Re Loughman, G.I. Ex Parte Loughman, G.I.

[1992] FCA 203

JUDGMENT No. a3/.%k

FEDERAL COURT OF AUSTRALIA

GENERAL DIVISION No VP 1075 of 1991

EXERCISING FEDERAL JURISDICTION

IN BANKRUPTCY

BANKRUPTCY DISTRICT OF THE STATE OF VICTORIA

RE:

GEOFFREY IAN LOUGHMAN

Debtor

EX PARTE:

GEOFFREY IAN LOUGHMAN

Applicant

AND :

BANK OF MELBOURNE

ACN 007 270 448

Respondent

COURT

--	NORTHROP J
PLACE :	MELBOURNE
DATE :	8 APRIL 1992

3.	There be a stay of twenty-one (21) days of this
Order. "

EX TEMPORE REASONS FOR JUDGMENT

On 18 March 1992, the Court, constituted by Ryan J, made the following orders:

"1. A Sequestration Order be made against the estate of

the Debtor GEOFFREY IAN LOUGHMAN.

2 .    The Petitioning Creditor's Costs of and incidental to the Petition be taxed and paid in accordance with the statute.

It is noted that the date of the commission of the act of bankruptcy was 5 June 1991. It is noted also that the power

to order a stay is conferred by s52 of the Bankru~tcv	Act
1966. Sub-section 52(1) provides:

"At the hearing of a creditor's petition, the Court shall

require proof of -

(a) the matters stated in the petition (for which purpose the Court may accept the affidavit verifying the petition as sufficient);

(b) service of the petition; and

(c) the fact that the debt or debts on which the petitioning creditor relies is or are still owing,

and, if it is satisfied with the proof of those matters, may make a sequestration order against the estate of the

debtor. "

That is what was done here. The order made on 18 March 1992 was a sequestration order. Sub-section 52(3) provides:

"The Court may, if it thinks fit, upon such terms and

conditions as it thinks proper, stay all proceedings

under a sequestration order for a period not exceeding 21

days. "

Today is the 2lst day after the making of the

sequestration order on 18 March 1992. Pursuant to an
application filed this day the applicant is now seeking the
following orders:

"1. The Orders made by the Honourable Mr Justice Ryan on

18th March 1992 be varied by substituting for
paragraphs 1 to 4 thereof an Order that the Petition
be adjourned to a date to be fixed.

2.   Alternatively, that the Order made by the Honourable

Mr Justice Ryan on 18th March 1992 be rescinded.

3.    Further or alternatively, that the stay of proceedings granted by the Honourable Mr Justice Ryan on 18th March 1992 be extended for a further 60 days.

4.    That the time for service of this Notice of Motion

be abridged. ''

On the hearing of the application a solicitor appeared

for the petitioning creditor and opposed the granting of the
application. The application is brought under s37 of the

Bankruutcv Act. Sub-section 37(1) provides:

"Subject to subsections (2) and (3), the Court may
rescind, vary or discharge an order made by it under this

Act or suspend the operation of such an order."

Sub-section (2) provides:

"The Court shall not, after a sequestration order has
been signed and sealed as provided by the rules, rescind

or suspend the operation of the order."

In the present case, the order was made on 18 March 1992. on 8 April 1992. The Rule requiring the orders to be signed	It was signed and sealed as provided by the Bankruptcy Rules
and sealed is Rule 124 of the Bankruptcy Rules. Sub-rule 124(1) and (2) provide:

"124(1) Subject to these Rules, the person on whose

application an order has been made by the Court has the

carriage of the order.

within 7 days after the making of the order, deliver to	(2) The person having the carriage of an order shall,
the Registrar a draft of the order for settling by the Registrar."

Sub-rule 124(10)(b) provides:

"Where a fair copy of an order as settled by the
Registrar is lodged with the Registrar, the Registrar

shall -

(a) ---

cause the order to be signed and sealed as an order

(b) of the Court by which it was made, and when it has been so signed and sealed, file the order."

In the present case the order has been signed and sealed and was entered on 8 April 1992.

