FEDERAL COURT OF AUSTRALIA
Reynolds v Aluma-Lite Products Pty Ltd [2010] FCA 322
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Citation: |
Reynolds v Aluma-Lite Products Pty Ltd [2010] FCA 322 |
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Appeal from: |
Aluma-Lite Products Pty Ltd v Reynolds & Anor [2010] FMCA 122 |
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Parties: |
ROSS MACKENZIE MAX REYNOLDS and MARGOT LOGAN REYNOLDS v ALUMA-LITE PRODUCTS PTY LTD ACN 009 843 832 |
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File number(s): |
QUD 65 of 2010 |
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Judges: |
SPENDER J |
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Date of judgment: |
24 March 2010 |
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Catchwords: |
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Legislation: |
Bankruptcy Act 1966 (Cth) s 52(3) Federal Court of Australia Act 1976 (Cth) s 29 Federal Court Rules O 52 r 17 |
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Cases cited: |
Boumelhem v Commonwealth Bank of Australia(2008) 171 FCR 462 cited Burns v AMP Finance Ltd [2005] FCA 761 referred to Evans v Heather Thiedeke Group Pty Ltd (1990) 95 ALR 424 referred to Freeman v National Australia Bank Limited [2002] FCA 427 cited Goldberg v Motto (2004) ALD 244 cited Rigg v Commonwealth Bank of Australia [2001] FCA 1340 referred to |
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Date of hearing: |
16 March 2010 |
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Place: |
BRISBANE |
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Division: |
GENERAL DIVISION |
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Category: |
Catchwords |
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Number of paragraphs: |
82 |
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Counsel for the Appellants: |
Mr L Harrison QC with Mr A Evans |
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Solicitor for the Appellants: |
Shand Taylor Lawyers |
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Counsel for the Respondent: |
Mr B O'Donnell QC |
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Solicitor for the Respondent: |
Ellison Moschella & Co |
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IN THE FEDERAL COURT OF AUSTRALIA |
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QUEENSLAND DISTRICT REGISTRY |
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GENERAL DIVISION |
QUD 65 of 2010 |
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ON APPEAL FROM THE FEDERAL MAGISTRATES COURT OF AUSTRALIA |
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ROSS MACKENZIE MAX REYNOLDS First Appellant
MARGOT LOGAN REYNOLDS Second Appellant
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AND: |
ALUMA-LITE PRODUCTS PTY LTD ACN 009 843 832 Respondent
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JUDGE: |
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DATE OF ORDER: |
24 MARCH 2010 |
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WHERE MADE: |
BRISBANE |
THE COURT ORDERS THAT:
2. Costs on the motion be costs of the parties in the appeal.
Note:Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
The text of entered orders can be located using Federal Law Search on the Court’s website.
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IN THE FEDERAL COURT OF AUSTRALIA |
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QUEENSLAND DISTRICT REGISTRY |
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GENERAL DIVISION |
QUD 65 of 2010 |
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ON APPEAL FROM THE FEDERAL MAGISTRATES COURT OF AUSTRALIA |
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BETWEEN: |
ROSS MACKENZIE MAX REYNOLDS First Appellant
MARGOT LOGAN REYNOLDS Second Appellant
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AND: |
ALUMA-LITE PRODUCTS PTY LTD ACN 009 843 832 Respondent
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JUDGE: |
SPENDER J |
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DATE: |
24 MARCH 2010 |
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PLACE: |
BRISBANE |
REASONS FOR JUDGMENT
1 This is an application pursuant to O 52 r 17 of the Federal Court Rules for a stay of the sequestration order made by Burnett FM on 25 February 2010 until an appeal filed in this Court on 5 March 2010 is determined. On 25 February 2010, Burnett FM made the following orders:
1. A Sequestration Order be made against the estate of ROSS MACKENZIE MAX REYNOLDS and MARGOT LOGAN REYNOLDS.
2. The Applicant Creditor’s costs (including reserved costs, if any) be taxed and paid from the estate of the Respondent Debtor in accordance with the Bankruptcy Act 1966.
3. That pursuant to s.52(3) Order 1 be stayed until 4.00 pm on 10 March 2010.
4. That the respondent file any application for stay pending appeal, if any, by 4.00pm 5 March 2010.
5. That the matter be adjourned to 9.30am on 10 March 2010.
2 At the conclusion of those orders, the Court noted that “the date of the act of bankruptcy is 16 February 2008.”
3 By further orders, including the orders made by Burnett FM on 10 March 2010, the stay was extended to 17 March 2010.
4 Section 52(3) of the Bankruptcy Act 1966 (Cth) (the Bankruptcy Act) provides:
(3) The Court may, if it thinks fit, upon such terms and conditions as it thinks proper, stay all proceedings under a sequestration order for a period not exceeding 21 days.
5 Order 52 r 17 of the Federal Court Rules relevantly provides:
17(1) An appeal to the Court shall not –
(a) operate as a stay of execution or of proceedings under the judgment appealed from; or
(b) invalidate any intermediate act or proceeding;
except so far as the Court or a Judge or the court below may direct.
