Re Williams, K.J. Ex parte Yokohama Tyre Australia Pty Ltd

[1992] FCA 394

IN THE FEDERAL COURT OF AUSTRALIA) JUDGMENT NO^&,.,.,./ 92--

GENERAL DIVISION	1
BANKRUPTCY DISTRICT OF THE	) No BN 1273 of 1992
STATE OF NEW SOUTH WALES	1

BETWEEN KELLY JAMES WILLIAMS

Debtor

EX PARTE YOKOHAMA TYRE AUSTRALIA

PTY LIMITED

12 JUN 1992 Petitioning Creditor

FEDERAL COURT OF

AUSTRWA PRINCIPAL

REQlSTRI EX TEMPORE JUDGMENT

EINFELD J SYDNEY 13 MAY 1992

By an application filed on 7 May 1992 by Mr David Edward Francis, a solicitor of Darwin, the judgment debtor applies to rescind the sequestration order made on 5 May last. This hearing is being conducted in Chambers with Mr Francis and the judgment debtor on the telephone from Mr Francis' Darwin office and Mr Johnson of counsel for the petitioning creditor sitting in front of me. The other persons present in Chambers are my Associate and the court recording monitor.

judgment and seek to set it aside.

The circumstances which gave rise to this application were unfortunate. On 28 April the matter was referred to the Court by a Registrar on the basis that there was an application being made by a solicitor, acting as agent for the debtor's solicitor, for an adjournment of the petition, opposed by the petitioning creditor, to permit the debtor to go behind the

The petition was based on the act of bankruptcy of failing to comply with a bankruptcy notice demanding payment of a judgment of the Penrith District Court given on 5 July 1991. There was at the hearing of the petition some evidence on the file, most particularly an affidavit by the debtor of 19 March 1992, which sought to establish facts showing that the debtor had a good defence to the claim made in the District Court proceedings. The debtor had also filed a notice of intention to defend the petition which basically set out the grounds contained in the affidavit.

The solicitor who appeared on 28 April as the agent of Mr Francis did not appear to know very much about the matter and said that he had only received his instructions very shortly before he had to attend Court. Consequently, I adjourned the matter to 5 May stating then that I would proceed with the petition unless the debtor could show more seriousness and a more substantial basis for a longer adjournment. Costs were

then reserved.

On 5 May the matter was called on at approximately 10.00 am. There was no appearance on behalf of the debtor and no contact with the Court had come to my attention. The creditor was represented by counsel who sought a sequestration order and after hearing evidence a sequestration order was pronounced. There was an amendment granted to the petition to substitute 30 September for 28 September in 1991 in paragraph 4 because 28 September was a Saturday. The hearing of the petition was completed at about 10.10 am.

Shortly after I adjourned that day, there came to my notice a facsimile transmission from Mr Francis to the Deputy Registrar in Bankruptcy which the Court's record of facsimile activity shows as having been received at 10.24 am on that day. The facsimile indicated that the debtor wished to pursue the matters of defence outlined in his affidavit of 19 March 1992.

I immediately asked for an explanation of the situation from the Deputy Registrar and was advised that a telephone call had been made to the Court by Mr Greg Hansen of Mr Francis' office at some time on the morning of 5 May. The telephone call from Mr Hansen apparently preceded the transmission of the facsimile because part of his message was a statement that a facsimile with further information would follow. I note, of course, that both the facsimile transmission from Mr Francis and Mr Hansen's telephone conversation emanated from Darwin

which is half an hour behind Sydney time and the times I am

now giving are the times in Sydney. It is also relevant that

Monday 4 May 1992 was a public holiday in the Northern
Territory and Mr Francis' office was not open on that day.

The application for rescission was supported by an affidavit of Mr Francis of 11 May which basically sets out the facts just outlined. Also included with the material now before the Court is an application to the District Court dated 4 May to set aside the judgment, filed by Mr Burston, a solicitor of Timmins and Partners of Penrith. An affidavit by Mr Burston of 4 May filed in the District Court annexes the debtor's affidavit in this Court of 19 March, presumably to indicate to the District Court the nature of the defence. I also have, as a result of a letter of 5 May from Mr Francis to the Deputy Registrar, a photocopy of a facsimile of Mr Burston to Mr Francis of 4 May advising that the notice of motion to set aside the judgment and the affidavit were filed in the Penrith District Court on 4 May.

Mr Johnson of counsel who appears for the judgment creditor advises that at this time these documents have not been served on his solicitor, although the solicitor has been able to confirm that the application has been filed, as Mr Burston says, and is to be heard in the Penrith District Court on 15 June next. Service should certainly be effected in accordance with the rules of the District Court.

considered. The first is the non-attendance of the debtor or There are two principal matters that need now to be

anyone on his behalf at the hearing on 5 May, despite due notice from the Court, and the failure to give the Court any information at the time of the hearing of the petition. The second is the consequence of the filing of the application in the Penrith District Court to set aside the judgment.

