Re Florance, James Louis Ex parte Turimetta Properties Pty Ltd

lXIL\TLY

RE:

JAMES

L O U I S

F L O l l t V i C E

PARTE:

NO:

P 303 of 1979

CORAN:

LOCKHART J .

DATE O F ORDER

Page 2 , 11 ne	1
follo” should

CATCHWORDS

Uaskmptcy - creditor's petition - petitioning creditor held to be a secured creditor - whether petitlon may be

amended to permit secured credltors to state willingness

to surrender security o r estimate value of security o r

such statements must be made in petition when presented -

exercise of discretion in favour of amendment

FiZ:

JAMES LOUIS FLORANCE

PARTE:

TURIMETTA PROPERTIES

FTY. LIMITED NO. P 309 OF 1979

LOCKHART J.

SYDNEY

11 FEBRUARY 1980

IN THE FEDERAL COURT OF AUSTRALIA	)
GENERAL DIVISION

BANKRUPTCY DISTRICT

OF THE STATE

No. P 309 of 1979

OF NEW SOUTH WALES AND THE

AUSTRALIAN CAPITAL TERRITORY

RE:

JAMES

LOUIS

FLORANCE

Debtor

Ex PARTE:

TURIMETTA

PROPERTIES

PTY. LIMITED

Creditor

ORDER

JLTDGE MAKING

ORDER:

LOCKHART

SYDNEY

WHERE MADE:

ORDER:	DATE	OF	11 FEBRUARY 1980
THE COURT ORDERS THAT:

Leave be granted to the petitioning creditor

to amend

paragraph 3 . of the petition by deleting paragraph

3. in

its present form and substituting the

following:-

"3. The company holds security over part

of the property of the debtor for payment

of the amounts specified In the last

preceding paragraph, being the debtor's

interest in all those pieces

o r parcels

of land sltuate at Mona Vale In the Shire

of Warringah, Parish

of Narrabeen and

County of Cumberland. being the whole

the land comprised in Certiflcate

of Title

Volume 7199 Folic 118; Volume 9244 Follo

186 (excluding the land referred to in

dealing number P 60375) and Volume

12710

F o l l o 224 and 225, but the company is willing to surrender the security for the benefit of the creditors generally in the

event of a sequestration order being

made

against the estate of the debtor.''

. . ./2

-2-

The

pe t i t i on ing c r ed i to r

be d i rec ted

rever i fy

and

r e - se rve t he pe t i t i on a s

amended

i n accordance

wlth

t h e

Bankruptcy Rules and the practice

t h i s

C m r t ;

The

fu r the r hea r ing o f t he pe t i t i on

adjourned

t o

d a t e t o

be f ixed.

4 . Costs be reserved.

-1-

IN THE FEDERAL COURT OF AUSTRALIA )

DIVISION	GENERAL	)
)
BANKRUPTCY DISTRICT OF THE STATE	) NO. P309 of 1979
)

OF NEW	SOUTH	WALES	AND	THE	)
1

AUSTRALIAN

CAPITAL

TERRITORY

)

RE:	JAMES LOUIS FLORANCE

Debtor

EX PARTE: TURIMETTA PROPERTIES PTY.

LIMITED

Creditor

REASONS FOR JUDGMENT

LOCKHART J .

On 17 September 1979 I gave judgment on the grounds

of opposition to the petition and

ad-~ourned the further

hearing of the petition to allow the parties to consider my

reasons for judgment and

enable the petitioning creditor

to apply, if it wished, to amend the petition.

I held that

the petitioning creditor is

a secured creditor

of the debtor,

applying the decision of the High Court in Harvey & Ors. v.

Commercial Bank of Australia Limited (1937)

58 C.L.R. 382.

The petitioning creditor had not complied with the requirements of the Act and the Rules relating to the

presentation of petitions' by secured creditors including

the

requirements of S . 44

( 3 ) and

( 4 ) of the Bankruptcy Act 1966

( "the A c t " ) .

The

p e t i t i o n

was

r e l i s t e d

for

h e a r i n g

o n

1 4

December 1979 when counsel for t h e

p e t i t i o n i n g

c r e d i t o r

sought leave

t o

amend

t h e p e t i t i o n a s f o l l o w s

( a )

de le t ing

paragraph

3 .

and

s u b s t i t u t i n g

t h e

following

paragraph:

" 3 .

