Halls, Colleen May v Retravision (NSW) Pty Ltd & Anor Street, June Sheila v Retravision (NSW) Pty Ltd & Anor Street, Stanley v Retravision (NSW) Pty Ltd & Anor Halls, Francis Terence v Retravision (NSW) Pty Ltd
[1995] FCA 838
•5 OCTOBER 1995
CATCHWORDS
PRACTICE AND PROCEDURE - application for stay of sequestration orders pending hearing of appeals against making of the orders - prospects of success - balance of convenience - stay refused - no question of principle.
Federal Court Rules, O 52 r 17.
COLLEEN MAY HALLS v RETRAVISION (NSW) PTY LTD & ANOR
No NG 588 of 1995
JUNE SHEILA STREET v RETRAVISION (NSW) PTY LTD & ANOR
No NG 589 of 1995
STANLEY STREET v RETRAVISION (NSW) PTY LTD & ANOR
No NG 590 of 1995
FRANCIS TERENCE HALLS v RETRAVISION (NSW) PTY LTD & ANOR
No NG 591 of 1995
Lindgren J
Sydney
5 October 1995
IN THE FEDERAL COURT OF AUSTRALIA )
NEW SOUTH WALES DISTRICT REGISTRY ) No NG 588 1995
GENERAL DIVISION )
BETWEEN:
COLLEEN MAY HALLS
Appellant
AND:
RETRAVISION (NSW) PTY LIMITED (ACN 000 384 565)
First RespondentTHE OFFICIAL TRUSTEE IN BANKRUPTCY
Second RespondentNo NG 589 of 1995
BETWEEN:
JUNE SHEILA STREET
Appellant
AND:
RETRAVISION (NSW) PTY LIMITED (ACN 000 384 565)
First RespondentTHE OFFICIAL TRUSTEE IN BANKRUPTCY
Second RespondentNo NG 590 of 1995
BETWEEN:
STANLEY STREET
Appellant
AND:
RETRAVISION (NSW) PTY LIMITED (ACN 000 384 565)
First RespondentTHE OFFICIAL TRUSTEE IN BANKRUPTCY
Second RespondentNo NG 591 of 1995
BETWEEN:
FRANCIS TERENCE HALLS
Appellant
AND:
RETRAVISION (NSW) PTY LIMITED (ACN 000 384 565)
First RespondentTHE OFFICIAL TRUSTEE IN BANKRUPTCY
Second Respondent
CORAM:Lindgren J
PLACE:Sydney
DATE:5 October 1995
MINUTE OF ORDERS
THE COURT ORDERS THAT:
The appellants' motion brought by notice of motion filed on 28 September 1995 be dismissed.
The appellants pay the respondents' costs of the motion.
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 ) No NG 588 1995
GENERAL DIVISION )
BETWEEN:
COLLEEN MAY HALLS
Appellant
AND:
RETRAVISION (NSW) PTY LIMITED (ACN 000 384 565)
First RespondentTHE OFFICIAL TRUSTEE IN BANKRUPTCY
Second RespondentNo NG 589 of 1995
BETWEEN:
JUNE SHEILA STREET
Appellant
AND:
RETRAVISION (NSW) PTY LIMITED (ACN 000 384 565)
First RespondentTHE OFFICIAL TRUSTEE IN BANKRUPTCY
Second RespondentNo NG 590 of 1995
BETWEEN:
STANLEY STREET
Appellant
AND:
RETRAVISION (NSW) PTY LIMITED (ACN 000 384 565)
First RespondentTHE OFFICIAL TRUSTEE IN BANKRUPTCY
Second RespondentNo NG 591 of 1995
BETWEEN:
FRANCIS TERENCE HALLS
Appellant
AND:
RETRAVISION (NSW) PTY LIMITED (ACN 000 384 565)
RespondentTHE OFFICIAL TRUSTEE IN BANKRUPTCY
Second Respondent
CORAM:Lindgren J
PLACE:Sydney
DATE:5 October 1995
REASONS FOR JUDGMENT
The four appellants appeal against sequestration orders which were made by Hill J on 18 July last. They move for a stay of the sequestration orders pending the hearing and determination of their appeals. The appellants' motion came before Foster J on 28 September 1995 who stood it over to yesterday, 4 October, before the Duty Judge. His Honour granted a stay until midnight last night. At the hearing yesterday I continued the stay until 10 am this morning, pending the delivery of judgment at 9.00 am. The second respondent, the trustee of the four bankrupt estates, submitted to such order as the Court might make save as to costs.
