The Relevant Facts
16 The Council commenced the L & E Court proceedings in late 2004. In those proceedings, the Council sought declaratory and injunctive relief against the Stankovics requiring them to clean up the property and to cease keeping pigs there.
17 At a listing in the L & E Court on 24 November 2004, the Council's claims for relief were listed for hearing on 19 January 2005.
18 On 9 January 2005, the hearing fixed for 19 January 2005 was vacated. On that occasion, the proceedings were adjourned to 16 February 2005 before the Class 4 judge.
19 On 16 February 2005, when the matter was called on before the Class 4 judge, there was no appearance on behalf of the Council. Mr Stankovic appeared on his own behalf (unrepresented). His wife did not appear.
20 The judge who took the list on that day dismissed the L & E Court proceedings "… for want of prosecution".
21 On 22 February 2005, the Council applied to the L & E Court to have the L & E Court proceedings reinstated.
22 On 4 March 2005, the L & E Court fixed 14 March 2005 as the hearing date for the L & E Court proceedings. Mr Stankovic was present in Court on 4 March 2005. It is not clear from the file index of the L & E Court tendered in evidence before me whether any formal order reinstating the L & E Court proceedings was ever made. Nonetheless, it is clear that the Court and all of the parties thereafter proceeded upon the basis that those proceedings had been reinstated.
23 On 14 March 2005, a judge of the L & E Court (Pain J) heard the L & E Court proceedings. Mr Stankovic again appeared on his own behalf. His wife filed a submitting appearance. On that day, her Honour delivered Reasons for Judgment ex tempore and made final orders (Baulkham Hills Shire Council v Stankovic [2005] NSWLEC 110).
24 Her Honour was called upon to consider whether Mr and Mrs Stankovic should be restrained from keeping pigs at the property and whether they were maintaining a junk yard at the property in breach of the residential zoning applicable to the property. The Council had issued a number of notices and orders to the Stankovics in relation to the storage of building material, second hand items and general rubbish on the property in the period between October 2001 and late 2003. Following further inspections in the first half of 2004, the Council had decided to take action against the Stankovics.
25 At the hearing before Pain J, Mr Stankovic gave oral evidence and made submissions. Her Honour summarised that evidence at [19]-[24] of her Honour's Reasons for Judgment.
26 At [28]-[31] of her Reasons, her Honour said:
28 The Council has been taking action since 2001 to have building material, second hand items and general rubbish on the property removed. It has issued a number of notices and orders none of which have been complied with by the First Respondent. In relation to the junk yard matter I intend to make the declaration sought in prayer 4, the order sought in prayer 5 and the order for removal in prayer 6 but with some variation to that sought by the Council.
29 I have asked the parties to draw a map of the property showing the location of the bricks and timber brought from Eastwood. I will allow these to remain for 18 months to enable the First Respondent time to make an application to the Council for development consent for the building of a house. The parties are to return to the Court in 18 months to see how the matter has progressed, at which point I will decide whether or not to make an order for removal of these materials. The piles of timber are to be stacked neatly into four piles within two months in order to reduce the visual impact of the site on neighbouring properties.
30 All other second hand and unused items such as old cars and trucks, white goods and general rubbish are to be removed from the property within six months. I have allowed such a lengthy period because of the First Respondent's numerous medical difficulties as evidenced by the medical report dated 28 October 2004 tendered by the First Respondent. While this report is now some months old I will give the First Respondent the benefit of the doubt and take this into account in allowing such a generous period.
31 While these orders and declarations are sought against the Second Respondent and she is one of the registered proprietors of the land, there is no evidence that she has played any active role in relation to the property and I am not minded to make any orders or declarations in relation to her.
27 Her Honour also decided to grant the injunction sought in relation to the keeping of pigs on the property.
28 At [33] of her Reasons, her Honour said:
For completeness I note that the First Respondent has sent a letter to the Chief Judge dated 9 March 2005 in relation to which I have provided the opportunity for both parties to make submissions. There is no particular matter in the letter that I consider needs to be taken into account in this judgment.
29 At the end of her Reasons for Judgment delivered on 14 March 2005, Pain J invited the Council to provide a final version of the orders required to give effect to her Honour's Reasons.
30 On 22 March 2005, the L & E Court made the following orders:
1. An Order restraining the First Respondent by himself, his servants, agents or contractors from carrying out or undertaking on the property a use of pig keeping;
2. A declaration that the property is being used as a junk yard in breach of s 76B of the Environmental Planning and Assessment Act 1979;
3. An Order restraining the First Respondent by himself, his servants, agents or contractors from carrying out or undertaking on the property the use of a junk yard;
4. An Order that the First Respondent neatly stack all timber located on the property as at the date of these Orders into stacks at the locations marked "X" identified on the plan at Annexure A to these Orders within two months of the date of these Orders;
5. An Order that the First respondent remove from the property all second hand and unused items such as old cars, white goods, general rubbish and accumulated used building material (with the exception of bricks located on the property as at the date of these Orders and timber identified in locations marked "X" identified on the plan at Annexure A to these Orders) within six months of the date of these Orders;
6. Direct that the issue of the making of an Order concerning the removal of bricks and timber located on the property be stood over before me on Tuesday 19 September 2006;
7. Grant liberty to all parties to apply for further Directions or Orders on 3 days' prior notice; and
8. Order that the First Respondent pay the Applicant's costs of the proceedings
31 Mr Stankovic was the first respondent referred to in the orders made by Pain J on 22 March 2005. He was, therefore, the person liable to pay the Council's costs of the L & E Court proceedings pursuant to Order 8 of those orders.
32 It is not necessary for present purposes to reproduce Annexure "A" to the orders extracted at [30] above and I have not done so.
33 The Council subsequently took steps to have its costs assessed. Those costs were ultimately quantified in the amount of $22,077.87.
34 In 2007 and 2008, Mr Stankovic made applications to the L & E Court in which he sought adjustments to the Orders which Pain J had made on 22 March 2005. Those applications did not concern or touch the costs order which her Honour had made on that occasion.
