Fightvision Pty Ltd v Tszyu

[2000] FCA 1282

FEDERAL COURT OF AUSTRALIA

Fightvision Pty Ltd v Tszyu [2000] FCA 1282

FIGHTVISION PTY LIMITED v KONSTANTIN TSZYU
N 7281 of 2000

SACKVILLE J
8 SEPTEMBER 2000
SYDNEY

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY	N 7281 OF 2000

BETWEEN:	FIGHTVISION PTY LIMITED APPLICANT
AND:	KONSTANTIN TSZYU RESPONDENT
JUDGE:	SACKVILLE J
DATE OF ORDER:	8 SEPTEMBER 2000
WHERE MADE:	SYDNEY

THE COURT ORDERS THAT:

1.   The proceedings stand over until 26 October 2000 at 9:30 am.

2.   Liberty be granted to apply on 48 hours notice.

Note:    Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY	N 7281 OF 2000

BETWEEN:	FIGHTVISION PTY LIMITED APPLICANT
AND:	KONSTANTIN TSZYU RESPONDENT

JUDGE:	SACKVILLE J
DATE:	8 SEPTEMBER 2000
PLACE:	SYDNEY

REASONS FOR JUDGMENT

1. The applicant (“the creditor”) has filed a petition for the sequestration of the estate of the respondent (“the debtor”). When the proceedings were called on for hearing on 7 September 2000, Mr Aldridge SC, who appeared with Mr Coleman for the debtor, applied for an adjournment. I granted the adjournment and indicated that I would provide brief written reasons for doing so. These are my written reasons.

2. The creditor obtained a judgment against the debtor in the sum of $7,310,445 in proceedings determined by Bainton J in the Supreme Court of New South Wales: Fightvision Pty Ltd v Tszyu (unreported, 27 March 1998).  His Honour held that the debtor, who is a well-known professional boxer, had breached a term of his contract with the creditor. The relevant term of the contract prevented the debtor boxing professionally anywhere in the world for a specified period, unless the bout was promoted or co-promoted by the creditor. 

3. According to the findings of Bainton J, the debtor had entered into a contract on 17 January 1992 with Bill Mordey’s Classic Promotions Pty Ltd, a company associated with Mr Mordey, a boxing promoter. Bainton J found that, in or about January 1993, the contract had been novated to the creditor by discharge and the substitution of a new contract in the same terms between the debtor and the creditor. The creditor is another company associated with Mr Mordey.

4. In the same proceedings, Bainton J dismissed a claim by the creditor against Sky Channel Pty Ltd (“Sky Channel”). The creditor had sued Sky Channel for inducing the debtor to breach his contract with the creditor. Other claims were also dealt with by Bainton J but it is not necessary to refer to them.

5. Appeals against the judgment of Bainton J were brought by the debtor (against the judgment finding him liable to the creditor) and by the creditor (against the judgment dismissing the claim against Sky Channel). The Court of Appeal dismissed the debtor’s appeal, but allowed the creditor’s appeal against Sky Channel: Fightvision Pty Ltd v Onisforou (1999) 47 NSWLR 473. The Court of Appeal entered judgment for the creditor against Sky Channel in the sum of $7,310,445, such order to take effect from the date of Bainton J’s judgment. It will be seen that the judgment against Sky Channel was for precisely the same sum as the judgment against the debtor.

6. The debtor filed but later discontinued an application to the High Court for special leave to appeal against the judgment of the Court of Appeal.

7. After the Court of Appeal delivered its judgment, the creditor caused a bankruptcy notice to issue against the debtor.  The notice was founded on the judgment debt due by the debtor under the orders made by Bainton J, which were affirmed by the Court of Appeal.  An application by the debtor to set aside the bankruptcy notice failed.  According to the creditor, the debtor committed an act of bankruptcy on 12 January 2000, by failing to comply with the bankruptcy notice.  The creditor’s petition is founded upon this act of bankruptcy.

8. The debtor opposes the creditor’s petition on a number of grounds.  Grounds 1 and 2 are as follows:

   “1.The debtor is not truly and justly indebted to the petitioning creditor because the contract upon which the judgment was obtained is liable to be set aside by the Industrial Relations Commission of New South Wales.

   2.The debtor has a claim against the petitioning creditor, which claim, if successful, will establish that, in fact, the petitioning creditor is indebted to the debtor or that the petitioning creditor has no debt owed by the debtor, and the petition should be dismissed pursuant to section 52(2)(b) of the Bankruptcy Act [1966 (Cth)].

   Particulars

   Amended summons in proceedings No. IRC 1760 of 1997 in the Industrial Relations Commission of New South Wales.”

