Field, Herbert Junior v The Commercial Banking Company of Sydney Ltd

FIELD v. COMMERCIAL BANKING COMPANY OF SYDNEY LTD. (1978) 37 FLR 341
Bankruptcy

COURT

FEDERAL COURT OF AUSTRALIA

GENERAL DIVISION
Sweeney(1), Franki(2), St. John(3) JJ.

CATCHWORDS

Bankruptcy - Appeal - Refusal of application for adjournment by debtor and making of sequestration order on hearing of creditor's petition - Considerations applicable to application for adjournment - Principles governing consideration by court of appeal of exercise of discretion - Whether sequestration order should have been made - Bankruptcy Act 1966, (Cth.), ss. 33, 52, 188, 206.

HEADNOTE

The appellant failed to comply with a bankruptcy notice served by the respondent, after which a creditor's petition was presented, and an application for substituted service was later granted. On the day before the hearing of the creditor's petition the appellant executed an authority under s. 188 of the Bankruptcy Act 1966, requesting a meeting of his creditors. By affidavit dated the day of the hearing the appellant exhibited the authority and requested adjournment of the petition pending the creditors' meeting, and an application for adjournment was made by counsel for the appellant. The trial judge, in considering the application, observed that it was reasonable to infer from the evidence that the appellant had been evading service, but disclaimed any great reliance on that fact in coming to his decision. He refused the application for adjournment on the basis that the only reasonable inference was that the appellant was only seeking further time, adding that it was otherwise "almost invariably" the practice of the court to grant adjournments of petitions in cases where the hearing came on after the execution of an authority under s. 188 but before the meeting of creditors.

The appellant appealed from the order refusing an adjournment and the order of sequestration on the grounds that the court should have exercised its discretion to allow an adjournment until after the meeting of creditors, and should also have exercised its discretion under s. 52 of the Act to refuse to make a sequestration order.

Held: Per C. A. Sweeney and Franki JJ., St. John J. dissenting - (1) On the facts, there was ample justification for the view that it could reasonably be inferred that the debtor was evading service.

(2) There is no general practice of the court to adjourn the hearing of a creditor's petition when a debtor has executed an authority under s. 188 of the Act, and the execution of such an authority is only one relevant consideration amongst many.

Re Martyn; Ex parte Capes (1929), 1 ABC 176, referred to.

(3) The principles governing the consideration by a court of appeal of the exercise of a discretion are: whether the judge acted upon a wrong principle, whether he allowed extraneous or irrelevant matters to guide or affect him, whether he mistook the facts and whether he failed to take into account some material consideration.

Mace v. Murray (1955), 92 CLR 370; House v. The King (1936), 55 CLR 499; EG. & H. Nominees Pty. Ltd. v. General Mutual Insurance Co. Ltd. (In Liquidation) (1976), 50 ALJR 460, referred to.

(4) On the facts, the adjournment was properly refused, and the sequestration order was justified, there having been no sufficient cause shown why such an order should not be made.

Rozenbes v. Kronhill (1956), 95 CLR 407, referred to.

Consideration of relevant matters to which a court may have regard when considering an application for adjournment of a creditor's petition.

HEARING

Sydney, 1978, October 19; December 7. #DATE 7:12:1978

APPEAL.

Appeal from a decision of Riley J.

The material facts appear from the judgment.

D. E. Grieve, for the appellant.

A. E. Cramer-Roberts, for the respondent.

Cur. adv. vult.

Solicitors for the appellant: M. J. Moloney & Associates.

Solicitors for the respondent: Dibbs, Crowther & Osborne.

R. L. CRISP

JUDGE1

December 7.

The following judgments were delivered.

C. A. SWEENEY J. This is an appeal from an order made by Riley J. on 26th July, 1978, refusing an application by the appellant for the adjournment of the hearing of a creditor's petition against him and from an order of sequestration against his estate. (at p342)

