Australia and New Zealand Banking Group Limited v James (No 3)
[2021] FCA 788
•12 July 2021
FEDERAL COURT OF AUSTRALIA
Australia and New Zealand Banking Group Limited v James (No 3) [2021] FCA 788
File number(s): NSD 873 of 2020 Judgment of: CHEESEMAN J Date of judgment: 12 July 2021 Catchwords: BANKRUPTCY – creditor’s petition – whether preconditions on the exercise of the discretion to make a sequestration order are satisfied – respondent debtor opposes creditor’s petition in circumstances where the amended notice of grounds of opposition to the creditor’s petition was withdrawn during the course of proceedings – consideration of discretion to exercise power to make a sequestration order under s 52(1) of the Bankruptcy Act 1966 (Cth) - Held: sequestration order made
BANKRUPTCY – By consent, the parties sought orders seeking a stay of the “operation of” the sequestration order – no power to make such an order, s 37(2) of the Bankruptcy Act – premature and speculative to consider making a stay order other than under s 52(3) in circumstances where no application for leave to appeal or appeal proper has been formulated – Held: parties to bring in order conformable with the power under s 52(3) to stay all proceedings under the sequestration order for a period not exceeding 21 days
Legislation: Bankruptcy Act 1966 (Cth), ss 37(2)(a), 52
Federal Court Rules 2011 (Cth), r 36.08
Cases cited: Australia and New Zealand Banking Group Limited v James [2021] FCA 768
Bechara v Bates [2021] FCAFC 34
Endresz v Australian Securities and Investments Commission [2014] FCA 1139
Endresz v Australian Securities and Investments Commission (No 2) [2015] FCAFC 33; (2015) 228 FCR 334
Ramsay Health Care Australia Pty Ltd v Compton [2017] HCA 28; (2017) 261 CLR 132
Totev v Sfar [2008] FCAFC 35; (2008) 167 FCR 193
Division: General Division National Practice Area: Commercial and Corporations Sub-area: General and Personal Insolvency Registry: New South Wales Number of paragraphs: 45 Date of hearing: 8 - 9 July 2021 Counsel for the Applicant: Mr J Stoljar SC with Mr J Hynes and Ms K Boyd Solicitor for the Applicant: Allens Counsel for the Respondent: Mr M Condon SC with Mr H Durack Solicitor for the Respondent: Allsop Glover
ORDERS
NSD 873 of 2020 BETWEEN: AUSTRALIA AND NEW ZEALAND BANKING GROUP LTD
Applicant
AND: DAVID ANTHONY JAMES
Respondent
ORDER MADE BY:
CHEESEMAN J
DATE OF ORDER:
12 JULY 2021
THE COURT ORDERS THAT:
1.The estate of David Anthony James be sequestrated under the Bankruptcy Act 1966 (Cth) (Sequestration Order).
2.By 5 pm on 13 July 2021, the parties are to provide to the Associate to Cheeseman J, an agreed form of order staying all proceedings under the Sequestration Order for a period not exceeding 21 days pursuant to s 52(3) of the Bankruptcy Act 1966 (Cth).
3.Liberty is granted to the parties to apply on 2 hours’ notice in respect of the agreed form of order the subject of Order 2.
BY CONSENT, THE COURT ORDERS THAT:
4.Each party to bear their own costs of the proceedings.
5.Any previous costs orders made in the proceedings be vacated.
THE COURT NOTES THAT:
6.The date of the act of bankruptcy is 3 July 2020.
7.A consent to act as trustees signed by John Melluish and Stephen John Michell has been filed under section 156A of the Bankruptcy Act 1966 (Cth).
8.
Any application for leave to appeal the decision of Cheeseman J on 7 July 2021 (to the extent required) or appeal from the Sequestration Order must be commenced within
14 days of these Orders and pursued by the Respondent with expedition.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
REASONS FOR JUDGMENT
CHEESEMAN J:
INTRODUCTION
The proceedings concern a creditor’s petition filed by the Australia and New Zealand Banking Group Ltd (ANZ) seeking the sequestration of the estate of David Anthony James (the Respondent). The date of the act of bankruptcy is 3 July 2020. At the hearing, the Respondent withdrew his amended notice of grounds of opposition to the creditor’s petition filed on
18 December 2020. At this time, the parties agreed to the making of an order to stay the operation of the sequestration order on certain terms. These reasons address the making of the sequestration order, a stay and costs.
