Ling, Noel v Enrobook Pty Ltd
[1997] FCA 1
•8 JANUARY 1997
IN THE FEDERAL COURT OF AUSTRALIA )
NEW SOUTH WALES DISTRICT REGISTRY ) No NG 15 of 1997
GENERAL DIVISION )
BETWEEN:
NOEL LING
Appellant
AND:
ENROBOOK PTY LIMITED
Respondent
CORAM:Lindgren J
PLACE:Sydney
DATE:8 January 1997
REASONS FOR JUDGMENT
(ex temporare)
There has been filed today a notice of appeal by Noel Ling ("Mr Ling") against Enrobook Pty Limited ("Enrobook") in respect of a decision of Lehane J given on 18 December 1996. On that date his Honour made a sequestration order against Mr Ling's estate in proceeding No NP 168 of 1996. On the same day, 18 December 1996, his Honour made an order under sub-s 52 (3) of the Bankruptcy Act 1966 ("the Act") staying proceedings under the sequestration order for a period of 21 days. I have been told that that period expires today.
In association with his notice of appeal, Mr Ling has also filed today a notice of motion seeking, in effect, an extension of the stay until the hearing and determination of his appeal. That motion has come before me as Duty Judge. Both Mr Ling and Enrobook have been represented by counsel on the hearing. In due course, I will make an order that the
notice of motion be made returnable instanter and that further or other service of it be dispensed with.
The background to the application could be recounted at some length, since it involves several relevant proceedings to which Mr Ling has been a party covering a substantial period of time. The other litigation was referred to in outline by Lehane J in his Reasons for Judgment dated 18 December 1996 at page 13 and following. His Honour based his account of it on an earlier judgment of Sundberg J in Ling v Commonwealth of Australia (1996) 139 ALR 159 at 162-165. I draw upon Lehane J's summary account for what follows.
Mr Ling provided courses of study, particularly intensive courses in the English language, to students from the Republic of China. Prior to the Tiananmen Square incident in June 1989, the Commonwealth readily issued visas to students from the Republic of China wishing to undertake such courses. After that time, however, the Commonwealth adopted a much more restrictive policy. As a result, a number of students who had enrolled in Mr Ling's courses and paid fees in advance were unable to come to Australia to undertake the courses and became entitled to refunds. Apparently, the Commonwealth came to an accommodation with those prospective students, took assignments of their entitlements to refunds, and sued Mr Ling to recover the amounts of those entitlements. The Commonwealth was successful before Beaumont J who gave judgment in its favour on 3 September 1993 for $7,990,535.86:
(1993) 44 FCR 397. On 2 December 1993, Lockhart J granted a "Mareva injunction" against Mr Ling upon the application of the Commonwealth. There was an appeal to a Full Court against the judgment of Beaumont J which was dismissed: (1994) 51 FCR 88. The High Court refused special leave to appeal.
The Commonwealth served a bankruptcy notice on Mr Ling. He did not comply with it. The Commonwealth presented a petition in this Court for a sequestration order against Mr Ling's estate. Mr Ling opposed the petition on the ground that he had a claim against the Commonwealth for an amount greater than the judgment debt. Mr Ling sued the Commonwealth in the Supreme Court of Victoria ("the negligence action"). The negligence action was transferred to this Court in its New South Wales District Registry and became proceeding number NG 751 of 1995. In short, in the negligence action Mr Ling claims damages against the Commonwealth for negligent misrepresentation. Lehane J explained:
"It is alleged that the Commonwealth negligently represented that it would facilitate the entry into Australia of students wishing to undertake courses such as those provided by Mr Ling."
The Commonwealth moved to have the statement of claim in the negligence action dismissed or struck out or, alternatively, the negligence action stayed. On 29 April 1996, Lehane J held that Mr Ling was estopped, in accordance with the principle of Port of Melbourne Authority v Anshun Pty Limited (1981) 147 CLR 589, from asserting the claim made against the Commonwealth in the negligence action, and his Honour made an order, the effect of which was to dismiss the negligence action. The result of this was that Mr Ling's opposition to the Commonwealth's petition in bankruptcy could not succeed and his Honour made a sequestration order on 14 May 1996.
