Love, Paul James v Pattison, Paul (as Trustee of the Bankrupt Estate of Paul James Love)

[1997] FCA 985

IN THE FEDERAL COURT OF AUSTRALIA
VICTORIA DISTRICT REGISTRY	VG 395 of 1997

BETWEEN:	PAUL JAMES LOVE APPELLANT
AND:	PAUL PATTISON (AS TRUSTEE OF THE BANKRUPT ESTATE OF PAUL JAMES LOVE) AND PYRAMID BUILDING SOCIETY (IN LIQUIDATION) RESPONDENTS

COURT:	NORTHROP ACJ
PLACE:	MELBOURNE
DATE:	29 AUGUST 1997

REASONS FOR JUDGMENT

On 30 June 1997 a sequestration order was made against the estate of the appellant Paul James Love.  The sequestration order was based upon an act of bankruptcy being the non-compliance with a bankruptcy notice based upon a judgment debt obtained by the respondent Pyramid Building Society against the appellant.  One of the issues before the Court on the hearing of the petition was the question of whether the bankruptcy notice had in fact been served.  An order had been made earlier for service to be by means of substituted service. The trial judge found in favour of the service, accepting the evidence of the process server who served that notice in conformity with the order for substituted service.  There were other arguments put to the trial judge relating to the nature of the debt, whether the debtor had a claim against Pyramid Building Society and matters of that kind, but on all the material before him the trial judge made the sequestration order, and there is such an order of the Court in existence.

It is noted that s 58(1)(a) of the Bankruptcy Act provides that:

“58(1)Subject to this Act, where a debtor becomes a bankrupt:

(a)the property of the bankrupt, not being after - acquired property, vests forthwith in the Official Trustee or, if, at the time when the debtor becomes a bankrupt, a registered trustee becomes the trustee of the estate of the bankrupt by virtue of section 156A, in that registered trustee;”

Here, the effect of that paragraph is that upon the sequestration order being made all the property of Mr Love, for practical purposes, vested in the trustee in bankruptcy who is one of the respondents to the appeal.

I should also refer to s 52 which makes provision for what must be proved at the hearing of the petition and the power to make a sequestration order against the estate of the debtor. Section 52(3) provides that:

“(3)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.”

That subsection is of importance, since unless a stay is made under that subsection the sequestration order applies immediately with the effect I have referred to of s 58 vesting all the property of the debtor in the trustee.  In this context comparisons may be made with s 37 of the Bankruptcy Act and I will read those provisions:

“37.(1)       Subject to subsection (2), the Court may rescind, vary or discharge an order made by it under this Act or may suspend the operation of such an order.

(2)The Court does not have power to rescind or discharge, or to suspend the operation of:

(a)a sequestration order; or

......”

The effect of that provision is mandatory on the Court and has been discussed in a number of decisions of this case, one of which is Re Deriu (1970) 16 FLR 420. There are also a number of other decisions comparing the powers and effect of s 37, s 52(3) and s 58.
In the present case Mr Love who appeared in person before the trial judge, within the time limited by the Federal Court of Australia Act and the Rules of Court, filed a notice of appeal  from the orders made on 30 June.  The grounds for the appeal are stated as follows:

“1.I have to have a solicitor represent me in this matter.  I believe I have a case against the Pyramid/Geelong Building Societies as I have been treated unfairly.  Master Evans said I have a good case against them.

2.In regard to my wife giving evidence the Judge said Mr Paretsky would be correct in what he was saying as it was too important a matter not to be.  I find this decision flawed.

3.There are matters that need to be put before the Court by a solicitor as he would know the relevant Acts to refer to.”

By motion Mr Love is seeking an order that the sequestration order made on 30 June be stayed until the hearing and determination of the appeal.  I need not refer to procedural problems arising from that notice of motion, but the affidavit in support of it is as follows.  It is sworn by Mr Love on 20 August and says:

“(1)I was not served with a Notice of Bankruptcy.

(2)No debt owing to Judgment Creditor as it is compounding interest.   Master Evans gave me leave to appeal against judgment but I had no money to pay for a specialist accountant and I need a solicitor for my appeal.  There is not very much equity in the house and we fear with a forced sale by the bank we and our two small children will be homeless.”