BACKGROUND
The background and procedural history of the proceedings is set out in Australia and New Zealand Banking Group Limited v James [2021] FCA 768 and is not repeated in detail here. A brief recitation is necessary to elucidate the orders which are the subject of these reasons.
Extension of lapsing date and allocation of hearing date
The creditor’s petition was presented on 12 August 2020. The initial 12 month lapsing period under s 52(4)(a) of the Bankruptcy Act 1966 (Cth) was, by consent, extended on the basis that it was just and equitable to do so under s 52(5) of the Act: order 1, 25 June 2021. The lapsing period was extended to 24 months commencing on the date of presentation of the petition:
s 52(5) of the Act. No further extensions may be made. The extension of the lapsing date was necessary to ensure that the petition was determined within the statutory period. The initial statutory period was consumed by procedural delays in relation to service of the petition, the filing of evidence and by difficulties the Court had in accommodating the parties in respect of a hearing date: James at [79] – [80] and [102] – [103].
The proceedings were listed for hearing on 6 July 2021 with a 5 to 7 day estimate. The hearing dates were convenient to the Respondent’s then Senior Counsel but allocation of those dates necessitated ANZ retaining alternate Senior Counsel. Orders were in place for the hearing to be conducted remotely using Microsoft Teams.
Interim application to adjourn, amend and rely on additional affidavit evidence – 7 July 2021
About three weeks prior to the hearing, the Respondent engaged alternate Senior and Junior Counsel when his existing Senior Counsel became unavailable. One business day before the hearing was due to commence, the Respondent filed an application seeking (1) to adjourn the substantive hearing for a lengthy period, (2) leave to file and serve a proposed further amended notice of grounds of opposition to the creditor’s petition, and (3) leave to rely on an additional 9 affidavits of 6 witnesses which had been filed in other proceedings. The Respondent also sought to leave to file and rely upon a further affidavit of his of 2 July 2021. In James, I dismissed the Respondent’s Interim Application on what would have otherwise been the second day of the hearing. The Respondent was, however, given leave to rely on his further affidavit of 2 July 2021, subject to objections being determined in the ordinary course.
The Respondent’s Senior Counsel indicated that the need to open had been overtaken in effect by his address on the Respondent’s Interim Application and that he would call the Respondent the next morning.
COVID-related adjournment – 8 July 2021
On 8 July 2021, the Respondent was to be called and cross-examined. However, on that morning, Senior Counsel for the Respondent sought an adjournment of the proceedings because the Respondent had taken a COVID-19 test and was self-isolating pending receipt of test results and may not be available for cross-examination. Senior Counsel foreshadowed that the Respondent would provide an affidavit, which affidavit was ultimately received shortly after
6 pm that evening. The Respondent’s legal team, having been in contact with the Respondent, wished to take COVID-19 tests and needed to relocate to their homes in order to isolate until they received the results of their own tests.
Evidentiary Rulings – 8 July 2021
In an effort to minimise wasted time, and with an admirable level of co-operation from the Respondent’s legal representatives who were self-isolating at the time, the hearing reconvened in the afternoon of 8 July 2021 to deal with the extensive objections that had been exchanged to the Respondent’s first two affidavits. I ruled on objections to the Respondent’s first affidavit of 11 December 2020 and his second affidavit of 15 June 2021. The objections to the Respondent’s affidavits were determined save for one objection to his 15 June affidavit which was deferred pending determination of the objections to the Respondent’s affidavit of 2 July 2021. The proceedings were listed to commence at 9:30 am on 9 July 2021 for argument on objections to the Respondent’s third affidavit.
Resumption of the Hearing and withdrawal of notice of opposition - 9 July 2021
On the morning of 9 July 2021, at the request of the parties, the proceedings were stood down to enable the parties to engage in settlement negotiations. The proceedings resumed at 11:13am on 9 July 2021. At that time, the Respondent withdrew his amended notice of grounds of opposition to the creditor’s petition filed by ANZ.
