Re Turner, James George Ex Parte Turner, James George

[1993] FCA 1059

N THE FEDERAL COLRT OF AUSTRALIA

EXTRCISING FEDERAL JLRISDICTION IN B.-t\KRIJPTCY

B.LNKRI;PTCY DISTRICT QFJHE STrZTE OF I'.L\S.LIANT,\ NO BY 12 of 1993

J A E S GEORGE TURNER Judgment Dcbtor

EX PARTE	JAMES GEORGE TURhER	Applicant
and

KEITH h.IT,KLEY Rcspondent

COTiRT	NORTHROP J
DATE	26 AUGUST 1993
PLACE	HOB.4RT

REASONS FOR m G \ l E X T

"33(1)	Subject to thls Act, where
(a)	a debtor has committed an act of bankruptcy, and
(b)	at the time when the act of bankruptcy was commtted, the debtor
(I) was personally present or ordinarily resldent in Australia,
(ii) had a dwelling-house or place of business in Australia,
(111) was carrying on business in Austraha. e~ther personally or by means of an

This application involves the construction and application of subsection -11(7) of the

Bnr~ktlrplc) .&I 1966 but in order to understand the application it IS necessar) to gibe a brief

outllne of the structure of the H~olkrliplcj Acf relekant to thls heanng Section 43 probides. for
relevant purposes, as follows

agent or manager, or

(I\) was a member of a firm or partnership carrying on busmess In .Australia by
rncans of a partner or partncrs or of an agent or manager.

the Court ma! on a petltion presented by a cred~tor. make a sequestration order agalnst thc

estate of the debtor '

'52(1) 4t the heanng of a cred~tor's pctltlon, the Coult shall requlre proof of

(a)	the matters stated in the petltlon (for which purpose the Court may accept the
afidav~t ver~fylng the petltlon as sufic~ent),
(b)	senice of the petltlon, and
(C)	the fact that the debt or debts on ~bhich the prtitlomng cred~tor rel~es rs or arc still

owlng.

and if it 1s satisfied \tlth the proof of those matters, may make a sequestration order agalnst

the estate of the debtor "

2 )	If the C o u ~ t	15 not sat~sfiecl	uith the proof of any of those matters or is satisfied
by the debtor
(a)	that he 1s able to pay h ~ s	debts, or

(b) that for other suficlent cause a sequestratlon order ought not to be made,

d may dlsmlss the petltlon "

So ebcn if a debtor has comrnltted an act of bankruptcl. thc court may refuse to nlahe a

sequestratlon order

In the present case there IS a suggestion that the debtor has comm~tted an act of

bankruptcy, the relevant act of bankruptcy belng that referred to In paragraph 40(1)(g) of the

Bailh~rptc):  Act The relevant part of that paragraph IS -

' 40(1)	A debtor commits an act of bankruptcy in each of the following cases
(g)	fa creditor nho has obtalned agalnst the debtor a final judgment or final order
being a judgment or order the e\ecutlon of whlch has not been staled has sened on the debtor In Austraha or, by leave of the Court, elsewhere, a bankmptcy notlce under this Act and the debtor does not
(l) uhere the notlce was served In Australia - ni thn the tlme fixed by the

Reg~strar by whom the notice was issued, or

(11) \there the notlce was served elsewhere - w ~ t h ~ n the tlme fixed for the

purpose by the order glvlng lcate to effect the semlce

comply w ~ t h the requirements of the notlce or sat~sfy the Court that he has a counter-cla~m, set-off or cross demand equal to or exceedlng the amount of the judgment debt or sum payable under the final order, as the case may be, belng a counter-cla~m, set-off or cross demand that he could not have set up m the action

or proceeding in wh~ch the judgment or order was obta~ned .

In the present case the creditor Ke~th Mulley has served a bankruptcy notlce on thc debtor

James George Turne~ The judgment debt IS aludgment of the Supreme Court oCTasmania made on the 27th day of September 1991 In procecd~ngs In ~ t h ~ c h the drb~or was plalnt~tf and the cred~tor was defendant It was a case nhere. after a hearlng the dtbtor's clam nas dismissed and he was ordered to pay the defendant's costs to be taxed That order was made on the 77th

day of September 1991 Subsequently, pursuant to that order, the costs were taxed at 55661 20
and a cert~ficate	of tauatlon n a s ylven on the 15th day of November 1991 In accordance \\it11

the relevant lax\, that certificate of taxatlon quant~liei the amount of costs \\h~ch was ordered to be paid by the order of the Supreme Court made on 27 September 1991 and constltutcs a

judgment debt agalnst the debtor

In thls case the bankruptcy notlce was Issued on 30 March 1992 It was, In fact, served on

14 Apr~l 1993 It was a 2s-day notlce requlrlng the payment of $5663 20, belng the judgment

debt,	w ~ t h ~ n	28 days, or requiring the debtor to do another of the matters referred to In the
bankruptcy notlce	The notlcc stated, in conforrn~ty w ~ t h	paragraph 40(1)(g), that unless the
demand was complied nlthin the spec~fied	tlme or, wlth~n	that tlme the debtor failed to satlsfi, the

Federal Court of -1ustralla that he had a counter-claim, set-off or cross demand an act of

bankruptcv would be colnm~tted

Kormally thc act of bankruptcy fiould have been comm~tted on l:! May 1993 An act of

bankmptc!, changes to some extent, the status of the debtor and because of the effects of such an

act of bankruptcq belng comm~tted m~hlch can be used to found a petltlon for a scquestratlon order there 1s a problslon contamed in subsect~on 41(7) of the Bonkrlrp/e~ Act whlch provides

[or an automatic stav for the tlme for compl~ance w ~ t h the bankruptcl notice Thai subsection IS

as follows

17) Where, before the explratlon of the tlme fixed for compl~ance with the

requlrenients of a bankruptcy notlce, the debtor has filed wlth the Reg~strar an affidaxlt to the effect that he has such a counter-clam. set-off or cross demand as

IS referred to in paragraph 40( l)(g) and the Court has not before the cxplratlon

of that time, determined ~ h e t h c r it IS sat~sfied that thc debtor has such a counter- clam set-off or cross demand. that tlme shall be deenlcd to hake bccn extended ~mrncdiatel, before its explratlon, unt~l and including the day on nhlch the Court

determ~nes whether 11 is so satisfied

In the present case the debtor filed m the office of the Reg~strar in Bankruptcy on 12. hla!