35 By Notice of Motion filed on 25 November 2008 in the L & E Court proceedings, Mr Stankovic sought to attack the costs order which Pain J had made on 22 March 2005. That application was determined by Reasons for Judgment delivered by Pain J on 19 December 2008 (Baulkham Hills Shire Council v Stankovic (No 5) [2008] NSWLEC 327).
36 After referring to various rules in the Uniform Civil Procedure Rules 2005 (UCPR) (at [3]-[6]), at [7]-[9], her Honour said:
7 The Respondent swore an affidavit dated 24 November 2008 and filed written submissions beforehand, which I have read and taken into account. The affidavit sets out the history of the proceedings in this Court, attaches the numerous judgments handed down by me, refers to two Notices of Intention to Appeal filed, states that he believes these refer to the 2005 orders including the 2005 costs order and also refers to bankruptcy proceedings against him which have been commenced by the Council in the Federal Magistrates Court. He states that he is aware the 2005 order is still enforceable. He also states that it is his belief that the September 2008 judgment has given rise to circumstances that need to be revisited, including the 2005 costs order.
8 The Respondent stated that the Notice of Motion is made, firstly, in reliance on r 36.15 on the basis that the costs order was entered irregularly. The basis for the submission that the order was made irregularly was that the Respondent believed that the proceedings were not then finalised and he did not understand that the costs order was also final. Further, there have been four judgments in this matter and the orders made in March 2005 have been amended significantly so that the costs order should be set aside pending the finalisation of this matter. The Respondent submits that all the previous decisions in the proceedings need to be revisited, including the 2005 costs order. The 2005 orders should not be treated as final orders. Alternatively, as a matter of fairness any costs penalty involved in the 2005 orders should be stayed or set aside pending the final outcome of the proceedings.
9 Reliance was also placed on r 36.16(3), relying on the same grounds.
37 At [10], her Honour recorded the fact that the Council had obtained a judgment by default in the Local Court of New South Wales at Hornsby on 22 August 2007 for the amount of the costs which Pain J had ordered Mr and Mrs Stankovic to pay to the Council by Order 8 made by her on 22 March 2005, which amount had been subsequently assessed in accordance with the cost assessment regime under the UCPR.
38 The Council submitted to Pain J that there was nothing irregular about the costs order which she had made on 22 March 2005, that it had been well and truly perfected and that it was therefore final. The Council also submitted that no appeal had been lodged by any party in relation to that costs order. In previous applications to the L & E Court, there had been no challenge by either Mr Stankovic or his wife to the costs order which Pain J had made on 22 March 2005. The Council went on to submit that the L & E Court proceedings had been finalised with the consequence that there was no residual discretion in the L & E Court to set aside the costs order.
39 At [16]-[27], her Honour set out her reasons for dismissing the application before her in relation to costs. Her Honour held that the costs order was a final order. She noted that Mr Stankovic had never appealed from that order. She held that there had been no irregularity in the making or the entry of that order. She concluded that there was no basis for altering or interfering with the costs order and she declined to do so.
40 On 12 May 2009, Raphael FM heard the Creditor's Petition in matter No SYG 1333 of 2008. On that occasion, Mr Stankovic again appeared on his own behalf. Mr Ash appeared for the Council. Mr Kent appeared for Kent. He claimed that Kent was a supporting creditor. At the time of the hearing before Raphael FM, Kent had claimed an amount in excess of $246,000 as legal fees and disbursements due to them from Mr Stankovic.
41 On 12 May 2009, Mr Stankovic sought an adjournment of the hearing of the Creditor's Petition. His Honour refused that application.
42 His Honour then moved on to consider whether a sequestration order should be made against the estate of Mr Stankovic. Ultimately, his Honour made such an order. His Honour gave the following Reasons for Judgment in support of the orders which he made (The Hills Shire Council v Stankovic [2009] FMCA 478):
1. The applicant creditor now seeks a sequestration order against the debtor. The amount of the debt owed is approximately $22,000.00. The debtor resists on two grounds. First he says that he is solvent and second he says that there is other sufficient cause why I should not make the sequestration order. Insofar as his solvency is concerned he puts forward the fact that he owns, at least in part, a piece of land which has a value admitted by the council to be at least $5,000,000.00. I am prepared to accept the evidence given by the debtor that there is only one mortgage on the property of approximately $100,000.00. However, the existence of an asset is not the appropriate test for solvency. It is now well established that the applicant must show an ability to pay his debts as and when they fall due from funds available to him or capable of being made available within a reasonable time; Sarina, Re; Ex parte Wollondilly Shire Council [1980] 43 FLR 163, Sandell v Porter (1966) 115 CLR 666 at [670].
2. The debtor has sworn to the fact that he is an invalid pensioner existing on a pension of approximately $567.90 per fortnight and so it is clear that he has no available moneys with which to pay this debt, other than the land. In this regard he has put forward some evidence that he has received an offer of a line of credit from the ANZ of approximately $500,000.00. As I explained in my decision relating to the grant of the adjournment, the offer from the ANZ Bank that was produced to this court was incomplete and there would appear to be another document which sets out the conditions upon which it is proposed that this loan be given. Because I have so little evidence about the loan I do not believe that I could take it into account to the extent that I would decline to grant the sequestration order to which I believe Mr Ash has established his client is entitled; Cain v White (1933) 48 CLR 639. I note that the land is held in joint names and that Mr Stankovic is awaiting a decision upon a property settlement application with his former wife. The land is unlikely to be sold for some time.
3. However, I am prepared to give Mr Stankovic some assistance. The court is empowered to grant a stay of any sequestration order for a period of a maximum of 21 days. Mr Stankovic has told me that all he needs to do in order to have this loan from the ANZ Bank materialise is to obtain his wife's signature on the documentation and present it to the ANZ Bank. He further tells me that if he receives the payment from the ANZ Bank he will pay, under protest, the Baulkham Hills Shire Council which I understand is now know as "The Hills Shire Council", and in those circumstances if I am not prepared to dismiss the application for other sufficient cause I would propose to make a sequestration order subject to such a stay.