The granting of a stay pending appeal is provided for in O 52, r 17 of the Federal Court Rules. The appropriate order would be for a stay of all proceedings under the sequestration orders.
There are two matters to be considered: the appeal's prospects of success and the balance of convenience. The authorities do not speak with one voice on the question of whether it is appropriate to embark upon any consideration of the balance of convenience if there is an adverse conclusion on the first question. One thing is clear: the two are interrelated. Accordingly, if it could be said that there was a strong case in favour of success, a stay might be granted even if the balance of convenience did not clearly favour that course. Similarly, weakness of the prospects of success may be overcome by a strong "balance of convenience" consideration in favour of the granting of a stay. What I have said suggests that it may be required to consider the balance of convenience in all cases except those which are truly hopeless. If there are reasonably arguable grounds of appeal and a refusal of a stay would have the effect of rendering the appeal nugatory, there will be a disposition in favour of the granting of a stay.
There are eight grounds of appeal set out in the notices of appeal filed on 8 August 1995. They are as follows:
"1.His Honour should have held on the whole of the evidence that there was sufficient material to entitle him to go behind the Judgment entered against the Appellant and others and to determine whether the debt upon which the Judgment was based was a good debt.
2.His Honour should have held on the whole of the evidence there was sufficient material to entitle the Appellant in the events that had happened to raise and litigate the issue of liability under the guarantee which are alleged to have been signed by the Appellant and others.
3.His Honour should have held on the evidence that there was insufficient evidence of the existence of a debt sufficient to base a sequestration order.
4.His Honour should have given no weight or,
alternatively, less weight to claims of persons claiming to be supporting creditors.
5.His Honour should have held that the evidence of the petitioner was insufficient to establish the existence of a debt and should have dismissed the petition or, alternatively, adjourned the further hearing of the petition to allow the issue of liability generally to be contested.
4.His Honour should have given no weight or, alternatively, less weight to claims of persons claiming to be supporting creditors.
5.His Honour should have held that the evidence of the petitioner was insufficient to establish the existence of a debt and should have dismissed the petition or, alternatively, adjourned the further hearing of the petition to allow the issue of liability generally to be contested.
6.His Honour when dealing with the orders of another Judge of the Court should not have proceeded with the hearing of the petition and should have granted the Appellant and [sic] adjournment to file further or other evidence as to the issues likely to arise on the hearing of the petition.
7.His Honour should in the exercise of his discretion have dismissed the petition.
8.In the alternative His Honour in the exercise of his discretion should have adjourned the further hearing of the petition."
As can be seen, the first three grounds refer to the evidence before Hill J. The first two grounds are to the effect that his Honour "should have held [something] on the whole of the evidence". The third ground is that his Honour "should have held on the evidence that there was insufficient evidence of the existence of a debt sufficient to base a sequestration order". But there was no evidence led by the appellants before his Honour and no submission has been made as to why the evidence led by the petitioning creditor before Hill J did not establish the existence of a debt. These three grounds of appeal are truly hopeless.
I turn to the fourth ground. This is that Hill J should have given no weight, or alternatively less weight, to the claims of persons claiming to be supporting creditors. For the following reasons, I think that there is no substance in that ground and that it clearly would not succeed.
The primary reason why the sequestration orders were made was that no reason was shown why the Court should go behind the final judgment or order, a judgment given by Giles CJ Comm D in proceedings No 50211/94 in the Commercial Division of the Supreme Court of New South Wales on 20 December 1994 for $2,817,867.88. Hill J gave as a second reason for making the sequestration orders that it was not in dispute that an act of bankruptcy had been committed and observed that the debtors owed other monies to the petitioning creditor on which it would have been entitled to rely to support its petition even if the judgment debt of $2,817,687.88 had not been available.
