Delph Sing v Wood [1918] HCA 69

'A sequestration order had been made against the appellant based upon failure to comply with a bankruptey notice calling upon him to pay the amount _ due on a judgment against him. An application made by the appellant two years afterwards under sec. 37 of the Bankruptcy Act 1898 to discharge the 'sequestration order, in which he sought to go behind the judgment and show that no debt existed, was refused hy the Registrar, and his decision was affirmed hy the Supreme Court in Bankruptcy. On appeal to the High Court,

Held, that in the absence of any suggestion of fraud or collusion, and the question of indebtedness having been fought out in the action, the Registrar Properly dismissed the application.

Decision of the Supreme Court of New South Wales (Sireet J.) affirmed.

from the Supreme Court of New South Wales. 14th May 1915 a sequestration order was made against the

of Delph Sing on the petition of Arthur Charles Jackson H. C. or A.

Wood. In the petition it was alleged that Delph Singh had com- mitted two acts of bankruptcy by failing to comply with two bank- uptcy notices. The first bankruptcy notice was issued by Thomas Welby Martin and Emily Elizabeth Martin, his wife, and called upon Delph Singh to pay the sum of £691 3s. 6d. being the amount due on a final judgment obtained by them against him in an action in the Supreme Court. The second bankruptey notice was issued by Arthur Charles Jackson Wood, and called upon Delph Singh to pay the sum of £473 14s. 3d. being the amount due on a final judgment obtained by Wood against Delph Singh in an action in the Supreme Court.

On 30th May 1917 Delph Singh applied on motion to the Registrar in Bankruptcy for the annulment of the sequestration order, but the motion was dismissed with costs. Delph Singh appealed to the Supreme Court in Bankruptey, and the appeal was heard by Street J., who made an order dismissing the appeal with costs. The judgment of the learned Judge was as follows : -

"On 19th May 1915 an order was made sequestrating the estate of the bankrupt. Two years later, that is to say, on 30th May of this year (1917), the bankrupt applied to the Court to discharge that order. That application came on to be heard by the Registrar, and was dismissed. The matter now comes before me by way of appeal from his decision. I think that Mr. Loxton has urged everything that could be urged on behalf of his client, but in my opinion the appeal fails. Sec. 37 of the Bankruptcy Act 1898 provides that if in the opinion of the Court a sequestration order ought not to have been made, or where it is proved to the satisfaction of the Court that the debts of the bankrupt are paid in full, the Court may, on the application of any person interested, discharge such order. Now, it is not suggested here that the debts of the bankrupt have been paid in full. Therefore the Court has to consider, in the first instance, whether in its opinion a sequestration order ought not to have been made, and, if it is of that opinion, then it has to consider whether - in the exercise of its discretion that order should be discharged.

" Even if it were of opinion that the order ought not to have been made in the first instance, it does not follow as a matter of course that it will be discharged. The question of discharge is one for the

of the discretion of the Court, and that discretion - no doubt ial discretion, to be exercised upon principle - must be exer- on the facts of each case.

As was said by Knight Bruce V.C. in Ex parte Maawell (1): 'F h case is one of circumstances, among which is the lapse oftime.' Therefore, in every case, in considering whether the Court ld exercise its discretion, it must take into consideration the ole of the circumstances, including the lapse of time which has place before the application for the annulment of the sequestra-

"Now, in the present case, the act of bankruptcy upon which the stration order was founded was non-compliance with the terms bankruptcy notice issued by one Wood, a judgment creditor the bankrupt. It has been contended on behalf of the bankrupt the order ought not to have been made as, upon the facts now ore the Court, it would appear that the judgment obtained by od against the bankrupt amounted to a miscarriage of justice. y agreement made on 25th September 1914, between the bankrupt Wood, after reciting various agreements entered into between bankrupt, a company called the Universal Brickmaking Supply Ltd. and other people, and after reciting that the bankrupt had lied to Wood for an advance of £375, the bankrupt, in considera-

of that advance, covenanted with Wood to repay him that amount on 28th January 1915. He also agreed that, in order more tively to secure the repayment to Wood of the sum of £375, should have the right to receive certain moneys which were d to be due to the bankrupt by the Company. He further ed that, as an additional or collateral security, he would give od a promissory note for the sum of £375 which was to be payable the same day on which the debt was payable under the covenant, is, 28th January 1915. The agreement further provided that n the due date of the said promissory note the bankrupt should 'pay the sum advanced with interest then, in such case, Wood uld at the request of the bankrupt renew the promissory note time to time until such time as the Company should be in a on to pay to the bankrupt some part of the moneys which he (1) 3M. D. & D., 708, at p. 713.