The grounds set out in the notice of appeal are as follows: "1. That the court should have exercised its discretion and allowed an adjournment of the hearing of the petition until after a meeting of creditors had been called pursuant to s. 194 of the Bankruptcy Act as amended. 2. That the court should have exercised its discretion pursuant to s. 52 of the Bankruptcy Act and not proceeded to make a sequestration order." (at p342)
The act of bankruptcy relied upon in the petition, as amended by leave, was the failure of the appellant on or before 9th March, 1978, either to comply with the requirements of a bankruptcy notice served on him on 23rd February, 1978, or to satisfy the court that he had a counterclaim, set-off or cross demand equal to or exceeding the sum specified in the bankruptcy notice, namely $41,876.48. The bankruptcy notice was based upon a judgment against the appellant in the Supreme Court of New South Wales on 23rd September, 1977, and was personally served on the appellant on 23rd February, 1978. (at p342)
On 13th June, 1978, Riley J., on the ex parte application of the petitioning creditor, made an order dispensing with personal service of the petition which had been presented on 21st March, 1978. His Honour ordered substituted service of the petition by delivery to the business address of Herbert Field Pty. Ltd., to the address of the solicitors who had previously written to the solicitors for the petitioning creditor on behalf of the appellant, and who acted for him on the hearing of the petition and of this appeal, and to the address of the accountants who had written various letters to the petitioning creditor on the appellant's behalf. These three deliveries were duly made on 22nd June, 1978, and the petition came on for hearing on 26th July, 1978. (at p343)
The petition bore the prescribed indorsement that if the appellant intended to deny or dispute any statements in the petition or to oppose the petition on any other ground, he should file a notice setting out or referring to those statements or the other grounds on which he intended to oppose the petition and serve a copy of that notice on the solicitor for the petitioning creditor not less than three days before the hearing. (at p343)
The appellant did not file or serve any such notice but in an affidavit sworn on the day of the hearing he deposed to the fact that on the previous day he had "executed an authority pursuant to Pt X of the Bankruptcy Act 1966 as amended" requesting John Edward Walker to call a meeting of his creditors. Beyond a request that the court adjourn the hearing of the petition pending a meeting of his creditors being held, the affidavit contained no more. (at p343)
When the petition was first called on 26th July, Mr. Cramer-Roberts of counsel appeared for the petitioning creditor and Mr. Ireland of counsel for the appellant. The transcript recited that "Mr. Graham, solicitor, appeared for a supporting creditor, Rural News Ltd., in the sum of $581 and Mr. Chalmers, solicitor, appeared for a supporting creditor, the Bank of New South Wales, in the sum of $70,900 approximately". Mr. Cramer-Roberts referred to the fact that on 23rd May, when the application for substituted service of the petition was before the court, a solicitor (Mr. Travers) had appeared for Australian Guarantee Corporation Ltd., an intervening creditor in the sum of $300,000. Mr. Ireland stated that he was seeking an adjournment and the matter was stood down. (at p343)
On the resumption of the hearing, an hour later, Mr. Ireland applied for an adjournment of the petition until 20th September, to permit the holding of a creditors' meeting, pursuant to the execution by his client on the previous day of the Pt X authority. He referred the learned trial judge to his client's affidavit and to the Pt X file which, he said, "has now been put with the file of the petition". The Pt X file was a file kept by the registrar in bankruptcy under Pt X of the Bankruptcy Act in accordance with general practice separately from the file kept by him in relation to the creditor's petition. It appears from this statement by Mr. Ireland that he had taken advantage of the opportunity generally afforded to counsel when a matter is stood down of looking at the files in court. His Honour evidently accepted Mr. Ireland's invitation to look at the Pt X file, because he observed that it simply contained the original of the authority. (at p343)
Mr. Ireland referred to s. 33 (1) (a) of the Bankruptcy Act 1966 as giving the court a "wide and discretionary power" to adjourn the hearing of the petition, and submitted that it should be adjourned until a date after the creditors had had an opportunity of meeting. His Honour observed to Mr. Ireland, "you say that is the general practice of the court", who replied that he so submitted. (at p344)
Mr. Cramer-Roberts, in opposing the application, began by asking his Honour to recall that "there were difficulties in serving the creditor's petition on the debtor necessitating an application for substituted service" and added that "your Honour might recall that affidavits were filed by three process servers all deposing to the difficulties which they had in serving the debtor". Counsel did not read these affidavits to the court but made it plain that he was seeking to rely upon them. Mr. Cramer-Roberts stated that "the solicitor for Mr. Howitt who had been acting for Mr. Field, and indeed still is, and is certainly one of those on whom the order was served, was present at the court when your Honour made the order for substituted service". He relied on the fact that the application was made "at this late stage" and submitted that the court should "depart from the usual practice, particularly as the intervening creditors who have taken such an interest in the proceedings have appeared on previous occasions and have been supporting creditors". (at p344)
