Samootin v Wagner [2009] FCAFC 77 (26 June 2009)

BANKRUPTCY – appeal from dismissal of application to annul bankruptcy pursuant to s 153B Bankruptcy Act 1966 (Cth) – whether sequestration order ought not to have been made – whether any relevant change of circumstances to warrant annulment.

HELD: Appeal dismissed.

Bankruptcy Act 1966 (Cth) 153B
Uniform Civil Procedure Rules 2005 (NSW) regs 36.1A, 36.10(1)

Re Frank; Ex parte Piliszky (1987) 16 FCR 396 considered
Boles v Official Trustee in Bankruptcy [2001] FCA 639; (2001) 183 ALR 239 considered

ALEXANDRA SAMOOTIN v GISELLE MONIKA WAGNER, ADRIAN HOLMES and OFFICIAL TRUSTEE IN BANKRUPTCY
NSD 1172 of 2008

EDMONDS, MCKERRACHER AND BARKER JJ
26 JUNE 2009
SYDNEY

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY	NSD 1172 of 2008

ON APPEAL FROM A SINGLE JUDGE OF THE FEDERAL COURT OF AUSTRALIA

AND:

GISELLE MONIKA WAGNER
First respondent

ADRIAN HOLMES
Second respondent

OFFICIAL TRUSTEE IN BANKRUPTCY
Third respondent

JUDGES:	EDMONDS, MCKERRACHER AND BARKER JJ
DATE OF ORDER:	26 JUNE 2009
WHERE MADE:	SYDNEY

Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
The text of entered orders can be located using Federal Law Search on the Court’s website.

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY	NSD1172 of 2008

ON APPEAL FROM A SINGLE JUDGE OF THE FEDERAL COURT OF AUSTRALIA

AND:

GISELLE MONIKA WAGNER
First respondent

ADRIAN HOLMES
Second respondent

OFFICIAL TRUSTEE IN BANKRUPTCY
Third respondent

JUDGES:	EDMONDS, MCKERRACHER AND BARKER JJ
DATE:	26 JUNE 2009
PLACE:	SYDNEY

1 This is an appeal from a judge of this Court dismissing the appellant’s application for an annulment of bankruptcy (Samootin v Wagner [2008] FCA 1066).

2 The first and second respondents, Ms Wagner and Mr Holmes, are the successive proprietors of a legal practice known as ‘Northern Beaches Legal Service’. Ms Wagner was involved in conveyancing transactions out of which the underlying litigation, which indirectly gave rise to these proceedings, arose. Mr Holmes was the proprietor of that practice at the time of the commencement of that litigation. The third respondent is the Official Trustee in Bankruptcy.

3 The factual background of this proceeding, in particular the multitude of proceedings in various courts that have been commenced by the appellant, are set out at some length in the reasoning of the primary judge. For present purposes, it suffices to recite the salient aspects.

4 The appellant commenced proceedings in the Supreme Court of New South Wales against her ex-husband, Mr Shea, a Mr Deans and Shea Dealite Pty Ltd in March 2001 (‘Supreme Court Proceeding 1973/2001’). The first respondent was joined as the fifth defendant to those proceedings on 21 November 2001 and the second respondent was joined as the sixth defendant to those proceedings pursuant to leave granted by Palmer J on 3 June 2003. On 4 July 2003, the New South Wales Court of Appeal dismissed an application for leave to appeal from interlocutory orders made by Palmer J on 17 October 2002, with costs. The costs of those proceedings were assessed and judgment was entered in the sum of $9,006.44 in Supreme Court Proceeding 11966/2005 on 13 May 2005 in favour of the first respondent. On 1 August 2003, Palmer J delivered judgment in Supreme Court Proceeding 1973/ 2001, dismissing the appellant’s claim against Ms Wagner and Mr Holmes, with costs. The costs of those proceedings were assessed and judgment was entered in the sum of $155, 522.69 in Supreme Court Proceeding 11967/2005 on 13 May 2005 in favour of the first and second respondents. All appeals and applications for leave to appeal from judgments underlying the two costs judgments have been dismissed.

