Krowe, Clayton John v Hughes, Mark Lewis
[1997] FCA 864
•29 August 1997
FEDERAL COURT OF AUSTRALIA
BANKRUPTCY - creditor’s petition - validity of certified judgment failing to set out name of debtor - whether bankruptcy notice should be set aside - whether judgment debt had been satisfied - whether court should go behind judgment debt - whether certain payments were to be appropriated to the judgment debt or were for other monies due - whether after going behind judgment debt, there still remained outstanding indebtedness in excess of the statutory minimum required under the Bankruptcy Act 1966 (Cth) to obtain a sequestration order - whether creditor can be compelled to accept payment of part or whole of the debt after an act of bankruptcy has been committed
Bankruptcy Act 1966 (Cth) s 41(5), s 52
Bankruptcy Rules r 7
Magistrates Court Rules r 157, r 187
Re Bedford; Ex parte H C Sleigh (Queensland) Pty Ltd (1967) 9 FLR 497 - Appl
McIntosh v Shashoua (1931) 46 CLR 494 - Appl
In re Gentry [1910] 1 KB 825 - Appl
Re Skaff Ex parte Farrow Mortgage Services Pty Ltd (1993) 41 FCR 331 - Appl
Wolff v Donovan (1991) 29 FCR 480 - Appl
Corney v Brien (1951) 84 CLR 343 - Appl
Re McCollum, Ex parte The Bankrupt (1987) 71 ALR 626 - Appl
CLAYTON JOHN KROWE v MARK LEWIS HUGHES
QP 795 of 1996
Cooper J
Brisbane
29 August 1997
IN THE FEDERAL COURT OF AUSTRALIA ) ) GENERAL DIVISION BANKRUPTCY
DISTRICT)
) QP 795 of 1996) OF THE STATE OF QUEENSLAND )
RE: CLAYTON JOHN KROWE
Debtor/BankruptEX PARTE: MARK LEWIS HUGHES
Judgment Creditor
JUDGE: COOPER J PLACE: BRISBANE DATED: 29 AUGUST 1997
MINUTES OF ORDER
THE COURT ORDERS THAT:
The estate of Clayton John Krowe be sequestrated.
That the petitioning creditor’s costs of and incidental to the petition (including reserved costs) be taxed and paid in accordance with the Bankruptcy Act 1966 (Cth).
Note:Settlement and entry of orders is dealt with in Rule 124 of the Bankruptcy Rules.
IN THE FEDERAL COURT OF AUSTRALIA ) ) GENERAL DIVISION BANKRUPTCY
DISTRICT)
) QP 795 of 1996) OF THE STATE OF QUEENSLAND )
RE: CLAYTON JOHN KROWE
Debtor/BankruptEX PARTE: MARK LEWIS HUGHES
Judgment Creditor
JUDGE: COOPER J PLACE: BRISBANE DATED: 29 AUGUST 1997
REASONS FOR JUDGMENT
On 19 February 1996 the petitioning creditor, Mark Lewis Hughes, filed a plaint and summons against the debtor Clayton John Krowe. The plaint claimed the sum of $5,827.21 as money due and owing pursuant to a lease agreement in respect of property described as Unit 16, The Big Bed Motel, 204 Ipswich Road, Buranda in the State of Queensland. No further particulars of the claim were provided in the plaint, it being alleged that full particulars had previously been supplied to the debtor.
On 18 June 1996 judgment by default was entered against the debtor in the sum of $5,827.21 for claim, $688.50 for costs and $114.95 for interest. On 5 September 1996 a bankruptcy notice issued in respect of the judgment sum of $6,583.91. A bankruptcy petition was subsequently filed on 11 December 1996 alleging non-compliance with the bankruptcy notice as the relevant act of bankruptcy. The petitioning creditor swore that the debtor was then indebted to him in the sum of $3,252.66 being the balance owing under the judgment.
On the hearing of the petition the judgment debtor appeared to oppose the making of a sequestration order. The debtor’s opposition was based on two grounds :-
that no valid judgment existed upon which the bankruptcy notice could issue;
that the judgment debt had been satisfied at the time of the presentation of the petition.
