Cottrell v Wilcox [2002] FCAFC 53; [2002] FCA 232 (14 March 2002)

Last Updated: 8 May 2002

Cottrell v Wilcox [2002] FCAFC 53

Cottrell v Wilcox [2002] FCA 232

NOTE: CHANGES TO THE MEDIUM NEUTRAL CITATION (MNC)

The Federal Court adopted a new medium neutral citation (FCAFC) for Full Court judgments effective from 1 January 2002. Single Judge judgments will not be affected and will retain the FCA medium neutral citation.

The transitional arrangements are as follows:

* All Full Court judgments delivered prior to 1 January 2002 will retain the FCA medium neutral citation.

* All Full Court judgments delivered between 1 January 2002 to 30 April 2002 have been assigned parallel medium neutral citations in both the FCA and FCAFC series.

* All Full Court judgments delivered from 1 May 2002 will contain the FCAFC medium neutral citation only.

FEDERAL COURT OF AUSTRALIA

Cottrell v Wilcox [2002] FCA 232

BANKRUPTCY - appeal against sequestration order - application by appellant to lead further evidence on appeal - whether appellant entitled to go behind judgment debt - bankruptcy notice based on judgment debt arising out of Local Court judgment - judgment debt set aside by Local Court after sequestration order made - whether appellant thereby entitled to have sequestration order set aside

Federal Court of Australia Act 1976 (Cth) s 35A(6)

Bankruptcy Act 1966 (Cth) ss 52, 153A and 153B

Federal Court Rules O 77 r 19

Martin v Commonwealth Bank [2001] FCA 87 referred to

Australia and New Zealand Banking Group Ltd v Prestia [2001] FCA 792 at par  [32] referred to

CDJ v VAJ [1998] HCA 76; (1998) 197 CLR 172 at 184-186, 199-201 and 230-238 referred to

DAVID MERVYN COTTRELL v JOHN ALFRED WILCOX

N1415 OF 2001

BRANSON, WEINBERG and DOWSETT

14 MARCH 2002

SYDNEY

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY	N1415 OF 2001

ON APPEAL FROM A SINGLE JUDGE

BETWEEN:	DAVID MERVYN COTTRELL APPELLANT
AND:	JOHN ALFRED WILCOX RESPONDENT
JUDGES:	BRANSON, WEINBERG and DOWSETT JJ
DATE OF ORDER:	14 MARCH 2002
WHERE MADE:	SYDNEY

THE COURT ORDERS THAT:

1. The appeal be dismissed.

2. The respondent's costs be taxed and paid from the estate of the appellant in accordance with the Bankruptcy Act 1966 (Cth).

Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY	N1415 OF 2001

ON APPEAL OF A SINGLE JUDGE

BETWEEN:	DAVID MERVYN COTTRELL APPLICANT
AND:	JOHN ALFRED WILCOX RESPONDENT

JUDGES:	BRANSON, WEINBERG and DOWSETT JJ
DATE:	14 MARCH 2002
PLACE:	SYDNEY

REASONS FOR JUDGMENT

THE COURT

1 This is an appeal by David Mervyn Cottrell from a decision of Conti J who, on 21 September 2001, made a sequestration order against the estate of the appellant.

BACKGROUND

2 The matter has had a long and somewhat convoluted history. On 29 November 2000 a Registrar of the Court, acting upon the petition of John Alfred Wilcox which was filed on 18 October 2000, made a sequestration order against the estate of Mr Cottrell.

3 The act of bankruptcy upon which the Registrar's order was founded was the appellant's failure to comply with a bankruptcy notice. That notice required payment of the sum of $36,697.42, that being the amount of a judgment obtained by the respondent against the appellant in the Local Court at Wagga Wagga.

