Nadjarian, G. v Myer Melbourne Ltd

[1981] FCA 271

JUDGMENT No. z.?,! ........ I ....... 81 .....

GENERAL DIS~TSJON	---
BANKRUPTCY DISTXICT	--

-	OF THE	S T A T E 01 VIC'CORIA	-
BETWEEN:

GEORGS N A D J A R I A N Deinul t J u d g m n t

Debtor

and

MYER MCLBOURXE - LTD. Default Judgment

C r e d i t c r

NORTHROP J. EX TEXPORE JUDGNENT -- - 9 D E C E M l E R 1981

I n t h i s matter, George Nadjarian, the bankrupC, IS

s e e k i n g o r d e r s a g a l n s t Myer E:elbourne Limited, the credi tor ,

t h a t t h e s e q u e s t r a t i o n o r d e r made by t h t , Federa l Ccur t of

A u s t r a l i a , c o n s t i t u t e d by Nr. J u s t i c e McGregoc on 1 3 August

1981 , be s tayed pending the hear lng of appea l No. V . G . 154 of

1 9 8 1 and of appeal No. V.G. 193 of 1981 .

I should ind ica te kha t the f l r s t of those appea is

i s an a p p e & l a g a l n s t t h e s e q u e s t r a t i o n o r d e r and t h a t lr! t k n t

appea l Mr. J u s t i c e S m i t h e r s made an order on 9 hlovember thak

t h e b a n k r u p t g l v e s e c u r i t y f o r c o s t s and t h a t t h e hearing of

the appea l be s taycd pendlng the g iv ing of s e c u r l t y and :nat

u n l e s s s e c u r i t y was g iven w i t h i n th ree months the appea l

should s tand d l smissed .

The second appeal V.G. 1 9 3 of 1981 is an appeal

from t h a t o r d e r of Mr. J u s t i c e S m i t h e r s and t h e c o u r t ,

c o n s t l t u t e d by a s i n g l e j u d g e , h a s j u s t made a s l m i l a r o r d e r

- .

i n	r e l a t i o n	t o	s e c u r i t y	f o r	c o s t s ,	i n	r e l a t i o n	t o	t h a t
appeal,	and	the	hea r ing	o f	tha t	appea l	has	been	s tayed

pend ing t he g iv ing o f t ha t s ecu r i ty and un le s s t h a t s e c u r i t y

i s g l v e n w i t h i n t h r e e m o n t h s t h e a p p e a l shall s t a n d

dismissed.

T h e p r e s e n t m o t i o n t h e s t a y t h e f o r o f

segues t r a t lon o rde r is made p u r s u a n t t o 0 . 5 2 , r.17 of t h e

Federal Court R u l e s , and I quo te sub - ru l e s (1) and ( 3 ) :

"17.(1) An a p p e a l t o t h e C o u r t [ a n d t h a t is

t h e Full C o u r t o f t h e F e d e r a l C o u r t o f

A u s t r a l i a ] s h a l l n o t -

( a ) o p e r a t e a s a s t a y of execu t ion oe of

proceedlngs under the judgment appezled

from; or

( '3 ) i n v a l l d a t e a n y l n t e r m e d l a t e a c t o r

proceeding ,

exczpt s o f a r a s t he Cour t [ and t ha t is t h e

F u l l Court of	the	Federa	l	Cour t	of	A u n t r a l l a l
o r	the	ccur	t	be low	may	d i r e c t .

...

( 3 ) An a p p l i c a t i o n f o r a d i r e c t i o n of the

Court under sub- ru le (1) or an order under

sub- ru le ( 2 ) s h a l l be made t o t h e C o u r t by

motion	epon	notlce,	and	may be made whether	or
n o t	a	s i n i l a r	a p p l l c a t i o n h a s b e e n	made	t o t h e

cour:	below."
The	quest ion  immediately arlses r rhether thc court

a s p r e s e n t l y c o n s t i t u t e d o r , f o r t h a t m a t t e r , a Full Court of

t he Fede ra l Cour t , has power tinder t h a t r u l e t o o rde r a s t a y

of execut jon or of proceedings under the order appealed f rom.

T h e reason why t h i s d o u b t a r i s e s is because of s.59.(3) of

the Federa l Cour t of Aus t r a l i a Ac t 1976. Sec t ion 59 o f t h a t

Ac t au tho r i zes t he j udges of t he Fede ra l Cour t t o make rules

i n r e l a t i o n t o t h e p r a c t i c e and procedure to be fol lowed i l l

the F e d e r a l C o u r t . S u b - s e c t i o n ( 2 ) l i s t s p a r t i c u l a r

p r o v i s i o n s t h a t may be made and included among those i s

paragraph	( k ) , and I quote :
" ( 2 ) I n p a r t i c u l a r , t h e Rules of Court may
make p r o v i s i o n f o r or i n r e l a t i o n t o -
...
(k:  t h e s t a y of proceedings i n , under or

j u d g m e n t s o f , t h e C o u r t o r a n o t h e r

c o u r t :  "

"(3) Rules of Court under t h i s s e c t i o n have

e f f e c t	s u b S e c t	t o	a n y	p r o v l s i o n	medp	b y
another	Act ,	o r	by	r u l e s or	regulations	under

another Act , w i t h r e s p e c t t o t h e p r a c t i c e and

proccdure I n p a r t i c u l a r matters."

