Preece v Preece

The proceeding before the Federal Court of Australia concerned a creditor's petition filed by the applicant against the respondent. The respondent sought leave to argue that an earlier order by a Registrar, substituting the applicant creditor, should not have been made. This challenge was predicated on the assertion that the debt underpinning the applicant's claim was jointly owed to the applicant and another creditor. Further issues arose concerning stamp duties under the *Duties Act 1997* (NSW), specifically whether the applicant's reliance on a loan agreement creating an equitable mortgage, without the agreement being stamped, constituted an attempt to enforce a mortgage and whether the court could consider such an unstamped instrument. The respondent also sought to amend his notice of grounds of opposition, and the court considered whether the proposed amendments raised matters truly in issue. Finally, the court examined whether the creditor's petition constituted an abuse of process, considering the creditor's alleged ill will and suggestions to other creditors, and whether the debtor was able to pay his debts.

The court was required to determine several key legal issues. Firstly, it had to ascertain whether the debt relied upon by the applicant was indeed jointly owed by the respondent to the applicant and another creditor. If it was, the court needed to consider whether it possessed the power under s 49 of the *Bankruptcy Act 1966* (Cth) to substitute the other creditor. Secondly, the court had to decide whether the applicant, by seeking a sequestration order based on a loan agreement containing a clause creating an equitable mortgage, was effectively seeking to enforce that mortgage. This involved determining whether the court could have regard to the loan agreement, which was not stamped as required by the *Duties Act*, and whether an order confirming its admissibility could be made after it had been admitted into evidence without satisfying s 304(2) of that Act. Thirdly, the court had to assess the principles for granting leave to amend a notice of grounds of opposition and whether the respondent's proposed amendments met these criteria. Finally, the court considered whether the creditor's petition was an abuse of process, and whether the debtor was able to pay his debts.

In relation to the stamp duty issue, the court found that the applicant was not seeking to enforce a mortgage, but rather to rely on the loan agreement as evidence of a debt. Consequently, the court held that it could have regard to the unstamped loan agreement, as the requirements of s 304 of the *Duties Act* were not triggered by the nature of the applicant's claim. Regarding the proposed amendments to the grounds of opposition, the court refused leave, finding that the amendments did not raise matters that were truly in issue between the parties and that the respondent had not demonstrated a sufficient basis for their introduction at that stage. The court also determined that the creditor's petition did not constitute an abuse of process, finding that the alleged ill will and suggestions to other creditors were insufficient to establish such an abuse. The court concluded that the respondent was unable to pay his debts.

The court made orders dismissing the respondent's application for leave to argue that the substitution order should not have been made and dismissing the respondent's application to amend his notice of grounds of opposition. The creditor's petition was adjourned to a date to be fixed, with liberty to the applicant to seek directions.