Re Beattie, T.L. v Ex parte Centurion Finance Ltd
[1995] FCA 535
•27 JULY 1995
CATCHWORDS
BANKRUPTCY - Creditor's petition - bankruptcy notice founded on default judgment in Magistrates Court - whether in truth and reality a debt due - affidavit and documents inconsistent with debt as alleged - exercise of discretion to go behind the judgment.
Re Frazer Ex parte Central Bank of London [1892] 2 QB 633 - Appl.
Wren v. Mahony (1972) 126 CLR 212 - Appl.
Simon v. O'Gormon Pty. Ltd. (1979) 619 - Appl.
Re David Ex parte Lahood (1979) 26 ALR 306 - Appl.
Corney v. Brien (1951) 84 CLR 343 - Appl.
Petrie v. Redmond (1942) 13 ABC 44 - Appl.
Re Vojnovski [1970] ALR 355 - Appl.
Oliveri v. Stafford (1989) 24 FCR 413 - Appl.
Trevor Lawrence Beattie; Ex parte Centurion Finance Limited
No. QP61 of 1995
Cooper J., Brisbane, 27 July 1995
IN THE FEDERAL COURT OF AUSTRALIA
GENERAL DIVISION
BANKRUPTCY DISTRICT OF THE
STATE OF QUEENSLAND
Cred. Pet. No. 61 of 1995
RE: TREVOR LAWRENCE BEATTIE
Debtor
EX PARTE: CENTURION FINANCE LIMITED
Creditor
JUDGE MAKING ORDER: Cooper J.
WHERE MADE: Brisbane
DATE OF ORDER: 27 July 1995
MINUTES OF ORDER
THE COURT ORDERS THAT:
1. Within twenty-eight (28) days of today the petitioning creditor file and serve all material upon which it relies to establish that it has a presently enforceable debt due against the debtor in an amount not less than the statutory minimum to support a bankruptcy petition and the legal basis of that entitlement.
2. Within fourteen (14) days thereafter the debtor file and serve any material upon which he intends to rely to contend that there is no presently enforceable debt due by him to the petitioning creditor of at least the statutory minimum amount and give written notice of any legal contention he wishes to advance in support of such contention.
3. The petition be adjourned to the list of contested bankruptcy matters to a date to be fixed by the District Registrar.
4. The costs of this application be reserved.
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 OF THE
STATE OF QUEENSLAND
Cred. Pet. No. 61 of 1995
RE: TREVOR LAWRENCE BEATTIE
Debtor
EX PARTE: CENTURION FINANCE LIMITED
Creditor
CORAM: Cooper J.
PLACE: Brisbane
DATE: 27 July 1995
REASONS FOR JUDGMENT
The petitioning creditor is Centurion Finance Ltd. On 8 April 1994 the petitioning creditor obtained default judgment against the debtor in the sum of A$13,552.03 being $6,914.26 for claim, $678.25 costs and $5,959.52 for interest.
On 16 June 1994 the petitioning creditor obtained a bankruptcy notice based on the default judgment. On 8 July 1994 a sealed copy of the bankruptcy notice was served on the debtor. The debtor failed to comply with the terms of the bankruptcy notice.
On 6 February 1995 the petitioning creditor filed the within petition which was served on the debtor on 11 May 1995. The act of bankruptcy relied upon was non-compliance with the terms of the bankruptcy notice.
The debtor appears in person to resist the making of a sequestration order.
He is 68 years old and claims to have no assets, being a pensioner. He advises that he applied for and was refused legal aid because the matter was a bankruptcy matter. Such a refusal by the Legal Aid Office, if based on other than a consideration of the merits of the application, is to be deplored. It places the debtor and the court in an invidious position in attempting to determine whether or not there is material which would justify the court going behind the judgment.
The approach to be taken by the court is well established. The existence of a judgment is prima facie evidence of a debt (Re Frazer Ex parte Central Bank of London [1892] 2 QB 633 at 636). However a judgment is never conclusive in bankruptcy and the court has a discretion to go behind a judgment to determine whether there is in truth and reality a debt due (Wren v. Mahony (1972) 126 CLR 212 at 224-225). Before the court will exercise the discretion there must be established substantial reasons for questioning whether there is in truth and reality a debt owing to the creditor; the court will not inquire into the validity of a judgment debt as a matter of course (Simon v. O'Gormon Pty. Ltd. (1979) 619 at 633; Re David Ex parte Lahood (1979) 26 ALR 306 at 307). The requirement may more readily be met where there has been no adjudication on the merits, for example a default judgment and there exists a bona fide allegation that no real debt lies behind the judgment (Corney v. Brien (1951) 84 CLR 343 at 357-358; Petrie v. Redmond (1942) 13 ABC 44 at 49; Re Vojnovski [1970] ALR 355 at 359; Oliveri v. Stafford (1989) 24 FCR 413 at 422).
The debtor has taken no steps to stay or set aside the Magistrates Court judgment. He says that at the time of the Magistrates Court proceedings he had health
problems which were paramount in his mind at the time and that it was in those circumstances that the default judgment was entered.
In an affidavit filed on 14 June 1995 he deposes :-
"6. I do not consider that the Creditors had a right to obtain Judgment against me and that I had and have always had a Defence to the action by the Creditor on the following grounds:
(a) the action instituted barred, the debt having been incurred more than six (6) years prior to the filing of the Plaint and Summons;
(b) I never entered into any agreement with the Creditor. I made an application to Marac/American Express Gold Card which I signed by the application form does not show the name of the Creditor and the Plaint and Summons does not plead any reference between the two.
