Howell v Rose

[2002] FCA 1196

FEDERAL COURT OF AUSTRALIA

Howell v Rose [2002] FCA 1196

BANKRUPTCY – Appeal against sequestration order – Agreement between parties to “stay of proceedings” pending trial of cross-claim by debtor against creditor – Whether this extended to bankruptcy proceedings – Authority of solicitor to make the agreement – Whether it is necessary for a substituted petitioning creditor to have obtained judgment in order to satisfy s 44(1)(a) of Bankruptcy Act 1966 –Whether debtor able to pay his debts – Whether other sufficient cause for not making a sequestration order – Need to value cross-claim.

Bankruptcy Act 1966 ss 44(1)(a), 49, 52(2), (4), (5)

PAUL ROCH HOWELL v JOHN EMMANUEL ROSE

N1602 of 2001

WILCOX J
27 SEPTEMBER 2002
SYDNEY

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY	N1602 of 2001

ON APPEAL FROM A JUDGMENT OF A FEDERAL MAGISTRATE OF THE
FEDERAL MAGISTRATES COURT OF AUSTRALIA

BETWEEN:	PAUL ROCH HOWELL APPELLANT
AND:	JOHN EMMANUEL ROSE RESPONDENT
JUDGE:	WILCOX J
DATE OF ORDER:	27 SEPTEMBER 2002
WHERE MADE:	SYDNEY

THE COURT ORDERS THAT:

1.        The appeal be allowed.

2.The orders made by Raphael FM on 19 November 2001 be set aside and, in lieu thereof, it be ordered that the petition be dismissed with costs.

3.The respondent, John Emmanuel Rose, pay the costs of the appeal of the appellant, Paul Roch Howell.

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	N1602 of 2001

ON APPEAL FROM A JUDGMENT OF A FEDERAL MAGISTRATE OF THE
FEDERAL MAGISTRATES COURT OF AUSTRALIA

BETWEEN:	PAUL ROCH HOWELL APPELLANT
AND:	JOHN EMMANUEL ROSE RESPONDENT

JUDGE:	WILCOX J
DATE:	27 SEPTEMBER 2002
PLACE:	SYDNEY

REASONS FOR JUDGMENT

WILCOX J:

1. This is an appeal against orders made in the Federal Magistrates Court of Australia.  On 19 November 2001 Raphael FM made a sequestration order against the estate of the appellant, Paul Roch Howell, and ancillary orders.  These orders included a stay of proceedings under the sequestration order until 30 November 2001.  Raphael FM later extended the stay until 10 December 2001.  After an appeal was filed in this Court, the stay was further extended, effectively until the determination of the appeal.

2. On 5 February 2002, pursuant to s 25(1A) of the Federal Court of Australia Act 1976, the Chief Justice determined that the appeal should be heard and determined by a single judge of the Court. The matter was assigned to me. However, I did not immediately set a hearing date, the reason being that the parties wished to engage in negotiations. These negotiations, which included a formal mediation conference, extended over some months. But they were unproductive and I appointed 19 September 2002 for the hearing. On that occasion, Mr B De Buse of counsel appeared for the appellant. The respondent, John Emmanuel Rose, the petitioning creditor, was represented by Mr C Stomo of counsel.

3. Early in the hearing of the appeal, Mr Stomo sought to tender additional evidence, in the form of an affidavit.  Mr De Buse objected to the tender on several grounds.  During ensuing argument, Mr Stomo withdrew the tender.  In the result, therefore, the evidence before this Court is the same as what was before the learned magistrate.  That evidence did not give rise to any dispute concerning primary facts, although there were (and remain) issues between the parties concerning the interpretation of some documents and the significance of some primary facts.

   The facts

4. Mr Howell is a real estate developer/investor.  For some time he was involved in a business relationship with Fine Real Estate Network Pty Limited (“Fine Real Estate”).  A dispute arose.  There was litigation (“the Fine litigation”) in the Supreme Court of New South Wales between Mr Howell, on the one side, and Fine Real Estate, and two individuals associated with that company, Mervyn Keith Fine and Patricia Joan Fine, on the other.

5. Mr Rose is a solicitor.  He acted for Mr Howell in the Fine litigation.  Mr Howell was unsuccessful in the litigation, both at first instance and on appeal to the New South Wales Court of Appeal.  The result was that Mr Howell had an indebtedness to Fine Real Estate, and to Mr and Mrs Fine (“the Fine creditors”).

