Grofam Pty Ltd v Australia and New Zealand Banking Group Ltd
[1993] FCA 374
•04 JUNE 1993
ALFRED CONAMORE SHEEDY also known as JACK SHEEDY
Ex parte: COOPERS and LYBRAND (a firm)
No. P2056 of 1992
FED No. 374
Number of pages - 12
Bankruptcy
COURT
IN THE FEDERAL COURT OF AUSTRALIA
BANKRUPTCY DISTRICT OF THE STATE OF QUEENSLAND
GENERAL DIVISION
Neaves J(1)
CATCHWORDS
Bankruptcy - Application to set aside bankruptcy notice - Bankruptcy notice founded on final judgment obtained in Magistrates Court of Queensland - Judgment obtained after consideration of merits but in absence of debtor - Applications to set aside judgment dismissed by Magistrates Court, District Court of Queensland and Supreme Court of Queensland (Court of Appeal) - Whether at time of application for issue of bankruptcy notice execution of the judgment had been stayed.
Bankruptcy - Creditor's petition - Petition based on judgment debt - Applications to set aside judgment dismissed by Magistrates Court of Queensland, District Court of Queensland and Supreme Court of Queensland (Court of Appeal) - Whether the circumstances such that Federal Court in exercise of its discretion should "go behind" the judgment.
Bankruptcy Act 1966 (Cth), s.41(3)(b)
Magistrates Courts Rules, rr.145, 234(1)
Re a Debtor (1908) 1 KB 344
Re Browbank and Miller; Ex parte Loniplus Pty Ltd (1985) 12 FCR 254
HEARING
CANBERRA, 10 May 1993
#DATE 4:6:1993
Counsel for the petitioning creditor: Mr R. Derrington
Solicitors for the petitioning creditor: Carter Newell
Counsel for the debtor: Mr P. Hackett
Solicitors for the debtor: Stokes and Panettiere
ORDER
THE COURT:
1. Orders that the application to set aside the bankruptcy
notice issued on 13 March 1992 be dismissed.
2. Makes a sequestration order against the estate of the
debtor.
3. Orders that the petitioning creditor's costs, including any
reserved costs, be taxed and paid in accordance with the provisions of the Bankruptcy Act 1966 (Cth), the costs of the debtor's application to set aside the bankruptcy notice issued on 13 March 1992 being treated, for the purposes of s.109(1)(a) of the said Act, as costs of the petition.
Note: Settlement and entry of orders is dealt with in rule 124 of the Bankruptcy Rules.
JUDGE1
NEAVES J On 1 September 1992 Coopers and Lybrand ("the creditor") presented a creditor's petition seeking the making of a sequestration order against the estate of Alfred Conamore Sheedy also known as Jack Sheedy ("the debtor"). The petition alleges that the debtor was, at the date of the commission of the act of bankruptcy specified in the petition, ordinarily resident in Australia. It further alleges that the debtor is justly and truly indebted to the creditor in the sum of $9,544.93 "for services requested and rendered for which sum judgment was obtained in the Magistrates Court of Queensland held at Brisbane on the 23rd day of January 1991". The petition further alleges that the creditor does not, nor does any person on the creditor's behalf hold any security over the property of the debtor for payment of the amount of the debt.
The act of bankruptcy on which the petition is founded is the failure of the debtor on or before 27 April 1992 to comply with the requirements of a bankruptcy notice issued on 13 March 1992 and served on the debtor on 13 April 1992 or to satisfy this Court or other court exercising federal jurisdiction in bankruptcy that he had a counter-claim, set-off or cross demand of the kind referred to in s.40(1)(g) of the Bankruptcy Act 1966 (Cth).
