Gould v Day [2002] FCA 173

FEDERAL COURT OF AUSTRALIA

Gould v Day [2002] FCA 173 STEPHEN GOULD v JULIAN DAY & ANOR N 7019 OF 2002 EMMETT J 19 FEBRUARY 2002 SYDNEY

IN THE FEDERAL COURT OF AUSTRALIA

NEW SOUTH WALES DISTRICT REGISTRY N 7109 OF 2002

BETWEEN: STEPHEN GOULD

APPLICANT

AND: JULIAN DAY

FIRST RESPONDENT

ALAN MANLY

SECOND RESPONDENT

JUDGE: EMMETT J

DATE OF ORDER: 19 FEBRUARY 2002

WHERE MADE: SYDNEY

THE COURT ORDERS THAT: 1. the application for annulment of bankruptcy filed on 18 January 2002 be dismissed. 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 N 7109 OF 2002

BETWEEN: STEPHEN GOULD

APPLICANT

AND: JULIAN DAY

FIRST RESPONDENT

ALAN MANLY

SECOND RESPONDENT

JUDGE: EMMETT J

DATE: 19 FEBRUARY 2002

PLACE: SYDNEY

REASONS FOR JUDGMENT 1 I have before me an application pursuant to s 153B of the Bankruptcy Act 1966 (Cth) for the annulment of the bankruptcy of Stephen Gould. The sequestration order was made by Conti J on 7 September 2000. The act of bankruptcy on which the sequestration order was based was non-compliance with Bankruptcy Notice N1632 of 1999. That bankruptcy notice was based on a judgment of the District Court in the sum of $44,515.16 resulting from a costs order against Mr Gould. 2 On 13 September 1999 Mr Gould applied to the Court for an order that the Bankruptcy Notice be set aside. That application was based on three grounds: (i) that the costs judgment in the District Court should not have been awarded because the true plaintiff was not Mr Gould but a body known as Halisa International; (ii) that the costs order should not have resulted in the quantum assessed by the costs assessor, but should have been for an amount reduced by reason of the conduct of the judgment creditors in the course of the District Court litigation; and (iii) that Mr Gould had a counter-claim, set-off or cross-demand equal to or exceeding the amount of the judgment debt.

