Federal Court of Australia

Ritson v Commissioner of Police (NSW) [2021] FCAFC 208

ORDERS

THE COURT ORDERS THAT:

1.    The appeal is dismissed.

2.    There be no order as to costs.

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

REASONS FOR JUDGMENT

THE COURT:

The proceedings below

1    On 12 August 2021, the Federal Circuit Court made a sequestration order against Mr Ritson’s estate pursuant to a creditor’s petition filed on 16 August 2019 and again on 5 December 2019 moved on by the New South Wales Commissioner of Police: Commissioner of Police (NSW) v Ritson (No 5) [2021] FCCA 1835. The creditor’s petition was due to lapse on 16 August 2021: see s 52(4) of the Bankruptcy Act 1966 (Cth).

2    The hearing of the proceedings leading to the making of the sequestration order was conducted on 14 April 2021 and 5 May 2021.

3    At the hearing, Mr Ritson opposed the sequestration order because (amongst other things) he was prosecuting a claim for damages against Mr Jonathan Ryan in the District Court of Queensland for the torts of malicious prosecution and abuse of process, being a claim for damages which would be sufficient to satisfy the Commissioner’s debt and which therefore was “other sufficient cause” within the meaning of s 52(2)(b) of the Bankruptcy Act.

4    At the hearing, the Commissioner, by his written submissions filed on 9 April 2021, submitted at [14] that:

In circumstances where the Court is being asked to exercise its discretion to decline to make a sequestration order on the grounds that there exists a claim against a third party for an amount equal to or greater than the amount the debtor owes the creditor, the debtor must show that the claim is genuine and serious which at the time of the request to exercise discretion the debtor has not been able to litigate the issue and that it is a real claim that is likely to succeed having sufficient validity to justify dismissal or adjournment of the petition: McDermott v Wakim [2013] FCCA 1950 at [71].

5    The Commissioner also submitted at [22] of his written outline that the “Commissioner accepts that this Court does not try Mr Ritson’s claim for the tort of malicious prosecution contained in the [Further Amended Statement of Claim] in advance”. This was consistent with the passage from St George Bank Ltd v Helfenbaum [1999] FCA 1337 at [13], in which the following statement was highlighted in bold in [16] of the submissions:

While the Court does not try the cross-claim in advance, the debtor must adduce sufficient evidence to show that it is a real claim which is likely to succeed.

6    On 30 July 2021, Mr Ritson filed an interim application seeking leave to reopen his case to rely on an additional affidavit and an order pursuant to rule 14.04 of the Federal Circuit Court Rules 2001 (Cth) that he be ordered to produce to the Court certain documents in his possession that had been produced to him by Optus in the District Court proceedings.

7    By his outline of submissions dated 4 August 2021, the Commissioner’s (entire) submission in relation to the Optus documents was that:

In relation to paragraph 2 of the Interim Application, the Commissioner opposes that order. First, it is a matter for Mr Ritson to adduce to the Court the evidence he relies upon to establish his grounds of opposition – and not for the Court to compel him to do so via a novel use of rule 14.04. Second, it is clear that Mr Ritson has not sought that the Queensland District Court release him in respect of the implied undertaking which applies to documents produced by a third party under compulsion: Hearne v Street (2008) 235 CLR 125, [2008] HCA 36 at [96]. Mr Ritson would place himself in contempt of the Queensland District Court if he sought to tender those documents in these proceedings. Third, the Commissioner is unable to determine the relevance of the documents without first seeking them – which would involve the Commissioner reviewing documents knowingly provided in breach of the implied undertaking which applies to documents produced by a third party under compulsion.

8    At the hearing of the interim application on 5 August 2021, Mr Ritson acted for himself. He made an oral submission that the application to reopen should be granted because of the strength of the fresh evidence. The primary judge stopped Mr Ritson and sought confirmation from the Commissioner that the “only issue” was “the implied undertaking of confidentiality in relation to the documents produced under compulsion in the Queensland District Court proceedings”, and the Commissioner agreed that this was the only issue.

