Mitzev v Foxman
[2008] FMCA 404
•25 March 2008
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| MITZEV v FOXMAN | [2008] FMCA 404 |
| BANKRUPTCY – Creditor’s petition – adjournment application – foreshadowed application for special leave to appeal to the High Court. |
| Bankruptcy Act 1959 (Cth) s.52 Judiciary Act 1903 (Cth) s.35A |
| Ahern v Deputy Commissioner of Taxation(Queensland) (1987) 76 ALR 137 Bryant v Commonwealth Bank of Australia (1996) 70 ALJR 306 Foxman v Mitzev [2006] NSWCA 1404 Guss v Johnstone [2000] FCA 1465 Mitzev v Foxman [2007] NSWCA 273 Morris v The Queen (1987) 163 CLR 454 Re Flatau; Ex Parte Scotch Whiskey Distillers Limited (1888) 22 QBD 83 Westpac Banking Corporation v Carver (2003) 126 FCR 113 |
| Applicant: | ASSEN ATANASOV MITZEV |
| Respondent: | MARSHA FOXMAN |
| File Number: | SYG 3987 of 2007 |
| Judgment of: | Barnes FM |
| Hearing date: | 25 March 2008 |
| Delivered at: | Sydney |
| Delivered on: | 25 March 2008 |
REPRESENTATION
| Counsel for the Applicant: | Mr. B J Skinner |
| Solicitors for the Applicant: | Hancock Solicitors |
| Respondent: | In Person |
ORDERS
The respondent’s application for an adjournment is refused.
The matter be heard before me at 2.30pm today.
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT SYDNEY |
SYG 3987 of 2007
| ASSEN ATANASOV MITZEV |
Applicant
And
| MARSHA FOXMAN |
Respondent
REASONS FOR JUDGMENT
(Revised from transcript)
The application before the Court is a creditor's petition presented on 31 December 2007. It relies on an alleged failure by the respondent to comply with a bankruptcy notice.
By notice of opposition filed on 19 March 2008 the respondent, Ms Foxman, raised a number of grounds of intention to oppose the petition, most of which seek an adjournment of the creditor's petition, apart from an issue as to the effectiveness of service of the bankruptcy notice and the creditor's petition that would be relevant to a hearing of the creditor's petition.
I gave Ms Foxman leave to make an oral application for an adjournment. She took issue with the circumstances in which the applicant creditor Mr Mitzev and others obtained and used certain funds (described as Credex funds) which she stated were currently part of an investigation by the liquidator of Credex National Australia Trade Exchange Limited and its manager CAN Management Pty Ltd. The notice of opposition suggested that at this stage of the investigations the liquidator (Mr Fiorentino of Hamiltons Chartered Accountants) was “not as yet in a position to disclose his findings or to proceed with further action”.
The respondent debtor pointed to the fact that the judgment which founds the bankruptcy notice in these proceedings is a judgment of the New South Wales Court of Appeal of 5 October 2007 in which it was ordered that Ms Foxman pay to Mr Mitzev the sum of $50,405.18. (See Mitzev v Foxman [2007] NSWCA 273 on appeal from the decision of Hamilton J in Foxman v Mitzev [2006] NSWCA 1404 in which Ms Foxman sought a declaration that she was entitled to assert a “vendor’s lien” over certain real property on the basis of an alleged failure by the purchaser to pay part of the purchase price).
The respondent’s submission in relation to the adjournment application is that the Court of Appeal judgment was achieved based only on “assumptions” by the Court of Appeal that Credex funds were “accepted” by the vendor of the property purchased by Mr Mitzev. The respondent stated in the notice that “no evidence of fraud was able to be introduced into the appeal hearing to demonstrate the worthlessness of the $510,000 in Credex funds provided by the applicant in connection with his purchase of a property … and as such, the matter now falls within the scope of the liquidator”.
It was also claimed that the “Credex matters” have been referred by a Member of Parliament to relevant Ministers and that there had been a recommendation by that Member of Parliament that the Federal Police conduct an investigation into matters relating to the Credex trade scheme.
On that basis it was said in the notice of opposition that it was “anticipated that the end of the investigations and proceedings” (which I take to be a reference to the liquidator's investigation) the judgment in the Court of Appeal in favour of the applicant creditor in the amount of $50,405.18 would be “set aside” and the first instance judgment in favour of Ms Foxman would stand against Mr Mitzev.
The respondent debtor sought an adjournment “until investigations and any subsequent legal avenues are pursued by the liquidator and the matter concluded”. In oral submissions, however, the respondent expressed the application for an adjournment not in terms of an adjournment to enable the liquidator to pursue subsequent legal action, but rather on the basis that once the liquidator concluded the inquiries referred to in the notice of opposition the applicant would be, for reasons that she was not able to explain, in a position to succeed in an application for special leave to appeal to the High Court. I am told that the liquidator is still conducting public examinations.
Hence Ms Foxman sought an adjournment until she has the opportunity to proceed with an application for special leave to appeal in the High Court. She confirmed that she has not, at this time, filed any such application for special leave to appeal. Nor is it apparent from what she told the Court that she intends to do so in the immediate future. Rather Ms Foxman intends to wait until the liquidator has finished his inquiries on the basis that these investigations will somehow allow her to raise fresh matters in the High Court that were not before the Judge at first instance or before the Court of Appeal.
The orders made by the Court of Appeal on 5 October 2007 were entered on 11 November 2007. Basten JA (with whom Tobias and McColl JA agreed) discussed a number of arguments that were not before the Court and legal issues that might have been considered were such other issues raised (such as the potential relevance of the system of registration which vests title in a purchaser of land under ss.42 and 43 of the Real Property Act 1900 (NSW)).
However, their Honours reached the conclusion (at [36]) that the judgment of the Court below “involved acceptance of Ms Foxman's claim that Mr Mitzev failed to provide part of the consideration for the purchase of the land, not because he did not provide that for which the vendor had asked, but because that part of the consideration was, in fact, valueless. All other questions of legal principle aside, Ms Foxman bore the burden of establishing that the ‘Credex dollars’ were valueless.”
Basten JA referred to the fact that the argument that the Credex dollars were valueless, which the primary judge had accepted, had been based on the proposition that once the relevant company (Exchange Limited) had been deregistered it had no members and therefore there was no trading programme within which credits identified in terms of “trade dollars” could be utilised. However his Honour pointed out that while that proposition was based on a legal analysis, whether or not Credex dollars had value “was a question of fact, proof of which lay upon Ms Foxman”. The Court of Appeal found that the evidence adduced by her had “failed to establish that fact”. Hence the appeal was allowed. The orders made at first instance were set aside. The respondent (Ms Foxman) was ordered to pay to the appellant (Mr Mitzev) the sum of $50,405.18 or such an amount as had been received by her from the trustee for sale of the property under court order. It is this order for payment which provided the basis for the bankruptcy notice in these proceedings.
It is well established that the Court has power to adjourn the hearing of a creditor's petition. As a general principle it is necessary to have regard to the interests of justice and the interests of the parties. In the context of an application for an adjournment of the hearing of a creditor’s petition the Full Court of the Federal Court has held that the Court in general “should not proceed to sequestrate the estate of a debtor where an appeal is pending against the judgment relied on as the foundation of the bankruptcy proceedings” and that the Court can exercise its discretion to allow an adjournment to allow the debtor to prosecute the appeal against such a judgment where there are substantial or “genuine and arguable” grounds for the appeal (Ahern v Deputy Commissioner of Taxation(Queensland) (1987) 76 ALR 137 at 147-149).
The mere fact that an appeal is pending is not of itself a sufficient ground for staying the proceedings upon the petition. (See in particular Re Flatau; Ex Parte Scotch Whiskey Distillers Limited (1888) 22 QBD 83 and more recently Bryant v Commonwealth Bank of Australia (1996) 70 ALJR 306).
In this case there is, however, no suggestion that Ms Foxman has sought special leave to appeal to the High Court from the judgment of the Court of Appeal. Ms. Foxman foreshadows that she intends to do so after the liquidator completes his investigation.
There is also authority that an adjournment may be ordered to enable litigation of a claim that a debtor has against a petitioning creditor provided the Court is satisfied that it is a real one. (See for example Commonwealth Bank of Australiav Jeans (No 3) [2006] FCA 693). However, despite some reference in Ms Foxman’s affidavits to matters that might emerge from the investigations of the liquidator, it was not claimed that the respondent debtor sought to litigate some other specified claim that she had against the petitioning creditor. Rather Ms Foxman suggested generally that the result of the current enquiries by the liquidator may produce evidence of fraud, which may give rise to some form of legal proceedings. There is also a suggestion in the affidavits of possible misleading and deceptive conduct by certain other persons in relation to the circumstances surrounding the use of Credex dollars and the Credex trading scheme.
While this is not a case in which there is evidence that the debtor might not intend to prosecute an appeal with all due diligence and bona fide, in the sense that Ms Foxman indicates that once the liquidator has completed his enquiries she would intend to do so, the respondent’s application is for an open-ended adjournment to a date that cannot be determined, on the basis that she will seek leave to appeal in the future. However the respondent has not satisfactorily addressed the manner in which it could be said that there are “genuine and arguable” grounds for an appeal from the decision of the Court of Appeal.
