To whom is the money owed?

Healthcare giant Ramsay is in a legal stoush with a former distributor it claims owes a debt of nearly $10m

Ramsay Health Care Australia has recently lost an appeal in the High Court in a case that judges say may be the first of its kind in the country.

According to court documents, Ramsay had entered into an agreement with a company trading as Medichoice, which agreed to import medical products on Ramsay’s behalf.

Medichoice was also appointed Ramsay’s distributor to coordinate the procurement, importation, logistics and inventory management of the products.

The directors of Medichoice were Adrian Compton and Anna Stevis, with Mr Compton having signed a Guarantee with Ramsay, under which the parties agreed that “a certificate from Ramsay stating that an amount is owing or an event has occurred is taken to be correct unless the contrary is proved”.

The agreement expired on 30 June 2013, and Medichoice subsequently went into liquidation.

In June 2014 Ramsay commenced proceedings in the Supreme Court against Mr Compton, claiming he owed money to it under the Guarantee.

At trial, the judge awarded judgement for Ramsay against Mr Compton in the amount of $9,810,312.33 – the amount stated in a Certificate of Debt adduced by Ramsay in accordance with the Guarantee.

Mr Compton did not appeal the judgement, and in April 2015 Ramsay served a bankruptcy notice on him, requesting he pay the amount of the judgement or make arrangements for settlement of the debt by May 2015.

Mr Compton failed to comply with the bankruptcy notice, and on 4 June 2015 Ramsay presented a creditor’s petition in the Federal Court of Australia.

The following month, Mr Compton filed a notice stating ground of opposition, contending that “no debt is or was really owed by [Mr Compton] to [Ramsay] because the judgement is not founded on a debt that in truth and reality was or is owed by [Mr Compton] to [Ramsay].”

At the hearing before the Federal Court, Mr Compton sought to rely on a “reconciliation” of indebtedness between the parties.

It was submitted by Mr Compton’s behalf that, if accepted, the “reconciliation” established that it was Ramsay that owed money to Medichoice, and not the other way around.

The “reconciliation” was supported by evidence on affidavit from Medichoice director Ms Stevis, and one of three liquidators of Medichoice also gave affidavit evidence to the effect that it was more likely that Ramsay was indebted to Medichoice than vice versa.

The primary judge decided not to investigate as to whether the debt relied on by Ramsay was truly owing.

However Mr Compton appealed and accordingly a Full Court ordered that the Bankruptcy Court should be allowed to go behind the judgement and investigate whether the money was really owed or not.

Ramsay argued that the Bankruptcy Court should only go behind a judgement after a contested hearing in the event of some fraud, collusion or miscarriage of justice – for which there was no suggestion.

However, the Full Court stated that a Bankruptcy Court “has a statutory duty to be ‘satisfied’ as to the existence of the petitioning creditor’s debt; a creditor should be not be able to make a person bankrupt on a debt which is not provable”.

In Ramsay’s appeal of the decision, the High Court judges suggest there was a failure on the part of Mr Compton to present his case on its merits in the initial litigation.

Despite this, they say there is evidence that is apt to suggest that the debt was not truly owing and it is now up to the Bankruptcy Court to investigate this question.

“The Full Court was correct to conclude that there was a substantial question as to whether the debt on which Ramsay relied was owing. That being so, the Bankruptcy Court should proceed to investigate this question in order to decide whether it was open to it to make a sequestration order,” said the High Court bench in its conclusion.  

They dismissed Ramsay Health Care’s appeal and ordered it to pay Mr Compton’s costs.

Another trial will now be scheduled, and the judges say Ramsay will again “bear the onus of proof” to show that a debt is truly owed by Mr Compton.

The current case is possibly the first of its kind in Australia.

“The researchers of the legal representatives of the parties in the present unearth no case … in which a court exercising bankruptcy jurisdiction has exercised its discretion to ‘go behind’ a judgement entered after a trial on the merits,” say the High Court judges.

“The present case appears to have the distinction of becoming the first, maybe ever.”

Previous Education in the icy north
Next Sensitivity in the healthcare sector

NOTICE: It can sometimes take awhile for comment submissions to go through, please be patient.

No Comment

Leave a reply