Re Kyle, E. v Ex parte Aboriginal & Torres Strait Islander Commission [1995] FCA 597

CATCHWORDS BANKRUPTCY - Creditor's petition - bankruptcy notice founded on Magistrates Court judgment debt for rent arrears - whether in truth and reality a debt due - exercise of discretion to go behind the judgment Bankruptcy Act 1966 (Cth) - ss 44, 52 and 82 Corney v Brien (1951) 84 CLR 343 Applied Re Skaff (1933) 113 ALR 715 Applied Wren v Mahony (1972) 126 CLR 212 Applied Re Eric Kyle; Ex parte Aboriginal and Torres Strait Islander Commission QP 2743 of 1994 Drummond J Townsville 3 August, 1995

IN THE FEDERAL COURT OF AUSTRALIA ) No. QP 2743 of 1994 GENERAL DIVISION ) BANKRUPTCY DISTRICT OF ) THE STATE OF QUEENSLAND ) RE: ERIC KYLE Debtor EX PARTE:ABORIGINAL AND TORRES STRAIT ISLANDER COMMISSION Creditor MINUTES OF ORDER JUDGE MAKING ORDER: Drummond J DATE OF ORDER: 3 August, 1995 WHERE MADE: Townsville THE COURT ORDERS THAT: 1. The petition be dismissed. NOTE: Settlement and entry of orders is dealt with in Rule 124 of the Bankruptcy Rules.

