FEDERAL COURT OF AUSTRALIA Westpac Banking Corporation v Carver, in the matter of Carver [2003] FCA 222 BANKRUPTCY – PRACTICE & PROCEDURE – creditor's petition – application for stay pending special leave to appeal to High Court – general discretion to grant a stay of sequestration order. Bankruptcy Act 1966 (Cth) IN THE MATTER OF MARIE PHILLIPPE CYRIL GRELY CARVER; WESTPAC BANKING CORPORATION V MARIE PHILLIPPE CYRIL GRELY CARVER NO. N 7373 OF 2002 IN THE MATTER OF DEAN STARR JOSEPH CARVER; WESTPAC BANKING CORPORATION V DEAN STARR JOSEPH CARVER NO. N 7271 OF 2002 BEAUMONT J 27 FEBRUARY 2003 SYDNEY IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY N 7373 OF 2002 IN THE MATTER OF: MARIE PHILLIPPE CYRIL GRELY CARVER BETWEEN: WESTPAC BANKING CORPORATION APPLICANT CREDITOR AND: MARIE PHILLIPPE CYRIL GRELY CARVER RESPONDENT DEBTOR IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY N 7271 OF 2002 IN THE MATTER OF: DEAN STARR JOSEPH CARVER BETWEEN: WESTPAC BANKING CORPORATION APPLICANT CREDITOR AND: DEAN STARR JOSEPH CARVER RESPONDENT DEBTOR JUDGE: BEAUMONT J DATE OF ORDER: 27 FEBRUARY 2003 WHERE MADE: SYDNEY THE COURT ORDERS THAT: 1. A sequestration order be made against the estate of Dean Starr Joseph Carver. 2. A sequestration order be made against the estate of Marie Philippe Cyril Grely Carver. 3. Proceedings upon the sequestration orders be stayed for seven days. 4. The applicant creditor's costs (including reserved costs, if any) be taxed and paid in accordance with the Bankruptcy Act 1966 (Cth). Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules. IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY N 7373 OF 2002 IN THE MATTER OF: MARIE PHILLIPPE CYRIL GRELY CARVER BETWEEN: WESTPAC BANKING CORPORATION APPLICANT CREDITOR AND: MARIE PHILLIPPE CYRIL GRELY CARVER RESPONDENT DEBTOR IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY N 7271 OF 2002 IN THE MATTER OF: DEAN STARR JOSEPH CARVER BETWEEN: WESTPAC BANKING CORPORATION APPLICANT CREDITOR AND: DEAN STARR JOSEPH CARVER RESPONDENT DEBTOR JUDGE: BEAUMONT J DATE: 27 FEBRUARY 2003 PLACE: SYDNEY REASONS FOR JUDGMENT Beaumont J: 1 Before the Court is a creditor's petition fixed for hearing some time ago but the subject of several applications for adjournment, some of which I have already acceded to on a short term basis. 2 The hearing of the petition involved the consideration of a preliminary point in respect of which I have already given reasons for judgment this morning. The adjournment application made on behalf of the respondent debtors is, for the reasons I gave this morning, limited to consideration of two questions at this point, that is to say, whether the application made to the High Court of Australia for special leave to appeal is genuine, something which I am prepared for present purposes to assume and, secondly, whether there is an arguable basis for propounding the application for special leave. 3 As I have indicated in the judgment given this morning, the High Court of Australia is required by the provisions of section 35A of the Judiciary Act 1903 (Cth), in considering any application for leave, to have regard to whether the proceedings involve a question of law of public importance, or one on which a High Court decision is needed to resolve differences of judicial opinion, and as to whether a judgment already given requires consideration by the High Court in "the interests of administration of justice either generally or in a particular case". 4 As I have also indicated in my earlier reasons, in most cases special leave is granted only where a point of law of importance is involved; and applicants for special leave ordinarily need to demonstrate that what they seek to agitate is of sufficient importance to merit the grant of special leave; that the case is a suitable vehicle for the resolution of that issue; and that their contentions on that issue are sufficiently arguable. As I have mentioned earlier, the application for special leave here is brought in respect of a judgment of the Court of Appeal of the Supreme Court of New South Wales dismissing an appeal from Austin J at first instance. 5 The proceedings before Austin J concerned the exercise by the petitioning creditor of its power of sale under a mortgage in which the respondent debtors were borrowers and in which one of them was named as mortgagor. Following default under the mortgage, the petitioning creditor entered into a contract to sell the land for the sum of $115,000. Thereafter, the respondent debtors brought proceedings in the Equity Division claiming that the petitioning creditor had breached duties owed to the appellants in relation to the sale, and seeking consequential relief. 6 For present purposes, the challenge made before the primary Judge and pursued in the Court of Appeal may be reduced in essence to two points. The first is that it was contended, on behalf of the respondent debtors, that the petitioning creditor did not properly advertise the property by reason of the circumstance that the petitioning creditor failed to ensure that the advertisements stated that the subject property had been granted subdivision and building approval by the local Council. 7 In dealing with this challenge, Austin J held that, in principle, a proper advertisement of a property offered for sale by a mortgagee requires description of relevant planning approvals and other redevelopment opportunities where these matters are material to the value of the property. There is, and can be, no dispute about that abstract proposition of law. However, the factual context in which the challenge arose was complicated by several circumstances, as follows: 8 First, although the petitioning creditor did obtain a copy of the Council's working party report, which was stamped "adopted", and caused this material to be provided to the petitioning creditor's estate agent before the auction, Austin J found that when the agent received a copy of the working party report he then contacted the Council, but was told that no formal approval had been given. 