FEDERAL COURT OF AUSTRALIA

Farrow Mortgage Services Pty Ltd (in liq), in the matter of Stone v Stone [1999] FCA 1761

BANKRUPTCY – application for adjournment of hearing of creditor’s petition – where debtor has appealed unsuccessfully to the Court of Appeal against judgment on which bankruptcy notice was based – whether sufficient prospects of debtor obtaining special leave to appeal from the High Court to justify further adjournment of the petition

Judiciary Act 1903 (Cth), s35A

IN THE MATTER OF GEORGE BARRY EVERETT STONE

FARROW MORTGAGE SERVICES PTY LTD (IN LIQ) v GEORGE BARRY EVERETT STONE

N7249 OF 1998

EMMETT J

10 DECEMBER 1999

SYDNEY

THE COURT ORDERS THAT:

1.         The application by the respondent for a further adjournment of the hearing of the petition be refused.

2.         A sequestration order be made against the estate of George Barry Everett Stone.

3.         The petitioning creditor’s costs, including all reserved costs (if any) of the hearings before Emmett J, be taxed and paid according to the Bankruptcy Act 1966.

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

REASONS FOR JUDGMENT

1                     I have before me a creditor's petition for an order for the sequestration of the estate of George Barry Everett Stone.  The matter first came before me on 24 March 1998 when it was referred by a Registrar.  On that day, for the reasons that I then gave, I adjourned the hearing of the petition to 28 April 1998.  I gave Mr Stone directions concerning the submission of further written submissions in support of any further application for an adjournment of the hearing of the petition.  The basis of Mr Stone's application for an adjournment was that he wished to pursue an appeal to the New South Wales Court of Appeal from the judgment of the Commercial Division of the Supreme Court of New South Wales upon which the bankruptcy notice that gave rise to an act of bankruptcy was based.

2                     On 28 April 1998, for reasons that I then gave, I stood the matter over for further directions on 19 June 1998 and extended the hearing of the petition up to that date.  On 19 June 1998, I directed Mr Stone to file a written response to submissions that had been filed by the respondent at that time.  The proceedings were stood over to 13 July 1998.  On 13 July 1998, I stood over the petition for directions on 9 October 1998, for reasons that I then gave.  On 9 October 1998, I again stood the petition over for directions to 6 November 1998.  I granted leave to the petitioner to restore the matter for directions if it wished to contend that Mr Stone's appeal to the New South Wales Court of Appeal was not being prosecuted reasonably and diligently.

3                     On 6 November 1998, the proceedings were stood over for further directions on 5 February 1999.  Once again, I granted leave to the petitioner to restore the matter for directions if it wished to contend that the appeal to the New South Wales Court of Appeal was not being prosecuted reasonably and diligently.  On 5 February 1999, I extended the period at the expiration of which the petition would lapse to 6 March 2000.  I stood over the hearing of the petition to 10 September 1999.  I also reserved liberty, once again, for the petitioner to restore the matter if the appeal to the Court of Appeal was not being prosecuted reasonably and diligently.

4                     On 10 September 1999, the proceedings were stood over again to 22 October 1999.  On that day, they were stood over again to 3 December 1999.  On 3 December 1999, the Court of Appeal dismissed Mr Stone's appeal for reasons which were then published – see Stone v Farrow Mortgage [1999] NSWCA 435.  The matter came before me on 3 December 1999 before that order was made and, accordingly, I stood the matter over to today.  I indicated that I would stand the matter over for directions but the petitioner now seeks the hearing of the petition.  Mr Stone opposes the hearing of the petition and seeks a further adjournment to enable him to seek the grant of special leave to appeal from the High Court.

5                     Mr Stone has addressed me for a short time today.  Notwithstanding that I drew his attention to section 35A of the Judiciary Act 1903 (Cth), which specifies the matters that the High Court must have regard to in considering the grant of special leave, Mr Stone addressed no submissions to those questions.  Rather, he sought to take me to matters which he contended demonstrate that the decision of the Court of Appeal was wrong.  More specifically, he endeavoured to canvass the factual and evidentiary matters that had been canvassed before Bainton J, at first instance in the Supreme Court, and before the Court of Appeal.

6                     I indicated to Mr Stone that it is not my function, sitting as a bankruptcy court, to sit on appeal from the decision of the Court of Appeal.  I indicated to him that, if he could persuade that there was some reasonable prospect of the grant of special leave by the High Court, I would be prepared to consider his application for a further adjournment of the hearing of the petition.  I indicated, however, that unless he could so persuade me, I was not prepared to adjourn the petition further.

