Jackson, J.W. v Nat-West Finance (Australia) Ltd

Not for distribution

IN THE FEIjEPAL C0W.T OF AUSTRALIA

)

Ex PARTE:

NATIONAL WESTMINSTER FINANCE

(F-USTRALIA) LIMITED

SPENDER J.

BRISBANE

I	20 NOVEMBER, 1986.

REASOMS FOR JUDGMENT

This is an application that the hearing of a creditor's

petition be adlourned. It does have a number of quite unusual

features.

There are two associated

creditor's petitions:

one a

joint petition against Mr. & Mrs. Jackson, which petition is

I	number 788	of 1986; and the second is a petition against John
I

William Jackson solely, that petition being number

1337 of 1986.

2 .

suffices

for

present

purposes

confine

consideration to the petition against Mr. Jackson personally.

That petition is founded on a judgment of the Supreme Court o f

Queensland of

the 14th May

1986, in which judgment was obtained

against both

Mr. Jackson and his wife in default

of appearance in

a Supreme Court proceedings number 1640

of 1986.

The judgment sum and the amount in which the bankruptcy

notice issued

is $2,084,163.12. The material shows that this

debt 1s founded on guarantees given by

number of companies as

well as by John William Jackson and Maxene Susan Jackson.

The application for an adjournment was made by Sterling

Industries Llmited (Receivers and Manaqers

appomted), !"Sterling

Industries"). As will later appear, Sterling Industries is an

unsecured creditor of

Mr. Jackson to the extent

of $3,250,000.00

as a consequence of a judgment entered against him in the Federal

Court of Australia, Sydney. That order was made by

his Honour,

Mr. Justice Neaves, on 29

Aprll 1986.

By a

notice of motion

filed

court,

Sterling

Industries sought amongst other things an order that Sterling Industries "be heard in opposition to the making of a sequestration order against the estate of the debtor", an order that Sterling Industries "be granted leave to intervene in these

proceedings",

and "an order

adjourning

the

hearing

of the

petition herein.

3 .

I granted the application made by Sterling Industries to

be heard in respect of the making	of the sequestration order and
to seek the adjournment of it.

should be said that the application

Sterling

Industries to be heard was not opposed by counsel for National

Westminster Finance (Australia) Limited ("Natwest Finance").

It is clear that the maklng of

a sequestration order on

the petition of Natwest Finance would affect the rights of

Sterling Industries pursuant to its judgment

of 29

April 1986.

Section 58(3) of the Bankruptcy Act

1966 provides that:-

"Except as provlded

by this Act, after a debtor has

become a bankrupt,	it is not competent for a
creditor -

(a) to enforce any remedy agalnst

the person or

the property of the bankrupt In respect of a

provable debt; or

(bl except

with

the leave of the Court and on

such terms as the Court thinks

fit,

commence any legal proceeding in respect of

a provable debt or take any fresh step in

such a proceeding.

The making of a sequestration order

on the petition of

Natwest Finance would have

the consequence

of converting the

remedies

which

Sterling

Industrles

has

relation

its

judgment against Mr. Jackson into a right to prove in his estate

in bankruptcy.

Unlike

the

position

that

applies

a company

liquidation, there

is no requirement that the hearing

of a

creditor's petition be advertised

and, as a consequence, the

position

that,

generally,

creditors

are

unaware

that

creditor

a particular

debtor

petitioning

for

the

sequestration of the estate of that debtor.

From time to time, however, creditors do appear and seek

to be heard on whether a petition ought to

be made. The basis on

which they are heard is	a matter to which some attention should
be directed.

In Corporate Affairs Commission

v. Bradlev; Commonwealth

Australia

(Intervener)

C19747 1 N.S.W.L.R.

391, the

Commonwealth, at first instance, had been granted leave to

intervene on the hearing of whether the business name, Rhodesia

Information Centre, ought properly to be registered.

The Court of Appeal held that the Commonwealth ought not

to have been granted leave to intervene. In the Judgment of

Hutley J.A., a detailed analysis of

the clcumstances in which

intervention ought properly to occur is made. At p.396,

stated:-

"A person accepted as

an intervener becomes a party

to the proceedings with

all the privileges

of a

party.

Thus he can appeal, tender evidence and

participate fully in all aspects of the argument.

His position is quite different from that of	an
amicus curiae. Interveners have been allowed to

appeal.

Thus

the

Attorney-General

the

Commonwealth appealed to the Privy Council in

Attornev-General of the Commonwealth of Australia

The Queen (the Boilermakers' case)

(1957)

C.L.R. 529;

C19577

A.C. 288, though he was only

intervener in

v. Kirby; Ex parte Boilermakers'

Society of	Australia (1956)	94	C.L.R.	254 in the
High Court.	I'

Hutley J.A.

concluded that intervention was never permitted

common

law

and did not exist in equity unless permitted by

statute or rule.

