FEDERAL COURT OF AUSTRALIA

Shirreff v Beck Legal Pty Ltd [2010] FCA 1407

THE COURT ORDERS THAT:

1.    The application made by notice of motion dated 7 December 2010, be refused.

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

Introduction

1    The applicant, Austin Douglas Shirreff, who was made bankrupt on 30 July 2009, has filed a notice of appeal from a judgment dismissing the application to have the sequestration order set aside. The appeal is fixed for hearing on 28 February 2011. The bankrupt estate is estimated to have a surplus of assets over liabilities. Mr Shirreff seeks orders staying the operation of the sequestration order and restraining the trustee in bankruptcy from holding a series of auctions of materials which are assets of the bankrupt estate, commencing on 18 December 2010, pending the hearing and determination of the appeal. By a notice of motion dated 7 December 2010, Mr Shirreff seeks the following orders:

1.    Stay of sequestration order of 30 July 2009.

2.    Interlocutory relief stopping trustee from selling or disposing of my assets.

2    The application was supported by the affidavit of Mr Shirreff sworn on 7 December 2010.

3    Mr Shirreff, who is not legally qualified, prepared his affidavit and the notice of appeal, but at the hearing of the application was represented by counsel.

4    The application was opposed by the respondent, Beck Legal Pty Ltd (“Beck Legal”).

5    The affidavit of Charles Geoffrey Bowyer was sworn on 13 December 2010 in opposition.

6    The trustee of Mr Shirreff’s bankrupt estate, David James Lofthouse, swore an affidavit on 13 December 2010 in relation to the application, which he neither opposed nor supported.

7    The present application has arisen due to the trustee’s proposal to auction material stored on one of the properties in the bankrupt estate in a series of auctions scheduled to commence on 18 December 2010. The trustee’s letter to Mr Shirreff dated 1 December 2010 stated:

Dear Sir

YOUR BANKRUPT ESTATE No. VIC 3732 of 2009

I refer to previous communications regarding your bankrupt estate.

I confirm that we have instructed Global Auctioneers and Valuers Pty Ltd ("Global") to assess the items of plant and equipment located at 117 Wimble Street, Seymour, Victoria and to provide a proposal for the realisation of same. Following Global's inspection and assessment of the site, it is their recommendation that a number of onsite clearing auction sales should be conducted to try and maximise the return to creditors of your bankrupt estate and to yourself.

I note that Mr Peter Kirkham of Global is currently at the site cataloguing all items of plant and equipment in preparation for the first of a number of auctions. It is expected that approximately four (4) to six (6) auctions will need to be held to clear the external areas of the site and that this may take two (2) to six (6) months to complete. The internal warehouse will be dealt with after the external area is completed.

I reiterate that, as Trustee of your bankrupt estate, I am required to comply with the Enforcement Order issued by Mitchell Shire Council currently pending against this property. Under no circumstances are you and/or any other party to enter the property during this process.

I again invite you to provide me with your suggestions regarding the realisation strategy in order to achieve the best possible outcome for the assets which are currently stored at the Seymour property.

Should you wish to discuss the above matter further, please do not hesitate to contact Ms Kate Fox or Mr Michael Carrafa of this office.

Yours faithfully

DAVID J LOFTHOUSE

Trustee

background

8    As appears from the affidavit and exhibits, on 30 July 2009, Mr Shirreff was made bankrupt pursuant to the order of Registrar Luxton who, in Mr Shirreff’s absence, made a sequestration order against his estate.

9    On 30 July 2009, Mr Shirreff applied for a review of the sequestration order made on that day.

10    On 16 September 2009, on the application of Beck Legal (the petitioning creditor), David Lofthouse was appointed trustee of the bankrupt estate in substitution for the original trustee, ITSA.

11    On 3 March 2010, Burchardt FM dismissed Mr Shirreff’s application for review and affirmed the 30 July 2009 sequestration order.

12    On 17 March 2010, Mr Shirreff lodged an appeal against Burchardt FM’s decision but subsequently, on legal advice, abandoned it, in order to apply instead for annulment of the sequestration order. (The appeal was dismissed on 30 April 2010.)

13    On 18 May 2010, Mr Shirreff applied to set aside the sequestration order made on 30 July 2009 and for the annulment of his bankruptcy.

