Re Sheldon, W.V. v Ex parte Sun Alliance Australia Ltd

[1989] FCA 373

Re: WINIFRED VERA SHELDON
Ex parte: SUN ALLIANCE AUSTRALIA LIMITED
No. 462 of 1989
FED No. 373
Practice and Procedure

COURT

IN THE FEDERAL COURT OF AUSTRALIA

SOUTH AUSTRALIA DISTRICT REGISTRY
GENERAL DIVISION
BANKRUPTCY DISTRICT OF THE STATE OF SOUTH AUSTRALIA
Fisher J.(1)

CATCHWORDS

Practice and Procedure - bankruptcy proceedings - creditor's petition - adjournment pending application for special leave to appeal to High Court - judgment in Supreme Court confirmed by Full Court - primarily a question of fact - suspicion that judgment debtor had disposed of assets - discretion regarding adjournment.

HEARING

ADELAIDE

#DATE 17:7:1989

Judgment Debtor: Mrs. Sheldon in person.

Solicitors for Judgment Creditor: Mr. J.M. Wilkinson with

Mr. J.P. De Ruvo

Ross & McCarthy.

ORDER

The judgment debtor's application for an adjournment of the hearing of the judgment creditor's petition be dismissed.

Note: Settlement and entry of order is dealt with in Bankruptcy Rule 124.

JUDGE1

In this matter the judgment debtor Winifred Vera Sheldon ("Mrs. Sheldon") is applying for a creditor's petition to be adjourned so that she may apply for special leave from the High Court to appeal against the decision establishing the judgment debt. The adjournment is opposed by the judgment creditor Sun Alliance Australia Limited ("Sun Alliance"). The judgment debt arises from a judgment of Mr. Justice von Doussa then of the Supreme Court of South Australia dismissing proceedings by Mrs. Sheldon against Sun Alliance with costs. The costs were agreed at the sum of $220,000 and this amount is the judgment debt. A bankruptcy notice was issued by the Registrar of this Court on 1 March 1989 and it is not disputed that by failing to comply with this notice Mrs. Sheldon committed an act of bankruptcy on 21 March 1989. A creditor's petition was presented on 24 April 1989 for hearing on 29 May 1989.

1. At the various hearings before the Court prior to today Mrs. Sheldon has been represented by differing solicitors and counsel. However on Friday last to which date that matter was adjourned to enable Mrs. Sheldon to be cross-examined on an affidavit which she had filed detailing her assets she was no longer represented by either solicitor or counsel. She was also unrepresented when the hearing resumed this day.

2. As already mentioned Mrs. Sheldon seeks an adjournment of the hearing of the creditor's petition so that she may apply for special leave to appeal to the High Court against a judgment of the Full Court of this State dismissing her appeal against the order of von Doussa J. It appears that this application for special leave cannot be heard by the High Court prior to 21 August 1989. Mrs. Sheldon has also applied for legal assistance to prosecute her appeal.

3. The Full Court of this Court stated Mrs. Sheldon's case at its highest when it said in Ahern v Deputy Commissioner of Taxation (1987) 76 ALR 137 at p 148:
   

"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 Heyworth (1884) 14 QBD 49; Bayne v Baillieu (1907) 5 CLR 64 and Re Verma: Ex parte Deputy Commissioner of Taxation (1985) 4 FCR181. 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 that 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. Bankruptcy is not mere inter partes litigation. It involves change of status and has quasi-penal consequences."

1. There are however a number of grounds upon which it is, in my opinion, not appropriate in this matter that in the exercise of my discretion I apply this reasoning of the Full Court. Mrs. Sheldon made claims against Sun Alliance before von Doussa J. under a House and Contents policy of assurance for damage caused by a fire in 1985. It was alleged by Sun Alliance that Mrs. Sheldon and her family were guilty of wilfully setting fire to the house and in support of this allegation evidence was tendered of 8 fires between 1962 and 1980 at premises occupied by Mrs. Sheldon and her husband. In reliance upon certain of this evidence von Doussa J. found that the 1985 fire was set as part of a plan to burn the house and claim insurance. As a result of this and a finding of non disclosure he dismissed the claim in a judgment which in typescript reasons extended over 109 pages and after an extremely lengthy hearing. Mrs. Sheldon appealed to the Full Court which, in reasons of varying length delivered by each member thereof, unanimously dismissed the appeal. It appears that the Full Court was of opinion that if any error of law was made by the trial judge it was an error which had consequence favourable to Mrs. Sheldon. It was suggested that he might have imposed an unnecessarily strict test in determining the extent to which he could make use of the evidence of earlier fires.