…
17(3) An application for a direction of the Court or a Judge under subrule (1) shall be made to the Court or a Judge by motion upon notice, and may be made whether or not a similar application has been made to the court below. An application for a direction under subrule (2) shall be made to the Court by motion upon notice, and may be made whether or not a similar application has been made to the court below.
6 The 21 days mentioned in s 52(3) of the Bankruptcy Act expired on 18 March 2010.
7 When the matter was before me for the stay application on 16 March 2010, I made an interim order extending the stay until 4 pm today and indicated that I would give judgment on the stay application at 10.15 am today.
8 Section 29 of the Federal Court of Australia Act 1976 (Cth) provides:
29(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 Magistrates Court 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 he or she thinks fit, suspend the operation of an injunction or other order to which the appeal, in whole or in part, relates.
29(2) 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.
9 Because of doubts based on a judgment of Phipps FM in Goldberg v Motto (2004) ALD 244 as to the competence of a stay application made to the Federal Magistrates Court, the applicant decided that an application for a stay should be made to the Federal Court of Australia.
10 It is common ground that this Court has power to entertain that stay application. It is also common ground that the relevant considerations in determining whether a stay of proceedings should be granted are whether there is an arguable point on the proposed appeal and whether the balance of convenience favours the granting of a stay: Freeman v National Australia Bank Limited [2002] FCA 427; Boumelhem v Commonwealth Bank of Australia (2008) 171 FCR 462 at 467, at [23] of that judgment.
11 Also, it is common ground that it is sufficient that the application for a stay demonstrate a reason or an appropriate case to warrant the exercise of the discretion in the applicant’s favour, and each case has to be determined on its own merits. That is particularly important in the present case where, as I hope to indicate, there seems to be a conflating of issues in relation to the creditor’s petition with issues which were the subject of proceedings in the Supreme Court before by Martin J.
12 This proceeding has a long and complicated history, and it is important to have regard, first of all, to those parts of the history that are directly relevant to the making of the sequestration order, and in particular to the stay application made to this Court concerning it.
13 The history of direct relevance starts with the judgment of Fryberg J on 14 March 1996 in proceedings numbered 1822 of 1995 in the Supreme Court, where his Honour ordered that the plaintiff recover against the defendants the sum of $1,750,000, and interest at the rate of $635.62 per day from 1 March 1996 until payment. His Honour also ordered that the plaintiff recover possession of the land described in the schedule to that judgment, but that execution of any writ of possession be stayed until 28 March 1996, and his Honour ordered that the defendants pay the plaintiff’s costs of an incidental to that application.
14 The next step directly relevant to these proceedings is the order of McMurdo J on 15 August 2003, who ordered that the plaintiff, Aluma-Lite Products Pty Ltd, be given leave to start enforcement proceedings against Mr and Mrs Reynolds in relation to the judgment given on 14 March 1996. His Honour ordered that there be no order as to costs.
15 The next set of events directly relevant occurred in January 2008, concerning enforcement proceedings. I will have to deal in some detail with those events.
16 Amongst other things, those events reveal that attempts were made in execution of the judgment to take possession of property at 4 Kruiswijk Court, Middle Ridge, Queensland, 4350, on 21 January 2008. Eventually the notice to vacate which was served with the warrant of enforcement was retrieved by the bailiff, having been informed by Mr Ross Moschella, solicitor for Aluma-Lite Products, that the premises the subject of the notice to vacate was owned by Mr and Mrs Reynolds’s daughter.
17 On 25 January 2008, Mr Roach, the enforcement officer and bailiff, received requests from Mr Moschella to collect items of property for auction. Those items included 20 stays for fencing, food troughs and 1x1 hp electric motor and gearbox. Those chattels were said to be owned by Mr and Mrs Reynolds, on a property at Wickhams Road, Elbow Valley via Warwick.
18 The bailiff hired a vehicle, went to the property, loaded those items and took them to a holding yard. On 3 February 2008, the bailiff was instructed by Mr Moschella to return all the items that had been seized, except for the 1 hp motor. He then returned those items to the property at Elbow Valley and on 8 February arranged for a notice of sale to be placed in the Toowoomba Chronicle for the sale of property, namely:
1 hp electric motor and gearbox in nonworking condition … as is and where is …
as instructed by Mr Moschella.
19 On 16 February, the bailiff attended the Toowoomba Supreme Court for the auction. The motor and gearbox was sold for $5.
20 On 22 February, in a report by Mr Roach, he indicated that the enforcement warrant was returned to Toowoomba Supreme Court unsatisfied. In respect of the sale of the electric motor and gearbox, the report indicates that $1,063.15 (the aggregate of $170.78, $76.06, $191.38, $55, $70.42, $336.51, $100 and $63) was expended in the execution of the enforcement warrant, which resulted in a sale of the motor for $5.