Intervention was the rule In jurisdlctions derived from the ecclesiastical or civil law. Intervention existed by statute in the matrimonial causes jurisdiction in certain circumstances,

and also exists

in probate. Reference was made by Hutley

J .A .

the practice

the court in hearing an amicus curiae, while

reliance was also placed on the practice

of the Attorneys-General

of the Commonwelth and States intervening in constitutional

litlqation in the High Court.

In that regard, Hutley J . A .

referred to the judgment of

Dixon J.,

he then was, in Australian Railwavs Union

The Victorian Railways Commissloners (1930)	44 C.L.R. 319 at 331,
where he said:-

"I think

we should be careful to allow arguments

only in support of some right, authority

or other

legal tltle set up by the party intervening.

Normally parties, and parties alone, appear in

litlqation. But, by a very special practice, the intervention of the States and the Commonwealth as

persons

interested

has

been

permltted

the

discretion

of the Court in matters which arise

under the Constitution. The discretion to permit appearances by counsel is a very wide one; but I think we would be wise to exercise it by allowing

only those to be heard who wish to maintain some particular right. power or immunity in which they

are concerned, and not merely

to intervene to

contend for what they consider to be

a desirable

state

of the general law under the Constitution

without regard to the diminution

or enlargement of

the powers which

as States or as Commonwealth they

may exercise.

D o l l f u s Mieq

et Comparmie S.A.

v. Bank of Enqland

C19511 Ch. 3 3 , Wynn-Parry

J. held that there was jurisdiction to

permit the governments of the United States and France to be

added as defendants, as they

ad a direct interest in the subject

matter of the action and

a right nearly akin to

a proprietary

right therein, the true test being what would be the result on

the subject matter if the applicants' right could be established.

Reference was made to the three classes of cases which

are

exceptions to the general rule that

plaintiff is not

compelled to proceed against persons whom

he has no desire to

sue.

The first of those three classes is

a representative action

in which the person seeking to intervene is one of

a class that

the plaintiff claims to represent and the intervener is unwilling

I I

to be

so represented; the second class is where the proprietary

rights

the

mtervener are

directly

affected

the

proceedings;

and

the

third

class

comprises

actions

for

specific

forms of

contracts

where

third

parties

have

interest

the

question

the

manner

which

the

contracts

should

performed.

Those classes relate to Order

16 rule 1, as it then was,

of the English Practice. There is no equivalent provision in the

bankruptcy rules, but the cases show that creditors of

a debtor

have

been

permitted

heard

the

question

of the

disposition of the petition. They	fall into the second class
referred to above.

The first

of those to which

I wish to refer is Re

N.L.R.

Griffin (1929) 46 W.N.N.S.W. 25.

In that case, on

an application

under s.59 of the Bankruptcy Act

1924

for leave to withdraw a

creditor’s petition, Long Innes

S . held that:

“...circumstances may exlst when it would be proper

for the Court to allow another creditor to show

cause, or to attempt to show cause, why such leave

should not be granted, notwithstanding the absence

of any provision in the Act giving any such person

a right to be heard on

an application under the

abovementioned section.

l ‘

In Re Harris (1930) 2 A.B.C. 77, the same judge was concerned with the hearing

of a creditor’s petition, and leave to

intervene wa3 granted to another creditor whose object was the

protectlon of his o r . rights. Hi3 action resulted In no benefit

to the creditors generally. While the case was concerned with

the

proper

order sequestratlon order having been made,

costs

those

circumstances,

the

there

appears to be no

direct reference to the basis

on which

the intervention was

granted or whether, in fact, there was any contention in relation

to that issue.

Re McNamara

(1930,31)

3 A.B.C. 169,

the

actual

decision of

which was reversed by the

High Court in McNamara

Lanqford (1931) 45 C.L.R. 267,

a petition had been filed which

came on for hearing

some little time later.

A person, not the petitioning creditor.

to whom the

debtor was indebted to an amount exceedingk50, obtained leave to

appear and

file affidavits and,

if necessary, to

be heard in

support. When the petitioning creditor sought leave to withdraw,

the	application was opposed by the intervening creditor, who

sought leave to be substituted as petitioner, as provided in

s.35

of the Bankruptcv Act

1924.

Tkat application

was granted but, on appeal, the High

Court held that the person to

be substituted under

s.35 must be a

person whose debt was in existence at the date of the act of

bankruptcy alleged in the

petition.

Notwithstanding the extent

of that litigation,

no question seems to have arisen as to the

rlght of Mrs. Langford to intervene.

Finally in Re

V.H. Moss and A. Moss: Ex parte D.W.

Custer Ptv.Ltd. (1948) l4 A.B.C. 160, Counsel for the Deputy

Commissioner of

Taxation, who was a creditor of

Arthur Moss to

the extent of

a 4 0 0 0 ,

sought leave to

appear on his behalf, to

protect his interests should any question of withdrawal

of the

petition by

the petitioning creditor arise. Mansfield S.P.J.,

granted leave to

the Deputy Commissioner of Taxation to appear on

the hearing of the petition. Reliance was placed on Re N.L.R.

