IN THE FEDERAL COURT OF AUSTRALIA JUDGMENT No. 22 Q.seeof L282 GENERAL DIVISION BANKRUPTCY DISTRICT OF NEW SOUTH WALES AND No. W 1607 of 1986 AUSTRALIAN CAPITAL TERRITORY ed Coram: Date: Place: (a) (b) (c) Re KURT AND GERLINDE PICCARDI Ex parte GEORGE GREGORY GRIVAS Einfeld J. 8 July 1987 Sydney MINUTE OF ORDERS I order that the applicants file and serve any application to annul the sequestration order within fourteen days from today, together with any affidavits in support thereof. I stand over the application to set aside the signing and sealing of the sequestration order, and the application to rescind or suspend the sequestration order, to Thursday 23 July, at 9.30 am on which date the application to annul should also be returnable. I direct that the applicants give notice to the Registrar in Bankruptcy by not later than Friday 10 July, of the proceedings to set aside the signing and sealing of the sequestration order and of the other orders made today, so that he might appear by counsel or otherwise on 23 July to put such argument in relation to the application as he may wish or be advised. , (d) (e) (£) NOTE: I direct that on 23 July the parties bring in short minutes of orders proposed for the further hearing of all the matters involved in these proceedings, including the filing of any necessary affidavits, together with any discovery or other interlocutory orders that are sought. I direct that these proceedings be treated with urgency by the parties in the first instance, so that the earliest possible resolution of the outstanding matters can be envisaged. I give leave to the parties to approach my associate in the Meantime, and before 23 July, to see what dates would be available for the early hearing of ail the outstanding matters. I reserve costs. Settlement and entry of orders are dealt with in accordance with Order 36 of the Federal Court Rules. JUDGMENT No. 2:2 Conneul sh Suc IN THE FEDERAL COURT OF AUSTRALIA ) GENERAL DIVISION ) BANKRUPTCY DISTRICT OF ) No. W 1607 of 1986 ) ) NEW SOUTH WALES AND AUSTRALIAN CAPITAL TERRITORY Re KURT AND GERLINDE PICCARDI Ex parte GEORGE GREGORY GRIVAS Coram: Einfeld J. FEDERAL COURT Date: 8 July 1987 OF AUSTRALIA 28 JAN 2003 Place: Sydney - ™ LIBRARY EX—-TEMPORE JUDGMENT This is an application for the setting aside of the act of the Registrar in Bankruptcy in signing and sealing the sequestration order made by Justice Neaves on 18 November 1986. The signing and sealing appears to have taken place on 27 January 1987. The application was first stated to be based upon the powers of the court under section 23 of the Federal Court of Australia Act 1976 which states: "The Court has power, in relation to matters in which it has jurisdiction, to make orders of such kinds, including interlocutory orders ... as the Court thinks appropriate." In the light of the powers set out in the Bankruptcy Act 1966 ("the Act") I have serious reservations as to whether that section would provide the power to make the order sought in this application. However, in the light of section 14(5) and section 30(1)(b) of the Act, it is not necessary to decide that question in these proceedings, because it seems to me that one or other of these sections of the Act, especially section 14(5), would permit this order to be made in appropriate circumstances. Section 14(5) provides: "An order or direction made or given, or an act done bya Registrar or a Deputy Registrar under this Act, is subject to review on summary application to the Court." This permits summary review of any act done by a Registrar, and notwithstanding the argument of counsel for two of the judgment creditors appearing in these proceedings that this may not be possible, there seems to be no basis for reading down section 14(5) to meaning something less than what it says, and, in particular, to excluding from reviewable acts done by the Registrar, acts done to sign and seal sequestration orders pursuant to Rule 26. The first question in this case therefore is whether on the evidence, the order is available. I envisage that the order sought is that the signing and sealing, after review under section 14(5), should be set aside or quashed. The facts of the matter are in relatively short compass. It appears that immediately following the making of the sequestration order by Justice Neaves, the solicitors for the bankrupt wrote to the Registrar of the Federal Court of Australia, as distinct from the Registrar in Bankruptcy, to advise him that it was proposed to seek rescission or suspension of the sequestration order (under section 37 of the Act), and seeking an assurance that the sequestration order would not be permitted to be "taken out", as the letter expresses it. The letter announced that the application for rescission or suspension had already been filed. The letter was dated 18 November, the same day as the sequestration order. It appears that this letter was not shared with the petitioning creditor and was certainly not made known to the other creditors of the bankrupt. On 19 November 1986, the city agents of the solicitors for the bankrupt wrote to the Registrar in Bankruptcy, addressing their letter to the Federal Court of Australia. This letter, amongst other things, confirmed in substance that on the previous afternoon, the application to rescind or suspend the sequestration order, and the affidavits in support of it, had been filed, and that at that time the earliest possible return date had been asked for. The return date given, the letter announces, was 15 December 1986, but the Registrar's attention