Empato Sheet Metal Products Pty Ltd (in liq) v Page, Ronald Phillip

[1998] FCA 502

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY	NG 8135 of 1997

IN THE MATTER OF RONALD PHILLIP PAGE

BETWEEN:	EMPATO SHEET METAL PRODUCTS PTY LIMITED (IN LIQUIDATION) APPLICANT
AND:	RONALD PHILLIP PAGE RESPONDENT

JUDGE:	WHITLAM J
DATE:	25 FEBRUARY 1998
PLACE:	SYDNEY

REASONS FOR JUDGMENT (EX TEMPORE)

The creditor’s petition relies upon an act of bankruptcy under s 40(1)(g) of the Bankruptcy Act 1966. The relevant bankruptcy notice is founded on a judgment obtained by the applicant creditor against the respondent debtor in the Supreme Court of New South Wales. The respondent debtor submits that the Court should go behind that judgment and hold that it was not founded on a real debt. The threshold issue arises, therefore, whether I should go behind the judgment.

The background to that judgment may be quickly sketched.  A liquidator of the applicant creditor was appointed on 26 February 1996.  The liquidator arranged for the examination on 5 July 1996 of the respondent debtor, who was a director of the applicant creditor.  On 26 September 1996 the applicant creditor commenced proceedings against the respondent debtor in the Supreme Court by filing a statement of claim, in which it claimed (inter alia) a sum of money.  No defence to that claim having been filed, the applicant creditor filed notice of a motion for summary judgment.  The motion was eventually heard on 21 March 1997 by a Master, who gave judgment for the applicant creditor on its claim.

Several affidavits have been read on this threshold issue.  Counsel for the respondent debtor has read his client’s affidavit sworn 29 January 1998 and affidavits by Ross Paterson and Mark Tapper, each sworn 13 November 1997.  Counsel for the applicant creditor has read the affidavit of his client’s solicitor, Kevin John Pringle, sworn 10 February 1998.  In addition, the Supreme Court pleadings, notices of motion and supporting affidavits have been received in evidence.

In the Supreme Court the respondent debtor applied upon notice of motion to have the judgment given on 21 March 1997 set aside.  That motion was refused by Cohen J on 20 October 1997.  I was informed from the Bar table that his Honour did so on the procedural ground that an appeal was required to set aside the judgment given by the Master.

The money judgment ordered by the Supreme Court was in respect of several money counts proved by the applicant creditor.  The voluminous affidavit of the respondent debtor, which has been read on this threshold issue, annexes a great many documents.  Although paragraph 1 of his grounds of opposition to the petition alleges that he does not owe any money to the applicant creditor, the upshot of the other paragraphs, taken with the assertions in his affidavit, is that, on any view, an amount in excess of $60,000 is acknowledged as owing in respect of those counts for which judgment was obtained.

The Court will not go behind a judgment as a matter of course but only if appropriate circumstances are shown to exist: Wolff v Donovan (1991) 29 FCR 480 at 486; Makhoul v Barnes (1995) 60 FCR 572 at 581, 584. The nature of the discretion to go behind a judgment was explained by Barwick CJ in Wren v Mahony (1972) 126 CLR 212 at 224-225. The discretion will be exercised where a debtor can demonstrate that there is any substantial reason for questioning whether behind the judgment there was in truth and reality a debt due to the applicant creditor: Wiltshire-Smith v Mellor Olsson (1995) 57 FCR 572 at 582, 584. The Supreme Court judgment having been proved, this involves “a tactical onus on the debtor”: Wolff v Donovan at 487.

The material in the affidavits read on behalf of the debtor does not assist him on the threshold issue.  Mr Paterson and Mr Tapper say that the debtor repaid moneys each of them advanced to the applicant creditor.  Only the loan by Mr Paterson is linked to the moneys claimed in the Supreme Court proceedings.  Whatever might be the situation in respect of any obligation on the part of the applicant creditor to indemnify the debtor in respect of those amounts, it does not affect the fact, as I have previously noted, that an outstanding balance is acknowledged as owing in respect of the counts for which judgment was obtained.

On the other hand, the material that was before the Master in support of the summary judgment application is also in evidence.  This pointed to a powerful case which is reflected in the learned Master’s reasons for judgment.  The debtor was represented by counsel at that hearing and, although an application for an adjournment was refused, it may be assumed that anything that could be said in opposition to summary judgment was said.

The discretion to go behind a judgment may be more readily exercised in the case of a default judgment.  It was perhaps faintly suggested by counsel that there is little distinction between a summary judgment and a default judgment.  I could not accept such a submission.  Every case depends on the circumstances.  In a particular case a review may be justified after a full hearing: Emerson v Wreckair Pty Ltd (1992) 33 FCR 581 at 588. I respectfully agree with what Beaumont J said in Olivieri v Stafford (1989) 24 FCR 413 at 423-426 about accepting the process of adjudication in another court. Here the events in the Supreme Court have been comprehensively chronicled and explained in Mr Pringle’s affidavit.

Accordingly, in the present case there is, in my opinion, no substantial reason for questioning whether behind the Supreme Court judgment there was a real debt, and I decline to exercise my discretion to go behind that judgment.

I certify that the preceding three (3) pages are a true copy of the Reasons for Judgment herein of the Honourable Justice Whitlam

Associate:

Dated:            25 February 1998

Counsel for the applicant:	P S Braham
Solicitors for the applicant:	Gordon & Johnstone
Counsel for the respondent:	E H Baskerville
Solicitors for the respondent:	Hassetts
Date of hearing:	25 February 1998
Date of judgment:	25 February 1998