Mr Ling appealed against the order made on 29 April 1996, the effect of which was to dismiss the negligence action, and against the sequestration order made on 14 May 1996. The appeal was successful and on 25 July 1996 a Full Court adjourned the Commonwealth's petition until determination of Mr Ling's claim in the negligence action. That claim subsists. Apparently the Commonwealth applied for special leave to appeal to the High Court against the Full Court's decision but the High Court dismissed that application. As will be seen later, the pending negligence action assumes some significance in relation to the matters with which I have to deal.
Apparently another result of the inability of Mr Ling to continue to provide courses to Chinese students was that he defaulted under a lease from Enrobook. On 28 October 1994, Enrobook obtained a judgment in the Supreme Court of New South Wales against Mr Ling for $1,347,018.07 for rent and outgoings under the lease. On 28 June 1995, Enrobook issued a bankruptcy notice against Mr Ling based on that judgment. On 14 December 1995, that bankruptcy notice was served. Mr Ling
did not comply with it upon its expiry on 29 December 1995. That non-compliance was, of course, an act of bankruptcy. On 12 January 1996, Enrobook presented a creditor's petition.
On 18 December 1996, Enrobook's petition was heard by Lehane J. The grounds of opposition were, first, that Mr Ling was able to pay his debts, and, secondly, that there was other sufficient cause why a sequestration order ought not to be made. The first ground was not pressed but the "other sufficient cause" ground was pressed. There were two aspects of it. One was founded on Mr Ling's pending negligence action. Shortly, his contention was that if he succeeded in that action, he would have the means to pay his debts in full. The other aspect finds its genesis in the "Mareva injunction" which, it will be recalled, had been ordered by Lockhart J as long ago as 2 December 1993. I need not set out the terms of the Mareva injunction: they are set out at pages 3 to 4 of the judgment of Lehane J from which the appeal is brought. It suffices to say that the Mareva injunction restrained Mr Ling from disposing of assets and so, by their terms, mad it impermissible for him to pay Enrobook.
The relevance of this to the hearing of Enrobook's petition was this: Mr Ling submitted that an effect of the Mareva injunction was that Enrobook's judgment was not one the execution of which had not been stayed - see para 40 (1) (g) of the Act. Mr Ling's contention was that since the Mareva injunction prevented him from paying Enrobook, Enrobook ought not to have issued the bankruptcy notice (see para 41 (3) (b) of the Act) and, accordingly, that his non compliance with Enrobook's bankruptcy notice was not an act of bankruptcy.
Lehane J dealt first with the effect of the Mareva injunction and considered the authorities at length. It is fair to say that his Honour thought the question a difficult one. He concluded, however, that the existence of the Mareva injunction did not have the effect contended for by Mr Ling. He added that although he regarded this conclusion as correct in principle, he reached it "with some hesitation" (see Reasons for Judgment p 12). I need not embark upon a discussion of his Honour's reasoning or the ground for his hesitation. It is significant in the present context, however, that later on the same day, 18 December, he granted a stay under sub-s 52 (3) of the Act in order that the question of an appeal might be considered.
The second aspect of the "other sufficient cause" ground of opposition to the making of the sequestration order, the subsistence of Mr Ling's negligence action, was also, with respect, dealt with thoroughly by his Honour. Perhaps it suffices to say that his Honour was not satisfied that:
"It is likely that within a relatively short space of time the litigation will produce funds sufficient to discharge Mr Ling's debts."
(Reasons for Judgment, p 20).
This brings me to the notice of appeal which has been filed today. It purports to identify two errors of law. In summary, the first is that his Honour erred in his finding that the existence of Mr Ling's claim in the negligence action was not "other sufficient cause" why a sequestration order ought not to be made against Mr Ling's estate. The second ground is that his Honour ought to have found that, as a result of the Mareva injunction, Enrobook did not have an immediate right to execution of its judgment debt and that for this reason the bankruptcy notice served by Enrobook was invalid.
