Mehajer (Bankrupt) v Weston (Trustee) [2020] FCA 596

FEDERAL COURT OF AUSTRALIA

Mehajer (Bankrupt) v Weston (Trustee) [2020] FCA 596 Appeal from: Application for extension of time: Mehajer v Weston in his Capacity as Trustee of the Bankrupt Estate of Salim Mehajer [2019] FCA 1713

File number: NSD 2185 of 2019

Judge: MARKOVIC J

Date of judgment: 6 May 2020

Catchwords: PRACTICE AND PROCEDURE – application for extension of time to file a notice of appeal – where no explanation for delay – where proposed appeal has no merit and no reasonable prospects of success – application dismissed

Legislation: Bankruptcy Act 1966 (Cth) s 153B Federal Court of Australia Act 1976 (Cth) s 27 Federal Court Rules 2011 (Cth) rr 36.03, 36.05, 36.57

Cases cited: BQQ15 v Minister for Home Affairs [2019] FCAFC 218 Deputy Commissioner of Taxation v Broadbeach Properties Pty Ltd (2018) 237 CLR 473 House v The King (1936) 55 CLR 499 Sami v Minister for Immigration and Citizenship [2013] FCAFC 128

Date of hearing: 15 April 2020

Registry: New South Wales

Division: General Division

National Practice Area: Commercial and Corporations

Sub-area: General and Personal Insolvency

Category: Catchwords

Number of paragraphs: 66

Counsel for the Applicant: The Applicant appeared in person

Solicitor for the First Respondent: Mr D Calabria of Bridges Lawyers

Counsel for the Second Respondent: Mr A Leopold SC and Mr B Koch

Solicitor for the Second Respondent: Corrs Chambers Westgarth

ORDERS NSD 2185 of 2019

BETWEEN: SALIM MEHAJER (A BANKRUPT) Applicant

AND: PAUL GERARD WESTON IN HIS CAPACITY AS TRUSTEE OF THE BANKRUPT ESTATE OF SALIM MEHAJER First Respondent

SC LOWY PRIMARY INVESTMENTS, LTD Second Respondent

JUDGE: MARKOVIC J DATE OF ORDER: 6 may 2020

THE COURT ORDERS THAT:

1. The application for an extension of time to file a notice of appeal filed on 30 December 2019 is dismissed. 2. The applicant pay the respondents' costs of the application. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

REASONS FOR JUDGMENT

MARKOVIC J: 1 This is an application under r 36.05 of the Federal Court Rules 2011 (Cth) (Rules) for an extension of time in which to appeal from orders dismissing an application made by the present applicant, Salim Mehajer, to annul his bankruptcy: see Mehajer v Weston in his Capacity as Trustee of the Bankrupt Estate of Salim Mehajer [2019] FCA 1713 (Primary Judgment or PJ). 2 On 10 October 2019 the primary judge delivered ex tempore reasons and made orders including an order that, pursuant to r 36.03(b) of the Rules, the date by which any notice of appeal is to be filed be fixed as the date 28 days after the provision by the Court to the parties of the revised reasons for judgment. His Honour's revised reasons were received by Mr Mehajer on 25 October 2019. The last day by which Mr Mehajer was to file any appeal was thus 22 November 2019. Mr Mehajer filed his application for an extension of time in which to appeal on 30 December 2019, some five weeks out of time.

Background 3 On 20 March 2018 a sequestration order was made against Mr Mehajer's estate. The first respondent, Paul Gerard Weston, is the trustee of Mr Mehajer's bankrupt estate (Trustee). 4 On 17 April 2018 Mr Mehajer commenced proceeding NSD617/2018 seeking an order pursuant to s 153B(1) of the Bankruptcy Act 1966 (Cth) (Bankruptcy Act) that his bankruptcy be annulled (First Annulment Proceeding). The Trustee was a respondent to the First Annulment Proceeding. 5 In the First Annulment Proceeding Mr Mehajer sought interim relief (Interim Relief Application) including an order that the sequestration order be stayed. On 26 April 2018 Mr Mehajer's Interim Relief Application was dismissed: see Mehajer v Weston (Trustee), in the matter of Mehajer [2018] FCA 608 (Mehajer v Weston (No 1)). 6 On 21 June 2018, at the final hearing of the First Annulment Proceeding, on the application of Mr Mehajer and with the Trustee's consent, the First Annulment Proceeding was discontinued. 7 On 12 October 2018 SC Lowy Primary Investments, Ltd (SC Lowy) filed an originating application commencing proceeding NSD1902/2018 against Mr Mehajer and the Trustee as first and second respondents respectively, seeking declarations that certain property had vested in the Trustee (Vesting Proceeding). SC Lowy subsequently filed an amended originating application in the Vesting Proceeding. On 11 December 2018, the Trustee filed a notice of cross-claim in the Vesting Proceeding seeking additional but related declarations that certain property had vested in him. 8 The Vesting Proceeding was heard on 19 December 2018 and adjourned until 25 January 2019 for closing submissions. On 25 January 2019: (1) the primary judge gave ex tempore reasons in favour of the relief sought by SC Lowy in its amended originating application and by the Trustee in his notice of cross-claim in the Vesting Proceeding; and (2) Mr Mehajer sought informally to commence a new proceeding seeking annulment of his bankruptcy. That informal commencement became proceeding NSD144/2019 (Second Annulment Proceeding). The Trustee and SC Lowy were the first and second respondents respectively to the Second Annulment Proceeding and are the first and second respondents to the present application. 9 The Second Annulment Proceeding was ultimately listed for hearing for three days commencing on 8 October 2019. Mr Mehajer was legally represented by a solicitor and senior counsel. 10 As noted at [2] above, on 10 October 2019 orders were made in the Second Annulment Proceeding including an order that the further amended application filed in that proceeding be dismissed. It is from those orders that Mr Mehajer now seeks an extension of time in which to appeal. 11 On 11 October 2019 Mr Mehajer filed an application for an extension of time in which to appeal the orders made in the Vesting Proceeding (Vesting Appeal Extension Application). Mr Mehajer subsequently filed an amended application for an extension of time in which to appeal. That application was listed for hearing on 4 February 2020. On 3 February 2020 Mr Mehajer sought an adjournment of the hearing. However, in the absence of consent from the respondents, the Vesting Appeal Extension Application remained listed for hearing on 4 February 2020. 12 The Vesting Appeal Extension Application came before me for hearing on 4 February 2020. Mr Mehajer did not appear. On an ex parte basis, I made orders dismissing both Mr Mehajer's application for an adjournment of the hearing of the Vesting Appeal Extension Application and the Vesting Appeal Extension Application with costs: see Mehajer (A Bankrupt) v SC Lowy Primary Investments, Ltd (A Company Incorporated in Hong Kong) [2020] FCA 125.

