FEDERAL COURT OF AUSTRALIA

Menzies v Paccar Financial Pty Ltd (ACN 005 592 049) [2010] FCA 692

THE COURT ORDERS THAT:

1.         The application for the transfer of the appeal to the New South Wales Registry of the Court be refused.

2.         All proceedings under the sequestration order made on 11 June 2010 be stayed until the hearing and determination of the appeal or further order on condition that each of the appellants lodge with the trustee in bankruptcy (“the trustee”) a statement of his or her affairs in conformity with s 54 of the Bankruptcy Act 1966 (Cth).

3.         Liberty be reserved to any party and to the trustee to apply on not less than 48 hours’ notice in writing to the other parties to the docket Judge to whom the appeal has been allocated.

4.         The costs of all parties of this motion on notice dated 23 June 2010 including the costs of the hearing, be their costs 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.

REASONS FOR JUDGMENT

1                     This matter came before me on an urgent basis yesterday, being a matter requiring the attention of the duty Judge.  At the conclusion of the hearing, I made the following orders:

1          The application for the transfer of the appeal to the New South Wales Registry of the Court be refused.

2          All proceedings under the sequestration order made on 11 June 2010 be stayed until the hearing and determination of the appeal or further order on condition that each of the appellants lodge with the trustee in bankruptcy (“the trustee”) a statement of his or her affairs in conformity with s 54 of the Bankruptcy Act 1966 (Cth).

3          Liberty be reserved to any party and to the trustee to apply on not less than 48 hours’ notice in writing to the other parties to the docket Judge to whom the appeal has been allocated.

4          The costs of all parties of this motion on notice dated 23 June 2010 including the costs of the hearing, be their costs in the appeal.

When I made those orders, I indicated that I would publish the reasons for them as soon as practicable.  These are those reasons.

2                     At issue when I made the orders to which I have referred was the appellants’ entitlement to the interlocutory relief they seek in their notice of appeal, which is there expressed in these terms;

1                    That these Appeal proceedings be heard in Sydney

2                    That the judgment and orders of the Court below be stayed pending appeal.

3                     The appellants’ appeal is from the orders of Hartnett FM given at Melbourne on 11 June 2010, in proceedings MLG 1191 of 2009, where her Honour ordered, so far as is relevant that;

(3)        There be a sequestration order against the estates of Ian David Menzies and Colleen Anne Menzies.

For the purposes of the hearing before me, it was necessary only that I resolve the question of the appellants’ entitlement to the interlocutory relief claimed in their application.  I turn first to the question whether I should order that the appeal be transferred to the New South Wales Registry of this Court.

Transfer of the proceedings to New South Wales?

4                     The basis of the appellants’ contention that these proceedings ought be transferred to the New South Wales Registry of the Court appears from Mrs Menzies’, the second appellant’s, affidavit sworn on 23 June 2010 and filed herein on 24 June.  In that affidavit, Mrs Menzies deposes to her desire for any appeal to take place in Sydney in the following terms;

On the basis that:

(i)         Menzies Haulage is a company registered in New South Wales;

(ii)        The liquidator is located in Sydney;

(iii)       The Supreme Court in Melbourne has determined that the proper venue for determination of the substantive dispute between ourselves and Paccar Financial is the Supreme Court of New South Wales;

(iv)       my alleged bankrupt estate is the subject of trustees appointed in Melbourne and the other in Brisbane;

(v)        I reside 5 hours from Sydney and the travel burdens that are imposed upon me by attending court in Melbourne.

(vi)       the solicitors for Paccar Financial have offices in Sydney;

(vii)      Paccar Financial is a company conducting business throughout Australia;

(viii)     The hearing of the proceedings in the court below in Melbourne arose simply on the basis that BP Australia, a company with whom my husband and I have settled, filed these proceedings in Melbourne

I request that the hearing of any appeal proceedings of the Federal Magistrates Court in Victoria, take place at the Federal Court in Sydney.