Mr J T Johnson of counsel who appears for Enrobook does not, and could hardly, submit that there is not an arguable ground of appeal in relation to the Mareva injunction point. Of course, he contends that Lehane J's conclusion on the issue was correct and emphasises that his Honour examined the authorities at some length. Mr Johnson does, however, submit that there is no arguable ground of appeal in relation to the other aspect, that is, the negligence action. I must say that the way in which the ground of appeal in respect of the negligence action is expressed does leave something to be desired. It is not entirely clear to me what error of law is propounded in that respect. It may be that the ground of appeal in relation to the negligence action will be amended. However, I do not think I need dwell on that matter because it does seem to me that Mr Ling is entitled to prosecute his appeal in respect of the Mareva injunction point. If an extension of the existing stay were refused and Mr Ling succeeded on his appeal, he would, in substance, have been deprived of the benefit of his success in the appeal.
Mr Johnson opposes any extension of the stay which was granted by Lehane J, although he concedes that I have jurisdiction to grant an extension under O 52 r 17 of the Federal Court Rules. He points out, correctly, that his client has had a judgment against Mr Ling since as long ago as 28 October 1994. He points out, correctly, that there has been no challenge to Enrobook's entitlement to its judgement and to its entitlement to be paid. In effect, Enrobook's position has been "confused" by reason of the dealings between Mr Ling and a third party, the Commonwealth. Be this as it may, the fact remains that if it should be held on appeal that Lehane J was in error in relation to the effect of the Mareva injunction, a matter about which I express no opinion whatever, it would then be established that Enrobook had not been entitled to obtain the sequestration order.
Mr Ling further submits that if there is no extension of the existing stay of proceedings under the sequestration order, the negligence action itself would be stayed by the operation of s 60 of the Act, and that the trustee in his bankruptcy might, pursuant to that section, elect to discontinue that proceeding. He points out that this would deprive him of one of his two grounds of appeal.
Mr Johnson submits that if there is to be an extension of the existing stay, it should be subject to a condition that Mr Ling furnish a statement of affairs. A statement of affairs is, of course, provided for in s 54 of the Act and, but for the stay of proceedings under the sequestration order granted by Lehane J, Mr Ling would have had to file his statement of affairs within 14 days from the day on which he was notified of his bankruptcy. Mr Galvin of counsel for Mr Ling says that there is no difficulty in his submitting to an order for the filing of a statement of affairs, but also submits that the granting of an extension of the existing stay should not be made subject to the condition suggested.
The estimated hearing time for the appeal is one to one and one half days. In my opinion, the hearing of the appeal should be expedited. Inquiries reveal that it is possible for it to be heard in the February Full Court sittings in Sydney.
Taking into account all of the foregoing matters, I think that the existing stay should be extended until the hearing and determination of the appeal subject to this. Mr Ling should be ordered to provide a statement of affairs. There should be an order for expedition of the hearing of the appeal and directions relating to the appeal. The parties' legal representatives, when preparing their submissions, should bear in mind the desirability that the hearing of the appeal be confined to one day if possible.
There will be orders as follows:
1(a)Order that the notice of motion filed by the applicant as appellant against Enrobook Pty Ltd be made returnable at 10.15 am on 8 January 1997.
(b)Dispense with other or further service of the notice of motion.
Direct that the hearing of the appeal be expedited and be listed in the February Full Court sittings in Sydney, with an estimated hearing time of one to one and one half days.
Order that Noel Ling within 14 days make out and file in the office of the Official Receiver a statement of affairs as provided for in sub-s 54 (1) of the Bankruptcy Act 1966.
Save as provided for in Order 3, order that further proceedings under the sequestration order made on 18 December 1996 in proceeding No NP 168 of 1996 be stayed until the hearing and determination of the appeal.
Direct that the parties take out an appointment in the Registry for the settling of the appeal book.
Make the usual order for written submissions.
Order that the costs of the motion be the respective parties' costs of the appeal.
Direct the parties to contact the Executive Assistant to the Chief Justice for the purpose of obtaining a fixture for the hearing of the appeal.
Grant liberty to the parties to apply on 48 hours' notice.
I certify that this and the preceding 10 pages are a true copy of the Reasons for Judgment of the Honourable Justice Lindgren.
Associate:
Dated:13 January 1997
Heard: 8 January 1997
Place: Sydney
Decision: 8 January 1997
Appearances: Mr Galvin of counsel, instructed by J M Smith & Emmerton, appeared for the appellant, the applicant on the motion.
Mr J T Johnson of counsel, instructed by Sally Nash & Co, appeared for the respondent.
0
0
0