Klemmer, William Sterling v Taylor, Simon
[1998] FCA 504
•13 MAY 1998
FEDERAL COURT OF AUSTRALIA
BANKRUPTCY - Bankruptcy notice - stay of execution - whether time to comply with bankruptcy notice should be extended until after determination of appeal against judgment on which notice based
Bankruptcy Act 1966 - s 40(1)(g), s 41(6A), s 41(6C)
Re Schekeloff; Ex parte Schekeloff v Hopkins Group Pty Ltd (1989) 22 FCR 407
Bryant v Commonwealth Bank of Australia (unreported, Full Court, Federal Court of Australia, 11 November 1994)
Vincent v State Bank of New South Wales (1995) 60 FCR 290 at 297
Bryant v Commonwealth Bank (1996) 134 ALR 460 at 466
Jennings Construction Ltd v Burgundy Royale Investments Pty Ltd (No. 1) (1986) 161 CLR 681; 69 ALR 265
Re Taylor; Ex parte Deputy Commissioner of Taxation (1983) 74 FLR 377 at 379
Bryant v Commonwealth Bank of Australia (unreported, Hill J, 4 May 1994)
WILLIAM STERLING KLEMMER v SIMON TAYLOR
VG 7017 of 1998
Judicial Registrar Ryan
Melbourne
13 May 1998
IN THE FEDERAL COURT OF AUSTRALIA
VICTORIA DISTRICT REGISTRY
VG 7017 of 1998
BETWEEN:
WILLIAM STERLING KLEMMER
APPLICANTAND:
SIMON TAYLOR
RESPONDENTJUDICIAL REGISTRAR:
RYAN
DATE OF ORDER:
13 MAY 1998
WHERE MADE:
MELBOURNE
THE COURT ORDERS THAT:
The debtor’s application to set aside the bankruptcy notice be dismissed.
The order extending time for compliance with the bankruptcy notice be terminated as at 3.00 pm on 15 May 1998.
The debtor pay the creditor’s costs of the application including reserved costs.
IN THE FEDERAL COURT OF AUSTRALIA
VICTORIA DISTRICT REGISTRY
VG 7017 of 1998
BETWEEN:
WILLIAM STERLING KLEMMER
APPLICANTAND:
SIMON TAYLOR
RESPONDENT
JUDICIAL REGISTRAR:
RYAN
DATE:
13 MAY 1998
PLACE:
MELBOURNE
REASONS FOR JUDGMENT
THE APPLICATION
On 14 January 1998 William Sterling Klemmer filed an application under s 41(6A) of the Bankruptcy Act 1966 (the Act) claiming:
an order setting aside a bankruptcy notice of 14 November 1997 and served on him on 12 December 1997
that the time for compliance for the filing of the application be extended
costs.
PRELIMINARY HEARINGS
On that day Registrar Wood ordered:
time for compliance with the bankruptcy notice be extended to 4 March 1998
service on the respondent of his order, the application of 14 January and supporting affidavits.
The orders were settled that day by Donald S. Lampe, solicitor acting for the applicant.
On 4 March Mr Strang, counsel then acting for the applicant, advised the respondent’s solicitor, Mr Steinfort, that Registrar Wood had indicated that he would reconvene that day to hear an application on behalf of the applicant that time for compliance with the bankruptcy notice be extended to 30 March. Mr Strang sought the consent of the respondent to the extension of time. Mr Steinfort advised that he had no instructions to agree to extend compliance. The matter came on before the Registrar on 5 March. Both parties were represented by counsel and the Registrar:
adjourned the application to 30 March
extended time for compliance with the bankruptcy notice to 30 March
directed that the applicant file and serve any affidavits in reply by 20 March
reserved the costs of the parties and the question of costs in the application to extend time.
On 30 March both parties were again represented by counsel and Registrar Efthim acceded to a request by the applicant for adjournment to 20 April.
