Sexton v Tagget - [2007] FMCA 1438

FEDERAL MAGISTRATES COURT OF AUSTRALIA

SEXTON v TAGGET

[2007] FMCA 1438

BANKRUPTCY – Creditor’s petition – applicant appealing against the judgment debt – appeal stayed – security for costs ordered – no other sufficient reason for the Court to refrain from making a sequestration order – stay on proceedings under the bankruptcy.

Bankruptcy Act 1966 (Cth), s.52
Bankruptcy Regulations

Adamopoulos & Anor v Olympic Airways SA & Ors (1990) 95 ALR 525
Ahern v Deputy Commissioner of Taxation (Qld) (1987) 76 ALR 137

Applicant:

CHARLENE SEXTON

Respondent:

GRAEME HENRY TAGGET

File Number:

SYG862 of 2007

Judgment of:

Driver FM

Hearing date:

20 August 2007

Delivered at:

Sydney

Delivered on:

20 August 2007

REPRESENTATION

Solicitors for the Applicant:

Mr James Stevens
Barwick Stevens Lawyers

Solicitors for the Respondent:

Mr Grant Butterfield
Marsdens Law Group

ORDERS

A sequestration order is made against the estate of Graeme Henry Tagget.
The petitioning creditor’s costs, including reserved costs, if any, be taxed and paid in accordance with the Bankruptcy Act 1966 (Cth).
The Court notes that, under the Bankruptcy Regulations, a copy of these orders is to be given to the Official Receiver in Sydney within two days after these orders are entered.
The Court notes that the date of the act of bankruptcy is 13 March 2007.
The Court notes that a consent to act as trustee has been signed by Michael Gregory Jones.
The Court directs that the consent to act as trustee be lodged with the Official Receiver in Sydney.
All proceedings under order 1 are stayed pursuant to s.52(3) of the Bankruptcy Act for a period of 21 days.
The Court directs that the orders made today are not to be entered until the end of the 21 day stay.

FEDERAL MAGISTRATES
COURT OF AUSTRALIA AT
SYDNEY

SYG862 of 2007

CHARLENE SEXTON

Applicant

And

GRAEME HENRY TAGGET

Respondent

REASONS FOR JUDGMENT

(revised from transcript)

