case_text: Federal Court is a superior court (FCA Act, s 5(2)) and therefore, whatever the nature of the defect or defects in the proceedings, the sequestration order is not void or a nullity in the sense that it is without legal effect: see Cameron v Cole [1944] HCA 5 ; (1944) 68 CLR 571 at 590 per Rich J; Emanuele v ASC [1997] HCA 20 ; (1997) 188 CLR 114 at 119, 120 per Brennan CJ and at 156 per Kirby J; Re Anasis; Ex parte Total Australia Ltd (1985) 63 ALR 493 at 496 and Re Fuller [1999] FCA 1811 at [13] [16] per Hill J. This principle applies to orders made by registrars of the Federal Court pursuant to the scheme of delegation of powers under s 35A of the FCA Act: Official Trustee v Nedlands [2000] FCA 599 ; (2000) 173 ALR 255 at [22] [25] per Finn J. 88 In Cameron v Cole the High Court held that the Federal Court of Bankruptcy was a superior court and Williams J, whose dissent was not on this point, said (at 607): 'When, therefore, the Federal Court of Bankruptcy has made a sequestration order under the Act, it is not, in my opinion, a nullity, so that, even if it has been irregularly obtained, it operates until it is set aside and causes the debtor to become a bankrupt and his property to vest in the official receiver...' The sequestration order in the present case is therefore, at worst, voidable and was effective to bankrupt Ms Cross when it was made. The question of whether it can truly be seen to be voidable depends upon the applicability and operation of s 306. Section 306 only applies to a formal defect or an irregularity but where that precondition is satisfied, it operates automatically: Kleinwort Benson Australia Ltd v Crowl [1988] HCA 34 ; 165 CLR 71 at 81. As the High Court said in Adams v Lambert [2006] HCA 10 ; (2006) 225 ALR 396 at [24] , the composite expression 'a formal defect or an irregularity' conveys a meaning with elements of both inclusion and exclusion. The Court went on to say (at [26]): 'The question of construction raised by the words "a formal defect or an irregularity" is one to be decided by reading s 306 in the context of the whole Act, informed by the general purpose of the legislation, and the particular purpose of the provisions relating to bankruptcy notices. It is similar to the question that, in former times, would be explained by asking whether a statutory requirement was mandatory or directory. In Project Blue Sky Inc v Australian Broadcasting Authority it was said: "A better test ... is to ask whether it was a purpose of the legislation that an act done in breach of [a] provision should be invalid ... In determining the question of purpose, regard must be had to 'the language of the relevant provision and the scope and object of the whole statute'".' The High Court also held that the kind or degree of breach is relevant to a consideration of s 306 and that if a defect could cause substantial injustice, it may not easily be classified as a formal defect or irregularity: see [18], [22]. Ultimately, the characterisation of a defect as formal or substantive is a matter for judgment, however, it is first necessary to consider, as the High Court has indicated, the legislative regime in relation to, in this case, creditors' petitions. A useful starting point is the analysis of Burchett J in Re Millar; Ex parte Commonwealth Development Bank of Australia (No 388/1993, unreported, 27 April 1993), where his Honour first set out what the Full Court had said in Ginnane v Diners Club Limited (1993) 120 ALR 375 at 376: 'Paragraph 52(1)(b) of the Bankruptcy Act provides that at the hearing of a creditor's petition, the Court shall require proof of the service of the petition and, if it is satisfied with the proof of that service, as well as the other matters specified in sub-section 52(1), it may make a sequestration order against the estate of the debtor. Sub-section 52(2) provides, among other things, that if the Court is not satisfied with the proof of the service of the petition, it may dismiss the petition. These provisions illustrate a unique prescription relating to a petition for a sequestration order. A sequestration order affects the status of a person. The Legislature, in recognition of this feature, has insisted that the petitioner must prove, among other things, service of the petition on the debtor.' Burchett J went on to say: 'If one turns to s 52 of the Act, the force of what their Honours say is immediately apparent. It is a peculiar feature of litigation under the Bankruptcy Act , upon a creditors petition, that the court is expressly required to hear proof of service of the petition, and is expressly required, if it is not satisfied with the proof (among other things) of that matter, to dismiss the petition. It seems to me very difficult to regard s. 306 as capable of avoiding the consequences of any serious default, in respect of the requirements regarding the service of the petition so specifically stated in s. 52 , on the basis that such a serious default would be a mere formal defect or an irregularity. The requirements of s. 52 are essential requirements for the proof of the petition. They are made essential, no doubt, because the law recognises that proceedings in bankruptcy have an extraordinarily far reaching effect, not only upon the status of the debtor but also so as to convert, in some cases, actions and omissions of his in the past which at the time they were done or omitted did not constitute any offence into serious criminal offences.' It is clear from what his Honour said that having regard to the purposes of the statutory regime a serious breach of the requirements of service was intended by the legislature to lead to invalidity, in the sense that it would not constitute a mere formal defect to which s 306 would apply. This analysis echoes what the High Court said in Adams v Lambert , namely that the kind or degree of the breach is relevant to a consideration of s 306. In Re Ditfort; Ex Parte DCT (1988) 19 FCR 347, which was an application for annulment, Gummow J expressed agreement with the proposition, advanced by Walters J in Re Long; Ex parte Fraser Confirming Pty Ltd (1975) 12 SASR 130, that there is a necessity for strictness of proof in observance of the requirements for service of bankruptcy notices and bankruptcy petitions. His Honour said (at 359 360): 'Whilst not necessarily being of the view that s 306 can never apply in such a case in any circumstances, I respectfully agree with what was said by his Honour as to the importance of proper proof in these cases, and as to the salutary consequences for creditors of failure to comply with the rules...' In this case the relevant rules are, of course, the provisions of O 43 r 13 which set in place a special regime for service. The provisions of sub-rule 13(6) reflect the position in England as it became after Judicature: See, T Snow et a., The Annual Practice , 11 th edn, Sweet & Maxwell, London, 1893 at 248; T W Chitty, Chitty's Archbold's Practice of the Queen's Bench Division of the High Court of Justice 14 h edn, H Sweet & Son, London, 1885 at 1144. The practice in Chancery before Judicature was that 'service of a copy of the bill was effected in the ordinary manner' ( Annual Practice, supra, at 248). The Rules of Court in the First Schedule to the Supreme Court of Judicature Act (1873) 38 & 39 Vict. c. 77 provided, relevantly in O 9 r 5: 'When a lunatic or person of unsound mind not so found by inquisition is a defendant to the action, service on the committee of the lunatic, or on the person with whom the person of unsound mind resides or under whose care he or she is , shall unless the Court or Judge otherwise orders, be deemed good service on such defendant.' (Emphasis added) In The Fore Street Warehouse Company Limited v Durrant & Co. (1883) 10 Q.B.D. 471 the writ had been served on the lunatic defendant's business manager. Grove J said of the rule (at 473): 'I think the principle of this rule is that the service should be on some person qualified to act for the lunatic or most likely to know to whom the fact of service ought to be communicated. The manager of the lunatic's business might be ignorant of these matters. Where the writ is served in such a manner that it may probably never reach the lunatic, I do not think it can be valid and proper service. The plaintiffs may reasonably be required to go through the formalities which may give the friends of the lunatic a proper opportunity of appearing.' It is also useful to consider what has been said about the next step in the process contemplated by the rules, namely the appointment of a next friend or tutor. The Rules of the Supreme Court of New South Wales, and in particular those which preceded the recent uniform civil procedure regime, are in a similar form to those which operate in this Court. In State Rail Authority of New South Wales v Hammond (1988) 15 NSWLR 395 Kirby P, with whom Hope and Mahoney JJA agreed, explained (at 400) that: '... the provisions of Pt 63, r 2 [which establishes the procedural requirement of a next friend] are simply machinery or procedure provisions. They are designed, principally, to ensure that there is someone answerable to the court on behalf of the litigant, with a disability; that crucial decisions affecting that litigant can be properly and responsibly made; and that a person exists who can bear any costs as are ordered against the person with the disability at the end of the litigation.' Two features of the language of O 43 r 13 merit particular consideration. First, while the machinery provisions of O 43 r 13, namely, sub-rules (3) (6) use the word 'may', one must take into account sub-rule (2) which provides: '(2) Personal service on a person under a disability shall not be effected otherwise than in accordance with this rule.' Second, a certain tension seems to arise within the rule when ones comes to sub-rule (4), which provides: '(4) The document may be served on any person (including the person under disability) whom the Court may, before or after service , approve.' However, when one bears in mind the purpose of this rule and its place in the broader rules as to litigation involving disabled persons, there is no tension between sub-rules (2) and (4). One can readily imagine a case where the Court would approve a particular person upon whom service could be effected. Indeed, it would be a prudent course to obtain such approval in advance of proceeding against a disabled person. On the other hand, where service has taken place in breach of the rule but those who care for the disabled person nevertheless appear at Court and no injustice has been occasioned by the breach of the rules, one appreciates how the Court might approve service which has already taken place. The discretion in sub-rule (4) is premised upon the mandatory nature of the rule, as reflected in the language of sub-rule (2). Where the objects of the rule have otherwise been achieved, it facilitates the proceedings moving forward by validating service which would have otherwise been prohibited. It is also important to note that the rules expressly reject the idea that one might serve, perhaps out of an abundance of caution, both the person designated by sub-rule 13(6) and the mentally disabled person with an initiating process such as a creditor's petition. The course which is not only to be preferred but which appears to be required is to approach the Court for a grant of approval. Only in relation to the limited class of documents in sub-rule (8) is a different approach to be adopted. Thus, in their general application the special rules as to service firmly ensure that their aim is attained, namely that an opportunity is afforded to those who care for a mentally disabled person to appear before the Court and to represent and protect that person's interests where by definition he or she does not have the capacity to do so alone. The existence of a facility for the proceedings to move forward once that aim has been achieved does not detract from the control which the Court maintains over this step in proceedings against mentally disabled persons. In bankruptcy proceedings the legislature has protected all debtors by requiring proof of service of the petition in every instance. In the case of mentally disabled persons that protection extends to the requirement to serve in accordance with the special rules designed to ensure that the opportunity is a real one. In my judgment, strict compliance with the provisions of O 43 r 13 is necessary in bankruptcy proceedings. A breach of these rules could result in substantial injustice being visited upon the disabled respondent. Moreover, a serious breach could defeat the intention of the O 43 altogether and lead to a breach of the fundamental rules of natural justice. The FCR require service upon a particular person and that was not done. The FCR also prohibit service upon the disabled person and that was ignored. The conduct of the Creditor constituted a serious breach of the FCR and resulted in a defect in the proceedings which was not a formal one. Section 306 does not apply and the sequestration order is voidable. The separate question of whether substantial injustice has been occasioned by the defect in these proceedings does not arise. In any event, I am of the opinion that in all the circumstances of this case substantial injustice has been occasioned by the defect which cannot be remedied by order of the Court save to set aside the