On 20 April counsel for the applicant again sought adjournment. Counsel for the respondent opposed the adjournment and Registrar Seccombe refused an adjournment and referred the matter to Sundberg J. Later that day his Honour:
referred the matter for hearing before a Judicial Registrar
extended time for compliance with the bankruptcy notice to the conclusion of the hearing before the Judicial Registrar
reserved costs
ordered that any further affidavit material be filed one week prior to the hearing.
At each of the five preliminary hearings (14 January, 5 March, 30 March and two hearings on 20 April) the applicant was represented by Mr Strang of counsel. Mr LaPirow of counsel represented the respondent on 14 January, 5 March and 20 April and Mr Dixon of counsel represented the respondent on 30 March. At no stage, after filing his primary affidavit on 14 January until 5 May, did the applicant file further material other than a letter of 17 April from the Victorian Government Reporting Service to the applicant advising that the logs and tapes of a County Court matter of Taylor and Klemmer had not been received from the Court.
In two affidavits sworn respectively on 27 March and 17 April and both filed on 20 April the applicant expressed the belief that transcript was not yet available for the first day of the County Court hearing.
On 5 May the transcript of the last five days of the County Court trial were filed together with a copy of all material in the Appeal Books 1-3 in the Supreme Court, Civil Court of Appeal, Civil Division action of Klemmer and Taylor No. 5850 of 1997.
THE ORIGINAL DEBT
On 12 November 1993 the respondent as plaintiff in the Magistrates’ Court of Victoria claimed $16,450 and $4,853.81 costs against the applicant as defendant. The substance of the claim was that the plaintiff and the defendant entered into a loan agreement whereby the plaintiff agreed to lend to the defendant a sum of $52,750 which the defendant agreed to repay on or before 31 September 1992. In a notice of defence filed in the Magistrates’ Court on 4 November 1994 the applicant as defendant denied the debt but admitted that he had entered into a loan agreement with the respondent and had agreed to repay the sum of $52,750 by 31 September 1992 (sic).
In his particulars of claim the respondent as plaintiff had asserted that:
The applicant as defendant had granted the respondent, the plaintiff, a bill of sale over a motor vehicle for an agreed value of $35,000 at the time when the loan agreement had been entered
The bill of sale executed by the parties stated that the defendant was to repay the $35,000 by 13 March 1993
The defendant failed to repay the sum within the time stipulated and the plaintiff exercised his rights under the Bill of Sale and sold the collateral on 6 September 1993 for $35,000
Under the loan agreement the defendant paid in total $1,300
The outstanding claim was for $16,450 as the balance of monies due and $4,853.81 in interest, costs, insurance and valuation fees.
The applicant as defendant did not admit the above particulars and filed a counter claim in the sum of $85,000. The counter claim exceeded jurisdiction and the matter was transferred to the County Court. The respondent alleges that after a Directions hearing on 29 August the applicant defaulted in providing discovery and delayed in answers to interrogatories but was represented before Keon-Cohen J on 13 August 1996 when the matter was set down for hearing on 2 May 1997.
The parties have filed in affidavits differing versions as to what occurred when the trial began in the County Court before Spence J on 2 May 1997. What is clear is that the trial proper proceeded from 5 to 9 May with the applicant as defendant and counter claimant representing himself and the respondent as plaintiff represented by Mr LaPirow of counsel instructed by Mr Steinfort, solicitor.
JUDGMENT AND APPEAL
On 23 May 1997 Spence J gave Judgment in the County Court for the plaintiff (i.e. the respondent in this application) in the sum of $15,225 and damages in the nature of interest of $6,970. A stay of 30 days was granted and the Registrar of the Court authenticated the Judgment on 12 June 1997.
On 6 June 1997 the applicant in this matter filed a Notice of Appeal in the Court of Appeal of the Supreme Court of Victoria. He states in his affidavit of 13 January 1998 that he has prepared court books served on the respondent as Judgment creditor about November 1997 and states in paragraph 11 of the affidavit “by reason of the above (the filing and service of the court books) I am advised by my legal representatives and verily believe that an application has been made to set aside the judgment debt in respect of which the bankruptcy notice herein has been issued”.