4 The appellant did not endeavour to establish a counter claim or cross-claim. Nor did he make application, prior to the date upon which the Registrar made the sequestration order, to set aside the bankruptcy notice

5 On 20 December 2000 the appellant filed a notice of motion in which he sought review of the Registrar's decision. He sought to have the sequestration order set aside, and in lieu thereof, to have an order made dismissing the creditor's petition. The basis of that application seems to have been an allegation of abuse of process on the part of the respondent. Conti J, who heard the notice of motion as a matter of urgency, characterised the appellant's claim as being referable to a "champertous agreement". His Honour rejected the application to set aside the sequestration order, and dismissed the notice of motion. The appellant then filed a notice of appeal against that decision.

6 On 9 July 2001, a Full Court comprising Sundberg, Emmett and Finkelstein JJ delivered reasons for judgment in which each and every contention advanced by the appellant regarding the supposedly champertous agreement was rejected. So too were various other claims which he made of breach of duty and of an attempt to pervert the course of justice. However, the Full Court found that Conti J had erred by dealing with the review of the Registrar's decision as though it were an appeal stricto sensu rather than a hearing de novo: see s 35A(6) of the Federal Court of Australia Act 1976 (Cth) and Martin v Commonwealth Bank [2001] FCA 87.

7 The Full Court's reasons for judgment in their initial form contained an order that the appeal be dismissed. That order was subsequently the subject of a corrigendum making it clear that the appeal had been allowed but only for the purpose of enabling the matter to be remitted to Conti J so that his Honour could consider it afresh, as a hearing de novo, in accordance with the reasons for judgment given by the Full Court. The orders pronounced and the reasons for judgment made it clear that his Honour was required to have before him current affidavits in accordance with O 77 r 19 of the Federal Court Rules. It was also indicated that he was expected to say, as a judge hearing an application for a sequestration order "customarily does", that he was satisfied of the matters proof of which s 52 of the Bankruptcy Act 1966 (Cth) ("the Act") requires. It is important to note that the Full Court specifically ordered that the remitter to his Honour be dealt with on the basis that there was no notice of opposition to the petition.

THE TRIAL JUDGE'S DECISION

8 The matter was heard again by Conti J on 21 September 2001. That proceeding was conducted, at Mr Cottrell's request, by telephone link. This was done upon the basis that he claimed to be ill, and physically incapable of attending court. In compliance with the orders of the Full Court, current affidavits were filed on behalf of the petitioning creditor.

9 In opposing the making of a sequestration order, the appellant relied principally upon a copy of a notice of motion filed on 5 September 2001 in the Local Court at Wagga Wagga together with an affidavit sworn on 3 September 2001 in support. By that notice of motion he sought an order setting aside the judgment in favour of the respondent upon which the sequestration order originally made by the Registrar was based.

10 Conti J in his reasons for judgment observed that the notice of motion did not disclose any basis in law for setting aside the judgment. His Honour commented:

" the stated basis is supposedly contained in an affidavit made by Mr Cottrell on 3 September 2001. The affidavit referred to a previous affidavit said to have been provided in support of a notice of motion made to the Local Court on 8 March 2001, but no such affidavit was provided. What was the fate of that notice of motion was not stated. The present notice of motion is listed for hearing by the Local Court on 31 January 2002; ...

11 The appellant also relied upon a signed statement to the effect that the purpose of the respondent's pursuit of the bankruptcy proceeding was to "stifle" litigation in a particular Victorian County Court proceeding which was said to relate to the "act of Marie Den Boer to incite others to murder the Applicant Cottrell". The appellant claimed that the respondent and others (including the legal representatives acting for the defendants in that litigation) had engaged in a conspiracy designed to prevent him from pursing his legal rights in that proceeding. Conti J continued:

"When I asked Mr Cottrell to explain verbally the basis for his application to set aside the Local Court judgment obtained by Mr Wilcox against Mr Cottrell upon which the present proceedings are based, he said words to the effect that the judgment debt was based upon some form of illegal conduct involving Mr Wilcox and the Applicant, which was said to vitiate the viability of the judgment debt. Nothing that he said to me in that regard was comprehensible in terms of legal principle, but he claimed that he had nevertheless the support of legal advice from solicitors who were acting for him in connection and the setting aside of the judgment debt."

