Matthews as trustee of the Bankrupt Estate of Sellars v Sellars (No.2)
[2017] FCCA 3155
•15 December 2017
FEDERAL CIRCUIT COURT OF AUSTRALIA
| MATTHEWS AS TRUSTEE OF THE BANKRUPT ESTATE OF SELLARS v SELLARS (No.2) | [2017] FCCA 3155 |
| Catchwords: BANKRUPTCY – Appeal to Federal Court following undefended hearing – application for a stay of orders – matters to be considered – merits of appeal – will denial of appeal render appeal nugatory – can appellant, if successful be restored to her prior appeal position – stay application refused. |
| Legislation: Bankruptcy Act 1966, ss.58, 120 Federal Circuit Court of Australia Act 1999, ss.76, 79 |
| Cases cited: Matthews as Trustee of the Bankrupt Estate of Sellars v Sellars [2017] FCCA 2323 Powerflex Services Pty Ltd & Ors v Data Access Corporation (1996) 67 FCR 65 Middle Harbour Investments Ltd (in liquidation) (unreported) Court of Appeal, New South Wales 15 December 1976 Aon Risk Management Limited v Australian National University [2009] HCA 27 |
| Applicant: | A C MATTHEWS AS TRUSTEE OF THE BANKRUPT ESTATE OF D R SELLARS |
| Respondent: | JACQUELINE ROBIN SELLARS |
| File Number: | ADG 38 of 2014 |
| Judgment of: | Judge Brown |
| Hearing date: | 1 December 2017 |
| Date of Last Submission: | 1 December 2017 |
| Delivered at: | Adelaide |
| Delivered on: | 15 December 2017 |
REPRESENTATION
| Counsel for the Applicant: | Ms O’Toole |
| Solicitors for the Applicant: | O’Toole Lawyers |
| Counsel for the Respondent: | In person |
IT IS ORDERED:
The application filed on 15 November 2017 is dismissed.
| FEDERAL CIRCUIT COURT OF AUSTRALIA AT ADELAIDE |
ADG 38 of 2014
| A C MATTHEWS AS TRUSTEE OF THE BANKRUPT ESTATE OF D R SELLARS |
Applicant
And
| JACQUELINE ROBIN SELLARS |
Respondent
REASONS FOR JUDGMENT
Introduction
Anthony Matthews is the trustee in bankruptcy of the Estate of Dean Sellars “the bankrupt”. Mr Matthews “the trustee” was appointed on 4 March 2013.
Mr Sellars’ bankruptcy arose because of his inability to satisfy a relatively modest judgement debt in the sum of $23,953.52. The money was owed in respect of unpaid workers’ compensation premiums relating to a business operated by him.
Mr Sellars has been involved in the transport industry for many years. He operated a fleet of trucks prior to his bankruptcy. Jacqueline Sellars is the bankrupt’s wife, although she has deposed that she and Mr Sellars are separated and have undergone an informal settlement of their financial affairs.
From the trustee’s perspective, the bankrupt, in concert with Ms Sellars, have acted in a way intended to frustrate and obstruct his statutory obligations arising under the Bankruptcy Act 1966. As a consequence of this perception, these proceedings have become a matter of high principle for Mr Matthews.
In particular, Mr Matthews has sought to impugn the validity of a number of transactions involving the bankrupt and Ms Sellars, which he asserts fell within the relating back period of Mr Sellar’s bankruptcy. The potential monetary value of these various transactions approaches the sum of $400,000.00.
The legal costs relating to these proceedings, which have been on foot, in various forms, since 31 January 2014, have not as yet been definitively tabulated, however they are likely to be significant – quite probably many times more than the original debt.
The trustee’s various applications were fixed for final hearing on 28 February and 1 March 2017, at a directions hearing, which occurred on 14 July 2016. Ms Sellars personally appeared when the matter was fixed for hearing. There is no controversy she knew of the hearing date. She indicated, to the court, that she would retain counsel and defend the proceedings.
