Re Patullo, D.W. & Anor Ex Parte Amev-UDC Finance Pty Ltd v Patullo, W.

[1989] FCA 404

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4-04~ Sq

JUDGMENT No. .. ........ . ,..- --

IN THE FEDERAL COURT OF AUSTRALIA	)	I
GENERAL DIVISION	)	QLD P237 of 1989
BANKRUPTCY DISTRICT OF THE SOUTHERN	)	QLD E481 of 1989
DISTRICT OF THE STATE OF QUEENSLAKE )

RE:	DESMOND WILLIAM PATULLO and INES RENATA TERESA PATULLO
EX PARTE:	AMEV-UDC FINANCE PROPRIETARY LIMITED

Applicant

WILLIAM PATULLO and INES RENATA TERESA

PATULLO

Respondents

MINUTES OF ORDER

JUDGE MAKING ORDER:	PINCUS J.
DATE OF ORDER:	21 JULY 1989
WHERE MADE:	BRISBANE
THE COURT ORDERS THAT:

1.   the time for service of the application be abridged, as asked in para.1 of the application;

2.    the application to discharge the order made on 20 July 1989 be refused.

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

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IN THE FEDERAL COURT OF AUSTRALIA	)
GENERAL DIVISION	) QLD P237 of 1989
BANKRUPTCY DISTRICT OF THE SOUTHERN	) QLD E481 of 1989
DISTRICT OF THE STATE OF QUEENSLAE	)

RE:	DESMOND WILLIAM PATULLO and INES RENATA TERESA PATULLO
EX PARTE:	AMEV-UDC FINANCE PROPRIETARY LIMITED

Applicant

--	WILLIAM PATULLO and INES RENATA TERESA
PATULLO

Respondents

PINCUS J. 21 JULY 1989

EX TENPORE REASONS FOR JUDGMENT

In this matter there has been a history of events which perhaps should be set out chronologically. There was a sequestration order made by Spender J. on 2 June 1989 against the estate of Mr and Mrs Patullo. An appeal was lodged on 14 June and on the same day an application was made to me, in effect, to stay	further proceedings on the sequestration order. That application	succeeded and, I might mention that it was prompted by the
prospect of the trustee, Mr Knight, taking possession of premises on which the Patullos reside with their family.
The appeal is due to come on next Wednesday, but the difficulty which has arisen is that a party alleging itself to be a secured creditor, AMEV-UDC Finance Proprietary Limited, which was innocent of all knowledge of the stay, was proceeding against Mr Patullo, the male bankrupt, in the Supreme Court contemporaneously.
The statement of claim in the Supreme Court, although it does not allege (somewhat oddly, I think) that anything is due, says that there is a bill of encumbrance and that a demand of possession has been given. The male bankrupt defended that suit, setting up that the notices given were invalid. Mr Fraser, who has appeared today for AMEV-UDC, points out that there is no denial of the debt; but then there is no allegation of a debt, so that is hardly surprising. There is a counter-claim for conversion and the pleading mentions damages of $20,000. Mr Fraser informs me that particulars have been given of further damages in a larger sum. Now, the problem which has arisen is the fate of the Supreme Court suit pending the resolution of the appeal.
Mr Fraserls principal argument is as follows. He says that the plaintiff in the Supreme Court is, on the material, a secured creditor and that it either cannot or should not be held
up by the uncertainty as to the status of the trustee or the bankrupt and, in particular, should not be held up by any doubt as
to who is the proper party to resist its suit.
Mr Fraser points out that under s.60 of the Bankruptcy Act 1966, AMEV-UDC gave the appropriate notice to the trustee to elect and that under the Act the trustee is deemed to have elected not to proceed. I made an order yesterday which was based upon the view that the practical course was to hold matters in status quo until the appeal was disposed of and, despite having heard Mr Fraserls cogent arguments, I confess to being of the same view.
The difficulty, I suppose, is related to the fact that it is Patullo's residence which one is talking about. That was a circumstance which induced me to stay the sequestration order, there not being suggested to be any particular urgency in obtaining possession of the premises so long as suitable undertakings were given. The plaintiff in the Supreme Court, however, is said to be very anxious to obtain possession as soon as possible and it says that unless it is free to pursue the matter in the Supreme Court, it may be held up for some' time.
Mr Fraser raised before me the question of the effect of what has been done and who, if anyone, can take part in the Supreme Court proceedings. The position is, as it seems to me, that the trustee can have no right to do so and he had no right to elect because of the order which I made on 14 June. On the other hand, the bankrupt is also, as it seems to me, unable to take part
bankrupt. either in the claim or in the counter-claim, simply because he is The effect of the sequestration order is not wholly suspended. I did simply what I was asked to do and stopped the trustee from taking any step under it, pending the appeal, and it is not suggested I should vary that.
Mr Fraser says that the claim and counter-claim should be regarded as utterly disconnected one from the other. He says that AMEV-UDC is secured on the amount the subject of the claim and the counter-claim is another matter altogether and that a secured creditor should never be held up. I do not necessarily think that is right. Bankruptcies do affect secured creditors in a number of ways. One is that if there is a surplus, they have to hand it over. Another is if there is a deficiency, they may be able to prove and recover it. They cannot, of course, simply sue for the debt and execute as a creditor can ordinarily do. It is not really correct that a secured creditor is entirely unaffected by a bankruptcy.
The claim and counter-claim are not, in my view, unconnected with each other. If the statement of claim was put in order and the debt (which is said to be $48,000) was alleged, and judgment or a declaration were asked in respect of it, then it seems to me clear enough that the Supreme Court would have the right, whether by way of set-off or simply treating the counter-claim as such, to reduce or eliminate the debt and dismiss the plaintiff's claim because of the quantum of the counter-claim.
To take an example, if there were judgment in favour of the plaintiff in that suit for $48,000 by way of a declaration but a judgment the other way for the same sum in favour of Patullo, then it is quite unlikely that the plaintiff would recover possession. The matter might have taken quite a different course. I might have refused to make the order sought, restraining the trustee from acting under the sequestration order. But as I have made that order and there being no complaint of it now, the order, as it seems to me, must be given effect to. One consequence of it is that it does create the difficulty about the Supreme Court case. The practical course is either to do nothing and let the creditor ride to victory, as it seems to me it must necessarily do in the absence of an opponent in the Supreme Court, or to let the Patullos have, at least potentially, the benefit of any success they may have in the appeal in this Court. To put that more precisely, if the Patullos, for example, had the sequestration order overturned next Wednesday, then it seems to me they would be perfectly entitled, if they are able to raise the money, to both defend the plaintiff's claim and pursue the counter-claim. At present they are not.
In other circumstances, I would refrain from restraining the plaintiff from pursuing the matter. Here, the time involved is so short and the case is one in which there is no urgency asserted. There is a faint suggestion that there will be enormous delay necessarily incurred if AMEV-UDC do not get on in the Supreme Court next week, but that is not so. If the appeal fails and the trustee, as seems to me quite likely, takes no further interest in the Supreme Court case, then I would have thought
AMEV-UDC would get judgment quite quickly, without the necessity of going to Mackay and waiting for the next sittings.
The order, therefore, will be that the time for service of the application be abridged, as asked in para.1 of the application. The application to discharge the order I made yesterday is refused.

I c e r t i f y t h a t t h i s and t h e f o u r p r e c e d i n g p a g e s

a r e a t r u e c o p y o f t h e r - a s o n s f o r judgment h e r e i n

o f H i s nonour Mc J u s t i c e Pincus.

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