Jorna, Re G.P. Ex Parte Westpac Banking Group

[1986] FCA 378

CATCHWORDS

BANKRUPTCY - creditor's petition - application by debtor for dismissal of petition - petition based on judgment of District

Court - proceedings instituted in Supreme Court for relief -

whether "sufficient cause" to dismiss petition - circumstances in

which Bankruptcy Court will go behind a judgment - whether

adjournment should be granted.

Bankruptcy Act 1966 ss. 33(l)(a), 52(2)('b).

In Re Flatau; Ex parte Scotch Whisky Distillers Ltd. (1888)

22 Q.B.D. 83

Re Basile: Ex parte Ancich (1979) 37 F.L.R. 501

Corney v. Brien (1951) 84 C.L.R. 343

- Wren v. Mahony (1971-2) 126 C.L.R. 212

Simon v. Vlncent J. O'Gorman Pty Ltd (1979) 41 F.L.R. 95

RE: GERRIT PETRUS JORNA; EX PARTE: WESTPAC BANKING CORPORATION

No. P 622 of 1986

Jackson J.

Sydney

22 August 1986

IN THE FEDERAL COURT OF AUSTRALIA	)
)

DIVISION	GENERAL	) )
BANKRUPTCY DISTRICT OF THE STATE OF	) No. P622 of 1986
1

AND	WALES	SOUTH	NEW	1
)
THE AUSTRALIAN CAPITAL TERRITORY	)

- GERRIT RE : PETRUS JORNA

Debtor

EX PARTE: WESTPAC BANKING CORPORATION

Petitioning Creditor

CORAM :	JACKSON J.
-	DATE :	22 August 1986
PLACE :	SYDNEY

MINUTES OF ORDER

THE COURT ORDERS THAT:

1.	The application to dismiss the petition be refused.
2.	The application to adjourn the petition be refused.
3 .	The matter be remitted to the Registrar.
-	NOTE :	Settlement and entry of orders is 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. P622 Of 1986

1

AND	WALES	SOUTH	NEW	1
)
THE AUSTRALIAN CAPITAL TERRITORY	)

- GERRIT RE : PETRUS JORNA

Debtor

EX PARTE: WESTPAC BANKING CORPORATION

Petitioning Creditor

CORAM :	JACKSON J.
DATE :	22 August 1986
PLACE :	SYDNEY

REASONS FOR JUDGMENT

This m .at t er came before me in the B #an lkruptcy Lis rhere it P

the debtor sought to oppose the making of a sequestration order

on a creditor's petition.

A presiding Registrar's Certificate has not yet been

given but the parties were in agreement that I should determine

the-questions to which I shall advert below before such a

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certificate is given, and that if I am against the debtor on

those issues, the matter will then	go back to the Registrar	for
that purpose.

I should say that the debtor does not contend that the

case is one where, on the material before me, a sequestration

order might not properly be made. Rather the debtor's first

contention is that notwithstanding those matters the case is yet

one where, in terms of s.S2(2)(b) of the Bankruptcy Act 1966, I

should "for other sufficient cause" dismiss the petition.

The petition in question is based on failure to comply

with a bankruptcy notice, the bankruptcy notice itself being

based on a judgment of the District Court of New South Wales

given on 3rd October 1984 in the sum of $20,000. The reasons €or

judgment in the District Court did not become available, it is

said, until early 1986 and on 30th July 1986 proceedings were

instituted in the Supreme Court of New South Wales by the debtor

seeking cancellation of the contract sued	on and other equitable
relief.

I express no opinion on whether in the light of s.6 of

the Law Reform (Law and Equity) Act 1972 the relief now claimed

might have been relied on in the District Court, as was urged

upon me, and I express no opinion on the debtor's prospects of

success in the proceedings in the Supreme Court.

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The particular grounds upon which the debtor seeks to

establish "other sufficient cause" why a sequestration order ought not to be made are s t out in paragraphs 4 , 5 and 6 of his

affidavit. They are as follows:-

" 4 . At the hearing of the suit I say that certain

equitable defences were precluded from me by virtue of

the limits of the jurisdiction of that Court.

