Re Wharton, S.L. Ex parte Household Financial Services Ltd v Wharton, S.L

[1994] FCA 1089

1089  j 95'

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

EXERCISING FEDERAL JURISDICTION	No VP 657 of 1994
IN BANKRUPTCY

BANKRUPTCY DISTRICT OF THE STATE OF VICTORIA

STEPHEN LYNNE WHARTON

Debtor

EX PARTE: HOUSEHOLD FINANCIAL

SERVICES LIMITED

Petitioner

AND: STEPHEN LYNNE WHARTON

Respondent

Court:	NORTHROP J
PLACE :	MELBOURNE
a:	16 NOVEMBER 1994

REASONS FOR JUDGMENT

This is the return of the petition.of the

which occurred on 23 March 1994, the act of bankruptcy being

the failure to comply with a bankruptcy notice served on 9

creditor against the debtor based upon an act of bankruptcy $26,499.23 obtained in the Magistratesr Court on 10 December 1993. The petition was presented on 5 July 1994, was served and has been adjourned on four occasions. The debtor filed a notice of intention to appear setting out grounds of opposition namely (1) the judgment debtor is not indebted to the judgment creditor and (2) the judgment creditor is precluded by section 7 of the Hire Purchase Act 1959 from proceeding with this matter.

It transpires that the reason for one of the adjournments

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of the petition referred to earlier was to enable the debtor

to apply to the Magistrate's Court to have the judgment upon '

which the bankruptcy notice was based set aside. That

application came on for hearing before the Magistrate's Court

on 4 November 1994. The Court refused to set aside the

judgment debt.

In order to understand the grounds of opposition, brief

reference needs to be made to the facts of the case. The

judgment debt obtained by the petitioning creditor was based

upon guarantees given by the judgment debtor in relation to

certain hire purchase agreements entered into by companies

with which he was associated. Those hire purchase agreements

apparently have terminated. The petitioning creditor alleged

that there were moneys owing to the petitioning creditor under

the hire purchase agreements and under the guarantees. The

action in the Magistrate's Court was based upon those two

claims. Apparently, the judgment was entered in default for

various reasons and is not a matter which was argued out at

that time. Reference is made to section 7 of the Hire

Purchase Act. The relevant provisions of it are to the effect

that an owner, if required, must give certain information to

the hirer and under subsection (2) it is provided that if that

information or those things are not given to the hirer, the

owner commits a criminal offence and the subsection continues:

"until the default by the owner is remedied the owner

shall not be entitled to enforce (among other things) any

contract of guarantee relating to the agreement."

3

In the present case, it is claimed that the petitioning

creditor did not comply with section 7 of the Hire Purchase

'

Act in that it did not provide the information sought by the debtor and that, as a result, the judgment creditor is not entitled to enforce the contract of guarantee upon which the judgment debt is based. That matter has come again before the Magistrate's Court and there is evidence before this Court to the effect that on the application to set aside the judgment, the Magistrate was satisfied that the requirements of section

7 of the Hire Purchase Act 1959 had been complied with and

dismissed the application, that is the application to set

aside the judgment. Despite that, counsel for the judgment

debtor has argued today that the petition is an action to

enforce the guarantee in contravention of section 7(2)(a)(iii)

of the Hire Purchase Act, and accordingly the petition should

not be granted, because that would be enforcing the contract

of guarantee contrary to the provisions of section 7 of the

Hire Purchase Act.	In my opinion there is no basis to support
such an argument.

The is a matter was raised in the Magistrates' Court.

The Magistrate rejected the claim that there had been a non- compliance with section 7. More importantly, in the case presently before the Court, the matter is whether a sequestration order should be made or not. This depends essentially upon an act of bankruptcy having been committed by the debtor. That act of bankruptcy has been established, subject to what I say later, and the question of whether a petition based on that act of bankruptcy is an "enforcement"

4

under the provisions of the Hire Purchase Act just cannot

arise.