14    On 10 September 2010, Whelan FM dismissed that application.

15    By a notice of appeal dated 1 October 2010, Mr Shirreff appealed from the decision of Whelan FM. The notice of appeal states:

GROUNDS OF APPEAL

1.    Details in 2nd respondents affidavit not correct.

2.    No. 28 Amounts set out not correct.

3.    No. 35 I intend to use a lawyer this time.

Grounds of Appeal

FM Whelan relied on in No 28 $111,204.20 owed to unsecured creditors

This is not true

The creditors listed in trustees report are not correct

The Federal Magistrate in assessing whether I was solvent relied on information from the trustee which was not true and correct

She refers to this evidence in paragraph 28 of her reasons

These judgments from previous creditors had been paid before I was made bankrupt

These depts should not have been considered in assessing my solvency

Federal Magistrate should of found that my assets assessed my liabilitys

16    The appeal, pursuant to the order of Gray J, is listed for hearing on 7 February 2011.

Whelan FM’s decision

17    Whelan FM observed that Mr Shirreff contended that the sequestration order should not have been made on 30 July 2009, because he was able to pay his debts as they fell due and had remained solvent thereafter.

18    Whelan FM referred to the evidence on which Mr Shirreff (who was selfrepresented) relied, including the affidavit of the trustee in bankruptcy, Mr Lofthouse, sworn on 10 August 2010, which identified four properties belonging to Mr Shirreff as follows:

Airport West:    subject to a mortgage to Australian Securities Limited

Campbellfield:    which had been subject to a mortgage to Australian Securities Limited but had since been sold

Seymour:    subject to a mortgage to Australian Securities Limited

Coolaroo:    subject to a mortgage to RMBL Investments Pty Ltd.

19    Mr Lofthouse deposed that as at 2 December 2009, he had been unable to say if the realisation of the properties would produce sufficient funds to pay the costs of the bankruptcy administration and the proved debts in full.

20    Mr Lofthouse also deposed that the applicant owned assets stored at the Coolaroo and Seymour properties. The Seymour property was subject to a VCAT Enforcement Order obtained by the local council in relation to unlawful storage of, inter alia¸ hazardous material. The Airport West property was also subject to council notices to comply, as the land was in an “unsightly, dangerous or detrimental state”.

21    Mr Lofthouse was unable to estimate the cost of remediating the Seymour property to a saleable condition or whether the sale of the stored material would cover it. The Airport West property was valued at $1,450,000 but had a mortgage securing a debt of $300,000; the Coolaroo property had an estimated market value of $380,000 and was subject to a mortgage securing $110,000.

22    Mr Lofthouse deposed that he could not verify the applicant’s claimed assets of $800,000 in scrap steel, and amounts he claimed regarding Kingfisher and Aussie Shelving.

23    The Federal Magistrate stated:

[16] The Trustee’s report set out a total of $481,500.00 owing to secured creditors and based on investigations to date, a total of $111,204.20 owed to unsecured creditors. The total costs and expenses of the Trustee was approaching $100,000.00.

[17] Mr Lofthouse expressed the view that there was sufficient equity in the Airport West, the Coolaroo and Seymour properties to raise finance to pay out the estate in full if the bankrupt, with his consent, was able to have such a proposal approved by a financier. Otherwise it would be necessary for the Trustee to sell one or more of the properties in order to achieve this.

24    The Federal Magistrate observed that the applicant asserted his solvency, disputed the amounts owed to creditors, and stated that if the bankruptcy were annulled, he would pay the trustee’s costs from the proceeds of sale of the Campbellfield property, but wished to control the refinancing himself.

25    The Federal Magistrate observed that the applicant had not previously asserted that he was solvent. She noted the creditor’s submissions that even now it was not possible to conclude that the applicant was solvent, given his inconsistent statements, the indeterminate value of some intangible items on which he relied and the possibility of further unascertained unsecured creditors. Beck Legal also relied on the applicant’s failure to take timely action.

26    Whelan FM stated:

[20] Mr White referred the court to the decision in Samootin v Wagner, a judgment of Flick J dealing with the application of s 153B.3. He submitted that the court must first consider whether a sequestration order ought not to have been made and then, if it is so finds, whether in the exercise of its discretion the bankruptcy should be annulled. The relevant time at which such an assessment is to be made is the time when the sequestration order is made although the court may take into account later evidence of previously unknown facts.

