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[2011] FCA 1470
Federal Court of Australia
2011-12-16
Mr J, Kenny J
Original judgment source is linked above.
REASONS FOR JUDGMENT 1 The applicant has applied pursuant to Rule 36.05 of the Federal Court Rules 2011 (Cth) ("the Rules") for an extension of time in which to file a notice of appeal from orders of the Federal Magistrates Court made on 21 October 2011. These orders were: 1. The Personal Insolvency Agreement of the Respondents in Administration Number VIC 502 of 2010 dated 9 March 2010 be terminated pursuant to s 222C of the Bankruptcy Act 1966 (Cth) ("the Act"). 2. The Respondents have committed an act of Bankruptcy by having a personal insolvency agreement executed under Part X of the Act terminated by this Honourable Court. 3. A sequestration order be made against the estates of Guiseppe Sutera and Emanuella Sutera. 4. The Applicant be appointed as trustee of the bankrupt estates of Guiseppe Sutera and Emanuella Sutera. 5. The Applicant's costs of this application be taxed and paid as a priority out of the assets of the Respondent Debtors' bankrupt estates. 2 The sole ground of appeal disclosed in the draft notice of appeal accompanying the application for an extension of time is that: The Federal Magistrates Court erred in law in exercising its discretion under section 222C of the Bankruptcy Act 1966 (Cth) to terminate the personal solvency agreement executed by the Plaintiffs. 3 The first applicant, Guiseppe Sutera, filed two affidavits - sworn on 7 December 2011 and 14 December 2011 - in support of his application for an extension of time. There were three affidavits filed by the respondent - the affidavit of his solicitor, David Alan Baker, sworn on 14 December 2011, which annexed the transcript of the hearing before the Federal Magistrate; the affidavit of Manuel Hanna (an accountant employed by Northern Insolvency Solutions) sworn on 14 December 2011, in which Mr Hanna deposed to his efforts to contact Mr Sutera before the creditors' meeting (referred to below); and the affidavit of Simon Patrick Nelson sworn on 14 December 2011. 4 Affidavits filed on the parties' behalf show that: (a) From 1995 until he became bankrupt, Mr Sutera ran a small security business, which employed about 10 staff on a casual basis. (b) On 29 January 2010, Mr Sutera and his wife executed a proposal under Part X of the Bankruptcy Act 1966 (Cth) ("the Act"), which stated that they proposed to make a payment of $50,000 to their unsecured creditors in full and final settlement of their debts over 36 months. (c) On 26 February 2010, the controlling trustee, Des Ryan, prepared a report pursuant to s 189A of the Act. (d) On 9 March 2010, Mr Sutera and his wife executed a Personal Insolvency Agreement ("PIA"), in accordance with the proposal. Clause 4 of the PIA provided: The debtor agrees to pay to the trustee a sum of money as set out in the SCHEDULE 1 hereof upon trust to deal with the same in accordance with this deed … The Schedule stated: Item 1: A sum of $50,000.00 over a three year period after acceptance of this offer by creditors. (e) On 20 August 2010, Simon Patrick Nelson was appointed trustee of the PIA ("trustee"). (f) On about 26 October 2010, the trustee sent a letter to the Australian Prudential Regulatory Authority ("APRA") regarding the early release of superannuation funds, stating: Pursuant to the terms of the PIA, the debtors are required to pay $50,000 over a three year period. At this time the debtors have been unable to make any payments to the PIA. Should this situation continue, I am duty bound to terminate the PIA. Should the termination of the PIA occur, creditor's rights against the bankrupt will be revived, ultimately leading to the bankruptcy of the debtors. A Trustee in Bankruptcy would be likely to take immediate action to sell the debtor's house property. (g) On about 6 April 2011, the trustee sent a further letter to APRA, regarding the proposed early release of superannuation benefits to be used as contributions under the PIA. (h) On 6 April 2011, the trustee and Mr Hanna met with Mr and Mrs Sutera to discuss the performance of the PIA. (i) On about 7 April 2011, the trustee sent a letter to creditors, advising that there had been no contribution under the PIA; the debtors had made application to APRA for the early release of their superannuation benefits, $20,000 of which they proposed to contribute to the PIA; that the debtors held significant equity in a property at Greenvale; and that, if the application to APRA failed and funds were not available within 28 days, the trustee would make application to Court to