The petition was served on the debtor on 10 September 1992. It was listed for hearing on 14 October 1992, 16 December 1992 and 4 February 1993. On each occasion the hearing was adjourned because of a proceeding between the parties that was then pending in the Supreme Court of Queensland (Court of Appeal). The petition was again listed for hearing on 21 April 1993 on which occasion the hearing was again adjourned until 10 May 1993. On 19 April 1993, the debtor had given notice that he intended to oppose the petition. On the same day, an application was filed on behalf of the debtor for an order setting aside the bankruptcy notice.
The bankruptcy notice was founded on a final judgment obtained by the creditor against Jack Sheedy in the Magistrates Court of Queensland held at Brisbane on 23 January 1991. It is common ground that the Jack Sheedy named in the judgment is identical with the debtor named in the bankruptcy notice and in the petition. The judgment was for $9,544.93. The application for the issue of the bankruptcy notice was filed on 12 March 1992 and stated that, at the time of the making of the application, execution of the judgment had not been stayed. A statement that execution of the judgment had not been stayed also appears in the bankruptcy notice itself. The bankruptcy notice required compliance with its terms within 14 days after service of the notice upon the debtor, excluding the day on which service was effected.
To understand the issue that arises upon the application to set aside the bankruptcy notice, it is necessary to refer to the circumstances in which the judgment on which the bankruptcy notice was founded was obtained.
On 22 November 1989, a plaint was filed in the Magistrates Court on behalf of the creditor as plaintiff against Jack Sheedy as defendant. The defendant was described as being of 183 Orangegrove Road, Coopers Plains in the State of Queensland. Particulars of the claim were expressed in the following terms:
"The plaintiff claims the sum of eight thousand dollars ($8,000-00) for professional services rendered by the plaintiff to the defendant at the defendant's request in this district 28th January 1988 and 31st December 1988 inclusive together with interest at the rate of 12% pursuant to the Common Law Practice Act 1867 as amended and costs. Particulars of the claim have been forwarded to the defendant."
It is common ground that the plaint came to the notice of the debtor on 16 December 1989 by being left at 179 Dunedin Street, Sunnybank.
On 5 January 1990, the debtor, acting in person, entered an appearance to the plaint and gave notice that be intended to defend the proceedings on the following grounds:
"1. Not indebted as charged.
2. Not engaged their professional services.
3. No particulars of (sic) ever received."
The debtor failed to complete the part of the printed form that provided for an address for service on the defendant to be specified. Nor did he make any notation on the form that the address shown on the plaint was not his correct address.
A judgment summons dated 25 October 1990 was issued out of the Magistrates Court on behalf of the creditor pursuant to r.145 of the Magistrates Courts Rules. The summons called upon the debtor to show cause before the Court why the creditor should not be at liberty to enter judgment forthwith for the amount claimed (with interest) and costs. The judgment summons was supported, inter alia, by the affidavit of Christopher Harold Lowe, an accountant in the employ of the creditor, sworn on 25 October 1990. Mr Lowe deposed that, in his belief, there was no defence to the action. The affidavit also stated that on 25 November 1988 he, the deponent, had attended upon the debtor "who requested the professional services of the (creditor) as Accountants" and that those services had been provided between 25 November 1988 and 31 December 1988.
Difficulty was experienced in serving the debtor with the judgment summons and supporting affidavits. Attempts, all unsuccessful, were made to serve the debtor personally at 179 Dunedin Street, Sunnybank and 203 Bunya Road, Ferny Hills and by post in envelopes respectively addressed to the debtor, Post Office Box 21, Annerley and to the Principal Officer, Sheedy Holdings Pty Ltd, care of Roy Zaghini and Associates, 1st Floor, Building 1, Terrace Office Park, 527 Gregory Terrace, Fortitude Valley. The latter address was said to be the registered office of Sheedy Holdings Pty Ltd, a company controlled by the debtor. The Principal Officer was requested to forward the enclosed documents to the debtor or inform the writer of the debtor's address.
