Re Bond, Julia Natalia Ex Parte The Bankrupt
[1978] FCA 95
•08 NOVEMBER 1978
Re BOND; Ex parte THE BANKRUPT (1978) 36 FLR 131
Bankruptcy
COURT
FEDERAL COURT OF AUSTRALIA
GENERAL DIVISION
J.B. Sweeney J.(1)
CATCHWORDS
Bankruptcy - Applications for annulment of sequestration order and rescission of order for costs - Whether annulment appropriate - Whether rescission necessary - Bankruptcy Act 1966(Cth.), s. 154.
HEADNOTE
Held, that where a sequestration order ought not to have been made at all, the proper way of disposing of it was to annul it under s. 154 of the Act, rather than rescind it, and semble, such annulment makes a consequential order for costs ineffective.
Re Norris (1890), 7 Morr 8, not followed.
Re Deriu (1970), 16 FLR 420; Cameron v. Cole (1944), 68 CLR 571, considered.
HEARING
Sydney, 1978, October 24; November 8. #DATE 8:11:1978
APPLICATION.
The material facts appear from the judgment.
C.R. Hoeben, for the bankrupt.
C.T. Barry, for the petitioning creditor.
Solicitors for the petitioning creditor: F.A. & J.F. Newnham.
R.L. CRISP
JUDGE1
November 8.
The following judgment was delivered.
J.B. SWEENEY J. In this matter a sequestration order was made against the debtor on 6th August, 1978. Application is now made that the sequestration order be annulled on the grounds that: (a) the applicant was not served with a bankruptcy notice; and (b) the judgment debt in respect of which the petition was presented has been paid in full. (at p132)
Both parties treated the application as one for annulment of the bankruptcy under s. 154(1)(a) and (b) of the Bankruptcy Act. On the hearing, a further application was made that there be added to the orders sought an order under s. 37 of the Act rescinding the order for costs made at the time of making the sequestration order. In view of the manner in which the case proceeded, I think it proper to allow an amendment by adding the words "bankruptcy resulting from" before the word "sequestration" in the first order sought and by adding the following to the orders sought: "(2) that the order for costs made on 16th August, 1978, be rescinded." (at p132)
The act of bankruptcy which had been relied on was a failure to comply with a bankruptcy notice claimed to have been served on 23rd March, 1978. At the original hearing, reliance was placed on an affidavit by a process server that he had served the notice on the debtor and that he had identified her by asking whether she was the person referred to as the judgment debtor in the bankruptcy notice and receiving an affirmative reply. The same person's affidavit was relied on as showing service of the petition. (at p132)
However the debtor has now given evidence that she was absent from Australia in Hong Kong on 23rd March, 1978, the date when it is claimed that the bankruptcy notice was served. She also gave evidence that she was away from home at the time when it is claimed that the petition was served. Her evidence as to 23rd March, 1978, is corroborated by the production of a passport and airline ticket. These show her leaving Australia on 16th March, 1978, of visas being granted in Hong Kong on 19th and 21st March, 1978, and her return from Hong Kong on 30th March, 1978. I am quite satisfied that the debtor was not in Australia on 23rd March, 1978, and consequently could not have been served as was claimed in the affidavit. To the extent that it is material, I at least am not satisfied that she was served with the creditor's petition as was claimed on 24th July, 1978. This view is based on her evidence, the manner in which she gave it and the corroboration of the passport and airline ticket. (at p132)
It appears that the debtor had only one debt, the sum of $1,050 owing to the petitioning creditor. This has since been paid and the report of the official receiver discloses no unsecured liabilities and unrealized assets of an estimated value of $12,388. There is an amount of $183.09 owing to the official receiver in respect of his outstanding fees but the official receiver, who appeared before me, said that arrangements satisfactory to him had been made for the payment of these. A report was made by the official receiver dated 6th October, 1978, stating that the bankrupt's conduct during her bankruptcy had been satisfactory and that no matters were reported by him pursuant to s. 150(6) of the Act. (at p133)
It is argued for the petitioning creditor that this is not a matter where the court can be satisfied that a sequestration order ought not to have been made and that s. 154(1)(a) therefore does not apply. Reliance was placed on Re Norris (1890) 7 Morr 8, at p 10 . In Re Deriu (1970) 16 FLR 420 , a case in which application was made under this section to annul a bankruptcy on the ground that the judgment on which proceedings were founded was not a real debt, Gibbs J. said: "In my opinion, the English decisions as to the power to rescind a receiving order (some of which are referred to in the judgments in Cameron v. Cole (1944) 68 CLR 571, at pp 583-584, 593, 600, 608, 610 ) must be applied with caution to the Australian statute, since the English section which corresponds to s. 154 of the Bankruptcy Act 1966-1969 (s. 29 of the Bankruptcy Act 1914) although it gives power to annul an adjudication, does not give power to annul a receiving order. With the greatest respect to the view of Manning J., it seems to me that, where a sequestration order ought not to have been made, because the debtor was not indebted to the petitioning creditor, the proper way of getting rid of the sequestration order is by annulling it under s. 154. Indeed, as Williams J. pointed out in Cameron v. Cole, the rescission of the sequestration order would not put an end to the bankruptcy (see s. 43(2) of the Bankruptcy Act 1966- 1969)" (1970) 16 FLR, at p 422 . (at p133)
In the judgment of Williams J. in Cameron v. Cole his Honour referring to the predecessor to s. 154 said: "By s. 124 (1) (a) the Court is given the fullest power to remedy any injustice that the debtor may have suffered through a sequestration order having been improperly obtained. It can annul the order whenever, in the opinion of the Court, it ought not to have been made. It can decide, therefore, at a properly constituted hearing whether the order should have been made on the merits in the light not only of the evidence which was available at the date the sequestration order was made, but also of any evidence that has subsequently become available before the date of the application to annul" (1944) 68 CLR, at p 608 . (at p133)
Having considered the English Act as it then stood and these cases, I am of opinion that I should not follow the dicta in Re Norris (1890) 7 Morr 8 . In my view annulment is an appropriate procedure here. In the light of the evidence then available and of the evidence which has now become available, the sequestration order should not have been made and the proper way of getting rid of the order is by annulment under s. 154. (at p133)
I am satisfied then that the debtor is entitled to succeed under both limbs of s. 154(1). Nothing has been put before me to disentitle her to an order for annulment. As to the second order asked, I am of the view that the annulment of the bankruptcy probably makes the order ineffective. The position will not be altered, if I am right, by making an order for rescission. I think it clear that if the facts as to the debtor's absence had been before the court no order as to payment in any way of the petitioning creditor's costs would have been made. In those circumstances I will also rescind the order for costs made on the making of the sequestration order. There will be no order as to the costs of this present application. (at p134)
The exhibits may be handed out to the parties tendering them. (at p134)
ORDER
Orders accordingly.
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