Re John Lymberopoulos Ex Parte: James Smith Pty Ltd [1983] FCA 36; (1983) 68 FLR; 157 (11 March 1983)

FEDERAL COURT OF AUSTRALIA

Re: JOHN LYMBEROPOULOS
Ex parte: JAMES SMITH PTY. LTD. [1983] FCA 36; (1983) 68 FLR 157
No. 1001 of 1981
Bankruptcy

COURT

IN THE FEDERAL COURT OF AUSTRALIA
SOUTH AUSTRALIA DISTRICT REGISTRY
GENERAL DIVISION
BANKRUPTCY DISTRICT OF THE STATE OF SOUTH AUSTRALIA
Fisher J.(1)

CATCHWORDS

Bankruptcy - Costs - Creditor's Petition - Notice of Opposition - Lapse of Petition - Whether Court thereafter empowered to award costs to Petitioning Creditor.

Bankruptcy Act 1966 s.30(1), s.32, s.52(4).

Bankruptcy - Creditor's petition seeking sequestration order - Notice of opposition - Lapse of creditor's petition - Whether court was empowered to hear and determine creditor's application for costs - Bankruptcy Act 1966 (Cth) (as amended), ss. 30(1), 32, 52(4), 52(5). Section 52(4) of the Bankruptcy Act 1966 (Cth) (as amended), so far as relevant, provides:
"A creditor's petition lapses at the expiration of -

(a) subject to paragraph (b), the period of 12 months commencing on the
date of presentation of the petition; or
(b) if the Court makes an order under sub-section (5) in relation to the
petition
- the period fixed by the order, unless, before the expiration of
whichever of those periods is applicable, a sequestration order
is made on the petition or the petition is dismissed
or withdrawn."

On 9 December 1981, the petitioning creditor presented to the Court of

Insolvency of the state of South Australia exercising federal jurisdiction in bankruptcy a creditor's petition seeking a sequestration order against the estate of the debtor. The petitioning creditor relied upon the failure of the debtor to comply with the requirements of a bankruptcy notice as an act of bankruptcy.

On 2 June 1982, the debtor filed in the Federal Court of Australia a notice of opposition to the making of the sequestration order and an application to set aside the bankruptcy notice. On 8 December 1982, an adjournment was requested on behalf of the debtor upon the debtor giving two undertakings to the Federal Court concerning the payment of certain moneys.

On 9 December 1982, the creditor's petition lapsed pursuant to the provisions of s. 52(4) of the Bankruptcy Act 1966 (Cth). On 20 December 1982, the petitioning creditor sought costs against the debtor of the proceedings up to and including that date. It was contended for the debtor that, upon the lapsing of the creditor's petition through the effluxion of time, the court had no jurisdiction to hear and determine other matters such as the petitioning creditor's applications for costs as it was functus officio.

Held: (1) Although the creditor's petition had lapsed by effluxion of time and the impact of s. 52(4) of the Bankruptcy Act 1966 (Cth), that did not mean or require that the proceedings were concluded.

(2) The court had jurisdiction to make all other consequential or ancillary orders, and in effect all appropriate orders other than a sequestration order.

(3) The court was empowered to hear and determine the petitioning creditor's application for costs.

(4) Accordingly, the debtor would be ordered to pay to the petitioning creditor its costs of the proceedings, including all costs reserved, the same to be taxed if not agreed.

HEARING

Adelaide, 1982, November 12, 18, 26; December 8; 1983, March 11.
11:3:1983
APPLICATION.

On 9 December 1981, the petitioning creditor presented to the Court of Insolvency of the state of South Australia exercising federal jurisdiction in bankruptcy a creditor's petition seeking a sequestration order against the estate of the debtor. On 20 December 1982, the petitioning creditor sought costs of the proceedings up to and including that date against the debtor. The facts appear in the judgment.

R. Lindquist, for the petitioning creditor.

J. Pertl, for the debtor.
Cur. adv. vult.

Solicitors for the petitioning creditor: S.J. Barratt & Co.

Solicitor for the debtor: J. Pertl.
J.D.W.

ORDER

The debtor John Lymberopoulos pay to the creditor James Smith Pty. Ltd. its costs of these proceedings the same to be taxed if not agreed. Orders accordingly.

DECISION

The only matter for determination in these proceedings is the question of the costs sought by James Smith Pty. Ltd. (the "petitioning creditor"). As the only significant ground upon which counsel for Mr. John Lymberopoulos ("the debtor") opposed the making of an order is a question of law, there is no need for me to relate in any detail the circumstances in which it arises. Stated shortly, the point has been taken by counsel for the debtor that this Court has no jurisdiction to make any order in relation to the costs of proceedings subsequent to the lapse of the creditor's petition.