By application dated 28 November 1990 pursuant to r.70 of the Magistrates Courts Rules, the creditor applied to the Magistrates Court for an order for substituted service of the judgment summons. That application was heard on 11 December 1990 by Mr Webster SM and an order for substituted service made. On 13 December 1990, pursuant to that order, a sealed copy of the judgment summons and a copy of the supporting affidavits were sent by certified mail to the debtor at 203 Bunya Road, Ferny Hills. Paul Stuart Morris, an articled clerk in the employ of the creditor's then solicitors, deposed, in an affidavit sworn on 20 December 1990, that as at that date the certified mail had not been returned by Australia Post.
On 20 December 1990, the Magistrates Court (Mr O'Donnell SM), after consideration of the evidence placed before it on affidavit by the creditor, expressed itself as being satisfied that the defence did not disclose such facts as were sufficient to entitle the debtor to defend the proceedings. An order was made, pursuant to r.145(2) of the Magistrates Courts Rules, authorising the creditor to enter judgment in the sum of $9,544.93. Judgment was entered accordingly on 23 January 1991.
On 5 November 1991, the solicitors then acting for the creditor wrote to the debtor care of Isla House, 183 Juliette Street, Greenslopes. The letter referred to the judgment entered on 23 January 1991 and informed the debtor that the solicitors had received instructions to institute bankruptcy proceedings against him unless within 7 days he discussed the matter with the creditor's agents, Commercial Collections Services Pty Ltd. The solicitors added that, unless such discussions eventuated, their instructions were to make an application for an order for substituted service of bankruptcy proceedings against the debtor. A bankruptcy notice had, apparently, been issued against the debtor on 26 August 1991.
The receipt of the letter dated 5 November 1991 prompted the debtor to consult a firm of solicitors and instruct them to apply to the Magistrates Court for an order that the judgment entered on 23 January 1991 be set aside. Such an application, dated 28 November 1991, was subsequently filed. Prior to that application being filed, correspondence had been entered into between the solicitors for the parties. By letter dated 18 November 1991, the solicitors for the creditor said:
"We are obtaining further instructions from our client in relation to the matter generally and will recommend that our client allow Mr Sheedy a period of seven days from the date hereof to bring the envisaged application. If your client fails to file and serve an application to set aside the judgment we expect to have our client's instructions to proceed with an application for substituted service of the Bankruptcy Notice along with appropriate costs orders."
The bankruptcy notice referred to was that issued on 26 August 1991.
In an affidavit sworn on 28 November 1991 in support of the application to set aside the judgment, the debtor asserted that he had not seen, received or had brought to his attention prior to 27 November 1991 any of the documents filed in the Magistrates Court on behalf of the creditor other than the plaint. He said that during the period 2 November 1990 to 25 January 1991 he had not resided at any of the addresses at which service of documents had been attempted nor had he maintained Post Office Box 21 at Annerley. He said that he had received no documents in respect of the proceedings from his former solicitor, Mr Roy Zaghini. He also stated that, although certain meetings had taken place between 25 November 1988 and January 1989 at which he, one Chris Derrick whom he described as being of LRL Constructions Pty Ltd and Mr Lowe representing the creditor were present, he had not requested the creditor to provide professional services to him as accountants and denied that he had received from the creditor any invoice or interim account in respect of such services. The debtor further stated that the meetings to which he referred were "called to discuss a proposal by LRL Constructions Pty Ltd and a company associated with me (the debtor) to purchase the Brumby's Bakery business, the holding company of which had been placed into receivership by Tricontinental".
The application to set aside the judgment was opposed by the creditor. Affidavits were filed on the creditor's behalf disputing the essential facts concerning liability to which the debtor had deposed in his affidavit sworn on 28 November 1991. Included in the affidavits so filed were the affidavit of Christopher John Derrick sworn on 5 December 1991 and the affidavit of Christopher Harold Lowe sworn on 6 December 1991.
On 6 December 1991, the Magistrates Court (Mr Pascoe SM) dismissed the application to set aside the judgment on the ground that the Court had no jurisdiction to do so.