12 His Honour concluded that there were no viable grounds upon which he would be justified in withholding the making of a sequestration order against the estate of the appellant. He observed that there was nothing to suggest that the appellant would be successful in having the judgment of the Local Court at Wagga Wagga set aside, particularly in the light of the earlier findings of the Full Court. Whether or not the appellant's bankruptcy would necessarily inhibit or bring to an end his proceeding in the Victorian County Court, which he had been conducting for some time, in person, was not clear. However, the appellant had failed to demonstrate that the subsistence of that proceeding was sufficient to establish that there was a reasonable basis for concluding that its success would put him in a position to satisfy the debt which he owed to the respondent and, indeed, another debt owed to a supporting creditor.

13 Conti J referred to the following passage from the judgment of Hely J in Australia and New Zealand Banking Group Ltd v Prestia [2001] FCA 792 at par  [32] in support of his conclusion.

"[32] In Ling v Enrobook Pty Ltd (1997) 74 FCR 19 a Full Court approved a statement by Lehane J that, as a general proposition, there is no apparent reason why a petitioning creditor should not be entitled to have a sequestration order made, if the requirements of s 52 are otherwise satisfied, simply because the debtor may have a counter claim or cross demand against some other creditor. The Full Court said:

"The above authorities do not, in our view, support the appellant's contention that the courts recognise a public interest in allowing a debtor to prosecute litigation commenced by the debtor. The public interest recognised by such authorities is that which, in broad terms, is reflected also in s 40(1)(g) of the Act; that is, that a sequestration order ought only to be made on the basis of an indebtedness which is not counterbalanced by a claim by the debtor against the petitioning creditor. Such authorities provide no comfort to a debtor who asserts a claim, not against his or her creditor, but against a third party.

The authorities also show that satisfaction that the debtor is well advanced with litigation likely to result in the debtor being in a position to pay his or her debts may well provide a basis for a finding that there is a `sufficient cause' for a sequestration order not to be made; see for example, Maddestra v Penfolds Wines Pty Ltd [1993] FCA 406; (1993) 44 FCR 303. But the authorities do not suggest that it is in the public interest to allow insolvent debtors to prosecute litigation generally. They only recognise that it is not in the public interest for a debtor to be forced into bankruptcy by reason of a state of insolvency likely to be of only short duration.""

THE APPEAL TO THIS COURT

14 By notice of appeal filed on 11 October 2001 the appellant appeals from the whole of the judgment of Conti J. The grounds of appeal are elaborately stated, but expressed in terms with are not altogether coherent. They are also numbered in a confusing manner. They are as follows:

"2. THE PRIMARY JUDGE FAILED TO GIVE SUFFICIENT WEIGHT TO ABUSE OF PROCESS REFERRABLE TO THE CONSPIRACY PERPETRATED BY CLAIRE BRANCH AND DAVID LUCAS AND OTHERS, UNDER THE CONSPIRACY PROVISIONS OF THE CRIMES ACT 1958, S 321 TO S 321E. SEE ANNEXURE (1) ATTACHED. 21 pages.

2. IN PARAGRAPH 13 OF THE REASONS FOR JUDGMENT (3) SHOULD READ. `THE APPEAL BE ALLOWED'. see anx.3.

4. THE PRIMARY JUDGE FAILED TO GIVE ANY CONSIDETATION TO THE ACTIONS OF THE APPEALLANT TO SETASIDE WAGGA WAGGA LOCAL COURT ''DEFAULT JUDGEMENT'' 459 OF 92. IN THIS ACTION THE RESPONDENTS STATEMENT OF CLAIM IS POORLY DEFINED AND VARIES FROM EACH APPLICATION.

5. THE PRIMARY JUDGE TO GIVE DUE WEIGHT TO FACT THAT THE WAGGA MATTER 459/92 IS CURRENT PART HEARD AND WAS ADJURNED FROM 10 & 11 SEPTEMBER 01 TO 21/01/02. see anx.4

6. THE PRIMARY JUDGE FAILED TO GIVE WEIGHT TO THE FACTS THAT THE ARRANGEMENT/AGREEMENT BETWEEN THE APPEALLANT AND THE RESPONDENT WAS IN FACT AN AGREEMENT FOR AN UNLAWFUL PURPOSE AND THEREFORE NOT ENFORCEABLE.

