Re George Zagoridis and Maria Anne Zagoridis Ex Parte: Q'Plas Group Pty Ltd [1990] FCA 459; 27 FCR 108 (22 November 1990)

FEDERAL COURT OF AUSTRALIA

Re: GEORGE ZAGORIDIS and MARIA ANNE ZAGORIDIS
Ex parte: Q'PLAS GROUP PTY LTD
No. QLD P199 of 1990
FED No. 667
Bankruptcy
[1990] FCA 459; (1991) 6 ANZ Insurance Cases 61-023
27 FCR 108

COURT

IN THE FEDERAL COURT OF AUSTRALIA
BANKRUPTCY DISTRICT OF THE STATE OF QUEENSLAND
GENERAL DIVISION
Spender J.(1)

CATCHWORDS

Bankruptcy - application for dismissal of creditor's petition - bankruptcy notice based on a default judgment - default judgment set aside for non-service of the originating writ after the time fixed for compliance with the bankruptcy notice had expired - whether default judgment entered irregularly and subsequently set aside ex debito justitiae can found a bankruptcy notice - whether non- compliance with such notice constitutes an act of bankruptcy - whether there is a relevant distinction between void and voidable judgments in the context of bankruptcy notices.

Bankruptcy Act 1966 ss. 40, 52(5)

District Courts Rules 1967 (Qld) rr. 5, 146, 287

English R.S.C. O. 2 r. 1

Re Hanby; Ex parte Flemington Central Spares Pty Ltd (1967) 10 FLR 378

Clyne v. Deputy Commissioner of Taxation (1983) 57 ALJR 673

Re Vella; Ex parte Seymour [1983] FCA 115; (1983) 67 FLR 287

Re Hayes; Ex parte Thomas Borthwick and Sons (A/asia) Ltd (1970) 18 FLR 216

Anlaby v. Praetorious (1888) 20 QBD 764

Marsh v. Marsh (1945) AC 271

Calvin v. Carr [1979] UKPC 1; (1980) AC 574

Crane v. Director of Public Prosecutions (1921) 2 AC 299

Russell v. Bates [1927] HCA 56; (1927) 40 CLR 209

In re Pritchard (1963) 1 Ch 502

Harkness v. Bell's Asbestos and Engineering Ltd (1967) 2 QB 729

Isaacs v. Robertson (1985) AC 97

HEARING

BRISBANE
22:11:1990

Counsel for the debtors: Mr S. Couper

Instructed by: Hopgood and Ganim

Counsel for the petitioning creditor: Ms. C. Holmes

Instructed by: Cleary and Hoare

ORDER

The creditor's petition to be adjourned to the registry to be brought on on five working days' notice.

The period at the expirtion of which the creditor's petition will lapse be the period expiring on 21 February 1992.

Liberty to apply.

The debtors pay the petitioning creditor's costs of and incidental to the hearing of 31 October 1990.

DECISION

In these proceedings, Mr and Mrs Zagoridis ('the defendants') seek an order that the sequestration petition presented against them by Q-plas Group Pty Ltd be dismissed, on the basis that the judgment on which the bankruptcy notice was founded, which has been set aside, is a nullity.

2. The application raises the question of the distinction between judgments that are void and judgments that are voidable.

3. Counsel for the petitioning creditor seeks an order extending the life of the petition and that the hearing of the petition be adjourned to the Registry to be brought on on seven days' notice and with liberty to apply.

4. The judgment on which the bankruptcy notice is founded concerns a claim against Mr and Mrs Zagoridis as guarantors of a sub-lease of premises. Mr Zagoridis claims that the lease came to an end when the company of whom the defendants were guarantors was locked out of the premises. The judgment was obtained in default of appearance. It was set aside on two grounds. In the District Court, Judge Robin QC said:
" I have little difficulty in coming to the view

that there is a defence which the defendants ought to
be permitted to argue and for that reason I think the
judgment ought to be set aside."

and he also found:

" ...that service was not effected by the
plaintiff and that is an additional reason for setting
aside the judgment."