Order 52 of the Federal Court Rules contains provisions relating to an appeal brought under s 24 of the Federal Court of Australia Act.  The section provides, in substance, that there may be an appeal from a judgment of the Court constituted by a single judge and that the jurisdiction of the Court on appeal shall be by a Full Court of three or more judges.  But applications of a certain kind may be heard by a single Judge or by a Full Court.  The motion for the stay of the proceedings under the sequestration order has come on for hearing before me today.  Mr Love has appeared in person and the respondents, the Trustee and Pyramid Building Society have appeared by counsel.  Order 52, r 17(1) provides that:

“17.(1)        An appeal to the Court shall not -

(a)operate as a stay of execution or of proceedings under the judgment appealed from; or

(b)invalidate any intermediate act or proceeding;

except so far as the Court or a Judge or the court below may direct.”

Subrule (3) provides for the method of making an application for an order for a stay and how it comes before the Court.

There are a number of decisions of this Court constituted by single judges which proceed on the basis that despite a sequestration order being made and the property of the bankrupt vesting in the trustee nevertheless the Court, in the exercise of its powers under O 52, r 17, has power to stay the proceedings under the Bankruptcy Act.  A reference to those judgments can be made:- Evans v Heather Thiedeke Group Pty Ltd (1990) 95 ALR 424, Coleman v Lazy Days Investment Pty Ltd (1995) 55 FCR 297 and Halls v Retravision (NSW) Pty Ltd and the Official Trustee in Bankruptcy, a judgment given by Lindgren J on 5 October 1995, unreported, matter No. NG 588 of 1995.  I must say I have reservations, in fact grave reservations, against the views expressed and acted upon in those authorities as to the power of the Court under O 52, r 17, to stay the proceedings under a sequestration order. It appears to me that none of those judgments consider the nature of a bankruptcy order, the effect of s 58 of the Bankruptcy Act and the effect of s 37 of the Bankruptcy Act.  In Coleman, Carr J said at 303:

“A stay of proceedings will not prevent the appellant's available property vesting in the trustee so the creditors will have that protection.”

I would have thought that unless such an order had been made staying the operation of a sequestration order under s 52(3), for a period not exceeding 21 days, once the sequestration was made, the property would have vested in the trustee in bankruptcy, or official receiver. Thereafter it would remain under the control of that officer in which case it is difficult to see what effect an order staying proceedings under a Bankruptcy Act would have. If questions arose as to whether a trustee in bankruptcy should dispose of certain property or not, applications could be made in relation to that particular matter.  But I have grave doubts in accepting the view that the Court has jurisdiction under the Federal Court Rules to stay the operation of a sequestration order. The debtor has become a bankrupt, a change of status has occurred. However, having regard to the authorities I have referred to and the comity required within the Court, I proceed on the basis that there is such a power.

The authorities also seem to suggest that in determining whether to grant a stay or not the Court should look at the strength of the appeal in the same sense of whether there is a likelihood of the appeal succeeding and also the convenience of the parties.  Again I must say I have difficulty in accepting the view that a single judge should be able to express a view as to whether a trial judge was in error or not or to consider the strength of the appeal.  Other authorities discuss the principles to be applied where a stay of judgment is sought pending the hearing and determination of an appeal.  Different considerations apply if the application comes before a Full Court, but in the last of the judgments I referred to, these views were expressed by Lindgren J and I apply them.

In the present case, looking at the grounds for the appeal, all I can say is that they disclose no ground of appeal which has any hope of success.  One can understand the concerns of Mr Love, but unfortunately for him the law must be applied.  The only substantive issue appears to be the question of the proof of service of the bankruptcy notice.  This was decided by the trial judge as a matter of fact after hearing evidence relating to it. In these circumstances, it is very rare for a Full Court to interfere with a finding of fact. 

The other matters as set out in the grounds of appeal appear to go to discretionary matters at the very most and again it is very difficult to see any basis on the material before the Court at the present time grounds for saying that they do disclose any reasonable grounds for an appeal succeeding.

Accordingly, in the exercise of my discretion, I would refuse to grant a stay of proceedings under the sequestration order made on 30 June 1997 pending the hearing and determination of the appeal.

I will order that the appellant pay the respondent's costs of the motion.

Orders accordingly.

I certify that this and the preceding five (5) pages are a true copy of the Reasons for Judgment herein of the Honourable Justice R M Northrop

Associate:

Dated:            19 September 1997

Counsel for the Applicant:	Appellant in person
Solicitor for the Applicant:
Counsel for the Respondent:	Ms S Horovitz
Solicitor for the Respondent:	Madgwicks
Date of Hearing:	29 August 1997
Date of Judgment:	29 August 1997