9    Immediately following the hearing on 5 August 2021, the primary judge made orders including an order which dismissed the interim application insofar as it related to the Optus documents: Commissioner of Police (NSW) v Ritson (No 6) [2021] FCCA 1942.

10    On 2 September 2021, Mr Ritson filed a notice of appeal in which he appealed from the whole of the judgment and all of the orders made in Ritson (No 5) and orders 2 and 3 made in Ritson (No 6).

11    By an interlocutory application, also dated 2 September 2021 and filed in these appeal proceedings, Mr Ritson sought an order pursuant to rule 36.08 of the Federal Court Rules 2011 (Cth) that proceedings under the sequestration order made by the primary judge be stayed pending the determination of his appeal.

12    The hearing of the interlocutory application took place before Halley J on 24 September 2021. The Commissioner appeared at that hearing.

13    On 24 September 2021, Halley J made orders suspending the operation of the sequestration order to the extent necessary to permit Mr Ritson to pursue proceedings that he had instituted in the Queensland Civil and Administrative Tribunal: Ritson v Commissioner of Police, New South Wales Police Force [2021] FCA 1315. At [42] – [48] of that decision, Halley J referred to the grounds of the appeal brought by Mr Ritson. The QCAT proceeding was one involving Mr Ritson seeking to recover debts for which he had received assignments.

14    We infer from these matters that the Commissioner was served with the notice of appeal by no later than 24 September 2021.

15    On 3 November 2021, the Chief Justice ordered that ground 1 of the appeal be heard separately and prior to any other grounds of appeal. Steps were taken to obtain pro bono counsel for Mr Ritson through the Bar Association. Mr Hutton made himself available, filed written submissions on behalf of Mr Ritson and appeared at the hearing on 15 November 2021.

16    Ground 1 of the appeal raised the question of the primary judge’s approach to the Optus documents:

The primary judge erred in the exercise of his discretion in refusing to make an order under rule 14.04 of the Federal Circuit Court Rules 2001 by:

(a)    failing to take into account material considerations, namely:

(i)    there was insufficient time for an application seeking to be relieved from the implied undertaking to be heard and determined by the District Court of Queensland before the petition lapses on 16 August 2021;

(ii)    the court’s power in relation to its own proceedings will provide the necessary scrutiny and protection against misuse of the Optus documents;

(b)    acting upon wrong principles, namely:

(i)    the proper approach is to be relieved of the obligation by the second court so as to be free to use the documents in the first court;

(ii)    to do otherwise would seem to be a collateral attack on the implied undertaking of confidentiality;

(c)    allowing the implied undertaking to fetter or restrict the Court’s power in relation to its own processes in the proceedings before it.

17    The appeal on this ground was set down for hearing on 15 November 2021.

18    Pursuant to the orders made by the Chief Justice on 3 November 2021, on 10 November 2021, the Commissioner filed an outline of submissions. Later on 10 November 2021, the Commissioner filed a further outline of submissions. It is the second outline of submissions which is relied upon by the Commissioner at the hearing of this appeal.

19    During the afternoon of Friday 12 November 2021, being the last business day before the hearing of this appeal, the Commissioner attempted to file a notice of contention, an interlocutory application and an affidavit of Ms Maria Marta Yum.

20    Written submissions were filed by Mr Ritson, through Mr Hutton, on the morning of the hearing, 15 November 2021.

Notice of contention and application to adduce further evidence

21    No objection was taken to the notice of contention or the interlocutory application. The affidavit of Ms Yum attaching the Optus documents was filed in support and read without objection.

The hearing on 15 november 2021

22    When the matter was called on for hearing, the Court raised a number of matters with counsel. First, it expressed the view, subject to hearing from counsel, that the Court was of the view (as now reflected in the reasons below) that the primary judge erred in failing to appreciate that he could have regard to the Optus documents notwithstanding the implied undertaking to the Queensland District Court: see Clifford v Vegas Enterprises Pty Ltd [2009] FCA 1204. For such reasons the Court expressed the view that there was likely an error.

