Westpac Banking Corporation v Paras and Anor (No.2)
[2020] FCCA 1719
•23 June 2020
FEDERAL CIRCUIT COURT OF AUSTRALIA
| WESTPAC BANKING CORPORATION v PARAS & ANOR (No.2) | [2020] FCCA 1719 |
| Catchwords: BANKRUPTCY – Ex tempore ruling on application for a stay of sequestration orders pending appeal. |
| Legislation: Bankruptcy Act 1966 (Cth), s. 52(3). Federal Court of Australia Act 1976 (Cth), s. 29. Federal Circuit Court Rules 2001, r. 29.04. |
| Cases cited: Endresz v Australian Securities and Investments Commission [2014] FCA 1139 Freeman v National Australia Bank Limited [2012] FCA 427 Narain v Euroasia (Pacific) Pty Ltd [2008] VSCA 195 Nolten v Groeneveld Australia Pty Ltd [2011] FCA 1494 Purnell Motors Pty Ltd v Jones [2014] FCCA 620 |
| Applicant: | WESTPAC BANKING CORPORATION |
| First Respondent: | JOHN PARAS |
| Second Respondent: | STEPHEN MATTHEW APPERLY |
| File Number: | MLG 2563 of 2019 |
| Judgment of: | Judge Burchardt |
| Hearing date: | 23 June 2020 |
| Date of Last Submission: | 23 June 2020 |
| Delivered at: | Melbourne |
| Delivered on: | 23 June 2020 |
REPRESENTATION
| Counsel for the Applicant: | Mr Brown |
| Solicitors for the Applicant: | DLA Piper |
| Counsel for the Respondents: | Mr McEwen |
| Solicitors for the First Respondent: | Pathway Legal Pty Ltd |
| Solicitors for the Second Respondent: | Patrick & Associates |
ORDERS
The deceased estate of John Paras be sequestrated under the Bankruptcy Act 1966 (Cth).
The estate of Stephen Matthew Apperly be sequestrated under the Bankruptcy Act 1966 (Cth).
The applicant creditor's costs, including reserved costs, be taxed and paid on a joint and several basis from the estates of the respondent debtors in accordance with the Bankruptcy Act 1966 (Cth).
AND THE COURT NOTES THAT:
A. The date of the act of bankruptcy in relation to the deceased estate of John Paras is 29 April 2019.
B. The date of the act of bankruptcy in relation to the estate of Stephen Matthew Apperly is 1 August 2019.
C. A consent to act as trustee in both estates signed by Daniel Peter Juratowitch has been filed with the Court by the applicant.
| FEDERAL CIRCUIT COURT OF AUSTRALIA AT MELBOURNE |
MLG 2563 of 2019
| WESTPAC BANKING CORPORATION |
Applicant
And
| JOHN PARAS |
First Respondent
| STEPHEN MATTHEW APPERLY |
Second Respondent
REASONS FOR JUDGMENT
(Revised from Transcript)
The starting point is the judgment as I delivered on 17 April 2020 in which, putting the matter broadly, the bank, which was the petitioning creditor, was successful, but at paragraph 122, I said:
Given the additional complications arising from the death of Mr Paras, I will direct the parties to confer and forward Minutes of Orders to my chambers within fourteen days.
Draft orders giving effect to those conclusions have now been forwarded, and would include orders that the deceased estate of Mr Paras be sequestrated and that the estate of Mr Apperly also be sequestrated, together with usual orders as to costs and notations.
It is important to remember that those orders would ordinarily have been made when judgment was delivered, but, as I expressed at the time, the most unfortunate demise of Mr Paras left me in some doubt as to what orders were appropriate, and, indeed, I am informed that so far as anyone is aware, no executor has yet been appointed in any event. Mr Apperly and the estate of Mr Paras, albeit in a slightly unincorporated way, if I can so describe it, seek that there be a stay of the proposed sequestration orders.