sequestration order and dismiss the petition. The Annulment Issue It is quite clear that Ms Cross should not have been bankrupted. She was solvent at the time. A creditor who issues a creditor's petition runs the risk that if the debtor is solvent, the likelihood is that the petition will be dismissed with costs. The evidence suggests that Ms Cross, due to her state of mind, may have thought that the body corporate of her home unit building did not exist and that she therefore did not owe it any money. Whether that be right or not, bankruptcy proceedings are not for debtors who won't pay debts. They are for debtors who can't pay debts. As the Full Court said in Sarina v Council of the Shire of Wollondilly (1980) 48 FLR 372 at 376: 'In bankruptcy, rights of creditors to sue the bankrupt are converted into rights of proof against his estate and he is protected from suit. The avoidance of preferences, voluntary settlements and fraudulent dispositions of property by the bankrupt is intended to restore the property or money of the bankrupt to his estate to achieve a fair and rateable division of the bankrupt's property among his creditors. The bankrupt is disqualified from holding certain offices. Bankruptcy involves a change of status and quasi-penal consequences. Upon discharge from bankruptcy, the bankrupt is released form his debts subject to certain exceptions. These considerations negate the existence of any policy underlying the Act that a debtor should be made bankrupt if he is able to pay his debts but is unwilling to do so. If a debtor is able to pay his debts but is recalcitrant, his creditors may resort to the remedies otherwise afforded by the law such as execution against his property and garnishee proceedings. The words "able to pay his debts" in s. 52(2) of the Act do not mean "willing and able" to do so .' (Emphasis added) The parties are agreed that the bankruptcy should be brought to an end, the only question being how that should be achieved. By her motion, Ms Cross seeks to have the sequestration order made by the registrar on 9 August 2004 set aside. In opposing the motion, the Creditor and the Trustee contend that the appropriate course is to make an order pursuant to s 153B(1) of the Act annulling the bankruptcy. In a normal case, annulment is undoubtedly the appropriate course; but this is anything but a normal case. The matter which evokes the response on the part of the Trustee to oppose the motion is that in the case of annulment, the Trustee gets the benefit of s 154(1)(b) of the Act, namely, he may apply the property of Ms Cross still vested in him the home unit at 12/28 Tullimbar Road, Cronulla in payment of the costs, charges and expenses of the administration of the bankruptcy, including the remuneration and expenses of the Trustee; whereas, if the sequestration order is set aside, he has no such right of application. The Creditor's opposition to the setting aside of the sequestration order is no doubt sourced in the consequential orders I would make of dismissing the petition and revoking the costs order made by the registrar on 9 August 2004. At the outset, it may be said that there is no longer any third course, for example, rescission of the sequestration order: See s 37(2) of the Act; Vaucluse Hospital Pty Ltd v Phillips & Anor [2006] FMCA 44 at [19] and [20]. On the other hand, reviews of registrar's orders, like appeals to the Full Court, are outside the intended ambit of s 37. At the forefront of Ms Cross' case is that she was bankrupted on the first return date of a creditor's petition which was left with her while she was an involuntary patient in the Psychiatric Unit of Sutherland Hospital, but which I have found was not properly served, for a debt in respect of unpaid body corporate levies of $1,813.58, increased to approximately $2,400 by debt collection, legal and court costs of obtaining a default judgment in respect thereof; when, on the evidence before me, she owned assets in excess of half a million dollars including the home unit worth $375,000, money on deposit with major banks of more than $130,000 and shares and securities in major listed companies worth approximately $90,000. Moreover, Ms Cross was not present when the sequestration order was made. Had she, or representatives on her behalf, been present on the day, or if her circumstances and the circumstances of service of the Creditor's petition had been ventilated with the registrar on 9 August 2004 rather than being left buried in some affidavit of service, I have no doubt that the sequestration order would not have been made. Mr Bentley, in his submissions, said: 'At this point I would just like to also make this quite clear that my friend made some submissions about what happened in front of Registrar Tesoriero but that affidavit of Mr Wellmeela clearly says that she was served in a psychiatric unit. There is no hiding that, the documentation which was presented to the court clearly stated the fact. Now I presented that petition but unfortunately so long ago I can't remember what was said. I have a vague recollection that something may have been said about it but I can't recall and I am unable to assist the court or swear an affidavit so I haven't but there is no doubt that it is quite clear in evidence from Mr Wellmeela's affidavit what happened, where it happened and what was going on, so it is not as if anyone has tried to conceal this from the court or from the Registrar.' The fact is that Mr Bentley was the only person present before Registrar Tesoriero on 9 August 2004. He would not have been surprised at that. He certainly did not expect Ms Cross to be present. That he cannot remember what was said before the registrar on that day suggests to me that none of the relevant surrounding circumstances were brought to the registrar's attention because he, Mr Bentley, was blinded by an obsession to ensure that whatever else happened, Registrar Tesoriero made the sequestration order on that day. As an officer of the Court, he had an overriding duty to do more to draw to the Court's attention Ms Cross' circumstances and the circumstances under which she was purportedly served with the Creditor's petition. It is true that there has been some effluxion of time between the making of the sequestration order on 9 August 2004 and the filing of the motion on 7 November 2005. At least three things can be said about this, maybe more. First, there is no time limitation in which to bring a motion to set aside an order after it has been entered where the order has been made in the absence of a party: O35 r 7(2)(a) of the FCR, cf., s 35A(5) of the FCA Act and O 77 r 8 (now repealed) of the FCR. Second, there is a dearth of evidence as to what occurred in the period from 9 August 2004 until April 2005. It seems that the Trustee applied to become and became the registered proprietor of the home unit at Cronulla on or about 19 October 2004 but otherwise there was no administration of the bankrupt estate. The Legal Aid Commission became aware of Ms Cross' bankruptcy on or about 30 September 2004, nearly two months after she was made bankrupt. But otherwise there is no evidence as to what happened, if anything happened at all, in addition to the matters mentioned, during this period. In all the circumstances, I do not think this period should be counted as part of the effluxion of time. Third, on the evidence before me, the second period in the effluxion of time (from 11 April 2005 until 7 November 2005) was taken up by the OPC discovering the relevant evidence as to what took place, obtaining legal advice thereon and, on the basis of that advice, deciding what action was to be taken. In all the circumstances I do not find the second period so long as to militate against exercising my discretion to set aside the sequestration order rather than annul the bankruptcy. In re Daskalavski (Applicant); Ex parte The Austral Brick co Pty Ltd [1998] FCA 782 , Emmett J (in a short ex tempore judgment) concluded that, in circumstances where his Honour was satisfied that the sequestration order ought not to have been made, it was appropriate to annul the bankruptcy rather than set it aside where the estate had already been administered in bankruptcy. But that is not the case here. Only one asset of Ms Cross, her home unit at Cronulla, has been vested in the Trustee and the debt on which she was bankrupted, together with subsequent unpaid strata levies, was paid out by the OPC, not the Trustee, following the Protective Commissioner being appointed the financial manager of Ms Cross' financial affairs by order of the Guardianship Tribunal dated 11 April 2003. Notwithstanding the Trustee's claim for remuneration to 3 June 2005 ($13,990) and his anticipated claim for additional remuneration ($5,500), there was no evidence that the Trustee had been actively involved in the administration of Ms Cross' bankrupt estate. CONCLUSION When this choice as between an order that the sequestration order be set aside on the one hand and an order for annulment of the bankruptcy on the other has come before the courts on earlier occasions, the courts have consistently stressed that a balance must be struck between the rights of the applicant, who should never have been made bankrupt in the first place, and the Trustee who has simply done what the Act requires him to do: Kyriackou v Shield Mercantile Pty Ltd (No. 2) [2004] FCA 1338 at [43] per Weinberg J; followed in Capsalis v Ozdemir [2005] FMCA 1163 at [17] per Connolly FM; Hadjimouratis v Casanova [2005] FMCA 1468 at [13] and [16] per Connolly FM; and in Vaucluse Hospital Pty Ltd v Phillips at [70] and [71] per Riethmuller FM. The rights of the petitioning creditor have never been referred to as a relevant factor, and understandably so. This is not a case where the pendulum of balance tilts in favour of Ms Cross (compare Kyriackou ) as against the Trustee; on the contrary, I have come to the firm conclusion that it would be totally unfair, indeed a miscarriage of justice, for Ms Cross to be saddled with any of the relatively considerable costs of the administration of her estate. While that may involve the invocation of some injustice on the Trustee, in the circumstances of this case it seems it must be tolerated in the face of an inability of the Court to order the petitioning creditor to bear such costs: Kyriackou at [39] per Weinberg J. For present purposes, I am prepared to accept that as being the correct position, however, I do not think it is free from doubt. The powers of the Court under s 30 of the Act are expressed in extremely wide terms. In the circumstances of this case, it seems unjust to me that the Creditor only has to pay the costs of the motion even though it also loses the registrar's order as to costs of the petition. Because of the conclusion I have come to as expressed in [116] supra, I propose to exercise my discretion under O 35 r 7 of the FCR to set the sequestration order aside. In the circumstances, it is only appropriate that I summarise the matters I have taken into account in exercising my discretion to do so: 1. The inappropriateness of bankruptcy proceedings as a debt collection remedy or mechanism. Such proceedings were never intended to operate against debtors who could, but would not, for whatever reason, pay. 2. The size of the debt originally less than $2,000. 3. The aggregate value (free of encumbrances) of Ms Cross' assets closer to $600,000 than $500,000, approximately $200,000 of which were in liquid form. 4. The size of the actual and anticipated costs and expense of administering the estate: In excess of $35,000, when, on the evidence, there was minimal administration. 5. The circumstances of Ms Cross' mental condition and her admissions (once involuntarily) to the Psychiatric Unit of Sutherland Hospital during 2004 for a total of over three months. 6. My finding that Ms Cross was not properly served with the Creditor's petition. 7. The fact that she was not present or represented at the hearing at which the sequestration order was made. 8. The fact that the circumstances referred to in 5 and those underlying my finding in 6 were not ventilated before the registrar on 9 August 2004 (the first return date of the petition) when the sequestration order was made. 9. The fact that those involved in ensuring that Ms Cross was bankrupted on 9 August 2004 Messrs Meuller and Bentley were officers of the Court. The orders of the Court will be: 1. Michael Gregory Jones, trustee of the bankrupt estate of Isabell Jean Cross, be joined as a party (second respondent) to the proceeding, effective 6 December 2005. 2. The orders of Registrar Tesoriero made 9 August 2004 be set aside and the Creditor's petition dated 4 March 2004 and filed 23 March 2004 be dismissed. 3. The costs of Ms Cross and of the Trustee of the motion be paid by the Creditor on an indemnity basis. I certify that the preceding one hundred and eighteen (118) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Edmonds. Associate: Dated: 14 July 2006 Solicitor for the Applicant: Mr B Bentley of J S Meuller & Co Counsel for the First Respondent: Ms P Gormly Solicitor for the First Respondent: Office of the Protective Commissioner Solicitor for the Second Respondent: Merewether & Co Date of Hearing: 6 December 2005 Date of Judgment: 14 July 2006 AustLII: Copyright Policy | Disclaimers | Privacy Policy | Feedback URL: http://www.austlii.edu.au/au/cases/cth/FCA/2006/900.html