23    Secondly, it expressed the view that, though there may have been some debate as to the degree of influence or weight of those documents on the assessment of the strength of Mr Ritson’s claims against Mr Ryan for malicious prosecution and abuse of process in the Queensland District Court, they were relevant to that issue (in the sense that they could rationally affect, directly or indirectly, the assessment of the probability of the existence of a fact in issue in the District Court proceeding) and hence it was not possible to say that the refusal to permit a reopening and to accept the Optus documents into evidence could not possibly have affected the judgment as to the merits of Mr Ritson’s case.

24    Thirdly, it expressed the view that the real issue for the disposition of the appeal was how Mr Ritson dealt with [84] and [85] of the primary judge’s reasons in Ritson (No 5) which were as follows:

84.     In the event that I am wrong in my assessment of Mr Ritson’s prospects in the Qld DCt proceedings, I should consider whether success by him in that case would be sufficiently prompt such that the Court would be justified in declining to make a sequestration order in his case. In that connexion I have regard to the fact that the creditor’s petition was presented nearly two years ago and yet the Qld DCt proceedings remain on foot and one cannot be confident that they will be resolved in the short term. It is almost impossible to conceive of them concluding in Mr Ritson’s favour in such a time frame absent a capitulation by Mr Ryan and there is no cogent evidence that that is a likely eventuality. It seems probable that the Qld DCt proceedings will proceed to a contested hearing, given that Mr Ritson’s affidavit sworn 30 July 2021 deposes to Mr Ryan having filed a defence.

85.     I conclude that, even if he is ultimately successful in the Qld DCt proceedings, the likelihood that Mr Ritson will receive a damages payment in a suitably short time is no better than remote. In those circumstances, I would not be satisfied that it was appropriate to decline to make a sequestration order.

25    In these paragraphs, the focus was not on whether Mr Ritson would obtain a judgment in the proceedings in the Queensland District Court in excess of the petitioning creditor’s debt, but that such outcome was likely to take some time. Meanwhile, the petition would become stale in circumstances where Mr Ritson had never asserted he was solvent. In such circumstances, the public interest and the interests of the general body of creditors become obviously important. There was no debate about the correctness of this approach of the primary judge in [84] and [85] to the disposition of the petition.

26    Mr Hutton’s response was that the documents would have meant that there was a significant degree of sharper focus on the issues and that the proceedings being demonstrated to be stronger were more likely to be resolved quickly. The primary judge recognised that the Queensland proceedings might be expected to be determined sufficiently quickly if there was a capitulation by Mr Ryan. Mr Hutton submitted that the Optus documents would have provided a further such circumstance.

27    In the light of the arguments, the Court inquired of counsel whether the points made in [84] and [85] were equally available to all grounds of appeal other than grounds 3(a), 3(b)(i) and 4(a) and 4(b) which dealt with asserted procedural deficiencies in the hearing.

28    Mr Hutton accepted and Mr Ritson gave instructions that there was no separate point to be made for the other grounds (apart from the procedural grounds) that were concerned with the asserted deficiencies in the primary judge’s analysis of the evidence concerned with the Queensland District Court proceedings and the prospects of success.

29    Thus the Court varied the orders made on 3 November 2021 that restricted the hearing of the appeal to ground 1 and indicated that it would deal with the whole appeal. The Court gave leave for further short submissions on the procedural points and otherwise reserved its decision on the arguments presented on 15 November on grounds 1, 2, 3(b)(ii)–(iv), (c), (d), 4(c) and 5 on the basis of the submissions as to why [84] and [85] were not an answer to the appeal. On 17 November, Mr Hutton filed a note of submissions abandoning grounds 3(a), 3(b)(i), 4(a) and 4(b) of the notice of appeal. May we say that this course was proper and correct and reflected appropriate instructions from Mr Ritson.

The appeal

30    The Commissioner submits that the first issue raised in the appeal is whether the decision of Barker J in Clifford v Vegas Enterprises Pty Ltd [2009] FCA 1204 was wrong. However, that is a false issue because the Commissioner submits that the decision in Clifford is correct.

