Russo v Private Funds Management Pty Ltd & Anor (No.2) [2011] FMCA 41 (19 January 2011)

Federal Magistrates Court of Australia

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Russo v Private Funds Management Pty Ltd & Anor (No.2) [2011] FMCA 41 (19 January 2011)

Last Updated: 9 February 2011

FEDERAL MAGISTRATES COURT OF AUSTRALIA

RUSSO v PRIVATE FUNDS MANAGEMENT PTY LTD & ANOR (No.2)

[2011] FMCA 41

BANKRUPTCY – Application for order of stay of sequestration order after appeal to Federal Court from a decision of a Federal Magistrate refusing a review of a sequestration order made by a Registrar – no jurisdiction to make orders sought.

Bankruptcy Act 1966, ss.37 & 52 Federal Court of Australia Act 1976, ss.24 & 29 Federal Magistrates Act 1999, s.104

Watts v Bendigo & Adelaide Bank Limited (2010) FCA 1013 Liprini & Liprini (2010) FCA 1117

Applicant:

ANGELO PETER RUSSO

First Respondent:

PRIVATE FUNDS MANAGEMENT PTY LTD

Second Respondent:

ANNETTE JOY CONN

File Number:

ADG 154 of 2010

Judgment of:

Lindsay FM

Hearing date:

19 January 2011

Date of Last Submission:

19 January 2011

Delivered at:

Adelaide

Delivered on:

19 January 2011

REPRESENTATION

Applicant:

In person

Counsel for the Respondents:

Mr Rowley

Solicitors for the Respondents:

Madsen Rowley

ORDERS

(1) The Interim Application filed by the applicant on 14 January 2011 for a stay of the Sequestration Order made against the estate of Angelo Peter Russo made on 29 September 2010 be refused.
(2) The applicant pay the respondent’s costs of an incidental to these proceedings fixed in the sum of SEVEN HUNDRED AND FIFTY DOLLARS ($750.00).

FEDERAL MAGISTRATES COURT OF AUSTRALIA AT ADELAIDE

ADG 154 of 2010

ANGELO PETER RUSSO

Applicant

And

PRIVATE FUNDS MANAGEMENT PTY LTD

First Respondent

ANNETTE JOY CONN

Second Respondent

REASONS FOR JUDGMENT

1. On 13 January 2011, I refused an Application for Review of a sequestration order made by Registrar Christie on 29 September 2010. Mr Russo has instituted an appeal to the Federal Court against my decision, and in that appeal seeks a revocation of the sequestration order. He also seeks from that Court an order that the sequestration order be stayed. He has brought an application to me seeking that order, and that is the issue that is before me this morning.
2. The appellate jurisdiction of the Federal Court arises from s.24 of the Federal Court of Australia Act 1976. The relevant provisions of the Bankruptcy Act 1966, of course, are s.37, which provides that:
   • Subject to subsection (2), the Court may rescind, vary or discharge an order made by it under this Act or may suspend the operation of such an order.

but then goes on to provide in subsection (2):

The Court does not have power to rescind or discharge, or to suspend the operation of:

• (a) a sequestration order.

And s.52(3), which gives the Court a power:

...if it thinks fit, upon such terms and conditions as it thinks proper, stay all proceedings under a sequestration order for a period not exceeding 21 days.

