FEDERAL COURT OF AUSTRALIA Compton v Ramsay Health Care Australia Pty Ltd (No 2) [2018] FCAFC 21 Appeal from: Ramsay Health Care Australia Pty Ltd v Compton (No 2) [2017] FCA 629 File number: NSD 886 of 2017 Judges: SIOPIS, GLEESON AND MOSHINSKY JJ Date of judgment: 19 February 2018 Catchwords: BANKRUPTCY – personal insolvency agreements – where proceedings relating to creditor's petition were stayed by force of s 189AAA of the Bankruptcy Act 1966 (Cth) – form of orders to be made – costs Legislation: Bankruptcy Act 1966 (Cth), ss 30, 33, 52, 188, 189AAA Federal Court of Australia Act 1976 (Cth), s 23 Bankruptcy Regulations 1996 (Cth) Insolvency Practice Rules (Bankruptcy) 2016 (Cth) Cases cited: Compton v Ramsay Health Care Australia Pty Ltd [2017] FCAFC 221 Re Minister for Immigration and Ethnic Affairs; Ex parte Lai Qin (1997) 186 CLR 622 Date of hearing: Determined on the papers Date of last submissions: 9 February 2018 Registry: New South Wales Division: General Division National Practice Area: Commercial and Corporations Sub-area: General and Personal Insolvency Category: Catchwords Number of paragraphs: 13 Counsel for the Appellant: Mr JT Svehla Solicitor for the Appellant: Pure Legal Counsel for the First Respondent: Mr J Stoljar SC and Mr J Hynes Solicitor for the First Respondent: MinterEllison Counsel for the Second Respondent: The second respondent filed a submitting appearance, save as to costs ORDERS NSD 886 of 2017 BETWEEN: ADRIAN JOHN COMPTON Appellant AND: RAMSAY HEALTH CARE AUSTRALIA PTY LTD (ACN 003 184 889) First Respondent PAUL GERARD WESTON Second Respondent JUDGES: SIOPIS, GLEESON AND MOSHINSKY JJ DATE OF ORDER: 19 FEBRUARY 2018 THE COURT DECLARES THAT: 1. Pursuant to s 188(6) of the Bankruptcy Act 1966 (Cth), the second respondent (Mr Weston) became the controlling trustee of the property of the appellant (Mr Compton) by about 5.00 pm on 1 June 2017 (Australian Eastern Standard Time). 2. Pursuant to s 189AAA(1) of the Bankruptcy Act, Federal Court of Australia proceeding No. NSD 660 of 2015, Ramsay Health Care Australia Pty Ltd v Adrian John Compton (the Creditor's Petition Proceeding), relating to the creditor's petition presented by the first respondent (Ramsay Health Care) against Mr Compton, was stayed by about 5.00 pm on 1 June 2017 (Australian Eastern Standard Time) and remains stayed until the earlier of: (a) the conclusion of the first or only meeting of Mr Compton's creditors called under the authority signed by Mr Compton under s 188(1) of the Bankruptcy Act; or (b) the adjournment of that meeting. AND THE COURT ORDERS THAT: 3. The appeal be allowed. 4. Paragraphs 2 to 4 of the orders made by the primary judge on 2 June 2017 in the Creditor's Petition Proceeding be set aside. 5. Pursuant to ss 30(1) and 33(1)(c) of the Bankruptcy Act and s 23 of the Federal Court of Australia Act 1976 (Cth), the time be extended nunc pro tunc for doing any act or thing under Pt X of the Bankruptcy Act, the Bankruptcy Regulations 1996 (Cth) or the Insolvency Practice Rules (Bankruptcy) 2016 (Cth) in relation to the authority signed at 9.15 pm on 31 May 2017 in Altavista, Virginia, United States of America, by Mr Compton under s 188(1) of the Bankruptcy Act naming and authorising Mr Weston to call a meeting of Mr Compton's creditors and to take control of Mr Compton's property, which Mr Weston consented to in writing on 1 June 2017 (Australian Eastern Standard Time), as if that authority had become effective on the seventh day after the date of this order. 6. Ramsay Health Care pay Mr Compton's costs of the appeal (including the costs incurred after 15 June 2017 in relation to paragraph 3 of Mr Compton's interlocutory application dated 9 June 2017), to be taxed if not agreed. 7. The Creditor's Petition Proceeding be remitted to the primary judge, or another judge of this Court, to deal with the following matters after the stay referred to above has ceased to have effect: (a) costs in relation to that proceeding; and (b) dismissal of that proceeding. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011. REASONS FOR JUDGMENT THE COURT: 1 On 21 December 2017, we delivered reasons for judgment in relation to the appeal: Compton v Ramsay Health Care Australia Pty Ltd [2017] FCAFC 221 (the December 2017 Reasons). We did not make substantive orders at that time, but rather provided the parties with the opportunity to file short written submissions on the orders to be made. The parties have now filed submissions and proposed orders. The appellant (Mr Compton) has also filed (with leave) reply submissions. These reasons, which should be read together with the December 2017 Reasons, set out our reasons in relation to the form of orders to be made, and costs. We adopt the abbreviations used in the December 2017 Reasons. 2 In the December 2017 Reasons, we concluded that the primary judge erred in not concluding that Mr Compton was ordinarily resident in Australia at the time he signed the Controlling Trustee Authority. In our view, the evidence established that Mr Compton was ordinarily resident in Australia at the time. It followed that: he satisfied one of the jurisdictional connections referred to in s 188(1) of the Bankruptcy Act 1966 (Cth); and the authority he signed was effective (no other basis having been raised to suggest that the authority was not effective). It further followed that proceedings relating to the creditor's petition were, by force of s 189AAA of the Bankruptcy Act, stayed for a period of time as set out in that section. 3 There is substantial agreement between the parties as to the orders to be made, apart from the issue of costs in relation to the proceeding below (the Creditor's Petition Proceeding). The parties agree that declarations and orders to the following effect should be made: (a) A declaration that, pursuant to s 188(6) of the Bankruptcy Act, Mr Weston became the controlling trustee of the property of Mr Compton by about 5.00 pm on 1 June 2017 (Australian Eastern Standard Time). (b) A declaration that, pursuant to s 189AAA(1) of the Bankruptcy Act, the Creditor's Petition Proceeding was stayed by about 5.00 pm on 1 June 2017 (Australian Eastern Standard Time) and remains stayed until the earlier of: (i) the conclusion of the first or only meeting of Mr Compton's creditors called under the Controlling Trustee Authority; or (ii) the adjournment of that meeting. (c) An order that the appeal be allowed. (d) An order that, pursuant to ss 30(1) and 33(1)(c) of the Bankruptcy Act and s 23 of the Federal Court of Australia Act 1976 (Cth), the time be extended nunc pro tunc for doing any act or thing under Pt X of the Bankruptcy Act, the Bankruptcy Regulations 1996 (Cth) or the Insolvency Practice Rules (Bankruptcy) 2016 (Cth) in relation to the authority signed at 9.15 pm on 31 May 2017 in Altavista, Virginia, United States of America, by Mr Compton under s 188(1) of the Bankruptcy Act naming and authorising Mr Weston to call a meeting of Mr Compton's creditors and to take control of Mr Compton's property, which Mr Weston consented to in writing on 1 June 2017 (Australian Eastern Standard Time), as if that authority had become effective on the seventh day after the date of this order. (e) An order that Ramsay Health Care pay Mr Compton's costs of the appeal. 4 It is also agreed between the parties that paragraphs 2 and 4 of the orders made by the primary judge on 2 June 2017 should be set aside. Paragraph 2 was the sequestration order and paragraph 4 was an order relating to the sequestration order. 5 Mr Compton's proposed orders contain a declaration to the effect that Ramsay Health Care's creditor's petition has lapsed. There is no dispute that the petition has lapsed. It lapsed on or about 5 June 2017 pursuant to s 52(4)(b) of the Bankruptcy Act. Ramsay Health Care submits that the proposed declaration is unnecessary. In circumstances where there is no dispute that Ramsay Health Care's creditor's petition has lapsed, we consider it unnecessary to make the proposed declaration. 