31    In truth, the Commissioner’s opposition to the appeal is on two bases.

32    The first basis is that the primary judge was correct, albeit for four different reasons, to refuse to make the order requiring the production of the Optus documents as follows:

The primary judge was correct to conclude the Optus Documents ought not be admitted albeit for different reasons. First, the documents were produced by Optus on 30 June 2021. No proper explanation was provided by Mr Ritson (a resident of Queensland) as to why he did not take any steps to be released from the implied undertaking provided to the Queensland District Court. Second, no explanation was provided by Mr Ritson as to why he did not seek leave of the Federal Circuit Court to issue a subpoena on similar terms to Optus seeking those documents, or his delay in bringing the application to reopen. Third, no admissible evidence was adduced from Optus as to their internal systems to establish that they recorded and retained all call data in respect of a phone call received by an Optus managed mobile number, and, accordingly, the documents ought to be rejected under s 135(b) – (c) of the Evidence Act. Fourth, to the extent that the Optus Documents could affect the outcome of the proceedings, the delay in brining (sic) those documents to the attention of the Commissioner meant that the Commissioner was deprived of an opportunity to properly respond to them, given the imminent lapse of the creditors (sic) petition on 16 August 2021. The above matters would justify a refusal to admit the Optus Documents into evidence.

33    We reject these submissions.

34    The first and second reasons identified by the Commissioner are merely factors for consideration in the exercise of discretion to admit evidence. Further, both of these factors are explicable by the fact that Mr Ritson is a self-represented litigant (and obviously so) and it may be inferred that Mr Ritson was not aware of those procedures.

35    Further, during the hearing below, Mr Ritson did provide an explanation as to why he did not seek leave from the District Court, stating that:

I’ve put in evidence that Mr Ryan [the defendant in the District Court proceedings] has been delaying and not responding to various – the process in the District Court. ... I submit that going through a process of seeking leave from the District Court would require me to file an application, serve it on Mr Ryan, and go through that process, which would take weeks at best. And I’m conscious of the time limit in this proceeding, for the life of the creditor’s petition. ... So to suggest that I should have taken some other course ignores the fact of the tight timeframe, and also of Mr Ryan’s obvious uncooperativeness. [The] approach I’ve taken in the circumstances is the least time consuming and also the most efficient way of doing things.

36    The third reason identified by the Commissioner is misconceived. The Commissioner submits that the Optus documents were in any event inadmissible as the primary judge would have exercised his discretion to refuse to admit the documents under s 135 Evidence Act 1995 (Cth) including because there was no admissible evidence adduced from Optus as to their internal systems to establish that they recorded and retained all call data in respect of a telephone call received by an Optus managed mobile number. There are a number of difficulties with this submission.

37    First, Mr Ritson did not seek to tender the Optus documents below. This was no doubt due in part to the submission by the Commissioner that to do so would amount to contempt. And the primary judge intervened when Mr Ritson attempted to refer to their contents in oral submissions. Hence the question of the admissibility or discretionary exclusion of the Optus documents did not arise because of the acceptance by the primary judge of submissions advanced on behalf of the Commissioner.

38    Secondly, had Mr Ritson sought to tender the documents in the proceedings before the primary judge, which he did not, the purpose of the tender would have been to show that Mr Ritson possessed evidence which would be able to be adduced at the trial of the District Court proceedings (probably under s 95 Evidence Act 1977 (Qld)) and which would necessarily impact on the primary judge’s assessment of his prospects of success in relation to his claim in that proceeding. That was the fact in issue in relation to which the relevance of the representations in the document would have been assessed if the tender had been made.

39    Thirdly, if the argument had not been misdirected by the Commissioner and, in response to the tender, objection to admissibility had been made, no doubt the primary judge would have considered whether the documents should have been admitted subject to an appropriate limitation under s 136 of the Evidence Act 1995 (Cth).

40    The Commissioner has failed to show, and indeed cannot show, that the primary judge would have exercised a discretion to exclude this evidence under s 135 Evidence Act 1995 (Cth) in these circumstances. Indeed the suggestion that the documents may have been excluded on a discretionary basis (rather than rejected as inadmissible) merely reinforces that view we have formed that they were clearly relevant to the fact in issue we have identified (documents which do not pass through the Pt 3.1 “gateway” of relevance are not, of course, the subject of discretionary exclusion provided for by Pt 3.11).

