Deputy Federal Commissioner of Taxation v. Chamberlain.

Judges:
Kelly J

Court:
Supreme Court of the Australian Capital Territory

Judgment date: Judgment handed down 1 July 1986.

---

Kelly J.

On 18 June 1986 I gave judgment against the applicant in favour of the respondent Deputy Commissioner of Taxation for the sum of $256,476.25 at the same time ordering that each party should pay his own costs of the action. On 18 June 1986, on an oral application under sec. 4 of the Judiciary (Stay of Proceedings) Ordinance 1933 (the Ordinance), I granted a stay of proceedings until the late afternoon of 23 June 1986. By notice of appeal dated 20 June 1986 the applicant has appealed to the Federal Court of Australia from the whole of the judgment.

By notice of motion dated 23 June 1986 the applicant sought an order, pursuant to sec. 29 of the Federal Court Act or, alternatively, pursuant to sec. 4(1)(b) of the Ordinance, that, pending the hearing of the appeal, the judgment be stayed. The hearing of the application could not be completed on 23 June 1986 and it was adjourned to 25 June 1986 when submissions were completed. At the conclusion of submissions I indicated that I was minded to grant a stay and received an intimation from counsel for the respondent that no step in execution of the judgment would be taken until these reasons were handed down and a formal order made.

At the adjourned hearing counsel for the respondent said that his instructions were to issue a bankruptcy notice against the applicant in respect of the judgment debt.

The applicant is a barrister and solicitor carrying on practice in Canberra with three partners under the firm name Crowley & Chamberlain.

In his affidavit sworn 23 June 1986 he said that he was unable to meet the judgment from his own assets. He said that apart from his interest in the practice to which I have referred he had assets by way of personal possessions and effects and cash in hand of a total value not exceeding $20,000. His gross income for the financial year ended 30 June 1985 was almost $78,000. He estimated that after payment of living expenses for himself and his family and making provision for taxation his current net disposable income was approximately $10,000 per annum.

He also deposed that he was a member of a class of beneficiaries of the T.J. Chamberlain Family Trust, the trustee of which is a company known as Chinthe Investments Pty. Limited (the trustee) of which he is a director and shareholder. Its principal assets are a residence at 3 Mugga Way, Forrest where the applicant resides with his family and a residential property at North Rosedale, New South Wales. The combined value of the properties is, he said, approximately $500,000. After taking into account mortgages the trustee has a net equity in the properties of approximately $250,000.

Counsel for the respondent attempted to show that the applicant might readily encumber the assets of the trust in order to raise a loan which would enable him to pay the judgment debt.

The applicant, on the other hand, swore that his capacity to satisfy the judgment debt depended wholly upon his receiving a distribution from the Trust. The trustee's ability to raise funds for the purpose of such a distribution was highly dependent, he said, upon its being able to dispose of the two residential properties referred to at realistic market values. I accepted that evidence and all the applicant's evidence.

I am satisfied on all the evidence that, should it be necessary to sell those properties before the appeal is disposed of, the trustee's position would be so altered to the detriment of the applicant as a beneficiary of the Trust and, incidentally, of his dependants, that it could not be restored to its present position by repayment of the amount of the judgment following a successful appeal.

In cross-examination the appellant gave evidence that the structure of the partnership had been altered to provide that it should no longer operate as a capital assets partnership but as a non-capital partnership. This was done so that new partners might be introduced without the necessity for their paying large capital sums to buy into the partnership. As a result of the reorganisation he received a capital sum of approximately $294,000, $100,000 of which he used to discharge some of the mortgages over the two properties above referred to. The balance plus some $33,000 went to a company of which the trustee is the sole shareholder.

Counsel for the respondent said that if any hardship were shown by the applicant it was hardship that had come about as a result of his own fault in disposing of the proceeds of the

---

ATC 4422

reorganisation as he had done. It appears that the applicant received those proceeds on or about 30 June 1984 and on or about 30 June 1985. The amounts paid him on each of those dates do not appear from the evidence.

If the applicant is made bankrupt grave consequences flow under sec. 15H(1) of the Legal Practitioners Ordinance 1970. It provides that on the bankruptcy of a barrister and solicitor who holds an unrestricted practising certificate his practising certificate is cancelled by force of the subsection. By sec. 15H(2) the Law Society of the Australian Capital Territory is forbidden to issue an unrestricted practising certificate to a barrister and solicitor who is bankrupt. His right to practise as a principal in the partnership would therefore, under sec. 15B(1) of that Ordinance, be suspended at least during the currency of his bankruptcy. Counsel for the respondent conceded that this would be a grave hardship.

Counsel for the respondent also conceded that the appeal raised a serious question of law for determination. I agree, noting that the case was, so far as the researches of counsel and my own could establish, one of first impression.

Section 29 of the Federal Court Act 1976 provides, inter alia, that where an appeal to the Federal Court from another court has been instituted a judge of the other court may order on such conditions (if any) as he thinks fit, a stay of all or any proceedings under the judgment appealed from. The discretion given by that section is, on its face, unfettered. But, as Derrington J., with whom Kelly J. concurred, remarked in
J.C. Scott Constructions v. Mermaid Waters Tavern Pty. Ltd. (No. 2) (1983) 2 Qd.R. 255 at p. 258:

``A discretion is not necessarily and naturally a creature born free. It is always a matter of construction of the source of the power.''

