Klewer v Walton (No.2)

[2005] FMCA 1486

FEDERAL MAGISTRATES COURT OF AUSTRALIA

KLEWER v WALTON (No.2) [2005] FMCA 1486

BANKRUPTCY – Application for stay of sequestration order where appeal foreshadowed but not instituted – where bankrupt wishes to take steps to sell property – power of Federal Magistrates Court to grant a stay. 

Bankruptcy Act 1966 (C’th), ss.37(2), 52(3)
Federal Magistrates Court Act 1999 (C’th,) ss.15, 85(a)
Federal Magistrates Court Rules 2001, Rule 1.05
Federal Court of Australia Act 1976 (C’th), s.29
Federal Court Rules O.52, r.17

Klewer v Walton [2004] FCAFC 284
ANZ v Merribee Pastoral Industries Pty Ltd [1998] FCA 856
Evans v Heather Thiedeke Group Pty Ltd  (1990) 95 ALR 424
Grundy v Wattyl Pty Ltd [2002] FCA 615
Beames v Rigby [2002] FCA 806
Gould v Day [2002] FCA 663
Freeman v National Australia Bank Ltd [2002] FCA 427
Teese v Clinch [2002] FMCA 205
Day in the matter of Gould [2000] FCA 1377
Stedman v Commissioner of Taxation [1999] FCA 539
Alexander v Cambridge Credit Ltd (Receivers appointed) (1985) 2 NSWLR 685

Applicant: LUCY KLEWER

Respondent: IAN WALTON

File Number: SYG 2483 of 2004

Judgment of: Barnes FM

Hearing date: 5 October 2005

Delivered at: Sydney

Delivered on: 5 October 2005

REPRESENTATION

The Applicant: In Person

Counsel for the Respondent: Mr P See

Solicitors for the Respondent: Hannigans Lawyers

ORDERS

1. That the application of 23 September 2005 for a stay of proceedings under the sequestration order is dismissed. 

2. That the Respondent creditor’s costs be taxed and paid in accordance with the Bankruptcy Act 1966 (C’th). 

FEDERAL MAGISTRATES
COURT OF AUSTRALIA AT
SYDNEY

SYG 2483 of 2004

KLEWER

Applicant

And

WATSON

Respondent

REASONS FOR JUDGMENT

(Revised from transcript)

1. This is an application filed on 23 September 2005 seeking a stay of a sequestration order made by Federal Magistrate Driver on

   
   

   20 September 2005 against the estate of the applicant Lucy Patricia Klewer.  The respondent was the petitioning creditor.  The application is expressed as an application that the order of Federal Magistrate Driver be stayed pending an appeal to the Federal Court.  It is accompanied by a short affidavit sworn and filed on 23 September 2005 by Ms Klewer to the effect that she was the respondent in the proceedings for the sequestration order heard in her absence of

   
   

   20 September 2005; that a doctor's certificate was provided to the Court outlining her unfitness to attend; that she is not insolvent and that she had told the Court on another occasion that she would refrain from paying creditors while a related matter in the High Court was pending.  I note that the applicant was represented by Counsel appearing pro bono on 20 September 2005 and that it appears that the outstanding matter in the High Court was determined on 5 August 2005 by the High Court refusing an application for special leave to appeal from a decision of the Full Court of the Federal Court in relation to

   
   

   Ms Klewer’s application to set aside a bankruptcy notice (see Klewer v Walton [2004] FCAFC 284). In addition the applicant faxed to the Court on 1 October 2005 a written submission and annexures.

2. The matter was listed before the Court for hearing yesterday (4 October 2005).  However when the matter came before the Court the applicant indicated that she sought pro bono assistance.  Her application to be referred for pro bono assistance was refused.  She then indicated that she wished to have the opportunity to consult with a lawyer who had provided her with some assistance.  The matter was adjourned for hearing on 5 October 2005. 

