JUDGMENT No. sunt tH CATCHWORDS BANKRUPTCY - sequestration order - Judgment debt - validity of Judgment of Adelaide Magistrates Court No. SP 313 of 1994 Re: DOUGLAS WILTSHIRE-SMITH Branson J. 5 December 1994 Adelaide RECEIVED -8 DEC 1994 (DERAL COURT OF AUSTRALIA PRINCIPAL REGISTRY IN THE FEDERAL COURT OF AUSTRALIA ) ) CT_REG ) ) GENERAL DIVISION ) No. SP 313 of 1994 ) BANKRUPTCY DISTRICT OF THE STATE ) ) QF SOUTH AUSTRALIA ) Re: sw = fe SON fe) CORAM: Branson J. DATE: 5 December 1994 PLACE: Adelaide This is a contested application for the making of a sequestration order against the estate of the debtor. The judgment creditor obtained a default judgment against the debtor in the Adelaide Magistrates Court in its Civil Division on 25 March 1993. There is nothing to suggest that the default judgment was not lawfully and properly obtained. Application was made by the debtor to the Adelaide Magistrates Court to have the judgment set aside. The application was heard and determined by Mr Prescott SM. From what Mr Wiltshire-Smith has told me today all relevant material was apparently placed before Mr Prescott for his consideration. Mr Prescott dismissed the application. No appeal from his decision was instituted. -2- The bankruptcy notice relating to the unpaid default judgment was served on the debtor on 11 August 1994. It called for compliance within 14 days, that is on or before 25 August 1994. It was not complied with within that time nor was any application made to this court within that time for an order extending the time for compliance with the bankruptcy notice. An act of bankruptcy was thus committed by the debtor upon the expiration of the 14 day period. An application made by the debtor after the expiration of the 14 day period referred to in the bankruptcy notice sought an order setting aside the bankruptcy notice. This application was heard by O'Loughlin J. His Honour did not construe the application as containing an application for an extension of time within which to comply with the bankruptcy notice. However, he indicated that if such an application had been made he did not regard it as appropriate to consider it. He considered the application to set aside the bankruptcy notice. He dismissed the application with costs. Subsequently the debtor sought leave to appeal against the decision of O'Loughlin J. That application came before me and was refused. The debtor now asks me to exercise a discretion to refuse to make a sequestration order. He asserts that the judgment debt does not reflect a pre-existing liability in him to make payment to the judgment' creditor. He asserts that he -3- consulted the judgment creditor, a firm of legal practitioners, as an officer of a company Leighton Hill Pty Limited, and that this fact was known to the judgment creditor. He therefore contends that the contract for the provision of legal services was between Leighton Hill Pty Limited and the judgment creditor. The judgment creditor, however, asserts to the contrary. It asserts that the contract was entered into by the judgment debtor personally. This issue has been ventilated and determined adversely to the debtor in his application to set aside the judgment of the Adelaide Magistrate's Court. As to the effect before this court of the decision of the Adelaide Magistrate's Court, I am content to refer to what was said by O'Loughlin J in his reasons for decision on the application of the debtor to set aside the bankruptcy notice. At pages 7 to 8 of his ex tempore reasons his Honour said this: "There is no doubt that this court is entitled to go behind the Magistrates Court judgment and inquire into the validity of the debt - Petrie v Redmond (1942) 13 ABC 44, For bankruptcy purposes, a judgment is only prima facie evidence of a debt - Ex parte Lennox (1885) 16 QBD 315 at 329 - but a court will not do so as a matter of course - Wren v Marnie (1972) 126 CLR 212. It is not sufficient for a debtor to express dissatisfaction with -4- the results of earlier litigation. Nor is 1t enough to make general accusations, such as the judgment creditors well knew that the debtor was merely acting as a representative of a limited liability company. I share the view expressed by Justice Pincus in Re V & J Removals Ex parte Earl (unreported judgment, Federal Court, delivered 21 June 1985) that Wren v Marnie (supra) is authority for the proposition that a judgment debtor must satisfy the court that there are substantial reasons for questioning the validity of a judgment. No information was placed before the court in these proceedings that would point to any irregularity in the proceedings before Mr Prescott. Although I was informed from the bar table that the magistrate did not give any reasons for his decision, no challenge has been mounted about the manner in which he conducted the debtor's application to have the judgments set aside. I have come to the conclusion that the debtor has failed to satisfy me that there are substantial reasons for questioning the validity of the judgment." I agree with the reasoning of O'Loughlin J as set out in his ex tempore judgment. I am not satisfied that there are substantial reasons in this case for questioning the validity of the judgment of the Adelaide Magistrates Court. -5- I make a sequestration order against the estate of the debtor. Judgment Debtor in Person Counsel for the Petitioning Creditor Solicitors for the Petitioning Creditor Counsel for the Supporting Creditor Solicitors for the Supporting Creditor Hearing Date er I certify that this and the preceding pages are a true copy of the Reasons for Judgment of Justice Branson. S maowhbey Ae G Dated: Douglas Wiltshire-Smith Mr T Mellor Mellor Olsson Mr J Taylor Randle & Taylor 5 December 1994