In support of the application, the applicant has sworn an affidavit which contains material which could support the fact that the debt upon which the petition was based should have

been set aside, and would be set aside. But before the Court
is able to consider the discretionary matters it must be

satisfied that it has the power to make the orders sought.

In Re Haaen; ex parte Harrison and Others, Federal Court

of Australia, 29 August 1990, in matter No P3 of 1990 in the

Bankruptcy District of the State of Tasmania, unreported, the

Court, as presently constituted, considered a number of

questions which are relevant to the present matter. In that

case a sequestration order had been made but had not been
entered or signed and sealed. There were applications to have
that sequestration order rescinded. There were other
applications to have another petitioning creditor substituted
for the petitioning creditor who had obtained the
sequestration order. The Court considered a number of
principles and authorities from which it appears clear that a
sequestration operates from the moment it is announced but
that once it has been entered, it cannot be rescinded. This
is quite in conformity with the provisions of s37 of the

Bankru~tcv Act. Normally there would have been no doubt that

in this case, the order having been signed, sealed and
entered, there is no power in this Court to rescind or vary

the order made by the Court on 18 March.

Submissions were made, however, based on the effect of

the order that there be a stay of 21 days of the sequestration
order. Although the order made was in the form that there be
a stay of 21 days of the order nice questions arise as to the
meaning and effect of that order. The only power given to the

Court making a sequestration order is that contained in sub-

section 52(3). In that regard, that the Court may stay all

proceedings under a sequestration order for a period not

exceeding 21 days.	So when the order states that there be a
stay of 21 days of this order, in my opinion, that means that

there must be a stay of all proceedings under that

sequestration order for that period of 21 days. This is so
because of the fact that the pronouncement of the

sequestration order, of itself, has the effect of making the

debtor a bankrupt.	That is made quite clear by a reference to
sub-section 43(2) of the Bankru~tcv	Act which provides:

"Upon the making of a sequestration order against the
estate of a debtor, the debtor becomes a bankrupt, and

continues to be a bankrupt until -

(a) he is discharged by force of section 149;
(b) he is discharged by order of the Court; or
(c) his bankruptcy is annulled under section 74 or 154."

Discussion took place as to what was the true meaning to

be given to the words of sub-section 52(3). It was suggested

that a bankruptcy order should not be entered if there had
been a stay because the entry of a judgment itself constitutes
a proceeding under the sequestration order. I reject that
submission. The word "proceeding" is defined in the
Bankruutcv Act but not very helpfully in the sense that it is
defined as being a proceeding under the Act. Having regard to
the general meaning of the word "proceeding" in sub-section
52(3) the word "proceeding", in my opinion, must relate to

some application or matter, or something of that kind brought

under the Bankruutcv Act. For instance, the present

application before the Court is a proceeding in that sense.
What comes within sub-section 52(3) as being a proceeding may

be uncertain but, nevertheless, in my opinion, it does not

include the entering of the sequestration order.

In my opinion, having regard to the fact that the

sequestration order has been entered, there is no power in the
Court to make an order of the kind referred to in sub-section
37(1) of the Bankruutcv Act that the sequestration order be
rescinded, varied or discharged since sub-section 37(2)
prevents the provisions of sub-section (1) applying to the
facts of this case.
Accordingly, the application is refused.

The petitioning creditor has asked for an order for costs to be taxed and paid in accordance with the Bankru~tcv Act on

the basis that they are part of the petitioning creditor's

costs and should come within s109 of the Bankru~tcv Act with

the priority accorded to the petitioning creditor's costs. The petition, having been heard and brought to end, having merged as it were into the sequestration order, I fail to see

how these costs can be part of the petitioning creditor's
costs for the purposes of priority of payment. In the
circumstances, I will make an order that the applicant, that
is, the bankrupt, pay the petitioning creditor, that is, the
respondent's, costs of this applicatton.

I certify that this and the preceding six (6) pages are a true copy of the Ex Tempore Reasons for Judgment of the Honourable

Mr Justice R.M. Northrop.

Date: 

Associate: .ifz-W, - &&L