On 23 December 1991, a further application was filed in the Magistrates Court on behalf of the debtor for an order setting aside the judgment entered on 23 January 1991 or, alternatively, for an order extending the time within which to make such an application. The application was dismissed by Mr Wilkie SM on 29 January 1992.
The debtor, having obtained an extension of the time within which to appeal, appealed to the District Court of Queensland from the decision of Mr Pascoe SM of 6 December 1991. He also appealed to that Court from the decision of Mr Wilkie SM of 29 January 1992. The notice of appeal was filed on 18 February 1992.
As has already been mentioned, the bankruptcy notice which the debtor seeks to have set aside was issued on 13 March 1992 and was served on the debtor on 13 April 1992.
By letter dated 23 April 1992 the solicitors for the creditor wrote to the solicitors for the debtor concerning the debtor's appeal to the District Court. The letter was in reply to correspondence which is not in evidence. The letter contained the following paragraphs:
"As you are aware the Notice of Appeal filed by your firm on behalf of Mr Sheedy is some 2 months old, and no action has been brought to determine your client's appeal.
Our client has instructed us, without prejudice to its rights under the (indecipherable) Notice, not to proceed with the Notice until the appeal has been determined."
The reference to "the Notice" appears to be a reference to the bankruptcy notice issued on 13 March 1992.
The matter came before the District Court (Boulton DCJ) on 29 July 1992, the debtor being represented by counsel. Judgment was delivered on 14 August 1992 dismissing the appeal. His Honour held that Mr Pascoe SM was correct in finding that he had no jurisdiction to entertain the application at least so far as any express power contained in the Magistrates Courts Rules was concerned. While there was an express power in those rules to set aside a default judgment where a defendant does not appear at trial, no such power was expressly conferred in respect of a summary judgment given in the absence of the defendant. In the former case, as his Honour observed, a consideration of the merits was not involved whereas the latter case did require the merits to be considered. His Honour went on to consider whether the case fell within the inherent power of the Magistrates Court to set aside a judgment entered irregularly or in bad faith. After examining the material before the Court, Boulton DCJ concluded that no ground for the exercise of that power had been established.
From that judgment the debtor appealed, by leave, to the Supreme Court of Queensland (Court of Appeal) by notice of appeal dated 9 September 1992.
A letter dated 18 September 1992 was addressed by the solicitors for the creditor to the solicitors for the debtor in reply to a letter from the debtor's solicitors dated 7 September 1992 which is not in evidence. The letter dated 18 September 1992 contained the following statement:
"Due to the receipt of your client's Notice of Appeal, our client submits to undertake not to advance the bankruptcy proceedings pending resolution of this matter. It should be stated that our client has only given the undertaking not to advance the bankruptcy proceedings on the basis that your client proceeds swiftly with its appeal proceedings. Should any delay be evidenced in these proceedings, our client will not hesitate to recommence action under the bankruptcy proceedings."
The appeal was heard on 4 March 1993 by Pincus, Davies and McPherson JJA. The debtor was represented on the hearing of the appeal by senior and junior counsel. Judgment was delivered on 11 March 1993 dismissing the appeal with costs.
The Court of Appeal concluded that it was inappropriate to decide the question raised by counsel for the debtor as to the jurisdiction of the Magistrates Court to set aside a summary judgment given under r.145 of the Magistrates Courts Rules because the Court was of opinion that, even if the Magistrates Court had jurisdiction to set aside the judgment, the judgment should not, as a matter of discretion, be set aside. Their Honours said:
"That is, the appeal must fail on the merits and we, therefore, say nothing as to the strength or the validity of the arguments advanced for the appellant on the jurisdictional point."
