Re Bennett, D. also known as Drago Komljenovic Ex Parte Deputy Commissioner of Taxation of the Commonwealth of Australia

[1993] FCA 416

4 lb 1943

JUDGMENT No. .m ,.I. 1 I I I I I I I I I I I I W I I I I I H I I .

IN THE FEDERAL COURT OF AUSTRALIA

EXERCISING FEDERAL JURISDICTION NO P 1314 of 1992

BANKRUPTCY DISTRICT OF THE STATE OF VICTORIA

RE:  DAVID BENNETT

ALSO KNOWN AS DRAG0 KOMLJENOVIC

Bankrupt

EX PARTE: DEPUTY COMMISSIONER OF TAXATION

OF THE COMMONWEALTH OF AUSTRALIA .L. :

Applicant L

COURT :  NORTHROP J

PLACE: MELBOURNE

M:  27 MAY 1993 24 ]UN 1993

MERAL WURT 0'

AUSTRALIA

EX TEMPORE REASONS FOR JUDGMENT

On 21 April 1993 the Court, constituted by

adjourned the hearing of a petition for the sequestration of
the estate of David Bennett, also known as Drago Komljenovic,
to 6 October 1993. The petition had been presented on 30

October 1992. The petitioner was the Deputy Commissioner of

Taxation of the Commonwealth of Australia. Initially the

petition had come on for hearing on 8 February 1993 but was

adjourned to 24 February 1993. On that occasion counsel

appeared for the Attorney-General of the State of Victoria and

sought an adjournment of the hearing of the petition. The

Court reserved its decision. On 21 April 1993 the Court made an order granting the adjournment and published its reason for so doing.

It is to be noted that the period of time specified in subsection 52(4) of the Bankru~tcv	Act 1966 does not expire
until 29 October 1993.	There is power to extend that period
for a further 12 months.

The Commissioner of Taxation, by motion, is now seeking

leave to appeal against the order made on 21 April 1993
adjourning the hearing of the petition. There is no doubt
that the adjournment order is an interlocutory order. Under
subsection 24(1A) of the Federal Court of Australia Act 1976
an appeal from an interlocutory order can be brought only by
leave of the Court. Order 52 r10 of the Federal Court Rules
makes provisions for the seeking of leave to appeal from

interlocutory judgments of the Federal Court. Under subrule

(l), an application for leave to appeal from an interlocutory

judgment of the Court may be made orally to the Judge who has

pronounced the judgment at the time of its pronouncement.

That was not done here. Subrule (2) provides:

"(2) (a) Where an application has not been made in

accordance with subrule (l), an application may be made by motion on notice to a single

Judge or to a Full Court, and the provisions of

Order 19 shall apply.

(b) The notice shall be filed and served within

seven days from the pronouncement of the

interlocutory judgment from which leave to
appeal is sought or within such further time as
the Court or a Judge may allow."

Order 19 merely deals with the matter of motions.

There are always problems associated with an application for leave to appeal being made before a single Judge. The

difficulties arise from the fact that the single Judge is in
no position to consider the merits of the judgment from which

leave is being sought to appeal. The Judge is placed in the

difficult position of being asked to say whether what was done

was in fact right or wrong, in error or not. Normally all

that the Judge can do is to consider whether there is, in reality, a real and genuine issue involved which requires consideration by a Full Court.

The essence of the exercise of the discretion to give

leave to appeal has been stated clearly by the High Court of
Australia in Adam P. Brown Male Fashions Ptv Limited v Phili~

Morris Inc (1981) 148 CLR 170 at 177:

"Nor is there any serious dispute between the parties
that appellate courts exercise particular caution in
reviewing decision pertaining to practice and procedure.
Counsel for Brown urged that specific cumulative bars
operate to guide appellate courts in the discharge of
that task. Not only must there be error of principle,
but the decision appealed from must work a substantial
injustice to one of the parties. The opposing view is

that such criteria are to be expressed disjunctively.

Cases can be cited in support of both views:	for
example, on the one hand, Niemann v.	Elec t ron ic

I n d u s t r i e s L t d . [l9781 V . R . 431, at p.440; on the other

hand, D e Mestre v. A.D. Hunter P t y . L t d . (1952) 77 W.N.

