Re Peter Leopold Clyne v Deputy Commissioner of Taxation [1985] FCA 3; 1983 Bankruptcy 5 FCR 1 (22 January 1985)

FEDERAL COURT OF AUSTRALIA

Re: PETER LEOPOLD CLYNE
And: DEPUTY COMMISSIONER OF TAXATION
No. NSW P4 of 1983
Bankruptcy
5 FCR 1

COURT

IN THE FEDERAL COURT OF AUSTRALIA
GENERAL DIVISION, BANKRUPTCY DISTRICT OF THE STATE OF NEW SOUTH WALES AND THE AUSTRALIAN CAPITAL TERRITORY
St. John J.(1)

CATCHWORDS

Bankruptcy - Creditor's Petition - opposition based upon "other sufficient cause" sub-section 52(2)(b) - effect of annulment of sequestration order on debts due

BANKRUPTCY ACT 1966 sub-section 52(2)(b)

Bankruptcy - Petition - Whether "other sufficient cause" to decline to make sequestration order - Bankruptcy Act 1966 (Cth), s 52(2)(b). Evidence adduced by the judgment debtor relating to his financial dealings and current assets, the fact of disclosure of those dealings and assets to the petitioning creditor, a proposal by the debtor to submit himself to examination by the petitioning creditor under s 264 of the Income Tax Assessment Act 1936 (Cth), and to the debtor's state of health was not evidence of matters capable in the context of these particular proceedings of constituting "other sufficient cause" within the meaning of s 52(2) of the Bankruptcy Act 1966 (Cth) so as to ground a refusal to make a sequestration order.

HEARING

Sydney, 1984, November 20; 1985 January 11, 22; 22:1:1985
PETITION AND APPEAL

Petition and Appeal from judgment and orders of St John J.

D. G. Hill QC and T. F. Bathurst, for the petitioning creditor/appellant.

The judgment debtor/respondent, in person.
Cur adv vult

Solicitor for the petitioning creditor: Australian Government Solicitor
GFV

ORDER

1. A sequestration order is made against the estate of the debtor.

Orders accordingly

Appeal dismissed with costs

DECISION

The history of this litigation up until the end of July 1984 is contained in the High Court judgment Clyne v. Deputy Commissioner of Taxation and Others (No. 3) [1984] HCA 44; (1984) 58 ALJR 398. Since then, Sweeney, J. on 12 October 1984, on the application of the petitioning creditor, made an order annulling the bankruptcy of the debtor consequent upon the presentation and acceptance of the debtor's petition. An appeal to a Full Court of this court, in which the debtor sought to have that order set aside, was dismissed. The petition was heard before me on 20 November 1984 and on 11 January 1985 when I reserved my decision.

2. The grounds of opposition to the petition were reduced to writing by the debtor in the following terms:-

"1. The petitioner's debt ceased to be a debt
owing to the petitioner on the 6th September
1983, by virtue of the filing of a debtors
petition and the operation of Sec. 55(3)(b), and
was converted to a provable claim. -Clyne v.
Deputy Commr. of Taxation (No. 3)[1984] HCA 44; , 58 ALJR
398 at p. 400. The order made by Sweeney J. on
12/10/84 did not have the effect of making the
statutory bankruptcy void ab initio, but merely
terminated that bankruptcy as from 12/10/84.
Consequently the debt is not now "owing" to the
petitioner, and the Court has no power to make a
sequestration order.

2. The respondent (the debtor) still claims that
the statutory bankruptcy remains effective, in
which case a sequestration order cannot be made.

3. Proceedings to set aside the annulment order
made on 12/10/84 are before the High Court, and
if these are successful and a sequestration
(sic) has been made in the meantime, that
sequestration order would need to be set aside.
This Court ought not to make a defeasible
sequestration order when two previous
bankruptcies have collapsed in the same estate.
It is put that this constitutes "other
sufficient cause" why at this point of time no
sequestration order should be made. -Sec.
52(2)(b)

4. The petition has lapsed. -Sec. 52(4).

5. Having regard to the whole history of the
matter and the present situation the respondent
(the debtor) says that there is "other
sufficient cause" why a sequestration order
ought not to be made, and asks the Court in the
exercise of its discretion to dismiss the
petition. -Sec 52(2)(b)"

The Sections referred to in the grounds are of the Bankruptcy Act 1966 ("the Act").

3. Paragraphs 2 and 4 were submitted formally; the debtor, who appeared in person, stating that he wished to preserve his right to test the Full Court's decision adverse to him on those matters.

4. The debtor filed in court, without opposition from the petitioning creditor, a lengthy affidavit to which many objections were taken by counsel for the petitioning creditor and, as a result, much of the content of that affidavit was ruled inadmissible. The objections were both to form and to substance, but where such objections related to the substance of the allegations, those allegations were submitted to be relevant by the debtor as constituting "other sufficient cause" within the meaning of sub-section 52(2)(b). The whole of that sub-section is in the following terms:-

"52(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."

Where the objection to admissibility was based upon the substance of the allegations, my ruling was to the effect that the allegations could not, even if proved, amount to "other sufficient cause" within the meaning of that sub-section. Because of my rulings adverse to the debtor, he declined to address me on ground 5 above, stating that the factual material remaining and held to be admissible all made it pointless for him to press that ground.

5. The debtor submitted that the court had a wide discretion pursuant to sub-section 52(2)(b). Those parts of the affidavit ruled inadmissible on the grounds of relevance were in the main, assertions that the debtor had no assets or otherwise related to his financial position past, present and future. No authority for the proposition that such allegations, if proved, would amount to "other sufficient cause" were cited. Moreover, it appeared to me that, if ability to pay debts under sub-section 52(2)(a) was a ground to dismiss the petition, the opposite situation, inability to do so, could not be considered as being comprehended within "other sufficient cause". The general description could hardly include the antithesis of the specific. In my view the allegations ruled inadmissible could not constitute "other sufficient cause". To hold otherwise would be to subvert the clear purposes of bankruptcy legislation.

6. As to ground 3, I accept the submissions of counsel for the petitioning creditor that the debtor's application for special leave to appeal to the High Court are not proceedings: Collins (Hass) v. R [1975] HCA 60; (1975) 8 ALR 150. In any event, should I make a sequestration order, that can be rescinded if both the application for leave and the appeal are successful.

7. At the hearing of the petition on 20 November 1984, the debtor conceded that all formal matters had been proved, but later withdrew that concession so far as his reliance upon ground 1 of his notice of grounds was concerned. His argument in support of that ground was to the effect that the High Court decision in Clyne v. Deputy Commissioner of Taxation and Others (No. 3) (supra) supported the contention made in the ground. In my view, this submission is misconceived as there are clear statements in the majority judgment which indicate that the debt due to the petitioning creditor was converted to a right to prove only during the period of the bankruptcy. If the bankruptcy is extinguished, so are its consequences, except so far as they are preserved by the Act.

8. I am satisfied that the ground in the petition has been made out and the other matters of which proof are required under S.52 of the Bankruptcy Act. I therefore make a sequestration order against the estate of the debtor.