There is evidence before the Court on this present motion led by the first respondent to the effect that the following judgments in its favour exist and are still outstanding:
a judgment for Retravision (NSW) Limited against Francis Terence Halls and Colleen May Halls dated 16 June 1995 for $10,823.64 in the Local Court at Moss
Vale, file number 116/94.
a judgment for Retravision (NSW) Limited against Stanley Street and June Sheila Street dated 16 June 1995 for $7383.16 in the Local Court at Moss Vale, file number 117 of 1994.
It is not submitted that the two judgment debts would not have supported the petition. As well, there is evidence that the Wingecarribee Council has a judgment against Mr and Mrs Street for $14,101.44 dated 28 April 1995 in the Local Court at Sutherland in proceedings No 54689 of 1994 and that Convoy International Pty Ltd has a judgment against Mr and Mrs Halls for $6,663.94 in the Local Court at Campbelltown in proceedings No 1074 of 1994. There was evidence of all these matters before Hill J.
The commission of the act of bankruptcy not having been in dispute before Hill J sequestration orders must have been made by reason of the existence of the other debts to the petitioning creditor. The fourth ground of appeal is, in my view, hopeless.
The fifth ground of appeal is that Hill J (a) should have held that the evidence of the petitioning creditor was insufficient to establish the existence of a debt and dismissed the petition, or alternatively (b) should have adjourned the hearing of the petition to allow the issue of liability generally to be contested. This is, as it were, a "wrap up" ground which adds nothing to other grounds. Sub-ground (a) is a repetition of ground 3 with which I dealt above. Sub-ground (b) foreshadows ground 6 with which I deal below. It suffices to say that in my view ground 5 has no prospects of success.
I deal with ground 6 below.
Grounds 7 and 8 assert that Hill J wrongly exercised his discretion and should have dismissed the petition or alternatively adjourned the hearing. A discretionary judgment of the kind attacked in these two grounds is, of course, very difficult to disturb and it must be shown that the judge approached the matter in such a way that the discretion miscarried. No submission was made suggesting this independently of the submissions made in respect of other grounds, particularly ground 6 dealt with below. There are no prospects of success, in my view, in relation to grounds 7 and 8
The result of what I have said is that it is only ground 6 which needs to be dealt with in greater detail. Ground 6 is to the effect that when Hill J dealt with the orders of another judge of the Court (a reference to Einfeld J) his Honour should not have proceeded with the hearing of the petition and should have granted an adjournment to allow the debtors to file further or other evidence.
It is best that I approach ground 6 by going to the history. At the risk of over-generalisation, I will give a thumbnail sketch of the background facts. I should say at the outset, however, that on the hearing before me, the only evidence which was led by the appellants related to issues concerning goods of the appellants and relatives of theirs at a property known as "Jancollyn" at Oxley Hill, Bowral, and that, as before Hill J, no evidence whatever was led by them going to the fundamental question of why the Court should go behind the final judgment or order against them.
Apparently, Mr Stanley Street is a former cabinet maker of some 78 years of age and his wife is June Sheila Street, is aged 76 years. Relevantly, there are three daughters, Janice June Street, Colleen May Halls (one of the debtors), and Lynette Anne Luff. Thus the name "Jancollyn" for the property and, as will be seen, for a certain family company. Colleen May Halls is married to the fourth debtor, Francis Terence Halls.
Two companies must be mentioned: Terry's Sound Lounge Pty Ltd ("Terry's") and Jancollyn (1980) Pty Ltd ("Jancollyn"). Terry's was a member of Retravision (NSW) Pty Ltd ("Retravision"). The members of Terry's were Mr and Mrs Halls. The members of Jancollyn were Mr and Mrs Street. Mr and Mrs Street and Mr and Mrs Halls were directors of both companies. Retravision purchased electrical goods on behalf of its members. Terry's carried on a retail business at Bowral under the name "Terry's Retravision Discounts". The four directors guaranteed Terry's' indebtedness to Retravision. Jancollyn mortgaged the property "Jancollyn", (where, inter alia, Mr and Mrs Street and Mr and Mrs Halls resided) to Retravision as security for that indebtedness. Terry's went into liquidation owing a large amount to Retravision. Retravision took proceedings No 50211/1994 in the Commercial Division of the Supreme Court of New South Wales against all four individuals on their guarantees and against Jancollyn under the mortgage (for possession of the property "Jancollyn"). With the foregoing introduction, I proceed to give a chronological outline of the litigation between the parties.