(N.S.W.) 143, at p.146. For ourselves, we believe it to

be unnecessary and indeed unwise to lay down rigid and
exhaustive criteria. The circumstances of different
cases are infinitely various. We would merely repeat,

with the approval, the oft-cited statement of Sir

Frederick Jordan in In re t h e W i l l o f F . B . G i l b e r t ( d e c . )

(1946) 46 S . R . (N.S.W.) 318, at p.323:

" ... I am of opinion that, ... there is a material

difference between an exercise of discretion on a point of practice or procedure and an exercise of discretion which determines substantive rights. In

the former class of case, if a tight rein were not
kept upon interference with the orders of Judges of
first instance, the result would be disastrous to
the proper administration of justice. The disposal
of cases could be delayed interminably, and costs
heaped up indefinitely, if a litigant with a long
purse or a litigious disposition could, at will, in
effect transfer all exercises of discretion in
interlocutory applications from a Judge in Chambers
to a Court of Appeal."

See also, Brambles Holdings Ltd. v. Trade Practices

Commission (1979) 40 F.L.R. 364, at p.365; 28 A.L.R. 191,

at p.193; Dougherty v. Chandler (1946) 46 S.R.	(N.S.W.)
370, at p.374.	It is safe to say that the question of

injustice flowing from the order appealed from will
generally be a relevant and necessary consideration."

The important aspect of this extract is the reference to,

and endorsement of what was said by, Sir Frederick Jordan in
Re Will of F.B. Gilbert where attention is drawn to the
difference between matters of practice or procedure and
matters which affect substantive rights. The judgment from
which leave to appeal is being sought in the present case

relates to a matter of practice. -

In the present case his Honour, when granting the

adjournment, said that there was no prejudice caused to the
petitioning creditor by the granting of the adjournment.

Nothing has been put to me to suggest that the petitioning

creditor will suffer any disadvantage or prejudice by the

adjournment. In these circumstances great care must be given

to the question of whether leave should be given in a matter
which is solely related to practice.

In substance the case for the petitioning creditor for leave to appeal is based upon the provisions of s52 of the

Bankru~tcv Act. Under subsection 52(1) a number of matters

are required to be proved at the hearing of the petition.
Subsection 52(1) then provides that if the Court is satisfied
with the proof of those matters, it may make a sequestration
order against the estate of the debtor.

Subsection 52(2) provides in substance that if the Court is not satisfied with any of those matters or is satisfied by the debtor that he is able to pay his debts or for other

sufficient cause a sequestration order ought not be made, it

may dismiss the petition.

It is clear, and I accept, that on proof of the matters

referred to in subsection 52(1), prima facie, a petitioning
creditor is entitled to a sequestration order being made.

There are a number of authorities which state that

proposition. The case of Re Field v Commercial Bankina CO of

Svdnev Ltd (1978) 22 ALR 403 per Sweeney J at 411 is a good illustration of this principle.

The real problem in this case is that no question of

substantive law was determined by the trial Judge. To some

extent this, essentially, is the basis of the complaint by the

petitioning creditor. The Commissioner desires to have the

substantive matter determined.

In order to understand the substantive matter reference

should be made to the earlier history of this matter. The

debtor had been charged with and convicted of drug trafficking offences. On 18 August 1992 the petitioning creditor obtained judgment in the sum of approximately $435,000 against the

debtor in the Supreme Court of Victoria. On 9 October 1992

the debtor was convicted of two counts of trafficking, in

prohibited drugs. One of those offences was trafficking in a

commercial quantity. On 14 October 1992 the petitioning

creditor caused a bankruptcy notice to be issued. This was

served on the debtor on the following day. On 19 October 1992

an application by the Director of Public Prosecutions
(Victoria) was made under the Crimes (Confiscation of Profits1