4. Coming to "other sufficient clause" [sic], the debtor's submissions in this regard are a combination of his complaint against the council for bringing litigation against him over the hoarding of rubbish upon his land and the fact that as he has a significant asset he would say that the council has not properly sought to recover its debt by a manner other than this particular one. He also argues that he has an appeal on foot against certain decisions of the New South Wales Land and Environment Court. A court in bankruptcy is always reluctant to become too deeply involved in the litigation which parties have had previously and which have resulted in orders that end up being the subject of bankruptcy notices and then petitions. In this particular case, as I understand it, there has been a long running dispute between Mr Stankovic and the council over the land in question. But the matter which impresses me most is the fact that the costs order which is the basis of the petition does not relate to the proceedings which Mr Stankovic is seeking to appeal and that those costs were assessed in 2007 and we are now in 2009. It may well be that even if Mr Stankovic is successful in his appeal, and I understand that he really is making a cross appeal against some appeal from the council in relation to the 2008 litigation, this will not necessarily have the effect of reversing the costs order upon which this petition is based. I am unable to see how raising the matters which include the existence of the appeal, constitutes other sufficient cause for the purposes of s.52(2) of the Bankruptcy Act 1966 (the "Act"). Mr Stankovic has not satisfied me that the council has brought this case for an improper motive, and as I have already said, I am not satisfied that a successful appeal would alter the situation. For that reason I would not dismiss the petition for other sufficient cause.
5. I have heard from Mr Kent, a solicitor and a supporting creditor. Mr Kent claims that he is owed approximately $244,677.00 plus interest on bills of costs rendered to Mr Stankovic between January and July 2008 which Mr Stankovic has not requested be the subject of assessments. These are certainly bills of costs for which Mr Kent could prove in Mr Stankovic's bankruptcy but they are not bills which are yet the subject of any judgment of a court. The existence of this other creditor does reinforce the view I have taken that I should not exercise my discretion to dismiss this petition.
43 His Honour then made the following orders:
THE COURT ORDERS THAT:
1. Pursuant to s.33(1)(b) of the Bankruptcy Act 1966 I amend the name of petitioning creditor to "The Hills Shire Council".
2. A sequestration order be made against the estate of Milovan Stankovic.
3. All proceedings under this order are stayed for a period of 21 days.
4. The Applicant creditor's costs (including any reserved costs) be taxed (in accordance with the Federal Magistrates Court (Bankruptcy) Rules 2006) and paid from the estate of the Respondent Debtor in accordance with the Act.
5. Liberty to apply on 2 days notice.
THE COURT NOTES:
i) The date of the act of bankruptcy is 30 December 2007.
ii) A Consent to Act as Trustee has been signed by Mr Terry Grant Van Der Veld and Mr Jason Shane Cronan and has been lodged with the Official Receiver in Sydney.
iii) Under the Bankruptcy Regulations a copy of the sequestration order be given to the Official Receiver in Sydney.
44 After Raphael FM delivered Reasons for Judgment and made orders on 12 May 2009, the following exchange took place between the Federal Magistrate, Mr Ash and Mr Stankovic:
FEDERAL MAGISTRATE: Thank you, Mr Ash, for your assistance. All right. Do you understand, Mr Stankovic? You have told me that you can get this money within a week. You've got 21 days. If you can get it within 21 days and you pay them you can come back ---
MR STANKOVIC: As soon as I get it, as I said, your Honour, I will pay in a protest.
FEDERAL MAGISTRATE: You can come back to this Court and you can seek to have the order dismissed. You have to do that. Do you understand that? Just paying him isn't going to be good enough because there's this gentleman here who's got a problem.
MR STANKOVIC: Well, that gentleman have to do proper way.
FEDERAL MAGISTRATE: Yes, well, that may be the case. I'm not going to make up my mind about that.
MR STANKOVIC: Yes, okay.
FEDERAL MAGISTRATE: All right? If you can't do it in 21 days then you have to talk to your trustee.
MR STANKOVIC: Yes.
MR ASH: Your Honour, might it be I think it appropriate given Mr Stankovic's lack of representation - either by way of note or by way of order that if Mr Stankovic wishes to relist the matter it must be on notice to the creditor and to the supporting creditor.
FEDERAL MAGISTRATE: Do you understand that?
MR STANKOVIC: I - part of it.
MR ASH: If you want to come back to Court you have to be able to show the Court that you have informed my solicitor and you have informed Mr Kent. Do you understand that?
MR STANKOVIC: I did not receive from Mr Kent anything. I don't know what I owe him. I don't know how he come·---
FEDERAL MAGISTRATE: No, whatever your views may be about Mr Kent and his bill, he has put on an appearance in this Court. He's here. All right?
MR STANKOVIC: Yes.
FEDERAL MAGISTRATE: So you're going to have to tell him if you want to come back. Otherwise if you don't come back to the Court the bankruptcy - the sequestration order will take effect. Do you understand that?
MR STANKOVIC: Yes, all right.
FEDERAL MAGISTRATE: If you don't come back here within that three weeks the sequestration order will take effect.
MR STANKOVIC: Yes, your Honour.
FEDERAL MAGISTRATE: Do you understand that?
MR STANKOVIC: Yes, I do, your Honour.
FEDERAL MAGISTRATE: Whether you've paid him or you haven't. Do you understand that?
MR STANKOVIC: Yes, okay, your Honour.
FEDERAL MAGISTRATE: So if you get the money from the ANZ Bank and you pay Mr Ash's client, you have still got to come back to this Court and ask the Court to dismiss the petition.
MR STANKOVIC: Okay, thank you.
FEDERAL MAGISTRATE: And you must tell Mr Kent. Do you understand that?
MR STANKOVIC: Yes, your Honour.
FEDERAL MAGISTRATE: Not an hour before you come back to the Court but when you are going to the Court. Okay? Do you understand that?
MR STANKOVIC: I didn't want to do that deliberately, your Honour. That's just my problems with ---
FEDERAL MAGISTRATE: I'm just telling you, I'm not criticising you.
MR STANKOVIC: Thank you.
FEDERAL MAGISTRATE: All right? You have to tell·- I think we'll have liberty to apply on two days' notice.
MR ASH: Thank you, your Honour.
FEDERAL MAGISTRATE: Two days' notice you have to give him.
MR STANKOVIC: Okay. Thank you, your Honour.