5 On 17 June 2005, the first and second respondents caused a bankruptcy notice to be issued to the appellant based on the costs judgments (‘the Bankruptcy Notice’). On 2 August 2005, the appellant filed an application to set aside the Bankruptcy Notice which was dismissed by Federal Magistrate McInnis with an order for indemnity costs in favour of the first and second respondents on 30 September 2005. On 2 November 2005, the first and second respondents filed a creditor’s petition in the Federal Magistrates Court on the basis of the appellant’s failure to comply with the Bankruptcy Notice. On 23 December 2005, the appellant filed a notice of intention to oppose the creditor’s petition. The creditor’s petition and related applications were heard before Federal Magistrate Lloyd-Jones on 27 April 2006 and 24 May 2006. The sequestration order against the appellant’s estate was made on 24 May 2006.

6 On 31 May 2006, the appellant filed a notice of appeal in this Court seeking to set aside the sequestration order. On 21 July 2006, Wilcox J dismissed the appeal.

7 On 14 March 2007, the appellant filed an application in the Federal Magistrates Court seeking, inter alia, to annul the sequestration order made against her estate and to set aside, annul or strike out, the bankruptcy notice upon which the sequestration order was founded. Federal Magistrate Smith dismissed this application on 4 July 2007.

8 On 31 July 2007, the appellant filed an application in this Court seeking an extension of time within which to serve a notice of appeal from the judgment and orders of Smith FM and on 21 August 2007 she filed an application for leave to appeal from the judgment and orders of Smith FM. Gyles J dismissed these applications.

9 On 29 April 2008, the appellant filed an application in this Court seeking, inter alia, to annul her bankruptcy and filed an amended application in this regard on 16 June 2008. Flick J dismissed the application on 21 July 2008. It is from that order that the appellant’s appeal is brought.

10 The appellant filed an amended notice of appeal on 19 December 2008 from which some eight grounds of appeal may be distilled. None of them have any factual or legal substance.

(1) The primary judge erred in law in finding that the Court could not be satisfied that a sequestration order ought not to have been made.

(2) The primary judge erred in fact in finding that no consent orders were made by Ms Sally Nash, a solicitor.

(3) The primary judge erred in fact and law in finding that there was no relevant change of circumstances to warrant any annulment of the bankruptcy.

(4) The primary judge erred in law in refusing leave to issue various subpoenas and to require legal representatives of the third respondent, the Official Trustee in Bankruptcy, to give evidence.

(5) The primary judge erred in law when he cited, in his reasons for judgment, judgments in other proceedings not in the Federal Court.

(6) The primary judge erred in law in finding that the application to annul the appellant’s bankruptcy should be dismissed and was an abuse of process.

(7) The primary judge erred in law and in fact in finding that the appellant was not a victim of financial, legal and civil abuse.

(8) The primary judge erred by ignoring possible conflict of interest elements in the appellant’s matter.

11 Section 153B of the Bankruptcy Act 1966 (Cth) provides for the exercise of a discretion to annul a bankruptcy in certain circumstances. The primary judge, at [33], observed that this section ‘contemplates two elements: the Court reaching a state of satisfaction that an order "ought not to have been made" and an exercise of discretion’ in favour of the bankrupt. On the material before his Honour, he found that the appellant had failed to establish any reason why the sequestration order ought not to have been made. The test to apply in determining whether the sequestration order ought not to have been made is whether the judicial officer making the order (Lloyd-Jones FM) was bound not to make it: Re Frank; Ex parte Piliszky (1987) 16 FCR 396 at 403 per Fisher J; f’lld: Boles v Official Trustee in Bankruptcy [2001] FCA 639; (2001) 183 ALR 239 at 243 per Emmett J (Katz and Conti JJ agreeing). The primary judge correctly applied this test. He observed at [34] that:

12 The primary judge went on at [40] to say that given the evidence as to continued insolvency of the appellant, even ‘if the occasion for the exercise of discretion had arisen, it would have been exercised adversely to her’.

13 The appellant contended the primary judge erred in finding there was no ‘state of satisfaction’ for two reasons:

(1) The hearing before Palmer J in Supreme Court Proceeding 1973/2001 was interlocutory and therefore could not form the basis of a bankruptcy notice and/ or;

(2) the costs judgments were based on ‘fabricated court hearings’ to which the appellant was not the ‘true plaintiff’ and therefore unable to lodge any competent appeal.

14 Pursuant to ss 40 and 41 of the Bankruptcy Act, acts of bankruptcy and the issue of bankruptcy notices can only be made on final judgments or orders as opposed to interlocutory relief. It is important, therefore, to identify the true nature of the proceedings before Palmer J and the judgment handed down by his Honour. It is true that the hearing was interlocutory insofar as financial accounting between the parties still had to take place. Relevantly, however, it was a final determination in respect of the liabilities of the parties to the proceeding. The first and second respondents were excused from any further attendance as the claims that related to them had been finally determined and appropriate costs orders made. As such, the nature of the judgment provides no basis for a finding that the sequestration order ought not to have been made.