3. That was the source of the power exercised by Registrar Christie pending the review application brought to this Court. When I granted a stay of the operation of the sequestration order late last year, and continuing until the delivery of my Judgment on 13 January 2011, I utilised the powers this Court has under s.104(3) of the Federal Magistrates Act 1999 to order a stay pending the determination of a review.
4. The other relevant provision of the Federal Court of Australia Act 1976 is s.29, which provides that:
   • Where an appeal to the Court from another Court has been instituted:
     • (a) the Court or a Judge, or a judge of that other Court (not being the Federal Magistrates Court or a court of summary jurisdiction), may order, on such conditions (if any) as it or he or she thinks fit, a stay of all or any proceedings under the judgment appealed from;
5. When I dealt with the review, the order in its terms provided for a refusal of the review application, I did not go on separately to affirm the sequestration order that was made by Registrar Christie, but that might be thought to be a necessary implication of the fact that Registrar Christie when exercising the power to make the sequestration order was exercising a Commonwealth judicial power delegated to her under the terms of the Federal Magistrates Act 1999. And that delegation is only sound, of course, if this Court, the Court delegating the power, controls, in a practical sense, ultimately, has the operation or the exercise of that power. So in an implicit sense, even though it was not expressly provided for in my orders, I should be taken not only to have refused the review application but to have affirmed the sequestration order by discrete order of this Court.
6. Mr Russo, of course, is representing himself and was not able to assist me with respect to any of the jurisdictional issues, and there is no criticism of him for that, but I think I am certainly obliged to clarify the jurisdiction I have to make the order that he is asking me to make.
7. The operation of these provisions has been the subject of recent discussion by Yates J in the decision of Watts v Bendigo & Adelaide Bank Limited (2010) FCA 1013, and by Jagot J in Liprini & Liprini (2010) FCA 1117, each of those cases dealing with appeals from decisions of the Federal Magistrates Court which either were sequestration orders themselves or refusal of reviews from sequestration orders.
8. Section 37 of the Bankruptcy Act 1966 is quite specific in its terms. The general power the Court has in exercising its bankruptcy jurisdiction to rescind, vary, or discharge orders is expressly limited in the case of sequestration orders. It is not just expressly limited; the power to make such an order as it relates to a sequestration or is taken from the Court by virtue of s.37(2). That is subject, of course, to the specific provision of s.52(3), but that is a power to stay proceedings under a sequestration order for a period not exceeding 21 days. That power had already been exercised and that 21 days had already elapsed by the time the matter came before me, and before this Court was asked to make an order which had the effect of staying all proceedings under the sequestration order.
9. So that head of power is not available to me. I have mentioned what was implicit in the order I made refusing the review, that is, the implicit affirmation by separate order of this Court of the sequestration order, and I have mentioned that because I think that was a necessary incident of the way in which the power has been delegated to the Registrar. And, it being the case that I have implicitly affirmed the operation of the sequestration order, the Court might be thought to have a general jurisdiction, an inherent jurisdiction, to stay the operation of any orders it makes so that, arguably, the order that is sought to be stayed is not the original sequestration order but the order affirming the existence of the sequestration order made by me on 13 January 2011.
10. As I say, that is arguable. I do not come to any final view about that because I do not think it matters. Because whether or not I should have been taken to have affirmed, by separate order, the sequestration order, I am still confronted with the express terms of s.37 of the Bankruptcy Act 1966, and I am still confronted with the express terms of s.29 of the Federal Court of Australia Act 1976. Neither under the Bankruptcy Act 1966 nor under the Federal Court of Australia Act 1976 which facilitates the appeal to the Federal Court from my order have I been given a power to order a stay of the order, and I think, in those circumstances, with the express exclusion of the power in each of those sections, I should not be considering, and I propose not to consider, the exercise of any inherent power to stay such an order.
11. So the view I take is that I am without jurisdiction to make the order that Mr Russo asked me to make in relation to the stay. The view I have taken in relation to these matters is implicit from the reasoning of Yates J in the decision of Watts v Bendigo & Adelaide Bank Limited (supra) to which I have referred, although not expressly dealt with in the context of the facts before him in that case.
12. I should add, though, that even had I been satisfied as to the existence of a power in this Court to stay the operation of the sequestration order, I would not have been satisfied that the circumstances before me in this matter would have justified the exercise of the discretion to grant the stay in Mr Russo’s favour. There are a number of reasons for that. As I understand his appeal to the Federal Court, it is agitated upon the basis that I fell into error in finding that he was insolvent, and that in fact, he says he is solvent, and he relies specifically upon the proposal he mooted at the last moment, as it were, before me in the Review proceedings that the judgment creditor’s debt and his other debts can be paid from the proceeds of sale of a property at Beaumont.
13. But the problems I identified with that proposal in my Judgment of
    13 January 2011 remain. To mention just a few of them, there is no evidence of value – there is no evidence before the Court that the property has the value that Mr Russo contends that it does, somewhere between $2.0 million and $2.2 million. The only evidence of value before the Registrar, and the only evidence of value before me from persons qualified to give such evidence, was evidence of a value of less than $1.0 million. Matters relating to whether or not a Ms Costanzo, who advanced a significant proportion of the purchase price for the property – and we know that from the oral evidence of Mr Russo in the proceedings before me - would seek to realise or have recognition of any equity she might have in the Beaumont property were it sold are left unclear. Mr Russo made some assertions from the bar table in relation to that this morning, but there is no affidavit, for example, from Ms Costanzo in relation to any of the matters he put to me from the bar table, and I am not able to act upon them.
14. We find out this morning, too, that the Beaumont property is the subject of proceedings in the Supreme Court for possession, and I infer, as I think I am entitled to infer, that those proceedings arise from default by Mr Russo in respect of the moneys due under the first mortgage which is secured over that property. Furthermore, we have no attempt by Mr Russo in the affidavit filed before me in relation to this application, to deal with the significant issue of the absence of any evidence as to his income in the proceedings before me on review. I am just touching upon some of the matters that would have been relevant. There are others, but I am just touching upon some of the matters, which had I been satisfied I had a jurisdiction to make the orders sought, would have obliged me, in the circumstances of this case, to refuse the application.

I certify that the preceding 14Error! Style not defined.!Syntax Error, !Error! Style not defined.Error! Style not defined.!Syntax Error, !fourteenfourteen (14) paragraphs are a true copy of the reasons for judgment of Lindsay FM

Date: 31 January 2011