(TATOr a hE. Bankruptey - exelation wf deedus of asslanment wnether at time of execution respondents had frovable debt - nature of a contingent debt - whether damages arising by breach of contract are provable in bankruptcy. Practice and procedure - jurisdiction - judgment of the District Court of Western Australia challenged in the Federal Court - whether matter before the Federal Court properly "in bankruptcy" - question of comity - declaratory relief. Bankruptcy Act 1966 s8.27,30,82,187,188,190,198,222,228-230 Judiciary Act 1903 s.39 District Court of Western Australia Act 1969 s.7 Federal Court of Australia Act 1976 3.43 Re Dawson; Ex parte Dawson and Arthur Anderson and Co. (1985) 5 F.C.R. 133 Rowell v. Child (1983) 48 A.L.R. 333 Barewa O01) and Mining NL (in lig) v. Isim Mineral Development Pty. Ltd. and others (1981) 38 A.L.R. 288 Re Baxter; Ex parte The Official Trustee in Bankruptcy v. Baxter, 10 April 1986, unreported. CHARLES RICHARD MORRIS and PAMELA MORRIS and JOHN MAROUDAS and SHIRLEY JANET MAROUDAS W.A. No. G 60 of 1986 NORTHROP, TOOHEY AND SPENDER JJ. 25 NOVEMBER 1986 PERTH ~~ See oO a ST eer TORRE T AUSTERT TA TST Pec Sop w WoA. No. GC Bx Lae Ate = eee) x ae es os ee ie Sie athe ad ror ON APPEAL FROM THE FEDERAL COURT OF AUSTRALIA BETWEEN : CHARLES RICHARD MORRIS and PAMELA MORRIS Appellants (Applicants) and JOHN MAROUDAS and SHIRLEY JANET MAROUDAS Respondents (Respondents) COURT: NORTHROP, TOOHEY AND SPENDER JJ. DATE: 25 NOVEMBER 1986 PLACE: PERTH MINUTES OF ORDER THE COURT ORDERS THAT: - Ne The appeal be allowed. Di. The orders made on 26 May 1986 in the Federal Court of Australia be set aside and in lieu thereof it be ordered: - (i) That the Court declares that by reason of sub-section 230(1) of the Bankruptcy Act 1966, the deeds of assignment executed by the appellants on 20 September 1983 operated to release them from their liability to the respondents for breach of the franchise agreement made on 10 April 1983. (ii) That the respondents pay the appellants' costs of the application to the Court. Federal Court Rules.) (Settlement and entry of Orders is dealt with in 0.36 of the ON APPEAL FROM THE FEDERAL COURT OF AUSTRALIA BETWEEN : CHARLES RICHARD MORRIS and PAMELA MORRIS Appellants (Applicants) and JOHN MAROUDAS and SHIRLEY JANET MAROUDAS Respondents (Respondents) COURT: NORTHROP. TOOHEY AND SPENDER JJ. DATE: 25 NOVEMBER 1986 PLACE: PERTH REASONS FOR JUDGMENT NORTHROP J. On 17 January 1985, the District Court of Western Australia gave judgment in favour of John Maroudas' and Shirley Janet Maroudas ("the respondents") against Charles Richard Morris and Pamela Morris ("the appellants") in the sum of $48,660.00 for breach of contract. The amount of damages was arrived at by adding the amount of $25,000 being moneys paid by the respondents te the appellants pursuant to a franchise agreement entered into between them on 10 April 1983. damages in the sum of $15.000 for breach of that agreement and intersst in the rum af 35.660 calculated on the judgment remains in existence: it has not been set aside or staved. On 6 December 1385, the appellants made application to the Federal Court of Australia for orders that the judgment of the District Court be set aside. alternatively that execution of the judgment be stayed, and for a declaration that they are released from the debt or liability claimed by the respondents in the District Court proceedings. On 26 May 1986, the Federal Court constituted by a single Judge dismissed the application, but at the hearing no question was raised as to whether the Federal Court had jurisdiction to hear and determine the application. The appellants have appealed from the judgment of the Federal Court, but on the hearing of the appeal no question of jurisdiction was raised. Nevertheless, it is necessary to consider whether the Federal Court has jurisdiction to hear and determine the application. On 20 June 1983 the appellants, pursuant to sub-section 188(1) of the Bankruptcy Act 1966 ("the Act"), signed an authority authorising Ross Stewart Norgard, a registered trustee ("the trustee'), to call a meeting of their creditors and to take over the control of their property; see paragraph 188(1)(e). As a result, the property of the appellants thereupon became subject to control under aPeneeG INERT yodect until bamber 2° Gy date the uppeliants 2 aa 5 ASzlanment in ursuance of oa special regoluticn of their creditors under Division 2: see Lo Paragraph 199(1)tb). t should be noted that the appellants committed a breach of their franchise aqreement on 22 June 1983, just two days after they signed the authority under s.188 of the Act and at atime when their property was subject to control under Division 2. Reference should be made also to the whole of s.190 of the Act. The trustee consented to exercise the powers conferred upon him by the authority. Under sub-section 190(1), he was required to call a meeting of the appellants' creditors. Under sub-section 190(2), he was empowered to take immediate control of the appellants' property and affairs and to carry on their business if. in his opinion, it was in the best interest of the creditors to do so. On S July 1983, the respondents commenced their action against the appellants in the District Court. The meeting of creditors required to be called under sub-section 190(1) of the Act. was held on 18 July 1983 and was adjourned to 31 August 1983; generally see sections 194 and 197. The respondents, by an agent, attended the creditors meeting held on 18 July. The minutes of that meeting show that the existence of the District Court writ issued on behalf of the respondents was adverted to but was described as "a contingent liability". That might have been a wrong description but the minutes show also that the appellants independent legal advice Ths rugtes appears toa have eplocked the exierence of the pewere cenferred upon him 5b the Act. The respondents may not have bean entitled to vote because their debt was unliquidated or a debt, which includes a liability ('see $5,323). the value of which had not been ascertained: see 3.198 and in particular sub-section 198(2). At the adjourned meeting, the respondents were represented by an agent but were not permitted to vote. The minutes of the adjourned meeting show that it was stated that the appellants were defending the District Court action and that the respondents would not be afforded a vote since the debt was considered contingent. At the adjourned meeting, the creditors, by special resolution, required the appellants to execute a deed of assignment under Part X; see paragraph 204(1)(b). The trustee was nominated the trustee of the deed: see paragraph 204(4). The appellants entered into the deed of assignment on 20 September 1983. Under the deed of assignment the appellants, jointly and severally, assigned to the trustee all their divisible property within the meaning of Part X upon trust to deal with the same in accordance with Part X for the benefit of creditors; cf. s.214. Thereafter, the trustee could sue and be sued in the name "The Trustee of the Property of" (the appellants) and was authorised to do all the things referred to in 5.219. In passing, reference should be made to $.222 of the Act which empowers specified Division 4 of Part ZX. comprising sections 228 to 232 of the Act. contains special provisions applicable to deeds of assignment. Under 3.228. the deed was binding on all creditors of the appellants. Under 3.229. all the divisible property of the appellants vested in the trustee. Under paragraph 228(2)(c) and subject to exceptions not relevant to the appeal, it was not competent for a creditor, so long as the deed remained valid, to commence any legal proceedings in respect of a provable debt or take any fresh step in such a proceeding. Sub-section 230(1) is set out:- "2304 Subject to this section, a deed of assignment that has become binding on the creditors of the debtor operates, unless declared void under this Part, to release the debtor from all provable debts, other than those (if any) that would not be released by his discharge from bankruptcy if he had become a bankrupt on the day on which he executed the deed." The exceptions contained in $.230 are not relevant for present purposes. Putting aside for the moment the substantive issue argued on the appeal, it is readily apparent that the real question between the parties to the appeal is whether the respondents were. at the time the appellants entered into the deed of assignment on 20 September 1983. creditors of the appellants. If the angwer to the qusetien is ves. then und