Re Bruce Lindsay Ex Parte: Liddy Kennelly & Co [1985] FCA 339 (18 September 1985)

FEDERAL COURT OF AUSTRALIA

Re: BRUCE LINDSAY
Ex Parte: LIDDY KENNELLY & CO.
No. QLD PET 409 of 1985
Bankruptcy

COURT

IN THE FEDERAL COURT OF AUSTRALIA
GENERAL DIVISION
BANKRUPTCY DISTRICT OF THE SOUTHERN DISTRICT OF THE STATE OF QUEENSLAND
Pincus J.

CATCHWORDS

BANKRUPTCY - creditor's petition - default Magistrates Court judgment - going behind judgment - relevance of wrong refusal of adjournment in Magistrates Court - no substantial reason shown.

HEARING

BRISBANE
18:9:1985

ORDER

The petition be listed for further hearing at an early date, to be fixed.

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

DECISION

This is a creditor's petition for a sequestration order, in which counsel for the debtor has appeared and asked that I go behind the judgment debt. She seeks procedural directions, as to delivery of affidavits and the like, to enable it to be determined whether the debt alleged in the petition truly exists.

2. The amount involved is small, the alleged debt being only $1,175 plus costs. It seems likely that the costs associated with investigating whether it exists would be disproportionate to that sum. Yet there is, as far as I have been able to ascertain, no authority in favour of the view that the small size of the alleged debt can be determinative of, or even relevant to, the question whether leave should be given to go behind the judgment.

3. Mr Tunn, solicitor, appeared for the petitioning creditor and argued that the sequence of events was of particular significance. It is desirable, then, to set out the history, at least in summary. In April 1983 the creditor brought proceedings against the debtor and Mrs Donna Lindsay, claiming the sum of $1,175 mentioned above for services rendered between August 1981 and February 1983. The defendants to the suit, namely the debtor and Mrs Donna Lindsay, engaged solicitors who filed a defence and counter-claim. The latter set up that the plaintiff was guilty of negligence in some respects but the allegations do not seem to me very plausible.

4. In April 1984 each party to the Magistrates Court proceedings gave notice requiring discovery and in June the defendants' solicitors wrote to them reminding them "again ... of the urgency of making discovery". On 12 June the defendants told their solicitors they would appear for themselves.

5. The matter was set down for trial in the Magistrates Court on 10 September as he had a "busted shoulder". The debtor wrote to the Court saying that because of injuries in an accident received in August he found it virtually impossible to appear and asked for an adjournment. That letter was received at the Court on 10 September 1984. With it there was a medical certificate saying that a doctor named in it had examined the debtor who was suffering from a "badly sprained right shoulder" and would be unfit for duty up to 22 September 1984. The certificate was dated 15 August 1984. According to the debtor, it was pre-dated by 14 days at his request, apparently fraudulently.

6. When the matter was called on for hearing in the Magistrates Court on 10 September the letter from the debtor and the medical certificate were read. Mr Tunn, who appeared for the plaintiff, according to the Court's notes, said that "The defendant has not notified him of the above matters ...". For some reason which is not immediately obvious to me, the Magistrate asked Mr Tunn to contact his office to ascertain if "any advice has been received today as the above referred to correspondence was only received in the Registry this morning". The note then continues: "On resumption, Mr Tunn informs me there are no messages or correspondence from the defendant."

7. The Magistrate acted on the view that Mr Tunn's office had not received advice similar to that in the letter to the Court; that may have been an error. There is a note in the bill of costs of the solicitors for the defendants which suggests that on 7 September they phoned Mr Tunn and advised him that the debtor had a broken collar bone.

8. On 5 November 1984, in response to a telephone enquiry, the Registrar of the Magistrates Court wrote to the debtor informing him of the outcome of the proceedings. No application was made to that Court to set the judgment aside.

9. The Magistrate may well have been mistaken, in entering judgment, on the ground that he should, in the exercise of his discretion, have adjourned the matter, on the information available to him. However, the strength of that contention is somewhat weakened by the fact that, as the debtor swore, the certificate he forwarded to the Court was false in an important respect. That is, as mentioned above, he says he induced the doctor to put a false date on it. Further, this Court has not general supervision of the proceedings in the Magistrates Court, even when the judgments they produce are used here as the foundation of bankruptcy proceedings. The fact that the Magistrate should not, perhaps, on the material before him, have entered judgment is merely a circumstance to be taken into account in exercising the discretion whether or not to go behind the judgment.

10. The creditor promptly caused a bankruptcy notice to be issued against the debtor, and it was served on 3 December 1984. On 17 December 1984 the debtor wrote to the solicitors enclosing three post-dated cheques equalling the amount of the judgment. The first cheque was dated 10 January 1985 but when presented was not honoured. The debtor gave evidence that he arranged with Mr Tunn to present it again and complained of the fact that that was not done.

11. What I believe to be the law relating to going behind default judgments has been summarised in Re Marshall; ex parte James Hardie and Coy Pty Ltd (unreported) a judgment of 8 July 1985. The relevant part of those reasons is as follows:-

"The Court need not always go behind a default
judgment even if a bona fide allegation of no real
debt is made. Rather, there must be substantial
reasons for questioning whether there is a debt in
truth and reality ... and that principle applies,
in my view, in all cases, both default judgments
and others; however the Court should regard
default judgments with more suspicion."

As I have said, the counter-claim which appears to set up the basis of resistance to payment of the sum alleged to be due looks rather thin. It was not, I thought, contended by Mrs Wolfe who appeared for the debtor that I should decide the matter on the basis that the debtor had shown a good defence. Her contention was merely that there was an unresolved counter-claim and that I should in the exercise of my discretion go behind the judgment because of the circumstances in which it was entered.

12. I will not accede to Mrs Wolfe's submission. Although the circumstances in which judgment was entered were rather unsatisfactory, the important question is whether substantial reasons have been shown for questioning the existence of the debt. My discretion is considerably influenced by the fact that an implied admission that the debt was justly due is to be derived from the fact that the three post-dated cheques were given. Keeping that in mind, I hold that not enough is shown to go behind the judgment. I decline to direct the delivery of affidavits.

13. Counsel for the debtor intimated that, if I were against her on this point, the debtor desired a brief opportunity to pay the debt. I will therefore direct that the petition be listed for further hearing at an early date, to be fixed.