To raise the first ground of opposition the judgment debtor sought to file an application to set aside the bankruptcy notice. This course was objected to by the petitioning creditor. I refused to deal with the matter as a preliminary issue and indicated that I would deal with the contention as part of the substantive hearing of the petition.
As to the first ground, the debtor argued that the certified judgment produced to this court in order to obtain the issue of the bankruptcy notice did not comply with Rule 7 of the Bankruptcy Rules. Rule 7 requires that the debtor be identified as the person against whom the judgment has been obtained. In the present case the judgment is signed, sealed and certified by a Registrar of the Magistrates Court. It is a default judgment entered in accordance with Rules 157 and 187 of the Magistrates Court Rules. Those rules relevantly provided that :-
“157(1) Judgment by default may be given by a Court for any sum not exceeding the amount claimed and endorsed on the summons, together with interest at the rate provided (if any) and costs, if -
(a) ***
(b)the defendant has not -
(i)filed an entry of appearance and defence; or
(ii)filed an entry of appearance, defence and counterclaim; or
(iii)paid into Court, or filed a confession for, the total amount of the claim and costs; and
(c)service of the summons is proved; and
(d)less than 4 years have elapsed since the summons was served; and
(e)the plaint discloses a sufficient cause of action; and
(f)the plaintiff, or his or her solicitor or agent, requests that judgment by default be given, by -
(i)filing a request in Form 32; and
(ii)deposing by affidavit to -
(A)the amount (if any) received by the plaintiff since the commencement of the proceedings; and
(B)the amount justly and bona fide due and unpaid to the plaintiff.
.....
187 (1) All judgments given by a Court shall be endorsed on the record of process by the Court.
(2) Any judgment shall not be enforced until that judgment has been duly entered, by filing a written record of the judgment with the registrar of the Court.”
The judgment is in Form 54 under the Magistrates Court Rules. It identifies the petitioning creditor as the plaintiff and the debtor as the defendant. The form states that :-
“ Judgment is hereby entered against
for:”
The debtor’s name has not been inserted in the certified copy of the judgment. It is this defect in the certified copy which counsel for the debtor submits is fatal to the issue of a valid bankruptcy notice.
In my opinion, the purpose of Rule 7 is to ensure that the court can be satisfied that the person to be named in the bankruptcy notice is in fact the judgment debtor, and on that basis, that a notice may properly issue. Where from a perusal of the judgment the court can conclude that it is a judgment issued in default of appearance against the defendant in accordance with the relevant Magistrates Court Rules, there is sufficient on the face of the judgment to identify the defendant as the person against whom the judgment has been entered. Accordingly, there has been a sufficient compliance with Rule 7.
It was further submitted that the total of the claim, costs and interest is in the sum of $6,630.66, that the total sum of $6,583.91 stated in the certified copy judgment understates the amount properly due by $46.75 and that the bankruptcy notice is thereby invalid. There is no substance in this submission. That the judgment debtor is called upon to pay less than the proper judgment debt due to an arithmetic error does not excuse non-compliance with the notice (Re Bedford; Ex parte H C Sleigh (Queensland) Pty Ltd (1967) 9 FLR 497).
The first ground as to the validity of the bankruptcy notice fails.
The second ground involves contested issues of fact and requires a consideration of two payments made by the judgment debtor after the entry of the default judgment.
In order to understand the circumstances in which the payments were made and for what purpose, some understanding of the background to the dealings between the parties is necessary.
The judgment creditor purchased the strata titled Unit 16 of The Big Bed Motel from the judgment debtor in October 1994. The sale completed on 30 December 1994. Thereafter the judgment creditor leased the unit to the judgment debtor under a written lease commencing on 30 December 1994. The rent payable under the lease was $7,995 per annum monthly in arrears. Accordingly, the monthly rental was $666.25.
On the material it is clear that payments were not made regularly by the judgment debtor and by February 1996 the judgment creditor was claiming that the judgment debtor was in arrears in respect of amounts payable under the lease. On 19 February 1996 the judgment creditor filed his plaint and summons in the Magistrates Court at Brisbane claiming $5,827.21.