Having referred to the nature of the claim by the creditor and to the efforts made to serve the various documents on the debtor and to ensure that they came to his notice, the Court noted that the difficulty was caused by the debtor not having given an address for service. The Court inferred from the evidence, before it that the failure to do so was deliberate, the Court expressly stating that that conclusion was strengthened by the circumstance that the debtor had evaded service of the plaint. Their Honours added:
"If it was true, as the appellant asserts, that he had no notice of the judgment summons, that circumstance was due to his failure to give an address for service, which failure, one could only infer, was part of his policy of evasion."
The judgment continued:
"In our view, the circumstances to which we have already referred would, in themselves, have made it right to dismiss the appellant's application to set aside the judgment against him. In determining the application on the merits, the Magistrates Court would and should, in our opinion, have taken into account against the appellant that his proposed defence to the respondent's suit had a thin and technical appearance. It was not in issue that the respondent had done work in relation to a business proposal in which were involved a company called LRL Constructions Pty Ltd and what the appellant's affidavit rather coyly calls 'a company associated with me'. That company, we were informed by the appellant's counsel, was Sheedy Holdings Pty Ltd, mentioned above. The appellant's defence was to be that he did not himself engage the respondent to do any work for him; he 'was always under the impression' that LRL Constructions Pty Ltd would not be charged, either. The contemporaneous documents before the Magistrates Court recording the work which the respondent did give no support to either proposition. The documents mention the appellant himself as being in the process of 'putting together a consortium' to achieve a purpose discussed in them and consistently refer to him, not to Sheedy Holdings Pty Ltd. It does not appear that any challenge was made to the authenticity of those documents. In our opinion, it would not have been a proper exercise of discretion on the part of the Magistrates Court to set aside the judgment entered pursuant to r.145, if it had jurisdiction to do so. The appeal must therefore be dismissed, with costs."
On 19 April 1993, a further application was made by the debtor to the Magistrates Court for an order setting aside the judgment entered on 23 January 1991. That application was dismissed by Mr Sullivan SM on 7 May 1993.
On 5 May 1993, yet another application had been made by the debtor to the Magistrates Court to set aside the judgment but that application did not proceed.
The ground upon which it was contended on behalf of the debtor that the bankruptcy notice should be set aside was that its issue was precluded by s.41(3)(b) of the Bankruptcy Act 1966 (Cth) which relevantly provides:
"(3) A bankruptcy notice shall not be issued in relation to a debtor:
(a) ....
(b) if, at the time of the application for its issue, execution of the judgment or order to which it relates has been stayed; or
(c) ...."
It was submitted that the execution of a judgment or order "has been stayed" within the meaning of that expression in s.41(3)(b) not only where at the relevant time a formal curial order to that effect has been made but also when, in the words of Fletcher Moulton LJ in Re a Debtor (1908) 1 KB 344 at p 349, "there are circumstances under which the Court would, if applied to, prevent the issue of execution". To support the proposition that such circumstances were present at the time of the application for the issue of the bankruptcy notice in this case, viz 12 March 1992, counsel for the debtor relied upon r.234(1) of the Magistrates Courts Rules and upon the fact that, as at 12 March 1992, the debtor's appeal from the decisions made in the Magistrates Court on 6 December 1991 and 29 January 1992 dismissing applications to set aside the judgment on which the bankruptcy notice was founded was pending in the District Court. As has already been stated, the relevant notice of appeal had been filed on 18 February 1992.
At the material time r.234(1) of the Magistrates Courts Rules provided:
"If at any time it appears to the satisfaction of a Court, by oath or otherwise, that the judgment debtor in any proceeding is unable from sickness or other sufficient cause to pay and discharge the amount for which judgment has been recovered against him, or any part or instalment thereof, the Court may suspend or stay the judgment or any execution issued in the proceeding for such time and upon such terms as it thinks fit, and so from time to time until it appears, by the like proof as aforesaid, that the cause of inability has ceased."
