Re Basile, Tony (also known as Basile, Orlando) Ex parte Ancich, Eric John (trading as John Ancich & Co.)

[1979] FCA 109

Re BASILE; Ex parte ANCICH (1979) 37 FLR 501
Bankruptcy - Appeal - Costs

COURT

FEDERAL COURT OF AUSTRALIA

GENERAL DIVISION
Bowen C.J.(1), Franki(2) and Deane(3) JJ.

CATCHWORDS

Bankruptcy - Creditor's petition - Application for adjournment refused and sequestration order made - On appeal evidence admitted of subsequent proceedings resulting in setting aside of judgment on which bankruptcy notice based - Sufficiency of affidavit verifying petition discussed - Sequestration order set aside - Bankruptcy Act 1966 (Cth.), ss. 47, 52, 306 - Federal Court of Australia Act 1976 (Cth.), s. 27.

Appeal - New evidence - Judgment on which sequestration order based set aside after order - Federal Court of Australia Act 1976 (Cth.), s. 27.

Costs - Successful appeal - Necessity for appeal occasioned by appellant's delay and omission - Appellant ordered to pay costs of appeal.

HEADNOTE

A bankruptcy notice, based on a default judgment obtained by the petitioning creditor against the debtor, was issued and served. At the hearing of the creditor's petition the debtor applied for an adjournment on the ground that he had given instructions for the institution of proceedings to set aside the default judgment. The application for an adjournment was refused.

The affidavit verifying pars. 1, 2, and 3 of the petition followed the prescribed form, with the addition of a further paragraph to the effect that the debt had not been compounded or secured to the satisfaction of the petitioning creditor. On the hearing of the petition the debtor argued that the petition had not been properly verified since there was no evidence that the debt had not been paid, or secured to the satisfaction of the court. This contention was rejected, and a sequestration order was made.

On the hearing of the debtor's appeal, fresh evidence was admitted establishing that subsequent to the sequestration order the default judgment had been set aside, upon terms as to the debtor making a payment into court; and that at the date of hearing the appeal no judgment debt against the debtor remained on foot.

Held: (1) Per curiam - On the facts then before him, the trial judge's decision to refuse the adjournment was a proper exercise of his discretion.

Per Bowen C.J. and Deane J. - In view of the fresh evidence admitted on the appeal, the sequestration order should be set aside.

Per Franki J., dissenting - The question argued on the appeal was whether the trial judge was wrong in refusing the debtor's application for an adjournment on the basis of the facts then before him. This was not a case where it was appropriate for the court to take into account evidence of matters which occurred after the hearing in considering whether to allow the appeal.

(2) Per curiam - The additional paragraph in the affidavit verifying pars. 1, 2, and 3 of the petition was superfluous, and the petition was properly verified.

HEARING

Sydney, 1979, October 19, 31. #DATE 31:10:1979

APPEAL.

The appellant appealed against the making of a sequestration order against him by the Supreme Court of Queensland (Campbell J.).

R. Chesterman, for the appellant debtor.

D. Marks, for the respondent petitioning creditor.

Cur. adv. vult.

Solicitors for the appellant: Skinner & Smith.

Solicitors for the respondent: B. J. Perriman & Co.

R. R. BOADEN

JUDGE1

October 31.

The following judgments were delivered.

BOWEN C.J. This is an appeal from a judgment of the Supreme Court of Queensland given on 5th September, 1978, whereby on the petition of Eric John Ancich a sequestration order was made against Tony Basile. On the hearing of the appeal the making of the order was contested upon two grounds: 1. The learned trial judge erred in hearing the petition before an application of the appellant to set aside the judgment, upon which the relevant bankruptcy notice was based, was heard and determined. 2. The learned trial judge erred in treating the failure of the petitioner to verify the petition properly as a mere irregularity or formal defect and in holding that he had a discretion to remedy the failure and in purporting to do so. (at p502)