3. Today the applicant faxed to the Court a further document consisting of undertakings signed by her not to sell or dispose of her property; not to enter into a contract for sale of the property without notice to the respondent’s solicitor; and to provide written authorisation to her real estate agent to inform the respondent’s solicitor if an offer is made to purchase the property that is acceptable.  She also told the Court that she had faxed further documentation in support of her application.  That arrived in the course of the hearing.  A copy of this documentation was provided to and addressed by counsel for the respondent and considered by the Court. 

4. It is apparent from the application for a stay, the written submissions and what the applicant told the Court that she seeks a stay on a number of bases.  As drafted the application seeks a stay pending resolution of an appeal to the Federal Court.  The sequestration order was made, as I have indicated, on 20 September 2005.  The applicant seeks a stay in anticipation of an appeal and on the basis that this Court can and should grant a stay until determination of the foreshadowed appeal by the Federal Court.  She told the Court, and I accept, that she has not at this stage filed an appeal to the Federal Court.  Nor is there a draft notice of appeal, although the applicant’s written submissions take issue with the procedure and decision of Federal Magistrate Driver (see Walton v Klewer [2005] FMCA 878) in a number of respects. The time for filing an appeal has not yet expired.

5. Section 52(3) of the Bankruptcy Act 1966 (C’th) allows the Court to grant a stay of all proceedings under a sequestration order but only ‘for a period not exceeding 21 days’.  However I am not satisfied that this Court has jurisdiction to grant a stay until determination of a foreshadowed appeal for a number of reasons.  There is no specific power in the Federal Magistrates Court Act 1999 (C’th) to stay proceedings pending an appeal, although the power to grant a stay would be a power within the general words of section 15 of the Act (see ANZ v Merribee Pastoral Industries Pty Ltd [1998] FCA 856) and section 85(a) of the Federal Magistrates Court Act 1999 (C’th) gives the court power to make rules in relation to enforcement and execution of judgments. The Court has not made any rules in relation to an appeal to the Federal Court. Under Rule 1.05 of the Federal Magistrates Court Rules 2001 the Court may apply the Federal Court Rules.  Order 52 of the Federal Court Rules deals with appeals. Under Order 52 Rule 17 a stay unlimited as to time can be ordered notwithstanding s.52(3) of the Bankruptcy Act 1966 (C’th) (see Evans v Heather Thiedeke Group Pty Ltd (1990) 95 ALR 424). However for this Court, Order 52 Rule 17 is to be seen in light of section 29 of the Federal Court of Australia Act 1976 which is to the effect that the appropriate body for determining an application for a stay where an appeal from this Court has been instituted to the Federal Court is the Federal Court.  That section provides, in subsection (1):

   Where an appeal to the Court from another court has been instituted:

   (a)     the Court or a Judge, or a Judge of that other court (not being the Federal Magistrates Court or a court of summary jurisdiction), may order, on such conditions (if any) as it or he or she things fit, a stay of all or any proceedings under the judgment appealed from.

6. In light of section 29, on the material presently before me I consider that insofar as the applicant seeks an unlimited stay or a stay exceeding that available under s.52(3) of the Bankruptcy Act while she pursues a foreshadowed appeal before the Federal Court this Court cannot grant such a stay.  The Court from which to seek such a stay is the Federal Court.  There would seem to be nothing to stop the applicant from her instituting an appeal within the immediate future and seeking such a stay (see O.52, r.17(3)).  The time for such an appeal has not yet expired.  (See Grundy v Wattyl Pty Ltd [2002] FCA 615, Beames v Rigby [2002] FCA 806 in which the Federal Court dealt with considerations relevant to the grant of a stay where there was an appeal from a decision of the Federal Magistrates Court). I am not, however, satisfied that this Court has the power to order such a stay in this case.

