Re Hibbard, N.K. v Ex parte Playroom Pty Ltd

[1987] FCA 776

IN THE FEDERAL COURT OF AUSTRALIA	)
GENERAG DIVISION	) QLD P1606 of 1987
BANKRUPTCY DISTRICT OF THE SOUTHERN	)
DISTRICT OF THE STATE OF OUEENSLAND	)

RE: NORMAN XINGSLEY HIBBARD

EX PARTE: PLAYROOM PTY. LTD.

JUDGE MAKING ORDER:	PINCUS 3 .
DATE OF ORDER:	18 DECEMBER 1987
WHERE MADE:	BRISBANE

THE COURT ORDERS THAT:

1. The petltion for sequestratlon wlll be ad~ourned

generally, with liberty to either party to apply to

have the matter llsted on reasonable notlce,

provided that if no such applicatlon is made In the meantime, the case shall be listed for mention on Monday, 21 March 1988 at 9.30 a.m.

2. Costs of today be the petitioning credltor's costs In the proceedings.

m:

Settlement and entry of orders is dealt wlth in

Rule 124 of the Bankruptcy Rules.

IN "2 FEDERAL COURT OF AUSTRALIA	1
GENERAL DIVISION	1 QLD P1606 of 1987
BANKRUPTCY DISTRICT OF THE SOUTHERN )
DISTRICT OF THE STATE OF OUEENSLAND )

RE: NORMAN KINGSLEY HIBBARD

EX PARTE: PLAYROOM PTY. LTD.

PINCUS J. 18 DECEMBER 1987

EX TEMPORE REASONS FOR JUDGMENT

Thls is a creditor's petition for a sequestratlon order

based upon a 1udgment in the Supreme Court of Queensland glven on

18 September 1987 m a sum slightly in excess of $1 million. The

judgment debtor has instructed his sollcitors to appeal and they

have set the processes of appeal in train. However, there seems

to have been some dilatoriness, whlch is referred to below. The

judgment debtor says that the petition should be ad~ourned pending

the resolution of the appeal, and the creditor, of	course, says a
sequestration order should be made now.

The first question is: what is the proper principle t o

be applied? In a somewhat similar case, namely, Re Lewin and

Glasson: ex parte Milner (1986) 67 A.L.R. 591, I said in effect

that differences between our statute and that which was in force

2.

in England when Ex parte Hevorth. In re Rhodes (1884) 14 Q.B.D.

49 was decided bore upon that question.

However, since Re Lewin and Glasson, the Full Court has

had the opportunity to discuss the matter in the case of Ahern v.

Deputv Commissioner of Taxation (unreported, 15 September 1987). There, the petitioning creditor was the Deputy Commissioner, who

had obtained judgment for income tax, provisional tax and

addltional tax in a very large sum. An application was made for

adjournment of bankruptcy proceedings; that was refused, but the

Full Court on appeal set the sequestration order aslde and made

certain other directions.

At p.21 their Honours said:

"It is also well establlshed that in general a court

exercislng jurisdlction m bankruptcy should not

proceed to sequestrate the estate of a debtor where

an appeal is pending against he judgment relied on

as the foundation of the bankruptcy proceedings

provlded that the appeal 1s based on genuine and

arguable grounds. I'

The reasons then refer to authority, including Ex parte Hevworth.

In re Rhodes.

Mr. Lyons, for the creditor, appeared to suggest that I

should not, perhaps, follow the principle laid down by the Full Court but should follow my own previous decision. He hesitated, however, to expound the basis of that submission and it seems to

me clear that I should apply what the Full Court has said. The

questions, therefore, are three: firstly, are there genuine and

. , , ,

i 3 .

arguable grounds; secondly, if there are, is there any special

circumstance in the case to take it outside the general rule laid

down by the Full Court; thirdly, if there is not, should any order

be made designed to give the creditor protection.

As to the flrst question, whether there are genuine and

arguable grounds, I am of opinion, clearly enough, that there are.

Mr. Lyons submitted that the appeal will probably fail. One is

hesitant in expressing an opinion on such a point; It is a

delicate task, partlcularly when the nature of the appeal has been

argued only briefly. I feel obliged, however, to say that I

should have thought the appeal has its difficulties.

Nevertheless, I am of the view that there are arguable grounds

which may be described as genuine, and that that 1 s so appears

slmply from a reading of the careful reasons which were given.

The second question, then, is whether there 1 s any

circumstance taklng the case outside the general rule. A number

of matters were relled upon by Mr. Lyons. He said that the appeal

records had not been prepared, nor ordered. That seems to be so,

and apparently the reason is that, although money has been

provided, the solicitor	f o r the ~udgment	debtor has not taken the
necessary steps.

"he second point made by Mr. Lyons was that, on the

evidence, the position of the creditor might well be in jeopardy,

because the debtor may be insolvent. It is not possible for me to

assess the state of solvency of the debtor on the material I have,

but he plainly has a serious liquidity problem.

4.

The third point made by Mr. Lyons is that nothing is

offered to show that the creditor will suffer no prejudice if th

petition is adjourned. That seems to me a point well taken, but

it is, of course, common enough that prejudice is suffered by

adjournment of a petition.

I should add, however, that there is nothing before me

to suggest that the debtor is attempting to spirit assets away,

pending the resolution of the appeal. If there were such

evidence, that might well constitute an exceptional circumstance,

and indeed is a means of reconciling the actual result In re Lewin

and Glasson with the rule as laid down by the Full Court.

Mr. Lyons a l s o referred to the fact that there was an

attempt to evade service of the bankruptcy notice. That 1 s a

matter which, in my opinion, should be taken lnto account against

the debtor, but does not seem to me of sufficient weight to take

the case outside the general rule.

Mr. Bland, for the debtor, said from the bar table that

it was intended to order the appeal record immediately, and that

any risk as to excessive delay could be met by adjourning the case

generally, rather than to	a specific date, with liberty to restore
it.

I have some concern about cases of this sort, in that it

can operate unfairly to a petitioning creditor, to require it, in

general, to wait until the resolution of appeal proceedings.

During that period its chance of recovery may deteriorate greatly.

5 .

However, if one simply asks the question, does this case appear to

fall within the general rule, the answer, in my oplnion, must be

yes. It is, speaking broadly, an ordinary case where a genuine

appeal against a judgment has been brought which, if successful,

may extinguish the judgment debt. Nothing relied upon by Mr.

Lyons seems to me to be strong enough to take the case outside the general rule.

I therefore propose to accede to the application for

adjournment, and to do so in the way suggested by Mr. Bland. That

is, the petition for sequestration will be adjourned generally,

with liberty to either party to apply to have the same listed on

reasonable notice, but with the proviso that, if no such

application is made in the meantime, the case shall be llsted for

mention on Monday, 21 March 1988, at 9.30 a.m., before me. I

select that date simply as being three months away, approxlmately.

By then, the progress of the matter in the Supreme Court should be

better known. I propose to make the costs of today the

petitioning creditor’s costs in the proceedings.