27    Whelan FM stated:

[25] The onus lies on the Applicant to satisfy the court that the Sequestration Order ought not to have been made because he was at the relevant time solvent. In Pollock v Deputy Federal Commissioner of Taxation,4. Carr J set out the relevant considerations in determining an application for annulment:

1. It is the applicant for annulment who alleges, and it is therefore for him to bring himself within the section and satisfy the court, that the sequestration order ought not to have been made.

2. The court to whom the application is made seeks to ascertain the actual state of affairs at the time when the sequestration order is made.

3. In order to ascertain that actual state of affairs the court hearing the application for annulment looks at the facts that were before the court which made the sequestration order and at any other facts that were not before that court but are shown on the hearing of the application for annulment to have been in existence when the sequestration order was made.

4. Having considered all the facts so looked at, the court determines whether on those facts the applicant has satisfied it that the sequestration order ought not to have been made.

5. If it is so satisfied, the court is not bound to annul the sequestration order but must consider in all the circumstances of the case whether it ought to be annulled.

(footnote omitted)

28    Whelan FM observed that on the facts before Burchardt FM, it was not possible to say what the applicant’s financial position was and, although the Campbellfield property was subsequently sold 12 months after the making of the sequestration order, it was still not possible to accurately describe the applicant’s financial position at the time the sequestration order was originally made or later, when it was affirmed by Burchardt FM. The applicant bore responsibility for that, as his material was vague, he had not filed a statement of affairs until 9 April 2010 and had not provided information cooperatively to the trustee.

29    Whelan FM concluded that the most that could be stated with certainty was that the applicant’s secured liabilities were $2,109,919, his unsecured liabilities were $111,204, his Airport West and Campbellfield properties were valued at $2,990,000, and the Coolaroo and Seymour properties were valued at up to $780,000, but could require substantial expenditure to realise that value.

30    Whelan FM stated:

[32] The Trustee has expressed the view in his August 2010 affidavit, after sale of the Campbellfield property, that there is sufficient equity in the remaining properties to raise sufficient finance to pay out the estate in full. This may have also been the position in June 2009 and March 2010 but from the material before me, I am unable to come to such a conclusion. The Applicant’s assets may have exceeded his liabilities but it is not clear that these were realisable within a reasonable period of time.

[33] A person who seeks an annulment carries what O’Loughlin J described in Re Papps; Ex parte Tapp as a “heavy burden”. On the material before me, including those matters about which Burchardt FM had no knowledge at the time of making his decision, but excluding events such as the sale of the Campbellfield property, which have occurred since, I am not satisfied that the Applicant has established that the Registrar was bound not to make the Sequestration Order and Burchardt FM was bound not to affirm that decision. I note in this regard that Flick J, in Samootin v Wagner, quoted the judgment of Fisher J in Re Franke; Ex parte Piliszky who concluded, where in considering the wording of the predecessor provision to s 153B:

In my opinion it can be said that a judge “ought” not to have made an order only if he was “bound” not to make the order. In circumstances where it was open to a judge to make an order in the exercise of his discretion, it can only be said he “ought not to have made the order” if none of the circumstances could justify the making of an order.

[34] Further, even if I was satisfied that the Applicant had established his solvency at the time the Sequestration Order was made, there are circumstances which would weigh against exercising my discretion in favour of the Applicant. These considerations would include the following:

• The Applicant’s conduct of this matter, in particular his failure to oppose the making of the original Sequestration Order by the Registrar; the inadequacy of the information placed before Burchardt FM despite several adjournments being granted to him; his failure to lodge a statement of affairs until April 2010; and the paucity of the material which he chose to place before the court on the hearing of this application.

• The fact that until the filing of this application, the Applicant had never asserted that he was solvent.

• The fact that the Applicant continues to dispute some of the debts found by the Trustee in Bankruptcy and has made only vague and contradictory proposals about how, if his application was to be granted, he would pay his creditors.