FEDERAL MAGISTRATE: That's not Saturday and Sunday. Do you understand that?
MR STANKOVIC: I understand that.
FEDERAL MAGISTRATE: All right. Thank you both.
MR ASH: Thank you.
45 I pause to observe that, at T 25, ll 24-27, the Federal Magistrate made clear to Mr Stankovic that paying out the Council would not, on its own, be a sufficient basis for having the sequestration order set aside or stayed. His Honour specifically adverted to the need for Mr Stankovic to deal with Kent and Mr Kent to whom his Honour referred as "…. this gentleman here who's got a problem". His Honour also stressed that, if Mr Stankovic wished to attempt to have the sequestration order set aside and the Creditor's Petition dismissed, he would be required to make an application to the Federal Magistrates Court. Mr Stankovic was told that nothing would happen automatically just because Mr Stankovic paid out the Council.
46 On 18 May 2009, Giulia Inga, the Official Receiver, issued a Certificate of Appointment of Trustee. I have attached to these Reasons for Judgment as Attachment "A" a copy of that certificate.
47 On 20 May 2009, Mr Stankovic filed an Application in the Federal Magistrates Court of Australia (matter No SYG 1223 of 2009) (the first annulment proceeding). The only respondent named in that Application was the Council. The trustees were not initially joined as parties to that proceeding.
48 In his Application filed on 20 May 2009 in the first annulment proceeding, Mr Stankovic claimed the following relief:
A. The Debtor pay to Creditor pay forthwith $22077,87 by bank cheque.
B. The Debtor account and pay by bank cheque the outstanding interest to the Creditor on reciled of the amount within 14 day or recile of the agee amount.
C. The Bankrupt Notice be set aside OR
D. A stay on the orders of 12 May 2009 unless the Debtor has findilgs the Court of Appel between the Debtor and Creditor OR
E. The bankrupt be annulment of the Notice OR
49 In the same Application, he also sought a stay of the orders made by Raphael FM on 12 May 2009 in proceeding NSD 1333 of 2008.
50 In an affidavit sworn on 20 May 2009 in support of the relief sought by him in the first annulment proceeding, Mr Stankovic made clear that he intended to pay the full amount of the debt due to the Council (including interest) and that, upon payment, he wished to have the sequestration order set aside or his bankruptcy annulled.
51 On 25 May 2009, Mr Stankovic paid to the Council the amount of $25,420, being the full amount due to the Council under the costs order made in its favour on 22 March 2005 together with interest thereon. After he was made bankrupt, that payment was disgorged by the Council.
52 After he had paid the Council, Mr Stankovic took steps to have matter No SYG 1333 of 2008 relisted before the Federal Magistrates Court. It was initially listed in that Court on 29 May 2009 and subsequently listed before that Court on 2 June 2009 when the first annulment proceeding was also listed before that Court.
53 In two affidavits sworn on 27 May 2009 and filed in the first annulment proceeding on 28 May 2009, Mr Stankovic made clear that he did not accept liability to Kent in the amount claimed by that firm. He also said that he was solvent and wished to press the claims for relief made by him in the first annulment proceeding.
54 In support of those claims, Mr Stankovic also put on evidence to suggest that he was taking steps to procure sufficient finance to pay all of his debts in full.
55 Matter No SYG 1333 of 2008 came before the Federal Magistrates Court on 29 May 2009 after Mr Stankovic exercised the liberty to apply granted to him by Raphael FM. On that day, Barnes FM ordered that the matter be adjourned to 2 June 2009 so as to be listed at the same time as the first annulment proceeding.
56 In support of the adjournment order which her Honour made, Barnes FM delivered Reasons for Judgment (Baulkham Hills Shire Council v Stankovic [2009] FMCA 529). In her Reasons for Judgment, Barnes FM explained why she was not prepared to extend the stay which had been granted by Raphael FM on 12 May 2009. Her Honour also declined to set aside the Bankruptcy Notice upon which the sequestration order had been based. At [8]-[9], in concluding her Reasons, her Honour said:
8. Based on what has been said to me today by Mr Stankovic, it has not been established that I can or should set aside the orders that were made by Raphael FM. I note that there seems to be no reliance on any of the bases for a Court to set aside orders under r.16.05 of the Federal Magistrates Court Rules.
9. Rather than dismiss the oral application before me today, I consider that the appropriate way to deal with this matter, given the possibility of a connection with the orders Mr Stankovic seeks in matter SYG1223 of 2009 which is before the Court on Tuesday, is to adjourn matter SYG1333 of 2008 to 9.45am on Tuesday, 2 June 2009 before the Registrar. If there are overlapping matters they can be dealt with at the appropriate time in the normal way. I also consider it appropriate to reserve the costs of today.
57 On 2 June 2009, Kent wrote to SV Partners (the partnership in which the trustees were principals) and informed that firm that the amount currently owed to Kent by Mr Stankovic was $268,015.78. The calculations leading to that figure were set out in two schedules attached to that letter.
58 On 2 June 2009, when both matter No SYG 1333 of 2008 and the first annulment proceeding were before the Federal Magistrates Court, orders were made in both matters by consent. On that occasion, Mr Gourlie represented the Council and the trustees, Mr Charles Hockey represented Mr Stankovic and Mr Orlizki represented Kent. With the consent of each of those lawyers, orders were made in matter No SYG 1333 of 2008 in the following terms:
BY CONSENT, THE COURT ORDERS THAT:
1. Any application made (orally) by the Respondent be dismissed.
2. The Respondent to pay the Applicant's costs of 29 May 2009 and 2 June 2009 as taxed or agreed.
59 On the same day, in the first annulment proceeding, the following orders were also made by consent:
1. Application for annulment be adjourned to 9.45 am on 28 July 2009.
2. Costs of respondent and supporting creditor (Kent Attorneys) be reserved.
60 On 13 July 2009, Mr Stankovic signed a Statement of Affairs in relation to his bankrupt estate. It appears that that document was completed by Ms Groves on or about 15 June 2009 and signed by Mr Stankovic on 13 July 2009. Ms Groves was a financial advisor retained by Mr Stankovic to assist and advise him at that time.
