Shal-Houb v ASSAF - [2003] FMCA 77

FEDERAL MAGISTRATES COURT OF AUSTRALIA

SHAL-HOUB v ASSAF & ANOR

[2003] FMCA 77

BANKRUPTCY – Bankruptcy notice – applicant to extend time for compliance based on existence of application for leave to appeal – principles to apply.

Ahern v Deputy Commissioner for Taxation (QLE) (1987) 76 ALR 137
Blacker v National Australia Bank Limited (2001) FMC7
Byron v Southern Star Group Pty Limited (1997) 73 FCR 264
Geard; Ex parte Reid, Unreported FedCt (NSW) – 11/02/1994
Lui v Schnabel [2002] FMCA 274

Applicant:

FRANK SALIM SHAL-HOUB

Respondent:

NAZIH ASSAF & MONA ASSAF

File No:

SZ 1363 of 2002

Delivered on:

18 February 2003

Delivered at:

Sydney

Hearing date:

18 February 2003

Judgment of:

Raphael FM

REPRESENTATION

For the Applicant:

Self Represented

Counsel for the Respondent:

Mr M Cleary

ORDERS

Application dismissed.
Time for compliance to the bankruptcy notice extended to 4 March 2003.
The applicant to pay the respondents costs pursuant to the Federal Court Rules to be taxed if not agreed.

FEDERAL MAGISTRATES
COURT OF AUSTRALIA AT
SYDNEY

SZ 1363 0f 2002

FRANK SALIM SHAL-HOUB

Applicant

And

NAZIH ASSAF & MONA ASSAF

Respondent

REASONS FOR JUDGMENT

This is an application by Frank Salim Shal-Houb dated 23 December 2002 to set aside a bankruptcy notice in which the respondents demanded the sum of $185,640.58 pursuant to a judgment registered in the District Court of New South Wales on 31 May 2002. When the matter came before me for hearing on the first occasion I was advised by Mr Cleary who appears on behalf of the respondent that there was some urgency in the matter as it had become known to the respondents on 5 February 2003 by an affidavit sworn by the applicant that the applicant had disposed of a property which he owned some months beforehand and had distributed the proceeds of sale, which had not been utilised to repay the secured charge. It was the existence of this property that had provided the respondent creditors with some comfort during lengthy appeal proceedings against the original judgment.
On the first occasion, Mr Shal-Houb was represented by a firm of solicitors, who had appeared before him in Supreme Court proceedings that were heard by Dunford J on 10 October 2002. His Honour had given judgment in the matter on 25 October 2002. Those proceedings sought to set aside a decision of the Fair Trading Tribunal not to allow a re-hearing of a Tribunal action in which the major part of the debt and costs were ordered to be paid by the debtor to the creditor. The solicitor informed me that he was not experienced in bankruptcy matters and unless arrangements could be made for him to brief counsel, he would have to refer the matter back to the applicants original solicitor, a Mr Russo.
I granted a short adjournment during which time it appears that the builders lawyer, as he was known, did hand the matter back to Mr Russo, but Mr Russo has not appeared today. He telephoned the court shortly before the hearing to inquire as to what the nature of the proceedings were, and when he was told by my associate, he advised her that Mr Shal-Houb would have to act on his own behalf.
So far as I can see from the papers, the basis of Mr Shal-Houb's application is that there is, in process, an appeal from the judgment of Dunford J, to which I previously referred. Closer investigation reveals that there is, in fact, an application for leave to appeal to the Court of Appeal, and a copy of the summons is annexed to an affidavit of a Jayson Fung Choy Cheung, filed in these proceedings. No indication is given of when the application for leave to appeal may be heard.
I have read through the documents attached to the affidavit, which include the judgment of Dunford J, and the notice of appeal. There is no doubt that the points raised are complex and involve statutory interpretation, but there is equally no doubt that leaving aside the problems which appear to have arisen from the repeal of The Fair Trading Tribunal Act 1998 and the replacement of that Tribunal by the Consumer, Trader and Tenancy Tribunal together with its own Act, No 82 of 2001, which commenced on 25 February 2002, Dunford J felt that the application for re-hearing was misguided.
At paragraph 30 of his judgment he said:
“On any view of the matter, these were not facts of which evidence had only become available after the original hearing, and irrespective of the amendments to section 94 of the Home Building Act, the plaintiff was precluded from recovering damages or pursuing any other remedy for breach of contract because he was unlicensed (s.10(3)(a)). Moreover, the only conclusion that could be drawn from the evidence, including the evidence on the appeal, was that insurance which complied with s.92(1) was never in force in relation to the specified contract or building works.
It follows that even if the application for a re-hearing was within time and within the jurisdictional limits, the care person would have been required to refuse it.”
The setting aside or granting a further extension of time for compliance with a bankruptcy notice based upon the existence of an appeal, has been considered by the Federal Court, and this Court, on several occasions.
I discussed the principles in Blacker v National Australia Bank Limited (2001) FMC7, and again in Lui v Schnabel [2002] FMCA 274. In that latter case, I considered the Federal Court authorities, such as, Ahern v Deputy Commissioner for Taxation, Geard; ex parte Reid and most importantly Byron v Southern Star Group Pty Limited (1997) 73 FCR 264.
The general principle which comes out of those cases is that a stay should be granted where the appeal is the first appeal against the judgment upon which the bankruptcy notice is based. This is not a hard and fast rule but it follows the views expressed by the court in Ahearn v Deputy Commissioner for Taxation (QLE) (1987) 76 ALR 137 at 148:
“It is also well established that, in general, a court exercising jurisdiction in bankruptcy shall not proceed to sequestrate the estate of a debtor wherein 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.”
These matters were all considered by Katz J in Byron who took into account the fact that no stay had been granted in the matter before him and that the appeal was a second appeal, namely one from the Court of Appeal to the High Court where only special leave was being sought. The situation is very similar here. An appeal has already been heard and leave is being sought from the Court of Appeal of New South Wales to re-agitate the matter. In the exercise of my discretion I have to consider not just the merits of the appeal but the situation generally including whether a stay has been sought and whether there is any other conduct by the debtor that might cause one concern.
I understand that a stay had been sought but last week that application was withdrawn. The applicant has put on no evidence other than the affidavit to which I have referred indicating what special circumstances might exist to enable me to grant him the extension or to set aside the bankruptcy notice. But I have been handed affidavits by the respondent which indicate that a property has been sold and that the proceeds of sale have been distributed to other creditors.
This would indicate a possible preference situation and that makes it important that the relation bank period is not overly extended by virtue of any orders of this court extending the time for compliance so that those creditors obtain an advantage over the present creditor.
I understand Mr Shal-Houb's difficulties, in particular, his problems with representation. He has provided me with certain information concerning discussions with the respondent. I think that in the circumstances I should dismiss the application but I should extend the time for compliance of the bankruptcy notice for a further 14 days to give Mr Shal-Houb the opportunity to make good on any proposals which he might have to deal with his debt to the respondent. The orders I make are as follows:
(1)Application dismissed.
(2)Time for compliance to the bankruptcy notice extended to 4 March 2003.

(3)The applicant to pay the respondents costs pursuant to the Federal Court Rules to be taxed if not agreed.

I certify that the preceding twelve (12) paragraphs are a true copy of the reasons for judgment of Raphael FM

Associate:

Date: