Turner v Rothmore Farms Pty Ltd (In Liq)

[2002] FCA 1613

FEDERAL COURT OF AUSTRALIA

Turner v Rothmore Farms Pty Ltd (In Liq) [2002] FCA 1613

Bankruptcy Act 1966 (Cth)
Federal Court Act 1976 (Cth)

Powerflex Services Pty Ltd v Data Access Corporation (1996) 137 ALR 498

TENNYSON TURNER v ROTHMORE FARMS PTY LTD (IN LIQUIDATION)

S 278 of 2002

MANSFIELD J
19 DECEMBER 2002
ADELAIDE

IN THE FEDERAL COURT OF AUSTRALIA
SOUTH AUSTRALIA DISTRICT REGISTRY	S 278 OF 2002

BETWEEN:	TENNYSON TURNER APPELLANT
AND:	ROTHMORE FARMS PTY LTD (IN LIQUIDATION) RESPONDENT
JUDGE:	MANSFIELD J
DATE OF ORDER:	19 DECEMBER 2002
WHERE MADE:	ADELAIDE

THE COURT ORDERS THAT:

1.        The application is refused.

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

IN THE FEDERAL COURT OF AUSTRALIA
SOUTH AUSTRALIA DISTRICT REGISTRY	S 278 OF 2002

BETWEEN:	TENNYSON TURNER APPELLANT
AND:	ROTHMORE FARMS PTY LTD (IN LIQUIDATION) RESPONDENT

JUDGE:	MANSFIELD J
DATE:	19 DECEMBER 2002
PLACE:	ADELAIDE

REASONS FOR JUDGMENT

1. This is an application by motion to stay a sequestration order made by a Federal Magistrate on 6 December 2002 in respect of the estate of the appellant.  At the time of making the order the Magistrate stayed the order until 12 December 2002.  The appeal from the making of the order was instituted on 10 December 2002.  The present application for a stay of the sequestration order pending the hearing and determination of the appeal was made at the time of the institution of the appeal.

2. I have granted an order staying the sequestration order until today to enable the application by motion to be determined.  The respondent opposes the further stay of the sequestration order.  Two supporting creditors have appeared today, also to oppose the stay of the sequestration order.

3. In considering the application for the stay, I am prepared to assume, contrary to the contentions of the respondent, that the Court has jurisdiction to grant a stay of a sequestration order once the appeal has been duly instituted and may do so for a period exceeding the 21 day period referred to in s 52 (3) of the Bankruptcy Act 1966 (Cth) and despite or in the light of s 37 of that Act.

4. Counsel for rhe respondent has referred to three decisions of the Court in which the power appears to have been exercised notwithstanding those provisions, but in circumstances where, as counsel has pointed out, the provisions of s 29 and in particular s 29(2) of the Federal Court of Australia Act 1976 (Cth) have not apparently been specifically addressed.

5. I am also prepared to assume, in favour of the appellant, that the appeal has more than insignificant prospects of success.  That is, I do not propose to refuse the application for the stay on the ground that the appeal has no real merit.

6. The issue upon which I propose to base my ruling is whether in all the circumstances the Court should grant a stay of the sequestration order further pending the hearing and determination of the appeal.  In exercising that discretion, I propose to apply the ordinary principles in determining whether to stay proceedings pending the hearing and determination of an appeal as discussed in Powerflex Services Pty Ltd v Data Access Corporation (1996) 137 ALR 498 at 499.

7. The factors which the appellant has indicated as favouring the exercise of a discretion to grant a stay are that he would otherwise be vulnerable by the actions of the trustee of his estate to not being permitted to prosecute his appeal; secondly, that he would not be permitted or may be impeded by the trustee for the same reason from continuing to participate as a defendant in proceedings in the Supreme Court of South Australia Action No. 1032 of 1999 (the Supreme Court action); and thirdly, that he faces the general disadvantages of a bankrupt including losing the opportunity  to participate in transactions which may become available to him in the period between the sequestration order and determination of the  appeal, assuming the appeal on his part is successful.   He would in that period of time be “hamstrung”.  I also note his undertaking to prosecute the appeal with all reasonable expedition if he is granted a stay although, as he candidly said, if the appeal is heard before the hearing and final determination of the Supreme Court action he would seek to have the appeal adjourned until the Supreme Court action has been finally resolved.