21 The next matter directly relevant is the creditor’s petition which was filed on 10 March 2008. After reciting that the debtors jointly and severally owe the applicant creditor the amount of $858,710.00 for a judgment debt awarded in March 1996, and setting out details of that calculation, the petition says in paragraph 4:
The following acts of bankruptcy were committed by the Respondent Debtors within six months before presentation of this petition:
In the consequence of execution against the respondent debtors that:
(i) property of the Respondent Debtors has been sold and;
(ii) the warrant of execution relating to the act of bankruptcy has been returned unsatisfied.
22 That petition was heard on 17 February 2010. It is to be noted that the life of the creditor’s petition under the Bankruptcy Act is two years, and so there is naturally to be inferred that there was a degree of urgency in the hearing of the petition having regard to the fact that the creditor’s petition was presented on 10 March 2008.
23 Also contributing to the urgency of that hearing is the circumstance that the affidavit of Mr Ross Moschella, deposing to many of the incidents involved in Supreme Court litigation before Martin J, was filed only the day before the hearing on 16 February 2010, as was the affidavit of Mr Peter Roach, the bailiff, concerning the events which occurred in January and February of 2008.
24 The affidavit of the respondent to the creditor’s petition, Ross Reynolds, had been filed on 11 February 2010.
25 On 25 February 2010, Burnett FM delivered his decision and ordered that the estate of Mr and Mrs Reynolds be sequestrated.
26 Associated with the chain of events relevant to the making of the sequestration order is a proceeding in the Supreme Court which commenced in 1997. That proceeding involved four versions of the statement of claim, and a three-week trial in October 2008 before Martin J. Martin J delivered judgment on 27 November 2009. Because it is relevant to the reasons for judgment of Burnett FM, it is necessary to have regard to a number of aspects of his Honour’s reasons.
27 Paragraph 10 and 11 of Martin J’s judgment deals with “The issues”:
[10] The main dispute arises out of the contentions by the Reynolds that Aluma-Lite failed to take reasonable care when selling the properties and, thus, obtained less than market value for them.
[11] The other major issues are related to the sale of other property – grain, equipment, cattle, horses and other chattels – by Aluma-Lite which the Reynolds say it was not entitled to sell.
28 At [88] and [89], under the heading “The claim in detinue and bailment”, Martin J said:
When the defendant entered into possession there were chattels left on Condamine Ponds (some grain, cattle and horses) which were not the subject of the defendant’s securities. There was also machinery and associated items which had been left on either the road reserve or the mortgaged land. The plaintiffs claim that they were the owners of all those items or were entitled to immediate possession of them. They further claim that adequate demands for the return of those items were made, but they were not so returned, and that, as a result they have suffered damage.
The plaintiffs, in their written submissions, seek damages for the loss of use of certain machinery for the two year period from the date of the mortgagee going into possession until September 1998. The basis upon which those damages are calculated is that the plaintiffs could have hired out the five particular pieces of machinery: a D4 bulldozer, a D7 bulldozer, a Massey-Ferguson 760 harvester, a John Deere 4630 tractor and a John Deere 2010 tractor. That claim is based upon a loss of a chance of hiring out the equipment in accordance with the principles in Malec v Hutton (1990) 169 CLR 638.
29 At [91], his Honour continued:
By the Wilson bill of sale the plaintiffs effectively used all of their otherwise unsecured property as security for a loan from Wilson. The only other similar items of any worth were the subject of another bill of sale to the defendant.
30 And at [92], his Honour, in part, said:
… Each of the five items of equipment the subject of the claim for damages was left on the road reserve and formed part of that blockade. After the machines had been there for about a month, the defendant caused them to be moved from the road reserve onto one of the properties. That was done without the permission of the plaintiffs but the defendant justified it on the basis that the road reserve needed to be cleared in order that access could be obtained and that the properties could be sold. The machines stayed on the property for a couple of years and were moved in that time as parts of the property were sold. They eventually ended up on the Kingsley property.
31 At [97], his Honour continued:
The plaintiffs found themselves in the position that, having left the machines on the road reserve, they had given up actual possession of the machines and, being in default under the Wilson bill of sale, did not have a right to immediate possession but only the right to pay all amounts outstanding in order to regain that right.
32 At [102], his Honour said:
The five particular items of machinery ceased to be in the possession of the plaintiffs when they abandoned them on the road reserve at the beginning of October 1996. When the defendant did move those machines from the road reserve onto the mortgaged property any right that may have existed was that of R W L Wilson Pty Ltd and not the plaintiffs. That finding brings to an end the claim both in detinue and bailment but I will proceed to consider, briefly, the other aspects of the elements of a claim in detinue.
33 At paragraph 137, his Honour said:
Both parties agree that it is appropriate to order an account but that the exercise can be accepted as having been undertaken by the taking of the evidence in this trial. I am satisfied that there is a dispute between the parties as to the amount owing, that any declaration relates to the amount of the judgment debt which was outstanding at the date of trial, and that there is utility in making a declaration.
34 The orders that his Honour proposed are set out in [139]:
The claim and counterclaim are dismissed. I will hear the parties on the appropriate orders: to reflect the decision as to an account, and as to costs.