The Court notes that as late as 25 February 1998 Mr Steinfort deposed in paragraph 20 of his affidavit of that date that he had no knowledge of the reference by the applicant to “an application made to set aside the judgment debt”. Order 77 Rule 13(2)(c) provides that an application to set aside a bankruptcy notice must be accompanied by a copy of any application to set aside the judgment or order in relation to which the bankruptcy notice was issued and any material in support of that application.
The Court also notes that since the service of the bankruptcy notice the applicant made an application for stay of judgment pending his appeal and that that application was dismissed by Dove J on 5 January 1998.
The bankruptcy notice (exhibit WSK 5 to the applicant’s affidavit of 13 January 1998) was issued by the official receiver on 14 November 1997. The question of whether there has been a stay of execution is a question of whether there was a stay at the date of the issue of the notice or, at the latest, the date of its service on the debtor: Re Schekeloff; Ex parte Schekeloff v Hopkins Group Pty Ltd (1989) 22 FCR 407. However, the Full Court of the Federal Court in Bryant v Commonwealth Bank of Australia (unreported, 11 November 1994) agreed with the Judge at first instance, Hill J, that an appeal in the Supreme Court should be treated as a proceeding to set aside the judgment in respect of which the bankruptcy notice was issued. See also Vincent v State Bank of New South Wales (1995) 60 FCR 290 at 297.
FURTHER APPLICATION FOR ADJOURNMENT
The matter was listed for hearing on 7 May. The applicant appeared on his own behalf but armed with written submissions prepared by Mr Strang. Mr LaPirow appeared for the respondent.
The applicant once more applied for an adjournment of his application. On this occasion he sought an adjournment of seven days. He stated his grounds as being:
the need for seven days in which he might attempt to resolve and settle the judgment debt claimed in the bankruptcy notice
the opportunity, should the judgment debt be resolved, to withdraw his appeal against the County Court judgment which led to the bankruptcy notice
his inability to afford counsel but his expectation and hope that he would be in a position to afford counsel in the near future should a short adjournment fail to lead to a settlement of the debt and a withdrawal of the Supreme Court appeal
his general inability to prepare for and proceed with his application as listed because of personal problems, family law matters and the effects on him of drought.
The respondent opposed a further adjournment on numerous grounds outlined by his counsel and including:
the age of the original debt with the claim of debt instituted in the Magistrates’ Court on 12 November 1993
a County Court judgment delivered on 23 May 1997 after a six day trial
a bankruptcy notice issued on 14 November 1997 and served on 12 December 1997
Directions hearings in this Court on 14 January, 5 March, 30 March and 20 April and adjournments sought by the applicant and granted on 14 January, 5 March and 30 March and an adjournment sought by the applicant on 20 April and refused
a matter specifically listed for hearing and time for compliance extended to the conclusion of the hearing
the failure of the applicant to take the opportunity to file further affidavit material as provided by the orders of the Court on 5 March and 20 April
the failure of the applicant to provide any notice of his adjournment application
the cost of a further adjournment in respect of a debt of approximately $22,000 in which the respondent had appeared with counsel on five occasions in respect of the applicant’s application
the likelihood that further negotiations in respect of the judgment debt would be, in the view of the respondent, to no purpose and would delay further the procedures which the respondent as creditor must yet take if the applicant fails to have the bankruptcy notice set aside and/or fails to obtain a further extension of time for compliance with the notice.
Application for adjournment was refused and primarily on the grounds submitted by counsel for the respondent.
THE APPLICANT’S SUBMISSION
S 41(6A) provides:
“Where, before the expiration of the time fixed for compliance with the requirements of a bankruptcy notice:
(a)proceedings to set aside the judgment or order in respect of which the bankruptcy notice was issued have been instituted by the debtor; or
(b)an application has been made to the Court to set aside the bankruptcy notice;
the Court may, subject to subsection (6C), extend the time for compliance with the bankruptcy notice.”