p " WIL Ssstsen Lae sf the Act. the deed became binding on them and if their slaim arm the District fourt proceeding was in vespect of a provable debt. it was not competent for them to take any fresh step in that proceeding: see paragraph 228(2)ic). Further, if the claim by the respondents was a provable debt, then under sub-section 230(1), the appellants have been released from that debt. It should be noted that the deed of assignment has not been declared void; the trustee was not a party to the District Court proceeding; that at the hearing of the District Court proceeding, which occurred after 20 September 1983, the appellants did not raise any defence based on section 228 or 230 of the Act and in its reasons for judgment, the District Court made no reference to those statutory provisions. By letter dated 15 June 1984, the trustee notified the appellants that all matters relating to his administration of their property under the deed of assignment had been completed and that final documentation had been lodged with the Registrar in Bankruptcy. A reference to the statements enclosed with that letter show that the only creditor which received a dividend was the Commissioner of Taxation who received a preferential dividend. No other creditor received any dividend. The evidence does not disclose whether a certificate has been given under 3.232 of the Act. fection 27 ar the Act confers furisdiction in Fd hankruptey on a number of Courts ineludina the Federal Court of Australia and that durisdiction extends throughout "Q Australia: see ¢.29. In the Act the words "the Court" means co a Court having jurisdiction in bankruptcy under the Act: the word "bankruptcy", in relation to jurisdiction or proceedings, means any jurisdiction or proceedings under or by virtue of the Act: the word "debt" includes liability, and the words "provable debt" means a debt or liability that is, under the Act, provable in bankruptcy; see generally sub-section 5(1) of the Act. Section 30 of the Act confers powers on Courts exercising jurisdiction in bankruptcy. For present purposes, it is sufficient to set out sub-section 3001) only: "30(1) The Court- (a) has full power to decide all questions, whether of law or of fact, in any case of bankruptcy or any matter under Part X or Part XI coming within the cognizance of the Court; and (b) may make such orders (including declaratory orders and orders granting injunctions or other equitable remedies) as the Court considers necessary for the purposes of carrying out or giving effect to this Act in any such case or matter." It should be noted that this section does not confer jurisdiction upon Courts. it confers powers as an aid in the exercise of jurisdiction conferred on Courts by s.27 of the Act. In accordance with the scheme of the Act, jurisdiction é. 13 conferred upon Courts with respect to many matters, By way of iilustration reference is made to s.222 of the Act which confers Jurisdiction to make declarations with respect to the validity of deeds of assignment on the application of the Registrar in Sankruptcy, the trustee of the deed, a creditor or the debtor. Under s.31 of the Act. specified matters must be heard and determined in open Court while other matters may, in the discretion of the Court. be heard in open Court or in Chambers. Applications under Part X for orders under 8.222 declaring a deed of assignment to be void or otherwise, must be heard in open Court; see paragraph 31(1)(4). Under Bankruptcy Rule 102, an application to the Court that is not required to be made by petition, is instituted by filing an application in accordance with the prescribed form. Under s.231 of the Act, a large number of the general provisions of the Act are made applicable to deeds of assignment. A debtor who executes a deed of assignment under Part X of the Act does not thereupon become a bankrupt, but, in order to enable the provisions of the Act to be applied, the debtor is, for many purposes, deemed to be a bankrupt. Thus in order to enable the trustee of the deed to get in the property of the debtor, the provisions of s.8l apply as if the debtor were a bankrupt and the trustee of the deed were the trustee in the bankruptcy; see sub-section 231(1). Under sub-section 231(2). a large number of the sections of the Act. with modifications, apply to and in relation to a deed of assiqnment as if:- (Db) a sequestration order had been made aqainst him on the petition on the day on which he executed the deed; and (c) the trustee of the deed were the trustee in his bankruptcy." In applying those provisions, a reference in them to the property of the bankrupt shall be read as a reference to the divisible property of the debtor and a reference to a provable debt shall be read as a reference to a provable debt within the meaning of Part X; see sub-section 231(3). That meaning is contained in sub-section 187(2) which provides that in Part X a reference, in relation toa deed, to a provable debt shall be read as a reference to a debt or liability that would have been a provable debt in the debtor's bankruptcy if the debtor had become a bankrupt on the day on which he executed the deed, in this case, 20 September 1983. There is no doubt that at any time before the final dividend had been paid by the trustee, the trustee, the appellants or the respondents, could have made application under the Act to the Court for a determination of whether the respondents were creditors of the appellants or whether the claim by the respondents was a provable debt against the appellants. This would have involved a consideration of the nature of the liability of the appellants, the application of a.82 of the Act as modified by Bankruptcy Bule 82. and a of whether the liability constituted a provable debt. If the itabilityv did constitute a sorovable debt. the trustee would have been required to make an estimate of the value of that liability; see sub-section 82(4). Under sub-sections 82(5), (6) and (7). the Court would have had jurisdiction to hear and determine applications relating to that consideration. The Court contains provisions relating to the manner in which creditors prove debts. see for example sections 84 and 102. and the jurisdiction of the Court to review decisions by the trustee; see s.104. The respondents knew of the deed executed by the appellants but took no steps to lodge a proof of debt with the trustee. Asa result, the real issue between the appellants and respondents were not determined either by the trustee or by the Court on an application under the Act. After the execution of the deed of assignment by the appellants and even after the final dividend was paid under the deed, the respondents prosecuted their District Court claim. At the hearing of that claim, the appellants appeared in person. They did not raise a defence based upon 3.228 or s.230 of the Act: cf. Re Dawson; Ex parte Dawson and Arthur Anderson and Co. (1985) 5 F.C.R. 133. If such a defence had been raised, the District Court would have had to decide the issues, namely whether, at the time the appellants executed the deed of assignment, the respondents were creditors under s.228 of the Act and whether the respondents' claim was a provable debt under s.230 of the Act. The substantive order goudht by the respondents in their application to the Federal Court wa in that the dudament of the District Court be set aside. alternatively, that execution of the judgment be stayed. The Act does not confer on the Court jurisdiction to hear and determine an application for either of those orders. That application does not confer jurisdiction in bankruptcy. At the hearing of the appeal, counsel for the appellants sought to rely upon the power conferred by s.30 of the Act to support a claim that the Court had jurisdiction to make the declaration sought, namely, that the appellants are released from the debt or liability claimed in the District Court proceeding and which resulted in the judgment. In my opinion, the Federal Court has no jurisdiction to hear and determine the application by the appellants. Before the Court can exercise the powers conferred by s.30, the Court must have before it a valid matter within its jurisdiction in bankruptcy. In other words, there must be before the Court a proceeding under or by virtue of the Act. In the present case, there is no such matter before the Court. The appellants can point to no specific provision of the Act, including the Bankruptcy Rules; see definition of the words "the Act" as contained in sub-section 5(1) of the Act; under or by virtue of which the 2 = application was made te