1. The circumstances appearing in the evidence before the learned trial judge were that Eric John Ancich, the respondent, had obtained a judgment by default in the District Court in Sydney on 12th August, 1977, against Tony Basile, the appellant, in the sum of $4,010; that the bankruptcy notice based upon this judgment had been issued and was served upon the appellant on 29th December, 1977, requiring compliance within twenty-eight days; that there was no compliance and that an act of bankruptcy was committed upon the expiry of the period specified on 26th January, 1978; that a bankruptcy petition was issued also based upon the amount of the judgment and served upon the appellant on 14th July, 1978. This petition was, in the first instance returnable on 8th August, 1978, but was not heard on that day, being stood over to 5th September, 1978. On 5th September, 1978, the petition was heard and a sequestration order made. On that day before the learned trial judge an adjournment was sought. Evidence was submitted to him that instructions had been given for the institution of proceedings to set aside the District Court default judgment and a copy of the affidavit in support of that application in the District Court sworn on 4th September, 1978, was placed before him. In this affidavit Mr. Basile admitted that he owed to the respondent the sum of $1,925.85 and he offered to pay it. It was also argued that verification of the petition was defective. (at p503)

2. The learned trial judge considered these matters and also the delay in the making of the application to set aside the judgment and refused the adjournment. He came to the conclusion that a sequestration order should be made. (at p503)

3. Dealing with the first ground on which the appeal was argued, it appears to me that if there was before this Court no more than was before his Honour, I would not be disposed to interfere with the exercise of his discretion in refusing the adjournment. It has not been shown to me that there was any error which would justify an appeal court in interfering with the exercise of discretion by the trial judge. However, this Court has power to accept evidence on appeal (Federal Court of Australia Act s. 27). In the exercise of this power at the request of the appellant the court permitted evidence to be given which showed that on 5th September, 1978, the appellant's application to set aside the District Court judgment was filed in the District Court. There was some suggestion that this was prior to the hearing of the petition but this suggestion was not made good. It was also shown that a notice of appeal was lodged on 6th September; that on 7th September $100 was paid into court for security of costs securing a stay of proceedings under the rules which then applied to appeals in this Court, namely the High Court Rules O. 70 r. 12; that on 6th October, 1978, the District Court set aside the default judgment on terms requiring the filing of notice of grounds of the defence and cross claim (if any) and the payment of $2,500 into court. It further appeared that the sum of $2,500 had in fact been paid into court in compliance with this order on 20th October, 1978, and that the appellant had filed a defence and cross claim in the District Court action. So far no pleading in reply to the defence or cross claim had been filed or delivered by the respondent who it appeared was seeking certain particulars. (at p503)

4. In the light of these additional facts which were not before the learned trial judge, it appears to me that this Court on appeal should approach the matter with hindsight. When this is done, I think that the balance tips in favour of the appellant. The present position is that the judgment upon which the bankruptcy notice was based has been set aside. No judgment debt against the appellant remains on foot. The appellant has paid into the District Court the sum of $2,500 which exceeds the amount which is admittedly owing to the respondent. There is plainly a dispute as to the residue of the amount claimed. That dispute awaits hearing in the New South Wales District Court. No other person claiming to be a creditor of the debtor appeared to support the making of a sequestration order. No person has appeared before us to sustain the order which was made. It is my opinion that this Court should now set aside the sequestration order. (at p504)

5. It appears to me that the affidavits filed in support of the petition do in fact comply with the Bankruptcy Act 1966 and the Bankruptcy Rules. The affidavits follow the prescribed forms. It is true that the affidavit of the truth of the statements in pars. 1, 2 and 3 of the petition (form 5) contains an additional paragraph not specified in the prescribed form. This is as follows: "3. There has been no compounding or securing of the debt referred to in the said bankruptcy petition to my satisfaction within the time specified in the said bankruptcy notice." This covers only some of the possibilities. It was argued that it left uncovered the two possibilities which I have mentioned, namely, denial of payment and denial that the appellant had secured the sum owing to the satisfaction of the Supreme Court of Queensland. But it was apparent from the case put before the learned trial judge that while the appellant admitted he owed $1,925.85 he had not paid it and had given instructions to set aside the District Court judgment and contest the matter in that court. The learned trial judge was, in my view, correct in drawing the inference that payment had not been made and had not been secured to the satisfaction of the Supreme Court of Queensland. If, contrary to my view, it was necessary to include in the affidavit proof of those two matters, it would be my opinion that the learned trial judge was not in error in treating the failure to do so as a formal defect or irregularity which could be cured under s. 306 of the Bankruptcy Act. (at p504)

