FEDERAL COURT OF AUSTRALIA

Cirillo v Consolidated Press Property Pty Ltd (formerly known as Citicorp Australia Limited) [2007] FCA 592

VINCENZO GIOVANNI CIRILLO v CONSOLIDATED PRESS PROPERTY PTY LIMITED (FORMERLY KNOWN AS CITICORP AUSTRALIA LIMITED), CW CONSTRUCTION PTY LTD (RECEIVERS AND MANAGERS APPOINTED) (IN LIQUIDATION), JOHN HAROLD HEARD AND STEPHEN ELLIOTT YOUNG

SAD 57 OF 2007

LANDER J

24 APRIL 2007

ADELAIDE

IN THE MATTER OF VINCENZO GIOVANNI CIRILLO

THE COURT ORDERS THAT:

1.                   The time for the trustee in bankruptcy to make an election in writing as to whether to prosecute or discontinue the proceedings brought by the applicant in the Supreme Court of South Australia be extended to 14 days after the disposal of the appeal.

2.                   The application for a stay of the sequestration order be dismissed.

3.                   The parties have liberty to apply in relation to this order and the timely prosecution of the appeal.

4.                   The applicant pay the respondents’ costs of the application for a stay and the hearing of the stay application on Friday, 20 April 2007.

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

IN THE MATTER OF VINCENZO GIOVANNI CIRILLO

REASONS FOR JUDGMENT

1                     The applicant has appealed against orders made by Mansfield J on 23 March 2007 wherein his Honour:

(1)        refused an application for an adjournment at the hearing of the respondent’s creditors petition;

(2)        made a sequestration order against the estate of the applicant;

(3)        ordered that the respondent’s costs be taxed and paid in accordance with the Bankruptcy Act; and

(4)        refused an application for a stay of the order.

2                     The applicant has applied again for a stay of the order.  The order sought is that all proceedings under the sequestration order made against the estate of the respondent be stayed pending the final determination of his appeal against the judgment pursuant to O 52 r 17 of the Federal Court Rules or any other enabling power.

3                     The appeal and the notice of motion seeking the stay order were filed on 3 April 2007, 11 days after his Honour’s orders.  The application for a stay came on for hearing before me on Friday, 20 April 2007.  The hearing proceeded all day.

4                     During the course of the hearing, counsel for the respondents argued that the applicant was in default of the sequestration order in that he had not complied with his obligation to provide a copy of his statement of affairs to the trustee within 14 days after the sequestration order was made: s 54 of the Bankruptcy Act 1966 (Cth) (the Act).  At the end of that day’s hearing, I directed the applicant to make out and file his statement of affairs and furnish a copy to the trustee, and exhibit a copy of it to an affidavit to be filed in this Court by one o’clock on Monday, 23 April 2007.  The applicant complied with that direction.  He also complied with a further direction that he meet with the trustee on Monday afternoon. 

5                     The application for a stay was brought in part to protect the applicant from losing the benefit of a proceeding in the Supreme Court by the operation of s 60(2) of the Act pending the appeal.  The applicant has brought proceedings in the Supreme Court, inter alia, seeking an order for discovery against the respondents, so that the applicant might consider whether he should apply to set aside the costs order upon which the petition for the applicant’s bankruptcy was based.

6                     The applicant also claimed that, if a stay order were not made, it would suffer other prejudice which he identified in his affidavit, which was sworn and filed on 3 April 2007.  In that affidavit, he deposed to the effect that the sequestration order would have upon him unless a stay was granted.  The statement of affairs, which has now been exhibited to an affidavit sworn on 23 April 2007 by the applicant, demonstrates that much of which was contended for as prejudicial effect upon the applicant could never be made out.  The only prejudice that the applicant could ever suffer, by reason of the sequestration order continuing in full force until the hearing of the appeal, would be, perhaps, the statutory effect of s 60(3) of the Act in relation to the Supreme Court proceedings, which would mean that the proceedings would be abandoned.

7                     The trustee was represented at the hearing on 20 April 2007 but was unable to be present today.  However, the trustee has made written submissions to the Court and proposed a solution which would mean that the only point of prejudice which might be suffered by the applicant, pending the disposal of the appeal, is addressed.  The trustee has suggested that I could make an order pursuant to s 60(3) of the Act to extend the time under which the trustee has to elect in writing to prosecute or discontinue the Supreme Court proceedings until 14 days after the disposal of the appeal.  I have power to make an order of that kind by reason of s 33(1)(c) of the Act. 

8                     Both the applicant and the respondents have agreed that I should make an order extending the time for the trustee to elect to prosecute or discontinue the action until 14 days after the disposal of the appeal.  The respondents urged that the application for the stay be dismissed.  The applicant has agreed that the application for the stay should be dismissed if I were to make the order in relation to s 60(3) of the Act.