Griffin and

McNamara (supra). The report is silent as to

whether there was opposition and as to the precise basis on which

that leave was granted.

In granted costs in respect of

the circumstances of that case, his Honour also

the appearance of the creditor who

was not the petitioning creditor, those costs to be paid out	f
the bankrupt's estate.

l .

Tke ordinary principles that a party is entitled to be heard where his proprietary rights may be directly involved by

the making

the order sought are reflected in the cases to

which I have referred.

I am satisfied that it is not only competent but right that Sterling Industries should be heard on whether it was

appropriate to make

a sequestration order on the petition of

Natwest Finance, that order having a direct and clear relevance

to the rights

Sterling Industries under the judgment

to which

I have referred.

It is necessary to have regard to the events leading to

this present applicatlon. Those events are quite complex. They

have their orlgin in the purchase by Sterling Industries of a

number of taverns in May

1984.

It was

said in respect of those

transactions that misrepresentations and contravention of the

provisions of the Trade Practices Act

1974 had occurred and, on

10 August 1984, proceedlngs under the Trade Practices Act 1974 were commenced against NIM Services Proprietary Limited and John

William Jackson in the Federal Court in Sydney.

The trial of the

matter had been listed

for

November 1985, and was then

adjourned until

11 November 1985 on the application

Mr.

Jackson, the circumstances	of the application for adjournment
being his ill health.

On 12 November

the trial was further adjourned, and

Mr.

Jackson gave undertakings

the Court

Mareva kind,

undertaking not to dispose

of his assets and so on.

On 23 April

1 "

10.

1986, there was a motion for contempt heard by his Honour,

Mr.

Justice Sheppard, and his Honour made orders in respect of the payment of the sum of $3,000,000 into court (to which I need

later refer in some

detail).

On 29 April 1986, Mr. Justice Neaves made

an order by

consent that there be judgment against Jackson in favour of

Sterling Industries In the sum of $3,250.00.

On 30 April 1986,

Mr. Justice Beaumont made an

ex parte order that Mr. Jackson be

restrained up to and including

May 1986 from presenting a

petition against himself, pursuant to

5.55 of the Bankruptcy Act,

and that the Registrar in Bankruptcy

of the Southern District of

the State of Queensland be restrained up to and including that tlme from accepting such petltlon.

That

order

was

result

Sterling

Industries

I	learning that it was proposed, but had not yet been done, that
I	Jackson present a debtor's petltion in Brlsbane. On 2 May 1986,
the Full Court of the Federal Court granted leave to appeal from
the order of Mr. Justice Sheppard, but no stay of that order was given.

On 6	May 1986, Burchett J. further continued the order

made by

Mr.

Justice Beaumont

on 30 April (and which had been

extended) and

on that day there was default by

Mr.

Jackson in

compliance with the

$der of Mr. Justice Sheppard, as extended by,

first, Mr. Justice Beaumont and then by Mr. Justice Burchett.

11.

On 22 May 1986, Mr. Justice Woodwdrd adjourned the

motion for contempt until the decision of the Full Court in the

appeal from the order of

Mr. Justice Sheppard. The appeal

was

heard on 4

and 5 August 1986. On

5 September 1986, Mr. Justice

Burchett delivered judgment, and extended the orders restraining

Mr. Jackson from presenting his

own

petition, and from the

Registrar for the Southern District from accepting it.

The basis of that judgment, in short, was that it would

be an abuse

of process to enable

Mr. Jackson. by the mechanism of

a debtor's petition, to frustrate the orders made by Mr. Justice

I	Sheppard.
i
I

October 1986, the Full Court dismissed by

majority the appeal of

Mr. Jackson against the order of Mr.

Justice Sheppard. On

November, an appllcation for special

leave to appeal to the High Court from a Full Court judgment was

made. On

14 November, Mr. Jackson was committed for trial to

criminal courts in Queensland on charges arising out of the

events which were canvassed in the judgment

of Mr. Justice

Sheppard; that is to say, in relatlon to an alleged purchase by Mr. Jackson for $4.3 million of diamonds which, In fact, turned out to be fake.

It	is accepted that that trial will not proceed this

year, and I

am also told

from the bar table, and it is accepted

by the parties, that

on 4 December, it is anticipated that the

application for special leave to appeal to the

Hiqh Court will

heard, and that on

5 December, the motion for contempt of the

Federal Court in Sydney is listed for mention and to	fix a
hearing date.

For myself, I find

some

difficulty

these

proceedings,

which difficulty is occasioned by the fact that the contempt

proceedings have been adjourned until the determination

of the

correctness or

otherwise of the order of Mr.

Justice Sheppard.

By s.5

of the Federal Court of Australia Act 1976, the Federal

Court is

a court of

record, and the orders

of the court,

therefore, remain valid until they are set aside.