5                     As Mr Fary of Counsel, who appeared before me for the respondent on the appeal, pointed out, this Court has ample powers to control the location of its hearings in a given matter: see O 1 r 4, O 10 and O 52 r 29 of the Rules of this Court.  The “proper place” spoken of in those rules was discussed by a Full Court of this Court in National Mutual Holdings Pty Ltd v The Sentry Corporation (1998) 19 FCR 155, where, dealing with discretionary factors going to the transfer of proceedings from the place of commencement to another place, it was said (at 162) that:

The Court must… be satisfied, after considering all relevant matters, that there is sound reason to direct that the proceeding be conducted or continued elsewhere. Its starting point is that the proceeding has been commenced at a particular place. Why should it be changed? On the one hand, if the party who commenced the proceeding chose that place capriciously the Court would be justified in giving no weight to the choice of place. At the other end of the scale, a proceeding may have continued for some time at the place of commencement with many steps having been taken there, for example, filing of pleadings and affidavits, discovery and inspection. Due weight would be given by the Court to such matters before directing that the proceeding should continue at a different place.

The balance of convenience is important, but its weight must vary from case to case. Ultimately the test is: where can the case be conducted or continued most suitably bearing in mind the interests of all the parties, the ends of justice in the determination of the issues between them, and the most efficient administration of the Court. It cannot and should not, in our opinion, be defined more closely or precisely.

6                     Relevant also to the discretion is, as I said in ACCC v Harvey Norman Holdings Limited [2002] FCA 1569, at [8], dealing with considerations similar to those advanced by Mrs Menzies in her affidavit, the fact that;

this is a national Court, with the capacity to make flexible arrangements for taking evidence and receiving submissions.  If it is inconvenient for witnesses to travel from Sydney, and if they are of sufficient number and importance that receiving their evidence by video-link would be inappropriate, then there is no obstacle to this Court’s sitting in Sydney for a day, or a number of days as needed, to take their evidence.

7                     As presently advised, I am not disposed to transfer these proceedings to the New South Wales Registry of this Court.  In the first place, it is far from clear to me that any objection of the type which is now made was made to the hearing in the Federal Magistrates Court.  While I accept that there may be some inconvenience to the appellants in having to travel from their home 500 kilometres north of Sydney to Melbourne to participate in hearings, I would note that, here as in Harvey Norman Holdings, the Court has the capacity to make flexible arrangements to mitigate inconvenience of that kind.  Weighing heavily in the balance under this head, it should be said, is that these proceedings are by way of appeal and hence it is unlikely that further evidence will be required or led.  Accordingly, and without pre-empting any decision which may be made by the docket Judge on this issue, I do not consider that, at this stage, the proceedings in the Federal Magistrates Court having been commenced and conducted without objection in Victoria, that the appeal from the orders of that Court should be transferred to the New South Wales Registry of this Court.  Arrangements can no doubt be made by way of video or telephone link to enable Mr and Mrs Menzies to put to this Court whatever submissions they wish.  Again without pre-empting the docket Judge, there is nothing in principle (as in Harvey Norman Holdings) to preclude the hearing of the appeal in Sydney if that is ultimately thought necessary or convenient.

8                     I would therefore refuse the relief sought in paragraph 1 of the appellants’ prayer for interlocutory relief.  I turn to consider the stay of the Federal Magistrate’s sequestration order sought by paragraph 2 of the prayer for interlocutory relief.

Stay of the sequestration order?

9                     Ultimately, whether this Court should grant a stay of orders from which an appeal is brought in this Court calls for an exercise of the Court’s discretion.  After providing, in s 37(1), that, subject to sub-s(2), the Court may rescind, vary or discharge an order made by it, or suspend the operation of such an order, s 37(2) of the Bankruptcy Act 1966 (Cth) (“the Bankruptcy Act”) provides that;

(2)        The Court does not have power to rescind or discharge, or to suspend the operation of:

(a)        a sequestration order; or

(b)        an order for the administration of the estate of a deceased person under Part XI.

It is then provided, in s 52(3) of the Bankruptcy Act, that;

(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.

It will be noted that, by s 37(2)(a) of the Bankruptcy Act, a Court exercising bankruptcy jurisdiction may not rescind, discharge, or suspend the operation of a sequestration order, but it may, by s 52(3), stay all proceedings under such an order for a period of not more than 21 days.  “Proceeding” in this context, as Carr J pointed out in Coleman v Lazy Days Investment Pty Ltd (1994) 55 FCR 297, at 301, is in this context a term of wide import, including:

the various administrative steps normally taken in accordance with the Act once a sequestration order is made would fall within the expression "proceedings under the judgment appealed from". They may also constitute proceedings under the Act. I shall assume, without deciding, that they are proceedings under the Act or at least proceedings of the type referred to in s 52(3). The fact that the administrative steps are prescribed by the Act does not, in my view, prevent them from also being proceedings under a judgment, which is a very wide expression. In the context of bankruptcy, the reference to subsequent proceedings under a sequestration order, in my opinion, requires a wider definition of "proceedings" than that contained in s 5(1) of the Federal Court of Australia Act. It must extend to administrative proceedings designed to give effect to the statutory consequences of that judgment.

