Re Collie, I.D.S Ex Parte Forsyth, N

[1993] FCA 636

6 3 6     1 4 3

JUDGMENT NO. ........ ..... m . . ~IIW-*-

IN THE FEDERAL COURT OF AUSTRALIA	)
1
GENERAL DIVISION	1 No. VP 400 of 1992
j
BANKRUPTCY DISTRICT OF	)
THE STATE OF VICTORIA	)
B E T W E E N :

RE: I D S COLLIE

Judgment Debtor

EX PARTE: N FORSYTH

Judgment Creditor

JUDGE :	Heerey J
m:	1 September 1993
PLACE :	Melbourne  HE^^^^^^

REASONS FOR JUDGMENT '5 SEP 1993

FEOERA~ COURT nc

The debtor seeks an adjournment of the hearing of the creditor's petition. The grounds for that application are based on a complex history of civil litigation between the parties and also criminal proceedings which led to that civil litigation.

The petitioning creditor is a Queen's Counsel practising at the Victorian Bar who had advised the debtor in relation to tax matters. The debtor was prosecuted in relation to those matters, convicted and sentenced to imprisonment. The debtor sued the petitioning creditor alleging negligent advice.

bankruptcy notice was issued on 3 September 1991 and the	$113,307.28. It is that debt which founds the petition. The
petition on 15 April 1992.
In the meantime the debtor had appealed against Gobbo 3's judgment by notice dated 15 February 1991. The petitioning creditor sought an order for security for costs on that appeal. An order was made that the debtor pay $20,000 security and that order has been complied with. The parties gave an estimate to the Supreme Court of a hearing of four days for the appeal. It was set down for hearing on 2 February 1993. In late January 1993, the appeal was by consent taken out of the list. The reason for that is connected with the progress of the criminal proceedings.
I was told by counsel for the debtor that the debtor claims that material which emerged in the course of the hearing before Gobbo J raised questions as to whether the debtor should have been convicted. The debtor brought a petition for mercy which was referred to the Victorian Court of Criminal
Appeal and dismissed on 18 December 1992, that is to say of course before the civil appeal was taken out of the list. But
in the meantime the debtor had filed an application for special leave to appeal to the High Court in the criminal proceedings.
The special leave application will apparently be heard by the High Court in October or December this year. The reason for that delay is said to be that the debtor moved to live in Queensland, retained a Queensland solicitor who in turn briefed senior counsel from Sydney. Counsel asked for the formulation of certain material about the issue of intent as raised in the criminal proceedings. This involved the Queensland instructing solicitor in very extensive researches into the previous history of the criminal proceedings.
What is of more direct relevance to the present application for adjournment is the question of what happened to the civil appeal to the Appeal Division of the Supreme Court of Victoria in the meantime. On 25 January 1993 Messrs Godfrey Stewart, the solicitors for the debtor, wrote to the solicitors for the petitioning creditor, Messrs Ebsworth and Ebsworth, confirming that Master Wheeler had ordered by consent that the matter be removed from the Full Court list on 2 February and referred back to the Listing Master for refixing.
The petitioning creditor had intended that the creditor's petition would be adjourned until next year and brought an
April the District Registrar declined to make such an order. application on before the District Registrar. However on 7
The position is recorded in a letter dated 27 April which Ebsworth and Ebsworth wrote to the debtor himself in the following terms:

That trial was heard before Gobbo J in the Supreme Court over a period of ten days. On 31 January 1991 his Honour pronounced judgment for the defendant with costs. On 14 August 1991 those costs were taxed in the amount of

"Registrar Seccombe on 7 April 1993 adjourned the hearing of the creditor's petition to 1 September 1993. In addition he extended the life of the petition to 29 October 1993. Attached is a copy of the order of Registrar Seccombe dated 7 April 1993. The Registrar refused to extend the life of the petition beyond 29 October 1993 and indicated that he expected N Forsyth to proceed with his application on 1 September 1993. We hereby give you notice that we lntend to proceed with the hearing of the petition on 1 September 1993."

On 29 April Ebsworth and Ebsworth sent a fax to Godfrey
Stewart in these terms:

"We would be grateful if you would let us know when the High Court is likely to hear your client's application for special leave to appeal. Our client will not agree to the hearing of the appeal from his Honour Mr Justice Gobbo ' s judgment being deferred indefinitely. The matter is likely to be called over on Monday of next week and we would be grateful to hear from you before then."