On 14 October 1994, when the present debtors were represented by counsel, the then Chief Judge of the Commercial Division O'Keefe J made a number of declarations. These were to the effect that under the respective instruments the debtors were liable to Retravision "for all moneys properly due and owing by Terry's Sound Lounge Pty Limited". Clearly, the declarations left open the question as to what were the moneys "properly due and owing" by Terry's to Retravision.
On 14 December 1994 the case came before Giles CJ Comm D in the Commercial Division for hearing. Relevantly, Mr and Mrs Street and Mr and Mrs Halls applied to amend their defence. In relation to the application his Honour said this:
"A major difficulty with now seeking to put in issue by way of non-admission the defendants' liability as guarantors is that on 14 October 1994 the first to fourth defendants consented to declarations that they were liable to the plaintiff under the guarantees on which the plaintiff relied for all moneys properly due and owing by the principal debtor. It was properly acknowledged that in the light of that it was necessary for those defendants to seek to have the declarations discharged, if that be the right word, in order to be able now to put in issue their liability as guarantors."
Thus, back on 14 December 1994 Giles CJ Comm D remarked that so long as the declarations remained in effect, the guarantors were precluded from denying liability. His Honour noted that they accepted that this was so. His Honour refused leave to amend.
The hearing then proceeded and extended over four days. Giles CJ Comm D gave judgment on 20 December 1994. This is the judgment on which Retravision's bankruptcy notice was based. The judgment was for $2,817,867.88. As well, judgment for possession was entered in favour of Retravision under its mortgage over the property, "Jancollyn". Although leave to issue a writ of possession was given, it was directed that that writ lie in the Supreme Court office until 31 March 1995.
On 2 February 1995 a notice of appeal was filed by the four individuals and Jancollyn against the judgment in the Commercial Division.
On 31 March 1995 the writ of possession issued from the Supreme Court office. The appellants applied for a stay of execution on the judgment. On 3 April 1995 Meagher JA dismissed that application for a stay.
There followed a number of developments, some of which are not directly relevant to the issues before me. However, they do account for the passing of time. For example, on 4 April 1995, the then solicitors for the appellants, P J Pollack & Co, advised Retravision's solicitors that the appeal to the Court of Appeal was "to be withdrawn". However, no notice of discontinuance was filed. This prompted an application by Retravision for dismissal of the appeal for non-prosecution (see below), the appellants contending that they had not instructed Mr Pollack to discontinue the appeal and he contending, with the support of a diary note, to the contrary.
On 10 April 1995 Jancollyn was ordered to be wound up.
On 24 April 1995 possession of the property "Jancollyn" was taken by Retravision as mortgagee.
The proceedings in bankruptcy came before Registrar Hedge on 22 May 1995.
On 23 May 1995 Retravision filed its notice of motion in the Court of Appeal for dismissal of the appeal for non prosecution.
On 30 May 1995 Retravision's applications for sequestration orders came before Sheppard J. His Honour stood the matter over to 13 June 1995 and directed that the debtors' affidavits in opposition be filed by 9 June 1995. No such affidavits were filed.
On 5 June 1995, in the Court of Appeal, Sheller JA refused Retravision's application for dismissal of the appeal for non prosecution.
Accordingly, the appeal against the judgment given by Giles CJ Comm D remained on foot when, on 13 June 1995, the bankruptcy proceedings came before Hill J, when his Honour gave the first of his two judgments in the bankruptcy proceedings. The debtors applied for an adjournment on the basis that adjudication of Retravision's application for the sequestration order should await determination of the hearing of the appeal by the New South Wales Court of Appeal. Reference was made to the fact that this might take some two years. In the event, his Honour noted an undertaking by the solicitor for the debtors to prosecute the appeal before the Court of Appeal, including the settling of the appeal index, and to apply for expedition of the hearing of the appeal. His Honour directed that affidavits be filed by the debtors by 26 June and stood the matter over to 28 June 1995 before himself. This was the second direction that the debtors file their affidavits. Again, no affidavits were filed.
When the matter came before his Honour on 28 June 1995 time did not permit it to be dealt with by him and it was stood over to the following day, when it came before Einfeld J. It is really what occurred on that day which has prompted the submission that Hill J should have granted an adjournment on 18 July.