In February 1996 the judgment debtor paid to, or on behalf of, the judgment creditor the sum of $2,243.33 which payment I shall refer to later.
Under cover of a letter dated 27 June 1996 the judgment debtor forwarded a cheque to the judgment creditor for $3,331.25. The letter said in part :-
“Your payments are due to you and accordingly I hereby tender conditional cheques to you for the full amount due to you as at end of June 1996 ...”
A similar form of letter was sent to other owners of units in The Big Bed Motel with whom the debtor had entered into leaseback arrangements, and owed money to.
The amount, the letter stated, was worked out in conjunction with Mr Davor Pilipovic-Kljajic (“the manager”), the manager of the motel.
The cheque was not met when presented for payment and a substitute cheque number 000462 was drawn on 9 July 1996.
The manager swore that the cheque number 000462 for $3,331.25 was for rental for the period February, March, April, May and June 1996 (five months at $666.25).
In a reconciliation of payments (Exhibit 7) prepared by the judgment creditor for his then solicitors Baker Johnson covering the period up to and including 18 September 1996, he records the payment of the sum $3,331.25. He places against the months of January, February, April, May and June an asterisk and in a side note states :-
“* The $3331.25 that was paid were for these months but because of his late payment we are in arrears of interest owing.”
The March payment which the judgment creditor has given credit for was, on the manager’s affidavit, drawn as cheque 342 on 4 March 1996 and paid on account of the rental due for December 1995. The cheque was banked into the judgment creditor’s bank account on 5 March 1996.
I find that the sum of $3,331.25 was tendered as payment of the rent due for the months of February to June 1996 and accepted as payment on that basis. It was not tendered as part payment of the judgment debt of $5,827.21 for claim, $688.50 for costs and $114.95 for interest. The claim underlying that judgment was computed up to and including January 1996 but not thereafter. Although filed on 19 February 1996 the February rental was not then due and payable and formed no part of the claim. The sum of $3,331.25 was tendered and accepted without reference to the judgment debt. Although the judgment creditor in his affidavit verifying the petition appears to give credit for the sum of $3,331.25 against the judgment, that credit is in error and having been appropriated earlier to the rental for February to June 1996 could not later be appropriated to the judgment debt so as to revive a liability for that rent.
When the judgment debtor received the bankruptcy notice he wrote to Baker Johnson alleging that he had not been given credit for the payment of $3,331.25 in July. In taking this position the judgment debtor was in error as the payment by him had been appropriated to debt arising after the date of the plaint and accepted on that basis.
On 21 October 1996, when his letter was not responded to, the judgment debtor attended at the offices of Baker Johnson and saw Mr Craig Bax, a solicitor with that firm. The judgment debtor alleges that Mr Bax stated that his client agreed that they had received part payment but that the balance was outstanding and the judgment debtor had until 4.30 pm the following day to pay the outstanding balance before the judgment creditor signed the petition.
The judgment debtor attended on 22 October and handed to Mr Bax a letter which read (T26) :-
“Dear Mr Bax,
Further to our meeting yesterday and your subsequent phone conversation with Mrs Hughes, I realise the best way to complete this situation is to pay cash to satisfy their petition immediately, as I felt Mr and Mrs Hughes are very upset. Your patience in listening to my proposal was appreciated. As you may recall, I had sent you a letter on 17 September 1996, and, as of yesterday, your office staff had not sent me your reply regarding my previous payment directly to Mr and Mrs Hughes in July. I do understand from our discussions that Mr and Mrs Hughes now acknowledge the payment to them of the $3331.25 on the July 1996 period. Based on your form 4 bankruptcy notice, the claim was for $6583.91 less an amount paid in July of $3,331.25, the balance due is $3,252.66. I have available immediately $2000 in cash for Mr and Mrs Hughes with the balance of $1,252.66 available on Thursday before lunch. I also understand I will be levied costs associated with this collection, and I would appreciate your contact [sic] me direct care of Davies Wineglass offices, and I will arrange to pay your firm those costs direct. Thank you, I shall contact Mr Sam Beam at 3 pm to hand over the cash for Mr and Mrs Hughes.”