On the same day Godfrey Stewart replied by fax stating that they had been instructed that the application for special leave would be likely to be heard during July. They noted that the application was in the High Court's B list and as such the merits of the application would be heard at the same time as the application for special leave. They stated that no formal date has as yet been granted by the High Court and that they would advise of such date as soon as it is to hand.

On 19 August Ebsworth and Ebsworth again wrote to the debtor's	Melbourne solicitors noting the application of the debtor for
the adjournment of the application of the bankruptcy petition on 1 September, and indicating that the debtor would on that date apply for a sequestration order and would oppose any application for adjournment.
The principle to be applied when an adjournment of a bankruptcy petition is sought because of the existence of a pending appeal against the judgment founding the petition is laid down in decisions of the Full Court of this Court. In Ahern v Deputy Commissioner of Taxation (Qld) (1987) 76 ALR
137 at 148, the Full Court said:

"It is also well established that in general a court exercising jurisdiction in bankruptcy should not proceed to sequestrate the estate of a debtor where an appeal is pending against the judgment relied on as the foundation of the bankruptcy proceedings, provided that the appeal is based on genuine and arguable grounds: Re Rhodes; Ex parte Hayworth

(1884) 14 QBD 49; Bayne v Baillieu (1975) CLR 64 and

Re Verma; Ex parte Deputy Commissioner of Taxation

(1985) 4 FCR 1981.

These cases rest on the broad principle that before a person can be made bankrupt the court must be

satisfied that the debt on which the petitioning

creditor relies is due by the debtor, and if any genuine dispute exists as to the liability of the debtor to the petitioning creditor it ought to be investigated before he is made bankrupt. A bankruptcy is not mere inter partes litigation, it involves change of status and has quasi penal consequences."

Another Full Court applied that principle in Adamopolous v

Olympic Airways SA (1990) 95 ALR 525.

me on which I could say that the appeal was not based on	In the present case there is no basis on the material before
genuine and arguable grounds. The fact that an order for security for costs has been complied with is some indication of at least the fact that it is being proceeded with in good faith, in the sense that the debtor has some belief that it is arguable.
As to the question of whether the appeal is being progressed with reasonable diligence, it seems to me one has to approach this case from the starting point that both parties agreed to the matter being taken out of the list for hear~ng in February this year. Although it was said in the application before me that there was no logical connection between the civil appeal and the application for special leave, the fact is that the parties themselves seem to have treated the existence of the special leave application as a reason for not pursuing the civil appeal in the ordinary way.
The petitioning creditor did not thereafter really resile from that stand, and no steps were taken by the petitioning creditor to have the appeal relisted for hearing; nor did the correspondence which passed after the District Registrar had made the order of 7 April put the onus clearly on the debtor to get the appeal back into the list.
I think therefore, in all the circumstances, it would not be
consistent with the principle laid down in the Full Court authorities to which I have referred that I should proceed
with the hearing of the petition today.
Nevertheless it is highly desirable that this petition, which already has been in existence for much longer than is usual or desirable, be determined. While I accept, as I say, the existence of a civil appeal against the judgment itself as bearing on the question of the adjournment of the petition, I am so far not persuaded that the criminal proceedings have anything like the same relevance, if indeed they are relevant at all.
The practical solution, I think, is to extend the life of the petition until the maximum date permissible by the statute which I am told is 15 April 1994. I will adjourn the hearing of the creditor's petition to a date to be fixed in March 1994.
I should add that the debtor is now on notice that if no steps are taken to relist the civil appeal in the meantime, the judge hearing the petition may take a different view as to whether the petition should then proceed.
I will order the petitioning creditor's costs be reserved.

I certify that this and the preceding six (6) pages are a true copy of the reasons for judgment of his Honour Mr Justice Heerey.

D ed: 1 Sep mber 1993

kcL.

Counsel for the judgment debtor:	Mr P K Searle
Solicitor for the judgment	Godfrey Stewart
debtor:
Counsel for the judgment	Mr S Gardiner
creditor:
Solicitor for the judgment	Ebsworth & Ebsworth
creditor:
Date of hearing:	1 September 1993