Federal Court of Australia|1977-09-16|Before: Riley J

Re Padagas; Ex Parte Carrier Air Conditioning Pty Ltd [1977] FCA 12; (1977) 30 FLR 170 (16 September 1977)

Re PADAGAS; Ex parte CARRIER AIR CONDITIONING PTY. LTD. [1977] FCA 12; (1977) 30 FLR 170

Bankruptcy - Creditor's petition for sequestration order - Judgement debt previously ordered to be payable by instalments - Whether such order stays execution of judgment - Whether petition defeated by such order - Whether debt within class of debts "payable either immediately or at a certain future time" - , , , - (N.S.W.), ss. 85, 88. After obtaining judgment in the District Court for $11,834.56 against the bankrupt, the petitioning creditor issued a bankruptcy notice, which was ignored by the bankrupt, thus constituting an act of bankruptcy. The bankrupt then obtained an order from the registrar, pursuant to s. 88 of the (N.S.W.), that the judgment debt be paid by instalments, after which the petitioning creditor filed a petition for a sequestration order.

The petition was opposed by the bankrupt on the grounds that the order for payment by instalments both stayed execution of the judgment and also removed the debt from the class of debts "payable either immediately or at a certain future time" referred to in s. 44 of the Bankruptcy Act 1966.

Held: (1) An instalment order, by reason of s. 88 (8) of the District Court Act, 1973 (N.S.W.) operates "as a stay of enforcement of the judgment", and had the order been operative at the time of issue or service of the bankruptcy notice, which was not the case, the notice would have been bad.

Re Moss; Ex parte Tour Finance Ltd. (1968), 13 FLR 101, referred to.

(2) Although both at the date of the presentation of a petition and at the date of its hearing, the creditor's debt must be, in accordance with s. 44 of the Bankruptcy Act 1966, "payable either immediately or at a certain future time", s. 44 does not require that the debt shall be one the execution of which has not been stayed, and the stay did not defeat the petition.

Re Agrillo; Ex parte Bankrupt (1976), 29 FLR 484, referred to.

(3) Although the debt in question (being $11,834.56, the statutory addition of interest being irrelevant for present purposes) would take almost 114 years to pay by the instalments ordered, it could be said to be payable "at a certain future time".

Re Pearcy; Ex parte Sturt & Co. (1871), LR 13 Eq 309; Re Seckold; Ex parte Sargood, Gardiner Ltd. (1935), 5 ABC 195, referred to; Sophian v. A J. Clifford & Son, (1947) KB 212, distinguished.

(4) On the facts, the petitioning creditor was entitled to a sequestration order.

Sydney, 1977, May 11; June 17; September 16. 16:9:1977

J. Glissan, for the debtor.

Cur. adv. vult.

Solicitors for the petitioning creditor : Remington & Co.

Solicitors for the debtor : P. G. Bryant & Co.

(Reported by R. L. Crisp Esq., Barrister-at-Law.)

The following judgment was delivered.

RILEY J. On 11th October, 1976, Carrier Air Conditioning Ltd. obtained in

the District Court of New South Wales a judgment against James Padagas for $11,686.06 on his claim and $148.50 for costs. A fourteen-day bankruptcy notice claiming the total of $11,834.56 was issued on 1st November, 1976, and served on the debtor on 17th December, 1976. He did not comply with it and accordingly committed an act of bankruptcy on 31st December. (at p171)

2. On 26th January, 1977, he filed in the District Court an application for leave to pay the judgment debt by instalments of $2 a week, and sent a copy to the registrar of the Federal Court of Bankruptcy. Under s. 88 (4) (a) of the District Court Act, 1973 (N.S.W.) the registrar to whom the application was made was under the duty of considering and determining the application and had a discretion either to order that the judgment debt be paid by such instalments payable at such times as were specified in the application or to refuse to make such an order. The registrar took the former course, and on the same day ordered that the unpaid amount of the judgment debt be paid by instalments of $2 per week, the first payment to be made on or before 4th February, 1977. (at p171)

3. On 1st February, 1977, the judgment creditor filed a petition, returnable on 11th May, 1977, for a sequestration order against the estate of the debtor. The petition in par. 2 alleged that : "The debtor is justly and truly indebted to the company in the sum of eleven thousand eight hundred and thirty-four dollars and fifty-six cents ($11,834.56) for monies due under guarantee dated 28th April, 1975, for which sum judgment was obtained in the District Court of New South Wales at Campbelltown on 11th October, 1976". On the return date, the hearing of the petition was adjourned to 17th June and the debtor was ordered to comply with r. 20 of the Bankruptcy Rules on or before 25th May. A notice of opposition was filed on 13th May, opposing the petition on the ground that the order for payment by instalments had been made and complied with by the debtor. (at p172)

4. It was submitted by counsel for the debtor that the order for payment by instalments had two effects, each of which was fatal to the petition: it stayed execution of the judgment, and it removed the debt from the class of debts "payable either immediately or at a certain future time" referred to in s. 44 (1) (b) of the Bankruptcy Act 1966. (at p172)

