FEDERAL COURT OF AUSTRALIA Nejad v Vouris [1999] FCA 347 FRANK M NEJAD v JOHN VOURIS NG 1443 OF 1998 JUDGES: BEAUMONT, FINN & HELY JJ. DATE: 30 MARCH 1999 PLACE: SYDNEY IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY NG 1443 OF 1998 BETWEEN: FRANK M NEJAD Applicant AND: JOHN VOURIS Respondent JUDGES: BEAUMONT, FINN & HELY JJ DATE OF ORDER: 30 MARCH 1999 WHERE MADE: SYDNEY THE COURT ORDERS THAT: 1. The appeal is dismissed with costs. Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules. IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY NG 1443 OF 1998 BETWEEN: FRANK M NEJAD Applicant AND: JOHN VOURIS Respondent JUDGES: BEAUMONT, FINN & HELY JJ DATE: 30 MARCH 1999 PLACE: SYDNEY REASONS FOR JUDGMENT BEAUMONT & FINN JJ. 1 We have had the benefit of reading the reasons for judgment of Hely J and agree with those reasons. I certify that the preceding one (1) numbered paragraph is a true copy of the Reasons for Judgment herein of their Honours Justice Beaumont and Justice Finn. Associate: Dated: 30 March 1999 IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY NG 1443 OF 1998 ON APPEAL FROM A SINGLE JUDGE OF THE FEDERAL COURT BETWEEN: FRANK M NEJAD Appellant AND: JOHN VOURIS Respondent JUDGES: BEAUMONT, FINN & HELY JJ DATE: 30 MARCH 1999 PLACE: SYDNEY REASONS FOR JUDGMENT HELY J: 2 On 11 December 1998 an order was made for the sequestration of the appellant's estate on the petition of a creditor, Mr John Vouris. 3 The Creditor's Petition was founded on a bankruptcy notice served on the appellant on 11 February 1998 claiming payment of $14,500. That debt was based upon an order made by Einfeld J in proceedings NG 3185 of 1995 on 28 February 1996, to the effect that Sanirise Pty Ltd, Christine Kelly and the appellant should pay the respondent's costs of those proceedings. The respondent to those proceedings is John Vouris. 4 Those costs were taxed at $14,500 and on 26 November 1997 an order for the payment of those costs was entered. 5 Proceedings NG 3185 of 1995 began as an application in which Sanirise Pty Ltd was named as applicant and Court & Co was named as respondent. The trial judge details the subsequent history of the proceedings in his reasons for decision, and explains how it is that the proceedings were ultimately constituted as a claim by Sanirise Pty Ltd as first applicant, Christine Kelly and Frank Nejad, as second applicants against John Vouris as respondent. 6 The Notice of Appeal includes as the sole ground of appeal an assertion that the respondent to the proceedings was Court & Co, as distinct from Mr Vouris, and any change in that position was "not legal". 7 But, on 5 July 1994 Mr Vouris was appointed Administrator of Sanirise Pty Ltd. The Amended Application and Statement of Claim filed on 29 June 1995 sought an order, on the application of amongst others, the appellant, for the removal of Mr Vouris as administrator. Mr Vouris was thus a necessary and proper person to be joined as respondent to the proceedings. 8 The transcript of the proceedings before Einfeld J on 30 June 1995 confirms that the name of the respondent was changed to John Vouris, in the Amended Application pursuant to a direction of the Court. The costs order made by Einfeld J on 28 February 1996 was in relation to the Amended Application and Amended Statement of Claim, rather than in relation to the proceedings as originally constituted. 9 In his reasons for decision given on 28 February 1996 Einfeld J said: "For those reasons it is my decision that the proceedings by Sanirise Pty Ltd and the two individual applicants, Kelly and Nejad, against John Vouris should be dismissed with costs, including any costs reserved on previous occasions." His Honour's intention was clear, and is reflected in the orders subsequently entered, namely that John Vouris' costs in proceedings NG 3185 of 1995 should be paid by Sanirise Pty Ltd, Kelly and Nejad. That creates a joint and several liability for the payment of the costs: Re Bowen Ex Parte v The Australian Workers Union & Ors (1945) 13 ABC 275 at 278; (1945-6) 72 CLR 575 at 583, 584, 591. 10 No appeal was lodged against his Honour's decision, nor was an application for leave to appeal filed. As a result of his Honour's decision and the subsequent taxation of the costs ordered to be paid, the appellant became jointly and severally indebted to the respondent in the sum of $14,500. That was a liquidated sum due at law and payable (at least after 26 November 1997 when the order for payment was entered) immediately. Thus the conditions specified in s 44(1)(a) and (b) of the Bankruptcy Act 1966 were satisfied. 11 The cases show that a court of bankruptcy needs to be satisfied that the petitioning creditor is owed the money on which the petition is founded before it changes the legal status of a person to that of a bankrupt. In some circumstances the Bankruptcy Court will "go behind" a judgment in order to see whether it is satisfied of the matters referred to in s 52(2) of the Bankruptcy Act. A recent case recording the applicable principles in that respect is the decision of the Full Federal Court in Udovenko v Mitchell (1999) 160 ALR 161. 12 The order made by Einfeld J was made in contested proceedings and has not been the subject of an appeal. No basis has been shown as to why the Bankruptcy Court should have gone behind the order which Einfeld J made, and which was the foundation of the Bankruptcy Notice. 13 In any event, as the reasons of the trial judge made clear, Einfeld J intended that the costs of the proceedings before him should be paid by, amongst others, the appellant. His Honour clearly had jurisdiction to make an order to that effect whether or not the proceedings were reconstituted so as to include the appellant as a party. 14 The appeal is dismissed with costs. I certify that the preceding thirteen (13) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Hely. Associate: Dated: 30 March 1999 Applicant: In person Counsel for the Respondent: J T Johnson Solicitor for the Respondent: Watson Mangioni Date of Hearing: 30 March 1999 Date of Judgment: 30 March 1999