is drawn to the fact that at the time when that date was given, the particular clerk's attention had been drawn to the fact that' the proceedings to rescind could be aborted if the sequestration order was signed and sealed in accordance with the rules before they had been heard. The clerk had told the person presenting the application that the file would be noted that the application had been filed so as, in substance, to prevent the signing and sealing of the order until the application had been dealt with. The city agents drew the Registrar's attention to the concerns of their side of the record in this regard, and again asked that the Registrar not sign and seal the order before the application could be dealt with. The evidence, though not entirely without doubt as to some aspects, appears to indicate that such a file note was made, and that' the sequestration order was lodged for signing and sealing six days after the making of the sequestration order. There also appears' to be a file note suggesting that the solicitor for the bankrupt had been advised that there was a practice of not signing sequestration orders while there were pending applications under section 37. When the application was returned on 15 December, there was a hearing before Justice Jackson. The transcript of that hearing is not free from doubt. It is argued that the transcript should be read as revealing no application for an order that the Registrar not seal and sign the sequestration order, even though the terms of the actual framed order which appear at the top of page 7 of the transcript, are: "_.. that the Registrar of the Court and the trustee be directed to take no further step in respect of this matter without specific direction of the Court." These words, together with the response to them by counsel representing the petitioning creditor lower on page 7, would appear to indicate that of all the "steps" that the Registrar could "take", there was no intention to exclude the exercise of the signing and sealing power under Rule 26. Ordinarily, I would be inclined to think, on a reading of the transcript, that when Justice Jackson declined the order as so _ framed, his Honour had in mind, inter alia, refusing to stay the Registrar's hand when it came to the signing and sealing operation provided by Rule 26. However, the matter was before his Honour, not as a matter for general directions, but as the return of an application to have the Court exercise its power to rescind or suspend under section 37(1). In addition, the immediate consequence of his Honour's declining to make the order sought was to list the matter for the return of subpoenas approximately a month after the hearing then under way, and to permit the parties to approach the registry with a view to obtaining a hearing date in February 1987 for the application for rescission. It seems hardly likely that his Honour would have made those orders in the knowledge or belief that the whole of that procedure could be aborted by the presentation to the Court of a sequestration order for signing and sealing, and by the Registrar proceeding to sign and seal under his powers derived from Rule 26. In these circumstances, it seems to me that the legal representatives of the bankrupts were proceeding upon the basis that their application for rescinding or setting aside the sequestration order was well on foot and was understood by the court and by the petitioning creditor as _ being still open and available. When the matter first came before me on 19 February 1987, there was then a proposal that nothing should be done in relation to the application until a meeting of creditors could be held to consider some form of arrangement that was acceptable to them. That was permitted. The report to the court, when the matter next came back for hearing on 25 March 1987, was that there had been substantial but not unanimous agreement at the meeting to the proposed arrangement. A number of creditors have subsequently appeared in these proceedings to oppose the application to rescind the sequestration order. Some time after their appearances were first noted and permitted, attention was drawn to the fact that, although the file contained a sequestration order that had not been signed and sealed, it also contained one that had been signed and sealed, apparently, on 27 January 1987. Evidently this had been done without anyone having been notified, either before the event or after it. Of course, if it is a valid signing and sealing, or if the signing and sealing is not now set aside or quashed, section 37(2) would immediately abort the application to rescind the sequestration order. It is true, as has been submitted, that there is no express evidence available to me that an application was not made to stop the Registrar from signing and sealing because of the alleged agreement or understanding with the Court or Bankruptcy Registry that' the sequestration order would not be signed and sealed pending this application. It is clear, nonetheless, that the basis for the application is that the lawyers representing the bankrupts believed that they did not have to make such an application, because the practice of the Registry in Bankruptcy was to withhold signing and sealing whilst there was on foot an undecided application for rescission or suspension. The Court's power under section 14(5) to review any act done by the Registrar provides no limitation on the grounds upon which this review can be undertaken and no limitation on the basis upon which an act done can be set aside or