Pearson v Commissioner of Taxation

[2000] FCA 1427

FEDERAL COURT OF AUSTRALIA

Day, in the matter of Gould v Gould [2000] FCA 1427

BANKRUPTCY – application for stay of sequestration order

Bankruptcy Act 1966 (Cth) ss 52, 54

Federal Court Rules 0 52 r 17

IN THE MATTER OF STEPHEN GOULD

STEPHEN GOULD v JULIAN DAY & ANOR

N 978 OF 2000

EMMETT J
5 OCTOBER 2000
SYDNEY

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY	N 978 OF 2000

ON APPEAL FROM A JUDGE OF THE FEDERAL COURT OF AUSTRALIA

IN THE MATTER OF STEPHEN GOULD

BETWEEN:

STEPHEN GOULD
APPELLANT

AND:

JULIAN DAY
FIRST RESPONDENT

ALAN MANLY
SECOND RESPONDENT

JUDGE:

EMMETT J

DATE OF ORDER:

5 OCTOBER 2000

WHERE MADE:

SYDNEY

THE COURT ORDERS THAT:

1.The stay of proceedings under the sequestration order be extended up to and including 19 October 2000. 

2.If on or before 19 October 2000 security for the respondents’ costs of the appeal in the sum of $20,000, in a form satisfactory to the Registrar, be provided by Mr Gould, the stay referred to in order 1 above be extended up to the determination of the appeal provided such appeal is prosecuted diligently and expeditiously

3.The appeal be expedited. 

4.If security as referred to in order 2 above is not provided on or before 19 October 2000 the appeal be dismissed. 

5.The bankrupt pay the costs of today.

Note:    Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY	N 978 OF 2000

ON APPEAL FROM A JUDGE OF THE FEDERAL COURT OF AUSTRALIA

IN THE MATTER OF STEPHEN GOULD

BETWEEN:

STEPHEN GOULD
APPELLANT

AND:

JULIAN DAY
FIRST RESPONDENT

ALAN MANLY
SECOND RESPONDENT

JUDGE:

EMMETT J

DATE:

5 OCTOBER 2000

PLACE:

SYDNEY

REASONS FOR JUDGMENT

1. On 7 September 2000 Conti J made a sequestration order against the estate of Mr Stephen Gould.  On 12 September 2000 I heard an application for a stay of proceedings under the sequestration order both under section 52(3) of the Bankruptcy Act 1966 (Cth) (‘the Bankruptcy Act’) and under Order 52 rule 17 of the Rules of the Federal Court.  At that stage I did not have the reasons of Conti J for making the order. 

2. I have now had the opportunity of considering those reasons.  I have also considered a detailed submission prepared by Mr Gould pursuant to a direction that I gave on 12 September 2000.  On that occasion I directed Mr Gould to file a detailed written submission outlining his grounds of appeal and referring to all evidence before Conti J that would be relied upon in support of those grounds.  I stayed the proceedings up to and including today. 

3. Mr Gould now seeks an extension of the stay pending the determination of the appeal.  The notice of appeal is not entirely clear in identifying the grounds upon which Mr Gould relies.  The grounds are set out in the notice of appeal in the following terms:  

   “BThe appellant had issued a Notice of Motion on Mon 04/09/2000 requesting another judge to hear the matter as he believed Justice CONTI was biased

   COn Tue 05/09/2000 the Registry and the other side were informed by fax that a hearing was requested before the Duty Judge on Wed 06/09/2000

   DAround 09:15 Wed 06/09/2000 the Applicant received a telephone call from the Registry to say the hearing would not be before the Duty Judge as the matter had been referred back to Justice CONTI

   EThe Applicant asked what to do as it was highly unlikely that a Judge would disqualify himself from a hearing. The response he received it [sic] that he ‘could appeal’ if he was not satisfied at the hearing

   FOn Thu 07/06/2000 Justice CONTI again demonstrated his bias by saying ‘ as I said on 21 August 2000 a sequestration order is inevitable’

   GI believe the Judge had made up his mind at the meeting on 21/08/2000 that a sequestration order was inevitable no matter what evidence the Applicant filed

   HI appeal the decision by Justice CONTI not to disqualify himself from the matter on the grounds of bias

   II appeal the decision of Justice CONTI to issue a sequestration order as the Applicant had provided detailed evidence including:

   1other court hearings against Alan MANLY and Julian DAY

   2why there were special reasons under 52.2(b) why funds had been limited by the actions of Julian DAY and Alan MANLY

   3progress with funding to pay the amount claimed by the Respondents

   4proof of intellectual property

   II appeal the decision of Justice CONTI not to grant 21 days according to rule 52.3.  Again I believe that this is an indication of the bias by his Honour against the applicant.”

