Du Bray v ACW

Case [2020] FCA 1142

FEDERAL COURT OF AUSTRALIA

Du Bray v ACW [2020] FCA 1142

Appeal from: ACW v Du Bray (No 2) [2020] FCA 994
File number: NSD 800 of 2020
Judge: STEWART J
Date of judgment: 3 August 2020
Catchwords: BANKRUPTCY AND INSOLVENCY – interlocutory application – stay of sequestration order sought under s 52(3) of the Bankruptcy Act 1966 (Cth) – stay of sequestration order sought under r 36.08 of the Federal Court Rules 2011 (Cth) – distinction between staying a sequestration order and staying proceedings under a sequestration order – consideration of relevant principles – whether arguable point on appeal – balance of convenience – bankrupt able to quickly prosecute appeal – possible effect on the maintenance of litigation in the Family Court of Australia – where bankrupt is a director of companies – whether bankruptcy disqualifies the bankrupt from managing companies under the Corporations Act 2001 (Cth) even during stay of proceedings – balance of convenience not supportive of a stay – stay application dismissed
Legislation:

Bankruptcy Act 1966 (Cth) ss 5(1) 37(2), 43(2), 47(1), 52(3), 58(1), 109(1), 122, 153B

Corporations Act 2001 (Cth) ss 201B, 206B, 206GAB, 206G

Federal Court of Australia Act 1976 (Cth) s 28

Federal Court Rules 2011 (Cth) r 36.08

Cases cited:

Alexander v Cambridge Credit Corp Ltd (1985) 2 NSWLR 685

BP Exploration Co (Libya) Ltd v Hunt [1980] 1 NSWLR 496

Bryant v Commonwealth Bank of Australia [1996] HCA 3; 134 ALR 460

Culleton v Balwyn Nominees Pty Ltd [2017] FCAFC 8; 343 ALR 632

Daly v Watson [1994] FCA 361; 50 FCR 544

Damberg v Damberg [2001] NSWCA 87; 52 NSWLR 492

De Robillard v Carver [2007] FCAFC 73; 159 FCR 38

Dimitriou v Pineview Property Holdings Pty Ltd [2019] FCA 2123

Endresz v Australian Securities and Investments Commission [2014] FCA 1139

Mehajer v Weston (Trustee), in the matter of Mehajer [2018] FCA 608

Pattison v Hadjimouratis [2006] FCAFC 153; 155 FCR 226

Re Cirillo; Ex parte Commissioner of Taxation [1992] FCA 408; 36 FCR 279

Re Watts [2011] FCA 1185; 284 ALR 403

Simon v Vincent J O’Gorman Pty Ltd (1979) 27 ALR 619
Date of hearing: 3 August 2020
Registry: New South Wales
Division: General Division
National Practice Area: Commercial and Corporations
Sub-area: Corporations and Corporate Insolvency
Category: Catchwords
Number of paragraphs: 43
Counsel for the Appellant: CD Wood SC
Solicitor for the Appellant: Prime Lawyers
Counsel for the Respondent: C Ward SC
Solicitor for the Respondent: Marque Lawyers

ORDERS

NSD 800 of 2020
BETWEEN:

LEE FRANCIS DU BRAY

Appellant
AND:

ACW

Respondent

JUDGE:

STEWART J

DATE OF ORDER:

3 AUGUST 2020

THE COURT ORDERS THAT:

1.The appellant’s interim application filed on 23 July 2020, as amended orally on 3 August 2020, is dismissed.

2.The appellant is to pay the respondent’s costs of the application.

3.The parties are given leave to apply for the reconsideration of order 2 by filing written submissions (of no more than three pages) within seven days…

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AGLC
Du Bray v ACW [2020] FCA 1142
Case
[2020] FCA 1142
Decision Date

CaseChat Overview and Summary

In the Federal Court of Australia, Mr Du Bray, a bankrupt, sought to stay a sequestration order made in favour of Ms ACW under s 52(3) of the Bankruptcy Act 1966 (Cth) and r 36.08 of the Federal Court Rules 2011 (Cth). The primary issue for determination was whether the balance of convenience favoured a stay of the sequestration order. The court had to consider the effect of the sequestration order on Mr Du Bray's ability to manage companies, the possibility of prejudice to Mr Du Bray if the stay was not granted, and the possibility of prejudice to Ms ACW if the stay was granted.

The court considered that Mr Du Bray had already been disqualified from managing corporations under s 206B(3) of the Corporations Act 2001 (Cth) due to his bankruptcy, and that a stay of proceedings would not alter his status in this regard. Additionally, the court found that the balance of convenience did not favour a stay, as Mr Du Bray had failed to pay several costs orders, and the prospects of success on appeal were weak. The court also noted that Mr Du Bray's failure to pay the costs orders was a factor to weigh against him in the exercise of its discretion.

The court dismissed the application for a stay of the sequestration order and ordered that Mr Du Bray pay Ms ACW's costs of the application. The parties were given leave to apply for the reconsideration of the costs order if they wished to do so.

Orders

Orders of the court

1. The appellant’s interim application filed on 23 July 2020, as amended orally on 3 August 2020, is dismissed.

2. The appellant is to pay the respondent’s costs of the application.

3. The parties are given leave to apply for the reconsideration of order 2 by filing written submissions (of no more than three pages) within seven days of these orders.

4. In the event that a party makes an application referred to in order 3, the other party shall file any written submissions (of no more than three pages) in response and the application will be determined on the papers.

Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

Background

Background to the litigation

Full text does not contain this section.

