JUDGMENT No. .2SSronol L232 IN THE FEDERAL COURT OF AUSTRALIA GENERAL DIVISION BANKRUPTCY DISTRICT OF NEW SOUTH WALES AND AUSTRALIAN CAPITAL TERRITORY No. W 1607 of 1987 Nee ee ee Between: Kurt PICCARDI and Geraldine PICCARDI Debtors lz Q George Gregory GRIVAS Petitioning Creditor CORAM: Einfeld J. DATE: 7 September 1987 PLACE: Sydney EX—-TEMPORE JUDGMENT On 18 November 1986 Justice Neaves made a sequestration order against the debtors on the petition of the petitioning creditor. The matters now before the court in relation to that sequestration order are applications by the debtors for rescission and/or annulment. In circumstances set out in an earlier judgment of mine in this matter, before the applicants may proceed with their application for rescission, it is necessary for them to move to set aside the signing and sealing of a sequestration order which ordinarily would preclude an application for rescission. This matter has been before the court now on a number of occasions and certain creditors have been represented in addition to the petitioning creditor. A number of procedural directions have been given in order to ready this matter for hearing today, and, as I am informed, these creditors have complied, as they have been advised, with those procedural directions. At the commencement of the hearing this morning, and without prior notice to the other parties or to the court, the petitioning creditor announced, through his solicitor, his withdrawal of his previous staunch and stout opposition to the applications made by the debtors. He announced also that he now consents to the setting aside of the sealing and signing of the sequestration order, and to the consequent rescission and, if it be necessary, to annulment as well. The legal representatives of four creditors assert an entitlement, as of law, to participate in and pursue opposition to the various applications made by the applicant. They say that if they do not have a right to he heard, they seek leave to be heard in opposition to the applicants' applications. It should be noted that I have previously heard three out of the four creditors, through their legal representatives, during the course of earlier proceedings, including the initial hearing of the application to set aside the signing and sealing of a sequestration order. The assertion of their entitlement to be heard, as of law, or alternatively, theix application for leave to be heard is now not limited to any part of the applicants' applications, but is comprehensively to oppose them. Various provisions of the rules were referred to in support of the submission that these creditors have a right to be heard as of law, but I am by no means sure that this is a correct interpretation of the provisions referred to. Indeed, as a matter of common sense, it seems to me unlikely. that creditors would have an unfettered right enforceable, if necessary, for prerogative writ, or some such similar administrative order, to carry on what could be substantial and lengthy proceedings when an examination of their bona fides, and of their interest in the proceedings, might be shown to be either trivial or unworthy. It seems to me that in those circumstances, the public interest would require that there should, in advance of the proceedings, be heard not a submission of entitlement but an application for leave in which the appropriate issues could be addressed. When judgment is ultimately given in this matter, I will examine this question more deeply than the time permits at the present time, in deference to what appears to have developed as a practice in the court, to permit, almost as of right, creditors to be heard in full in proceedings brought by a bankrupt. In support of the applications for leave to be heard in these proceedings, the various creditors assert that they are either admitted or judgment creditors of the bankrupts; that the bankrupts have thus far in the proceeedings not opposed and indeed concurred in the appearances and right to make submissions by these creditors; that the petitioning creditor's late withdrawal of his opposition should permit their appearance; and that in the case of the company Dick and Don's Pty. Limited, a judgment creditor seeking to appear, it had a petition before the court at the time when the petitioning creditor's petition successfully achieved a sequestration order; and that its petition was dismissed because the sequestration order had been made. It says in this regard that it was and would have been ready to proceed with its petition and that its petition would more than likely have been successful. The applicants oppose the granting of leave on the grounds that a meeting of creditors, that was held in May 1987, at the instance of the parties but with the concurrence of the court, voted overwhelmingly in favour of permitting a Part X arrangement to be entered into by the bankrupts with their creditors. Something less than five percent of the value of the debts which have been identified as those of the debtors, voted against this opportunity being given, and the applicants for leave in these proceedings number only a small proportion even of that minority. The bankrupts also submit that in relation to a company called Fire Fighting Equipment Company Limited, whose representative was present at the meeting, and who is now seeking leave to intervene, only gave notice of its intention to oppose the orders sought by the bankrupts last Friday, long after the time limit fixed by the court had passed for such opposition to be notified. In answer to those submissions, the creditors who are applying for leave point to the fact that the meeting was an informal meeting that had no force of law because, of course, it took place after the sequestration order was made. It is obvious that such a meeting could only vote or indicate a point of view in relation to a possible arrangement between the creditors and the debtors in the event that the sequestration order was rescinded, or otherwise desposed of. The creditors thus say that the court should not read into the voting at that meeting anything which would be influential in deciding whether leave should be granted. It is also submitted that the meeting itself had some features which were indicative of an unsatisfactory state of affairs upon which the court should therefore place no reliance. As to the objection to leave being granted to Fire Fighting Equipment Company Limited, it is said that, although its opposition has been notified very late, no prejudice would flow to the bankrupts and that leave should nonetheless be granted. It seems to me that this type of procedure is a very unsatisfactory way in which to deal with very significant rights of parties and a very significant public interest. The whole of the question of the status of these creditors in these proceedings was raised by me when the petitioning creditor withdrew his opposition. In order to ascertain presicely who were the parties to this litigation and what issues were properly before the court in the proceedings. Whilst of course it is true that the petitioning creditors consent or otherwise to orders of the kind which the bankrupts are seeking would not be decisive in the proceedings, they obviously represent one significant or primary factor to be considered. So far as_ the bankrupt is concerned, it is obvious that if they were unable to dispose satisfactorily or favourably to them of the inappropriateness of the sequestration order obtained by the petitioning creditor last November, no further questions would arise in these proceedings. I am troubled by the fact that creditors who, generally speaking, prove their debts by making a statement from the bar table that the bankrupts are indebted to them should thereby obtain some form of standing before the court to conduct lengthy and expensive litigation for the purpose of permitting the court to determine what is or is not in the public interest. These creditors perfectly properly have no status in defending the public interest. They assert their own interests. On the other hand, it is long standing law that applications by bankrupts must be dealt with with a view to the interests of creditors as a whole and the interests of the public. The amount of the alleged debt involved in this bankruptcy is, as I have pointed out in a previous judgment, quite staggering in size, and it would be wrong for the court to proceed on the basis that would not permit at least some analysis of the capacity of these bankrupts to pay their debts in the event that they should succeed in either or both of these applications. I will, as I say, in my ultimate judgment in this matter, give attention to this whole question of the status of judgment' creditors in circumstances such as these and the way in which their permission to participate in these proceedings might beneficially be resolved. For the present, I am satisfied that there are grounds which, at least prima facie, call for leave to be granted to the creditors to participate in and, as I am informed they intend to do, to oppose the bankrupt's applications. As to Fire Fighting Equipment Company, I think ordinarily that company would be excluded from intervention because of its late notification of opposition, but I think that the bankrupts will be able to be protected against whatever flows from their admission as a party to these proceedings now in the form of costs. As the litigation, by and large, appears likely to proceed upon broader bases than merely the debt of this company, it seems to me that nothing will be seriously lost by admitting them as a participating party in the proceedings at this stage, though, as I say, ultimately, it may have to deal with an application for costs notwithstanding the result which may at that time be otherwise in their favour. For those reasons, I propose to grant leave to Dick and Don's Proprietary Limited, BW Modern Interiors Proprietary Limited, Fire Fighting Equipment Company Limited and Boral Johns Perry Industries Proprietary Limited to participate in these proceedings as respondents to the applications.