Re Gleeson, G. & Anor v Ex parte Richardon, K.J. Summary

LIMITED DISTRIBUTION

IN THE FEDERAL COURT

OF AUSTRALIA

)

EXERCISING FEUERAL JURISDICTION

\.' '

BANKRUPTCY

)

BANKRUPTCY DISTRICT

OF THE STATE OF VICTORIA

KENNETH J O H N F.ICX4FDSON xnd

RAELENE CHERYL

RICHMUSOU

Judgment Debtors

Ex Farte :	GERALIj GLEESON, LORNA GLEESON
and DAR'LL ~GLEESIXI

Judgment Creditors

m:	NORTHRGP J.

DATE:

11 FEBRUARY 1987

W: MELBOURNE

REASONS FOR JUDGMENT

The petltion of the

judgment

creditors

for a

sequestratlon

order

agalnst

the

estate

of the

ludgment

debtors came on for hearlng on 30 October 1986.

The ludqment

debtors made appllcation

that the hearlnq of the petltlon be

ad~ourned

p e n d m g the hearmu and determlnatlon of an

appeal

aaalnst the ]udgment whlch formed the basls

€or the petltlon.

The ludgment creditors opposed chat

appllcatlon.

After

hearlng evldence and submlsslons, the Court ordered

that the

hearlng of the petitlon be adlourned to

15 June 1987 and made

a numoer .af ccnaequenclal orders . The Court announced that

lr. would publish Its reasons for qrantmq the ad~ournment at

a later dar,?. Tho5-e reasons are now puollshrd.

The judgment ilebtors

are

husband and wlie.

The

Iudgment

creditors

are

the

father, mother

and

brother,

respectively, of the

ludgment

debtor

Raelene

Cheryl

Rlchardson.

The petltlon 1s founded upon the fallure

by the

~udqment

debtors to comply

with a bankruptcy notice

In whlch

thz

ludgment credltors clalmed that the sum

$ 2 8 5 , 0 0 0

was

due by the

~udgment

debtors, as defendants. under a final

ludgment obtalned by the ludgment

credltors, as

plalntlffs,

aqalnsr: them I n	the Supreme	Courr: of V l r t o r l a	on 25	March
1986.

The Iadument In ths hareme Caurt xas qlven at the

conclusion of a trlal extendlnu over aeiren days relatlng to

the sale of a

business

the

judgment

debtors

the

~udqment

credltors.

The relevant part of the ludgment of the

Supreme Court 1s set out:-

"THIS COURT

DOTH DECLARE that -

(1) the agreement for the sale

of a business known

'Richardsons'

Country

Fare'

( 'the

business') dated the 11th day

of November 1983

by the defendants to the

plaintiffs, bemg the

buslness of

a restaurant and takeaway food

shop carried on from premlses

at 176 Campbell

Street

Swan H111 and

the

lease

the

aforesald

premises of

the same date was

induced by the fraudulent representations

to the said buslness made by the

defendants;

- 3 -

(11) the sald sale of the said business

and

the

lease

thereto

have

been

resclndsd

the

plalntlfr's and are null and vold and	of no
effect.

.VID DOTH ORDER that on the 14th day of Aprll

1986

the defendants

pay to the plalntlifs the sum of

$170,000 and that

u p n payment of

such

s u m the

plalntlffs deliver up to the defendants possesslon

of the premlses and the buslness.

AND DOTH DECLARE that

sum

$170.0~0

represents chat falr adJustment of

the amount that

ought to be t-epald to the plalntlfls in respect

the purchase p r l c e paid

by them after taklnq

lnto

accouni interest on

the purchase prlcr. rental for

the use of

thz premlses, the proflts made by the

plalntlffs In the ronduct

of the buslness and

a l l

other necessary and reasonable allowances.

AND DOTH ORDER AND ADJUUCE that:

1. In

addition

the

sum of $170,000 the

plalntlffs recover aqalnst the defendants the sum of $105,000 together wlth damages by way of interest in the sum of $10,000.

2 . The defendants' counterclaim be dismissed."

The ludgment debtors did not pay the sum of

$170,000 referred

that judgment, but the ludgment credltors vacated

possesslon

the

premlses

and

the

buslness.

Shortly

thereafter,

the

Iudgment

debtors

trjok possession of the

buslness

and thereafter have conducted tne buslness.

The

business

conducted on premlses owned by the ludgment

debtors but the premlses

are sub-~ect

to a mortgage. The

ludgment has not been stayed.

The ludgment

debtors

have

appealed

from

the

~udgment

of the

Supreme Court. After some lnltlal problems

and a change

of solicitors. the appeal is proceedlng. On the

materlal, I am satisfled that the appeal is genuine,

is bona

flde and is not

a sham. Without formlng any

view on the

merlt; of the appeal, I am satlsfled Lhat suDstantla1 Issues

are

ralaed b.; the

appeal.

The Judgmenc

sredltors

have

cross-appealed seeking aggravated damages.

At the present tune. the ludgment

debtors do not

have sufilcient assets to pay the ~udgment debt. The appeal challenges the lssues of llabllity and of damages. On the

appllcatlon for the ad~ournment,

the ludgment

debtors were

cross-examined at length.