6. The Fine creditors served a bankruptcy notice on Mr Howell.  It was not satisfied.  On 2 December 1999 they filed in this Court a creditor’s petition in which they claimed an indebtedness by Mr Howell to them of $312,537.55.

7. In the meantime, Mr Rose had been attempting to recover from Mr Howell a balance of costs that he claimed to be owed to him in respect of the Fine litigation.  On 6 November 1998 he had obtained summary judgment against Mr Howell in the District Court of New South Wales.  But Mr Howell subsequently obtained leave to file a cross-claim alleging that Mr Rose was negligent in his conduct of the Fine litigation.  On 30 July 1999 the summary judgment awarded to Mr Rose was set aside on terms that related primarily to prosecution of the cross-claim.

8. On 8 October 1999 judgment was again entered in favour of Mr Rose, this time for $360,877 plus costs.  However, this judgment also was set aside.

9. On 10 February 2000 Mr Howell’s solicitors, Dennis and Company, filed in this Court a notice of intention to oppose the creditor’s petition. 

10. On 12 May 2000 a third summary judgment was entered in the District Court in favour of Mr Rose.  It was stayed until 21 June 2000.  There was no subsequent court order, either to stay proceedings on the judgment or to set the judgment aside.

11. On 26 June 2000 the Fine creditors’ bankruptcy proceeding was adjourned to 26 October 2000. On that day an order was made, in this Court, substituting Mr Rose as petitioning creditor. Pursuant to s 52(5) of the Bankruptcy Act 1966, it was ordered that the period at the end of which the petition would lapse be extended to 24 months from the date of presentation. That meant the petition would lapse on 2 December 2001.

12. On 15 March 2001 Sackville J transferred the bankruptcy proceeding to the Federal Magistrates Court.

13. Mr Howell’s cross-claim against Mr Rose was listed for hearing in the District Court on 9, 10 and 11 April 2001.  Ebsworth & Ebsworth were the solicitors recorded as acting for Mr Rose, although they apparently took their initial instructions from LawCover (as agent for Mr Rose’s insurer, HIH Insurance), and acted at the expense of the insurer.

14. Shortly before the projected hearing date, HIH Insurance collapsed.  This was thought to cause a problem in relation to defence of the cross-claim.  Ms E Baxter, the solicitor at Ebsworth & Ebsworth with carriage of the matter, sought the agreement of Mr B Dennis, the solicitor for Mr Howell, to an adjournment of the cross-claim hearing.  The evidence does not disclose the content of their conversation(s) about the matter.  But it includes a letter from Mr Dennis to Ms Baxter dated 22 March 2001.  The letter reads:

    “We confirm we agree to the vacation of the hearing date listed for 9, 10 and 11 April, 2001 upon your client agreeing to stay of proceedings until the conclusion of the trial of the Cross-Claim.”

15. On the following day, Ms Baxter forwarded a copy of this letter to the District Court in support of a request for vacation of the hearing date.  The hearing was vacated.

16. On 13 July 2001 the Federal Magistrates Court held a directions hearing in relation to the bankruptcy proceeding.  Information as to what transpired comes from a letter to Dennis & Company from Mr V D’Arcy of White & Downey, the solicitors who were acting for Mr Rose in connection with the bankruptcy proceeding:

    “We confirm that Mr Vince D’Arcy from this office appeared on the directions hearing on Friday, 13 July 2001 at the Federal Magistrate’s [sic] Court.  It was noted that Mr D’Arcy was mentioning the matter on your behalf and by consent asked for the matter to be adjourned for a further month, and accordingly it was adjourned, to Tuesday 14 August 2001.

    The adjournment was sought to see if any further developments were about to unfold with Law Cover recommencing actions they are in, which would allow the cross-claim your client is claiming against, our client to come to hearing.”

17. On 14 August 2001, the bankruptcy proceeding was again adjourned. 

18. On 11 October 2001 Mr D’Arcy wrote a further letter to Dennis & Company.  Relevantly, he said:

    “Please note that at the further direction hearing at the Federal Magistrate’s [sic] Court, we propose to have the Bankruptcy Proceedings set down for hearing.  It is apparent that LawCover are now ready to proceed in the cross-claim filed by your client against Mr Rose.  Accordingly we do not propose to file a motion in the District Court to have the purported undertaking or agreement made between your office and Ms Elisa Baxter of Ebsworth’s Lawyers withdrawn.