Accordingly, ANZ moved on the creditor’s petition.
PRINCIPLES
Proceedings on a creditor’s petition
The nature of proceedings on a creditor’s petition was recently considered by the Full Court in Bechara v Bates [2021] FCAFC 34 at [32] – [37] in which the Court observed:
[32] Due formality has long been required in respect of an application by a creditor for an order sequestrating the estate of a person on the basis of insolvency. The requirements to be met by a creditor who petitions for bankruptcy reflect the significance of the making of such an order for the status of any person. The resonant words of Deane J in Kleinwort Benson Australia Limited v Crowl [1988] HCA 34; 165 CLR 71 at 82 (albeit in dissent) should never be forgotten in dealing with the law of bankruptcy.
[33] Section 52(1) of the Bankruptcy Act provides:
At the hearing of a creditor’s petition, the Court shall require proof of:
(a)the matters stated in the petition (for which purpose the Court may accept the affidavit verifying the petition as sufficient);
(b)service of the petition; and
(c)the fact that the debt or debts on which the petitioning creditor relies is or are still owing;
and, if it is satisfied with the proof of those matters, may make a sequestration order against the estate of the debtor.
[34] In practical terms, such proof must demonstrate an act of bankruptcy and requires current affidavit evidence that the debt is still owing and that a sequestration order has not been made since the bringing of the petition.
[35] If such matters are not proven then the petition will be dismissed or adjourned to enable the creditor to comply.
[36] As to dismissal, s 52(2) provides as follows:
If the Court is not satisfied with the proof of any of those matters, or is satisfied by the debtor:
(a) that he or she is able to pay his or her debts; or
(b)that for other sufficient cause a sequestration order ought not to be made;
it may dismiss the petition.
[37] Therefore, a debtor may point to a failure by a creditor to prove the matters required or may take an active role in opposition to the petition and seek to satisfy the Court that he or she is able to pay his or her debts or that there is other sufficient cause as to why the order should not be made. In the latter case, but not the former, the debtor bears the onus. The opportunity for the debtor to prove solvency reflects the fact that the petitioning creditor is likely to rely upon a matter such as a failure to comply with a bankruptcy notice in order to prove the relevant act of bankruptcy. A debtor who claims to be solvent notwithstanding such a failure will bear the onus of demonstrating that to be so.
In addition to proof of the matters in s 52(1), the preconditions for the exercise of the discretion to make a sequestration order may be summarised as follows:
(a)The Bankruptcy Notice must refer to a final judgment or order for an amount "of at least $5,000": s 41(1)(a)(ii) and s 5 of the Act;
(b)The debtor or his estate must be within Australia: s 43(1)(b) of the Act;
(c)There is owing by the debtor to the petitioning creditor a debt that amounts to $5,000: s 44(1)(a) and s 5 of the Act; and
(d)
The creditor’s petition must be in the form required under the Federal Court (Bankruptcy Rules) 2016 (Cth) and must include an affidavit verifying the petition:
r 4.02 of the Bankruptcy Rules.
The creditor bears the onus on each of these factors and the factors set out in s 52(1) of the Act, noting that the Court may accept the affidavit verifying the petition as sufficient proof of the matters stated therein. On proof of the matters in s 52(1) "the Court will generally proceed to make an order for sequestration": Totev v Sfar [2008] FCAFC 35; (2008) 167 FCR 193 at [37] (Emmett J). In this regard, I note the observations of the Full Court in Endresz v Australian Securities and Investments Commission (No 2) [2015] FCAFC 33; (2015) 228 FCR 334 at [36] – [37]:
[36] A petitioning creditor has a “prima facie right” to a sequestration order once proof of the matters required by s 52(1) has been satisfied (Deputy Commissioner of Taxation v Cumins (2008) 101 ALD 78 at [14] per Gilmour J; Clapham v Commonwealth Bank of Australia [2013] FCAFC 84 (Clapham) at [54] per North, Barker and Nicholas JJ; Cain v Whyte (1933) 48 CLR 639 at 646 and 648, the Court agreeing with Henchman J; Russell v Polites Investments Pty Ltd [2012] FCA 11 at [23]-[24] per Flick J and Rozenbes v Kronhill (1956) 95 CLR 407 at 414 per Dixon CJ and Webb and Fullagar JJ). Nevertheless, there is a discretion to refuse such an order for inter alia “other sufficient cause” (s 52(2)(b)).