invalidated. Unconstrained by authority and uninformed of any contrary view, it seems to me on general principles that if there is evidence that the signing and sealing was done in error or done by inadvertence, review would be an available remedy. Similarly, if it was done following upon the holding out by the Registry to a party who would be adversely affected by such an act, a feeling of confidence or satisfaction that it would not be done, at any rate without notice so that action could be taken if necessary in the court to prevent the action being taken, a ground would exist for an order for review to be made under section 14(5). The next question therefore is whether any of those prerequisites exists in this case. The problem immediately arises that the Registrar has not been represented in these proceedings. It is being said, on behalf of the applicants for the order, that, in substance, this signing and sealing was done in error. It is not suggested that it was done wilfully, and it is certainly not suggested that it was done by fraud or with any intent to mislead. Obviously, no personal or official advantage is gained by any Registrar in signing and sealing a sequestration order. That brings me to a matter which I raised with counsel during the course of this hearing. This is, on its face, a bankruptcy of very large proportions. There are a very substantial number of identified creditors and the sum total of the alleged debts of the bankrupts are, to say the least, quite enormous. The bankrupts, through their counsel, have advised the court that if the application under section 37 to rescind or suspend the sequestration order fails, they will make an application to annul the sequestration order. They have said that as part of their resistance to the application to rescind and to annul when it is filed, they will be seeking to go behind the judgment obtained by the judgment creditor. If there was a successful attack on the status of the judgment creditor, the Court is on notice that a number of other judgment creditors would wish to be substituted as petitioning creditors. The Court has also been informed that there would also be a challenge to the meeting of creditors to which I have earlier referred, and other attacks on the capacity of the bankrupts to pay their debts at any time now or in the future. This foretells a future of very substantial litigation, including I suspect appeals against first instance decisions. In view of the fact that the sequestration order under assault is now eight months old, it is essential that all these matters be brought to the court for resolution at the earliest possible time. Nothing of any significance in relation to the bankrupt's estate is proceeding at the present time, and nothing will proceed, as I understand it, until all these matters are resolved, the trustee having been asked to give and having given undertakings to this effect. On the application to set aside the signing and sealing of the sequestration order, it seems to me that the Registrar should be given an opportunity to be heard when, in particular, the challenged act of his is alleged to be either accidental or inadvertent but when it may have been deliberate, perhaps for very good reason. I do not think that in a matter such as this it is appropriate to speculate on the reason why the act subject to review was done. In accordance with long established authority and in any event, the Registrar is entitled to an opportunity to be heard when there is a possibility of a finding which may be conceived as adverse to him in some way. Further, assuming that the signing and sealing were set aside, it would obviously be inappropriate to proceed with an application to rescind the sequestration order, have that fully litigated, and then, if it were unsuccessful, embark upon an application to annul. The reasons for this are obvious and do not have to be stated but to say the least of it, the litigation would have no visible or identifiable end if such a procedure were adopted. In those circumstances, what I propose to do in this case is as follows: (a) (b) (c) (d) I order that the applicants file and serve any application to annul the sequestration order within fourteen days from today, together with any affidavits in support thereof. I stand over the application to set aside the signing and sealing of the sequestration order, and the application to rescind or suspend the sequestration order, to Thursday 23 July, at 9.30 am on which date the application to annul should also be returnable. I direct that the applicants give notice to the Registrar in Bankruptcy by not later than Friday 10 July, of the proceedings to set aside the signing and sealing of the sequestration order and of the other orders made today, so that he might appear by counsel or otherwise on 23 July to put such argument in relation to the application as he may wish or be advised. I direct that on 23 July the parties bring in short minutes of orders proposed for the further hearing of all the matters involved in these proceedings, including the filing of any necessary affidavits, and any discovery or other interlocutory orders that are sought. (e) (f£) I direct that these proceedings be treated with urgency by the parties in the first instance, so that the earliest possible reesolution of the outstanding matters can be envisaged. I give leave to the parties to approach my associate in the meantime, and before 23 July, to see what dates would be available for the early hearing of all the outstanding matters. I reserve costs.