    The running of both a Bankruptcy Hearing and the Cross-claim by Mr Howell against Mr Rose may place Mr Howell at a dis-advantage [sic].  One could argue that the full efforts of his legal representatives would need to be divided between the two matters.  If this is your belief our client may be prepared to withdraw the Bankruptcy proceedings on the proviso that Mr Howell provides Mr Rose with suitable security by way of a mortgage pending the hearing of the cross-claim.  Such a mortgage would have to involve security that Mr Howell could not dissipate.

    ...

    Accordingly we ask you to obtain urgent instructions from your client in the matters raised above and ask you to convey the result of those instructions to us before we attend the next directions hearing in this matter on Tuesday 16 October 2001.”

19. On 16 October 2001 the bankruptcy proceeding was fixed for hearing on 8 November 2001.  This was done over the objection of Mr Dennis, who contended the hearing should not proceed until the District Court determined the cross-claim.

20. In fact the bankruptcy proceeding was not heard on 8 November 2001.  Because Mr Howell was ill that day, it was adjourned until 13 November 2001.  On that day, Mr Dennis again sought an adjournment.  However, his application was refused.  The hearing proceeded.  At its conclusion Raphael FM reserved his judgment.  He delivered judgment, and made orders, on 19 November 2001.

    The magistrate’s judgment

21. The magistrate set out a summary of the facts, with particular mention of the letter from Mr Dennis to Ms Baxter of 22 March 2001 and the White & Downey letter of 11 October 2001.  He went on:

    “I find this correspondence somewhat confusing.  Firstly, the letter from Dennis & Co to Ebsworth & Ebsworth refers to ‘stay of proceedings’ and does not refer specifically to the bankruptcy application.  I am aware from an affidavit sworn by Mr Vincent Darcy [sic] of Messrs White & Downey and dated 13 November 2001 that on 20 March 2001 that firm lodged a certified copy of a writ obtained in the District Court matter at the Land Titles Office against a property owned by Mr Howell at 2 Vickar Street Coogee.  It is certainly possible that the reference to stay of proceedings could be to a stay of proceedings to enforce the judgment that had previously been obtained by Mr Rose.  The issuance and prosecution of a bankruptcy petition is not the enforcement of a judgment (Re Sarina: Ex parte Wollondilly Shire Council (1980) 32 ALR 596, 599). In any event, given the letter from Messrs White & Downey of the 11 October 2001, I would have expected Mr Howell’s lawyers to take immediate steps to enforce the agreement if it had really been extended to the bankruptcy process. I would also have considerable doubt as to whether without further evidence I could be satisfied that Messrs. Ebsworth & Ebsworth whose real client was the insurer, could have bound the creditor to such an arrangement without specific authority when the debtor’s solicitor well knew that the firm was not acting in the bankruptcy proceedings but only in respect of the District Court proceedings. I would not be prepared to find on the evidence before me that there was any binding agreement between the parties that prevents me from dealing with the petition now before me.”

22. Raphael FM indicated he was not satisfied that Mr Howell was able to pay his debts, within the meaning of s 52(2)(a) of the Bankruptcy Act.

23. In relation to the claimed set-off, Raphael FM acknowledged that the “existence of a cross-claim can be sufficient cause” for dismissal of a petition.  He cited a decision of a Full Court of this Court, Ling v Enrobook Pty Limited (1997) 74 FCR 19. The learned magistrate went on:

    “It is the respondent’s argument that his cross claim goes to the very heart of the judgment against him.  The judgment is in respect of legal costs for Mr Rose’s representation of Mr Howell in proceedings against Fine Real Estate Network.  Mr Howell claims that the conduct of those proceedings was flawed in a number of respects but in particular in relation to the failure to produce evidence.  I have read the judgment of the Court of Appeal in the case where that court upheld the decision of the primary Judge not to admit evidence which had not been tendered before the referee.  These matters are dealt with in pages 15 to 18 of the Reasons for Judgment which are supportive of a strongly critical approach taken to Mr Howell by both the referee and the trial Judge.  I did not have before me either the judgment of the referee or of the Judge at first instance.  Although I do have the cross claim, this is a document without much particularisation.  In the absence of more information it is very difficult for me to make any finding as to the likelihood of success of the respondent in those District Court proceedings.  I can say, however, that I am entitled to draw an inference if there was anything that was particularly helpful it would have been produced.  I am further assisted in coming to the decision which I reach below by the fact that there is no current stay of execution in respect of the original judgment even though the effect of the cross claim is a direct attack upon it.  A stay was originally granted but, for some reason which has not been presented to me, it lapsed in June 2000 and was not renewed.  Surely, the most appropriate application that could have been made in this matter was one for a further stay pending the hearing of the cross claim.  The District Court would have had before it all particulars relating to the judgment and to the cross claim.  That Court would have been in a far better position to decide the merits of a matter coming before it than a Judge in bankruptcy who has not had the benefit of any of the papers.”

