High Court of Australia Kirby J Bryant v Commonwealth Bank of Australia [1996] HCA 3 ORDER Summons dismissed Judgment reserved 28 February 1996 Kirby J. Mr Joseph Bryant (the applicant), by summons, seeks an order staying all proceedings upon a sequestration order made in the Federal Court of Australia by Lockhart J and confirmed by the full court of that Court (Beaumont J, Whitlam J and Moore J). In separate proceedings, the applicant has sought special leave to appeal to this Court against the orders of the full Federal Court dismissing his appeal. The applicant is an unrepresented litigant. His application for special leave will, in due course, be considered by this Court in accordance with the procedures laid down by O 69A, r 13 of the High Court Rules 1952 Cth. At this stage, no decision has been made on the application for special leave. The applicant argues that he is entitled to the stay in order to protect the utility of his application for special leave and, if successful, of the appeal which would follow. He also contends that an order is required to protect him in his capacity as a councillor of a local government authority in Sydney, from the consequence of disqualification from that office for bankruptcy, which might follow by the application of the Local Government Act 1993 NSW, s 234(e). This consideration, and a pending public examination of the applicant, listed for hearing on 28 February 1996, to discover his assets and liabilities, including the identity and interests of unsecured creditors, have lent an element of urgency to the resolution of the stay application. The Commonwealth Bank of Australia (the respondent) opposed the provision of a stay. The trustee in bankruptcy appeared to submit to the orders of the Court. However, he suggested the need to resolve the application, if possible, before the date listed for the public examination of the applicant. Background facts It is neither necessary nor appropriate, in connection with this application, to detail all of the facts which explain how the applicant comes to his present predicament. It is enough to begin with the fact that, on 27 October 1993, in proceedings in the Supreme Court of New South Wales, Levine J gave final judgment against the applicant and in favour of the respondent in the sum of $2,427,329.34. The judgment in that sum provided the foundation for a bankruptcy notice by the respondent which was served upon the applicant. It was the applicant's failure to comply with that notice, notwithstanding extensions of time for compliance, which, in turn, provided the basis for a creditor's petition filed by the respondent seeking the sequestration order ultimately made by Lockhart J in the Federal Court on 30 March 1995. The applicant has opposed the respondent's claims at every point along the way. He has done so, appearing in person in his own interests. Inevitably this has presented him with a number of difficulties. But he is obviously an intelligent man. He told me that, before the respondent proceeded against him, he employed 150 persons. By now he is reasonably familiar with court procedures. His written and oral arguments have proved helpful in identifying, fairly efficiently, the issues which he wishes to raise. After judgment was entered by Levine J, the applicant appealed against it to the Court of Appeal of the Supreme Court of New South Wales. The applicant has apparently, informally, sought expedition of the hearing of that appeal. Whether an order for expedition has been made is unclear but seems unlikely. No hearing date for the appeal appears yet to have been fixed. The applicant's resistance in the Federal Court has been more vigorous although, so far, unsuccessful. He applied to have the bankruptcy notice, founded on the judgment of Levine J, set aside. That application was heard in the Federal Court by Hill J and dismissed. That decision was, in turn, the subject of an appeal to the full Federal Court. That Court (Davies J, Foster J and O'Loughlin J), on 9 November 1994, dismissed the appeal. An application for special leave to appeal against the full Federal Court's orders was dismissed by this Court on 6 September 1995. Meanwhile, on 28 June 1994, the respondent had filed its petition under the Bankruptcy Act 1966 Cth (the Act) seeking a sequestration order against the estate of the applicant. At the hearing of this application, the applicant challenged the petition on a number of bases. These included that the service of the petition had been defective; that he was, in fact, not insolvent; that the petition had been presented and prosecuted by the respondent maliciously; and that the Federal Court should go behind the judgment debt founding the petition, inter alia upon the ground that there had been a denial of natural justice at various stages during the course of the proceedings in the Supreme Court before Levine J and in subsequent proceedings. Lockhart J dismissed all of these (and other) objections. He