Re Sebastian Canzoneri v Heine Finance Pty Ltd [1993] FCA 12 (29 January 1993)

FEDERAL COURT OF AUSTRALIA

Re: SEBASTIAN CANZONERI
And: HEINE FINANCE PTY. LTD.
No. VG525 of 1992
FED No. 238
Number of pages - 4
Bankruptcy - Practice and Procedure

COURT

IN THE FEDERAL COURT OF AUSTRALIA
GENERAL DIVISION
VICTORIA DISTRICT REGISTRY
Gray J (1)

CATCHWORDS

Bankruptcy - sequestration order - appeal - security for costs - decision appealed from involving exercises of discretions - no allegation that bankrupt owed petitioning creditor nothing - amount of security.

Practice and procedure - appeal - security for costs - appeal from sequestration order - decision appealed from involving exercises of discretions - no allegation that bankrupt owed petitioning creditor nothing - amount of security.

Ahern v. Deputy Commissioner of Taxation [1987] FCA 312; (1987) 76 ALR 137

HEARING

MELBOURNE
29:1:1993

Counsel for the appellant: L. Watts

Solicitor for the appellant: Issac Brott and Co.

Counsel for group of creditors: G. Berkovitch

Solicitor for group of creditors: S.V. Winter and Co.

Counsel for respondent: T.J. North

Solicitors for respondent: Lander and Rogers

DECISION

GRAY J On 10th December 1992, a deputy registrar in bankruptcy pronounced a sequestration order against the present appellant, Mr. Sebastian Canzoneri. The appellant then applied to a judge of the Court to set aside that sequestration order. That application came on before Northrop J on 18th December 1992. His Honour set aside the previous sequestration order and declined to grant an adjournment of the creditor's petition on which it was based, which adjournment was sought by the appellant. Instead, his Honour made a fresh sequestration order on that day.

2. On 24th December 1992, the appellant filed a notice of appeal, appealing from the whole of the judgment of Northrop J on 18th December 1992, and, presumably, from the sequestration order which followed upon that judgment. On the same day, the appellant filed a notice of motion, seeking two orders. One was that there be a stay of the operation of the order of Northrop J made on 18th December 1992, pending the hearing of the appeal. The other application was for annulment of the bankruptcy. On 6th January 1993, the respondent to the appeal, who was the judgment creditor on whose petition the sequestration order was made, filed a notice of motion seeking an order that the appellant provide security for costs of the appeal and various consequential orders.

3. Both notices of motion came on before a judge of the Court in the vacation on 12th January and were adjourned until 19th January, on which day I was the vacation duty judge. The full day was not available to hear the motions on that day and they were adjourned part heard until today.

4. In the course of argument this morning, counsel for the appellant conceded that the material on which he was forced to rely in seeking a stay was inadequate for that purpose. He therefore sought to adjourn the application for a stay for a period of a few days, in order to supply further material. That application was supported by counsel for certain creditors who appear to take a stance which is friendly to the appellant. It was opposed vigorously by counsel for the respondent. In my view it would be proper to dismiss the application for a stay now.

5. Having regard to the number of times on which the application has been before the Court to date, it is apparent that the appellant is largely making his way as he goes. The inadequacy of the material to support the application was revealed largely as a result of some comments of mine in the course of argument. Even if that inadequacy were cured by the filing of further material, there is no guarantee that further inadequacies will not be revealed in other respects as the argument proceeds.

6. It is undesirable that a respondent to a proceeding such as this appeal should be compelled to continue appearing on applications to stay the original order, in circumstances in which, if that respondent is successful, it will be unable as a practical matter, to execute any order for costs. It is perfectly clear that the appellant is insolvent. I therefore propose to dismiss the application for a stay. I should say, of course, that the appellant may make further application for a stay as and when he sees fit and if he considers that he has sufficient material to justify such a stay. I will, of course, order that the appellant pay the respondent's costs of the stay application.

7. As to the application for annulment, again counsel for the appellant has conceded that there is no material before the Court which would justify an annulment at the present time. No attempt was made to proceed with that application and there was no controversy about the adjournment of it until today. An application for a further adjournment of it has been resisted by counsel for the respondent, and again supported by counsel for the friendly creditors. I am disposed to think that the appellant ought to be given an opportunity to see if he can persuade the Court on proper evidence that the bankruptcy ought to be annulled on proper evidence. An adjournment of approximately six weeks was sought and 24th March 1993 appears to be an appropriate date, not objected to by anyone. I therefore propose to adjourn the application for annulment to that date and to reserve the costs of that application.