Mr. Ireland submitted that there was no disadvantage to the petitioning creditor, apart from appearances on that day, if the petition were adjourned as sought. He referred to an opposing argument that a meeting is a further way in which the creditors may have payment delayed. He then said that there was "no evidence filed at this stage as to what proposal may be put to the creditors at the meeting, whether that proposal would involve the present assets of the debtor himself, or other people, or a combination of those matters. In my submission it would be quite wrong in principle to prejudge that matter now in the absence of evidence when the countervailing course would be to produce no disadvantage, because the petition, if it ultimately succeeds, will be unchanged. In my submission your Honour would permit the meeting to be called and the expression of opinion of all the creditors to be taken into account". (at p344)
His Honour asked what was the position in relation to Mr. Travers who had appeared on 23rd May for the Australian Guarantee Corporation Ltd., "for about $300,000". Mr. Ireland replied that Mr. Travers had been in attendance earlier in the day, and had been shown a copy of his client's affidavit and had gone away. (at p344)
Mr. Chalmers then stated that he appeared for the Bank of New South Wales, that his client's debt was $70,000 odd" and in answer to a question from the bench as to its attitude to the application for adjournment, replied "I have no instructions on this meeting, but I was instructed to apply to be substituted as petitioning creditor had the matter gone the other way". (at p345)
Mr. Cramer-Roberts stated that the amount of the debt alleged by his client in the petition was "$41,000 odd" and added that he was further instructed that in addition to that debt, the bank was owed a further $70,000 by the appellant. (at p345)
His Honour then said, "I would just like to look at some of the earlier affidavits filed in this matter for a moment". (at p345)
His Honour then did so. On the hearing of the appeal, we were referred by Mr. Grieve, counsel for the appellant, to affidavits which set out certain correspondence between the appellant's accountant and solicitors and the petitioning creditor. These affidavits were filed in support of the application for substituted service and set out in the appeal book. (at p345)
The bankruptcy notice upon which the petition was based was served personally on the appellant on 23rd February and on 17th March his solicitors wrote the following letter to the solicitors for the petitioning creditor: "We are instructed that you have served upon our client a bankruptcy notice. We note that time for compliance with such notice has expired. Firstly, please take note that we dispute the validity of such notice, however, we shall be pleased if you will advise whether you have instructions to present a petition based on such notice." (at p345)
On 2nd May Mr. Huntington wrote as follows to the petitioning creditor: "I am the accountant for Herbert Field and I have been advised by him and his solicitors, M. J. Moloney & Associates, that the C.B.C. Bank may have numerous claims on Herbert Field personally for moneys pursuant to guarantees for various company overdrafts at your bank. To assist me in sorting out Mr. Field's liabilities, would you please have delivered to me a letter listing all the various company accounts which you may be looking to Herbert Field to repay. Specifically, I would like to know: (1) how each debt arose, e.g., what the principal amount was and the amount of interest charged on the loan to date; (2) why, in your opinion, Herbert Field should be asked to repay these moneys. If under a personal guarantee, would you please advise whether there were joint guarantors for the debt; and (3) the rate of interest charged on the loans and the dates when the interest is charged to the accounts, and if interest is accruing at the moment. I would be grateful if you could let me have this letter prior to the end of this week." (at p345)
In the letter of 4th May the petitioning creditor's chief manager confirmed his advice that he was prepared to meet Mr. Field on 9th May. The letter continued: "We are prepared to undertake that we shall not serve Mr. Field with the petition in bankruptcy subject to the following qualifications. We have had various discussions with Mr. Field as to the means whereby he can satisfy his various liabilities to this bank. All of those discussions have proved fruitless. We are presently of the view that unless some concrete proposal is placed before us at the meeting on Tuesday next then the only course which is open to us would be to pursue the proceedings in bankruptcy against Mr. Field and to that end we would consider that our undertaking would be at an end. In order that it might be clearly understood what we mean by a concrete proposal, we would require that Mr. Field make a specific offer as to the repayment of all his liabilities to the bank together with interest and in addition we advise that we would expect Mr. Field or the companies and trusts with which he is associated to offer us adequate security to support the repayment of these liabilities. In the absence of a proposal of that type we see no purpose in pursuing a seemingly endless and fruitless series of discussions with Mr. Field." (at p346)
