FEDERAL COURT OF AUSTRALIA

Papatriantafillou v Kekeff [2011] FCA 778

THE COURT ORDERS THAT:

1.    The application be dismissed.

2.    The applicant pay the respondent’s costs of and incidental to the hearing of the application.

3.    The applicant pay the supporting creditor’s costs of and incidental to the hearing of the application.

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

(REVISED FROM THE TRANSCRIPT)

1    The applicant applies for an extension of time within which to file and serve a notice of appeal from a judgment given by the Federal Magistrates Court of Australia on 1 April 2011, by which a sequestration order was made against the applicant’s estate. The presiding Federal Magistrate also made an order for the taxation and payment of the petitioning creditor’s costs and ordered, pursuant to s 52(3) of the Bankruptcy Act 1966 (Cth) (the Bankruptcy Act), that all proceedings under the sequestration order be stayed for a period of 21 days.

2    Under O 52 r 15(1) of the Federal Court Rules, any notice of appeal should have been filed and served within 21 days after judgment was given. The applicant did not take that step. He now seeks the favourable exercise of the power in O 52 r 15(2), which provides that the Court or a Judge “for special reasons” may at any time give leave to file and serve a notice of appeal.

3    In his reasons for judgment published on 1 April 2011, the presiding Federal Magistrate identified the principal issue arising on the hearing of the creditor’s petition to be whether the applicant had satisfied the Court that he was able to pay his debts: see s 52(2)(a) of the Bankruptcy Act. The applicant had sought to demonstrate his solvency by paying into court the sum of $15,235.50 from an undisclosed source. His Honour described this payment as “the amount remaining due to [the petitioning creditor]”. His Honour also found that the applicant had the capacity to borrow a further $17,000 if certain caveats on the title to real property were lifted. These sums were referable to the debt on which the petitioning creditor’s – that is, the current respondent’s – petition was presented.

4    However, a supporting creditor, Ms Nida Drew, had a judgment debt for $80,000 which, as at 18 February 2011, was unsatisfied and had accumulated post-judgment interest in the amount of $10,954.11. His Honour accepted evidence from Ms Drew that she had made two unsuccessful attempts to recover some or all of her debt through writs of execution. In the end result, his Honour was not satisfied that the applicant had demonstrated a capacity to pay his debts. In these circumstances, his Honour found it appropriate to make a sequestration order for the orderly administration of the applicant’s affairs for the benefit of all creditors: see Kekeff v Papatriantafillou [2011] FMCA 114 at [19].

5    The applicant has provided a draft notice of appeal. The grounds of appeal are stated as follows:

1.    Appellant and supporting creditor’s debt (claim) paid in full.

2.    Current accounts with lending criteria and up to date.

3.    Current prices of the two properties exceed one and a half million dollars. Stock more than $90,000 after valuation.

6    In order to succeed on this application, the applicant must establish “special reasons” as to why leave to file and serve a notice of appeal should be granted out of time. In Jess v Scott (1986) 12 FCR 187 at 195, the Full Court described the expression “special reasons” as used in O 52 r 15(2) as:

… an expression describing a flexible discretionary power, but one requiring a case to be made upon grounds sufficient to justify a departure, in the particular circumstances, from the ordinary rule prescribing a period within which an appeal must be filed and served.

7    A subsequent Full Court noted in Zocchi v The Queen [2000] FCA 1163; (2000) 116 A Crim R 245 at 246 that Jess v Scott was authority for the proposition that:

… the court’s power to extend time is a flexible one, designed to enable substantial justice to prevail over technical default.

8    More recently, the nature of the requirement for “special reasons” was discussed in Perpetual Trustee Company Ltd v Smith (2010) 186 FCR 566 where the majority (Moore and Stone JJ) said at [13]:

A ground will be a “special reason” where it takes the case out of the ordinary and the expression “for special reasons” does not imply something narrower than this: Jess v Scott (1986) 12 FCR 187 at 195. The principles guiding the Court’s discretion were discussed by a Full Court in Parker v The Queen [2002] FCAFC 133 per Spender, O’Loughlin and Dowsett JJ at [6]:

1. Applications for an extension of time are not to be granted unless it is proper to do so; the legislated time limits are not to be ignored. The applicant must show an acceptable explanation for the delay; it must be “fair and equitable in the circumstances” to extend time;

2. Action taken by the applicant, other than by way of making an application for review, is relevant to the consideration of the question whether an acceptable explanation for the delay has been furnished;

3. Any prejudice to the respondent in defending the proceedings that is caused by the delay is a material fact militating against the grant of an extension;

4. However, the mere absence of prejudice is not enough to justify the grant of an extension; and

5. The merits of the substantial application are to be taken into account in considering whether an extension of time should be granted.