The

company h o l d s

s e c u r i t y

o v e r

p a r t

t h e p r o p e r t y o f

the

debtor

f o r

payment

the

a m o u n t

s p e c i f i e d

i n

t h e

l a s t

p r e c e d i n g

paragraph ,

ing

the

debtor ' s

i n t e r e s t

i n a l l

those

p ieces

p a r c e l s

l a n d

s l t u a t e

a t

Mona

Vale

i n t h e S h i r e

Warr ingah,

Par

ish of

Narrabeen

and

County

of Cumberland being the

whole

t h e l a n d

comprised

I n c e r t i f l c a t e s o f

t i t l e volume

7199

f o l i o 1 1 8 ,

volume

2744

f o l l o

186

( exc lud ing t he l and r e fe r r ed

t o

i n d e a l l n g

N o .

P 60375)

and

volume

12710

f o l i o s 224

and

225,

b u t

the

company

is w i l l l n g

t o su r rende r

t h e

s e c u r i t y

for

t h e

b e n e f l t

t h e

c r e d i t o r s

g e n e r a l l y

i n

the

event

o f

s e q u e s t r a t i o n

order

being

made

a g a i n s t

the

e s t a t e

o f

the

deb to r . "

-3-

(b) By adding

the

fol lowing

words t o paragraph 4:

" T h e

debtor

h a s

c o m m i t t e d

t h e

f o l l o w i n g

f u r t h e r

a c t

bankruptcy ,

namely

tha t

the

30th A p r i l 1979 he

s igned

au thor i ty

under

S .

188 of

t h e A c t

. I '

The

p e t i t i o n i n g

c r e d i t o r

a l s o

s o u g h t

a n

o r d e r

d i s p e n s i n g w i t h t h e n e c e s s i t y o f r e v e r i f i c a t i o n

and

r e s e r v i c e

t h e amended

p e t i t i o n .

The

orders

sought

were

opposed

t h e d e b t o r .

Counse l

for

the

debtor

contended

f i r s t ,

t h a t

t h e r e

i s no

p w e r i n

the

c o u r t t o a l low the p e t i t i o n t o be

amended

a n d

s e c o n d ,

t h a t

i f

t h e r e

i s

s u c h

p o w e r ,

i n

a l l

t h e

c i rcumstances	o f	the	case ,	the	amendment	ought	not	t o be
allowed.

The

argument

l ack

power

was

p u t on

t h e

g r o u n d

t h a t

t h e

r e l e v a n t

p r o v i s l o n s

S .

44,

namely

sub-sections

( 3 )

and

( 4 ) ,

upon

t h e i r

p r o p e r

c o n s t r u c t i o n ,

r e q u i r e ,

c o n d i t i o n

p r e c e d e n t

t o

t h e

r i g h t

secured

c r e d i t o r

t o

p r e s e n t

p e t i t i o n

i n

b a n k r u p t c y ,

t h a t

h e

i n c l u d e s

i n

t h e

p e t i t l o n

s t a t e m e n t

t h a t

h e

w i l l i n g

t o

s u r r e n d e r h i s s e c u r i t y

for

t h e b e n e f i t o f c r e d l t o r s g e n e r a l l y

-4-

in the event of a sequestration order being made against the

debtor (sub-section

( 3 ) ) ,

and that

he sets out in the

petition particulars of his security (sub-section ( 4 ) ) :

and

that those requirements are not merely as	to the matters that
must be stated in the petition.

Section 44 provides :-

"44.

( l )

A creditor's petition shall

not be presented against

a debtor unless

(a)	petitioning creditor a debt that amounts to Five hundred dollars or

there is owing by the debtor to the aggregate to Five hundred dollars,

or, where two or more credltors loin

in the petition, there

1 s owl~g

the

debtor

the

several

petitioning credltors debts that

amount in the

aggregate to Flve

hundred dollars:

(b)	that debt, or each of those debts,

as the case may be

(i) is

liquidated

sum

due

law or in equity or

partly at law and partly in

equity; and

(ii) is payable either lmmediately

-	or at a certain	future	tune;
and

of bankruptcy on whlch the

petition is founded was

comitted

within six months

before

the

presentation of the petition.