15 It is further argued by the appellant that her bankruptcy was based on ‘fabricated proceedings’. Insofar as this issue was not before the primary judge, nor does it arise from the material the appellant placed before the Court on her annulment application, it is not competent.

16 That aside, the argument is based on a misunderstanding of the administrative process for the entering of costs orders in the Supreme Court of New South Wales. In that court, following costs orders being made, costs assessments being undertaken and certificates as to determination of those costs having being issued and filed, judgments in the amount of these costs assessments are entered. It is the procedure of the Supreme Court to enter these judgments under new Common Law Division proceedings with the parties remaining the same as in the proceedings upon which it is based. Regulation 36.10(1) of the Uniform Civil Procedure Rules 2005 (NSW) envisages the use of such an administrative procedure in providing:

Section 368(5) of the Legal Profession Act 2004 (NSW) as it stood at the relevant time, provides further support for this procedure. As such, the cost orders made in Supreme Court Proceedings 1973/2001 were entered as judgments in the new Common Law Division proceedings 11966/2001 and 11967/2001.

17 Contrary to what the appellant submitted, this procedure for costs determination and assessment does allow for appeals; see Part 3.2, Division 11 of the Legal Profession Act. The appellant, however, never chose to pursue such relief. For the foregoing reasons, Supreme Court Proceedings 11966 and 11967/2001 are not ‘fabricated proceedings’ and do not provide support for the submission that the sequestration order ought not to have been made.

19 The second ground of appeal raised by the appellant centres on orders made by Hammerschlag J in the Supreme Court of New South Wales on 17 July 2007 and as amended on 30 July 2007, specifically whether these were valid ‘consent orders’.

20 The primary judge considered these orders at [41] – [43] of his reasons. At [42], his Honour said:

21 The appellant contended that this finding was wrong in fact and that these orders are invalid as she did not provide consent as is required by Reg 36.1A of the Uniform Civil Procedure Rules.

22 This submission, however, ignores the nature of the proceedings before Hammerschlag J. As counsel for the third respondent outlined in his submissions, the hearing before his Honour lasted several days during which his Honour made several rulings allowing some matters and disallowing others. At the conclusion of the hearing, his Honour directed that short minutes be brought in reflecting the various matters that he had ruled on with respect to each of the points in issue raised before him during the course of the hearing. It is these orders that were signed by Ms Nash. As such, the orders reflected the orders made by the court; not ‘consent’ orders that required the consent of appellant.

23 Accordingly, we agree with the primary judge’s conclusion at [42] and find that this ground of appeal cannot be sustained.

24 The third ground of appeal raised by the appellant relates to whether there was any relevant change of circumstances to now warrant annulment of the bankruptcy.

25 The primary judge found, at [38], that the only change of circumstances, being that the appellant moved out of the marital home which is at the centre of this litigation, was not relevant to consideration of any potential annulment of her bankruptcy.

26 The appellant claims that there are two relevant changed circumstances: (1) Smith FM did not look at the default cost order judgments that were presented by the first and second respondents, and (2) the third respondent unlawfully caused the Shea/Samootin marital property pool of assets a severe loss.

27 The first issue is largely a re-agitation of concerns dealt with in respect of the first ground of appeal. As there explained, the cost orders were validly entered in ‘fresh proceedings’ in the Common law Division of the Supreme Court of New South Wales and therefore do not constitute ‘changed circumstances’. The second issue has already been considered and dismissed by Jacobson J in Samootin v Official Trustee in Bankruptcy [2007] FCA 1618. Relevantly, at [19], his Honour found:

28 As both of these circumstances have been canvassed and dismissed before, they do not constitute any relevant ‘changed circumstances’ to warrant any re-examination of the sequestration order made against the appellant’s estate.

30 The fourth ground of appeal relates to the primary judge’s refusal to issue subpoenas to (a) Mr Stephen Golledge; (b) Ms Sally Nash and (c) Mr Tibor Karolyi, an Assistant Official Receiver. The appellant contended that this refusal amounted to a denial of procedural fairness.