5. He set aside the judgment and let the defendants in to defend.

6. Counsel for the defendants submits that, the judgment having been set aside for non-service of the originating proceedings, it is a nullity, and no act of bankruptcy was committed when the bankruptcy notice founded on it was not complied with. Counsel for the petitioning creditor, relying on a line of Australian bankruptcy cases, submits that an act of bankruptcy has been committed and the better course is to adjourn the petition until the determination of the District Court proceedings, at which time the question of whether there is in truth and reality a debt owing by the defendants to the petitioning creditor will be established.

7. The history of the matter is as follows.

8. On 23 August 1989 judgment was given in the District Court at Brisbane for the petitioning creditor in the sum of $8,657.17 and costs, in default of appearance by the defendants. A bankruptcy notice dated 8 September 1989 issued in respect of that judgment and, according to an affidavit of Frederick Frier, service of the bankruptcy notice was effected on each of the defendants personally on 2 November 1989. Both the defendants have deposed to the fact that personal service was not effected on them and the first they became aware of the bankruptcy notice was in February 1990.

9. On 22 February 1990, Q'plas Group Pty Ltd presented the creditor's petition for a sequestration order against the defendants.

10. Between March and August 1990 there was correspondence between the solicitors for the defendants and the solicitors for the petitioning creditor, but it was not until August 1990 that the judgment debtors asserted that they had not been served with any documents relating to proceedings in the District Court.

11. The first communication to the solicitors for the petitioning creditor that the debtors denied receiving the plaint which commenced the District Court proceedings was on 6 August 1990. On 20 August 1990 an application was filed in the District Court to set aside the judgment. The affidavits in support of that application were served on the solicitors for the petitioning creditor on 4 September 1990. The application was thereupon adjourned until 25 September 1990.

12. The notice of intention to oppose the petition was filed on 29 August 1990. In it, the defendants advanced grounds that they were not indebted to the judgment creditor as alleged or at all and that the judgment entered on behalf of the judgment creditor against the debtors was irregular and should be set aside and that the petition was founded on a judgment which was irregular and therefore unenforceable. They gave notice that they sought an adjournment of the proceedings to a date to be fixed pending the determination of the application to set aside the judgment entered by the judgment creditor against the defendants on 23 August 1989.

13. On 6 September 1990 the creditor's petition was adjourned to 3 October 1990, pending the outcome of the application in the District Court. On 3 October 1990 the hearing of the petition was further adjourned until 31 October 1990 in the light of the adjournment of the District Court application, and leave was granted to the creditor to file an application seeking an order that the period at the end of which the creditor's petition will lapse be extended, and directions were given concerning the foreshadowed application by the judgment debtors that the petition be dismissed.

14. On 25 September 1990 his Honour Judge Robin QC ordered that the judgment dated 23 August 1989 be set aside and ordered that the defendants file and serve their entry of appearance and defence on or before 9 October 1990, and ordered that the plaintiff pay the defendant's costs of the application to set aside the judgment but limited to the costs incurred after 4 September 1990. The order for costs reflects the delay of the defendants in seeking to have the judgment set aside.

15. Ms. C. Holmes, counsel for the petitioning creditor, submitted that the judgment of 23 August 1989, until it was set aside, is a final judgment for the purposes of a bankruptcy notice under s. 40(1)(g) of the Bankruptcy Act 1966, and the relevant time to consider whether an act of bankruptcy had been committed is the expiry of the period for compliance after the service of the bankruptcy notice, fixed in the notice: in this case, 14 days. While there is a dispute as to the time of service, the petitioning creditor asserting service in November 1989 and the judgment debtors acknowledging the bankruptcy notice came to their notice in February 1990, nothing turns on this for present purposes.