Ms Sellars did not appear, either personally or through legal counsel, on 28 February 2017. She filed an affidavit, to which a medical certificate was attached, which indicated that she was indisposed, due to an unspecified illness. She further deposed that felt overwhelmed by the proceedings against her. In her absence, she sought their adjournment.[1]
[1] See Matthews as Trustee of the Bankrupt Estate of Sellars v Sellars [2017] FCCA 2323 at paragraph 60
The adjournment was opposed by counsel for the trustee, who did not accept that Ms Sellars had provided sufficient grounds to adjourn the longstanding trial. No doubt, from his perspective, the absence of Ms Sellars and her provision of a bland medical certificate were evidence of a further attempt to frustrate his administration of Mr Sellars’ bankruptcy.
I was not prepared to adjourn the proceedings. In these circumstances, I determined that I had no viable alternative other than to deal with the trustee’s application on an undefended basis. I was aware, for reasons detailed in my judgment, that this was a course not without its difficulties.
As a consequence of this determination, I attempted to analyse the extensive evidentiary evidence, which had been obtained by the trustee and which was the subject of a notice to admit, earlier personally served on Ms Sellars and unanswered by her. During an earlier aspect of the proceedings, there had been a significant amount of oral evidence gathered, particularly from the bankrupt’s former accountant.
On 22 September 2017, I published reasons for judgment, following this exercise and made a number of orders, which had the following effect:
·Mr Matthews was declared the owner of two motor vehicles – a campervan and a Jeep station wagon, which had earlier been ordered to be secured at the premises of a car auction firm;
·Mr Matthews was declared the owner of a fleet of trucks, which Ms Sellars was ordered to deliver up to him;
·In the alternative, Ms Sellars was to pay Mr Matthews the sum of $198,700.00;
·Ms Sellars was to pay Mr Matthews the sum of $183,200.32, which represented the monetary value of the various transactions impugned by the trustee.
It has been Ms Sellars’ consistent position that the trucking fleet in question is her property and was so prior to Mr Sellars’ bankruptcy, including during the relating back period. However, the effect of her evidence is that she does not currently know the location of each of the vehicles in question.
From the trustee’s perspective, this situation adds weight to his submission that there is a high degree of irregularity regarding the financial affairs of Ms Sellars and the bankrupt.
I said as follows, in the published judgment:
“In my view, Ms Sellars was given an opportunity to take part in the proceedings, which had been fixed for a significant period prior to the date scheduled for their commencement. The proceedings were fixed after a process of oral examination, which led to the production of a significant amount of documents, which the trustee has utilised to shed some light on the somewhat abstruse financial affairs of Mr and Ms Sellars.
Given Ms Sellars’ failure to engage in the process of the final hearing, notwithstanding her earlier indication that she would do so and given what I regard as an unacceptable explanation for being ready to proceed with the case, the court, in my view, has no viable alternative but to deal with the evidence which the trustee has been able to muster through the process of discovery and the oral examination of the various witnesses concerned.”[2]
[2] Ibid at [115]-[116]
The current proceedings
On 13 October 2017 Ms Sellars filed an appeal in respect of the orders made on 22 September 2017. The grounds of appeal can be summarised as follows:
·The court was in error in not adjourning the hearing, given the contents of the medical certificate submitted by Ms Sellars on 27 February 2017;
·The court was in error in not adjourning the hearing not only because of the medical certificate but also because Ms Sellars had deposed she required further time to seek legal advice, particularly in respect of the Notice to Admit Facts;
·Ms Sellars had not been given sufficient time to respond to the Notice to Admit Facts;
·The court was in error in proceeding with the hearing in the absence of Ms Sellars;
·The time frame provided by the court to deliver up the vehicles was unreasonable.