31 At [30] of his reasons, the primary judge decided that it was not considered that Mr Golledge or Ms Nash could ‘give any evidence of relevance to the matters properly before th[e] Court’. As for Mr Karolyi, the primary judge noted he was able to present himself for cross-examination and the appellant was able, in fact, to ask him questions, and he was able to provide an account to the appellant as to the realisation of assets, and the payment of debts therefore removing the need for the issue of a subpoena.

32 The appellant’s main concern appears to be that she was unable to question the above three individuals about the Supreme Court proceedings and their conduct in relation to the Shea/Samootin marital property.

33 We agree with the findings of primary judge on this ground. Mr Karolyi was available for cross-examination. As an assistant official receiver who had the day-to-day carriage of this administration, subject to the overriding supervision of the official receiver, he, rather than Ms Nash and Mr Golledge, was the person most obviously connected with the conduct of the administration. In any event, the issues the appellant wanted to question these individuals about relate to the first and second grounds of appeal which have been rejected.

35 The fifth ground of appeal agitated by the appellant concerns the primary judge’s reference to judgments in other proceedings not in the Federal Court.

36 The appellant contended that the primary judge referred to passages from other proceedings which the appellant considers cast her in an unfavourable light. In particular, the Court was taken to [36] of the primary judge’s reasons where reference was made to Palmer J’s comments in Supreme Court Proceeding 1973/2001.

37 Whilst the appellant may feel aggrieved at the way in which Palmer J articulated his reasons, this in itself does not amount to error. Moreover, the primary’s judge recitation of these comments does not constitute appellable error.

39 The sixth ground of appeal raised by the appellant concerns the view formed by the primary judge, at [53], that the appellant’s amended application should be dismissed as an abuse of process.

40 This ground was not agitated specifically in the appellant’s written submissions or on the hearing of her appeal. It appears to encompass the whole of the other arguments put by the appellant. As a discrete ground, without further argument, it must be rejected.

41 The penultimate ground of appeal concerns the primary judge’s finding that the appellant was not a victim of financial, legal and civil abuse.

42 The primary judge found, at [52], that the submission as to legal and civil abuse was ‘totally without merit’. At [51], his Honour noted that the appellant has been afforded numerous opportunities to ‘ventilate her grievances’ and such opportunities are inconsistent with her claims of discrimination.

43 The appellant continues to assert she is the victim of such abuse. This ground appears based on a complaint that she was denied access to justice and legal systems that are available to other citizens. We agree with what the primary judge said at [50] – [52]. The appellant has been afforded every opportunity to present her case before this Court and before other judicial officers on repeated occasions. The fact that relief for her grievances has been repeatedly refused says more about the merits of her case than it does about the possibility of any discrimination at the hands of judicial officers.

44 Absent any further material being led by the appellant, the seventh ground of appeal must be rejected.

45 The final ground of appeal concerns the primary judge’s alleged failure to address possible conflict of interest elements in previous judicial proceedings concerning both the appellant and the respondents.

46 This issue was not considered by the primary judge. In the amended notice of appeal, the appellant articulates this ground as arising out of her contention that the Honourable Justice Michael Kirby, formerly of the High Court of Australia, had known the ‘Deans family for 40 years’ and did not disclose this conflict at a special leave application in which the appellant was the applicant. This ground was only mentioned in passing on the hearing of the appeal.

47 Even if, however, this contention is correct, it has no bearing on whether the sequestration order, based on the costs judgments, ought not to have been made against the appellant’s estate. The matter over which Kirby J was involved concerned the appellant seeking special leave from a decision of the Full Court of the Family Court which was in her favour. Callinan and Kirby JJ explained to the appellant that as her appeal was successful and the original orders made by Cohen J revoked, there was no relief the High Court could afford her and an appeal to the High Court was futile (High Court Transcript Samootin & Anor v Shea & Ors S283/2000, 23 November 2001).

49 For the foregoing reasons, the appeal must be dismissed. The appellant must pay the respondents’ costs.

I certify that the preceding forty-nine (49) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justices Edmonds, McKerracher and Barker.

Counsel for the Appellant:	The appellant appeared in person

Counsel for the First and Second Respondents:	Ms K Dawson

Solicitor for the First and Second Respondents:	Mallesons Stephen Jaques

Counsel for the Third Respondent:	Mr S Golledge

Solicitor for the Third Respondent:	Sally Nash & Co

Date of Hearing:	26 May 2009

Date of Judgment:	26 June 2009

Federal Court of Australia - Full Court

Samootin v Wagner [2009] FCAFC 77 (26 June 2009)