FEDERAL COURT OF AUSTRALIA

Charan v Gleeson [2012] FCA 675

THE COURT ORDERS THAT:

1.    The interlocutory application filed 13 June 2012 be dismissed.

2.    The respondent’s costs of the interlocutory application are to be taxed and paid out of the estate of Usha Wati Charan.

Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011

REASONS FOR JUDGMENT

(Revised from Transcript)

1    On 6 June 2012 Federal Magistrate Smith made a sequestration order against the estate of Mrs Charan. The sequestration order was made on the application of the respondent, Mr Gleeson, who was a creditor of Mrs Charan and who was previously the trustee in bankruptcy of Mrs Charan’s son, Mr Prashant Charan.

2    On 13 June 2012 the applicant, Mrs Charan, filed a notice of appeal against the judgment of the Federal Magistrate. On the same day Mrs Charan filed an interlocutory application seeking certain orders. That application was accompanied by an affidavit made by her. It is clear from what has been said by her today that what she really seeks (although no such order is referred to in the interlocutory application) is an order staying the sequestration order pending the determination of her appeal. Mr Gleeson opposes the making of such an order.

3    There are eight grounds of appeal set out in Mrs Charan’s notice of appeal. The principal relief sought is an order that “the creditor’s petition be set aside”. There are a number of comments I make about the notice of appeal. First, the Federal Magistrate delivered an ex tempore judgment, but his reasons for judgment were not available in revised form until 15 June 2012. Hence, the notice of appeal was prepared without the benefit of a copy of his Honour’s reasons for judgment. Secondly, Mrs Charan is not legally represented today, and I gather that she was not legally represented at the time of preparing her notice of appeal in the present matter. Even so, what is immediately apparent upon a reading of the grounds of appeal is that they were originally prepared for the purpose of initiating an appeal against orders made at an earlier stage of the dispute between Mrs Charan and Mr Gleeson. In the result, they do not even attempt to identify error on the part of the Federal Magistrate in respect of the decision I am now concerned.

4    It is clear that the Federal Magistrate was satisfied that it was appropriate to make a sequestration order against Mrs Charan’s estate. His Honour’s reasons for judgment indicate that there was evidence before him to show that Mr Gleeson was a creditor of Mrs Charan under a judgment entered on 1 April 2011 which gave effect to a certificate of taxation in the sum of $19,534 arising out of a costs order made by Federal Magistrate Barnes in other proceedings between Mrs Charan and Mr Gleeson (see Charan v Gleeson [2010] FMCA 703) arising out of dealings between Mrs Charan and Mr Gleeson in his capacity as trustee in bankruptcy of her son’s estate.

5    In his reasons for judgment the Federal Magistrate observed that the uncontested evidence before him established that Mrs Charan had not paid the judgment debt and that she had failed to comply with the bankruptcy notice based upon it. Apparently Mrs Charan made an application to set aside the bankruptcy notice, but that application was dismissed, first by a Registrar, and then by Federal Magistrate Raphael.

6    Mrs Charan was not legally represented at the hearing of the creditor’s petition. The Federal Magistrate expressed the opinion that the grounds relied upon by Mrs Charan in support of her opposition to the making of a sequestration order were legally misconceived in that they failed to recognise that she had already committed the relevant act of bankruptcy by the time the creditor’s petition was filed. The Federal Magistrate then observed (at para 18):

However, as was accepted by counsel for Mr Gleeson, it is appropriate to understand her three grounds of review as maintaining, in effect, that her factual contentions should satisfy the Court that there is “other sufficient cause a sequestration order not to be made” within s.52(2)(b), and that the Court should exercise its discretion under that subsection to dismiss the petition upon being so satisfied.

7    In essence, the relevant question as identified by his Honour was whether Mrs Charan had a good claim against Mr Gleeson which might satisfy his Honour that there existed a sufficient reason not to make the sequestration order.

8    The Federal Magistrate addressed that question in accordance with the approach endorsed in the relevant authorities, a number of which are referred to in his Honour’s reasons for judgment. Those authorities included Rigg v Baker (2006) 155 FCR 531 at paras [64]-[66] (French J); Totev v Sfar (2006) 230 ALR 236 at para [44] (Allsop J) and Re Schmidt; ex parte Anglewood Pty Ltd (1968) 13 FLR 111 at 115-116 (Gibbs J). His Honour also referred to the judgment of Flick J in Davidova v Murphy [2009] FCA 601 in which his Honour considered these and other authorities.

9    This court has jurisdiction to make an order staying a sequestration order for a period not exceeding 21 days under s 52(3) of the Bankruptcy Act 1966 (Cth) or until the determination of an appeal against the sequestration order in an appropriate case: see, for example, Liprini v Liprini (No 2) [2011] FCA 1150 (Yates J) and Bourke v Westpac Banking Corporation [2012] FCA 6 (Buchanan J).

10    I have of course read Mrs Charan’s affidavit and listened to what she has to say. As I understood Mrs Charan, it is her contention that Mr Gleeson has misconducted himself in some way, and that he ought never to have obtained any order for costs. In fact, she contends that he ought to be paying her compensation. However, the learned Federal Magistrate who determined that aspect of this unfortunate dispute disagreed, and made the costs order in favour of Mr Gleeson upon which the bankruptcy notice and the creditor’s petition were founded. I do not think there is anything in the material relied upon by Mrs Charan to suggest that her appeal has any prospect of success.

11    I should also mention that Mrs Charan’s affidavit does not provide any indication of her financial situation at the present time including what moneys may be owing under other costs orders made in the various proceedings in which she has been involved apart from that upon which the bankruptcy notice and the creditor’s petition were founded.

12    In the circumstances, I am not persuaded that it would be appropriate to grant a stay of the sequestration order. The interlocutory application which I have treated as an application for a stay of the sequestration order is therefore dismissed.

13    Mrs Charan must pay Mr Gleeson’s costs of the application. Such costs are to be taxed and paid out of Mrs Charan’s estate.

14    Orders accordingly.

Associate:

Dated:    29 June 2012