It is inimicable to the orderly and efficient discharge of the court's business if a party can disobey an order made by

the court on the basis that

he believes that it might be posslble

successfully to challenge

the validity of that order on appeal.

It cannot be that

a party is entitled not to obey

order of the court on the ground that that party believes that there may be error in the order. Until the order is set aside, it stands in full force and effect and should be obeyed. If the

appeal is successful, that does

not, in my view, affect the

obligation of the party to comply with the order in the terms in

which it was made.

If, on the other hand, such

a practice were to be

tolerated, it would mean that,

on the hearing of committal for

contempt proceedings,

a party could urge that non-compliance

was

I '

;

13.

occasioned by a genulne belief that the order was erroneous.

While I

fully appreciate that, as Mr. Justice Sheppard himself

conceded, the order that he made was of a novel kind and, as the disagreement in the Full Court indicates, there is not unanimity as to the correctness of it, in o way does the obligation of a

litigant to obey the orders of a court depend on

an assessment of

the correctness or otherwise of that order. If non-compliance of

the order is to be engaged in, it can only be as the consequence

of a successful application to stay the operation of the order,

which did not apply

in this case.

That because it is the gravamen of Sterllng Industries' applicatlon

has a real significance in these proceedings,

that the sequestration order ought not be permitted to be made because it would have the effect of

frustrating the prospect of

the sum of $3,000,000 being avallable to the general body

of the

creditors of

Mr.

Jackson if, by committal proceedings and the

coercive powers associated

or inherent in such powers, compliance

with the order of

Mr. Justice Sheppard can be

obtamed.

That coercive power of the committal proceedings, it

submitted, would be put

at risk by the making of

a sequestration

order in that Jackson GIOUld, by that order, be legally precluded

from complying with the order of

Mr. Justice Sheppard to pay the

sum of

$3,000,000

into court and, in those circumstances, the

making of

the sequestration order ought to be postponed until

reasonable opportunity

has been given to enable the committal

proceedings to be attempted to realise moneys for the benefit of

creditors.

i	.
I

14.

In that regard, reference ought to be made

to two cases:

first, in A.N.S. Nominees Ptv.Ltd. v. Beverly Manufacturinq Co. Pty. Ltd. C19797 2 N.S.W.L.R. 875, Needham J. was concerned with

an application by

a vendor for leave to issue

a writ of

sequestration

against

the

property

the

director

of the

purchaser, the purchaser having at some earlier time been wound

up for insolvency. Needham J. said at 878:-

"It is plain that sequestration is not directed to

enforcing direct compliance with the judgment or

order but is, again, a persuasive power depriving

the person bound by the ~udgment or order of his

personal property until such time as

he complies

with the judgment or the order.

In the case of c. 5(2)(c) the purpose of the rule

1s even more clear, because that subrule gives

Court a power

commit

officer

corporatlon,

the

corporatlon

being

the

person

bound by the ~udgment

or order, or to sequestrate

the

property

ofhe

officer.

1 s

the

corporation in

such a case which

is bound by the

judgment

order,

not

the

officer,

and

the

committal or sequestration of the property of the

officer, In my opinion, must be directed towards

obtaining

the

co-operation

the

officer

persuading

the

corporation to comply with its

obllgatlons under the

~udgment

order.

Rule

5(2)(c) does not substitute the officer for the

corporation as the person bound by the Judgment.

It has the effect, in my opinion, to which I have

already referred.

In those circumstances,

think that the use of

r.5	(2)(c) is limited to cases where orders made

can have the effect of enforcement of

a judgment.

If the person bound by the judgment was legally

unable to comply with it, then it seems to me the

Court would not have power to commit an officer

a corporation in such a position

under

the

provisions of r.6(2)(c). Nor would the Court have

power to sequestrate that officer's property."

In Enfield London Borouqh Council v. Mahonev

C19837 2

All E.R. 901, Mr. Mahoney had found a cross on the property of the local authority and had refused

to surrender it to that local

authority.

The court had made an order requiring him to deliver

up the cross, which

he failed to do.

In proceedings for contempt, he was adjudged guilty

serious contempt and, because the learned judge dealing with the

matter thought the severity of the sentence might coerce the

of a

defendant into changing his mind,

imposed the maximum period

of imprisonment of two years permitted under the Contempt of

Court Act 1981.

After serving nearly 12 months, it appearing that there

!	was no inclination on	the part of	Mr. Mahoney to purge hls
I I

contempt and rather, on

the contrary, he was enjoying the novelty

and attention which his case had attracted, an application to the

court for a discharge was made by the Official Receiver, on the

ground

that 12 months

imprisonment

was

sufficient

punishment

for

the contempt.

I	In the Court of Appeal, Civil Division, May	L.J. said:-
I

"As this court made clear in

Re Barrel1 Enterprises

C19727 3 All E.R. 631, C19737 1 W.L.R. 19, to

which Watkins

L.J. had referred, the reasons for

committal to custody for

civil contempt are

twofold: first, to

punish

the

contemnor

for

disobedience of an

order of the court and second,

to attempt to coerce him to comply with the

order.