In Mr. Huntington's reply of 9th May he wrote: "I acknowledge receipt of your letter dated 4th May, 1978, and have advised Mr. Field of its contents. I understand from Mr. Field that certain concrete proposals have been formulated and will be put to you as soon as possible. However, before these proposals can be completed certain additional information is required. In my letter of 2nd May I requested a breakdown on principal and interest of the various outstanding accounts, and note that in your reply you have only given me the amount of accrued interest. So that we can complete our proposals would you kindly advise the amount of interest charged to the accounts since they commenced operation. I understand that Mr. Field had an appointment with you at 2.30 p.m. today. However, as we have not received all the information I would be grateful if you would postpone this meeting for a further week to ten days. Once I have received this additional information I will contact you with a view to arranging a further appointment to put forward our proposals." (at p346)
The chief manager's reply of 10th May read as follows: "We acknowledge your letter dated 9th May, 1978, with reference to Mr. Herbert Field Jnr. We note that you require the balances of the various accounts to which the bank is looking for payment from Mr. Field be broken up into amounts specifying that part of the debt which is principal and that part which is interest. You will appreciate that prior to the majority of the accounts reaching the present dormant debt situation the accounts fluctuated and we are therefore unable to supply this information. If there had been one drawing on the accounts your request may have been a practicable exercise. We must say we are at a loss to understand what real bearing any dissection of the principal and interest could have on any proposals for liquidation of the several existing debts. However, any arithmetical calculation which for some reason you may wish to do may possibly be achieved by reference to the statements of account which have been supplied to the respective debtor companies from time to time. It is noted that Mr. Field's appointment with this office at 2.30 p.m. on 9th May, 1978, has again been deferred for a further week to ten days." (at p347)
By letter dated 17th May, Mr. Huntington replied as follows: "I refer to your letter dated 10th May, 1978. As you are unable to supply the information requested I am attempting to do so in the limited time I have available for Mr. Field's affairs. I will be in a position to discuss the matters raised in our correspondence on Monday 22nd May and I respectfully request a meeting with you at, say, 11.45 a.m. on that day. The bank should realize that forcing Mr. Field into a bankruptcy situation will in no way benefit its cause and this will be explained further at the meeting. Mr. Field is earnestly endeavouring to find ways of reducing any indebtedness he may have to the bank and unless you are prepared to undertake that you will not be serving any notices on Mr. Field prior to this meeting then we feel that it is pointless discussing the matter any further and will rely on our legal representations which will prolong the matter even further." (at p347)
Affidavits sworn by three licensed agents disclosed that unsuccessful attempts were made to serve the creditor's petition on the appellant on 6th, 13th, 18th, 20th, 25th and 26th April and on 1st, 5th, 8th, 12th, 15th, 16th and 17th May. (at p347)
Mr. Grieve referred us to these dates in support of a submission that Mr. Ireland might, had he read the affidavits, have submitted that some of these attempts at service were made during the period covered by the petitioning creditor's agreement not to attempt service. Had he done so, Mr. Grieve contended, his Honour may have avoided the error which he made in placing some reliance on what he evidently believed to be attempts by the appellant to avoid service. This was described by Mr. Grieve as the principal point in the appellant's submission. (at p347)
If Mr. Ireland had made the submission to which Mr. Grieve referred, it would have shown that, of the thirteen attempts at service of the petition, six had been made by the agents during the period covered by the petitioning creditor's undertaking to the appellant's accountant that service would not be attempted. In my opinion, seven unsuccessful attempts at service of the petition upon the appellant, in the circumstances revealed by the affidavit filed in support of the application, would have afforded ample justification for the view which the learned judge expressed in these words: "From the evidence filed in support of that application, a very reasonable inference can be drawn that the debtor was evading service, but I do not rely to any great extent on that fact in coming to this decision." (at p347)