41    The fourth reason identified by the Commissioner is similarly unmeritorious. The Commissioner submits that the delay in bringing the Optus documents to the attention of the Commissioner meant that the Commissioner was deprived of an opportunity to respond to them properly.

42    However, the interim application was filed on 30 July 2021 and the hearing was on 5 August 2021. The creditor’s petition did not lapse until 16 August 2021. Having regard to the small number of pages contained within the Optus documents, there is no apparent reason why the Commissioner would not have had sufficient time to review and respond to them, including by supplementary submissions, and for the application to be determined prior to 16 August 2021.

43    The second basis put forward by the Commissioner for opposing the appeal is that the admission of the Optus documents would have made no difference to the outcome of the case.

44    We have already noted that they were relevant. This is because, having regard to the submissions by the Commissioner before the primary judge, it was accepted by the Commissioner that the primary judge was required to engage in a consideration of the merits of Mr Ritson’s case in the District Court proceedings.

45    When undertaking this process, the primary judge concluded in Ritson (No 5) that he was satisfied Mr Ritson would satisfy the first two elements of the tort of malicious prosecution, as elucidated by the High Court in A v State of New South Wales [2007] HCA 10; 230 CLR 500.

46    However, the primary judge also concluded that he was unable to be satisfied Mr Ritson would be more likely than not to succeed in relation to the final two elements of the tort of malicious prosecution or the tort of abuse of process because the determination of these elements by the District Court would:

... depend on an assessment of the credibility of the two versions of events and of Messrs Ritson and Ryan themselves, which this Court cannot essay with any confidence in light of the nature of the evidence led in this proceeding. Put another way, an attempt by me [the primary judge] to determine which and who is more likely to be believed in the Qld DCt would not be much better than speculation.

47    As a consequence, the primary judge concluded there was no “other sufficient reason” and sequestrated the estate of Mr Ritson.

48    In this context, the submission that the admission of the Optus documents would have no impact on the primary judge’s consideration of Mr Ritson’s claims made in the Queensland District Court cannot be correct.

49    The Optus documents were relevant evidence in the District Court proceeding in that they would tend to prove or disprove the respective accounts of Mr Ritson and Mr Ryan which in turn were relevant to proving or disproving the elements of the torts which are the subject of the proceedings.

50    Consequently, the Optus documents were relevant to the primary judge’s consideration of the merits of Mr Ritson’s claim in the District Court proceedings in the way we have explained and we reject the submission that the admission of the Optus documents below would have made no difference to the primary judge’s consideration of the strength of Mr Ritson’s case against Mr Ryan.

51    That however does not mean that the appeal should be allowed. Mr Ritson still has to deal with [84] and [85]. In Ling v Enrobook Pty Ltd [1997] FCA 226; 74 FCR 19, the Full Court (Davies, Wilcox and Branson JJ) dealt with “other sufficient cause” in s 52(2)(b) of the Bankruptcy Act in circumstances where the debtor had other litigation. Relying upon Cain v Whyte [1932] HCA 6; (1933) 48 CLR 639 at 645–646, the Court made clear that it was for the debtor to make out the basis for the other sufficient cause. The Court indicated that a review of the authorities disclosed in certain circumstances, but not in all circumstances, the fact that the debtor has pending before a court legitimate claims to funds sufficient to satisfy the petitioning creditor’s debt may amount to other sufficient cause. The Court referred to the reasons of the primary judge (Lehane J) when his Honour said at 95:

As a general proposition … there is no apparent reason why a petitioning creditor should not be entitled to have a sequestration order made, if the requirements of s 52 are otherwise satisfied, simply because the debtor may have a counter-claim or cross-demand against some other creditor.