The judgment debtor swears he asked Mr Bax what was the amount remaining to be paid “to finish this off” and that the solicitor replied “You need to bring in the amount of $3,252.66 in cash or cleared funds before 4.30 pm this afternoon.”
Mr Bax denies that he made any agreement that all that was to be paid was $3,252.66. The following evidence was given by Mr Bax in cross-examination (T48) :-
“But you will not [sic] of course, that the two receipts that were issued were not only for the sum of 2000, but were also for the sum of 1252.66 and he did that before your clients were to come in the following afternoon, that is the afternoon of the 22nd to sign the creditor’s petition documents?---That’s correct.
And the reason he did that is because he had an agreement with you that if he paid all of those moneys, that is the 2000 and the 1252.66, then all of the judgment moneys would be paid?---He had no agreement with me.
I put to you that that was in fact the agreement, Mr Bax?---No. The position was as I said before. He asked me. I got instructions from Mr and Mrs - I rang Mrs Hughes and subsequently got instructions from Mr Hughes that they did not want to accept the money and I communicated that fact to Mr Krowe.”
After his conversation with Mr Bax the judgment debtor made a note on the letter he had provided to Mr Bax and which was returned by Mr Bax after he read it. The note read (T26) :-
“I was told by Craig Bax at 3.45 pm when I went up to deliver the $2000 that his clients would not accept this, so I said I would get the balance by 4.30. He said his clients are calling in to sign the petition at 4.30. Providing I get the money in by 4.30, then nothing can be done. I contacted Tamara. She got Davor to drop in $1252.55 cheque made out to Baker Johnson Solicitors trust account, and I will take it over to Cathy at reception who will issue me a receipt for the cheque number on the Big Bed of 551.”
The judgment debtor after referring to the note gave the following evidence (T26) :-
“Now at the time I wrote in here: ‘Davor suggest I find out what the amount is made up of’ - and that alludes to the fact that it was far more than we imagined it was supposed to be. I hope that helps.”
He continued (T27) :-
“MR SWEENEY: Well, the point that I want to make out of that letter I suggest to you is it was clear to you that Mr Bax did not have his client’s authority without reverting to them to come to any agreement with you?---No, sir, that is not how I interpreted it at all.
All right. You asked him to acknowledge whether Mr and Mrs Hughes now acknowledged the payment to them for the July ‘96 period rent and this letter suggests that the discussions you had with Bax showed that they did acknowledge that payment?---You are correct. Mrs Hughes acknowledged to Mr Bax - and I was not present, it was done by phone I understand - that she had received 3321.25 [sic] and both Mr Bax and myself therefore worked out the balance of the amount of money that had to be paid to satisfy the judgment.
Well, I suggest to you that you misled Mr Bax in this respect, that you said to him words to the effect, or you led him to believe that the first payment in July had been made to the Hugheses on the basis that it was to discharge part of the judgment debt when, in fact, that was false?---Acting on my own initiative, sir, I went to Baker Johnsons to find out why they had not replied to the letter that notified him two months before that I had paid $3331.25 and he explained that he had sent me a letter and when going to his records realised he had never posted it.
Yes?---So if any errors have been made on both parties because we both believed that the amount of money that they have received was the full amount. If Mr Bax had asked me for more money I would have paid him more money. I simply wanted to satisfy the judgment debt.”
I find that Mr Bax was not authorised by the judgment creditor to accept the sum of $3,252.66 in discharge of the judgment debt and did not agree to do so.