24. Raphael FM said he could find nothing in the submissions or evidence that would lead him to exercise his discretion in favour of Mr Howell under s 52(2)(b) of the Bankruptcy Act.  After noting the evidence of formal matters, he made a sequestration order.

    Contentions on the appeal

25. Mr De Buse relied on four substantial arguments:

    (i)there was a binding agreement between the parties for a stay of proceedings in relation to the judgment debt until determination of the cross-claim.  Under those circumstances, the petitioning creditor should not have been allowed to proceed on 13 November 2001;

    (ii)at the date of the petition, 2 December 1999, Mr Rose had a judgment against Mr Howell, but this was subsequently set aside. The judgment upon which the petition was based was not in existence at the date of the petition; s 44(1)(a) of the Bankruptcy Act was not satisfied;

    (iii)the evidence indicated that Mr Howell was solvent; the petition should have been dismissed under s 52(2)(a) of the Act; and

    (iv)the magistrate failed to take into account the value of the cross-claim by Mr Howell against Mr Rose; he was not entitled to dismiss this from consideration in the way he did.

26. Mr Stomo joined issue with Mr De Buse on all four arguments.  He supported the view of the magistrate in relation to each of them.

    The second, third and fourth arguments

27. It is convenient immediately to deal with Mr De Buse’s second, third and fourth arguments.  There is no substance in any of them.

28. It is true that the judgment held by Mr Rose against Mr Howell on the date of the petition was subsequently set aside. It is also true, as Mr De Buse noted, that the effect of s 49 of the Bankruptcy Act, read with s 44(1), is that it must be established that, at the date of the petition, the debtor owed the substituted creditor a liquidated debt of at least $2,000.  However, the Act does not require that the substituted creditor (or a petitioning creditor) hold a judgment at that date.  Although it is commonplace for creditors to obtain judgment against the debtor before instituting bankruptcy proceedings, this is not essential.  The evidence before Raphael FM clearly established, subject to the cross-claim, that Mr Howell was indebted to Mr Rose for legal costs on 2 December 1999, in a sum exceeding $2,000.

29. In relation to solvency, it is true that Mr Howell made an affidavit claiming a surplus of assets over liabilities.  He was not subjected to cross-examination about this and there was no rebutting evidence.  However, Raphael FM was correct in holding that it was necessary for Mr Howell also to prove that his assets (or sufficient of them to meet his liabilities) were capable of ready realisation.  He did not do so.

30. In relation to the cross-claim, I agree with Mr De Buse that Raphael FM was required to consider the value of the cross-claim in order to determine whether or not he was satisfied that Mr Howell had an indebtedness to Mr Rose of $2,000 or more.  Raphael FM realised this.  He noted the cross-claim.  However, his problem was that Mr Howell had failed to put before him any material that would enable him to determine the likelihood of the cross-claim being successful.  As it was Mr Howell who asserted that the cross-claim had value, the onus lay on him to establish its prospect of success.  There being no material demonstrating that prospect, Raphael FM cannot fairly be criticised for treating the cross-claim as having no value.

    The first argument

31. It seems to me that the only meritorious argument for the appellant is the first argument advanced by Mr De Buse.  In considering that argument, it is appropriate to note four items contained in a chronology of relevant events that was set out in an affidavit sworn by Mr D’Arcy and read at the hearing of the petition.  They each suggest the existence of an understanding between the parties that the cross-claim had to be determined before the bankruptcy proceeding could be heard. 

32. The four items were:

    “20 February 2001     Bankruptcy proceedings in Federal Court before Matthews, J.  The matter was adjourned to 15 March 2001 for further directions as Mr Dennis informed the Court that the District Court proceedings involving LawCover being the cross claim by Howell on [sic] Rose has been stood over to 7 March 2001 before Judge Patten for the purpose of setting a hearing date for the action.