7. THE PRIMARY JUDGE FAILED TO GIVE ANY CONSIDERATION TO THE GACT THAT THE APPEALLANT WAS TRIED AND CONVICTED OF THE UNLAWFUL ACTS THAT BROUGHT ABOUT 459/92. AND WAS IMPRISONED FROM 6 MONTHS HARD LABOUR AT WAGGA WAGGA COURT. From 21/10/91 to 21/4/92. see ans 5.

8. THE PRIMARY JUDGE FAILED TO GIVE ANY WEIGHT TO THE FACT THAT THE RESPONDENT WILCOX WAS AT ALL TIMES AWARE THAT HE WILCOX WAS INVOLVED IN AN ILLEGAL OPERATION, AND WAS DERIVING A FINANCIAL PROFIT FROM SUCH OPERATION.

9. THE PRIMARY JUDGE FAILED TO GIVE CONSIDERATION TO THE FACT THAT THE COURT RECORDS IN RELATION TO THIS UNLAWFUL OPERATION AND THE APPEALANTS CONVICTION AND ARE STILL ON THE WAGGA WAGGA COURT FILES.

2. THE PRIMARY JUDGE FAILED TO SEE THE MISTAKES IN THE PUBLISHED JUDGEMENT OF THE FULL COURT OF APPEAL. AND THEREFORE TREATED THE APEALNT [sic] AS IF HIS APPEAL HAD BEEN DISMISSED. AND IN SO DOING, MADE ORDERS THAT AS PRIMARY JUDGE WAS NOT ENTITLED TO, AS SUCH OTHER ORDERS HAD ALREADY BEEN MADE BY THE FULL BENCH, JUSTICES SUNDBERG, EMMETT AND FINKELSTEIN. see annexure (2)

3. THE PRIMARY JUDGE FAILED TO CONSIDER THE CORRIGENDUM TO THE REASONS FOR JUDGEMENT OF SUNDBERG, EMMETT AND FINKELSTEIN JJ DELIVERED 9^th JULY 2001.

1. order 3 should read `THE APPEAL BE ALLOWED' ON THE ORDERS PAGE."

15 At the appellant's request the appeal to this Court was heard by telephone link from his home.

The application to lead further evidence

16 At the outset of the appeal the appellant indicated that he wished to rely upon an affidavit sworn on 6 October 2001, and filed with the Court on 19 November 2001. The affidavit was included in an appeal book which was not certified. It consisted of some 40 paragraphs and 32 separate annexures. The annexures alone ran for some 143 pages. The respondent objected to the affidavit and its annexures being received by the Court.

17 The appellant acknowledged, in answer to a question from the Court, that there was nothing in the affidavit or in any of the annexures of which he had not been aware at the time of the hearing of the hearing of this matter before Conti J on 21 September 2001. He maintained, however, that the material contained therein was relevant to a number of the grounds of appeal, and that it provided some clarification of the matters which Conti J had said he found incomprehensible when these had been addressed orally by the appellant in argument.

18 The appellant relied upon s 27 of the Federal Court of Australia Act 1976 (Cth). That section provides as follows:

"In an appeal, the Court shall have regard to the evidence given in the proceedings out of which the appeal arose, and has power to draw inferences of fact and, in its discretion, to receive further evidence, which evidence may be taken:

(a) on affidavit; or

(b) by video link, telephone or other appropriate means in accordance with another provision of this Act or another law of the Commonwealth; or

(c) by oral examination before the Court or a Judge; or

(d) otherwise in accordance with section 46."

19 At common law the position was that a new trial would not be ordered on the ground of the discovery of fresh evidence unless that evidence was not available at the trial and could not have been obtained by reasonable diligence. Moreover, it had to be reasonably clear that if the evidence had been available at trial an opposite result would have been highly likely to have been produced.