(footnotes omitted)

Parties’ evidence on stay application

Affidavit in support

31    In his affidavit in support of the application for a stay, Mr Shirreff:

1.    deposed that Beck Legal was the petitioning creditor which claimed he owed $7,526.31 plus interest and costs;

2.    disputed the trustee’s estimates of his debts and liabilities set out in the trustee’s letter of 14 September 2010, both in relation to some items and to quantum. Mr Shirreff set out his own estimate of the liabilities, or stated that they were “to be taxed”;

3.    assessed the value of his assets at $4,020,000 with a net value of $3,620,000;

4.    deposed to rental income of approximately $60,000, which could rise to $100,000 if the properties could be leased;

5.    stated that if the sequestration order was annulled, he could operate his business to produce substantial additional income;

6.    deposed that a private lender had “verbally agreed” to provide finance to pay the debts and costs, and had submitted draft mortgages, but Mr Shirreff required the cooperation of the trustee to obtain the finance, which Mr Lofthouse had refused; and

7.    further deposed:

The trustee in a previous affidavit sworn in August 2010 has stated that there is sufficient equity in my remaining properties to raise finance to pay out the estate in full and has also in correspondence to and discussions with me stated that the best option for me is to seek finance and pay out all my debts and costs in relation to the sequestration order.

32    Mr Shirreff deposed that he is 51 years old and acquired his properties, which have capitally appreciated, many years ago. The Seymour property is his home, is of particular sentimental value and houses shelving material and equipment required for a shelving manufacturing business he proposed to establish in the future. Mr Shirreff deposed that if the trustee sold the material as scrap metal, it would realise substantially less than its real value and could not be reacquired at the same price. The trustee, however, by letter dated 1 December 2010, proposed to proceed with a public auction.

Affidavits in opposition

33    By his affidavit sworn 13 December 2010, Mr Lofthouse referred to his previous affidavits and deposed to the further steps he had taken in the administration of the bankrupt estate since August 2010.

34    Mr Lofthouse deposed that as the owner of the Seymour property for the purposes of ss 112 and 119 of the Planning and Environment Act 1987 (Vic), he was obliged to comply with the council’s Enforcement Order. Mr Lofthouse had also received on 19 August 2010 a preliminary waste assessment report from OTEK, stating the work required for compliance with the Enforcement Order, which he exhibited.

35    Consequently, Mr Lofthouse had engaged Global Business Auctioneers and Valuers (“Global”) to clear the Seymour property by a series of auctions, the first of which was scheduled for 18 December 2010. Global had undertaken a significant amount of preparation for the auction and had placed advertising. Mr Lofthouse exhibited the letter of Global dated 24 November 2010, which referred to the 10 hectare site at nearly full capacity, rendering the task of realisation difficult. Global proposed a strategy of four to six auctions. Global noted that the auctions would initially deal with materials on the perimeter of the site to create pathways and would then deal with the warehouse in which shelving material was stored.

36    Mr Lofthouse deposed that if a stay were granted, he could not commence steps to achieve compliance with the Enforcement Order until at least February 2011, and compliance would not be achieved until some months thereafter. Additional costs would also be incurred in readvertising.

37    Mr Lofthouse exhibited the letter of the solicitors for the Mitchell Shire Council dated 10 December 2010, which advised that the Council opposed the stay, as it could compromise the trustee’s ability to comply with the Enforcement Order and the clean up of the land, including the removal of prescribed industrial waste. The Council approved the trustee’s steps towards compliance and the proposal to hold up to six auctions, the first to occur prior to Christmas 2010. The letter noted that Mr Shirreff had previously taken no action to comply with the Enforcement Order.

38    Mr Lofthouse noted that there was also an Emergency Order against the building on the Seymour property, which did not comply with safety regulations and could not be used for accommodation. The building was locked and, contrary to Mr Shirreff’s assertions, he did not currently reside there.

39    Mr Lofthouse deposed to the substantial work undertaken and liabilities incurred in relation to the administration of the estate, for which no funds had been or were currently available. He deposed that the administration was hampered by Mr Shirreff’s failure to provide information as to his assets and affairs, the commencement of various legal proceedings and the need to comply with the Enforcement Order.

40    Mr Lofthouse deposed that, contrary to Mr Shirreff’s assertions, he and his staff cooperated to permit him to obtain finance to pay out his estate, and had attempted to consult him on the asset realisation strategy, given the probable substantial surplus of assets in the estate. Mr Lofthouse exhibited correspondence comprising his office’s communications with Mr Shirreff, including invitations to participate in the realisation process and to provide a realisation strategy or an alternative proposal to clean up the Seymour site.

41    Mr Lofthouse estimated his outstanding fees to be $109,978 with disbursements of $13,272 and unbilled legal costs of over $30,000.

