Cotellessa v Ameduri - [2012] WASCA 236

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA

TITLE OF COURT : THE COURT OF APPEAL (WA)

CITATION: COTELLESSA -v- AMEDURI [2012] WASCA 236

CORAM: PULLIN JA

HEARD: 9 NOVEMBER 2012

DELIVERED : 9 NOVEMBER 2012

PUBLISHED : 19 NOVEMBER 2012

FILE NO/S: CACV 65 of 2012

BETWEEN: SERGIO COTELLESSA
Appellant
AND
JOHN AMEDURI
First Respondent
KAREN AMEDURI
Second Respondent

ON APPEAL FROM:
Jurisdiction              :  DISTRICT COURT OF WESTERN AUSTRALIA
Coram  :STONE DCJ
Citation  :AMEDURI -v- COTELLESSA [2012] WADC 86
File No  :CIV 3751 of 2009

Catchwords:

Practice and procedure - Application for a suspension order - Second application - Bankruptcy notice issued and served

Legislation:

Bankruptcy Act 1966 (Cth)
Civil Judgments Enforcement Act 2004 (WA)

Result:

Application refused

Category: B

Representation:

Counsel:

Appellant:     Mr P J Hannan
First Respondent           :     Mr N D C Dillon
Second Respondent      :     Mr N D C Dillon

Solicitors:

Appellant:     De Vita & Dixon
First Respondent           :     Andrew James Foster
Second Respondent      :     Andrew James Foster

Case(s) referred to in judgment(s):

Byron v Southern Star Group Pty Ltd (1997) 73 FCR 264
Clyne v Deputy Commissioner of Taxation (NSW) (No 3) (1982) 82 ATC 4484
Guss v Johnstone [2000] HCA 26
Kakavas v Paradise Enterprises Ltd (No 2) [2010] FCA 915
Re Bedford; Ex parte HC Sleigh (Qld) Pty Ltd (1967) 9 FLR 497
Re Nguyen; Ex parte Commissioner of Taxation (1995) 54 FCR 403
Samuels v The State of Western Australia [2005] WASCA 193; (2005) 30 WAR 473
Streimer v Tamas (1981) 37 ALR 211
Tradesman Technologies Pty Ltd v Ameduri [2012] WASCA 168

