FEDERAL COURT OF AUSTRALIA

Commonwealth Bank of Australia v Pattison [2012] FCA 1511

THE COURT ORDERS THAT:

1.    The respondent’s application for a stay of the operation of Orders 1, 2 and 3 made by the court on 17 December 2012 be dismissed.

2.    The applicant’s costs of the respondent’s application for a stay be its costs in the administration of the estate of the respondent.

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

REASONS FOR JUDGMENT

1    I gave judgment in this proceeding on 17 December 2012, at which time I ordered, amongst other things, that the estate of the respondent be sequestered. At that time, an application was made by counsel for the respondent for a stay of the operation of that order and associated orders pursuant to section 52(3) of the Bankruptcy Act 1966 (Cth) (“the Act”), which gives the court the discretion to stay proceedings under a sequestration order for a period not exceeding 21 days. At the time, counsel sought an interim stay for a short term so that they might read my reasons for judgment and give consideration to the possibility of filing an appeal on behalf of the respondent should that be the course which he chose to follow. After some discussion with counsel, it was resolved that the application for a stay be adjourned until 2:15 pm today and that the sequestration order and associated orders be stayed until 4:00 pm today so as to permit the application to be properly considered.

2    Between the date upon which I gave judgment and today, the respondent and his legal advisers, including counsel who appeared for him in the case, have parted company. The respondent now appears before me in person in order to prosecute his application for a stay. However, he does not base that application upon any submission with respect to the reasons for judgment which I gave on 17 December 2012. Rather, he now says that he is without legal representation, that he is in the course of attempting to find new practitioners to represent him, and that, if he is successful in that course, he proposes to obtain their advice as to the merits of an appeal and, if thought appropriate, to have them draw, settle and file a notice of appeal on his behalf. It is because he now seeks the opportunity to take those steps that he prosecutes the application for a stay which was originally made on 17 December and adjourned to today.

3    The application is opposed by the applicant substantially upon the grounds that the respondent has shown no basis for a stay according to the conventional tests, that he has shown no instance in the reasons which I published on 17 December which he claims to have been in error or wishes to challenge on appeal, and that, if a stay were granted on what are said to be the very skimpy grounds put forward by the respondent today, then, in effect, a stay would be the automatic entitlement of anyone against whom a sequestration order was made under section 52 of the Act.

4    The considerations that should guide a court under section 52(3) were said by Kenny J in Nolten v Groeneveld Australia Proprietary Limited [2011] FCA 1494 at [24] to be not materially different from those applicable under r 36.08 of the Federal Court Rules 2011. Her Honour said:

Rule 36.08 of the Rules confers a broad discretion to order a stay notwithstanding that an appeal shall not operate as a stay of execution or of proceedings under the judgment appealed from. In Powerflex Services Proprietary Limited v Data Access Corporation (1996) 67 FCR 65, a Full Court of this Court held that the appropriate test for a stay under the equivalent of Rule 36.08 of the current Rules was that set down in Alexander v Cambridge Credit Corporation (1985) 2 NSWLR 685, namely, whether the applicant for a stay showed a reason or an appropriate case to warrant the exercise of discretion in his favour. More specifically, with respect to an application for a stay of a sequestration order, the question is whether there is an arguable point on the proposed appeal and whether the balance of convenience favours the granting of a stay –

for which proposition her Honour referred to a number of authorities. As I have observed above, her Honour went on to say that the test for a stay under s 52(3) of the Act was not materially different from that arising under r 36.08.

5    Given the way in which the respondent has put his application for a stay before me today, I would be quite unable to form the view that there is an arguable point with respect to a proposed appeal. Not only has no appeal been lodged, but the respondent is unable to say that he is in receipt of advice that an appeal should be lodged, or that there is anything in the reasons which I gave on 17 December 2012 which should be challenged.

6    Looking at it from the perspective of the arguable point on appeal, I think that by far the better course would be to await the event when the respondent does lodge his appeal, if that is what happens, when the Judge before whom any application for a stay comes will be in a position to measure the prospects of success against the grounds articulated in the respondent’s notice and to weigh them with the other factors going to the balance of convenience which should guide the exercise of a discretion on such an occasion. Given the nature of the respondent’s application before me today and the absence of any criticism of the reasons of 17 December 2012, I take the view that it is inappropriate to grant the stay which he seeks.

7    However, I accept that there may, nonetheless, be strong considerations with respect to the balance of convenience which would favour the grant of a stay, and it is more in this area that the respondent has advanced his arguments today. What he says is that if a stay is not granted trustees will be appointed to his estate. The respondent will be obliged to provide the required statement of his affairs, and the trustees would be obliged to go about their conventional tasks of investigating the respondent’s asset position and getting in the assets which are available. The respondent says that the trustees will inevitably incur costs in the doing of this and would be entitled to those costs from the estate even if an appeal were successful. That is to say, if the appeal succeeded, the trustees would be entitled to the costs which they had incurred from funds which would ultimately come out of the pocket of the respondent himself.

8    As it seems to me, this is a consideration which could be advanced by anyone against whom a sequestration order had been made. If it were a consideration of weight in its own right, then it is difficult to conceive of circumstances in which a stay under s 52(3) of the Act would not be the entitlement of an unsuccessful respondent to a bankruptcy petition. The reason, of course, why such arguments are not always successful, and why they do not always entitle a respondent to a stay almost as a matter of course, is that, in the normal course, they are advanced in conjunction with a draft notice of appeal, and with an argument which must be developed, at least to some extent, as to the kind of appeal that would be conducted and the points with respect to which it would be said that the bankruptcy Judge’s decision was in error. That is the difficulty which the respondent faces on the present occasion. As I said before, he has not advanced his case upon the basis that there is something in error in the reasons which I gave. He is, for whatever reason, in the position of a party who is still seeking advice on that very question.

9    My refusal to grant a stay will not preclude the respondent, if he does file an appeal, from applying under r 36.08(2) of the Rules in the same way as any appellant in the court. In the view I take, it would be preferable for that course to be followed. The Judge before whom any such application then came would have before him or her the notice of appeal in question and would be able to weigh the respondent’s arguments against the discretionary considerations that otherwise appear to have force.

10    I also take into account the time during which this proceeding has been in the list of this court and of the Federal Magistrates Court before it came here. The petition was originally filed on 29 September 2011, that is to say, nearly 15 months ago. In my view, that is a long period of time for a bankruptcy petition to be making its way through the court process. It is no part of my present project to investigate, or to comment upon, the circumstances which may have led to the elapse of that period of time, but, the sequestration order having been made, the creditors are now, in my view, entitled to see the administration of the respondent’s estate moving forward in the way prescribed by the Act, and with more expedition than has previously been the case. As I commented once or twice in my reasons, the interests of the creditors themselves are most important. In a case such as the present, they are the silent parties who have been patiently waiting for their debts to be settled, or at least to be addressed in the context of the respondent’s estate generally.

11    I would be reluctant to take any step which would have the result of asking the creditors to keep waiting even longer than they already have in the absence of a good reason for taking that step. As I indicated, I cannot see, in the case which has been put before me by the respondent, any particularly good reason why the creditors should be held out of their normal expectations, or why the onus is not now on the respondent to establish, at least to the prima facie satisfaction of a Judge, that there is some reasonably arguable merit in any such appeal as he proposes to lodge.

12     For those reasons, the order I make is that the respondent’s application for a stay of the operation of orders 1, 2 and 3 made by the court on 17 December 2012 be dismissed.

Associate:

Dated:    17 January 2013