Pastrello, R.J. v Lennock Motors Pty Ltd

[1990] FCA 277

D t s n 7 r 6 o r / w

JUDGMENT No. 21.7,..:/..2.=

IN THE FEDERAL COURT OF AUSTRALIA	)
)
GENERAL DIVISION	)
) No. NP 391 of 1990
BANKRUPTCY DISTRICT OF THE	) )
AUSTRALIAN CAPITAL TERRITORY	1

Re:  ROBERT JOHN PASTRELLO

Judgment Debtor

Ex parte:  LENNOCK MOTORS PTY LIMITED

Judgment Credltor

MINUTE OF ORDER

JUDGE MAKING ORDER	: Neaves J.
DATE OF ORDER	: 22 June 1990
WHERE MADE	: Canberra

THE COURT ORDERS THAT:

1.    The further hearing of the petltlon herein be adjourned until 17 August 1990.

2.     Either party have llberty to restore the petition to the llst on 7 days' notice.

REQISTRY

3.     The costs of the petition to date be reserved.

Note: Settlement and entry of orders is dealt with in

rule 124 of the Bankruptcy Rules.

RECEIVED
2 G JUN 1990
FEDERAL COURT OF

AUSTRALIA PRINCIPAL

IN THE FEDERAL COURT OF AUSTRALIA	1
)
GENERAL DIVISION	1
) No. NP 391 of 1990
BANKRUPTCY DISTRICT OF THE	)
AUSTRALIAN CAPITAL TERRITORY	)

Re:  ROBERT JOHN PASTRELLO

Judgment Debtor

Ex parte:  LENNOCK MOTORS PTY LIMITED

Judgment Creditor

CORAM: Neaves J.

m: 22 June 1990

REASONS FOR JUDGMENT

This is a petition by Lennock Motors Pty Limlted ("Lennock Motors") for a sequestration order against the estate of Robert John Pastrello ("the judgment debtor"). The petition alleges that the judgment debtor is indebted to Lennock Motors in the sum of $10,501.59 for debt together with interest

thereon amounting to $2,559.22, making a total of $13,060.81.

The debt is alleged to be due under a final judgment obtained

in the Supreme Court of the Australian Capital Territory on 17 December 1987. The judgment debtor is alleged to have committed an act of bankruptcy on 24 August 1989 by reason of his failure to comply with the requirements of a bankruptcy notice served on him on 10 August 1989. The making of a sequestration order is opposed by the judgment debtor.

It appears that proceedings were instituted by Lennock Motors against the judgment debtor in the Supreme Court of the Australian Capltal Territory on 19 January 1987 in respect of damage to a Nissan Pulsar motor vehicle in the following

circumstances. It was alleged that on or about 24 May 1986 Lennock Motors, in the course of its business as a motor vehicle dealer, entrusted the motor vehicle, which was owned by it, to the judgment debtor so as to facllitate the test driving of the vehicle by the judgment debtor. It was further alleged that the judgment debtor so negligently, carelessly and unskillfully drove, managed and controlled the vehicle that he caused or permitted it to leave the roadway and to come into violent impact with a signpost thereby causlng the damage the subject of the clam.

An appearance on behalf of the judgment debtor was entered on 23 March 1987 by a solicitor acting on his behalf. By letter dated 1 April 1987 the solicitor for the judgment debtor informed the solicitors for Lennock Motors that

liability was not in issue but that the quantum of damages was

contested. In the event, no defence was filed and on 22 Aprll	1987 interlocutory judgment in favour of Lennock Motors was
entered with damages to be assessed.
The matter came before the Supreme Court for the assessment of damages on 17 December 1987. The judgment debtor was not legally represented at that hearing but appeared in person, the solicitor formerly acting for him having obtained leave of the Court to withdraw as his solicitor on the basis that, despite a number of requests to the judgment debtor, no
instructions in relation to the conduct of the matter had been
received. It was on that day adjudged that Lennock Motors recover against the judgment debtor the sum of $10,501.59 together with costs at two-thlrds of the Supreme Court scale.

The making of a sequestration order is opposed on two

grounds -

(a)	that the judgment of the Supreme Court was obtained oppressively and that, in truth and reality, there is not a debt owlng to Lennock Motors by the ludgment debtor; and
(b)	that the ludgment debtor has no assets nor any prospect of assets in the foreseeable future.