16. In Re Hanby; Ex parte Flemington Central Spares Pty Ltd (1967) 10 FLR 378, Gibbs J. in the Federal Court of Bankruptcy was concerned with a creditor's petition which relied on an act of bankruptcy constituted by the debtor's failure to comply with a bankruptcy notice relating to a District Court judgment which was set aside after the debtor's failure to comply with the bankruptcy notice. It appears from the judgment of Gibbs J. that the judgment in the District Court was not set aside as irregularly obtained, but on the basis that there was a defence on the merits. A further judgment was subsequently entered for an amount smaller than the original judgment. The petitioning creditor relied upon the second judgment to establish his debt.

17. Under s. 98 of the District Courts Act 1912-61 (N.S.W.) every judgment of any District Court in New South Wales was "final and conclusive between the parties" but a judge was empowered:

" ...on sufficient cause being shown at the same
or any subsequent sitting of the court, on such terms
as he thinks fit, set aside any judgment and any
execution thereupon, and let in the defendant to
defend, if such judgment was entered up (a)
irregularly, (b) illegally, (c) against good faith, or
(d) for neglect to file notice of grounds of defence."

18. Gibbs J. said at p 380:

" I cannot agree that because the judgment was
capable of being set aside under this section it was
not a final judgment. The judgment was not merely
interlocutory, but, until set aside, it was final and
conclusive and entitled the petitioning creditor to
proceed to execution upon it under s. 102 of the
District Courts Act. So long as the judgment stood, it
finally determined the questions raised in the action
and finally established the right of the petitioning
creditor and the liability of the debtor."

And then at p 381 his Honour continued:

" It was, however, said on behalf of the debtor
that once the judgment was in fact set aside it could
no longer be treated as a final judgment. However, the
critical time for determining whether an act of
bankruptcy has been committed is the date on which the
period limited by the bankruptcy notice expired - see
Re Grace; Ex parte Castling (1931) 3 ABC 131; Re
McDonald (1934) 8 ABC 184, at p 193; Re Edmunds
(1936) 9 ABC 1, at p 5. At the time when the
bankruptcy notice expired in the present case, namely
30th May, 1966, the judgment had not been set aside and
remained a final judgment. Since the debtor had not by
that date complied with the requirements of the notice,
the act of bankruptcy was then completed. It is not
possible to say that by reason of subsequent
circumstances an act of bankruptcy once committed
ceases to have been committed or must be treated as
though it had never been committed. Of course this
does not mean that a sequestration order may be made if
a judgment has been set aside in circumstances that
show that the debtor was under no liability to the
petitioning creditor, for the court must inquire
whether there is a debt due by the debtor to the
petitioning creditor, and if not, will refuse an order
notwithstanding the commission of an act of bankruptcy.
If, however, a judgment is set aside after an act of
bankruptcy has been completed, and subsequently the
existence of the debt is established by a further
judgment after a new trial, or by a compromise of the
proceedings, the conditions which entitle the
petitioning creditor to a sequestration order will have
been established."

19. In Clyne v. Deputy Commissioner of Taxation (1983) 57 ALJR 673, the High Court consisting of Gibbs C.J., Murphy, Wilson, Brennan and Deane JJ. said in a joint judgment at 675:

" The fact that a judgment is subject to appeal or
that it may later be set aside or become inoperative
does not mean that it is not final; Re Hanby; Ex parte
Flemington Central Spares Pty Ltd (1967) 10 FLR 378."

20. In Re Vella; Ex parte Seymour [1983] FCA 115; (1983) 67 FLR 287, Morling J. referred to the judgment of Gibbs J. in Hanby (supra) and said at p 290 of that decision:

" The decision...does make clear that a subsequent
event, namely, the setting aside of a judgment upon
which a bankruptcy notice is based, does not nullify
the consequence of non-compliance with the notice."

21. Morling J. also referred to Re Hayes; Ex parte Thomas Borthwick and Sons (A/asia) Ltd (1970) 18 FLR 216, where Street J. applied the decision of Gibbs J. in Re Hanby. Street J. held that the failure to comply with a bankruptcy notice requiring payment of a judgment debt constitutes an act of bankruptcy notwithstanding that the judgment is later set aside and the debtor allowed in to defend the creditor's action.

