Re Behan, D. - [1995] FCA 564

CATCHWORDS

BANKRUPTCY - Bankruptcy notice issued on basis of judgment debt obtained against company director guaranteeing debt of company - whether company administration operates to stay execution of judgment debt - whether bankruptcy proceedings involve enforcement of guarantee - merger of rights under guarantee with judgment - s440J Corporations Law.

Corporations Law: ss436A, 440D, 440F, 440G, 440J.
Bankruptcy Act 1966: (Cth) s44(1)(g)

Ex parte Fewings; In re Sneyd (1883) 25 ChD 338; applied.
In Re European Central Railway Company; Ex parte Oriental Financial Corporation [1876] 4 ChD 33; applied.
In Re Jenkins (1889) 15 VLR 271; approved.
McDonald v Scobie [1980] QdR 477; approved.
Wren v Mahoney (1972) 126 CLR 212; referred to.
Bayne v Blake (1909) 9 CLR 360; discussed.

RE DARRELL BEHAN; EX PARTE PIONEER CONCRETE (QLD) PTY LTD

No QN 777 of 1995

CORAM: HILL J
PLACE: BRISBANE
DATED: 3 AUGUST 1995

IN THE FEDERAL COURT OF AUSTRALIA )
GENERAL DIVISION )

BANKRUPTCY DISTRICT OF THE ) No. QN 777 of 1995
STATE OF QUEENSLAND )

RE:DARRELL BEHAN

Debtor

EX PARTE:PIONEER CONCRETE (QLD) PTY LTD

Creditor

CORAM:    HILL J
PLACE:    BRISBANE
DATED:    3 AUGUST 1995

MINUTES OF ORDER

THE COURT ORDERS THAT:

(1)The application be dismissed.

(2)The debtor pay the creditor's costs of the application.

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 ) No. QN 777 of 1995
STATE OF QUEENSLAND )

RE:DARRELL BEHAN
Debtor

EX PARTE:PIONEER CONCRETE (QLD) PTY LTD
Creditor

CORAM:    HILL J
PLACE:    BRISBANE
DATED:    3 AUGUST 1995

REASONS FOR JUDGMENT

Mr Behan ("the debtor") applies to set aside a bankruptcy notice dated 13 June 1995 issued at the request of Pioneer Concrete (Qld) Pty Ltd ("the creditor").

The debtor is a director of Casino Developments Pty Ltd ("the Company") and by a deed of guarantee dated 24 April 1994 guaranteed the creditor the due and punctual payment of all moneys at that date or thereafter owing by the Company as if the principal debtor. The guarantee was expressed specifically as not being discharged in the event of, inter alia, the liquidation of the Company.

The creditor commenced proceedings against the debtor in the District Court at Brisbane alleging moneys owing under the guarantee in respect of non-payment by the Company for goods supplied to the Company by the creditor. On 28 April 1995 the creditor obtained a default judgment against
the debtor in the sum of $41,139.95, together with $585.50 for costs.

On 22 May 1995 administrators were appointed by the directors of the company pursuant to the provisions of s436A of the Corporations Law ("the Law"). That administration, which began on that day, continued until 7 July 1995 when a deed of company arrangement in respect of the company was executed: s435C of the Law.

On 13 June 1995 a bankruptcy…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

Continue reading Re Behan, D.

Details

AGLC: Re Behan, D. [1995] FCA 564
Case: [1995] FCA 564
Decision Date: 3 AUGUST 1995

CaseChat Overview and Summary

The case of Re Behan involved the debtor, Darrell Behan, who sought to set aside a bankruptcy notice issued against him by Pioneer Concrete (Qld) Pty Ltd. Behan, a director of Casino Developments Pty Ltd, had guaranteed the payment of debts owed by the company. When the company defaulted on its payments, Pioneer Concrete obtained a default judgment against Behan. The crux of the dispute was whether the bankruptcy notice, which was based on this judgment, was valid given that the company was in administration under the Corporations Law.

The primary legal issue before the court was whether the company's administration under the Corporations Law operated to stay the execution of the judgment debt, thereby rendering the bankruptcy notice invalid. Specifically, the court needed to determine if section 440J of the Corporations Law, which prohibits enforcement of guarantees during a company's administration, also applied to stay the execution of a judgment debt obtained prior to the administration.

The court found that section 440J of the Corporations Law did not operate to stay the execution of a judgment debt. The reasoning was based on the principle that once a judgment is obtained, the original debt merges into the judgment, and the rights and obligations of the parties are thereafter governed by the judgment. The court held that section 440J was concerned with preventing the enforcement of guarantees and the commencement of proceedings in relation to such guarantees, but it did not extend to staying the execution of a judgment debt. Therefore, the bankruptcy notice remained valid, and the application to set it aside was dismissed. The debtor was ordered to pay the creditor's costs of the application.

Orders