He later said:-

"I therefore ask myself whether continuing custody

in so far as he is concerned will

have any

coercive effect.

I think that it

is quite clear,

16.

as Watkins

L. J. has s a i d ,

that it will not, and

that any further imprisonment of Mr. Mahoney in

this case will only enable him and his family to

continue to exploit the existing situation to

their misguided and selfish benefit."

The basis of the application for an adjournment is not the usual one, either. Ordinarily, the object

of an application

for an adjournment is ultimately to resist the making of

sequestration

order.

Usuaully,

sought

either

the

debtor, or by a creditor, or some number of creditors who desire

a course other than that of sequestration

to be followed.

In	this particular case, that is not necessarily the

position

Sterling Industries. What it seeks is that the

sequestration order not be made

now, but that the hearing

of the

application

f o r sequestration be adjourned until at least

attempt has been made, by

the commlttal process

fo r contempt, to

persuade or coerce Mr. Jackson of	disgorging In accordance with
the order of Mr. Justice Sheppard.

Sterling

Industries

asserts

that,

since

one

the

purposes

of the

coercive process of committal

1 s to enforce

compliance with the order of Mr. Justice Sheppard, it should not

be shut out at this stage. If

a sequestratin order is made, then

Jackson is precluded by law from obeying the order of Mr. Justice

Sheppard.

The powers of the court and, therefore, the likely

prospects of inducing compliance with the order

Mr. Justice

Sheppard, will be greatly circumscribed by the	makmg of	a
sequestration order.

17.

The rival contention can equally shortly be put.

That

is that realistically Jackson is not going to disgorge the sums

the subject

of the order of

Mr. Justice Sheppard, and that

unnecessary delay will, therefore, be occasioned by adjourning

the

proceedings

for

a sequestratlon

order.

Applying

the

principle that a

petitioning credltor prima facie is entitled to

the rights given to him by the BankruptCV Act 1966 and it not

being shown that Natwest Finance is acting for any improper

motive

and,

indeed,

not

insubstantial

creditor,

the

sequestration order ought to be made and the ordinary processes of the bankruptcy law, including the discovery and realisatlon of the property the divislble property of the bankrupt, should be

put into action.

That, lt

is submltted, is the better method of

securing the mterests of the creditors

of Mr. Jackson generally.

So far as Sterllng Industrles

1 s concerned, it may be

accepted that

the

making of a sequestration order affects not

only the legal rights

of Sterling Industries and

of Natwest

Finance but also the legal rights of

a l l other crditors. That is

a consequence of s.58(31a to which I have referred.

I accept that the court ought not to be concerned only with the interests of the petitioning creditor but also with

those

other

creditors.

Sterling

Industries

claims

that

"...the

real

exposure

of the

petitioning

creditor

(after

realization of the various securities which it holds, albeit not

directly from

John Wllliam Jackson) is substantially less than

the amount of the judgments, and substantially less than the

amount of the judgment obtained

by Sterling."

i .

18.

While

I accept that the amount

oi the

judgments that

Natwest Finance holds has been reduced by not an inconsiderable

sum by the realization of

a property, which has already occurred,

and will also be substantially reduced by a further property

which it holds, the material before me is not sufficient to say

the extent to which that reduction will occur, except in the most

general terms, and

I think it is fair to proceed on the basis

that, while the question of what ultimately will be the amount

properly owing uncertain, Natwest Finance from its point of view

Jackson

the

petitioning

creditor

will be a

substantial creditor of

Mr. Jackson and is properly, in its view,

seeking sequestration as being the method best suited in its

commercial interests, and not inconsistent with the general

interests of the credltors.

It M ~ S

submitted by Sterling Industries that, if an

adjournment

were refused, Jackson would be enabled to achieve

indirectly what he has been enjoined from doing directly by Mr. the hearlng did not oppose the orders sought; his words were:

“Mr. Jackson

was

certainly

not

opposing

the

making

sequestration order.“

There is not the slightest suggestion of collusion on

the part of

Mr. Jackson and the petitioning creditor, nor am I

satisfied

that

there

anything

other

than

a bona fide

assessment of its

own commercial Interests that is prompting the

petition for sequestration by the petitioning creditor. The fact

that, if the sequestration is made

on Natwest Finance’s petition,

19.

that will have a consequence much to be desired by

Mr. Jackson,

is not

a matter which, in my

view, should be prejudiclal to a

situation where otherwise it would be appropriate to grant to

Natwest Finance the relief which the Bankruptcv Act gives it.

It submission). that the prejudice to a

was uggested

(and

not

unimportant

petitioning creditor, if an

adjournment is given,

is not very great in that the petition

remains on foot

for 12 months after presentation (s.52(4)(a)) and

can be further extended (s.52(5)), and that the other creditors

are also protected by reason of the relation back period already

having commenced, (s.llS(1)).

