Re Carpenter, K.J.
[1989] FCA 783
•3 Nov 1989
IN THE FEDERAL COURT OF AUSTRALIA ) ) GENERAL DIVISION 1 1 BANKRUPTCY DISTRICT IN THE
1 No. NP 1607 of 1989 ) STATE OF NEW SOUTH WALES AND THE ) 1 AUSTRALIAN CAPITAL TERRITORY 1
RE: KENNETH JAUES CARPENTER Debtor
EX PARTE: CLEMENT ANTHONY GYE
Creditor
CORAM: Einfeld J DATE : 3 November 1989 PLACE : Sydney
EX TEMPORE JUDGMENT
judgment for that sum. This matter came before the Court on 31 October 1989 as a creditor's petition seeking the sequestration of the estate of Kenneth James Carpenter at the suit of Clement Anthony Gye. The claim is that Mr Carpenter is in debt to Mr Gye at the present time for a sum in the order of $250,000, and that he has failed to comply with a bankruptcy notice requiring
Counsel for Mr Carpenter seeks an adjournment of the hearing of the creditor's petition until the outcome is known of an appeal to a Full Court of this Court from a decision of Mr Justice Hill given on 27 September this year in related litigation involving a Mrs I B McIntyre.
It is not necessary for me to relate in detail the facts which have led to the debt which comprises the creditor's petition or the matter which was the subject of litigation before Mr Justice Hill. All of this is set out in some detail both in the judgment of his Honour and also in the judgment of Mr Justice Brownie given in the Commercial Division of the Supreme Court of New South Wales on 13 April 1988 on this debt, in related litigation also involving some other parties.
Those judgments make clear that the disputes between these parties date back at the latest to 1980, since which time, I am informed, there have been several dozen appearances in court to debate all these issues in one form or another. M Justice Brownie was even moved to hope that his judgment might be the end
of the litigation, as was Mr Justice Hill. Regrettably both of their Honoursr hopes have not been realised and the litigation grinds on. The application for an adjournment of the petition is based in substance upon three grounds: first, that there is reason to believe that Mr Justice Hill's judgment will be overturned or, put another way, that there is a respectable and appealingly arguable case that his Honour's decision was in error; secondly,
that if the judgment is overturned there is a respectable and available legal argument that the subsisting indebtedness of Mr Carpenter to Mr Gye or to someone else arising out of the same facts would be a small sum, perhaps between $500 and $1000; thirdly, that the consequences of bankruptcy to Mr Carpenter are unusually and excessively great because he is a chartered accountant who will lose not only his right to practise but even his right to act as a consultant to a person who might be persuaded or wish to buy his practice. That has not only professional consequences, it is alleged, but also substantial financial consequences because the value of the goodwill in the practice would be significantly diminished and therefore its sale price would be quite small by comparison to what could be realised if those facts did not exist.
As to the first of these grounds, it is conceded that if the appeal against Mr Justice Hill's judgment is successful then Mr Gye will be unable to recover from Mr Carpenter the judgment which he has obtained against him. According to the argument of counsel for Mr Gye, that would leave an unarguable sum of in
excess of $80,000 owing by Mr Carpenter to Mr Gye and in those circumstances there is no reason at all why the petition should not be now heard, especially as no answer is given concerning
this balance of $80,000.In an affidavit filed in the proceedings, Mr Carpenter says that if the whole of the judgment debt has to be paid by him then he cannot do so, but that if Mrs McIntyre is successful in her
appeal, he expected to be able to make arrangements for the payment of any balance which he expected to be modest. I take from this that he expects the sum to be, as argued by his counsel, less than $1000.
Hence, according to the argument of counsel for Mr Gye, it is really not necessary for me to consider the merits or otherwise of Mr Justice Hill's judgment because there will still be a substantial amount owing by Mr Carpenter and he admits that he will be unable to pay it, at any rate in the near or forseeable future, although he might be able to arrange to obtain the money from somewhere else.
At the same time both counsel have argued that I should give some attention to Mr Justice Hill's judgment. It is put by counsel for Mr Gye that the appropriate law is that I should examine the judgment to see whether there is a serious doubt about the validity of his Honour's decision and thus to see whether a substantial injustice might result if I do not wait for the appeal.
Counsel for M Carpenter, on the other hand, says, as I
understand him, that I should take into account that Mr Justice Hill made a painstaking and careful review of the law on the matters before him dating back some 350 years. Even still his Honour acknowledged that the conclusion to which he came produced, if not injustice, then certainly an anomaly, in that a composition with creditors offered by Mr Gye in 1985 could not be availed of or used in any way by Mrs McIntyre to prove the particular debt which she claimed to have.
I expressed in argument and say again that I am not willing to engage in any examination of the correctness or otherwise of Mr Justice Hill's judgment. This is not an application for leave to appeal his Honour's decision on an interlocutory matter. ~lthough similar principles have been called in aid in argument to suggest that they should or might be applied in such circumstances as these, I am unable to agree that this is the approach that ought to be taken. There is an appeal as of right from Mr Justice Hill's judgment and I am informed that the appeal has already been lodged. The matter is now in the entirely exclusive domain of a Full Court of this Court and it is not only inappropriate but unhelpful and invidious that another single judge express even a passing view about whether his Honour's
judgment is or is not likely to be upheld. I have not even heard argument on the matters that were agitated before his Honour in any serious way, although the arguments have been summarily explained to me. In these circumstances, it is just not appropriate and I do not feel myself in a position to comment one way or the other on the judgment which has been given.