( 2 ) Subject to the next succeedlng

-5-

sub-section, a secured creditor shall,

for the purposes of paragraph (a) of the

last preceding sub-section, be deemed to

be a creditor only

to the

extent, 1f

any,

by which the amount of the

debt owing to

him exceeds the value

of his security.

( 3 )

secured creditor may present, or

join in presenting,

a creditor's petition

as if he were an unsecured creditor if

includes in the petition a statement that

he is willing

to surrender his security

for the benefit

of creditors generally In

the event of a sequestration order being

made against the debtor.

( 4 )

Where a petitioning creditor is

secured creditor,

he shall set out

in the

petition particulars of his security.

(5) Where a secured creditor

has

presented, or joined in presenting,

creditor' S petltion as if he were an unsecured creditor, he shall, upon request in writing by the trustee within the prescribed time after the making of a sequestration order, surrender hls security to the trustee for the benefit of the creditors generally.

(6) A secured creditor to whom the last

preceding sub-section applies who falls

to surrender his security when requested

to do so by the trustee in accordance

with that

sub-sectlon is guilty of

contempt of court.

There are no reported cases to which my attention

was drawn that support the contention

of counsel for the

debtor. Counsel for the petitioning creditor referred

me to

number

cases where petitioning creditors were given

-6-

leave to amend petitions

enable compliance with the

requirements of

the relevant

bankruptcy

legislation

corresponding to S. 44 of the Act. The cases include In

Re A

Debtor 1922 2 K.B. 109; In Re Small 1934 1 Ch.

541;

and

In Re A Debtor 1977 1

W.L.R. 1308.

They are cases where

petitioning creditors, being secured creditors, were allowed

to	amend the petitions to make the appropriate allegations

relevant to their security: but the leave to amend was sought

and given, after sequestration orders were made.

I do not

regard that fact as material. What matters is that courts

have given leave to petitioning creditors to amend petitions

to allege the matters required

by the relevant bankruptcy

legislation corresponding to

S . 44 of the Act notwithstandlng

that the relevant allegations were not made in the petitions

at the time

of thelr presentation.

Counsel for the debtor sought to distinguish these cases and the relevant sections

of the bankruptcy legislation

in England and of the 1924 Act in Australia

the ground

that they were cast in materially different language from	S .
44 of the Act, thus leading to the conclusion for which	he
contends.

There is an initial attraction

in the argument of

-7-

counse l

for

the

debtor .

Sub-sec t ion

( 2 ) of

deems

s e c u r e d c r e d i t o r t o b e

c r e d i t o r o n l y t o t h e e x t e n t , i f a n y ,

which

the

amount

t h e

d e b t

owing

to him

exceeds

the

v a l u e

o f

h i s

s e c u r i t y .

I t

i s

deeming

p r o v i s i o n

f o r

t h e

purposes of paragraph

(a )

of sub-section

(1) namely,

f o r

t h e

purpose of determining

the

amount

o f

t he

deb t

owing

t h e

d e b t o r

t h e

t o

p e t i t i o n i n g

c r e d i t o r .

S u b - s e c t i o n

(1)

1 s

introduced

the

language

“ A

c r e d i t o r ‘ s

p e t i t i o n

s h a l l

n o t

resented

aga ins t

deb to r

un le s s . .

. ‘ I .

The

under l in ing

i s

mine .

Counse l

for

the

debtor

contended

tha t

th i s

sugges ts

t h a t t h e r e

i s

r i g h t

t o p r e s e n t

p e t i t i o n

i n

the case o f

s e c u r e d

c r e d i t o r

u n l e s s

t h e r e

r e m a i n s ,

a f t e r

h e

h a s

v a l u e d

h i s s e c u r i t y ,

unsecured

component

a t l e a s t

$500.00.

S u b s e c t i o n

( 3 )

i s

couched

i n

l a n g u a g e

t h a t

a t

f i r s t g l ance s ecu red c r ed i to r

suppor t s

t he

deb to r

because

provides

“ A

may

present ...

c r e d i t o r ’ s p e t l t i o n a s i f h e

were

a n

u n s e c u r e d

c r e d i t o r

h e

i f

i n c l u d e s . .

. ‘ I .

The

under l in ing

i s mine.

I n my

op in lon ,

t he con ten t ion

unsound.