6. I propose that the court order that the sequestration order made by the Supreme Court of Queensland and its order for costs be set aside and, in lieu thereof, order that the matter stand out of the list of the Supreme Court, with liberty being reserved to either party, to the official receiver, or to any person claiming to be a creditor of the appellant to have the matter restored to the list on seven days' notice to the other party or parties. This will enable either party to have the matter restored to the list when the outcome of the proceedings in the New South Wales District Court is known. (at p505)

7. The present position has been brought about as the result of delay and omissions on the part of the appellant. In the circumstances I propose that the appellant be ordered to pay to the respondent his costs of the appeal to this Court. As to the respondent's motion to dismiss the appeal for want of prosecution or, alternatively, to have the hearing of the appeal expedited which was stood over to the hearing of the appeal, the need for that proceeding was also brought about by delay and omissions on the part of the appellant. It resulted in a prompt hearing of the appeal. I propose that the appellant pay the respondent's costs of that motion. I would make no other order in that proceeding. (at p505)

8. So far as the proceedings before the Supreme Court of Queensland are concerned I am of opinion that the costs of those proceedings should be reserved for the determination of that court when the petition finally comes to be disposed of. (at p505)

JUDGE2

FRANKI J. The Chief Judge has dealt with the facts of this case so there is no need for me to refer in detail to them. Although the learned trial judge had the affidavit in support of the application to the District Court before him, in which the appellant admitted he owed the sum of $1,925.85, and in which he offered to pay this amount, no time was mentioned when it would be paid nor is there any evidence that there was any tender of the money. In addition, no notice of intention to oppose the making of a sequestration order was filed under the provisions of r. 20 of the Bankruptcy Rules nor did the appellant seek to contest the validity of the debt before the learned trial judge. In addition no attempt was made to resist the making of the sequestration order on the ground that the appellant could pay his debts. (at p505)

1. The case was presented on appeal as a request to review the decision of the learned trial judge on the facts before him. (at p505)

2. When the affidavit of Mr. Litster was being read, counsel for the respondent objected to the admissibility of pars. 10, 11 and 12 of that affidavit upon the basis that the true nature of the appeal confined the hearing to matters that existed at the date the sequestration order was made. Counsel then started to argue the nature of the appeal to this Court and counsel for the appellant was then asked about his attitude. He replied: "We do not rely upon pars. 10, 11, 12 or 13 in any way to argue that his Honour was wrong, but what we do say is that if we can persuade your Honours that his Honour was wrong on the material before him then the material in those paragraphs goes to show the sort of order that ought to be made by this Court and goes to show that there is some point to the appeal. With respect, I take the point of Deane J. that it is necessary to show there has been no trial, for example in the District Court of New South Wales, resulting in a judgment against the appellant. If that were so, our point would be worthless.
   
   

"We seek to show that his Honour was wrong on the material before him and then if we do that we say, look at this further material, may it please your Honours, and then decide whether your Honours ought to dismiss the petition or adjourn it. Your Honours will note the notice of appeal appearing at p. 46 of the record sought an order from this Court that the petition be dismissed or adjourned. Adjournment would have been the

appropriate order if, when we came before your Honours, the application before the District Court had not been resolved, but it is relevant for your Honours to know what happened to that application when deciding, if your Honours come to that point, to make an order in relation to that appeal; but we do not seek to rely on what is in those paragraphs to criticize in any way the trial judge's decision." (at p506)