8. The respondent's application for security for costs was resisted by counsel for the appellant, not surprisingly. It is based not merely on the proposition that the appellant is insolvent, but also on the proposition that he appears to be supported financially in respect of these proceedings by others who may have something to gain, whether materially or otherwise, from a successful appeal. The existence of those appearing to support the appellant and knowledge of their financial contribution can be gleaned from rather strange circumstances.

9. At an adjourned meeting of creditors of the appellant on 16th September 1992, a Mr. Brott, a solicitor, who is the solicitor on the record for the appellant, told the meeting that he was instructed by the appellant's brothers and not by the appellant. Further, in the course of correspondence relating to this very appeal and in response to a letter from the respondent's solicitors demanding security for costs, Mr. Brott, in a letter dated 30th December 1992, made the bold statement, "We are not instructed by S. Canzoneri." Some attempt has been made to explain that statement in an affidavit which was drawn up and sworn during the luncheon adjournment today. In that affidavit, Mr. Brott concedes that his reference to not being instructed by Mr. S. Canzoneri was a misleading use of the word "instructed". I would go so far as to say it was a lie. Mr. Brott says in his affidavit that he has at all times received instructions from the appellant in relation to this proceeding and earlier proceedings. He reveals that, because of the appellant's inability to pay fees, he has received instructions from the appellant's brothers, the substance of which was that they would meet Mr. Brott's fees.

10. I am aware that one matter which is appropriate to take into account, in determining whether security for costs should be ordered, is the question whether the appeal is likely to succeed. I do not desire to say very much about this, except to say that the appeal is an appeal from the exercise by Northrop J of two discretions. The first exercise of discretion was a refusal to grant an adjournment of the hearing of the creditor's petition. The second exercise of discretion was the decision to make a sequestration order, which is of course a discretionary matter. The authorities, particularly Ahern v. Deputy Commissioner of Taxation [1987] FCA 312; (1987) 76 ALR 137 make clear that an appeal from an exercise of a discretion is possible but will succeed only rarely.

11. The appellant also desires to make complaint on the appeal as to the inadequacy of the evidence of the petitioning creditor's debt which was available to his Honour on 18th December, and it may be said in that sense that the appeal is not an appeal from an exercise of a discretion. One thing is abundantly clear however, and that is that the appellant at no stage contended before his Honour, and does not contend now, as I understand his position, that he owed the petitioning creditor nothing at all. It therefore appears that the appellant has a difficult task in maintaining the appeal.

12. The purpose of the appellant's desiring to avoid bankruptcy, whether by stay, annulment or successful appeal, appears to be his desire to enter into an arrangement under Part X of the Bankruptcy Act 1966 with his creditors. Indeed, that was the basis on which the adjournment was sought on 18th December. There was at the time in existence an adjourned meeting of creditors, which had been adjourned on some three previous occasions, because of difficulties in sorting out voting entitlements at that meeting. The meeting had been adjourned until 23rd December 1992, and the appellant desired that his creditors should have one more opportunity to consider whether to accept a scheme of arrangement proposed by him. It would appear from the appellant's insolvent state that any money contributed to such an arrangement with the creditors would come from other persons who have some interest in the appellant not being made bankrupt. In those circumstances, it seems to me entirely appropriate that an order for security for costs ought to be made in favour of the respondent to this appeal.

13. In response to some comments of mine as to the inadequacy of the evidence to support the respondent's solicitor's estimate of the likely costs of the appeal, an affidavit was sworn during the luncheon adjournment and filed this afternoon. It reveals some detail as to the estimate and suggests that a likely range of costs to the respondent of the appeal would be between $9,130 and $10,780. In the time available, neither counsel for the appellant nor his instructing solicitor was able to assist me by commenting at all on the figures which are contained in that affidavit. I therefore feel bound to accept the only evidence which is before me as to a proper estimate. In making an order for security for costs I should prefer the lower figure of $9,130 to the upper figure, endeavouring to be as fair as I can to the appellant and those supporting him. For those reasons I make the following orders:
1. The appellant's application for a stay made by notice of motion

filed on 24th December 1992 is dismissed.
2. The appellant pay the respondent's costs of the application
for a stay.
3. The appellant's application for annulment of the bankruptcy
is adjourned until 24th March 1993.
4. The costs of the application for annulment are reserved.
5. Unless within fourteen days the appellant provide security in the
sum of $9,130, by paying the same to the District Registrar of the
Court, or otherwise to the satisfaction of the respondent's
solicitors, the appeal be forever stayed.
6. The appellant pay the respondent's costs of the application
for security for costs.