4. Under those grounds an assertion appears to be made that Conti J exhibited bias.  The sole basis for that contention appears to have been the rejection by Conti J of Mr Gould’s arguments and Conti J’s observation that a sequestration order seemed inevitable.  On the material that I have considered an appeal based on the ground of bias of Conti J is doomed to inevitable failure.  It is completely without merit and I consider that it cannot succeed. 

5. The other grounds appear in the first item “I” above.  They are generally the grounds that I referred to in my reasons of 12 September 2000.  I do not consider that there is material sufficient to have justified either a dismissal of the bankruptcy petition or indefinite adjournment by reason of the existence of other claims against the petitioning creditors, Messrs Manly and Day.

6. Nor, for the reasons that I previously indicated, do I consider that malicious conduct in the past, if it be established, is a ground for refusing the making of a sequestration order.  If there is a cause of action based on such malice and it were established that such a cause of action had some substance, that might have been a ground for either dismissing the bankruptcy petition or granting an adjournment pending the determination of such claims.  However, no such claim is on foot.

7. The grounds numbered “3” and “4” under the first item “I” above relating to progress with funding and proof of intellectual property are simply not grounds upon which a sequestration order would be refused unless it were established that Mr Gould is in a position to pay his debts.  Mr Gould accepts that, while other creditors may have been paid, he is not in a position to pay the judgment debt owing to the petitioning creditors either from his own money or from money that he might be able to borrow.  He asserts, however, that negotiations that he is pursuing may at some stage in the future generate income.  I am not satisfied from the evidence before me that there is any practical prospect of that occurring.  Nor am I satisfied that there was evidence before Conti J that would justify his Honour exercising his discretion in relation to that matter.  I am not persuaded, therefore, that there is any real prospect of the appeal succeeding. 

8. However, I accept that Mr Gould genuinely believes that he has a grievance.  I am satisfied that the appeal is brought in good faith in the sense that Mr Gould himself believes that he has a grievance.  On the other hand I do not consider that it is appropriate that such an appeal be pursued except on terms that the respondents to the appeal not be at risk as to any costs that might be incurred.

9. The respondents appear before me in person.  I have been informed, however, that in the past they have been represented by counsel and that the reason why they appear in person is because of reluctance to incur costs in defending a claim which they perceive to be completely groundless.  In the light of the view that I have formed about Mr Gould’s prospects of success I consider that he should be allowed to pursue his appeal only if he is able to provide security for costs for the respondents’ legal representation on the appeal.

10. Since the pursuit of the appeal would be futile in the absence of a stay it would be appropriate for proceedings under the sequestration order to be stayed for so long as the appeal is on foot. On the other hand, as I indicated on the last occasion, I do not see any reason why the provisions of section 54 of the Bankruptcy Act relating to statement of affairs should not be complied with.

11. Mr Gould would be given a fair opportunity to pursue his appeal in a way that would not be unduly prejudicial to the respondents if I extend the stay that I ordered on 12 September 2000 for 14 days.  If, on or before 19 October 2000 Mr Gould provides to the Registrar security in a form satisfactory to the Registrar in the sum of at least $20,000, the stay would be continued up to the determination of the appeal, provided the appeal is prosecuted diligently.  If security is not provided by that date then the appeal will be taken to be dismissed.  They are the orders that I propose to make. 

I certify that the preceding eleven (11) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Emmett.

Associate:

Dated:             10 October 2000

The appellant appeared in person.
The first respondent appeared in person.
The second respondent appeared in person.
Date of Hearing:	5 October 2000
Date of Judgment:	5 October 2000