IN THE FEDERAL COURT OF AUSTRALIA ) No. QP 2743 of 1994 GENERAL DIVISION ) BANKRUPTCY DISTRICT OF ) THE STATE OF QUEENSLAND ) RE: ERIC KYLE Debtor EX PARTE:ABORIGINAL AND TORRES STRAIT ISLANDER COMMISSION Creditor CORAM: Drummond J PLACE: Townsville DATE: 3 August, 1995 REASONS FOR JUDGMENT I have before me a petition by the Aboriginal and Torres Strait Islander Commission ("ATSIC") seeking a sequestration order against Mr. Eric Kyle. The petition is founded on non-compliance by Mr. Kyle with a bankruptcy notice calling on him to pay the amount of a judgement debt for $4,338.75. Mr. Kyle challenges ATSIC's entitlement to a sequestration order on two bases. Firstly, he contends that ATSIC was not entitled to recover this judgment because of his previous bankruptcy. The judgment on which the petition is based was given on 15 October, 1993. It was for arrears of what are described as rent in respect of a 66 week period commencing on 8 July, 1992, i.e., after the applicant was bankrupted in February 1991. Mr. Kyle's previous bankruptcy was therefore no bar to ATSIC obtaining this judgment against him: see s. 82(1) the Bankruptcy Act 1966 (Cth). Secondly, Mr. Kyle has raised a more substantial argument against the making of a sequestration order by his contention that there is no debt truly owing by Mr. Kyle to ATSIC, despite the judgment debt. I am invited to go behind the judgment. The judgment here in question was obtained after a contested hearing in the Magistrates Court at Mount Isa, at which Mr. Kyle was legally represented. The Bankruptcy Court will not automatically go behind such a judgment: substantial reasons must be shown by the debtor to question the correctness of the determination that the debtor was indebted to the creditor in the respect reflected in the judgment. See Wren v Mahony (1972) 126 C.L.R. 212 at 224-5. ATSIC has put before me the reasons which the Magistrate gave for judging Mr. Kyle liable to pay the judgment debt on which the petition is founded. It is what emerges from those reasons that has caused me to think that this is a proper case to go behind the judgment. In early 1988 Mr. Kyle was president of the Balyanna Community Advancement Co-Operative Society Ltd. ("the Society") in Mount Isa. This Society claimed ownership of a large number of houses, including the one at 63 Suter Road in which Mr. and Mrs. Kyle lived. Mr. Kyle, in his affidavit, says that the board of directors of the Society made a decision to establish an office at 63 Suter Road and also decided that Mr. and Mrs. Kyle were to live at that address rent free, a decision bound up with the earlier one to make use of those premises as the Society's office. Mr. Kyle has tendered the relevant minutes of the meeting of directors of the Society held on 17 May, 1986 which confirms what he has to say in this regard. However, in proceedings in the Supreme Court of Queensland between the Aboriginal Development Commission ("the Commission"), the statutory predecessor of ATSIC, as plaintiff, and the Society and Mr. and Mrs. Kyle as defendants, de Jersey J declared on 4 November, 1988 that the Commission owned each of the properties, including 63 Suter Road, and made orders vesting those properties in the Commission. By June 1989 the title was registered in the name of the Commission. The complaint of ATSIC upon which the judgment debt is founded is set out in the Magistrate's reasons. ATSIC sought, firstly, possession of the 63 Suter Road premises from Mr. and Mrs. Kyle, alleging that it was held by them under a periodic tenancy being a tenancy from fortnight to fortnight acknowledged by Mr. and Mrs. Kyle as commencing on 4 November, 1988, which was terminated on 30 September, 1992 by a notice to quit and demand for possession dated 15 September, 1992. Secondly, ATSIC claimed rent in respect of the whole of the period from 4 November, 1988. In the course of recording his findings on fact, the Magistrate said that it was discovered after November 1988 when the Commission became the owner of the 63 Suter Road premises that a tenancy agreement had not been entered into by the Commission and Mr. and Mrs. Kyle. At this time the Commission arranged for a letter to be sent to the Kyles, as well as apparently to a large number of other persons in occupation of premises previously owned by the Society but which had been vested in the Commission by the Supreme Court order. This general letter, as the Magistrate described it, was sent to Mr. and Mrs. Kyle and the other occupants in 1988 or 1989. The Magistrate also found that in June 1992 a letter was forwarded to Mr. Kyle and on 8 July, 1992 a similar letter was sent to Mrs. Kyle. Each informed them that a tenancy agreement had not been entered into and the Magistrate continued by finding that, as there was no response to either of these letters, ATSIC served a notice to quit on them in early September 1992 requiring them to quit the premises by 30 September, 1992. Mr. Kyle has not put any evidence before me which puts into dispute any of these facts. He says in his affidavit that at no time was a tenancy agreement drawn up or signed and the funding body, a reference I take to be to the Commission and its successor, ATSIC, were fully aware of this arrangement as this showed up on each quarterly rental report presented to them by the Society. He relies, as I have said, on the decision of the Society's board of 1986 allowing him and his wife to occupy the premises rent free thereafter. Because of this, Mr. Kyle continued, no pressure was put on the Society by the funding body to collect rent or even have a tenancy agreement signed. ATSIC did not dispute what Mr. Kyle said about the position that existed as between the Commission and then ATSIC, from November 1988 until mid-1992, when ATSIC did take the action I have referred to aimed at recovering possession of 63 Suter Road from Mr. and Mrs. Kyle. Given the period of time that appears to have passed between the Commission becoming owner of the premises in November 1988 and action being taken to eject Mr. and Mrs. Kyle, who never paid any rent in the whole of this period of nearly four years, there seems to be a deal of substance in what they have to say in that regard. However, there is clear evidence that from well prior to the period in respect of which the Magistrate gave judgment against Mr. and Mrs. Kyle for rent due, viz., 8 July, 1992 to 15 October, 1993, when he pronounced his judgment, ATSIC or the Commission, and not the Society, was the landlord of the premises. There is no evidence before me that raises any suggestion that the Society had any authority to bind either the Commission or ATSIC to give Mr. and Mrs. Kyle rent free occupation of the premises in question after November 1988, as Mr. Kyle says the board did, back in 1986. That 1986 decision of the Society could not bind the landlord, the Commission or ATSIC, after November 1988. It might be suggested that ATSIC's knowledge that Mr. Kyle was not paying rent in the period from 4 November, 1988, coupled with its inaction, at least until June 1992 in failing to demand payment, raised an estoppel against ATSIC demanding payment. But ATSIC's actions in mid-1992 would be sufficient to prevent any claim that ATSIC was, from about that time on, estopped from demanding payment from Mr. Kyle for his occupation of the premises. On any view of the evidence before me, it seems clear that Mr. Kyle was not a trespasser at any time during his occupancy of the premises from November 1988, at least until the notice to quit expired. He was in occupation on 4 November, 1988, when in proceedings in which he was a party, orders were made declaring the Commission, not the Society, to be the owner of the premises. The Commission clearly was aware of Mr. Kyle's occupancy. However, neither it nor its successor took any action to remove Mr. Kyle until September 1992, when the notice to quit was issued. That Mr. Kyle was not a trespasser was the view expressed by the Magistrate in his reasons. He said that the only two competing explanations for the Kyles' occupancy of the premises were that they were in occupation under what he called a tenancy on sufferance or that Mr. and Mrs. Kyle were in the house illegally. He concluded that some form of tenancy must have existed, whether it be oral or written, because, as he said, it would defy imagination for the defendants to be in occupation of the premises illegally. As I have indicated I have no difficulty in accepting that Mr. and Mrs. Kyle were not on the premises illegally from 4 November, 1988. But whether the only alternative to their being trespassers from November 1988 is that there must have been some form of tenancy between Mr. Kyle and the Commission and then ATSIC, as the Magistrate said was the case, is a questionable proposition. There is no basis for thinking that ATSIC as landlord had legally bound itself to allow Mr. Kyle to use the premises free of charge. As from June 1992, when ATSIC called on Mr. Kyle to execute a tenancy agreement, Mr. Kyle well knew he could only occupy 63 Suter Road if he did that. I infer that rent was required to be paid under the terms of his agreement. ATSIC was therefore entitled in my view to recover payment from Mr. Kyle in respect of his occupancy in the period 8 July, 1992 to 30 September, 1992 when the notice to quit expired. The cause of action giving ATSIC that entitlement would be an action for use and occupation. In Halsbury's Laws of England, 4th Ed., Vol. 27, paragraph 254, the circumstances in which such an action lies are described in this way: "... wherever the landlord has permitted the defendant to occupy his land with the intention of creating [the relationship of landlord and tenant], the landlord may bring an action for use and occupation to recover a reasonable satisfaction for the land held or occupied by the tenant [even though no actual relationship of landlord and tenant ever comes into existence]."