Teese v Woodgate

[2004] FCA 1787

FEDERAL COURT OF AUSTRALIA

Teese v Woodgate [2004] FCA 1787

ANN CAROLYN TEESE v GILES GEOFFREY WOODGATE

N1347 OF 2004

EMMETT J
10 NOVEMBER 2004
SYDNEY

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY	N1347 OF 2004

BETWEEN:	ANN CAROLYN TEESE APPLICANT
AND:	GILES GEOFFREY WOODGATE RESPONDENT
JUDGE:	EMMETT J
DATE OF ORDER:	10 NOVEMBER 2004
WHERE MADE:	SYDNEY

THE COURT ORDERS THAT:

1.The application for a stay of the proceeding under the sequestration order be dismissed.

2.The costs of today of the trustee in bankruptcy be paid out of the bankrupt’s estate and the trustee in bankruptcy have liberty to proceed with taxation forthwith.

Note:    Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY	N1347 OF 2004

BETWEEN:	ANN CAROLYN TEESE APPLICANT
AND:	GILES GEOFFREY WOODGATE RESPONDENT

JUDGE:	EMMETT J
DATE:	10 NOVEMBER 2004
PLACE:	SYDNEY

REASONS FOR JUDGMENT

1. I have before me an oral application for a stay of orders made by Raphael FM on 8 September 2004.  The application is made in aid of an appeal instituted in this Court by notice of appeal from the orders of Raphael FM.  The applicant is a bankrupt, her estate having been sequestrated some time ago. 

2. On 16 October 2003, the applicant filed an application in the Federal Magistrates Court for orders under s 179 of the Bankruptcy Act 1966 (Cth) (‘the Act’) relating to the conduct of her trustee in bankruptcy. At some stage that application came to be treated as an application for annulment of the bankruptcy under s 153B of the Act.

3. One of the assets of the bankrupt’s estate is, or was, a parcel of land known as 262 Clovelly Road, Clovelly. The trustee, having become the registered proprietor of that parcel of land, commenced proceedings in the Supreme Court of New South Wales for possession of the land. On 27 April 2004, the Supreme Court ordered that that proceeding be transferred to the Federal Magistrates Court, to be listed jointly with the proceeding to which I have just referred. Both proceedings were listed for hearing before Raphael FM on 24 August 2004. For reasons published on 8 September 2004, his Honour ordered that the application for annulment and for orders under s 179 be dismissed. His Honour also ordered the bankrupt to give possession of the parcel of land to the trustee on or before 15 September 2004. Leave was given to issue a writ of possession on that day.

4. The bankrupt has not given possession to the trustee.  On 15 September 2004, the bankrupt instituted the proceeding in which the application before me is made.  That proceeding was instituted by notice of appeal from the orders made by Raphael FM on 8 September 2004.  Three grounds were specified.  However no relief was claimed. 

5. On 15 September 2004, the applicant applied ex parte to Stone J for orders staying the orders of Raphael FM relating to possession.  Her Honour granted orders staying the order for the issue of a writ of possession up to 17 September 2004, when her Honour dismissed the application for a stay.  Her Honour gave reasons on that day for making those orders.  A written version of the reasons for judgment was published on 21 September 2004. 

6. The bankrupt then made what seems to be misconceived applications in the Supreme Court for orders staying the proceedings on the writ for possession or at least restraining the Sheriff from executing the writ.  On 15 October Hulme J made an order ex parte; however, that order was discharged on 22 October 2004.  On 31 October 2004 the bankrupt applied to the Supreme Court again seeking similar relief.  That proceeding was dismissed by Levine J on 8 November 2004.

7. The trustee in bankruptcy had notified the bankrupt that he required vacant possession of the property by today.  That has prompted the bankrupt to apply again for an order staying the execution of the writ for possession. 

8. I have approached the matter on the basis that the bankrupt must first persuade me that there is at least an arguable case that one or other of her grounds of appeal will succeed.  The appeal is presently in the docket of Sackville J, who has fixed it for hearing on 14 February 2005.  However, the trustee is not prepared to be delayed further, having regard to the history of the litigation between the bankrupt and the trustee. 

9. Pursuant to directions given by Stone J, an amended notice of appeal was filed on 27 October 2004.  The notice of appeal is an improvement on the first notice of appeal, in that it now claims some relief, including orders that the orders made by Raphael FM be set aside and that, in lieu thereof, there be orders for an inquiry into the conduct of the trustee, for the removal of the trustee and that the bankruptcy be annulled. 

10. I granted a certain degree of indulgence today to enable the bankrupt, who originally appeared in person, to arrange for her solicitor, Mr Douglas Knaggs, to appear this afternoon.  Mr Knaggs provided me with written submissions in support of the appeal.  If I were persuaded that there was at least an arguable case that the bankrupt might obtain, on appeal, the orders set out in the amended notice of appeal, it would then be necessary to inquire into the balance of convenience to determine whether the status quo should be maintained.