I am not satisfied on the material before me that it has been established that there are genuine and arguable grounds for special leave to appeal so that it could be said that, even though such proceedings have not been commenced, there are circumstances such as to warrant an adjournment despite the fact that such an adjournment would be considerably longer than would be the case had an appeal or application for leave already been instituted.
It is relevant to have regard to the fact that an application for special leave to appeal to the High Court is not, strictly speaking, an appeal. While similar principles are applicable, an appeal would not lie as of right and the requirements for an application for special leave to appeal differ from those that apply to an appeal as of right. (See s.35A Judiciary Act 1903 (Cth), Westpac Banking Corporation v Carver (2003) 126 FCR 113, Morris v The Queen (1987) 163 CLR 454 and Guss v Johnstone [2000] FCA 1465). I also note that it would appear that the debtor would require an order dispensing with compliance with the time limit on an application for special leave to appeal to the High Court.
Under s.35A of the Judiciary Act 1903 the High Court may have regard to any matters that it considers relevant in considering whether to grant an application for special leave to appeal but shall have regard to several matters specified, including whether the proceedings involve a question of law or of public importance or a question of law about which there are differences of a judicial opinion and whether the interests of the administration of justice require consideration by the High Court of the judgment to which the application relates. Contrary to what Ms Foxman seemed to be suggesting, such an application would be an application for special leave to appeal from the judgment of the Court of Appeal and not a fresh proceeding in which some of the issues of fraud that she suggests might arise out of the results of the enquiries of the liquidator might be canvassed.
I have had regard to the nature of the proceedings in issue, the fact that there is no application for special leave currently on foot and no date on which such an application would be filed and the fact that any such application is said to depend not on an argument as to legal error in the decision of the Court of Appeal but on the outcome of a liquidator's inquiry. It is not clear how the results of the liquidator's inquiry, and allegations of fraud, possible insolvent trading, or other issues that the applicant raises as likely or possible to emerge from that enquiry, would provide a basis on which she might, at some uncertain date in the future, seek special leave to appeal to the High Court (or otherwise commence proceedings).
In all the circumstances I am not persuaded that it is in the interests of justice or of the parties that the hearing of the creditor's petition should be adjourned on the basis sought by the applicant. There is nothing in the material before me to suggest that a more limited adjournment would be in the interests of the parties or the interests of justice. There is no foreshadowed or draft form of application for special leave to appeal to the High Court before the Court to provide a basis on which I might assess whether there are genuine and arguable grounds for an application for leave to appeal.
I realise that Ms Foxman is self-represented and hopes to rely on the results of enquiries of a liquidator which have not yet been finalised. However that is not such as to warrant an adjournment of these proceedings.
I have also had regard to the nature of the creditor's petition. There is no evidence before me in relation to the existence of other creditors (except that Ms Foxman attests that there are “no other pressing creditors”). The evidence in relation to the liquidator’s investigation of the affairs of companies said to be involved in the scheme which underlies the provision of Credex dollars is not such as to justify an adjournment. Nor is the foreshadowed possibility of an application for special leave to appeal to the High Court depending on the results of those enquiries. The petitioning creditor indicates that he is ready to proceed today.
I raised with the parties my concern that the notice of opposition and the affidavit evidence before me focussed almost entirely on the question of whether there should be an adjournment based on Ms Foxman's claims as to what might result from the liquidator's inquiry and how she might then proceed to the High Court. There is an absence of evidence before the Court in relation to solvency for the purposes of my consideration of the requirements of s.52 of the Bankruptcy Act 1959 (Cth).
I canvassed the possibility that there should be a short adjournment to enable Ms Foxman to put on affidavit evidence in relation to solvency, if she sought to do so. She indicated, however, that she could not pay the debt. She did not seek to rely on evidence of solvency. Counsel for the creditor pointed to the limited grounds in the notice of opposition and the affidavit evidence and contended on the basis of what was before the Court that nothing would be served by delay.
While I am mindful of the need to ensure that a self-represented litigant has an opportunity to put before the Court relevant material, I consider that in this case that opportunity has been afforded. The matter was before Registrar Kavallaris on 7 February 2008 and Registrar Tesorieio on 19 March 2008, at which time the applicant had an opportunity to file further affidavits. She did so, but such material does not address issues such as insolvency.
The application for an adjournment is refused. In light of the time I propose to adjourn until 2.30pm and will hear the matter at that time.
I certify that the preceding twenty-eight (28) paragraphs are a true copy of the reasons for judgment of Barnes FM
Associate:
Date: 3 April 2008
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