The second ground on which Mr. Grieve based his case was that the execution by the appellant of the Pt X authority, which he conceded was "belated", should have led his Honour to grant the application for adjournment. (at p347)
Both counsel had referred to what they described as the "general practice" of the court to adjourn the hearing of a creditor's petition, when a debtor had executed an authority. (at p348)
The source of these submissions may have been the following passage at pp. 11-12 of Irlicht on Assignments, Arrangements and Compositions by Debtors: "Quite frequently a Bankruptcy petition against the debtor comes on for hearing after the execution of the authority but before the meeting. As a matter of practice, the court almost invariably, in such circumstances, adjourns the petition to enable the meeting to be held. This procedure is well worth noting because the specific power for adjournment which is contained in s. 206 refers only to an adjournment of a petition which has come on for hearing after the holding of the meeting whereas, in fact, the practice is far wider than that." No authority was cited for this statement. (at p348)
In his reasons for refusing the application his Honour said: "Section 206 of the Act is not applicable to this situation, but it is almost invariably the practice of the court that when a petition comes on for hearing after the execution of an authority under s. 188, but before the meeting of creditors called in pursuance of that authority, the court will adjourn the petition to enable the meeting to be held." (at p348)
In my respectful opinion, this statement was unduly favourable to the appellant. Section 33 (1) (a) of the Bankruptcy Act provides that: (at p348)
"(1) The Court may - (at p348)
(a) upon such terms as it thinks fit, at any time adjourn any proceeding before it, either to a fixed date or generally." (at p348)
Section 206 (1) of the Act provides that - (at p348)
"(1) Where - (at p348)
(a) a meeting of creditors has, in accordance with this Part, passed a special resolution requiring a debtor to execute a deed of assignment or a deed of arrangement under this Part; and (at p348)
(b) a creditor's petition was presented against the debtor before the passing of the resolution or is presented against him after the passing of the resolution but before the deed has been duly executed, the Court may, upon application by the debtor, a creditor or a person nominated as trustee of the proposed deed, if it appears to the Court that it would be for the advantage of the creditors that the debtor's affairs be administered under the deed, adjourn the hearing of the petition for such period as it considers necessary to allow the deed to be executed and, if the deed is duly executed within that period, shall dismiss the petition." (at p348)
Section 206 makes it plain that where a meeting of creditors has passed such a special resolution, the court has a discretion to adjourn the hearing of the petition for such period as it considers necessary to allow the deed to be executed, "if it appears to the Court that it would be for the advantage of the creditors that the debtor's affairs be administered under the deed". (at p349)
It would indeed be a strange result if, on the one hand, where a meeting had passed a special resolution for a deed, the court could, pursuant to s. 206, adjourn the hearing of a petition only if it appeared to it that it would be for the advantage of the creditors that the debtor's affairs be administered under the deed. and, on the other hand, it should be almost invariably or generally the practice of the court, when a petition comes on for hearing after the execution of an authority and before any meeting of creditors has been held, that it will adjourn the hearing of the petition to enable the meeting to be held. (at p349)
In my experience, the court has adopted no such practice. It has regarded the execution of an authority as one relevant circumstance, amongst many, but it has not sought to give it any decisive effect or to regard it as casting any burden upon a petitioning creditor to show cause why the hearing of its petition should not be adjourned. (at p349)
In Re Martyn; Ex parte Capes (1929) 1 ABC 176 some of the creditors, other than the petitioning creditor, at an informal meeting of creditors held under Pt X of the Bankruptcy Act 1924 had resolved that a deed of assignment under that Part should be accepted from the debtor. The resolution was supported by fifteen creditors to the extent of 1,700 Pounds and opposed by three creditors to the extent of 1,000 Pounds. The total liability of the debtor was said to be 28,000 Pounds. The evidence showed that at least some of the votes cast at the meeting were informal. In these circumstances the court refused the debtor's application for an adjournment of the hearing of the petition. (at p349)
This case has been faithfully noted to the appropriate section of the Act in successive editions of McDonald, Henry & Meek's Australian Bankruptcy Law and Practice (see fifth ed., par. 104). It supports the opinion I have expressed that the court has not adopted a practice that it would generally adjourn the hearing of a petition upon the mere evidence that the debtor has executed an authority under s. 188. (at p349)
It would be unwise to attempt to draw up an exhaustive catalogue of the circumstances to which the court should pay regard in considering an application for an adjournment of a creditor's petition. However, to illustrate the point that the one circumstance of the execution of an authority should be looked at in the general context of each individual case, one may usefully refer to some other relevant circumstances in such a case, as for example: 1. the course of dealings between the parties, from the time when the obligation to the petitioning creditor is said to have arisen to the date of the hearing; 2. the attitude to the application of the petitioning creditor, as prima facie, on proof of the matters mentioned in s. 52 (1) of the Bankruptcy Act 1966, the court will proceed to make an order for sequestration (see Rozenbes v. Kronhill (1956) 95 CLR 407 ); 3. the general financial position of the debtor; 4. the relation between the debt of the petitioning creditor and the total liabilities of the debtor, as it may be seen, for example, that the petitioning creditor's opposition would be sufficient to defeat any special resolution proposed at a creditors' meeting; 5. any attitude to the application disclosed by other creditors; 6. any evidence bearing upon the question whether it would be for the advantage of the creditors that the debtor's affairs be administered under Pt X of the Act; 7. the likelihood that the debtor would be able to place before a meeting of creditors a particular proposal, or evidence of his general circumstances, calculated to persuade them to vote for the administration of his affairs under Pt X. It will at once be obvious that many of these circumstances will be within the knowledge of the debtor, rather than of the petitioning creditor, and it will be for the former to give evidence of them. Such evidence should, where practicable, be in affidavit form. (at p350)