Sec t ion

- the

Austral

ian

Bankruptcy

Act

1924

p r o v i d e d

t h a t ,

i f

p e t i t i o n i n g

c r e d i t o r

was

secured

-8-

c r e d i t o r ,

h e

m u s t

i n h i s

pet i t ion:-

( a )

S t a t e

t h a t

i s

w i l l l n g

t o

g i v e

his

s e c u r i t y

f o r

t h e

b e n e f i t

t h e

c r e d i t o r s

i n

t h e even t of

seques t r a t ion

o rde r

be lng

made

a g a i n s t

t h e

debtor:

(b)

Give

estimate

t h e

v a l u e

h i s

s e c u r l t y ,

i n which

c a s e

h e

may

a d m i t t e d

a s

p e t i t i o n i n g

c r e d i t o r

t o

t h e

e x t e n t

o f

t h e

balance of

t h e

d e b t

d u e

t o

h i m ,

a f t e r

deduct ing

the

va lue

e s t i m a t e d ,

i n

t h e

same

manner as i f he were an

unsecured

credi tor .

Tha t

s e c t i o n

a l s o

r e q u i r e d

s u c h

p e t i t i o n i n g

credi tor ,

upon

a p p l i c a t i o n

b e l n g

made

the

t r u s t e e

Off lc ia l

Rece iver

w l t h l n

t he p re sc r ibed

tlme

a f t e r t h e

making

s e q u e s t r a t i o n

o r d e r ,

and

upon

payment

of the

e s t ima ted

v a l u e

s t a t e d

i n t h e p e t i t i o n ,

t o g i v e

h i s s e c u r i t y

for

t h e

b e n e f i t o f t h e

creditors.

Notwi ths tanding

the

d i f fe rence

i n

language

between

t h e

r e l e v a n t

p r o v i s i o n s

S .

o f

t h e

Act

the

one

hand

and

those

S. 5 5 of the 1924 Act, and of the

Eng l i sh

-9-

Bankrup tcy

A c t

1 9 1 4

and

ear l ie r

E n g l i s h

b a n k r u p t c y

l e g i s l a t i o n

t h e

other

h a n d ,

i n

my opin ion

the

l anguage

44 of t h e A c t does n o t

b r i n g

a b o u t

t h e

r a t h e r

r a d l c a l

change

contended

for

by counsel

for

t h e

debtor.

t r u e

t h a t

s u b - s e c t i o n

( 2 )

S .

the

English A c t p rovides

( S .

( 2 ) of

t he

Aus t r a l i an

A c t of

1924

s u b s t a n t i a l l y t h e

same) :

"If

t h e p e t i t i o n l n g c r e d i t o r

i s

secured

c r e d i t o r , h e

m u s t ,

i n h i s p e t i t i o n , e i t h e r s t a t e t h a t

h e

w i l l i n g t o g i v e

h i s s e c u r i t y

for

t h e

b e n e f i t

o f

t h e

c r e d i t o r s i n

the

event

the debtor being adjudged bankrupt ,

give

es t imate

the va lue

hls

s e c u r i t y . . . I '

t h a t

t h i s

r e q u i r e m e n t

i s

c l e a r l y a s

t o what

m u s t

s t a t e d i n t h e

p e t i t i o n

i t s e l f

and

not

the

l anguage

cond i t ion

precedent

t o the

r i g h t t o p r e s e n t

p e t i t i o n .

However, In my opinlon S. 44, so f a r

a s

m a t e r l a l

t o

t h e q u e s t i o n s r e su l t :

before

me,

does

no t

ach ieve

any

d i f fe ren t

can

d i s c e r n

from

the

language of S. 44 or any

other

s e c t i o n of

t h e A c t any

reason

why

d i f f e r e n t

r e s u l t

was intended to be achieved	by	Parliament	when	enac t ing S .
4 4 .

Indeed,

s.55 of t h e 1924 A c t ( S . 4 of

the

Enol

-10-

Act

of 1914 is substantially the same) itself is introduced

by the words " A creditor shall not be entitled

to present a

petition against a debtor unless..." (the

underlmings are

mine) followed by the requirements

as to the minimum monetary

amount to found a petition, the debt being a liquidated

sum,

the act

of bankruptcy

on which the petition is grounded

having occurred within a specified period before the

presentation of the petition, and the debtor being domiclled

in Australia or England as the case may be.