I have read in full the transcript of what happened before Einfeld J on 29 June 1995. It was mentioned that the question of the enforceability of the guarantees was proposed to be raised by the debtors. Throughout the course of the argument reference was made by his Honour to the great difficulty which seemed to confront the debtors in view of the fact that they had, through counsel, consented to the declarations as to liability in the Commercial Division and that those declarations were still on foot.
Counsel for the debtors said that he was seeking an adjournment for a time long enough to put on evidence to justify an assertion that the debtors were entitled to go behind the judgment debt. The transcript reveals, inter alia, the following exchanges:
"MR WALSH ... So, one of the grounds of appeal is that the debtors should be allowed to put in question the effectiveness of the guarantee in whole or in part in each case. That is an issue which has not been determined at a trial and the debtors would if they were allowed to seek to run that argument if they succeeded on the appeal and there were a retrial.
It is for that reason that the debtors seek an adjournment of this creditors petition to enable the appeal to be determined. If your Honour were not minded to do that ...
HIS HONOUR: The appeal would include, would it, an appeal against the refusal to allow the defence to be amended to blame Retravision for the loss?
MR WALSH: Yes.
HIS HONOUR: I see that Giles J did not come to any favourable conclusion about your client's credibility." (tr 7.8-7.20)
At page 9 the following exchange is recorded:
"HIS HONOUR: ... If the Court of Appeal upholds your appeal, gives you expedition and upholds your appeal in 3 or 4 months then nothing much will have happened in that period anyway as a matter of fact because the petitioning creditor already has the securities." (tr 9.10-9.14)
"MR WALSH: So a number of matters will be dealt with in the near future. At the end of the day I suppose my submission is that it is desirable that the matter be dealt with in the Court of Appeal and the merits of the appeal be dealt with there rather than here.
HIS HONOUR: Yes, what do you want to say, Mr Johnson? If it will help at all I am a little inclined to give a short adjournment, not very long, mainly to see what happens in the Court of Appeal. You do have security for the whole of the debt and no apparent inhibition on your capacity to realise it." (tr 9.21-9.28)
At page 12 of the transcript his Honour said this:
"HIS HONOUR: ... I do not want to impose upon them the responsibility at the moment of justifying going behind the debt because the chances of getting a bankruptcy court to go behind a debt after a four day hearing in the Supreme Court would have to be regarded as somewhat less than low, I should have thought. But I would be willing to allow them to put in writing the arguments they would use if the affidavit evidence was available, just so that I can give them an opportunity of being heard on the matter before dealing with it. (tr 12.20-12.27)
His Honour granted an adjournment to 18 July 1995, saying
this:
"I would be prepared to grant an adjournment of each of the petitions for a short period, perhaps two weeks. That is for two purposes. One is to allow the proceedings in the Court of Appeal to take some form which can be authoritatively advised, and the second is to enable you to put in writing the submissions of the debtors in support of their notice of intention to oppose, including in response to the matters raised by the legal representatives of the petitioning creditor and the supporting creditors.
........ ........ ........ ........ ........ ........ .
I propose that those submissions be served on the petitioning and supporting creditors instructing solicitors by not later than 4pm on Friday, 7 July and I will list the matter at 9.30 on Tuesday, 18 July ..." (tr 17.4-17.10 and 17.17-17.20.)
What is abundantly clear is that the only reason why an adjournment was granted at all by Einfeld J was the pendency of the appeal before the Court of Appeal. But for that factor, the hearing would have proceeded before his Honour on 28 June.
The next development was truly remarkable, in the light of (a) the debtors' solicitor's undertaking to Hill J on 13 June that the appeal would be prosecuted before the Court of Appeal and that expedition of the hearing of the appeal would be applied for, and (b) the basis for the adjournment put to Einfeld J and on which his Honour granted that adjournment. That development was that the debtors discontinued their appeal to the Court of Appeal by a notice of discontinuance bearing date 7 July 1995 and filed on 10 July 1995. Accordingly, from that time there was no longer a challenge to the judgment in the
Commercial Division.