The	question of prejudice to Natwest Flnance by the

adjournment of

its petition has troubled me

but, on balance, it

seems to me that the posslbllity of some benefit accruing to the

body

creditors

generally

from

allowing

the

committal

application to proceed without the shackles of sequestration

against Jackson is

not antipathetical to the putting into motion

of the

disciplinary and investigatory powers of

the Bankruptcy

Act after sequestration.

In a

sense, they may be viewed as complementary, and

do not think It appropriate to make a sequestration order at this

stage, since there may be something to be gained from permitting

the committal proceedings to proceed unimpeded. That is	a chance
that I think ought to be permitted to be taken.

Section 52(2) provides:-

“If the Court

1s not satislied with the proof of

any of those matters, or is satisfied by the

debtor -

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

(b)

that for other

sufficient

cause a

sequestration order ought not

to be made,

it may dismiss the petition.“

That section is not directly in point here but,

essence, the application of Sterling Industries is that the court

ought to adjourn

the hearing of the petition for sequestration

because there is sufficient cause why it ought not to be made at

this stage.

The plain view of the

petitioning creditor is that

Jackson is not going to disgorge. While that is a very real

likelihood,

I am not persuaded that that, beyond question, is

what is going to occur and, weighing up the chances

of something

happening in that respect a s against the likely prejudice to the

creditors generally of postponinq the hearing of the petition

until that avenue has been further explored,

it seems to me that,

on balance,

I ought properly to adjourn the petition.

As to what I ought properly to do, I have had regard to

a number of considerations.

In Cain v. Whyte (1933) 48 C.L.R. 639, the High Court expressed agreement with the judgment

the Supreme Court of

Queensland constituted by Henchman J..

Henchman J. had at first

instance said, (his remarks being reported

at p.646):-

“...prima facie, on proof of the matters mentioned

in s.56(2), the Court will proceed to make

order for sequestration, and that 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

21.

who are unahlp to get their debts paid to them as

they become due. Something has to be put before

the Court to outweigh those considerations before

it can be said that sufficient cause is shown

against the making of a sequestration order."

Mercantile

Credits

Limited

Foster

Clark

(Australia)

Limited C19657 A.L.R. 574, the

Full

Court

was

concerned with an appeal from a finding by the primary judge that

he had jurisdlction to make a winding up order in respect of

company; that he had a discretion in that

matter and that he

ought to exercise it against the claim for winding up.

The Full

Court of the

High Court constituted by Kitto, Taylor and Windeyer

JJ. said at 575:-

"The learned judge held that

he had jurisdiction in

the clrcumstances of the case to make a windlng up

order, and indeed no argument to the contrary

seems to have been addressed to hlm. Nor is hls

jurlsdiction questioned in thls appeal. It could

hardly be questioned, in view

of such cases as

Commercial Bank of

South Australia (1986), 33 Ch.