61 The Statement of Affairs made clear that the only substantial asset owned by Mr Stankovic was the property. It also made clear that he held that property jointly with his former wife, Milka. The Statement of Affairs also disclosed debts of $716,458.57.
62 Mr Stankovic's application for an annulment of his bankruptcy and other relief in the first annulment proceeding was next listed before the Federal Magistrates Court on 28 July 2009. On that occasion, that application was adjourned by consent to 8 September 2009.
63 On 12 August 2009, the trustees delivered a report to creditors. In that report, the trustees summarised Mr Stankovic's financial position in two broad ways: First, they did so by reference to his estimate of the value of the property ($9 million); and, second, by reference to their estimate (based upon advice) of the value of the property ($2.4 million). In both cases, the summary indicated a substantial surplus of assets over liabilities but no cash flow. Mr Stankovic suggested he had a surplus of approximately $8.2 million and the trustees suggested that the true surplus was more like $1.589 million.
64 The report made crystal clear that the only substantial asset owned by Mr Stankovic was the property and that he had debts totalling approximately $816,000.
65 On 8 September 2009, the first annulment proceeding was adjourned to 9.45 am on 13 October 2009. Costs were reserved. On this occasion, Mr Stankovic was represented by Counsel.
66 On 13 October 2009, by consent, Smith FM dismissed all of Mr Stankovic's claims for relief made in the first annulment proceeding and made no orders as to costs. On that occasion, the Council and the trustees were represented by Mr Gourlie and Mr Stankovic was represented by Mr Hockey.
67 In 2010, the trustees rejected a Proof of Debt lodged by Kent. The trustees purported to reduce the amount of legal fees and disbursements claimed by that firm against Mr Stankovic's bankrupt estate. The principals of Kent appealed to this Court in respect of the trustees' decision. In a judgment delivered on 16 March 2012 (Kent and Orlizki, in the matter of the Bankrupt Estate of Milovan Stankovic [2012] FCA 333), Emmett J held that the trustees should have admitted the proof of debt made by Kent in the full amount of $246,677.68 (exclusive of interest). There was no appeal from that judgment. Part of his Honour's reasoning was that Mr Stankovic had lost his right to challenge the amount claimed by Kent under the relevant provisions of the Legal Profession Act 2004 (NSW) (LPA) with the consequence that that amount had become due and payable in full.
68 In an earlier application by Mr Stankovic filed on 19 May 2011 (NSD 690 of 2011), Mr Stankovic sought leave to file and serve a Notice of Appeal out of time against the decision and orders made by Raphael FM on 12 May 2009. Emmett J decided that application on 4 May 2012 (Stankovic v The Hills Shire Council (No 3) [2012] FCA 523) (Stankovic No 3).
69 At [5]-[9] of his Reasons in Stankovic No 3, Emmett J said:
5 Those grounds do not make a great deal of sense [referring to the grounds articulated by Mr Stankovic]. The thrust of the complaint by Mr Stankovic appears to be that, although he has substantial assets, those assets are derived from moneys paid to him as compensation for injuries received in the course of his employment. He says that those moneys, and the property that represents the moneys, do not form part of his estate for the purpose of distribution to creditors. While that question has been ventilated from time to time by Mr Stankovic in the course of this proceeding, and in another related proceeding concerning the review of a decision of the Trustees, it is not a matter that was ventilated before the Federal Magistrates Court when the sequestration order was being sought by the Council. Further, it appears that, on 3 May 2012, Mr Stankovic commenced a fresh proceeding in the Court seeking review of decisions of the Trustees in relation to the treatment of property that Mr Stankovic says was acquired with the proceeds of workers compensation payments.
6 Even if Mr Stankovic now has some well-founded complaint about the conduct of the Trustees in relation to exempt assets, that has nothing to do with the question of whether a sequestration order should have been made. The question of what property of Mr Stankovic's was divisible among his creditors was not raised before the Federal Magistrates Court. There was no error on the part of the Federal Magistrates Court in that regard. It is clear that an appeal based on the grounds specified in the draft notice of appeal could not possibly succeed, and would be doomed to failure. That is a basis for refusing the application for an extension of time.
7 However, in the course of oral submissions today, Mr Stankovic also raised other grounds upon which he complained about the making of the sequestration order. First, he complained that the Federal Magistrates Court took account of contentions advanced on behalf of Kents as a supporting creditor. Raphael FM recorded that Kents claimed a debt of $244,677, together with interest, in respect of bills of costs rendered to Mr Stankovic between January and July 2008. Mr Stankovic had not requested assessments of the bills under the Legal Profession Act 2004 (NSW), as he would have been entitled to do. His Honour observed that those bills represented debts for which Kents were entitled to prove in Mr Stankovic's bankruptcy, although they were not bills of costs that had yet been made the subject of a judgment of a court. They therefore could not have been the subject of a bankruptcy notice. Mr Stankovic's complaint about Raphael FM's reference to Kents is that he now asserts that there was some arrangement that the fees were to be paid only after a property had been sold. That is not a matter that appears to have been put before the Federal Magistrates Court.
8 The second matter complained of by Mr Stankovic in the course of his submissions today concerns the reference made by Raphael FM to evidence advanced by Mr Stankovic that he had received an offer of a line of credit from the ANZ Bank of approximately $500,000. Mr Stankovic submitted to me today that his Honour ought to have adjourned the hearing of the bankruptcy petition to enable those arrangements with the bank to be finalised. However, his Honour observed that the offer from the ANZ Bank was incomplete, and that there appeared to be another document that set out the conditions upon which it was proposed that the loan be given. His Honour considered that he had so little evidence of the loan that he did not believe that he could take it into account to the extent that he would decline to grant a sequestration order.
9 Mr Stankovic apparently contended in the Federal Magistrates Court that the proceeding should be dismissed under s 52(2) of the Bankruptcy Act 1966 (Cth) (the Bankruptcy Act), on the basis that the Court was satisfied that he was able to pay his debts. The reasons of Raphael FM indicate that one of the grounds upon which Mr Stankovic opposed the making of a sequestration order was that he was solvent, by reason of his ownership, at least in part, of a parcel of land that he said was worth at least $5 million, a value that appears to have been conceded by the Council.