It was contended that, pending the hearing of the appeal to the District Court, the debtor would have been entitled to a stay under that rule if a stay had been sought. This was said to be sufficient to bring the case within s.41(3)(b) of the Bankruptcy Act. In this regard, reliance was placed on the judgment of Beaumont J in Re Browbank and Miller; Ex parte Loniplus Pty Ltd (1985) 12 FCR 254. The submission made on behalf of the debtor went so far as to assert that, in the circumstances of this case, s.41(3)(b) of the Bankruptcy Act precluded the issue of a bankruptcy notice founded on the judgment entered on 23 January 1991 from 18 February 1992 when the appeal to the District Court was instituted until the expiration of the period within which the debtor might appeal from the decision of Mr Sullivan SM given on 7 May 1993. This assertion was based on the contention that, during the whole of that period, the debtor would have been entitled to orders staying the execution of the judgment entered on 23 January 1991 if he had made applications to the Magistrates Court and the District Court for such orders.
The words of Fletcher Moulton LJ on which the debtor relied must be read in their context. The full paragraph in which those words appear reads as follows (see the report, p 349):
"The extremely able argument of Mr Hogg raised all the points that could be raised on behalf of the respondent in this case and did so in a way which has much assisted me in common with the other members of the Court. He relies on the bare language of s.4, sub-s.1(g), of the Bankruptcy Act, and says that this bankruptcy notice was good because the creditor had obtained final judgment, and execution had not been stayed upon it. There might have been a question as to whether those words are to be taken in their strictest literal sense, i.e., whether they refer solely to a formal stay by order made in chambers or in Court suspending the right to enforce execution. But Mr Hogg very properly felt that he could not press it so far as that. He admitted that by taking the bill in the present case his client had suspended during the currency of the bill the right to issue execution, and that this operated to prevent his serving a bankruptcy notice by reason of its bringing him within the words 'execution having been stayed,' although no formal stay had been ordered at chambers. In other words, when there are circumstances under which the Court would, if applied to, prevent the issue of execution, those circumstances may bring the case within the interpretation which the Court has put upon the words 'execution having been stayed.' So we start the consideration of this question with the admission on both sides that execution may be stayed so as to prevent a bankruptcy notice being served under s.4, sub-s.1(g), even though no formal stay has been made in chambers."
What his Lordship said must also be read in the light of the issues with which the judgment was concerned. Before the issue of the bankruptcy notice on which the creditor relied -
. the debtor had accepted a bill of exchange drawn by the creditor for the balance of the judgment debt then outstanding;
. the creditor had indorsed the bill in blank and handed it to his bankers, his account with the bank being then overdrawn; and
. the bill had been dishonoured at maturity but was still held by the bank.
Shortly after the debtor had failed to comply with the requirements of the bankruptcy notice, the bill was handed back to the creditor by the bank.
The three members of the Court of Appeal found that what had been done operated as an agreement by the creditor not to enforce the judgment not only during the currency of the bill but so long as the bill was outstanding in the hands of a third party. As appears from the passage cited from the judgment of Fletcher Moulton LJ, the creditor conceded that his right to issue execution on the judgment had been suspended during the currency of the bill. The issue was whether that suspension came to an end when the bill became overdue. On the basis of its finding, the Court concluded that the creditor had, by his conduct, placed himself in a position where, at the date of the issue of the bankruptcy notice, he could not issue execution on the judgment and that the bankruptcy notice was, therefore, not validly issued.