7. Even if I am wrong and this Court does have the power to grant a stay in relation to a period of time sufficient to allow for the resolution of an appeal to the Federal Court (notwithstanding s.52(3) of the Bankruptcy Act) I am not persuaded on the material before me that the court should grant such an extended stay where a notice of appeal has not been filed.  As Emmett J stated in Gould v Day [2002] FCA 663, Order 52 Rule 17 of the Federal Court Rules has no application where there is no appeal pending. (Also see Freeman v National Australia Bank Ltd [2002] FCA 427 at [3].)

8. It is apparent that the applicant also seeks a stay pursuant to section 52(3) of the Bankruptcy Act.  Section 52 deals with ‘proceedings and order’ on a creditors petition.  Subsection (3) provides that:

   The Court may, if it thinks fit, upon such terms and conditions as it thinks proper, stay all proceedings under a sequestration order for a period not exceeding 21 days.

9. It is important to note, however, that the power in section 52(3) is to grant a limited ‘stay’ of proceedings under a sequestration order. Much of what the applicant, who is self-represented, has contended in fact seems to relate to either her application for an indefinite stay pending resolution of a foreshadowed appeal (as to which see above) or seeks what might more properly be described as a discharge or suspension of the operation of the sequestration order. However it is clear that under section 37(2) of the Bankruptcy Act the Court does not have power to rescind or discharge or to suspend the operation of a sequestration order.  Insofar as her generally expressed application and submissions seek such a result the Court does not have the power to rescind or suspend the operation of the sequestration order either generally or pending an appeal.

10. Nonetheless, the Court does have power under section 52(3) to stay proceedings under a sequestration order for a period not exceeding 21 days. (See Teese v Clinch [2002] FMCA 205 at [12] and Day, in the matter of Day v Gould [2000] FCA 1377). The applicant stated that she was not entirely sure as to the operation of this provision and from when the 21 days should run. Counsel for the respondent contended that it should run from the time of the sequestration order although he was not certain as to whether or not the day on which the sequestration order was made should be included in the calculation of the 21 days. The material put before me by the parties does not persuade me that s.52(3) has a broader operation than in relation to the period not exceeding 21 days from the date of the sequestration order. The sequestration order was made on 20 September 2005 and on this basis (even if the date of the order is excluded) a stay of less than seven days could now be granted in relation to proceedings under the sequestration order.

11. However, in any event I am not satisfied on the material put before me by the applicant (and I note that much of that material is not in proper or affidavit form but is by way of written submissions and allegations) that any such stay as may be ordered under s.52(3) (whenever the 21 day period may commence) should be granted. (See Stedman v Commissioner of Taxation [1999] FCA 539 at [19] as to the principles applicable).

12. The applicant raised a number of issues in her written submissions which she stated were grounds for appeal. In an appropriate case, depending on all of the circumstances, the court has the power to grant a stay for a short period to allow an unrepresented applicant to formulate and file grounds of appeal in circumstances where property is not in jeopardy and the bankrupt has nonetheless filed a statement of affairs as required by section 54 of the Bankruptcy Act, even if the court is not persuaded that there is any real prospect of the appeal succeeding: Day, in the matter of Gould v Gould [2000] FCA 1377.

13. However in this instance as I have indicated, no appeal has been filed.  There is no draft notice of appeal.  It has not been established that at this stage a stay is necessary or appropriate to enable the applicant to institute an appeal within the next few days (given the time limit on the filing of an appeal).  According to the applicant’s submissions she has not received a statement of affairs form to complete.  There are extensive written submissions and the applicant foreshadows that she intends to file an appeal, but despite the time that has elapsed since the sequestration order was made it has not been established that she has taken any steps towards the filing of an appeal, other than to prepare the material that she puts before this Court in relation to the stay application.  Importantly, I note in that respect that the applicant had pro bono representation on the hearing of the creditors' petition.  There is nothing before me to suggest that a stay of the sequestration order was sought at that time. 

