Howell v Rose

The appellant, Paul Roch Howell, was a real estate developer who was involved in a business relationship with Fine Real Estate Network Pty Limited. Following a dispute, Howell was unsuccessful in litigation against Fine Real Estate and two associated individuals, Mervyn Keith Fine and Patricia Joan Fine. The Fine creditors served a bankruptcy notice on Howell which was not satisfied. They subsequently filed a creditor’s petition in the Federal Magistrates Court claiming an indebtedness by Howell of $312,537.55. During this time, the respondent, John Emmanuel Rose, a solicitor who had acted for Howell in the Fine litigation, had also sought to recover costs from Howell. Howell filed a cross-claim alleging negligence against Rose in relation to the Fine litigation. The Federal Magistrates Court heard the appeal against the sequestration order, with issues including whether an agreement to stay proceedings extended to the bankruptcy proceedings, the authority of Rose’s solicitor to make the agreement, whether it was necessary for a substituted petitioning creditor to have obtained judgment in order to satisfy s 44(1)(a) of the Bankruptcy Act 1966, whether Howell was able to pay his debts, whether there was other sufficient cause for not making a sequestration order, and the need to value the cross-claim.

The court found that there was no binding agreement between the parties that prevented it from dealing with the petition. The court was not satisfied that Howell was able to pay his debts and found that the existence of a cross-claim could be sufficient cause for dismissal of a petition. The court noted that it was difficult to make any finding as to the likelihood of success of Howell’s cross-claim in the absence of more information. The court concluded that it was in a far better position to decide the merits of a matter coming before it than a Judge in bankruptcy who had not had the benefit of any of the papers.

The appeal was allowed, the orders made by Raphael FM on 19 November 2001 were set aside and, in lieu thereof, it was ordered that the petition be dismissed with costs. The respondent, John Emmanuel Rose, was ordered to pay the costs of the appeal of the appellant, Paul Roch Howell.