As to the first of the two matters, the circumstances are certainly unusual. To some extent there may have been some slight slip up in the Registry in this regard although no definite conclusion can be drawn in this regard. It may well be that the hearing was actually completed at the time the first contact was made with the Court on the morning of the hearing. At best it would have been a very close thing as to whether the content of Mr Hansen's telephone call could have reached the Court before the sequestration order was pronounced.

The main problem in that regard is the fact that nothing appears to have happened between the hearing on 28 April, at which a solicitor was present, and today. In fairness, the public holiday in the Northern Territory on Monday 4 May means that any contact with the Court would have had to be by Friday 1 May. I must allow for the fact that the hearing of petition was held in Sydney, the debtor is living in a remote place significantly away from Darwin, his solicitor is in Darwin and

communicating them to the Court would have taken time. Mr necessarily the question of obtaining instructions and

Francis reminds me this morning that he himself did not obtain his original instructions until very late in the piece.

I also must take into account two facts which do not appear to be in dispute. First, the debtor is at present without significant funds and therefore has not been able to afford a solicitor. In fact the Deputy Registrar has waived the payment of the fee for the present application pursuant to rule 179. Secondly, part of his defence is that he originally consulted an accountant in relation to the claim made against him in the District Court and received advice that there was nothing he could do. This is advice which Mr Francis, as his solicitor today, wishes to challenge.

In the circumstances I do not think that the failure of the debtor to make contact with the Court, either personally or through a solicitor, between the hearing on 28 April and 1 May was so inattentive to the Court's requirements and his obligations as to forfeit the possible exercise of my present discretion in his favour on that ground alone.

That brings me to the second question, viz. whether the sequestration order should be rescinded on the basis that a real claim is available to set aside the judgment in the District Court.

the basis of the current bankruptcy proceeding is based upon The case originally brought in the District Court and forming

what is called, in a document in evidence, a guarantee. It purports to be the debtor's personal guarantee of a debt incurred to the judgment creditor by the debtor's company, Jahangir Pty Limited, trading as Top End Tyre Sales. The debt appears to have been incurred between June and November 1990 and the guarantee on which the District Court judgment and the bankruptcy proceedings are based was in the form of a letter submitted to the debtor by the creditor, presumably some time at or near the beginning of the transaction. It bears a date

27 June 1990 which could be the date of the document. It is

not in any customary form of guarantee and may be open to
attack on the basis that it is not clear:

(i)	that Mr Williams is guaranteeing the debt or what debt he is guaranteeing; or
(ii)	what the circumstances are by which the guarantee becomes activated.

The affidavit of Mr Williams in the proceedings also raises a second possible defence, namely that at the time when he signed the document he did not know what it meant, he had no advice as to its contents and the obligations which he was undertaking under it, and that it was signed under some form of pressure or duress from the judgment creditor suggesting sanctions against him if it were not signed.

as defences because obviously it is a matter on which evidence I make no comment about the credibility of any of those claims

will be necessary. It can be said, however, that if such matters are established, the District Court may determine that they represent grounds upon which the judgment could be set aside.

There is another factor which must also be considered. As far as the guarantee is concerned, the amount of the debt was $32,555.61. The amount actually sued for in the summons in the District Court was $25,042.59, of which a small amount was for court fees, solicitor's costs and service fees, the basic amount being $24,663.99. In my experience it is possible, in applications to the District Court to set aside judgments, especially when made a considerable time after the judgment as in this case, that the District Court will require security for the whole or part of the amount in dispute. If this should happen in this case, and the fact be true that the debtor is without funds, even a meritorious application to set aside a judgment may be thwarted at the threshold.

I am not in a position to make an assessment as to whether that is likely to happen here, but I think I should take into account the fact that the bankruptcy proceedings have come on rather quickly and that it is not unreasonable to ask the creditor to wait another month, until after the hearing in the

the matter to be properly examined there. Penrith District Court, to enable the justice and merits of

For those reasons I grant the application for rescission. I stand over the petition for further hearing in the Court at 10.15 am on Friday 19 June in Darwin.

As to the question of costs, the judgment creditor has been put to expense that should have been avoided, in particular the expense of the hearing on 5 May. I will not make an order for costs today, but I will say that in view of the circumstances that I have outlined, I am sympathetic to an application that at least some costs should be recouped by the judgment creditor. I will hear further submissions on the issue of costs on 19 June 1992.

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