In Re Browbank and Miller; Ex parte Loniplus Pty Ltd (supra), Beaumont J set aside a bankruptcy notice founded on a default judgment obtained by the creditor in the District Court of New South Wales, a judgment which the debtors contended had been entered irregularly. The irregularity relied upon was that the Court had allowed judgment to be entered notwithstanding that a notice to plead facts had been filed and served. The debtors had made no attempt to have the judgment set aside and, as his Honour held, had not established any agreement on the part of the creditor not to enforce the judgment on which the bankruptcy notice was founded. The ground on which the bankruptcy notice was set aside appears from the following passage in his Honour's judgment (see the report at pp 255-6):
"...the discretion given to the District Court by s.156(3) of the District Court Act 1973 (NSW) will be exercised 'where the applicant for a stay demonstrates a reason or an appropriate case to warrant the exercise of discretion in his favour': see Alexander v Cambridge Credit Corporation Ltd (1985) 10 ACLR 42 at 50. In the present circumstances, in my view, the debtors have made out a case for the intervention of the District Court by granting an interim stay of execution pending their application to set aside the judgment on the ground that it had been irregularly entered. If such an irregularity or a breach of good faith were established, the debtors would be entitled to a permanent stay or alternatively, to have the judgment set aside: see Ritchie's Supreme Court Procedure, (NSW), at p 2856. But, short of a permanent stay, I think that, on the material then available, the debtors would have been entitled to a temporary stay pending the hearing of their application to set the judgment aside. It follows, in my view, that for the purposes of s.41(3)(b), execution of the judgment should be treated as if stayed. The notice is therefore bad and will be set aside."
The factual situation which was before Beaumont J is clearly distinguishable from the factual situation in the present case. The judgment on which the bankruptcy notice considered in that case was founded was a judgment entered by default, not a summary judgment entered after a consideration of the merits, and there was clear evidence before the learned judge that the judgment was entered irregularly. In the present case, it would not, in any opinion, be open to the debtor to have the judgment set aside on the ground of procedural irregularity, the judgment not being a default judgment but a judgment entered after consideration of the merits by the Magistrates Court.
In my opinion, the decisions upon which the debtor relied do not support the conclusion that, in the circumstances of the present case, the issue of the bankruptcy notice was precluded by the provisions of s.41(3)(b) of the Bankruptcy Act. Clearly, no order had been made granting a stay of execution of the judgment upon which the bankruptcy notice was founded. Indeed, no application for such a stay had been made. Further, there is nothing in the evidence to found even a suggestion that, in terms of the decision in Re a Debtor (supra), the creditor had, by its conduct, placed itself in a position where, at the time of the application for the issue of the notice, it could not issue execution on the judgment. Whatever may have been the effect of the letter dated 23 April 1992 written by the solicitors for the creditor to the solicitors for the debtor, the relevant extract of which is set out above, that letter was not sent until after the issue and service of the bankruptcy notice. It should also be said that, whatever be the width of the power conferred by r.234(1) of the Magistrates Courts Rules, I am not satisfied that the Magistrates Court would have granted a stay of execution of the judgment on which the bankruptcy notice was founded on the ground that an appeal to the District Court was pending, not from that judgment (which had been entered after a consideration of the merits), but from a judgment dismissing, for want of jurisdiction, an application to set aside that judgment.
It follows that, in my opinion, s.41(3)(b) of the Bankruptcy Act provided no impediment to the issue of the bankruptcy notice. Although the submissions put on behalf of the debtor rested solely upon the terms of that provision, I have not overlooked that in Re Moss; Ex parte Tour Finance Ltd (1968) 13 FLR 101 Gibbs J (as he then was), speaking of ss.40(1)(g) and 41(3)(b) of the Bankruptcy Act and the prescribed form of bankruptcy notice (see Bankruptcy Rules, r.8 and Form 4), said at pp 103-4 (emphasis added):
"The effect of these provisions is that if at the time of the issue or the service of the notice the execution of the judgment on which the notice is founded has been stayed, and the stay is still in force, so that at that time the creditor is not entitled immediately to issue execution on the judgment, the notice will be bad."
In the present case, however, there was no relevant change in the situation that obtained at the time of the application for the issue of the bankruptcy notice and that which obtained at the date of its service on the debtor.
The application to set aside the bankruptcy notice is, therefore, dismissed.
