Case: George v Hamilton-Smith [2006] FMCA 566
Outcome: referred to
The respondent applied for a review of the Registrar's decision to adjourn the hearing of the creditor's petition to 5 June 2006. On the review Federal Magistrate Raphael upheld the Registrar's decision to adjourn the hearing of the creditor's petition and in fact he altered the adjourned date from 5 June 2006 to 20 June 2006: George v Hamilton-Smith [2006] FMCA 566. The following passages from the Federal Magistrate's reasons of 21 April 2006 should be noted (at [4], [12] and [13]): '4. The debtor claims she is solvent. She says that she has tendered payment of the petitioning creditor's debt and has a substantial cross claim against Bernsteen which would effectively nullify any debt that she has to that company. Bernsteen is not in a position to make any payment to her as it is a company in liquidation. She argues that another petitioning creditor, CFS, who had initially claimed a sum in excess of $20,000.00, has had its claim reduced to some $4,297.53 which has now been paid. What the debtor does not do is provide the court with any evidence about her financial circumstances. There is no affidavit indicating what real property she owns, what is the status of her bank accounts and what other assets are owned by her. There is no evidence of other creditors. There is no evidence that it was the debtor herself who paid the CFS debt or provided the funds for the tender to the petitioning creditor. This lack of evidence meant that Registrar Christie was unable to be satisfied that the debtor was solvent and I am likewise unable to be satisfied of her solvency. As Registrar Christie said in her judgment: "The debtor has not put before me the strong and tangible evidence necessary to establish that she is able to pay all her debts as and when they fall due (see Weinberg J in Esanda Finance Corporation Limited v Velissaris [1999] FCA 1359 at [17] ." ... 12. Even though the existence of the proceedings may not constitute sufficient cause to dismiss the sequestration order their existence might bear heavily upon an application for adjournment. We are now in April. The proceedings between the debtor and Bernsteen are set down for hearing in May. The proceedings between the debtor and the creditor are set down for hearing in early June. I have heard nothing about any additional creditors but I am aware that the debtor has obtained an order for security for costs in the sum of $6,000.00 against Bernsteen in respect of those proceedings. It is possible, given the existence of these proceedings, that Bernsteen could obtain a similar (and probably larger) order against the debtor if she was permitted to pursue her cross claim. 13. I have taken all these matters into account when considering whether or not to adjourn this petition. As much as there is a public interest in bringing petitions to finality and thus preventing the possibility of insolvent trading or the incurring of debts a bankrupt is unable to repay there is also the fact that the making of a sequestration order has quasi criminal consequences: Re A Judgment Debtor [1908] 3 K.B. 474. It puts severe restraints upon a bankrupt's freedom of movement and ability to do business and it is these effects which must be weighed by a court considering an adjournment rather than the prejudice to the debtor or the prejudice to the creditor as suggested by Registrar Christie at [27] of her judgment. In truth evidence on both of these matters is sorely lacking but I note that the debtor has not been totally unsuccessful in her previous litigious skirmishes, e.g. in reducing the CFS debt down to a manageable figure. I am of the view that whilst the current timetable for the forthcoming proceedings remains fixed with hearings in May and June the petition should be adjourned to allow those proceedings to be heard. But if the debtor is unable to mount her cross claim without a significant adjournment or if the claim against the creditor is delayed then the rationale for the adjournment of the petition (the speedy resolution of outstanding disputes) will no longer apply. Registrar Christie was unaware of the date of the hearing of the claim in the Magistrates Court between the creditor and the debtor but I have been informed that it is to take place on 13 June. I will adjourn the petition until 20 June 2006 but I will grant the parties liberty to apply so that in the event that these hearing dates are not kept to an application can be made for an earlier hearing. The petition and any such application will be returnable before Registrar Christie.' 29 On 20 June 2006 Registrar Christie heard and refused an application for discovery by the appellant which had only been filed the day before and she made the sequestration order which was reviewed by the Federal Magistrate. 30 On 5 July 2006 Federal Magistrate Raphael heard the application for review and on 19 July 2006 he made the sequestration order which is the subject of this appeal.