As a consequence of the appeal, on 15 November 2017 Ms Sellars filed an application seeking a stay of the orders, made on 22 September 2017, pending the outcome of her appeal. These reasons for judgment are directed towards the resolution of this application, which is opposed by the trustee.
In support of her application, Ms Sellars has filed an affidavit to which is attached a more extensive medical report from Dr Lam, who had provided the earlier certificate indicating simply that Ms Sellars was “unfit for his/her normal work from 27/2/17 to 3/3/17”.
The report indicates Ms Sellars had had three episodes of vomiting; had mild abdominal pain; and some congestion; following a curry the previous night. In contrast to the report of Mr Sellars that she had been suffering from diarrhoea this is not noted in Dr Lam’s report.
The doctor advised rest with plenty of fluids and paracetamol. In her supporting affidavit, Ms Sellars deposed as follows:
“I saw my general practitioner Dr Michael Wai Hung Lam at Grange Medical Centre at 314 Military Road, Grange in the said State on the 27th February 2017. I informed him that I had vomited three times that day and was in considerable discomfort and detailed my symptoms to him. I felt quite unwell and unable to attend at Court with respect to this matter. I was suffering from abdominal pain and congestion.
Apart from requiring treatment I said that I was involved in a court case and was not well enough to attend the court and could he provide me with a sick certificate for this purpose. Dr Lam subsequently gave me a sick certificate a copy of which was exhibited to my affidavit sworn on the 27th February 2017 and filed in the Court on that day. Now produced to me and marked with the letters “JSR1” is a copy of a Selective History Report obtained from Dr Lam on the 19 October 2017 for the consultation I had with him on the 27th February 2017.”[3]
There is no specific reference to the issue of the court case in Dr Lam’s notes.
[3] See affidavit of Ms J R Sellars sworn 15 November 2017
In addition, Ms Sellars has complained that she consulted lawyers prior to the hearing but was not advised by them what were the consequences of failing to respond to the notice to admit facts. As indicated in the reasons for judgment, the notice in question bore an endorsement in respect of the consequences of failing to respond to such a notice.
The legal principles applicable
There is no specific provision dealing with the stay of orders, pending appeal, in the Federal Circuit Court of Australia Act 1999. However, pursuant to section 15 of the Act, the court is empowered to make orders of such kinds, including interlocutory orders, as the court thinks appropriate, in relation to matters within its jurisdiction.
In these circumstances, there can be no doubt that the court has jurisdiction to make an order of the kind sought by Ms Sellars. In addition, pursuant to rule 19.12 of the Federal Circuit Court Rules 2001 a party may apply to the court for a stay of execution of a judgment or order.
Ms Sellars has instituted her appeal in the Federal Court, which is the appropriate court to hear the matter. Pursuant to section 29 of the Federal Court of Australia Act 1976 the Federal Court has the specific power to stay all or any proceedings under the judgment appealed from. Accordingly, it is open to the Federal Court to grant the stay sought prior to it dealing with Ms Sellars’ appeal.
It is uncontroversial that an appeal does not automatically result in the stay of the order or determination, which is subject to appeal. It is not necessary for the applicant for a stay to demonstrate special circumstances before a stay is granted. Rather, it is necessary for such an applicant to demonstrate a reason or appropriate case to warrant the exercise of the discretion concerned.