35 The reasons for judgment of Burnett FM rely very heavily on reference to the issues that were mitigated in the trial before Martin J, and are complicated by the circumstance that the question of the ownership of the electric motor and gear box was, at the very best, quite peripheral and certainly irrelevant to the claim for damages that was being pursued by the applicants in the proceedings before Martin J. Martin J found that the five particular items of machinery were abandoned by the Reynolds on the road recesses at the beginning of October 1996. It is highly unlikely that the motor and gearbox had not similarly been abandoned, and was thus no longer the property of the debtors.
36 Burnett FM set out in short form the background to the application for a sequestration order as follows:
1. In about March 1996 Aluma-Lite Products Pty Ltd (the creditor) obtained a judgment against Ross Mackenzie Max Reynolds and Margot Logan Reynolds (the debtors) for the sum of $1,750,000.00. Shortly after, on about 29 March 1996, the debtors granted a Bill of Sale in favour of RWL Wilson Pty Ltd over various chattels alleged to be owned by them.
2. Subsequently the creditor obtained possession of the debtors’ real property being a farming property described as Condamine Ponds after obtaining a Writ of Possession. In exercise of its power of sale it sold various property of the debtors during the course of 1997.
3. The debtors were unhappy with the creditor’s conduct in the exercise of its powers of sale and sued the creditor, initially in the Federal Court and then following transfer of the proceedings, in the Supreme Court of Queensland (the Proceeding).
4. The Proceeding was amended in 2004 to include a claim for detinue in respect of the non-return to the debtors of various chattels particularised in the pleadings and which will be discussed later in these reasons. The Proceeding went to trial in October 2008, and the result, the action in the Proceeding was dismissed following reasons for judgment being delivered in November 2009 with final orders for judgment being entered in December 2009.
5. Before these events, on 15 August 2003, the creditor sought leave, and leave was granted, to proceed to enforce its judgment. An enforcement warrant issued on 2 January 2008. Pursuant to the enforcement warrant a bailiff, Patrick Roach, attended the property Kingsley, a part of Condamine Ponds and seized an electric motor and gearbox which he subsequently sold at auction.
6. On 10 March 2008 the creditor presented its petition against the debtors (the Petition). The act of bankruptcy relied upon in the Petition was an act pursuant to section 40(1)(d)(i). That is execution had been issued against the debtor under process of a court and property had been sold by the bailiff.
7. The creditor submits these facts demonstrate the commission of an act of bankruptcy pursuant to section 40(1)(d)(i) Bankruptcy Act in support of the Petition. Subject to two matters the creditor submits it is entitled to a sequestration order against the debtors as all other matters required to be established under section 52 of the Bankruptcy Act have been satisfied.
8. Two issues arise in this case. The creditor accepts that if it fails on either issue the Petition must fail: They are:
a) Was the electric motor and gearbox the property of the debtors; and
b) Were those chattels unencumbered or did they form part of a chattel subject to the AWL Wilson Pty Ltd Bill of Sale (the Wilson Bill of Sale).
37 What this history does is to elide the circumstances leading to the creditor’s petition. The focus before Burnett FM was entirely on the electric motor and gear box. That concentration is complicated by the inferences that the Federal Magistrate drew from the proceedings before Martin J, including the various formulations of the plaintiff’s case. Those various formulations, and the various interlocutory judgments concerning them, are comprehensively addressed by Mr Moschella in his very lengthy affidavit filed the day before the hearing of the creditor’s petition. That affidavit, complete with exhibits, totals some 474 pages.
38 In fact, the Supreme Court proceedings before Martin J focused on the claim for damages, based on a failure to earn money essentially from hiring out the five pieces of machinery to which I have already referred.
39 In the reasons for judgment of Burnett FM, at [9], his Honour said:
The issue here is whether the electric motor and gearbox constituted a discrete chattel or had it originated from a bale stacker and was property part of it.
40 At [19], Burnett FM said:
Mr Reynolds stated that the third bale stacker was one he had purchased second hand a few years earlier in reasonable condition. He swore that it was used inside the shed and he would take the motor off when it was not in use and store the motor in the shed to keep it out of the weather. He said the third stacker (absent its electric motor) was evident in photograph exhibit 2 “D” and “C”. That observation was made only by Mr Reynolds. When Mr Williams was cross examined about the photos he stated that they depicted only piles of “junk”. Close examination of exhibit 2 “C” and “D” does not reveal anything of fixed form. As was suggested to Mr Reynolds in cross examination the photograph merely exhibited a heap of scrap metal. That factor is in my view significant when considered against his evidence that the third bale stacker was one similar to the Taylor bale stacker depicted in exhibit JW4.
41 That paragraph forms the basis for his Honour’s preference for the evidence of Mr John Williams over that by Mr Reynolds.
42 May I say that the examination of the photographs does not carry the same degree of conviction that Burnett FM seems to give them.