5. I say that proceedings have been instituted by me in

the Supreme Court of New South Wales in suit no. 17689

of 1986 in relation to the contract upon which the

Petitioner relied seeking Orders in the Supreme Court

for cancellation of the said contract and an Injunction

restraining the Petitioner itself from enforcing the

District Court judgment in proceedings no. 25409 of 1981

entered on the 21st December 1984.

6 . I deny that the alleged debt upon which the

Bankruptcy Notice was based was a debt incurred by me

and say that the circumstances of the debt was [sic]

that of a company of which I was a Director to which the

Petitioner bound me in an instrument of Mortgage which

was never properly executed or applied and for which

there was no real consideration."

In my opinion the grounds suggested by the debtor do not

constitute "sufficient cause" why a sequestration order ought not

to be made against his estate. The case seems to me to fall

clearly within the principles exemplified by In Re Flatau; Ex

parte Scotch Whisky Distillers Ltd. (1888) 22 Q.B.D. 83, a case

concerning a provision in the Bankruptcy Act 1883 specifically

giving the Court a discretion to stay or dismiss a petition in

the event that an appeal was pending from the judgment forming

the basis of the petition.

- The principles stated in In Re Flatau: Ex parte Scotch

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Whisky Distillers Ltd. are two, first that the mere fact that an

appeal is pending from the judgment which is the basis of a

petition is not a sufficient ground for staying the proceedings

on the petition and, secondly, that a Bankruptcy Court will not

inquire into the validity of a judgment debt as a matter of

.

course,but will do so only when there is evidence that the

judgment has been obtained by fraud or collusion, or that there

has been some other miscarriage of justice.

In relation to the first principle, the approach adopted

in In Re Flatau: Ex parte Scotch Whisky Distillers Ltd. was

followed in Re Basile; Ex parte Ancich (1979) 37 F.L.R. 501, an

additional factor influencing the Court to refuse an adjournment

in that case being 'delay in the institution of the appeal. In

this case of course there is no "appeal" in the strict sense but

there was a delay of over five months in instituting the

proceedings in the Supreme Court after, on the debtor's evidence,

a copy of the reasons for judgment in the District Court became

available to him and I take that factor into account.

In relation to the second principle stated in In Re

Flatau, clearly this Court has the power to go behind the

judgment relied on by the petitioner and inquire whether it s

founded on a real debt. See e.g. Corney v. Brien (1951) 8 4

C.L.R. 3 4 3 , Wren v. - Mahony (1971-2) 126 C.L.R. 212. But as was

recognized in Wren v. Mahony (supra) at 222-3, 233 (citing with -

, approval In Re Flatauj Ex parte Scotch Whisky Distillers Ltd.) it

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is not an inquiry instituted as a matter of course. In

particular, as Lockhart J. said in Simon v. Vincent J. O'Gorman

Pty Ltd (1979) 41 F.L.R. 95 at 111:-

"The courts are reluctant to exercise this jurisdiction

where the judgment was entered after a full

investigation of the issues at a trial where both

parties appeared and had ample opportunity to put their

case to the court ."

I consider that the present case is one where I should

demonstrate the reluctance to which Lockhart J. referred and I

decline to dismiss the petition pursuant to s.52(2)(b).

I was asked in the alternative to exercise my discretion

under s.33 of the Act and to grant an adjournment of the

proceedings pending the outcome of the appeal to the Supreme

Court. I decline to exercise my discretion to grant an

adjournment for reasons similar to those set out above. I add

that the size of the debt now due to the petitioner is not

insubstantial being $23,948.00 and remains wholly unpaid. When

the matter was last before me I inquired of Mr Bizannes who

appeared for the debtor whether, in the event that an adjournment

was granted, the debtor would be in a position to pay into Court

or provide other security for all or any part of that sum. After

a short adjournment Mr Bizannes informed that he could obtain

no instructions to give any such payment or security.

In these circumstances I decline the adjournment sought

and-remit the matter to the Registrar as sought by the petitioner.

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I certify that the 5 preceding pages are a true copy of the Reasons for Judgment herein of

his Honour Mr Justice Jackson.

Associate: -A 1

U

Date : 2 2 August 1986

Solicitor for the debtor: Victor A. Bizannes

Counsel for the petitioning

Mr	creditor:	G. McVay
Solicitors for the petitioniig

creditor: Simpson Minter

of Date hearing: 19 August 1986