Qureshi v Commonwealth Bank of Australia

[2007] FCA 2096

FEDERAL COURT OF AUSTRALIA

Qureshi v Commonwealth Bank of Australia [2007] FCA 2096

ZIA UL-ISLAM QURESHI v COMMONWEALTH BANK OF AUSTRALIA

NSD2182 OF 2007

EMMETT J

13 DECEMBER 2007

SYDNEY

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY	NSD2182 OF 2007

BETWEEN:	ZIA UL-ISLAM QURESHI Applicant
AND:	COMMONWEALTH BANK OF AUSTRALIA Respondent

JUDGE:	EMMETT J
DATE OF ORDER:	13 DECEMBER 2007
WHERE MADE:	SYDNEY

THE COURT:

1.Directs that the time for filing the application for leave to appeal be extended up to today.

2.Grants leave to the applicant to file an application for leave to appeal in the form initialled by Emmett J and dated with today’s date.

3.Orders that the Application for leave to appeal be dismissed.

4.Orders the applicant to pay all reasonable costs reasonably incurred by the respondent in the application for leave to appeal.  

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	NSD2182 OF 2007

BETWEEN:	ZIA UL-ISLAM QURESHI Applicant
AND:	COMMONWEALTH BANK OF AUSTRALIA Respondent

JUDGE:	EMMETT J
DATE:	13 DECEMBER 2007
PLACE:	SYDNEY

REASONS FOR JUDGMENT

1. I have before me an application for leave to appeal from orders made by the Federal Magistrates Court on 5 November 2007.  By those orders, the Federal Magistrates Court, in effect, dismissed an application for review of an order of a registrar declining to extend the time for compliance with a Bankruptcy Notice served on the applicant.  In order to deal with the matter, it is desirable that I briefly say something about the background. 

2. On 28 August 2007, Einstein J of the Supreme Court of New South Wales, published reasons in proceeding number 50149 of 2005.  In those proceedings, the applicant was the third defendant.  His Honour found that the applicant was party to a fraudulent conspiracy that resulted in the respondent, the Commonwealth Bank of Australia (the Bank), advancing $7 million, in reliance upon numerous fraudulent representations made to it by a number of the defendants in the proceeding.  On 29 August 2007, orders were entered in the Supreme Court including a verdict and judgment in favour of the Bank against the present applicant in the sum of $3,082,046.02 and for an additional amount of $150,000.

3. On 13 September 2007 Bankruptcy Notice NN3563/2007 was served on the applicant.  By the Bankruptcy Notice, the applicant was required to pay the sum of $3,232.046.02 within 21 days after service of the Bankruptcy Notice.

4. On 25 September 2007 the applicant filed a notice of appeal from the orders made on 29 August 2007.  On 28 September 2007, the applicant filed an application to the Federal Magistrates Court for an order setting aside the Bankruptcy Notice.  The applicant also applied to the New South Wales Court of Appeal for a stay of the orders of 29 August 2007.  On 8 October 2007, the President of the Court of Appeal refused to grant a stay.

5. The application to set aside the Bankruptcy Notice came before a registrar of the Federal Magistrates Court on 9 October 2007, when an order was made dismissing the application to set aside the Bankruptcy notice.  The registrar also declined to grant any further extension of time for compliance with the Bankruptcy Notice.  The applicant then sought review of the decision of the registrar by a judge of the Federal Magistrates Court. 

6. The review application was listed for hearing on 23 October 2007, when a judge of the Federal Magistrates Court adjourned the review application until 31 October 2007.  On that day, the proceeding was again adjourned on the applicant’s application and was listed for hearing on 5 November 2007.  On 5 November 2007, the Federal Magistrates Court ordered that the review application be dismissed with costs.  His Honour subsequently published his reasons for that decision.  On the same day, that is 5 November 2007, the applicant filed a notice of appeal to the Federal Court from the orders of the Federal Magistrates Court of 5 November 2007.  