The Full Court of the Federal Court in Powerflex Services Pty Ltd & Ors v Data Access Corporation[4] approved the following passage from the Court of Appeal of New South Wales:
“Where an application is made for a stay of proceedings, it is necessary that the applicant demonstrate an appropriate case. Prima facie, a successful party is entitled to the benefit of the judgment obtained by him and is entitled to commence with the presumption that the judgment is correct. These are not matters of rigid principle and a court asked to grant a stay will consider each case upon its merits, but where an applicant for a stay has not demonstrated an appropriate case but has left the situation in the state of speculation or of mere argument, weight must be given to the fact that the judgment below has been in favour of the other party.”[5]
[4] See Powerflex Services Pty Ltd & Ors v Data Access Corporation (1996) 67 FCR 65
[5] See Middle Harbour Investments Ltd (in liquidation) (unreported) Court of Appeal, New South Wales 15 December 1976 per Mahoney JA
Accordingly, the question of whether to refuse or grant a stay is a discretionary decision. However, the discretion is not an unfettered one. The following criteria are likely to be relevant to the exercise of the discretion in most cases:
·Whether refusing a stay will render a successful appeal nugatory or have the consequence of denying a successful appellant the fruits of a successful appeal;
·A similar consideration relates to the risk that an appellant will not be able to be restored to his/her former position, if a stay is not granted and the appeal is subsequently successful;
·A consideration of the merits of the appeal;
·Whether there has been any delay in applying for a stay;
·The bona fides of the application for the stay – is it a delaying tactic;
·The time when the appeal is likely to be heard.
Consideration
The grounds of the appeal focus on the refusal of the court to grant Ms Sellars an adjournment, in her absence, on the basis of the medical certificate provided by her. The situation confronting the court, arising from the presentation of the medical certificate in question, encapsulates a reasonably commonplace scenario, which can be summarised as follows:
·an unrepresented litigant presents a vague and un-particularised medical certificate, at a late stage, in order to secure the adjournment of proceedings, which have been fixed for final hearing for a lengthy period of time;
·the litigant in question is asserted by the opposing party not to have hitherto engaged in the proceedings in a proactive fashion;
·the proceedings in question have significant moment for both parties concerned;
·the opposing party greets the medical certificate in question with scepticism and characterises it as an attempt by its subject to avoid the evil day represented by the hearing in question.
In this case, the proceedings in question had been fixed for final hearing for approximately nine months. The hearing was fixed following a process of oral examination involving Ms Sellars and representatives from Mr Sellars’ firm of accountants. Following this process, the parties completed formal discovery. This, in turn, led to the Notice to Admit Facts, which was served upon Ms Sellars but to which she did not formally respond.
The Federal Circuit Court is a busy court of first instance. As was pointed out by French CJ in Aon Risk Management Limited v Australian National University[6] courts have an obligation to ensure that the litigation coming before them is transacted effectively and efficiently, not only in the interests of the individual parties concerned but also in the interests of other litigants and users of the court, whose cases are inevitably affected by how other cases in the system are managed.
[6] Aon Risk Management Limited v Australian National University [2009] HCA 27 at [23]
His Honour said as follows:
“…the adversarial system has been qualified by changing practices in the courts directed to the reduction of costs and delay and the realisation that the courts are concerned not only with justice between the parties, which remains their priority, but also with the public interest in the proper and efficient use of public resources.”
In my view, it is not likely to be in the public interest that long fixed proceedings are routinely adjourned following the presentation of bland medical certificates. However, I also concede that given the potential moment of the case for Ms Sellars, her appeal is not without merit. It remains arguable that the adjournment should have been granted, notwithstanding the deficiency arising from the medical certificate and the coincidence of its production because it was in the interest of justice to do so. Different minds are likely to have different views about the matter.
This issue does not appear, at first blush, to be an overly complex one and is likely to be resolved quickly. More complex issues are likely to arise in respect of the various transactions alleged by the trustee to have arisen in the relating back period of Mr Sellars’ bankruptcy. However, these issues are not the subject of any specific grounds of appeal.
If Ms Sellars is successful in her appeal, she is likely to be granted a rehearing of the matter, so the relating back transactions can be examined and her perspective on the various discovered documents examined. As I indicated in the reasons for judgment, under the applicable rules of the Federal Circuit Court, it is open to her to apply for such a rehearing on the provision by her of a reasonable explanation as to why she failed to appear earlier.
I have not been advised as to when Ms Sellars’ appeal is likely to be heard. It is clearly the case that she has not wasted any time in bringing her application for a stay. I do not consider that there is any lack of bona fides regarding the stay.
