CATCHWORDS Bankruptcy ~ Appeal against sequestration order - Whether Court should go behind judgment. Bankruptcy Act, 1966, s.41(7) ROBERT FRANK EASTICK vy AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED No. G121 of 1982. CORAM: Bowen C.J., Franki and St. John JJ. Sydney. 3 November, 1982. IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY No. G121 of 1982 GENERAL DIVISION On appeal from a Single Judge of the Federal Court BETWEEN: ROBERT FRANK EASTICK Appellant AND: AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED Respondent ORDERS JUDGES MAKING ORDERS: Bowen C.J., Franki and St. John JJ. DATE OF ORDERS: 3 November 1982 WHERE MADE: Sydney THE COURT ORDERS THAT: 1. The appeal be dismissed. 2. The appellant pay to the respondent its costs of the appeal. IN THE FEDERAL COURT OF AUSTRALIA) NEW SOUTH WALES DISTRICT REGISTRY) No. G121 of 1982 GENERAL DIVISION ) On appeal from a Single Judge of the Federal Court. BETWEEN: ROBERT FRANK EASTICK Appellant AND: AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED Respondent CORAM: Bowen C.J., Franki and St. John JJ. 3 November 1982 REASONS FOR JUDGMENT THE COURT This is an appeal by Robert Frank Eastick against a sequestration order which was made on the application of the Australia and New Zealand Banking Group Limited ("the Bank"). Litigation between Mr. Eastick and the Bank has extended over a long period. During the hearing of the petition in respect of which the sequestration order was made the learned trial Judge set out the relevant history of the litigation in the transcript for 28 June 1982. No useful purpose would be served by repeating that history in detail. The petition was based on non-compliance with a bankruptcy notice which relied upon a judgment in the New South Wales Supreme Court, first by Master Sharpe, then on appeal by a Judge of the Supreme Court of New South Wales and, on appeal therefrom, by the Court of Appeal of New South Wales. After the service of the bankruptcy notice the appellant applied under s.41(7) of the Bankruptcy Act 1966 for an extension of time to comply with the notice upon the ground that he had a counter-claim, set-off or cross demand within s.40(1)(g). A Judge of this Court sitting in bankruptcy, after a hearing which involved oral evidence, reached the conclusion that no such counter-claim, set-off or cross demand existed. Mr. Eastick appealed to a Full Court of this Court which upheld the judgment of the learned trial Judge on the critical assue. Mr. Eastick then appealed to the High Court which also dismissed the appeal. In doing so the Chief Justice, with whom the other members of the Court agreed, said: "... the appellant could not succeed either in persuading the Court to go behind the judgment, or in satisfying the Court of the existence of a cross-demand under s.40(1)(g), unless he could show that Daltons was not indebted to the Bank in any amount, or at least in the amount of $1,000 which is necessary to sustain a petition. There is not a scintilla of evidence to that effect and the appellant has not shown that he has any reasonable possibility of success in any action that he may bring against the Bank." Mr. Eastick was one of the guarantors of a debt of T.J.W. Dalton Real Estate Pty. Limited due to the Bank. The situation that the learned trial Judge was considering was one where the judgment relied on by the petitioning creditor was not that of a minor court but of the New South Wales Court of Appeal. In addition Mr. Eastick had chosen to allege that he had a counter-claim, set~off or cross demand equal to or exceeding the amount of the judgment debt being a counter-claim, set-off or cross demand that he could not have set up in the action in which the judgment was obtained. The issue raised by that application has been determined not only by a single Judge of this Court but, on appeal, by a Full Court of this Court and by the High Court. The relevant approach to the question whether a Judge should look behind the judgment on which a petition is based is dealt with in Wren v. Mahony (1972) 126 C.L.R. 212. This was a case which arose under a guarantee. Proceedings were taken in bankruptcy seeking a sequestration order against the guarantor. Barwick C.d., with whom Windeyer and Owen JJ. agreed, said that the Bankruptcy Court may accept a Court's judgment as satisfactory proof of the petitioning creditor's debt and that, in that sense, it had a discretion. The Chief Justice said that, where reason 1s shown for questioning whether behind the judgment there was in truth and reality a debt due to the petitioning creditor the Court of Bankruptcy can no longer accept the judgment as satisfactory proof. Later at pp.224 and 225 his Honour said: "The Court's discretion in my opinion is a discretion to accept the judgment as satisfactory proof of that debt. That discretion is not well exercised where substantial reasons are given for questioning whether behind that judgment there was in truth and reality a debt due to the petititoner." Menzies J. at p.236 and Walsh J. at p.238 dissented and expressed views less favourable to the debtor. Mr. Eastick had every opportunity to present his case under s.41(7) in any way he wished. Nevertheless his application failed. Against this background and the judgment of the Court of Appeal of New South Wales, it is difficult to see how any Judge could have held that there were "substantial reasons" for "questioning whether behind that judgment there is in truth and reality a debt due to the petitioner". In the absence of such reasons the trial Judge could not be expected to exercise his discretion by permitting Mr. Eastick again to challenge the debt upon which the bankruptcy notice had been founded or to decline to accept that judgment as proof of the debt. The notice of appeal is drawn on very broad lines. It avoids setting out the grounds relied on in any detail. The first ground of substance, numbered 2, deals with the refusal to receive certain evidence. This was refused because the trial Judge rightly took the view that it would anvolve going behind the judgment. The ground numbered 3, was that the trial Judge refused leave to amend the notice of opposition. It 1s clear that the amendments which were sought would raise issues which had been considered previously. The application was made two months after the first notice of intention to oppose the petition had been filed. Against the background of litigation which had taken place we consider the trial Judge did not make any error. Grounds numbered 4 and 5 raised the question whether the trial Judge was in error in being satisfied of the matters of which he had to be satisfied under the provisions of s.52 of the Bankruptcy Act. We are satisfied that no errors within these grounds have been established. Ground 6 raises the question of the trial Judge's discretion. We consider that there is no justification for reaching a conclusion that the learned trial Judge exercised his discretion in a way which would justify this Court in upholding the appeal. We would dismiss the appeal and order that the appellant pay the respondent's costs. certify that this and the 4 preceding pages are a true copy of the reasons for Judgment herein of the Court Aah re ee a Batad 3S11/ 9.2.