7. The matter came before me on 30 November 2007 when counsel for the Bank pointed out that the orders refusing extension of time for compliance with the Bankruptcy Notice were interlocutory in nature and, therefore, leave to appeal was required.  I directed the applicant to file an application for leave to appeal, together with an affidavit complying with Order 52 Rule 4 of the Federal Court Rules, no later than 7 December 2007 and directed that the matter be listed for hearing today

8. No application or affidavit was filed.  However, when the matter was called on for hearing today, I extended time for filing an application for leave to appeal and granted leave to file an the application for leave to appeal.  The matter, therefore, proceeded today on the basis of an application for leave to appeal with the expectation that if leave were granted, the appeal would be heard today.

9. The applicant is an accountant and a tax agent.  However, he has no formal legal qualifications and is unrepresented by lawyers in this proceeding.  In those circumstances, he is at somewhat of a disadvantage.  Nevertheless, the applicant is quite articulate and appears to understand, quite well, many of the issues that are likely to be raised. 

10. Under s 41(6A) of the Bankruptcy Act 1966 (Cth) where, before the expiration of the time fixed for compliance with the requirements of a bankruptcy notice, proceedings to set aside a judgment or order in respect of which the bankruptcy notice was issued have been instituted by the debtor, the Court may extend the time for compliance with the bankruptcy notice. Under section 41(6C), where the Court is of the opinion that the proceedings to set aside the judgment or order have not been instituted bona fide or are not being prosecuted with due diligence, the Court must not extend the time for compliance with the bankruptcy notice.

11. It has not been suggested, on behalf of the Bank, that s 41(6C) should be applied in the present case.  I accept that a filing of notice of appeal from the orders of the Supreme Court of 29 August 2007 to the Court of Appeal constitutes a proceeding to set aside the judgment and orders of 29 August 2007.  However, the question of whether the time for compliance with the Bankruptcy Notice should be extended involves the exercise of discretion on the part of the Court.  That discretion would ordinarily be exercised by weighing in the balance the competing interests of the debtor and creditor.  A principal consideration in that balancing exercise is whether or not there are prospects of success in the proceedings to set aside the relevant judgment or order, in this case, the appeal to the Court of Appeal.

12. The applicant has a substantial difficulty with this appeal in that there was not put before either the registrar or the Federal Magistrates Court, full details of the contentions that the applicant wishes to raise in the Court of Appeal. As I have said, the President of the Court of Appeal declined to grant a stay of the orders of 29 August 2007, although it is likely that if the matter came to this, there could be a stay at some later stage, at least of execution once the appeal is disposed of.  The applicant has not completed his preparation for the filing of a notice of appeal.  The procedure in the Supreme Court permits the filing of a notice which, in effect, stops time running.  The final formulation of the grounds of appeal is then carried out over such period as the Court permits.

13. In the present case, the Court of Appeal has directed that the notice of appeal and all grounds to be relied upon, be finalised no later than 25 December 2007.  At the time of the hearing before the registrar in the Federal Magistrates Court, the applicant had not progressed sufficiently far for him to be prepared to make available to the Bank or its legal advisors, his proposed detailed grounds of appeal.  While it appears that he informally proffered to the judge of the Federal Magistrates Court the current state of his draft, he declined to make that draft available to counsel for the Bank.  Accordingly, it is clear that that material was not formally before the Federal Magistrates Court when the review application was heard.

14. In the course of the hearing today, the applicant indicated his difficulty, saying that he had not understood that the material, if it was to be relied upon, should have been provided to the Bank.  It is curious that he would not have understood that both parties must have access to material that is put before the Court.  Be that as it may, I invited him to indicate the further evidence that he would wish to put before this Court on the hearing of the appeal from the orders of the Federal Magistrates Court. 

15. The reasons for judgment of the Supreme Court run to some 140-odd pages.  The matter was clearly of some complexity.  Those reasons are presently before the court and I assume were before the Federal Magistrates Court.

16. The applicant provided two pages from his proposed notice of appeal and indicated that there were six grounds which he considered constituted the strongest grounds of his appeal.  The extract from the grounds of appeal might be summarized as follows:

    (1)The Supreme Court erred in saying that the applicant certified key facts concerning the operations, receivables and tax position of the borrowing company.