7                     I am aware that Mr Stone feels strongly that he has not had a fair hearing in the Supreme Court.  I do not, in any way, endorse his feeling but, in deference to what I accept is a genuinely felt sense of injustice, I will say something about the judgment of the Court of Appeal.  The court was constituted by Meagher JA, Hodgson CJ in Eq and Cole AJA.  Meagher JA agreed with the reasons of Hodgson CJ in Eq and Cole AJA.  Hodgson CJ in Eq agreed with Cole AJA and added some reasons of his own. 

8                     Cole AJA concluded by saying that he had taken the unusual step of addressing the matters before the court at some length, rather than simply concentrating on criticism of the trial judge's findings.  His Honour adopted that course because of Mr Stone's obvious dissatisfaction with the trial proceedings and his unwillingness to accept the reality which the evidence, to Cole AJA’s mind, made plain.  Cole AJA had little doubt that that attitude was because of Mr Stone's close personal attachment to the property in question.

9                     The substance of Mr Stone's complaint is that the petitioner, in exercising a power of sale, breached its duty to act in good faith and to act with reasonable skill and care and to take reasonably adequate steps to ensure a fair price in relation to the sale.  Bainton J, at first instance, rejected the evidence of valuers called on behalf of Mr Stone regarding the value of the property at the time of sale, preferring evidence called by the petitioner.  It was that issue that occupied much of the hearing time before Bainton J and was the principal issue on appeal.

10                  Mr Stone presented his appeal to the Court of Appeal in person.  He filed a notice of appeal that comprised six paragraphs.  A supplementary notice of appeal was filed on 28 November 1997 that contained 219 paragraphs and covered 45 pages.  On 9 February 1998, Mr Stone filed an extension to the supplementary notice of appeal comprising a further 185 paragraphs and was 40 pages in length.  A fourth document, entitled “Extension to the Supplementary Appeal”, was filed on 4 February 1998 comprising 43 paragraphs and 6 pages.  Additional documents were handed up by Mr Stone at the hearing of the appeal.

11                  Cole AJA characterised those documents as “discursive, repetitive, verbose and contain[ing] emotional language not normally found in either a notice of appeal or submissions”.  Cole AJA observed that such documents would normally be struck out as not being in compliance with the Rules or practices of the court.  However, the court received the documents as being the basis of the submissions which Mr Stone wished to advance to the court.  The submissions were supplemented by oral submissions from Mr Stone which lasted a full day.

12                  Before me, Mr Stone advanced a further complaint that he was not given a fair hearing by the Court of Appeal.  The basis for that complaint appears to be that, after addressing for a full day, on the second day Mr Stone was indisposed and asked if he could defer submissions.  Counsel for the respondent to the appeal, being the petitioner before me, then addressed for some 2 hours.  It appears that the Court of Appeal then declined to hear Mr Stone further.  Mr Stone asserted before me that, on the basis of those circumstances, he was not given a fair hearing.  I do not accept that.  I have recited Cole AJA's observations about the documents to indicate that Mr Stone has had ample opportunity to put such submissions as he is capable of putting to the Court of Appeal.

13                  Mr Stone also complained that, after the Court of Appeal reserved its decision, he prepared supplementary submissions for the Court of Appeal which do not appear to have been received by the Court of Appeal.  Again, in the light of the material which had already been received, I do not consider that that could possibly give rise to a finding that the Court of Appeal had not given Mr Stone a fair hearing.

14                  Cole AJA, after those preliminary remarks, then embarked on a detailed examination of the background to the sale by the petitioner of the property in question.  That examination clearly entailed a consideration of evidence beyond the findings that were contained in Bainton J's decision at first instance.  Whether the material is material to which the court was taken by Mr Stone or counsel for the petitioner does not really matter.

15                  Cole AJA considered that it was impossible to hold, on the evidence of continuous endeavours to sell the property over a period of 18 months, both by Mr Stone and the petitioner, that other than the value of the property was achieved in the sale effected in February 1991 after the auction in 1990.  His Honour held that it followed that there was no sale by the mortgagee at an under-value.