70 At [10], Emmett J made several observations about the Reasons for Decision of Raphael FM.
71 At [11]-[18], his Honour said:
11 A third matter raised by Mr Stankovic as a ground for complaint concerns the debt that was owing to the Council, and which formed the basis for a bankruptcy notice upon which the Council's petition was founded. Raphael FM referred to what, as his Honour understood it, was a long-running dispute between Mr Stankovic and the Council over certain land. It appears that there was an appeal on foot against certain decisions of the New South Wales Land & Environment Court. However, his Honour observed that the costs order that was the basis of the petition did not relate to the proceedings that were the subject of the appeal. His Honour was unable to see how Mr Stankovic's complaints about the Council, including the existence of the appeal, constituted sufficient cause, for the purposes of s 52(2) of the Bankruptcy Act, for refusing to make a sequestration order. His Honour referred to assertions by Mr Stankovic that the Council had brought the case for an improper motive. His Honour was not satisfied that that assertion had been made out, and was not satisfied that any successful appeal that was then current would alter the situation.
12 In the course of his submissions about the Council today, Mr Stankovic went beyond what appears to have been put to Raphael FM. His submissions involved an assertion that the order for costs that was made by the Land & Environment Court was incompetent, because it was made in a proceeding that had been struck out or dismissed for want of appearance and had not been reinstated. The evidence as to that matter is not entirely clear. Mr Stankovic has tendered an extract from the record of the Land & Environment Court in proceeding 41243 of 2004. Insofar as it is possible to understand that extract, the course of the proceeding that resulted in the costs order appears to be as follows.
13 The proceeding in the Land & Environment Court had been fixed for hearing on 19 January 2005. However, on that day McClellan CJ ordered that the hearing date be vacated and that the proceeding be stood over to 16 February 2005 at 9.15am before a class 4 judge of that Court. On 16 February 2005, the matter was apparently called on before Lloyd J. Mr Stankovic appeared in person, but there was no appearance for the Council. It appears that Lloyd J made an order that the proceeding be dismissed for want of prosecution. There is a further note on the file that, on 22 February 2005, a motion was filed to be listed for 4 March 2005. That appears to have been an ex parte application made to the Land & Environment Court, and the note suggests that Mr Stankovic was to be notified of that application.
14 On 4 March 2005, the Land & Environment Court apparently made an order, although the terms of the order are not clear. At that time, the Council was represented by counsel and Mr Stankovic appeared in person. The parties were directed to approach the Registrar for a hearing date. A note on the file made later on the same day indicates that the hearing of 19 January had been adjourned and that the proceeding would be fixed for hearing on 14 March 2005 before a judge.
15 On 14 March 2005 the proceeding came before Pain J for hearing. Her Honour gave reasons for making orders on that day, which included orders restraining Mr Stankovic from carrying out or undertaking a use of pig keeping on his property. Her Honour also made a declaration that that property was being used as a junkyard, in breach of provisions of the Environment Planning and Assessment Act 1979 (NSW), and made an order restraining Mr Stankovic from carrying out or undertaking the use of a junkyard on the property. The final order made by Pain J was that Mr Stankovic pay the costs of the proceedings. In due course, costs were assessed and judgment was entered for the Council in the Local Court for the amount of the costs taxed and assessed. That is the order that apparently founded the bankruptcy petition.
16 Mr Stankovic's complaint appears to be that there was no proper reinstatement of the proceeding that had been dismissed by Lloyd J on 16 February 2005. It would be curious for Pain J to have embarked on a hearing, made the orders that I have indicated, and given reasons for those orders, if her Honour had not ordered the reinstatement of the proceeding. In any event, the Land and Environment Court is a superior court of record. The material before me does not support any contention that the order for costs made by the Land & Environment Court was incompetent. In any event, as I have said, that matter was not ventilated before Raphael FM.
17 Even if the proposed notice of appeal raised the additional matters to which I have referred, I am not persuaded that there is any substance at all in those matters. I am not persuaded that there is any prospect that any such ground could succeed, in the event that an extension of time were granted. Any such grant would therefore be futile.
18 In any event, the respondents also oppose the grant of an extension of time by reason of the excessive delay on the part of Mr Stankovic in making the application. No complaint is made about the conduct of the proceeding, once it was commenced on 19 May 2011. The matter was adjourned by consent to enable Mr Stankovic to take steps to obtain access to funds, such access having been denied by orders made by the Family Court of Australia. The complaint is as to the delay between the making of the sequestration order on 12 May 2009 and the filing of the application for an extension of time on 19 May 2011, more than two years later.
72 His Honour concluded his Reasons at [24]-[25] with the following:
24 The delay in this case is extraordinarily long. The length of the delay consolidates the strength of any vested right that the Council has in the judgment that it obtained from the Federal Magistrates Court. The only way in which the question of delay was addressed by Mr Stankovic in his affidavit evidence was to say that he had difficulties in obtaining legal representation and has had financial difficulties over the past few years, during which he has been involved in legal proceedings. He also asserted that he was late because of the conduct and misconduct of the legal profession through all of the courts. He asserted that everything was misconceived by the legal professionals, and that the duty of care and obligation to the courts was ignored. He asserted that, because of that, it took him so long to ascertain that, as he alleges, the case before the Land & Environment Court had not been reinstated. He said that, following the orders of 12 May 2009, it was difficult for him to obtain representation, and that he had on various occasions asked the Trustees for assistance but that the Trustees refused to assist him. Those matters, of course, have no bearing on the question presently before me.
25 I am not persuaded that there is a satisfactory explanation for Mr Stankovic's delay in applying for an extension of time. Coupled with the complete lack of any merit in the proposed grounds, or any other grounds that have been suggested, I do not consider that it is appropriate to extend the time for filing a notice of appeal from the orders of the Federal Magistrates Court of 12 May 2009. The application for leave to file and serve out of time, filed on 19 May 2011, should be dismissed with costs.
73 There was no appeal from the judgment of Emmett J given on 4 May 2012 refusing leave to Mr Stankovic to file and serve a Notice of Appeal out of time from the orders made by Raphael FM on 12 May 2009.