14. If the applicant does file an appeal she may then seek a lengthy stay from the Federal Court.  I consider that it is not in these circumstances for this Court to enter into a consideration of the extent to which possible grounds of appeal may be identified in her wide-ranging submissions or to consider the extent to which the written submissions raise any arguable ground of appeal. 

15. Critically, the applicant has not established to the court's satisfaction that the balance of convenience supports the grant of a stay under s.52(3) that would outweigh the prejudice to creditors and the public interest that would result from the sequestration order being stayed rather than the bankruptcy proceeding.

16. Apart from the institution of an appeal the applicant has indicated that she wishes to raise finance by applying for a loan but also that she wishes to sell her property and repay the petitioning creditor.  As Sackville J accepted in Stedman v Commissioner of Taxation [1999] FCA 539 at [15], a stay under section 52(3) does not have the effect of preventing or undoing the applicant's change in status or the vesting of her property in the trustee. Further, as I have indicated, any stay that the court should grant would be limited in duration, and not such as to reasonably enable and be likely to result in the applicant raising funds (insofar as she able in any event to take such steps) to repay the petitioning creditor if indeed that is a proper basis on which a stay under section 52(3) should be granted. (cf Day, in the matter of Gould [2000] FCA 1377 at [7]).

17. The applicant contends that the balance of convenience favours the grant of a stay because she is prepared to give a number of undertakings. There is an absence of proper evidence and some inconsistency in the applicant’s proposals. The undertakings suggest that what she seeks is in fact a suspension of the sequestration order contrary to s.37(2) and that she may wish to dispose of her property (cf Stedman at [19] referring to Alexander v Cambridge Credit Ltd (Receivers appointed) (1985) 2 NSWLR 685 at 694). Her house is said to be on the market. She undertakes not to sell or dispose of her home and not to enter a contract of sale of her home without notice to the petitioning creditor’s solicitor. She also then undertakes to provide written instruction and authorisation to her real estate agent to inform the creditors solicitor if an offer is made to purchase the property that is acceptable. She wishes to ‘continue’ to apply for loans but there is no satisfactory evidence of current proposals.

18. Critically, even if a stay were granted, there is nothing to suggest that any aim of raising funds to repay creditors can be realised in the limited time in which this Court could grant a stay.  The only stay that the court could grant would be for an extremely limited period (cf a stay pending resolution of an appeal).  The applicant has not satisfied me that the competing interests of the parties and the balance of convenience favour a stay. 

19. On balance then, having considered all of the material before me, I do not consider that this is an appropriate case in which the Court should exercise its discretion to grant such stay as may be granted pursuant to section 52(3) of the Bankruptcy Act 1966.  Accordingly, the application for a stay must be dismissed.

RECORDED   :   NOT TRANSCRIBED

1. The applicant has been unsuccessful and the respondent seeks that the creditor's costs be taxed and paid in accordance with the Bankruptcy Act on the basis that the stay application arises out of the same matter dealt with on the hearing of the creditor's petition, that the sequestration order was made on 20 September 2005 and that the application for a stay could have been made at the time that the sequestration order was made, being part of the same proceedings.

2. The applicant opposes any order for costs on the basis that she was not given pro bono assistance in relation to the stay application.  She contends that she would have succeeded in this application with pro bono assistance, that she is not well or in a position to deal with these matters and that she attributes some responsibility to her former pro bono legal counsel for not seeking a stay at the time the sequestration order was made. 

3. The circumstances that the applicant raises are not such as to warrant a departure from the principle that the unsuccessful applicant should meet the respondent’s costs.  The unsuccessful applicant is a bankrupt.  The matter arises out of and is related to the hearing of the creditor’s petition and the sequestration order that was made by Federal Magistrate Driver on 20 September 2005.  In these circumstances it is appropriate that the creditor's costs in relation to the stay application be taxed and paid in accordance with the Bankruptcy Act 1966 (C’th). 

I certify that the preceding twenty-two (22) paragraphs are a true copy of the reasons for judgment of Barnes FM

Associate: 

Date:  18 October 2005.