6 Mr Compton's proposed orders contain an order that the Creditor's Petition Proceeding be dismissed upon expiry of the stay referred to in the declaration described in [3](b) above. It is submitted in Mr Compton's reply submissions that an order dismissing the proceeding cannot be made while the statutory stay under s 189AAA remains in force. Ramsay Health Care submits that such an order is unnecessary, but does not explain why. Given the view we have reached, below, as to how the issue of costs of the Creditor's Petition Proceeding should be dealt with, we consider it preferable to remit to the primary judge the matter of the dismissal of that proceeding (rather than making an order now, in the terms sought by Mr Compton). 7 In relation to the costs of the Creditor's Petition Proceeding, the competing positions of the parties are as follows: (a) Mr Compton seeks an order that paragraph 3 of the orders made by the primary judge on 2 June 2017 (which was to the effect that Ramsay Health Care's costs be taxed and paid from Mr Compton's estate in accordance with the Bankruptcy Act) be set aside. Mr Compton seeks an order that Ramsay Health Care pay his costs of the Creditor's Petition Proceeding from 5.00 pm on 1 June 2017. He proposes that there be no order as to costs in respect of that proceeding before that time and date. (b) Ramsay Health Care proposes that paragraph 3 of the orders made by the primary judge on 2 June 2017 be varied such that Mr Compton pay Ramsay Health Care's costs of the Creditor's Petition Proceeding. 8 As is apparent from the above summary, Mr Compton draws a distinction between the costs incurred before and after 5.00 pm on 1 June 2017. That is the approximate time at which the statutory stay under s 189AAA came into force. 9 In relation to the period up to 5.00 pm on 1 June 2017, the parties' submissions may be summarised as follows: (a) Ramsay Health Care submits that an order for costs in its favour is appropriate in the circumstances. In particular, it submits that such an order is appropriate having regard to the Full Court's acknowledgement that the issue concerning s 189AAA was "properly raised only when the matter was called on for the delivery of judgment" on 2 June 2017 (December 2017 Reasons, [8]). Ramsay Health Care also submits there has been no challenge to the primary judge's refusal to grant any of the adjournment applications made up to 1 June 2017 on behalf of Mrs Compton, or to the primary judge's refusal to accede to the initial application on behalf of Mr Weston, on 1 June 2017. (b) In response, Mr Compton submits that, in circumstances where the proceeding below was stayed by statutory force (at about 5.00 pm on 1 June 2017) and no reasons for judgment could be delivered or orders (including a sequestration order) made, Ramsay Health Care should not be compensated by an order for costs. Mr Compton submits that the creditor's petition has now lapsed and the Creditor's Petition Proceeding must be dismissed. He submits that the Court does not have power (alternatively, if it does have power, it should not exercise that power) to award the petitioning creditor its costs. Mr Compton also relies on the principles applicable to costs where a proceeding is determined without a hearing on the merits: see Re Minister for Immigration and Ethnic Affairs; Ex parte Lai Qin (1997) 186 CLR 622 at 624-625 per McHugh J. On this basis, it is submitted that each party should bear its or his own costs up to 5.00 pm on 1 June 2017. 10 In relation to the period after 5.00 pm on 1 June 2017, we note that on the afternoon of 2 June 2017, Mr Compton made an application to the duty judge for a stay in relation to the sequestration order. An application to this effect was also dealt with over the following days at a number of further hearings. On 9 June 2017, Mr Compton filed an interlocutory application. This sought, in paragraph 3, orders extending the time periods for doing certain things under Div 2 of Pt X of the Bankruptcy Act in relation to his affairs, estate and property in the event that, upon determination of Mr Compton's appeal from the orders of the primary judge, it was held that a stay was in place pursuant to s 189AAA. As noted in [44] of the December 2017 Reasons, on 15 June 2017 the primary judge made an order that paragraph 3 of Mr Compton's interlocutory application