FEDERAL COURT OF AUSTRALIA

Westpac Banking Corporation v Carver, in the matter of Carver [2003] FCA 221

BANKRUPTCY – PRACTICE & PROCEDURE – application to stay sequestration order pending application for special leave to appeal to High Court – factors to be considered – whether applicant must show that arguable that special leave application will be granted.

Bankruptcy Act 1966 (Cth)

Judiciary Act 1903 (Cth)

Adamopoulos v Olympic Airways SA (1990) 95 ALR 525

Ahern v Deputy Commissioner of Taxation (Qld) (1987) 76 ALR 137

Atkinson v Oakleigh Holdings Pty Limited (2000) 105 FCR 15

Bunnings Forest Products Pty Limited v Bullen (1994) 54 FCR 342

Digitech (Australia) Limited v Kalifair Pty Limited (unreported, 18 February 2003)

Gus v Johnston [2000] FCA 1455

SDN Children’s Services Inc v Hughes (unreported, 14 May 2002)

Oxford Companion to the High Court of Australia

IN THE MATTER OF MARIE PHILLIPPE CYRIL GRELY CARVER;  WESTPAC BANKING CORPORATION V MARIE PHILLIPPE CYRIL GRELY CARVER

NO. N 7373 OF 2002

IN THE MATTER OF DEAN STARR JOSEPH CARVER;  WESTPAC BANKING CORPORATION V DEAN STARR JOSEPH CARVER

NO. N 7271 OF 2002

BEAUMONT J

27 FEBRUARY 2003

SYDNEY

REASONS FOR JUDGMENT

Beaumont J:

1                     In the course of argument on the hearing of a petition for a sequestration order, a preliminary question of law has arisen and this judgment will deal with that preliminary question. 

2                     On behalf of the respondent debtors reliance has been placed upon the principle explained by Davies, Lockhart and Neaves JJ in Ahern v Deputy Commissioner of Taxation (Qld) (1987) 76 ALR 137 at 148 as follows:

“It is also well established that in general a court exercising jurisdiction in bankruptcy should not proceed to sequestrate the estate of a debtor where an appeal is pendingagainst the judgment relied on as the foundation of the bankruptcy proceedings provided that the appealis based on genuine and arguable grounds.”  (Emphasis added)

3                     Their Honours went on to refer to the “broad principle” that:

“[B]efore a person can be made bankrupt the court must be satisfied that the debt on which the petitioning creditor relies is due by the debtor and that if any genuine dispute exists as to the liability of the debtor to the petitioning creditor it ought to be investigated before he is made bankrupt.  Bankruptcy is not mere inter partes litigation.  It involves change of status and has quasi-penal consequences.”

4                     This passage has been cited and applied on many occasions.  It is sufficient for present purposes to refer to Adamopoulos v Olympic Airways SA (1990) 95 ALR 525 per Burchett and Gummow JJ at 531.  In Adamopoulos, Burchett and Gummow JJ went on (at 532) to say this:

“It will, of course, be observed that the principle is stated in terms which acknowledge the existence of exceptions;  It operates ‘in general’.”

5                     The history of the litigation between these parties is a lengthy one and I will, for present purposes, refer only to the following circumstances. 

6                     At first instance the respondent debtor failed in proceedings in the Equity Division of the Supreme Court of New South Wales.  An appeal from that decision was dismissed by the Court of Appeal of that Court in December 2002.  Recently an application for special leave to appeal from the Court of Appeal judgment has been filed in the High Court of Australia.  No date has yet been fixed by the High Court for the hearing of the application for special leave although an application for expedition of the special leave application has now been filed.

7                     As I have emphasised earlier, the principle upon which the respondent debtor now seeks to rely proceeds upon the assumption that the relevant analysis to be made by the Court at bankruptcy is an analysis of the prospects of an appeal being allowed, the analysis being, as has been noted, one that focuses upon the questions whether the appeal is genuine and is brought on an “arguable” ground.

8                     However, it is not, in my opinion, appropriate to describe the proceedings in the High Court as an “appeal” either as a matter of form or of substance.  This distinction has, however, been noticed in authority in this Court.  In Bunnings Forest Products Pty Limited v Bullen (1994) 54 FCR 342, Carr J (at 349), having cited the passage from Ahern and referred also to Adamopoulos, held, in an application for a stay of a declaratory order declaring that a deed of arrangement was void (the stay application being made pending the hearing of an application for special leave to the High Court), that the matter was to be approached by addressing the question whether the application for special leave “is based on genuine and arguable grounds”.