For t h l s purpose t h e Bankruptcy P.ct - 1966 1s another Act and

the Bankruptcy Xules app ly t o p roceed ings i n m a t t e r s of

bankruptcy as def ined i n che -. Bankruptcy Act, and i t m i g h t be

useful to rcfer to the meanlng to be given to the word

"bankruptcy" In this regard. This appears in s.5 where

unless a contrary lntention appesrs, "henkruptcy":

... in relatlon to 1urisdlc~ion or

proceedings, means any jurlsdictlon or

proceedings under or by virtue of this Act."

Section 315 of the Eankruptcy Act authorizes the Governor-General to make rules, not inconsistent with the Act, prescrlbing all matters that by the Act are requlred or permitted to be prescribed, and In particular including rules relating to the practice and procedure of courts having jurlsdictlon under that Act, iccluding costs and the taxation of costs.

The Federal Court of Australia is one of the courts

having jurisdiction under the Bankruptcy Act, see s .27 of the Bankruptcy Act. AccOKdingly, having regard to s .59 (3 ) of the Federal Court of Australis Act a?d the Fankruptcy Act tfle latter Act and the Bankruptcy Rules apply to proceedings ir:

bankruptcy and not the Federal Court Rules.

Thls is of importancc when one comes to conslder

the questlon o f whether a Full Court, or the Court

constituted by a slngle judge has power under 0.52, r.17 t o

grant a s t a y of the bankruptcy order, or rather the

sequestration order whlch has beep made in this case.

Where a seques t r a t lon o rde r has been made t h e

judgment d e b t o r becolnrs 2 bankrupt, and I quote s . 4 3 ( % ) :

" 4 3 . ( 2 ) Upon the making of a s e q u e s t r a t i o n

o r d e r	a g a l n s t	t h e	e s t a t e	o f	a	d e b t o r ,	t h e
deb to r	becomes	a	bankrupt ,	and	c o n t l n u e s	t o	be

a bankrupt untll -

( a ) h e is d lscharqed by f o r c e of s e c t i o n

1 4 9 ;

( b ) h e is d lscharqed by o rde r of the Cour t ;

o r

( c ) hls bankruptcy is annul led under sect lon

7 4 o r 1 5 4 . "

None of those	provisions	have	been	complied	w i t h	i n	t he
p re sen t	ca se	and ,	t he re fo re ,	t he	bankrup t	is a b3r:krupt	and

r e m a i n s a b a n k r u p t p u r s u s n t t o t h e p r o v i s i o n s o f t h e

Bankruptcy= follovi!lg upon t h e making of a s e q u e s t r a t i o n

order on 1 3 A u g u s t 1981.

Under s . 5 8 of the Bankruptcy Act a l l the p r o p e r t y

of	the	bankrupt	has	vested	i n t h e	o f f i c l a l	t r l ; s t e e .	S e c t i o n
52(3)	d e a l s	w i t h	s t a y s	of	proceedings.	That	sub-sect ton
r eads :

" 5 2 . ( 3 ) The Court ndy, i f i t t h i n k s f l t , upon

such	terms	and	c o n d l t l o n s	a s	i t t h i n k s p rooer ,
s t a y	a l l	proceedlngs	under	a	s e q u e s t r a t i o n

o r d e r f o r a per iod not exceeding 21 days."

In the present case what is being sought to be stayed 1s the effect of the sequestration order and under s.52(3) there 1s no power in the court to stay that order for a perlod

exceeding 21 days. That period has long since explred,

namely, in early September 1981 and, because of the effect of the provision of the Bankruptcy Act in vesting the property of the bankrupt in the Official Trustee and the llmltation on the power of the court to stay the sequestration order, grave

doubts arise as to wnether the court	has power under 0.52,
5
r.17	to grant a stay o r , in other words, to grant the motlon

of the bPnkrupt.

In my oplnion th? court COIIS: ;~IJ : :? '01,~ : s l n q l e

judge has n3 such power but, bccause of the uncertpintles that might arise, I propose to deal with the other aspects of the motlon. Reference is made also to s . 3 7 of the Eankrcotcy

Act. - That is a section whlch empowers the Court to suspend the operacion of an order. Sub-section (1) provides:

"37. (1) Subject to subsections ( 2 ) end ( 3 ) ,

the Court may rescind, vary or dlscharge an

order made by it under thls Act or suspena' the

operation of such an order.''

