Re Devries, J. & Anor

[1992] FCA 424

Re: JAN DEVRIES and JAN DEVRIES
Ex Parte: WAYNE RICHARD FOALE and JILL LESLEY FOALE
No. Q P2024 of 1991
FED No. 424
Bankruptcy

COURT

IN THE FEDERAL COURT OF AUSTRALIA

BANKRUPTCY DISTRICT OF THE STATE OF QUEENSLAND
GENERAL DIVISION
O'Loughlin J.(1)

CATCHWORDS

Bankruptcy - judgment debt challenged by debtors - consideration of relevant facts - consideration of circumstances when this Court will go behind a judgment.

HEARING

BRISBANE

#DATE 3:6:1992

The Debtors appeared in person.

Counsel for the Petitioning Creditor: Mr Ryan

Solicitors for the Petitioning Creditor: Messrs Lyons

ORDER

THE COURT ORDERS THAT:

1. A sequestration order be made against the estate of Jan Devries

(Snr).

2. A sequestration order be made against the estate of Jan Devries

(Jnr).

3. The costs of the petitioning creditors including those costs reserved on 22 April 1992 be paid out of the estates of the abovenamed debtors.

Date of Commission of Act of Bankruptcy:

Jan Devries (Snr) 26th day of June 1991

Jan Devries (Jnr) 14th day of June 1991

Note: Settlement and entry of order is dealt with in Bankruptcy Rule 124.

JUDGE1

Within 4 days of their arrival in Australia in October 1987, the Devries family entered into a contract to purchase a house at Deception Bay, Queensland. The family consisted of Jan Devries, his wife Renske and their children Henny and Jan (Jnr). The petitioning creditors Wayne Richard Foale and his wife Jill Lesley Foale were the vendors of the house.

1. The source of the problem and the cause of this litigation was the dispute between the parties about the purchase price of the house. An additional issue was the claim by the Devries that the children were not co-purchasers of the house. The price stated in the contract was $85,000 and the petitioning creditors have maintained that the price was never varied. The Devries' claimed that $85,000 was the original price but that the petitioning creditors ultimately agreed to accept $80,000 when the Devries' said they would be financially unable to purchase the house at $85,000.

2. The petitioning creditors acknowledged that the Devries were having financial difficulties but their case was that they accommodated their purchasers by carrying $5,000 as vendors' finance for a period of 12 months.

3. The Devries had paid a deposit of $8,500 and at settlement they paid a further $70,000, being the amount borrowed by them by way of first mortgage. For reasons which have not been made clear they were permitted to settle on the purchase of the house without paying the shortfall of $1,500 (the difference between $78,500 and $80,000) and $285.12 the amount that was said to be due by them on an adjustment for rates and taxes.

4. The Devries made one payment of $500 by cheque dated 28 April 1988 but they have paid nothing since. Having regard to the manner in which their evidence unfolded, this admitted payment of $500 has cast the most severe doubts in my mind about the truthfulness of the claims advanced by Mr and Mrs Devries. First, Mrs Devries said they had paid at settlement - shortly before Christmas 1987 - all moneys that they were obliged to pay to their vendors and all moneys owing by them to their mortgagee for fees, costs and insurance covers. They therefore owed nothing other than the $70,000 to their mortgagee. She was "stunned", so she said, when she read Mr Tierney's letter of 3 February 1988 setting out details of moneys owing by them to the extent of $6,785.12. Mr Tierney was the solicitor who acted for both the vendors and the purchasers on the settlement. Mrs Devries was pressed, more than once, to explain why, in these circumstances she would have paid $500 to the vendors in late April. Her answers were confusing and unconvincing. She seemed to be suggesting that as the solicitor made a mistake, as a consequence of which the Foales had suffered loss, she had some responsibility to make some payment; Mr Devries avoided his wife's confusion by admitting that there had been a shortfall at settlement of $1,500 and that they still owed the Foales $1,000. But, like his wife, he insisted that the purchase price had been reduced to $80,000.

5. According to the petitioning creditors, the bargain they struck with the Devries was that the outstanding $5,000 plus $375 for interest would be paid by 12 equal calendar monthly instalments; the first such payment was to have been made on 24 January 1988. It was said that this collateral agreement was evidenced by an unsigned agreement that had been prepared by Mr Tierney.

6. The petitioning creditors instituted proceedings seeking from the four members of the Devries family recovery of $6,285.12. That sum was calculated as follows:
   

Amount due on adjustment of rates and taxes $ 285.12 Shortfall in purchase price due on

settlement $1,500.00 Balance of purchase price due under the

collateral agreement $5,000.00 $6,785.12 Less paid $ 500.00 $6,285.12

1. Presumably the petitioning creditors waived their rights to interest on the $5,000.

2. The Devries defended the proceedings pleading that there was no collateral agreement to pay an additional $5,000. However their pleadings were silent about their failure to pay $1,285.12. The quality of the drafting of their defence suggests that they had the benefit of a legal adviser but when the matter came on for trial Mrs Devries alone appeared and conducted the family's defence. Mrs Devries used this fact in support of her claim that there had been a miscarriage of justice in the Magistrate's Court. As I understand her complaint she and her family had been legally represented originally but, being unable to pay the legal costs she found herself having to defend the matter personally on an hour's notice.