To return to the narrative of the course of proceedings below, when his Honour stated that he intended to look at the earlier affidavits, Mr Ireland said: "If your Honour was going to act on any of the material to which my friend has not specifically referred, I have not had an opportunity to see that material nor to know what parts of it your Honour might deem important. I do not know if your Honour would give a preliminary indication, but if your Honour were to refuse the adjournment taking into account in any substantial way some material filed but not referred to, I would seek some opportunity to address your Honour on those matters." (at p350)
It became plain from what the learned trial judge said and did that he did not "take into account in any substantial way" the material contained in those earlier affidavits. In the course of his reasons for refusing the application he said: "From the evidence filed in support of that application, a very reasonable inference could be drawn that the debtor was evading service, but I do not rely to any great extent on that fact in coming to this decision." What his Honour did was to proceed at once to refuse the application and state his reasons for doing so. (at p350)
In refusing the application, his Honour was of course exercising a discretion committed to him by the Act. The principles governing the consideration by a court of appeal for such an exercise of discretion have often been stated. (at p350)
As was said in the judgment of the High Court in Mace v. Murray (1955) 92 CLR 370 : "The principles to be applied in such a case are not in doubt. The order of the learned primary judge was made in the exercise of a discretionary judgment; and it has been repeatedly laid down by this Court, following decisions of the highest authority in England, that in such a case a court of appeal is not justified in interfering with the decision appealed from unless it reaches a clear conclusion that by reason of some error, whether of fact or of law, the primary judge not only has taken a view different from that which the judges of the court of appeal would have taken if they had been in his place, but has failed properly to exercise the discretion committed to him: House v. The King (1936) 55 CLR 499, at pp 504-505 ; Lovell v. Lovell (1950) 81 CLR 513, at pp 518-520, 526, 528, 532-534 ; Pearlow v. Pearlow (1953) 90 CLR 70, at pp 76-77 ; Paterson v. Paterson (1953) 89 CLR 212, at pp 218-224 " (1955) 92 CLR, at p 378 . (at p351)
In House v. The King Dixon, Evatt and McTiernan JJ. said: "The manner in which an appeal against an exercise of discretion should be determined is governed by established principles. It is not enough that the judges composing the appellate court consider that, if they had been in the position of the primary judge, they would have taken a different course. It must appear that some error has been made in exercising the discretion. If the judge acts upon a wrong principle, if he allows extraneous or irrelevant matters to guide or affect him, if he mistakes the facts, if he does not take into account some material consideration, then his determination should be reviewed and the appellate court may exercise its own discretion in substitution for his if it has the materials for doing so" (1936) 55 CLR, at pp 504-505 . (at p351)
Although the ground was not raised in the notice of appeal, some discussion took place as to whether the reference which the learned trial judge made to the affidavits in support of the application for substituted service amounted to his allowing "extraneous or irrelevant matters to guide or affect him". (at p351)
I do not find it necessary to examine this question. On the view most favourable to the appellant, we would be free to exercise our own discretion in substitution for that of the learned trial judge. Putting the affidavits in support of the application for substituted service entirely on one side, I would have unhesitatingly refused the application for adjournment. The history of the litigation between the parties, the admittedly belated execution of the authority and the eloquent silence of the appellant's affidavit in support of his application on every aspect of the case other than the execution of the authority, all told stongly against the granting of the application. If we were to adopt the contrary view, our decision would be taken as conferring a right upon a debtor to obtain an adjournment by simply executing an authority on the eve of the hearing of the petition. (at p351)
Mr. Ireland then sought an order that the matter be stood down until 2 p.m. for the purpose of obtaining some further instructions "as to whether evidence could be adduced from the debtor at 2 p.m. as to some additional matter which might change the basis of your Honour's presently evinced attitude to a longer adjournment", adding that the appellant "was not in court at the moment". This application was refused. In the event, the case for the petitioning creditor had not been completed when the court adjourned at 1 p.m. and the hearing was resumed at 2 p.m. Mr. Ireland did not seek to call the appellant, or any witness on his behalf, either at 2 p.m. or when the case for the petitioning creditor was completed. (at p352)
Mr. Ireland then submitted that his Honour should not be satisfied that the petition was duly executed. He then turned to the provisions of s. 52 (2) which are as follows:

"If the Court is not satisfied with the proof of any of these

matters, or is satisfied by the debtor -

(a) that he is able to pay his debts; or

(b) that for other sufficient cause a sequestration order ought

not to be made,

it may dismiss the petition." (at p352)

When seeking the adjournment to 2 p.m. Mr. Ireland had said that "there may be some further evidentiary materials as to what it is intended to put to the meeting which might influence your Honour in another direction". When he came to make this submission that the court should be satisfied that "for other sufficient cause a sequestration order ought not to be made", Mr. Ireland adopted the submissions he had made in support of his application for an adjournment and relied upon the execution of the authority. He did not seek to tender evidence as to what the appellant intended to put to the meeting. (at p352)
His Honour stated that he was satisfied that the debtor had committed the act of bankruptcy alleged in the petition as amended, and with the proof of the other matters of which s. 52 (1) required proof, that he was not satisfied by the debtor that for "other sufficient cause" an order ought not to be made, and he accordingly made the order of sequestration. (at p352)
In Rozenbes v. Kronhill Dixon C.J., Webb and Fullagar JJ. said: "In Cain v. Whyte (1933) 48 CLR 639, at p 646 this Court expressed agreement with a judgment of the Supreme Court of Queensland (Henchman J.) in which his Honour said: ". . . prima facie, on proof of the matters mentioned in s. 56 (2), the Court will proceed to make an order for sequestration, and . . . it is for the debtor to show some cause overriding the interest of the public in the stopping of unremunerative trading, and the rights of individual creditors who are unable to get their debts paid to them as they become due. Something has to be put before the Court to outweight those considerations before it can be said that sufficient cause is shown against the making of a sequestration order'" (1956) 95 CLR, at p 414 . (at p353)
No sufficient cause having been shown, his Honour's order was, in my opinion, completely justified. I would dismiss the appeal, with costs. (at p353)

JUDGE2

FRANKI J. I have had the advantage of reading the judgment of C. A. Sweeney J. and I agree with his conclusion and with his reasons. So far as concerns the proper approach to adjournment applications those reasons appear to me to be in accord with the principles expressed by the High Court in E. G. & H. Nominees Pty. Ltd. v. General Mutual Insurance Co. Ltd. (In Liquidation) (1976) 50 ALJR 460 , and with the general principles referred to in The Supreme Court Practice 1976 (The White Book) at pp. 548-549 and Williams, Supreme Court Practice, (1973) 2nd ed, pp 1562- 1564. I would dismiss the appeal with costs. (at p353)

JUDGE3

ST. JOHN J. The appellant Herbert Field junior, was served with a bankruptcy notice on 23rd February, 1978, that notice having been taken out by the respondent, the Commercial Banking Company of Sydney Ltd. The appellant did not comply with the notice and a creditor's petition dated 20th March, 1978, was presented on 21st March, 1978. An application for substituted service, supported by affidavits was made and on 13th June, 1978, the learned trial judge made an order dispensing with personal service and ordering that the petition and other documents be served by delivery of them to certain addresses. (at p353)