declined an adjournment sought by the applicant ostensibly so that he could tender, in proper form, evidence foreshadowed in three letters from real estate agents said to prove that the respondent was proposing a sale of his assets at an under-value. Lockhart J said: I can see on the material no purpose to be served by the adjournment. It would not in my view have any realistic prospect of establishing solvency of Mr Bryant. Lockhart J then went on to dismiss the technical, and to reject the substantive, objections raised by the applicant against the making of the orders sought. He concluded that, even taking the view of the facts most favourable to the applicant, the existence of the judgment debt in favour of the respondent in the sum of $2.4 million (excluding interest) and the proved value of the securities ($1.25 million) left a shortfall of about $1.17 million. The sequestration order followed. It was that order which the full Federal Court confirmed by dismissing the applicant's appeal. From that order of dismissal he seeks special leave to appeal to this Court and now requests a stay. Applicable legal principles This is not the occasion for an exhaustive review of the principles governing applications such as the present. It is enough that a few of the well-known, and regularly applied, principles should be recalled: 1. In an application for a stay, adjunct to an application for special leave to appeal, it is necessary to consider the applicant's prospects of success in gaining special leave. But that consideration will not pre-empt the separate determination of that issue which is left to the Court, differently constituted, usually with a fuller understanding of the issues involved and with the benefit (typically) of more detailed written, and (usually) more focused oral, submissions. A decision on a stay application should not become an occasion for a detailed analysis of the issues that will arise in the special leave application and, if granted special leave, the appeal. Necessarily, the evaluation of the prospects of success will involve a judicial impression. But it is one that does not pre-determine, one way or the other, the substantive application; 2. Although the provision of stays, to protect the utility of the appellate process, is generally more common today than was formerly the case, a stay is, by no means, granted simply for the asking. Considerations relevant to the grant of a stay, pending the hearing of an application to this Court for special leave to appeal, will include the applicant's satisfying the Court that "a stay is required to preserve the subject matter of the litigation or that refusal of a stay would make it difficult for this Court, in the determination of the appeal, to grant the relief sought": see Manfal Pty Ltd (In liq) v Trade Practices Commission; [1] 3. At least in some jurisdictions of Australia, the frequency and normality of appeals have been reflected in the adoption of principles which relax somewhat the stringency of the necessity, previously required, to show "special" or "exceptional" circumstances to secure provision of a stay. [2] As I was a party to one such decision [3] (with Hope JA and McHugh JA, as the latter then was) it will be unsurprising that I am generally sympathetic to the view that (subject to any particular provisions of any applicable Rules of Court) special or exceptional circumstances are not now generally required to afford a stay of the execution of orders the subject of an appeal, which lies as of right. The reasons for this shift in emphasis are explained by the New South Wales Court of Appeal in Alexander v Cambridge Credit Corp Ltd [4] . Those principles have not, to this time, been adopted by this Court in respect of its own stay orders; 4. In the High Court, the old rule of stringency continues largely to be maintained, with particular force where no grant of special leave to appeal has yet been secured. There are obvious reasons for a measure of greater stringency at this point. Ordinarily, the case will have proceeded through at least two tiers of the judicial process. The would-be appellant's arguments will have been rejected by the court whose orders are the subject of the special leave application. Only a relatively small proportion of the applications for special leave succeed. To succeed, something more than legal or factual error must usually be shown. These are reasons for maintaining a higher standard in this Court for the provision of a stay than would now usually be imposed by other Australian appellate courts in respect of invocations of their jurisdiction; 5. The expression of the stringent standard, and a description of some of the matters to be taken into account where a stay is sought before a grant of special leave, may be found in numerous reported and unreported decisions of this Court. [5] Repeatedly, the Court has emphasised that the jurisdiction to grant a stay is exercised only in very exceptional