He went on to say:

``A plaintiff, having succeeded in the court below, is entitled to the fruits of its judgment.
Annot v. Lyle [1886] 11 C.P.D. 114 at p. 116 (C.A.);
McBride v. Sandland [1918] 25 C.L.R. 369 at p. 375. That is so unless good reason is shown to the contrary.

The applicant claims that its grounds of appeal raise a serious question of law and not merely a dispute as to facts, which would be largely in the province of the trial judge. That alone is not enough to move this Court to exercise its discretion favourably to the applicant -
Atkins v. Great Western Railway Co. [1886] 2 T.L.R. 400;
Amoco v. Rocca Bros. Meter Engineering Co. Pty. Ltd. [(1972) 7 S.A.S.R. 324]; McBride v. Sandland (supra at p. 375); Halsbury's Laws of England, 4th ed., vol. 17, para. 451.''

Cf.
F.C. of T. v. Myer Emporium Limited 86 ATC 4222; (1986) 60 A.L.J.R. 300. At ATC p. 4223; A.L.J.R. p. 301, Dawson J. said:

``Special circumstances justifying a stay will exist where it is necessary to prevent the appeal, if successful, from being nugatory.... Generally that will occur when, because of the respondent's financial state, there is no reasonable prospect of recovering moneys paid pursuant to the judgment at first instance. However, special circumstances are not limited to that situation and will, I think, exist where for whatever reason, there is a real risk that it will not be possible for a successful appellant to be restored substantially to his former position if the judgment against him is executed. See
McBride v. Sandland [No. 2] (1918) 25 C.L.R. 369 at p. 375.''

See also
Andrews v. John Fairfax & Sons Ltd. (1979) 2 N.S.W.L.R. 184, particularly at p. 189 where Maxwell J. quoted a passage from the unreported judgment of the New South Wales Court of Appeal (Sugerman P., Jacobs and Mason JJ.A.) in
Bridges v. Australian Consolidated Press Ltd. (16 June 1970).

Accepting, as I do, the applicant's evidence as to the results if a stay is not granted and the appeal is upheld, I think that serious injury would result to the applicant if a stay were not granted. I therefore am prepared to grant a stay of execution pursuant to the provisions of sec. 29 of the Federal Court Act 1976.

If, however, I be wrong in taking that approach, I think that, nevertheless, a stay ought to be granted under the provisions of sec. 4 of the Ordinance. That section says:

``(1) Where it is shown to the satisfaction of a court that a person, against whom the court has given judgment or made an order for the payment of a sum of money -

• (a) has suffered such a loss; or

  ---

  ATC 4423

• (b) is in such circumstances,

that the immediate payment of the whole or any part of the sum will entail serious hardship, the court may, at the time of giving the judgment or the making of the order, or subsequently thereto, upon the application of the person adjudged or ordered to pay the sum of money, in its discretion, if in all the circumstances it deems it desirable so to do, order that the payment of the whole or part of the sum shall be deferred until such time and upon such conditions as the court thinks fit.''

Consideration of the section makes it plain, I think, that the concern is to ensure that the immediate payment of the moneys adjudged or ordered to be paid shall not cause serious hardship as that expression is properly to be understood. Immediate payment of the moneys would, of course, prevent the possibility, one would think, of an act of bankruptcy and of the applicant's subsequent bankruptcy. I am, however, satisfied that immediate payment of the judgment would cause the applicant serious hardship.
Union Offset Pty. Ltd. v. Whigham (1977) 14 A.C.T.R. 43.

Taking into account as well the serious nature of the appeal, I would on this ground also grant a stay of proceedings.

The applicant by his affidavit said that he was prepared to undertake to the Court that he would not, without the consent of the respondent, deal with, encumber or dispose of or allow to be dealt with, encumbered or disposed of the two residential properties to which reference was earlier made while there remains in existence any stay of proceedings granted by this Court. I do not think that proposed undertaking entirely satisfactory and would require the applicant to enter into an undertaking that, without the consent of the respondent or the leave of the Federal Court of Australia or a judge thereof or of this Court or a judge thereof, he will not nor will he permit the trustee to assign, transfer, convey, encumber, dispose of or deal with any part of his or its assets except in the ordinary course of business or for usual and proper living expenses and in such a way as will not constitute a preference under the provisions of the Bankruptcy Act 1966 or the Companies Act 1981.

I accept the applicant's undertaking that he will prosecute the appeal to the Federal Court of Australia as expeditiously as possible.

When a further satisfactory undertaking is given the order of the Court will be that proceedings on the judgment herein be stayed until the appeal to the Federal Court of Australia be disposed of or until the Federal Court or this Court otherwise orders.

The applicant must pay the respondent's costs of the applications for a stay.

THE COURT ORDERS THAT:

Proceedings on the judgment herein be stayed until the appeal to the Federal Court of Australia be disposed of or until the Federal Court or this Court otherwise orders.