3. This was not one of those cases where the presiding Magistrate was forced to chose between the evidence of one party and the evidence of his opponent nor was it a case where an unrepresented party would obviously have been disadvantaged. The Devries had said in their defence that the change of price from $85,000 to $80,000 had been negotiated with their vendor's agent, a Mr Herbert. He was called as part of the case for the plaintiffs and he denied the allegation. Mr Herbert has filed an affidavit in these proceedings repeating that denial. Mr Tierney, the solicitor who acted in the preparation of the various documents likewise repudiated the claims of the Devries. He was called in these proceedings and repeated those denials. Although Mrs Devries acted for herself and her family in the Magistrate's Court that was not a difficult issue that demanded the forensic skills of a legal practitioner; it was a simple case of credibility - did the petitioning creditors agree to drop their price? - was there a possibility or a probability that they might have or that the Devries might have misunderstood some aspect of the negotiations?

4. The learned Magistrate found in favour of the petitioning creditors. He accepted the evidence of Mr Foale and that of Mr Herbert and Mr Tierney in preference to Mrs Devries. He entered judgment in the amount claimed plus interest and costs. Tragically the debt has been so heavily inflated by interest and costs that judgment was entered in the sum of $12,072.22.

5. For bankruptcy purposes, a judgment is only prima facie evidence of a debt. As Lindley L.J. said in Ex parte Lennox: In Re Lennox (1885) 16 QBD 315 at p 329:-
   

"The Court will not allow bankruptcy proceedings to be had recourse to for the purpose of enforcing debts which are fictitious, and not real, even although they are in the form of judgment debts."

1. There is no doubt therefore that this Court is entitled to go behind the judgment of the Magistrate's Court and to "inquire into the validity of the debt": Petrie v Redmond (1942) 13 ABC 44 at 48. However it will not do so as a matter of course: Wren v Mahony (1972) 126 CLR 212; it is not sufficient for a debtor to express dissatisfaction with the results of earlier litigation - nor is it enough to make broad and unsubstantiated accusations. I share the view expressed by Pincus J. in Re V. and J. Removals: ex parte Earl (unreported: 21 June 1985) that Wren v Mahoney is authority for the proposition that a judgment debtor must satisfy this Court that there are substantial reasons for questioning the validity of the judgment. More recently, a Full Court of this Court has pointed to the need for "cogent" reasons: Evans v The Heather Thiedecke Group Pty. Ltd. (1990) 95 ALR 424.

2. As Fullagar J. explained in Corney v Brien, (1951) 84 CLR 343 the power of this Court to go behind a judgment is discretionary; his Honour said at page 356:
   

"No precise rules exist as to what circumstances call for an exercise of the power, but certain things are, I think, clear enough. If the judgment in question followed a full investigation at a trial on which both parties appeared, the court will not reopen the matter unless a prima-facie case of fraud or collusion or miscarriage of justice is made out."

1. The question whether this Court should investigate the propriety of a judgment obtained in another Court involves "some preliminary investigation of the merits of the attack on the judgment": Corney v Brien at 358; see also the remarks of the Full Court in Emerson v Wreckair Pty. Ltd (unreported: 31 January 1992) at p 15.

2. In these proceedings, with the co-operation of Mr Ryan, counsel for the Petitioning Creditors, a substantial degree of latitude was extended to Mrs Devries who was permitted to represent her husband and her son. However, at the end of the day after hearing their evidence and submissions there was nothing which gave me any cause for concern. In my opinion the Devries have failed to satisfy me that this Court should interfere. Although it is not fatal to their cause, it is a fact to be weighed in the balance - and adversely against them - that they could have but did not appeal against the Magistrate's decision c.f. Re Huston; Ex parte Kendall, McAdam and O'Dwyer (1985) 8 FCR 355.

3. There is an abundance of evidence to support the claim that the purchase price of the house always remained fixed at $85,000. Likewise there was evidence that the Devries well knew and understood that the mortgagee insisted on the son and daughter being co-purchasers and co-borrowers so that four income earners would be responsible for the repayment of the mortgage debt. Nothing that has occurred in the proceedings before me has caused me any disquiet.

4. The creditors' petition is directed only to Mr Devries (Snr) and Mr Devries (Jnr); apparently the other judgment debtors have not been served with the proceedings. Affidavits of debt and search are in order. It is therefore appropriate that there be orders sequestrating the estates of Jan Devries (Snr) and Jan Devries (Jnr). The petitioning creditors are to have their costs including those costs reserved on 22 April 1992.