the Court. The powers contained in s.30 of the Act are ancillary only, thev do not confer As stated earlier in these reasons, many of the provisions of the Act apply to and in relation to a deed of assignment: see 5.231. Thus, a creditor shall be taken not un to have proved a debt until a proof of debt has been admitted: see 3.83. Section 84 contains provisions relating to the manner of proving debts. The trustee has power to admit or reject a proof of debt in whole or in part and a dissatisfied creditor can apply to the Court for a review of that decision by the trustee; see s.104. Under sub-section 134(4), the trustee has power to apply to the Court for directions in respect of a matter arising in connexion with the administration of the deed of assignment. In the present case, none of these procedures were followed. The respondents lodged no proof of debt. They did not make application to the Court to review any decision of the trustee. They have not sought any order declaring the deed of assignment void; see s.222. The administration of the deed of assignment has been completed and the final dividend has been paid. There is nothing further to be done under the deed of assignment. The trustee is not a party to these proceedings. There is no application under the Act under which the Court has jurisdiction in bankruptcy. In truth, the application is an attempt to induce this Court to rype) i. a be] ct (ee Pi) ' un oS ) at ww There is no doubt that had the appellants pleaded by way of defence to the respondents' claim in the District Court that the claim by the respondents was for a provable debt from which they had been released under 8.230 of the Act. the District Court would have had jurisdiction to determine whether the claim was for a _ provable debt. Further, the appellants could have applied to the District Court for an order preventing the respondents taking any fresh step in those proceedings; sub-section 228(2); and on that application the District Court would have had jurisdiction to determine whether the claim by the respondents was for a provable debt. Under the practice and procedure of most Courts, a defendant to a proceeding is required to plead or give notice of a matter which shows that the plaintiff's claim is not maintainable; see, for example, 0.19 r.15 of the Rules of the Supreme Court of Victoria and 0.11 r.10 of the Federal Court Rules. It is interesting to note that in the forms of defences contained in Section IV of Appendix D of the Rules of the Supreme Court of Victoria made applicable by 0.19 r.5, a number of defences are set out under the heading "Bankruptcy". Some of those forms are as follows:- ae aActulon, trustees 4. The defendant was discharged under a liquidation by arrangement pursuant to the Commonwealth Bankruptcy Act." The first two of those defences are based on s.58 of the Act and the third is based on s.240. A similar defence could be based on s.230 of the Act. Where a defence based on s.230 of the Act is pleaded in a State Court, that Court is invested with federal jurisdiction to hear and determine that defence. The federal jurisdiction is invested by s.39 of the Judiciary Act 1903. I discussed the nature of that jurisdiction in Rowell v. Child (1983) 48 A.L.R. 333 at pp.335-6. The exercise of federal jurisdiction by a State Court is illustrated by Barewa Oil and Mining NL (in lig) v. Isim Mineral Development Pty. Ltd. and others (1981) 38 A.L.R. 288 in the Supreme Court of Western Australia. There, one of the defendants raised a defence based upon s.240 of the Act. A preliminary issue, namely, did s.240 of the Act afford the defendant a defence in respect of any of the causes of action disclosed by the statement of claim, came on for hearing before Brinsden J. Section 240 comes within Division 6 of Part X of the Act. That Division contains special provisions applicable to compositions and is analagous to Division 4 of Part X (sections 228 to 230) which 'Se EASES Tt tate contains special previsions applicable to deeds of assilanment. fection 249, which is analaqgous to s.230 in substance provides that a compesition. unless set aside, declared void or terminated. operates to release the debtor from "all provable debts". Brinsden J. had to determine whether any of the plaintiffs' claims were provable debts under s.240, the defendant not having proved those claims under the composition. His Honour held that s.240 did not afford a defence in respect of any of the causes of action disclosed by the statement of claim. The fudgment is of interest also since a number of the substantive issues therein discussed could be relevant to the substantive issue raised in this appeal. Because of the danger of conflicting orders being made by different Courts in different hierarchies but affecting the same persons, it is essential that the Federal Court should be satisfied that it. has jurisdiction before hearing and determining a proceeding which could lead to a judgment which conflicts with a judgment of another Court. Thus, in the Barewa Oil and Mining Case, could the plaintiff have made application to the Federal Court exercising jurisdiction in bankruptcy seeking orders setting aside the judgment of the Supreme Court and ancillary orders seeking to restrain the defendant from giving effect to the judgment of the Supreme Court? Could the plaintiff seek a declaration to the effect that the judgment of the Supreme Court was wrong? i Could the defendant in the Supreme Court exrcceedinas seek Grderz in those proceedings restrainina the plaintiff from proceeding with such an application in the Federal Court? The District Court is a Court of record: see s.7 of the District Court of Western Australia Act 1969. The judgment claimed by the respondents is a matter of record in the District Court. That judgment remains valid until set aside. The only method by which that judgment can be set aside is by due process of law. The Federal Court should not interfere with that due process of law. A similar issue came before the Federal Court in Re Baxter; Ex parte The Official Trustee in Bankruptcy v. Baxter, 10 April 1986, unreported. In that matter, the Family Court of Australia had made an order which, on its face, contravened s.58 of the Act which provides that where a debtor becomes a bankrupt, his property vests in the Official Trustee. In that case, a property was held by a husband and wife as joint tenants. The husband became a bankrupt. Subsequently the Family Court made orders vesting in the wife the interest of the husband. By an application under sub-section 134(4) of the Act, the Official Trustee sought directions on the questions of whether the interest of the husband in the property vested in the Official Trustee despite the order of the Family Court and whether the Family Court order had any effect on the interest of the Official Trustee. The Federal Court, on a preliminary question, held that the Court should refrain from hearing and determining the application of the Official while the order of the Family Court remained in existence. In giving reasons for judament. I said:- "The relevant facts are simple. By order, the Family Court has made a declaration that the wife is the sole proprietor of the equity in the house. That order has not been set aside. The Trustee is making an application to the Federal Court for orders which would be inconsistent with and contradictory to the order of the Family Court. The question is whether the Federal Court should refrain from hearing and determining the application of the Trustee under the Bankruptcy Act while the Family Court order remains in existence. In my opinion it should. The general rule is that once an order of a Court has been entered, except by way of appeal, no Court has power to review that order; generally see Halsbury's Laws of England, Fourth Edition, Vol.26, para.556. See also Re K. Piper (Deceased) [£1960] S.RYN.S.W. 328." In that judgment I gave illustrations of difficulties that could arise from the existence of conflicting judgments binding upon the same parties but made by Courts in different hierarchies. The difficulties are based on the question of which judgment prevails. For similar reasons, in these proceedings, the Federal Court, on the assumption it has jurisdiction to hear and determine the application by the appellants, should refrain from hearing and determining the application while the order of the District Court remains in existence. In the veguic. I would dismiss the appeal with costs on the ground of want of duricdiction: ef. 2.43 of the However. my opinion on the issues