3 Sackville J found that neither the first nor second ground had been made out. His Honour observed that Mr Gould faced insuperable difficulties so far as the third ground was concerned. His Honour held that it was necessary for Mr Gould to establish that he had a counter-claim, set-off or cross-demand equal to, or exceeding the amount of the judgment debt or sum payable under the District Court order. In such a case, as his Honour observed, the Court does not undertake a preliminary trial of the counter-claim, set-off or cross-demand. Rather, it is necessary that the Court be satisfied that the debtor had a fair chance of success. Sackville J was not satisfied to the requisite standard that Mr Gould had a fair chance of success. 4 The evidence before Sackville J indicated that Mr Gould had instituted defamation proceedings in the Supreme Court against Mr Day, one of the petitioning creditors. His Honour was not satisfied on the evidence before him that Mr Gould had a fair chance of success in the proceeding against Mr Day. Mr Gould also asserted that there was an action for defamation under way against Mr Manly, the other petitioning creditor. His Honour observed that no statement of claim alleging a cause of action in defamation had yet been filed. His Honour considered there was insufficient evidence to support, to the necessary standard, the element of the cause of action in defamation that Mr Gould would need to make out in order to recover damages against Mr Manly. 5 In his reasons of 7 September 2000 Conti J said that he was not satisfied that Mr Gould had a counter-claim, set-off or cross-demand equal to or exceeding the judgment debt, being a claim that could not be set-up in the action in which the District Court judgment was obtained. Conti J considered that Mr Gould would have to put forward much more tangible material and information than had been placed before Sackville J before he would be satisfied that there was a relevant counter-claim, set-off or cross-demand. 6 Mr Gould then applied for a stay of proceedings under the sequestration order. That application came before me and, on 12 September 2000, I granted a stay on terms. In my reasons for that date I observed that Mr Gould relied on the existence of two proceedings in the Supreme Court of New South Wales. In proceeding N12242 of 1999 against Mr Manly an application for the joinder of additional parties was refused. An appeal from that order had been dismissed by O'Keefe J. At that stage Mr Gould was seeking leave to appeal from the order of O'Keefe J from the Court of Appeal. 7 I had nothing before me to suggest that there were any prospects of success in that application for leave. More importantly I did not have before me any material to indicate there was a substantial claim against Mr Manly. However, I ordered that if Mr Gould provided security in respect of his appeal from the order of Conti J on or before 19 October 2000, the stay would be continued up to the determination of the appeal; but that if security was not provided the appeal would be taken to be dismissed. That order was subsequently set aside by the Full Court on 27 October 2000. Nevertheless, in due course, the appeal from the order of Conti J was dismissed by a differently constituted Full Court on 24 November 2000. An application for leave to appeal to the High Court from the order dismissing the appeal was refused. 8 Mr Gould then made an application in the Magistrate's Court for annulment of the bankruptcy. That application was dismissed by Driver FM on 20 November 2001. Mr Gould has appealed to this court from that order. Mr Gould also made an application for a stay of proceedings in this current application. In the course of hearing that application for a stay I indicated that it was inappropriate that Mr Gould continue with his appeal from the orders of Driver FM. 9 As a term of my proceeding to hear the application for a stay, Mr Gould undertook to discontinue that appeal or indicated that he would consent to its dismissal. That term was imposed in circumstances where Mr Gould had on foot both an appeal from the decision of Driver FM as well as a further application in this Court for an annulment. At the moment the appeal is still on foot. It is against that background that I have heard Mr Gould's second application for an annulment. It may be that this application should have been dismissed as being vexatious, having regard to the orders that were made by Driver FM. Mr Gould's justification for bringing this second application within weeks of the dismissal of his earlier application is that new material has come to light. 10 The new material that he relies upon is his newfound knowledge of the terms of the Trade Practices Act 1974 (Cth). He now asserts that he wishes to make a claim against Messrs Day and Manly under that legislation. However, he does not refer to any material or evidence that has come to light that was not available to him at the time when the matter was before Conti J. The application for an annulment does not specify any grounds for contending that the order ought not to have been made. Mr Gould has formulated his grounds in the course of the hearing. 11 Section 153B of the Bankruptcy Act authorises the Court to annul a bankruptcy only where the Court is satisfied that the sequestration order ought not to have been made. Even if the Court is satisfied that a sequestration order ought not to have been made, there is a residual discretion for the Court in determining whether or not to annul the bankruptcy. The words of the section refer not only to the case as disclosed at the time it was heard but to the case as it would have been disclosed had all the true facts as disclosed in the application for annulment been before the trial. The expression "ought not to have been made" applies if the trial judge is bound not to make the order. Later evidence of previously unknown facts might disclose matters that show that the sequestration order ought not to have been made. However, the ascertainment of knowledge concerning the law does not, in my view, fall within that category. 12 The grounds outlined by Mr Gould in the course of oral argument are as follows: (i) Conti J was aware that Mr Gould had a claim in the Supreme Court but did not have before him the evidence as to the likely success of that claim; (ii) Messrs Day and Manly are not pursuing their debt but are intending to prevent Mr Gould from earning a living; and (iii) Mr Gould cannot earn a living as a bankrupt. 