22. However, there is a passage in Re Hayes (supra) from which Mr S. Couper, counsel for the defendants, draws comfort. At p 218 of Re Hayes, Street J. said:

" It may be that if the judgment, being a judgment
of an inferior tribunal, were a complete nullity in the
sense of being made without jurisdiction, then some
qualification should be read into the general
impression that I have stated from p 381 of Gibbs J.'s
reasons."

23. The expression "a complete nullity" is a fascinating oxymoron.

24. Mr Couper submitted that where a judgment of a District Court is set aside because service of the originating proceedings had not been effected, the judgment is a nullity. In Anlaby v. Praetorius (1888) 20 QBD 764, the plaintiff had obtained judgment before the time limited for appearance by the defendant had expired. The Court of Appeal (Fry and Lopes L.JJ) concluded that where a plaintiff had obtained judgment irregularly, the defendant is entitled ex debito justitiae to have such judgment set aside.

25. In Marsh v. Marsh (1945) AC 271, the judgment of the Privy Council was delivered by Lord Goddard who said at 284:

" ...it does not necessarily follow that because
there has not been a literal compliance with the rules
the decree is a nullity. A considerable number of
cases were cited to their Lordships on the question as
to what irregularities will render a judgment or order
void or only voidable. Anlaby v. Praetorius 20 QBD
764 and Smurthwaite v. Hannay (1894) AC 494 are
leading examples of the former, while Fry v. Moore 23
QBD 395 may be said to illustrate the latter. The
practical difference between the two is that if the
order is void the party whom it purports to affect can
ignore it, and he who has obtained it will proceed
thereon at his peril, while if it be voidable only the
party affected must get it set aside. No court has
ever attempted to lay down a decisive test for
distinguishing between the two classes of
irregularities, nor will their Lordships attempt to do
so here, beyond saying that one test that may be
applied is to inquire whether the irregularity has
caused a failure of natural justice. There is, for
instance, an obvious distinction between obtaining
judgment on a writ which has never been served and one
in which, as in Fry v. Moore 23 QBD 395 there has
been a defect in the service but the writ had come to
the knowledge of the defendant."

26. It was submitted that the judgment of 23 August 1989, having been entered when no initiating process had been served on the judgment debtors was void, and was, to adopt the words of the Privy Council in Marsh v. Marsh, one which "the party whom it purports to affect can ignore".

27. According to the Privy Council, there is no decisive test for distinguishing between void and voidable judgments. The Privy Council treated both as species of judgments that were irregular.

28. The grounds on which pursuant to s. 98 of the District Courts Act (N.S.W.) a judge might set aside a judgment, being (a) irregularity (b) illegality (c) against good faith or (d) for neglect to file notice of grounds of defence, clearly comprehend both void and voidable judgments as so characterised by the Privy Council in Marsh.

29. Gibbs J. in Re Hanby, having recited these grounds, expressed the view that until set aside a judgment in the N.S.W. District Court was final and conclusive and entitled the petitioning creditor to proceed to execution upon it under s. 102 of the District Courts Act (N.S.W.). In terms, the judgment of Gibbs J. in Re Hanby tells strongly against the submissions for the defendants, although the judgment in the District Court in Hanby was not a 'void' judgment in the sense characterised by the Privy Council in Marsh. The observation of Gibbs J. as applying to judgments which the Privy Council in Marsh characterised as void are therefore obiter.

