Bankruptcy - Power of Court to make self-executing order - delegation of power to Registrar

Judgments and Orders - self-executing - District Registrar of Federal Court - no power to make in bankruptcy

Bankruptcy Act 1966 - s. 31A

Exell v Exell [1984] VicRp 1; (1984) VR 1

FAI General Insurance Co. Ltd. v Southern Cross Exploration N.L. [1988] HCA 13; (1988) 165 CLR 268

Freeman v Rabinov [1981] VicRp 52; (1981) VR 539

Werner v Bailey Aluminium Products Pty. Ltd. (1988) 80 ALR 134

Counsel for the applicant: P.R. Dutney, QC and D.B. Fraser

Counsel for the first respondent: J.S. Douglas, QC and P.J. Baston

Solicitors for the first respondent: P. Lynch and Co.

Solicitors for the second respondent: Feez Ruthning

1. The applicant pay the respondents' costs of and incidental

to the application filed on 26 November, 1992, up to but not

including the hearing of 1 December, 1992, to be taxed.

2. The applicant pay the respondents' costs of and incidental

to the application filed 28 October, 1992 to be taxed.

Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

DRUMMOND J. On 1 December, 1992 I heard, and determined in Mr. Bendeich's favour, his application to set aside what was described as a self-executing order made by Deputy District Registrar Allen on 6 November, 1992. This order (which was made by consent) operated, in the events which happened, to bring about the dismissal, as from 13 November last, of Mr. Bendeich's application for registration as a trustee in bankruptcy. It was in the following terms:

"1. That the Applicant file and serve an Affidavit of

Discovery identifying the documents contained in

Schedule One Part Two of his Affidavit filed in this

Honourable Court on 10 September, 1992, such

identification being sufficient to allow the objectors

to evaluate any claim for privilege asserted by the

Applicant within seven days of the date of the hearing

of this Application and that in default of which the

Applicant's application for registration as trustee be

dismissed and that the Applicant pay the Objectors'

costs of and incidental to his application for

registration including all reserved costs, to be

taxed."

2. I granted Mr. Bendeich's application because, assuming that the Deputy Registrar had power to make a self-executing order of the kind in question, there were in my view good discretionary reasons why that order should be set aside and Mr. Bendeich's application for registration as a trustee allowed to continue. However, I took the view that before I could make a costs order in respect of his successful application, I would have to determine whether the Deputy Registrar had power to make the self-executing order. Accordingly, after hearing argument on costs I reserved my decision on that question.

3. It was not disputed that this Court could grant relief in respect of a self-executing order by, for example, granting an extension of time for compliance with the order even after the time originally fixed for compliance had expired, even though the order had already operated to produce a dismissal of the originating proceeding. Section 33(1)(c) of the Bankruptcy Act 1966 confers on the Court authority to do this. Cf. FAI General Insurance Co. Ltd. v Southern Cross Exploration N.L. [1988] HCA 13; (1988) 165 CLR 268 at 283-4.

4. Nor was it suggested that the fact that the Deputy Registrar's order was made by consent excluded the power of this Court to set aside or vary the order. Section 30A(6) confers on this Court power to review the Deputy Registrar's decision to make the order and that power extends to the review of a consent order such as that made here: see Werner v Bailey Aluminium Products Pty. Ltd. (1988) 80 ALR 134 at 138-9. Moreover, if the Deputy District Registrar lacked power to make the self-executing order, that it was included in a consent order could not prevent this Court setting it aside.

5. Mr. Allen could only have made the order in question in his capacity as a Deputy District Registrar of the Federal Court and not as a Deputy Registrar in Bankruptcy. Section 31A of the Bankruptcy Act 1966 permits officers of this Court, including the Registrar and a Deputy District Registrar, to exercise those powers of the Federal Court in its bankruptcy jurisdiction which are listed in s. 31A(1)(a) to (s), provided a judge of the Federal Court gives a direction in that behalf: see s. 31A(1) and (10) of the Bankruptcy Act.