The primary judge's reasons 13 The primary judge first set out the background to the commencement of the Second Annulment Proceeding. In doing so his Honour referred to the First Annulment Proceeding and to his reasons in Mehajer v Weston (No 1) delivered at the time of refusing the relief sought in the Interim Relief Application. His Honour noted that in refusing that relief he considered the issue of whether there was a serious question to be tried. At PJ [4]-[6] his Honour relevantly said: 4 … I noted at that time that in the original application for annulment, Mr Mehajer called in aid three matters said to support his annulment contentions. They were as follows (at [14]): The first was that there were defects in the creditors' petition, being erroneous information and an overstatement in the amount of the interest claimed on the judgment debt (Defects Contention); the second was that an adjournment of the hearing of the creditors' petition ought to have been sought and granted, given Mr Mehajer's circumstances (Adjournment Contention); the third was that Mr Mehajer had the ability to pay his debts as at the date of the making of the sequestration order (Ability to Pay Contention). 5 When considering the third matter, the "Ability to Pay Contention", I said the following at [26]-[29]: The third matter raised on the serious question to be tried is that Mr Mehajer intends to contend that he had the ability to pay his debts at the time the sequestration order was made. In this regard, it is fair to say that the present state of the evidence is unsatisfactory. I was provided with Mr Mehajer's schedule of claimed assets and debts (Schedule), which is based on the affidavit material. In relation to the assets, a number of properties were identified, including seven for which there was no evidence as to whether or not they are the subject of encumbrances. Two of the properties, said to be owned by Mr Mehajer, are offered as security for an undertaking for the stay, and I will deal with these separately. A number of other assets are identified, for which values are asserted, including a series of personal loans, chattels, and an amount of $27 million said to represent an interest in developments being carried out by two companies: SET Services Pty Ltd (SET) and Sydney Project Group Pty Ltd (SPG). The evidence in respect of this last asset is illustrative of the difficulties which beset the evidence. At [38] of her affidavit affirmed on 24 April 2018, Ms Zali Burrows, Mr Mehajer's solicitor, deposed as follows: I am informed by Mr Mehajer that, since October 2017, he has been unsuccessfully attempting to obtain from the external controllers of Sydney Project Group and SET Services Pty Ltd copies of the entities' financial records. However, I am informed by Mr Mehajer that SET Services Pty Ltd is, together with Sydney Project Group Pty Ltd, the proponent of a development which has made approximately $83,000,000 of pre-sales of real estate. I am also informed by Mr Mehajer that he has an interest in developments carried out by SET Services Pty Ltd and Sydney Project Group Pty Ltd to a value of $27,000,000. On or about 18 April 2018, Mr Mehajer obtained caveats against 18 lots in respect of his interest in SET Services Pty Ltd. Now shown to me at Tab [5] of ZB-1 is a copy of those caveats. (Uncorrected) When one goes to the annexure referred to by Ms Burrows, rather than seeing a copy of the caveats, what is annexed at pages 160-162 are copies of registration notices identifying the dealing numbers issued by Land Registry Services. What is notable is that the caveats are not in evidence, which caveats would have identified the nature of the interest sought to be asserted. When I sought clarification of the nature of the interest that was to be asserted, nothing further could be said other than what is extracted above. Two other examples from what might be described as the other side of the ledger further illustrate the difficulties. One is the debt owed to the DCT, which, according to Mr Raguragavan Nithiaseelan, a Senior Manager in the employ of the Trustee, is an amount of $8,604,202.56, not the amount of $8,355,778 referred to in the Schedule. Similarly, in respect of Prime, the amount identified as the debt in the Schedule is $199,519, when it appears from a copy of the bankruptcy notice served on Mr Mehajer that as at 11 October 2017, the debt was $668,276.76. While the material was, no doubt, prepared with some haste, it is fair, at least at present, to describe the evidence as to assets and liabilities as somewhat high, wide and (depending upon the view one takes of it) handsome. 6 My last comment reflected my concern that the solvency evidence put before the Court at that stage was, to put it mildly, less than compelling. (Original emphasis.) 14 At PJ [15] the primary judge succinctly set out the principles governing an application for an annulment of a bankruptcy as follows: There are five general principles which assume importance on this application, which are as follows: (1) An applicant who seeks an annulment of his bankruptcy "carries a heavy burden"; it is incumbent on an applicant "to place before the Court all relevant material with respect to his or her financial affairs so that the Court may be properly informed and may make a judgment that is based on the full facts and the actual circumstances of the applicant": Re Papps; ex parte Tapp (1997) 78 FCR 524 at 531. (2) In addressing the question of whether or not a sequestration order "ought not to have been made", the inquiry is a broad one and is not confined to a consideration of whether the order should have been made on the facts known to the Court at the time at which it was made; the Court is to take account of the facts, known at the time the sequestration order was made and also other facts, which are evident, at the time of the hearing of the annulment application, even if those facts were not before the Court at the time the sequestration order was made: see Boles v Official Trustee in Bankruptcy [2001] FCA 639; (2001) 183 ALR 239 at 243 [16]; as Mansfield J described it Re Almassy [1999] FCA 1004; (1999) 92 FCR 597 at 599-600 [15]: The expression "ought not to have been made" in s 153B in respect of a sequestration order being cancelled requires there to be shown that there was some matter upon which the order was made which was not in fact correct, although that might be shown not just from the facts as disclosed at the time, but as they would have been disclosed had all the true facts been disclosed at the time of the making of the order… (3) A sequestration order "ought not to have been made" if the Court would have been bound not to make the sequestration order: see Re Frank; Ex parte Piliszky (1987) 16 FCR 396; this means that if it was open to the judge to make an order in the exercise of discretion, it can only be said that the judge ought not to have made the order if none of the circumstances could justify the making of the order; or, alternatively, if it can be established that an order ought not to have been made because subsequent evidence discloses that all of the true facts were not before the Court when the order was made: Re Cook (1946) 13 ABC 245. (4) The power conferred on the Court by s 153B(1) is discretionary in nature; even if persuaded that the sequestration order ought not to have been made, the Court can, under appropriate circumstances, decline to annul the bankruptcy: Boles v Official Trustee in Bankruptcy at 243 [16]; as Logan J in Crocker v Infa-Secure Pty Ltd [2018] FCA 84 at [7] explained: The Court retains a discretion as to whether to annul a bankruptcy, even if persuaded that a sequestration order ought not to have been made… In Francis v Eggleston Mitchell Lawyers Pty Ltd [2013] FCA 564 at [26] Marshall J offered a necessarily non-exhaustive summary of circumstances which, in earlier cases, had been regarded as warranting an adverse exercise of that discretion. Factors such as whether the issue put forward as a basis for being satisfied the sequestration order ought not to have been made were capable of being raised at the time of the hearing of the petition, whether the bankrupt was legally represented then, the bankrupt's conduct over the course of the bankruptcy and the commercial morality of the bankrupt's conduct prior to bankruptcy are some which, in the past, have been regarded as relevant to the exercise of the court's discretion. (5) Considerations which may have a bearing on the exercise of discretion include delay, whether or not the applicant for annulment at the time of the hearing of the application is solvent, whether or not the applicant has made full disclosure of his financial affairs and also whether there was a failure by the bankrupt to oppose the creditor's petition and attend the hearing at which the sequestration order was made: re Williams (1968) 13 FLR 10; also see Hassall, D A, "Annulment of Bankruptcy and Review of Sequestration Orders" (1993) 67 ALJ 761 at 766. 