Case: Heinrich v Commonwealth Bank of Australia [2003] FCAFC 315
Outcome: applied
manner in which s 153B is to be applied has been summarised as follows by Carr, Finn and Sundberg JJ in Heinrich v Commonwealth Bank of Australia [2003] FCAFC 315: [20] The Court must first consider whether the sequestration order ought not to have been made. If it so finds, then the Court must consider whether, in the exercise of its discretion, the bankruptcy should be annulled: Re Deriu (1970) 16 FLR 420. Later evidence of previously unknown facts may disclose matters which show that the sequestration order ought not to have been made. That is, the Court is entitled to consider not only the case as disclosed at the time when the sequestration order was made, but also those facts now known then to have existed. The Court excludes those facts which have occurred since the order was made. Later evidence of previously unknown facts may disclose matters which show that the sequestration order ought not to have been made: Re Frank; Ex parte Piliszky (1987) 16 FCR 396 ; Stankiewicz v Plata [2000] FCA 1185 at [19] ; Re Williams (1968) 13 FLR 10 at 23; Re Ditfort; Ex parte Deputy Commissioner of Taxation (1988) 19 FCR 347. These authorities, all of which were cited by the learned primary judge in his judgment, were accepted at first instance as reflecting the relevant law. See also: Voskuilen v Morisset Megamarket Pty Ltd [2004] FCA 1727 at [14] per Jacobson J; Hacker v The Owners - Strata Plan No 17572 [2005] FCA 1936 at [46] per Emmett J; Johnston v Challen t/as Hawthorn Cappaidge and Badgery [2006] FCA 401 at [32] per Collier J; Gargan v Kippin Investments Pty Ltd [2008] FCA 1718 at [11] per Perram J. It was further understood to be common ground that when entertaining an appeal against a decision refusing to annul a sequestration order, this Court could potentially consider further evidence not before the Federal Magistrate whose decision is under appeal &#8212; provided that such further evidence was confined to evidence as to those facts now known to have existed as at the date of the sequestration order. On appeal, this Court is just as constrained as the Federal Magistrate to exclude from consideration " facts which have occurred since the order was made ": Heinrich v Commonwealth Bank of Australia [2003] FCAFC 315 at [20] . Although it is considered that the reasons of the Federal Magistrate expose appellable error, it is further considered that the appeal should be dismissed either because: the Appellant has failed to establish that the sequestration order as made in September 2008 " ought not to have been made "; or: as a matter of discretion, an order annulling the bankruptcy should not now be made. The District Court proceedings to which the Notice of Appeal refers were commenced by way of a Statement of Claim filed in the District Court of New South Wales on 4 July 2007. It alleged professional negligence against the Appellant's then solicitor retained for the purposes of the Family Court proceedings, being the judgment creditor and now Respondent. The task he was undertaking was the task entrusted to him by s 153B, namely the task of considering whether the sequestration order " ought not to have been made ". Whether or not the Appellant appealed the making of the sequestration order is not of immediate relevance to the separate and discrete task entrusted by s 153B. An appeal from the making of a sequestration order is a separate process from an application under s 153B. One fundamental difference is that when undertaking the task of considering whether a sequestration order " ought not to have been made ", the Court is not confined to a consideration of only that material which was before the person making the order. As Heinrich and Bulic make clear, " the Court 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 must take account of facts, known at the time at which the sequestration order was made and at which it determines an annulment application, even if those facts were not before the Court at the time at which the sequestration order was made ". A further difference is the existence of the discretion conferred by s 153B. It was not disputed that " procedural issues " may fall within s 153B: Rigg v Baker [2006] FCAFC 179 at [64] , [2006] FCAFC 179 ; 155 FCR 531 at 545. It may further be assumed for present purposes that, albeit inadvertently, the Appellant was denied procedural fairness in both April and September 2008. The denial of procedural fairness in September 2008 may provide a basis upon which it could be contended that the sequestration order ought not to have been made. Indeed the present case provides an instance of the ability in an application made pursuant to s 153B to consider all of the " true facts " as at the date of the making of the sequestration order: Heinrich v Commonwealth Bank of Australia [2003] FCAFC 315 at [20] . The Federal Magistrate may not have known why neither the Appellant nor her solicitor was present on 2 September. But the Magistrate who heard the annulment application knew the reason; as does this Court. Even so, reservation may be expressed as to whether or not &#8212; even in those circumstances &#8212; it should be concluded that he was " bound " not to have made the sequestration order.