174, and Re Hibernlan Merchants Ltd.,

C19587

Ch.76: C19577 3 All E.R. 97. The contention to

~~~~

which the judge gave effect

was

that he had a

discretion in the matter and ought to exercise it

against the claim for a

wmding up. That he had a

discretlon is undoubted: see

S. 197; Re Channel

House Colliery Co. (1883), 24 Ch. D. 259.

But it

was

judicial discretion to be exercised in

accordance

with

established

principles.

The

leading principle is that as between himself and

the company a

creditor has a prima facle right to

a winding up order:

Re James Milward

Ft Co., C19407

Ch.333; C19407 1 All E.R. 347; Re Home Remedies

Ltd., C19437 Ch. 1; C19427 2 All E.R. 552; Re B.

Karsberq Ltd., C19553 3 All E.R. 854. It is a right which he possesses on behalf of the whole class of creditors to which he belongs: Re

Criqqlestone Coal Co., C19067 2 Ch. 327; C1904-E All E.R. Rep. 894; Re P. & J. Macrae Ltd., C19613

1 All E.R. 302,

and for that reason the wishes

the majority in value, if they are expressed, will

always be considered."

22.

In this case,

I accept that the material

does not

establish that Sterling Industries is

the majority in value of

the creditors

Jackson.

All that can be gleaned from the

material is that It I s a substantial creditor and that this is

not a case viewed as representative of the view

where Sterling Industries' application ouqht to be

of the majority of Jackson's

creditors.

In that, as their Honours said at

Mercantile Credits Limited case, the position was

576:-

"The respondent bank opposes

wlndmg

up order

precisely because thls would be the result: it

wishes to be in

a position to apply for payment

out to itself of the whole

the moneys in

court.

This is not the case here. Sterling Industries accepts that any

sums pald into court pursuant to the order

Mr.

Justice

Sheppard are funds which are available for all the creditors	of
Jackson.

As to an adjournment, s.33(l)(a) gives

to the court

very wide discretion. That sub-paragraph provides:-

"The Court may

(a) upon such terms as it thinks fit, at any

time

adjourn

any

proceeding

before

it,

either t o a fixed date

or generally;"

I n Re

Galvln (19521 16 A.B.C.

38,

a debtor had entered

Into a deed of arrangement under

Part XI1

of the Bankruptcv Act

23.

1924, following which a non-consenting creditor presented a

petition for sequestration

of his estate. This was opposed by

the trustee under the provisions of that Act, on the ground that

it was

to the advantage

of the creditors that the estate should

be administered under the deed. Clyne

J. said at 42:-

"The Court in acting under the provisions

of s.197A

has, I think, a wide discretion in the exercise

which the advantage of the creditors is not and

cannot be the sole consideration. It is difficult

to enumerate the considerations by which the Court

should

guided

upon

this

question.

obvious

that

the

interests

the

petitioning

creditor and

other creditors who have not

assented to the deed cannot be disregarded.

The

interest of the public

also

very

important

consideration.

I volved

this

consideration 1s the conduct of the debtor."

In Re Dolman & Ors.; Ex parte Elder Smith Goldsbrouqh

Mort Ltd. (1967) 10 F.L.R. 384,

Gibbs J.,

as he was then, in the

Federal Court

of Bankruptcy, held that:-

"when a debtor shows that there

a deed

arrangement under Pt.XII

of the Act and that there

are some advantages in allowing

an administration

to take place under the deed, it does not follow

that the petitlon must be dismissed unless the

petitioning

creditor

proves

that

there

are

advantages

ained

from

making

sequestration order."

At p.390, his Honour said:-

"In my opinion it is not helpful

to approach a

case

this

kind

saying

that

the

petitioning

creditor

has cast upon him the onus

of proving

that

there

would

be advantages

making

sequestration order. Clearly enough, in the first

instance, the

debtor has the onus

of showing facts

which

amount

to 'sufficient cause'

within

s.56(3)(b) why

no order should be made. When

has shown that there is

a deed of arrangement

under Pt.XI1, and that there are some advantages

in allowing an

administration to take place under

the	deed, it does not follow that the petition

24.

must be dismissed unless the petitioning creditor

proves that there are advantages

to be gained from

making

a sequestration order. The Court

has a

discretion to exercise; it is

wide discretion

and must be exercised in the light of all the

circumstances, not forgetting on the one hand that

the petitioning creditor, if

he has proved the

existence of the debt and the act of bankruptcy, has what may be called a prima facie right to a

sequestration order, and, on the other

hand, that

the fact that a majority in number and value of the creditors desires an administration under the deed is a matter to be considered, and is an

important matter if the majority is substantial.

Finally, however, the Court has to decide in what

manner the discretion should be exercised in all

the circumstances of the particular case, having

regard to the interests of the various parties and

the interest of the public (cf. Faulkner

Commonwealth (1962) 20 A.B.C.

148, at p.153; and

Re Galvin (1952)

16 A.B.C.

38, at pp.42-43."

Finally, reference can shortly be made to two further

cases. In debtor asked that the hearing of a creditor's petition against

Re Grahame; Ex parte m i t e (1940) 11 A.B.C. 141, the

him be adjourned because there was the prospective sale

certain assets which would more than cover his outstanding debts.

That

application

was

refused

because

the

evidence

was

fragmentary, uncorroborated, and there were some doubts	about,the
debtor's bona fides. Lukin J. said at 143:-

"The discretion of the court to grant adjournments

of petitions is referred to by Lord Esher M.R. in

Re Thurlow; Ex parte Official- Receiver C(1895) 1

O.B. 724 at p.7303 where. referrins to the case In

re Reed, Bowen

S1 Co. Ci1887) 19-Q.B.D. 2443 he

said: 'The result of that case is that it is

obligatory to make an adjudication of bankruptcy,

unless something exists which constitutes a good

reason for an adjournment.' See also Re Hevl, ex

parte D.P. Morqan Ltd. C(1918) 1 K.B. 452 at p-

4563

where

Swinfen

Eady

L.J.

says:

'Speaking

generally I have

formed

the

opinion

these

bankruptcy petitions are adjourned

from

time to

time much more frequently than they should be. It is in the discretion of the Court ... whether an

