FEDERAL COURT OF AUSTRALIA Sogelease Australia Ltd v Griffin, in the matter of D J Griffin [2003] FCA 455 BANKRUPTCY – creditors' petition – application for an adjournment of the hearing of the petition – where application for leave to appeal pending in Court of Appeal of New South Wales – effect of sequestration order on proceedings in Court of Appeal Bankruptcy Act 1966 (Cth) ss 50, 52, 60 SOGELEASE AUSTRALIA LTD & ANOR v DAVID JAMES GRIFFIN, IN THE MATTER OF D J GRIFFIN N 7101 OF 2003 EMMETT J 2 MAY 2003 SYDNEY IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY N7101 OF 2003 BETWEEN: SOGELEASE AUSTRALIA LIMITED ACN 002 093 030 FIRST APPLICANT CREDITOR SG AUSTRALIA LIMITED ACN 002 093 021 SECOND APPLICANT CREDITOR AND: DAVID JAMES GRIFFIN RESPONDENT DEBTOR JUDGE: EMMETT J DATE OF ORDER: 2 MAY 2003 WHERE MADE: SYDNEY THE COURT: 1. directs that pursuant to s 50(1) of the Bankruptcy Act 1966 (Cth) that Warren Pantzer forthwith take control of the property of the debtor, David James Griffin; 2. directs that the control of the property of the debtor pursuant to Order 1 end upon the making of a sequestration order in these proceedings; 3. notes that the debtor by his counsel undertakes to the Court and the petitioning creditors that: (a) he will consent, in any event, to the making of a sequestration order on 15 May 2003; (b) he will not, in any event, seek an adjournment of the hearing of the petition on 15 May 2003 on any ground; (c) he will consent to the appointment of Warren Pantzer as trustee upon the making of a sequestration order; 4. reserves liberty (to the parties to these proceedings and Warren Pantzer) to apply; 5. orders upon: (a) the undertakings noted in paragraph 3 hereof; (b) the basis upon the directions recorded in paragraphs 1 and 2 hereof; that the hearing of the petition be adjourned to 10.15 am on 15 May 2003. 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 N7101 OF 2003 BETWEEN: SOGELEASE AUSTRALIA LIMITED ACN 002 093 030 FIRST APPLICANT CREDITOR SG AUSTRALIA LIMITED ACN 002 093 021 SECOND APPLICANT CREDITOR AND: DAVID JAMES GRIFFIN RESPONDENT DEBTOR JUDGE: EMMETT J DATE: 2 MAY 2003 PLACE: SYDNEY REASONS FOR JUDGMENT 1 I have before me a petition for the making of a sequestration order in respect of the estate of David James Griffin ('the Debtor'). The matter has been adjourned since Tuesday on several occasions. When the matter was called on for hearing today, senior counsel for the Debtor applied for an adjournment of the hearing of the petition to 15 May 2003, upon offering to submit both to an order under s 50 of the Bankruptcy Act 1966 (Cth) ('the Act') for the appointment of Warren Pantzer to take control of the Debtor's property and to the making of a sequestration order on 15 May 2003. 2 The reason advanced for the grant of the adjournment is to enable the Debtor to prosecute an application in the Court of Appeal of New South Wales for leave to appeal and to prosecute any appeal, if leave is given, from orders made by Palmer J in the Equity Division of the Supreme Court of New South Wales on 27 March 2003. The indebtedness upon which the petition is founded arises out of the misappropriation by the Debtor of funds of the applicant creditors (together 'the Creditors'). 3 The proceedings in which orders were made in the Equity Division and which founded the bankruptcy notice claim relief against the Debtor beyond a money sum. On 27 March 2003, Palmer J ordered, inter alia, that the Debtor's wife 'take all reasonable steps to procure' from the Debtor and his solicitors 'all documents relating to any bank account'in her name. Palmer J also ordered that the Debtor produce to his wife and his wife's solicitors 'all documents sought by [her] in accordance with the steps taken by [her] in compliance' with the first order. 4 The Debtor opposed the making of the second order on the ground that the material produced might tend to incriminate him. He has sought leave to appeal from the making of the order. The application for leave to appeal has been fixed, at least provisionally, for hearing by the Court of Appeal on 14 May 2003. If a sequestration order were made today, the effect of s 60(2) of the Act could be that any application to the Court of Appeal would be stayed until the trustee makes election, in writing, to prosecute or discontinue the action. Section 60(5) defines 'action' for that purpose as meaning any civil proceeding, whether at law or in equity. 5 It may be that, in considering whether to exercise the discretion conferred on the trustee by s 60(2), the trustee would be required to take account of the interests of the Debtor in relation to the possibility of self-incrimination. On the other hand, it is at least arguable that the discretion of the trustee, in deciding whether or not to elect to prosecute that matter, should be exercised solely by reference to the welfare of the bankrupt estate and the property that would vest in the trustee. 6 I express no view about the extent of the trustee's duty and neither counsel has been in a position to make a firm submission one way or the other. Both counsel in the circumstances, as I understood it, accept that it is at least arguable that the trustee would not be required to take into account the personal interest of a bankrupt in those circumstances. The right to prosecute a proceeding is unlikely to be property of the bankrupt within the meaning of the Act that would vest in the trustee. It is, for that reason, at least arguable that the duty of the trustee would not extend to protecting the Debtor's personal interest except in so far as the prosecution of the appeal might have some bearing on the welfare of the estate of the bankrupt. 7 The effect of s 60 appears to me to be, in a sense, anomalous in a context such as the present. The stay that arises under s 60 might have the purpose of enabling the trustee to assess whether any action that might constitute property of the bankrupt should be pursued in the interests of the creditors and, in the meantime, to ensure that property of a bankrupt is not dissipated in costs expended on the prosecution of an unmeritorious claim. The appeal is probably not property of the bankrupt that could be realised for the benefit of creditors. 8 An order under s 50 would enable the trustee to take control of the Debtor's property, whatever that may be. That would ensure that property of the Debtor is not dissipated to the detriment of creditors. On the other hand, the Debtor will be able, if he is funded by someone else, to prosecute his application for leave to appeal. If a dispute were to arise as to what constitutes the Debtor's 'property', such as whether or not the documents that are the subject of the orders made by Palmer J are the property of the Debtor, that question would arise even if a sequestration order were made. Any dispute as to that matter could be resolved by the Court on an application made either by a trustee appointed pursuant to s 50 or by a trustee appointed pursuant to s 52. 9 I am satisfied that the granting of an adjournment on the terms that are proposed would not be prejudicial to the interests either of the Creditors or of the public. By adjourning the hearing of the petition to 15 May 2003, the Debtor's right to prosecute his application, which might conceivably be lost if a sequestration order were made, will, at least, be preserved. 10 In the circumstances, I consider that it is appropriate to adjourn the hearing of the petition to 10.15 am on 15 May 2003 on terms that the Debtor consents to the making of an order under s 50 for the appointment of Warren Pantzer to take control of his property and any other reasonable orders sought by the Creditors in relation to his property, that the Debtor undertakes to submit to an order under s 52 in respect of his estate and undertakes not to seek any further adjournment of the hearing of the petition beyond 15 May 2003. I certify that the preceding ten (10) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Emmett. Associate: Dated: 14 May 2003 Counsel for the Applicant Creditors: G C Lindsay SC with P A Fury Solicitor for the Applicant Creditors: Piper Alderman Counsel for the Respondent Debtor: A W Street SC with G D Wendler Solicitor for the Respondent Debtor: North & Badgery Date of Hearing: 2 May 2003 Date of Judgment: 2 May 2003