H. C. or A. had assigned to Wood as a further security for the repayment of h

Derren Sixc recover it. I forgot to say that, within a day or two after the mone

loan. The loan was not paid on 28th January, and Wood sued

fell due, the bankrupt applied to Wood to renew the prom note, but that application was refused. Now, it seems to me tl it is clear that there was one advance only, that is, the sum of £3 and that the bankrupt on the terms of the agreement entered int was entitled in the circumstances to a renewal of the promiss note. The renewal of the promissory note meant, on the tru construction of the agreement between the parties, the postpone ment of the obligation to pay. However, as I say, the bankrup application for the renewal of the note was refused, and Wood then instituted his action. The bankrupt did not set up by way of def in that action his right to a renewal of the promissory note, nor did he take any proceedings in equity to restrain the action upon #) ground that he was entitled to a renewal of the note and that th right had been refused him. The action was defended, and a verdi passed for the plaintiff. On the judgment so obtained the ban ruptey notice was issued, and, upon non-compliance with that bank- | ruptcy notice, the petition for sequestration was presented. 'Mr. Loaton has contended that the case is one in which, if whole of the facts now before the Court had been known to it at time this sequestration order was made, the sequestration order would not have been made. I think, as I have already said, that W« acted in violation of his agreement in refusing to renew the prom sory note when asked. I think that the true intention of i parties was that the promissory note should be renewed, and thi this renewal would carry with it a postponement of the obligatio to pay. In refusing to renew, Wood violated his agreement, and it is conceivable that if the facts had been brought before this C before the order of sequestration was made, the Court might, in the exercise of its discretion, have refused to make an order. With out expressly so deciding, I assume, at all events, in favour of bankrupt that that would have been so. Assuming that, the ques- tion now arises whether the sequestration order should be dischai That, as I have said, depends upon all the circumstances of the including, amongst others, the lapse of time. Now, certain featur

have to be considered are these. No explanation has been forward by the bankrupt as to why it was that he took no steps

rights under the agreement and to the violation of those rights. me reason unknown to me, that application was not proceeded nor was the matter brought to the notice of the Court on the ition for sequestration. The bankrupt was content to allow e order to go without calling the attention of the Court to the facts to the significance of those facts, of which he was perfectly well He then filed his statement of affairs, in which he included od as a creditor, and Wood had lodged a proof of debt which has n admitted. The matter, however, does not rest there. One of the provisions of the agreement was in these words: ' Provided if the said Company shall go into liquidation either voluntary by compulsion, the said sum of £375 or such part thereof as may in due or unpaid together with interest thereon shall thereupon e due by the said Delph Singh to the said Wood.' So that parties expressly stipulated that whatever other provisions be contained in their agreement as to the payment of this m of £375, it was to become immediately payable in the. event Company going into liquidation, either voluntary liquidation rt by compulsion. The Company did, in fact, go into voluntary ition on 10th November 1915, some six months or so after the stration of the bankrupt's estate. The debt thereupon e due. Now, in these circumstances, and having regard to lapse of time, why should the Court interfere? Why should Court at the instance of the bankrupt discharge the order on the petition of Wood? Assuming, for the sake of ent, as I have already said I have assumed, that Wood, if the whole of the facts had been known to the Court, might not have ceeded at the time in establishing a good petitioning creditor's ied him to make his debtor a . the facts show that

afterwards into an actual liability payable immediately. The bank- rupt took no proceedings during those six months, nor for eighteen months afterwards. In those circumstances, seeing that there is now a debt undeniably owing by the bankrupt to Wood, and seeing that, on the bankrupt's own sworn admission as contained in his statement of aflairs, he is absolutely insolvent, it seems to me that in the exercise of its discretion the Court should not interfere with the sequestration order which has been made.

"Tt might be sufficient, perhaps, to leave the case there, because, on that ground alone, it seems to me that the appeal fails altogether. As, however, considerable discussion has taken place regarding the validity of the judgment obtained by Martin and his wife against the bankrupt, perhaps it is right that I should say a word or two as to that. It was brought inte the matter in this way : - The legal advisers of the bankrupt, recognizing that it might be possible that, even if they succeeded in showing that a sequestration order ought not to have been made on Wood's petition, still the Court, in the exercise of its discretion, might refuse to annul that order if it appeared that the bankrupt was insolvent, endeavoured to get rid of Martin and his wife as creditors by showing that the judgment which they obtained was obtained under such circumstances as to amount to a miscarriage of justice. That was endeavoured to be made out by showing that the advances made by Martin and his wife to the bankrupt were made to the bankrupt as the agent of the Company in such circumstances that Martin and his wife both knew that the bankrupt was only contracting as agent for the Company, and was contracting so as not to incur any personal liability. Well, undoubtedly, if Martin and his wife knew that though the money was actually advanced to the bankrupt he was to be under no - personal liability to repay it, and if it was understood between them that Martin and his wife should only look to the Company for payment, then undoubtedly, as Mr. Lozton has said, they would have been acting unconscientiously in endeavouring to enforce against the bankrupt a liability which they knew he had never undertaken. Now, the bankrupt's contention that he was only an agent in the matter is not now being raised by him for the first time. It appears, from the affidavit of Mr. Houston, the solicitor who