30. The terms of the District Courts Rules 1967 (Qld) are not as explicit as those which Gibbs J. considered in Re Hanby. Rule 146 of the District Courts Rules 1967 (Qld) which deals with judgment by default provides:

" If the defendant does not file an entry of
appearance and defence within the time limited for
filing an entry of appearance and defence to a claim
for a debt or liquidated demand, the plaintiff may,
upon proof of the service of the plaint, sign judgment
for any sum not exceeding the sum claimed in the
plaint, together with the interest at the rate
specified, if any, to the date of the judgment and the
prescribed sum for costs; but a Judge may set aside or
vary the judgment and execution upon it, upon such
terms and conditions as to costs, giving security and
otherwise as he thinks fit."

31. In applying this rule, if the judgment is irregular or obtained in breach of good faith it will be set aside ex debito justitiae. Where, on the other hand, judgment has been regularly entered, the court has a discretion as to whether the judgment should be set aside.

32. Where judgment is irregular or signed in breach of good faith, the plaintiff is usually ordered to pay the costs of the application to set it aside, but if the judgment be regular, as a rule it will be set aside only on terms that the defendant pay the costs of the judgment and of the application to set the judgment aside. Delay is a relevant factor in the exercise of the discretion to set aside a judgment regularly obtained, but it is not a bar where a judgment is irregular.

33. Rule 287 of the District Courts Rules 1968 (Qld) provides:

" In any case in which a judgment is given for the
payment of money, and the party against whom judgment
was given has made default on the payment thereof, the
Registrar, on the application of the party in whose
favour the judgment was given, may issue a warrant of
execution, which shall be directed to a bailiff. Such
execution shall be for the amount of the judgment and
costs then remaining unsatisfied.
No execution shall issue upon any judgment until
an affidavit of debt by or on behalf of the party
seeking the same showing that the debt is justly and
bona fide due to him upon the judgment (and to which affidavit
is exhibited particulars thereof), has been filed."

34. In my opinion, until the judgment by default was set aside the petitioning creditor would have been entitled to proceed to execution upon it under r. 287 of the District Courts Rules 1968 (Qld).

35. The act of bankruptcy specified in s. 40(1)(g) of the Bankruptcy Act 1966 requires that the creditor have:

" obtained against the debtor a final judgment or
final order, being a judgment or order the execution of
which has not been stayed."

36. Section 40 (3) deems certain judgments, orders or awards to be a final judgment or final order for the purposes of paragraph 1(g) of s. 40. Those provisions reinforce the conclusion that it is the capacity to enforce the judgment or order which is the crucial aspect of whether the judgment or order can form the basis of a bankruptcy notice, and in turn the act of bankruptcy specified in paragraph 40(1)(g) of the Bankruptcy Act 1966.

37. In Calvin v. Carr [1979] UKPC 1; (1980) AC 574 the Privy Council was concerned with an appeal by a person who had been disqualified by stewards after the running of a race in which the plaintiff's horse was engaged. The plaintiff appealed to the committee of the Jockey Club, which committee dismissed the appeals. The Judicial Committee held that, notwithstanding that a decision of an administrative or domestic tribunal which had been reached in breach of the rules of natural justice might, for certain purposes, be void, it was nevertheless susceptible of appeal, and that therefore assuming (without deciding) that there had been a failure of natural justice in the stewards' enquiry, the Jockey Club committee had had jurisdiction to entertain the plaintiff's appeal from the stewards' decision to disqualify him. The Judicial Committee concluded, on the facts, that the committee had given the plaintiff's case overall a full and fair consideration and any failure of natural justice by the stewards at the enquiry stage was irrelevant.