[37] The circumstances which may constitute “other sufficient cause” are extremely variable, and it is inappropriate to catalogue or circumscribe them (Clyne v Deputy Commissioner of Taxation (1985) 5 FCR 1 at 5 per Fisher, Morling and Wilcox JJ and Cain v Whyte at 645). But even if “other sufficient cause” has been shown, that merely enlivens the Court’s discretion to refuse to make a sequestration order. The power in
s 52(2) is permissive, not mandatory. Even if a debtor can bring himself within
s 52(2)(b), that does not entitle him to have a sequestration order refused (Russell v Polites at [24] per Flick J).CONSIDERATION
ANZ seeks orders as follows:
1.The estate of David Anthony James be sequestrated under the Bankruptcy Act 1966 (Cth) (Sequestration Order).
2.Each party to bear their own costs of the proceedings.
3.Any previous costs orders made in the proceedings be vacated.
4.Unless agreed by the parties or ordered otherwise, the operation of the Sequestration Order be stayed until the earlier of the following:
a.the discontinuance by Mr James of any application for leave to appeal the decision of Cheeseman J on 7 July 2021 (to the extent required) or appeal from the Sequestration Order;
b.14 February 2022;
c.the determination of any application for leave to appeal the decision of Cheeseman J on 7 July 2021 (to the extent required) or appeal from the Sequestration Order, or any subsequent appeals or applications for leave to appeal or special leave arising.
Included in the draft orders was a notation to the following effect:
3.Any application for leave to appeal the decision of Cheeseman J on 7 July 2021 (to the extent required) or appeal from the Sequestration Order must be commenced within 14 days of these Orders and pursued by the Respondent with expedition.
Senior Counsel for the Respondent informed the Court that:
The orders before your Honour, in effect, are in agreement between the parties. As my learned friend, Mr Stoljar, indicated fairly to your Honour, what is happening is that Mr James is withdrawing the amended notice of grounds of opposition, being the document filed on 18 December of last year. He – there were some issues to preserve his right to seek leave to appeal from your Honour’s judgment delivered on Tuesday, and to the extent leave is required. And otherwise, the appeal from the order which your Honour’s being asked to make today. The stay, as I understand, order 4, is effectively an agreement reached between the parties earlier today, albeit in a different form.
The Tuesday judgment referred to by the Respondent’s Senior Counsel is the James decision in which I refused the Respondent’s application for an adjournment, leave to amend and to rely on some of the additional evidence he sought leave to rely upon at the hearing of the creditor’s petition.
Sequestration Order
ANZ relied on:
(a)The affidavit verifying the creditor’s petition of Dao Nguyen, Banker, ANZ, of 7 August 2020;
(b)The further affidavit of debt of Dao Nguyen of 9 July 2021;
(c)
The affidavit of Przemek Kucharski, employed solicitor, Allens, deposing to the results of his search of the National Personal Insolvency Index (NPII) on
9 July 2021; and
(d)A consent to act as trustees signed by John Melluish and Stephen John Michell, has been filed under section 156A of the Act.
In respect of service, I note that the Registrar made orders on 30 October 2020 for substituted service of the creditor’s petition on the Respondent. On 1 July 2021, by consent, I made an order that pursuant to r 10.23 of the Federal Court Rules 2011 (Cth) service of the creditor’s petition is taken to have occurred on 18 November 2020.
The creditor’s petition is in the following terms:
The applicant creditor Australia and New Zealand Banking Group Limited ACN 005 357 522 of 242 Pitt Street, Sydney NSW 2000 applies to the Court for a sequestration order under section 43 of the Bankruptcy Act 1966 against the estate of David Anthony James of 1 Ridgeway Road, New Lambton Heights, NSW 2305, unemployed.