    (2)The Supreme Court erred in saying that the applicant wrote letters of certification.

    (3)The Supreme Court erred in saying that the applicant prepared schedules detailing the receivables of the borrowing company.

    (4)The Supreme Court erred in saying that the applicant or his company prepared schedules detailing the receivables of the borrowing company.

    (5)The Supreme Court erred in saying that the applicant certified key facts concerning the operations, receivables and tax position of the borrowing company.

    (6)The Supreme Court erred in saying that a letter, written by the applicant, provided independent corroboration as the borrowing company’s external accountant.

17. However, no further reasoning or argument was advanced by the applicant in support of those grounds.  Nevertheless, by way of indicating that the applicant considered that he had some prospects of success in the appeal, the applicant referred to an interlocutory judgment given by the Supreme Court of New South Wales on 1 July 2005 (Commonwealth Bank of Australia v Saleh [2005] NSWSC 681). In its reasons at [47], the Court relatively said as follows:

    “My conclusion, then, is that while there is a serious question to be tried as to whether the applicant did so participate, [in some fraudulent conspiracy], the evidence that he did so is not strong.  Moreover, there is only slight evidence that [the Bank] relied upon the representations contained in the correspondence from [the applicant].  Thus, while there is a serious question to be tried on both of the causes of action, which [the Bank] has foreshadowed, on the present material, I would not characterise [the Bank’s] case as a strong one.”

18. Nevertheless, unfortunately for the applicant, the interlocutory judgment indicates that there was a serious question to be tried as to those matters.  The material that is presently before me does not enable me to form the view that there is a reasonable prospect of success in the appeal or that the appeal is reasonably arguable.  That, however, is not to express any view one way or the other as to whether or not the appeal has any prospects of success.  It is simply that I do not have material before me on which to base a judgment.  More importantly, there was no material before either the registrar or the Federal Magistrates Court upon which any judgment as to those matters could have been made. 

19. In all of the circumstances, I am not persuaded on the material before me that the applicant has a reasonably arguable case in support of his prospective appeal from the orders of the Federal Magistrates Court.  In my view, therefore, there would be no utility in granting leave to appeal since, if leave were granted, the appeal would have to be dismissed.

20. I am mindful of the possible detriment to the applicant by reason of his having committed an act of bankruptcy by reason of non-compliance with the Bankruptcy Notice.  Indeed, a petition has already been filed in the Federal Magistrates Court although it was adjourned to 4 February 2008 pending the determination of this appeal.

21. It would, of course, be open to the applicant to seek either the adjournment or dismissal of the petition under s 52(2)(b) of the Act, on the basis that he has reasonable prospects of success, or he may even be able to persuade the Court of good prospects of success in the appeal, and that therefore, the petition should either be adjourned or dismissed.  The adjournment, of course, would only be pending the hearing of the appeal. 

22. If the applicant puts himself in a position where he can advance cogent arguments to the Federal Magistrates Court on 4 February 2008 in support of his appeal and provides appropriate assurances that he intends to prosecute the appeal with all due diligence, the Federal Magistrates Court may be disposed to adjourn the hearing of the petition pending the hearing of the appeal to the Court of Appeal.  It may also be necessary for the applicant to proffer appropriate undertakings concerning non-disposition of property, as a term of any adjournment.  Those, of course, are matters that would have to be weighed in the balance by the Federal Magistrates Court in determining whether or not to adjourn the hearing of the petition pending the resolution of the appeal to the Court of Appeal.

23. However, in all of the circumstances, I consider that the application for leave to appeal should be dismissed.

I certify that the preceding twenty-three (23) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Emmett.

Associate:

Dated:       14 January 2008

The Applicant appeared in person.
Counsel for the Respondent:	Mr A R Zahra
Solicitor for the Respondent:	Henry Davis York
Date of Hearing:	13 December 2007
Date of Judgment:	13 December 2007