The conversation between the judgment debtor and Mr Bax has to be put in the context that it was being carried on upon a false premise, namely that $3,331.25 had previously been paid off the judgment debt by the judgment debtor. That false premise was created and maintained by the judgment debtor and not by Mr Bax. There are two further reasons why I do not accept that Mr Bax tendered a figure “to finish this off”. The first is that $3,252.66 covers the alleged balance of the judgment and allows nothing for the costs and expenses incurred in the bankruptcy proceedings nor anything for the period of the lease arising after 31 January 1996. The second is the note “Davor suggest I find out what the amount is made up of” indicates that the judgment debtor had no clear idea of what was owing to the judgment creditor in respect of the whole of their dealings and that he was seeking such information to attempt to work out the totality of what was owing. It is highly unlikely that Mr Bax would nominate the alleged balance due on the judgment debt as the totality of the monies outstanding. This is particularly so when he had in his possession a reconciliation (Exhibit 7) which has substantial other monies owing up until mid September 1996 when the lease was terminated.
I am satisfied that at its highest, Mr Bax spoke of nothing other than the balance due to his client, and, to the extent that there was any discussion of the balance due on the judgment debt to avoid the issue of the petition, it was a discussion wherein Mr Bax was acting on a mistaken belief as to the nature of the payment of $3,331.25. That belief was induced by the misrepresentation by the judgment debtor that payment of that sum was in part payment of the judgment debt. If therefore any agreement had arisen between the parties in consequence of the dealings between the judgment debtor and Mr Bax and the payment of $3,252.66 on 22 October 1996, it was an agreement induced by the misrepresentation of the judgment debtor. The misrepresentation was material and induced Mr Bax to act in the way that he did. The judgment debtor in making the misrepresentation intended Mr Bax should so act. In those circumstances the judgment creditor was entitled to avoid any contract if the parties could be returned to their former positions. The judgment creditor in signing the petition and refusing to take the money in Mr Bax’s trust account has avoided any agreement made by Mr Bax. That the money remains in the trust account available to the judgment debtor ensures that the parties can be restored to their former position.
I find that the payment of $3,252.66 on 22 October 1996 did not discharge the judgment debt.
The judgment debtor has failed to make the second ground of opposition.
On the hearing of the petition the judgment debtor went beyond the two stated grounds of objection and submitted that the court should go behind the judgment debt because in truth and reality there exists no debt due to the petitioning creditor. It was submitted that the judgment was a default judgment and that credit had not been given for payment of $2,243.33 in February 1996 and other payments made in March and April 1996 prior to judgment. It was submitted that on a proper accounting of what was due between the parties there was in truth and reality no debt payable at the time of the judgment on 18 June 1996.
Having regard to the absence of any particularity in the plaint, that some evidence of additional payments has been demonstrated and the fact that it was a default judgment, I am satisfied that the case is one where the discretion to look behind the judgment ought to be exercised.
The judgment debt relates to the balance due to the judgment creditor for the period of the lease from January 1995 up to and including January 1996. Putting aside any other payments due under the lease as at 31 January 1996, the judgment debtor was obliged to have made thirteen payments of $666.25. That is, $8,661.25.
The judgment creditor acknowledges the following rental payments made in the months indicated :-
February 1995 666.25
April 1995 759.70
May 1995 1000.00
July 1995 666.25
August 1995 666.25
September 1995) 1332.50
October 1995 )
December 1995 666.25
$5757.20
This leaves a deficiency on the judgment creditor’s figures of $2,904.05.
In addition to the rental payment the judgment debtor was obliged to pay, or indemnify the judgment creditor for the Council rates and body corporate fees applicable to unit 16.
The body corporate fees claimed by the judgment creditor as payable up to and including January 1996 were :-
February 1995 415.00
April 1995 629.45
June 1995 599.44
September 1995 599.44
December 1995 599.44
$2842.77
The rates claimed by the judgment creditor as payable up to and including January 1996 were :-
February 1995 237.26
April 1995 401.72
July 1995 318.52
October 1995 282.19
January 1996 289.09
$1528.78
The total amount claimed by the judgment creditor as payable at 31 January 1996 was :-
Rent outstanding 2904.05
Rates 1528.78
Body corporate fees 2842.77
$7275.60
It is not possible to set out precisely the figures used to compute the claim made in the plaint and summons filed in the Magistrates Court in February 1996. Neither Mr Bax, nor the judgment creditor could explain the figures. However, there were on Mr Bax’s file handwritten reconciliations prepared by the judgment creditor. One was prepared to January 1996 (Exhibit 6) and I find was in part relied upon by Baker Johnson in formulating the claim. The other (Exhibit 7) was prepared in late September 1996 and includes components not stated in the earlier reconciliation but describes them as payable in the 1995 year under the lease and as being outstanding. Exhibit 6 was only concerned with rent and additional interest incurred by the judgment creditor to the bank which financed the purchase of the unit. Exhibit 6 acknowledged payments of $4,994.13 for rent leaving a shortfall for 1995 of $3,000.87. To this had to be added the rent due for January 1996 of $666.25 and interest of $177 for September 1995 and $55 for January 1996, giving a total of $3,899.12.