1.The respondent debtor owes the applicant creditor the amount of $11,751,606.73 pursuant to a judgment in the Supreme Court of New South Wales, proceedings 2013/00306563, given on 16 May 2014.
2.The applicant creditor does not hold security over the property of the respondent debtor.
3.At the time when the act of bankruptcy was committed, the respondent debtor was ordinarily resident in Australia.
4.The following act of bankruptcy was committed by the respondent debtor within 6 months before presentation of this petition:
The respondent debtor failed to comply on or before 3 July 2020 with the requirements of a bankruptcy notice served on him on 4 September 2017 or to satisfy the Court that he had a counter-claim, set-off or cross demand equal to or more than the sum claimed in the bankruptcy notice, being a counter-claim, set-off or cross demand that he could not have set up in the action in which the judgment referred to in the bankruptcy notice was obtained.
The affidavit verifying the creditor’s petition is dated 7 August 2020 and was updated by the affidavit of 9 July 2021 which confirmed that the Respondent still owes the Applicant the debt on which the Applicant relies in the creditor's petition. The amount of that debt is $11,751,606.73, which the Respondent owes to the Applicant pursuant to a judgment in the Supreme Court of New South Wales, proceeding number 2013/00306563, given on
16 May 2014.
The ANZ also read an affidavit of Mr Kucharski of 9 July 2021 deposing to his search of the NPII on 9 July 2021. In his affidavit, Mr Kucharski deposes that the search confirmed that:
3. The only reference in the extract to the Respondent is the reference to the Respondent in these proceedings in which the Respondent is a party, and the reference to the Respondent in the earlier Creditor's Petition proceedings in NSD982/2015 which are recorded as being dismissed on 5 April 2016.
4. The extract demonstrates that there are no details of a debt agreement in connection with the debt on which the Applicant relies in the NPII:
(a)on 12 August 2020, being the date the Creditor's Petition was presented; or
(b)on 9 July 2021, being the date on which I caused the search of the NPII to be conducted.
John Melluish and Stephen John Michell, each in their capacity as registered trustees, have consented to act as joint and several trustees of the bankrupt estate of the Respondent if he becomes a bankrupt pursuant to a court sequestration order. Mr Melluish and Mr Michell have each declared that they and their related entities are not related to the Respondent.
On the basis of the material relied upon by ANZ, I am satisfied that the conditions in s 52(1) of the Act are met and the discretion to exercise the power to make a sequestration order is enlivened.
I now turn to consider the exercise of the discretion to make a sequestration order. In doing so, I am conscious that the discretion conferred must be exercised judicially and even if other sufficient cause is shown, that would merely enliven the Court’s discretion to refuse to make a sequestration order. As noted in Endresz (No 2) (at [37]) the power in s 52(2) is permissive, not mandatory. Even if a debtor can bring himself within s 52(2)(b), that does not entitle him to have a sequestration order refused.
I note that the Respondent formally opposes the making of the sequestration order but in circumstances where he has withdrawn his amended notice of grounds of opposition to the creditor’s petition and where he offers no evidence in respect of the matters in s 52(2)(a) or (b) of the Act. The Respondent has not read his own affidavits which were the subject of the evidentiary rulings made on 8 July 2021 or his third affidavit of 2 July 2021, in respect of which objections had been exchanged but not yet determined. Whereas ANZ bears the onus of establishing the matters under s 52(1) of the Act, the Respondent bears the onus under s 52(2) in seeking to satisfy the Court that he is able to pay his debts or that there is other sufficient cause as to why the sequestration order should not be made.
I am conscious that on proof of the matters in s 52(1), the Court will generally proceed to make an order for sequestration. In this case, I am satisfied that it is appropriate to make the sequestration order in accordance with that general approach but more specifically having regard to the particular circumstances of this case and the public interest in the timely and efficient resolution of bankruptcy proceedings.
The Respondent has withdrawn his amended notice of grounds of objection to the petition. That objection sought in accordance with the principles in Ramsay Health Care Australia Pty Ltd v Compton [2017] HCA 28; (2017) 261 CLR 132 at [102] – [103] and [110] (Edelman J) to go behind the judgment debt that derived from a consent judgment that was entered in May 2014. The consent judgment was entered after the Respondent had filed a defence in proceedings in which ANZ claimed against him on a guarantee. In the face of a summary judgment application, the Respondent consented to judgment being entered.