I have before me a creditor's petition filed on 14 March 2007 seeking a sequestration order against the estate of Graeme Henry Tagget. The petitioning creditor relies upon a bankruptcy notice filed on 13 February 2007, an affidavit of service of the bankruptcy notice of Patrick F Murphy sworn on 20 February 2007, the creditor's petition itself, a part 2 affidavit verifying the creditor's petition sworn on 13 March 2007, an affidavit of service of the creditor's petition by Patrick F Murphy sworn on 4 April 2007 and two affidavits of Robert Daoud sworn 16 August 2007 and 20 August 2007. The first of those relates to developments in the NSW Court of Appeal in relation to an appeal against the judgment debt. The second of those is an affidavit of search and debt.
On 15 May 2007 the respondent filed a notice stating grounds of opposition to the petition. That relevantly states that the respondent has filed an appeal in the Supreme Court of New South Wales from the decision upon which the petition is based, a copy of which is annexed to a supporting affidavit by the debtor. In addition, Mr Tagget relied on two affidavits by Emma Macfarlane made on 15 and 17 August 2007 and filed on 16 and 20 August 2007. The first of those details the arguments in the appeal which is in the New South Wales Court of Appeal, and the second of those related to an application for an adjournment made today by the respondent’s solicitor.
This matter came before me from the registrar's list on 26 June 2007. At that time I listed the matter for hearing today and gave the parties the opportunity to file additional affidavit evidence. The solicitor for Mr Tagget expressed concern that I had accepted further evidence on behalf of the petitioning creditor today notwithstanding that the time for filing affidavits had expired and sought an adjournment so that the debtor would have a like opportunity. I do not think an adjournment for that purpose is necessary or warranted. The additional material received today is first an affidavit of search and debt which is a formal matter, and the other affidavit of Robert Daoud, although accompanied by extensive exhibits, in essence, bears on one issue, that is, orders made by the Court of Appeal on 23 July 2007 requiring the provision of security for costs and staying the appeal pending compliance with those orders. Those orders are a matter of public record.
Both parties took the opportunity to file written submissions and also made oral submissions. Mr Stevens, for the petitioning creditor, drew attention to a number of matters. The first of those is that in terms of s.52 of the Bankruptcy Act 1966 (Cth) (“the Bankruptcy Act”) the only apparent basis on which the petition is opposed is pursuant to s.52(2)(b), that for other sufficient cause a sequestration order ought not to be made. The debtor has not asserted that he is able to pay his debts. The petitioning creditor made submissions about the debtor's lack of solvency but, as solvency is not asserted, I place no weight on those. The issue is whether other sufficient cause has been advanced for the Court not to make a sequestration order or whether until that issue is resolved in the Court of Appeal an adjournment should be granted.
It is significant that the appeal in the Court of Appeal is against the judgment debt. In Ahern v Deputy Commissioner of Taxation (Qld) (1987) 76 ALR 137 at 148 Davies, Lockhart and Neaves JJ stated 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. The petitioning creditor asserts that the appeal is not based on genuine and arguable grounds, or that even if it is, it goes only to a minor issue of quantum.
The affidavit of Emma Macfarlane filed on 16 August 2007 deals with the arguments in the appeal. Annexed to that is an outline of the appellant's submissions in the Court of Appeal. I incorporate paras.4 through to 8 of that outline in this judgment:
His Honour determined that the respondent should be compensated for the full market value of the 35 cattle which had died or escaped while on agistment, plus the nett loss (market value less price obtained) from the sale of 166 cattle which otherwise would have been agisted but for the breach of the agistment contract[1]. This resulted in an award of $53,993.00 plus interest from 1 September, 2003 to 14 December, 2006 in the sum of $15,989.00
His Honour awarded the respondent the sum of $97,500.00 to compensate for increases in the value of the Dorrigo property since August 2003, plus interest from 1 July, 2006 to 14 December, 2006, being $4,015.00[2].
Finally, his Honour allowed the respondent compensation for lost cash flow which she would have made from August, 2003 to June, 2006, discounted by 25% for contingencies. This resulted in an award of $194,502.00, plus interest of $59,086.00[3].
On the basis of his Honour’s judgment, handed down on 8 December, 2006, Short Minutes of Order were agreed and final judgment in the sum of $426,540.00 was entered.[4]
[1] Judgment at Red Book 79
[2] Judgment at Red Book 80
[3] Judgment at Red book 80-81
[4] Judgment at Red Book 84
Grounds
The appellant has challenged his Honour’s judgment on the basis that his Honour erred in accepting evidence from the respondent which should have properly been given by an independent expert. That evidence entirely underpinned the assumptions relied upon by Dr Ferrier, the respondent’s expert accountant, in calculating the respondent’s damages on the capital loss associated with the destruction and sale of cattle and the quantification of lost cash flow.
It does appear that in substance the appellant's arguments in the Court of Appeal go to the admission of evidence having a bearing on the quantum of damages awarded by the District Court. Although I do not rule out the possibility that a rehearing may be ordered should the appeal succeed, it is equally possible that the only relief granted on a successful appeal would be a reduction in quantum of damages. In that event a debt of some description would remain.
The petitioning creditor also places emphasis on the fact that in giving judgment on 14 December 2005, Hungerford J refused an application for a stay. Mr Stevens took me to the decision of the Full Federal Court in Adamopoulos & Anor v Olympic Airways SA & Ors (1990) 95 ALR 525, in particular in the first paragraph of the judgment of Pincus J where his Honour stated:
It would be unfortunate if the general principle stated in Ahern's case were to be applied too rigidly, particularly where execution on the judgment appealed against has not been stayed, so that the judgment creditor may have the debtor's assets sold pending the appeal; there is no general rule that a money judgment is stayed pending appeal.
In this case of course a stay was refused by the Judge at first instance and no stay has been granted by the Court of Appeal. That has a bearing at least on the act of bankruptcy relied upon, being non‑compliance with a bankruptcy notice based upon a judgment the operation of which has not been stayed.
Perhaps the most significant factor relied upon by the petitioning creditor in pressing for a sequestration order today is the orders of the Court of Appeal on 23 July 2007 staying the appeal until the appellant can comply with the security for costs order. Unless the appellant debtor can meet that security, there will be no appeal. The stay will continue in operation. The deadline for compliance with the security for costs order is next Monday, 27 August 2007. It was pressed on me by Mr Butterfield, for the debtor, that I should grant an adjournment at least pending the expiry of that period when it will be known whether or not the appeal will continue. There is much to be said for that view. It would seem unjust to make a sequestration order, the effect of which would be to prevent Mr Tagget from meeting the security for costs order when he still has a week to do so.
I am presented with substantial material which might hypothetically bear on the question of the capacity of Mr Tagget to obtain the required security, but I place no weight on that. Mr Tagget has not filed evidence relating to his capacity and in view of the orders I made for filing of affidavit material on 26 June 2007, he may have been under the misapprehension that the opportunity to do so was not open given that he would have had to have filed such affidavits by 6 August 2007. Nevertheless, it is a fact that the security has not been paid to date and only a week remains. It would be possible for me to bring the parties back after the expiry of the deadline for the payment of security to see what has happened. That would put the parties to additional expense in circumstances where the argument has already been heard on whether a sequestration order should be made notwithstanding the appeal.
In my view, the appropriate course, bearing in mind that the appeal is currently stayed, and only a week remains to Mr Tagget to meet the required security, and bearing in mind the limited nature of the appeal, is to proceed today to make the sequestration order but to stay the operation of it for a period of 21 days pursuant to s.52(3) of the Bankruptcy Act. That would give Mr Tagget the opportunity to consider his rights of appeal to the Federal Court from my orders and would also ensure that he is not inhibited in meeting the security required of him. Should that security be paid and should the present stay on the appeal be lifted, there would be the opportunity for Mr Tagget to return to this Court to seek the vacation of orders made today provided that they have not been entered. To that end, I should direct that the orders made today not be entered for the period of the 21 day stay.
I make the following findings and orders. I am satisfied that the debtor committed the act of bankruptcy alleged in the petition. I am satisfied with the proof of the other formal matters of which s.52(1) of the Bankruptcy Act requires proof. I am not satisfied that the debtor has advanced other sufficient cause for the Court not to make a sequestration order today for the purposes of s.52(2)(b) of the Bankruptcy Act.
I make a sequestration order against the estate of Graeme Henry Tagget.
I order that the petitioning creditor's costs, including reserved costs, if any, be taxed and paid in accordance with the Bankruptcy Act. I note that under the Bankruptcy Regulations a copy of these orders is to be given to the Official Receiver in Sydney within two days after the orders are entered. I note that the date of the act of bankruptcy is 13 March 2007.
I note that a consent to act as trustee has been signed by Michael Gregory Jones. I direct that that be lodged with the Official Receiver in Sydney if he has not already been so lodged.
I order that the above orders be stayed pursuant to s.52(3) of the Bankruptcy Act for a period of 21 days. I direct that the orders not be entered for that period.

I certify that the preceding seventeen (17) paragraphs are a true copy of the reasons for judgment of Driver FM

Associate:

Date: 23 August 2007