case_outcome: referred to


case_title: Capsalis v Ozdemir [2005] FMCA 1163


case_text: provisions of O 43 r 13 are triggered if the person to be served is a 'person under disability'. Where it is said that the person is a 'mentally disabled person' rather than an infant or minor the relevant question is: Is the person concerned a person who, owing to mental illness, is incapable of managing his or her affairs in respect of the proceedings? The words 'in respect of the proceedings' are important because they focus upon the person's ability to bring or defend proceedings rather than whether the person is able to manage his or her affairs generally or in relation to some other transaction. Such an approach is consonant with the common law approach to capacity. For example, in Gibbons v Wright [1954] HCA 17 ; (1953) 91 CLR 423 the High Court said (at 437): 'The law does not prescribe any fixed standard of sanity as requisite for the validity of all transactions. It requires, in relation to each particular matter or piece of business transacted, that each party shall have such soundness of mind as to be capable of understanding the general nature of what he is doing by his participation.'


case_title: Ginane v Diners Club Limited (1993) 120 ALR 375


case_title: Hadjimouratis v Casanova [2005] FMCA 1468


case_outcome: distinguished

case_title: In re Daskalavski (Applicant); Ex parte The Austral Brick Co Pty Ltd [1998] FCA 782

case_text: Masterman-Lister v Brutton & Co (Nos 1 and 2) (CA) [2003] 1 WLR 1511 Chadwick LJ illustrated the point (at 1538-9) by reference to the case of In Re C (Adult: Refusal of treatment) [1994] 1 WLR 290: 'C had been admitted to a secure hospital as a patient under Part III of the Mental Health Act 1983. He was subsequently diagnosed as suffering from gangrene in the foot. Acting by his next friend he sought an injunction to restrain the hospital from amputating. Thorpe J held that C had the requisite mental capacity to make a decision to refuse treatment. As he put it, at p 295: "Although his general capacity is impaired by schizophrenia, it has not been established that he does not sufficiently understand the nature, purpose and effects of the treatment he refuses. Indeed, I am satisfied that he has understood and retained the relevant treatment information, that in his own way he believes it, and that in the same fashion he has arrived at a clear choice." Nevertheless, it was never in doubt that C was a patient for the purposes of the procedural rule which required that his suit could not have been brought except with the interposition of a next friend. There is no inconsistency between the requirement that a party to legal proceedings comply with Order 80 and a decision that he has an understanding of the nature, purpose and effects of the medical treatment which is under consideration in those proceedings. The test is issue specific; and, when applied to different issues, it may yield different answers. ' The Federal Court is a superior court (FCA Act, s 5(2)) and therefore, whatever the nature of the defect or defects in the proceedings, the sequestration order is not void or a nullity in the sense that it is without legal effect: see Cameron v Cole [1944] HCA 5 ; (1944) 68 CLR 571 at 590 per Rich J; Emanuele v ASC [1997] HCA 20 ; (1997) 188 CLR 114 at 119, 120 per Brennan CJ and at 156 per Kirby J; Re Anasis; Ex parte Total Australia Ltd (1985) 63 ALR 493 at 496 and Re Fuller [1999] FCA 1811 at [13] [16] per Hill J. This principle applies to orders made by registrars of the Federal Court pursuant to the scheme of delegation of powers under s 35A of the FCA Act: Official Trustee v Nedlands [2000] FCA 599 ; (2000) 173 ALR 255 at [22] [25] per Finn J. 88 In Cameron v Cole the High Court held that the Federal Court of Bankruptcy was a superior court and Williams J, whose dissent was not on this point, said (at 607): 'When, therefore, the Federal Court of Bankruptcy has made a sequestration order under the Act, it is not, in my opinion, a nullity, so that, even if it has been irregularly obtained, it operates until it is set aside and causes the debtor to become a bankrupt and his property to vest in the official receiver...' The sequestration order in the present case is therefore, at worst, voidable and was effective to bankrupt Ms Cross when it was made. The question of whether it can truly be seen to be voidable depends upon the applicability and operation of s 306. Section 306 only applies to a formal defect or an irregularity but where that precondition is satisfied, it operates automatically: Kleinwort Benson Australia Ltd v Crowl [1988] HCA 34 ; 165 CLR 71 at 81. As the High Court said in Adams v Lambert [2006] HCA 10 ; (2006) 225 ALR 396 at [24] , the composite expression 'a formal defect or an irregularity' conveys a meaning with elements of both inclusion and exclusion. The Court went on to say (at [26]): 'The question of construction raised by the words "a formal defect or an irregularity" is one to be decided by reading s 306 in the context of the whole Act, informed by the general purpose of the legislation, and the particular purpose of the provisions relating to bankruptcy notices. It is similar to the question that, in former times, would be explained by asking whether a statutory requirement was mandatory or directory. In Project Blue Sky Inc v Australian Broadcasting Authority it was said: "A better test ... is to ask whether it was a purpose of the legislation that an act done in breach of [a] provision should be invalid ... In determining the question of purpose, regard must be had to 'the language of the relevant provision and the scope and object of the whole statute'".' The High Court also held that the kind or degree of breach is relevant to a consideration of s 306 and that if a defect could cause substantial injustice, it may not easily be classified as a formal defect or irregularity: see [18], [22]. Ultimately, the characterisation of a defect as formal or substantive is a matter for judgment, however, it is first necessary to consider, as the High Court has indicated, the legislative regime in relation to, in this case, creditors' petitions. A useful starting point is the analysis of Burchett J in Re Millar; Ex parte Commonwealth Development Bank of Australia (No 388/1993, unreported, 27 April 1993), where his Honour first set out what the Full Court had said in Ginnane v Diners Club Limited (1993) 120 ALR 375 at 376: 'Paragraph 52(1)(b) of the Bankruptcy Act provides that at the hearing of a creditor's petition, the Court shall require proof of the service of the petition and, if it is satisfied with the proof of that service, as well as the other matters specified in sub-section 52(1), it may make a sequestration order against the estate of the debtor. Sub-section 52(2) provides, among other things, that if the Court is not satisfied with the proof of the service of the petition, it may dismiss the petition. These provisions illustrate a unique prescription relating to a petition for a sequestration order. A sequestration order affects the status of a person. The Legislature, in recognition of this feature, has insisted that the petitioner must prove, among other things, service of the petition on the debtor.' Burchett J went on to say: 'If one turns to s 52 of the Act, the force of what their Honours say is immediately apparent. It is a peculiar feature of litigation under the Bankruptcy Act , upon a creditors petition, that the court is expressly required to hear proof of service of the petition, and is expressly required, if it is not satisfied with the proof (among other things) of that matter, to dismiss the petition. It seems to me very difficult to regard s. 306 as capable of avoiding the consequences of any serious default, in respect of the requirements regarding the service of the petition so specifically stated in s. 52 , on the basis that such a serious default would be a mere formal defect or an irregularity. The requirements of s. 52 are essential requirements for the proof of the petition. They are made essential, no doubt, because the law recognises that proceedings in bankruptcy have an extraordinarily far reaching effect, not only upon the status of the debtor but also so as to convert, in some cases, actions and omissions of his in the past which at the time they were done or omitted did not constitute any offence into serious criminal offences.' It is clear from what his Honour said that having regard to the purposes of the statutory regime a serious breach of the requirements of service was intended by the legislature to lead to invalidity, in the sense that it would not constitute a mere formal defect to which s 306 would apply. This analysis echoes what the High Court said in Adams v Lambert , namely that the kind or degree of the breach is relevant to a consideration of s 306. In Re Ditfort; Ex Parte DCT (1988) 19 FCR 347, which was an application for annulment, Gummow J expressed agreement with the proposition, advanced by Walters J in Re Long; Ex parte Fraser Confirming Pty Ltd (1975) 12 SASR 130, that there is a necessity for strictness of proof in observance of the requirements for service of bankruptcy notices and bankruptcy petitions. His Honour said (at 359 360): 'Whilst not necessarily being of the view that s 306 can never apply in such a case in any circumstances, I respectfully agree with what was said by his Honour as to the importance of proper proof in these cases, and as to the salutary consequences for creditors of failure to comply with the rules...' In this case the relevant rules are, of course, the provisions of O 43 r 13 which set in place a special regime for service. The provisions of sub-rule 13(6) reflect the position in England as it became after Judicature: See, T Snow et a., The Annual Practice , 11 th edn, Sweet & Maxwell, London, 1893 at 248; T W Chitty, Chitty's Archbold's Practice of the Queen's Bench Division of the High Court of Justice 14 h edn, H Sweet & Son, London, 1885 at 1144. The practice in Chancery before Judicature was that 'service of a copy of the bill was effected in the ordinary manner' ( Annual Practice, supra, at 248). The Rules of Court in the First Schedule to the Supreme Court of Judicature Act (1873) 38 & 39 Vict. c. 77 provided, relevantly in O 9 r 5: 'When a lunatic or person of unsound mind not so found by inquisition is a defendant to the action, service on the committee of the lunatic, or on the person with whom the person of unsound mind resides or under whose care he or she is , shall unless the Court or Judge otherwise orders, be deemed good service on such defendant.' (Emphasis added) In The Fore Street Warehouse Company Limited v Durrant & Co. (1883) 10 Q.B.D. 471 the writ had been served on the lunatic defendant's business manager. Grove J said of the rule (at 473): 'I think the principle of this rule is that the service should be on some person qualified to act for the lunatic or most likely to know to whom the fact of service ought to be communicated. The manager of the lunatic's business might be ignorant of these matters. Where the writ is served in such a manner that it may probably never reach the lunatic, I do not think it can be valid and proper service. The plaintiffs may reasonably be required to go through the formalities which may give the friends of the lunatic a proper opportunity of appearing.' It is also useful to consider what has been said about the next step in the process contemplated by the rules, namely the appointment of a next friend or tutor. The Rules of the Supreme Court of New South Wales, and in particular those which preceded the recent uniform civil procedure regime, are in a similar form to those which operate in this Court. In State Rail Authority of New South Wales v Hammond (1988) 15 NSWLR 395 Kirby P, with whom Hope and Mahoney JJA agreed, explained (at 400) that: '... the provisions of Pt 63, r 2 [which establishes the procedural requirement of a next friend] are simply machinery or procedure provisions. They are designed, principally, to ensure that there is someone answerable to the court on behalf of the litigant, with a disability; that crucial decisions affecting that litigant can be properly and responsibly made; and that a person exists who can bear any costs as are ordered against the person with the disability at the end of the litigation.' Two features of the language of O 43 r 13 merit particular consideration. First, while the machinery provisions of O 43 r 13, namely, sub-rules (3) (6) use the word 'may', one must take into account sub-rule (2) which provides: '(2) Personal service on a person under a disability shall not be effected otherwise than in accordance with this rule.' Second, a certain tension seems to arise within the rule when ones comes to sub-rule (4), which provides: '(4) The document may be served on any person (including the person under disability) whom the Court may, before or after service , approve.' However, when one bears in mind the purpose of this rule and its place in the broader rules as to litigation involving disabled persons, there is no tension between sub-rules (2) and (4). One can readily imagine a case where the Court would approve a particular person upon whom service could be effected. Indeed, it would be a prudent course to obtain such approval in advance of proceeding against a disabled person. On the other hand, where service has taken place in breach of the rule but those who care for the disabled person nevertheless appear at Court and no injustice has been occasioned by the breach of the rules, one appreciates how the Court might approve service which has already taken place. The discretion in sub-rule (4) is premised upon the mandatory nature of the rule, as reflected in the language of sub-rule (2). Where the objects of the rule have otherwise been achieved, it facilitates the proceedings moving forward by validating service which would have otherwise been prohibited. It is also important to note that the rules expressly reject the idea that one might serve, perhaps out of an abundance of caution, both the person designated by sub-rule 13(6) and the mentally disabled person with an initiating process such as a creditor's petition. The course which is not only to be preferred but which appears to be required is to approach the Court for a grant of approval. Only in relation to the limited class of documents in sub-rule (8) is a different approach to be adopted. Thus, in their general application the special rules as to service firmly ensure that their aim is attained, namely that an opportunity is afforded to those who care for a mentally disabled person to appear before the Court and to represent and protect that person's interests where by definition he or she does not have the capacity to do so alone. The existence of a facility for the proceedings to move forward once that aim has been