Re Grisillo, L. v Ex parte Deputy Commissioner of Taxation

[1991] FCA 855

IN THE FEDERAL COURT OF AUSTRALIA	)
GENERAL DIVISION	)
1 No. B3283 of 1991
)

LILIANA GRISILLQ Applicant/Debtor

EX PARTE:  DEPUTY COMMISSIONER OF TAXATION
Respondent/Creditor

GORAM:	HILL J
PLACE :	SYDNEY
DATED :	9 DECEMBER 1991

EX TEMPORE REASONS FOR JUDGMENT

The applicant, Liliana Grisillo, applies to the court for an order that the sequestration order made by me on 1 November 1991 be rescinded, or in the alternative, that her bankruptcy be annulled. A further alternative seeking an order that the sequestration order be discharged has not been the subject of any submission and I put it to one side.

On 1 November 1991 I made the sequestration order in question on the petition of the Deputy Commission of Taxation who alleged that an amount of $637,759 was owing to him as at the date of the petition. No other creditor appeared on the petition and in an affidavit which had been filed in those proceedings, and a part of which was read in the present proceedings, Mrs Grisillo deposed that she had no other creditors. On the application of counsel for Mrs Grisillo, I stayed the order made by me for a period of 21 days to enable further negotiations to be carried out between the bankrupt

and the petitioning creditor.

Although those negotiations ultimately apparently bore fruit, they did not do so within the 21 days. However, the evidence before me shows that the amount owing to the Deputy Commissioner has been paid to the satisfaction of the Deputy Commissioner who does not oppose, and indeed joins with the bankrupt in consenting to the application for rescission. In an affidavit dated 6 December 1991 read in these proceedings, Mrs Grisillo states that she is not aware of any other creditors and that she is able to pay her debts as when they fall due.

The trustee of the estate who has been notified of these proceedings, although not made a party to them, has appeared and has no objection to an order being made as sought. I should say that notwithstanding the expiration of the 21 day period the sequestration order was not signed or sealed so that there is no doubt that for the purposes of 6.37 of the Bankru~tcv Act 1966 (Cth) the court has power to

rescind the sequestration order: s.37(2). There is no doubt

that the power of the court to rescind the sequestration order is a power that will only be sparingly exercised. It would of course be appropriate in a case where for example the bankrupt had no notice of the presentation of the petition or where the sequestration order was obtained by fraud.

Although I have some doubt about the propriety of rescinding a sequestration order properly made at the time on the grounds of subsequent payment of debts, this course was taken by Davies J in Re Baker Ex Parte TLE Electrical Pty Limited (1988) 79 ALR 445, in facts indistinguishable from those before me. His Honour expressed the view that as payment of the debt to the petitioning creditor had been secured in a "proper manner" and as no other person had shown interest in the bankruptcy it was "desirable" that the power conferred by s.37 of the Act be exercised. As a matter of comity I would take the same view as taken by a single judge of this court unless of the opinion that it was clearly wrong. The present is not such a case.

There was some discussion in Re Baker of the

provisions of s.43(2) and what had been said by Gibbs J in
Deriu (1970) 16 FLR 420 where his Honour had pointed out that
by force of s.43(2) once a sequestration order was made the

person against whom it was made continued a bankrupt unless

the bankruptcy was either annulled or discharged. Although

what was there said was said prior to the insertion of sub- secs.2 and 3 of s.37, the comments have been followed and applied in a number of cases subsequently some of which are referred to by Davies J in Re Baker.

In his Honour's view the effect of rescission of a sequestration order is to set aside the sequestration order ab initio. If this is so then it would of course follow that the person in question had never become a bankrupt so that the provisions of S. 43 (2) would have applied. There is a problem with that argument in that the effect of rescission is always to set aside ab initio but the argument did not appeal to Gibbs J in Re Deriu nor for that matter in the cases that followed it to the extent that in more than one case orders of this court have been pronounced both rescinding and annulling to ensure that the problem does not arise.

Again, however, there is the decision of Davies J in Re Baker which as a matter of comity I believe I should follow. Should it turn out that the combined effect of rescission and s.43(2) is not to have the result that the bankrupt never was a bankrupt that is a problem for the applicant who has asked me to make the order rescinding the

difficulty in the present circumstances annulling the bankruptcy in any event. I should say that I would have

bankruptcy under s.154 at a point of time prior to a notice having been inserted calling for creditors to prove their debts, in that s.154 in contemplating that a person seeking annulment of the sequestration order show that the unsecured debts of the bankrupt that have been proved have been paid in full suggests that at least some time be given to enable unsecured creditors to in fact prove their debts.

In the circumstances, however, I would order that the sequestration order made by me on 1 November 1991 be rescinded and secondly that the creditors petition dated 29 November 1990 be dismissed.

I certify that this and the
preceding four (4) pages
are a true copy of the Reasons
for Judgment herein of his Honour

Mr Justice Hill.

Date: 9 December 1991

Counsel and Solicitors	N.A. Confos instructed by
for Applicant/Debtor:	Castrission & Co.
Counsel and Solicitors	R. Quinn of the Australian
for Respondent/Debtor:	Government Solicitor Mr Castrisos appeared on behalf of the Official Trustee
Date of Hearing:	9 December 1991
Date Judgment Delivered:	9 December 1991