Cameron v Cole [1944] HCA 5;

Cameron v Cole [1944] HCA 5; - HCA 1944 case summary — Zoe

[3]

In Ex parte Ashworth; In re Hoare[48] Bacon C.J. expressed the opinion that the Court of Bankruptcy had, without any special enactment, power at any time for good reasons to annul any adjudication of bankruptcy. Power is vested in the Bankruptcy Court by s. 124 of the Bankruptcy Act 1924-1933 to annul sequestration orders, and it has been said that there is no power now to annul an adjudication other than this express power: See King v. Henderson[49]; In re Hester; Ex parte Hester[50]; In re Beer; Ex parte Beer[51]; In re Keet[52]; In re Gyll; Ex parte Board of Trade[53]. It is contended that the Court, having annulled the sequestration, was powerless to order any review of that order or any rehearing of the petition for the sequestration of the debtor's estate. The learned counsel who argued Ex parte Keighley; In re Wike[54] observed that before the Bankruptcy Act 1869 Imp. it was almost a matter of course to allow rehearings in the Court of Bankruptcy. However this may be, the Bankruptcy Act 1924-1933 provides in s. 26 that the Court - that is, the court having jurisdiction in bankruptcy - may review, rescind or vary any order made by it in its bankruptcy jurisdiction. The section, it should be observed, gives power to review any order. It has been said under corresponding English sections that in a proper case the power is discretionary and almost without limits (Ex parte Keighley; In re Wike[55]; In re Tobias & Co.; Ex parte H. A. Tobias[56]). Thus in a case in which a petition was dismissed and no appeal brought a rehearing was granted because the registrar came to the conclusion that he had been in error in dismissing the petition (Ex parte Ritso; In re Ritso[57]). And the English courts hold that there is jurisdiction to rescind receiving orders under the Bankruptcy Act of England (Ex parte Wemyss; In re Wemyss[58]; In re Izod; Ex parte Official Receiver[59]; In re A Debtor[60]). And an annulling order was discharged though a considerable time had elapsed since its date where the bankrupt was shown to have concealed from his creditors portion of his property (Ex parte Jarvis; In re Spanton[61]).

[38]

These sections correspond to ss. 21 and 29 of the English Bankruptcy Act 1914. But under that Act the initial step upon a petition is to make a receiving order for the protection of the estate. A receiving order does not divest a bankrupt of his property (Rhodes v. Dawson[80]). After a receiving order has been made the creditors meet, the debtor submits his statement of affairs, he is publicly examined, and is given an opportunity to propose a composition or scheme of arrangement for the acceptance of his creditors and its approval by the Court before the further step is taken of adjudicating him bankrupt. Section 16 (16) provides that if a composition or scheme is accepted by the creditors and approved by the Court but there is default in payment of any instalment or the composition cannot on account of legal difficulties or for any other sufficient cause proceed without injustice or delay or the approval of the Court was obtained by fraud, the Court may adjudge the debtor bankrupt and annul the composition or scheme, without prejudice to any sale, distribution or payment duly made or thing done under or in pursuance of the composition or scheme. The sub-section also provides that where a debtor is so adjudged bankrupt, any debt provable in other respects, which has been contracted before the adjudication, shall be provable in the bankruptcy. Where a composition or scheme is not accepted by the creditors or approved by the Court the debtor is adjudicated bankrupt and his property becomes divisible amongst his creditors and vests in his trustee. Section 29 of the English Act is the same in substance as s. 124 of the Commonwealth Act, but s. 21 of the English Act contains two provisions which do not appear in s. 71 of the Commonwealth Act, namely, that where the composition is annulled on one of the grounds therein mentioned (which are the same as the grounds in s. 16 of the English Act and s. 71 of the Commonwealth Act), the Court may adjudge the debtor bankrupt, and that when the debtor is adjudged bankrupt any debts provable in other respects which have been contracted before the adjudication shall be provable in the bankruptcy. When a debtor is adjudged bankrupt under ss. 16 or 21 no available act of bankruptcy is required, so that the doctrine of relation back does not apply and the property which vests in the trustee is the property which the debtor owns at the date of adjudication (In re McHenry; Ex parte McDermott[81]).

