FEDERAL COURT OF AUSTRALIA

Sood v Crown Diagnostic Imaging Pty Ltd [2006] FCA 715

BANKRUPTCY – application for stay of proceedings under sequestration order pending appeal – where assets frozen by order pursuant to Proceeds of Crime Act 2002 (Cth) – possible release of funds for costs of appeal – stay granted

Bankruptcy Act 1966 (Cth) s 58A

Proceeds of Crime Act (2002) (Cth)

Federal Court RulesO 52 r 17

Evans v Heather Thiedeke Group Pty Ltd (1990) 95 ALR 424applied

Stedman v Commissioner of Taxation [1999] FCA 539 applied

DR SUMAN SOOD v CROWN DIAGNOSTIC IMAGING PTY LTD

NSD 590 OF 2006

GYLES J

30 MAY 2006

SYDNEY

ON APPEAL FROM THE FEDERAL MAGISTRATES COURT OF AUSTRALIA

THE COURT ORDERS THAT:

1.       The sequestration order made by Raphael FM on 1 March 2006 against the applicant’s estate be stayed up to and including the date of determination of the appeal or further order of the Court.

2.       Costs be costs in the appeal.

3.       Order 1 above is conditional upon:

(a)     the applicant delivering to the respondent a statement of affairs within seven days.

(b)     the applicant prosecuting the appeal expeditiously.

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

ON APPEAL FROM THE FEDERAL MAGISTRATES COURT OF AUSTRALIA

REASONS FOR JUDGMENT

1                     This is an application for a stay of proceedings under a sequestration order pending appeal.  Because of the limitations in the Bankruptcy Act 1966 (Cth) (the Act) it must be seen as an application pursuant to O 52 r 17 of the Federal Court Rules which has been held to operate in circumstances such as the present.  See for example Stedman v Commissioner of Taxation [1999] FCA 539 which referred in turn to Evans v Heather Thiedeke Group Pty Ltd (1990) 95 ALR 424.

2                     The circumstances which give rise to the application are somewhat unusual.  At least the bulk of the applicant’s assets are the subject of an order made pursuant to the Proceeds of Crime Act 2002 (Cth).  The effect of that order is that the proceeds are effectively frozen and can only be released on somewhat restrictive conditions.  Because the original order was made in the Supreme Court of New South Wales, it is apparently thought desirable that any application pursuant to the Proceeds of Crime Act be made to that Court.  I cannot say any more about what might happen on an application to free enough money to enable the applicant to pursue her appeal to be paid to the trust account of the solicitor for the applicant.

3                     However, it is relevant to that application, and also relevant to the basis for a stay, for me to say that, in my opinion, the appeal is arguable.  There are provisions of the Act which relate to the interplay between it and the Proceeds of Crime Act (see for example s 58A of the Act)and, no doubt, on some occasion it will be necessary to closely examine how the two Acts interrelate.  It will be necessary to look at some of those issues in the course of the appeal in this case.

4                     The Trustee in Bankruptcy, whilst accepting the case to be made in practice for the payment to be permitted, draws attention to the fact that vesting of property is effective by virtue of the operation of s 58 of the Act and there is no authority to establish that a stay would negate the effect of what has occurred to date.  Indeed, as I read Stedman, the tendency may be rather to the contrary.  However, it seems to me that a stay would operate from its date and the sequestration order would not have an effect upon events after that.  Thus, the practical effect of the sequestration order would not lead to any moneys held pursuant to the Proceeds of Crime Act being vested in the Trustee to the exclusion of the bankrupt if released after the stay.  In my opinion, if the Supreme Court of New South Wales were persuaded to make an order releasing some of those moneys, they would not vest in the Trustee but could be properly paid to the solicitors for the applicant for the purpose of conducting the appeal.

5                     I can do no more than express my view about the way the law operates.  The solicitor for the applicant seeks some comfort in relation to any claim that might be made in the event of the appeal failing.  I think it is better that I say no more than I have said about that issue at the moment.

6                     Under the circumstances, as the order under the Proceeds of Crime Act is in force, I therefore propose to grant a stay of proceedings under the sequestration order until the disposition of the appeal or earlier order on certain terms which have been discussed between the parties.

Associate:

Dated:              8 June 2006