S 41(6C) provides:
“Where:
(a)a debtor applies to the Court for an extension of the time for complying with a bankruptcy notice on the ground that proceedings to set aside the judgment or order in respect of which the bankruptcy notice was issued have been instituted by the debtor; and
(b)the Court is of the opinion that the proceedings to set aside the judgment or order:
(i)have not been instituted bona fide; or
(ii)are not being prosecuted with due diligence;
the Court shall not extend the time for compliance with the bankruptcy notice.”
The applicant by way of counsel’s written submission asserted that:
“It is up to the Court to decide whether it wishes to investigate the chances of success of Mr Klemmer’s appeal. Clearly, if the case was a very simple factual case then the Federal Court may be able to investigate this question as Hill J did in Bryant’s case at first instance.”
The applicant was unrepresented before me and counsel’s written submission on his behalf appears incomplete. The applicant tendered the submission and added to it and I assume that the reference in the written submission to the comments of Kirby J in Bryant v Commonwealth Bank (1996) 134 ALR 460 at 466, coupled with the reference to the exercise of discretion by the Court as cited above, were part of a submission that the Court, in this case, should exercise a discretion to extend time for compliance with the bankruptcy notice until the resolution of the appeal in the Supreme Court.
Kirby J was dealing with a question of whether the High Court should stay an order of the Full Court of the Federal Court pending the outcome of an application to the High Court for special leave to appeal. To that extent he was dealing with a somewhat different matter and with the “extraordinary” jurisdiction of that Court to grant a stay in very exceptional circumstances. However, it was a bankruptcy matter although one step further down the process chain in that a bankruptcy notice had issued and a sequestration order had been made and the Federal Court had not delayed the sequestration order. His Honour at 465 referred to “the applicant’s assertion that the Federal Court ought to have delayed the sequestration order pending the determination of his appeal to the New South Wales Court of Appeal”. At 466 he said:
“... it is true that, in many cases, it will be proper for the Federal Court to postpone making a sequestration order, founded ultimately upon a judgment in another court until that judgment, where challenged, is ultimately upheld. In my experience, such a course is often taken. But it cannot amount to an absolute rule. Otherwise, taking advantage of the notorious delays of the appellate process, a judgment debtor could simply postpone a sequestration order by filing a notice of appeal. It is therefore necessary that, in every case, some estimate should be made of the utility and possible outcome of the appeal. As Hill J observed in the Federal Court in this case, such estimates involve an element of embarrassment in predicting what another court, with full argument and analysis, might do. The applicant warned me about the dangers of jumping to conclusions about his appeal to the New South Wales Court of Appeal, without the benefit of the trial transcript and full argument. I agree that some caution is required. It is not feasible (nor would it be proper) for me to pre-judge the outcome of his appeal. The most that can be done is to secure a general impression of its prospects, having regard to the principal issues to be ventilated.”
His Honour without a transcript and with an unrepresented applicant, and taking account of the “extraordinary” jurisdiction of the High Court and that the jurisdiction to grant a stay is exercised by that Court only in very exceptional circumstances concluded (at 467) that the applicant did not satisfy the primary requirement for the grant of a stay in that Court. Kirby J went further than an analysis of the applicable principles for a stay in the High Court and gave some consideration, albeit he described it as “superficial”, to the guidelines in Jennings Construction Ltd v Burgundy Royale Investments Pty Ltd (No. 1) (1986) 161 CLR 681; 69 ALR 265.