15 At PJ [17] the primary judge recounted the history of the Second Annulment Proceeding, noting that senior counsel appearing for Mr Mehajer had indicated that the primary argument to be put on the application was that Mr Mehajer was solvent at the time that the sequestration order was made. 16 However, in setting out what his Honour described as the "refined case of Mr Mehajer", the primary judge noted that, by the time of final submissions, senior counsel appearing for Mr Mehajer conceded that he was not in a position, based on the evidence, "to gainsay the proposition that Mr Mehajer was insolvent at the time the sequestration order was made": at PJ [17]. It is convenient at this point to note the following exchange which took place at the hearing of the Second Annulment Proceeding between the primary judge and Mr Finnane QC, senior counsel appearing for Mr Mehajer: HIS HONOUR: Can I ask you one question, Mr Finnane, about the submission at the bottom of the page? The applicant, because he was in custody, was unable to attend the court, was unable to put forward any evidence on the day nor negotiate with any of his creditors. The way I understand the case has been run, though, is that the reason why the sequestration order ought not to have been made by Judge Smith was – the reason was he was solvent at the time the sequestration order was made - - - MR FINNANE: Yes. HIS HONOUR: - - - it's not – there's not some sort of freestanding argument which says that it ought not to have been made because he was in custody, was unable to attend court and there should have been an adjournment or something. MR FINNANE: Well, obviously, your Honour, all I could say about his attending court, had he been able to attend court, he would have been able to give evidence, of course, he would have been able to enter into negotiations with those who might or wanted to be substituted, but the question of solvency I cannot raise anything in opposition to the matters put forward by the trustee as to what was owing at the time. HIS HONOUR: Yes. MR FINNANE: That's obviously correct. HIS HONOUR: But – so does that mean the argument is less now about whether or not he was insolvent at the time the sequestration order was made and more the judge shouldn't have made the sequestration order on the day because he had, potentially, access to funds of 1.6 million and he could have – he was – by the sequestration order being made at that time, he was, in effect, deprived of the opportunity of entering into negotiations with his creditor to see if he could do some sort of deal. MR FINNANE: Well, that's so, your Honour. (Emphasis added.) 17 At PJ [18] the primary judge referred to an aide memoire prepared by the Trustee which appears as Schedule 1 to the Primary Judgment (Schedule 1) and which his Honour found "demonstrates beyond peradventure that according to the Trustee's estimate of assets and liabilities, the Trustee's estimate of the net total deficiency of assets over liabilities was negative $24 million". Despite this, at PJ [19] his Honour observed that Mr Mehajer submitted that the conclusion about his financial position as at the date of the sequestration order was not fatal to the Second Annulment Proceeding, relying on two principal matters. 18 First, unchallenged psychiatric evidence that Mr Mehajer had been "affected by symptoms of bipolar disorder since at least 2012 and was in a hypomanic state during 2015, when he entered into various loan agreements": at PJ [20]. The primary judge noted that none of the material about Mr Mehajer's mental state was before the Federal Circuit Court of Australia (Federal Circuit Court) at the time of making the sequestration order but inferred based on the evidence that, given Mr Mehajer had suffered from bipolar disorder since at least 2012, at the time of making the sequestration order he was afflicted in the same way: at PJ [22]. 19 Secondly, a variation of what the primary judge had earlier referred to as the "Adjournment Contention", being that on 23 January 2018 Mr Mehajer was taken into custody on remand and held in a holding cell in Surry Hills for eight days during which time he was permitted one telephone call, which he made to his family, and his solicitor and barrister in the bankruptcy proceeding did not visit him: at PJ [23]. The primary judge recorded the submission made on behalf of Mr Mehajer that, in circumstances where he had given instructions to his solicitor to seek an adjournment while he was in gaol pending a bail application, the matter should have been adjourned: at PJ [24]. 20 Next, despite his Honour's understanding that the figures in Schedule 1 were no longer in dispute, the primary judge made the following findings (at PJ [26]-[33]): (1) Mr Mehajer was indebted to the Australian Taxation Office (ATO) in the sum of $8,355.778.03, based on notices of amended assessment and a notice of assessment of shortfall penalties issued on or around 24 October 2017. With the impact of the general interest charge on that amount, the debt he owed to the ATO was in the order of $8.6 million by the time of the sequestration order. Despite the fact that prior to the date of the making of the sequestration order objections had been lodged with the ATO, as is well established by the authorities, the relevant legislative provisions require the Court to treat the debt as undisputed; (2) there were undisputed miscellaneous debts owing at the relevant date to SM Project Developments Pty Ltd (in liq), Prime Marble & Granite Pty Ltd and Alan Teo totalling $937,000, and $2.905 million was also owing to the National Australia Bank; (3) as at the date of the making of the sequestration order Mr Mehajer was indebted to Charles Gittany for in excess of $3 million. In relation to this debt, at PJ [49]-[50] the primary judge referred to the "curious" entry of judgment against Mr Mehajer for a sum of over $3.05 million on 30 April 2018 after the sequestration order had been made and a deed of release between Mr Gittany and some of Mr Mehajer's co-sureties entered into in early 2019 which purported to vary arrangements to reduce the sum outstanding to $600,000. His Honour concluded that whether the debt owing to Mr Gittany was for the judgment amount or some lesser amount was immaterial to the conclusion of insolvency both as at the date of the sequestration order and at the present time, and that the Trustee's second report to creditors dated 15 October 2018 demonstrated that Mr Mehajer remained insolvent irrespective of the view taken in respect of this debt; (4) Minh Hua was listed as a personal creditor who was owed approximately $2.6 million in a document prepared by Mr Mehajer in December 2018 titled "Composition with Creditors"; (5) Mr Mehajer owed Portcullis Capital Pty Ltd in excess of $2.1 million as at the date of the sequestration order; (6) there was evidence that he owed $880,000 to a company called "JFI"; (7) in his capacity as guarantor Mr Mehajer was liable to Mercedes-Benz for the loss of $100,000 incurred following the sale of a repossessed vehicle; (8) it appeared that Mr Mehajer was indebted to ACE Demolition in the sum of $6.2 million as at the date of the sequestration order. At PJ [51] his Honour referred to Mr Mehajer's evidence that ACE Demolition had been repaid, noting that even if he accepted that evidence, it was not decisive as to any conclusion about Mr Mehajer's present solvency; and (9) Mr Mehajer owed BMW $743,000 at the time of his bankruptcy. 