FEDERAL COURT OF AUSTRALIA Jeans v Commonwealth Bank of Australia [2004] FCA 938 JOHN ANTHONY JEANS v COMMONWEALTH BANK OF AUSTRALIA N 7372 OF 2003 STONE J 9 JULY 2004 SYDNEY IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY N 7372 OF 2003 BETWEEN: JOHN ANTHONY JEANS APPLICANT AND: COMMONWEALTH BANK OF AUSTRALIA RESPONDENT JUDGE: STONE J DATE OF ORDER: 9 JULY 2004 WHERE MADE: SYDNEY THE COURT ORDERS THAT: 1. The application for leave to appeal be dismissed. 2. The applicant pay the respondent's costs of today's proceedings. 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 7372 OF 2003 BETWEEN: JOHN ANTHONY JEANS APPLICANT AND: COMMONWEALTH BANK OF AUSTRALIA RESPONDENT JUDGE: STONE J DATE: 9 JULY 2004 PLACE: SYDNEY REASONS FOR JUDGMENT 1 By notice of motion filed in Court the applicant seeks a stay of orders made by Conti J on 8 July 2004 and leave to appeal from those orders. Justice Conti ordered that the Commonwealth Bank of Australia, the respondent to the notice of motion, be released from an undertaking given to the Court on 21 January 2004 subject to a fresh undertaking being given to the Court. Background 2 The background to the notice of motion can be summarised briefly. In 1998 the applicant, Mr Jeans, entered into certain guarantees in favour of the Commonwealth Bank. In May 2003 Mr Jeans' application to set aside the guarantee was dismissed and judgment on the guarantee was entered for the Bank in the sum of $4,749,813.30 (see Deangrove Pty Ltd v Commonwealth Bank of Australia [2003] FCA 470). On 16 December 2003 the Bank served a bankruptcy notice on Mr Jeans who then applied for an extension of time for compliance with the notice. With the consent of the parties, that application was dismissed on 21 January 2004 by Deputy District Registrar Hedge who noted the Bank's undertaking that it would not present a creditor's petition for a sequestration order until Mr Jeans' application to the High Court for special leave to appeal (and any subsequent appeal) had been finalised. 3 Mr Jeans did not comply with the bankruptcy notice and, as a result, he committed an act of bankruptcy on 21 January 2004. In April 2004 however, the High Court registry advised the Bank that the special leave application was listed for hearing in December 2004.It was accepted by both parties that, pursuant to s 44(1)(c) of the Bankruptcy Act 1966 (Cth), this act of bankruptcy can only be relied on to support a creditor's petition that is presented by 21 July 2004. For this reason the Bank sought to be released from its undertaking subject to it giving a new undertaking to the effect that it would consent to an adjournment of the proceedings under petition until the appeal process in the High Court was exhausted. The primary judge's decision 4 The primary judge accepted that, at the time it gave the undertaking referred to above, the Bank expected the special leave application made by Mr Jeans would be heard within six months of the date on which the application for an extension of time was dismissed, that is the date on which the act of bankruptcy occurred. 5 Justice Conti granted the relief sought by the Bank. His Honour noted that the High Court in Adam P Brown Male Fashions Pty Ltd v Philip Morris Inc (1981) 148 CLR 170 ('Adam P Brown')held that the Court has power to release a party from an undertaking given to the Court without the consent of the other party even when there was no mistake operative at the time it was given. The High Court held, at 178, that a court must 'remain in control of its interlocutory orders' and specifically stated that such an order would be 'appropriate whenever, inter alia, new facts come into existence or are discovered which render its enforcement unjust'. 6 His Honour regarded the unanticipated delay in the High Court hearing the special leave application as a new fact that would render the maintenance of the original undertaking unjust. He rejected Mr Jeans' submission that the Bank was seeking to negate its undertaking completely. In his Honour's view the Bank was only seeking to maintain the status quo 'constituted by the Full Court's judgment, and the act of bankruptcy of Mr Jeans subsequently committed by virtue of his non-compliance with the bankruptcy notice based on that judgment'; Jeans v Commonwealth Bank of Australia [2004] FCA 841 at [14]. 7 His Honour held that Mr Jeans had not identified any material detriment that would or might result from the relief sought by the Bank. In particular, Mr Jeans had not identified any creditor who might be able to take advantage of his non-compliance with the Bank's bankruptcy notice. On the other hand his Honour noted that counsel for Mr Jeans acknowledged that if relief were denied: 'the Bank would thereafter find itself compelled to issue and serve a fresh bankruptcy notice after denial of the application for special leave, with the consequential disadvantage thereby conversely occasioned to the Bank of an act of bankruptcy of Mr Jeans no longer crystallising until some time in 2005.' Leave to appeal from an interlocutory order 8 When considering an application for leave to appeal from an interlocutory decision, the utility of granting leave is a significant consideration. If there is little or no prospect of an appeal succeeding leave should not be granted; Decor Corporation Pty Ltd v Dart Industries Inc (1991) 33 FCR 397. 9 Furthermore, where the interlocutory decision involves an exercise of the primary judge's discretion, the basis on which an appeal court may interfere is governed by established principles. The Court is not entitled to substitute its discretion for that of the primary judge unless the primary judge made an error such as was described in House v The King (1936) 55 CLR 499 at 505 per Dixon, Evatt and McTiernan JJ: 'If the judge acts upon a wrong principle, if he allows extraneous or irrelevant matters to guide or affect him, if he mistakes the facts, if he does not take into account some material consideration, then his determination should be reviewed and the appellate court may exercise its own discretion in substitution for his if it has the materials for doing so. It may not appear how the primary judge has reached the result embodied in his order, but, if upon the facts it is unreasonable or plainly unjust, the appellate court may infer that in some way there has been a failure properly to exercise the discretion which the law reposes in the court of first instance. In such a case, although the nature of the error may not be discoverable, the exercise of discretion is reviewed on the ground that a substantial wrong has in fact occurred.' 