of jurisdiction and discretion is the minority opinion in this appeal. on the basis that the Court has jurisdiction to hear and determine the appeal and that the Court should exercise that jurisdiction, it is my opinion that the appeal should be allowed. In this respect I agree with the order proposed by Toohey J. and concur with his reasons for making the order. B I certify that this and the seventeen preceding pages are a true copy of the reasons for judgment herein of the Honourable Mr. Justice R.M. Northrop. iO Associate RY nn ae [Ree corde, <j 25 November 1986 IN THE FEDERAL CoURT ' OF AUSTRALIA ' WESTERN AUSTRALIA ' No. WA Gou of 1386 OISTRICT FEGISTFr ' GENERAL DIVISION ' ON APPEAL FROM A SINGLE JUDGE OF THE FEDERAL COURT OF AUSTRALIA BETWEEN : CHARLES RICHARD MORRIS and PAMELA MORRIS Appellants (Applicants) and JOHN MAROUDAS and SHIRLEY JANET MAROUDAS Respondents (Respondents) CORAM: Northrop, Toohey and Spender JJ. 25 November 1986 REASONS FOR JUDGMENT TOOHEY J. This is an appeal from an order of a judge of this Court dismissing an application by the appellants. The application was in terms that a judgment obtained by the respondents against the appellants in the District Court of Western Australia on 17 January 1985 be set aside, that execution pursuant to the judgment be stayed and that there be a declaration that the appellants "are released from the debt claimed by the Respondents in the said District Court action". It is immediately apparent that there are difficulties in the way of the Federal ba Court granting the relief sought, whatever the merits of the application. I shall return to that matter later in these reasons. The application came about in this way. On 20 June 1983 the appellants signed an authority under s.188 of the Bankruptcy Act 1966 ("the Act"). By that authority they appointed Mr. R.S. Norgard their trustee for the purposes of Pt X of the Act. There was a meeting of creditors on 18 July 1983 and a meeting thereafter on 31 August. On 20 September 1983 the appellants executed separate and joint deeds of assignment of their property to the trustee. Administration of the estate was completed on 15 June 1984 on which date, it appears, the trustee furnished a certificate in accordance with s.232 of the Act. On 10 April 1983 the parties had entered into a franchise agreement. On 5 July 1983 the respondents issued a writ out of the District Court of Western Australia against the appellants alleging fraudulent misrepresentation, negligent misrepresentation and breach of contract in connection with the franchise agreement. The action was heard on 30 and 31 October 1984. Judgment was delivered on 17 January 1985 in which the respondents were awarded damages for breach of contract. That breach was expressed by the learned judge of the District Court in this way: "There is no question but that as from the 22nd day of June 1983 the defendants failed in their obligations to the plaintiffs 1n that they failed to supply provide and deliver sausages, maintain an adequate advertising and promotion of the trade names and failed to maintain a prompt and efficient delivery service of sausages to the licensee". Damages were assessed at $40,000.00 together with interest from 1 July 1983 to the date of judgment, fixed in the sum of $8,660.00. The action in the District Court was defended by the appellants in person; no point was taken by them before or at' the hearing that they had executed deeds of assignment under Pt X of the Act. By reason of sub-s.228(2) of the Act, where a deed of assignment has become binding on the creditors of a debtor, it is not competent for a creditor, so long as the deed remains valid, "to commence any legal proceedings in respect of a provable debt or take any fresh step in such a proceeding" (para.c). Furthermore sub-s.231(1) provides that, subject to the section, a deed of assignment operates to release the debtor from all provable debts, other than those that would not be released by a discharge from bankruptcy. The minutes of the meeting of creditors held on 18 July 1983 record that the chairman informed the meeting: ",.. that Mr. Maroudas a franchisee had issued a Writ against Mr. Morris in the amount of $25,000 plus other unascertained amounts in respect to the Breach of the agreement and that this had been reflected in the Statement of Affairs as a contingent liability at the time of preparation. He understood that Mr Morris was to defend the Writ and that Mr. Morris was presently obtaining independent legal advice". At the meeting of creditors on 31 August 1983, the meeting which the creditors resolved that the debtors execute deeds assignment, the trustee informed the meeting that: "Mr. Morris was defending the action and as the debt was considered contingent Mr. Maroudas would not be afforded a vote in this matter". at of The respondents did not submit a proof of debt and made no claim in the administration of the appellants' estates. A number of issues arise in this appeal but central them is the question - when the appellants executed the deeds assignment, did the respondents have a provable debt? expression "provable debt" is defined in sub-s.5(1) to mean debt or liability that is, under this Act, provable bankruptcy". That definition must be read in the light sections of Pt X that make special provision inthe case arrangements made under that part. to of The "a in of of Sub-section 82(1) provides that, subject to Division 1 of Part VI, ",.. all debts and liabilities, present or future, certain or contingent, to which a bankrupt was subject at the date of the bankruptcy, or to which he may become subject before his discharge by reason of an obligation incurred before the date of the bankruptcy, are provable in his bankruptcy". Sub-section 82(2) reads: "Demands in the nature of unliquidated damages arising otherwise than by reason of a contract, promise or breach of trust are not provable in bankruptcy". Sub-section 82(8) defines "liability" to include: "(a) compensation for work or labour done; (b) an obligation or possible obligation to pay money er money's worth on the breach of an express or implied covenant, contract, agreement or undertaking, whether or not the breach occurs, is likely to occur or is capable of occurring, the discharge of the bankrupt; and before (c) an express or implied engagement, agreement or undertaking, to pay, or capable of resulting in the payment of, money or money's worth, whether payment is - the (i) in respect of amount - fixed or unliquidated; (ii) in respect of time - present or future, or certain or dependent on a contingency; or (iii) in respect of the manner of valuation - capable of being ascertained by fixed or only as matter of opinion". rules It is apparent that sub-s.82(8) is not a definition of would in any event fall within sub-s.82(1). "liability"; rather it enumerates a number of obligations that Sub-section 82(4) requires the trustee to make an estimate of the value of a debt or liability provable in bankruptcy which, by reason of its being subject to a contingency or for anv other reason, does not bear a certain value. Anyone aggrieved by such an estimate May appeal to the Court (sub-s.82(5)) which shall assess the value, if the value can be fairly estimated (sub-s.82(7)). If it cannot be fairly estimated, the debtor's liability is deemed not to be provable in the bankruptcy (sub-s.82(6)). By virtue of sub-s.231(2), various sections of the Act are expressed to apply to a deed of assignment, "subject to such modifications and adaptions (if any) as are prescribed by the rules". Sub-section 231(3) provides that, in the application of the provisions of the Act specified in sub-s.(2) in relation to a deed of assignment, "a reference to a provable debt shall be read as a reference to a provable debt within the meaning of this Part". (para. (b)) Thus, where a deed of assignment has been executed, the provisions of s.82 must be read subject to such modifications as are prescribed by the rules. Rule 82 modifies s.82 by omitting sub-ss.