Exhibit 7 discloses that the council rates claimed for 1995 were $1,820.
From Exhibits 6 and 7 it is possible to reconstruct the claim as made in the plaint to $5,719.12 being rent $3,667.12, ($7,995 less $4,994.13 paid in 1995 and $666.25 due for January 1996) interest $232 and rates of $1,820. However, it is impossible to find for what the further sum of $108.09, to bring the amount to $5,827.21, is claimed. What is apparent is that no sum was claimed for outstanding body corporate fees.
The body corporate fees for the period February 1995 up to and including September 1995 total $2,243.33. This was the amount of the payment for body corporate fees made by the judgment debtor to the body corporate in February. I find that the payment was insufficient to discharge all body corporate fees then due and owing in respect of Unit 16. No part of the payment was for council rates or rental.
The judgment debtor relies upon the affidavit of the manager to support payments made by him to the judgment creditor. Unfortunately the manager could not of his own knowledge depose to payments prior to July 1995. Nothing which he says as to dealings prior to that time casts any doubt on the accuracy of the petitioning creditor’s figures for the earlier period. Although the manager deposes to the payment of the rental for the months of December 1995 and January 1996, these payments were made on 4 March 1996 and 10 April 1996 respectively. Both of the alleged payments were made after the date of the issue of the plaint and summons but before the date of the default judgment on 18 June 1996.
The banking records of the judgment creditor disclose the deposit of a cheque for $666.25 on 5 March 1996 and this I find was cheque number 342 drawn on 4 March 1996 for the December rent. The cheque number 375 drawn on 10 April 1996 does not appear in the judgment creditor’s bank records and the judgment debtor, beyond exhibiting the cheque butt, did not prove up that the cheque was paid upon presentation and debited to his bank account. The next cheque shown in the account of the judgment creditor is the deposit of a cheque on 8 July 1996 for $3,331.25 which was not met upon presentation. A further cheque was deposited on 17 July 1996 for $3,331.25 which was met and credited to the judgment creditor’s account.
In terms of the judgment creditor’s reconciliation as to 31 January 1996, the judgment debtor was indebted to him for :-
Rent outstanding 2904.05
Rates 1528.78
Body corporate fees 2842.77
$7275.60
Against that amount the judgment debtor is entitled to have credited the sum of $666.25 paid on 5 March 1996 and the sum of $2,243.33 paid in February 1996 on account of body corporate fees. This left outstanding $4,366.02 at the time the judgment issued.
The claim in fact filed was computed differently.
Having regard to the way the claim was computed, in the absence of an agreement to pay interest, the sum of $232 claimed as such was not recoverable. Similarly, to the extent $108.09 cannot be justified, that amount is not recoverable on any identifiable basis. The later reconciliation acknowledges a payment of $759.70 in April 1995, $3.25 extra in the July 1995 payment and 12 cents extra in the November 1995 payment for which credit has not been given. The rates also appear to have been overclaimed by $291.22. Therefore the claim of $5,827.21 needs to be adjusted to take account of the above amounts and when so adjusted is $4,432.83. The only payment of rent included in that sum proved up by the judgment debtor is the $666.25 paid on 5 March 1996. As at the date of judgment the judgment debtor remained indebted to the judgment creditor in respect of the matters claimed in the plaint to the extent of $3,766.58. The difference between this figure and the later reconciliation to 31 January 1996 is the unpaid body corporate fees of $599.44.