6. A direction in writing was given by Spender J on 10 April, 1987 to Mr. Allen, a Deputy District Registrar of the Federal Court, to exercise the powers listed in s. 31A(1)(a) to (s). A copy of this direction is scheduled to these reasons.

7. The Deputy District Registrar's sole power to make the order in question arises under s. 31A(1)(b) of the Bankruptcy Act. It empowers him to exercise:

"In relation to a proceeding:

(b) the power (of the Court under this Act) to make orders

in relation to discovery, inspection and production of

documents in the possession, power or custody of a

party to the proceeding or of any other person."

8. Under s. 31A(1)(s) and by force of Spender J's direction, the Deputy District Registrar could here also have exercised any power of the Court prescribed by the Rules. But s. 31A(1)(s) cannot confer power on the Deputy District Registrar to make a self-executing order associated with an order for discovery because the Bankruptcy Rules do not confer any such power on the Federal Court. Rule 114B empowers the Court - the Federal or a State Supreme Court - exercising bankruptcy jurisdiction in the particular matter to make any order that could be made by that Court in the exercise of any jurisdiction it possessed otherwise than under the Bankruptcy Act. But that power is conferred on the Court by r. 114B solely "for the purpose of enforcing a judgment or order of the Court under the (Bankruptcy) Act". The stipulation in the order of 6 November, 1992, that the originating application for registration as trustee was to stand dismissed if Mr. Bendeich did not comply by 13 November, 1992 with the order to file the affidavit, could only take effect upon the requirement in the order that the affidavit be filed by 13 November itself becoming incapable of performance. The stipulation in the order that the application would stand dismissed upon default by Mr. Bendeich in complying with the requirement to file the affidavit is thus not made "for the purpose of enforcing" an order for discovery. Rather was it a stipulation forming an integral part of an order and made for the purpose of providing a sanction for the abuse of process on Mr. Bendeich's part that would be constituted by any failure to comply with this particular order for discovery against a background of his persistent non-compliance with prior interlocutory orders and directions. The justification for including such a stipulation in an interlocutory order is that the party has shown a contumacious disregard of the Court's orders or (although not contumacious) has been persistently dilatory in taking steps in the action: Freeman v Rabinov [1981] VicRp 52; (1981) VR 539 at 544. The purpose of such a provision in an interlocutory order is not to enforce the particular order, but to secure the just, expeditious and economical disposal of the action: Halsbury's Laws of England, 4th Ed., Vol. 37, para. 409. The fact that the stipulation as to dismissal of the originating proceeding may have provided encouragement to Mr. Bendeich to comply with the requirement in the order to file the affidavit on time cannot turn that stipulation into an order made for the purpose of enforcing another separate order for discovery.

9. Returning to s. 31A(1)(b), the proceeding here in question, so far as that sub-section is concerned, is the application made by Mr. Bendeich for registration as a trustee in bankruptcy pursuant to s. 155(2) of the Bankruptcy Act.

10. The question comes down to one of construction, namely, is an order for discovery that contains a provision that the originating proceeding itself in which the order is made is to stand dismissed if the order for discovery is not complied with within a fixed time, an exercise of "the power (of the Court under this Act) to make orders in relation to discovery ... of documents in the possession, power or custody of a party to the proceeding" within s. 31A(1)(b)?

11. I do not think that such an order falls within this statutory expression for the following reasons:

(a) It is no part of the power to make orders in relation

to discovery for the Court to terminate the proceeding

in which such orders are made without a final hearing.

The power to make orders in relation to discovery in

relation to a proceeding is a power aimed at ensuring

that that originating proceeding will go to a final

hearing in circumstances in which that hearing will be

able to be conducted expeditiously and without

disruption because the parties will come prepared and

ready to deal with all relevant issues. It is also

aimed at ensuring, so far as possible, that a just

result will be achieved.