74 Very recently, Mr Stankovic approached Raphael FM seeking to reopen proceeding SYG 1333 of 2008.
75 On 13 March 2013, Raphael FM dismissed that application with costs (Stankovic v Baulkham Hills Shire Council [2013] FMCA 178).
76 After failing to secure an extension of time within which to appeal from the orders made by Raphael FM on 12 May 2009, Mr Stankovic sought to quarantine a portion of the proceeds of sale of the property as protected monies within the meaning of s 116 of the Bankruptcy Act. For present purposes, it is not necessary to traverse the history of the dealings between Mr Stankovic and the trustees concerning the question of whether or not some part of those proceeds was protected monies.
77 In Reasons for Judgment delivered on 14 December 2012 (Stankovic v Van Der Velde [2012] FCA 1436), Emmett J decided that 30.1% of a portion of those proceeds for sale were protected monies within the meaning of s 116(4) of the Bankruptcy Act. After discussing the competing contentions made by the trustees and Mr Stankovic before him, at [12]-[19], his Honour said:
12 The appropriate approach in order to determine what part of the proceeds of realising the Kellyville Property can fairly be attributed to the Compensation Moneys is pro-rata apportionment. Such an apportionment entails the following steps:
(a) The purchase price for the Kellyville Property, apart from the loan from the Bank, was provided as to $255,826 from the proceeds of the sale of 79 Terry Road, and as to $491,813 from the proceeds of the sale of 77 Terry Road.
(b) $255,825.54 represents 30.10 per cent of $850,000, the total price paid for the Kellyville Property.
(c) Of the $255,825.54 that was provided from the proceeds of the sale of 79 Terry Road, 50 per cent can fairly be attributed to the Compensation Moneys.
(d) Thus, of the total purchase price paid for the Kellyville Property of $850,000, $127,912.82 can fairly be attributable to the Compensation Moneys.
(e) $127,912.82 represents 15.05 per cent of the total purchase price of $850,000 paid for the Kellyville Property.
(f) On that basis, 15.05 per cent of the net proceeds from the realisation of the Kellyville Property can fairly be attributed to the Compensation Moneys.
13 The Trustees have expended time and effort and have incurred costs in realising the one half of the proceeds of the sale of the Kellyville Property that do not belong to Mr Stankovic's wife. Those costs include the costs of participating in this proceeding in order to determine the entitlement of the respective parties to the proceeds of the realisation of the Kellyville Property. The costs of the Trustees in realising the Kellyville Property and the cost of the Trustees in relation to the determination of that entitlement should be treated as a charge on the one half of the proceeds of the realisation of the Kellyville Property that do not belong to Mr Stankovic's wife.
14 On 6 March 2012, the Trustees made a decision that no protected money formed part of the outlay for the Kellyville Property so as to require any payment to Mr Stankovic under s 116(4) of the Act. This proceeding was commenced by Mr Stankovic by application filed on 3 May 2012. Mr Stankovic claimed an order that the decision of the Trustees of 6 March 2012 be set aside, a declaration that Mr Stankovic's interest in the Kellyville Property was purchased substantially with protected money and an order that the proceeds of the sale of the Kellyville Property do not vest in the Trustees and do not constitute property divisible amongst the creditors of Mr Stankovic's bankrupt estate.
15 The Trustees filed a cross claim in which they sought declarations as to the various entitlements to the proceeds of the realisation of the Kellyville Property. In the course of the argument of the cross-claim, the Trustees conceded that their decision would not have been made had there been provided to the Trustees, as they requested, information concerning the dealings with the properties described above that support the conclusion just reached. The Trustees accept, therefore, that their decision of 6 March 2012 should be set aside.
16 Accordingly, there should be an order that the decision of the Trustees made on 6 March 2012 be set aside. In lieu of that decision, there should be a decision that the proceeds of the realisation of the Kellyville Property be distributed as follows:
• One half of the net proceeds of the realisation of the Kellyville Property should be paid to Mr Stankovic's wife.
• The Trustees' costs and remuneration reasonably incurred in realising the Kellyville Property and in conducting the cross-claim in this proceeding should be charged on the other half of the net proceeds of the realisation of the Kellyville Property.
• 30.10 per cent of the balance of the other half of the proceeds of the realisation of the Kellyville Property, after deducting such costs and remuneration, should be paid to Mr Stankovic under s 116(4).
• 69.9 per cent of that balance should be distributed to the unsecured creditors of Mr Stankovic's bankrupt estate.
There should be declarations accordingly.
17 The determination of the cross-claim has resolved the issues raised by the original application. Mr Stankovic has been partially successful, in that the Trustees' decision should be set aside. However, he has not been totally successful. In the circumstances, apart from orders and declaration along the lines indicated above, there should be an order that Mr Stankovic's application and the Trustees' cross-claim be otherwise dismissed.
18 Had Mr Stankovic provided to the Trustees the information that was provided after the commencement of the proceeding, it is highly unlikely that the decision made by the Trustees on 6 March 2012 would have been made in those terms. There is every reason to conclude that the Trustees would have reached the conclusion reflected in the declarations just proposed. In the circumstances, there should be no order as to the costs of the proceeding or the cross claim.
19 There has been litigation between Mr Stankovic and his wife in the Family Court of Australia. In the course of that litigation, the Trustees apparently gave undertakings to the Family Court not to distribute any part of the estate without the leave of the Family Court or the Federal Court. Subject to the interests of Mr Stankovic's former wife in relation to the Family Court proceedings being protected, there is no reason why the Trustees should continue to be bound by an undertaking not to administer the bankrupt estate.
78 In the result, his Honour made the following orders on 14 December 2012:
THE COURT:
1. DECLARES, without prejudice to the accrued rights and liabilities of the parties in relation to the pending application by the second cross-respondent for relief under s 79 of the Family Law Act 1975 (Cth), that:
1.1 immediately prior to the sequestration of the estate of the first cross-respondent on 12 May 2009, the first cross-respondent owned an equitable joint interest in the property known as Lot B, President Avenue, Kellyville, New South Wales and being the land in Folio Identifier B/379959 (the Property).