(c) Any agreement made between myself and Marac/American Express gold Card was made in New Zealand and any action should have been commenced in that Country;
(d) Any debt incurred by me was in New Zealand currency and the Plaint and Summons failes [sic] to refer to the debt in New Zealand dollars and the relevant exchange rate.
(e) The Plaint and Summons fails to adequately and sufficiently plead details concerning the jurisdication [sic] how the debt is calculated, the creation of any agreement between the parties and any proper relevance to sundry documentation."
In support of his contention that the debt was statute barred the debtor produced to the court a monthly statement dated 8 May 1987 which shows a debit balance due to Centurion Finance Limited of NZ$6,210.96 with an effective interest rate of 28.5% per annum and a new rate of 30.50% per annum effective from 15 May 1987. The statement has a handwritten notation that $310.55 was paid on 3 June 1987. The debtor was unable to say whether he had made any other payments on this account. He says he never agreed to pay interest rates of this magnitude.
The New Zealand solicitor for the petitioning creditor deposed as to the creation of the debt :-
"3. The debt the subject of this petition arose as a consequence of the judgment debtor's use of American Express card no. 3774-206282041007 to access the judgment debtor's drawn-down facility no. 2062824-00 with the judgment creditor.
4. Now produced and shown to me marked withe the letter "A" is a true copy of the application for the Marac/American Express Gold Card in the judgment debtors name and signed by him on or about 29 July 1987.
5. At about that time, Marac Financial Services Pty Ltd (`Marac') provided the line of credit which allowed American Express cardholders (such as the judgment debtor) to access funds contained in their respective drawn-down facility.
6. In about 1993 the judgment creditor purchased Marac's line of credit and thereby acquired all debts previously due and owing to Marac pursuant to the various American Express cards, including the debt due by the judgment debtor.
7. Subsequent notice of the acquisition was sent to all debtors (including the judgment debtor) and all future statements of indebtedness in respect of the judgment debtor's debt were issued by the judgment creditor/"
The invoice produced to the court by the debtor is on the letterhead of Centurion Finance Ltd. for account 2062824 00 and states on its back :-
"THIS Centurion Account Statement is your record of Deposits and Withdrawals made by you during the monthly billing period of your Centurion Account. Credit `in funds' balances on your Account are secured deposits in accordance with the Terms and Conditions of the Trust Deed issued by Centurion Finance Limited in favour of national Mutual Life Nominees Limited dated the 4th of April 1986."
The debtor alleges from the bar table that he has been an American Express Gold Card holder from 1976 and that the application he made was in the 1970's and not in July 1987.
Paragraphs 4 and 5 of Mr. Miller's affidavit cannot be correct. The petitioning creditor was rendering invoices on account 2062824 00 before the date of the alleged application in July 1987. Whatever the petitioning creditor acquired from Marac Financial Services in January 1993 prima facie it did not include any sum then payable on account number 2062824 00 maintained by the petitioning creditor and in respect of which it was invoicing and receiving payments in May/June 1987.
In support of his statement as to the creation of the account and there being a debit amount of NZ$8,315.79 as at 9 April 1990, Mr. Miller exhibits fax copies of an application form and a statement of account. However the quality of the reproductions makes it impossible to read the writing on the documents. Unfortunately it is not possible to say when the monies first became due and payable and when the relevant statute of limitations first began to run in respect of these debts. Nor are the terms and conditions upon which account 2062824 00 was opened and operated discernible from the documents nor are such terms and conditions themselves before the court. The statement of account Exhibit "B" to his affidavit shows the account number as 3774 206282 42009 (?) which prima facie is an American Express card number but not the card number of the judgment debtor which was 3774 206282 41. It is not the drawn down facility account number in respect of which the debt is claimed.
All of these matters may be capable of some rational explanation or when the whole basis and history of the transaction is set out there will be revealed a debt due in the statutory sum sufficient to support the making of a sequestration order.
I am satisfied on the material before the court there are substantial reasons for questioning whether there is in truth and reality an enforceable debt due to the petitioning creditor in the amount and on the basis claimed by Mr. Miller in his affidavit filed in support of the petitioning creditor. Therefore I propose to exercise my discretion to go behind the judgment.
Having determined to do so the petitioning creditor must have an opportunity to file material to satisfy the court that it has a presently enforceable debt against the debtor in not less than the statutory amount and the legal basis of such entitlement and the debtor be given an opportunity to challenge that claim.
THE COURT ORDERS THAT:
1. Within twenty-eight (28) days of today the petitioning creditor file and serve all material upon which it relies to establish that it has a presently enforceable debt due against the debtor in an amount not less than the statutory minimum to support a bankruptcy petition and the legal basis of that entitlement.
2. Within fourteen (14) days thereafter the debtor file and serve any material upon which he intends to rely to contend that there is no presently enforceable debt due by him to the petitioning creditor of at least the
statutory minimum amount and give written notice of any legal contention he wishes to advance in support of such contention.3. The petition be adjourned to the list of contested bankruptcy matters to a date to be fixed by the District Registrar.
4. The costs of this application be reserved.
I certify that this and the preceding six (6) pages are a true copy of the reasons for judgment herein of his Honour Justice Cooper.
Date: 27 July 1995
Associate
Applicant in Person: Mr. T.L. Beattie
Solicitor for the Respondent: Mr. D.J. Wing of Quinn and Scattini
Date of Hearing: 27 July 1995
Place of Hearing: Brisbane
Date of Judgment: 27 July 1995
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