42    By his affidavit sworn 13 December 2010, Mr Bowyer, of Beck Legal, the respondent’s solicitors, deposed that the respondent’s costs as petitioning creditor are yet to be taxed. Further, the respondent opposed the application for a stay.

Relevant legislation and case law

43    Section 29 of the Federal Court of Australia Act 1976 (Cth) states:

29 Stay of proceedings and suspension of orders

(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.

(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.

44    Order 52, rule 17 of the Federal Court Rules 1979 provides:

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.

(2)    The Court may vary or vacate any direction of the Court or the court below referred to in subrule (1).

(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.

45    Section 37 of the Bankruptcy Act provides:

37 Power of Court to rescind orders etc.

(1) Subject to subsection (2), the Court may rescind, vary or discharge an order made by it under this Act or may suspend the operation of such an order.

(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.

46    Section 52(3)of the Bankruptcy Act 1966 (Cth) 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.

47    In Evans v Heather Thiedeke Group Pty Ltd (1990) 95 ALR 424 (“Evans”), Pincus J granted a further stay of proceedings under a sequestration order pending the hearing and determination of an appeal. An initial stay had been ordered when the sequestration order was made.

48    Pincus J rejected the creditor’s argument that the 21 day limit prescribed in s 52(3) of the Bankruptcy Act could not or should not be exceeded.

49    Pincus J stated (at 425):

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. Under that rule, a single judge may stay proceedings under “the judgment appealed from” and there is, of course, no 21 day limit. The rules of the court do not in general apply to proceedings under the Bankruptcy Act: O 1, r 11. However, this appeal is brought under s 24 of the Federal Court of Australia Act 1976 (Cth) and not under any provision of the Bankruptcy Act; s 38 of the latter Act does not apply.

50    In Carver v Joyce [1990] FCA 793 (“Carver”), Lockhart J on 12 December 1990 refused a stay of execution of a sequestration order made on 13 November 1990 against the estate, pending the determination of an appeal from the order of a Federal Court judge made on 3 December 1990 dismissing an application to set aside the sequestration order.

51    A stay of the sequestration order had already been granted on 20 November 1990. The 21 days referred to in s 52(3) of the Bankruptcy Act had expired on 4 December 1990.

52    Lockhart J referred to s 37(2) of the Bankruptcy Act, which at that time provided that the court could not rescind or suspend the operation of a sequestration order after it had been signed and sealed as provided by the bankruptcy rules.

53    Lockhart J considered that s 37(1) did not confer “a power which can operate over and beyond the power conferred by s 52(3)”.

54    It therefore followed that, subject to the court’s appellate jurisdiction, the power to stay proceedings under s 52(3) had already been exercised and could not be further exercised.

55    Lockhart J endorsed but distinguished Evans, observing that in contrast to the case before him, it involved an appeal against the making of the sequestration order.

56    In Coleman v Lazy Days Investments Pty Ltd (1994) 55 FCR 297 (“Coleman”), Carr J granted a stay of most of the proceedings under a sequestration order against which appeals were lodged. Carr J considered both Carver and Evans. His Honour did not consider that the power to stay proceedings under the judgment appealed from, conferred by O 52 r 17, was “limited to curial activities”.

57    Carr J considered that “[i]n 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 s5(1) of the Federal Court Act”. It extended to “administrative proceedings designed to give effect to the statutory consequences of that judgment” (at 301). Thus, the words “proceedings under the judgment appealed from” in O 52 r 17 included administrative steps to give effect to a judgment which took the form of a sequestration order, and the Federal Court had “power to grant a stay, pending the hearing of an appeal against a sequestration order, of some or all of the proceedings or steps which would otherwise be taken as a consequence of the sequestration order notwithstanding the provisions of ss.37 and 52(3) of the [Bankruptcy] Act” (at 301).

58    Carr J nevertheless endorsed Carver and the distinction drawn in that case between an appeal from an order dismissing an application to set aside the sequestration order and an appeal against the making of a sequestration order, as in Evans (at 300). His Honour stated that such appeals were “entirely different” matters (at 300).

59    In Menzies v Paccar Financial Pty Ltd [2010] FCA 692 (“Menzies”), Ryan J recently considered the relevant authorities and statutory provisions.