21 The primary judge concluded that, in accordance with Schedule 1, the unsecured amount owing by Mr Mehajer as at the date of the sequestration order was about $25 million, leaving aside various minor creditors, and noted that no admissible evidence had been provided on behalf of Mr Mehajer to prove the value of his assets as at the relevant date: at PJ [34]-[35]. Accordingly, his Honour concluded that no persuasive evidence was adduced to dispute the Trustee's estimate recorded in Schedule 1: at PJ [36]. 22 Next, the primary judge addressed Mr Mehajer's argument that he had access to two sources of funds which he would have used to pay the petitioning creditor's claim and various other creditors. The two sources were the ability to raise "working capital" in early 2018 (referred to by the primary judge as the "working capital source") and "causes of action" that Mr Mehajer believed he had against a range of persons, including SC Lowy in relation to a development known as "Skypoint Tower". 23 In relation to the "working capital source", the primary judge concluded that on the evidence he could not make a finding that it was more likely than not that Mr Bogoevski, a broker on whose evidence Mr Mehajer relied, would be able to raise $1 million or $1.6 million, the two amounts that were the subject of evidence. However, his Honour noted that "the prospect of raising funds was available which could have been relevant to any adjournment application if it had been advanced". For completeness the primary judge also noted Mr Bogoevski's evidence that he considered he would be able to raise funds based on Mr Mehajer's assets should the annulment application be successful but found this evidence not to be compelling: at PJ [42]. 24 In relation to the alleged "causes of action" against SC Lowy and other persons arising out of a Syndicated Construction Loan Note Subscription Agreement dated 29 April 2016 (Subscription Agreement), the primary judge observed that the alleged "cause of action" against SC Lowy is premised on the fact that the relevant loan agreement contains a term that specifies that the "Total Commitment to the Loan Facility" is $73.5 million but that the loan significantly exceeded that amount. The evidence before the primary judge was that Mr Mehajer valued the "cause of action" asset as being worth a minimum of $35 million: at PJ [43]-[44]. 25 The primary judge observed that the benefit of the alleged "cause of action" is not enjoyed by Mr Mehajer personally but by two companies with which he was formerly associated, SET Services Pty Ltd (SET) and Sydney Project Group Pty Ltd (SPG), and which were guarantors of the amount repayable by the borrower, a company called "Auckland Lid". SET and SPG have been in liquidation since December 2017 and any claim arising pursuant to contract would be for the benefit of their respective creditors. His Honour also observed that, to the extent there is a claim based on the fact that there was a requirement that only the amount of $73.5 million was to be advanced, a review of the Subscription Agreement and the Security Trust Deed (Project Auckland security trust) demonstrated that an argument that those documents prevented the advance of additional sums was misconceived: at PJ [45]-[46]. 26 His Honour concluded that while he considered that any contractual claim against SC Lowy was one which could properly be described as having no value, he could not reach the same level of satisfaction as to the worthlessness of claims which Mr Mehajer may have against other third parties arising out of the same substratum of facts: at PJ [47]. However, his Honour found that even if such a valuable asset existed, given its nature it was not "reasonably immediate nor realisable in a relatively short time and, accordingly, ought not be taken into account in assessing Mr Mehajer's present solvency": at PJ [54]. 27 The primary judge then considered the proceeding before the Federal Circuit Court at the time the sequestration order was made. His Honour observed that Mr Mehajer was in custody and unable to attend court on that day but that he was represented by experienced counsel, Mr Johnson, and that, for reasons which were not explained, no application was made to adjourn the proceeding despite the instructions Mr Mehajer said he gave his solicitor. Relevantly, his Honour noted that there seemed to be unchallenged evidence that at some time prior to the hearing instructions were given to seek an adjournment and a decision was subsequently made not to proceed with that application. His Honour found that a forensic decision was made by experienced counsel not to seek to adjourn the hearing and only to run an argument going to the validity of the bankruptcy notice, and not to advance the other grounds included in Mr Mehajer's notice stating grounds of opposition, namely that he was able to pay his debts and there was some other sufficient cause as to why the court ought not make the sequestration order: at PJ [55]-[58]. 28 Having made those findings, the primary judge then turned to draw his conclusions as to whether the relief sought by Mr Mehajer should be granted. 29 The primary judge first considered whether he was satisfied that a sequestration order ought not to have been made on the basis that Mr Mehajer was solvent (a contention which his Honour said was not sustainable on the evidence) or because the proceeding ought to have been adjourned. His Honour concluded that he was not so satisfied. The primary judge found, having regard to the facts available to the Federal Circuit Court at the time of making the sequestration order and those which would have been disclosed had all the true facts, as shown in the application for annulment, been before that court at the hearing, that "the notion that a court would have been bound not [sic] to adjourn and not proceed to make the sequestration order [could not] be sustained" and that "it was clearly within the permissible exercise of discretion of the judge hearing the application for a sequestration order (in the light of all the true facts) to have made a determination that it was in the interests of everyone that an adjournment be refused and that a sequestration order be made sooner rather than later, notwithstanding Mr Mehajer's incarceration": at PJ [59], [62]-[63]; 30 As the primary judge was not satisfied that the sequestration order ought not to have been made, his Honour observed that it was not necessary to deal with discretionary matters other than to state his conclusions in a summary way. In that regard the primary judge concluded as follows (at PJ [65]-[70]): (1) his Honour did not consider, in light of the psychiatric evidence, that the "dilatory, unorthodox and somewhat irregular way that Mr Mehajer had conducted his application should weigh adversely in the balance against him"; (2) there had been no concrete proposal made to the Court to provide security for the Trustee's costs. The primary judge was not satisfied on the evidence that Mr Mehajer had access to sufficient funds to ensure that the Trustee's fees would be paid; (3) given Mr Mehajer's current solvency position, it was difficult to understand why a discretion would be exercised in favour of granting the relief sought; (4) as to alleged "causes of action", there was no reason to think that the Trustee would fail to bring any case against any third party which was to the benefit of Mr Mehajer's creditors if the case was worthwhile bringing; (5) as to the issue of seeking an adjournment of the hearing of the creditor's petition, that a forensic decision was made to proceed, in circumstances where Mr Mehajer was legally represented, was a factor that tended against the exercise of discretion in favour of Mr Mehajer; and (6) finally, even if his Honour had fallen into error in taking into account one of the "non-solvency" discretionary matters or failed to take into account any other "non-solvency" matter, the position in relation to Mr Mehajer's "current insolvency is so stark that it would overwhelm any other discretionary considerations".