Evidence

Evidence Before The Court

Full text does not contain this section.

Decision

Reasons for decision

Thirdly, two of the corporations are in any event registered abroad. There is no evidence before me as to the relevant law in their countries of registration. It was not submitted that it should be presumed that the relevant foreign law is the same as the domestic law, i.e. that a local bankrupt is prohibited from being a director of a corporation under the law of the relevant foreign countries. If that had been the submission, the complete answer to that might have been that the presumption does not operate to the benefit of the party who bears the onus of proving the foreign law: Damberg v Damberg [2001] NSWCA 87; 52 NSWLR 492 at [126] per Heydon JA citing BP Exploration Co (Libya) Ltd v Hunt [1980] 1 NSWLR 496 at 503 per Hunt J.Conclusion In the circumstances, I am not satisfied that either of the particular grounds of prejudice that Mr Du Bray seeks to have me weigh in the balance of convenience are made out. Even taking into account some inevitable prejudice to Mr Du Bray in the fact of proceedings under a sequestration order not being stayed on the assumption that the sequestration order is later set aside or the bankruptcy is annulled on appeal, I cannot find that the balance of convenience favours a stay. When taken together with the weak prospects of the appeal, I cannot be satisfied that there should be a stay in this case. In any event, in the exercise of my residual discretion with regard to whether or not to order a stay I would take into account the fact that on the uncontested evidence before me there are three costs orders of this Court in fixed amounts which have not been paid by Mr Du Bray. In that regard:(1)On 4 July 2017, Mr Du Bray and associated companies were ordered to pay $154,034.69 to ACW of which only $25,364.78 has been paid;(2)On 29 March 2018, a costs order of the Full Court was quantified by a registrar on a lump-sum basis in the amount of $60,516.14 which has not been paid;(3)On 20 December 2018, Mr Du Bray was ordered to pay $20,950 to ACW in respect of her costs which has not been paid. Given the history of the protracted litigation between the parties including the exhaustive efforts by Mr Du Bray to resist judgments against him in favour of ACW at every turn as documented in the judgment of Wigney J, his continued failure to pay the above costs orders is a substantial factor to weigh against Mr Du Bray in the exercise of my discretion. If I had not otherwise been satisfied not to grant the stay, in the exercise of my residual discretion I would not have granted the stay on account of the unpaid costs. Mr Du Bray submits that if he was to have paid the costs judgments against him those would stand to be set aside as voidable preferences in his sequestration (under s 122 of the Bankruptcy Act), and that his failure to pay them should therefore not be held against him. There are several reasons why that submission cannot be accepted. First, those judgments were quantified and unpaid a long time – years even – before the sequestration order. The creditor’s petition was presented on 12 March 2019 with the result that the relevant period for voidable preferences commenced six months before, i.e. on 12 September 2018. That post-dates two of the costs orders I have referred to and in one case by well more than a year.

Ratio Decidendi

Legal Principle Established

Secondly, as I have already indicated, the sequestration order has already taken effect and it will continue in effect until the sequestration is set aside or the bankruptcy is annulled. In those circumstances, the disqualification from being a director of a company to which Mr Du Bray alludes has already taken effect and will be unaffected by any stay that I might order. In that regard, s 206B(3) of the Corporations Act 2001 (Cth) provides that a person is disqualified from managing corporations if the person is an undischarged bankrupt under the law of Australia, its external territories or another country. Until such time as the sequestration order is set aside or the bankruptcy is annulled, Mr Du Bray will remain an undischarged bankrupt. Mr Du Bray has the possible remedies referred to in s 201B(2) of the Corporations Act. That subsection provides that a person who is disqualified from managing corporations under Pt 2D.6, in which s 206B(3) is located, may only be appointed as a director of a company if the appointment is made with permission granted by ASIC under s 206GAB or leave granted by the Court under s 206G. What is clear, is that a stay of proceedings under the sequestration order will not save Mr Du Bray’s current directorships. In the above regard, in Re Watts [2011] FCA 1185; 284 ALR 403, Mr Watts, an undischarged bankrupt, applied for leave under s 206G of the Corporations Act to act as a director of corporations. Yates J (at [7]) observed that Mr Watts had been disqualified from managing corporations since the making of the sequestration order against his estate and that the stays of proceedings under the sequestration order pending an appeal did not alter his status in that regard. See also Mehajer v Weston (Trustee), in the matter of Mehajer [2018] FCA 608 at [33] per Lee J. Thirdly, two of the corporations are in any event registered abroad. There is no evidence before me as to the relevant law in their countries of registration. It was not submitted that it should be presumed that the relevant foreign law is the same as the domestic law, i.e. that a local bankrupt is prohibited from being a director of a corporation under the law of the relevant foreign countries. If that had been the submission, the complete answer to that might have been that the presumption does not operate to the benefit of the party who bears the onus of proving the foreign law: Damberg v Damberg [2001] NSWCA 87; 52 NSWLR 492 at [126] per Heydon JA citing BP Exploration Co (Libya) Ltd v Hunt [1980] 1 NSWLR 496 at 503 per Hunt J.Conclusion In the circumstances, I am not satisfied that either of the particular grounds of prejudice that Mr Du Bray seeks to have me weigh in the balance of convenience are made out. Even taking into account some inevitable prejudice to Mr Du Bray in the fact of proceedings under a sequestration order not being stayed on the assumption that the sequestration order is later set aside or the bankruptcy is annulled on appeal, I cannot find that the balance of convenience favours a stay. When taken together with the weak prospects of the appeal, I cannot be satisfied that there should be a stay in this case.