    …

    15 March 2001          Appearance in Federal Court in bankruptcy proceedings before Sackville, J.  Matter is transferred to the Federal Magistrate’s [sic] Court to be listed after 9 April 2001 to allow Cross Claim in District Court to be heard first.

    …

    16 May 2001              Bankruptcy proceedings listed in Federal Magistrate’s [sic] Court.  Matter was adjourned to 13 July 2001 due to undertaking by Ebsworths, the solicitors for John Rose, being the Cross Defendant in the Cross Claim lodged by Howell in the District Court proceedings that the undertaking by Mr Rose that bankruptcy proceedings would be stayed pending the outcome or progression of the LawCover claim.

    …

    14 August 2001          Bankruptcy proceedings in Federal Magistrate’s [sic] Court is adjourned to 16 October 2001 for the possibility of the Petitioning Creditor to file a Notice of Motion in the District Court to have the undertaking withdrawn that Mr Howell was relying on, to in effect permanently stay the bankruptcy proceedings.”

1. The first argument put by Mr De Buse involves two criticisms of Raphael FM’s reasoning, as recorded in para 21 above.  First, Mr De Buse challenged Raphael FM’s doubt about the authority of Ebsworth & Ebsworth to bind Mr Rose.  Second, he submitted Raphael FM erred in construing the words “stay of proceedings”, in the letter of 22 March 2001 from Dennis & Company to Ebsworth & Ebsworth, as not extending to bankruptcy proceedings. 

2. Raphael FM did not go so far as to hold that Ebsworth & Ebsworth had no authority to bind Mr Rose; he said he had “considerable doubt” as to whether he could be so satisfied.  However, with respect, there was no basis for doubt.  Ebsworth & Ebsworth were the solicitors on the record in the District Court in relation to the relevant litigation.  So far as the District Court was concerned, they spoke for Mr Rose in connection with that litigation.  There is nothing to suggest the situation was any different, so far as Mr Howell was concerned.  Despite the fact that Mr Rose was represented in the bankruptcy proceeding by a different firm of solicitors, White & Downey, no evidence was tendered to Raphael FM to suggest that Ebsworth & Ebsworth lacked authority to make the agreement noted in Mr Dennis’ letter of 22 March 2001 or that Mr Dennis or Mr Howell was aware of any lack of authority.  The fact that Mr Dennis consented to an adjournment of the cross-claim, pursuant to an agreement reached with Ms Baxter, indicates he thought she had authority to bind Mr Rose.  Mr Dennis was entitled to assume that Ms Baxter had obtained all the instructions necessary for her to enter into the agreement.  These instructions would obviously extend beyond LawCover, to Mr Rose himself.  The subsequent conduct of White & Downey suggests Mr Rose did give the necessary instructions.  Their conduct was consistent only with a recognition on Mr Rose’s part that he was bound by the agreement made in his name by Ebsworth & Ebsworth.

3. In relation to the other point, with respect to Raphael FM, the issue is not the juristic basis of a bankruptcy proceeding.  The issue is what was intended by Mr Dennis and Ms Baxter when they made the agreement that was confirmed by Mr Dennis’ letter of 22 March 2001. 

4. By 22 March 2001 Mr Rose had obtained his third summary judgment.  No application had been made to set it aside.  There was every reason for the parties, and their solicitors, to approach the matter on the basis that Mr Rose held an effective and enforceable judgment, subject only to the cross-claim.

5. By that time, also, Mr Rose had been substituted as petitioning creditor in the bankruptcy proceeding.  This proceeding was one means by which he might obtain payment of the judgment debt.  But the judgment debt was subject to a cross-claim.  Both parties accepted that the cross-claim should be disposed of before the bankruptcy petition was brought on for hearing.  Mr Rose’s acceptance of that situation is implicit in the chronological entries for 20 February 2001 and 15 March 2001.  As is apparent from the latter entry, the parties were working on the basis that the hearing of the cross-claim would commence on 9 April 2001; after that hearing, the bankruptcy petition could be heard.  Then the HIH problem occurred and Ebsworth & Ebsworth sought an adjournment of the hearing of the cross-claim.  Mr Dennis was prepared to agree, but only subject to a “stay of proceedings”.  These words are somewhat cryptic but it is inconceivable that Mr Dennis did not intend them to extend to the bankruptcy proceeding.  That proceeding was an existing and serious threat to his client.