Counsel on their behalf submits that the Court has power to make an order staying the judgment pursuant to r 29.04 of this Court’s Rules. That order relevantly reads:
A party bound by a judgment or order may apply to the Court for an order that the judgment or order be stayed.
I note that reference was also made to r. 16.02, but that has fallen away. However, pursuant to section 52(3) of the Bankruptcy Act 1966 (Cth) (“Bankruptcy Act”):
The Court -
… which relevantly includes this Court –
… may, if it thinks fit, upon some terms and conditions as it thinks proper, stay all proceedings under a sequestration order for a period not exceeding 21 days.
I have been referred to the judgment of Spender J in Freeman v National Australia Bank Limited [2002] FCA 427 where Spender J said, relevantly, at [3]:
3. I am satisfied that, as the notice of appeal has been filed, it is competent for the Court to stay all proceedings under the sequestration order, pursuant to O 52, r 17 of the Federal Court Rules, and I so find, notwithstanding the terms of s 52(3) of the Bankruptcy Act 1966 (Cth) (the Act). On this point, I am in respectful agreement with the judgment of Carr J in Coleman v Lazy Days Investment Pty Ltd [1994] FCA 1442; (1994) 55 FCR 297 and Pincus J in Evans v The Heather Thiedeke Group Pty Ltd (1990) 95 ALR 424.
That decision has been followed in a number of subsequent cases. I have also, however, been referred to the judgment of Beach J in Endresz v Australian Securities and Investments Commission [2014] FCA 1139 (“Endresz”) where His Honour said at [9], having noted at [8] that sequestration orders take immediate and automatic effect by the force of the Act:
9. In concept, one can only consider whether there should be a stay of any proceedings or action under a sequestration order, rather than a stay of the order itself. So much is made plain by the language of s 52(3) of the Act which uses the language of “stay all proceedings under a sequestration order”. I interpolate at this point that s 52(3) also has a time limit of 21 days. Nevertheless, in the Court’s appellate jurisdiction under r 36.08, such a time bar does not limit the Court’s power thereunder. A separate source of jurisdiction can be invoked, rather than that applicable under s 52(3).
And then at [11] his Honour continued:
11. In summary, the Court only has power to stay proceedings or action under the sequestration order. The present interlocutory applications do not identify what proceedings or action ought to be stayed and why. They fail in limine on this aspect alone.
Now, the rules have, I think, changed since 2014, but nothing turns on that. His Honour went on at [14] and thereafter to deal with the principles applicable to stays, and said:
14. Rule 36.08 confers a broad discretion. Generally, there must be demonstrated “a reason or an appropriate case” to warrant the exercise of discretion in favour of granting a stay.
15. More specifically, two questions must be considered.
16. First, is there an arguable point on the proposed appeal or is there “some rational prospects of success” in relation to any of the grounds of appeal?; second, does the balance of convenience favour the grant of a stay?
I should note that I have omitted the citations of authority. His Honour went onto say, in dealing with, at [18], with whether there was a risk of irreparable injury to the appellants if stay is not granted, to say:
18. In this context, it is clear that the absence of any stay order does not render the appellants’ appeal rights against the sequestration orders nugatory. The right to appeal the sequestration orders is not “property” under s 5(1) of the Act and does not vest in the Official Trustee.
I should observe that Her Honour Justice Kenny in the case of Nolten v Groeneveld Australia Pty Ltd [2011] FCA 1494 (“Nolten”) came to the same conclusion.
To the extent that the Supreme Court of Victoria and the Court of Appeal in Narain v Euroasia (Pacific) Pty Ltd [2008] VSCA 195 might be thought to come to a different conclusion, firstly, I would point out that this arose in distinguishable circumstances, because the matter under appeal was not the appeal from the sequestration order. Secondly, in any event, I would regard myself as obliged to follow directly on point Federal Court authority that is subsequent in any event, as this Court is relevantly directly under the Federal Court in the hierarchy of courts.