In the present case the effect of going behind the judgment is that after taking account of the matters of which the judgment debtor complains, there still remains outstanding substantial indebtedness in excess of the statutory minimum debt necessary under the Bankruptcy Act 1966 (Cth) (“the Act”) to obtain a sequestration order.
For the reasons outlined above the payment of $3,331.25 in July 1996 was not made in part payment of the judgment debt. Likewise, there was no agreement to accept payment of the sum of $3,252.66 in discharge of the monies remaining outstanding under the judgment or properly due under it. Nor can the judgment creditor be compelled to accept payment of the whole or part of the debt by having recourse to the monies in the Baker Johnson Trust Account after an available act of bankruptcy had been committed as has happened in this case (McIntosh v Shashoua (1931) 46 CLR 494 at 508; In re Gentry [1910] 1 KB 825 at 830 - 831).
The judgment debtor did not seek in a timely fashion to set aside the bankruptcy notice nor to have extended the time for compliance with the notice. Time for compliance with the notice expired on 15 October 1996. Mr Egan of counsel for the judgment debtor accepted that there had been an act of bankruptcy on the part of the judgment debtor (Transcript p 80). No notice was given pursuant to s 41(5) of the Act asserting that the amount in the bankruptcy notice was overstated. The fact that the bankruptcy notice was issued on a judgment entered for an amount more than the amount actually due at the date of the judgment does not mean that failure to comply with it where the debt exceeds the statutory minimum is not an act of bankruptcy (Re Bedford; Ex parte H C Sleigh).
Where the judgment debtor on the hearing of the petition seeks to go behind the judgment debt it is to demonstrate that for the purposes of s 52(1)(c) of the Act the petitioning creditor cannot prove that the debt upon which the petitioning creditor relies is still owing (Re Skaff Ex parte Farrow Mortgage Services Pty Ltd (1993) 41 FCR 331 at 335). However, the petitioning creditor carries the onus of proving the existence of a real debt to the statutory minimum amount underlying the judgment (Wolff v Donovan (1991) 29 FCR 480).
Although the petitioning creditor filed material which sought to show that on balance there was a debt due to him as at 11 September 1996 of $6,525.71, it is not sufficient for the purposes of s 52(1)(c) of the Act to show the existence of a debt based on a cause of action other than that which gave rise to the judgment debt (Corney v Brien (1951) 84 CLR 343 at 352 - 353; Re McCollum, Ex parte The Bankrupt (1987) 71 ALR 626 at 629). Therefore the petitioning creditor not having sued for body corporate charges or for entitlement to rent or payment of other costs and charges arising after 31 January 1996, cannot rely upon that indebtedness to support its entitlement to a sequestration order.
When one looks behind the judgment, although the quantum is reduced, there is nothing to support a finding that there is not in truth and reality a debt due to the petitioning creditor in an amount of approximately $4,573.40 for claim, costs and interest in respect of the debts claimed as due when the plaint was filed in February 1996.
I am satisfied that the judgment debtor has committed the act of bankruptcy specified in paragraph 4 of the petition filed 11 December 1996. I am satisfied that the petitioning creditor has made out each of the elements of s 52(1)(a), (b) and (c) of the Act. The judgment debtor has failed to show other sufficient cause as to why a sequestration order ought not to be made (s 52(2)(b)).
The court orders that the estate of Clayton John Krowe be sequestrated and that the petitioning creditor’s costs of and incidental to the petition (including reserved costs) be taxed and paid in accordance with the Bankruptcy Act 1966 (Cth).
I certify that this and the preceding thirteen (13) pages are a true copy of the Reasons for Judgment herein of the Honourable Justice Cooper
Associate:
Dated: 29 August 1997
Counsel for the Judgment Creditor: J B Sweeney Solicitor for the Judgment Creditor: Greg Kelly & Co Counsel for the Judgment Debtor: G M Egan Solicitor for the Judgment Debtor: Broadley Rees Date of Hearing: 3 March 1997 Date of Judgment: 29 August 1997
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