Clyne, P.L. v. Deputy Commissioner of Taxation [1985] FCA 4

CuRAM: ST. JOHN. J. DATE: 22 JANUARY 1985 ELACE: SYDNEY

l. A sequestration order 18 made against che estate of

GENERAL DIVISION, BANKRUEFTCY DISTRICT No. F.4 of 15383

BETWEEN : EFETER LEOPOLD CLYNE Lebtsor aliD: DEPUTY CoMMISSIONEP OF TAXATION

July ljd4 413 contaimed an the High Court fudament Clyne v.

Leputy Commissioner of Taxatiun and Cthers 'Ne. 3) 334) 58

A.L.d.R. 398. Since tnen. sweeney, J. on if Cctcrer i384, on the application or the cetitioninas creditor, made an order annulling the bankruptcy of the debtcr consequent upcen the presentation and acceptance of the debtor 3 petition. An appeal to a Full Court of thia 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 il

The arounds of opposition to the petition were reduced to writing by the debtor in the following terms3:-

owing to the petitioner on che 6th Septemper 1383, by virtue of the filing of a debtors petition and the operation of Sec. S55:3)tb). and was converted to a prevable claim. -Clvne v. Deputy commr. of Taxation (No. 2), 58 A.L.J.K. 238 at p. 409. The order made ny Sweeney J. on lo, ly/a4 dia not have the effect of makina the Statutory bankruptcy vo1d ab initio. but mereliv terminated that kEankruptcy as from l2,lu, 34. Conzsequently the debt is not now "owing" to tne petitioner, and tne Tourt has no feower to make a Sequestraticn order, Z: The resrtondent (the debtor) stiii claims that the statutory bankruptcy remains 2ffective. in which case a sequestration order cannot be made.

made on lé,lus24 are before tné -.an Court. and if these are successrul and 4 se 3uUestration

\zic? nas been made in the .3antime, that sequest:ation order would need ts be <et aside.

This Ccurt ocuaht net to make a defreasible aesuestration order when two preev1ous bankruptcies have collapsed ain the same estate. Ic 13. put chat thls constitutes "other Burlicient cause" wnv at this point of time no wequestration order shcoula ce made :

5. Havina reqara to the whole history of the matter and the present situation tne respondent \ the debtor) savs chat there 15 'other Burficient cause' why a seque3tration order ought not to be made. and asks the Court in the exercise of 1t3 discretion to dismiss the petition. -3Sec 52:12)'p)"

The Sections referred to in the grounds are of the Eankruptcy

Faradraphs 2and 4 vere submitted formaliv: the debtor, who appeared 1n person. ostatina that he wished to

Preserve his ridqht to test the Full Court's decision adverse

The depcor filed in ccurt. without oppositicn from the petitioning creditor. a ienacthy affidavit to which many obiections were taken by ccunsel far the petitioning creditor and, aS a result. muztn of the ccrient cf that affidavit was ruled inadmis3ible. The objections wet soth to form and to

eubstance. but where such ob fectisns t-.ated to the substance

of the allegations. those allewyations vere submitted to be

relevant bv the debtor as constituting ""cther sufficient cauze" within the meaning of sup-section 3. 2:)¢b:. The whoie

OL tnat sup- section i135 in the faillewing terri:-

'E212) If the Court 15 not sacisrtied with the proof of any of ctrose matrers, or is

satisfied bv the debtor -- (a) that he 18 abie to pay his derts: ofr \b) that for otner

it may dismiss the petition. ' Where the obiection to admissibility was based upon the substance of the alleqation3. mv rulina was to the effect that

the allegations could net. aven 1f 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 around 5 above. stating that the factual

materzal remaining and held to be admissible all made it

The debtor submitted that the court had a wide discretion pursuant to sub-section 5214 2)(b). Those parts of fhe atridayit ruled inadmissible cn the grounds cf relevance were in the main. assertions that the ceptor had no assets ur otherwise related to hia financial position bast. present and future. No authority for the froposition that 3uch alleqations., aif preved. would amount to "other sufficient wause" were cited. Morecver, it app-ared to me that. if abllity to pay debts under sub-section %2:2,\a) was a ground to 113m1ss the petition. the opposite situation, inability to dv 30. could not be considered as being comprehended within '"sther sufficient cause". The general wescription coulda nardivy include the antithesis of tne specific. In mv view the alleqations ruled inadmissible couid not constitute "Uther

sufficient cause". To hold otherwise wouila be to supvert the

As to aground 3, I accept tne 3ubmissions of counsel for the petitioning creditor that the debtor 5 application for epecial leave to appeal to the High Ccurt are not proceedings:

Colling iHasa) v. R. (1975) 8 A.L.R. 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.

At the hearina of the petition on 20 November 1384, the debtor conceded that all formal matters had been proved. put later withdrew that concession so tar as his reliance upon qeound 1 of his notice of grounds was concerned. His arqument in support of that wround was to the effect that the Hiah

court decision in Clyne v. Deputy Commissioner of Taxation and

uthers (No. 3) «supra? supported tne contention made in the

around. In mv view. this submission 13 misconcelived as there are clear statements in the maicrity tudgment which indicate that the aebt due to the petitioning cre.1tos was converted to

a right to crove onlv during the period +: the pankruptcy. If

the bankeustcy 13 extinguished. 3060 4 2 1t3 consequences,

Tam satisfied that the qrour't in the petition has been made out and the other matters ot whicn proot are requirea under 3.52 of the Bankruptev Act. I therefore make a

eequestration order aqainst the estate or tue debtor.

I certifv that this and the four (4) preceding pages are a true copv of the Reasons for Judqment herein of nis Honour Mr. Justice St. John