Bankruptcy proceedings are not proceedings to enforce a

judgment. They are certainly not proceedings to enforce

rights created by a contract or by a hire purchase agreement

or by any other means. It is a method by which the status of

proceedings are enforcement proceedings shows a

misunderstanding of what the Bankruptcy Act is all about.

the debtor can be affected. The concept that bankruptcy to pay their debts. That Act provides a method whereby the assets of such a person who becomes bankrupt are divided equally according to law to the persons who are owed money by that bankrupt. It is essential to remember that the matter before the Court on facts of this kind is whether an act of bankruptcy has been established or not. This is made clear by a reference to subsections 52(1) and (2) of the Bankruptcy

Act , which provides:

"52 (1) 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 seq~~estration order against the estate of the debtor.

( 2 ) If the Court is not satisfied with the proof of

any of those matters, or is satisfied by the debtor:

(a) that he is able to pay his debts; or

(b) that for other sufficient cause a sequestration order ought not to be made;

it may dismiss the petition."

Subsection 52(2) empowers the Court to dismiss a

petition. In the present case, there is no suggestion that

the debtor is able to pay his debts. There is an affidavit on

the file purporting to show that the debtor is solvent, but a

reference to that makes it quite clear he is not able to pay

his debts within the meaning of paragraph 52(2)(a). This

again illustrates the fact that the procedures on a petition

are different in nature from an enforcement of a judgment. In

any event, it is certainly not an enforcement of a debt, under

the Hire Purchase Act, and section 7 can have no application

at all in the present case.

It was next argued that, in any event, the Court should

go behind the judgment of the Magistrate and look at the

material in the affidavit, which it is suggested, shows that

the figures claimed by the judgment creditor are of necessity

wrong. Assuming that those facts are established,

nevertheless the Court in this case does not propose to go

behind the judgment debt found by the Magistrate. At the very

most, that is a discretionary matter. In a case like this

where the debtor has applied to the Court to have the judgment

set aside and has failed, because as was said in the evidence

before me, it was satisfied that the requirements of section 7

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of the Hire Purchase A c t had been complied with, this Court

should not go into it again to determine whether the

Magistrate was right or wrong.

Tape malfunction. Part of reasons not recorded.

the bankruptcy notice and being satisfied with the

requirements specified in section 52(1) of the Bankruptcy Act,

I can see no reason why a sequestration order should not be

made. It may be argued that this is a case where there may be

sufficient cause for a sequestration order not to be made

under section 52(2)(b), but in my opinion that is not an

appropriate course to adopt in this case for the reasons

already given.

.~

Accordingly, acting on the certificate of the Registrar, I am satisfied that the debtor on 23 March 1994 committed the act of bankruptcy alleged in the petition. I am satisfied of the proof of the matters with which section 52(1) of the Act

requires proof. I make a sequestration order against the

estate of the debtor and I order that costs, including

reserved costs, be taxed and paid according to the Act. I

direct that a draft of this order be delivered to the

Registrar within seven days in accordance with rule 124(2).

I propose to give a stay of proceeding under the order

for a period of 21 days. The terms and conditions, I think,

should be that the debtor, or rather the bankrupt, should not dispose or attempt to dispose of any of his assets or pay any

creditor except i n the ordinary course of h i s profession

during that period.

I c e r t i f y that t h i s and the preceding s i x ( 6 ) pages are a true

copy of the Reasons for Judgment of The Honourable Just ice

R.M. Northrop. , -

Associate: p -

Date: -& ++%F

ATTACHMENT

Counsel for the Petitioner:	Mr J.A. Nolan
Solicitor for the Petitioner:	Home Wilkinson & Low-
Counsel for the Respondent:	Mr R.E. Cook
Solicitor for the Respondent:	Oakley Thompson & CO
Date of Hearing:	16 November 1994

JUDGES' CHAMBERS

FEDERAL COURT OF AUSTRALIA

450 LITTLE BOURKE STREET

MELBOURNE. 3000

23 May 1995

Mr Darren Goodwin

Records Clerk

Library and Information Services

Principal Registry

Federal Court of Australia

Level 16

Law Courts Building

Queens Square

SYDNEY NSW 2000

Dear Darren

Re: Computerized Leaal Information Retrieval Svstem

I enclose the following judgment for inclusion in the data base of Federal Court Judgments:

Stephen Lvnne Wharton Ex Parte Household Financial

Services Limited v Stephen Lvnne Wharton

No VP 657 of 1994

The word processing disk containing the above judgment is enclosed. Please return the disk to the me when appropriate.

Thank you

Secretary to

he Hon Mr Justice Northrop