ex parte

[1979] FCA 181

B s n l t r u p l c y - bank 1-up tcy p c . 1 i.t i on .- a p ~ ~ l i c a t i o n t h a t c o u r t

go behii1c-l t he .jl,c;f;rnen t - f'ac t o r s r c ~ l c x ~ a n t i 11 de term iniilg

whe the]- t o go behirid t h e j ur!glnent .

IN TH?3 F3T)XliiiJ~ - COURT OF BANKRUYTGY W----

BAWKRUPTCY DISTRICT OF TXE STATI3 OF

--- ..-..-p-- $ No. P 1582 o f l 9 ? E

NSW SOUTH WATJRS	- -	AN11 THE AUSTRAXII;~N	m	1
\ 1

CAPITAL TERRITORY

- - I _ _ 1 "

RE: ALI DAVID -

EX PARTE:	ABM LAHOOD
-

LOCYLKART J.

VJH"fiRE MADE: - SYDIJEY

- '

. , X /\l,wc3Y'i"' 17; / . I ,

DATE OF ORDER:

----	THE COURT ORDERS THAT:
A s e q u e s t r a t i o n order be made a g a i n s t t h e e s t a t e o f t he d c S t o r .
Costs , in.cluding reserved c o s t s and the c o s t s of a l l p roce~d i~- ig
before Lockhart J. be taxed and paid according t o t h e A c t ,
A d r a f t o f t h i s o rde r be lodged with the R e g i s t r a r with.in
seven days i n accordance wi th r u l e 124 ( 2 ) .

I N TIIE PFDERAIJ COURT OF BliNXRTJYTCY )

- - - - - - - - - -- .-----

BANYJiUPTCY DISTRTCT 05' TIi3 STATE OF l

-_-_-- - -I - ---I-

{ NO. P 1582 of 1978

NEW SOUTH VALES. i1I\T9 TIE13 fiTJ,STR!iLIAN	!
CAPITAL TERRITORY	I

Ri3:	ALI DAVJD
EX PARTE:	ABIIA LAHOOD --

REASONS POR JUDGMENT

LOCKHART J.

This i s a p e t i t i o n f o r a s e q u e s t r a t i o n order

a g a i n s t t h e e s t a t e of A l i Uavid. The a c t of bankruptcy

on which t h e p e t i t i o n i s founded i s t h e f a i l u r e of the debtor t o comply wi th t h e requirements o f a bankruptcy n o t i c e i s sued on 26 J u l y 1978 <md servec! on t h e debtor

on 23 August 1978. The bankruptcy n o t i c e i s based on a

judgment obtained by t h e p e t i t i o ~ i n g c r e d i t o r , Abda Lahood,

a g a i n s t t h e debtor i n t h e D i s t r i c t Court of New South I J ~ l e s

a t Sydney on 21 June 1977 i n t h e smi of $5,000.00 toge the r

wi th i n t e r e s t .

The debtor opposes t h e p e t i t i o n on t h e fol lowing

grounds:.

l .	That t h e judgment was obtained by the p e t i t i o n i n g c r e d i t o r f r audu len t ly and
i n bad fai . th;

2.

That tlie debtor h a s instituted proceeciings judgment on the grounds of the petitioning creditor's fraud and d.eception and. the action has not yet been heard or determined by the District Court.

The debtor asks this court to go behind the judgment

/and to dismiss the petition.

The court, on the hearing of a petition has jurisdiction

to go behind the judgment on which the petitioning creditor's

claim is based in various circunstaxces. One instance is

('where substantial reasons are given for questioning whether

behind that judgment there was in truth and reality a debt due

to the petitionerv: per Barivick C. J. in W e n v. Mahonev

The court will not inquire into the validity of a

judgment debt as a matter of course.

nCircumstances tending to show fraud or

collusion or miscarriage of justice or

that a compro:nise was not a fair and

reasonable one, in the sense that even

if not fraudul-ent it was foolish, absurd

and improper, or resulted from an unequal position of the parties. ..offer occasions for the exercise by the Court of Bankruptcy

of its power to inquire into the consideration

for the judgment:l1

per Barwick C. J. in Vren -v. Maho11e.y (supra) at

p. 223.