10 In addition, there is a need for particular caution where the orders of the primary judge involve matters of practice and procedure. An interlocutory order releasing a party from an undertaking given to the Court is a matter of practice and procedure. It is well established that a court considering an application for leave to appeal from such an order should grant leave sparingly; Adam P Brown at 177; Bright v Femcare Ltd 195 ALR 574 ('Femcare') at 575 per Lindgren J. An appellate court should not merely substitute its own view as to the appropriate exercise of the court's discretion for that of the primary judge. This application 11 The thrust of the applicant's claim at the hearing of the leave application was that the primary judge had failed to take into account a material consideration. Senior Counsel for the applicant, Mr Ireland QC, drew my attention to a further notation on the orders made by Deputy District Registrar Hedge. It is as follows: 'The Court also notes the statement made by Mr Butler, the solicitor for the applicant that if, at the conclusion of proceedings in the High Court, it becomes necessary for the respondent to serve a fresh bankruptcy notice, then Mr Butler will obtain instructions from the applicant to accept service of such fresh bankruptcy notice.' 12 I have some difficulty in understanding what was intended by this statement. It is hard to see how Mr Butler could deliver on a promise to obtain instructions if the applicant were not willing to give those instructions. Perhaps it was intended to be a promise by the applicant, through his solicitor, that he would co-operate with the Bank if a fresh bankruptcy notice turned out to be necessary. In any event, the meaning is irrelevant for present purposes. Mr Ireland raised the issue, not because of the content of the promise or undertaking, but to show that when the Bank gave its undertaking to delay presenting a creditor's petition it was in the contemplation of both parties that a fresh bankruptcy notice might be required. 13 Mr Ireland pointed out that although Conti J discussed the undertaking given by the Bank at some length, nowhere does his Honour refer to this additional statement made by Mr Butler. He submitted that the statement was a material consideration that 'slipped through the cracks' and that, if leave to appeal were granted, the applicant on such appeal would have a strong argument that the Bank should not be allowed to withdraw its undertaking in circumstances that were anticipated when the undertaking was given and provided for by the parties. 14 If his Honour had overlooked the fact that the parties had provided for the consequences of delay in the High Court hearing the special leave application, Mr Ireland's argument would, in my view, have some merit. However, it was not in dispute that the statement was drawn to Conti J's attention. The fact that his Honour does not refer to it in his reasons for judgment does not necessarily indicate that he overlooked the point. Given its opaque nature and the uncertainty as to what the statement was intended to achieve, it is likely that his Honour attributed little weight to it. In these circumstances I am not prepared to infer that his Honour overlooked the matter. 15 The other issue raised by the applicant on the notice of motion relates to what was referred to as the contract between the parties underlying the orders made by the Court and the undertaking given. It was suggested that the Court ought not interfere with this contract. I attach no weight to this argument. An agreement between the parties may explain why the parties consented to the dismissal of the proceedings and why the undertaking was given. However, the contract was not argued before the primary judge and, in other than in exceptional circumstances (which have not been pleaded here), the Court's interest in keeping control of its interlocutory orders does not require it to go beyond those orders and the material that was before it when those orders were made. 16 Ultimately for the primary judge the question came down to the parties' respective disadvantage. His Honour expressed the view that, given the substitute undertaking proffered by the bank, the presentation of a creditor's petition would not effect any change in the legal status of the applicant. Mr Ireland has pointed to the fact that there is some disadvantage to a person in merely having a creditor's petition issued against them. I accept that submission, just as I accept the submission that there would be a significant disadvantage to the Bank if it were not able to rely on the act of bankruptcy that occurred on 21 January of this year. 17 However, the weight to be attributed to these factors was a matter for the primary judge. His Honour's decision was made in the exercise of his discretion made after careful consideration of the competing views of Mr Jeans and the Bank. There was no dispute as to the applicable principles. While, with hindsight, it might have been preferable for his Honour to have mentioned the statement attributed to Mr Butler, I see no reason to infer that his Honour failed to exercise that discretion properly. 18 Bearing in mind the caution advised in Adam P Brown and reiterated in Femcare, the application for leave to appeal is denied and the applicant on the motion is to pay the respondent's costs of today. In the circumstances it is not necessary to consider the application for a stay of the primary judge's order pending the determination of an appeal. I certify that the preceding eighteen (18) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Stone. Associate: Dated: 19 July 2004 Counsel for the Applicant: Mr J Ireland QC Solicitor for the Applicant: Robert H Butler Counsel for the Respondent: Mr DA McClure Solicitor for the Respondent: J K O'Sullivan Date of Hearing: 9 July 2004 Date of Judgment: 9 July 2004