Sub-section (2) reads:

" 3 7 . 1 2 ) T h e Court shall not, after a scquestratlon order hes been slgned and sealeci as provided by the ru les , rescind or suspend the operatron sf the order."

Rule 1 2 4 of the Bankruptcy Rules prov ldes fo r t he

s l g n l n g and s e a l i n g of o r d e r s and n : p a r t i c u l a r i t provldes

f o r t h e s e t t l l n g o f o rde r s and sub-rule 11) provides :

" 1 2 4 . ( 1 0 ) Where a f a i r c o p y o f a n o r 2 e r a s

s e t t l e d by t h e R e g l s t r a r i s lodged w i t h t h e

R e g l s t r a r , t h e R e g i s t r a r s h a l l -

( a ) I f t h e o r d e r was made by t h e Federa l

Cour t of Bankrliptcy - s i g n , s e 2 1 and

f i l e t h e o r d e r : o r

(b) i n any o the r esse - cause the o rder t o

be s l g n e d and s e a l e d a s an o rde r of t he c o u r t by which It was inade, and when i t

has been s igned and s ea l ed , f i l c t he

o rde r .'l

I n t h e p r e s e n t c a s e t h e s e q u e s t r a t i o n o r d e r was made by a

Court o ther than t h e Federal Court of Bankruptcy. I t was

made	by	t h e	F e d e r a l	C o u r t	A u s t r a l i a ,	o f	e x e r c l s l n g
j u r l s d i c t l o n c o n f e r r e d	by	s . 2 7	of	t h e	Bankruptcy Act -	and,	j ,

t h a t c a s e , t h e R e g i s t r a r is requ l r ed t o c a d s e t h e o r d e r t o be

s lgned and sea l ed a s an o rde r of t h e Federal Court of

A u s t r a l i a	and	when	it	h s s been	signed	and	s e a l e d	t o	f i l e	t h e
o r d e r .

Ruie 26 p r o v i d e s f o r the form of t h e o r d c r and i t

r e q u i r e s t h z t a s e q u e s t r a t i o n o r d e r s h a l l be i n accordance

wi th Form 1 2 . The procedure is t h e r e s e t o u t as t o t h e

obi-alning of such o r d e r s .

Form 12 to the Bankruptcy Rules is in a form common

in orders of the Federdl Court and I need ~ o t szy any nore about it except that it is the order nornally applicable to a seyuestratlon order against the estate of a debtor and questions might arlse whether a sequestration order of that kind needs to Le settled in any formal way by the Registrar, but I make no comment on thar: in view of the provisions of Rule 124(10).

#c

It 1s sufflcient to say that I have been informed

by	counsel from the bar table that in this case the
sequestration order has not been slgned and sealed	as

provided by the rules. Accordingly, the prohibitlon

contained in s.37(2) of che - Bankruptcy Act does not apply and there is power in the Court to suspend or to rescind, vary or discharge the sequestration order. In those circumstances I propose to consider whether the Court ought to suspend the

operatlon of the Sequestration order and also, in case I am wrong on the views already expressed, whether it should grant

a stay of the operation of that order pending the hearing of the appeal.

Firstly, I draw attention to the fact that orders

for security of coscs have been made and i f that security 1 s not given in accordance with the orders made, both the

appeals presently pending	in the court will be dismissed.
That is a factor why the	court should not suspend or stay the
sequestration order.

Secondly, the grounds upon which the debtor seeks

the stay or suspension are set out in the affldavit of the

. . I

bankrupt sworn 7 December 1981 and filed herein. I refer to each of those grounds - and do not propose to read them - but it is sufficient to say that they, in substance, refer to notning exceptional but merely to matters which affect every

bankrupt upon a sequestration order being made. The

bankrupt has referred to the difficulties facing him as a

bankrupt; the difflculties of getting employment; his

standing in the community - particularly the business

communlty; the fact that no creditor will really get any

advantage from the bankruptcy, that the appeal has been

lodged, and he asserts there are	strong grounds that the
appeal wlll succeed. But these	are not facts whlch are
unusual, and in view of the orders	made for security for

costs one must draw the inference that the grounds	of appeal
are such as to not give rlse	to a strong	case.

If the sequestration order is suspended for reasons
similar to those relled upon by the bankrupt, it would mean a

serious interfere'lce with the ordinary administration of

bankruptcy, and in my opinion none of the grounds are

sufflciently strong to justify either a suspension of the

J

,

- 10 -

sequestration order or a stay of its operation pending the

hearing 01 the appetls, partlcnlarly when the appeals may not

proceed.

Accordingly, the motions for the stay and a l s o any

application for suspension of the operation of the

I	* -
.	I

sequestration order are refused.