achieved does not detract from the control which the Court maintains over this step in proceedings against mentally disabled persons. In bankruptcy proceedings the legislature has protected all debtors by requiring proof of service of the petition in every instance. In the case of mentally disabled persons that protection extends to the requirement to serve in accordance with the special rules designed to ensure that the opportunity is a real one. In my judgment, strict compliance with the provisions of O 43 r 13 is necessary in bankruptcy proceedings. A breach of these rules could result in substantial injustice being visited upon the disabled respondent. Moreover, a serious breach could defeat the intention of the O 43 altogether and lead to a breach of the fundamental rules of natural justice. The FCR require service upon a particular person and that was not done. The FCR also prohibit service upon the disabled person and that was ignored. The conduct of the Creditor constituted a serious breach of the FCR and resulted in a defect in the proceedings which was not a formal one. Section 306 does not apply and the sequestration order is voidable. The separate question of whether substantial injustice has been occasioned by the defect in these proceedings does not arise. In any event, I am of the opinion that in all the circumstances of this case substantial injustice has been occasioned by the defect which cannot be remedied by order of the Court save to set aside the sequestration order and dismiss the petition. The Annulment Issue It is quite clear that Ms Cross should not have been bankrupted. She was solvent at the time. A creditor who issues a creditor's petition runs the risk that if the debtor is solvent, the likelihood is that the petition will be dismissed with costs. The evidence suggests that Ms Cross, due to her state of mind, may have thought that the body corporate of her home unit building did not exist and that she therefore did not owe it any money. Whether that be right or not, bankruptcy proceedings are not for debtors who won't pay debts. They are for debtors who can't pay debts. As the Full Court said in Sarina v Council of the Shire of Wollondilly (1980) 48 FLR 372 at 376: 'In bankruptcy, rights of creditors to sue the bankrupt are converted into rights of proof against his estate and he is protected from suit. The avoidance of preferences, voluntary settlements and fraudulent dispositions of property by the bankrupt is intended to restore the property or money of the bankrupt to his estate to achieve a fair and rateable division of the bankrupt's property among his creditors. The bankrupt is disqualified from holding certain offices. Bankruptcy involves a change of status and quasi-penal consequences. Upon discharge from bankruptcy, the bankrupt is released form his debts subject to certain exceptions. These considerations negate the existence of any policy underlying the Act that a debtor should be made bankrupt if he is able to pay his debts but is unwilling to do so. If a debtor is able to pay his debts but is recalcitrant, his creditors may resort to the remedies otherwise afforded by the law such as execution against his property and garnishee proceedings. The words "able to pay his debts" in s. 52(2) of the Act do not mean "willing and able" to do so .' (Emphasis added) The parties are agreed that the bankruptcy should be brought to an end, the only question being how that should be achieved. By her motion, Ms Cross seeks to have the sequestration order made by the registrar on 9 August 2004 set aside. In opposing the motion, the Creditor and the Trustee contend that the appropriate course is to make an order pursuant to s 153B(1) of the Act annulling the bankruptcy. In a normal case, annulment is undoubtedly the appropriate course; but this is anything but a normal case. The matter which evokes the response on the part of the Trustee to oppose the motion is that in the case of annulment, the Trustee gets the benefit of s 154(1)(b) of the Act, namely, he may apply the property of Ms Cross still vested in him the home unit at 12/28 Tullimbar Road, Cronulla in payment of the costs, charges and expenses of the administration of the bankruptcy, including the remuneration and expenses of the Trustee; whereas, if the sequestration order is set aside, he has no such right of application. The Creditor's opposition to the setting aside of the sequestration order is no doubt sourced in the consequential orders I would make of dismissing the petition and revoking the costs order made by the registrar on 9 August 2004. At the outset, it may be said that there is no longer any third course, for example, rescission of the sequestration order: See s 37(2) of the Act; Vaucluse Hospital Pty Ltd v Phillips & Anor [2006] FMCA 44 at [19] and [20]. On the other hand, reviews of registrar's orders, like appeals to the Full Court, are outside the intended ambit of s 37. At the forefront of Ms Cross' case is that she was bankrupted on the first return date of a creditor's petition which was left with her while she was an involuntary patient in the Psychiatric Unit of Sutherland Hospital, but which I have found was not properly served, for a debt in respect of unpaid body corporate levies of $1,813.58, increased to approximately $2,400 by debt collection, legal and court costs of obtaining a default judgment in respect thereof; when, on the evidence before me, she owned assets in excess of half a million dollars including the home unit worth $375,000, money on deposit with major banks of more than $130,000 and shares and securities in major listed companies worth approximately $90,000. Moreover, Ms Cross was not present when the sequestration order was made. Had she, or representatives on her behalf, been present on the day, or if her circumstances and the circumstances of service of the Creditor's petition had been ventilated with the registrar on 9 August 2004 rather than being left buried in some affidavit of service, I have no doubt that the sequestration order would not have been made. Mr Bentley, in his submissions, said: 'At this point I would just like to also make this quite clear that my friend made some submissions about what happened in front of Registrar Tesoriero but that affidavit of Mr Wellmeela clearly says that she was served in a psychiatric unit. There is no hiding that, the documentation which was presented to the court clearly stated the fact. Now I presented that petition but unfortunately so long ago I can't remember what was said. I have a vague recollection that something may have been said about it but I can't recall and I am unable to assist the court or swear an affidavit so I haven't but there is no doubt that it is quite clear in evidence from Mr Wellmeela's affidavit what happened, where it happened and what was going on, so it is not as if anyone has tried to conceal this from the court or from the Registrar.' The fact is that Mr Bentley was the only person present before Registrar Tesoriero on 9 August 2004. He would not have been surprised at that. He certainly did not expect Ms Cross to be present. That he cannot remember what was said before the registrar on that day suggests to me that none of the relevant surrounding circumstances were brought to the registrar's attention because he, Mr Bentley, was blinded by an obsession to ensure that whatever else happened, Registrar Tesoriero made the sequestration order on that day. As an officer of the Court, he had an overriding duty to do more to draw to the Court's attention Ms Cross' circumstances and the circumstances under which she was purportedly served with the Creditor's petition. It is true that there has been some effluxion of time between the making of the sequestration order on 9 August 2004 and the filing of the motion on 7 November 2005. At least three things can be said about this, maybe more. First, there is no time limitation in which to bring a motion to set aside an order after it has been entered where the order has been made in the absence of a party: O35 r 7(2)(a) of the FCR, cf., s 35A(5) of the FCA Act and O 77 r 8 (now repealed) of the FCR. Second, there is a dearth of evidence as to what occurred in the period from 9 August 2004 until April 2005. It seems that the Trustee applied to become and became the registered proprietor of the home unit at Cronulla on or about 19 October 2004 but otherwise there was no administration of the bankrupt estate. The Legal Aid Commission became aware of Ms Cross' bankruptcy on or about 30 September 2004, nearly two months after she was made bankrupt. But otherwise there is no evidence as to what happened, if anything happened at all, in addition to the matters mentioned, during this period. In all the circumstances, I do not think this period should be counted as part of the effluxion of time. Third, on the evidence before me, the second period in the effluxion of time (from 11 April 2005 until 7 November 2005) was taken up by the OPC discovering the relevant evidence as to what took place, obtaining legal advice thereon and, on the basis of that advice, deciding what action was to be taken. In all the circumstances I do not find the second period so long as to militate against exercising my discretion to set aside the sequestration order rather than annul the bankruptcy. In re Daskalavski (Applicant); Ex parte The Austral Brick co Pty Ltd [1998] FCA 782 , Emmett J (in a short ex tempore judgment) concluded that, in circumstances where his Honour was satisfied that the sequestration order ought not to have been made, it was appropriate to annul the bankruptcy rather than set it aside where the estate had already been administered in bankruptcy. But that is not the case here. Only one asset of Ms Cross, her home unit at Cronulla, has been vested in the Trustee and the debt on which she was bankrupted, together with subsequent unpaid strata levies, was paid out by the OPC, not the Trustee, following the Protective Commissioner being appointed the financial manager of Ms Cross' financial affairs by order of the Guardianship Tribunal dated 11 April 2003. Notwithstanding the Trustee's claim for remuneration to 3 June 2005 ($13,990) and his anticipated claim for additional remuneration ($5,500), there was no evidence that the Trustee had been actively involved in the administration of Ms Cross' bankrupt estate. CONCLUSION When this choice as between an order that the sequestration order be set aside on the one hand and an order for annulment of the bankruptcy on the other has come before the courts on earlier occasions, the courts have consistently stressed that a balance must be struck between the rights of the applicant, who should never have been made bankrupt in the first place, and the Trustee who has simply done what the Act requires him to do: Kyriackou v Shield Mercantile Pty Ltd (No. 2) [2004] FCA 1338 at [43] per Weinberg J; followed in Capsalis v Ozdemir [2005] FMCA 1163 at [17] per Connolly FM; Hadjimouratis v Casanova [2005] FMCA 1468 at [13] and [16] per Connolly FM; and in Vaucluse Hospital Pty Ltd v Phillips at [70] and [71] per Riethmuller FM. The rights of the petitioning creditor have never been referred to as a relevant factor, and understandably so. This is not a case where the pendulum of balance tilts in favour of Ms Cross (compare Kyriackou ) as against the Trustee; on the contrary, I have come to the firm conclusion that it would be totally unfair, indeed a miscarriage of justice, for Ms Cross to be saddled with any of the relatively considerable costs of the administration of her estate. While that may involve the invocation of some injustice on the Trustee, in the circumstances of this case it seems it must be tolerated in the face of an inability of the Court to order the petitioning creditor to bear such costs: Kyriackou at [39] per Weinberg J. For present purposes, I am prepared to accept that as being the correct position, however, I do not think it is free from doubt. The powers of the Court under s 30 of the Act are expressed in extremely wide terms. In the circumstances of this case, it seems unjust to me that the Creditor only has to pay the costs of the motion even though it also loses the registrar's order as to costs of the petition. Because of the conclusion I have come to as expressed in [116] supra, I propose to exercise my discretion under O 35 r 7 of the FCR to set the sequestration order aside. In the circumstances, it is only appropriate that I summarise the matters I have taken into account in exercising my discretion to do so: 1. The inappropriateness of bankruptcy proceedings as a debt collection remedy or mechanism. Such proceedings were never intended to operate against debtors who could, but would not, for whatever reason, pay. 2. The size of the debt originally less than $2,000. 3. The aggregate value (free of encumbrances) of Ms Cross' assets closer to $600,000 than $500,000, approximately $200,000 of which were in liquid form. 4. The size of the actual and anticipated costs and expense of administering the estate: In excess of $35,000, when, on the evidence, there was minimal administration. 5. The circumstances of Ms Cross' mental condition and her admissions (once involuntarily) to the Psychiatric Unit of Sutherland Hospital during 2004 for a total of over three months. 6. My finding that Ms Cross was not properly served with the Creditor's petition. 7. The fact that she was not present or represented at the hearing at which the sequestration order was made. 8. The fact that the circumstances referred to in 5 and those underlying my finding in 6 were not ventilated before the registrar on 9 August 2004 (the first return date of the petition) when the sequestration order was made. 9. The fact that those involved in ensuring that Ms Cross was bankrupted on 9 August 2004 Messrs Meuller and Bentley were officers of the Court. The orders of the Court will be: 1. Michael Gregory Jones, trustee of the bankrupt estate of Isabell Jean Cross, be joined as a party (second respondent) to the proceeding, effective 6 December 2005. 2. The orders of Registrar Tesoriero made 9 August 2004 be set aside and the Creditor's petition dated 4 March 2004 and filed 23 March 2004 be dismissed. 3. The costs of Ms Cross and of the Trustee of the motion be paid by the Creditor on an indemnity basis. I certify that the preceding one hundred and eighteen (118) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Edmonds. Associate: Dated: 14 July 2006 Solicitor for the Applicant: Mr B Bentley of J S Meuller & Co Counsel for the First Respondent: Ms P Gormly Solicitor for the First Respondent: Office of the Protective Commissioner Solicitor for the Second Respondent: Merewether & Co Date of Hearing: 6 December 2005 Date of Judgment: 14 July 2006 AustLII: Copyright Policy | Disclaimers | Privacy Policy | Feedback URL: http://www.austlii.edu.au/au/cases/cth/FCA/2006/900.html