be stood over for determination by the Full Court as part of the appeal. The parties' submissions in relation to the period after 5.00 pm on 1 June 2017 can be summarised as follows: (a) Ramsay Health Care submits that the steps taken between 5.00 pm on 1 June 2017 and 4.30 pm on 2 June 2017 were taken on behalf of Mr Weston and not Mr Compton, and therefore Mr Compton is not entitled to any costs. Ramsay Health Care further submits that, having regard to the "obvious strategic approach" that Mr Compton adopted in availing himself of Pt X of the Bankruptcy Act at the time that he did, a fair and just exercise of the discretion would be to limit any costs order in Mr Compton's favour to the costs of the appeal. (b) Mr Compton submits in response that Mr Weston should obtain an order for costs in his favour in relation to the steps he took as controlling trustee in the Creditor's Petition Proceeding from 5.00 pm on 1 June 2017 until about 10.00 am on 2 June 2017. Mr Compton submits that there should be an order for costs in his favour in relation to steps taken in the Creditor's Petition Proceeding from the afternoon of 2 June 2017 to preserve the status quo and obtain an expedited hearing of the appeal. In particular, Mr Compton submits that his costs in relation to paragraph 3 of the interlocutory application dated 9 June 2017 should form part of his costs of the appeal. 11 It is convenient to deal first with the costs of paragraph 3 of Mr Compton's interlocutory application dated 9 June 2017. As noted above, on 15 June 2017 the primary judge made an order that this paragraph be stood over for determination by the Full Court as part of the appeal. The issue raised by the paragraph has been dealt with in these reasons, at [3](d) above. In circumstances where the issue has been dealt with as part of the appeal, it is appropriate that the costs of the issue (after 15 June 2017) form part of the costs of the appeal. We will reflect this in the costs order to be made in relation to the appeal. 12 In relation to the other costs of the Creditor's Petition Proceeding, we accept Mr Compton's submission that paragraph 3 of the orders of 2 June 2017 should be set aside. That order was made in the context of the making of the sequestration order. As that order is to be set aside, the issue of costs needs to be revisited. In circumstances where the Creditor's Petition Proceeding is currently stayed, we consider it appropriate to remit the issue of costs to the primary judge, to be dealt with once the stay under s 189AAA has come to an end. There is, at least, a question whether there is power to deal with the issue of costs while the proceeding is stayed. Further, it is possible that not all relevant materials are before us. In particular, in relation to the period before 5.00 pm on 1 June 2017, we do not have the evidence filed by the parties on the substantive issue of whether a sequestration order should be made. We are therefore not in a position to assess whether, in the circumstances of the case, and notwithstanding that the judgment of the primary judge of 2 June 2017 is to be put to one side (as a statutory stay was in force), an order for costs should be made in favour of Ramsay Health Care consistently with the principles discussed by McHugh J in Ex parte Lai Qin at 624-625. 13 For these reasons, we propose to remit the Creditor's Petition Proceeding to the primary judge (or, in case he is unavailable, another judge of this Court) to deal with the following matters after the stay referred to above has ceased to have effect: costs in relation to that proceeding; and dismissal of that proceeding. In relation to the latter, in circumstances where the creditor's petition has lapsed, dismissal of the proceeding would follow as a matter of course. However, we consider it appropriate for such an order to be made by the primary judge after the statutory stay has lifted and after the issue of costs has been dealt with. I certify that the preceding thirteen (13) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justices Siopis, Gleeson and Moshinsky. Associate: Dated: 19 February 2018