavily against an exercise of the discretion to annul. An application for annulment has already been refused. There is a lengthy and unexplained delay between the refusal of the first application for annulment and the current application. During that delay, there have been many steps taken in the administration of the bankruptcy, including many steps in contested litigation brought by Dr Ghosh which have led to significant delay and expense in the administration. I am not satisfied that Dr Ghosh has made full disclosure of her financial affairs, or that she is currently solvent, especially when one takes into account that she is subject to numerous adverse costs orders. Dr Ghosh has made no offer to pay her outstanding creditors, nor on the evidence of her financial position could any such offer plausibly be made and performed. There was nothing identified in the public interest in favour of annulment. Dr Ghosh will shortly be discharged from bankruptcy in any event. That is, on 19 October 2024.

13    Accordingly, I reject Dr Ghosh’s application for annulment of her bankruptcy.

14    As to s 139ZQ, the lengthy history regarding the obtaining of that notice on 4 June 2020 and subsequent litigation by Dr Ghosh attempting to challenge the notice is set out in the Trustee’s evidence. Dr Ghosh’s position appears to be that the real property which is the subject of that notice is immune from recovery by the Trustee because it is owned by the trustee of a superannuation fund connected with her, of which the trustee is Ghoband Pty Ltd. However, the insuperable obstacle facing Dr Ghosh’s contention is that the property was transferred to Ghoband Pty Ltd on 8 December 2014 for no consideration. That date was less than five years before the sequestration order and accordingly is void pursuant to s 120(1) of the Act. Even if one take the shortest of the periods referred to in s 120(3) of the Act, namely two years, the transfer occurred less than two years before the sequestration order was made. In any event, the validity of the notice has already been decided in the Federal Circuit and Family Court of Australia. The matter was dealt with at first instance by Jarrett J in Lahiri and Saha [2022] FedCFamC1F 271, refusing an extension of time to bring the application and dismissing the application to set aside the s 139ZQ notice. In the course of considering the extension of time, Jarrett J dealt with the merits of the application to set aside the notice at [81]–[92], and concluded at [92] that it would be futile to grant the extension because the application could not succeed. An appeal was subsequently dismissed on 11 November 2022: Saha and Lahiri (No 2) [2022] FedCFamC1A 181 (Aldridge, Kari, and Brasch JJ).

15    Even if those obstacles facing Dr Ghosh’s application were not present, the application is several years too late: s 139ZS of the Act. While an extension of time is sought, and the respondent does not contest that the Court has power to grant an extension of time, no cogent basis for an extension has been advanced by Dr Ghosh.

16    As to the claim for damages, that has been expressed by Dr Ghosh to be on the basis of “theft” by the respondent of her and her son’s property. However, there is no admissible evidence in support of any such allegation. I treat the application as being, in essence, an application for damages for torts such as detinue, conversion or trespass, but the evidence does not provide any cogent basis on which those torts or any other wrong sounding in damages could be established. In any event, the evidence before me would not enable any quantification of damages, even if such a cause of action were available.

Associate:

Dated:    9 August 2024