Re Stewart, K.

[1992] FCA 612

IN THE FEDERAL COURT OF AUSTRXLIA ) d12 1 92

JUDGMENT NO. ..... .. ........ ...

EANKRUPTCY DISTRICT OF TEE	1
STATE OF OUEENSLAND	) No. QP 1201 of 1992
1
GENERAL DIVISION	1
B E T W E E N :

RE:

Debtor

EX PARTE: WOORABINDA ABORIGINAL COUNCIL

JUDGE :	Heerey J
m:	30 June 1992
PLACE :	Brisbane

EX TEMPORE REASONS FOR

to go behind the judgment debt. The judgment debt in question was a judgment of the Magistrates' Court at Rockhampton on 14	This is the return of a creditor's petition. The obtained following an order made on 6 August 1991 on the petitioning creditor's application for summary judgment.
Because a full hearing of this dispute would probably require witnesses who live in the Rockhampton area, the parties agreed that I should not go beyond deciding whether there was an appropriate case to go behind the judgment relied on.
The Full Court indicated in Wolff v Donovan (1991) 29 FCR 480
at 487 that such a course will usually not be appropriate, but
nevertheless, the Full Court plainly left it open as a course
which could be followed in appropriate circumstances. In the present case, I can see the common sense reason for adopting such a course.
The dispute between the parties arises out of building work which the debtor carried out for the petitioning creditor. This work involved the renovation of 12 houses, together with some other works.
However, the actual debt which founded the judgment is alleged to be the price of a backhoe said to have been sold by the petitioning creditor to the debtor. The endorsement on the summons that was issued in the Magistrates' Court claims "the amount of $15,000 for goods to wit a 580C Case Backhoe [serial number, engine number and registration number are given] sold and delivered by the Plaintiff to the Defendant in this District in 1990." The contract in respect of the backhoe was recorded in a letter sent by the petitioning creditor to the debtor dated 20 September 1990 and signed by both parties.
The letter reads as follows:

"Dear Keith,

RE CASE BACKHOE 580C:

Council acknowledges your letter regarding your $15,000 tender for the Case Backhoe and accepts your proposal in theory, regarding payment for the machine subject to the following:

1.  The WAC will still hold a Bill of Sale over the machine and Buckets

1. The $15,000 full payment for this machine will be taken out of the retention monies owing to you at the end of the House Maintenance Contract

3.   When that occurs, Transfer of the vehicle will be effected to you and the Bill of Sale cancelled through normal Solicitors transactions

4.  You may use the machine from the receipt of this letter

5.   I, KEITH STEWART of M r Larcom, agree to and will abide by all of the above conditions and this letter will form THE AGREEMENT.

(sgd) BRIAN HOGAN (sgd) KEITH STEWART

BUILDING SUPERINTENDENT

(sgd) T G MUNNS

CHAIRMAN "

The debtor filed an entry of appearance and defence in which it was stated:

"$15,000 was taken out of retention money of house contract for 580C Case Backhoe, Woorabinda still owe me $100,000. Paperwork will be tendered at Court

Hearing. "

On the hearing of the application for summary judgment, the debtor was not legally represented. There is some dispute as

to whether there was any reference to the letter of 20 to what took place and, in particular, there is a dispute as	September 1990. I do not think I am able to resolve that
dispute at the moment. What does, however, appear clearly enough is that the petitioning creditor was, as its summons indicated, suing for the price of goods sold and delivered.
The petitioning creditor's rights, therefore, were governed by s.50(1) of the Sale of Goods Act 1896 which provides:

"When, under a contract of sale, the property in the goods has passed to the buyer, and the buyer wrongfully neglects or refuses to pay for the goods according to the terms of the contract, the seller may maintain an action against him for the price of the goods."

Before me, counsel for the debtor advanced in substance two grounds for going behind the judgment debt: first, that the petitioning creditor was not entitled to the price because, on the judgment debtor's version of the history of the performance of the building contract, the retention moneys were owing to the debtor and therefore the petitioning creditor should have satisfied the price out of those moneys; secondly, that even if there were no retention moneys owing, the contract did not on its proper construction have the effect that the property passed and consequently the debtor was not liable for the price. Reference was made to the decision of Cooper J when a Judge of the Supreme Court of Queensland in Stvle Finnish (Old1 Ptv Limited v Ablov Security Ptv Limited (unreported) 17 September 1991 at p.10.

question of the exercise of the general discretion to go	Before dealing with those grounds, there is of course the
behind a judgment debt. This is a well established jurisdiction. The authorities are summarised in Wolff v Donovan. The present case did not involve a default judgment, a situation in which the court will be the more ready to go behind a judgment debt. Nevertheless, there is the fact that the debtor was not legally represented and also that there is at least some doubt that the true legal basis of the petitioning creditor's claim was put before the court. That basis, I might add, is not at all a straightforward one.
I am mindful also of what was put by counsel on behalf of the petitioning creditor about the delay that has occurred after the entry of judgment, and indeed, after the service of the bankruptcy notice. That of course is a relevant consideration, but I think it does not outweigh the fact that on examination of the material I am satisfied that the debtor has raised an arguable case that the debt claimed is not due.
It will be convenient to deal with the second of the grounds to which I have referred before going on to the rather more factually complicated question of rights under the building contract. In my opinion, it is arguable that the contract constituted by the letter of 20 September 1990 has the effect that if no retention moneys are owing to the debtor at the end of the house maintenance contract, then no obligation to pay the price of $15,000 arises. I say that because it seems,
again I say at least arguably, that the contract provides that title in the vehicle is only to pass at the end of the house
maintenance contracts and when the payment of the purchase price is taken out of the retention moneys.
The conclusion that transfer of title is to be delayed until payment of the purchase price is rather strengthened by the circumstance that apparently there was a bill of sale over the machine held by the petitioning creditor and, although this is not completely clear, I rather infer that the petitioning creditor was in substance selling as mortgagee. On that construction, if the petitioning creditor's contention about the performance of the building contract is right, then there were no retention moneys owing to the debtor, and consequently no amount out of which the purchase price could be paid. The debtor obtained possession of the machine in September 1990 and the petitioning creditor's right therefore would be not for payment of the price, but, for return of the chattel, and possibly for damages. Therefore, it seems to me, that there is an arguable case that the debt founding the judgment was not in truth owing.
The other ground relating to the performance of the building contract raises typical issues as to whether the debtor had completed the building work in accordance with the contract and whether extras were agreed to be paid and whether the petitioning creditor wrongly excluded the debtor from the building site.
I think it is sufficient to say for the present purposes that
there are factual issues raised. I will say no more as to the factual contentions raised or the inherent probability of one side or the other being correct.
I think that is all I need say on the substance of the matter
and I will hear what counsel have to say as to directions.

I certify that this and the preceding (6) six pages are a true copy of the reasons for judgment of his Honour Mr Justice Heerev.

Appearances

Counsel for the Debtor:	M r A P J Collins
Solicitors for the Debtor:	Kinneally Teys
Counsel for the Petitioning
Creditor:	M r P E Hack
Solicitors for the Petitioning
Creditor:	Connolly Schirmer and Batts