2. These circumstances do not necessarily determine the matter before me against Mrs. Sheldon. But they are to be taken into account in the exercise of my discretion in conjunction with the other evidence.

3. In Ahern's case the circumstances were very different. There had at no time been a hearing on the merits of the applicant's case, the Supreme Court not having heard his tax appeals. The Full Federal Court in that matter was in particular of the opinion that he had been deprived of an opportunity to present his case in support of an adjournment pending the outcome of the Supreme Court tax appeals. In this matter Mrs. Sheldon has had to date a hearing on two occasions before four judges who have all decided against her on matters which are essentially questions of fact. Her application for an adjournment in this matter has been before the Court on at least 5 occasions. The circumstance that she has been found to have conspired with others to achieve an illegal result is not an irrelevant matter when considering whether to accept her contention that she has virtually no assets and that a sequestration order would deny her the opportunity to pursue her application for leave to appeal. I also note that if Mrs. Sheldon obtains leave to appeal and her appeal succeeds she can obtain an annulment of a sequestration order. If, as she deposes, she has only the assets referred to in her affidavit, her bankruptcy will have little impact other than she will have status of a bankrupt prior to annulment.

4. As I have already indicated Mrs. Sheldon swore an affidavit deposing in the following terms to her only assets, namely that they were:
   

"a) approximately $500.00 in a savings bank account. b) personal and household items. c) furniture.

d) jewellery to the value of approximately $2,000.00. I work part-time as a clerk and earn approximately $93.00 per week nett."

1. However the evidence before me establishes the probability of very different circumstances and her cross-examination leaves me with no confidence that I can accept her evidence. The following matters were put to Mrs. Sheldon in respect of which she was unable to satisfy me that she had made adequate disclosure of her circumstances or any satisfactory explanation of her dealings with her assets. She was unable to explain the discrepancy between her affidavit filed in this Court and her statement in an affidavit filed in March of this year that she had assets totalling $20,000. There was evidence in this Court that she had sold a dwellinghouse in January of this year for $480,000, all of which she said was taken by the A.N.Z. Bank as mortgagee and applied to satisfy the Bank's security and to pay legal costs to her solicitors. However the mortgage which she had granted was as collateral security for advances to Phoenix Nominees Pty. Ltd. as trustee for the Sheldon Family Trust which trades as North Adelaide Health & Fitness. Mrs. Sheldon acknowledged that she was a beneficiary under that trust. She also conceded that she had earlier sold a property at Moonta and that she had transferred shares which she had in two family companies to her son and daughter. She also mentioned her release of certain loan accounts in the companies on 12 May 1987. Furthermore no information was forthcoming from her concerning the very substantial amount of interest income which she conceded she received in 1986. All of these matters prompt one to feel that the sooner the underlying transactions are investigated the better, particularly as Mrs. Sheldon continually reiterates that she does not remember relevant details.

2. Throughout her cross-examination Mrs. Sheldon was extremely vague in her evidence, claiming that she could not remember the various transactions which were put to her and that her solicitors had not warned her that she would be cross-examined on these or any other matters. Because of this the matter was adjourned to enable her to obtain any evidence or documents which might be of some greater assistance to the Court and generally to refresh her memory.

3. Today she was permitted to give her evidence on the particular topics by way of a statement which she read to the Court. However the matters which she put forward did not assist to elucidate or explain the true position on these topics.

4. The upshot is that I am not inclined to exercise my discretion and to grant the adjournment sought. I am extremely doubtful whether it can be said that her efforts to appeal are genuine and not merely an attempt to obtain time. Moreover being essentially questions of fact I doubt whether she will gain leave to appeal and there has been nothing put to me to satisfy me that her grounds are arguable. All submissions were to the contrary. Furthermore there is much evidence to the effect that during the two proceedings in the Supreme Court and in particular at about the time the extent of her liability for costs was quantified Mrs. Sheldon has been engaged in disposing herself of assets. Finally in seeking to persuade the Court to exercise its discretion in her favour, there is an obvious obligation on an applicant to be frank and to make full disclosure. I am far from satisfied that Mrs. Sheldon has complied with either of these obligations. I dismiss her application for an adjournment.