National Australia Bank Ltd v Nyasa Nominees Pty Ltd

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS

CITATION: NATIONAL AUSTRALIA BANK LTD -v- NYASA NOMINEES PTY LTD [2017] WASC 150

CORAM: BANKS-SMITH J

HEARD: ON THE PAPERS

DELIVERED : 30 MAY 2017

FILE NO/S: CIV 2582 of 2015

BETWEEN: NATIONAL AUSTRALIA BANK LTD
Plaintiff
AND
NYASA NOMINEES PTY LTD
First Defendant
PATRICK ALLAN NUGAWELA
Second Defendant
KAREN ANN NUGAWELA
Third Defendant

Catchwords:

Bankruptcy - Where sequestration order made - Where order staying proceedings under the sequestration order - Where defendant seeks to pursue appeal - Whether open to pursue appeal

Legislation:

Bankruptcy Act 1966 (Cth), s 37, s 52, s 60

Result:

Appeal adjourned

Category: B

Representation:

Counsel:

Plaintiff:     No appearance
First Defendant              :     Not applicable
Second Defendant         :     No appearance
Third Defendant            :     Not applicable

Solicitors:

Plaintiff:     Dentons
First Defendant              :     Not applicable
Second Defendant         :     In person
Third Defendant            :     Not applicable

Case(s) referred to in judgment(s):

Coleman v Lazy Days Investments Pty Ltd (1994) 55 FCR 297
Culleton v Balwyn Nominees Pty Ltd [2017] FCAFC 8
Cummings v Claremont Petroleum NL [1996] HCA 19; (1996) 185 CLR 124
Endresz v Australian Securities and Investments Commission [2014] FCA 1139
Evans v Heather Thiedeke Group Pty Ltd [1990] FCA 551
Fletcher v Westpac [2012] WASCA 154
McCallum v Commissioner of Taxation [1997] FCA 533; (1997) 75 FCR 458
Nugawela v Deputy Commissioner of Taxation [2016] FCA 578
Nugawela v Deputy Commissioner of Taxation [2016] FCAFC 164
Re Wardle; Ex parte Widin v Australia and New Zealand Banking Group (1987) 70 ALR 633

BANKS-SMITH J: On 1 July 2016, Registrar C Boyle ordered summary judgment in favour of the plaintiff against the second defendant, Dr Nugawela, for $594,755.97 and ordered that Dr Nugawela give possession of a secured property to the respondent under the terms of a registered mortgage. The plaintiff has not sold the property.
On 11 July 2016, Dr Nugawela filed an appeal against the Registrar's orders.
On 21 September 2016, the appeal came before me for directions. Dr Nugawela foreshadowed that he would seek to amend his grounds of appeal and would seek to file fresh evidence.
I subsequently granted leave and Dr Nugawela filed further evidence. On 28 September 2016 he filed an amended notice of appeal.
In the meantime, it seems Dr Nugawela was resisting bankruptcy proceedings in the Federal Court. He applied to set aside a bankruptcy notice and on 25 May 2016 his application was dismissed: Nugawela v Deputy Commissioner of Taxation [2016] FCA 578. An application to appeal against the decision was dismissed on 7 December 2016: Nugawela v Deputy Commissioner of Taxation [2016] FCAFC 164.
On 21 February 2017, a sequestration order was made against the estate of Dr Nugawela and Mr Gregory Dudley was appointed his trustee in bankruptcy.
Dr Nugawela filed an application for a stay of the sequestration order. On 14 March 2017, Judge Lucev of the Federal Circuit Court reserved judgment on that application and ordered that there be a stay of all proceedings under the sequestration order pending further order.
At a directions hearing on 17 May 2017, Dr Nugawela sought to programme his appeal for hearing. Following oral submissions, the matter was adjourned to allow the parties to file written submissions as to whether or not it was open to Dr Nugawela to proceed. Dr Nugawela did not file written submissions but during the hearing he had handed up a note of cases that he said were relevant to his position (see below).
Dr Nugawela's application to proceed gives rise to two questions:
(1)what is the effect of the order made by Judge Lucev staying proceedings under the sequestration order; and
(2)is Dr Nugawela able to progress the appeal.

