Daly, P.m. v Watson, D.

[1994] FCA 240

2+0, 9y.

JUDGMENT No. ........ . ,., , , . . ,

IN THE FEDERAL COURT OF AUSTRALIA	)
GENERAL DIVISION	)
BANKRUPTCY DISTRICT OF THE	) No. NP 3259 of 1993
STATE OF NEW SOUTH WALES	)

RE :	PATRICK MICHAEL DALY Debtor
EX PARTE:	DANIEL WATSON & JOAN WATSON Creditors

CORAM :	HILL J
PLACE :	SYDNEY
DATED :	7 APRIL 1994

EX TEMPORE REASONS FOR JUDGMENT

Before the Court is a creditor's petition presented by Mr and Mrs Watson, who are the judgment creditors in proceedings in Number 2732 of 1990 in the District Court of New South Wales. The act of bankruptcy relied upon is the failure to comply with the requirements of a bankruptcy notice founded on that judgment.

When the matter first came before me, it was the subject of an application for adjournment by counsel for Mr Daly. I adjourned it for a relatively short period to permit the sale of a house to proceed and to permit Mr Daly, should he be so advised, to formulate a scheme for the benefit of his creditors, directing that any proposal be put forward to the creditors before the matter came again before the Court in

draft form.

When the matter again came before me yesterday, a number of creditors were present in court and supported the petitioning creditor. It was accepted that the creditors who supported the petition held greater than 25 per cent in value of the debts of the debtor, so that there would be no point in a scheme proceeding to a meeting of creditors when the requisite percentage in value and number could not be obtained. As all the creditors appearing opposed a further adjournment and as the matter had been adjourned in the past, I refused a further adjournment and the matter then proceeded. Various matters were the subject of challenge during the course of the hearing of the petition.

Ultimately, the challenge to the petition rested upon three matters; the affidavit verifying the petition, the form of authority given by the petitioning creditors to their agent and the proper construction of a deed that was entered into between the debtor and the petitioning creditors. I shall deal with each of these three matters in turn.

The affidavit verifying the petition was an affidavit of Philip James Brand of 7 October 1993. In that affidavit, Mr Brand swore that the statements contained in paras.1, 2 and 3 of the petition were, within his own knowledge, true. Mr Brand was not available for cross- examination but it was conceded by the petitioning creditors that, were Mr Brand cross-examined, he would say that the statements contained in paras. l, 2 and 3 were true but that his knowledge came from information and belief.

The source of that information and belief was not the subject of any concession.

Section 47(l)(b) of the Bankru~tcv Act 1966 (Cth)

("the Act") requires that a creditor's petition be verified by

the affidavit of a person who has "knowledge of the facts", as von Doussa J said in Re Cirillo: Ex ~arte Deputy Commissioner of Taxation (1992) 112 ALR 704, those words include, of course, direct knowledge but also are capable of extending to knowledge obtained on information and belief. A deponent who swears on affidavit on information and belief that the material contained in the petition is correct, will comply with the provisions of 6.47 of the Act, at least where the affidavit follows the provisions of r.132 of the Bankru~tcv

Rules and states the source of information of any facts or

deponent's own knowledge. circumstances set out in the affidavit not within the

In the present case, additional evidence has been adduced. That evidence comprised evidence of service or attempts of service which made it clear that, at the relevant times, the debtor resided at 86 Gooraway Drive, Castle Hill. That evidence was supplemented additionally by evidence of an application for finance in which the debtor had himself admitted that he lived at that address and had done so for two years previously.

There is also evidence on affidavit and belief, setting out the source of that belief from Mr Andrews, the solicitors for the petitioning creditors, which, while not directly verifying the provisions of paras.1, 2 and 3 of the petition, verifies the facts contained in those paragraphs. Despite this evidence, counsel for the debtor admits that the petition must fail, having regard to the fact that the actual affidavit verifying the petition does not set out the sources of information and belief and the person swearing the affidavit did not go into the witness box and set them out.