acted for the plaintiffs in the action brought by the Martins against the bankrupt, that at the hearing of that action the bankrupt swore that the money advanced by the Martins was not lent to him per- onally but only as agent for the Company, and that he also called witnesses in support of his case. It is evident, therefore, that he 'not only had an opportunity of raising the question of his personal liability, but that he actually did raise it and submitted the facts toa jury. How, then, can it be said that any miscarriage of justice took place? The jury was a proper tribunal to determine the natter, and the proper parties were before it. There is no suggestion that there are any facts brought forward now that were not known then to the bankrupt. He was represented by solicitor and counsel, _and, in point of fact, he set up the very contention which is now ing set up. I am altogether at a loss to see, in those cireum- _ stances, how it can be said that there has been anything in the nature of a miscarriage of justice which would justify the Court in reopening _ the matter and allowing the bankrupt to litigate it again. If that could be done in this case, it might be done in any cases in which 'an unsuccessful litigant asked the Court for a fresh adjudication on the ground that he might have adduced further arguments or further facts. If that kind of thing were allowed, there would never be an No doubt there are cases in which, in this branch of the Court's jurisdiction, a judgment will be gone behind and the onsideration for the judgment debt will be inquired into ; but that is ot done as a matter of course. In every case the Court must have some circumstances before it going to show that a miscarriage of justice has taken place. In the present case, whatever the rights of the parties may have been between themselves, and whatever its the bankrupt may have had to recover over against the Company, not only did he set up his defence before the proper 'tribunal, but, in addition to that, it seems to me that on the addi- tional facts brought before me there is nothing which would justify "me in saying that on the whole of the facts as now presented to the ' the jury would not have been justified in coming to exactly 'the same conclusion as they did in fact come to. The cireumstances w that the bankrupt is hopelessly insolvent. On his sworn tement: of affairs his assets consist of property to the value of

H.C. or A. £2 and some bad debts amounting to £100. His statement of 1918.

Deters Stnc to show that the debt claimed by the Martins is one which should Woon, _ be further investigated by the Court has failed. The debt to Wood was - as the Registrar found - a matter between Wood and the

bankrupt alone, and, whatever the position may have been at the

affairs shows debts amounting to £1,300 and upwards. The attempt

time the sequestration order was made, that debt is now undeniably due and payable. Having regard therefore to the fact that that debt is now due and payable, and that the bankrupt is insolvent,

and having regard to the unexplained delay for upwards of two

years before asking the Court to discharge the sequestration order, I think that the Registrar was perfectly right in coming to the conclusion to which he did come, that is, that the application should be dismissed. I accordingly dismiss this appeal and I order the bankrupt to pay the costs."

From that decision Delph Sing now appealed to the High Court. The respondents were Wood, Martin and his wife, and William Harrington Palmer, the Official Assignee.

Loxton K.C. (with him Saunders), for the appellant. If it were proved that at the time the petition for sequestration was presented no debt was due either to Martin and his wife or to Wood, then the onus was cast upon the petitioning creditor of supporting the sequestration on equitable grounds, and in the absence of such support the Registrar ought under sec. 37 of the Bankruptcy Act 1898 to have annulled the sequestration order. The appellant is entitled to go behind the judgments obtained by the respondents 'Wood and Martin and his wife for the purpose of showing that no debt existed in either case. The principles which guide the Court in dealing with bankruptcy matters such as this are stated in Bx parte Lennox ; In re Lennox (1). The judgment in the present case is founded on conduct of the appellant which is held to preclude him from denying the existence of the debts. But the conduct of the appellant is immaterial. The only matters to be taken into con- sideration are matters relevant to the provisions of the Bankruptcy

A debtor cannot admit that that which was not really a debt a debt, because it affects his other creditors. Although the will not go behind a judgment where issues of fact have been out before, and decided by, a jury, yet where the judgment s on undisputed facts and there is a mistake of daw as to effect the Court will review the decision. Here the question e existence of the debts depends on written documents and the puted circumstances under which those documents came into

rton J. I am of opinion that this appeal should be dismissed. not wish to add anything except that the reasons given by J. satisfy me.

avan Durry J. There are many peculiar circumstances in this se and, without laying down any general rule, it is enough for me iy that I think that the Registrar in Bankruptcy properly ed his discretion under sec. 37 (1) of the Bankruptey Act 1898, that the order appealed against is right.

J. Lagree. There is no suggestion of fraud or collusion, iscarriage of justice cannot be predicated of the judgment ht to be impeached, obtained as it was in an action where the of indebtedness was fought out between the parties before the (In re Howell (1) ).

Appeal dismissed with costs. itor for the appellant, 4. J. Grant. itor for the respondents, J. W. H. Houston.