On 9 December 1981 the petitioning creditor presented to the Court of Insolvency of the State of South Australia, the Court at that time and until February 1982 exercising Federal Jurisdiction in Bankruptcy, a creditor's petition seeking a sequestration order against the estate of the debtor. That petition, being in the form provided by the Rules under the Bankruptcy Act 1966 ("the Act"), initiated proceedings in the Court of Insolvency but sought expressly nothing more from the Court than a sequestration order against the estate of the debtor. The petition made no reference to any ancillary or consequential orders which might be made by the Court, and in particular it made no reference to the question of the costs which had been or might be incurred in the proceedings by either the judgment creditor or the debtor. It contained all that was required by the Act, the Rules thereunder and the relevant forms.

The petitioning creditor relied upon as an act of bankruptcy the failure of the debtor to comply with the requirements of a bankruptcy notice served on him on 3 September 1981, which notice was based upon a judgment in the sum of $3,843.82 obtained against the debtor on 17 March 1981. The petition was not served upon the debtor until 30 April 1982, and 7 June 1982 was therin notified as the hearing date. By that date the Federal Court of Australia was exercising Jurisdiction in Bankruptcy in place of the Court of Insolvency and the petition was returnable before this Court pursuant to the transitional provisions enacted in the Statute Law (Miscellaneous Amendments) Act 1981.

On 2 June 1982 the debtor in person filed in this Court a Notice of Opposition to the making of a sequestration order and an application to set aside the bankruptcy notice. I set out in full the terms of these documents although, notwithstanding the fact that they occasioned much argument and evidence over a number of sitting days, in the ultimate they have little relevance to the point taken on behalf of the debtor. The application to set aside the bankruptcy notice is as follows:
"APPLICATION is made to the Court by JOHN LYMBEROPOULOS of 450 Magill Road, Kensington Gardens in the State of South Australia Land Agent for the following orders:-

1. That the Bankruptcy Notice number 648 of 1981 herin be set aside.
2. In the alternative, that time for compliance with the said Bankruptcy

(sic) notice be extended.
3. In the alternative, that the amount claimed in the said Bankruptcy (sic) notice be secured to the satisfaction of this Honourable Court.

4. Such further or other order as to this Honourable Court deems fit.
DATED the 1st day of June 1982.
(signed) John Lymberopoulos"

The Notice of intention to oppose the petition provided

"NOTICE OF INTENTION TO OPPOSE PETITION
To: The judgment Creditor by its Solicitors S.J. Barratt & Co., 320

Wakefield Street, Adelaide S.A. 5000

TAKE NOTICE that JOHN LYMBEROPOULOS intends to oppose the petition JAMES SMITH PTY. LTD. dated the 9th day of December 1981 on the following grounds:-
1. That the judgment Debtor is able to pay his debts and is not insolvent.
2. That the judgment Debtor has by written notice given to the judgment Creditor on the 10th day of September 1981 pursuant to Section 41(5) of the Bankruptcy Act invalidated the Bankruptcy (sic) Notice No. 648 of 81 on the grounds of misstatement (sic).
3. That the judgment Debtor has by reason of Section 41(6) of the Bankruptcy Act complied with the Bankruptcy Notice No. 648 of 81 by payment of the sum of $1075.00 to the judgment Creditor.

DATED the 1st day of June, 1982.
(Signed) John

Lymberopoulos

JOHN LYMBEROPOULOS
45 Magill Road,
KENSINGTON GARDENS S.A.

5068.

The petitioning creditor opposed my making any of the orders or findings sought by the debtor and his opposition and his application filed in each instance on 2 June 1982 came before me for hearing on a number of occasions during October and November 1982. The greater part of the evidence and argument centred around the debtor's attempts to satisfy me that he was solvent.

On 8 December 1982 Counsel for the debtor asked that the hearing of the various matters before me be adjourned upon his client giving certain undertakings to the Court. These undertakings, varied slightly in consequence of suggestions during discussion, were in the end as follows:
"It is that my client is hereby undertaking to this Court to pay the sum of $4,647.03 to the Local Court of Adelaide in action number 46 of 1979 by 12 noon on the 9th day of December 1982 and he further undertakes to pay into the trust account of Messrs S.J. Barratt & Co (solicitors for the petitioning creditor) the sum of $2,000 by 12 noon on the 20th day of December 1982, the said sum to be held in a trust account pending the determination of liability and amount of costs whether by taxation or agreement, and upon the delivering of a certified taxed bill of costs or upon agreement the solicitor of the petitioning creditor be entitled to debit the trust account with the amount of the taxed costs and the balance, if any, to be paid to the debtor."

