Qureshi v Commonwealth Bank of Australia
[2007] FMCA 1862
•5 November 2007
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| QURESHI v COMMONWEALTH BANK OF AUSTRALIA | [2007] FMCA 1862 |
| BANKRUPTCY – Bankruptcy Notice – Application for extension of time to comply – where applicant has appealed against the judgment upon which the bankruptcy notice is based – where application for a stay has been refused pending filing of Red Book. |
| Federal Magistrates Court (Bankruptcy) Rules 2006 |
| Dennis v Cranitch [2005] FMCA 168 Porter v OAMPS Ltd [2004] FMCA 272 |
| Applicant: | ZIA UL-ISLAM QURESHI |
| Respondent: | COMMONWEALTH BANK OF AUSTRALIA (ACN 123 123 124) |
| File number: | SYG 3026 of 2007 |
| Judgment of: | Raphael FM |
| Hearing date: | 5 November 2007 |
| Date of last submission: | 5 November 2007 |
| Delivered at: | Sydney |
| Delivered on: | 5 November 2007 |
REPRESENTATION
| For the Applicant: | In person |
| Counsel for the Respondent: | Mr A R Zahra |
| Solicitors for the Respondent: | Henry Davis York |
ORDERS
Application dismissed.
Applicant debtor pay the respondent creditor's costs to be taxed if not agreed in accordance with the Federal Magistrates Court (Bankruptcy) Rules 2006.
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT SYDNEY |
SYG 3026 of 2007
| ZIA UL-ISLAM QURESHI |
Applicant
And
| COMMONWEALTH BANK OF AUSTRALIA ACN 123 123 124 |
Respondent
REASONS FOR JUDGMENT
This is an application by Mr Qureshi for what he describes as a "stay" on a bankruptcy notice numbered NN3563/07 issued on 31 August 2007. Although the judgment annexed to the bankruptcy notice makes a claim against the debtor in a sum exceeding $3,000,000.00 I am told by the creditor, the Commonwealth Bank, the amount currently owed is approximately $1,000,000.00.
The grounds upon which Mr Qureshi seeks what is in effect an extension of time for compliance with the bankruptcy notice are that he has filed a notice of appeal against the very judgment upon which the bankruptcy notice is based. He has provided me today with a copy of what he describes as "a draft red book". At the moment he has only filed a holding appeal and he has until 25 December 2007 to file this red book which is intended to contain fuller grounds of appeal. He tells me today that he is hopeful that the red book will be filed prior to that date. He has been encouraged to file the red book earlier in a judgment of the President of the Court of Appeal Mason P made on 8 October 2007. His Honour was hearing an application for a stay of the judgment. One of the grounds upon which Mr Qureshi was seeking that stay was the current bankruptcy proceedings.
His Honour said:
“[4] This court endeavours to ensure that a party having a right of appeal can exercise that right. Equally, the court does not grant a stay simply because the party intends to exercise that right. A judgment creditor has rights including rights under the bankruptcy legislation to get its toe in the door in order to be in a position to challenge dispositions of property and exercise its rights under the doctrine of relation back. …
[5] Nothing I have been told persuades me that the mere commission of an act of bankruptcy will cause any irreparable prejudice to the claimant. On the evidence the only debt of substance is the debt that is the subject of the proceedings in this court. If the claimant diligently pursues his appeal rights and is successful in the appeal then that debt will be swept aside. I would indicate that it would be the normal practice of this court, if satisfied that the appellant is exercising his rights of appeal diligently and if satisfied that the appeal is not itself an abuse of process, that the court would grant a stay of execution which would have the effect of precluding the hearing of a bankruptcy petition. But it is not my normal practice to preclude the filing of a bankruptcy petition because of the rights that that confers under the bankruptcy regime upon a judgment creditor. It does seem to me that the proper balancing of the respective rights of the parties is to refuse the application for the stay. The reasons I have given will be available to both parties and it seems to me there is some consequence that flow from that. If the bankruptcy notice is not set aside and a petition is presented then the parties will understand my present intention on the material that I have presently seen to protect the judgment debtor provided he prosecutes his appeal diligently.”
Mr Qureshi informs the court that he believes that unless compliance with the bankruptcy notice is extended he will suffer irreparable harm. He says that he will have problems in his profession of tax agent and worse, he will not be able to obtain the services of legal advisors in relation to the appeal. He says that he has asked several people to act for him but they have all demanded that money be put up by a third party rather than himself and he has quoted to me some very large figures for the provision of that advice. He tells me that he is required to report fortnightly to the Tax Agents' Board about the progress of these and the other proceedings. This may well have more to do with the fact that the Judge at first instance in the substantive proceedings was critical of Mr Qureshi's professional work.
In regard to the attitude of the legal advisors my views about the dangers of acting for a person who may become bankrupt would probably differ from those apparently expressed, particularly if bills were regularly submitted and paid. But I accept that the existence of an unsatisfied bankruptcy notice and therefore the commission of an act of bankruptcy is a matter that would concern Mr Qureshi and any other person who has found himself in that position.
The resolution of the application made by Mr Qureshi is one which has been considered previously both by this court and the Federal Court. As Mason P said it is a balancing act that is required. In Dennis v Cranitch [2005] FMCA 168 I considered a case where only a holding appeal had been filed and came to the view that it did not really constitute "an appeal which in reality seeks to have the judgment or orders set aside". I felt that I had no jurisdiction under s.41(6A) to extend time for compliance.
I am not prepared to go so far in this case because of the production to me by Mr Qureshi of the draft red book and my acceptance that it is more than likely he will file grounds of appeal within the time provided and probably earlier. But given the views expressed by Mason P as to the probability of him obtaining a stay following the filing of the red book (and providing the Court of Appeal does not consider the appeal itself to be bound to fail) I am of the view that I should follow the views I expressed in Porter v OAMPS Ltd [2004] FMCA 272 [21-24].
In that case I reviewed the authorities noting that the commission of an act of bankruptcy "while undoubtedly of significance to the debtor, does not affect the actual status of the debtor". I then noted the factors which weighed against the setting aside of a bankruptcy notice which included the possible disadvantage to creditors if the relation back period was extended for a significant period of time, the fact that the committal of an act of bankruptcy does not prevent a debtor from continuing his appellant proceedings and the fact that the court would have control over the timing of the hearing of a creditors petition at which time the situation regarding the appeal would be clearer.
I am of the view that the balance in this case favours the creditor and I should not extend the time for compliance with the bankruptcy notice. I am satisfied that in an appropriate case the Court of Appeal will grant Mr Qureshi the stay he seeks and in those circumstances the petition will not proceed. I am also satisfied that any Federal Magistrate hearing the bankruptcy petition will be made aware of the existence of this decision and will him or herself be able to then assess whether or not a sequestration order should be made in the light of the existence of the appeal. Such Federal Magistrate, whilst doubtless being influenced by any subsequent decision of the Court of Appeal not to grant a stay, would make his or her own independent judgment based upon the information provided at the time of the hearing of the petition.
I dismiss the application. I order the applicant debtor pay the respondent creditor's costs to be taxed if not agreed in accordance with the Federal Magistrates Court (Bankruptcy) Rules 2006.
I certify that the preceding ten (10) paragraphs are a true copy of the reasons for judgment of Raphael FM
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