1993 an afidav~t \ \h~ch it 1s sa~d satisfies the requirements of subsection -11(7) to autornat~call!

stay the operation of the bankruptc) notlce In fact, the jurat of the affidawt states that the afidaklt was sworn on 13 May 1993. but it appears that was a mlstake and in fact it was smorn on 12 May 1993, and the Court IS prepared to accept that So the affidav~t IS wlthln tlme So, in

those circumstances. the Court is requ~red to determine whether that affidavit 1s suffic~cnt to

comply w ~ t h the requirements of subsection 41(7)

A numbcr of authorities were referred to and are rel~ed upon, and I refer to them Rt.

Hodh) ex pcirte kkenr(l, ( 1986) 76 .ALR 1 l 1 Re RI ~trk er par ~e C'omr~l~.rcm/ Bcrrrk~rrg ('onlpati) of

Sl.rli~rj (19SO) 30 -\LR 433 J~~IIIL,\ 1' -1hrn/him1\ (1951) 34 :\LR 657

It appears that the Court. as far as subsection 41(7) is concerned. is only able to look at any
affidavit or affida~its filed before the date specified in the bankruptcy notlce, here the relevant
date being 13 May 1993 Other afidatits have been filed subsequcnt to that date but the Court 1s

not allowed to look at them in order to determine whether there has been an automatic stay Secondly, it seems fairly clear that the material in the affidavit must be looked at liberally because

in many circumstances it is required to be prepared in a hurry n~thout tlme for full consideration

of all the aspects of it Sekertheless the material in the aflidacit must contain facts which are sufficient to show that there 1s a genulne clam agalnst the cred~tor by the debtor a claim which

could not have been brought in the proceedings in whlch the judgment uas obta~ned	and for an
amount greater than the amount of the judgment	The rationale of this is to prcvent a debtor to be
unfairlq dealt mith ifin realit!	he has claims against the creditor greater than \\hat IS oned to that
creditor
I turn to consider the material in the affidavit in the light of those authorities The claim in the Supreme Court 111 nhich this judgment was obtained \\as decided in 1991 The debtor u a s in fact a bankrupt from sonietlme in 1957 until 1993 and claims to havc many causes of action

agalnst the Trustee in Bankruptcy hievertheless, he brought this action in the Supreine Court for defamation and initially included in it clams based upon what mght be said to be breach of dutc

and public oftice misfeasance For various reasons these cla~ms were struck out and were not pursued In Supreme Court proceedings But all those events took place sometime before the

judgment in 1991 .Most of them took place in 1989 or about that time In these circumstances it is clear that any claims whlch are based upon that breach of duty or public ofice misfeasance

could hace been brought in those Supreme Court proceedings Assuniing for prcscnt purposes, that those clalms are in the nature of a cross demand against the judgment cred~tor they do not sa t~sh the Court that the!, come xbith~n the requlrenients of subsection 41(7) since those clalms could have been brought in the Supreme Court proceedings. the proceedings in which the order for costs was made, the proceedings in which thc present judgment cred~tor wab not the rnoblng

party and was not thc pla~nt~ff	The debtor u a s the plaintiff and could have made claims on the
other matters as well

There arc also rererences to po>sible claims against the judgment cred~tor in relat~on to

events nhich took place before the Tasmanian Thoroughbred Racing Council in which, apparently the creditor xcas a witness, the council detemln~ng matters in relation to the licence of 1Mr Turner to conduct and control race horses in Tasmania An> claim there xxould be a= -ainst the council not against the judgment creditor This all occurred in 19S9 and could ha\e been brought in those proceedings in the Supreme Court of Tasmania in which the judgment Tor costs was made

There is also much material before the Court about other act~vities involwng the judgment

creditor but, ha\ing regard to \\hat appears in the atlidavit. I can see nothlng uhich suggests that there is an? claim u h c h has any chance of success against the judgment creditor ~bhich could not

have been brought in the Supreme Court proceed~ngs	in which the judgment debt for the cost
was obtained

In these circumstances, I am not satisfied that the debtor has conlplied with the

requirements of subsection 41(7) of the Bunh~rptcy Act Accordingly, there can be no automatic

evtenslon of tlme The act of bankruptcy occurred on l ? May 1993 Thls does not mean that the debtor cannot challenge the balld~t? or effect~venerb of the bankruptcy notlcc In other

proccedln_es That can always be done, and the Court expresses no blew on an! of those lnatters

at all The only matter bcfore the Court 1s that based on subsect~on 41(7)

The Court makes the follow~ng orders

(1)	that there be no deemed evtenslon of t ~ m e	to comply 1~1th	requirements of the bankruptcy
notlce dated 30 March 1993
(2)	costs reserved

I certifv that t h ~ s and the prcccdlng SIX ( 6 ) pages are a true copy of the Reasons for Judgment o r the

I-Ionourable Just~ce R M iiorthrop

Date I lqq7.