5. By reason of s. 88 (8) of the District Court Act an instalment order, while it remains in force, operates "as a stay of enforcement of the judgment" in respect of which it was made. (There is an exception which is not material to this case.) Had this order so operated before the time of the issue or the service of the bankruptcy notice, the notice would have been bad: ss. 40 (1) (g), 41 (3) (b) of the Bankruptcy Act; Re Moss; Ex parte Tour Finance Ltd. (1968) 13 FLR 101, at pp 103-104 . But it did not: by the time it operated the act of bankruptcy had been committed and, subject to s. 44 (1) (b) (ii) to which I shall refer, the judgment creditor was entitled to present its petition. In Re Agrillo ; Ex parte Bankrupt (1976) 29 FLR 484 I stated my conclusion that both at the date of the presentation of a petition and at the date of its hearing the petitioning creditor's debt must answer the description contained in s. 44 (1) (a) and (b). But those paragraphs do not require, as does s. 40 (1) (g), that the debt therein referred to shall be one the execution of which has not been stayed. I therefore do not think that in this case the stay operated to defeat the petition. (at p172)

6. The debtor's second submission is that, by reason of the instalment order, the petitioning creditor's debt did not, either when the petition was presented or when it was heard, fulfil the requirement of s. 44 (1) (b) (ii) that a petitioning creditor's debt shall be "payable either immediately or at a certain future time". The alternative form of that requirement descends from the (English) Bankruptcy Act 1883, s. 6 (1) (b), which restored the law to what it had been under the bankruptcy legislation before the Act of 1869 and overcame the decision under that Act in Re Pearcy ; Ex parte Sturt & Co. (1871) LR 13 Eq 309 see Robson on Bankruptcy, 5th ed., at pp. 193-194 ; and it seems ill-adapted to the case of a debt payable by instalments. (at p173)

7. There are dicta in Sophian v. A. J. Clifford & Son (1947) KB 212 which indicate that a judgment debt in respect of which an order for payment by instalments has been made is no longer payable either immediately (which is clear enough) or at a certain future time, and that therefore a petition cannot be presented while such an order is in force. But the ground for the decision in that case was that the order in question had been made, contrary to the relevant rule, without notice to and in the absence of the judgment creditor, so that it had been made without jurisdiction and, in the words of Bucknill L.J. (1947) KB, at p 215 , there had been a miscarriage of justice. (at p173)

8. On the other hand, in Re Seckold ; Ex parte Sargood, Gardiner Ltd. (1933) 5 ABC 195 after the debtor had committed an act of bankruptcy by failing to comply with a bankruptcy notice, an order was made in the Supreme Court of New South Wales under the Moratorium Act, 1930 (N.S.W.) that payment of the judgment debt of 71 Pounds 2 Shillings 8 Pence on which the bankruptcy notice was based be deferred so long as the debtor paid seventy shillings per month in reduction of the debt on the first day of every month commencing from 1st February, 1933. There was a proviso that if a certain event happened the whole of the debt should be payable forthwith. Lukin J., in the Federal Court of Bankruptcy, said : "In this case, the court has deferred the payment of the judgment debt to equal payments of a part of the debt on the first of every month, commencing on 1st February, 1933. Such deferment to pay converts, in my opinion, the 'immediately payable' (debt) into one payable 'at some certain future time'. The debt so deferred fulfils the requirements of s. 55 (1) (b) (of the Bankruptcy Act 1924). The failure to pay on any particular month, or (the happening of the specified event) may, in either case, accelerate the date of payment, but does not, it seems to me, make the judgment debt any the less payable at some future time" (1933) 5 ABC, at p 197 . (at p173)

9. The order for deferment in that case would, if adhered to, have ensured payment of the judgment debt in about twenty months. The order in the present case is rather less sensible, as it would take almost 114 years to pay a debt of $11,834.56 at the rate of $2 a week. Nevertheless I am of the opinon that if the debt in Re Seckold can be said to have been payable "at some certain future time" the debt in this case can equally be said to be payable "at a certain future time". (at p173)

10. Counsel for the debtor pointed out that the combined effect of s. 85 of the District Court Act, s. 95 (1) of the Supreme Court Act, 1970 to which it refers, and Pt 40, r. 7 (2) (b), of the Rules of the Supreme Court is that interest calculated as from 11th October, 1976, at the rate of ten per cent per annum is payable on so much of the judgment debt of $11,834.56 as is from time to time unpaid; and that the interest forms part of the judgment debt. It was suggested that in those circumstances the debt could never be paid off at the rate of $2 a week. The statutory addition of interest is, however, in my opinion irrelevant to the present question : the petitioning creditor's debt is the original judgment debt of $11,834.56 only. In any event, the suggestion overlooks the provision of s. 85 (2) (c) of the District Court Act that the interest shall form part of the judgment debt "but not so as to require the payment of interest upon interest". Interest is payable on the reducing unpaid balances of the original judgment debt, and ceases to run when that debt is paid. (at p174)

11. In my opinion the opposition to this petition fails. The evidence is sufficient to entitle the petitioning creditor to a sequestration order. I therefore make a sequestration order against the estate of the debtor, and order that costs, including reserved costs, be taxed and paid in accordance with the Act. (at p174)

(English) Bankruptcy Act 1883

Re Padagas; Ex Parte Carrier Air Conditioning Pty Ltd [1977] FCA 12; (1977) 30 FLR 170 (16 September 1977)

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Re Padagas; Ex Parte Carrier Air Conditioning Pty Ltd [1977] FCA 12; (1977) 30 FLR 170 (16 September 1977)

Legislation Cited (8)

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