In opposing the petition, it was submitted on behalf of the debtor that this Court should exercise its discretion and "go behind" the judgment on which the creditor relies in order to determine whether it was in truth and reality founded on a debt of the requisite amount then due and owing by the debtor to the creditor: Corney v Brien (1951) 84 CLR 343: Wren v Mahony (1972) 126 CLR 212; Olivieri v Stafford (1989) 24 FCR 413: Emerson v Wreckair Pty Ltd (1992) 109 ALR 539.
In my opinion, this is not an appropriate case in which this Court should go behind the judgment of the Magistrates Court. I have reached that conclusion on the basis of the curial history of the matter to which reference has been made earlier in these reasons. This is not a case, like many of the cases in this area of the law, where judgment was entered in default of appearance or defence. The judgment was entered only after the Magistrates Court satisfied itself, upon a consideration of the affidavit evidence placed before it by the creditor and the grounds of defence advanced by the debtor, that the defence did not disclose such facts as were sufficient to entitle the debtor to defend. The case for going behind the judgment would clearly have been stronger if the decisions of the District Court and the Court of Appeal had been limited to the question whether the Magistrates Court had jurisdiction to set aside a judgment entered in such circumstances. However, neither the District Court nor the Court of Appeal confined their consideration of the matter to that question. Relevant extracts from the judgments are set out above. In the light of the conclusions expressed by the Court of Appeal, a very strong case would have to be established to justify this Court embarking upon what would amount to a re-hearing of the issue upon which that Court expressed a considered view. The Court of Appeal, not this Court, was the appropriate forum in which to review the correctness of the judgment entered on 23 January 1991.
It is, however, necessary to refer to the submission on behalf of the debtor that there is material before this Court additional to that which was before the District Court and the Court of Appeal. That material was said to be contained in two affidavits. The first was an affidavit of the debtor sworn on 28 July 1992 in connection with the proceedings in the District Court but which was said not to have been received in evidence by that Court. It was an affidavit in reply to an affidavit sworn by Christopher Harold Lowe on 10 July 1992. The second affidavit was an affidavit of Melissa Jane Hamilton, an articled clerk in the employ of the creditor's solicitors, sworn on 27 April 1993. That affidavit referred to the discovery in the offices of the former solicitors for the creditor of an envelope containing the judgment summons and supporting affidavits which had been sent by certified mail pursuant to the order for substituted service made on 11 December 1990 and which had been returned unclaimed to the creditor's then solicitors.
I am satisfied that, although the particular affidavits were not before the Court of Appeal, it had before it the substance of the matters deposed to in the debtor's affidavit sworn on 28 July 1992. It also had before it an assertion by the debtor that the means of substituted service directed by the Magistrates Court were not effective to bring the judgment summons and the supporting affidavits to his notice. It is clear from a reading of the judgment of the Court of Appeal that it would not have reached a different conclusion had the particular affidavits to which the debtor refers been included in the material before it.
One further matter should be mentioned. The creditor's petition bears the words "SIGNED by the Petitioner" but it was in fact signed not by or in the name of the petitioner but by Christopher Harold Lowe without any description of the capacity in which he signed the document. I accept that Mr Lowe was at the time a partner in the firm of Coopers and Lybrand and that he was authorised by the petitioner to sign the petition on its behalf. I regard the inaccuracy in the attestation clause of the petition as an irregularity within the meaning of that expression in s.306(1) of the Bankruptcy Act which, in the circumstances, does not invalidate the proceedings. Counsel for the debtor raised no objection to my treating the matter in that way.
I am satisfied that the debtor committed the act of bankruptcy specified in the petition. I am satisfied with the proof of the other matters of which s.52(1) of the Bankruptcy Act requires proof. I note that Robert Burns, a registered trustee, has consented to act as the trustee of the estate of the debtor. I make a sequestration order against the estate of the debtor. I order that the petitioning creditor's costs, including any reserved costs, be taxed and paid in accordance with the provisions of the Bankruptcy Act, the costs of the application to set aside the bankruptcy notice being treated, for the purposes of s.109(1)(a) of the Act, as costs of the petition.
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