Accepting by analogy with the judgment of Beach J, although it is not without doubt – a matter I will return to – that the Court has power under r 29.04 for present circumstances, and I note that the question of the arguable case is, on any view of the matter, a low threshold, and while the grounds of appeal seem to me to be somewhat lengthy and possibly prolix, I am prepared to conclude in favour of the applicants that there is an arguable case. When one turns to the question of the balance of convenience, I will start with the affidavit filed by Mr Apperly, putting the matter once again as a matter of paraphrase, necessarily, somewhat broadly.
The first point made by Mr Apperly is that the appeal may not be prosecuted by the trustee. For the reasons given in relation to the decisions of the Federal Court in Endresz and Nolten, that assertion is simply wrong. Second, Mr Apperly points to reputational damage and possible resulting financial difficulty occasioned by that, and I accept that that is certainly possible, but I note that the appeal he proposes is to be funded by further debt, and that, of its nature, is inherently problematic where there is no direct evidence of Mr Apperly’s solvency or otherwise.
Plainly, in the tragic circumstances attaching to Mr Paras, there is no evidence from him. Indeed, I would go so far as to say that the submissions made by counsel for the bank that the appointment of the trustee in bankruptcy might assist the administration of that estate may well be correct. The Court also needs to be bear in mind the terms of section 29(1)(a) of the Federal Court of Australia Act 1976 (Cth) (“Federal Court of Australia Act”), which relevantly proscribed as follows:
(1) Where an appeal to the Court from another court has been instituted:
(a) the Court or a Judge, or a judge of that other court (not being the Federal Circuit Court or a court of summary jurisdiction), may order, on such conditions (if any) as it or he or she thinks fit, a stay of all or any proceedings under the judgment appealed from.
So even if I do not grant a stay, it is still open plainly to the applicants to make an application once the appeal is lodged to the Federal Court and that, once the appeal is lodged, I have no power to make a stay order. I accept the trustee’s submissions that there is no sufficient evidence of the solvency of the two bankrupt estates, rather, that to the extent that materials reveal anything, to the reverse. With respect, I also adopt the remarks made by Justice Beach in Endresz at [26], where His Honour observed:
…there is a public interest in not restraining the Official Trustee from engaging in such investigations as it thinks fit in terms of the affairs of the appellants.
I should finally observe that this Court’s power to proceed under r 29.04 is not free from doubt in any event, and in that regard I would refer to the judgment of Lloyd-Jones J in Purnell Motors Pty Ltd v Jones [2014] FCCA 620 where His Honour at [90] and following went onto refer to the doubt expressed by the learned authors McQuade and Gummow in Australian Bankruptcy Law and Practices to whether this Court did indeed have such power. I have assumed, for present purposes, that I may, but it is not free from doubt. But, in this particular case, once the appeal is filed, it is plainly a matter for the Federal Court. No doubt an appeal can and will be filed.
In my view, it is inappropriate for me to grant a stay in these circumstances, bearing in mind the various difficulties with the applicant’s case to which I have referred. It may well be, in fact, that given the way in which the matter has been explained by Beach J in Endresz that in truth, the power available under s 52(3) of the Bankruptcy Act is somewhat limited, as it is not perhaps all that likely that there will be proceedings under a sequestration order within 21 days of its being made. Certainly, it seems to me, anomalous that I might have a position to grant a stay on an ongoing basis or up to 21 days, as the case might be, in circumstances where, upon the filing of the appeal, my capacity to make any order is circumscribed by the statute as I have described.
All of these matters are required to be considered, and, in my view, bearing in mind the difficulties as to the solvency of the applicants, the public interest that weighs in favour of the administration of the estates externally, the fact that the stay application can and no doubt should be made properly to the Federal Court, bearing in mind the terms of section 29 of the Federal Court of Australia Act, and some residual doubts as to my own powers in any event, it is inappropriate to grant a stay. Accordingly, there will be orders made in terms of the minutes forwarded to the Court.
I certify that the preceding nineteen (19) paragraphs are a true copy of the reasons for judgment of Judge Burchardt
Associate:
Date: 25 June 2020
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