case_title: Kirby v Leather [1965] 2 QB 367

case_text: ability to properly instruct an advisor was also referred to by Lord Denning MR in the limitation case of Kirby v Leather [1965] 2 QB 367. In upholding the trial judge's decision that the plaintiff was of unsound mind so as to prevent the relevant period of limitation from running against him, his Lordship said, at 384: 'After a time he was to some extent able to appreciate (from being told by others) something of what had happened to him, and indeed to his scooter. But he could not concentrate on it for any length of time: not long enough to be able to appreciate the nature and extent of any claim that he might have. In particular he had no insight at all into his own mental state. He was not capable of instructing a solicitor properly. He certainly was not capable of exercising any reasonable judgment upon a possible settlement.'


case_outcome: applied

case_title: Kleinwort Benson Australia Ltd v Crowl [1988] HCA 34 ; 165 CLR 71


case_outcome: considered

case_title: Kyriackou v Shield Mercantile Pty Ltd (No. 2) [2004] FCA 1338


case_text: Masterman-Lister v Brutton & Co (Nos 1 and 2) (CA) [2003] 1 WLR 1511 Chadwick LJ illustrated the point (at 1538-9) by reference to the case of In Re C (Adult: Refusal of treatment) [1994] 1 WLR 290: 'C had been admitted to a secure hospital as a patient under Part III of the Mental Health Act 1983. He was subsequently diagnosed as suffering from gangrene in the foot. Acting by his next friend he sought an injunction to restrain the hospital from amputating. Thorpe J held that C had the requisite mental capacity to make a decision to refuse treatment. As he put it, at p 295: "Although his general capacity is impaired by schizophrenia, it has not been established that he does not sufficiently understand the nature, purpose and effects of the treatment he refuses. Indeed, I am satisfied that he has understood and retained the relevant treatment information, that in his own way he believes it, and that in the same fashion he has arrived at a clear choice." Nevertheless, it was never in doubt that C was a patient for the purposes of the procedural rule which required that his suit could not have been brought except with the interposition of a next friend. There is no inconsistency between the requirement that a party to legal proceedings comply with Order 80 and a decision that he has an understanding of the nature, purpose and effects of the medical treatment which is under consideration in those proceedings. The test is issue specific; and, when applied to different issues, it may yield different answers. '


case_title: Mason v Tritton (1994) 34 NSWLR 572

case_text: the present case it is important to have regard to the second 'presumption' mentioned above, namely that the law presumes a person's state of mind to continue unchanged. Such a presumption is one application of the more general 'presumption of continuance', which Kirby P discussed in Mason v Tritton (1994) 34 NSWLR 572 at 587 588. In its application to mental illness, Wigmore explained the role of that principle in the following way: 'A condition of mental disease is always a more or less continuous one, either in latent tendency or in manifest operation. It is therefore proper, in order to ascertain the fact of its existence at a certain time, to consider its existence at a prior or subsequent time. The degree of continuity varies infinitely in various cases, and hence there can be little certainty in the inference from one period to another. Nevertheless, since it can never be known beforehand to what variety the case in question belongs in this respect, the facts of prior and subsequent existence cannot be absolutely known beforehand to be relevant. Much must depend on the type of insanity, as preliminarily indicated by the person's conduct at the time in question. There is also a further element of uncertainty in criminal cases, in that the accused has a strong motive to feign insanity after the act charged; and thus particular scrutiny is required in weighing the evidence of the accused person's subsequent insane conduct. In spite, however, of these uncertainties and difficulties, Courts are to-day universally agreed that both prior and subsequent mental condition, within some limits, are receivable for consideration; stress being always laid on the truth that these conditions are merely evidential towards ascertaining the mental condition at the precise time of the act in issue . ' (Emphasis added) (See J H Wigmore, A Treatise on the Anglo-American System of Evidence in Trials at Common Law , 3 rd edn, Little Brown & Co., Boston, 1940, Vol 2 par SS233.) In relation to the presumption of continuance generally, Wigmore said (at SS437): 'The opponent... may always attempt to explain away the effect of the evidence by showing that in the meantime other circumstances have occurred to raise a probability of change instead of continuance.' In the present case Ms Cross' representatives bear the burden of proving that Ms Cross was incapable of managing her affairs in respect of the proceedings as at the time of service of the Creditor's petition. The best way to discharge that burden would be by expert evidence in proper form directed to the test of capacity under the FCR, including the matters set out at [61] supra, and focussed upon Ms Cross' state of mind at the time of service.


case_text: is a principle of long standing that the law presumes every person to be sane and, in modern times, the principle has been expressed as a presumption that a person of full age is capable of managing his or her affairs: Murphy v Doman [2003] NSWCA 249 ; (2003) 58 NSWLR 51 at [36] per Handley JA. It follows that the person who asserts incapacity must prove it. However, that is not to say that the burden may not be discharged in other ways. One way in which that burden might be discharged is by establishing Ms Cross' incapacity at some other point in time and inviting the Court to infer that Ms Cross' state of capacity had remained unchanged between the time of such proven incapacity and the time of service of the Creditor's petition. A similar course was taken in Murphy v Doman [2003] NSWCA 249 ; (2003) 58 NSWLR 51. That case concerned a litigant in person who suffered the effects of mental illness during the course of the proceedings. He was required to file written submissions by a certain date, which was extended. At the expiration of the extended period he appeared before the court and behaved in a bizarre manner, refusing to tender the submissions he had brought that day (6 August 2001). On 18 September the matter was listed for judgment and that morning the trial judge received a letter from Mr Murphy explaining that he had been admitted to a psychiatric hospital shortly after 6 August and asking for leave to file and serve his submissions.


