Satchithanantham v Multilink Investments Pty Limited

REASONS FOR JUDGMENT (revised from transcript) 1 I have before me today a notice of motion filed by Mr Thambiappah Satchithanantham who is known in this court as Mr Satchi. The notice of motion seeks a stay of a sequestration order made by Registrar Hedge on 23 April 2002. The order was made on the application of the respondent to this motion, Multilink Investments Pty Limited. 2 Mr Satchi, was not legally represented on the motion. Mr De Buse of counsel appeared for the respondent. Ms McLean, solicitor, appeared for the Official Trustee in Bankruptcy ("the trustee"). Ms McLean sought leave to intervene in the proceedings, and I granted her leave to be heard on this motion under O 77 r 9 of the Federal Court Rules 1979. Rule 9 (6) provides that an application for leave for an order under this rule must be made by filing a notice of motion. Ms McLean has undertaken to file a notice of motion and accordingly I gave her leave to be heard on the motion in accordance with the rule. 3 After the making of the sequestration order by Registrar Hedge, Mr Satchi sought an order reviewing the Registrar's decision. Federal Magistrate Driver heard that application on 7 May 2002. The Federal Magistrate gave judgment on the application on the same day and ordered that the application for review of the Registrar's decision to make a sequestration order be dismissed. 4 There were two substantial grounds argued by Mr Satchi before the Federal Magistrate. The first ground was that the bankruptcy notice was not properly served because it was served by way of facsimile. The second substantial ground was that Registrar Hedge had erred in not adjourning the hearing of the creditors petition pending the outcome of an application for special leave filed by Mr Satchi on 23 April 2002 in the High Court against a judgment of the Court of Appeal of New South Wales confirming a decision of the District Court of New South Wales on which the bankruptcy notice was based. I will refer again to those proceedings in the reasons for my judgment. 5 The Magistrate dismissed the application for review of the sequestration order made by the Registrar. He found that the bankruptcy notice was properly served and he did not accept the evidence given by Mr Satchi that the bankruptcy notice was not brought to his attention until approximately a month after the date on which the facsimile was transmitted. 6 As to the second ground pursued before Federal Magistrate Driver, namely that the creditors petition should have been adjourned pending the application to the High Court for special leave, the Driver FM referred in of his judgment, Satchithanantham v Multilink Investments Pty Ltd [2001] FMCA 84 at par 15, to a decision of the Federal Court in Ahern v Deputy Commissioner of Taxation (1987) 76 ALR 137 ("Ahern") and the decision of the High Court in Bryant v Commonwealth Bank of Australia (1996) 134 ALR 460. That judgment is now reported in (1996) 70 ALJR 306. As the Driver FM said, Ahern is authority for the proposition that a court exercising jurisdiction in bankruptcy should not proceed to sequestrate the estate of a debtor when an appeal is pending against the judgment relied upon as the foundation of the bankruptcy proceedings so long as the appeal is based on genuine and arguable grounds. 7 However, Driver FM came to the view that whether or not the application for special leave is genuine it does not have reasonable prospects of success and is almost certainly doomed to fail. The special leave application, so it seems, is likely to be hear in October or November of this year but in view of the decisions which he came to on prospects of the special leave application Driver FM decided that he should not adjourn the petition to await the outcome of the special leave application. 8 Mr Satchi argued two grounds before me today in support of the motion for a stay. The first ground is, in effect, the same ground, which was argued as the second basis of the application for an order of review sought before Driver FM. That is to say, Mr Satchi contends that a stay ought be granted to enable him to pursue his special leave application in the High Court. 9 The second ground put forward by Mr Satchi in support of the stay is that he wishes to leave Australia for Brunei where he apparently has business interests. He has told me today that he wishes to work in Brunei and I gather from what he has told me that he can earn a better living there than he can in Australia. 10 I will proceed in this application upon the basis that I have power to grant a stay notwithstanding ss 37 and 52(3) of the Bankruptcy Act 1966. There is authority for the proposition that power exists under O 52 r 17 of the Federal Court Rules 1979; see Guss v Johnstone [2000] FCA 1455, at par 8, per Sackville J, a decision of the Full Court of this Court. 