(1) and (8) and substituting the following sub-sections: "(1) Subject to this Division, all debts and liabilities to which a bankrupt was subject at the date of the bankruptcy are provable in his bankruptcy. "(8) In this section, liability' includes - (a) compensation for work done or labour done; and (b) an express or implied engagement, agreement or undertaking to pay, or capable of resulting in the payment of, money or money's worth, whether the payment is - (1) in respect of amount - fixed or unliquidated; or (ii) in respect of the manner of valuation - capable of being ascertained by fixed rules or only as matter of opinion". No argument was addressed to the Court to suggest that r.82 did not lawfully give effect to sub-s.231(2). There is however a question as to how far the changes made to s.82 by r.82 provide a guide to the proper construction of the sub-section as amended. It may be argued that the deletion of any reference to "contingent" is an indication that contingent liabilities are not provable debts where there has been a deed of assignment. On the other hand, "present" and "certain" no longer appear in sub-s.(1) and it is not likely that the intention of r.82 was to ensure that a "present" or "certain" debt or liability was not provable. Equally, the removal of para.(b) from sub-s.(8) can hardly be taken as an indication that an obligation to pay money on the breach of a contract is no longer a provable debt. By implication sub-s.(2) preserves a claim for damages arising from breach of contract as adebt or liability provable in bankruptcy. The method of permitting a rule to amenda section for certain purposes carries its own dangers. But in my view, where r.82 is applicable, the proper course 1s to look at s.82 as modified and not seek to construe 1t by reason of semantic differences that exist between sub-s.82(1) as modified and as unmodified. The question to be answered is - were the appellants, at the date of execution of the deeds of assignment, subject to a debt or liability on the part of the respondents? In my view they were. As the District Court found and as was not challenged, as from 22 June 1983 the appellants had failed in certain obligations under the franchise agreement. A cause of action then accrued in favour of the respondents. Furthermore, on 5S July 1983 i.e. before the appellants had executed deeds of assignment, the respondents had issued a writ against them claiming damages. It may be that damages had not then been quantified but that goes merely to the difficulties the trustee may have faced in making an estimate of the value of the appellants' liability to the respondents. It does not affect the existence of that liability. Counsel for the respondents submitted that any liability of the appellants to the respondents was contingent only at the date of execution of the deeds of assignment. I find it unnecessary to determine whether a contingent liability is, by reason of the modifications to sub-s.82(1) by r.82, a liability for the purposes of an arrangement with creditors made under Pt X. For there was no contingent liability in the present case. Pressed to identify the contingency, counsel for the respondents was unable to do so. This is not surprising for there was in RR SL TTY A TE. Fem ey = > RE truth no contingency upon which the liability of the appellants to the respondents depended. See Community Development Pty. Ltd. v. Engwirda Construction Co. (1966) 120 C.L.R. 455. Likewise, it 1s not to the point that the obligation of the appellants to the respondents may not have fallen within either of the paragraphs of sub-s.82(8). It was a liability within sub-s.82(1) and that was enough to make it a provable debt for the purposes of sub-s.231(3). The learned primary judge, having referred to the sections of the Act of which mention has been made in these reasons, concluded: "It seems to me therefore that the proper interpretation of the legislative scheme is that contingent and uncertain liabilities allegedly arising from contract at the date of the deed of assignment are not provable in a deed of assignment under Part X". His Honour proceeded on the basis that the obligation of the appellants to the respondents was a contingent liability; he made no express finding to this effect. He then concluded that there was no provable debt and that therefore the respondents were not bound by the deed of assignment "so as to prevent them pursuing their rights under the District Court judgment which was regularly entered". 10, With respect to his Honour's conclusions, there was a provable debt and a debt that was not proved in the administration of the appellants' estates. The deeds of assignment operated to release the appellants from that debt (sub-s.230(1)). It was not competent for the respondents, once the deeds of assignment were executed, to take any fresh step in the District Court action (sub-s.228(2)). However they did proceed and they obtained judgment and on 13 November 1985 they issued a warrant of execution against the appellants. It seems that the parties agreed that execution be stayed pending the decision of the primary judge on the appellants' application. Just how that was done was not said but presumably the respondents gave some instruction to the sheriff not to proceed further with execution. There was no mention of any later agreement between the parties once the appellants' application had been dismissed and this Court was not asked to grant any relief pending the determination of the appeal. What relief now may appropriately be granted to the appellants, the conclusion of the primary judge that there was no provable debt being in error? This Court has full power to decide all questions of law or fact in any matter under Pt X and to make such orders, "including declaratory orders and orders granting injunctions or other equitable remedies", as it considers necessary to give effect to the Act (sub-s.30(1)). But there is a judgment of the District Court regularly entered and in my view this Court has no power to set aside that judgment. It seems to ll. me that the Court may do one of two things or both of them. It may make a declaration that, by reason of sub-s.230(1) of the Act, the deeds of assignment executed by the appellants operated to release the appellants from their liability to the respondents for breach of the franchise agreement. If the Court did no more than make such a declaration, it would then be for the appellants, armed with the declaration, to apply to the District Court to set aside the judgment and in the interim to restrain the respondents from proceeding further with execution on the judgment. It would be a matter for the District Court to decide whether in all the circumstances that relief should be granted. A relevant circumstance is the failure of the appellants to plead the deeds of assignment. The appellants might seek an extension of time in which to appeal to the Supreme Court of Western Australia from the judgment of the District Court; the obvious difficulty they would face in that regard is that none of these matters was canvassed before the District Court. In my view the appellants are entitled to a declaration as mentioned. This Court might, as well as granting a declaration or in lieu thereof, restrain the respondents from taking any further step by way of execution on the judgment of the District Court. That relief is in my opinion available in this Court, any such order acting in personam. St. Justins Propertie Pty. Ltd. v. Rural Holdings Pty. Ltd. (1980) 40 F.L.R. 282 at 285. Such an injunction might need to be in mandatory terms directing the respondents to countermand their instructions to the sheriff. i2. See Corbett v. The King (1932) 47 C.L.R. 317 at 332. Should this Court grant that relief? It 1s true that the appellants were not represented by counsel at the hearing in the District Court. But that was not the fault of the respondents and the fact 1s that the appellants did not bring the deeds of assignment to the attention of the District Court by way of defence or in support of a stay of proceedings in that Court. The respondents may well have been led into continuing the proceedings in the District Court because of the view expressed by the trustee that they had a contingent debt, not provable in bankruptcy. It is true that they had the benefit of legal advice. None of these matters going to the terms of any orders that might be made in favour of the appellants was canvassed before the primary judge and he, having dismissed the application, was not required to consider the matter for himself. The granting of an injunction is a discretionary matter. In my view that discretion should not be exercised in favour of the appellants. Any injunction granted by this Court on appeal would be a permanent injunction, a step that would effectively tie the hands of the District Court notwithstanding the judgment entered by that court. Comity demands that the District Court should remain fully seized of the action brought before it, albeit in the light of any declaration made by this Court. 