10                  There is, notwithstanding the very limited power conferred by s 52(3), a power to stay the operation of a sequestration order where there has been an appeal instituted in this Court.  That is the effect of O 52 r 17 of the Rules of this Court, which reads as follows;

17        Stay

(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 proceedings;

except so far as the Court or a Judge or the court below may direct.

11                  While the respondent accepts that such a power exists to be exercised, Mr Fary of Counsel contended on its behalf that “in the absence of an appeal in respect of cogent or arguable errors of law”, the Court ought not exercise the power.  This submission was supported, in the respondent’s outline, by the following contentions:

• The notice of appeal contains “a number of generalised assertions”, rather than identified errors of law;
• The appellants have engaged in a “flagrant abuse of process” in issuing proceeding SYG 1171 of 2010 in the Federal Magistrates Court in Sydney to set aside the foundational bankruptcy notice while the respondent’s application to be substituted as petitioning creditor and for a sequestration order was pending in the Federal Magistrates Court in Melbourne;
• The appellants “have conducted themselves in such a way as to demonstrate a lack of respect for the law and property rights of others”, and, as well, have not filed statements of their affairs; and
• In the circumstances of the case, it is important that the appellants be brought under the control of a trustee as soon as possible.

12                  I do not consider that it is either appropriate or necessary for me in the circumstances of the present urgent application to express a concluded view about the appellants’ prospects of success on any of the grounds raised by their notice of appeal.  That is particularly so as I have not had the advantage of reviewing in detail Hartnett FM’s reasons for decision, and as it may be necessary, as Mr Fary implied, following Mr Hall’s submissions on behalf of the appellants, for them to seek leave to supplement or otherwise amend their grounds of appeal.

13                  It suffices for present purposes to indicate that I do not regard the pending appeal as doomed to fail.  It appears to raise, amongst other things, important questions about the exercise of a discretion by a bankruptcy Court to decide for itself the genuineness of a disputed debt where another superior Court is already seised of the same dispute.  Not having giving detailed consideration to the learned Federal Magistrate’s reasons for decision, to which I was not taken during the hearing, it appears to me, as I have intimated, that there may be arguable grounds for challenging on appeal the learned Federal Magistrate’s exercise of discretion.

14                  That, I consider, is particularly so in light of the fact that Habersberger J, sitting in the Supreme Court of Victoria, ordered that what were referred to before me as the “principal proceedings” be transferred from the Supreme Court of Victoria to the Supreme Court of New South Wales.  That I consider would only have been done on the premise that there was a genuine dispute between the appellants and the respondents about the alleged debt upon which the sequestration order was founded.

15                  I therefore acceded to the appellants’ prayer for interlocutory relief in respect of a stay of the operation of the sequestration order made by Hartnett FM on 11 June 2010.  Though I have not disregarded the petitioning creditor’s concerns, noted at [11] above, the balance of convenience appears to me to favour a grant of a stay, particularly as there is authority indicated 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”: Evans v Heather Thiedeke Group Pty Ltd (1990) 95 ALR 424, per Pincus J, at 425; see also Ahern v DCT (Qld) (1987) 76 ALR 137.

16                  I am reinforced in this conclusion by the recent formulation of the test  by Siopis J in Greyson v Commonwealth Bank of Australia [2005] FCA 1108, where his Honour said, at [17];

The relevant principles in determining whether a stay 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 at [4]).

In the authority to which his Honour there referred, Freeman v National Australia Bank Limited [2002] FCA 427, Spender J expressed (at [4]), in terms as plain as the principle permits, the rule 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.

17                  For the reasons which I have endeavoured to explain, I therefore made the orders of 1 July 2010, refusing thee appellants’ application for the transfer of these proceedings to the New South Wales District Registry of this Court, and granting a stay of proceedings under the sequestration order until the hearing and determination of the appeal.  To meet the concern expressed on behalf of the respondent which is noted in the penultimate point of [11] above, the stay has been conditioned on the appellants’ each lodging a statement of affairs in accordance with s 54 of the Bankruptcy Act.

Associate:

Dated:         2 July 2010