Johnson, K & D.

[1987] FCA 57

CATCHWORDS

BANKRUPTCY - application €or annulment - meanlng of

"sequestratlon order ought not to have been made" -

dlstlnctlon between facts exlstlng at time of sequestratlon

order and facts later comlng Into existence - exerclse of

dlscretlon to annul the bankruptcy.

Re Scott (1975 6 A.L.R. 558

Re Grlfflths; Ex parte Huntley (1892) 3 B.C. (N.S.W.) 6

RE: KENNETH JOHNSON and DIANNE JOHNSON

NO. W 1746 OF 1986

Jackson J.

Sydney

5 February 1987

3

IN THE FEDERAL COURT OF AUSTRALIA	)
1

GENERAL	DIVISION	1
)

BANKRUPTCY DISTRICT OF THE STATE OF ) NO. W 1746 Of 1986

)

NEW SOUTH WALES AND	1
)

THE AUSTRALIAN CAPITAL TERRITORY )

RE :

- KENNETH JOHNSON and

DIANNE JOHNSON

Applicants

CORAM :	JACKSON J.
-	DATE :	5 February 1987
PLACE :	Sydney

MINUTES OF ORDER

THE COURT ORDERS THAT:

1.	The bankruptcles brought about by the sequestration order made In the case of each of the appllcants on 24 November 1986, be annulled.
-	Note:	Settlement and entry of orders 1s dealt with in Rule 124 of the Bankruptcy Rules.

IN THE FEDERAL COURT OF AUSTRALIA	)
)

DIVISION	GENERAL	1
)

BANKRUPTCY DISTRICT OF THE STATE OF ) No. W 1746 of 1986

)

AND WALES SOUTH NEW ) 1

THE AUSTRALIAN CAPITAL TERRITORY )

- RE : KENNETH JOHNSON and

DIANNE JOHNSON

A p p l l c a n t s

CORAM :	JACKSON J.
DATE :	5 Februa ry 1987
-
PLACE :	Sydney

REASONS FOR JUDGMENT

T h e a p p l l c a n t s a re husband and wife who have a t a l l

material times c a r r i e d o n a b u s i n e s s I n p a r t n e r s h l p involving

t h e s u p p l y o f p a r t s a n d l n s t a l l a t i o n of e q u i p m e n t a s s o c l a t e d

w l t h	t h e c o n v e r s i o n o f	motor	v e h i c l e s	t o	t h e	u s e	of	gas	as
f u e l .

2.

The applicants were made bankrupt by a sequestration

order made on 24 November 1986. They were not present or

represented at the hearlng of the credltor's petition which

led to the making of the sequestration order, and it may be

that thelr lack of dlllgence In that regard In relatlon to

thelr own affairs was contributed to by the fact that on 16

August 1986 the male applicant had suffered relatlvely serious

in~uries In a motor accldent. Whatever be the reason for the

failure of the appllcants to oppose the maklng of the

sequestratlon order, I am satisfied that If the applicants had

placed before the court on that occaslon the true facts as to

their flnanclal sltuatlon, those facts would have demonstrated

that, In terms of s.52(2)(a) of the Bankruptcy Act 1966, the

applicants were then able to pay their debts.

In these circumstances the applicants, relylng on

S . 154	(l)(a) of the Bankruptcy Act, applied for an order
annul	llng their bankruptcles. S.l54(l)(a) provldes relevantly

that :-

Where the court 1s satlsfied "that a sequestratlon order ought not to have been made", the court may make an order annulllng the bankruptcy.

As Lucas J. sald of the part of s.l54(l)(a) to which

I have referred In Re Scott (1975) 6 A.L.R. 558 at 559:-

"And It has been remarked that these are words of wide to time 1s that the matter should be consldered as If all the true facts as shown in the appllcatlon for the annulment had been before the court when the

sequestration order was made."

3 .

See too Re Griffiths; ex parte Huntley, (1892) 3 B.C. ( N . S . W . )

6. In Re Scott (supra) Lucas J. drew a distlnctlon between

facts exlstlng at the tlme of the making of the ssouestration

order but not then before the court and facts later coming

lnto existence.

In the present case the relevant facts fall lnto the

former category, and I am satlsfied that the case is one

falllng wlthln the relevant part of s.l54(l)(a). The question which then arlses 1s whether I should exerclse the dlscretlon

conferred by s.l54(l)(a) In favour of the bankrupts. In this

regard it seems to me that the appllcants have been relatlvely

cavaller In their treatment of the proceedlngs in the Local

Court leadlng to the judgment debt and In this court. At the

same tlme, however, I think it likely that the serlous

lnjurles from whlch the male appllcant suffered have probably

played a part In leadlng to the maklng of the sequestratlon

orders. I propose to exercise my discretlon In favour of

annulllng the bankruptcies and I shall hear the parties as to

the appropriate form of order.