Re Simpson, J.C. v Ex parte Stevenson, J

[1985] FCA 423

Re: JOHN CAMERON SIMPSON
Ex parte: JILL STEVENSON (1985) 7 FCR 126
Nos. P291 of 1985 and B4887 of 1984
Bankruptcy - Appeal

COURT

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY
ON APPEAL FROM THE FEDERAL COURT
GENERAL DIVISION BANKRUPTCY DISTRICT
OF THE STATE OF NEW SOUTH WALES
AND THE AUSTRALIAN CAPITAL TERRITORY
Morling J.(1)

CATCHWORDS

Bankruptcy - petition - debt paid - amendment of petition - discretion - whether discretion wrongly exercised.

Practice and procedure - interlocutory order - application for leave to appeal - withdrawal of application - whether leave of Court required.

Bankruptcy Act 1966, s.33(1)(b)

Federal Court Rules, , Order 22, R.2

Appeal - Application for leave - Application made to a judge of the court - Whether applicant may discontinue without leave.

HEADNOTE

An applicant for leave to appeal whose application is being heard by a judge of the court may discontinue the application at any time before judgment without leave.

HEARING

Sydney, 1985, August 30. #DATE 30:8:1985
APPLICATION

Application for leave to appeal.

R V Gonda, for the applicant.

Solicitors for the applicant: McDonell Morgan Milne & Sailer.

GFV

JUDGE1

This is an application for an order that the applicant John Cameron Simpson ("the debtor") be granted leave to appeal from an order made on 18 June 1985 by Neaves J. sitting in bankruptcy.

1. His Honour was hearing a petition for the sequest ration of the debtor's estate. The petition was based upon the debtor's non-compliance with the requirements of a bankruptcy notice. At the time the petition came before Neaves J. the debtor had paid the amount referred to in the notice. However, according to the petitioning creditor, the debtor was indebted to her for another debt for a sum larger than that referred to in the bankruptcy notice. Accordingly, she sought leave to amend her petition so as to substitute the larger debt for that shown in the petition. After hearing argument Neaves J. acceded to the application and granted leave to amend.

2. The debtor seeks leave to appeal from Neaves J's order. Since the order was interlocutory, the leave of the Court or a judge is required - Federal Court of Australia Act 1976, s.24(1A). On the hearing of the application counsel for the debtor conceded that s.33(1)(b) of the Bankruptcy Act 1966 was an adequate source of power for the making of the order granting leave to amend the petition. It was contended that, although it lay within Neaves J's discretion to permit the amendment, he erroneously exercised his discretion and that the error was such as to warrant the Court setting his order aside.

3. In support of his submission counsel referred to a number of decisions in which it has been held that bankruptcy notices were invalid because of errors made in the statements of the amounts due by the debtors concerned. Those cases included Re McDonald; Ex parte Elder Smith Goldsbrough Mort Ltd. (1978) 32 FLR 11, Re Schierholter; Ex parte Geis (1978) 32 FLR 22 and Re Thomson; Ex parte Associated Midland Corporation Limited (1981) 53 FLR 97. In my opinion those cases do not bear upon the question which Neaves J. had to decide, i.e. whether or not, in the exercise of his discretion under s.33(1)(b) of the Bankruptcy Act he should permit the petitioning creditor to amend her petition.

4. I do not think that an appeal against Neaves J's order would have any real prospect of success. Counsel argued that the effect of the amendment was to expose the debtor to the risk of having his estate sequestrated when the debt referred to in the petition, prior to amendment, had been paid in full. This was said to be unfair to the debtor. As I understood the argument, the alleged unfairness to the debtor was the basis of the submsission that Neaves J. incorrectly exercised his discretion in favour of granting the amendment. I do not think there is any substance in his argument. If a debtor has debts other than the debt referred to in the petition, it is always competent for another creditor to seek to be substituted in place of the original petitioning creditor if he does not proceed with his petition. It is common that orders for substitution are made when the debt upon which the petition was originally presented is paid out in full. Failure to comply with a bankruptcy notice requiring payment of a judgment debt constitutes an act of bankruptcy notwithstanding subsequent payment of the judgment debt. Any creditor, able to prove another debt of sufficient amount, may prosecute a creditor's petition upon the original act of bankruptcy. See Re Hayes; Ex parte Thomas Borthwick & Sons (Australiasia) Limited (1970) 18 FLR 216 and Re Vella; Ex parte Seymour (1983) 67 FLR 287 at 292. The critical time for determining whether an act of bankruptcy has been committed is the date on which the period limited by the bankruptcy notice expires - see Re Hanly; Ex parte Flemington Central Spares Pty. Limited (1967) 10 FLR 378 at 381 and cases there cited. In these circumstances I do not understand how it can be said that there is any unfairness in the order granting leave to amend the petition. The order gave the petitioning creditor no greater advantage than is enjoyed by any other creditor who is substituted for an original petitioning creditor.

