4, ered & CATCHWORDS Bankruptcy - annulment - unsecured debts being debts that have been proved in the bankruptcy having been paid in full - person claiming to be a secured creditor failing to prove debt - claim disputed - separate proceedings pending in relation to disputed debt - whether order of annulment should be granted. Bankruptcy Act, 1966 - s.154(1)(b) John v. Mendoza £19391 1 K.B. 141 More v. More £1962] Ch. 424 Re Southwell; Ex parte Southwell (1978) 23 A.L.R. 253 RE: GIOVANNI GIUCA AND CARMELA GIUCA EX PARTE: THE BANKRUPTS No. 263 of 1984 Jenkinson J. 17 March, 1986 Melbourne IN THE FEDERAL COURT OF AUSTRALIA ) GENERAL DIVISION ) NO. 263 of 1984 BANKRUPTCY DISTRICT OF THE STATE OF ) VICTORIA RE: GIGVANNI GIUCA AND CARMELA GIUCA Bankrupts EX PARTE: THE BANKRUPTS Applicants CORAM: Jenkinson J. PLACE: Melbourne DATE: 17 March, 1986 REASONS FOR JUDGMENT Applications for orders annulling the bankruptcies of Giovanni and Carmela Giuca, a sequestration order against the estate of each of whom was made by this court on 10 April 1984. The ground of each application is that specified in 5.154(1)(b) of the Bankruptcy Act 1966 - "that -he unsecured debts of the bankrupt, being debts that have been proved in the bankruptcy, have been paid in full". The evidence establishes the ground. On the hearing of the application a person who claims to be a secured creditor of the bankrupts, Sergio Casonato, appeared by Mr. Nash of counsel. No proof of debt has been lodged in either bankruptcy by Mr. Casonato. His claim to be a secured creditor is disputed by the bankrupts and an action in which he 1s Plaintiff and the bankrupts are defendants is pending in the 2. Supreme Court of Victoria, wherein the mortgage which Mr. Casonato claims to secure payment of the debt is impugned by the bankrupts as vo1d or voidable. If in the result it is established that Mr. Casonato does not hold security for payment of the debt, Mr. Nash submits that there 1s doubt whether, after an order annulling the bankruptcies has been made, an action for recovery of the debt could be maintained. The principal source of the doubt which Mr. Nash sought to raise is the reasoning of du Parecg, L.d. (sitting as a judge of the King's Bench Division) in John v. Mendoza [£1939] 1 K.B. 141. Mendoza, being a bankrupt by whom a debt provable in the bankruptcy was owed to John, persuaded John to declare falsely to the Official Receiver that no debt to him existed. The bankruptcy having been thereafter annulled on the ground that the debts of the bankrupt had been paid in full, John's action to recover the debt failed, inthe judgment of du Parcq, L.d., because the order of annulment constituted an estoppel by record, binding on John as a creditor who had with knowledge of the bankruptcy abstained from proof of his debt in the bankruptcy and had thereby placed himself in the position of a party to the bankruptcy proceedings, the ultimate order in which negatived the existence of any debt by reciting the payment of the debts of the bankrupt. The English legislation under which Mendoza's bankruptcy was annulled, unlike s.154(1)(b) of the Bankruptcy Act 1966, made no reference to "debts that have been proved in the bankruptcy". Further, in More v. More €19621 Ch. 424 Cross J. construed that English legislation as referring, not to all the debts of the bankrupt, but to all the debts which had been proved in the bankruptcy, and concluded that a creditor who had not proved in the bankruptcy might after annulment maintain an action to recover his debt. Cross J. considered that John v. Mendoza ought to be regarded as turning on the particular arrangement made between bankrupt and creditor and not as an authority on the veroper construction of the English Act. In Re Southwell; Ex parte Southwell (1978) 23 A.L.R. 253 Riley J. adopted the same construction of the expression "unsecured debts" in s.154(1)(b) of the Bankruptcy Act 1966 as Cross J. had given to the word "debts" in the corresponding English provision, By inserting in 5.154(1)(b) of the Australian Act the words ", being debts that have been proved in the bankruptcy," Parliament appears to have confirmed in 1980 the construction of the paragraph which Riley J. had adopted in 1978. It 21s the construction which I also respectfully adopt. In any event, the concerns of Mr. Casonato as to his legal position in the event that he is hereafter held to be a creditor without security are not in my opinion a legitimate subject of consideration in the determination of these applications. Nor do I think that the court should make any order or yecital of the kind Mr. Nash suggested as a means of protecting his client's rights. The orders disposing of the applications are that the bankruptcy of Giovanni Giuca effected by the order of this court on 10 April 1984 for sequestration of his estate be annulled pursuant to s.154(1)(b) of the Bankruptcy Act 1966 and that the bankruptcy of Carmela Giuca effected by the order of this court on 4. 10 April 1984 for sequestration of her estate be annulled pursuant to s.154(1)(b) of the Bankruptcy Act 1966. i Toceriiiy thu ttas aind the 3 i preecding pases ale a true copy of the ® Reasors fox Judgrreat herein of the ; runovravie Mi. Jushee JENKINSON 4 (PO seskie k Associate hI if} 4 Hi "1D InarekK 986 H ee LS ua - = fe