eee a ne tee, Me IN THE FEDERAL COURT Mo, Pele OF AUSTRALIA ) GENERAL DIVISION JUDGE MAKING ORDER: DATE OF ORDER: WHERE MADE: In the last line but one on page 2 of the Reasons for Judgment published on 16 September 1977, ) No. P.89/77 Re: JAMES PADAGAS Ex Parte: CARRIER AIR CONDITIONING PTY LTD Riley J. 16 September 1977 Sydney CORRECTION stayed" should read "the execution of which has not been stayed". "the execution of which has been IN THE FEDERAL COURT Mn ere OF AUSTRALIA ) GENERAL DIVISION. JUDGE MAKING ORDER: DATE OF ORDER: ) No. P.89/77 Re: JAMES PADAGAS Ex Parte: CARRIER ATR CONDITIONING ' PTY LTD Riley J. 16 September 1977 WHERE MADE: Sydney ORDERS 1. A sequestration order against the estate of the debtor. 2. Costs, including reserved costs, to be taxed and paid in accordance with the Bankruptcy Act 1966. at CATCHWORDS Bankruptcy Act 1966, s. 44 = District Court Act 1973 (N.S.W.), ss. 85, 88 - Order for payment of judgment debt by instalments - Order made after act of bankruptcy committed but before petition presented ~ Stay of enforcement of judgment - Debt "payable either immediately or at a certain future time" - Sequestration order made. oe ae At he nr il tanh nn REASONS FOR JUDGMENT On Ll October 1976 Carrier Air Conditioning Limited 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 1 November 1976 and served on the debtor on 17 December 1976. We did not comply with it and accordingly committed an act of bankruptcy on 31 December. On 26 January 1977 he filed in the District Court an application for leave to pay the judgment debt by instalments of $2.00 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 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 $2.00 per week, the first payment to be made on or before 4 February 1977. On 1 February 1977 the judgment creditor filed a petition, returnable on 11 May 1977, for a sequestration order against the estate of the debtor. The petition in paragraph 2 alleged that "The Debtor is justly and truly indebted to the Company in the sum of Eleven Thousand Eight Hundred & Thirty- Four Dollars and Fifty-Six Cents ($11,834.56) for monies due under guarantee dated 28~4-75 for which sum Judgment was obtained in the District Court of New South Wales at Campbelltown ' on the llth day of October 1976". On the return date, the hearing of the petition was adjourned to 17 June and the debtor was ordered to comply with Rule 20 of the Bankruptcy Rules on or before 25 May. A notice of opposition was filed on 13 May, opposing the petition on the ground that the order for payment by instalments had been made and complied with by the debtor. 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. 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 (1968), 13 F.L.R. 101, 103-4. 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 (1976), 13 A.L.R. 635, 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), (b). But those paragraphs do not reguire, as does s. 40(1)(g), that the debt therein referred to shall be one the execution of which has been stayed. I therefore do not think that in this case the stay operated to et a A ne A et defeat the petition. 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 altetnative 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 Ex parte Sturt (1871), L.R. 13 Eq. 309: see Robson on Bankruptcy, 5th edn, 193-4; and it seems 111 adapted to the case of a debt payable by instalments. There are dicta in Sophian v. A. J. Clifford & Son, (1947) K.B. 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. (at 215), there had been a miscarriage of justice. On the other hand, in Re Seckold (1933), 5 A.B.c. 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 571. 2. 8 on which the bankruptcy notice was based be deferred so long as the debtor paid 70/- per month in reduction of the debt -4- , on the first day of every month commencing from 1 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 at 197: . "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 the lst 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". The order for deferment in that case would,1if adhered to, have ensured payment of the judgment debt in about twenty months. The order in the present case is rather less sensible, as 1t would take almost 114 years to pay a debt of $11,834.56 at the rate of $2.00 a week. Nevertheless I am of the opinion 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". 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 Part 40, Rule 7(2) (b), of the Rules of the Supreme Court is that interest calculated as from 11 October 1976 at the rate of 10% 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 circumstance the debt could never be paid off at the rate of $2 a week. The statutory addition of interest 1s, however, in my opinion j irrelevant to the present question: the petitioning creditor's ht a tw ome a ca, -5- 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. 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. we