1. It was upon this basis that evidence was admitted of the application to set aside the judgment having been filed, of the order setting aside the judgment having been made, of the payment into court of $2,500, and of further pleadings having been filed in the District Court. (at p506)

2. In my opinion the whole appeal was argued by counsel on the basis that the question for our determination was whether the learned trial judge was wrong on the facts before him in not granting the adjournment sought (the first ground of appeal argued) or in not dismissing the appeal (the second ground of appeal argued). It was only in the event of the court being satisfied of one or other of these matters upon the evidence before the learned trial judge that the evidence of events which took place after the pronouncement of the sequestration order became relevant and then only relevant for the purpose of deciding what was the appropriate order for the court to make. (at p506)

3. Before the learned trial judge it was common ground that the District Court could properly have entered judgment for $1,925.83. It was held by Gibbs J. in Re Bedford; Ex parte H. C. Sleigh (Queensland) Pty. Ltd. (1967) 9 FLR 497 that, if a judgment is wrongly entered for an amount in excess of the proper debt, bankruptcy proceedings founded on that judgment are not necessarily invalidated. In my opinion that case is relevant in the appeal before us because it is common ground that, at the time when the sequestration order was made, the appellant was rightly indebted to the respondent for an amount sufficient to support bankruptcy proceedings. (at p506)

4. In considering the first ground of appeal it is necessary to examine the principles governing such an appeal and I would refer to the judgment of C. A. Sweeney J., with whose reasons I agreed, in Field v. Commercial Banking Company of Sydney Ltd. (1978) 37 FLR 341 . In my opinion the decision of the learned trial judge to refuse an adjournment was an exercise of his discretion and on the facts before him I am satisfied that the exercise of his discretion to refuse an adjournment was a proper exercise of his discretion and I see no reason to uphold the appeal on this ground. There was no evidence before the trial judge that any application had been made then to set aside the judgment nor indeed is there any evidence before us that such application was filed before the sequestration order was pronounced. Whether or not it is appropriate or permissible in certain cases for this Court to take into account evidence of matters which have taken place after the trial judge pronounced his order in considering whether an appeal should be allowed, I do not consider this is such a case. (at p507)

5. I do not see how the upholding of this appeal would advance the public interest. (at p507)

6. I now pass to the second ground of appeal which was argued. (at p507)

7. Paragraph 3 of the petition accords with the requirements of s. 47 (1) (a) of the Bankruptcy Act 1966, and with r. 12 and form 5. (at p507)

8. Paragraph 2 of the affidavit of Mr. Ancich in support of the petition verifies par. 3 of the petition. This is in accordance with the usual form. The deponent has, however, added par. 3 to his affidavit. This paragraph is not normally added and in it the deponent has purported to verify for a second time, and in what I consider was a superfluous way, that the debt had not been compounded or secured to the deponent's satisfaction. I consider that the affidavits in support of the petition were adequate and I do not see any need to consider whether s. 306 applied. (at p507)

9. I would dismiss the appeal and order that the appellant pay the respondent's costs of the appeal and of the motion to dismiss the appeal for want of prosecution. (at p507)

JUDGE3

DEANE J. I agree with the judgment of the Chief Judge. (at p507)

ORDER

Orders that:

The sequestration order of the Supreme Court of Queensland exercising federal jurisdiction in bankruptcy made on 5th September, 1978, against Tony Basile also known as Orlando Basile and its order for costs be set aside.

The matter stand out of the list of the Supreme Court of Queensland with liberty reserved to either party or to the official receiver or to any person claiming to be a creditor of Tony Basile also known as Orlando Basile to have the matter restored to the list on seven days notice to the other party or parties.

The appellant to pay to the respondents' costs of the appeal to this Court.

The appellant to pay to the respondents, the respondents' costs of the motion to dismiss the appeal for want of prosecution.

The costs of the proceedings before the Supreme Court of Queensland be reserved for determination by that court when the petition finally comes to be disposed of.