43 At [36], his Honour said:
Another anomaly apparent in the evidence relates to the number of bale stackers. Three bale stackers were covered by the Wilson Bill of Sale. Mr Williams and Mr Reynolds agree from their evidence that in 1992 the International bale stacker was given to the Reynolds [Affidavit John Williams filed by leave 17 February 2010 at paragraph 7]. Both Mr Williams and Mr Reynolds also agree that a bale stacker was given to the McDonalds. Although Mr Williams was not able to be particular about the description of the bale stacker he agreed that the bale stacker was similar to that shown in photograph JW4. That bale stacker was similar to the Taylor bale stacker. Mr Reynolds contended the Taylor bale stacker was given to Mr McDonald. Although not spoken of, there must have been a fourth bale stacker on the property for two to be in existence at the time of the preparation of annexure B.
44 This, it is contended for the applicants for a stay, evidences error in the approach by the Federal Magistrate.
45 Paragraphs [39] and [40] deal with the question of whether the electric motor and gearbox form part of the bale stacker which Mr Reynolds said is now in pieces and is shown in exhibit 2C:
39. The question remains whether the electric motor and gearbox form part of the bale stacker which Mr Reynolds says is now in pieces and shown in photograph Exhibit 2-C. I do not accept it is. First I do not accept the material shown in photo Exhibit 2-C is a bale stacker disassembled or otherwise. As Mr Williams said the photograph shows “just a pile of junk”. Mr Reynolds said in his evidence he could see a bale stacker from within the material depicted in the photograph. I think Mr Reynolds was being both wishful and fanciful in the expression of his evidence. I have no reason to doubt Mr Williams’ evidence on this point. From the evidence it appears he has the least to gain personally from the outcome of these proceedings and accordingly less interest in that outcome. The same cannot be said for Mr Reynolds.
40. Even if I were wrong on that point, in my view, the weight of the documentary evidence relied upon and pleaded in the Proceedings supports a finding that the electric motor and gearbox was not part of a bale stacker but a discrete item of equipment. On the balance of probabilities I am satisfied that that was so.
46 This, arguably, manifests a failure to appreciate what precisely were the issues in the proceedings before Martin J. It could very well be that the appeal from the judgment of Martin J is unsuccessful, but that would not involve a conclusion or a finding in relation to the question of whether the applicants were the owners of the motor and gearbox or whether that motor and gearbox was covered by the Wilson Bill of Sale.
47 At paras [55] – [58], Burnett FM noted:
55. In his judgment His Honour noted at [90] that the debtors had granted a Bill of Sale over a large number of chattels. As was discussed above, this observation was clearly premised upon the very detailed pleadings alleged by the debtors in its various iterations. At para [91] His Honour continued:
“By the Wilson Bill of Sale the [debtors] effectively used all their otherwise unsecured property as security for a loan from Wilson. The only other similar items of any worth were the subject of another Bill of Sale to the defendant [to the creditor].”
56. In view of the broad statements noted above His Honour did not descend into any detailed analysis, explanation or findings as to the matters alleged by the debtors in their pleadings. His Honour clearly did not descend into such detail as was unnecessary in the context of the debtor’s claim. As His Honour noted the claim was for damages for detinue and/or bailment particularly in respect of five large items of equipment said by the creditor to be subject to the Wilson Bill of Sale. The matter of title to the electric motor and gearbox was not the subject of any express claim for damages so His Honour did not focus upon or specifically address the matter of its title.
57. This matter is confirmed by the subsequent amendment of pleadings at the commencement of the trial and the opening by counsel at the trial. Transcript of the opening, attached to correspondence forwarded to my chambers after the close of submissions addressed this issue. By way of explanation for the amendment to the statement of claim the following exchange took place:
“Mr Fleming QC:…What we are doing is limiting the claim entirely to those pieces of equipment that were returned but were returned with parts missing.
His Honour: Say that again.
Mr Fleming QC: We are limiting the claim to those pieces of equipment that were returned but were returned with parts missing or were damaged while they were in the possession of the defendant.”
58. A close review of paragraphs 90 and 91 demonstrate that His Honour dealt only with the substantive matters. The focus of the proceeding before His Honour was upon five machines which do not include the electric motor and gearbox. It is plain from His Honour’s reasons particularly at [91] that His Honour was only concerned with matters of “worth”. It is self evident given the sum realised on the sale of the electric motor and gearbox that it was not a matter of “worth”. In any event the action failed without need for His Honour to descend into any particular findings about title to the electric motor and gearbox. As is evidence at paragraph [102] the focus of His Honour’s attention was principally upon the five pieces of machinery.
48 So it is true to say, as his Honour noted, that the matter of title to the electric motor and gearbox was not the subject of an express claim for damages, therefore Martin J did not focus upon or specifically address the matter of its title.
49 In relation to the question of communication subsequent to the close of submissions, I do not have before me that correspondence; but as Sir Anthony Mason has expressed in previous occasions, the hearing is the time for submissions and further submissions and, unless they are specifically addressed and permitted by the judge at the time of the hearing, they cannot be submitted without leave.
50 This aspect, again, highlights the pressure cooker nature of the hearing, the huge amount of material that was filed the day before and, apparently, the further submissions after the close of submissions on the hearing of the creditors’ petition.