This, it is submitted, is what is required, having regard to the decision of von Doussa J in Re Cirillo, to which I have referred. In my view, that is not what von Doussa J decided. What his Honour decided was that, in the facts of that case where an affidavit verifying the petition was said	to have been made on the deponent's own knowledge, but was in	fact made on information and belief, there was a formal defect
or irregularity which could be validated by s.306(1) of the Act.

As his Honour said (at 711):

"The defect, such as it was, could not possibly have misled the debtor as the fact sworn to was in reality true and correct to the knowledge of the debtor."

On the facts of that case the deponent of the affidavit had gone into the witness box and given the source of his belief, namely income tax returns, which established the residence of the debtor. In the present case, while that has not happened, there is evidence before the Court which makes it clear that the debtor could not possibly have been misled and that the facts sworn to are, in reality, true and correct. The debtor has not, of course, sought to go into evidence to contradict the facts in any way. In so saying, I do not suggest that there is any obligation on the part of the debtor so deferred.

The second argument is based upon the form of authority which was an authority by the petitioning creditors to Mr Brand to issue any bankruptcy notice and/or present any creditor's petition, pursuant to the provisions of the Act

proceedings. It is submitted that the authority is	against Patrick Daly, being the judgment debtor in the said
insufficient to permit Mr Brand to prosecute the petition beyond the stage of presenting it.
Section 308(d) of the Act permits acts to be carried out by agents duly authorised in that behalf. Mr Brand is a solicitor and indeed a solicitor for the petitioning creditors and an argument could be put that that was sufficient

authority to permit him thereafter to prosecute the petition. However, I am of the view that an authority given to a solicitor to present a petition on behalf of a client carries with it, by necessary implication, the authority to do any other act which is necessary to proceed with that petition. In these circumstances I am of the opinion that Mr Brand had, at all relevant times, the necessary authority.

The final matter concerns a compromise recorded in the form of a deed dated 2 April 1993, between the petitioning creditors and the debtor and his wife. That compromise was apparently reached in an earlier stage in the proceedings and pursuant to it Mr Daly agreed to make certain payments in consideration of the petitioning creditors forbearing to proceed with the bankruptcy proceedings. No payments under the deed were in fact made.

Clause 5 of the deed provides:

Daly of the provisions of this Deed, the	"In the event of any default by Patrick
Watsons by their authorised agents may enforce payment of any balance due under this Deed by any means open to the Watsons in law or in egulty including by the issue of a further bankruptcy notice on the basis of the judgment debt or any unpaid
balance of the judgment debt. "

The argument is that the specific reference to the
issue of a further bankruptcy notice now precludes the

petitioning creditors from relying upon the bankruptcy notice already issued and the petition which is presently before the Court. In my view, as a matter of construction, there is no reason to limit the generality of the words, "enforce payment of any balance ... by any means open to the Watsons in law or in equity", to the issuing of a further bankruptcy notice. Further, the words "enforce payment" are, in my opinion, in the context of that deed, sufficiently broad to encompass the prosecution of a bankruptcy petition.

It follows, in my view, that the three challenges made to the petition are unsuccessful. I am satisfied that the debtor has committed the act of bankruptcy alleged in the petition and am satisfied with the proof of the other matters, of which S. 52 ( 1) of the Act requires proof. I would make a sequestration order against the estate of the debtor and order that costs, including reserve costs, be taxed and paid according to the Act.

I direct the draft of the order be delivered to the

Registrar within seven days in accordance with r.124.

I will stay the operation of the sequestration order for a period of fourteen days to permit the debtor to determine whether or not to appeal.

I certify that this and the
preceding six (6) pages
are a true copy of the Reasons
for Judgment herein of his Honour

Mr Justice Hill.

Associate:

Date: 2 May 1994

Solicitors for	Marshal1 Marks Kennedy
Petitioning Creditors:
Counsel and Solicitors	PR Clay instructed by
for Debtor:	Dennis Cooney
Dates of Hearing:	6-7 April 1994
Date Judgment Delivered:	7 April 1994