16                  His Honour considered that, in the light of that conclusion, he would regard the valuation evidence of little significance.  However, his Honour then summarised the valuation evidence, including evidence that was not the subject of findings by Bainton J.  His Honour concluded that the approach taken by Bainton J was not in error.  His Honour therefore agreed with Bainton J that there was no evidence at all to suggest that the petitioner exercised its power of sale otherwise than in good faith.

17                  Hodgson CJ in Eq agreed with Cole AJA and added some reasons of his own.  Hodgson CJ in Eq observed that, in a case such as that before the Court of Appeal, there are two broad areas of inquiry:  first, the steps that were taken in relation to the sale and, second, the comparison between the sale price and the true value of the property.  His Honour considered those areas to be interdependent.

18                  To that extent, it may appear that the approach of Hodgson CJ in Eq, in his supplementary reasons, varies a little from the approach involving a dichotomy between the two that was espoused by Cole AJA.  Hodgson CJ in Eq observed that a price actually obtained after proper steps had been taken is strong evidence of the true value of the property.  On the other hand, if it is proved that the price obtained is substantially below the true value, that may be some evidence that proper steps were not taken.  The relationship between the price obtained and the true value is also relevant in that, if it is shown that the duty has been breached, the measure of damages is the difference between the sale price and the true value.  If there is no difference, there is no remedy.  Thus, in substance there is no real difference between the approach taken by Hodgson CJ in Eq and the approach of Cole AJA, with which Hodgson CJ in Eq agreed in any event.

19                  Hodgson CJ in Eq then dealt with Mr Stone's case, in relation to the steps taken in relation to the sale.  His Honour concluded that none of the complaints made by Mr Stone concerning the steps taken and the way the trial judge dealt with the steps was made out.  His Honour also accepted that the findings made by Bainton J concerning the valuation evidence were not erroneous.

20                  My purpose in summarising, in that way, the reasons of the Court of Appeal is to indicate that the question before the Court of Appeal was one of fact only.  There was no dispute as to the proper principle to be applied.  No attack has been made by Mr Stone on the statement of principle to be applied in assessing whether or not there has been an improper exercise of a power of sale by a mortgagee.  It is against that background that one must consider the possibility of success of any application by Mr Stone for the grant of special leave to appeal to the High Court.

21                  Section 35A of the Judiciary Act provides as follows.

“In considering whether to grant an application for special leave to appeal to the High Court under this Act or under any other Act, the High Court may have regard to any matters that it considers relevant but shall have regard to:

(a)       whether the proceedings in which the judgment to which the application relates was pronounced involve a question of law:

(i)        that is of public importance, whether because of its general application or otherwise; or

(ii)       in respect of which a decision of the High Court, as the final appellate court, is required to resolve differences of opinion between different courts, or within the one court, as to the state of the law; and

(b)       whether the interests of the administration of justice, either generally or in the particular case, require consideration by the High Court of the judgment to which the application relates.”

As I have said, no question of law is raised or would be raised by any appeal to the High Court. 

22                  The only possible basis on which leave could be granted is that the interests of the administration of justice require consideration of the decision of the Court of Appeal by the High Court.  Thus, if it were established that there was a clear miscarriage of justice, that may be a ground upon which the High Court would grant special leave to appeal.  However, where four judges of the Supreme Court have unanimously reached the same conclusion on the facts, it appears to me to be virtually inconceivable that the High Court would consider that there has been such a miscarriage of justice as would justify the grant of special leave.

23                  Nothing has been brought to my attention, either today or in the long hearings that I have already had in relation to this proceeding, that would persuade me that there has been such a miscarriage of justice as would justify the intervention of the High Court.  I do not consider that there is any prospect that leave would be granted or that the appeal would be upheld, if leave were granted.  That, of course, is not to pre-empt the decision of the High Court.  That is solely a matter for the High Court, but I am not persuaded that there are such prospects as would justify the further adjournment of the hearing of the petition.  For those reasons, I refuse the application for any further adjournment of the hearing of the petition.

24                  I am satisfied that George Barry Everett Stone committed an act of bankruptcy on 24 February 1998, as alleged in the petition.  I am satisfied with the proof of the other matters of which subsection 52(1) of the Bankruptcy Act 1966 requires proof.  Accordingly, I make a sequestration order against the estate of George Barry Everett Stone.  I order that the petitioning creditor's costs, including all reserved costs of the hearings before me, if any, be taxed and paid in accordance with the Bankruptcy Act. 

Associate:

Dated:              15 December 1999