terminate the PIA and to sequester their estates. (j) On about 10 May 2011, the trustee allegedly sent Mr Sutera a letter (which Mr Sutera maintains he did not receive) advising that a meeting of creditors had been scheduled for 17 May 2011, to resolve whether an application would be made to the Court to terminate the PIA and for a sequestration order. (k) On 17 May 2011, the trustee held a creditors' meeting, at which the creditors resolved to terminate the PIA. (l) On 21 July 2011, the trustee filed an application in the Federal Magistrates Court for orders terminating the PIA and seeking that a sequestration order be made against the applicants' estates. (m) On 21 October 2011, Federal Magistrate O'Dwyer made an order terminating the PIA pursuant to s 222C of the Act and a sequestration order against the applicants' estates. (n) On 8 November 2011, Mr and Mrs Sutera executed statements of affairs. (o) On about 11 November 2011, Mr Sutera received a letter from Victoria Police regarding the suspension of his security business licence. (p) On about 30 November 2011, Mr Sutera received a notice to vacate the Greenvale property. (q) On about 5 December 2011, the trustee sent a report to creditors. (r) On 7 December 2011, the applicants filed this extension of time application. 5 Amongst other things, Mr Nelson also deposed to discrepancies in information regarding vehicles allegedly owned by Mr and Mrs Sutera, including as to the ownership of a 1978 Porsche (referred to at the hearing before the Federal Magistrate). In his second affidavit, Mr Sutera responded to various matters raised by Mr Nelson in his affidavit, including the matter of the ownership of the 1978 Porsche and other motor vehicles mentioned in Mr and Mrs Sutera's statements of affairs. In this second affidavit, Mr Sutera also deposed that he now has access to funds that would satisfy the PIA in full.
CONSIDERATION 6 The Rules currently provide that an appellant must file a notice of appeal within 21 days after the date of the judgment or orders from which the appeal is brought: see Rule 36.03. An extension of time in which to appeal may be made in accordance with Rule 36.05. 7 The Court has treated the factors referred to by Wilcox J in Hunter Valley Developments Pty Ltd v Cohen (1984) 3 FCR 344 (in respect of applications for extension of time under s 11 of the Administrative Decisions (Judicial Review) Act 1977 (Cth)) as relevant to a decision whether to extend time in which to file a notice of appeal, namely: (1) The application should not be granted unless the Court is satisfied that it is proper to do so; and the prescribed period is not to be ignored. (2) An acceptable reason for the delay is expected and would normally be required. (3) Any prejudice to the respondent, including any prejudice in defending the proceedings occasioned by the delay, is a material factor militating against the grant of an extension. (4) The mere absence of prejudice is not enough to justify the grant of an extension. (5) The merits of the appeal are properly to be taken into account in considering whether an extension of time should be granted. See, for example, SZQBI v Minister for Immigration and Citizenship [2011] FCA 1388 at [17] and Franich v Secretary, Department of Families, Housing Community Services and Indigenous Affairs [2011] FCA 1362 at [20]. 8 For the following reasons, I would grant the extension of time sought by the applicants.
(a) Explanation for the Delay 9 In conformity with Rule 36.03, the applicants ought to have filed their notice of appeal on 11 November 2011. There has been a delay of 26 days. Whilst the prescribed period is not to be ignored, this is not an inordinate delay. 10 Further, Mr and Mrs Sutera have provided an acceptable reason for the delay, which was largely due to their difficulty in obtaining legal representation. Mr and Mrs Sutera were unrepresented in the Federal Magistrates Court. Mr Sutera deposed that, in late October 2011, he and his wife contacted a firm of solicitors to act for them but, as they could not pay the requisite money sum, the solicitors would not agree to act for them. Mr and Mrs Sutera unsuccessfully approached another firm of solicitors, who recommended their present legal representatives. Their current solicitors were engaged in mid November and, from this time, they have taken active steps to resolve the matter with the trustee out of court. These steps have not been successful, with the result that Mr and Mrs Sutera make their current application.
(b) Prejudice to the respondent 11 The trustee did not point to any particular prejudice flowing from the extension of time, if granted.