11 In exercising my discretion under the rule I have taken into account what was said by Kirby J in Bryant v Commonwealth Bank of Australia (Supra) at 70 ALJR 306 at 309; 134 ALR 460 at 464 as follows: "In cataloguing, for this purpose, an order under the Act sequestrating the estate of a person found bankrupt, it is clear that the status of the bankrupt is affected. But so are, potentially, the interests of third parties. So too is the interest of the community. It would therefore be a mistake to approach the present application as if the only interests affected by its outcome were those of the applicant and the respondent. Also to be kept in mind are the interests of other creditors, particularly unsecured creditors, and of the community which has its own concerns in the due administration of the Act in respect of the estate of persons found to be bankrupt." 12 Driver FM referred in his judgment to the proceedings in the District Court and to the decision of the New South Wales Court of Appeal in which the appeal was dismissed. I think it is necessary to refer again briefly to history of those proceedings. 13 On 18 August 2000, acting District Court Boyd-Boland ADCJ gave judgment against Mr Satchi for an amount of approximately $272,000 on a guarantee given to Multilink Investments Pty Limited which is, of course, the judgment creditor. 14 On 11 February 2002 the Court of Appeal of New South Wales heard argument and gave judgment dismissing the appeal brought by Mr Satchi. The Court of Appeal gave short reasons for the decision because the Court, which was comprised of Mason P; Santow JA and Ipp AJA, was of the unanimous opinion that the appeal did not raise any question of general principle. Their Honours stated that the appeal either re-agitated issues dealt with by Boyd-Boland ADCJ or attempted to introduce new issues, which were not the subject of the grounds of appeal. 15 Their Honours were of the view that there was no error in the reasons of the Trial Judge on the matters, which Mr Satchi sought to re-agitate in the Court of Appeal. Their Honours noted that the issues principally related to an appeal on the grounds that the Trial Judge erred in his assessment and evaluation of the evidence. Their Honours stated that no appealable error was identified under the principles for setting aside or ordering a new trial as was summarised in a comparably recent judgment of Spigelman CJ, Sheller and Heydon JJA in Damberg v Damberg (2001) 52 NSWLR 492. Their Honours were of the view that the trial Judge had ample basis for reaching the conclusions he did on the various issues, which were before him. 16 It seems to me to be clear from what was said in the Court of Appeal that the application for special leave to appeal to the High Court does not involve any question of law of general public importance; nor does it involve the interests of the administration of justice: s 35A of the Judiciary Act 1903. I should point out that Mr Satchi does not have an appeal as of right to the High Court and that any appeal can only be heard if the Court grants special leave under the provision of the Judiciary Act 1903 to which I have referred. Accordingly, in my opinion, the application for special leave to appeal to the High Court has no prospects of success. I agree with the view reached by Driver FM that the application is almost certainly doomed to fail. 17 In any event, Mr Satchi has filed a notice of appeal on 28 May 2002 against the decision of the Federal Magistrate. The matters which will be the issue in the appeal are whether or not, as Mr Satchi contends, the bankruptcy notice was not properly served on him because it was served by facsimile and also the question to which I have already referred, namely whether the creditor's petition should have been adjourned to enable Mr Satchi to pursue his special leave application. It seems to me that Mr Satchi has poor prospects on the appeal but if I am wrong in this and he should succeed on his appeal then he will be in a position to pursue the special leave application. 18 There was evidence before me that there had been correspondence between Mr Satchi and the solicitors for the trustee in bankruptcy on the question of whether the special leave application could be pursued. I think it was a fair summary of the evidence to say that although the trustee initially expressed views against the prosecution of the special leave application, the position has not been determined finally. Ms McLean submitted that accordingly, it may still be possible for Mr Satchi to pursue the special leave application. 19 I turn next to the second ground of the application for a stay, namely, to enable Mr Satchi to return to Brunei in order to earn a living. I do not consider that this is a ground for granting a stay of the sequestration order. 20 Mr Satchi has delivered his passport to the trustee but there is power under s 139ZU of the Bankruptcy Act 1966 for the court to make an order granting the bankrupt permission to leave Australia. Mr De Buse and Ms McLean submitted, that it was open to Mr Satchi to make such an application. I accept that this is so and that in view of the fact that this course is open to him his wish to travel to Brunei, it cannot be a ground for granting a stay of the sequestration order. 