Finally, at [77], speaking of the appeal from the judgment of Martin J, Burnett FM said:
… The history of the Proceeding itself does not engender confidence that the appeal will be prosecuted expeditiously. This is not case such as commonly comes before the court where the act of bankruptcy was the failure to pay a sum of money required pursuant to a judgment which is now itself the subject of an appeal. The Petition premised upon an act of bankruptcy commissioned because of the sheriff exercising his power to sell. On balance I am not satisfied that in these circumstances despite the pendency of the appeal there is other sufficient cause demonstrated as to why the sequestration order ought not be made.
51 I have referred earlier to the creditor’s petition filed on 10 March 2008. As I indicated, Mr Ross Reynolds filed an affidavit in the creditor’s petition hearing on 11 February 2010. In that affidavit, he said:
10. In early 2008, my wife and I were residing in a residence at 4 Kruiswijk Court, Middle Ridge, Queensland owned by our daughter. On 21 January 2008, just before 8 am a person who identified himself as a bailiff of the Supreme Court of Queensland, came to the residence. My wife was not present. The bailiff asked me whether my name was Ross Reynolds. I replied that it was.
11. The bailiff handed to me a bundle of documents. He pointed to the first document in the bundle and said that it was a notice to vacate the residence by the 31st January 2008 as he was to sell it. Now produced and shown to me and marked as “RMMR-4” is a copy of the notice to vacate.
12. A heated exchange then followed during which I told him it was not our house and that it was my daughter’s house. He insisted we had to vacate the house. He then asked me whether my wife, Margo Logan Reynolds was present. I told him that she wasn’t. He asked me when she would be and I said she would be away for a couple of weeks. He then left.
13. About twenty minutes later, the bailiff returned and we had another discussion. He told me that he had spoken to the applicant’s solicitor, one Ross Moschella who had told him to collect the notice to vacate and for me to disregard it. I then handed it back to him, having previously taken a photocopy of it.
14. During the course of the two meetings the bailiff did not show to me any document containing the original seal of the Supreme Court of Queensland, nor did he make demand of me to deliver to him any personal property of mine.
15. I heard nothing further but some weeks later, I saw an advertisement dated 9th February 2008 in the local newspaper being the Toowoomba Chronicle. Now produced and shown to me and marked “RMMR-5” is a copy of the advertisement.
16. From the description of the goods in the advertisement as a “1hp electric motor and gearbox” I believed that, if it was part of the chattels left behind on Condamine Ponds in October 1996, it was likely to be a part of a piece of farming equipment called a “bale stacker” which was subject to the Wilson Bill of Sale.
17. I contacted our solicitor one Iain Marshall of Shand Taylor Lawyers and asked him to write to the applicant’s solicitor regarding the advertisement.
18. Neither my wife nor I attended the auction so I don’t know what was actually sold at the auction.
52 In the affidavit of Mr Patrick Roach, the Bailiff, it is quite clear that the property at Middle Ridge was believed by the solicitor for Aluma-Lite Products to be owned by the respondents. The original instructions given to Mr Roach do not appear in the material before me, so far as I am able to determine. However, the property was indicated by Mr Reynolds to be owned by the Reynolds’ daughter, a position which is confirmed by the exhibits to Mr Roach’s affidavit setting out the correspondence from Mr Moschella of 21 January 2008.
53 On 21 January 2008, the solicitors for Aluma-Lite Products wrote to Mr Roach saying:
… we enclose property search for the property which you attended to serve Mr Reynolds as discussed.
54 That shows a property of 818 square metres at Middle Ridge owned by Edwina Catherine Reynolds. After it became plain that execution could not be obtained against that property, Mr Moschella wrote to Mr Roach on 24 January 2008. The second paragraph of that letter says:
After review of the documents and pleadings contained in the current proceedings between our client and the abovementioned enforcement debtors we have been able to determine there are small number of items located on the property as set out below which are owned by the enforcement debtors but not subject to any bill of sale. We will enclose copy photos with the original of this facsimile to help you identify the items. The items are stored along a fence line on land which is now owned by a Mr Wilkins.
We request that you seize those assets pursuant to the warrant which you already hold.
55 In respect of the items there referred to, various photographs are included and the 20 stays for fencing appear in photo number 2; the feed troughs, of which there are six, appear in photos numbered 1, 3, 5 and 11; and the 1hp electric motor and gearbox is said to appear in photo 7.
56 Mr Moschella wrote:
As time limits are approaching we ask that you seize these items no later than 7 February 2008 but sooner would be preferable.
57 There is no explanation (so far as I am able to ascertain) as to why the fencing stays and the troughs were returned to the Elbow Valley property and why the enforcement process was limited simply to an electric motor and gearbox, which, as the bailiff described, was in very poor condition without an electric cord. That explanation would be highly relevant on the aspect of the question of title but does not appear.
58 From the report by the bailiff, it is obvious that expenses of a considerable amount were incurred in respect of an item, the motor and gear box, that was sold for $5.00. The affidavits of Mr Moschella and of Mr Roach were filed on 16 February 2010. However there was no objection to receipt of this voluminous material by counsel on behalf of the applicants.