6. The terms of the entry about 16 May 2001 demonstrate that Mr D’Arcy understood the agreement in this way.  According to his note, the bankruptcy proceeding was adjourned to 13 July 2001 “due to undertaking by Ebsworths … that bankruptcy proceedings would be stayed pending the outcome or progression of the LawCover claim”.  On 13 July the bankruptcy proceeding was further adjourned, according to Mr D’Arcy’s letter of that date to Dennis & Company, “to see if any further developments were about to unfold with LawCover recommencing actions they are in”.  Obviously, Mr D’Arcy saw the unresolved cross-claim as an impediment to a hearing of the bankruptcy petition.

7. This impression is further confirmed by Mr D’Arcy’s letter of 11 October 2001.  He informed Mr Dennis that “LawCover are now ready to proceed in the cross-claim”.  On that basis, he said, “we propose to have the Bankruptcy Proceedings set down for hearing”.  Presumably, he expected the cross-claim to be listed for hearing at an earlier date than the bankruptcy petition.  It was because LawCover was now ready to proceed that Mr D’Arcy said “we do not propose to file a motion in the District Court to have the purported undertaking or agreement made between your office and [Ms Baxter] withdrawn”.  Mr D’Arcy did not suggest the undertaking was inapplicable to the bankruptcy proceeding; only that its force would be spent once the cross-claim was determined.

8. It was not possible to arrange an early hearing date of the cross-claim.  There is no suggestion this was the fault of Mr Howell or his solicitor; apparently the District Court could not provide an early hearing date.  In the meantime, it seems, Mr Rose or his solicitor remembered the petition would expire on 2 December 2001.  So they departed from the position they had been adopting for the previous six months and pressed for the petition to be heard, despite the fact that the cross-claim was still outstanding.

9. It seems to me, with respect, that in para 10 of his reasons for judgment Raphael FM addressed the wrong question.  He should have asked himself what the parties meant by “stay of proceedings” in the letter of 22 March 2001.  He should have answered that question by reference to the evidence, including that concerning the conduct of the parties before and after that date.  Had he done this, I believe, he would have interpreted the words “stay of proceedings” as extending to the bankruptcy proceeding.  He would then have realised it had not been necessary for “Mr Howell’s lawyers to take immediate steps to enforce the agreement”.  They did try to enforce the agreement before him, so presumably Raphael FM was referring to enforcement by making an application for a stay in the District Court.  But why should Mr Howell throw himself on the discretion of the District Court, in relation to a stay of enforcement of the summary judgment, when he already had a binding agreement to that effect with Mr Rose?

10. Raphael FM concluded para 10 of his reasons by rejecting the submission that there was a “binding agreement between the parties” that prevented him from dealing with the petition. In my respectful opinion, in coming to that conclusion, he erred in law. There was a binding agreement. Accordingly, he should have been satisfied “that for other sufficient cause a sequestration order ought not to be made”: see s 52(2)(b) of the Bankruptcy Act. 

11. As I see the matter, Raphael FM’s decision did not involve the exercise of a judicial discretion.  No doubt because of the imminence of the expiry date, no application was made to him for a further adjournment of the hearing of the petition.  He had to determine how finally to dispose of it.  However, if I am wrong and the decision was a discretionary one, it was a case covered by the exceptions noted in House v The King (1936) 55 CLR 499 at 505:

    “If the judge acts upon a wrong principle, if he allows extraneous or irrelevant matters to guide or affect him, if he mistakes the facts, if he does not take into account some material consideration, then his determination should be reviewed and the appellate court may exercise its own discretion in substitution for his if it has the materials for doing so.”

    Disposition

12. It is necessary to set aside the orders made by Raphael FM on 19 November 2001. Ordinarily, I would think it appropriate to remit the matter to the Federal Magistrates Court for determination after the disposition of the District Court cross claim. However, in this case, that would be futile. By force of s 52(4) of the Bankruptcy Act, the petition would have expired.  Consequently, the appropriate course is to amend the order in the Federal Magistrates Court so as to include an order dismissing the petition with costs.

13. Mr Rose must pay the costs of the appeal.

I certify that the preceding forty-five (45) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Wilcox J.

Associate:

Dated:             27 September 2002

Counsel for the Appellant:	Mr B De Buse
Solicitor for the Appellant:	Dennis & Co
Counsel for the Respondent:	Mr C Stomo
Solicitor for the Respondent:	White & Downey
Date of Hearing:	19 September 2002