21 In the exercise of my discretion against the grant of a stay I have taken into account a number of circumstances disclosed on the evidence. First, as appears from paragraph 31 of an affidavit sworn on 15 March 2002 by Mr Satchi, he has substantial creditors who have existing charges on the matrimonial home situated at 76 Houison Street, Westmead, owned by Mr and Mrs Satchi. A total amount of existing charges referred in that paragraph is approximately $800,000. Mr Satchi referred me to evidence in another affidavit filed by him, which indicated that the total value of the home is approximately $600,000. Accordingly, Mr Satchi does not have, at least on this basis, any equity in his interest in the home. The matrimonial home was owned jointly by Mr and Mrs Satchi but the effect of the sequestration order is that the joint tenancy has been severed and the property is now owned by the parties as tenants in common. Mr Satchi's half-interest as tenant in common is, of course, an asset now vested in the trustee. 22 The second matter, which I take into account, is that Mr Satchi's only readily realisable asset in Australia seems to be his one half interest in the matrimonial home, to which I have referred above. I should mention that he has not filed a statement of affairs which was required to be filed under the Bankruptcy Act 1966 within 14 days after the date of making the sequestration order. It is therefore not know whether he has any other substantial realisable assets in Australia. In paragraph 32 of the affidavit of 15 March 2002 Mr Satchi says that he has no other assets in Australia, apart from the home. At least on this basis, it would seem that Mr Satchi is insolvent and that is a further basis for exercising my discretion against the grant of the stay. 23 The third matter which I have taken into account is that a caveat which is exhibit 1 in the motion has been filed by the official trustee in bankruptcy against Mr Satchi's undivided one half interest as tenant in common in the property. There was evidence before me that Mrs Satchi is proposing to deal with her undivided one half interest as tenant in common in the property. I should mention that the evidence of intention to deal with the matrimonial home is contained in annexure I to the affidavit of Mr Satchi sworn 14 June 2002 and in particular the second page of that annexure which is a letter apparently faxed by Mrs Satchi to Messrs Sally Nash & Co. Ms McLean for the trustee, and also Mr De Buse for the judgment creditor, submitted that there was serious cause for concern that the one substantial asset of the bankrupt estate may be dealt with to the prejudice of creditors. 24 Mrs Satchi gave a lapsing notice under the provisions of the real Property Act but an order has been made by the Supreme Court of New South Wales extending the caveat until further order. If the stay sought by Mr Satchi is granted it may well prejudice the position and standing of the trustee in the proceedings in the Equity Division of the Supreme Court. 25 The next matter I will take into account in the exercise of my discretion is that Mr Satchi claims to have substantial financial interests in Brunei. These are referred to in paragraphs 34 and 35 of Mr Satchi's affidavit of 15 March 2002. They consist of a judgment obtained in a Brunei court for an amount in excess of $1,800,000 dollars and a further amount of $400,000 dollars due to a company in Brunei. Both of the assets referred to in paragraphs 34 and 35 are said to be assets of Mr Satchi's company rather than Mr Satchi himself and a question arises as to whether if Mr Satchi is permitted to Brunei any interest the trustee might have in these assets through Mr Satchi's shareholding may be lost for the benefit of creditors. 26 I refer again to the fact that no statement of affairs has been filed and accordingly details of Mr Satchi's shareholding interest in the Brunei company referred to in paragraph 34 and 35 of the affidavit has not been provided to the trustee in accordance with provisions of the Bankruptcy Act 1966. In any event, the possibility of pursuing the assets referred to in paragraph 34 and 35 can be dealt with by Mr Satchi in an application under the Bankruptcy Act 1966 to be made to the Court for leave to travel outside Australia. In addition, the prejudice, which Mr Satchi refers to in paragraph 3.3 of his affidavit of 14 June, namely his inability to pursue his business activities in Brunei, can also be dealt with on an application for leave to travel outside Australia. 27 For the reasons set out about in my view there are strong grounds for refusing to grant a stay of the sequestration order made by Registrar Hedge on 22 February 2002. Accordingly the motion is dismissed with costs. The costs of the trustee be costs in the bankrupt estate of Mr Satchi. I certify that the preceding twenty-seven (27) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Jacobson.