20 Section 27 empowers this Court to receive further evidence on appeal notwithstanding the fact that it may not satisfy the somewhat narrower common law constraints set out above: CDJ v VAJ [1998] HCA 76; (1998) 197 CLR 172 at 184-186 per Gaudron J, 199-201 per McHugh, Gummow and Callinan JJ and 230-238 per Kirby J.

21 However, s 27 confers upon this Court a discretion as to whether or not to receive further evidence. That discretion is confined only by the requirement that it be exercised judicially and consistently with the judicial process: CDJ v VAJ at 185.

22 The Court concluded that the affidavit and annexures should not be received for the following reasons:

* The affidavit was largely tendentious and contained a great deal of material that was argumentative, rather than assertive of fact.

* It contained a lengthy dissertation upon the elements of the crime of conspiracy which was entirely irrelevant to the issues properly raised before the Court on the appeal.

* It contained material which was scandalous. For example, it asserted that the trial judge:

"failed in his duty to the Court by seeking refuge in the downgrading of the criminal conspiracy and all its ingredients to an act of champertous agreement and in so doing gave the conspirators the amnesty and protection of the Federal Court of Australia".

* It suggested that named individuals were involved in acts of collusion and corruption but provided no particulars of these allegations and no apparent basis for making them.

* It contained numerous assertions which were plainly hearsay, and sometimes hearsay upon hearsay.

* It contained a good deal of other material which was obviously irrelevant to any issue before the Court.

* It attempted to raise again the very matters that were the subject of the earlier Full Court decision in which these same claims were expressly rejected. These included the appellant's allegations of abuse of process, breach of duty, attempting to pervert the course of justice, and oppression.

* It sought to rectify the deficiencies in the appellant's presentation of his case to Conti J whereby he was unable to explain in terms which were comprehensible to his Honour precisely why he believed that he would be successful in having the judgment debt set aside upon the basis of the respondent's illegal conduct. (The paragraphs in question consisted largely of a recitation of the appellant's own past criminality, and his assertion that he was involved in a joint enterprise with the respondent in what he described as the "re-birthing" of motor cars. Apparently the appellant had been imprisoned for his involvement in that activity. However, according to him, the respondent had never been charged. It is implicit, but nowhere clearly spelt out in the affidavit, that the judgment debt, described in the creditor's petition as being "monies loaned" to the appellant, actually involved some kind of accounting between them for the proceeds of stolen goods.) It is at least open to serious doubt whether, had material in this form been before Conti J on 21 September 2001, it would have affected his Honour's conclusion that nothing said by the appellant was "comprehensible in terms of legal principle".

23 Conti J was obliged to consider the matter remitted to him upon the basis that there was no notice of opposition to the petition. The affidavit and annexures sought to be relied upon by the appellant sought, in effect, to circumvent the orders of the Full Court which had dealt conclusively, and to finality, with many of the issues raised by that evidence, on 9 July 2001.

24 When one adds to these considerations the fact that virtually all of the matters contained in the affidavit and in the annexures were fully known by the appellant at the time this matter was heard by Conti J on 21 September 2001, the discretionary considerations which favoured exclusion of this evidence were overwhelming. It was for these reasons that the Court rejected the application to lead further evidence.

The other grounds raised on the appeal

25 In addition to having sought to rely upon the new material contained in the affidavit and annexures, the appellant informed the Court both orally and in written submissions that on 31 January 2002 the judgment debt upon which the sequestration order had been based had in fact been set aside by the Local Court at Wagga Wagga . He caused to be sent by facsimile to the Court a copy of a letter which the Registrar of that court had sent to him on 31 January 2002. That letter was in the following terms:

Dear Sir/Madam

Civil Claims File No: 459/92

Plaintiff: JOHN ALFRED WILCOX

Ref:

Defendant: DAVID COTTERILL (sic) (M)

Ref:

********

JUDGEMENT SET ASIDE. JUDGEMENT DEBTOR PAY JUDGEMENT CREDITOR COSTS OF $500.00 WITHIN 28 DAYS. VERIFIED DEFENCE TO BE FILED WITHIN 21 DAYS."