(c) Merits of the Appeal 12 I am persuaded that, in the circumstances of the case, the proposed appeal has sufficient merit to justify the extension time sought. Counsel for Mr and Mrs Sutera argued that, at the time the learned Federal Magistrate made the orders in question, Mr and Mrs Sutera had not in fact breached the PIA, and that his Honour acted under "the mistake of fact that the time for compliance with the PIA had expired". 13 The Federal Magistrate has not to date delivered reasons for judgment and, in consequence, the precise basis for the orders that the applicants seek to appeal is uncertain. It is common ground that the Federal Magistrate terminated the PIA pursuant to s 222C of the Act. Relevantly, s 222C(1) provides: If a personal insolvency agreement is in force, the Court may, on application by: (a) the trustee … make an order terminating the agreement if the Court is satisfied; (e) that: (i) the debtor … has failed to carry out or comply with a term of the agreement; or (f) that the agreement cannot be proceeded with without injustice or undue delay to: (i) the creditors … (g) that, for any other reason, the agreement ought to be terminated. 14 In the Federal Magistrates Court, in his affidavit filed in support of his application for termination of the PIA under s 222C of the Act, the trustee stated that, at the meeting with Mr Sutera on 6 April 2011, the trustee "had said to Mr Sutera that no funds had yet been paid pursuant to the terms of the PIA …"; and that, on 10 May 2011, "as no funds had been received", he "sent a letter to the [Suteras] in which [he] indicated that [he] had not received a response to my request for funds to be paid pursuant to the terms of the PIA" (emphasis added). Counsel for Mr and Mrs Sutera argued that the terms of this affidavit indicated that, in the Federal Magistrates Court, the trustee had sought to invoke par (e) of s 222C(1), on the ground that Mr and Mrs Sutera had failed to carry out or comply with a term of the agreement. I accept that the trustee's affidavit was consistent with reliance on this ground. There was nothing in the trustee's material that indicated reliance specifically on the other paragraphs - (f) or (g) of s 222C(1). 15 Further, the transcript of the hearing before the Federal Magistrate indicated that his Honour was also under the impression that the trustee sought to rely on s 222C(1)(e) of the Act, and that Mr and Mrs Sutera had failed to comply with a term of the PIA - being a circumstance covered by that particular provision. This appears in an exchange following Mr Sutera's attempt to assure his Honour that he and his wife intended to repay their creditors. Mr Sutera said: And we need more time to do that in, and I think we - initial agreement is we had the three year term to pay off that debt, so I would think, you know, we're doing our utmost at the moment, and I have a vehicle that I've been trying to sell for the last four months, which I believe that will cover the debt in full, so. This led to the following exchange: HIS HONOUR: Yes. Well, what is presently outstanding, by way of amount? MR SUTERA: Well, I think it's 50,000, I believe, your Honour. HIS HONOUR: Yes, okay. But you had three years to pay the 50,000, so nothing has been paid off it. MR SUTERA: No. 16 As counsel for Mr and Mrs Sutera submitted, if his Honour was under the misapprehension that the three year period for payment of the sum of $50,000 under the PIA had expired, then his Honour was in error. Further, there is nothing in the transcript to indicate that any such misapprehension (if it existed) was corrected. The hearing was brief. As noted already, the transcript indicates that there was no other basis for terminating the PIA agitated before his Honour. Under the PIA, however, Mr and Mrs Sutera were not obliged to pay the entire sum until, at the earliest, 9 March 2013. It is arguable that they were obliged to make payments in diminution of the amount of $50,000 over the three year period for which the PIA provided, but the Federal Magistrate was not addressed on this question. 17 If the Federal Magistrate was persuaded that s 222C(1)(f) of the Act was satisfied (which, having regard to the transcript, appears unlikely) then it is fairly arguable that there was no evidence before the Court to support a finding that the agreement could not be proceeded with without injustice or undue delay to creditors, given that the time for payment under the PIA had not yet expired. There was apparently nothing further before the Federal Magistrate that might signify some other distinct reason, within s 222C(1)(g), for terminating the PIA. 18 In these circumstances, there would appear to be some merit in the appeal that Mr and Mrs Sutera seek to bring, although it is apparent that their draft notice of appeal requires some amendment appropriately to state the grounds of appeal. 19 Further, if the orders of the Federal Magistrate are not set aside, the applicants will suffer significant additional harm. Apparently as a result of the orders, Mr Sutera's security licence has been suspended and, if the orders are not set aside, the security licence will be cancelled. Mr and Mrs Sutera are plainly at risk of losing their family home. 20 There are other matters that might assume relevance on an appeal from the Federal Magistrate's orders, including Mr and Mrs Sutera's (particularly Mrs Sutera's) financial position; and that they have apparently secured access to the total sum required to be paid under the PIA. Bearing these matters in mind, I would not only grant the extension of time sought by the applicants but also, with the agreement of the parties, would make an order for mediation on the nearest available date. I certify that the preceding twenty (20) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Kenny.
Sutera
Nelson