1.2 since settlement of the sale of the Property, the net proceeds of that sale (the Proceeds) have been owned beneficially by the second cross-respondent, as to fifty (50) per cent, by the first cross-respondent, as to fifteen point zero five (15.05) per cent; and by the cross-claimants under s 58 of the Bankruptcy Act 1966 (Cth), as to thirty four point nine five (34.95) per cent.
2. DECLARES that the cross-claimants have a right to a lien over the whole of the fifty (50) per cent of the Proceeds owned by them and the first cross-respondent, to secure the payment of remuneration, costs and expenses reasonably incurred by them in the preservation and realisation of that fifty (50) per cent.
3. NOTES the acknowledgement of the cross-claimants that the said lien does not extend over any of the Proceeds owned by the second cross-respondent; and that the burden of any exercise of the lien is to fall in proportion to the beneficial ownerships of themselves and of the first cross-respondent.
4. ORDERS that the decision of the cross-claimants made on 6 March 2012 in relation to the ownership of the Proceeds be set aside.
5. ORDERS that the undertaking proffered by the cross-claimants on 1 December 2011 to the Family Court of Australia in Appeal Number EAA 150 of 2010 be discharged.
6. ORDERS that the proceeding and the cross claim be otherwise dismissed.
His Honour stayed these orders up to and including 8 February 2013. On 11 February 2013, his Honour refused an application by Mr Stankovic for a further stay.
79 Mr Stankovic appealed from his Honour's decision. That appeal was heard on 22 May 2013 and determined on 3 June 2013 (Stankovic v Van Der Velde [2013] FCAFC 57).
80 The Full Court dismissed Mr Stankovic's appeal. At [15]-[19] of their Reasons, the Full Court said:
15 The appeal may not be used as a vehicle for Mr Stankovic to effectively seek an annulment of the sequestration order. The appeal is from a specific determination made by the primary judge upon the foundation that a sequestration order had been validly made against Mr Stankovic's estate and that all property held by Mr Stankovic at the time he became a bankrupt vested in the Trustees.
16 Those foundational matters are not open to a collateral challenge upon this appeal.
17 The material before us does not establish that Mr Stankovic raised before the primary judge any of the matters upon which he now seeks to rely to challenge the validity of the sequestration order and the appointment of the Trustees. Mr Stankovic contended that he had raised those matters and submitted that the primary judge had erred in not considering them. However, even if we were to take a broad view of Mr Stankovic's first ground of appeal and presume that the matters now agitated were also agitated at the hearing before the primary judge, we would nevertheless dismiss the appeal. If the primary judge had refused to take into account the matters upon which Mr Stankovic now seeks to rely, he was right to do so. The primary judge was not dealing with a challenge to the validity of either of the sequestration order or the appointment of the Trustees, he was dealing with an application seeking relief pursuant to s 178(1) of the Act.
18 If the matters sought to be agitated by Mr Stankovic are to be agitated, they needed to be the subject of an application made by Mr Stankovic under s 153B(1) of the Act seeking an order annulling the bankruptcy. In fact a proceeding seeking such relief was instituted by Mr Stankovic in October 2012. That proceeding, which raises the same factual matters that Mr Stankovic sought to agitate on the appeal, is listed to be heard for a strike out motion on 5 June 2013 before Foster J.
19 The grounds of appeal raised by Mr Stankovic are unsubstantiated and the matters otherwise sought to be agitated by him are not open to be dealt with on this appeal. It follows that the appeal should be dismissed with costs. Leave for Mr Stankovic to rely upon his affidavits made on 9 and 14 May 2013 should be refused.
81 The Full Court went on to dismiss the intervention application made by Kent.
82 Finally, at [21], the Full Court said:
Late in the hearing, Mr Stankovic made an oral application for a stay of the orders made by the primary judge on 14 December 2012. In circumstances where no distribution of the funds held by the Trustee has been made and none is intended to be made prior to 5 June 2013 (when the s 153B(1) proceeding comes before Foster J), we made an order that the judgment of the primary judge of 14 December 2012 be stayed until 5 pm on 5 June 2013. That order has the intended effect of staying the order made on 14 December 2012 discharging the undertaking proffered by the Trustees on 1 December 2011 to the Family Court of Australia, that they would not distribute any part of Mr Stankovic's estate without the leave of the Family Court or the Federal Court. Any application by Mr Stankovic to extend any restriction upon the distribution of those funds beyond 5 June 2013 should be made to Foster J on 5 June 2013.
83 Consistent with the Reasons given by the Full Court at [21], the Full Court reimposed the stay granted to Mr Stankovic by Emmett J in respect of the orders which his Honour had made on 14 December 2012 in Stankovic v Van Der Velde up to 5.00 pm on 5 June 2013. On 5 June 2013, I extended that stay once more - on this occasion up to delivery of these Reasons for Judgment.
84 While the above events were taking place, there were proceedings on foot between Mr Stankovic and his former wife, Milka, in the Family Court of Australia. Mrs Stankovic had commenced those proceedings on 27 November 2006.
85 Under the supervision of the Family Court, the property was sold in 2011. There is no suggestion that the sale was other than bona fide for market value. The net proceeds of sale came to $6,700,000 after payment of GST and expenses. The following payments were subsequently made out of those proceeds:
(a) $1,858,396.16 to the trustees.
(b) $150,000 to Mr Stankovic.
(c) $450,000 to Mrs Milka Stankovic.
86 A little over $4 million is held in a controlled moneys account in the name of Mrs Stankovic's solicitors, under the supervision of the Family Court.
87 As at 7 August 2012, of the $1.8 million paid to the trustees, the trustees still held $1,244,597.37. By the time of the hearings before me on 5 June 2013, that amount had been substantially reduced by reason of the payment of trustees' remuneration and legal fees incurred in relation to litigation instigated and pressed by Mr Stankovic in 2012 and this year. I was told from the Bar table that it was now unlikely that the trustees would have sufficient funds to pay in full the admitted debts of all creditors without further recourse to the moneys held in the controlled moneys account. In addition, Milka Stankovic has been pressing for the release of further funds to her. As I understand the present position in the Family Court, no final determination as to the appropriate split of the matrimonial property has yet been made.