case_title: Official Trustee v Nedlands [2000] FCA 599 ; (2000) 173 ALR 255


case_title: Re Ditfort; Ex Parte DCT (1988) 19 FCR 347


case_title: Re Long; Ex parte Fraser Confirming Pty Ltd (1975) 12 ASR 130


case_title: Re Millar; Ex parte Commonwealth Development Bank of Australia (No. 388/1993, unreported, 27 April 1993, Burchett J)


case_title: Sarina v Council of the Shire of Wollondilly (1980) 48 FLR 372


case_title: State Rail Authority of New South Wales v Hammond (1988) 15 NSWLR 395


case_title: The Fore Street Warehouse Company Limited v Durrant & Co. (1883) 10 Q.B.D. 471


case_title: Vaucluse Hospital Pty Ltd v Phillips & Anor [2006] FMCA 44


case_title: White v Fell (Court of Appeal, unreported, 12 November 1987, Boreham J)

case_text: of the members of the Court of Appeal endorsed the approach taken by Boreham J in the unreported case of White v Fell , 12 November 1987, where the issue of incapacity arose in the context of the limitation of actions. In that case his Honour observed: 'The expression "incapable of managing her own affairs and property" must be construed in a common sense way as a whole. It does not call for proof of complete incapacity. On the other hand, it is not enough to prove that the plaintiff is now substantially less capable of managing her own affairs and property than she would have been had the accident not occurred. I have no doubt that the plaintiff is quite incapable of managing unaided a large sum of money such as the sort of sum that would be appropriate compensation for her injuries. That, however, is not conclusive. Few people have the capacity to manage all their affairs unaided ... It may be that she would have chosen, and would choose now, not to take advice, but that is not the question. The question is: is she capable of doing so? To have that capacity she requires first the insight and understanding of the fact that she has a problem in respect of which she needs advice ... Secondly, having identified the problem, it will be necessary for her to seek an appropriate adviser and to instruct him with sufficient clarity to enable him to understand the problem and to advise her appropriately ... Finally, she needs sufficient mental capacity to understand and to make decisions based upon, or otherwise give effect to, such advice as she may receive .' (Emphasis added)


case_outcome: followed

case_text: The judgment of the Full Court in SZEEU does not support a narrow construction of s 424A. It does not, in my view, throw doubt on the approach taken later by Lee J, with whom Tamberlin J agreed, in Applicant M164/2002 v Minister for Immigration & Multicultural & Indigenous Affairs [2006] FCAFC 16. In that case both the appellant and her husband indicated a wish to give evidence to the Tribunal. The Tribunal characterised the husband's evidence as 'significantly discrepant' from the appellant's evidence on an important issue. Lee J at [99] said that, if the Tribunal relied on the alleged discrepancy as the reason or part of the reason, for its decision, it was bound to comply with s 424A(1). 21 Although the observations of Lee J in Applicant M164/2002 were obiter , I do not accept that his Honour made them per incuriam . His Honour set out in his reasons for judgment the terms of s 424A in their entirety. Nor do I accept that Tamberlin J may have overlooked Lee J's observations and should be understood still to hold views expressed by him prior to the publication of SAAP v Minister for Immigration & Multicultural & Indigenous Affairs [2005] HCA 24 ; (2005) 215 ALR 162 in WABY v Minister for Immigration & Multicultural & Indigenous Affairs [2002] FCA 1091. Both Lee and Tamberlin JJ must be assumed to have read the reasons for judgment of Dowsett J who, in dissent, held that s 424A had no application because the evidence of the appellant's husband was evidence put before the Tribunal by the appellant and thus information that the appellant gave for the purpose of the application.


case_text: The appellant was represented at the hearing of his appeal by counsel appointed under O 80 of the Federal Court Rules . Judgment on the appeal has been delayed pending the publication of the Full Court judgments in SZEEU v Minister for Immigration & Multicultural & Indigenous Affairs [2006] FCAFC 2 and NBGM v Minister for Immigration & Multicultural & Indigenous Affairs [2006] FCAFC 60. I now have supplementary written submissions from the parties concerning these judgments. 7 The significance of Art 1C(5) to a determination of entitlement to a protection visa was the subject of consideration by the Full Court in NBGM . 8 For the appellant to be entitled to a protection visa it was necessary for the Tribunal to be satisfied, relevantly, that he is a person in respect of whom Australia has protection obligations under the Convention (s 36(2)(a)). Ordinarily, Australia will have protection obligations in respect of an individual who, owing to a well-founded fear of persecution for reasons of race, religion, nationality, membership of a particular social group or political opinion, is outside the country of his or her nationality and is unable or, owing to such fear, is unwilling to avail himself or herself of the protection of that country (Art 1A of the Convention). 9 Article 1C(5) of the Convention has been described as a 'cessation provision' . It provides that the Convention shall cease to apply to any person falling under Art 1A if that person can no longer, because the circumstances giving rise to his or her recognition as a refugee have ceased to exist, continue to refuse to avail himself or herself of the protection of the country of his or her nationality. 10 The Tribunal, which made its decision before the publication of NBGM , concluded that Art 1C(5) had no relevance to the appellant's application for a protection visa because he had not, as an individual, been recognised as a refugee when he came to Australia. The Tribunal considered s 36(3) of the Act to be determinative of the appellant's application. Section 36(3) provides: 'Australia is taken not to have protection obligations to a non-citizen who has not taken all possible steps to avail himself or herself of a right to enter and reside in, whether temporarily or permanently and however that right arose or is expressed, any country apart from Australia, including countries of which the non-citizen is a national.' 11 The appellant contended that the Tribunal erred both in concluding that he had not previously been recognised as a refugee and in treating s 36(3) of the Act as determinative of his application. The appellant submitted that the Tribunal ought to have proceeded on the basis that, because he was recognised as a refugee when he came to Australia, Australia owes protection obligations in respect of him unless those obligations have ceased because of Art 1C(5) of the Convention. As I do not accept the Tribunal erred in treating s 36(3) as determinative of the appellant's application, it is not necessary for me to reach a concluded view on whether he was recognised as a refugee when he entered Australia. 12 As mentioned above, the relevance of Art 1C(5) to a determination of whether an individual is entitled to a protection visa has recently been considered by a Full Court in NBGM . The Full Court was constituted by five judges. The differing views expressed by the members of the Full Court complicate the identification of guiding principles. 13 The appeal in NBGM was dismissed by a majority constituted by Black CJ and Mansfield and Stone JJ. Nonetheless, the appellant submits that I should follow the approach preferred by Allsop J, with whom Marshall J agreed, to the interaction of s 36(3) of the Act and Art 1C(5) of the Convention. Assuming the appellant to have been recognised as a refugee when he came to Australia, on the approach preferred by Allsop J, Australia will have protection obligations with respect to him unless Art 1C(5) applies to him. 14 I conclude that to accept the above submission would be to disregard [25] of the reasons for judgment of the Chief Justice in NBGM . Both Mansfield and Stone JJ expressed agreement with this paragraph. In [25] the Chief Justice noted that the majority of the Full Court agreed that, in considering an application for a protection visa, the decision-maker must be satisfied that, at the time the decision is made, the appellant then has a well-founded fear of persecution for a Convention reason. 15 The Tribunal was not satisfied that at the time of its decision the appellant had a well-founded fear of persecution for a Convention reason. It was therefore not open to the Tribunal to be satisfied that the appellant was entitled to a protection visa whatever the operation, if any, of Art 1C(5) of the Convention in respect of the appellant. 16 The appellant claimed to fear persecution in Vietnam because the Vietnamese authorities would impute to him the political opinions of his father who had been a member of the South Vietnamese army. The Tribunal did not accept that the political opinion of the appellant's father would lead to the appellant being persecuted in Vietnam. In its reasons for decision the Tribunal observed: 'The evidence shows that his father had only low-ranking involvement in the Vietnam War. It shows that the state considered his debt discharged and atonement complete after six months in re-education. The Applicant's father was allowed to return to the community and operate a small private business, however unrewarding, and was later allowed by the state to depart Vietnam.'


case_outcome: cited

case_text: Although the observations of Lee J in Applicant M164/2002 were obiter , I do not accept that his Honour made them per incuriam . His Honour set out in his reasons for judgment the terms of s 424A in their entirety. Nor do I accept that Tamberlin J may have overlooked Lee J's observations and should be understood still to hold views expressed by him prior to the publication of SAAP v Minister for Immigration & Multicultural & Indigenous Affairs [2005] HCA 24 ; (2005) 215 ALR 162 in WABY v Minister for Immigration & Multicultural & Indigenous Affairs [2002] FCA 1091. Both Lee and Tamberlin JJ must be assumed to have read the reasons for judgment of Dowsett J who, in dissent, held that s 424A had no application because the evidence of the appellant's husband was evidence put before the Tribunal by the appellant and thus information that the appellant gave for the purpose of the application. 27 As mentioned above, a reason, or a part of the reason, for the Tribunal's decision that the appellant is not entitled to a protection visa was that the applicant's father had been allowed by the Vietnamese authorities to return to the community and operate a small private business. The Tribunal, as I have found, did not comply with s 424A in respect of this information. Its decision is thus invalid ( SAAP ). 28 The appeal will be allowed and the orders of the Federal Magistrates Court will be set aside. In lieu thereof it will be ordered that the decision of the Tribunal be quashed and the appellant's application for a protection visa be remitted to the Tribunal to be determined according to law. The first respondent will be ordered to pay the appellant's costs thus giving his counsel an entitlement to recover fees and disbursements (O 80 r 9(2)). I certify that the preceding twenty-eight (28) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Branson. Associate: Dated: 13 June 2006 Counsel for the Appellant: Mr M Leeming and Ms K Dawson Solicitor for the Appellant: Ebsworth & Ebsworth Counsel for the First Respondent: Mr P Braham Solicitor for the First Respondent: Blake Dawson Waldron The Second Respondent filed a submitting appearance. Date of Hearing: 3 May 2005, 14 June 2005, 11 August 2005 and 16 September 2005 Date of Final Submissions: 29 May 2006 Date of Judgment: 13 June 2006 AustLII: Copyright Policy | Disclaimers | Privacy Policy | Feedback URL: http://www.austlii.edu.au/au/cases/cth/FCA/2006/733.html


case_text: The appellant was represented at the hearing of his appeal by counsel appointed under O 80 of the Federal Court Rules . Judgment on the appeal has been delayed pending the publication of the Full Court judgments in SZEEU v Minister for Immigration & Multicultural & Indigenous Affairs [2006] FCAFC 2 and NBGM v Minister for Immigration & Multicultural & Indigenous Affairs [2006] FCAFC 60. I now have supplementary written submissions from the parties concerning these judgments. 20 The judgment of the Full Court in SZEEU does not support a narrow construction of s 424A. It does not, in my view, throw doubt on the approach taken later by Lee J, with whom Tamberlin J agreed, in Applicant M164/2002 v Minister for Immigration & Multicultural & Indigenous Affairs [2006] FCAFC 16. In that case both the appellant and her husband indicated a wish to give evidence to the Tribunal. The Tribunal characterised the husband's evidence as 'significantly discrepant' from the appellant's evidence on an important issue. Lee J at [99] said that, if the Tribunal relied on the alleged discrepancy as the reason or part of the reason, for its decision, it was bound to comply with s 424A(1).