The application for an extension of time 31 Mr Mehajer's application for an extension of time filed on 30 December 2019 (Application) was accompanied by an affidavit sworn by him on that date. In that affidavit Mr Mehajer gives the following evidence (as written): Grounds of Appeal 17. The Grounds of Appeal are as follows: i. Arising Fresh Evidence ii. New Witnesses who have come forward in support of the Appellant. Draft Notice of Appeal 18. A copy of the draft notice of appeal is attached to this document. 32 The draft notice of appeal annexed to Mr Mehajer's affidavit sets out the following grounds of appeal (as written): 1. Arising Fresh Evidence 2. Arising witnesses in support of the Appellant.

Legal principles 33 A notice of appeal must be filed within 28 days after the date on which the judgment appealed from was pronounced or the order was made, or on or before a date fixed for that purpose by the court appealed from: see r 36.03 of the Rules. 34 The primary judge fixed the date that was 28 days from the delivery of his Honour's revised reasons as the date by which a notice of appeal was to be filed. The parties were agreed that that date was 22 November 2019. However, Mr Mehajer did not file the Application until 30 December 2019. Accordingly, he requires an extension of time within which to file his notice of appeal: see r 36.05 of the Rules. 35 In BQQ15 v Minister for Home Affairs [2019] FCAFC 218 at [33] a Full Court of this Court (Yates, Wheelahan and O'Bryan JJ) set out the principles which guide the Court's discretion to grant an extension of time in which to appeal as follows: Under rule 36.05, the Court may grant an extension of the time within which an appeal is to be filed. The principles applicable to the exercise of the Court's discretion were set out in Hunter Valley Developments Pty Ltd v Cohen (1984) 3 FCR 344 at 348-9, which were adopted by the Full Federal Court in Parker v R [2002] FCAFC 133 at [6]: (a) Applications for an extension of time are not to be granted unless it is proper to do so; the legislated time limits are not to be ignored. (b) There must be some acceptable explanation for the delay. (c) Any prejudice to the respondent in defending the proceedings that is caused by the delay is a material factor militating against the grant of an extension. (d) The mere absence of prejudice to the respondent is not enough to justify the grant of an extension. (e) The merits of the substantial application are to be taken into account in considering whether an extension is to be granted. Leave will not be granted where there are no reasonable prospects of success on the appeal: Kalanje v Minister for Immigration and Multicultural Affairs [2006] FCA 1618 at [5]. The applicant will have no real prospects of success where the case is devoid of merit or clearly fails; is hopeless; or is unarguable. In making an assessment the Court is not required to go into too great a detail, but is to "assess the merits in a fairly rough and ready way": Jackamarra v Krakouer (1998) 195 CLR 516 at [7] – [9]. (f) The discretion to extend time is given for the purpose of enabling the Court to do justice between the parties. Special circumstances often arise in immigration cases. Where the delay is short and no injustice will be occasioned to the respondent, justice will usually be done if the extension of time is granted: WAAD v Minister for Immigration and Multicultural Affairs [2002] FCAFC 399 at [7]. This will be so particularly if the applicant is in immigration detention, requires the assistance of an interpreter and has limited knowledge of law and practice including the time for any appeal: Ariaee v Minister for Immigration and Multicultural Affairs [2001] FCA 1627 at [14]; N1202/01A v Minister for Immigration and Multicultural Affairs (2002) 68 ALD 21 at [12] (N1202/01A). Further, where an applicant is an asylum seeker, the gravity of the circumstances that may confront him or her may be a reason for not applying the time rule too strictly: Applicants M160/2003 v Minister for Immigration and Multicultural and Indigenous Affairs (2005) 223 FCR 441 at [5]. Nevertheless, the merits of the appeal will remain a relevant factor: N1202/01A at [13]. 36 It is also convenient to set out s 153B of the Bankruptcy Act which concerns the annulment of a bankruptcy by the Court and which provides as follows: (1) 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. (2) In the case of a debtor's petition, the order may be made whether or not the bankrupt was insolvent when the petition was presented. (3) The trustee must, before the end of the period of 2 days beginning on the day the trustee becomes aware of the order, give to the Official Receiver a written certificate setting out the former bankrupt's name and bankruptcy number and the date of the annulment. 37 The legal principles relevant to the consideration of an application under s 153B of the Bankruptcy Act were summarised by the primary judge at PJ [15] (see [14] above).