5. An appellate court will only interfere with the exercise of a trial judge's discretion if he is shown to have acted upon a wrong principle and will exercise particular caution in reviewing decisions pertaining to practice and procedure - Adam P. Brown Male Fashions Pty. Limited v. Phillip Morris Incorporated (1981) 35 ALR 625 at 629. In my opinion it has not been shown that Neaves J. acted upon any wrong principle in giving leave to the petitioning creditor to amend his petition.

6. At the conclusion of argument on the application I expressed the view to the debtor's counsel that his application was most unlikely to succeed. It became apparent to counsel during the course of argument that if the debtor were to fail to obtain leave to appeal in the application before me, he would be unable to apply to the Court for such leave - see Reid v Nairn (Full Court, 7 June 1985 - unreported). Facing the prospect, as he was, of almost certain failure in his application, the debtor then instructed his counsel to withdraw the application. Having regard to the manner in which the matter was argued, it seems likely that withdrawal of the current application would be followed by the making of a fresh application to another judge or to the Court for leave to appeal against the decision of Neaves J.

7. If I had a discretion to refuse leave to withdraw I would exercise the discretion against the debtor. It is undesirable that a party should be able to make an application to a judge, argue his case, and then withdraw his application when it becomes apparent that it is about to fail because the judge hearing it has formed a view unfavourable to his case. However, the question arises whether the debtor needs the leave of the court to discontinue his application. I do not think he does. Order 52, rule 19(1) of the Federal Court Rules provides that an appellant may at any time file and serve a notice of discontinuance of the appeal and upon its being filed the appeal shall be abandoned. However, there is no provision in Order 52 dealing with discontinuance of an application for leave to appeal.

8. Withdrawal and discontinuance of proceedings are dealt with in Order 22. Rule 2 of that order provides as follows:
   
   

"2. (1) Subject to sub-rule (2) a party making a claim for relief may discontinue a proceeding so far as concerns the whole or any part of any claim for relief made by him -

(a) at any time before the directions hearing appointed in the application - without the leave of the Court or the consent of any other party;

(b) where after the directions hearing the proceeding continues on pleadings but the pleadings are not closed - without the leave of the Court or the consent of any other party;

(c) where judgment has not been entered - with the consent of all the parties; and

(d) at any time - with the leave of the Court.

(2) A party who represents any other person in the proceeding shall not discontinue his claid for relief under sub-rule (1) without the leave of the Court."

1. In my opinion an applicant for leave to appeal against an interlocutory judgment is within the expression "a party making a claim for relief" as used in sub-rule (1). It is true that most claims for relief are made in what might be described as originating process. Nevertheless when an interlocutory order is made in proceedings brought against a respondent, and the respondent seeks leave to appeal against that order, he can fairly be said to make a claim for relief against the consequences of that order. If, having initiated such a claim for relief, he wishes not to pursue it, his right to discontinue is governed by rule 2. In the present case, there appears not to have been any formal directions hearing. However on 18 June 1985 Neaves J. made orders in accordance with short minutes prepared by the parties. Those minutes contain directions for the taking of further steps by the parties to ensure the petition will, in due time, be ready for hearing. The directions do not strictly provide for pleadings. Even if the directions be treated as requiring the further hearing to proceed on pleadings, it is plain that the pleadings are not closed. In these circumstances, I think the debtor is entitled under either rule 2(1)(a) or (b) to discontinue his application for leave to appeal without the leave of the Court.

2. The conclusion at which I have arrived is consonant with the evident policy of the Federal Court Rules reflected in Order 52 Rule 19(1) to permit an appellant to withdraw his appeal without leave. It would be strange if an applicant for leave to appeal did not have the right to withdraw his application without leave, but could withdraw his appeal without leave after he had obtained leave to appeal.

3. Order 22 rule 5(1) requires that a discontinuance under rule 2 shall be made by filing a notice stating the extent of the discontinuance. If the debtor files such a notice he will become liable to pay the petitioning creditor's costs unless the Court otherwise orders - Order 62, r.26. This is not a case in which the Court should otherwise order.