Subsequently, in various proceedings in the Supreme Court of New South Wales and in this Court, the Respondent relied on the same or similar contentions that he had sought to prove in these proceedings in his amended notice of opposition to the creditor’s petition. Over the years from 2016 to 2020, the Respondent has attempted, directly and indirectly, to use various legal avenues to revisit the consent judgment. By the time of the present proceedings, there did not appear to be any proceedings pending in respect of the consent judgment that was the foundation of the creditor’s petition.
First, in 2016, the Respondent sought unsuccessfully to stay the consent judgment in the NSW Supreme Court. Secondly, again in 2016, the Respondent brought a derivative leave application to commence an action against ANZ and the ANZ Receivers in the name of the primary corporate debtors and corporate security providers, which application he later discontinued. Thirdly, in late 2016, the Respondent sought by way of amendment to bring the claims that had first been the subject of the derivative leave application in his personal capacity and being unsuccessful he then appealed the refusal of leave to amend and the dismissal of the derivative leave proceedings, first to the NSW Court of Appeal and then by special leave to the High Court. Fourthly, in September 2017, the Respondent sought to set aside the consent judgment. That application was dismissed in July 2019, as too was the appeal from that dismissal to the NSW Court of Appeal in June 2020.
In February 2017, on the application of ANZ, a bankruptcy notice was issued to the Respondent in the amount of $11,751,606.73. In September 2017, the Respondent filed an application in this Court to set aside the bankruptcy notice. In July 2020, following an unsuccessful attempt at the end of the hearing to amend his statement of grounds in support of setting aside a bankruptcy notice, the Court dismissed the Respondent’s application. A subsequent appeal to the Full Court from that dismissal was abandoned.
In this matter, taking into account the lengthy procedural history between the creditor and the debtor, the course of the present proceedings culminating in the Respondent’s withdrawal of his amended notice of opposition to the creditor’s petition, the public interest engaged by bankruptcy proceedings and having regard to the onus that the Respondent bears under s 52(2), I am satisfied that notwithstanding the Respondent’s stance of formally opposing the creditor’s petition, it is appropriate to make the sequestration order in accordance with order 1 of the orders submitted by the parties and extracted at paragraph 14 above.
Stay of the operation of the sequestration order
I now turn to consider whether it is appropriate to make an order staying the operation of the sequestration order in accordance with the agreement reached between the parties.
The parties’ agreement in respect of the stay of “the operation” of the sequestration order is extracted above and reproduced here for ease of reference. The parties’ proposed order is as follows:
Unless agreed by the parties or ordered otherwise, the operation of the Sequestration Order be stayed until the earlier of the following:
a.the discontinuance by Mr James of any application for leave to appeal the decision of Cheeseman J on 7 July 2021 (to the extent required) or appeal from the Sequestration Order;
b.14 February 2022;
c.the determination of any application for leave to appeal the decision of Cheeseman J on 7 July 2021 (to the extent required) or appeal from the Sequestration Order, or any subsequent appeals or applications for leave to appeal or special leave arising.
Included in the draft orders is a notation to the following effect:
3.Any application for leave to appeal the decision of Cheeseman J on 7 July 2021 (to the extent required) or appeal from the Sequestration Order must be commenced within 14 days of these Orders and pursued by the Respondent with expedition.
Apart from the agreement between themselves, the parties did not address any submissions to the Court’s power to make an order staying the operation of the sequestration order or why it would appropriate in these proceedings to make such an order at this stage.
Proceedings under a sequestration order may be stayed for a period not exceeding 21 days under s 52(3) of the Act:
The Court may, if it thinks fit, upon such terms and conditions as it thinks proper, stay all proceedings under a sequestration order for a period not exceeding 21 days.
The 21 day period does not apply to a stay made pursuant to the Federal Court's appellate jurisdiction under r 36.08 of the Rules:
36.08 Stay of execution or proceedings under judgment appealed from
(1) An appeal does not:
(a) operate as a stay of execution or a stay of any proceedings under the judgment subject to the appeal; or
(b) invalidate any proceedings already taken.
