Re Mehta, Peshotan v Ex Parte Motley, Geoffrey Peter & Anor [1995] FCA 903

CATCHWORDS BANKRUPTCY - bankruptcy notice - review of order of Deputy Registrar to not set aside - argument that amount claimed exceeded amount owed by judgment debtor - whether court to go behind judgment. Wren v Mahony (1972) 126 CLR 212 No SN 193 of 1995 Re: PESHOTAN MEHTA Judgment Debtor Ex Parte:GEOFFREY PETER MOTLEY and PETER MARK MOTLEY Judgment Creditors Branson J Adelaide 8 November 1995

IN THE FEDERAL COURT OF AUSTRALIA) ) SOUTH AUSTRALIA DISTRICT REGISTRY) ) GENERAL DIVISION ) No SN 193 of 1995 ) BANKRUPTCY DISTRICT OF THE ) ) STATE OF SOUTH AUSTRALIA ) Re: PESHOTAN MEHTA Judgment Debtor Ex Parte:GEOFFREY PETER MOTLEY and PETER MARK MOTLEY Judgment Creditors REASONS FOR JUDGMENT CORAM: Branson J PLACE: Adelaide DATE: 8 November 1995 The judgment debtor by an application to the Court dated 26 May 1995 sought an order that a bankruptcy notice dated 29 March 1995 served on him by the judgment creditors be set aside. The application was heard by the Deputy Registrar and on 24 July 1995 he published reasons dismissing the application. The judgment debtor sought a review of the order of the Deputy Registrar by an application dated 4 August 1995. A review hearing was conducted before me on 17 October 1995 and on that day I confirmed the decision of the Deputy Registrar. I indicated that I would publish my reasons later. These are my reasons.

The ground upon which it is contended that the bankruptcy notice should be set aside is that the amount claimed by the notice exceeds the amount owed by the judgment debtor to the judgment creditors. The amount claimed by the bankruptcy notice is $9,497.95. The copy of the record of the Adelaide Magistrates' Court (Civil) attached to the application of the judgment creditor for the bankruptcy notice reveals that on 20 May 1994, in proceedings in which the judgment creditors were plaintiffs and the judgment debtor was defendant, the court was informed that the matter was settled and "... by consent judgment [was entered] for the Plaintiffs in the sum of [$]24,500.00 inclusive of interest and costs, with judgment for the Plaintiffs on the c[ounter]/claim with no order as to costs." The record goes on as follows:- "There is to be a stay of execution of the judgment upon payment by the Defendant of a sum of $500.00 per week, in two payments of $250.00 on the Tuesday and Friday of each week, 1st payment due on 24/5/94. The whole of the balance of the judgment debt unpaid will fall due and owing upon default in any payment for a period in excess of 7 days." The judgment debtor accepts that judgment by consent was entered against him in the Adelaide Magistrates' Court in the sum of $24,500.00. However, he says that he has made 88 payments to the judgment creditors of $250.00 each making the total amount paid $22,000.00. Accordingly he asserts that he is indebted to the judgment creditors in the sum of $2,500.00 only. It is not disputed on behalf of the judgment creditors that the judgment debtor has made 88 payments of $250.00 each to them. However, it is their case that significant numbers of such payments were made before the date of the judgment. The total amount of such payments, it is contended, were taken into account in the calculation of the settlement figure and, for this reason, they are not amounts to be deducted from the settlement figure or judgment sum. This contention is supported by a letter placed in evidence by the judgment debtor. The letter is from his accountant and gives details of payments made by him to the "Motley's account". It refers to 88 payments of $250.00 each made between 2/11/93 and 13/12/94. That is, it includes in the 88 payments, payments made before the date of the judgment. Mr Geoffrey Motley , one of the judgment creditors, deposes by affidavit dated 31 May 1995 to the judgment debtor having made 63 payments of $250.00 each since the date of the judgment. That is, a total of $15,700.00. Mr Motley supports this statement with a schedule giving the date of each such payment and by copies of his banking records showing such payments. I accept the evidence of Mr Motley. It is not, I think, seriously disputed. The explanation for the bankruptcy notice claiming an amount greater than the difference between the initial judgment sum of $24,500.00 and the $15,700.00 which I find has been paid by the judgment debtor is explained by Mr Motley in his affidavit as being interest payable under the Magistrates' Court Rules on the balance outstanding on the judgment debt. There was no challenge made to this explanation, or as to the appropriateness of the amount claimed as interest. Mr Sallis, who appeared on behalf of the judgment debtor, invited the Court to go behind the judgment debt for the purpose of finding that the "real debt" owed by the judgment debtor to the judgment creditor was less than the amount of the judgment debt. I do not consider that this is a case in which it would be appropriate for the Court to go behind the judgment debt. First, it is clear that the agreement which lead to the settlement of the Magistrates' Court proceedings is accurately reflected in the judgment entered. The agreement was entered into by the judgment debtor's solicitors on his clear instructions. A copy letter from his then solicitors setting out such instructions and requesting his confirmation is in evidence before me. Such copy letter has been signed by him by way of confirmation of the instructions. In addition, later correspondence between the judgment debtor and the solicitors who acted for him in the Magistrates' Court proceedings is in evidence before me. It does not support the complaint made on behalf of the judgment debtor before me that the amounts paid by him to the judgment creditor before the date of settlement of the Magistrates' Court proceedings ought to have been deducted from the settlement figure. Although this Court has undoubted power to go behind a judgment debt it does not do so as a matter of course. There must be "substantial reasons for questioning whether there is a debt in truth and reality" (Wren v Mahony (1972) 126 CLR 212). In my view there are no such reasons in this case. For the above reasons the decision of the Deputy Registrar was confirmed by me on 17 October 1995. I certify that this and the preceding pages are a true copy of the Reasons for Judgment of the Honourable Justice Branson. Associate: Dated: Counsel for the Judgment Debtor : Mr R Sallis Solicitors for the Judgment Debtor : Jaak Oks Counsel for the Judgment Creditors : Mr T Mellor Solicitors for the Judgment Creditors: Mellor Olsson Hearing Date : 17 October 1995