Morton, Jeffery Roy Charles v Mitchell Products Pty Ltd (formerly Truefeat Pty Ltd)

[1995] FCA 912

LIMITED DISTRIBUTION

IN THE FEDERAL COURT OF AUSTRALIA )
GENERAL DIVISION                 )    No. NP 898 of 1995              BANKRUPTCY DISTRICT              )
OF THE STATE OF NEW SOUTH WALES

RE:               JEFFREY ROY CHARLES MORTON
  Applicant/Debtor            

EX PARTE:MITCHELL PRODUCTS PTY LIMITED (formerly TRUEFEAT PTY LIMITED)

(ACN 053 664 010) 
  Respondent/Creditor

CORAM:       TAMBERLIN J
PLACE:       SYDNEY
DATED:       2 NOVEMBER 1995

REASONS FOR JUDGMENT

TAMBERLIN J

In this matter the applicant Mitchell Products Pty Limited formerly known as Truefeat Pty Limited seeks an order that it be substituted as petitioning creditor in bankruptcy proceedings against Mr Morton who is the respondent to the application.  At the hearing this morning, Mr Morton appeared in person by way of a video-link. Mr Morton sought an adjournment on medical grounds.  He also stated that he was not in a position to proceed as he is heavily involved in other complex and time consuming litigation in this court and therefore has not had an opportunity to properly prepare his case.

He says that resolution of the determination of the present application is inextricably tied to other complex legal proceedings which have consumed his time and a decision on this application should not be made in isolation.  I have given careful consideration to the medical material shown to me and also to the detailed affidavit in the bankruptcy proceedings number QG100 of 1995 which Mr Morton asked me to read.

In the course of submissions on the adjournment application, Mr Morton has raised a large number of questions and issues.  Many of these matters may be raised and could bear on the hearing of the bankruptcy petition.  I do not consider that there is any denial of procedural fairness to Mr Morton if the present application is proceeded with today.  He has had a considerable period within which to prepare his evidence and formulate his case in opposition to the present substitution application.

I note that he has had the difficulties of the type which I have already mentioned but nevertheless, I consider that the matter should proceed today and be determined in relation to this matter which is in fairly narrow compass and which, in my view, is discrete from the multitude of other matters in respect of which Mr Morton is engaged.  I am satisfied that the application which was made on 26 July 1991, over four years ago, was served on Mr Morton and that the affidavits relied on by the applicant were served after the dates the bear with the exception of an affidavit filed today as to the present status of the outstanding debt.

Mr Morton has filed in these proceedings three substantial affidavits pursuant to directions given by the court.  These are the affidavits of 17 August 1995 of which there are two and the further affidavit of 28 September. Mr Morton has submitted that he should be entitled to rely in this application on a large number of other affidavits filed in other proceedings. Having regard to the directions which have been made in the past, I am not prepared to open up these proceedings to take in all the other material which Mr Morton wishes to raise before the court in relation to the application today.

In my view, it is important in this matter to bear in mind precisely what is being sought on this application.  It is as I have said, a matter which is not of a wide scope and the matters to be taken into account are set out in section 49 of the Bankruptcy Act.  I do not accede to the application for an adjournment of the hearing of this application for substitution.  In relation to the substantial application, I wish at the outset to refer to section 49 of the Bankruptcy Act which is in these terms. I will read it:

" Where a creditor' petition is not prosecuted with due diligence ... "

which is not this case ‑

" ... or where for any other reason the Court considers it proper to do so, the Court may ... permit to be substituted as petitioner .... another creditor .... to whom the debtor is indebted in the amount required by this Act in the case of a petitioning creditor, and the petition may be proceeded with as if the substituted creditor or creditors had been the petitioning creditor."

This section has been the subject of some authority.  The most notable and relevant of which is the decision of the Full Court of the Federal Court of Australia in the case of Dean v QUF Industries Ltd (1981) 51 FLR 317.

In that case, the court was comprised by Deane, McGregor and Sheppard JJ and at 321 their Honours referred to the circumstance that the claim on which the application was made for substitution, was a disputed debt.In the present case, Mr Morton has made it perfectly clear that the debt is disputed and that he proposes to make out a case that there is no subsisting debt which would ground any application for substitution.  However, in the decision in Dean's case at 321, their Honours said this:

"If there is a genuine dispute between the appellant and the respondent as to whether the appellant is indebted to the respondent, the appropriate order, when the petition comes on for hearing, may be that the petition be dismissed.  It was not, however, necessary that his Honour reach any conclusion in that regard on the application for substitution.  While it is necessary, as part of an application for substitution, that the person seeking substitution claim the existence of a debt of the requisite amount, it is not necessary that he should actually establish the existence of the debt at that stage."

In reaching that view, the Full Court was following the decision of the High Court in a case of Hyams v Elder Smith Goldsbrough Mort Limited (1976), 133 CLR 637. The Full Court went on to say that the fact that the appellant disputed his indebtedness to the respondent, was relevant to the question whether substitution should be permitted.

His Honour, the trial judge in Dean's case, had expressly referred to the fact that the debt was disputed, thereby apprising himself of the fact that it was not an uncontested debt and that he was aware that the appellant had delivered a defence to the claim.  There was no basis, the Full Court said, for assuming that the trial Judge on the substitution application, disregarded that circumstance in concluding that an order for substitution be made.

Having regard to the evidence which is before me, it is clear, although I note that it is disputed, that there is a claim for an amount outstanding on behalf of Mitchell Products Pty Limited.  That does not mean that the claim is undisputed or has been established.  That is a matter for decision at the hearing of the petition, as I have attempted to indicate to Mr Morton. All that is being decided here today, is whether there is a claim which comes within section 49 and whether the Court will substitute another petitioning creditor. In those circumstances, I think, having regard to the requirements of section 49 and the material which has been placed before me today, it is proper that a substitution order be made.

Accordingly, I make an order permitting Mitchell Products Pty Limited to be substituted as a petitioning creditor in this matter.  I adjourn the hearing of the petition to a date to be fixed by the Registry.  Should the substituted petitioner obtain a sequestration order, the original petitioning creditors costs are to take priority to the cost of the substituted creditor.  Should the substituted creditor not obtain a sequestration order, the debtor is to pay the original petitioning creditors costs including reserve costs.  I reserve the costs of the substituted creditor.  I direct the substituted creditor to serve a copy of today's order on the debtor within 7 days from today and I direct the substituted creditor to file an affidavit of service on or before one day before the hearing of the petition.

Those are the orders that I make in this matter Mr Morton, but I do wish to emphasise to you that if you have a look at the relevant section and direct your mind again to section 49 and to the authority to which I have referred and by which I am bound, you will see that it does indicate that you are not being shut off from making any defences to the petition which you may see fit to make. The court hearing the petition will then decide, on the merits of the evidence which it accepts, what the position is in relation to the debt.
I stand the matter over to the Registrar's list on 21 November 1995. That gives you three weeks. If you wish to make any application in relation to the hearing of the petition together with the other proceedings, you should make that application within two weeks from today, supported by any affidavits that you want to put on to support it.

You will be served with a copy of the orders which were made today within seven days from today.

I certify that this and
the preceding six (6)
pages are a true copy of the
Reasons for Judgment herein of
his Honour Justice Tamberlin.

Associate:

Date:  2 November 1995  

Debtor in person via Video-link             Mr J Morton  

Solicitor for Creditor:               Ms J Redfern
  Hunt & Hunt Solicitors

Date of Hearing:  2 November 1995  

Date Judgment Delivered:                   2 November 1995