The matter came before Hill J on 18 July 1995. The debtors again applied for an adjournment. His Honour referred to most, if not all, of the matters to which I have referred above, and refused the application for adjournment. His Honour referred to the change of circumstances which had arisen by reason of the debtors' discontinuance of their appeal. He also noted that Einfeld J had directed that the submissions to be filed on behalf of the debtors should indicate the evidence which would be relied on by the debtors as to the debt of Retravision and the debts of supporting creditors, and noted that there had not been filed any submissions addressing this matter. Hill J referred to the obstacle to the debtors' success of the consent declarations made in the Commercial Division. Finally, as noted earlier, his Honour said that even if the judgment were set aside, it was not disputed that the debtors had committed an act of bankruptcy and he noted that Retravision had judgment debts against the bankrupts on which it relied and was entitled to rely to support its application for sequestration orders. In the event, his Honour refused the adjournment and made sequestration orders.
On 8 August 1995, the four bankrupts filed their notices of appeal against these orders and, as I said at the beginning, on 28 September 1995, they filed the current notice of motion for a stay pending the hearing of the appeal.
The appellants say that they were induced to enter into the guarantees by duress. It was put for the appellants that they were misled by what happened before Einfeld J into believing that it was no longer required that affidavits be filed by them. I will assume, without suggesting that there is any substance in the assumption, that what happened before Einfeld J was capable of giving rise to that impression. The first thing to be said is that neither the appellants nor anyone else on their behalf has sworn an affidavit to the effect that any particular understanding was formed of the effect of his Honour's directions, or as to how any such understanding in fact affected the preparation for the hearing before Hill J or as to what it was understood was to happen before his Honour. Secondly, no affidavits or draft affidavits have been put before me showing the evidence which would have been led but for the alleged misunderstanding. Thirdly, Einfeld J allowed the indulgence which he did on one basis and one basis only: that the appeal in the Supreme Court was pending, and accordingly once the appellants discontinued that appeal they eliminated the only ground on which they had sought, or could have sought, the indulgence which his Honour gave to them. Fourthly, the discontinuance of the bankrupts' appeal signifies that the judgment given by Giles CJ Comm D stands unchallenged and so there is an issue estoppel arising in favour of Retravision and against the bankrupts as to the enforceability of the guarantees.
I do not think that there are any prospects of success in relation to the sixth ground of appeal.
The result is that the appeal is truly hopeless and so the first essential element of the ground on which a stay might be granted is not made out.
I do not find it necessary to reach any conclusion on the balance of convenience but will note certain matters briefly. No undertaking as to damages is proffered by the appellants. Although there is evidence that Retravision is incurring ongoing charges for insurance and otherwise, no security of any kind such as a payment into Court, has been proffered either. It is not suggested that the debtors are in fact solvent, and, as I said at the outset, they have not filed any evidence in support of the present application directed to anything other than questions arising as to the taking of goods in the property at "Jancollyn".
Mr Priestley has said everything that could have been said in favour of the appellants on the question of discretion. Perhaps the most significant point made in favour of the appellants is that some of the goods which the trustee will be entitled to sell have strong sentimental value to various members of the family, having been made by Mr Street and given to them. Mr Priestley submits that there will be irrevocable harm done if the sequestration proceeds and those particular goods are sold.
The fact is, of course, that the trustee is entitled to dispose only of goods of the bankrupts and then subject to the exception provided for in to subsection 116(2)(b) of the Bankruptcy Act 1966. Retravision has led evidence that prospective buyers of the goods may be lost if a stay is granted.
I need not consider these matters going to discretion to finality because of the clear view which I have formed that the appeal has no prospects of success. All that I need note is that on the question of the balance of convenience there is some evidence both ways and there have been submissions both ways.
CONCLUSION
There will be an order that the motion be dismissed and that the appellants pay the respondents' costs.
I certify that this and the preceding 18 pages are a true copy of the Reasons for Judgment of the Honourable Justice Lindgren.
Associate:
Dated:9 October 1995
Heard: 4 October 1995
Place: Sydney
Decision: 5 October 1995
Appearances: Mr J Priestley of counsel instructed by Anthony C B Jackson appeared for the appellants.
Mr R W Tregenza of counsel instructed by J R Gibb & Co appeared for the first respondent.
Mr S Hedge, solicitor appeared for the second respondent.
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