(2) However, an appellant or interested person may apply to the Court for an order to stay the execution of the proceeding until the appeal is heard and determined.
(3) An application may be made under sub-rule (2) even though the court from which the appeal is brought has previously refused an application of a similar kind.
However, section 37(2)(a) of the Act provides that:
37 Power of Court to rescind orders etc.
…
(2) The Court does not have power to rescind or discharge, or to suspend the operation of:
(a) a sequestration order; or
…
It follows that in making an order in a bankruptcy proceeding under r 36.08 that the court only has power to stay proceedings or an action under the sequestration order. In Endresz v Australian Securities and Investments Commission [2014] FCA 1139, Beach J observed at [8] to [11] (emphasis in original):
8It is apparent from the provisions and operation of the Bankruptcy Act 1966 (Cth) (the Act) that it is inapposite to talk of a stay of a sequestration order as such. When a sequestration order is made, it takes immediate and automatic effect by force of the Act. There is an immediate vesting of property in the trustee in bankruptcy. Moreover, after-acquired property of the bankrupt vests as soon as it is acquired. See, generally, Nand v Fuji Xerox Australia Pty Ltd [2014] FCA 757 at [3] per Yates J. It is conceptually incoherent to contemplate a judicial stay order as being available to countermand automatic legislative operation where no question of invalidity is involved.
9In concept, one can only consider whether there should be a stay of any proceedings or action under a sequestration order, rather than a stay of the order itself. So much is made plain by the language of s 52(3) of the Act which uses the language of “stay all proceedings under a sequestration order”. I interpolate at this point that s 52(3) also has a time limit of 21 days. Nevertheless, in the Court’s appellate jurisdiction under r 36.08, such a time bar does not limit the Court’s power thereunder. A separate source of jurisdiction can be invoked, rather than that applicable under s 52(3).
10Further, reference should also be made to s 37(2)(a) of the Act, which provides that the Court does not have power to suspend the operation of a sequestration order.
11In summary, the Court only has power to stay proceedings or action under the sequestration order…
For the reasons identified by Beach J with respect to the effect of s 37(2) of the Act, the Court does not have power to suspend the operation of a sequestration order in the manner proposed by the parties.
The considerations relevant to the grant of a stay under r 36.08 are whether there is an arguable point on the proposed appeal and whether the balance of convenience favours granting the stay: Endresz at [13] – [16] (Beach J).
In this case, the parties have reached an agreement which preserves and accommodates the Respondent’s ability to seek leave to appeal (if required) or to appeal the judgment in James and to appeal the sequestration order. The parties have included in their proposed orders a notation that any application must be commenced within 14 days of the sequestration order and be pursued by the Respondent with expedition. At this stage, the Respondent has not put forward any proposed notice of grounds of appeal in respect of either the leave to appeal application (if leave is required) or an appeal from the orders in James or the sequestration order. In my view, it would be premature, speculative and beyond power to grant a stay for the period proposed by the parties even if the form of the order is modified to otherwise conform to the language of s 52(3) of the Act.
Accordingly, in the present case, I will not make orders in the form submitted by the parties. In lieu thereof, and noting the agreement reached between the parties in respect of facilitating the Respondent’s present intention to apply for leave to appeal or to appeal my decision of
7 July 2021 or appeal from the sequestration order, I will make an order under s 52(3) of the Act for a period not exceeding 21 days. I note that any future application by the Respondent, whether for leave to appeal or an appeal, is to be commenced within 14 days. That will allow a period of 7 days for the Respondent to bring any future application for a stay under r 36.08 at a time when the Court will be in a position to properly consider whether there is an arguable point on the proposed appeal(s).
The parties are to bring in agreed draft orders giving effect to these reasons in respect of a stay of the sequestration order by no later than 5 pm on 13 July 2021.
Costs
I note that the parties have reached an agreement in relation to costs. I will make the orders agreed between the parties in respect of costs in accordance with orders 2 and 3 of the form of orders provided by the parties, extracted at paragraph 14 above.
I certify that the preceding forty-five (45) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Cheeseman. Associate:
Dated: 12 July 2021
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