Evidence was given by the judgment debtor that in May

1986 he went to the premises of Lennock Motors to try and find

a motor vehicle suitable for his purposes, his father having

promised him a car upon leaving school. He said that, having expressed interest in the vehicle in question a sales

Sales Manager, gave him permission to test drive the vehicle.	representative of Lennock Motors, after consulting with the
He further said that, having driven the vehicle to his home, he had an accident on the return journey to the premises of Lennock Motors. He said he was exceeding the speed llmlt and, while taking a left hand corner, the rear wheels hit the outer rim of the road and the vehicle went out of control and hit a sign post. He was not, he sald, covered by any insurance policy. After the accident, the judgment debtor returned to
the premises of Lennock Motors. He said he had a discussion with a Mr Trotter who told him that, if he paid "the $500 excess", nothing further would be heard about it. He said he borrowed money from friends and, over a period of two months, paid Lennock Motors the sum of $500.
The judgment debtor also gave evidence that he was 23 years of age, that he was studying accountancy on a part-time basis, having commenced the course at the beginning of 1990. He said he lived with his parents and worked part-time behind a bar when he was needed which was about 2 or 3 times a month. In cross-examination, the judgment debtor said that after he left school he was employed by his father on a full-time basis but that he was at present unemployed. He said he was being
supported by his parents. He proposed, he said, to make an arrangement with his father whereby his father would lend him the money to pay his solicitor and that he would work for his father as a means of repaying the loan. He had made no efforts to pay the amount of the judgment debt.
I did not find the judgment debtor a satisfactory witness but I think his evidence is sufficient to enable an inference to be drawn that the proceeding brought against him
in the Supreme Court, although brought in the name of Lennock Motors, may well have been a proceeding brought at the instance of the insurers of that company purporting to exercise a right of subrogation.
Based on that material, counsel for the judgment debtor submitted that the Court should go behind the judgment of the Supreme Court and enqulre whether there was, in truth, a debt due by the judgment debtor. In support of this submission rellance was placed upon 5.65 of the Insurance Contracts Act 1984 (Cth). That sectlon, so far as material, provides:

"65.(1) Subject to sub-section ( 2 ) , this

section applies where -

(a)	an insurer is liable under a contract of general insurance in respect of a loss;
(b)	but for this section, the insurer would be entitled to be subrogated to the rights of the insured against some other person (in this section called the 'third party'); and
(c)	the lnsured has not exercised those rights and might reasonably be expected not to exercise those rights by reason of -

(i) a family or other personal relationship between the insured and the third party; or

(il) the insured having expressly or impliedly consented to the use, by the third party, of a road motor vehicle that is the subject-matter of the contract.

( 2 ) Thls section does not apply where the

conduct of the thlrd party that gave rise to the
loss -

(a) occurred in the course of or arose out of his employment by the insured; or

(b) was serious or wilful misconduct.

( 3 ) Where the third party is not insured in

respect of his liability to the insured, the insurer does not have the rlght to be subrogated to the rights of the insured against the third party in respect of the loss.

The effect of those provisions, so it was submitted, was to make it unlawful for the insurer, through Lennock Motors, to seek to recover from the ludgment debtor the loss suffered as a result of the accident, no allegation based on sub-s.65(2) having been pleaded in the Supreme Court proceeding.

Although no reference was made to it during the course of the hearing, sub-s.4(1) of the Act would appear to be relevant. It provides -

"4. (1) Subject to sub-section (21 , this Act does not apply to or in relatlon to a contract of insurance that was entered into before the date of commencement of this Act."

The date of commencement of the Act was 1 January 1986. There is, however, no materlal before the Court to indicate the date upon which any relevant insurance policy was entered into but, having regard to the circumstance that the damage to the vehicle occurred on 26 May 1988, the date of the policy could be crucial.

Although the material before the Court is less than satisfactory, sufficient has I think been established to warrant this Court declining to make a sequestration order until the question is resolved whether, behind the judgment of the Supreme Court or as the consideration for it, there was in truth and reality a debt due to Lennock Motors by the judgment debtor: see Wren v. Mahony (1972) 126 C.L.R. 212 per Barwick C.J. at pp.224-5.

After the matter had been heard I was informed by the Registrar that on 12 June 1990 the judgment debtor had commenced proceedings in the Supreme Court for orders setting aside the judgment on which the petition is based and giving leave to the judgment debtor to file a defence. I have been further informed that that proceeding stands adjourned to 9 July 1990.

In the circumstances, I think the appropriate course for thls Court to take is to adjourn the further hearing of the petltlon for a period to enable the judgment debtor's application to be determined in the Supreme Court. The petition wlll, therefore, stand adjourned until 17 August 1990 wlth liberty to elther party to restore the petition to the llst on 7 days' notice. The costs of the petition to date are reserved.

I certify that this and the preceding 6 pages are

a true copy of the

Reasons for Judgment herein of the Honourable Mr Justice Neaves.

Dated: 22 June 1990

Counsel for Lennock Motors : Mr A. Tsirimokos

Solicitors for Lennock Motors : Vandenberg Reid Pappas

& MacDonald

Counsel for the judgment debor: Mr R. Thomas

Sollcltors for the judgment : Gary Robb & Associates

debtor

Date of hearing	: 31 May 1990
Date of judgment	: 22 June 1990