60    His Honour stated at [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.

61    While Ryan J thus concluded that there was a power to stay the proceedings, Menzies did not concern an appeal from dismissal of an application to set aside a bankruptcy notice. The distinction drawn in Carver and approved in Coleman is, however, fine and was not supported by detailed reasoning. In the present case, for reasons discussed below, nothing hinges on the distinction. Nevertheless, the proposition that curial power differs significantly in substantially similar situations invites caution.

The parties’ submissions

62    The applicant submitted that compliance with the Council Enforcement Order could be effected otherwise than by sale, and a short stay of the sequestration order would enable him to raise the finance necessary to remove the store, rather than sell, the relevant material. In the applicant’s submission, his inability to refinance was due to the trustee’s failure to cooperate, despite the significant estimated excess of assets over liabilities in the estate.

63    The respondent contended that there was no arguable case on appeal and further, a stay or injunction would occasion prejudice due to further delay and the waste of associated costs.

64    The trustee in bankruptcy submitted that the steps he was currently taking in relation to the Seymour property would be necessary for compliance with the Enforcement Order in any event. Further, Mr Shirreff had not advanced any detailed alternative proposal for clearing the Seymour property or any detailed refinancing arrangement. The trustee submitted that he had hitherto delayed taking steps in relation to the Enforcement Order while pending the outcome of the applicant’s attempts to refinance, and remained willing to cooperate, prompt compliance with the Enforcement Order was now necessary.

Discussion

65    In the present case, the applicant appeals from a judgment dismissing this application to have the sequestration order set aside. Thus, it appears to be on all fours with Carver, which indicates that there is no power to stay proceedings other than under s 52(3) of the Bankruptcy Act, for the period not exceeding 21 days.

66    The applicant alleges that it is necessary to stay the operation of the sequestration order to permit him to refinance, as to the trustee has refused to cooperate. His principal immediate concern is, however, to restrain the holding of the forthcoming series of auctions.

67    If Carver is correct, the court has limited power to stay the proceedings under the sequestration order for a period not exceeding 21 days. If, contrary to Carver, there is a wide power both to stay the operation of the sequestration order and grant the interlocutory relief, in my opinion, it should not be exercised in this case. The principles relevant to a stay 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 Ltd [2002] FCA 427 at [4]. In determining where the balance of convenience lies, it is necessary in the present context to consider whether the appeal, if successful, will be rendered nugatory in the absence of a stay, and the prejudice to other parties should a stay be granted. Like considerations govern the grant of interlocutory relief.

68    The subject matter of the immediate relief sought is limited, as it relates only to the scheduled auctions of material stored on one of the applicant’s real properties at Seymour.

69    In the present case, the notice of appeal was prepared by the applicant, who is not legally qualified. The basis for his allegations that Whelan FM had included as liabilities debts which were already paid, the relevance of any such inclusions to his ability to pay his debts as they fell due and the legal consequences thereof, are unclear. The material filed to date amounts to mere assertion. No consistent detailed estimation of liabilities is contained in the applicant’s most recent affidavit, and no legal error or statutory basis for the appeal is identified. I am unable confidently to conclude that the applicant has an arguable case on appeal.

70    Assuming, however, that the applicant’s appeal is arguable, in my view it will not be rendered nugatory if the operation of the sequestration order is not stayed. There is no evidence that the trustee proposes to auction any of the real properties prior to the hearing of the appeal and the evidence does not support the allegation that the trustee has declined to cooperate to enable the applicant to refinance the liabilities of the estate. More particularly, the appeal will not be rendered nugatory if the interlocutory relief restraining the auctions is refused.

71    The subject matter of the scheduled auction is not the Seymour property (which, contrary to Mr Shirreff’s assertions, is not his current home). Rather, material stored on the property will be sold and removed pursuant to the Council’s Enforcement Order. There is no evidence that the material is unique or rare. The circumstances do not justify an exercise of discretion which would halt the sale and removal of the material on the site in compliance with the Enforcement Order. So to order would occasion further delay and wastage of costs to the prejudice of creditors, and is contrary to the public interest in achieving timely compliance with the Enforcement Order. While the applicant, whose estate has an estimated surplus of assets, contends that the material could simply be removed to another site, the evidence indicates that the trustee’s invitations to provide feasible alternative proposals for the clearance of the site and realisation of the properties have proved unproductive.

conclusion

72    In my opinion, the application to restrain the proposed auction, or otherwise stay the operation of sequestration order pending the hearing and determination of the appeal, should be refused.

Associate:

Dated:    15 December 2010