Consideration 38 In determining whether I would exercise my discretion to grant an extension of time to Mr Mehajer to file his draft notice of appeal it is necessary to consider Mr Mehajer's explanation for the delay, any prejudice to the Trustee and SC Lowy and the merits of the proposed appeal. I do so in turn below.

Explanation for delay 39 Mr Mehajer gave evidence as to the reasons for the delay in filing the Application in his affidavit sworn on 30 December 2019. To the extent his evidence was admitted into evidence that explanation was limited. According to Mr Mehajer: (1) on or about 15 December 2019 he was injured by asbestos particles falling into his eye; (2) on 18 and 19 December 2019 he attended NAS Advanced Medical Centre at Auburn and Sydney Eye Hospital respectively for treatment of that injury; (3) on the evening of 19 December 2019 he attended Wollongong Private Hospital for treatment for an unrelated issue which required him to have a Triamcinolone injection, which Mr Mehajer explains is a glucocorticoid treatment used for skin diseases; (4) on 27 December 2019 he attended the registry of this Court. Mr Mehajer's evidence is that the Court was open but the registry was closed and he was therefore unable to lodge the documents on that day; and (5) it was not until 30 December 2019 that he was "able to successfully lodge [his] Notice to appeal and collate the missing information, notwithstanding medical obstacles [he] suffered during dates around 15 December – 23 December 2019". 40 Mr Mehajer provides no explanation of any steps taken between the date he was provided with the Primary Judgment and 22 November 2019, the last day by which he was to file his notice of appeal and, more critically, of the steps taken between 22 November 2019 and 15 December 2019, when he suffered an injury to his eye. According to the evidence before me, Mr Mehajer underwent medical treatment for two conditions between 15 and 19 December 2019. However, he provides no explanation for the delay in the period between 19 and 27 December 2019, when it seems that Mr Mehajer attended the Court's registry but found that it was closed. 41 While the delay is not extensive, being a period of some five weeks, in my opinion, Mr Mehajer has not provided an acceptable explanation for the delay. That is a factor to be taken into account in considering the Application.

Prejudice 42 The next issue that arises is that of any prejudice to the respondents caused by the delay. 43 The Trustee raises as an issue the costs he has incurred to date in defending proceedings brought by Mr Mehajer and in which he has the benefit of costs orders in his favour but which remain unsatisfied. To that end, the Trustee submits that if the Application is successful and an extension of time is granted, it ought to be conditional on security being provided by Mr Mehajer to compensate the Trustee for the costs incurred by him to date in defending the proceedings brought by Mr Mehajer as well as the costs he will incur in defending any appeal. Given the conclusion I have reached it is not necessary for me to consider this submission any further. 44 SC Lowy submits that the prejudice it will suffer if an extension of time is granted is that what it describes as a "quite hopeless proceeding" will remain extant.