case_text: Although the observations of Lee J in Applicant M164/2002 were obiter , I do not accept that his Honour made them per incuriam . His Honour set out in his reasons for judgment the terms of s 424A in their entirety. Nor do I accept that Tamberlin J may have overlooked Lee J's observations and should be understood still to hold views expressed by him prior to the publication of SAAP v Minister for Immigration & Multicultural & Indigenous Affairs [2005] HCA 24 ; (2005) 215 ALR 162 in WABY v Minister for Immigration & Multicultural & Indigenous Affairs [2002] FCA 1091. Both Lee and Tamberlin JJ must be assumed to have read the reasons for judgment of Dowsett J who, in dissent, held that s 424A had no application because the evidence of the appellant's husband was evidence put before the Tribunal by the appellant and thus information that the appellant gave for the purpose of the application.


case_text: evidence of the consideration given by the ERC's Board to the constraints sought by the bidder is generally in accordance with the approach that I discussed in Re APN News & Media Ltd [2007] FCA 770 ; (2007) 62 ACSR 400 ( APN ) at [55]. Warranty of freedom from encumbrances Clause 8.3(a) of the Scheme provides that the Scheme Participants are deemed to have warranted to ERC in its own right and on behalf of ECC that they have full power and capacity to sell and to transfer the Scheme Shares to ECC, and that their ERC shares are transferred fully paid and free from all mortgages, liens, charges, pledges, and other interests or restrictions on transfer of any kind. Clause 13.14 of the Scheme Booklet draws attention to this warranty. The warranty of freedom from encumbrances is consistent with the approach taken in APN at [59]-[62], which was followed by Barrett J in Macquarie Private Capital A Limited [2008] NSWSC 323 ; (2008) 26 ACLC 366 at [13] - [14] . Verification The $4 million break fee represents: (a) 1.9% of the equity value of ERC as at 14 September 2009, being the date when the bid was announced to the market. This percentage has been determined in accordance with para 7.17 of the Takeovers Panel's Guidance Note 7: Lock-up Devices , which I discussed in APN at [55]. The calculation was: $4,000,000 ÷ (167,904,914 ERC shares x the closing price of ERC shares of $1.27 as at 14 September 2009) x 100 (b) 4.4% of the total value of the proposal determined in accordance with the principles set out in APN as follows: $4,000,000 ÷ (167,904,914 ERC shares x the total consideration offered under the proposal being $0.545 per ERC share) x 100 (c) 0.06% of the enterprise value of ERC as set out in the consolidated pro forma balance sheet at s 10.5(e) of the Scheme Booklet. The "total consideration offered under the proposal" referred to in (b) above is arrived at by adding to the Cash Consideration of $0.40 per ERC share, the Capital Reduction Amount of $0.145 per ERC share. In relation to (c) above, it is to be noted that in its Guidance Note 7: Lock up Devices , the Takeovers Panel stated (at para 7.21): In some limited cases, the Panel accepts that it may be appropriate for the 1% guideline to apply to a company's enterprise value rather than equity value, because for instance, the target is highly geared . In such a case, as with every fee in excess of 1% of equity value, a party seeking to justify the fee must be prepared to show that the fee does not have an anti-competitive or coercive effect. [Emphasis added] The "enterprise value of ERC" referred to in [45](c) above was arrived at as described at [49] below.


case_title: Re Ausdoc Group Ltd (2002) 42 ACSR 629

case_text: note that in Re Ausdoc Group Ltd (2002) 42 ACSR 629 ( Ausdoc ) the Takeovers Panel found that a break fee of $3.5 million, that was 1.86% of the equity value and 1.1% of the enterprise value of the target company, was unobjectionable in the circumstances of that case. Those circumstances included the facts that: a six-month tender process had been conducted by the target company before it entered into the scheme implementation deed, yet no other bids had emerged; the bidder had made it clear to the board of the target company that it would not bid unless, relevantly, the break fee provision was agreed to; and the bid would give a substantial premium to the target company's shareholders. While each case turns on its own facts and, in any event, I must make my own assessment, it is nonetheless noteworthy that there are some similarities between the circumstances of Ausdoc and those of the present case. In this case, I concluded that the existence of the provision for payment of a break fee of nearly twice the "1% of the equity value of the target" should not, in the unusual circumstances, stand in the way of the making of an order for the convening of a meeting at which the proposed Scheme can be considered and voted upon by Scheme Participants. It was for the above reasons that I made the orders on 9 November 2009 referred to at the outset of these reasons for judgment. I certify that the preceding sixty-three (63) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Lindgren. Associate: Dated: 1 December 2009 Counsel for the Plaintiff: Mr T F Bathurst QC Solicitor for the Plaintiff: Gilbert & Tobin Counsel for Emerald Communications (Cayman) SPC: Mr K Andronos Solicitor for Emerald Communications (Cayman) SPC: Mallesons Stephen Jaques Date of Hearing: 9 November 2009 Date of Judgment: 9 November 2009 Date of Publication of Reasons: 1 December 2009 AustLII: Copyright Policy | Disclaimers | Privacy Policy | Feedback URL: http://www.austlii.edu.au/au/cases/cth/FCA/2009/1418.html


case_text: warranty of freedom from encumbrances is consistent with the approach taken in APN at [59]-[62], which was followed by Barrett J in Macquarie Private Capital A Limited [2008] NSWSC 323 ; (2008) 26 ACLC 366 at [13] - [14] . Verification


case_text: The defendant, apart from responding to all three grounds relied upon by the plaintiff, also contended that the plaintiff had failed to comply with s 459G(3) of the Act, compliance with which goes to jurisdiction. The defendant contended that as a result, the jurisdiction of the court had not been enlivened and the court could not make an order setting aside the demand either pursuant to s 459H(3) or s 459J(1)(a) or (b). The merits of that contention are dealt with at [16] to [37] of the reasons for judgment ( Kortz Ltd v Data Acquisition Pty Ltd [2006] FCA 1722). 8 I have had the benefit of receiving and considering submissions from both the plaintiff and the defendant in relation to the principles governing the exercise of the discretion as to costs in the light of the judgment and urging the exercise of the discretion in a particular way. 9 Since the plaintiff failed to establish the first two grounds of challenge to the statutory demand and the defendant was unsuccessful in relation to the contention going to s 459G(3) , the final question to be determined was whether the plaintiff's material adequately demonstrated the subsistence of a genuine dispute between the parties as to the existence or amount of a debt to which the demand related.


case_text: Until O 35A was introduced into the FCR in 2004, it was not open to the Court to make an order for a default judgment, except on a motion supported by evidence as to the merits of the application: Luna Park Sydney Pty Limited v Bose [2006] FCA 94 , at [17], per Jacobson J and cases cited there. However, O 35A r 3(2)(c) permits the Court to grant relief if: • a respondent is in default; • the applicant appears entitled to the relief 'on the statement of claim'; and • the Court is satisfied that it has power to grant the relief.


case_text: Order 35A has been interpreted as dispensing with the invariable requirement that the applicant prove by evidence that the pleaded claim is well-founded. In Wu v Avin Operations Pty Ltd [2006] FCA 36 , Kenny J (at [57]) said this: 'Under the former O 10 r 7, an applicant was required to file proof by way of evidence of his or her claims when seeking judgment ... Under the new O 35A r 3, it now seems that reliance may be placed on the allegations in the relevant statement of claim. Judges of the Court have held that the rule does not require proof by way of evidence of the applicant's claim, but that on the face of the statement of claim there is a claim for the relief sought and that the court has jurisdiction to grant that relief: see Arthur v Vaupotic Investments Pty Ltd [2005] FCA 433 , at [3], per Heerey J; Australian Competition and Consumer Commission v 1 CellNet LLC [2005] FCA 856 , at [14], per Nicholson J; Australian Competition and Consumer Commission v Albert [2005] FCA 1311 , at [6]-[7], per Jackson J and Deisel Spa v Hwang [2005] FCA 1619 , at [2], per Tamberlin J.'


