Mustafa, K v Galbally & O'Bryan (a firm) [1995] FCA 827

CATCHWORDS PRACTICE AND PROCEDURE - application for stay of sequestration order pending hearing of appeal against making of the order - whether appeal bona fide - application dismissed - stay refused - no question of principle. Federal Court Rules, O 52 r 17.

Evans v Heather Thiedeke Group Pty Limited 95 ALR 424. KANI MUSTAFA v GALBALLY & O'BRYAN (a firm) No VG 804/95

Olney J Melbourne 4 October 1995.

IN THE FEDERAL COURT OF AUSTRALIA VICTORIA DISTRICT REGISTRY GENERAL DIVISION No VG 804/95

BETWEEN: KANI MUSTAFA Applicant -and- GALBALLY & O'BRYAN (a firm) Respondent Coram: Olney J Place: Melbourne Date: 4 October 1995 REASONS FOR JUDGMENT The applicant was made bankrupt on 13 September 1995 when Ryan J made a sequestration order against his estate. On that occasion Ryan J ordered that the sequestration order be stayed for 21 days pursuant to s 52(3) of the Bankruptcy Act. The applicant has today filed a notice of appeal in which he appeals from the decision of Ryan J on the grounds that: (a) The judge made an error in law in granting the sequestration order; and (b) "My financial position is such that my assets far exceed my liabilities". In the appeal, the applicant seeks an order that the sequestration order be struck out. At the same time as filing the notice of appeal the applicant filed notice of a motion (unsupported by any affidavit evidence) for an order that the sequestration order be further stayed until the appeal is heard. I am told by the applicant that between about 1.30pm and 1.45pm today he served a copy of the notice of motion at the offices of the petitioning creditor (who is named as respondent to the appeal) and also at the office of the Official Trustee. Neither of those parties has appeared or otherwise been in contact with the Court. It is well established that there is no power to extend beyond 21 days a stay granted under s 52(3). I refer to the authority of Evans v Heather Thiedeke Group Pty Limited 95 ALR 424. However, pursuant to O 52 r 17 of the Federal Court Rules there is power to grant a stay where there is an appeal against a judgment of the Court and there is no limit as to the time for which the stay may be granted. The applicant is therefore entitled to have his application considered on its merits, although probably on a basis different from that upon which he thought he was entitled to rely. This matter has had a long history. The record shows that a bankruptcy notice was served on the applicant on 29 August 1994 and that he was granted various extensions of time within which to comply with the notice. All of these extensions had to do with a challenge the applicant was then attempting to make to the judgment relied upon in the bankruptcy notice. Ultimately, an act of bankruptcy was committed on 25 November 1994 when the applicant failed to comply with the demand of the bankruptcy notice and a creditor's petition was filed on 14 December 1994. The petition was adjourned from time to time over a period of some months, and the record shows that for the most part the adjournments were obtained upon the applicant's assertion that he had funds that were likely to come to hand to settle his debts. This was said as early as 23 February of this year when it was claimed the debtor was to receive moneys pursuant to a settlement. On 24 April 1995 the matter was adjourned because there was a delay in the property settlement in Cyprus; on 18 May 1995, when it was said that funds from the property in Cyprus should be cleared by 29 May; on 30 May, when it was said that the property in Cyprus was sold and the applicant was waiting for his father to transfer the funds; on 8 June, when a further adjournment was opposed by one of the supporting creditors (the record does not precisely show the basis upon which the adjournment was granted); on 3 July, when it was said that the applicant's father was still on his way with the money and was expected to arrive on 17 July 1995; on 27 July, when orders were made for the debtor to provide particulars of his assets and liabilities; and on 9 August, when the petition was adjourned to 13 September upon the undertaking of the applicant that if by that date he had not made arrangements acceptable to each of the petitioning creditor and the two supporting creditors to discharge his liabilities to those creditors he would not further oppose the making of a sequestration order. On 13 September the matter was heard by Ryan J and the sequestration order was made. On that occasion the Judge granted a stay for 21 days. It is now said that the Judge made an error of law which, as far as I can identify it from the submission that has been made, is that the Judge erred by not allowing more time within which to enable the applicant to make arrangements to satisfy his debts. It is also said by the applicant that he was not, at the time, in full command of his mental faculties due to a medical condition. The history of the matter leads one to doubt very much that this is a bona fide appeal. It is not said that the debtor is not indebted to the petitioning creditor. That aspect of the matter seems to have been resolved and the liability is now undisputed. If it be the fact that the applicant was at the time the sequestration order was made, able to pay his debts he obviously was unable to satisfy the Judge that the evidence of his solvency was sufficiently cogent to justify the exercise of the Judge's discretion to dismiss the petition. I do not have the advantage of a transcript of those proceedings but I do have the affidavit material on the bankruptcy file and it seems that on 13 September 1995 the real thrust of the argument was that the debtor needed more time in order to satisfy his debts and thus avoid bankruptcy; and this in the face of the undertaking he had given on 9 August 1995.