Merits of the proposed appeal 45 As set out at [32] above, Mr Mehajer's proposed grounds of appeal are to the effect that he will seek to rely on fresh evidence at the hearing of any appeal. In support of the Application Mr Mehajer gave evidence of the proposed fresh evidence. Relevantly, he says that: (1) he will call up to seven witnesses; (2) he has spoken to at least four people who are willing to give evidence under oath; (3) he intends to call evidence to establish that: (a) $6.2 million was paid to ACE Demolition and that its proof of debt is no longer valid; (b) Mr Gittany was paid the sum of $2.275 million in full and that his proof of debt is no longer valid; (c) $880,000 was paid to "JFI Holdings" and that its proof of debt is no longer valid; (d) the proof of debt lodged by "Portcullis" in the sum of $2.2 million will "be withdrawn following a private mutual settlement and agreement"; (e) the proof of debt lodged by "3 Wishes Group (Aladdin Yousef)" for $8,486 will be withdrawn following negotiations and a mutual agreement; (f) the proof of debt lodged by Ahmad Jabhier in the sum of $100,000 is to be withdrawn "by mutual consent following the fact that this Proof of Debt is a non-bona-fide debt"; (g) the proof of debt lodged by Anping Yan in the sum of $25,500 has been settled following negotiations and mutual agreement; (h) Kent Attorneys' claim for $18,622 is not bona fide; (i) the debt to Luisa Spedaliere in the sum of $33,123 is a debt that does not belong to Mr Mehajer; (j) the payment to Minh Hua in the sum of $2.635 million is a debt that does not belong to Mr Mehajer; (k) an agreement has been entered into "to remove unsecured debt lodged by creditor Prime Marble & Granite Pty Ltd for the sum of $668,276.00 be withdrawn"; (l) the proof of debt lodged by "St George" for the amount of $19,073 will be withdrawn following negotiations; (m) the proof of debt lodged by the ATO in the amount of $8,604,202 is not correctly recorded; (n) a third party has the financial means to pay the fees accumulated by the Trustee and will assist Mr Mehajer in paying those fees; and (o) any debts to any other creditors such as "BMW Finance" and the National Australia Bank were not due and payable as at the date of the making of the sequestration order. 46 Mr Mehajer also says that he intends to rely on a report that he has prepared to confirm that at the time the sequestration order was made his financial position was estimated to be at least $40 million. That report, which was prepared by Mr Mehajer, appears to set out Mr Mehajer's financing arrangements with SC Lowy and matters relating to a development referred to as "SKY". 47 Mr Mehajer also relied on his written submissions in which, in summary, he raised the following matters. 48 Mr Mehajer submits that as at the date of the sequestration order he did not owe SC Lowy any money but that SC Lowy became a creditor upon taking an assignment of a judgment debt. He contends that SC Lowy did so to try to obstruct any application by him to annul his bankruptcy because, if any such application was successful, he could then pursue his claim for damages against SC Lowy which was his "biggest asset" prior to becoming a bankrupt. 49 Mr Mehajer notes that his largest creditor is the ATO. He points out that prior to his bankruptcy he had filed notices of objection against the assessments issued by the Commissioner of Taxation. He contends that the Commissioner was obliged to deal with those objections but the ATO subsequently claimed that his objections were invalid because he was a bankrupt. 50 Mr Mehajer made a number of submissions about the Trustee, noting that he has commenced a proceeding against the Trustee and has requested the Australian Financial Security Authority to appoint a new trustee. He contends that the Trustee has accumulated over $1 million in fees and has not adjudicated any of the proofs of debt recorded in the Trustee's report to creditors. 51 Mr Mehajer submits that the primary judge erred by accepting the proofs of debt recorded in the Trustee's report to creditors despite the Trustee not adjudicating any of the proofs of debt or calling any creditors to give evidence and that the debts recorded in the Trustee's report are vague and inaccurate. He contends that he did not have witnesses available to give evidence at the time of the hearing of the Second Annulment Proceeding but that if an extension of time is granted, they will be available. He also contends that the Trustee misled the primary judge in that he knew that the proofs of debt were not accurate and/or out of date. Mr Mehajer submits that the Trustee purposely refused to adjudicate the proofs of debt to prevent the annulment of his bankruptcy. 52 Mr Mehajer also made submissions about some of his creditors: ACE Demolition, Ahmad Jaghbir and Anping Yan. Mr Mehajer contends that each of these creditors has not lodged a proof of debt and was included in the Trustee's list of creditors based on outdated or unreliable information. 53 Mr Mehajer submits that he has shown a clear willingness to have his sequestration order annulled for the sake of his creditors and that he has offered the Trustee, through third parties, $1 million to call a creditors' meeting, which the Trustee has refused to do. He submits that if the proofs of debt are adjudicated his third party financial supporters would have a better indication of what would be required to annul his bankruptcy. Mr Mehajer contends that he will rely on fresh evidence if an extension of time is granted and he can proceed with his appeal and that he will have all of the alleged debts adjudicated before an annulment application is determined by the Court by way of an appeal. He says that he should be entitled "to adjudicate all of the alleged debts" and also to call fresh evidence and witnesses to prove whether those debts are true and correct. 54 Mr Mehajer submits that a sequestration order ought not to have been made on 20 March 2018 because on that day he was able to pay his debts as they fell due but he was prevented from doing so due to unforeseen circumstances, being that he was held on remand and could not arrange for funds to be available. He contends that the evidence he intends to call will establish that as at 20 March 2018 he was solvent and that he continues to be solvent. 55 Having regard to the proposed grounds of appeal and Mr Mehajer's submissions, the inevitable conclusion is that the proposed appeal lacks merit. My reasons for reaching that conclusion follow. 56 First, Mr Mehajer's proposed grounds of appeal are concerned exclusively with an assertion that he intends to adduce fresh evidence on appeal. That evidence goes to the issue of his solvency. Mr Mehajer's proposed grounds of appeal do not otherwise identify any error in the Primary Judgment. 57 Section 27 of the Federal Court of Australia Act 1976 (Cth) (FCA Act) provides that the Court may, in its discretion, receive further evidence on appeal. Rule 36.57 of the Rules sets out the process to be followed by a party who wishes to apply to the Court for it to receive such further evidence on appeal. Such an application must, among other things, be accompanied by an affidavit setting out the facts on which the application relies, the grounds of appeal to which the application relates, the evidence that the applicant wants the Court to receive and why the evidence was not adduced in the court appealed from. 58 In Sami v Minister for Immigration and Citizenship [2013] FCAFC 128 at [7] a Full Court of this Court (Jagot, Barker and Perry JJ) set out the following principles in relation to the application of r 36.57 of the Rules: The requirements of r 36.57 reflect the principles which apply to questions of fresh evidence on appeals. Generally, if the evidence could have been adduced below by the exercise of reasonable diligence it will not be admitted on appeal (see, for example, Moore v Minister for Immigration and Citizenship (2007) 161 FCR 236; [2007] FCAFC 134 at [4]-[7]). Further, unless the evidence is of such relevance and weight that its admission would be likely to lead to a different result it also will not usually be admitted on an appeal. In the present case, the potential relevance and weight of the proposed fresh evidence must be assessed having regard to the limits on the Court's jurisdiction to review the decision of the AAT – that is, for jurisdictional error only, no review of the merits of the AAT's decision being permissible by this Court either at first instance or on appeal. 