Wilson, Re E.A. Wiggins, Ex Parte A

ROT FOR GEIiER4L DISTRIBUTION

IN	TI-d FEDERAL COURT OF ATJSTRALIA	I
>

GENERAL DIVISION

i ii,

No. F. 537 of 19136

BANKRUPTCY

DISTRICT OF THE STATE

OF . N E W SOUTH. WALES

AND

.THE AUSTRALIAN

CAPITAL

TEFRITORY

Re: ERNEST ARTHTJR WILSON

i	A Debtor
! I

parte: AUSTEN WIGGINS, RENE

kITGGTIIS ,

DONALD WIGGINS and	K E V C -
ROBINSON

ro i?rne~;d +he .

1. The petitioning creditors have leave

petition

herein

insertinq

the

p n i

n f

paragraph 4

thereof "beinq a counter-clalm. s e t - c f c

or cross demand that he could not have

s e t up

: I ,

the action or proceeding

in which the

luc!crmp.nt

referred to in the bankruptcy notice was

n b t a i n e q " .

The need to re-verify

th? petitlcjn is 4iepenced

with.

3 .

The petitioning creditors are. pursuant

t n rule :?F,

of the

Bankruptcy

Rules, relieved of th?

consequences of

non-compliance with the

F a n k r u p + r y

Rules as to service of the petition.

4 .	A sequestration order is made aaalnst	Ernest Arthur
Wilson ( "the debtor").

The costs of the petitionina creditor

be taxed m d

paid in accordance with the S_ankrupt:cv

9Ct 1? f i6

(Cth)

6. The costs of the petitionina creditors in defendlno the proceedinss by the debtor for the extFns1m cf the time within which to complv with the bankrupt,.,,,

notice herein be treated as

part of the

c o s t s of

the petitioning creditors for the

p u r p o s e s

t-ula

40(e) of the Bankruptcy

Rules.

N e : Settlement and entry	of orders is dealt with	i n ~ 1 1 1 ~	l 2 4
of the Bankruptcy Rules.

XN-THE	FEDERAL COURT OF AUSTRALIA	I
I

DIVISION	GENERAL	I
I No. P. 537 of 1986

BANKRUPTCY DISTRICT

OF THE STATE

OF NEW SOUTH WALES AND	I
THE AUSTRALIAN CAPITAL TERRITORY	I

Re: ERNEST ARTHUR WILSON

A Debtor

Ex parte: AUSTEN WIGGINS,

RENE WIGGINS,

DONALD WIGGINS and KEVIN

POBINSON

Fetitioning Credi%ors

C m : Neaves J.

D=:	23 April 19%

Before the

Court is a petition presented on 9 April

19R6 by Austen Wiggins, Rene Wiuqins, Donald Wiggins and Kevin

Robinson ("the petitioning creditors")

f o r the sequestration of

the estate of Ernest Arthur Wilson

("the debtor").

The petition

based

act

bankruptcy

consistinu in the failure of the debtor on

or before 14 March

1986

to complv

with the requirements of a bankruptcy notice

served on him on 21 Februarv

1986 or to satisfv the Court that

he had

a counter-claim, set-off

cross demand equal to or

exceedinu the amount of the iudament debt specified in the

bankruptcv notice, beinu a counter-claim, set-off or cross

demand

that

could

not

have

set

up in

the

action

proceedinu in which the iudament was obtained.	It may be noted
that the statement of the act of bankruptcv	set out in the

petition is defective in that it omits anv reference to the

counter-claim, set-off

or cross demand beina one that the

debtor could not have set up in the action

proceedina in

which the iudcrment was obtained. No issue

was raised as to the

sufficiency of the petition by reason of this omission but

is. I think. desirable that the petition be amended so that the act of bankruptcv is fullv stated therein. I, therefore. arant

leave to the petitioning creditors

amend the petition in

that

reaard.

I dispense with the need to re-verify

the

petition.

The petition alleaes that the debtor

indebted to

the petitioninu creditors

"in the sum of

$58.475.50 toaether

with interest thereon at the rate

of 13.5% p.a. from 25 March

1985 to 14 March 1986 which amounts to $7,675.10 makina

a total

of $66,132.60 for monies advanced under Bill of Sale".

The bankruptcv notice, which

was addressed to the

debtor

and one Patricia Lorraine Williams. was issued on 29

July 1985.

It was a 21 dav notice and was based on a

iudcrment

obtained by the petitionina creditors auainst the debtor and

Patricia Lorraine Williams in the District Court

of New South

Wales holden

at Penrith on 25 March 1985.