38. In delivering the judgment of the Privy Council, Lord Wilberforce said at 589-90:

" The first issue arising in this appeal is
whether the committee had any jurisdiction to enter
upon the appeal. The plaintiff's proposition is that
it had not, for the reason that the stewards'
'decision' was, on the assumption stated, void. A
condition precedent, it was said, of an appeal was the
existence of a real, even though voidable, decision.
This argument led necessarily into the difficult area
of what is void and what is voidable, as to which some
confusion exists in the authorities. Their Lordships'
opinion would be, if it became necessary to fix upon
one or other of these expressions, that a decision made
contrary to natural justice is void, but that, until it
is so declared by a competent body or court, it may
have some effect, or existence, in law. This condition
might be better expressed by saying that the decision
is invalid or vitiated. In the present context, where
the question is whether an appeal lies, the impugned
decision cannot be considered as totally void, in the
sense of being legally non-existent. So to hold would
be wholly unreal. The decision of the stewards
resulted in disqualification, an effect with immediate
and serious consequences for the plaintiff. This was a
fact: the plaintiff's horses could not run in, or be
entered for, any race; the plaintiff lost his
membership of the Australian Jockey Club and could be
excluded from their premises. These consequences
remained in effect unless and until the stewards'
decision was challenged and, if so, had sufficient
existence in law to justify an appeal."

39. His Lordship referred to Crane v. Director of Public Prosecutions (1921) 2 AC 299. In that case there were irregularities at trial which had the effect that the trial was "a nullity". Nevertheless an appeal was held to lie to the Court of Criminal Appeal. Lord Atkinson said at 323:

" The fact that the trial...was rightly held to
be...a nullity does not disentitle him, under section 3
of the Criminal Appeal Act, 1907, to appeal against it.
He is still a person convicted on an indictment within
the meaning of that section, since those words cannot
mean validly convicted, otherwise the statute would be
futile and unworkable."

and Lord Sumner, at p 331 said:

" It was a mis-trial, and in truth no trial at
all. All the same convicted Crane was and to all
appearance convicted on an indictment."

Holding that an appeal to the Court of Criminal Appeal lay, his Lordship said:

" Were it otherwise Crane, who has never had a
legal trial at all though imprisoned under sentence on
the strength of it, would have to serve his time and
apparently be without remedy."

40. In Russell v. Bates [1927] HCA 56; (1927) 40 CLR 209, Knox C.J., Isaacs, Gavan Duffy, Powers, Rich and Starke JJ. said in their joint judgment at 213:

" ...we are unable to agree with the conclusion
that if there was no jurisdiction (for a stipendiary
magistrate to hear together different charges against
different persons) there was no adjudication from which
an appeal lay to the Court of Quarter Sessions;
Crane's Case is, we think, a decisive authority to the
contrary."

41. So far as civil proceedings are concerned, in In re Pritchard (1963) 1 Ch 502, the Court of Appeal was concerned with proceedings seeking reasonable provision to be made for the widow of a testator out of his estate. The originating summons issued from a District Registry instead of from the Central Office. The registrar held that the originating summons was a nullity and all subsequent steps taken by the parties or by the court were ultra vires. The majority of the High Court, Upjohn L.J. with whom Danckwerts L.J. agreed (with Lord Denning M.R. dissenting) held that the originating summons had never been issued and was a nullity ab initio; the majority held that the summons not being issued in accordance with the only relevant rule constituted a fundamental failure to comply with the requirements relating to the issue of civil proceedings and the court had no power to cure proceedings which were a nullity.

42. Lord Upjohn, at p 519 et seq., made reference to Craig v. Kanssen (1943) 1 KB 256 and the judgment of the Privy Council in MacFoy v. United Africa Co. Ltd (1962) AC 152. He said at 520:

" I am not so sure that it is so difficult to draw
a line between irregularities, by which I mean defects
in procedure which fall within Ord. 70, and true
nullities, though I agree no precise definition of
either is possible. I think part of the difficulty is
that the phrase 'ex debito justitiae' has been taken as
being equivalent to a nullity, but, with all respect to
Lord Greene's judgment in Craig v. Kanssen, it is not."

He said at 523:

" I do not think that the earlier cases or the
later dicta upon them prevent me from saying that, in
my judgment, the law when properly understood is that
Ord. 70 applies to all defects in procedure unless it
can be said that the defect is fundamental to the
proceedings. A fundamental defect will make it a
nullity."