In this context, I must consider whether the refusal to grant the stay in question will render her appeal, if ultimately successful, nugatory. A related issue to this is whether, in the absence of a stay, it will be impossible to return her to the position she occupied prior to the making of the orders appealed against.
Initially, the major focus in the case was on the Mercedes Benz campervan and the Jeep station wagon. These vehicles had been secured, for the trustee, pursuant to earlier proceedings and had been lodged with a motor vehicle auctioneer, where they currently remain. In the judgment of 22 September 2017, I determined that title in the two vehicles vested in the trustee.
I concede that, in the event that no stay order is made in respect of the operation of the orders affecting the two vehicles concerned, it would be open to the trustee to sell them and utilise the funds towards the debts of the estate. If the appeal is successful, it seems unlikely that the earlier made injunctions will be affected – the two vehicles will remain at Pickles Auctions. In my view, the evidence regarding the bankrupt’s ownership of these vehicles, at the time of the sequestration order, is compelling.
Although I have not been provided with specific evidence in respect of the current value of these two vehicles, they are more likely than not to be declining in value. If, pending appeal, the vehicles are sold, and thereafter Ms Sellars is successful in her appeal, she could be reimbursed the value of the vehicles. At the stay hearing, Ms O’Toole, solicitor for the trustee, indicated no efforts had been made to sell the vehicles because of Ms Sellars’ appeal.
As a consequence of the discovery of documents, the focus of the hearing shifted from the comparatively modest value of the Mercedes Benz campervan and the Jeep station wagon, to more complex transactions alleged to have arisen between the bankrupt and Ms Sellars in the relation back period of the bankruptcy.
Considerable uncertainty continues to surround the whereabouts of the trucking fleet. In these circumstances, Ms Sellars is not in a position to surrender it to the trustee, who in turn is unable to secure it. Accordingly, in my view, any stay order, in respect of the ownership and surrender of the trucking fleet, is to all intents and purposes otiose.
The same came be said in respect of the order requiring Ms Sellars to pay the sum calculated to be the worth of the fleet and the other various other transactions impugned by the orders of 22 September 2017. She is not likely to provide the sum in question, whilst the appeal is outstanding. Accordingly, in practical terms, the granting or otherwise of the stay, in respect of these issues, is not likely to have any immediate consequences for her.
Accordingly, the main focus of the stay application, in my view, is on whether there should be a stay granted, which will have the immediate consequence of preventing the trustee from selling or disposing of the campervan and the station wagon, which remain subject to injunction.
In my view, it is a finely balanced issue. One the one hand, the trustee is entitled to the fruits of his successful application, which will enable him to proceed with his administration of a comparatively modest bankrupt estate, outstanding for what can only be regarded as a significant period of time.
In addition, the documentary evidence indicates that the bankrupt purchased the jeep, within the relation back period and, at relevant times, it was registered in the time of the car dealer from whom it was purchased. Similarly, so far as the campervan is concerned, documents indicate the bankrupt was the registered owner of it, at the time of the bankruptcy and was transferred to Ms Sellars a few days after the sequestration order was made.
On the other hand, for obvious reasons, any court proceeding with a significant application, in the absence of a party, is bound to raise significant considerations regarding the fairness of the process involved and whether it offends the overarching interests of justice.
However, if the two vehicles are sold and the appeal is ultimately successful in respect of them, I consider that Ms Sellars can be restored monetarily to the position which she was in previously. I concede that it will not be possible for the specific vehicles to be returned. However, these vehicles have been subject to injunction for a significant period of time.
Accordingly, after considering the relevant matters, I have decided, on balance, not to grant the stay in question. The application filed on 15 November 2017 is dismissed.
For all these reasons, the orders of the court will be as set out at the commencement of these reasons for judgment.
I certify that the preceding forty-nine (49) paragraphs are a true copy of the reasons for judgment of Judge Brown
Date: 15 December 2017
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