59 From discussions that I have had with counsel it seems that no point was raised in opposition to the making of a sequestration order that the enforcement process was simply a pretext. I raised with counsel on the stay application the possibility that the Sheriff’s execution was not a bona fide attempt to enforce the judgment, but was a pretext to bring the provisions of the Bankruptcy Act into effect. Mr O’Donnell, who appeared for Aluma-Lite Products, said there was no point taken as to that, and Mr Harrison of counsel for the applicants for a stay said, “That is so, your Honour.”
60 I turn now to the question of whether there is an arguable case and where the balance of convenience lies. The respondent opposes the stay and says that there is no arguable point in the appeal. The submission is that the whole case before the Federal Magistrate turned on acceptance of Mr Reynolds’ testimony and Mr Reynolds alone gave evidence supporting the contention that the electric motor and gearbox formed part of the bale stacker.
61 Referring to the advantages that the Federal Magistrate had of seeing Mr Reynolds give his evidence and the evidence of Mr John Williams, the counsel for Aluma-Lite Products says that the findings of credibility, which involved a finding by the Federal Magistrate that he had “no confidence in the reliability of anything Mr Reynolds has told me” and that his evidence should be rejected as unreliable, see paras [38] and [45] of his Honour’s judgment, would have to be set aside for the appeal to succeed. The Court would have to both set aside the rejection of the evidence and conclude that Mr Reynolds’ evidence should be accepted. It is only by acceptance of his evidence that a finding could be made that the electric motor formed part of the mortgaged property at the time the bill of sale was granted.
62 It was submitted that the Notice of Appeal does not disclose any arguable basis for reversing the Federal Magistrate’s conclusion regarding the reliability of Mr Reynolds’ evidence. I do not accept that submission. When one carefully looks at the reasons from the Federal Magistrate, there is at least an argument that his Honour has misconstrued the points that were at issue in the damages claim before Martin J in the Supreme Court proceedings. The question of the provenance of the electric motor and gearbox seems to have been determined by the Federal Magistrate only on the basis of accepting that, 10 years after the eviction in 1996, the material in the photographs appeared to be “a pile of junk” and “of no worth,” and that the evidence of John Williams was to be preferred. Particularly in the context that a considerable number of the chattels seized by the bailiff were returned, and only the electric motor in poor condition was the subject of public auction and received the princely sum of $5.00, does the question of the provenance of the motor and gearbox acquire central significance.
63 I have had regard to the submissions concerning the arguable points which counsel for the applicants for a stay have suggested. It has to be accepted that the prospects of upsetting a credibility finding are less than sanguine, but in the circumstances of this case there is, it seems to me, a basis on which the approach by the Federal Magistrate can be impugned.
64 As to the balance of convenience, it is true that the appellants will be able to continue with their appeal against the making of the sequestration order whether or not a stay is granted. However, Mr O’Donnell for Aluma-Lite Products says that there are a number of cases where a stay has been declined where the appellant has not put before the Court evidence as to the details of his or her financial position, which is the case here.
65 In those circumstances, it is said that the Court would not be ready to conclude that the refusal of the stay would disadvantage Mr and Mrs Reynolds, when they have chosen not to place before the Court details of their financial position.
66 In my view, each of the cases on which Mr O’Donnell relied has to be looked at carefully with regard to the circumstances of that particular case. In the earlier in time of those cases, Rigg v Commonwealth Bank of Australia [2001] FCA 1340, Hill J was concerned with an application for a stay of a sequestration order made on 16 July 2001 by Madgwick J.
67 The basis for the application was that Madgwick J was said to have erred in not giving discovery. In [25], Hill J said:
It is invidious always for a single judge to have to form a view on the prospects of success of a matter to be taken on appeal. I do find that the issue is not frivolous and do not find that the appeal has been brought other than bona fide. However, it is obvious enough that there is a real difficulty in the path of Mr and Mrs Rigg in succeeding in the appeal, particularly as no error of principle is apparent from my reading of his Honour’s reasons.
The only prejudice that was sought to be put to me in support of granting a stay was said to be that there was a prospect that the right to appeal the sequestration order might be negated by the provisions of the Bankruptcy Act if the sequestration order was not stayed. However, s60 of the Bankruptcy Act does not have that effect and counsel for Mr and Mrs Rigg ultimately conceded that. Hence, so far as the case for stay is concerned, I have before me merely the fact that an appeal has been lodged against the making of the sequestration order which, while not totally hopeless, could not be said to have great prospects of success. No discretionary matters to support the grant of a stay have been advanced. Counsel for the Bank points out that no attempt has been made before me, or for that matter before Madgwick J, to put to the Court details of the financial position of Mr and Mrs Rigg.
68 Later it was said, and there is some significance in this, that bankruptcy is not a private matter between creditors and debtors.
69 Hill J continues at [29] and [31]:
[29] An aspect of the public interest is that the affairs of a bankrupt are placed under the supervision of the Court as also, to some extent it can be said, are the conduct and trade dealings of the bankrupt. Bankruptcy operates also for the benefit of debtors in releasing them from all liabilities subject, of course, to the rateable distribution of such assets as they have among creditors. It is pointed out by counsel for the Bank that there is no evidence one way or the other as to whether there are other creditors and that there is an interest, presumably the public interest, in having the ordinary procedures in bankruptcy proceed so as to determine not only what assets Mr and Mrs Rigg have but also what creditors they may have.