adjournment shall be granted

or not."'

25.

And finally, in Re

John Martvn and John Vivian Martvn: Ex parte

Capes (1929) 1 A.B.C. 176, Foster J. was dealing wlth

a petition.

Some of the creditors other than the petitioning creditor had

informal meeting where they had agreed that a deed of assignment or a Pt. XI should be accepted from the debtor. Foster J. also

referred to the observations of Lord Esher in the case to which	I
have referred. Those observations also included:-

"The result of that case is that it

1s obligatory

to make an adjudication

bankruptcy, unless

something exists which constitutes a

good reason

for an adjournment.

The power

of adjournment is

given to the Court in the largest possible terms

s.105(2) of the Bankruptcv Act,

1883, which

provides that 'the Court may at any time ad~ourn

any proceedings before it upon such terms, if any,

as it may think fit to impose.' That enactment

appears

apply

to proceedlngs

under

s.20,(1), as much

as to proceedings under any

other section, and to enable the Court, even where

the case is brought within that section, for good

reason to adjourn the proceedlngs, although in the

absence of such reason it would be bound forthwith

to adludlcate the debtor bankrupt."

Having considered the factual circumstances before him, his Honour declined the adjournment and made the sequestration

order.

The present matter is by no means clear cut.

I am of

the view that, on balance, it would better serve the interests

the

creditors

generally

the

hearing

the

petitioning

creditor's petition be adjourned so as to enable the opportunity

of the committal proceedings to be further explored without the

shackles that would attend that application if

a sequestration

order were now made. While I am anxious not to adjourn this natter indefinitely, it seems to ne that I should grant the

26.

application

f o r an adjournment and adjourn the matter to the

first bankruptcy day in February of 1987 where

I will review what

has

occurred

after

today

and

reconsider

whether

further

adjournment is appropriate.

There is one matter dealing with the assets of Mr.

Jackson with	which it is appropriate to deal and	I will now deal
with that.

Counsel

for Natwest Finance filed affidavlts by Alan

Richard Taylor, a registered trustee, and by his instructing

solicitor,

Mr. David John Edwards. That material shows that

approximately two months ago Mr. Jackson executed and signed an

authority under Pt.X of the Bankruptcy

Act 1966 appointing Mr.

Taylor controlling trustee

his estate. At that time

surrendered to Mr.

Taylor a late model Mercedes Benz, registered

number 310 NSY, which vehicle is currently located at Southside Auto Auctions at Woolloongabba and

a computer comprising C.P.U.,

terminal, high presently at Systems and Management in Fortitude Valley.

speed

prmter and V.C.R. which

located

Further, there were given into the control

of Mr. Taylor

certain pieces of office furniture which are now located at Alex

Overett Auction Centre. These chattels are incurring costs by

way

storage and, on the basis that the hearing of the

sequestration petition

is adjourned, the petitioning creditor

asks for an order that these items

of the property of Mr. Jackson

be the subject

of an order of the Court.

27.

Section 50(1) provides:-

"If, on application by a creditor, it is shown to

be	necessary in the interests of the creditors,

the Court may, at any time after the presentation

of a creditor's petition and before sequestration,

direct

Official

Trustee

specified

registered trustee to take control of the property

of the debtor and may make such orders in relation

to that property as the Court considers just."

A question may arise as to whether that merely entitles

the Court to give directions to a registered trustee in respect

of the entirety of the property of the

debtor or whether, since

the whole includes the part, it is competent for the Court to

direct a specified registered trustee to take control of

specified part of the property of the debtor constituted in this

particular case

by identified chattels.

For myself,

I think the Court does have that power. It

is obviously conducive to the purposes of the Bankruptcy Act

that, in

appropriate case, the Court preserve and maintain

property for appropriate to make an order which applies to the whole of the

possible

later

distribution.

It may

not

property of

Mr.

Jackson under

s.50(1), as this might tend to

frustrate the committal

for contempt proceedings in

a like way as

a sequestration order would. It should

be noted, however, that

sequestration vests the property in the trustee, while

an order

under 3.50 would merely direct the trustee to take control of it.

I should also refer to the general powers of courts in

bankruptcy. Section

30(1) provides:-

28.

"The Court -

(a)

has full power to decide all questions,

whether of law or of

fact, in any case

bankruptcy or any matter under Part

X or

Part XI coming within the cognizance

of the

Court; and

(b)	may make such orders (including declaratory

orders and orders granting injunctions or

other

equitable

remedies)

as the

Court

considers

necessary

for

the

purposes

carrying out

or giving effect to this Act in

any such case or matter."

While this is

a general power,

I feel confident that, either

separately or m

conjunction, ss.30(1) and

50(1) enable me to

make the order sought by the petitloning creditor.

I am satlsfied that it is necessary in the interests of

creditors that somebody take control of this specified property

because

it may be some time before the matter ultimately is

resolved, and

therefore direct that Alan Richard Taylor,

registered trustee, take control of Mercedes Benz motor vehicle, registration number 310 NSY, presently sltuated at Southside Auto

Auctions, Woolloongabba, and the computer comprising

a C.P .U.

terminal, high

speed printer and V.C.R.

situated at Systems and

Management, Fortitude Valley, which are

the chattels referred to

in paragraph

3 B of

the affidavit of David

John

Edwards, filed

today by leave, and of the items of office furniture

which are

currently situated

at Alex Overett Auction Centre, being those

items referred to in paragraph 3C of the affidavit	of David John
Edwards filed today by leave.

1 certify

that this and the 2 7 PrccediXl

pages are a true copy of the reasons	for
judgment herein of His Honour

Mr. Justice Spender 9.-

,Associ.qt?

Dated

2 01

I,J [a L

[1986] FCA 662

20 Nov 1986