9 Moreover, Austin J went on to hold that having regard to the unusual nature of the subject property (at [45]): "[T]he evidence is that it is questionable whether the subdivision approval and in principle building approval added to the value of the Property or enhanced its prospects of sale". 10 In the Court of Appeal this challenge was dealt with by Hodgson JA with the concurrence of Mason P and Davies AJA. Hodgson JA said (at [28]): "As regards the criticisms of the content of the advertisements, I see no error in the view of the primary judge that there could be no breach in failing to mention the Council approvals, where the mortgagee's agent had inquired of the Council whether such a consent had been granted and had been told it had not." 11 Given that special factual context, I am of the view that there is no arguable basis for the grant of special leave in this matter by the High Court. 12 The second ground of challenge relevant for present purposes is concerned with issues of valuation. It appears that, before entering into the mortgage arrangement in question, the petitioning creditor obtained a valuation in July 1995 from a firm of valuers (Chenoweth) at $170,000. The advertisement for the property in September 1996, however, specified a price of $125,000. By about 12 September 1996, two offers had been received for the property at a figure of $100,000 and one of those offerers later raised her offer to $115,000, which was accepted and the sale was completed on 30 October 1996. 13 Before Austin J there was expert valuation evidence which referred to a number of sales said to be comparable. There were differences of opinion expressed by the valuers called. The primary Judge, however, for the reasons he gave, was of the view that more weight should be given to the valuation of one of the valuers than of Mr Chenoweth. Hodgson JA concluded that there was no basis shown for interfering with the primary Judge's acceptance of the petitioning creditor's valuers, which justified a finding that the true value was $125,000. There was, however, no challenge to the view of the primary Judge that it was appropriate to allow a tolerance of 10 per cent, something that appeared to be accepted by the respondent debtors' witnesses. 14 Accordingly, as Hodgson JA put it, even if there had been a breach of the mortgagee's duties, the respondent debtors had not made out a case for damages or for an account by the mortgagee. Again, I am of the view that a challenge arising out of an issue of that kind has no arguable basis for obtaining special leave from the High Court. I would not, therefore, as I have already indicated in the course of argument, allow an adjournment on the basis that there is an arguable prospect that the High Court would grant special leave in the proceedings now before it. I note in this regard that no application has been made to the Supreme Court to stay any proceedings before it. 15 Therefore, I refuse the adjournment application on that ground. But, as mentioned earlier, I do have a more general discretion to grant an adjournment, certainly one that I would exercise if it were in the interests of the general body of creditors. Yet, each of the respondent creditors has provided details of their respective assets and liabilities, each of them shows a substantial deficiency, with very few assets in either case, and little income. One respondent debtor is liable under a personal loan to purchase a motor vehicle in the sum of $2,000; the other is indebted to Esanda Finance in the sum of $12,000. There is no evidence before me that either of these creditors consents to the adjournment. Since it is clear that each of the respondent debtors is insolvent, I decline to exercise any general discretion to grant an adjournment. 16 I should note at this stage, in anticipation, that it has been submitted on behalf of the respondent debtors that, even if I were to refuse adjournment of the hearing of today's petition, I should, however, exercise my statutory discretion granted by virtue of s 52 of the Bankruptcy Act 1966 (Cth) not to proceed to sequestrate the estate of the respondent debtors at this stage. Again, I accept that this is a generally expressed discretion given by the statute but, as I see it, the circumstances relied upon here on behalf of the respondent debtors are the same as were propounded in support of the adjournment application. Again, I am not persuaded that these provide a proper basis for declining to make a sequestration order. 17 I propose therefore the make a sequestration order. There are no difficulties of a formal nature that need be mentioned. 18 The order I now make is that I order that sequestration order be made in respect of the estate of each of the respondent debtors. Mr Carver has, however, foreshadowed an application for a stay of proceedings of those orders indicating that there may be a prospect from an independent source of the availability of some funds which may avoid bankruptcy in the case of these debtors. 19 The application for stay is opposed. The stay sought was for the maximum period of twenty-one days and, given the length of time that has elapsed since the exercise of the power of sale giving rise to the current dispute between the parties, I am of the view that a stay should be granted, but that it should be for seven days only. I therefore order that proceedings on the sequestration order be stayed for seven days. I will make the usual order for costs, including reserved costs. I certify that the preceding nineteen (19) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Beaumont. Associate: Dated: March 2003 Counsel for the Applicant Creditor: Mr J Johnson Solicitor for the Applicant Creditor: Corrs Chambers Westgarth Solicitor for the Respondent Debtor: Carver Starr and Sons Date of Hearing: 27 February 2003 Date of Judgment: 27 February 2003