13. Since writing these reasons, I have read in draft form the reasons for i1udament of Northrop J. His Honour questions whether the Federal Court had iurisdiction to hear and determine the application the subject of this appeal. As his Honour has pointed out, that question was not raised before the primary judge nor was it raised on appeal. I agree with his Honour that 3.30 of the Act is not concerned with jurisdiction but with the powers available to the Court when it exercises jurisdiction. The source of jurisdiction is to be found in sub-s.27(1) which identifies the courts "having jurisdiction in bankruptcy". The jurisdiction of the Court is elaborated by provisions such as s.43 (sequestration orders), s.74 (approval of composition or scheme of arrangement), 8.150 (discharge from bankruptcy) and 8.222 (power to declare deed of assignment, deed of arra&fgement or composition void). Nevertheless it is "jurisdiction in bankruptcy" that is conferred on the Federal Court by gub-s.27(1) and, if a matter may properly be described as "in bankruptcy", the Court may exercise jurisdiction in respect of that matter. The term "bankruptcy" is defined in sub-s.5(1), in relation to jurisdiction or proceedings, to mean "any jurisdiction or proceedings under or by virtue of this Act". 14. There was a similar definition in the Bankruptcy Act 1924. In Re Hawkesford (1937) 10 A.B.C. 26 at 29, Lukin J. said of the 1924 definition: "The words 'in any proceeding in bankruptcy', in my opinion give the Court jurisdiction over matters arising for determination in regard to and under deeds of arrangement, Part XII, just as fully and effectively as they do in a bankruptcy by way of sequestration". In Re Amadio (1978) 24 A.L.R. 455 at 467-469 Rogerson J. referred to Re Hawkesford and cautioned against relying on the construction adopted in cases decided under the Bankruptcy Act 1924 when dealing with the Bankruptcy Act 1966. The question before Rogerson J. was whether the Court of Insolvency of South Australia might entertain an application seeking to challenge a decision by the chairman of a meeting of creditors under Pt X as to the right to vote at that meeting. Nothing in these reasons for judgment is intended to cast any doubt upon the correctness of the decision in Re Amadio. But I am satisfied that questions as to the existence of a provable debt under 8.82 as modified by r.82 and as to the operation of sub-ss.228(2) and 231(1) are matters of jurisdiction under or by virtue of the Act and that the exercise of jurisdiction in regard to those matters is the exercise of jurisdiction in bankruptcy within sub-s.27(1). The sections to which I have referred are not concerned merely with matters of administration; they bear directly on the legal rights and eee wees ewer a neers ao 15. obligations of creditors and debtors in the case of an arrangement with creditors made under Pt X of the Act. Sub-section 30(1) then operates to give the Court full power to decide all questions, of law or fact, in regard to the matter within its cognizance and to make such orders as it considers necessary to carry out or give effect to the Act. It follows that this Court had jurisdiction to entertain the application made to it. But it had no power to set aside the judgment of the District Court and, for the reasons already given, it was not appropriate to do more than grant declaratory relief in limited terms viz that, by reason of sub-s.230(1) of the Bankruptcy Act 1966, the deeds of assignment executed by the appellants on 20 September 1983 operated to release them from their liability to the respondents for breach of the franchise agreement made 10 April 1983. I would allow the appeal and grant a declaration in those terms. I would order that the appellants have the costs of the application to this Court but that there be no order as to the costs of this appeal. Although the appellants are entitled to a declaration, it is a declaration in limited terms and not what they were seeking to obtain by this appeal. I certify that this and the preceding fourteen pages are a true copy of the reasons for judgment herein of his Honour Mr. Justice Toohey. A Pk Associate Dated: 25 November 1986 IN _THE FEDERAL COURT OF AUSTRALIA WESTERN AUSTRALIA DISTRICT REGISTRY GENERAL DIVISION No. WA G6oO of 1986 ~wer ve ON APPEAL FROM A SINGLE JUDGE OF THE FEDERAL COURT OF AUSTRALIA BETWEEN: CHARLES RICHARD MORRIS and PAMELA MORRIS Appellants (Applicants) AND: JOHN MAROUDAS and SHIRLEY JANET MAROUDAS Respondents (Respondents) NORTHROP, TOOHEY and SPENDER J.J. PERTH ajs s a DATE: 25 NOVEMBER 1986 REASONS FOR JUDGMENT SPENDER J.: The chronology of the events leading to this appeal has already been set out in the Reasons for Judgment of Northrop J. and Toohey J.. The appeal raises the question as to the jurisdiction of this Court to deal with the matter. The question — we CTR Te CS TPE ~FaER of jurisdiction was not referred to before the learned primary judge nor on the appeal. Mr. and Mrs. Morris, ("the appellants"), applied at first instance for these orders:- "1. That the judgment for the Respondents against the Applicants delivered 17 January, 1985 in the District Court of Western Australia in Action 2453 of 1983 by His Honour Judge Hammond be set aside. 2. That execution pursuant to the said judgment be stayed. 3. There be a declaration that the Applicants are released from the debt claimed by the Respondents in the said District Court action. 4. Such other orders the Court deemed fit. 5. Costs." The application is dated 6 December 1985. The nature of the contest before the learned primary judge can be seen from some of the material before hin. Mr. Maroudas swore an affidavit on 16 December 1985 in which he said, in part:- "T am advised and verily believe that the judgment debt due to us by the Applicants was not a proveable debt within the meaning of Section 230 of the Bankruptcy Act. The debt was not a debt or liability that would have been a proveable debt in the debtors' bankruptcy if the debtors had become bankrupt on the day on which the Deed of Assignment was executed. Further, the trustee failed to make an estimate of the value of the debt of liability pursuant to Section 82(4) of the Bankruptcy Act; and further, at the date that the Deed was entered into the subsequent judgment sum of $48,660 was not a debt or liability present or i eee a future, certain or contingent as it was merely an assertion by my wite and I that the Applicants were in breach of their contract with us and that breach was strenuously denied by the Applicants." That affidavit exhibited a letter of 27 August 1985 from the solicitors for the appellants to Mr. Maroudas's solicitors. That letter said in part:- "We refer to our letter dated 21st August, 1985 and, having perused the relevant law relating to this matter, must, with respect, advise that we do not agree with your contention that your clients' claim is deemed not to be provable in bankruptcy." And later, "Our understanding of Section 82 of the Bankruptcy Act 1966 is that all debts and liabilities, present or future, certain or contingent, to which a bankrupt was subject at the date of the bankruptcy or to which he may become subject before his discharge by reason of an obligation incurred before the date of bankruptcy are provable in his bankruptcy. On the documentary evidence supplied to us by our clients and the Trustee, it is our firm opinion that the claim by your clients is provable in our clients' bankruptcy." And finally, "Otherwise, if your clients insist on instituting bankruptcy proceedings against Mr & Mra Morris, we have been instructed that we will be instructed to commence proceedings by Originating Summons for a Declaration as to our clients' position." The learned primary judge, in his Reasons for Judgment, gaid, inter alia:- "The applicants ... seek orders setting aside a District Court judgment, staying execution thereon and a declaration that the debtors be released from the debt which gave rise to the judgment. The judgment was entered in the District Court of Western Australia on 17 January 1985 in favour of the respondents (the creditors) whereby the soem TREY rages ane ° Kar" debtors were adjudged liable to pay to the creditors by way of damages the sum of $40,000. The appropriateness of the relief sought may be in doubt but as to form was not the subject of argument. As the application must be dismissed I will regard the application as one seeking a stay of execution." It seems clear from those Reasons that it was assumed that the liability presently in issue was a contingent liability. The learned primary judge posed the question:- "The question here is whether the creditors' then contingent claim should be categorised as a liability to which the debtors were subject at the date of the assignment, i.e. 31 August 1983." rs Having then explored the manner in which r.82 modifies the provisions of s.82 in the context of deeds of assignment under Part X, the learned primary judge concluded:- . "It seems to me therefore that the proper interpretation of the legislative scheme is that contingent and uncertain liabilities allegedly arising from contract at the date of the deed of assignment are not provable in a deed of assignment under Part X." And later, "As I have said, I consider the creditors' contingent claim was not provable under the deed of assignment." And finally, "I am not persuaded in the circumstances that the creditors are bound by the deed of assignment so as to prevent them pursuing their rights under the District Court judgment which was regularly entered. The application is dismissed. The applicants must pay the respondents costs of and incidental to the application." e ca tad . 