Re Van Tongeren, P.J. v Ex parte Chalmers & Partners

[1991] FCA 504

Re: PETER JOSEPH VAN TONGEREN
Ex parte: CHALMERS AND PARTNERS
No. WP869 of 1991
FED No. 504
Bankruptcy

COURT

IN THE FEDERAL COURT OF AUSTRALIA

BANKRUPTCY DISTRICT OF THE STATE OF WESTERN AUSTRALIA
GENERAL DIVISION
French J.(1)

CATCHWORDS

Bankruptcy - creditor's petition - act of bankruptcy - non-compliance with bankruptcy notice - bankruptcy notice based on judgment obtained in absence of debtor - attempt to go behind judgment - principles regulating court's discretion to go behind judgment - debtor absent due to misunderstanding - not a circumstance warranting exercise of discretion to go behind judgment - sequestration order made.

Bankruptcy Act 1966 s.52

Wren v. Mahony (1972) 126 CLR 212

Re: Marshall; Ex parte James Hardie and Co. Pty Ltd (unrep.; Federal Court; Pincus J.; 8/7/85)

HEARING

PERTH

#DATE 7:8:1991

Mr P.J. Van Tongeren appeared on his own behalf.

Counsel for the Creditor : Mr A. Wilson

Solicitors for the Creditor : Chalmers and Partners

ORDER

1. The estate of Peter Joseph Van Tongeren be sequestrated.

2. The costs of the petitioning creditor, including costs reserved, be taxed and paid out of the estate.

Note: Settlement and entry of Orders is dealt with in Rule 124 of the Bankruptcy Rules.

JUDGE1

This is a petition for the sequestration of the estate of Peter Joseph Van Tongeren, otherwise known as Jack Van Tongeren. The petition is brought by Mr Van Tongeren's former solicitors, Chalmers and Partners, and is based upon non-compliance with a bankruptcy notice which was issued by the Registrar on 10 April 1991. The bankruptcy notice made demand for payment within 14 days after service of the notice of the sum of $6,039.64 pursuant to the terms of a judgment awarded in the Local Court of Western Australia in action number 14882 of 1990 on 10 January 1991.

1. The amount of the judgment was $5,917.60, inclusive of $1,580.65 costs, together with $122.04 which was interest on that sum at the rate of 14% from and including 11 January 1991 up to and including 6 March 1991. The bankruptcy notice as set out in the petition was served on Mr Van Tongeren on 2 May 1991 and it is also asserted and not disputed that he failed either to comply on or before 16 May 1991 with the requirements of that notice or to satisfy the court that he had a counterclaim, set off or cross demand, equal to or exceeding the sum specified in paragraph (a) of that notice, being a counterclaim, set off or cross demand that he could not have set up in the action in which the judgment referred to in the bankruptcy notice was obtained and, on that basis, an act of bankruptcy was committed.

2. The petition is brought under s.52 of the Bankruptcy Act 1966 and I am satisfied having regard to the verifying affidavit that it has been established that the matters stated in the petition are proved, that service of the petition has been proved and, by reference to an affidavit filed this morning, that the debt or debts on which the petitioning creditor relies is or are still owing. Notwithstanding that those matters may be proven, sub-s.52(2) provides that if the court is satisfied by the debtor that for some sufficient cause a sequestration order ought not to be made, it may dismiss the petition. In this case Mr Van Tongeren contends that the debt, which was the subject of the judgment in the Local Court, is not owing by him. After an appearance before Lee J. on 8 July and directions given at that time, he filed, on 19 July, an affidavit setting out the basis on which he contests the judgment debt. The judgment debt was evidently, as appears from the summons which was issued out of the Local Court on 21 May 1990, for fees for professional services rendered by the judgment creditor, they being legal services in connection with criminal proceedings in which Mr Van Tongeren was involved. He maintains in his affidavit, in essence, that his solicitors were engaged only on the understanding that he was granted legal aid. Legal aid was never granted and, according to his affidavit which contains various other allegations that I need not refer to for present purposes, the basis upon which the claim for fees founding the judgment debt rested did not exist. That is to say that there was, on his contention, never any agreement that he would or would be in a position to pay fees to his lawyers. And that, if it had been made out in the Local Court, would have been in all probability a good defence to the claim made against him by his lawyers.

3. The threshold question for this court is whether or not it should go behind, what is on the face of it, a regularly obtained judgment of the Local Court. Mr Wilson, for the petitioning creditor, has referred me to the case of Wren v. Mahony (1972) 126 CLR 212. The substance of that and related authorities is that the court will not go behind a judgment debt unless there are substantial reasons for questioning whether behind the judgment there was, in truth and reality, a debt due to the petitioning creditor. And in Re Marshall; Ex parte James Hardie and Co. Pty Ltd (unrep. Federal Court; Pincus J.; 8/7/85), Pincus J., regarded the decision in Wren v. Mahony as providing authority for the proper test of substantial reasons for questioning whether there is a debt in truth and reality. Now, it is a matter of discretion to some extent and the court has to have regard to, and respect for, the authority of the court whose judgment is brought into question. And, of course, a threshold issue in that respect arises when one examines the circumstances under which the judgment debt came into existence, that is, the circumstances under which the judgment was obtained.

4. Mr Van Tongeren has given some evidence on that matter and has been cross-examined on it by Mr Wilson. It emerged from his evidence that he was served with a summons, that he did at some stage, and it seems it was August of last year, appear before a magistrate although the proceedings at that time were apparently of an interlocutory character rather than the final hearing of the case. It appears also from his evidence, as he concedes, that he did receive a notice of the trial, which was listed to proceed in January of this year. However, he did not take steps to make arrangements to attend at the Local Court, but acted on the assumption that the prison authorities, he then being in Fremantle prison, would arrange to have him attend at the court. And the assumption, as it turned out, was wrong. He had not attended court and the trial went on in his absence. The question is whether that discloses a circumstance by virtue of which I should go behind the judgment. In my view, it does not. There are many situations one could imagine in which people find themselves by virtue of misunderstanding or some other difficulty, unable to attend in answer to civil proceedings. A person who has been duly notified of those proceedings has the responsibility to take such steps as may be necessary to ensure that he can be in attendance at them. There is no suggestion in the evidence that Mr Van Tongeren was or would have been prevented from attending at the trial if he had taken steps to do so. I do not consider that the existence of misunderstanding on his part discloses a reason for going behind the judgment obtained in the Local Court. In so concluding, I do not assume that the Local Court took into account as part of the evidence before it, an affidavit which he had sworn on 14 August 1990 and which was evidently subsequently filed in that court on 16 August. In the circumstances, I will not go behind the judgment. The occasion for the exercise of the discretion to dismiss the application for the sequestration order has not arisen and I am of the view that the order ought to be made.

5. I therefore order:
   

1. The estate of Peter Joseph Van Tongeren be sequestrated.

2. The costs of the petitioning creditor, including costs

reserved, be taxed and paid out of the estate.