43. As a result of his review of the authorities, Upjohn L.J. said at 523-4 that they established as classes of nullity:

" (i) Proceedings which ought to have been
served but have never come to the notice of the
defendant at all. This, of course, does not include
cases of substituted service, or service by filing in
default, or cases where service has properly been
dispensed with: see, for example, Whitehead v.
Whitehead (orse. Vasbor (1962) 3 WLR 884; (1962) 3
All ER 800, CA.
(ii) Proceedings which have never started
at all owing to some fundamental defect in issuing the
proceedings.
(iii) Proceedings which appear to be duly
issued but fail to comply with a statutory requirement:
see, for example, Finnegan v. Cementation Co. Ltd
(1953) 1 QB 688."

44. It was as a result of the decision of the Court of Appeal in Re Prichard Decd. in 1963 that O. 2 r. 1 of the English rules was substituted in 1964, the former rule having been taken from the former O. 70 r. 1.

45. Sub-rule (1) of the English O. 2 r. 1 provides:

" Where, in beginning or purporting to begin any
proceedings or at any stage in the course of or in
connection with any proceedings, there has, by reason
of any thing done or left undone, been a failure to
comply with the requirements of these rules, whether in
respect of time, place, manner, form or content or in
any other respect, the failure shall be treated as an
irregularity and shall not nullify the proceedings, any
step taken in the proceedings, or any document,
judgment or order therein."

46. In the notes to the White Practice under O. 2 r. 1, the following appears:

" As a result of the decision of the Court of
Appeal in Re Pritchard decd. (1963) Ch 502, the
present rule was by R.SC 1964 substituted for rr. 1
and 2 of the previous O. 2, and under it the above
distinction between nullity and mere irregularity
disappears (see Harkness v. Bell's Asbestos and
Engineering Ltd (1967) 2 QB 729, p 735, CA) at any
rate in regard to 'a failure to comply with the
requirements of these rules', though it may still be
that there are other failures to comply with statutory
requirements or other improprieties so serious as to
render the proceedings in which they occur, and any
order made therein, a nullity."

47. In Harkness v. Bell's Asbestos and Engineering Ltd (1967) 2 QB 729, Lord Denning M.R. said at 735-6:

" This new rule does away with the old distinction
between nullities and irregularities. Every omission
or mistake in practice or procedure is henceforward to
be regarded as an irregularity which the court can and
should rectify so long as it can do so without
injustice. It can at last be asserted that 'it is not
possible for an honest litigant in Her Majesty's
Supreme Court to be defeated by any mere technicality,
any slip, any mistaken step in his litigation.' (see
Pontin v. Wood (1962) 1 QB 594: per Holroyd Pearce
L.J. at p 609)."

48. An application of a rule equivalent to the English O. 2 r. 1 is to be found in Perez v. Transfield (Qld) Pty Ltd (1979) QdR 444, where the Full Court of the Supreme Court of Queensland considered the effect of the present O. 93 r. 17 of the Rules of the Supreme Court 1965 (Qld), which follows the English O. 2 r. 1.

49. In Metroinvest Ansalt v. Commercial Union Assurance Co. Ltd. (1985) 1 WLR 513, the Court of Appeal held that an irregular step or order remains irregular until application is successfully made to the court to correct it.

50. In Isaacs v. Robertson (1985) AC 97, the High Court of St. Vincent had dismissed a motion for committal for contempt holding that the order, disobedience of which was asserted as the basis of the contempt, was a nullity. The Court of Appeal of St. Vincent and the Grenadines allowed an appeal holding that, although the order ought not to have been made and the defendant would have been entitled to succeed if he had applied to have it set aside, he was in contempt in disobeying it. An appeal to the Judicial Committee was dismissed, the Privy Council holding that an order made by a court of unlimited jurisdiction such as the High Court of St. Vincent had to be obeyed by the person against whom it was made unless and until it had been set aside by the court.