4 u Bs F +g ib As foreshadowed in the letter of the appellants' solicitors dated 27 August 1985, which referred to an application seeking "a Declaration as to our clients' position", the application to the Federal Court claimed, inter alia, "a declaration that the Applicants are released from the debt claimed by the Respondents in the said District Court action." His Honour's reasons indicated that he was of the view that the creditors were not bound by the deeds of assignment. The Notice of Appeal dated 16 June 1986 included the following grounds:- "2. The learned Judge was wrong in law in holding that the Appellants' liability to the Respondents for breach of contract which occured (sic) prior to the Appelliant's (sic) calling a meeting of their creditors, was a contingent liability. 3. The learned Judge was wrong in law in finding that a contingent liability is not a provable debt under a Deed of Assignment. 6. The learned trial Judge should have held that the Respondents were bound by the Appellants' Deed of Assignment." The orders sought in the Notice of Appeal were:- "1. %IIt be declared that the respondents have no rights to enforce the judgment delivered the 17th day of January, 1985 inthe District Court of Western Australia in Action no. 2453 of 1983. z. %It be declared that the Appellants are released from the debt claimed by the Respondents in the said District Court Action. 3. it be ordered that the Respondents pay the Appellants' costs of the Appeal, and of the application before His Honour Mr. Justice Muirhead." It is to be noted that the only relief sought, apart from costs, is declaratory. It is clear from the chronology earlier referred to that on 22 June 1983, the appellants breached the franchise agreement which had been made between the appellants and the respondents on 10 April 1983. On 31 August 1983, the creditors of the appellants, at a meeting which had been adjourned from 18 July 1983, resolved that the appellants execute deeds of assignment. This they did on 20 September 1983. On 17 January 1985, Hammond J. delivered judgment in the District Court action which had been commenced by Writ on 5 July 1983, and in his Reasons for Judgment held:- "There i3 no question but that as from the 22nd day of June 1983 the defendants failed in their obligations to the plaintiffs in that they failed to supply provide and deliver sausages, maintain an adequate advertising and promotion of the trade names and failed to maintain a@ prompt and efficient delivery service of sausages to the licensee. " He assessed the entitlement to damages for breach of contract in the sum of $40,000.00 and awarded interest of $8,660.00. As at 31 August 1983, when the resolution was passed, and at 20 September 1983, when the deeds of assignment were executed, the obligation of the appellants to the respondents for breach of contract existed. The liability to pay damages for breach of contract was not dependent on any event which might never happen. The liability of the appellants to the respondents as at either of those dates, therefore, was not a contingent liability: In re Sutherland, Decd. £19633 A.C. 235 at 247, 249, per Lord Reid, and at 26] per Lord Guest. The liability was assessed by Hammond J. in a liquidated amount but in no sense was the liability of the appellants to the respondents contingent on the making of any order by Hammond J. It follows that the assumption at first instance that the liability was contingent, is incorrect. Independently of the question of whether the liability was contingent, in my opinion, the claim of the respondents was provable under the deed of assignment. Section 82 of the Bankruptcy Act 1966, as modified by r.82 of the Bankruptcy Rules, applies to and in relation to deeds of assignment: (8.231(2). As so modified, s.82 relevantly provides:- "82(1) Subject to this Division, all debts and liabilities to which a bankrupt was subject at the date of the bankruptcy are provable in his bankruptcy. (2) Demands in the nature of unliquidated damages arising otherwise than by reason of a contract, promise or breach of trust are not provable in bankruptcy. (4) The trustee shall make an estimate of the value of adebt or liability provable in the bankruptcy which, by reason of its being subject to a contingency, or for any other reason, does not bear a certain value. (5) A person aggrieved by an estimate so made may appeal to the Court. (6) If the Court finds that the value of the debt or liability cannot be fairly estimated, the debt or liability shall be deemed not to be provable in the bankruptcy. (7) If the Court finds that the value of the debt or liability can be fairly estimated, the Court shall assess the value in such manner as it thinks proper. (8) In this section, 'liability' includes - (a) compensation for work done or labour done; and (bd) an express or implied engagement, agreement or undertaking to pay, or capable of resulting in the payment of, money or money's worth, whether the payment is - (1) in respect of amount - fixed or unliquidated; or (41) in respect of the manner of valuation - capable of being ascertained by fixed rules or only as matter of opinion." Para.231(3)(b) provides:- "a reference to a provable debt shall be read as a reference to a provable debt within the meaning of this Part." Sub-section 187(2), which is to be found in the same part of the Act, provides:- "In this Part, a reference, in relation to a deed or a composition, to a provable debt shall be read as a reference to a debt or liability that would have been a provable debt in the debtor's bankruptcy if the debtor had become a bankrupt on eernreworrs ~ < 'yer a. ae the day on which he executed the deed or on which the special resolution accepting the composition was passed, as the case may be." In my opinion, on 20 September 1983, when the deeds of assignment were executed, the appellants were subject to a demand on the part of the respondents, that demand being in the nature of unliquidated damages by reason of a contract. That wasa liability to which the appellants were subject as at that date. Applying the statutory provisions referred to above, in ny opinion, that liability was provable under' the deed of assignment. I thus respectfully differ from the conclusion to which the learned primary judge came. In the light of this conclusion, it is necessary to consider the consequences, in this case, of s.228(1), s.228(2), and 230(1). A deed of assignment under Part X, on due execution by the debtor and trustee, binds all the creditors of the debtor: s.228(1). Where a deed of assignment has become binding on all the creditors,- ",..it is not competent for a creditor, so long as the deed remains valid - (b) to enforce any remedy against the person or property of the debtor in respect of a provable debt; or 10. (c) to commence any legal proceedings in respect of a provable debt or take any fresh step in such a proceeding.": s.228(2). Section 230(1) effects a release of provable debts. It provides:- "Subject to this section, a deed of assignment that has become binding on the creditors of the debtor operates, unless declared void under this Part, to release the debtor from all provable debts, other than those (if any) that would not be released by his discharge from bankruptcy if he had become a bankrupt on the day on which he executed the deed." The debts excepted by the subsection are not relevant in this case. The combined effect of these provisions is that, on the due execution of a deed of assignment under Part