The Prospect of Special Leave Being Granted
8 For the following reasons it seems to me that Mr Murdaca's application for special leave could be understood to involve a question of law that is of public importance because of its general application. It also seems to me that the interest of the administration of justice could be understood to require consideration by the High Court of the judgment because authoritative guidance from the High Court, or indeed the Full Court of this Court, is not presently available on that question of law (s 35A of the Judiciary Act 1903 (Cth)).
9 The act of bankruptcy on which the creditor's petition was founded was Mr Murdaca's alleged failure to comply with a bankruptcy notice. The bankruptcy notice required payment of a judgment debt within 21 days after the service of the notice. At the time of issue and service of the bankruptcy notice, execution of the relevant judgment had not been stayed (see s 41(3)(b) of the Bankruptcy Act). However, an ex parte stay of proceedings in respect of the judgment was granted within the period of 21 days after the service of the notice; that is, before the commission by Mr Murdaca of the purported act of bankruptcy on which the creditor's petition was founded.
10 The learned Federal Magistrate rejected a submission that the stay of proceedings which had been ordered by the Local Court of New South Wales, precluded the creditor from 'pursuing the petition'. His Honour took the view that the stay order could not affect the rights of the creditor as the bankruptcy notice had been issued prior to the stay order. The reasons for judgment suggest that the Federal Magistrate placed weight on three authorities none of which was directly on point. However, as discussed below, there was a judgment of this Court directly on point to which his Honour's attention should have been drawn and which supported the view taken by his Honour.
11 I turn first to the authorities to which the Federal Magistrate relevantly referred. Re Moss; Ex parte Tour Finance Ltd [1969] ALR 285 is a decision of Gibbs J sitting as the Federal Court of Bankruptcy. The case concerned whether a stay that had been lifted before the issue of a bankruptcy notice nonetheless prevented the judgment from being described in the bankruptcy notice as a judgment 'the execution of which had not been stayed'. His Honour concluded that it did not. It was in that context that Gibbs J described the time of the issue or the service of the notice as the critical time for the purpose of s 41(3)(b) of the Bankruptcy Act.
12 The judgments of the Full Court of the Federal Court in Wiltshire-Smith v Mellor Olsson (1995) 57 FCR 572 and of Weinberg J in Lindholt v Merritt Madden Printing Pty Ltd [2002] FCA 260 similarly were not concerned with a situation in which a judgment was stayed between the date of service of a bankruptcy notice and the expiry of the time provided for compliance with the notice.
13 The authority that should have been drawn to the attention of the Federal Magistrate is Schekeloff; Ex Parte Schekeloff v The Hopkins Group Pty Limited (1989) 22 FCR 407. In that case Burchett J gave consideration to a factual situation relevantly indistinguishable from the present. His Honour concluded that, for the purposes of s 40(1)(g) of the Bankruptcy Act, the time for consideration whether a judgment on which a bankruptcy notice is founded has not been stayed is the time of issue, or at the latest, service of the notice. In reaching this conclusion Burchett J placed considerable weight on Re Dennis; Ex Parte Dennis (1888) 60 LT 348, a decision of the Court of Appeal concerning the service of a garnishee order nisi on the judgment debtor after the service of a bankruptcy notice on him.
14 Schekeloff has been referred to in a number of Federal Court judgments with apparent approval, but in none that I have been able to identify has a comparable factual situation been under consideration (see, for example, Re Frasersmith; Ex Parte J Blackwood & Son Limited (1992) 36 FCR 144 (Beaumont J); Re Roberts; Ex Parte Bower (1994) 48 FCR 350 (Einfeld J); Re Johnson; Ex Parte Johnson v Tonkin (1994) 53 FCR 70 (Spender J); Re Sgambellone; Ex Parte Jacques (1994) 53 FCR 275 (Drummond J)).
15 In my respectful view, the correctness of the decision in Schekeloff is open to reasonable question. It is at least arguable, in my view, that a debtor does not commit an act of bankruptcy by not complying with a demand to pay a judgment debt which becomes unenforceable during the period allowed for compliance with the demand - albeit that the debt had been due and payable at the dates of issue and service of the bankruptcy notice.
16 Mr Murdaca acted for himself before the Federal Magistrates Court although he had legal representation at the hearing of his appeal. The grounds of appeal set out in his notice of appeal were unhelpfully drawn and not properly particularised. I assume that they were drafted by Mr Murdaca. Stone J understood Mr Murdaca to claim that the Federal Magistrate erred by failing to go behind the judgment of the lower court and further erred in exercising his discretion in favour of making a sequestration order.
17 Her Honour declined to allow Mr Murdaca to adduce on the appeal evidence in addition to that adduced in the Federal Magistrates Court. After referring to s 27 of the Federal Court of Australia Acther Honour observed at [6]:
'Although the discretion conferred by s 27 is not expressed to be limited in any way, the principles that should guide the Court in its exercise are well established and uncontroversial. In general the Court must be satisfied that the evidence could not, with reasonable diligence, have been adduced at the trial; Council of the City of Greater Wollongong v Cowan (1955) 93 CLR 435 at 444. Moreover the evidence that was not presented at the trial must have sufficient probative value that it is likely to have produced a different result had it been presented at the trial; Guss v Johnstone [2000] FCA 1455, Freeman v National Australia Bank Limited [2003] FCAFC 200.'
18 It does not appear that either party drew her Honour's attention to the judgment of the High Court in CDJ v VAJ (1998) 197 CLR 172. In that case McHugh, Gummow and Callinan JJ at [102] indicated that the circumstances in which the discretionary power of the Family Court, and by inference the analogous power of the Federal Court, to receive further evidence on appeal should be exercised are to be determined as a matter of statutory construction and -
'[t]hat matter should not be approached as if the common law procedures which gave rise to the principles laid down in such authorities as Wollongong Corporation conclusively indicate the proper construction of the statutory provision.'
19 The only reason for referring here to Mr Murdaca's desire to adduce further evidence on his appeal is that the affidavit which he sought to have received in evidence makes reference to his obtaining a stay of execution of the judgment debt and includes as an annexure a copy of the stay order obtained by him. Although the fact and date of the stay order had been established before the Federal Magistrates Court, the content of the affidavit which Mr Murdaca sought to have received in evidence on his appeal could have been seen as throwing light on at least one of the bases on which he sought to have the judgment of the Federal Magistrates Court set aside.
20 In any event, the issue identified above is a question of law capable of being addressed on the evidence that was adduced before the Federal Magistrate. It does not appear that it was argued before his Honour that the dismissal by a Registrar of Mr Murdaca's application to have the bankruptcy notice set aside placed any impediment in the way of his challenging the alleged act of bankruptcy on which the creditor's petition was founded (Makhoul v Barnes (1995) 60 FCR 572).
21 I conclude that Mr Murdaca's prospects of success on his application for special leave are sufficiently real to be characterised as substantial in the sense discussed in Burgundy Royale 161 CLR 681 (see [7] above).