51. Lord Diplock delivered the judgment of the Privy Council and at 102-3 made observations which I, without remorse, set out at some length:

" Their Lordships would...take this opportunity to
point out that in relation to orders of a court of
unlimited jurisdiction it is misleading to seek to draw
distinctions between orders that are 'void' in the
sense that they can be ignored with impunity by those
persons to whom they are addressed, and orders that are
'voidable' and may be enforced unless and until they
are set aside. Dicta that refer to the possibility of
there being such a distinction between orders to which
the descriptions 'void' and 'voidable' respectively
have been applied can be found in the opinions given by
the Judicial Committee of the Privy Council in the
appeals Marsh v. Marsh (1945) AC 271, 284 and MacFoy
v. United Africa Co. Ltd (1962) AC 152, 160; but in
neither of those appeals nor in any other case to which
counsel has been able to refer their Lordships has any
order of a court of unlimited jurisdiction been held to
fall into a category of court orders that can simply be
ignored because they are void ipso facto without there
being any need for proceedings to have them set aside.
The cases that are referred to in these dicta do not
support the proposition that there is any category of
orders of a court of unlimited jurisdiction of this
kind; what they do support is the quite different
proposition that there is a category of orders of such
a court which a person affected by the order is
entitled to apply to have set aside ex debito justitiae
in the exercise of the inherent jurisdiction of the
court without his needing to have recourse to the rules
that deal expressly with proceedings to set aside
orders for irregularity and give to the judge a
discretion as to the order he will make. The judges in
the cases that have drawn the distinction between the
two types of orders have cautiously refrained from
seeking to lay down a comprehensive definition of
defects that bring an order into the category that
attracts ex debito justitiae the right to have it set
aside, save that specifically it includes orders that
have been obtained in breach of rules of natural
justice.
The contrasting legal concepts of voidness and
voidability form part of the English law of contract.
They are inapplicable to orders made by a court of
unlimited jurisdiction in the course of contentious
litigation. Such an order is either irregular or
regular. If it is irregular it can be set aside by the
court that made it upon application to that court; if
it is regular it can only be set aside by an appellate
court upon appeal if there is one to which an appeal
lies."

52. It follows from those observations that a judgment of a court of unlimited jurisdiction that was irregular as having been obtained in breach of the principles of natural justice would nonetheless be capable of founding a bankruptcy notice and non-compliance with which would constitute an act of bankruptcy. Is the circumstance that the District Court is not a court of unlimited jurisdiction sufficient to require a contrary conclusion?

53. Rule 5 of the District Courts Rules (Qld) provides:

" Non-compliance with any of these Rules or with
any rule of practice for the time being in force, shall
not render any proceedings void unless the Court or a
Judge so directs; but such proceedings may be set aside
either wholly or in part as irregular, or amended, or
otherwise dealt with in such manner and upon such terms
as the Court or Judge may think fit."

The thrust of this rule is similar to O. 93 r. 17 of the Rules of the Supreme Court 1965 (Qld) or the English O. 2 r. 1.

54. Having regard to the considerations set out at some length above and to the terms of r. 5, in my opinion, the defendants were entitled to have the judgment of 23 August 1989 set aside ex debito justitiae but, until that was done, a warrant of execution could have issued in respect of that judgment. The judgment was within the meaning of s.40(1)(g) of the Bankruptcy Act 1966, a "final judgment...the execution of which has not been stayed", and non-compliance with a bankruptcy notice founded on that judgment constitutes an act of bankruptcy.

55. As to the creditor's petition founded on that act of bankruptcy, there is a dispute as to whether there is in truth and reality a debt owing by the defendants to the petitioning creditor, in respect of which the District Court is presently seized.

56. In all the circumstances it is my view that I ought to adjourn the hearing of the petition to the registry to be brought on on five working days' notice, with liberty to apply. This is to accommodate the possibility of the proceedings in the District Court not being pursued with despatch by either party. I should extend the life of the petition, lest it lapse before the resolution of the District Court litigation.

57. I order that the period at the expiration of which the creditor's petition will lapse be the period expiring on 21 February 1992.