Accordingly, the contentlon

counsel for the

debtor that the court has no power to permit the amendment sought by the petitioning creditor to paragraph 3 of the petition fails.

turn to

the question whether, as a matter

discretion, the leave to amend the petition ought	to	be
granted.

I shall not deal with all the grounds relled on by

counsel for the debtor to support

the contention that the

application to amend ought not to be granted as some of them

were disposed

of in the course

of argument.

-11-

Counsei for the

debtor

contended

tha t ,

t h e r e had

been

f u l l h e a r i n g

o n

a l l

t h e

m a t t e r s

r a i s e d

b y

t h e

n o t i c e

oppos i t ion

t o

t h e

p e t i t i o n ,

i n c l u d i n g

the

ground

t h a t

the

p e t i t i o n i n g

creditorwas

secured

creditor;

a n d ,

a s

t h o s e

ma t t e r s

had

been

con te s t ed

t he

pe t i t i on ing

c r ed i to r ,

and

the

quest ion

whether

not it was

secured c red i to r

found

a g a i n s t

i t ,

would

not

r i g h t t o a l l o w t h e p e t i t i o n t o

amended

a t t h i s

s t a g e .

T h i s

c o n t e n t i o n

f a i l s .

T o

permi t

secured

c red i to r

t o

amend

t h e

p e t l t i o n

b y

s t a t l n g

t h e

ing red ien t s

necessa ry

t o

found

i t s

r i g h t

t o

p r e s e n t

t h e

p e t i t i o n a s

secured

creditor

is an

amendment

t h a t m u s t

n o t

be l i g h t l y c r e d i t o r h a s f a l l e d

g r a n t e d :

b u t

t h e

f a c t

t h a t

t h e

p e t i t i o n i n g

one

t h e p o i n t s r a i s e d

t h e n o t l c e

oppos i t i on ,

namely

whether

it i s a

s e c u r e d

c r e d i t o r ,

i s

n o t

i t s e l f ,

i n

opin ion ,

su f f i c i en t

g round

t o

r e f u s e

t h e a p p l i c a t i o n

t o amend.

C o u n s e l

f o r

t h e

d e b t o r

c o n t e n d e d

t h a t

t h e

p e t i t i o n i n g

creditor

knew

a t

a l l

m a t e r l a l

t i m e s

o f

a l l

t h e

facts

necessary

t o

found the conclus ion tha t

was

secured

creditor;

y e t ,

p r e s e n t e d

t h e

p e t i t i o n

I n

i t s

p r e s e n t

f o m

d i s c l a i m i n g

t h a t

was

a . s e c u r e d c r e d l t o r ,

and

t h a t i n those

circumstances,

it would

n o t b e r i g h t

t o al low the amendment.

-12-

The debtor

has

succeeded

i n h i s

a rgument

tha t

the

p e t i t i o n i n g

c r e d i t o r

i s

secu red

c r ed i to r

o f

t he

deb to r ;

b u t

s o l e l y

b e c a u s e

o f

t h e

a p p l i c a t i o n

t o

t h e

f a c t s

t h l s

c a s e

o f

t h e

p r i n c i p l e s

e n u n c i a t e d

b y

t h e

High

Court

i n

Harvey's

Case.

The

researches

o f

counse l

for

the

debtor

i n

t h i s ca se b rough t Harvey '

Case

t o l i g h t , n o t w l t h s t a n d i n g t h e

absence

o f

re fe rences

i n

e s t a b l i s h e d

t e x t

books

bankruptcy

law

and

l a t e r

r epor t ed

ca ses .

The re

i s

s u g g e s t i o n

t h a t

t h e

p e t i t i o n i n g

c r e d i t o r

knew

Harvey's

Case

when

p r e s e n t e d

t h e

p e t i t i o n .

I n d e e d ,

t h e

p e t i t i o n i n g

c r e d i t o r d i d not

know

t h a t

it was

secured

c red i tor

the

deb to r

u n t i l my

r easons

fo r

judgment

1 7 September 1979.

