Jago v Paal Frame Pty Ltd

[1989] FCA 870

JUDGMENT No. .,~..ZCJ d.?&?

IN THE FEDERAL COURT OF AUSTRALIA	)
)
NEW SOUTH WALES DISTRICT REGISTRY	) No. NG133 of 1989
1
GENERAL DIVISION	)

BETWEEN:

NOEL HAROLD JAG0

Appellant

AND :

PAAL FRAME PTY. LTD.

Respondent

COURT:  SHEPPARD, BURCHETT and HILL JJ.

DATE : 7 JUNE 1989

REASONS FOR JUDGMENT

SHEPPARD J.: This is an appeal from a judgment of a Judge of this Court (Einfeld S . ) in which his Honour decided that a sequestration order should be made in respect of the estate of the appellant, who was the debtor named in a bankruptcy petition presented by the respondent to the appeal, Paal Frame Pty. Ltd. The petition was presented on 1 December 1987. A sequestration order was made on 14 July 1988. On 5 September 1988 an application for annulment was filed, on 20 September 1988 there was a meeting of creditors, and on 8 November 1988, by consent, an annulment order was made by Einfeld J.

The petition was relisted for hearing on 5 December 1988, four days after the period of 12 months referred to in subsection

52(4) of the Bankruptcy Act 1966 had expired. The petition was adjourned until 12 December and on that day Einfeld J. made the order which is the subject of this appeal.

The principal ground on which the appellant, who has appeared in person, relies is that, the period provided for in subsection 52(4) having expired, it was not open to the Court to make a sequestration order as it did on 12 December 1988. Subsection 52(4) provides as follows:-

"52(4) A creditor's petition lapses at the

expiration of-

(a)	subject to paragraph (b), the period of 12 months commencing on the date of presentation of the petition; or
(b)	if the Court makes an order under sub-section (5) in relation to the petition - the period fixed by the order,

unless, before the expiration of whichever of those periods is applicable, a sequestration order is made on the petition or the petition is dismissed or withdrawn."

In Deputy Commissioner of Taxation v. Clyne (1984) 4 F.C.R.

156 a ~ u l l Court of this Court held that the making of a sequestration order on a creditor's petition within 12 months of the date of presentation of the petition will prevent a creditor's petition from lapsing under subsection 52(4) of the Bankruptcy Act, even if that sequestration order is subsequently set aside as beyond power by order of a superior court of record. Such setting aside does not mean that the sequestration order was a nullity but merely voidable. Their Honours pointed out that to hold otherwise would give debtors undesirable immunity in respect to a particular petition, possibly with important consequences in respect to the commencement of the bankruptcy and the assets available for distribution to creditors.

This is not a case precisely like Clyners case because there the sequestration was set aside as beyond power. Here it ceased to have effect because of the annulment, but the important point of similarity between the two cases is that in each case there had been made a sequestration order. Here the earlier sequestration order was, as I have said, made on 14 July 1988.

The making of that order took the petition out of the ordinary provisions of subsection 52(4) which require the sequestration order, unless the time is extended, to be made within a period of 12 months from the presentation of the petition. His Honour took the view that it was open to him, in the circumstances, to make an order that the period at the expiration of which the petition would lapse be 16 months from the date of its presentation. In making that order his Honour

acted pursuant to subsection 5 2 ( 5 ) of the Act.

I have reservations whether it was open to his Honour to take that course and it does not appear to me that the case was an appropriate one for the application of the slip rule, which his Honour also applied, but it seems to me that the case is clearly covered by Clynels case and that there is no reason for us not to follow that case.

In those circumstances, I have reached the conclusion that the appeal should be dismissed. The orders I would propose, however, would be that his Honour's orders be varied by omitting from the orders made by him order 1, which provided for the extension of time, but that otherwise his Honours orders stand.

BURCHETT J.: I agree.

HILL J.:  I also agree.

MR. CRAMER-ROBERTS: If your Honours please.

SHEPPARD J.: Before I formally make the orders could I just say this. We have been informed by the debtor this morning that he is in a position to pay out his unsecured creditors, partly with moneys that he has already in hand and partly with moneys that he is able to borrow from either the existing mortgagee of his property or from another financial institution. We have been informed by him that there is a caveat by the Official Trustee in Bankruptcy on the title to the property, which is his principal

asset, and that steps, as he understands it, are being taken to	sell that property. If what the debtor has informed us about his
financial affairs is correct, and we have no means of knowing whether what he has said is precisely correct or not, it would seem to me, to be a pity if the property has to be sold for the $30,000 or so which appears to be the amount of his unsecured liabilities. We should not give advice from the bench, but it would seem wise for the debtor perhaps to consult a solicitor in Taree for the purpose of seeing whether or not there cannot be arranged with the trustee some composition or other proposal whereby the debts can be paid out, the caveat withdrawn and the property saved from sale.
We, of course, have no power to interfere in the matter. It is not for us and, as I have said, it depends very much upon the view of the facts put to us by the debtor being correct; but it would seem that it would be in the interests of creditors as well as the debtor for such a scheme to be worked out, if it could be. Their money is likely to be paid to them very much more quickly than it would be in the ordinary course of the administration of an estate. However, what I have said in that regard is by the way.

The orders which we make are:-

1. The appeal be dismissed.

2.   The orders made by his Honour be varied by deleting therefrom order 1, but that otherwise the orders made by his Honour stand. Mr. Cramer-Roberts, do you say anything about costs?

MR. CRAMER-ROBERTS: Yes, your Honour, I will just get	instructions. I am instructed to seek an order for costs, your
Honour.
SHEPPARD J. : Well, then costs, Mr. Jago, I am afraid must follow the event. We cannot do anything about that, I am af raid, so that there will be added to the orders, an order that the appellant pay the respondent's costs of the appeal. If there is
nothing more we will adjourn.

pages are a true copy of the reasons for	I certify that this and the 5 preceding
judgment herein of The Honourable Mr. Justice Sheppard

L W Associate

Dated 3 / 99