9. The debtor commenced the proceedings in the Industrial Relations Commission (“the Commission”) on 2 April 1997, the sixth day of the hearing before Bainton J. The amended summons, filed by the debtor in the Commission, seeks orders that each of the three respondents to the proceedings, including the creditor, pays the debtor certain amounts pursuant to s 106(5) of the Industrial Relations Act 1996 (NSW). The amounts claimed by the debtor include:

   ·    the judgment awarded in favour of the creditor against the debtor in the sum of $7,310,445;

   ·    interest payable by the debtor on the judgment debt;

   ·    legal costs and disbursements payable by the debtor pursuant to the order of the Supreme Court.

10. Section 106(1) of the Industrial Relations Act empowers the Commission to make an order declaring wholly or partly void:

    “any contract whereby a person performs work in any industry if the Commission finds that the contract is an unfair contract”.

    The term “unfair contract” is defined to include a contract “that is unfair, harsh or unconscionable”: s 105. Section 106(5) of the Industrial Relations Act provides that, in making an order under s 106, the Commission may make such order as to the payment of money in connection with any contract declared wholly or partly void as the Commission considers just in the circumstances of the case.

11. On 9 June 2000, the creditor commenced proceedings in the Equity Division of the Supreme Court of New South Wales, seeking an injunction to restrain the debtor from taking any further steps in the proceedings in the Commission, other than for the purpose of discontinuing those proceedings. On 1 September 2000, Hunter J delivered a judgment granting the creditor’s application. Unfortunately, a transcript of his Honour’s reasons is not yet available. Notes of the judgment, prepared by a solicitor, indicate that his Honour took the view that the proceedings in the Commission involved an abuse of the process of the Supreme Court. However, it is not possible to analyse his Honour’s reasons in detail until a transcript becomes available. The debtor has filed an appeal in the Court of Appeal from Hunter J’s orders.

12. In support of the adjournment application, Mr Aldridge relied on the principle laid down in Ahern v Deputy Commissioner of Taxation (Qld) (1987) 76 ALR 137 (FC). In that case, the Court said this (at 148):

    “It is also well established that in general a court exercising jurisdiction in bankruptcy should not proceed to sequestrate the estate of a debtor where an appeal is pending against the judgment relied on as the foundation of the bankruptcy proceedings provided that the appeal is based on genuine and arguable grounds….

    These cases rest on the broad principle that before a person can be made bankrupt the court must be satisfied that the debt on which the petitioning creditor relies is due by the debtor and that if any genuine dispute exists as to the liability of the debtor to the petitioning creditor it ought to be investigated before he is made bankrupt.  Bankruptcy is not mere inter partes litigation. It involves change of status and has quasi-penal consequences.

    This principle was applied by the Full Court in Adamopoulos v Olympic Airways SA (1990) 95 ALR 525.

13. Mr Aldridge acknowledged that this was not the usual case in which an appeal had been filed against the judgment giving rise to the judgment debt. As Mr McAlary QC, who appeared with Mr Conomy for the creditor, pointed out, the judgment of Bainton J was affirmed on appeal and cannot be further challenged. Mr Aldridge submitted, however, that the position was very similar to the usual case because the proceedings in the Commission, if successful, would result in orders against the creditor offsetting the judgment debt entirely. According to Mr Aldridge, it was appropriate at least to await the outcome of the appeal to the Court of Appeal before hearing the creditor’s petition.

14. Mr Aldridge further argued that the creditor’s petition ought to be adjourned at least until the reasons of Hunter J are available.  He contended that, in the absence of those reasons, it was impossible to assess whether the appeal against Hunter J’s judgment had reasonable prospects of success. It was therefore impossible to determine whether the debtor had reasonable prospects of obtaining an order from the Commission against the creditor which would affect the judgment debt due by the debtor to the creditor.

15. In my view, it is not possible to give full consideration to the issues that arise on the creditor’s petition until the transcript of Hunter J’s judgment is available. If, as Mr Aldridge argued, there are strong prospects of success on the appeal from that judgment, that fact may be an important consideration in determining whether a sequestration order should be made. Doubtless, other issues will need to be addressed, but the question of whether the debtor will be permitted to continue proceedings in the Commission could be integral to the outcome of the creditor’s petition.

16. It follows that the petition should be adjourned at least until a date after Hunter J’s reasons become available. Mr McAlary and Mr Aldridge agreed that, if the proceedings were to be adjourned, they should be stood over until a date after the application for expedition is dealt with in the Court of Appeal. I propose to follow that course.

I certify that the preceding sixteen (16) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice SACKVILLE.

Associate:

Dated:             8 September 2000

Counsel for the Applicant:	Mr F S McAlary QC and Mr J B Conomy
Solicitor for the Applicant:	Back Schwarz Vaughan
Counsel for the Respondent:	Mr M Aldridge SC and Mr P Coleman
Solicitor for the Respondent:	Benjamin and Khoury
Date of Hearing:	7 September 2000
Date of Judgment:	8 September 2000