This is not a case

p e t i t i o n i n g

c r e d i t o r ,

knowing

o r

s u s p e c t i n g

t h a t

ho lds

s e c u r i t y

o v e r

p r o p e r t y

o f

t h e

d e b t o r ,

f a l s e l y

a l l e g i n g

i n

i t s

p e t l t l o n

t h a t

unsecured

c red i tor

the

debtor

Rather

is t h e c a s e

c r e d i t o r

b e l i e v i n g

t h a t

was,

a t

a l l

m a t e r i a l

t i m e s ,

unsecured

c r ed i to r

t he

deb to r ,

and

f ind lng

i n t he

cour se

o f

l i t i g a t i o n

i n

bankruptcy

tha t

i s i n f a c t a

secured

c r e d i t o r .

seeks

now

t o r e g u l a r i s e t h e p o s i t i o n

a l l e g m g

i n

t h e

p e t i t i o n

t h e

f a c t s

n e c e s s a r y

t o

e s t a b l i s h ,

i n

conformity

with

the

A c t ,

the

Bankruptcy

Rules

and

Forms,

t h a t

i s i n t r u t h a

secured

c red i tor .

Fur ther ,

evidence

-13-

any prejudice sustained by the debtor has been adduced, save

that which would necessarily flow from	the making	of	a
sequestration order against him.

The fact that the petitioning creditor resisted in

the course of the proceedings before

me, the conclusion that

it was a zecured creditor says nothing as to its entitlement

to be given leave to amend paragraph 3. of the petitlon.

Accordingly,

opinion,

the

petitloning

creditor should be granted leave to amend paragraph	3 . of the
petition.

As to the application to amend paragraph

4 . of the

petition by adding as an alternative act of bankruptcy the fact that the debtor on 30th April 1979 signed an authority under S . 188 of the Act, I accept the contention of counsel

for the

debtor

that

such

amendment

lmpermisslble

because of the requirement of S. 44 (1) (c) namely, that the

act of bankruptcy on which the petltion is founded must be

committed within six months before the presentation of the

petition. The petition was presented on

1 March 1979. “his

act of bankruptcy was CQmmitted later, namely

on 30 April

1979. Clearly, there is

entitlement to the amendment

-	*
I

-14-

sought. Although counsel for the petitioning creditor did

not concede that this was	so,	the point was but faintly
argued.

Counsel for the debtor contended that, if leave is

given to amend paragraph

3 . of the petition, the necessity

for reverification

and

reservice of the amended petition

should not be dlspensed with.

Counsel for the Petitioning

creditor offered nothing in opposltion to the argument

counsel for the debtor

on this point.

In my

opinion, as leave should be given to amend

paragraph

3 . of the petition, it should be reverified

and

reserved in accordance with the usual practice

of the court.

I make the following orders:-

1.1	grant leave to the petltionlng creditor to

amend paragraph 3 . of the petition by deletlng paragraph	3 .
in its present form and substituting the following:-

“ 3 . The company holds security over part of the

property of the debtor for payment of the amounts

specified in

the last preceding paragraph, helng

the debtor’s interest in all those pieces or parcels of land situate at Mona Vale in the Shlre

of	Warringah, Parish of Narrabeen and County of

Cumberland, being the whole of the land comprlsed

Certificate

Title Volume 7199 Folio 118;

-1 5-

Volume

9244 Fo l io

186

( exc lud ing

t he

l and

r e fe r r ed

t o

i n

d e a l i n g

number

60375)

and Volume

12710

F o l i o

224

and

225,

b u t

t h e

company

w i l l i n g

t o

s u r r e n d e r

t h e

s e c u r i t y

for

t h e

b e n e f i t

the

c r e d i t o r s g e n e r a l l y i n t h e e v e n t

s e q u e s t r a t i o n

order be ing

made

a g a i n s t t h e e s t a t e

t h e d e b t o r . "

2 .

d i r e c t

the

p e t i t i o n i n g

c r e d i t o r

t o

r e v e r i f y

and reserve t h e

p e t i t i o n

a s

amended

acco rdance

t he

Bankruptcy

Rules

and the practice

t h i s

C o u r t :

a d j o u r n

t h e

f u r t h e r

h e a r i n g

t h e

p e t i t i o n

t o a

d a t e t o be

f ixed .

4 .

r e s e r v e

c o s t s .

This is to certify that this and the preceding fourteen pages are a true copy of the reasons f o r judgment of His Honour Mr. Justice Lockhart.

[1980] FCA 13

11 Feb 1980