(b) If Registrars had power under s. 31A(1) to hear and

determine a proceeding of the kind here in question,

namely an application for registration as a trustee,

there might be room for the implication into that

power of determination of a further power to dismiss

the proceedings for failure to comply with procedural

directions and orders made in the course of getting

the proceeding ready for a final hearing. Cf. Exell v

Exell [1984] VicRp 1; (1984) VR 1 at 5-6. But s. 31A(1) confers no

power on Registrars to hear and determine this kind of

proceeding.

(c) Power to dismiss the originating proceeding for

non-compliance with an interlocutory order such as an

order for discovery exists, for the reasons given, to

provide a sanction against a party abusing the process

of the Court by wilful refusal to take, or by

persistent delay in taking, steps necessary to ensure

a fair and expeditious determination of an action.

The power to impose such a sanction is not within the

range of powers conferred on the Deputy District

Registrar here pursuant to s. 31A(1), although I think

it would be open to a judge of the Court to make such

an order in reliance on s. 30(1)(b) of the Bankruptcy Act.

12. In my view the Deputy District Registrar did not have power, by force of the direction given by Spender J in relation to s. 31A(1)(b) of the Bankruptcy Act, to include in an order in relation to discovery that required the filing of an affidavit the stipulation that, if the applicant defaulted in complying with that requirement, his application for registration was to stand dismissed.

13. It follows that the order of 6 November last had to be set aside even if the discretionary grounds I relied on to justify doing that could not have warranted such a step.

14. There is another basis upon which the applicant is entitled to have the order set aside which is relevant to the issue of costs: the Deputy District Registrar was prohibited by s. 31A(2) from exercising power under s. 31A(1)(g) to make an order as to costs, except an order as to costs for or in connection with the "proceeding heard by" that official. On 6 November, 1992 what he heard was an application in the originating proceeding; he disposed of it by making the self-executing order now challenged, as well as an order that the applicant pay the objectors' costs of and incidental to that particular application. He was entitled to make that costs order by force of s. 31A(1)(g) and s. 31A(2). But in what I have called the self-executing order, the Deputy District Registrar directed that, should the originating application for registration stand dismissed, Mr. Bendeich was to pay the objectors' costs of and incidental to the entire originating application, including all reserved costs. He was expressly prohibited by s. 31A(2) from so directing.

15. I do not think that, given the intent of this order as revealed by its terms, the direction that the applicant pay the objectors' costs of the entire originating proceeding can be severed from the rest of the order. This provision certainly cannot be severed from the direction in the order concerning what is to happen if the applicant defaults in filing the affidavit referred to in the order, since the liability to meet the costs of the whole proceeding is an integral part of the consequences of default in filing the affidavit as is the dismissal of that proceeding.

16. As to the costs order that should be made, Mr. Bendeich has successfully contended, over the respondents' objections, that the Deputy Registrar's order must be set aside as being beyond power in two respects.

18. While I am satisfied that it was so made on Mr. Bendeich's side, in circumstances in which Mr. Bendeich's then solicitor knew he had no instructions to give consent, as between Mr. Bendeich and the respondents, the latter were entitled to assume that Mr. Bendeich was joining with them in asking for the order to be made.

19. Moreover, the respondents were given no notice that the point that the order was beyond power would be taken at the hearing before me and came to meet an agreement that the discretion to set aside the order should be exercised in Mr. Bendeich's favour, an exercise in which they were unsuccessful. However, once the point was taken, the respondents argued against its validity, again unsuccessfully.

20. In these circumstances, costs being in my discretion under s. 32 of the Bankruptcy Act, I think the proper order is that the respondents should have their costs of Mr. Bendeich's application to set aside the orders of 6 November, 1992 up to but not including the hearing before me and that otherwise there should be no order as to the costs of that application.

21. Because Mr. Bendeich must be regarded, as between himself and the respondents, as having given his consent to the making of the order on 6 November, 1992, I think he should also pay the respondents' costs of that hearing.