case_text: Order 35A has been interpreted as dispensing with the invariable requirement that the applicant prove by evidence that the pleaded claim is well-founded. In Wu v Avin Operations Pty Ltd [2006] FCA 36 , Kenny J (at [57]) said this: 'Under the former O 10 r 7, an applicant was required to file proof by way of evidence of his or her claims when seeking judgment ... Under the new O 35A r 3, it now seems that reliance may be placed on the allegations in the relevant statement of claim. Judges of the Court have held that the rule does not require proof by way of evidence of the applicant's claim, but that on the face of the statement of claim there is a claim for the relief sought and that the court has jurisdiction to grant that relief: see Arthur v Vaupotic Investments Pty Ltd [2005] FCA 433 , at [3], per Heerey J; Australian Competition and Consumer Commission v 1 CellNet LLC [2005] FCA 856 , at [14], per Nicholson J; Australian Competition and Consumer Commission v Albert [2005] FCA 1311 , at [6]-[7], per Jackson J and Deisel Spa v Hwang [2005] FCA 1619 , at [2], per Tamberlin J.' 9 In the present case, as I have noted, the relief sought by the applicants includes restraining orders against the respondent. Order 35A r 3 has been applied where an applicant seeks relief of this kind (as distinct, for example, from damages), in consequence of default by a respondent: Arthur v Vaupotic Investments Pty Ltd [2005] FCA 433. 10 For myself, I am inclined to think that some caution should be exercised before granting default relief of the kind sought in this case simply on the basis of the pleadings. In particular, the sanctions that can be invoked where a respondent contravenes a restraining order should be borne in mind. Order 35A r 3 vests a discretion in the Court. Depending on the circumstances, it may be appropriate for the Court to require some evidence, for example, that the respondent has infringed an applicant's copyright as alleged in the statement of claim before making restraining orders or orders requiring a respondent to deliver up on oath infringing copies of copyright material (as the applicants seek here). 11 In the present case, Mr Cobden SC, who appeared with Ms Richardson for the applicants, read a number of affidavits in support of the motion. These satisfy me that the respondent has infringed the copyright of the various applicants in the identified films by selling or offering for sale DVDs that constitute copies of the films. The evidence also satisfies me that, unless restrained, the respondent is likely to continue his infringing activities. The evidence also supports the other relief sought by the applicants. There is therefore no need to consider whether it would have been appropriate, in the absence of such evidence, to grant the restraining orders sought by the applicants on the basis of the pleadings alone.


case_text: The restraining orders the applicants seek have been carefully drawn and follow the form approved by the Full Court of the Supreme Court of Victoria in Chappell & Co Ltd v Associated Radio Co of Australia Ltd [1925] VLR 350, at 362-363. Indeed, the orders proposed in the present case are somewhat narrower than those made in Chappell v Associated Radio . 13 In summary, I am satisfied that: • the respondent is in default for the purposes of O 35A r 3(2); • each of the applicants appears entitled to relief in the form of restraining orders on the statement of claim; • the Court has power to grant the relief sought; and • it is appropriate for the Court to exercise its discretion so as to make the orders sought. 14 Accordingly, I propose to make the orders sought by the applicants in the motion. These include restraining orders, an order for delivery up on oath of the infringing copies of the applicants' films and an inquiry as to damages. I certify that the preceding fourteen (14) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Sackville. Associate: Dated: 9 June 2006 Counsel for the Applicants: Mr R Cobden SC with Ms K Richardson Solicitor for the Applicants: Minter Ellison There was no appearance by the Respondent Date of Hearing: 8 June 2006 Date of Judgment: 9 June 2006 AustLII: Copyright Policy | Disclaimers | Privacy Policy | Feedback URL: http://www.austlii.edu.au/au/cases/cth/FCA/2006/727.html


case_text: This matter involves an appeal from a decision of Raphael FM in Klewer v Official Trustee in Bankruptcy [2008] FMCA 274. The appeal is listed for hearing on Tuesday 16 September 2008. The appellants have applied by notice of motion filed on 5 September 2008 to adjourn the hearing of the appeal. The order sought is that the hearing of the notice of appeal listed for 16 September 2008 be adjourned pending the fitness of the first appellant, Ms Klewer, to attend Court. In affidavits in support of the motion, Ms Klewer has stated that she is unable to deal properly with the hearing of the main proceedings due to her poor health. She also states that the second appellant, her son, is disabled and unable to participate in the proceedings. 2 Ms Klewer says that when she is exposed to stressful situations, such as court hearings, her chest tightens and restricts her breathing in a way similar to a cardiac event. She states that she has been hospitalised on various occasions as a result of this condition, that she is under the care of various doctors and that she has not been able to appear or file submissions in this matter. 3 The medical evidence presented by Ms Klewer in support of her claims describes the symptoms related by Ms Klewer to the various doctors and the findings of those doctors following their examinations of her. It is clear from the medical reports provided to the Court by Ms Klewer that the doctors who have examined her have not been able to find any structural cardiac reasons for the symptoms that she describes. The conclusion that the various medical practitioners draw regarding Ms Klewer's chest pains is that the symptoms seem to be stress-related or, possibly, in the case of one opinion, that they are caused by gastro-oesophageal reflux. I note that the medical treatment for Ms Klewer's health problems is ongoing. There is reference to other medical problems but they are not the basis of the application for the adjournment of the hearing.


case_text: recently, Lindgren J had cause to consider the operation of O 15 r 2(3) in Australian Competition & Consumer Commission v Advanced Medical Institute Pty Ltd (2005) FCA 366. Significantly, after reciting r 2(3), his Honour said at par 23: 'In the rare case in which the Court grants leave to a party to give a notice requiring general discovery, that subrule operates, rather than, as formerly, the Peruvian Guano test, to identify the discoverable documents. The Explanatory Memorandum which accompanied the Federal Court Amendments Rules 1999 (No 6) (SR 1999 No 295) stated of the new subrule 2(3) that '[t]he aim of the rule is to limit the documents that must be discovered to those which are directly relevant to the proceedings.' This interpretation is consistent with: • Order 15 r 5, which is titled ' Order for General Discovery ', and provides: 'The Court may, at any stage of the proceeding, order any party to give discovery in accordance with rule 2.' • the amendments to O 15 r 2 in 1999, the aim of which, according to the Explanatory Statement Statutory Rules 1999 No 295, was 'to limit the documents that must be discovered to those which are directly relevant to the proceedings' (note also Advanced Medical Institute per Lindgren J at par 23) • Practice Note 14, which states that orders for discovery will ordinarily be limited to the documents required to be disclosed by O 15 r 2(3) • Order 15 r 8 which continues to use the language of Peruvian Guano but only in the context of particular discovery and • the authority of cases to which I have already referred, in particular Spyer , Aveling and Advanced Medical Institute .


case_text: terms 'possession, custody or power' in O 15 represent three alternative states. As summarised in one learned text: 'The term "possession" means the physical or corporeal holding of the document pursuant to a legal right to its possession... (for example, agents and bailees); "custody" means the mere actual physical or corporeal holding of a document, regardless of its right to possession, (for example, servants and employees)...; and "power" means an enforceable right to inspect the document or to obtain possession or control of it from the person who ordinarily has it in fact.' (SD Simpson, DL Bailey and EK, Evans Discovery and Interrogatories 2 nd edn, Butterworths, Australia, 1990 at 43, see also Halsbury's Laws of England 4 th edn vol 12 Discovery par 39. With respect to 'possession' and 'custody' see also Santow J in Horsley v Phillips Fine Art Auctioneers Pty Ltd (1995) 7 BPR [97557] at 14,371-14,372; Stephen J in Federal Commissioner of Taxation v ANZ Banking Group Ltd [1977] HCA 57 ; (1979) 143 CLR 499 at 504-505; and S Fisher Commercial and Personal Property Law, Butterworths, Australia, 1997 ch 3; and with respect to the meaning of 'power' see also Beaumont J in Australian Independent Newspapers Ltd v John Fairfax Holdings Ltd (Federal Court of Australia, 22 June 1994) par 12 and Lord Diplock in Lonrho Limited v Shell Petroleum (1980) 1 WLR 627 at 635-6.)


case_text: is no question that the administrator is the agent of the company to which he or she is appointed: s 437B. However, as made clear by s 437A(1) , administrators have very extensive powers over all aspects of the company's business, property and affairs. Indeed as the High Court noted in Australasian Memory Pty Ltd v Brien [2000] HCA 30 ; (2000) 172 ALR 28 at 30, Div 3 of Pt 5.3A Corporations Act 2001 (Cth) provides that the administrator of a company under administration is to assume control of the company's affairs. On the basis that the administrator had possession of the documents, the relationship of administrator and company as contemplated by Pt 5.3A Corporations Act does not permit the company other than with the consent of the administrator to have 'power' over documents retained by the administrator: s 438C (cf Lord Diplock's comments in Lonrho at 636H discussed earlier in this judgment).


case_text: seems no doubt that, as a result of the 1999 amendments to O 15 r 2, the criteria in O 15 r 2(3) superseded the 'train of inquiry' test as the usual requirements for discovery. As pointed out by Branson J in Lubizol Corp Inc v Imperial Chemical Industries plc [2000] FCA 1464 (par 9) '...unless the Court should order to the contrary, documents the relevance of which is only that they may fairly lead to a train of inquiry which may directly or indirectly enable one party to advance its case or change that of its opponent are not required to be discovered.' (note also Finn J in South Sydney District Rugby League Football Club Ltd v News Ltd [2000] FCA 519 at par 10, The Hon Justice JW von Doussa 'Discovery in the Federal Court' Law Society of South Australia and the Federal Litigation Section Seminar, 14 March 2000; Spyer v Cuddles 'N' Mum (Franchise) Pty Ltd (No 3) (2002) FCA 1563 pars 4-8; Aveling v UBS Australia Capital Markets Holdings Ltd [2005] FCA 415 at par 10). In Aveling v UBS Australia Capital Markets Holdings Ltd [2005] FCA 415 , Lindgren J considered the principles which should guide the parties in identifying categories of documents. His Honour observed that they were the same principles which guide the Court when ordering discovery, and continued: 'It may be appropriate for parties to describe categories in terms which do not expressly incorporate the language of O 15 r 2(3), but that subrule should nonetheless govern the formulation of the categories. Alternatively, of course, the categories may be defined so as to incorporate expressly the terms of the subrule. Whatever approach is taken, it is important to understand that when, as happened in the present case, the Court orders discovery by categories to be notified by one party to another, the Court does not intend that the notifying party be at liberty to widen the discovery obligation beyond the four classes of documents referred to in O 15 r 2(3).' (par 11) This interpretation is consistent with: • Order 15 r 5, which is titled ' Order for General Discovery ', and provides: 'The Court may, at any stage of the proceeding, order any party to give discovery in accordance with rule 2.' • the amendments to O 15 r 2 in 1999, the aim of which, according to the Explanatory Statement Statutory Rules 1999 No 295, was 'to limit the documents that must be discovered to those which are directly relevant to the proceedings' (note also Advanced Medical Institute per Lindgren J at par 23) • Practice Note 14, which states that orders for discovery will ordinarily be limited to the documents required to be disclosed by O 15 r 2(3) • Order 15 r 8 which continues to use the language of Peruvian Guano but only in the context of particular discovery and • the authority of cases to which I have already referred, in particular Spyer , Aveling and Advanced Medical Institute .


case_title: Federal Commissioner of Taxation v ANZ Banking Group Ltd [1977] HCA 57 ; (1979) 143 CLR 499