K.& G. v Grivas, Ex Parte - [1988] FCA 424

CATCEWORDS

I

BANKRUPTCY - Application to set aside the signing and sealing of

sequestration order by Registrar - extension of time - application to

suspend/rescind or annul sequestratlon order - whether a sequestration
order ought not to have been made - comparing resclsslon and annulment of sequestration order - going behind judgment debt - deed of arrangement - omission of information in statement of affairs by bankrupt - interests of commercial community and public.
Bankruptcy Act 1966 - ss 14, 33, 37, 73, 74, 149, 150, 154, 188, 189,
195
Bankruptcy Rules - Rule 158
Re KURT AND GERLINDE PICCARDI
Ex parte GEORGE GREGORY GRIVAS

W 1607 of 1986 - .

- DATE: 3 August 1988

PLACE: Sydney
CORAM: Einfeld J.

IN THE FEDERAL COURT OF AUSTRALIA
GENERAt DIVISION

BANKRWTCY DISTRICT IN TEE No. W 1607 of 1986
STATE OF NEW SOUTE WALES AND TEE

AUSTRALIAN CAPITAL TERRITORY

Re : - KCRT AND GERLINDE PICCARDI
Applicants

Ex Parte: GEORGE REGORY GRIVAS

Respondent

CORAM: Einfeld J.

- DATE: 3 August 1988
PLACE: Sydney
MINUTE OF ORDWS
1. The bankruptcy is annulled.

2.

The objecting creditors, being Dick & Dons Pty Ltd, B.W.Modern Interiors Pty Ltd. Fire Fighting Sprinkler CO Ltd. and Boral Johns Perry Industries Pty Ltd, are to pay the applicants'
costs.

NOTE: Settlement and entry of these orders 1s dealt with in accordance
wlth Order 124 of the Bankruptcy Rules.

IN TEE FED= COURT OF AUSTRALIA )
GENERAL DIVISION

)

BANKRUPTCY DISTRICT IN TEE 1 No. W 1607 of 1986
)
STATE OF NEW SOUTE WALES AND TEE

AUSTRALIAN CAPITAL TERRITORY

Re : KURT AND GERLINDE PICCARDI
-

Applicants

Ex Parte: GEORGE GREGORY GRIVAS

Respondent

CORAM: Einfeld J.
DATE: 3 August 1988
PLACE: Sydney
On l8 November 1986, a sequestration order was pronounced against Kurt and Gerlinde Pi'ccardi (the applicants) on the petition of the respondent

(Grivas). Immediately afterwards the applicants sought resclsslon or
suspension of the order. On 27 January 1987, before the matter had been ruled on, the sequestratlon order was signed and sealed by the Registrar in Bankruptcy. Although in the circumstances set out in my earlier ~udgments in this matter on 8 and 24 July 1987, this administrative act was unknown to the applicants until 29 May 1987, section 37(2) of the Bankruptcy Act (the Act) prevents the suspension or rescission of this sequestration order.

- 2 -

Eence by application dated 5 June 1987, the applicants moved to have set aside the signing and sealing of the sequestration order by virtue of sections 14(5) and 30(l)(b) of the Act and section 23 of the Federal Court Act. Judgment on this matter was reserved on 24 July 1987 to permit the simultaneous litigation of the rescissionlsuspension application together with the subsequently added application to annul the bankruptcy. All three of these applications are now for resolution and judgment. In substance the parties sought and were given leave to use the evidence in any application in support of the others.

At…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

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Details

Case: [1988] FCA 424
Decision Date: 8 Mar 1988

CaseChat Overview and Summary

In the case of Re Kurt and Gerlinde Piccardi; Ex Parte George Gregory Grivas, the Federal Court of Australia was asked to consider whether a sequestration order should be annulled, rescinded, or set aside. The applicants, Kurt and Gerlinde Piccardi, had been declared bankrupt by Justice Neaves on 18 November 1986. However, the applicants sought to rescind or suspend the order to allow a Part X meeting of creditors to be called. The sequestration order was subsequently signed and sealed by the Registrar in Bankruptcy on 27 January 1987. The applicants then sought to set aside the signing and sealing of the sequestration order, as well as to annul the bankruptcy.

The applicants argued that the sequestration order should be annulled as it ought not to have been made, and that the appropriate remedy was annulment rather than rescission. The objecting creditors, however, argued that if rescission was to be considered, the tests to be applied were similar to those where there is an application to set aside judgment. They submitted that there should be no departure from the general rule that all available evidence must be produced at the original hearing. The applicants also submitted that the circumstances of the making of the sequestration order should be considered, and that a Part X scheme of arrangement was being proposed.

The court found that the sequestration order should be annulled as it ought not to have been made. The court considered that the third alternative represented the correct approach, and that the sequestration order should not have been made on the basis of the total knowledge of the debtors' affairs which the court now has, including the current facts relating to the creditor's petition. The court also found that the circumstances of the applicants' insolvency were not brought about through lack of industry or recklessness, but primarily through the attraction to them, and many others in the community at the time, of the seductively low interest rates of overseas loans.

The court also found that the circumstances of the applicants' insolvency were not brought about through lack of industry or recklessness but primarily through the attraction to them, and many others in the community at the time, of the seductively low interest rates of overseas loans. The principal cohorts of the applicants in these activities are now commendably standing back from the bankruptcy to permit the proposal to proceed.

The court also found that the applicants were apparently truthful witnesses, who were fundamentally not the authors of their bankruptcy. They have enlisted substantial support from their creditors, especially those who know the applicants and the standard of work attained by the applicants. The proposal is framed so that, if successful, creditors will obtain more than they would obtain from the applicants remaining bankrupt.

The court found that there are grave doubts about the Grivas debt to the point where on the evidence before me, I would have had doubts about pronouncing the original judgment and would on the evidence here have set it aside. The circumstances of the applicants' insolvency were not brought about through lack of industry or recklessness but primarily through the attraction to them, and many others in the community at the time, of the seductively low interest rates of overseas loans. The principal cohorts of the applicants in these activities are now commendably standing back from the bankruptcy to permit the proposal to proceed.

The court also found that the other factor related to the applicants' circumstances was the downturn in the Newcastle property market which was not easily predictable. Whatever disclosures were not made by the applicants to one or other of the creditors' meetings, I am satisfied that nothing of substance was withheld. Further I do not believe that there was an intent on the part of the applicants to mislead or deceive either the trustee or the creditors. Nor have any creditors appeared here to claim that they were actually misled.

The court found that perhaps most persuasively of all, the justice or injustice of the matter must take account of the fact that the overwhelming majority of creditors believe that their best interests lie in the Part X deed taking effect and the proposal proceeding. As it happens, I share this view with these creditors, but the Court should be cautious in substituting its own judgment for that of the creditors who are involved and have significant financial interests at stake.

Therefore, the court made an order annulling the bankruptcy of the applicants. The objecting creditors are to pay the applicants' costs.

Orders