1986 (Vic) to the County Court. The application sought orders imposing what is described as a pecuniary penalty on the debtor taking into account the proceeds of sale of the

drugs. There is a further provision in the same Act for the
making of orders for the forfeiture of property of the
convicted person. The application for the orders for
forfeiture under the Victorian Act were opposed by the Deputy
Commissioner of Taxation on the basis that the claim raised
constitutional issues. The issue was whether there was any
conflict between the provisions of the Bankruptcy Act and the
State Act in relation to the forfeiture of the property of the

convicted person. On 20 October 1992, in the Supreme Court of

Victoria, an order was made restraining the disposition of 10

properties, being the subject of the application by the
Victorian Director of Public Prosecutions. On 30 October
1992, as a matter of extreme urgency the petitioning creditor

applied to the Federal Court for an order under subsection

50(1) of the Bankru~tcv Act, that the Official Trustee take

control of the property of the debtor, the debtor in this case being the judgment debtor. The order was made and the reasons

for that order were given at that time. It is fair to say

that one of the prime submissions made on behalf of the Deputy
Commissioner of Taxation for the making of the order was that
it would give the Commissioner standing to appear in the
proceedings in the Victorian court.

On the same day the petition for a sequestration order

was presented. Also, on the same day, the restraining orders
made by the Supreme Court were extended. On 5 November 1992
the Supreme Court extended the stay of the restraining orders

and referred the matters to the County Court. On 9 November

1992, applications by the Director of Public Prosecutions for forfeiture and the pecuniary penalty in the County Court were adjourned to 18 January 1993 on the basis that there would be no more adjournments. On 18 January 1993 the Official Trustee

raised new constitutional issues regarding the conflict

between the Bankru~tcv Act and the Victorian legislation. The

matter was adjourned indefinitely. On 23 February 1993 the
Official Trustee commenced proceedings in the High Court

against the Victorian Director of Public Prosecutions for a

declaration that no forfeiture order could be made.	That
matter was adjourned.

At the hearing of the petition before Jenkinson J a

number of legal issues were raised as to the proper

construction and effect of sections of the Bankru~tcv Act, and

in particular subsections 82(1) and (3A) relating to provable

debts. In reality, those issues are not relevant to the

making of a sequestration order. They are matters which arise

after a sequestration order has been made because, under s58

of the Bankru~tcv Act, upon a sequestration order being made,

the property of the debtor normally vests in the Official

Trustee or the Trustee in Bankruptcy. There is a procedure

whereby creditors are able to prove debts in the bankruptcy.
The Trustee in Bankruptcy is the person who primarily decides
whether those debts should be accepted or not. Any question
of whether a pecuniary penalty order was a provable debt or

not would arise at that stage, not at the hearing of the

petition.	Any decision of the Trustee could be reviewed by
the Court.

It was argued also that the Attorney-General had no

standing to appear to seek the adjournment and that the trial Judge did not determine that issue. In cases of this kind it is not always easy-to determine who has the right to appear at

the hearing of the petition. The petitioning creditor and the

debtor quite clearly have the right. The standing of other

persons is not so clear cut. In the present case, the

Attorney-General was not a creditor but there was a long history between the petitioning creditor and the Attorney-

General in relation to this whole issue of pecuniary penalties

and also the forfeiture of the property of the deceased.
There is a suggestion, whether right or not I do not know and
do not propose to consider, that the decision of the High
Court in the proceedings there pending could have an effect on

the orders made by the County Court in relation to a pecuniary

penalty. In any event, particularly having regard to the

basis of the application for the orders made on 30 October
1992, it seems unreal to say that the Attorney-General should
not be heard at the hearing of the petition to seek the
adjournment.

All these matters, really, are peripheral to the real

issue between the parties. That issue is the question of what debts are provable in bankruptcy and matters of that kind. On the hearing of any appeal, no question of substantive law

would be raised. The only issue to be determined would be

whether the adjournment should have been granted or not. An
adjournment is a matter of practice. It is a matter in which
a Full Court is loath to intervene. In these circumstances I
see no basis at all for any successful argument that leave to
appeal should be granted. There is no reason given of any
substance as to why the appeal should succeed. The matter
will come on again in October of this year. It may be
necessary at some stage for the Court to determine the

petition. It would be desirable, as the trial Judge said, to

have at least the decision of the High Court before that
occurs. In all the circumstances of the case, in my opinion,
this is not a case where the petitioning creditor should have

leave to appeal. Accordingly the motion is refused.

Orders accordingly.

I certify that this and the preceding eight ( 8 ) pages are a
true copy of the Ex Tempore Reasons for Judgment of the

Honourable Mr Justice R.M. Northrop.

Associate: @2md-(m

Date: 17 mmlqq3