9                     The respondents have claimed the costs of the application for the stay.  The applicant opposes any order for costs. 

10                  I have had an opportunity of considering the applicant’s application between Friday and today and had written my reasons in relation to the application.  I had reached the firm view that the application for the stay should be dismissed.  It is not, of course, now necessary to give those reasons because the parties agree that the application for the stay should be dismissed upon me making the order under s 60(3) of the Act.  However, I should comment that the application which was brought to this Court was brought, in part, not only to protect the applicant in relation to the proceedings in the Supreme Court but also upon claims that the applicant would suffer other adverse effects as a result of the sequestration order if the stay were not granted pending the appeal. 

11                  It is clear now from the contents of the statement of affairs that the prejudice which the applicant claims he would have suffered could simply never be made out.  For example, the applicant said in his affidavit that his appeal against the orders made by Mansfield J would be rendered nugatory if the stay were not granted.  That simply is not right in law.  Clearly, the making of a sequestration order does not prevent the debtor from appealing against the order.  The right to appeal, unlike other rights, does not vest in the trustee in bankruptcy. 

12                  Next, he said that the sequestration order, unless stayed, would cause him irreversible and irreparable harm to his good name, credit rating and his ability to obtain credit which, he said in his affidavit, he needed at this time to assist him to rebuild his life after the extensive loss and damage suffered as a consequence of the conduct of the applicant. 

13                  Next he said that the sequestration order, unless stayed, would affect his ability to establish and operate a business of his own in the future and to derive an income.  He said he would not be able to become a director of a company and may be prevented from holding the office of a director.  He said that his bankruptcy would adversely affect his employment prospects and standing in the community.  He said he would have to surrender his passport.  He said that if he were made bankrupt this would adversely affect his capacity to support and provide for his dependants’ basic necessities of life.

14                  Those complaints, perhaps with the exception of the surrender of his passport, simply could never be made out.  The statement of affairs, which has been exhibited to his affidavit sworn on 23 April, shows that he has only one asset and that is the sum of $200 in cash.  He claims to have an asset in the sum of $156,300,000, being moneys he said are owed to him by the first respondent.  That claim simply cannot be right.  His proceedings against the first respondent were dismissed in the Supreme Court of South Australia in 2005.

15                  His statement of affairs shows that he is 68 years of age and due to turn 69 later this year.  He is, and has been, on an age pension for some years.  He has not been involved in business, apparently, for some years and he has no other assets apart from the sum of $200.  I cannot understand how, having regard to his statement of affairs, the assertions could have been made in his affidavit of 23 April of the prejudice that he would suffer if the order were not made.

16                  If due consideration had been given to the matters contained in the statement of affairs, this application would have been brought only for the purpose of protecting the applicant’s proceedings in the Supreme Court and for no other reason.  The matter would have been disposed of very quickly and not have taken the whole of Friday.

17                  There is an obligation on parties to litigation to be frank and candid in the evidence which they put before the Court.  There is an obligation on all parties, and especially parties in the position of the applicant, not to mislead the Court.  There is no explanation in the later affidavit as to why the matters claimed to be matters of prejudice to the applicant were contained in the first affidavit.  If I had not ordered that the applicant comply with his statutory obligations, which at the time of the hearing he had neglected to do, it would not have come to the attention of the Court that the claimed matters of prejudice simply did not exist.

18                  Orders for cost, of course, are not made by way of penalty.  They are made for the purpose of compensating the successful party in the legal proceedings.  However, it is appropriate to take into account, when ordering costs, the way in which the litigation was conducted and whether or not the manner of the conduct of the litigation itself caused harm to the other party.  In the end, the matter has been resolved by both parties accepting the sensible suggestion of the trustee.  However, the respondents have been put to costs to which they should not have been put and time has been taken which ought not to have been taken.

19                  If, before the hearing of this matter, the applicant had complied with his statutory obligations and provided the information which was provided yesterday to the trustee, both the respondents and the Court would have known well before the hearing of the matter that the matters claimed to be prejudicial to the applicant could not be sustained.  In those circumstances, I think it right that the applicant should pay the respondents’ costs and I will make an order accordingly.

20                  I make the following orders:

1.         The application for the stay of the sequestration order will be dismissed.

2.         I will extend the time for the trustee to make an election in writing as to whether to prosecute or discontinue the proceedings brought by the applicant in the Supreme Court of South Australia until 14 days after the disposal of the appeal.

3.         I will give the parties liberty to apply in relation to the order and in relation to the timely prosecution of the appeal.

4.         I will order the applicant to pay the respondents’ costs of the application for a stay and the hearing of the stay application on Friday, 20 April 2007.

5.         I will make no order as to the costs of today.

Associate:

Dated:         30 April 2007