52    The Court then referred to the valuable judgment of Gibbs J (as the later Chief Justice of the High Court then was) in Re Schmidt; Ex parte Anglewood (1968) 13 FLR 111 at 115–116, where the following was said:

The second main contention of the debtor is that he is entitled to damages for the wrongful removal of his own property…The question immediately arises whether I should proceed to determine the existence and extent of the debtor's alleged claim. The position is different from that which arose in relation to his claim that the trucks were sold at an undervalue. In that regard any sum which the mortgagee was entitled to have brought to its credit as the amount which was realised, or ought to have been realised, on the sale of the mortgaged property must also be allowed to the credit of the debtor as surety, thus pro tanto reducing the amount of his indebtedness. It was therefore necessary to determine in this court the questions that arose in relation to that aspect of the matter. Where, however, the debtor claims to be entitled to unliquidated damages in tort against the petitioning creditor the position seems to me to be different. As a general rule this court is not an appropriate forum to decide such a claim and is limited to forming a view as to whether it appears that there is sufficient validity in the debtor's claims to justify a dismissal or adjournment of the petition…Considerable evidence directed to this issue has been given before me and it seems to me that I ought to consider this evidence for the purpose of deciding only whether it is probable that the debtor has against the petitioning creditor a claim which is likely to succeed. If I am satisfied that the debtor has a claim against the petitioning creditor equal to or exceeding the amount of the judgment debt, I should not make a sequestration order. If, however, it appears that the debtor has a claim which is less than the amount of the petitioning creditor's judgment debt, the proper course would seem to be to require the debtor, if he desires to avoid a sequestration order, to pay the difference between the amount of the judgment debt and the amount which it seems probable to me that he will recover in the proceedings against the petitioning creditor. In many cases it would be more convenient, assuming that the debtor showed that he had a real claim to litigate, to adjourn the proceedings to enable his claim to be tried in the ordinary courts, but that course was not taken in the present case, partly because the existence of any valid claim was vigorously denied by the petitioning creditor and partly because the proceedings in the Supreme Court have been somewhat dilatory.

53    Justice Gibbs was dealing with claims by the debtor against the creditor. In relation to claims against third parties by the debtor the Court in Ling referred at 26 to the judgment of the Full Court in Maddestra v Penfolds Wines Pty Ltd (1993) 44 FCR 303 saying:

The authorities also show that satisfaction that the debtor is well advanced with litigation likely to result in the debtor being in a position to pay his or her debts may well provide a basis for a finding that there is a “sufficient cause” for a sequestration order not to be made [reference was then made to Maddestra]. But the authorities do not suggest that it is in the public interest to allow insolvent debtors to prosecute litigation generally. They only recognise that it is not in the public interest for a debtor to be forced into bankruptcy by reason of a state of insolvency likely to be of only short duration.

54    At first instance, in Re Maddestra; Ex parte Penfolds Wines Pty Ltd [1993] FCA 83, Lee J was faced with circumstances not unlike the present. The debtor had a claim against the third party not fully well advanced at a time when the petition was about to become stale. Justice Lee said at 9 and 10, which was upheld by the Full Court, the following:

If collateral litigation is well advanced and likely to bring a beneficial result to a debtor, there may be good cause for the Court not to make a sequestration order and it may be satisfied that such an order ought not to be made. The Court may mould its order according to the circumstances, deferring further hearing of the petition subject to review or it may be entirely satisfied that a sequestration order ought not to be made on the petition at any time and that the petition should be dismissed.

In the present case the extended petition is nearing the end of its life and the point has now come where a determination must be made whether the petition should be dismissed or sequestration orders made. I am not satisfied that the debtors have shown that there is other sufficient cause in which the Court may conclude that a sequestration order ought not to be made. The making of those orders will have no bearing on the conduct of the litigation in the Supreme Court.