9                     His Honour also addressed the balance of convenience in the circumstances of that case and expressed the opinion that the interests of justice required that the petition be adjourned until the High Court heard the application for special leave. 

10                  In Gus v Johnston [2000] FCA 1455, a Full Court constituted by Drummond, Sackville and Dowsett JJ appears to have adopted an approach similar to that taken in Bunnings.   Sackville J (with the concurrence of Drummond and Dowsett JJ) at [13] – [17] again cited and considered the application of the principle laid down in Ahern and followed in Adamopoulos in the context of an application for the adjournment of a hearing of a creditor’s petition where a special leave application to the High Court was pending.

11                  Finally, in Atkinson v Oakleigh Holdings Pty Limited (2000) 105 FCR 15, Heerey J, in an application to set aside a bankruptcy notice, or alternatively, to extend time for compliance pending the hearing of a special leave application to the High Court, said at [5] – [6]:

“On the hearing of a bankruptcy petition the general rule is that the Court should not proceed to sequestrate the estate of the debtor where an appeal is pending against the judgment relied on as the foundation of the bankruptcy proceeding, provided that the appeal is based on genuine and arguable grounds:  Ahern v Deputy Commissioner of Taxation (Qld) (1987) 76 ALR 137 at 148;  Adamopoulos v Olympic Airways SA (1990) 95 ALR 525 at 531.

In Guss v Johnstone [2000] FCA 1455 at [13]-[17] the Full Court appeared to be of the view that the same approach should be adopted where the debtor is pursuing an application for special leave to appeal to the High Court.  However by the time the case came before the Full Court special leave had been granted and the appeal heard and dismissed so the refusal of the adjournment did not occasion the debtor any injustice:  at [17].”

12                  As has been said, it is plain that, as a matter of form as well of substance, an application for special leave to appeal to the High Court is different in character from the situation where an appeal lies as a right.

13                  Section 35A of the Judiciary Act 1903 (Cth) provides:

“35A   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 related 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.”

14                  It will be noted that the provisions of s 35A are prefaced by the recognition that, in considering whether to grant special leave, the High Court “may have regard to any matters that it considers relevant”.  What follows in subsections (a) and (b) are mandatory considerations.  The general approach taken by the High Court in considering whether to grant special leave in the exercise of its discretion to choose the appeals it will hear, has been explained by David Jackson in the title “Leave to Appeal” in the Oxford Companion to the High Court of Australia at 426 as follows:

“The selection of the cases in which special leave is granted identifies the areas in which the law may be changed or confirmed, and also the possible extent and pace of any change.  For example, one result of the expanded requirement for special leave is that criminal appeals have become a significantly larger part of the Court’s work ... .  The mix of cases plays a part in determining the extent to which the Court attracts a description such as activist or conservative.

Cases where special leave to appeal is granted fall into two broad categories – those in which a sufficiently important legal issue is involved, and those where there has been a significant irregularity in the way in which the matter was dealt with in the courts below ... .  The second category has been of particular importance in criminal cases, but is also important in ensuring that civil cases at all levels are conducted according to law ... .

Applicants for special leave ordinarily need to demonstrate that the issue they seek to agitate is of sufficient importance to merit the grant of special leave;  that the case is a suitable vehicle for the resolution of that issue;  and that their contentions on that issue are sufficiently arguable.

A case may not give rise to an issue of sufficient importance if it involves only a question of construction of a particular contract, or of a statute of limited application, or a question that is otherwise unlikely to arise again, or if the decision sought to be appealed from is interlocutory, or if in reality only a question of fact is involved.  A case may not be a ‘suitable vehicle’ if the resolution of the issue is not essential to the ultimate determination of the litigation, or is premature, or if the necessary findings of fact have not been made, or have been made against the applicant (so that an appeal would also be necessary on the factual issue).  Special leave will not be granted if the decision appealed from is not sufficiently attended by doubt.  Even if the reasoning of the court below may be dubious, special leave will not be granted if the result arrived at by that court is not sufficiently in doubt.”