I refer to what I said on this question in Re Vong;

Ex p a r t e Kitson judgment deliversd on 22 October i 9 7 9 * unreported,

-3-

The petition firs-l; cane on for hearing on 2'7

February 1979 and has been adjourned since then on a on 2 November 1979 to determine the question whether this court should go behind the judgment. I gave directions for the filing and serving of affidavits by both parties, so that this question could be determined.

number of occasions at the request of the debtor, On 28

The petitioning creditor commenced proceedi-ngs

against the debtor in the District Court of New Soutlrl Walcs

claiming damages for breach of promise of marriage. The

proceedings were defended and heard by Judge Leslie over

a period of four days from 21 to 24 F'ia'rch 1977, Both

parties were represented by counsel. His Hcnour reserved

his decision and gave judgment on 21 June 19'77. There was

a substantial conflict of evidence. His Honour rejected

the debtor as a witness of truth a d believed the petitioning

creditor. He delivered a carefully reasoned judgment and

awarded the plaintiff $5,000.00 damages.

The debtor appealed to the Court of Appeal of New

South Wales. The petitioning creditor cross appealed. On

16 December 1977, the Court of Appeal, by consent of both

parties, dismissed the appeal and the cross appeal with no

order as to costs. The form of consent oreLer w z s signed by

the debtor personally and by the solicitor for the petitiorling

creditor.

The only relevant evidence before me is that the

debtor commenced proceedings on 7 September 1979 in the creditor al-leging thdt the judgment for $5,000.00 was obtained by the petitioning creditor vfr2udulently and against

good fai-th1I and that the petitioning creditor "deliberately

misled and deceived1' the District Court "and concealed from

it evideiice of a material matter1' and that accordingly the

judgment should be set aside. Particulars of the alleged

frauduleiit conduct appearing in the District Court statement

of claim are as follows:-

Ila) That up to the time -&& she first had intercourse with the Plaintiff she had not formed any association with any

other men.

b) That she had not accepted my proposals

of marriage whilst living in Lebanon.

c) That before she met the Plaintiff she

had ~ o t go]-~e out with ary men.

d) That before having intercourse with the

Plaintiff she had never had intercourse with any other man.

e ) Further that by misrepresentation and	implication the general effect and tenor of
the Defendant's evidence was that she had never been married previously to her association with the Plaintiff and to the Defendant l S oLhm knowledge this was false .
f) By reasons of the foregoing fraud and deception the Ylaintiff asks this Honourable
Court to set aside the j ~ ~ d g m e n t dated 21s-t
June, 1977 and to order that the*Plaintiffls costs in defending the action be paid by the Defendant, and that the Defendant pay the
Plaintifft s costs herein."
There is no evidence as to the truth of any of

those allegations.

I n t h e circwnstances t h e debtor asks th.e co.urt

t o go behind t h e judgrcent and f n q u i r e i n t o t h e v a l i d i t y

of t h e j u d g ~ e n t debt .

The fol lowing passage f rorn t h e judgment of

Fu l l aga r J. i n Corn= v. Brien (,1951) 84 C.L.R. 343 a t

p. 356 and 357 i s apposi te :-

"No p r e c i s e r u l e s e x i s t as t o what

circumstances c a l l f o r an exe rc i se of

t h e power, but; c e r t a i n t h i n g s a r e , I

t h i n k , c l e a r enough. If t h e judgment

i n ques t ion followed a f u l l i n v e s t i g a t i o n

a t a t r ial on which both p a r t i e s appeared,

t h e cour t w i l l n o t reopen t h e ma t t e r

u n l e s s a prima-facie case of f raud o r

c o l l u s i o n o r isc carriage o f j u s t i c e

i s made out . 111 I n r e P la tau ; Ex ~ a r t e

S c o t c h !:!hi sky 3 i sTiTl-eF-s-i~C T7G83JTZ--

Q.B.d. 83, a t 9. 86, Pry L . J . sa id :

"This power has never, so f a r as I am

aware, been extended t o cases i n which

a judgment has been obtained a f t e r i s s u e s

have been t r i e d out before a court11.

I n Wren v. ---. Mahol-a ( supra) Plenzies J. s a i d a-i;

"...it has been repea ted ly s a i d t h a t , whzn

a judgment has been given i n open c o a r t

a g a i n s t a person who i s rep resen tea , it

i s only i n except ional cases t h a t t h e Court

of Bmkruptcy should exe rc i se i t s

d i s c r e t i o n a r y power. Sec f o r i n s t a n c e

I n r e ------ I"la.tau: -- -p Ex n a r t e Scotch W'nisky

FiZt i ll e r S L$ ci ~*-(TE3*8~27 Q.73;- Z3TZd

~ & ~ ~ ~ e ~ - ~ l 1 3 1 5 ) -- -....- 84 L.J .X.3. 1393.