55    As the Full Court in Ling and Lee J in Maddestra [1993] FCA 83 made clear, the matters to weigh for consideration in circumstances such as these include the interests of the general public and the general body of creditors. In circumstances where Mr Ritson has not shown that the District Court proceedings are likely to come on any time soon, the learned primary judge was plainly correct in approaching the matter as he did in [84] and [85]. Mr Ritson was not solvent; any successful action would take time; the creditor is entitled to an order; and the general body of creditors are entitled to be protected. It is true that the approach of the primary judge in [84] and [85] did not include consideration of the Optus documents but the primary judge was explicit in noting that the point of departure for his consideration in those paragraphs was if he had been wrong in relation to assessment of the strength of Mr Ritson’s case. However, in the light of the acrimonious nature of the dispute between Mr Ritson and Mr Ryan, of the fact that there is no basis in the circumstances to conclude that the Optus documents would be transformative such that the case was likely to be resolved promptly, and of the correctness of the primary judge’s approach in [84] and [85], we are of the view that there is no reasonable possibility that the error of the primary judge could have led to a different outcome.

56    In these circumstances, notwithstanding that the learned primary judge made an error in how he treated the Optus documents and how he dealt with the reopening application because of that, and assuming (without deciding) the documents could have had a material effect upon the primary judge’s view about the strength of Mr Ritson’s case against Mr Ryan, there was no basis to conclude that even a reasonable case against Mr Ryan likely at some point to be successful should have prevented a sequestration order being made on the basis that there was other sufficient cause.

Stay or suspension of sequestration orders

57    The Commissioner did not seek leave to appeal the order made by the duty judge on the suspension of the sequestration order. It is appropriate, however, to make some comments in relation to this. We have not had the benefit of argument, but in the interests of the administration of bankruptcy jurisdiction by this Court, the following should be said.

58    The approach taken in Ritson v Commissioner of Police, New South Wales Police Force [2021] FCA 1315 to suspend the operation of the sequestration order was consistent with, and applied, the decision of James v Commonwealth Bank of Australia [2015] FCA 582; 236 FCR 379. Both of these cases concerned an appeal from a sequestration order made by a judge of the Federal Circuit Court.

59    In James, an order was made that “the operation of the sequestration order made against the estate of the applicant on 24 April 2015 be suspended to the extent necessary to permit the applicant to prosecute [certain proceedings]” on the premise that the power to make such an order arise from s 29 of the Federal Court of Australia Act 1976 (Cth). We consider this approach to be wrong.

60    Section 29 of the Federal Court Act provides that:

(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 and Family Court of Australia (Division 2) 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; and

(b)     the Court or a Judge may, by order, on such conditions (if any) as it or her or she thinks fit, suspend the operation of an injunction or other order to which the appeal, in whole or in part, relates.

61    However, s 29(2) of the Federal Court Act provides that:

This section does not affect the operation of any provision made by or under any other Act or by the Rules of Court for or in relation to the stay of proceedings.

62    That is, s 29 does not affect the operation of s 37(2) of the Bankruptcy Act which relevantly provides that that the Court does not have power to suspend the operation of a sequestration order.

63    Consistently with s 37(2), other single judge decisions of this Court have concluded that the Federal Court does not have power to grant a stay of a sequestration order: see, for example, Du Bray v ACW [2020] FCA 1142; Endresz v Australian Securities and Investments Commission [2014] FCA 1139; Stratton v Bowles [2014] FCA 1180; and Mehajer v Weston (Trustee), in the matter of Mehajer [2018] FCA 608; 16 ABC(NS) 135. A stay of a sequestration order is to the same effect as the suspension of a sequestration order.

64    Such decisions recognised, as is the case, that a sequestration order changes, by force of the statute, the status of a debtor, enlivens powers of a trustee and brings about changes to property. Such changes are drastic and immediate: see Bechara v Bates [2021] FCAFC 34; 388 ALR 414 at [176]; Robson as former trustee of the Estate of Samsakopoulos v Body Corporate for Sanderling at Kings Beach CTS 2942 [2021] FCAFC 143; 392 ALR 93 at [3] and [7] (per Allsop CJ with whom Markovic J and Derrington J agreed).