circumstances. It is "extraordinary". In Jennings Construction Ltd v Burgundy Royale Investments Pty Ltd (No 1), [6] Brennan J stated the approach to be taken: [7] In exercising the extraordinary jurisdiction to stay, the following factors are material to the exercise of this Court's discretion. In each case when the Court is satisfied a stay is required to preserve the subject-matter of the litigation, it is relevant to consider: first, whether there is a substantial prospect that special leave to appeal will be granted; secondly, whether the applicant has failed to take whatever steps are necessary to seek a stay from the court in which the matter is pending; thirdly, whether the grant of a stay will cause loss to the respondent; and fourthly, where the balance of convenience lies. At the outset of the hearing of the present application, I called these principles to the notice of the applicant so that he would understand them; 6. In the exercise of the jurisdiction to provide a stay, it has often been emphasised that cases involving a stay of the operation of the criminal law or of laws designed to protect the public (eg deregistration of a professional lawyer or medical practitioner) are in a class different from cases involving no more than the suspension of the operation of orders affecting two private litigants only. [8] Different considerations also arise where affirmative orders are required to protect the applicant's interests, as distinct from a simple order postponing the operation of the orders challenged by the appellate process. In cataloguing, for this purpose, an order under the Act sequestrating the estate of a person found bankrupt, it is clear that the status of the bankrupt is affected. But so are, potentially, the interests of third parties. So too is the interest of the community. It would therefore be a mistake to approach the present application as if the only interests affected by its outcome were those of the applicant and the respondent. Also to be kept in mind are the interests of other creditors, particularly unsecured creditors, and of the community which has its own concerns in the due administration of the Act in respect of the estate of persons found to be bankrupt; and 7. The suggestion, in Jennings, [9] that applications for a stay should ordinarily be made first to "the court in which the matter is pending and which is familiar with the matter", was not complied with in this case. Although the applicant failed to make an application for a stay to the full Federal Court, little weight should be attached to that consideration, given that he is not legally represented and was unfamiliar with the guidelines in Jennings. Those guidelines have encouraged a new procedure designed to reduce the burden on this Court of applications such as the present. 1. (1990) 65 ALJR 256 at 257. 2. See eg The Annot Lyle (1886) 11 PD 114; Monk v Bartram [1891] 1 QB 346; Klinker Knitting Mills Pty Ltd v L'Union Fire Accident & General Insurance Co Ltd [1937] VLR 142; Scarborough v Lew's Junction Stores Pty Ltd [1963] VR 129. 3. Alexander v Cambridge Credit Corp Ltd (1985) 2 NSWLR 685. 4. at 693-694. 5. See eg Marconi's Wireless Telegraph Co Ltd v Commonwealth (No 3) (1913) 16 CLR 384 at 386; Rahme v Commonwealth Bank of Australia (1993) 68 ALJR 53 at 54-55; Wentworth v Wentworth (High Court of Australia, Gummow J, 17 October 1995, unreported) transcript at 43-46. 6. (1986) 161 CLR 681. The difficulties of power and discretion presented by stay applications are universal. See eg the recent decision of the Court of Justice of the European Communities in Societé d'Informatique Service Réalisation Organisation (SISRO) v Ampersand Software BV [1996] 2 WLR 30 at 56f. 7. at 685. 8. See Edelsten v Richmond (1987) 11 NSWLR 51 at 59, 63, 64; McMahon v Gould (1982) 7 ACLR 202; Dwyer v National Companies & Securities Commission (1988) 15 NSWLR 285 at 287; Sibuse Pty Ltd v Shaw (No 2) (1988) 13 NSWLR 125 at 127-128. See also Edelsten v Ward (No 2) (1988) 63 ALJR 346 at 346. 9. at 684. Application of the principles The primary consideration expressed in Jennings is whether the applicant can establish that there is "a substantial prospect that special leave to appeal will be granted" [10] . To judge this, it is necessary to consider the reasons given by the full Federal Court for dismissing the applicant's appeal to that Court, the grounds relied upon by the applicant in support of his application to this Court and the written and oral submissions of the parties tendered in these proceedings. 