15                  The special character of an application for special leave which distinguishes it in principle and in practice from the exercise of an appeal as of right has been explained recently by McHugh J in SDN Children’s Services Inc v Hughes (unreported, 14 May 2002) where, in dealing with an application for expedition of a special leave application, his Honour explained the distinction in character to which I have referred as follows:

“Three applicants for special leave to appeal in three separate proceedings seek expedition of their special leave applications.  An application for expedition of a special leave application in this Court is not comparable with an application for expedition of a proceeding in other courts.

First, an application for special leave is an application for permission to commence proceedings in the Court.  For that reason, there are no parties in the proper sense of that word to an application for special leave to appeal.  Nor is there any matter in the Court until leave is granted.

Second, there is no right to special leave.  Moreover, the judgment that is the subject of the application is not a provisional judgment, having no effect or efficacy until its validity is confirmed by this Court.  The judgment of the court below represents the rights and liabilities of the parties and, when entered, it can be immediately enforced unless this Court sets it aside or there is an order of this Court or the lower court staying the judgment.

Thirdly, no special leave application can be or ought to be brought unless it involves some matter of public importance or a miscarriage of justice.  There is no miscarriage of justice in the relevant sense merely because it appears that the decision below was wrongly decided.  If error alone constituted a miscarriage of justice, every arguably wrong decision would be a candidate for special leave to appeal.

By ‘miscarriage of justice’, I mean such a departure from the rules that govern judicial procedures as to make the decision of the court below not a judicial decision in the proper sense of the term and therefore one where the interests of the administration of justice require the grant of leave.

Before examining and hearing a special leave application, this Court must proceed on the basis that applications for special leave that are pending in the Court are properly brought. That has the result that in hearing an application for expedition the Court must proceed on the basis that other pending applications are either of public importance or involve a miscarriage of justice.  Regrettably, over 85 per cent of applications for special leave to appeal do not have the requisite qualifications and are dismissed.  Many of them should not even have been filed in the first place.

Despite these melancholy statistics, the Court can only proceed on the basis that all pending applications are of public importance or involve a miscarriage of justice.  Many pending cases also involve the liberty of the subject.  They concern persons serving gaol sentences or being detained in refugee detention centres.  If an application for expedition is successful, it means that another application must lose its relative priority.  In these circumstances, very strong grounds, particularly in a civil case, are needed before an application for expedition can succeed.

The need to maintain the temporal priority of applications is reinforced by the increasing number of special leave applications.  The number of applications for special leave has increased 787 per cent since 1984, yet the Court has the same number of Justices as it did in 1984.  Panels of three Justices consider each leave application, although often only two Justices will hear the application.  The Court has been forced to set aside many more days for hearing special leave applications than was the case when I was appointed to this Court in February 1989.  So many hearing days and out of court time of the Justices are now taken up with leave applications that it seems impossible to give any more time to leave applications without affecting the Court’s capacity to continue to perform its appellate and constitutional jurisdiction in a proper manner.

As a result of the increasing number of applications, the time between filing and the hearing of applications is continuing to increase.  This makes it all the more important [that] an application for special leave not lose its temporal priority unless the application seeking expedition has some urgent aspect or need that is different in kind from that of other pending special leave applications”.

16                  His Honour has very recently repeated those observations in a judgment given on 18 February 2003 in Digitech (Australia) Limited v Kalifair Pty Limited (unreported, transcript at p 9). 

17                  It must follow therefore, in my opinion, that whilst, as Burchett and Gummow JJ reminded us in Adamopoulos, these are general principles, the discretion to adjourn is not fettered, in any sense, where an argument is put on behalf of a respondent debtor that an adjournment of a petition should be granted upon the basis that the appeal is genuine and that there are arguable grounds upon which the appeal is based.  The relevant inquiry, in my opinion, should in truth proceed upon the footing that the subject matter for consideration is not an appeal as of right but an application for special leave to appeal.

18                  In other words, the question for this Court is not simply whether the appeal is genuine and that there is an obvious or manifest error of law or of fact in the judgment from which special leave is sought.  The respondent debtor must go further and show not only that the application for special leave to appeal is genuine, but that there are arguable grounds for concluding that special leave to appeal will be granted, given not only the provisions of s 35A of the Judiciary Act but also the other considerations explained by Mr Jackson.   

Associate:

Dated:              March 2003