Re Head, Robert Keith & Anor v Ex Parte Dyson, Jana Lynn

[1997] FCA 194

IN THE FEDERAL COURT OF AUSTRALIA     
GENERAL DIVISION  
  No  QG 7017 of 1996
BANKRUPTCY DISTRICT OF THE                    
STATE OF QUEENSLAND  

RE:ROBERT KEITH HEAD AND DAWN FAY HEAD

Debtors

EX PARTE:JANA LYNN DYSON

Creditor

CORAM:       SPENDER J
PLACE:         BRISBANE
DATE:  17 MARCH 1997

MINUTES OF ORDER

1. A sequestration order be made against the estate of Robert Keith Head and Dawn Fay Head.

1. The costs of and incidental to today’s proceedings be taxed and paid in accordance with the Bankruptcy Act 1966.

Note:Settlement and entry of orders is dealt with in Rule 124 of the Bankruptcy Rules.

IN THE FEDERAL COURT OF AUSTRALIA     
GENERAL DIVISION  
  No. QG 7017 of 1996
BANKRUPTCY DISTRICT OF THE  
STATE OF QUEENSLAND  

RE:ROBERT KEITH HEAD AND DAWN FAY HEAD

Debtors

EX PARTE:JANA LYNN DYSON

Creditor

CORAM:       SPENDER J
PLACE:         BRISBANE
DATE:  17 MARCH 1997

REASONS FOR JUDGMENT

This is a contested creditor's petition. The petitioning creditor is Jana Lynn Dyson. Ms Dyson obtained a judgment in the Magistrates Court at Proserpine on 25 July 1996 against the debtors after a contested hearing. The claim by the petitioning creditor in those proceedings was for breach of contract or, alternatively, for misleading or deceptive conduct in breach of s 99 of the Fair Trading Act 1989. The magistrate gave judgment for the petitioning creditor and calculated the amount of damages to $25,320.00.

In respect of those proceedings, in an affidavit filed in this Court on 22 January 1997, the debtors say:

“  Our defence to this action was poorly put by our solicitor, he insisted on legal argument on points of law which to me seemed quite trivial and it was very apparent he was annoying the magistrate.  After numerous adjournments of this hearing bought (sic) about by legal argument and on the fourth sitting of the court, the magistrate made his decision after final summary was made by both solicitors.

My wife and I had to travel 1200 kilometres round trip on four occasions to attend the hearing, at which it was quite apparent the magistrate was not given the full facts pertaining to this case.  I had made two separate statements in relation to our defence against these claims, our solicitor for some reason, never tabled these statements in evidence for the magistrate.

In summary my wife and I feel we have been unjustly dealt with regarding this whole affair.  We don't have the money to mount an appeal against this judgment.  It would be out of the question anyway as Mrs Dyson has left the country and returned permanently to her native land America.  Again we say we have not committed an act of bankruptcy.”

In respect of the debt, a number of matters have been raised in the affidavits on behalf of the debtors.  First, that the Magistrates Court exceeded its jurisdiction in that its jurisdiction was limited to $20,000.  In fact the jurisdiction of the Magistrates Court was sufficient to entertain the claim.

In an affidavit filed on 18 February two further matters are referred to:

“  ...

3.We further claim that this action brought against us in the afore mentioned Magistrates Court was illegal and furthermore a breach of the original business contract.

4.The solicitors for the plaintiff in the case, did ignore and breach clause 16 of the Business Contract which states:

‘Should any dispute in connection with this Contract between parties hereto the same shall be determined by reference to Arbitration in accordance with the provisions of the “Arbitration Act of 1973” and any amendment or amendments thereof.’

and furthermore in reference to the case, Scott v Avery

5.We furthermore say that we were not given our rights regarding clause 16 of the Business Contract and have been damaged because of this breach of Contract.”

The reference to the arbitration clause in the original agreement provides no defence in relation to the petition. The question in bankruptcy proceedings is whether, in truth, there is a debt owed by the debtors to the petitioning creditor which exceeds the statutory amount of $2,000.00 But in any event, it seems to me that having regard to s 53 of the Commercial Arbitration Act 1990 which has replaced the Arbitration Act 1973, cl 16 of the bill of sale does not operate as a stay of any proceedings nor does it oust the jurisdiction of the court unless an application is made to stay the proceedings pursuant to s 53(2) of the Commercial Arbitration Act.  No such application, it appears, was ever made.  As a consequence, the arbitration clause does not assist the debtors in this case.

The final matter on which the debtors rely is said to be the fact that a bill of sale entered into on 15 October 1993 to secure the payment of $10,000.00 plus interest has not in fact been discharged.  As part of the acquisition of the business which led to the contested proceedings in the Magistrates Court, vendor finance of $10,000.00 was provided and a bill of sale executed to secure the repayment of that principle sum and interest.  As is usual, the bill of sale contained a power of attorney clause which permitted the grantees to take action in respect of property the subject of the bill of sale. 

Mr Head submits that the failure of the solicitors for the petitioning creditor to formally discharge the bill of sale precludes the making of a sequestration order. However, the moneys secured by the bill of sale have, in fact, been paid.  In an affidavit filed on 22 January 1997, the debtors say:

“  In February 1995 we were forced to exercise our rights under the Bill of Sale, it was then we discovered the motors and dinghy had been sold.  The Bill of Sale was eventually honoured after we had impounded the boats.”

Had the moneys not been paid in respect of the debt over which the bill of sale provided security, the amount of money owing by the debtors to the creditor would have been reduced by that amount.  It would not have had the effect of preventing the presentation of the petition.  The position in the present case is plainer in that it is acknowledged by the debtors that the moneys secured by the bill of sale had been paid.  In the words of the debtors, "the bill of sale had been honoured."

In those circumstances, the fact that the bill of sale remains formally undischarged is of no relevance to the present proceedings.  I am satisfied of all of the matters of which the Bankruptcy Act 1966 requires proof. I make a sequestration order against the estate of Robert Keith Head and the estate of Dawn Fay Head. I note that registered trustees Phillip Gregory Jefferson and J. R. Scott-Stephenson have consented to act as trustees in the event of a sequestration order being made against each of the debtors.

I order that the costs of and incidental to the petition, including any reserved costs, be taxed and paid in accordance with the Act.

I certify that this and the preceding four (4) pages are a true copy of the reasons for judgment herein of the Honourable Justice Spender.

Associate

Date: 17 March 1997

Mr Head appeared in person for the debtors.

Counsel for the creditor            :          A S Colavitti

instructed by  :          Grevell McLean

Date of hearing  :          17 March 1997