On 28

January 1986 a Deputv Reuistrar in Bankruptcy,

pursuant to rule

9 of the Bankruptcv Rules. extended the time

within which service of the bankruptcv notice miaht be effected

up to and includinu 29 July 1986. This followed a number of

unsuccessful attempts to serve the bankruptcv notice upon the

debtor.

The	bankruptcy notice was served personally on the

debtor on 21 February 1986.

Consequently. the time fixed in

the bankruptcy notice for compliance	with its requirements
expired on 14 March 1986.

On 10 March 1986 an application was filed in the Court

behalf

the debtor

pursuant

sub-s.41(6A)

of the

Bankruptcv Act 1966

(Cth) seekinq an order that

the time for

compliance with the bankruptcy notice be extended on the uround

that

proceedings

set

aside

the judwent on

which the

bankruptcy notice was founded had been instituted by the

debtor. No application was made to set aside the bankruptcy

notice.

It was common around between the parties that there is

pending in the District Court

of New South Wales

at Penrith an

application by the debtor that the iudument on

which

the

bankruptcy notice was founded be set aside and that the debtor

be allowed in to defend the proceedinus. An issue

arose,

however. whether the proceedinas to set aside the ludament had

been instituted by the debtor before the expiration of the time

fixed for

compliance with

the requirements of the bankruptcv

notice. After hearina evidence. includina evidence from the

debtor, and the

submissions of counsel for the parties upon

that issue. I concluded that the debtor had not shown that the

proceedinus had been

so instituted. The condition precedent

upon which the iurisdiction

of the Court to extend the time

for

compliance with the bankruptcv notice depended

had, therefore,

not been established and

I refused the application.

T also refused an application by the debtor that the

proceedinas upon the petition be adiourned and the hearina

proceeded.

satisfied that the debtor

14 March 1986

committed the act

of bankruptcv alleaed in the petition

amended. It cannot affect that situation that the debtor now asserts that the amount of the iudament is in excess of the

amount which

he owed to the petitionina creditors at the date

the iudament

was entered or

that there is at present

unresolved application pendinu in the District Court

New

South Wales to set aside the iudument: see

R_e

Bedford:

parte H.C. Sleiqh (Oueensland) Pty. Ltd. (1967)

9 F.L.R. 497

Re Hanbv:

Ex parte Fleminston Central Spares Pty. Ltd. (1967

10 F.L.R.

378:

Re Vella; Ex parte Sevmour (1983)

48 A.L.R

420.

I have

already set out

what the petition alleues in

relation to the indebtedness of the debtor to the petitioninu

creditors.

The relevant parauraph of the petition, parauraph

2 , is verified bv the affidavit of Austen Wiuuins sworn

9 April

1986. Mr Wiuuins also swore

an affidavit of

debt on 18 April

1986 statinu that he was authorized to swear the affidavit on

behalf of the petitioninu creditors, that no payments had been

received bv the petitioninu creditors since the date of the

presentation of the petition

and that

the debtor was still

iustlv and trulv indebted to the petitionmu creditors in the

sum of $66,132.60 referred to in the petition. Mr Wiuuins was

not cross-examined upon his affidavits.

The debtor. however. filed

an affidavit. sworn 6 March

1986. to which was annexed an affidavit sworn bv him on 27

Februarv 1986 for

the

purpose

the

application

the

District Court of New South Wales to set aside the iudument on

which the bankruptcy notice is based. In that affidavit the

debtor refers to a memorandum of aureement dated 6 April 1979

under which he and Patricia Lorraine Williams purchased from

the petitioninu creditors the qoodwill of Gardners Inn situated

at Blackheath for the sum of $65,000 and to a Bill of Sale

whereby part of the purchase moneys ($35.000) was secured. The

affidavit further states that the debtor had made a number of

payments

"in

reduction

principal

and

interest"

the

petitioninu creditors. The payments are said to have been made

between 13 Auuust 1979 and 3 January 1984, the date and the

amount of each payment beinu set out.	The amounts said to have
been paid total $36.448.16.

The debtor was cross-examined on his affidavit. He

said that the schedule of pavments set out in his affidavit was

derived from records

which he had handed to his solicitors.

Those records were not produced and the

makincr of the pavments

was not evidenced bv any documentation. It is clear from

the

evidence that the debtor may well be mistaken, at least as to a

payment of

$16,748.16 shown as havinu been made on 13

Aucrust

1979, in assertincr that all the payments were in reduction of

the principal and interest under the Bill of Sale.