11. The amended notice of appeal contains one more ground beyond those that were contained in the notice of appeal that was on the file when the matter was considered by Stone J.  The first ground is that Raphael FM erred in failing to grant an adjournment pursuant to the Legal Aid Commission Act 1979 (NSW). The bankrupt applied for legal aid and was granted some legal aid. However, the legal aid did not extend to fees for counsel to appear on the application that was fixed for hearing before Raphael FM. The bankrupt appealed against the decision of the Legal Aid Commissioner to limit its grant. Raphael FM denied the adjournment on the basis that the lack of preparation and adherence to the timetable fixed by him was not attributable to the withholding of legal aid pursuant to the Commissioner’s decision. The bankrupt concedes that she failed to follow all the Court’s directions in preparation for hearing. The bankrupt claims, however, that, in her legal aid application, she had sought fees to engage counsel and, if legal aid were granted, the opportunity for instructing counsel would be effectively denied her, by reason of the refusal of Raphael FM to grant an adjournment.

12. I am not persuaded that there was any error on the part of Raphael FM in the exercise of his discretion refusing an adjournment. The question of an adjournment is a matter at the discretion of the presiding judicial officer. No argument has been advanced to suggest that a wrong principle was applied by Raphael FM in refusing the adjournment. The bankrupt was in fact represented by her solicitor at the hearing. Mention was made of s 57 of the Legal Aid Commission Act (NSW). However the submission was not developed.

13. The second ground is that Raphael FM erred in holding that the trustee was justified in delaying, until 29 August 2003, the holding of a meeting of creditors to consider the bankrupt’s written application of 9 May 2003 for an annulment.  The assertion made from the bar table was that that delay resulted in hundreds of thousands of dollars of additional costs.  However, there was no evidence before Raphael FM that I have been able to glean that suggested that was so.  His Honour concluded that the trustee was within his rights in deferring the holding of a meeting until the question of the validity of a mortgage over the bankrupt’s property had been determined.  I am unable to glean any error on the part of Raphael FM in his conclusion in that regard. 

14. The third ground is that the Raphael FM erred in refusing the bankrupt’s request to cross-examine the trustee on his affidavit in the proceeding. While the two proceedings that I have mentioned were heard on the same day, it was not suggested that an order had been made that evidence in one be evidence in the other. No affidavit was filed by the trustee in the annulment and s 179 proceeding. There were formal affidavits filed on behalf of the trustee in the other proceeding, in which the trustee sought the writ for possession. As I understand the position, his Honour considered that there was nothing that was to be put to the trustee in cross-examination on his affidavits in the possession proceeding that was relevant to that proceeding. On the other hand, there was no affidavit filed in the annulment proceeding upon which the trustee could be cross-examined. It follows that there does not appear to have been any error at all on the part of the Raphael FM in so far as he refused any application to cross-examine the trustee.

15. The fourth ground, which was not in the original notice of appeal and therefore was not considered by Stone J, is that Raphael FM erred in failing to find that the bankrupt had, in May 2003 and up to at least August 2003, the capacity to raise, by mortgage of two properties, sufficient funds to pay all her creditors in full, together with the costs and expenses of the administration and that she would have retained that capacity were it not for misfeasance and nonfeasance on the part of the trustee.  It is not clear to what extent those matters were argued before Raphael FM.  However I will assume, for present purposes, that they were argued. 

16. His Honour dealt with the question of annulment in the following way:

    ‘12.     Although the current application has been on the file since 16 October 2003 it is an application which suffers from a number of defects.  Looking first at the application for annulment the grounds upon which this is sought have not been specified although they have been articulated today as based on the ground of solvency, this constituting a reason why the sequestration order ought not to have been made pursuant to [s 153B]. Whilst solvency is a ground… proof of that status would have to be established. To my mind the bankrupt has not established that she was solvent at the time of the sequestration order. But the bankrupt has other problems. Firstly, she has failed to comply with the provisions of Part 35 of the federal Magistrate’s Court Rules 2001 and in particular with… providing notice to creditors of the application. This failing is to my mind fatal to the bankrupt’s application today. These are creditors who have already refused an application by the bankrupt under s.73 of the Act. There is no reason to believe that some or all of them would not have wished to have something to say about this application.

    13.      The court also has a discretion to grant an annulment… and the conduct of the bankrupt is something which the court could take into account.  I must also be satisfied that all the debts can be satisfied out of the bankrupt’s own resources...  The trustee has provided me with a report to creditors which indicates that due to the increasing level of costs incurred in the administration of the bankrupt estate he estimates that a dividend will not be paid to unsecured creditors unless an amount greater than $800,000.00 net is realised from the sale of the Clovelly Road property.  According to the proof of debt register, there is at the moment the sum of $746,174.22 secured on that property which would mean that it would have to realise a sum in excess of $1,500,000.  I am not in possession of any evidence which would indicate that this will happen.

    14.      In all the circumstances, I would not be prepared to annul the bankruptcy of Ms Teese under s.153B of the Act.’

    I was not taken to any evidence to indicate that his Honour’s conclusions were wrong in the passages that I have just cited.  In the circumstances, there appears to be no substance to the fourth ground.  

17. On the basis of the material that has been put before me so far, I am not persuaded that there is any prospect of the appeal succeeding.  That, of course, is not to decide the matter.  I have not heard full argument and the matter has been brought on with considerable urgency in the circumstances that I described.  Nevertheless, I am not persuaded that the appeal has sufficient prospects of success to justify an inquiry into the balance of convenience.  Accordingly, I refuse to grant any stay at this stage.

I certify that the preceding seventeen (17) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Emmett.

Associate:

Dated:             9 February 2005

Solicitor for the Applicant:	Mr D Knaggs
Counsel for the Respondent:	Mr B Skinner
Solicitor for the Respondent:	Sally Nash & Co
Date of Hearing:	10 November 2004
Date of Judgment:	10 November 2004