PULLIN JA: The appellant applied for a suspension order under s 15 of the Civil Judgments Enforcement Act 2004 (WA). The application was dismissed with reasons to follow. These are the reasons.
This was the second application for a suspension order. The first application came before the court on 7 August 2012 and was dismissed on that day. It was dismissed for reasons published on 24 August 2012. See Tradesman Technologies Pty Ltd v Ameduri [2012] WASCA 168. It was dismissed because the appellant did not demonstrate that the appeal would be rendered nugatory if a suspension order were not granted and because it was impossible to say, on the information provided, whether there was any reasonable prospect of the appeal succeeding. At the time of that hearing the respondents had issued a notice of bankruptcy but had not served it. The respondents refused to give an undertaking not to serve the notice of bankruptcy. The appellant was given liberty to apply to make a second application.
The principles which usually govern an application for a suspension order are set out in my earlier reasons [22].
The first question to consider is whether the appeal will be rendered nugatory or there will be practical difficulties for the appellant if a suspension order is not granted. The appellant submits that this will happen because the bankruptcy notice has now been served and if it is not complied with, the appellant will commit an act of bankruptcy. As to that submission, it is important to bear in mind what Tracey J said in Kakavas v Paradise Enterprises Ltd (No 2) [2010] FCA 915, after referring to the decision of Lehane J in Byron v Southern Star Group Pty Ltd (1997) 73 FCR 264 and Heerey J in Re Nguyen; Ex parte Commissioner of Taxation (1995) 54 FCR 403. His Honour said:
As these judgments make clear, the issuing of a bankruptcy notice is but the start of a statutory process which may culminate in the making of a sequestration order. A failure to comply with the notice may lead the person to whom the notice is directed to commit an act of bankruptcy. If this happens a petitioning creditor is able to exercise certain rights under the Act to protect (insofar as he or she is able) his or her position vis-à-vis the debtor. A failure by the debtor to comply with a demand for payment is a means by which the creditor may establish the insolvency of the debtor. The bankruptcy will date from the commission of the act of bankruptcy: see s 115(1). The creditor has access to the property belonging to the debtor at the commencement of the bankruptcy: see s 116(1). It is for this reason that it may be disadvantageous to a creditor if the court extends time for compliance with the demands made in the bankruptcy notice. If the evidence suggests that the debtor is ... hopelessly insolvent, there will be no point in delaying the inevitable [24].
In Re Bedford; Ex parte HC Sleigh (Qld) Pty Ltd (1967) 9 FLR 497 it was held that if an act of bankruptcy were committed, it remained in effect even if the bankruptcy notice was based upon a debt resulting from a judgment which was later set aside. However, that was decided before s 41(6A) of the Bankruptcy Act 1966 (Cth) was introduced into the Bankruptcy Act in 1980. Section 41(6A) reads:
Where, before the expiration of the time fixed for compliance with the requirements of a bankruptcy notice:
(a)proceedings to set aside a judgment or order in respect of which the bankruptcy notice was issued have been instituted by the debtor; or
(b)an application has been made to the Court to set aside the bankruptcy notice;
the Court may, subject to subsection (6C), extend the time for compliance with the bankruptcy notice.
Since then the High Court in Guss v Johnstone [2000] HCA 26 said, after referring to Re Bedford and two other cases to similar effect:
[W]hat is said to be the ineluctable nature of an act of bankruptcy is qualified by the consideration that time for compliance with a bankruptcy notice may be extended even after the time has expired, provided the conditions of s 41(6A) are otherwise satisfied [58].
Streimer v Tamas (1981) 37 ALR 211 is a case where an order extending time was made after the expiry of time for compliance with a bankruptcy notice.
A federal magistrate might, on application by the appellant, further extend the time for compliance with the bankruptcy notice. If that application fails, the appellant may apply to adjourn the hearing of the petition to sequestrate the debtor's estate. See Clyne v Deputy Commissioner of Taxation (NSW) (No 3) (1982) 82 ATC 4484, 4492 (Lockhart J).
Thus, it has still not yet been established that the appeal will be rendered nugatory or the appellant's circumstances irreversibly adversely affected if a suspension order is not made.
It is next necessary to consider whether any of the appeal grounds have a reasonable prospect of succeeding. Grounds of appeal will have a rational and logical prospect of succeeding if the grounds are not irrational, fanciful or absurd: Samuels v The State of Western Australia [2005] WASCA 193; (2005) 30 WAR 473 [56].
There is no doubt that the appellant faces an uphill battle to succeed on the appeal. This is so because there is no issue that the respondents advanced $150,000 to the appellant and that there exists an agreement in writing whereby the appellant promised to repay the $150,000 by a specified date.
The appellant's case was that an oral agreement was entered into which altered the simplicity of the written agreement and which, if it existed, provided the appellant with a defence. To succeed in establishing the oral terms of what was called the 'continuing supply agreement' the appellant had to convince the trial judge to accept his evidence and reject the evidence of the respondents. The trial judge considered the evidence of the three witnesses but preferred the evidence of the respondents and rejected the evidence of the appellant. The trial judge did not merely rely on demeanour, but found that the surrounding circumstances supported the conclusion that there was no continuing supply agreement entered into.
Most of the grounds of appeal can be read as asserting no more than that the trial judge should have preferred the evidence of the appellant and rejected the evidence of the respondents. Simply contending that there were reasons why Mr Cotellessa's evidence could have been preferred does not establish that the trial judge fell into error. However, if a charitable view is taken of the grounds of appeal, they might be regarded as alleging that the findings of the trial judge were against the weight of evidence. They do not, at the moment, expressly contend that that was so. One ground raises a question about whether the written agreement is ambiguous which cannot on its own lead to the conclusion that an oral agreement was entered into. Nevertheless, based on the charitable view of the other grounds, they cannot be regarded as irrational, fanciful or absurd with the consequence that it can be said that the grounds have a real prospect of success.
The balance of convenience favours the respondents. If a suspension order were made and that resulted in a federal magistrate granting an extension of time for compliance with the bankruptcy notice, then that is against the interests of the respondents who have a judgment and who wish to proceed to enforce it. The disadvantages to the respondents are referred to in Kakavas. On the other hand, if an act of bankruptcy is committed, then of course it may have consequences for the appellant, vis-à-vis the bank which holds security for moneys due to the bank by Mr Cotellessa's company Tradesman. Under the bank's securities, an event of default occurs if steps are taken to have the appellant declared insolvent; but such a step was taken when the bankruptcy notice was issued and that happened before the previous application. The bank has not yet moved on the appellant. No evidence has been given by the appellant about the bank's attitude. If there have been discussions between the bank and Mr Cotellessa, then those discussions have not been disclosed.
Weighing up all of those factors and bearing in mind the statutory direction not to make a suspension order unless there are special circumstances, I came to the conclusion that the application for a suspension order should be refused. However, I granted liberty to the appellant to apply again if the circumstances do demonstrate that there is a risk that the appellant's circumstances will become irreversible if a stay is not granted.