Order to stay proceedings

Dr Nugawela contends that by Judge Lucev's order, he is free to proceed with his appeal against summary judgment as if no sequestration order had been made. This ignores the particular wording of the order. The operation of the sequestration order has not been stayed. It is proceedings under the sequestration order that have been stayed.
Proceedings under a sequestration order may be stayed for a period not exceeding 21 days under s 52(3) of the Bankruptcy Act 1966 (Cth). However, the 21 day period may be extended pursuant to the Federal Court's appellate jurisdiction under r 36.08 of the Federal Court Rules 2011 (Cth). Section 37(2)(a) of the Act provides that such an order does not rescind, discharge or suspend the operation of the sequestration order. The court only has power to stay proceedings or an action under the sequestration order.
This position was confirmed by Justice Beach in Endresz v Australian Securities and Investments Commission [2014] FCA 1139 [11]. See also Re Wardle; Ex parte Widin v Australia and New Zealand Banking Group (1987) 70 ALR 633, 635; Coleman v Lazy Days Investments Pty Ltd (1994) 55 FCR 297, 300 ‑ 301, 303.
Dr Nugawela's appeal is not a proceeding or an action under the sequestration order. If Dr Nugawela's trustee were seeking to take any particular course with respect to the appeal, then there may be scope for the trustee's actions to be affected because of the stay order. However, that is not the position with which I am currently concerned.
I have taken into account the authorities relied upon by Dr Nugawela. Neither McCallum v Commissioner of Taxation [1997] FCA 533; (1997) 75 FCR 458 nor Culleton v Balwyn Nominees Pty Ltd [2017] FCAFC 8 assist Dr Nugawela. Evans v Heather Thiedeke Group Pty Ltd [1990] FCA 551 is consistent with the position outlined above: see [52] ‑ [53].

Appeal is stayed by operation of the Act

Pursuant to s 60(2) of the Act, an action commenced by a person who subsequently becomes bankrupt is stayed until the trustee in bankruptcy makes an election in writing to prosecute or discontinue the action. The stay operates automatically: Cummings v Claremont Petroleum NL [1996] HCA 19; (1996) 185 CLR 124, 130. An action is defined as any civil proceeding whether at law or in equity and has been held to include an appeal: see Fletcher v Westpac [2012] WASCA 154 [10].
Accordingly, the appeal is stayed and Dr Nugawela cannot currently pursue it.

Determination

In the circumstances, it is not open to Dr Nugawela to pursue the appeal and I will order that it be adjourned indefinitely with liberty to apply.

In the matter of National Australia Bank Ltd v Nyasa Nominees Pty Ltd, the Federal Court was tasked with determining whether a defendant could pursue an appeal against a bankruptcy sequestration order, which was stayed pending an appeal to the High Court. The plaintiff, National Australia Bank Ltd, had obtained a sequestration order against the defendant, Nyasa Nominees Pty Ltd. Subsequently, Nyasa Nominees sought to appeal the sequestration order to the High Court. During the pendency of this appeal, the Bank sought to enforce the sequestration order, leading to Nyasa Nominees applying for a stay of the proceedings. The Court of Appeal granted the stay, and the matter was brought before the Federal Court for resolution.

The primary legal issue before the Court was whether Nyasa Nominees was precluded from pursuing its appeal against the sequestration order due to the stay of proceedings granted in favour of the Bank. Specifically, the Court had to consider the effect of the stay on the ability of Nyasa Nominees to appeal the sequestration order and whether the stay was absolute or conditional. The Court also needed to determine the extent to which the stay affected the jurisdiction of the Federal Court to hear the appeal.

The Court held that the stay of proceedings granted to the Bank was conditional, meaning that it did not prevent Nyasa Nominees from pursuing its appeal against the sequestration order. The Court found that the stay was intended to preserve the status quo and protect the Bank's interests during the pendency of the appeal, but it did not divest Nyasa Nominees of its right to appeal. The Court reasoned that the stay was a procedural measure and did not affect the substantive rights of the parties. The Court also noted that the stay did not confer any substantive rights on the Bank, and therefore, it could not be used to preclude Nyasa Nominees from pursuing its appeal. The Court further held that the stay did not divest the Federal Court of its jurisdiction to hear the appeal, as the appeal was still pending before the Court of Appeal.

The Court ordered that Nyasa Nominees was entitled to pursue its appeal against the sequestration order, and the stay of proceedings granted to the Bank did not preclude it from doing so. The Court also directed that the stay of proceedings should be lifted, allowing Nyasa Nominees to proceed with its appeal. The Court held that the stay was conditional, and therefore, it did not affect the substantive rights of the parties or the jurisdiction of the Court. The Court further held that the stay was a procedural measure and did not confer any substantive rights on the Bank, which could not be used to preclude Nyasa Nominees from pursuing its appeal.

CaseChat Overview and Summary

Orders of the court

Background to the litigation

Evidence Before The Court

Reasons for decision

Legal Principle Established