BBC Hardware Ltd v Boutros, Charlie

[1998] FCA 217

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY	NG 7035  of  1998

BETWEEN:	BBC HARDWARE LTD (ACN 000 003 378) Creditor
AND:	CHARLIE BOUTROS Debtor

JUDGE:	EMMETT J
DATE:	6 MARCH 1998
PLACE:	SYDNEY

EX TEMPORE REASONS FOR JUDGMENT

HIS HONOUR:   On 4 March 1998 a creditor's petition by BBC Hardware Limited for the sequestration of the estate of Charlie Boutros came on for hearing before Registrar Quinn.  In reliance upon the affidavit evidence then before her, the Registrar made a sequestration order.  That evidence included an affidavit by Dean Lawrence sworn 3 March 1998 to the effect that an amount of $4,855.21 was owing by the debtor to the creditor under a judgment recovered in the Local Court of New South Wales.

Following the making of the sequestration order, an application has been made by the petitioner ex-parte, either for the annulment of the order or that the order be set aside.  In support of the application an affidavit has been filed by the national credit manager of the petitioner indicating that the affidavit of Mr Lawrence was incorrect.

The national credit manager said in his affidavit that, on checking the petitioner's computer records, he had ascertained that the debt owed by the debtor was in fact paid on 25 January 1998, the day after the petition was served on the debtor. It is clear in those circumstances that the sequestration order ought not to have been made. Accordingly, it would be open to me to annul the order pursuant to section 153B of the Bankruptcy Act 1966 (Cth) (“the Act”).

In such a case, however, the rules require that an application for annulment be served on the trustee at least 28 days before the hearing date and that the creditors known to the bankrupt be notified of the application.  If I proceeded by way of setting the sequestration order aside, reliance would be placed on Order 77 Rule 8 of the Federal Court Rules which provides that a decision by a registrar may be reviewed by the Court or by a judge. Under Order 77 Rule 8(iv), a decision being a sequestration order must be reviewed by a judge sitting in Court.

I have been informed that at the hearing of the petition there was a solicitor in Court representing a creditor of the debtor who has not been represented in the course of the application presently before me.  I am informed that that creditor may well have sought to be substituted as a creditor if a sequestration order had not been made.

In the circumstances, it appears to me to be inappropriate to proceed to hear an application to review the sequestration order under Order 77.  I have considered the observations made by Spender J in Re Gollan (1992) 40 FCR 38, in which his Honour exercised the review powers which then existed under section 14(5) of the Act. In that case his Honour ordered that the sequestration order under consideration by him be set aside and in lieu thereof ordered that the petition be dismissed. His Honour also indicated that if he were not minded to make those orders, he would have dispensed with compliance with the requirements of the rules in relation to service on the creditors and the requirement for a report by the trustee and would have made an order under section 153B of the Act.

In that case the debtor had been served with a creditor's petition but did not attend the hearing because he was of the opinion that if the matter was to proceed further it would be by normal debt collection procedures, such as a seizure of assets or moneys owing to him.  The hearing of the creditor's petition was adjourned but no notice of the adjourned date was provided to the debtor.  The District Registrar then made a sequestration order notwithstanding that the debtor at the date of the sequestration order had net assets of more than $420,000.  After the sequestration order was made the debtor paid by bank cheque the amount claimed in the creditor's petition and then brought the application to review or reconsider the sequestration order.  All unsecured creditors of the debtor had been paid. 

If I had evidence before me that all of the unsecured creditors of Mr Boutros had been paid then I would be disposed to adopt the course which was adopted by Spender J, or possibly to adopt the alternative course which he said he would have been prepared to adopt, of ordering annulment.  However, in the light of the intimation which has been given, that there is a creditor who may have sought to be substituted, I am not disposed today to interfere with the sequestration order.

I therefore propose to give leave to the petitioner, or the debtor if so advised, to file a notice of motion in the form of the document which I have initialled and dated with today's date, such notice of motion to be returnable before me at 9.30 am on 10 March 1998.  I abridge the time for service of that notice of motion to 5 pm on Monday, 9 March 1998.  I direct the petitioner to notify any creditors of the debtor known to it as soon as possible of the date for return of the notice of motion and in any event no later than 5 pm on 9 March 1998.

I certify that this and the preceding two (2) pages are a true copy of the Reasons for Judgment herein of the Honourable Justice Emmett

Associate:

Dated:            6 March 1998

Solicitor for the Creditor:	Appleby & Nilson
Date of Hearing:	6 March 1998
Date of Judgment:	6 March 1998