Wealthsure Pty Limited v Selig

JUDGE: BESANKO J DATE: 21 AUGUST 2013 PLACE: SYDNEY via video link to adelaide

REASONS FOR JUDGMENT 1 On 25 June 2013 I made an order staying the execution of judgments against Wealthsure Pty Limited ("Wealthsure") and Mr David Bertram in favour of Mr Ronald Selig and Mrs Janna Selig. The stay of execution was subject to conditions including the payment into Court of a sum of $500,000. Included in the orders was a provision giving the parties liberty to apply. The conditions of the stay were complied with and the stay of execution is in place. 2 My reasons for granting the stay are set out in Wealthsure Pty Limited v Selig [2013] FCA 628. An application for leave to appeal from the orders was refused: Selig v Wealthsure Pty Limited [2013] FCA 685. 3 Mr and Mrs Selig have applied under the liberty to apply provision in the orders made on 25 June 2013 for an order that the stay of execution, insofar as it involves a stay of execution of the judgment against Mr Bertram, be discharged. They submit that the circumstances which supported the grant of a stay no longer exist in that Mr Bertram is no longer appealing against the judgment entered against him. They submit that Mr Bertram is a bankrupt and that the trustee of his estate, the Official Trustee, has elected to abandon his appeal. Neither Mr Bertram nor the Official Trustee appeared on the hearing of the application to discharge the order for a stay of execution. Correspondence from the Official Trustee's solicitors was part of the affidavit evidence put before the Court and I refer to that evidence below. Wealthsure, which is pursuing its appeal, sought to make submissions on the application claiming that it is an interested party. It opposes the discharge of the stay of execution in favour of Mr Bertram. Mr and Mrs Selig challenged Wealthsure's standing to be heard on the application. 4 Under the orders made on 25 June 2013 Wealthsure was the party required to pay money into Court as a condition of the stay. I think that gives it a sufficient interest to be heard on the application. 5 Wealthsure raised a preliminary objection to Mr and Mrs Selig's application to the effect that it was not authorised by the liberty to apply provision which formed part of the orders made on 25 June 2013. It contended that an application to discharge an order was not within the scope of a liberty to apply provision. It referred to authorities which considered the scope of a liberty to apply provision in the context of final orders: Abigroup Limited v Abignano (1992) 39 FCR 74 at 88; Maritime Union of Australia v Geraldton Port Authority [2000] FCA 1342 at [5] - [14]. In my opinion, this application is within the liberty to apply provision. The stay of execution is an interlocutory order and it seems to me that it must be capable of reconsideration where there is a change in the circumstances which justified its grant. The stay was granted pending "determination of the appeal". Subject to some qualifications to be mentioned, Mr Bertram's appeal will never be determined, or perhaps has been determined by its discontinuance. Counsel for Wealthsure accepted that the Court had the power to discharge the stay order and to do so in this proceeding. The point seemed to be, therefore, that there was no written interlocutory application. I do not accept that there needs to be such an application, but in any event, I could waive that requirement under the Federal Court Rules 2011 (Cth). 6 The judgment which was entered against Mr Bertram (and Wealthsure and other defendants) on 18 April 2013 was in the sum of $1,760,512. During the period when the events occurred which ultimately led to the judgments, Mr Bertram was an authorised representative and acted with the authority of Wealthsure. Throughout the proceeding in the Court below, Wealthsure and Mr Bertram were represented by the same solicitors and counsel and that was also the case when their application for a stay was issued on 30 May 2013 and when the application was called on before me on 6 June 2013. However, on the morning of the hearing on 13 June 2013 counsel for Wealthsure told me that he no longer appeared for Mr Bertram who had recently filed for bankruptcy. I was told that a bankruptcy trustee had apparently been appointed. Nevertheless, the stay of execution order I made included Mr Bertram. It seemed to me that it was appropriate to do so where, aside from Mr Bertram's bankruptcy, there were good reasons for a stay of execution and the implications of Mr Bertram's bankruptcy were not then known. I was certainly not making a decision at that point that events in Mr Bertram's bankruptcy could not in any circumstances affect the appropriateness of a stay. 7 Mr and Mrs Selig submit that the Official Trustee of Mr Bertram's estate has abandoned Mr Bertram's appeal and the basis for the stay in his favour has gone. They submit that nothing will happen in Wealthsure's appeal which can alter the fact that Mr and Mrs Selig have a judgment against Mr Bertram in the sum of $1,760,512. Wealthsure opposes the application submitting that it will be prejudiced if the stay is lifted. 