13 In support of the first contention, Mr Gould relies principally upon additional material tendered in support of fresh proceedings that he has begun in the Supreme Court of New South Wales. There is before me, as part of the report of the Trustee in Bankruptcy pursuant to Rule 44, a copy of Statement of Claim in Supreme Court proceeding No.20542 of 2000. The essence of the claim made in that proceeding is as follows: (1) Messrs Day and Manly have on a number of occasions since 1997 abused the legal process and damaged the reputation of, and created long term aggravation to Mr Gould; (2) Messrs Day and Manly have disrupted, and continue to endeavour to disrupt, any and all business arrangements instigated by Mr Gould; (3) Messrs Day and Manly have plotted to cause Mr Gould and any person or organisation working with him embarrassment through being associated with him; and (4) Substantial income has been lost by reason of that conduct 14 That proceeding was not on foot at the time of the making of the sequestration order. Mr Gould asserts that it was commenced following his lack of success in having additional parties joined to the earlier Supreme Court proceedings to which I have referred. The earlier proceeding appears to be the proceeding that was mentioned by Sackville J. 15 In support of the claim made in the proceeding commenced in 2000, Mr Gould relies on a letter of 20 November 1997 sent by Mr Manly to Mr Ross Cameron MP. There is no suggestion that that letter was not available to Mr Gould at the time when the sequestration order was made; nor is there any suggestion that it was not available to Mr Gould at the time when the application to set aside the bankruptcy notice was heard by Sackville J. 16 It would be fair to say that the letter is capable of being damaging to Mr Gould. I have no means of determining, from the material available to me, the truth of any of the assertions made in the letter. Mr Gould sought to establish that much of the material is false. Principally he relied on a determination of the Administrative Appeals Tribunal made on 27 April 1999, by which the Tribunal set aside a decision of the Secretary of the Department of Family and Community Services concerning Mr Gould and substituted a new decision. The new decision was that Mr Gould remained qualified for a Newstart allowance at all relevant times and that the payment of a Newstart allowance to him should not have been cancelled by the Secretary. 17 In the letter of 20 November 1997 a number of references are made to "Gould on the dole". Whether or not a Newstart allowance is capable of being characterised as the dole is not a matter for me to determine. The important matter is that the letter of 20 November 1997 was available to Mr Gould at the relevant time. Whether it was tendered or not is not clear, but even if it were not, there is no explanation as to why it was not tendered and was not relied upon in support of the contentions, advanced before Sackville J and before Conti J, that Mr Gould had a significant and substantial claim against Mr Day and Mr Manly. 18 The complaint in this first ground is not in my view made out. I am not satisfied on the material before me that Mr Gould has a reasonable prospect of success in the proceeding brought in the Supreme Court. That is not to say that ultimately he may have some success; that is not a matter for me to judge. However, on the material before me I am not satisfied that he has any reasonable prospect of success in claiming damages in excess of the amount of the judgment debt in the District Court. 19 The second ground does not in my view constitute a ground for annulling a bankruptcy. It is not an abuse of process to petition for bankruptcy with an indirect motive, that is, for a purpose other than the equal distribution of a debtor's assets. For example, it is not an abuse to exclude the debt of a partnership. If it be the fact that consequences flow from the making of a sequestration order, the fact that those consequences are desired does not of itself render the order an abuse. 20 However, I do not consider in any event that the evidence before me is sufficient to establish that the purpose of the petitioners in presenting the petition was to prevent Mr Gould from earning a living. It may be that their purpose was to ensure that the judgment debt from the District Court was paid. That is not a disqualification for the commencement and prosecution of a proceeding. 21 This ground appears to me to be misconceived, as appears from the third ground, namely, that the bankruptcy should be annulled because Mr Gould cannot earn a living as a bankrupt. Being a bankrupt is not a disqualification from earning income. Division 4B of Part VI of the Bankruptcy Act has the object of requiring a bankrupt who derives income during the bankruptcy to pay contributions towards the bankrupt's estate and to enable the recovery of certain money and property for the benefit of the bankrupt's estate. The whole object of Division 4B is designed to encourage a bankrupt to earn income in order to meet the debts that are provable in the bankruptcy. 22 Accordingly do not consider that the second or third grounds are established. It follows that I am not satisfied that the sequestration order ought not to have been made. Even if I were, I would have some reservation in making an order, having regard to the history of these proceedings. There has been no effort made by Mr Gould, on the material before me, to make any payment to meet the amount of the petitioning creditors' debt. In any event, that question does not arise because I am not satisfied that the order ought not to be made. 23 It follows in my opinion that the application should be dismissed.

I certify that the preceding twenty-three (23) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Emmett.

Associate: Dated: 19 February 2002

Counsel for the Applicant: The applicant appeared in person

Solicitor for the Applicant:

Counsel for the First Respondent: The first respondent appeared in person

Counsel for the Second Respondent: The second respondent appeared in person

Date of Hearing: 19 February 2002

Date of Judgment: 19 February 2002