[43]

It is, of course, a fundamental rule of British justice that a party should have notice of any legal proceedings that are brought against him, so that the requirements with respect to the service of a bankruptcy petition are strictissimi juris (In re A Debtor[82]). The Commonwealth Act, s. 56 (2) (a), provides, inter alia, that the Court shall require proof of the service of the petition, and the Court should equally require proof that the debtor has notice of the date of any adjourned hearing. In the present case the petition was duly served, and, at the adjourned hearing, there was evidence that notice of the date of the adjourned hearing had been given to Cameron, but on the application to annul the sequestration order his Honour was not satisfied that this notice had in fact reached him. Under the Act, s. 56 (3), the Court is not bound to dismiss the petition if it is not satisfied with proof of the service of the petition, and, in many cases, as the Master of the Rolls pointed out in In re A Debtor[83], it would be proper to adjourn the hearing in order that proper service could be effected. But it is clear that Cameron was entitled to have an opportunity of being heard in opposition to the making of a sequestration order, so that the order which was made in his absence was fundamentally defective, and, if he had known that the order had been made in time to appeal against it, this Court would have set it aside (Ex parte Phillips; Re Phillips[84]; Bear v. Official Receiver[85]). But I am unable to agree with the contention that because Cameron did not receive notice of the adjourned hearing the order of 22nd December 1942 was a nullity. Where service of a particular nature is required to give an inferior court jurisdiction, failure to effect such service will make all the subsequent proceedings null and void (Craig v. Kanssen[86] and In re the Affairs of Hart[87], referred to in the judgment of my brother Rich). But the authorities to which my brother Rich has referred show that an order made by a superior court, however fundamentally impeachable, is voidable and not void.

[55]

But his Honour first of all annulled the order and then proceeded to make a second sequestration order. Under this order the bankruptcy would again commence on 21st August 1942, and all the property which the bankrupt owned at that date and any property which he acquired or which devolved on him after that date but prior to his discharge would vest in the official receiver appointed by the second order. During the operation of the first order, some of this property might have been disposed of to purchasers by the official receiver, and persons might have acquired title to some of it under s. 98. If a second order could be made on the same petition the question would arise as to the effect it would have upon these titles. They are all titles to property which, on the literal wording of s. 91, would vest in the official receiver appointed by the second order as from 21st August 1942, or on any subsequent date upon which the bankrupt acquired any further property, and, therefore, at a date antecedent to that upon which these persons acquired title from the first official receiver or under s. 98. In order to preserve these titles it would be necessary to imply a limitation upon s. 91 so as to exclude the property in question from the property vested in the second official receiver by that section. This would be straining the literal construction of the section in the interests of justice. But such cases as In re Clark; Ex parte Beardmore[110] and In re Wigzell; Ex parte Hart[111] show the difficulty of so doing. Further, the protection afforded by s. 98 is only expressed to be against the official receiver appointed by the first order; and, even if these sections can be segregated as my brother Rich suggests by the use of the maxim generalia specialibus non derogant, there remains the further difficulty that if two sequestration orders can be made on the same petition two sets of preferential creditors can be created under s. 84, a result which would appear to be obviously opposed to the intention of the Act. Some of these difficulties which arise when a second sequestration order is made upon a second petition, whilst the debtor is still an undischarged bankrupt, have been recognized and provided for by s. 61 of the Act. But the section would hardly embrace a case where there was a voidable sequestration order made on a prior petition followed by a second sequestration order made on a subsequent petition followed by an annulment of the first sequestration order and the making of a second sequestration order on the prior petition. The express provisions of this section are a further indication to my mind that the only occasion contemplated by the Act in which a second sequestration order could be made to operate with respect to the same period or part of the same period as that covered by the first sequestration order is where the second order is made upon a subsequent petition.

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Judgment (112 paragraphs)

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Legislation Cited (4)

Cases Cited (2)

Cameron v Cole [1944] HCA 5; (1944) 68 CLR 571 (23 March 1944)