Re Davies, Kevin William

[1997] FCA 1326

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY	NG 7449 of 1997

RE:	KEVIN WILLIAM DAVIES Debtor
EX PARTE:	FINANCE & MORTGAGE CORPORATION (NSW) PTY LIMITED (ACN 071 267 420) Creditor

JUDGE:	EMMETT J
DATE:	4 NOVEMBER 1997
PLACE:	SYDNEY

EX TEMPORE REASONS FOR JUDGMENT

HIS HONOUR:   I have before me a petition brought by Finance & Mortgage (NSW) Pty Limited (“the Petitioner”), seeking a sequestration order in respect of Kevin William Davies (“the Debtor”).  When the matter came before the Registrar, the petitioning creditor indicated that it no longer wished to pursue the petition.  The Registrar referred the matter to a judge in circumstances which are not totally clear.  I do not think that the circumstances are relevant to any question which I have to decide.

Counsel for the petitioning creditor initially said that he wished to discontinue the petition but, when pressed, indicated that he was asking the Court to dismiss the petition under section 52(2) of the Bankruptcy Act 1966 (Cth). That course was not opposed by the Debtor. However, an issue has arisen concerning the appropriate order for costs. That requires an examination of the background to the proceedings.

On 28 October 1996, a default judgment was entered in the Local Court (Civil Claims) at North Sydney against the Debtor in favour of the Petitioner.  The amount of the debt was in the order of $4,067.  On 5 December 1996 a bankruptcy notice was served on the Debtor.  It was not complied with and accordingly an act of bankruptcy was committed.  However, on 10 January 1997, an application by the Debtor to set aside the default judgment was dismissed by the Registrar of the Local Court.

I have no evidence before me as to what happened between 10 January 1997 and 22 April 1997 but on the latter date the petition was filed.  I have no evidence as to when the petition was served.  However, on 29 April 1997, the Debtor applied for review of the decision of the Registrar dismissing the application to set aside the judgment.  The effect of that application was that the judgment was stayed.  On 2 June 1997, the solicitors for the debtor wrote to the solicitor for the Petitioner indicating that there was a stay of the judgment and that the application for review of the Registrar's decision was to be heard at North Sydney Local Court on 24 June. 

On 6 June, the first return day of the petition, the petition was adjourned to 27 June 1997.  On 24 June 1997, the judgment was set aside and the proceedings were subsequently remitted to Armidale for hearing.  On 27 June 1997, the petition was adjourned by consent to 4 July 1997.  There is nothing before me to indicate whether at that stage it was indicated that the petition would be prosecuted or otherwise.  However on 4 July 1997, directions were given by the Court for the filing of notice of opposition and affidavits as to assets and liabilities.  The matter was further adjourned to 5 August 1997.

On 5 August, further directions were given concerning the filing of an amended notice of opposition and further affidavits by the parties.  The proceedings were stood over to 25 September 1997.  On 25 September 1997 further directions were given concerning the provision of particulars and the filing of affidavits and the proceedings were stood over to 17 October 1997.  On 17 October 1997 the proceedings were, on the application of the Debtor, adjourned to today.

No indication has been given as to the reason for asking that the petition be dismissed at this stage.  However, the Petitioner has said that the Local Court is the appropriate forum for the purposes of determining the issue that now exists.  It would, of course, have been possible for the Petitioner to seek to have the petition adjourned pending the determination of that issue in the Local Court.  That, however, is not the course which has been adopted.  In the circumstances, it is reasonable to conclude that the Petitioner considers that it is not going to succeed on the petition.

Indeed, the Debtor adduced evidence which, it was said, demonstrated that there must be a very significant doubt as to whether the Debtor is indebted to the Petitioner.  The Petitioner’s claim is for an establishment fee for a loan which did not proceed.  The Debtor claims that there was no agreement to pay such a fee.

Prima facie, costs should follow the event and the Petitioner ought to pay the Debtor's costs of the petition.  Nothing has occurred which indicates why the Petitioner originally chose to prosecute the petition and has now decided to abandon the petition.  In the circumstances it seems to me to be appropriate that the Petitioner pay the costs of the petition at least after the time when the judgment had been set aside.  I did not understand counsel for the Petitioner to oppose such an order.

That, however, leaves the question of the costs of the petition up to and including the first return day.  In the circumstances, it appears to me that it is appropriate that there be no order as to those costs.  The Debtor had applied unsuccessfully for the default judgment to be set aside.  The Debtor had taken no steps following the service of the bankruptcy notice to have the bankruptcy notice set aside.  The Debtor apparently chose to commit an act of bankruptcy.  Further, there is no explanation as to why there was such a long delay from 10 January 1997 until 29 April 1997 in seeking to review the Registrar's decision.  In the circumstances it was not unreasonable for the creditor, once an act of bankruptcy had been committed, to file the petition.

On the other hand, as I have said, the Petitioner has been unsuccessful and has not prosecuted the matter.  In the circumstances I consider that the interests of justice are served by there being no order as to the costs of the petition up to and including 6 June 1997.

I order that the petition be dismissed.

I order that there be no order as to the costs of the petition up to and including 6 June.

I order that the petitioner pay the costs of the debtor after 6 June 1997.

I certify that this and the preceding three (3) pages are a true copy of the Reasons for Judgment herein of the Honourable Justice Emmett.

Associate:

Dated:            4 November 1997

Counsel for the Petitioning Creditor:	C. Hogg
Solicitor for the Petitioning Creditor:	J. Pappas
Counsel for the Debtor:	C. Lovas
Solicitor for the Debtor:	Watson McNamara & Watt
Date of Hearing:	4 November 1997
Date of Judgment:	4 November 1997