1. at 685. The applicant took me through various grounds, some of which appear wholly without merit and most of which raise purely factual issues, involving no general question of legal principle such as would be likely to attract special leave to appeal. Thus, the argument that the respondent's petition was founded on an incorrectly filed order would seem not to have merit, even if factually correct. It appears to relate, at most, to a misdescription of the file number of the Supreme Court process. Similarly, the complaint about Lockhart J's refusal of an adjournment runs into at least two problems, viz that the order made was discretionary and (having regard to its consequences) involved no ultimate injustice to the applicant. On the face of things, the complaint concerning the permission given to the respondent to amend its petition appears to be adequately answered by the reasons given by the full Federal Court for dismissing that ground of challenge. The complaints concerning the conduct of the hearing by Lockhart J, at least at this stage of my understanding of them (without benefit of the trial transcript) appear to raise no point of substantial injustice and, certainly, no point of new legal principle. [11] 1. The full court of the Federal Court referred to and applied Galea v Galea (1990) 19 NSWLR 263 at 280f: see Devries v Australian National Railways Commission (1993) 177 CLR 472 at 483. So far as the objection to the service of the creditor's petition within the precincts of the Supreme Court building in Sydney is concerned, the full Federal Court appears to have acknowledged the applicable principles affecting the undesirability of such service within a court building, the entitlement of a party to protect itself from another party who is avoiding service and the validity of orders which follow irregular service. Again, this would not appear to be a matter attracting special leave. Only two questions argued by the applicant caught my attention. They were the applicant's assertion that the Federal Court ought to have delayed the sequestration order pending the determination of his appeal to the New South Wales Court of Appeal and his argument that an important point of law on the meaning of "insolvency" fell to be determined. So far as concerns the first of these points, it is true that, in many cases, it will be proper for the Federal Court to postpone making a sequestration order, founded ultimately upon a judgment in another court until that judgment, where challenged, is ultimately upheld. In my experience, such a course is often taken. But it cannot amount to an absolute rule. Otherwise, taking advantage of the notorious delays of the appellate process, a judgment debtor could simply postpone a sequestration order by filing a notice of appeal. It is therefore necessary that, in every case, some estimate should be made of the utility and possible outcome of the appeal. As Hill J observed in the Federal Court in this case, such estimates involve an element of embarrassment in predicting what another court, with full argument and analysis, might do. The applicant warned me about the dangers of jumping to conclusions about his appeal to the New South Wales Court of Appeal, without the benefit of the trial transcript and full argument. I agree that some caution is required. It is not feasible (nor would it be proper) for me to pre-judge the outcome of his appeal. The most that can be done is to secure a general impression of its prospects, having regard to the principal issues to be ventilated. From an examination of the reasons of Levine J, it emerges that the applicant's case in the Supreme Court was to the effect that, although the respondent held security documents sustaining, on their face, the claimed debt, there was a special arrangement between the applicant and the respondent, for the most part made orally, which relieved the applicant of the ostensible obligations of the documents. Levine J, in his reasons, rejected this argument: [12] Unfortunately for Mr Bryant on my finding as I have that the bank's conduct was in accordance with the terms of the facilities, absent any arrangement as asserted by him, which arrangement I find not to have been proved at all, he cannot be heard to complain that the bank did not give notice, give warning, or act otherwise in a way that he might see as consistent with the history of his long relationship with the plaintiff. 1. Commonwealth Bank of Australia v Bryant (Supreme Court of New South Wales, Levine J, 27 October 1993, unreported) at 14. Conformably with the established principles controlling appellate intervention, as repeatedly expressed by this Court, [13] such a finding would appear to present the applicant with a significant hurdle in the way of a successful appeal. He states that he has incontrovertible evidence by which to overcome Levine J's conclusion. That may be so. But, at least at the moment, and viewed in the way that is appropriate at this stage, the prospects of disturbing the judgment by an appeal to the New South Wales Court of Appeal, do not seem very strong. Nor, making full allowance for the fact that the applicant is not legally represented, and for delays inherent in the appellate process, does it seem that the applicant has prosecuted his appeal with as much vigour as he could. Perhaps he has been concentrating his energies upon his other challenges in the Federal Court. 