Walter, Richard Jeremy v St George Bank Ltd

[1997] FCA 1238

FEDERAL COURT OF AUSTRALIA

BANKRUPTCY - Application to set aside bankruptcy notice - Exercise of discretion to go behind judgement which the bankruptcy notice is based on where only contention is that the debt is for a lesser amount

BANKRUPTCY - Application for extension of time to comply with the bankruptcy notice - Evidence that creditors will be paid within a week and not prejudiced by extension of time - Effect of previous indications that creditors would be paid out

Bankruptcy Act 1966 (Cth) ss 41(5), 41(6A)

Emerson v Wreckair Pty Ltd (1992) 33 FCR 581 applied

WALTER v ST GEORGE BANK LTD & ANOR
VG 7608 of 1997

JUDGE:        NORTH J
PLACE:        MELBOURNE
DATE:          13 OCTOBER 1997

IN THE FEDERAL COURT OF AUSTRALIA
VICTORIA DISTRICT REGISTRY	VG 7608 of  1997

BETWEEN

RICHARD JEREMY WALTER
APPLICANT

AND:

ST GEORGE BANK LTD
FIRST RESPONDENT

ST GEORGE PARTNERSHIP FINANCE LTD
SECOND RESPONDENT

JUDGE(S):

NORTH J

DATE OF ORDER:

13 OCTOBER 1997

WHERE MADE:

MELBOURNE

THE COURT ORDERS THAT:

1. The debtor’s applications to set aside the bankruptcy notice dated 27 August 1997 and to extend the time for compliance with the said bankruptcy notice are dismissed.

1. In the event of a sequestration order being made against the applicant, founded on the said bankruptcy notice, the costs of the creditors of and incidental to this application is to be treated as if they were petitioning creditors' costs. If no such sequestration order is made, then the debtor is to pay the taxed costs of and incidental to the application.

Note:Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

IN THE FEDERAL COURT OF AUSTRALIA
VICTORIA DISTRICT REGISTRY	VG 7608 of 1997

BETWEEN

RICHARD JEREMY WALTER
APPLICANT

AND:

ST GEORGE BANK LTD
FIRST RESPONDENT

ST GEORGE PARTNERSHIP FINANCE LTD
SECOND RESPONDENT

JUDGE(S):	NORTH J
DATE:	13 OCTOBER 1997
PLACE:	MELBOURNE

EX TEMPORE REASONS FOR JUDGMENT

HIS HONOUR: There are two applications before the Court brought by Mr Walter, the debtor. The first application is an application to set aside the bankruptcy notice, issued 27 August 1997, to the debtor. The bankruptcy notice is based on a judgment of the Supreme Court of New South Wales, which took effect from 25 July 1997, in the sum of $341,482.07, with interest of $3,045.27, a total of $344,527.34. Mr Walter admits that judgment in the sum of $314,193.09 is justified, on the basis of the general notices of demand issued by the creditors. He has given notice under s 41(5) of the Bankruptcy Act 1966 (Cth) (the Act) that the amount claimed in the bankruptcy notice is overstated.

The Court has a discretion to go behind the judgment of the New South Wales Supreme Court, upon which the bankruptcy notice is based. In the case of Emerson v Wreckair Pty Ltd (1992) 33 FCR 581 at 588-589, the Full Court of the Federal Court said:

“It would therefore seem appropriate that upon an application to a court exercising jurisdiction in bankruptcy to set aside a bankruptcy notice, the court should not go behind a judgment where the grounds upon which the judgment is challenged are such that, if accepted, they would only support a finding that the amount of the debt be reduced and would not support a finding that there was in truth no debt at all.”

That statement applies directly to this case. Mr Walter does not contend that there is no debt owing. He admits that $314,193.09 is owing. In the exercise of my discretion, I therefore refuse to go behind the judgment of the Supreme Court of New South Wales, and I dismiss Mr Walter's application to set aside the bankruptcy notice.

The second application brought by Mr Walter is for the extension of time for compliance with the bankruptcy notice. This application is brought under s 41(6A) of the Act. The debt which led to the judgment of the New South Wales Supreme Court arose from the failed purchase of a cannery from Corowa Council by a company of which Mr Walter was a director. Mr Walter told me that he expects the creditors to be paid out within about a week from funds which are available to new purchasers of the cannery. He tendered very recent correspondence to support this view. He also contended that the creditors would not be prejudiced by an extension of time because they had recourse to other sources of repayment.

Without more, these arguments would be persuasive. However, there is some background to be taken into account. Mr Walter hoped for the financial support as early as May this year. The action in the Supreme Court of New South Wales, which resulted in the judgment on which the bankruptcy notice is based, was adjourned to 20 June 1997 by Giles CJ because of this hope. The financial assistance was not forthcoming. On 20 June 1997, Mr Walter told the Supreme Court of New South Wales that he expected the creditors to be paid by 27 June 1997. Again, the assistance was not forthcoming. 

In my view, it would not be a proper exercise of discretion to extend time for compliance in these circumstances. The creditors are entitled to a fair degree of expedition of these proceedings. Mr Walter has had several opportunities to produce the necessary financial assistance and, regrettably for all concerned, that support has not eventuated. Consequently, I will order that the debtor's applications to set aside the bankruptcy notice dated 27 August 1997 and to extend the time for compliance with the said bankruptcy notice are dismissed.  The order for costs will be that, in the event of a sequestration order being made against the applicant founded on the said bankruptcy notice, the costs of the creditors of and incidental to this application are to be treated as if they were petitioning creditors' costs. If no such sequestration order is made, then the debtor is to pay the taxed costs of and incidental to the application.

I certify that this and the preceding two (2) pages are a true copy of the Reasons for Judgment herein of the Honourable Justice North

Associate:

Dated:            21 October 1997

The applicant appeared in person.
Counsel for the Respondent:	Ms J. Davies
Solicitor for the Respondent:	Phillips Fox
Date of Hearing:	13 October 1997
Date of Judgment:	13 October 1997