65    In The Owners - Strata Plan No 20,347 v Saha [2021] FCA 961, the parties asked the Court to grant a stay of a sequestration order by consent. Unlike the decisions referred to above, the stay was sought in the context of a review of a Registrar’s sequestration order. In that case, Stewart J stated at [21] – [24]:

I was well aware that in the context of an appeal from a sequestration order the court has no power to order a stay of the sequestration order, but only to order that proceedings under the sequestration order be stayed. That is because a sequestration order takes effect immediately it is made; the debtor immediately becomes a bankrupt, and their property immediately vests in the trustee in bankruptcy. Those are the effects of ss 43(2) and 58(1) of the Bankruptcy Act. Section 52(3) of the Bankruptcy Act provides that the court may stay all proceedings under a sequestration order for a period not exceeding 21 days, but it does not provide the power to stay a sequestration order. Also, under s 37(2) the court does not have power to suspend the operation of a sequestration order. I had discussed this issue not long before in Du Bray v ACW [2020] FCA 1142 at [4]-[11] where I had cited Endresz v ASIC [2014] FCA 1139 at [8]-[11].

However, the jurisdiction of the court in this case is exercised under s 35A of the Federal Court of Australia Act 1976 (Cth) (FCA Act) in review of a decision of a registrar under delegated power which decision is regarded as having been made subject to being able to be reversed or otherwise corrected by a judge on review. The right to seek review attaches to the delegation to the registrar and is an attribute of the nature of the delegated authority. If the review process is validly invoked in respect of an order made by a registrar, there is the possibility that by subsequent decision of a judge of the Court a different order will be made in place of the existing order. In effect, the delegated exercise of power is undone or revoked and a decision by a judge is made in its place. If there is a concern about steps being taken by parties based upon the order that has been made in the exercise of delegated power then interim relief could be sought pending the outcome of the review. See Bechara v Bates [2021] FCAFC 34; 388 ALR 414 at [1]-[6] per Allsop CJ, Markovic and Colvin JJ.

Section 35A(6) of the FCA Act provides that the court may, on application under sub-s (5) or of its own motion, review the exercise of power by a registrar and make such order or orders as it thinks fit in the matter with respect to which the power was exercised. It was held in Trustees of the Franciscan Missionaries of Mary v Weir [2000] FCA 574; 98 FCR 447 at [23] per Beaumont, Burchett and Hely JJ that s 35A(6) confers the power, in the context of a review of a registrar’s sequestration order, to stay such an order. It was under that Full Court authority that I made orders staying the sequestration order until 29 October 2021, listing the matter for hearing on that day and setting a timetable for the hearing.

As the events of this case demonstrate, which I will come to, I now doubt whether Weir is correct and whether as a matter of legal power or practicality a sequestration order made by a registrar can or should be stayed by a court in the exercise of its review power. That is however the law on current authority, and I applied it.

66    This Court has not heard argument on the issue of whether, in the context of a review of a Registrar’s sequestration order, the Court has power to grant a stay of a sequestration order. The question whether the Full Court in Trustees of the Franciscan Missionaries of Mary v Weir [2000] FCA 574; 98 FCR 447 is correct would or may involve an important constitutional question as to the scope of the necessary requirements attending a review by a judge of a Registrar’s decision made necessary by Harris v Caladine [1991] HCA 9; 172 CLR 84.

Orders

67    For the above reasons the appeal should be dismissed. There should be no order as to costs. The necessity for the appeal was brought about by the conduct of the matter below, and the failure of counsel for the respondent to alert the primary judge to the decision of Clifford v Vegas Enterprises [2009] FCA 1204. Further, the respondent was unsuccessful in respect of all arguments, save for the passing reference to [85] (not [84] and [85]) of the primary judge’s reasons in the last sentence of his submissions.

68    The Court wishes to express its gratitude to Mr Hutton for accepting the brief pro bono at short notice and putting all that could be put on Mr Ritson’s behalf. The willingness of members of the Bar to assist the Court in such circumstances, especially in the bankruptcy jurisdiction, so important and critical to the lives of ordinary people, is fundamental to the administration of justice, and should be recognised as such.

69    Finally, it goes without saying that Mr Ritson can continue with the Queensland proceedings as they are of a character contemplated by s 60(4) and s 116(2)(g)(i) of the Bankruptcy Act. If he is successful and if he obtains substantial damages, he will be in a position, if he sees fit, to seek to terminate his status as a bankrupt.

Associate:

Dated:    22 November 2021