Upon the giving of this undertaking the matters were adjourned to 2.30 p.m. on 9 December 1982 for mention for the purpose of ascertaining whether the specified amount had been paid into the Local Court and until 2.15 p.m. on 20 December 1982 for mention on the matter of payment of $2,000 into the trust account. Otherwise the application for a sequestration order and the hearing of the notice of opposition were adjourned to a date to be fixed. The undertaking and the transcript of the proceedings on 8 December 1982 make it abundantly clear that the question of the petitioning creditor's costs was outstanding and if possible it was to be argued on 20 December or otherwise on a subsequent date.

On 9 December 1982 the proceedings were called on for the purpose of confirming that the first undertaking, to pay into the Local Court, had been satisfied. Likewise on 20 December it was reported that the second undertaking had been satisfied. On that occasion counsel for the debtor indicated that he was resisting an order against his client for the costs of the petitioning creditor and the question was adjourned until the following morning. On that occasion counsel for the petitioning creditor formally asked for costs agianst the debtor of the proceedings up to and including that date. In reply counsel for the debtor drew attention to the fact that the creditor's petition had lapsed on 9 December 1982 pursuant to the provisions of s.52(4) of the Act. The consequence was, he said, that there was nothing before me, as the petitioning creditor had not applied for an extension under s.52(5), and his contention was that I had no jurisdiction to consider and make any order on the petitioning creditor's application for costs. It was common ground that it was not open to the petitioning creditor to make an application on a date subsequent to 9 December 1982 for an extension of the petition under s.52(5).

Section 52(4) and (5) are as follows:
"52(4). A creditor's petition lapses at the expiration of -
(a) subject to paragraph (b), the period of 12 months commencing on the

date of presentation of the petition; or
(b) if the Court makes an order under sub-section (5) in relation to the petition the period fixed by the order,
unless, before the expiration of whichever of those periods is applicable, a sequestration order is made on the petition or the petition is dismissed or withdrawn.
52(5). The Court may, at any time before the expiration of the period of 12 months commencing on the date of presentation of a creditor's petition, if it considers it just and equitable to do so, upon such terms and conditions as it thinks fit, order that the period at the expiration of which the petition will lapse be such period, being a period exceeding 12 months and not exceeding 24 months, commencing on the date of presentation of the petition as is specified in the order."

The powers generally of this Court when exercising jurisdiction in bankruptcy are set out as follows in s.30(1) of the Act.

"30(1) The Court -
(a) has full power to decide all questions, whether of law or of fact, in

any case of bankruptcy or any matter under Part X or Part XI coming within the cognizance of the Court; and
(b) may make such orders (including declaratory orders and orders granting injunctions or other equitable remedies) as the Court considers necessary for the purposes of carrying out or giving effect to this Act in any such case or matter."

Section 32 deals as follows with the question of costs.
"32. The Court may, in any proceeding before it, including a proceeding

dismissed for want of jurisdiction, make such orders as to costs as it thinks fit."

The word "proceeding" is defined, unless the contrary intention appears, to mean proceeding under the Act.

The debtor's contention that upon the lapsing of the creditor's petition through effluxion of time the Court has no jurisdiction to hear and determine any other matters, i.e. is functus officio, is misconceived. The proceedings before the Court were without doubt initiated and set in train by the presentation of the creditor's petition. However, in consequence of the institution of proceedings many matters in addition to the making of a sequestration order arise for consideration and determination by the Court. In the simplest of cases even the petitioning creditor may seek the making of orders over and above those referred to in the sequestration order, i.e. appointment of a private trustee, costs etc. Likewise the debtor's opposition to the making of a sequestration order is only one of a number of remedies and consequential orders he may seek. The creditor's petition to the Court seeking the making of a sequestration order initiates and specifies the essential nature of the proceesings but it does not represent the totality of the proceedings.

It follows that the fact that, by effluxion of time and the impact of s.52(4), the creditor's petition lapses does not mean or require that the proceedings are concluded and that there is nothing before the Court upon which it can adjudicate. The lapse of the creditor's petition means that there is no longer a petition for a sequestration order before the Court and thus no basis upon which such an order can be made. However the proceedings continue and the Court has in my opinion jurisdiction to make all other consequential or ancillary orders, and in effect all appropriate orders other than a sequestration order.

I reject the contention that I am not empowered to hear and determine the petitioning creditor's application for costs. In the circumstances it is appropriate that I award it its costs of the proceedings, including all costs reserved. The submissions to me of the debtor were not directed to any reduction on any ground of any portion of the creditor's costs. His counsel saw the petitioning creditor as entitled to no order for costs, or alternatively all of its costs. The proper amount of such costs is for determination by the taxing master.

The order of the Court is that the debtor pay to the petitioning creditor its costs of these proceedings, the same to be taxed if not agreed.