…
[31] I am of the view, and for the reasons which counsel for the Bank has submitted, that Mr and Mrs Rigg have not demonstrated any reason why this Court should intervene to grant a stay. It appears that there is little or no disadvantage to them, especially where they have not sought to put any evidence before the Court as to their financial position, and that their appeal will in no way be prejudiced by the grant of a stay. The public interest does not support, in the present case, the granting of a stay. In fact, if anything, it points in the opposite direction. I would accordingly dismiss the motion.
70 That was, in the circumstances of that case, an exercise in discretion where his Honour concluded there appeared to be little or no disadvantage to the applicants and that the public interest did not support the granting of a stay.
71 Similarly, in relation to Burns v AMP Finance Ltd [2005] FCA 761, a judgment of Emmett J, there was an application made to stay a sequestration order. The application, however, was based on a wish by the appellant to refinance the debt upon which the sequestration order was based.
72 In para [4]-[5], his Honour said:
[4] Whether or not the appellant is able to refinance the debt, and perhaps apply for an annulment is not, in my view, a reason for staying a sequestration order. That is particularly so in the absence of any evidence as to the likely prospects of such a refinancing being possible. …
[5] In so far as that is the basis for the stay, it is necessary to examine the grounds of appeal in order to determine whether there is some rational prospects of success. I would also have expected that there be evidence, in support of such an application, as to the financial position of the appellant. There is, however, no such evidence, nor was there any such evidence before Raphael FM.
73 In those particular factual circumstances, where the application for a stay was based on a possibility of refinancing the debt the subject of the sequestration order, in circumstances where financial disclosure was not made by the applicant for that stay, it is unsurprising that the stay was not granted.
74 I prefer to follow the judgment of Pincus J in Evans v Heather Thiedeke Group Pty Ltd (1990) 95 ALR 424, at 425, where his Honour said:
Since the order of Spender J was intended to permit consideration of an appeal and an appeal has now been filed, it would seem that, prima facie, a further stay should be granted. It appears that the initial stay was ordered on the assumption that the case is one on which an appeal would not be frivolous. …
75 His Honour, continuing at 425, said:
The decision of the Full Court in Ahern v DCT (Qld) (1987) 76 ALR 137 suggests (at 148) that an adjournment of the petition should fairly readily be granted where there is a genuine dispute as to the existence of the debt underlying the bankruptcy proceedings. There, the adjournment was granted to enable an appeal against the judgment on which the bankruptcy notice was based. Here, the question is not one of adjournment of the petition, nor is the appeal against the judgment on which the notice was issued; the court is asked for a stay of the sequestration order on the basis of an appeal against that order. Nevertheless, the decision in Ahern’s case perhaps tends to support the view that where there is a bona fide appeal challenging the existence of the debt, a stay of the sequestration order should fairly readily be granted.
76 His Honour continued:
In my opinion, the general power to grant a stay (not limited to a stay pending appeal) given by s 52(3) does not nullify the court’s jurisdiction to order a stay under O 52, r 17 of the Federal Court Rules which relates to appeals. … On the whole, and having regard to the content of the reasons for judgment of Spender J, it appears to me that a further stay should be granted, to allow the appeal to be prosecuted.
77 His Honour importantly said:
If that is not done, then the appeal (if successful) may be partly nugatory.
78 His Honour then stayed the proceedings until after the appeal was expected to be heard.
79 As to the prospects of the appeal from the judgment of Martin J being stifled, it is true that if a stay is not granted the trustee would determine whether, in all the circumstances, to prosecute that appeal. Having regard to the practical realities and, in particular, the need for funds to prosecute that appeal, it is likely that the decision of the trustee as to the prosecution of an appeal would be different from the decision if Mr and Mrs Reynolds were in a position to prosecute that appeal. If the stay is not ordered then that appeal may be put at risk.
80 In this regard, I have considered the basis of the creditor’s petition, namely, the fact that a chattel realised on execution the sum of $5 at a cost of some hundreds of dollars. One can infer that there was a perceived forensic advantage in adopting that course.
81 It seems to me there is no apparent detriment to the respondent from such a short delay. If the appeal is unsuccessful, the date of commencement of the bankruptcy will remain the day on which the original order was made and the stay will not have any effect on the operation of any of the timing provisions of the Bankruptcy Act with respect to potential recoveries available to the trustee.
82 For all of these reasons, it seems to me that, in the exercise of the court’s discretion, a stay of the sequestration order made by Burnett FM on 25 February 2010 should be extended until the conclusion and determination of the appeal to the Federal Court from that order. As to costs, it seems to me that the costs should be the costs of the parties in the appeal.
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I certify that the preceding eighty-two (82) numbered paragraphs is a true copy of the Reasons for Judgment herein of the Honourable Justice Spender. |
Associate:
Dated: 31 March 2010