The cross-examlnation Illustrated

the bitterness which has engulfed thls famllp. I do not flnd

It necessary to make flndlnya	on most of the Issues ralsed by
the Cross-examlnat1on.

An express

power of the

Csurt to ad~ourn the

hearlng of the appeal is contamed In paraqraph 33(11 of

the

Bankruptcv Act 1966.

Counsel for the ludgment debtors relled

upon oplnions expressed I n Bavne V. Balllleu (1907) 5

C.L.H.

64. In L i p o v v. Alexander Fraser & Son Ltd. (1978) 24 B.L.R. 616, the Federal

Court, constituted by Sweeney

extended

the time for compliance with a bankruptcy notlce to enable

the

ludgment

debtor

prosecute an appeal

agalnst

the

judgment upon which the notice was based.

HIS Honour applied

the

princlple

that

the

lnstltution

of an appeal, whlch

appears to be bona flde, is a good reason

for ad~ournlng the

A. hearlng of a bankruptcy petltlon based upon

the 3udgment

sub~ect

to the appeal; see p.620.

Counsel for the

]udgment credltors made reference

to a num.oer of

matters whlrh, he contended, shuuld lead the

Cour-t trJ exet-clse

its

dlscr-etlon

aqalnst

qrantznu

the

ad~ournment. H2 attempted tu dlsclngulsh L-lpov S Case on the basls that the extension of t m e there granted prevented the act of bankruptcy comlng I n t o znstence whlle In the przsent case the act of bankruptc:r had been commltted, the ludgment

debtors had not applied for

a stay of

the ludgment of the

Supreme Court and were expending large sums

of money

prosecute the appeal and that could pre~udlce the amounts of money avallable to be dlstrlbuted under a sequestration order. In my opinion, the principle executed In Llpov's Case

1s unequivocal and applies with respect to

an application for

an adjournment of the hearing

of the petltion. Welght is

given to the other facts mentloned.

Counssl for

the

Judument

credltors

referred

Scarbornuqh v . Lew s Junction Stores Pt-;. Llmlted C19633 V.H. 129. In that case, Adam J. granted a stay of execution of a

ludgment pendlng

an appeal. His Honour, in applylnq

0.63

r.17 of the Rules of the Supreme Court, held that a stay

should not be granted unless there were special circumstances

~ustlfylng

the stay, for example where there

was a real rlsk

that the appeal, if

successful, would prove abortlve if the

appllcant were not granted a stay. Counsel contended that in

exerclslng Its discretion to grant

an adlournment of

the

hearlng of a bankruptcy petltion

on the ground that the

~udgment

debtor has

a bona flde

appeal pending against the

ludqment whlch forms the basls for the petltlon, the Court

should be satlsfled ttLac speclal clrcumstances exlst before granting the adlournment. In my oplnlon, no such fetter

should

Imposed

upon the

exerclse of the

dlscretlon

conferred by paragraph

33(11(a) of the Bankruptcy Act.

the present case,

I take Into account the existence

of the

ludgment debt and the

fact that the ludgment

debtors have

each commltted an act of bankruptcy.

I take Into account

that ~f a sequestratlon order 1 s made, the judgment debtors

v111 seek an order under sub-section 5 2 ( 3 ) of the Eankruptcv

Act staylnq all proceedmgs under that order for a perlod not

exceedlna L 1 days to enable them

CO apply

to the Supreme

Court for a

stay of exscutlon of the ludqment pendlnq the

appeal.

I take Into account

the dlfficultles that would

arise If a sequestratlon order was made and

In due course the

appeal agalnst the ludgment was allowed. It is posslble that

on any application

for a

stay of the ]udgment pending the

hearing and determlnation

of the appeal,

the threat of the

sequestratlon order could be held to constltute special

circumstances.

Counsel for the ]udgment

creditors argued further

that on the evldence glven on the hearlng of the application,

the ludgment debtors are, in fact, msolvent and in those

clrcumstances the adlournment should

not be granted. In my

oplnlon, apart from the ludgment

debt, the evldence does not

show that the ludgment

debtors are Insolvent. Any rellance

on the ludgment debt to support

an argument that the ludgment

debtors are Insolvent.

on the facts of the appllcation for

- 7 -

adlournment,

begs the question. The

appeal

1s. on the

materla1 before the court. m n a f l d e .

It 1s bems prosecuted

wlth dlllrrence. These are all fxtors xhlch must

conzldered. It 1s

noted

that

subject

the

flllnq

notices

under

Rule

21, the Unurt 1s

satlsfled

that

sequestration order should be made.

Welqhing all these factors,

I formed the view that

on balancs che

ad~ournment

should be granted and made the

following orders:-

1.	The hearlng of the petltion	be ad~ourned	to 15
June 1937 at 9.45 a.m.

2 .

The ludqment debtors

do not dlspose of or

further encumber any caplcal ass& owned by them or elther of them except In the ordinary course of business.

3 .

General liberty to apply on

48 hours notice

4. The petitioning creditors'costs of the day be reserved.

Re Gleeson, G. & Anor v Ex parte Richardon, K.J.

CaseChat Overview and Summary

Orders of the court

Background to the litigation

Evidence Before The Court

Reasons for decision

Legal Principle Established