While assertincr that the amount for which iudcrment was entered in the District Court of New South Wales is in excess

of the amount that was at the time due and payable,

the

sucrcrestion beincr that

no allowance was made for the payments to

which the debtor deposed in his affidavit, the debtor did not

assert that he was not indebted to the petitioninu creditors in

a substantial sum.

Far from showincr that he was under no

liability to the petitioninu creditors, he acrreed that that

indebtedness was in excess

of $20,000.

It follows that the

most that the debtor can achieve in

his application to the

District Court of

New South Wales. even if

he be totally

successful, is a reduction in the amount

of the iudcrment debt.

In these circumstances it I s unnecessarv to express a

view	on the question whether the amount of the Indebtedness

stated in the petition

is correct for it is beyond question

that there

is, in reality.

debt due by the debtor to

the

petitioninu

creditors

ureatly

excess

the

amount

prescribed

sub-s.44(1)

the

Bankruptcy

Act

1966

necessary to found the petition.

Pursuant to rule 21 of the Bankruptcy Rules there was

filed on behalf of the petitioning creditors

an affidavit sworn

by Robvn Simpson on

18 April 1986 which deposed to a search

havina been

made on that date in the records of the District

Court of

New South Wales at Penrith and to that search havina

disclosed no payments havinu been made

the Court under the

relevant iudment.

It emeraed in the course of

Mrs Simpson's

oral evidence that the search

had been carried out bv makina

enquiries by telephone of the appropriate officer

of the Court

and not by direct search. Objection was taken by counsel for

the debtor to the use of the affidavit to prove the matters

deposed to. However, the debtor himself uave oral evidence

that no payments had been made under the iudqment

and, in the

liuht of that

evidence, I am satisfied that no such pavments

have been made.

The

debtor also obiected that

the petition had not

been

served

personallv

as required

rule

15(b)

the

Bankruptcy

Rules.

This

obiection

well

founded

the

affidavit of service of the petition,

an affidavit sworn by

Susan Padman on 15 April 1986, discloses that the appropriate

documents were on

10 April 1986 delivered personally to

female

person

over

the

acre

and

apparently

the

employment of Peter R. Murphv &

Co., the debtor's solicitors.

In the application to extend the time for compliance with the bankruptcy notice. the debtor had nominated the address of

Peter

R. Murphy

& Co. at Bondi Junction

as his address for

service. Counsel

for the petitionincr creditors conceded that

personal service on the debtor had not been effected but souaht

order

pursuant

to rule

195

the

Bankruptcv

Rules.

relievinu the petitioninu creditors of the consequences of the

non-compliance with rule

15(b).

It	is not disputed that the petition came to the

notice of the debtor.

He appeared in

the proceedinus and was

represented

counsel.

has

not

been

shown

that

any

preiudice or iniustice was suffered by the debtor by reason

the defective service. In my opinion. this is an appropriate case. particularly havina recrard to the history of the matter

as deposed

the

affidavits

filed

on behalf

the

petitionina creditors, to exercise the power conferred on the Court by rule 195 of the Bankruptcv Rules and so relieve the petitioninu creditors from the consequences of non-compliance

with the rules

as to service of the petition.

For the debtor it was submitted that, in the exercise of its discretion, the Court should not make a sequestration order but should allow the debtor an opportunitv to pursue to finality the pendina application in the District Court of New

South Wales and to seek to make arranaements for payment

of the

amount which

he admits is owinu to the petitioninu creditors.

In the licrht of the debtor's oral evidence

as to the admitted

indebtedness and as to the absence

of available assets

or funds

from	which that indebtedness could be satisfied and in the

absence of any positive proposal

for pavment. I am not prepared

to accede to the debtor's request. It seems to me. in the

liaht

of the historv

of the matter and the evidence

of the

debtor. that to adiourn the petition would have no practical

result other than the incurrinu of additional expense.

I am also satisfied, for the purposes

s u b - s . 5 2 ( 1 A )

of the Act. that the petitioninu creditors have been unable to obtain from reuistered trustees a consent under sub-s.l56A(l).

I. therefore, make

a sequestration order aaainst the

estate

the

debtor.

I order

that

costs

the

petitionino creditors be taxed and paid accordina to the Act. the petitionina creditor's costs of the application to extend the time for compliance with the bankruptcy notice and, in lieu

thereof. I order that the costs

of the petitioninu creditors in

10.

defendina those proceedinas be treated as part of the costs of the petitionina creditors for the purposes of rule 40(e) of the Bankruptcy Rules.

I certifv

that this

and

the precedlnu

9 paues are

a true copv of the Reasons

for Judament herein of the

Honourable

Mr Justice

Neave

S .

Associate

Dated: 23 April 1986

[1986] FCA 144

23 Apr 1986