X, all debts of the debtor which are provable under the deed of assignment are released, and the rights which a creditor previously had in respect of that provable debt are converted into a right to prove under the deed of assignment. What then, in this context, is the jurisdiction of this Court? The Federal Court of Australia has jurisdiction in bankruptcy: 3.27(1). Section 5(1) provides, inter alia, that, unless a contrary intention appears, " 'bankruptcy', in relation to jurisdiction or proceedings, means any jurisdiction or proceedings under or by virtue of this Act." ll. The general powers of the Court are given by s.30(1), which provides:- "The Court - (a) has full power to decide all questions, whether of law or of fact, in any case of bankruptcy or any matter under Part X or Part XI coming within the congizance of the Court; and (b) may make such orders (including declaratory orders and orders granting injunctions or other equitable remedies) as the Court considers necessary for the purposes of carrying out or giving effect to this Act in any such case or matter." In my opinion, there is no power in the Federal Court to set aside the District Court judgment. I respectfully agree with the conclusion of Northrop J. that:- "There is no doubt that any time before the final dividend had been paid by the trustee, the trustee, the appellants or the respondents, could have made application under the Act to the Court for a determination of whether the respondents were creditors of the appellants or whether the claim by the respondents was a provable debt against the appellants." I disagree, however, that the paying of a final dividend by the trustee terminates the power of the Court to consider whether the appellants' claim was provable under the deed of assignment, or whether it was competent, after the execution of the deeds, for the respondents to take any fresh step in the District Court proceedings. 12. I am of the view that, while a defendant who has executed such a deed of assignment might plead s.228(2) and 230(1) by way of defence in such proceedings, it would be within the jurisdiction of the Federal Court to entertain an application by that defendant for a declaration that the claim of the plaintiff in the District Court proceedings is provable under the deed of assignment, and for a declaration that, pursuant to 8.230(1), the deed of assignment operated to release the debtor from those provable debts. It would be also within the jurisdiction of the Federal Court (though questions of comity and discretion would arise), to enjoin the plaintiffs from taking any further step in the District Court proceedings. Such injunctive relief is, of course, in personan. All of those matters would be within jurisdiction and, in my opinion, are within jurisdiction of the Court whether or not the trustee has paid a final dividend. It is not immaterial to note the provisions of 38.102(3), (4) and (6). In this case, the trustee wrote a letter on 15 June 1984 to the appellants in these terms:- "I advise that all matters pertaining to your administrations have now been completed and the final documentation lodged with the Registrar in Bankruptcy. Please find enclosed copies of the Receipts and Payments Statements for each estate during the relevant period." "F 13. I doubt whether this is a certificate within s.232(1) and, in any event, a 5.232 certificate is but prima facie evidence of the facts stated in it: 5.232(2). A trustee 13 not released from his trusteeship by the paying of a 'final dividend' or by the giving of such a certificate: see s.183(2); and 8.184(1). In my respectful opinion, therefore, the paying of a final dividend does not bring to an end the ability of the Court to determine questions involving 38.228(1), 228(2) or 230(1). The fact that the appellants, because of an erroneous view of the law, (which view seems to have been shared, if not initiated, by the trustee), participated in the District Court action proceeding to judgment also does not, in my view, oust the jurisdiction of this Court, though it might be a relevant circumstance affecting the exercise of discretion. Nor, in ny opinion, does the fact of such judgment. A fortiori, in my view, where such judgment is arrived at in ignorance of the effect of $8.228(1), 228(2) and 230(1). It is worth noting that it is not uncommon for a court exercising jurisdiction in bankruptcy ta be invited, for the purposes of giving effect to the provisions of the Bankruptcy Act 1966, to go behind a judgment in another court regularly obtained and not set aside, which the court in an appropriate case does. 14. The fact that there 1s a judgment of another court does not preclude a court exercising jurisdiction in bankruptcy from enquiring into matters that were the basis of the action leading to that judgment. In my opinion, this Court has jurisdiction to declare that by reason of sub-s.230(1) of the Bankruptcy Act 1966, the deeds of assignment executed by the appellants on 20 September 1983 operated to release them from their liability to the respondents for breach of the agreement between the appellants and the respondents. For the reasons earlier given, it is appropriate to grant such a declaration. There is one final matter which, again, was one not argued on the appeal. As earlier indicated, in my view, the judgment in the District Court is a judgment in respect of a provable debt. On 13 November 1985, the respondents issued a warrant of execution against the appellants. In my opinion, it is competent for the Federal Court to enjoin the respondents from taking steps to enforce the District Court judgment. More importantly, in my opinion, the Federal Court, in addition to the power to make orders against the respondents in personam, has power to stay the execution of the warrant of execution. This is to be found in para.60(1)(b) (il), as applied to and in relation toa deed of assignment, by 8.231(2). A OT TK 3 RR EGS x & 15. Para.60(1)(b) provides:- "The Court may, at any time after the presentation of a petition, upon such terms and conditions as it thinks fit - (b) stay any legal process, whether civil or criminal and whether instituted before or after the commencement of this sub-section, against the person or property of the debtor - (1) in respect of the non-payment of a provable debt or of a pecuniary penalty payable in consequence of the non-payment of a provable debt; or (ii) in consequence of his refusal or failure to comply with an order of a court, whether made in civil or criminal proceedings, for the payment of a provable debt, I am fortified in this conclusion by the judgment of Gibbs C.J., (with whom Mason, Wilson and Brennan JJ. agreed), in Storey v. Lane (1981) 147 C.L.R. 549. Gibbs C.J. said at p.556:- "Stated shortly, the effect of the provision is to empower the court to relieve a debtor, against whom a petition has been presented, from process (civil or criminal) instituted against him because of his failure to pay a provable debt. The objects of the paragraph are to ensure that if a sequestration order is (or has been) made against the estate of the debtor his assets will be availabie for administration in the interest of his creditors generally, to prevent one creditor, who has the right to enforce payment of his debt under some other law, from exercising that right so as' to gain an advantage over other creditors, and to protect the debtor from punishment because he has not paid the debt when payment might be a breach of the bankruptcy law." 16. The jurisdiction to stay process under s.60(1) is discretionary: Ex parte Millis. In Re Manning (1870-71) 6L.R. Ch.App. 594. In this case, such a stay was not sought in the Notice of Appeal, though it was in the primary application to this Court. No submissions were addressed to it and s.60 was not adverted to. Moreover, the appellants, in the District Court, made no reference to any provisions of the Bankruptcy Act so that that Court was permitted to proceed to judgment in blitheful ignorance of any possible relevance of the provisions of the Bankruptcy Act to the action before it. No approach was made to the Federal Court until after judgment in January 1985. Indeed, ops such application was not made until after a warrant of execution issued in November 1985. In these circumstances, but primarily for the reason it was not sought on the appeal, it is not appropriate to order any such stay. As earlier indicated, I would allow the appeal. I agree with the orders proposed by my brother Toohey, including the orders as to costs. 4 ———MR JoOINCE WE '2 | 25 NOVEMBER 1986