At this stage I observe several distinctions between the circumstances in this case and in Bryant, quite apart from the fact that Kirby J was dealing with stay in terms of the jurisdiction of the High Court. Those distinctions are:
while the applicant is unrepresented before me he was represented by counsel in all directions hearings in the Federal Court
he has made his own representations before me armed with counsel’s written submissions.
he was represented on the first day of the County Court proceedings
he concedes he had access to legal advice in respect of his appeal to the Supreme Court
he unsuccessfully applied to the County Court for a stay of execution of a judgment of that Court
I have access to transcript of the County Court proceedings
the written submissions of counsel tendered by the applicant and the oral submissions of counsel for the respondent refer to and cite numerous passages in the transcript of the County Court trial.
In urging that time for compliance with the bankruptcy notice should be extended the applicant, referring to transcript, asserted that the trial judge:
failed at any stage to advise the applicant that he could seek an adjournment to enable a Mr Nelson to give evidence
failed to consider the evidence of the applicant in terms of the value of the relevant motor car which was the subject of the Bill of Sale
did not allow the applicant to produce relevant evidence
did not adjourn the proceedings to allow the applicant to call a witness from the United States or to provide affidavit evidence from such witness
refused to admit certain evidence relevant to the applicant’s access to finance and did not give weight to certain evidence as to access to finance
failed to take account that the applicant’s knowledge and history of the Ford Frontenac motor car was superior to that of the witness, Mr Sandford-Morgan.
THE RESPONSE
Counsel for the respondent first asserted that the circumstances were such that the Court had no authority to set aside the bankruptcy notice and that, at best, if the applicant could satisfy this Court that the appeal proceedings in the Supreme Court were instituted bona fide and were being prosecuted with due diligence this Court could, in the exercise of its discretion, extend time for compliance with the bankruptcy notice. Without considering the question of authority to set aside a bankruptcy notice, I agree with counsel for the respondent that, in this case, the most that could or should be achieved for the applicant would be an extension of time if that were considered an appropriate exercise of discretion.
I note that the Court has a discretion under s 41(6A) not to extend time, which discretion is at large: Re Taylor; Ex parte Deputy Commissioner of Taxation (1983) 74 FLR 377 at 379. That discretion is not limited to a case falling under s 41(6C) not to extend time where the application to set aside the judgment was instituted other than bona fide or was not being prosecuted with due diligence: Bryant v Commonwealth Bank of Australia (unreported, Hill J, 4 May 1994). In that case Hill J said:
“... I have considered the transcript of the proceedings in the Supreme Court and the debtor’s notice of appeal, as well as the judgment of Levine J. While there is some embarrassment in this Court commenting on the prospect of the success of an appeal in another court, it must be said that the prospects of success of Mr Bryant in the appeal are very slight. As I have already indicated, liability was admitted before Levine J and no evidence was presented on the question of quantum. It is difficult to see in those circumstances how any result could flow other than that the bank was entitled to judgment. There would, I think, have been a case for the view that Mr Bryant’s appeal was not instituted bona fide. However, be that as it may, I am satisfied that in all the circumstances the application to extend time should be refused in the exercise of the wide discretion entrusted to me under s.41(6A).”
In Bryant v Commonwealth Bank of Australia (unreported, Full Court, Federal Court of Australia, 11 November 1994) their Honours commented:
“The trial Judge treated the appeal in the Supreme Court as a proceeding to set aside the judgment in respect of which the bankruptcy notice was issued, a course with which we agree. In determining whether or not to extend the time for compliance, his Honour was obliged to form some view of the prospects of success. We would not disagree with his Honour’s finding that the prospects of success were slight, in the light of the very limited issue which Mr Bryant put to Levine J for his determination and the grounds of appeal.
We see no error in the manner in which the trial Judge exercised his discretion. His Honour was bound to take account of the prospects of success and of the period of time likely to pass before the appeal is heard and determined. An appellate court could not review his Honour’s exercise of the statutory discretion unless it was satisfied that his Honour erred as a matter of principle or had made an order that was plainly unreasonable.”
Counsel for the respondent drew attention to:
the applicant’s assertions from the bar table that he had received legal advice that the prospects of a successful appeal were good
the absence of any evidence of advice to the applicant on the prospects of a successful appeal.