26 Counsel for the respondent accepted that the Local Court had indeed set aside the judgment debt. He accepted also that it appeared that the appellant had settled all other outstanding claims, including that of the supporting creditor, thereby leaving the judgment debt in favour of the respondent, since set aside, as the only foundation for the appellant's bankruptcy.

27 It was against this background that the appellant informed the Court at the commencement of his submissions that he now wished to make application under s 153B of the Act to have his bankruptcy annulled. That section provides as follows:

"If the Court is satisfied that a sequestration order ought not to have been made or, in the case of a debtor's petition, that the petition ought not to have been presented or ought not to have been accepted by the Official Receiver, the Court may make an order annulling the bankruptcy."

28 The appellant also informed the Court that he had applied to the Trustee to be discharged from his bankruptcy because the original judgment debt had been set aside. He said that had not yet received a response from the Trustee. It may be that the appellant has, in effect, sought to invoke s 153A of the Act. That section deals with the consequences of bankrupt's debts having been paid in full. However, this matter was not explored in any detail. It was made abundantly clear by the Court that the matter which was before it was an appeal from the judgment of Conti J on 21 September 2001, and that the Court would not entertain an application under s 153B which would, in any event, have to be made to the Court in its original jurisdiction.

29 After considering his position, the appellant informed the Court that notwithstanding the possible availability of s 153B as a vehicle whereby his bankruptcy might ultimately be annulled, he still desired to proceed with his appeal. He was then invited by the Court to identify any error on the part of Conti J which would warrant setting aside his Honour's judgment.

30 In substance, a number of the matters upon which the appellant sought to rely were those contained in the affidavit and annexures (which the Court had already ruled it would not receive). The appellant also sought to rely upon the fact that the judgment debt upon which the bankruptcy was based had been set aside.

31 A number of the grounds of appeal were based upon what was contained in the affidavit and annexures. In the absence of that material those grounds are plainly untenable. Indeed, even had that evidence been received, the majority of the grounds of appeal would have been rejected as being clearly devoid of merit.

32 It is true, as several of the grounds of appeal note, that Conti J referred to the judgment of the Full Court of 9 July 2001 as having dismissed Mr Cottrell's appeal when, in fact, the appeal had been allowed. However, the point is little more than one of semantics. The appeal was allowed for the limited purpose of remitting the matter to his Honour to enable him to reconsider it as a hearing de novo, and not as an appeal stricto sensu.

33 Conti J's reference in his reasons for judgment to the Full Court having "dismissed" the appeal was plainly either a slip, or possibly, merely an observation which was somewhat loosely expressed. It is clear, from a reading of his Honour's reasons for judgment, that he fully understood the import of the Full Court's judgment, and that he carried out the remitter to the letter. There is no substance in any of the grounds of appeal which rely upon this point, or his Honour's having supposedly failed to consider the corrigendum to the reasons for judgment subsequently made by the Full Court.

34 The appellant was unable to point to any error, whether of fact or law, on his Honour's part which could possibly warrant this Court setting aside his judgment. Nor could he identify any error of principle in the manner in which his Honour exercised his discretion in relation to the making of the sequestration order. Whatever may ultimately be the consequence of the judgment debt having been set aside by the Local Court at Wagga Wagga, none of the grounds of appeal have been made out. It follows that the appeal must be dismissed. There will be an order that the respondent's costs be taxed and paid from the estate of the appellant in accordance with the Bankruptcy Act 1966 (Cth).

I certify that the preceding thirty-four (34) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Court.

Associate:

Dated: 14 March 2002

	The appellant appeared in person by telephone link
Counsel for the Respondent:	Mr M. Condon
Solicitors for the Respondent:	Kemp Strang
Date of Hearing:	13 February 2002
Date of Judgment:	14 March 2002