8. I accept the contention of counsel for the respondent that the making of the sequestration order does not, as a matter of law impede, the entitlement of the appellant to prosecute his present appeal.  I also accept the assurance of the trustee given through counsel that the trustee will not in fact take any action to impede in any way the appellant from prosecuting his appeal.  In that circumstance, I do not think the first concern of the appellant is of substance relevant to the exercise of my discretion in his favour

9. The Supreme Court action has a long history.  The appellant is one of the defendants.  It follows from a decision given in this Court on 4 June 1999 and an account then taken in accordance with orders made in this Court which was completed in the Supreme Court on 2 November 2001.  On the basis of that account, a bankruptcy notice was issued and served upon the appellant in March 2002, and an act of bankruptcy committed on 16 April 2002 by the appellant’s non-compliance with that bankruptcy notice.  The creditors petition, based upon that act of the bankruptcy, was issued on 18 April 2002 and ultimately, as noted, was the subject of a sequestration order on 6 December 2002.

10. The hearing of that petition was adjourned from time to time by reason of te proceedings in the Supreme Court action.  The appellant made an application to set aside the order of 2 November 2001 determining the account, and to extend the time to appeal from the decision of this Court of 4 June 1999, inter alia, ordering the account.  On 3 August 2002 those applications were dismissed.  Then on 2 September 2002 in the Supreme Court action the appellant further applied to review the accounting which had been carried out and for a further accounting.  On 13 November 2002 in the Supreme Court action his application was referred for further hearing to the Master who had conducted the initial account, for the parties to have “an opportunity of obtaining such further orders or directions as may be necessary to obtain a full and complete accounting by the liquidator and to ensure complete working out of the order” made on 7 November 2001.

11. As I understand the appellant’s proposed arguments on the appeal, they include claims that in the circumstances there has been no proper account or full account upon which the bankruptcy notice could have been issued and in turn the sequestration order could have been made, and that the Federal Magistrates Court did not have jurisdiction to make a sequestration order where on the material before the Federal Magistrates Court the final amount of the account had not been determined.

12. The trustee through counsel has undertaken that the trustee will not, pending the hearing and determination of the present appeal, take any step to impede the appellant’s participation in the Supreme Court proceeding as a defendant, including such action as he takes in that capacity in relation to the proposed further accounting. I make no observation as to whether that further accounting involves a revisitation of the earlier accounting, or some more refined and discrete exercise. The trustee accepts that the Bankruptcy Act does not prevent the appellant from participating as a defendant in the Supreme Court action in that way. Consequently, I do not think the second of the matters raised by the appellant is of great moment in the exercise of my discretion in favour of the appellant because, pending the hearing and determination of the appeal, he will be able to do that which his submissions suggested he feared he would not be able to do if no stay is ordered.

13. The disadvantage to the appellant of the sequestration order operating pending the hearing and determination of his appeal in the general sense the appellant referred to is obvious, assuming his appeal is successful.   But he did not suggest a particular opportunity of which he might be deprived, and in the course of his submissions in reply he indicated that in fact he had no assets and no income of substance other than a disabled veterans pension.

14. On the other hand, the further stay of the sequestration order, whilst it will not affect the relation back period determined by reference to the commission of the act of bankruptcy, and if the appeal is unsuccessful, will delay the vesting in the trustee of such property as the appellant has. It is clearly not in the interests of his creditors, if the appeal is unsuccessful, that that delay should take place, and that subject to the relevant provisions of Div 3 of Part 6 of the Bankruptcy Act, he should be free to deal with his property pending the hearing and determination of the appeal.

15. There is no general principle that an appellant against whom a sequestration order has been made should be entitled to a stay of the sequestration order pending the hearing and determination of the appeal in circumstances where there is no particular transaction identified in which the appellant wishes to engage notwithstanding the sequestration order and on the assumption that the appeal would be successful. Indeed, although I do not weigh it adversely to the appellant in the exercise of my discretion in this matter, I note s 37(2) of the Bankruptcy Act seems to indicate a legislative intent that, but for a short period of stay of 21 days, a sequestration order should be permitted to operate pending the hearing and determination of an appeal. As I have said, I do not place any weight on that consideration.

16. Balancing the factors to which I have been directed by the appellant and by counsel for the respondent, and in the light of the assurances given by the trustee of the estate of the appellant, and for reasons I have expressed, in my view there is no real basis shown to exercise the discretion (which I have assumed to have) to grant a stay of the sequestration order.  In my judgment, on balance, a stay is not appropriate in all the circumstances. I accordingly refuse the application.

I certify that the preceding sixteen-two (16) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Mansfield.

Associate:

Dated:             20 December 2002

Counsel for the Applicant:	The applicant appeared in person.
Counsel for the Respondent:	Mr Mr MG Evans with Mr R Mills
Solicitor for the Respondent:	DMAW Lawyers
Date of Hearing:	19 December 2002
Date of Judgment:	19 December 2002