9    I am not satisfied that the applicant has shown, on the material before me, that there are special reasons which would entitle him to have the benefit of O 52 r 15(2). The applicant has not shown, and cannot show, an acceptable explanation for the delay in filing a notice of appeal. Perhaps more fundamentally, the applicant has not pointed to any error, or the prospect of any error, on the part of the Federal Magistrates Court according to the grounds of appeal that are raised in the draft notice of appeal.

10    The present application has proceeded on the misconceived basis that the applicant should be granted an extension of time to appeal because, according to him, he has demonstrated that he has now paid his debts or is otherwise able to pay his debts. However, that is not an available ground for appeal.

11    In an affidavit sworn on 28 June 2011, the applicant annexed a document from the District Court of New South Wales headed “Notice of Orders Made”. This document is dated 30 May 2011, and records that on 27 May 2011 a note was made in Case Number 2009/00332681 between Ms Drew (as plaintiff) and the applicant (as defendant) as follows:

I note the judgment sum is now met and the stay on enforcement is dissolved.

12    The evidence does not reveal with clarity how that judgment sum came to be “met”, particularly in circumstances where, upon the applicant’s bankruptcy, Ms Drew’s rights to enforcement of her judgment debt were converted into a right to prove in the applicant’s bankrupt estate. Similarly the evidence is not clear as to how the note came to be made on 27 May 2011. There is some evidence before me from Ms Drew’s solicitor on that issue. In an affidavit sworn 8 July 2011 Mr Fox deposed to the existence of some discussions in relation to settlement of the debt which Ms Drew was owed. Those discussions involved the payment of $90,000, which subsequently came to be paid into Mr Fox’s trust account. However, his affidavit makes clear that that sum was received as part of a settlement proposal that required the applicant to demonstrate that his bankruptcy had been annulled, or that he had otherwise been discharged from bankruptcy. Those steps have not occurred.

13    Mr Fox’s affidavit also reveals that the note made by the District Court on 27 May 2011 was made when Ms Drew was not present or represented in court because of the fact that neither Mr Fox, nor to the best of his knowledge Ms Drew, had any notice that the matter was before the District Court on that day. It is not necessary for me to dwell on that matter because, whatever did happen on that day, was clearly an event post-dating the making of the sequestration order against the applicant.

14    In his affidavit the applicant also deposed that his assets are much greater than his debts. He says that his house would “now [realise] a value in excess of $500,000”; that property at 880 Hunter Street, Newcastle West, “would rent at around $2000 per week” and, if sold, “would realise more than [$1 million]”; and that his “stock and equipment” is “worth more than [$90,000]” following “a valuation from the Trustees”.

15    In his affidavit he also disclosed that he is indebted to Westpac Banking Corporation (Westpac) for a loan of $281,649.02, and for a loan for $24,893.92. He has also disclosed that he has an outstanding balance on a credit card issued by Westpac of $23,088.14. In each case the applicant has adduced evidence from Westpac that the loan is presently being conducted “in terms of the current repayment program”.

16    This evidence has been adduced by the applicant in an attempt to show that at the present time he is able to pay his debts. However that is not the issue involved in the present application. As I endeavoured to explain to the applicant on a number of occasions during the course of this application, I need to be satisfied that special reasons exist for extending time within which to file and serve a notice of appeal.

17    The grounds set out in the draft notice of appeal speak of matters or events that post-date the making of the sequestration order. None of the draft grounds raise a viable ground of appeal. In my view there is no point in extending the time within which to file and serve a notice of appeal claiming those grounds as grounds of appeal.

18    I suspect that what, in effect, the applicant really seeks is an annulment of his bankruptcy pursuant to s 153A of the Bankruptcy Act. If that is what the applicant seeks then it will be necessary for him to satisfy his trustee in bankruptcy of the matters required by that provision. I should add that, plainly, the present application before the Court is not one for annulment pursuant to s 153B of the Bankruptcy Act: see Simon v Vincent J O’Gorman Pty Ltd (1979) 41 FLR 95 at 102 and 109; Rangott v Marshall (2004) 139 FCR 14.

19    In all the circumstances the application must be dismissed.

Associate:

Dated:    12 July 2011