Hence I should move to consider the second matter that has been
| , | I | argued. That gives rise to a major dispute of principle between the parties and this dispute of principle wlll have to be agitated only in the event that Mr Justice Hill's judgment is overturned. His Honour expressly declined to deal with the matter and did not even indicate, quite rightly I think, what view he would or might have taken in the event that it had required to be determined. |
| ~t seems that this issue of principle was argued before his Honour. However, despite my questioning of counsel for Mr Carpenter today, I am unable completely to understand the basis upon which the argument was put then and is put now. It will suffice to summarise that each of these parties is in debt to the other for different sums. On any view, there is a balance owed by Mr Carpenter. The argument for Mr Gye is that the $80,000 sum is reached by assuming that the judgment he obtained against Mrs McIntyre, and thus the judgment he obtained against Mr Carpenter, will fall. In that event, the argument goes, the balance between the amounts owing by and to these parties as at today's date or close thereto is of the order of this $80,000 owed by Mr Carpenter to Mr Gye. | ||
| The argument on behalf of Mr Carpenter is that the correct time at which to assess the balance between the two sets of debts is the time of the composition offered by Mr Gye to his creditors in April 1985. As I understand it, the balancing figure which Mr Carpenter would owe to Mr Gye is to be calculated by taking the judgment given by Mr Justice Brownie and by deducting interest | ||
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be added from 1985 to 1989 on any balance between the respective debts from time to time, the state of the nett indebtness should be assessed as at the time of the composition. This leads to the suggestion that less than one thousand dollars is owing.
No authority was quoted to support this method of calculation. Nor was any argument put as to how a bankruptcy notice would even be expressed based upon such mathematical gymnastics. I know of no case and no case was cited in which this procedure had ever been adopted in the past, nor was any case or text book authority referred to which would give blessing to this mechanism being undertaken. If the matter was agitated before Mr Justice Hill and authority cited, it would have been readily available. I do not claim myself to be a mathematical or actuarial expert but I should even be surprised that, if the suggested calculation had to be made, it was as simple as was argued in its favour.
However, the main point is that I have no confidence at all that such an argument is respectably open. It seems to me that all of the provisions of the Bankruptcy Act are designed to ensure that at the time when a bankruptcy notice is issued on the basis of a judgment and a petition issued on the basis of non compliance with the bankruptcy notice, the debt referred to in the bankruptcy notice is to be the judgment figure, subject only to whether any part of the debt might be waived in some way by the judgment creditor. In this connection, as I recall the
authorities in the Court, it is not incumbent on the judgment creditor to issue a bankruptcy notice for every last cent of the judgment debt. Mr Carpenter is seeking the exercise of the court's discretion for an adjournment. Assuming in his favour that an appeal from Mr Justice Hill could or is even likely to be succesful, he has not shown that the resultant consequence would be a debt as low as he claims. To the contrary, it seems to me that the debt is much more likely to be of the order of the $80,000 claimed by Mr Gye than anything in the vicinity of $1000 agitated by Mr Carpenter.
That leaves the question of any residual discretion; that is, whether there are over-riding grounds for adjourning a creditor's petition even to enable an apparently meritless argument to be advanced, as well as perhaps take other steps that might enable Mr Carpenter to avoid bankruptcy.
On the one hand, Mr Gye argues that a chartered accountant whom a Judge of the Supreme Court has found has committed fraud, as did Mr Justice Brownie in the proceedings to which I have referred, should not be allowed to continue practice in the public interest. On the other hand, counsel for Mr Carpenter argues, with a degree of understandable urgency, that the Court would be slow to interfere with a professional's right to practise unless it is palpably clear that no other course could conceivably prove to be available.
I do not think that because Mr Justice Brownie found on the facts
before him dating back many years that Hr Carpenter had committed fraud, this should be allowed to determine for me whether this petition should be allowed to proceed. I do not think that these bankruptcy proceedings should be used as some form of penal sanction. Bankruptcy is not intended to be a basis for moral or criminal judgments which are not made by the Court determining the matter in the proceedings in which the determination is being made. On the other hand, I do not think that professional people are or ought to be entitled to any greater consideration, if the legal criteria for bankruptcy are established, than any other person in the community. It might even be argued that because professional people should undertake a higher degree of compliance with social and legal norms than other people, perhaps when their obligations are breached, they should be given less credence than members of the community who have not had the benefits of a professional education and experience.
Personally I do not think those sorts of approaches assist very much in consideration of matters of this kind. The question that has to be determined immediately is not whether M Carpenter should be made bankrupt, because I have not yet considered the evidence brought in support of the creditor's petition, but whether a discretion should be exercised in his favour of adjourning the hearing of an application for the sequestration of his estate which, as it seems to me on any view, is likely to owe a substantial sum of money whatever the result of other proceedings. He admits before me that he is not able to pay this sum of money although he may be able to arrange payment from
merely by saying that he is a man with professional I do not think that a person makes out a case for an adjournment somewhere else. qualifications whose professional standing and occupation will be under threat or entirely removed if the ordinary legal consequences flow from the facts which are before the Court. ~t is not a question of whether the person concerned is or is not a
professional and whether bankruptcy will or will not have greater consequences for him than for some other person, but whether he has discharged the significant task which he undertakes when the Court's discretion is sought to be activated in his favour, of making out a case for a delay in the ordinary legal consequences which follow from the facts sought to be presented if they are accepted. In my view, no such case has been established.
For those reasons, it seems to me that if I have a residual discretion in the matter, I should exercise it in favour of rejecting the application for adjournment of the creditor's petition.
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