1. See eg Brunskill v Sovereign Marine & General Insurance Co Ltd (1985) 59 ALJR 842 at 844; Jones v Hyde (1989) 63 ALJR 349 at 351; Abalos v Australian Postal Commission (1990) 171 CLR 167 at 178; Devries v Australian National Railways Commission at 479, 482; cf Lend Lease Development Pty Ltd v Zemlicka (1985) 3 NSWLR 207 at 210. The elaborated meaning of "insolvency" in the context of the modern credit economy, such as it has developed in Australia is, undoubtedly, an important one. The applicant asserted that if "insolvency" meant no more than an inability to pay debts as they fell due, many, perhaps most, Australians would be "insolvent" and the nation as well. The notion of "insolvency" is not as unsophisticated as the appellant suggested. In Sandell v Porter, [14] Barwick CJ construed the relevant provision of the Act [15] in a practical way: [16] [T]he debtor's own moneys are not limited to his cash resources immediately available. They extend to moneys which he can procure by realisation by sale or by mortgage or pledge of his assets within a relatively short time — relative to the nature and amount of the debts and to the circumstances, including the nature of the business of the debtor. The conclusion of insolvency ought to be clear from a consideration of the debtor's financial position in its entirety and generally speaking ought not to be drawn simply from evidence of a temporary lack of liquidity. It is the debtor's inability, utilising such cash resources as he has or can command through the use of his assets, to meet his debts as they fall due which indicates insolvency. The meaning of "insolvency" has been considered by the Australian Law Reform Commission. [17] An exploration of that meaning, in the modern credit economy, may indeed, in an appropriate case, attract special leave to appeal. It is a large and important question. However, in my understanding of the applicant's case, I could not say that there is a "substantial prospect" that special leave to appeal would be granted in this case. 1. (1966) 115 CLR 666. 2. s 95. 3. at 670. See also Bank of Australasia v Hall (1907) 4 CLR 1514 at 1517, 1518; Rees v Bank of New South Wales (1964) 111 CLR 210 at 218; Queensland Bacon Pty Ltd v Rees (1966) 115 CLR 266 at 287. 4. Australian Law Reform Commission, Insolvency: The Regular Payment of Debts , Report No 6 (1977) at 76f. Conclusion and order Upon the foregoing analysis, which I have elaborated beyond the ordinary out of respect for the applicant's earnest arguments and serious predicament, he does not satisfy the primary requirement for the grant of a stay by this Court. Strictly speaking, it is therefore not necessary to consider the other guidelines set out in Jennings. Yet a superficial consideration of them also tells against the provision of a stay. The applicant failed to take steps in the Federal Court to seek a stay order from it. The grant of a stay would cause some loss to the respondent and others by further delaying the public examination of the applicant. As to the balance of convenience, the applicant relied heavily upon his concern that he might be disqualified from office as a local government councillor unless a stay were provided. Although I will not purport finally to determine this question, it is at least strongly arguable, in the language of the Local Government Act, s 234(e) [18] that the disqualifying event has already occurred, making it necessary for the applicant, to save his position, to secure positive relief, beyond the mere provision of a stay. I will not elaborate this consideration. I mention it only to make the point that the balance of convenience is by no means necessarily on the side of ordering a stay. 1. That provision states relevantly: s 234. A civic office becomes vacant if the holder: (e) becomes bankrupt, applies to take the benefit of any law for the relief of bankrupt or insolvent debtors, compounds with his or her creditors or makes an assignment of his or her remuneration for their benefit. I take into account the serious consequences that may befall the applicant's proceedings in other courts unless, in due course, he obtains special leave. If he does, he will then be entitled to renew his application for a stay and other interlocutory relief with a much greater chance of success. It was not suggested for the respondent that a refusal of a stay would affect, one way or the other, the applicant's continued prosecution of his special leave application pursuant to O 69A. Self-evidently, the special leave application should be dealt with as quickly as possible. I depart this case as I began by emphasising that no final decision is made on the applicant's request for special leave to appeal. That request will be separately determined. But the application for a stay of execution of the orders of the Federal Court must be refused. If the respondent seeks costs, it should have them and I would certify for counsel.