Counsel for the respondent also identified the unchallenged evidence in the affidavit of Mr Steinfort as to:
representation by counsel of the applicant on the first day of the County Court trial
the retention of a solicitor on the record as representing the applicant (Mr Sapountsis)
the grounds put by applicant’s counsel for adjournment
the adjournment by the trial judge from Friday 2 May to Monday 5 May to permit the applicant time to determine if he could come to an arrangement on further representation
the refusal of a further adjournment on Monday 5 May and the presence in court at that time of a solicitor willing to act for the applicant provided he was put in funds
the unwillingness of the applicant to retain that solicitor
the failure of the applicant to make arrangements satisfactory to himself to engage another solicitor
the expressed intention of the applicant thereafter to represent himself
personal appearances by the applicant on his own behalf in the County Court and in the Supreme Court
the submissions made on behalf of the applicant before the County Court that he (the applicant) had known for some time that his original solicitor, Mr Remer of Davies and Gulquist, was unwell and unable to return to his practice and that a Receiver had been appointed to the practice
the failure of the applicant to indicate to the trial judge any intention or requirement to call overseas witnesses or witnesses with overseas commitments, but, nevertheless, asserting in his affidavit of 13 January 1998 that the trial judge refused an adjournment to allow such persons to be subpoenaed.
CONCLUSION AND ORDERS
I have considered the transcript of the last five days of the County Court trial including the reasons given on the second day for the refusal of a further adjournment. I note that while transcript of the first day was unavailable the trial proper did not commence until the second day and the transcript of the second day contains the Judge’s ruling refusing the adjournment sought on the first day.
I have considered the debtor’s notice of appeal and the detailed reasons for judgment delivered by Spence J and contained in Volume 3 of the Appeal Book.
I have concluded that the prospects of success of Mr Klemmer in his appeal are very slight. It is not necessary for me to form an opinion as to whether the appeal has been instituted bona fide. I am satisfied that in all the circumstances the appeal to extend time should be refused in the exercise of the wide discretion provided under s 41(6A).
In exercising the discretion in favour of the respondent and against the applicant I have taken account of the following findings at trial:
the real dispute arose from the deduction from monies due and payable of $35,000, being the disputed value and/or proceeds of sale of a 1924 Ford Frontenac racing car
the agreement between the creditor and the debtor was silent as to the position which arose when there was no repayment by the agreed date or any agreed extension thereof
the creditor as plaintiff was entitled to sell the car as he had been given it as security for that very purpose and he had informed the debtor as defendant of his intention to do so
valuation had not been shown by admissible evidence to be erroneous.
I have also taken account that the creditor has still to petition for bankruptcy and the delay to date has been considerable with proceedings issued in December 1993, a defence not delivered until November 1994, a counter-claim not made until February 1995, a bankruptcy notice finally issued in November 1997 and served in December 1997 and the present proceedings on foot since 14 January 1998.
Given the reasons for judgment I shall dismiss the debtor’s application and make an order terminating the period of extension granted in respect of the bankruptcy notice. I am prepared to make orders now, or, if the respondent prefers, I will direct the creditor to bring in appropriate short minutes in order to give effect to these reasons.
ORDERS
I order:
The debtor’s application to set aside the bankruptcy notice be dismissed.
The order extending time for compliance with the bankruptcy notice be terminated as at 3.00 pm on 15 May 1998.
The debtor pay the creditor’s costs of the application including reserved costs.
I certify that this and the preceding twelve (12) pages are a true copy of the Reasons for Judgment herein of Judicial Registrar Ryan
Associate:
Dated: 13 May 1998
The applicant appeared in person. Counsel for the Respondent: Mr M LaPirow Solicitor for the Respondent: Graeme Steinfort Date of Hearing: Melbourne, 7 May 1998 Date of Judgment: Melbourne, 13 May 1998
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