Re Neate, David William & Anor Ex Parte Pegasus Leasing Ltd [1995] FCA 1094

The history which preceded the bankruptcy notices can be summarised as follows. In November 1992 Pegasus Leasing Limited issued proceedings in the South Australian District Court ("the District Court") against Mr Neate claiming moneys allegedly due to it under a livestock leasing agreement. Subsequently Mrs Neate was joined as a co-defendant in the proceedings as a person who had guaranteed Mr Neate's obligations to Pegasus. Judgment was entered in those proceedings in default of appearances by the defendants at the time appointed for the trial of the proceedings. The judgment was entered in a form appropriate in circumstances of joint liability. In fact, the obligations of Mr and Mrs Neate to Pegasus were several. The bankruptcy notice was issued to Mr and Mrs Neate in reliance on the District Court judgment debt. An application was made to set the bankruptcy notice aside. On 30 March 1995 O'Loughlin J set aside the bankruptcy notice on the ground that the District Court judgment was flawed in form. Subsequently Pegasus has successfully applied to the District Court to have the judgment amended to reflect the several liabilities of Mr and Mrs Neate. An appeal against the decision of the Master of the District Court to the Chief Judge of the District Court was dismissed. Mr and Mrs Neate now seek to appeal from the decision of the Chief Judge. The South Australian Supreme Court rules provide for alternative methods of appealing interlocutory judgments of the District Court. A certificate pursuant to rule 96A.02 of the Supreme Court Rules 1987 (SA) may be sought from a judge of the District Court or an application for leave to appeal may be made to the Supreme Court. Mr and Mrs Neate have taken steps to initiate each of these procedures. Their application for leave to appeal to the Supreme Court of South Australia ("the Supreme Court") has been adjourned to allow their application to a District Court judge for a certificate to be heard and determined. That application is to be heard shortly. The issue debated before the Registrar was that of whether in the circumstances proceedings to set aside the judgment of the District Court have been instituted by the debtors. The Registrar considered that they had not. He concluded that the applications presently initiated on behalf of Mr and Mrs Neate could not be characterised as applications to set aside the judgment of the District Court as there was no intention, if such applications or either of them succeeded, to seek to defend the substantive proceedings in the District Court so as to achieve a determination in those proceedings favourable to Mr and Mrs Neate. The matter is put slightly differently before me by Mr Coppola, counsel for Pegasus. First he queried whether the steps initiated on behalf of Mr and Mrs Neate are appropriate in the circumstances. That is, whether the decision of the Chief Judge in the District Court is an interlocutory decision. He further pointed out that the steps which have been initiated on behalf of Mr and Mrs Neate will, if successful, lead to their being granted leave to appeal against an amendment made to the District Court judgment upon which the bankruptcy notice is founded. Such steps, he pointed out, cannot lead to proceedings to set aside the judgment itself. There is, I think, considerable strength in these arguments. There is also, I consider, much to be said for the view expressed by Hill J in Re Brindle and Another; Ex parte F B & F A McMahon Pty Ltd (1992) 108 ALR 470 at 477. His Honour there said:- "It may perhaps also be remarked that it must be doubted whether s41 contemplates a case where proceedings to set aside a judgment have been decided adversely to a debtor and all that remains outstanding is leave to appeal against the dismissal, but that is a matter that I do not have to decide in these proceedings." Mr Townsend, counsel for Mr and Mrs Neate, concedes that the power contained in s41(6B) of the Bankruptcy Act 1966 (Cth) ("the Act") is a discretionary power. Nothing before me suggests that Mr and Mrs Neate deny liability to Pegasus. Their failure to defend the original District Court proceedings, and their failure to file in this Court on these applications any affidavit suggesting that they are not indebted to Pegasus, suggest they do not deny such liability. In the circumstances that the complaints of Mr and Mrs Neate are highly technical in nature and do not go in any way to the question of whether in truth and reality they are indebted to Pegasus in the amount claimed by the bankruptcy notice, I do not consider it appropriate to exercise in their favour the discretion vested in the Court by s41(6B) of the Act. An alternative application was made orally by Mr Townsend before me. That was an application for the bankruptcy notice to be set aside and for an extension of time to comply with the notice pending the determination of such application. The only matter listed before me today is the review of the decision of the Registrar. This alternative application could not have been properly made to the Registrar. Mr Coppola opposed leave being granted to allow the application to be made to me. Assuming that I have the power to allow such an application to be made on this review and orally, I do not consider it appropriate to so allow it. Finally, Mr Townsend sought an order that I restrain the service of creditor's petitions upon Mr and Mrs Neate pending the determination of the applications presently before the Supreme Court and the District Court. The matters which Mr Townsend advanced in support of such an order being made are all matters which could be addressed to this Court on the hearing of any petition or petitions served. In the circumstances, again assuming I have the power to make such orders, I do not consider it appropriate to do so. The decision of the Registrar is confirmed. I certify that this and the preceding pages are a true copy of the Extempore Reasons for Judgment of the Honourable Justice Branson. Associate: Dated: Counsel for the Debtors : Mr C J Townsend Solicitors for the Debtors : Piper Alderman as agents for White Cleland Counsel for the Petitioning Creditor : Mr G Coppola Solicitors for the Petitioning Creditor : Kelly & Co Hearing Date : 15 December 1995