111 the f o r a e r case Lord Esher 1I.R. s a i d

a t p. 85:

"It i s no t necessary now t o r e p a t t h a t ,

when an i s s u e ha? been de te l -mi~ed i n any

o t h e r c o u r t , i f evidence i s brought before

t h e Court of Eankruptcg of circumstances

tending t o slrlew t h a t there has been f raud,

o r co l lus ion , o r miscar r iage of j u s t i c e , t h e Court of Bankruptcy has power t o go behind t h e judgment and t o i n q u i r e i n t o

t h e v a l i d i t y 01 t h e debi . ' But t h a t t.he

Court o f Rankruntcy i s baund i n every case as a ;na t te r of course 30 30 behind a

jutlgaen t i s 3 nrepos terous p r o p o ~ i t i o n . ' ~

"Fry L.J. said at p. 86:

"It is true that in some cases the

Court of Bankruptcy has gone behind

a judgment, when it has been obtained

by fraud, collusion, or mistake. But

this power has never, so far as I am

aware, been extended to cases in which

a judgment has been obtained after issues

have been tried out before a court." If

Although Menzies J. dissented, together with

llalsh J., from the decision of the majority of the court

in Mren v. Wahoney (supra), the passage which I have cited

is not inconsistent with the reasons for judgment of

Barwick C.J., with whom Windeyer and Owen JJ. agreed.

The debtor has not established a prima facie case

of fraud or collusion or miscarriage of justice. The

judgment entered against him by Leslie J. followed a

contested hearicg lasting four days with both parties

represented by counsel. His Honour reserved his decision

and gave full reasons to support the judgment in the

petitioning creditor's favour in the sum of $5,000.00.

The debtar appealed frcm the decision of his Honour. It

was dismissed by consent. There is no suggestion that there

are any grounds for challenging the agreement reached by

the parties resulting in the dismissal of the appeal and .

the cross appeal. For these reasons the opposition to &e

petition fails.

Counsel for the debtor contended; in the alternative,

that the question whether the judgnefit was fraudulently

obtained should be determined in the District Court as the

appropriate forum, rather than this court and tha.t the

petition should be a:i jourr~ed to enable the 3idrict Court

to hear the action.

I decline to adjou-rn the petition further. On

28 September 1979, I fixed 2 November 1979 for the purpose

of determining the question whether this court should

go behind the judgment. I ]nave heard evidence and

submissions and decided that I should not go behind the

judgment. That is an end of the matter.

Further, the petition expires on 5 December 1979

(E. 52 (4) ) It is urilikely th2.t the proceedings in the

District Court will be heard and determined by then. The unsuccessful party in those proceedings may appeal, so that for all practical purposes, this court will not know the fate of the proceedings in the District Court before the petition lapses.

In my opinion it would not be proper in all the

circumstances to adjourn the petition when the inevitable

consequence will be that the petition will lapse. The

District Court proceedings to set aside the judgment were

not commenced by the debfor until 7 September 1979. It is

true that the delay is explained in part by the fact that

the debtor applied for legal aid for a new trial of the

earlier District Court proceedings and that the application

necessarily took corce time to be dealt with. It was contended

by counsel for the debtor that, if the debtor is made bankrupt,

the right of action that he has against the petitioning

creditor to se-t aside the District Court judgrnent will vest

in the Official Receiver as part of his property (S. 58 1 (a) )

I need not detcrnine whether this contention j.s correct.

E i t h e r t h e r i g h t of a c t i o n w i l l remain vested. i n t h e

deb to r f o r him t o pursue o r i t will v e s t i n t h e

O f f i c i a l Receiver who nay decide whether t o continue

t h e a c t i o n .

This a l te rna . t ive ground of oppos i t ion t o t h e

p e t i Lion fails.

I am s a t i s f i e d t h a t t h e a c t of bankruptcy r e l i e d

on i n t he p e t i t i o n w a s cocur,itted. I &Q s a t i s f i e d as t o

t h e o the r ma t t e r s of	which	S.	52	( I ) of	t h e Act	r e q u i r e s
proof.

I make a s e q u e s t r a t i o n o rde r a g a i n s t t h e e s t a t e

o f t h e debtor . I o rde r t h a t cos t s , inc lud ing reserved

l

c o s t s and the c o s t s o f a11 proceedings before me, be

taxed and paid according t o t h e Act. X d i r e c t that a

d r a f t of t h i s order be lcdged wi th t h e R e g i s t r a r wi th in

seven days i n accordance wi th r u l e . 1 2 4 ( 2 ) .

/ 7

)C,'C.~ (7

I certify that t3is and i:ie -. l