8 In order to understand the competing submissions it is necessary to mention the QBE insurance and the provisions of the Act relating to election and insurance policies. 9 The QBE insurance is referred to in my reasons on the application for a stay (at [33] - [36]). The evidence from the Official Trustee's solicitors establishes the following: (1) Mr Bertram became bankrupt on his own petition on 12 June 2013. The Official Trustee in Bankruptcy became the trustee of his estate; (2) By letter dated 27 July 2013 the Official Trustee's solicitors gave Mr and Mrs Selig's solicitors notice that it elects under s 60(2) of the Bankruptcy Act 1966 (Cth) ("the Act") to discontinue Mr Bertram's appeal; (3) The Official Trustee did not propose to file a notice of discontinuance in Mr Bertram's appeal until after the 60 day period for a review of its decision under s 178 of the Act had expired; (4) The Official Trustee considers that its right to call on the indemnity from QBE under s 117 of the Act cannot be pursued until the stay is lifted; (5) Although stating that it is not required to do so, the Official Trustee has provided reasons to Wealthsure's solicitors for its election to discontinue Mr Bertram's appeal. Those reasons are before me and I have considered them. The soundness or otherwise of the reasons is not relevant to the present application. 10 Section 117 of the Act is in the following terms: Policies of insurance against liabilities to third parties (1) Where: (a) a bankrupt is or was insured under a contract of insurance against liabilities to third parties; and (b) a liability against which he or she is or was so insured has been incurred (whether before or after he or she became a bankrupt); the right of the bankrupt to indemnity under the policy vests in the trustee and any amount received by the trustee from the insurer under the policy in respect of the liability shall, if the liability has not already been satisfied, be paid in full forthwith to the third party to whom it has been incurred. (2) Subsection (1) does not limit the rights of the third party in respect of any balance due to him or her after the payment referred to in that subsection has been made. (3) This section applies notwithstanding any agreement to the contrary, whether entered into before or after the commencement of this Act. 11 Various matters raised in the course of submissions or identified in the evidence appear to me to raise complex issues of bankruptcy law. Having regard to the limited submissions put to me, I do not propose to decide any matter that I am not required to decide lest it prejudice the rights of any party. 12 I do not express a view as to whether it is open to the Official Trustee to wait until 27 September 2013 (i.e., 60 days) before filing a notice of discontinuance in Mr Bertram's appeal. The important point is that it is clear enough on the evidence that, subject to any order under s 178, the Official Trustee will not pursue Mr Bertram's appeal. I do not express a view on whether Wealthsure or QBE Insurance has standing to apply under s 178 of the Act or grounds to impugn the Official Trustee's decision to discontinue the appeal. The fact is that so far as I know, no person has applied for a review under s 178 of the Act in the three week period since the Official Trustee made its decision and no party has come before the Court and said that it will be making an application or that it requires further time to consider making an application and the reasons why it requires further time. Finally, I do not express a view on the argument advanced by Mr and Mrs Selig that s 117 of the Act operates to confer on the Official Trustee (or on them as assignors if they secure an assignment from the Official Trustee) a right of indemnity for a fixed amount and irrespective of whether QBE Insurance funds Wealthsure's legal costs of the appeal. I do not need to address that point because I think it is sufficient for Mr and Mrs Selig, to show that the basis for the stay - Mr Bertram's challenge to the judgment - has gone. 13 The only possible prejudice to Wealthsure if the stay is lifted which was clearly identified is that it may affect whether their future appeal costs are paid by QBE Insurance. I say "may" because the position is uncertain. It seems to me, however, that even if that "prejudice" was made out it would not be a proper basis for staying the execution of a judgment against another party who no longer challenges the judgment against him. 14 I will order that the stay of execution in favour of Mr Bertram made on 25 June 2013 be discharged. I certify that the preceding fourteen (14) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Besanko.