59 While this is not the application to adduce further evidence itself, Mr Mehajer has not, on his application for an extension of time, explained to me: the grounds of appeal to which his application to adduce further evidence, and thus the proposed further evidence, relate; why the evidence he intends to call was not adduced in the Second Annulment Proceeding; and how the further evidence he intends to adduce would have been likely to lead to a different result had it been available in the Second Annulment Proceeding. Given the nature of his proposed grounds of appeal, those are matters which arise for consideration on this application for an extension of time. Relevantly: (1) as I have already observed at [56] above, the grounds of appeal included in the draft notice of appeal amount to no more than an assertion by Mr Mehajer that he intends to adduce further evidence on appeal and do not identify any error in the Primary Judgment; (2) Mr Mehajer has not put before the Court in support of the Application any of the further evidence on which he says he will rely. To adopt the Trustee's description, Mr Mehajer at best "vaguely identified" what his fresh evidence will be and what it seeks to establish. The evidence in support of the Application (set out at [45] above) amounts to no more than assertions and statements by Mr Mehajer about the evidence he intends to call. That evidence is described in a general way, including statements that, for example, a particular debt was "paid in full" or that a proof of debt has been or will "be withdrawn", without explaining how, when and why these events have taken or will take place. That evidence, in part, also appears to relate to events which took place after the Second Annulment Proceeding; (3) as is evident from the matters set out at [16] above, any argument that Mr Mehajer was solvent was expressly abandoned during the course of the hearing of the Second Annulment Proceeding. Despite that, as is evident all of the intended fresh evidence goes to the issue of solvency. Given the election made at trial it is difficult to see how, even if Mr Mehajer, with the benefit of fresh evidence, could establish his solvency, that fresh evidence would undermine the basis of the Primary Judgment or change the outcome of the Second Annulment Proceeding; (4) even if Mr Mehajer was able to revisit the election made at trial and able to lead evidence going to the question of his solvency, that evidence would need to be considerable and compelling given the primary judge's finding based on the evidence before his Honour that Mr Mehajer was "hopelessly insolvent" at the time any application for an adjournment of the hearing of the creditor's petition would have been made, which was at the time of the sequestration order (at PJ [61]); and (5) in his evidence in support of the Application Mr Mehajer has not explained why the proposed further evidence was not called in the Second Annulment Proceeding in circumstances where he was represented by senior counsel and a solicitor. Mr Mehajer's submission that the evidence was not available at the time of the Second Annulment Proceeding does not amount to a proper explanation. Relevantly, I note that the primary judge observed that there was what his Honour described as a "tsunami of material" before the Court in the Second Annulment Proceeding (at PJ [1]). 60 Secondly, Mr Mehajer's submission that the debt due to the ATO was not owing because he had filed notices of objection to the assessments prior to the date of his bankruptcy (another matter which ultimately goes to the question of solvency) does not take the matter any further. As the primary judge identified at PJ [27] the relevant legislative provisions require the Court to treat the debt as undisputed despite an objection having been lodged: see Deputy Commissioner of Taxation v Broadbeach Properties Pty Limited (2018) 237 CLR 473 at [44]-[45]. 61 Thirdly, the argument that was pressed before the primary judge was that, in circumstances in which Mr Mehajer was held on remand and had given instructions to his solicitor to seek an adjournment while he was in gaol and pending a bail application to the Supreme Court, the hearing of the creditor's petition should have been adjourned. The primary judge referred to this argument at PJ [24] and, after addressing it, concluded at PJ [62] that the notion that the court would have been "bound not [sic] to adjourn and not proceed to make the sequestration order cannot be sustained". His Honour found that it was within the permissible exercise of the discretion of the judge hearing the application for a sequestration order, in light of all the true facts, to have determined that it was in everyone's interest that an adjournment be refused and that a sequestration order be made sooner rather than later, notwithstanding Mr Mehajer's incarceration. The "true facts" referred to by the primary judge included what his Honour found at PJ [61] to be the true financial position of Mr Mehajer, namely that he was "hopelessly insolvent" at the time that any application for an adjournment would have been made. 62 Mr Mehajer does not challenge those findings by the primary judge. He does not raise as a ground of appeal in his draft notice of appeal or contend in his submissions that these findings were infected by any error. Indeed, these findings were clearly open to the primary judge, having regard to the matters before him. 63 Fourthly and relatedly, even if Mr Mehajer was able to lead his evidence as to solvency and pursue that issue on appeal and/or challenged and could establish error in the primary judge's finding on the question of the adjournment, the primary judge found that he would not exercise his discretion in favour of making an order granting an annulment in any event. That finding is not challenged in the proposed grounds of appeal. Further, Mr Mehajer has not in his evidence in support of the Application or in his submissions identified any error on the part of the primary judge in the exercise of the discretion suggesting that his Honour acted upon a wrong principle, gave weight to extraneous or irrelevant matters, failed to give weight or sufficient weight to some material consideration or made a mistake as to the facts, or that, based on the facts, the exercise of the discretion was unreasonable or plainly unjust such that an appellate court may infer that in some way there has been a failure properly to exercise the discretion: see House v The King (1936) 55 CLR 499 at 505. 64 Finally, Mr Mehajer raises a number of other matters in his submissions, none of which identifies any error on the part of the primary judge in dismissing the Second Annulment Proceeding. Mr Mehajer complains about the conduct of the Trustee and makes submissions about the First Annulment Proceeding, the alleged claim against SC Lowy and the circumstances in which SC Lowy became a creditor. None of those matters is relevant to the Primary Judgment nor do they identify any error in his Honour's reasons.

Conclusion 65 It is not in the interests of justice to grant an extension of time in which to appeal from the orders made by the primary judge in the Second Annulment Proceeding. In my opinion Mr Mehajer has not adequately explained the delay but, even if he had, the proposed grounds of appeal have no merit and the proposed appeal does not have reasonable prospects of success. 66 Accordingly, the Application should be dismissed with costs. I will make orders accordingly. I certify that the preceding sixty-six (66) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Markovic.

Associate: Dated: 6 May 2020