Peterson v Fashkeev

REASONS FOR JUDGMENT 1 On 9 March 2007 a Federal Magistrate dismissed an application to discharge a sequestration order made by a Registrar of the Federal Magistrates Court on 11 December 2006. On 29 March 2007 the appellant appealed from the decision of the Federal Magistrate. That appeal is listed for directions on 1 May 2007. 2 The hearing before the Federal Magistrate took place on 27 February 2007, after the Federal Magistrate declined to grant the appellant an adjournment of that hearing, apparently on her application, to have a further opportunity to produce further evidence in support of her application. 3 Today the appellant has applied, by motion, for an order that the sequestration order made on 11 December 2006 be stayed pending the hearing and determination of the appeal or more accurately as expressed in the notice of appeal "all appeals" against that order. The Court has power to grant a stay of a sequestration order under s 29 of the Federal Court of Australia Act 1975 (Cth) and in accordance with O 52, r 17 of the Federal Court Rules. Generally, the Court will exercise the discretion to grant a stay or to not grant a stay on an application having regard to the grounds of appeal, provided they display an arguable prospect of the appeal succeeding, and having regard to the respective balance of convenience of the parties: see Freeman v National Australia Bank Ltd [2002] FCA 427. 4 Counsel for the appellant, in support of the stay application, contends that there is an arguable point to be raised on the appeal in two respects. Firstly, he contends that the Federal Magistrate erred in not granting the adjournment application which was sought. Secondly, he contends that the Federal Magistrate erred in dismissing the application for a review of the sequestration order, because on the material before the Federal Magistrate and now, on the further material (which I assume is intended to be the subject of an application for further evidence to be adduced before this Court), the appellant is solvent. 5 I do not need to say much about the issue of solvency except to point out that the assertion of solvency involves two premises. One is that the appellant's assets are said to have the value which she personally ascribes to them, although that value has not been supported by independent evidence. That was a difficulty which confronted her before the Federal Magistrate and indeed before the Registrar. It has still not been addressed. The second premise is that her assertion of solvency depends upon the Court assuming that the amount claimed to be owing to Permanent Mortgages Pty Ltd by her of about $397,000, which I understand to be the subject of proceedings in the Supreme Court of South Australia in Matter 1329 of 2005, should be ignored on the basis that the appellant considers that she will succeed in that proceeding. If that second premise is not correct then, even on her own evidence, she is clearly insolvent. 6 There is no evidence before me of any cogency to indicate that the appellant has such a prospect of succeeding in resisting the claim of Permanent Mortgages Pty Ltd or in succeeding in her counterclaim in that action to warrant making the assumption which I have been asked to make. At present I do not think there is an arguable case on the material before me that the appellant is solvent. I hasten to add that that is a view I have reached only on a quick reading of the material which has been adduced on this application and on the basis of the submissions which have been put on her behalf. There may be other evidence, in greater detail, concerning the action of Permanent Mortgages Pty Ltd to which my attention has not been drawn, so that is only a provisional view. 7 As to the issue of adjournment, I am prepared to assume that there is an arguable prospect of the appeal succeeding. In those circumstances I do not need to go into the facts as disclosed in the Federal Magistrate's reasons as to why the adjournment was refused, and why his Honour then proceeded to hear the application. 8 Given that assumption in favour of the appellant, my view that presently the issue of solvency is not one which is reasonably arguable, must be regarded as a provisional and tentative one. It does not weigh on the exercise of my discretion. 9 I turn to consider the respective balance of convenience. 10 There is, of course, an obvious inconvenience to the appellant in having a sequestration order made against her. I accept that. She complains more specifically that her trustee intends to abandon her participation in the Supreme Court action to which I have referred. That will mean that the action will proceed undefended, and that her counterclaim in that proceeding will not be prosecuted. I have no information to indicate the basis upon which the trustee has made that decision. As I have said, at present the information about that proceeding is very scanty. However, in my view, the appropriate recourse for the appellant, if she wishes to complain of that decision of which she now has notice, is to seek to have the decision reviewed. She has that right. It is not sufficient for her simply to assert that she disagrees with the decision, and then to ask that her disagreement be taken into account as indicating prejudice on her part. If the decision is a wrong one, she can apply for it to be reviewed and if she is successful the decision will not be activated. In the meantime, I am told that that proceeding is on for further directions on 27 April 2007. It is customary, if there is a challenge to such a decision on the part of the trustee, that the proceeding would be further adjourned whilst that challenge was heard, provided the challenge was pursued promptly. I have no reason to think that would not be the case in this instance. 11 I therefore do not take into account, except in a very general way, the risk of the appellant's position in that Supreme Court proceeding being abandoned, because she has an alternative available remedy to her to protect her position if she is entitled to such protection. 12 As the application came on for hearing on very short notice, the trustee has not filed any material in support of what has been put orally. Counsel for the trustee has said that there is to be an auction of a property in the name of the appellant on 15 April 2007 and that any stay would mean that the capacity for that auction to go ahead may well be lost, to the detriment of the estate and the creditors of the estate of the appellant. That was not challenged by counsel for the appellant and in the circumstances I am prepared to act on it in a general way. 13 There is also, from the point of view of the creditors of the estate of the appellant, and I think in particular the respondents to the appeal, the disadvantage and detriment which is caused by further delay in the administration of her estate. On her own submission, as I understand the material before me, her capacity to meet the liability to the respondents, the petitioning creditors, and to pay any other creditors she has depends upon the realisation of her property. The realisation of that property, in the circumstances, would not be likely to cause her significant detriment provided it is done conscientiously by the trustee because it is simply converting an asset in one form into a different form of asset. 14 If the sequestration order is set aside, the different form of asset, namely cash upon settlement of the property, would be available to her. If it is not set aside, that cash is available to her trustee. 15 Having regard to those various factors, in my view, the balance of convenience is not in favour of granting a stay of the sequestration order on the material presently before me and I refuse the application. 16 I order that the appellant pay to the respondents and to the trustee costs of the notice of motion. In the case of the trustee, those costs are to be the trustee's costs in the administration unless the sequestration order is set aside, in which case they are to be costs against the appellant personally. I certify that the preceding sixteen (16) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Mansfield J.