On 25th July, 1978, the appellant executed an authority pursuant to Pt X of the Bankruptcy Act 1966 requesting one John Edward Walker to call a meeting of his creditors. By affidavit dated 26th July, 1978, the appellant deposed to the execution of the authority, annexed a copy thereto, and stated: "I respectfully ask this Honourable Court to adjourn the hearing of the petition herein pending a meeting of my creditors being held." This affidavit was apparently filed in the court on 26th July, 1978, when the appellant appeared by counsel, the creditor's petition being listed for hearing that day. (at p353)
Application was made to the learned trial judge by the appellant's counsel for an adjournment and after making inquiry as to the amount of the debts alleged the learned trial judge stated that he wished to look at some of the earlier affidavits filed in the matter. Counsel for the appellant informed the learned trial judge that he had not had the opportunity of seeing the material (the affidavits in support of the application for substituted service) and further stated that if the learned trial judge were prepared to give a preliminary indication that an adjournment would be refused, he would seek an opportunity to address on those matters. The learned trial judge then gave the history of the matter and included in that history a statement to the effect that difficulty was experienced in serving the debtor with the petition at the address at which the bankruptcy notice had been served. His Honour then said: "From the evidence filed in support of that application, a very reasonable inference can be drawn that the debtor was evading service, but I do not rely to any great extent on that fact in coming to this decision." (at p354)
His Honour then referred to the order for substituted service and the signature of the authority pursuant to s. 188 of the Bankruptcy Act. The application for adjournment and the opposition thereto was referred to and his Honour said this: "Section 306 of the Act is not applicable to this situation, but it is almost invariably the practice of the court that when a petition comes on for hearing after the execution of an authority under s. 188 but before the meeting of creditors called in pursuance of that authority, the court will adjourn the petition to enable the meeting to be held. Mr. Cramer-Roberts (counsel for the respondent) asks me to depart from this practice on this occasion, basing his application mainly upon the difficulty that has been experienced in serving the petition on the debtor and upon the lateness of his exercising his right under s. 188 to appoint a controlling trustee. The appointment, as I have said, took effect only yesterday, although the debtor has had since at latest 6th July to take that step." (at p354)
His Honour then referred to other debts alleged against the debtor and then stated that he thought that the case was one in which he should not grant an adjournment. His Honour stated further: "From the mere history of the progress of the matter and the lateness of the date on which the debtor has taken advantage of s. 188, I think the reasonable inference to be drawn is that he is merely seeking further time, staving of the evil day when something must be done about his debts, so I propose not to grant the application for adjournment." (at p354)
Counsel for the appellant then made an application for the matter to stand down in the list until 2 p.m. in order that he could obtain further instructions. His Honour then asked whether the matter to be dealt with at 2 p.m. was still the question of an adjournment and when counsel replied that it was, his Honour said words to the effect that the application had been made and that counsel for the appellant did not offer to call any evidence. Counsel repeated his request that the matter be stood down and this request was again refused. (at p354)

It is to be noted that the learned trial judge did not inquire of counsel as to the reasons for the apparent lateness of the signature of the s. 188 authority. It is noteworthy that his Honour stated that where an authority pursuant to s. 188 had been executed and the creditor's petition came on for hearing before the meeting of creditors called in response to that authority, "almost invariably" the practice of the court was to adjourn the petition. (at p355)
Clearly his Honour based his refusal of the adjournment on two factors. Firstly, material contained in the affidavits in support of the application for substituted service and secondly, upon the lateness of the execution of the authority which was ascribed to "staving off the evil day". The affidavits were not available to counsel for the appellant; they were filed in support of an ex parte application and, additionally, having seen those affidavits it is apparent that they contained hearsay material. In my view his Honour was not only not entitled to rely on their contents but was not entitled to see them nor to take into account the contents. These affidavits contained statements to the effect that process servers called at a certain address on particular days at particular times and failed to serve the documents. They also contained statements to the effect that the telephone number believed to be that of the appellant was telephoned and information was given that the appellant was present. Their content was not only not tested but was not known to the appellant's counsel. Signing the authority at a late stage was not explained in the affidavit of the appellant. His Honour did not invite an explanation but ascribed one himself on no evidence except that which was inadmissible. The appellant was probably not the draughtsman of his affidavit. He is responsible for its truth. When he employs solicitors, as he did in this case, the content of the affidavit is their responsibility and the inference that there is no reasonable explanation for the lateness except "staving off the evil day" should not readily be drawn. (at p355)
Having refused the adjournment the learned trial judge proceeded to the hearing of the petition and made a sequestration order against the appellant and ordered that he pay the petitioning creditor's costs. (at p355)
I am of the opinion that the appeal should be upheld, the sequestration order set aside, the order for costs set aside and the matter remitted to be dealt with by a single judge on the basis that such time as has elapsed since the making of the sequestration order should not affect the course of events normally following the execution of the authority pursuant to s. 188. (at p355)

ORDER

Appeal dismissed with costs.

[1978] FCA 101

07 DECEMBER 1978