CATCHWORDS BANKRUPTCY - application to adjourn hearing of petition - pending appeal against judgment in the Court of Appeal of the Supreme Court of Queensland - whether a genuine dispute exists Ahern v Deputy Commissioner of Taxation (Qld) (1987) 76 ALR 137 Refd Adamopoulos & Anor v Olympic Airways SA & Anor (1990) 95 ALR 525 Cons Re John Dowson ex parte The Abovenamed v Fumio Kaku No QP 377 of 1995 Kiefel J Brisbane 1 September 1995 IN THE FEDERAL COURT OF AUSTRALIA GENERAL DIVISION BANKRUPTCY DISTRICT OF THE STATE OF QUEENSLAND No. QP 377 of 1995 RE: JOHN DOWSON EX PARTE: THE ABOVENAMED Applicant AND: FUMIO KAKU Respondent JUDGE MAKING ORDER: Kiefel J. DATE OF ORDER: 1 September 1995 WHERE MADE: Brisbane MINUTES OF ORDERS THE COURT ORDERS THAT: 1. The application be granted. 2. The hearing of the petition be adjourned to a date to be fixed by the Registrar. 3. Costs of the adjournment be reserved. NOTE: Settlement and entry of orders is dealt with in Rule 124 of the Bankruptcy Rules. IN THE FEDERAL COURT OF AUSTRALIA GENERAL DIVISION BANKRUPTCY DISTRICT OF THE STATE OF QUEENSLAND No. QP 377 of 1995 RE: JOHN DOWSON EX PARTE: THE ABOVENAMED Applicant AND: FUMIO KAKU Respondent CORAM: Kiefel J. DATE: 1 September 1995 PLACE: Brisbane REASONS FOR JUDGMENT The debtor applies for an adjournment of the creditor's petition to allow for the hearing and determination of his appeal by the Court of Appeal of the Supreme Court of Queensland. The petitioning creditor brought an application for summary judgment in that Court on his claim for monies due under a deed by which the debtor guaranteed certain returns by way of rental. The rental guarantee was provided in circumstances when the petitioning creditor was purchasing a number of units associated with a resort in North Queensland from a development company in which the debtor had an interest. They were then to be leased to another company in which he also had an interest, Cofordo 384 Pty. Ltd. ("Cofordo"), and further subleased to another company which was to operate the resort. To ensure some control over the functioning of the resort it was also agreed that a sublease of the lease of the resort itself be held by Cofordo. By the Agreement for Sale the petitioning creditor was to receive the resort lease and sublease in a form "capable of immediate registration" on settlement and it is said that an express undertaking was also given by him at settlement to effect registration. Before that was done however, the development company had defaulted and its financier moved to appoint receivers. The debtor was later called upon to make good the shortfall in rentals pursuant to the guarantee. It was at that time argued for the debtor, and it is sought to argue on the appeal, that having regard to the language of the sales agreement, the circumstances surrounding the transaction and in particular the importance of the resort sub-lease to Cofordo, one could conclude that the provision of the rental guarantee was conditional upon the lease and subleases' registration and that terms can be implied to that effect. Another argument, based upon an estoppel, is also referred to in the outline of argument on the Appeal but I confess to some difficulty in following it. Judgment was given in favour of the plaintiff on that application on 11 May 1995. From the reasons of the Chamber Judge it would appear that a provision in the rental guarantee which was taken to have confirmed Mr Dowson's liability regardless of any other circumstances carried some weight. In the outline of argument the debtor contends that he would not have signed the rental guarantee unless registration of the lease and sub-lease was to take place immediately, and also points to the fact that Cofordo would then have been in a strong position to resist the appointment of receivers by the financier. The last contention may have occurred to the debtor after the chain of events, not all of which were predicted, actually occurred. The first contention is one which is often made after the event and may be thought to be difficult to establish if no hint of such an obligation is contained in the documents drawn by the parties, and where the receipt of the documents is explicable on another basis, namely that it was also in the purchaser's interest to secure their registration. Which is to say, that on the brief outline of the case to be put for the debtor on the appeal it does not seem to be strong, although it is to be recalled that the appeal is from a judgment holding that there is no case which is proper to be tried. Where a genuine dispute exists as to the liability for the debt upon which a petition is founded it has been considered preferable usually to allow the conclusion of investigations, including an appeal, before a sequestration order is made: Ahern v. Deputy Commissioner of Taxation (Qld) (1987) 76 ALR 137, 148; Adamopoulos & Anor v. Olympic Airways SA & Anor (1990) 95 ALR 525, 531. It is however one aspect of the discretion to be exercised in considering whether an adjournment ought to be given, although it is not difficult to appreciate that it will be of great significance save in an exceptional case: Adamopoulos, 532. Pincus J. in that case did express the view that a Bankruptcy Court might form the view that the appeal "although arguable, has little chance of success..." (526) and that that opinion might influence the exercise of its discretion. In practical terms I would not think that many applications for adjournment are likely to include such argument on appeal points as to enable that line to be drawn with comfort. In any event the enquiry posed in Ahern's case and by Burchett and Gummow JJ. in Adamopoulos is as to whether a genuine dispute exists. A conclusion that it is not genuine might be arrived at where an appeal is not prosecuted with real diligence, or where the argument to be presented on it could not be said to be one which anyone would reasonably contend for. In the present case it seems to me that whilst the debtor's prospects may not be great he has an argument to advance. He has prosecuted the appeal for the most part within the times limited for the taking of steps. The fact that he did not apply to stay the judgment or to extend the time for compliance with the bankruptcy notice are decisions which might bear other explanations and do not suggest that he is not bona fide in his prosecution of the appeal. I am, to an extent, also influenced by the circumstance that here a date for the hearing of the appeal, only a few days after that for the hearing of the petition, was offered but not taken up by the petitioning creditor due to the availability of his Counsel who had been retained in the matter at earlier stages. If the appeal were to have been heard so soon there would have been no doubt that an adjournment would have been granted. As it is it will likely now be heard mid-October 1995. I propose to grant the application and adjourn the hearing of the petition to a date to be fixed by the Registrar following the determination of the appeal by the debtor in the Supreme Court of Queensland. I propose to reserve the question of the costs of the adjournment to the adjourned hearing, subject to argument. I certify that this and the preceding four pages are a true copy of the reasons for judgment herein of the Honourable Justice Kiefel. Associate Date: 1 September 1995 Counsel for the applicant: Mr D Cooper Solicitors for the applicant: Purcell Chadwick & Skelly Counsel for the respondent: Mr P Dutney QC and Mr R N Traves Solicitors for the respondent: Gilshenan & Luton town agents for Miller Harris Date of Hearing: 25 August 1995 Place of Hearing: Brisbane Date of Judgment: 1 September 1995