Commonwealth of Australia v Williams [2000] FCA 1928

FEDERAL COURT OF AUSTRALIA

Commonwealth of Australia v Williams [2000] FCA 1928 BANKRUPTCY – application for sequestration order THE COMMONWEALTH OF AUSTRALIA & ANOR v PATRICIA LORRAINE WILLIAMS N 7539 OF 2000 EMMETT J 13 DECEMBER 2000 SYDNEY

IN THE FEDERAL COURT OF AUSTRALIA

NEW SOUTH WALES DISTRICT REGISTRY N 7539 OF 2000

BETWEEN: COMMONWEALTH OF AUSTRALIA

FIRST APPLICANT

OFFICIAL TRUSTEE IN BANKRUPTCY

SECOND APPLICANT

AND: PATRICIA LORRAINE WILLIAMS

RESPONDENT

JUDGE: EMMETT J

DATE OF ORDER: 13 DECEMBER 2000

WHERE MADE: SYDNEY

THE COURT ORDERS THAT: 1. A sequestration order be made against the estate of Patricia Lorraine Williams. 2. The applicant creditors' costs (including reserved costs, if any) be taxed and paid from the estate of the respondent debtor in accordance with the Bankruptcy Act 1966 (Cth).

THE COURT NOTES THAT: 3. The date of the act of bankruptcy is 13 June 2000. 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 N 7539 OF 2000

BETWEEN: COMMONWEALTH OF AUSTRALIA

FIRST APPLICANT

OFFICIAL TRUSTEE IN BANKRUPTCY

SECOND APPLICANT

AND: PATRICIA LORRAINE WILLIAMS

RESPONDENT

JUDGE: EMMETT J

DATE: 13 DECEMBER 2000

PLACE: SYDNEY

REASONS FOR JUDGMENT 1 I have before me a petition for the sequestration of the estate of Patricia Lorraine Williams. The applicants are the Commonwealth of Australia and the Official Trustee in Bankruptcy. The petition is based on an act of bankruptcy committed on 13 June 2000 when Ms Williams failed to comply with the requirements of a bankruptcy notice served on her on 26 April 2000. The time for the compliance of the bankruptcy notice had been extended by the Court to 5.00 pm on 13 June 2000. 2 Ms Williams filed a notice of intention to oppose the petition on 13 July 2000. The grounds then specified were as follows: "1. The Respondent is appealing the position of Lindgren J. in N-7389 of 2000 in not setting aside the bankruptcy notice NN622 of 2000. 2. The Respondent is not insolvent and the premature sequestration could cause unnecessary and irreversible hardship. 3. The Respondent has proceedings before the Federal Court in relation to the conduct of Official Trustee in Bankruptcy and monies taken from the estate in an earlier bankruptcy on behalf of the creditors and the Trustee. The sequestration is for an ulterior motive on the part of the Official Trustee in Bankruptcy." In addition, oral submissions were made in which a fourth ground was advanced. 3 In order to explain the fourth ground it is necessary to say something more about the debt on which the bankruptcy notice is based. Ms Williams' estate was the subject of a sequestration order made some years ago. She has since been discharged from bankruptcy in respect of that order. However she has been involved in considerable litigation with the Trustee in Bankruptcy and creditors in respect of that bankruptcy. In particular, she was a party to proceedings that were heard by Sweeney J who made an order against her interests on 10 December 1992. The Full Court dismissed an appeal from Sweeney J's orders and costs were ordered in favour of the Official Trustee. An application to the High Court for special leave to appeal from the order of the Full Court was dismissed on 17 February 1995. Once again costs were ordered in favour of the Official Trustee. On 16 September 1998 Ms Williams was a party to an application to the Court for orders under sections 178 and 179 of the Bankruptcy Act 1966 (Cth)in respect of the conduct of the Trustee in Bankruptcy in relation to the administration of her estate and of the estate of Ernest Arthur Wilson. Mr Wilson has since died and Ms Williams was appointed as his legal personal representative. 4 The Official Trustee and the Commonwealth, who were respondents to the applications under ss 178 and 179, moved for dismissal pursuant to Order 22 rule 2 or, alternatively, for a declaration that no case had been made out by the applicants for an inquiry into the conduct of the Official Trustee. On 12 March 1999 Branson J dismissed nine of the claims summarily and determined that as to four further claims no case had been made out for an inquiry into the Trustee's conduct. Branson J ordered Ms Williams and Mr Wilson to pay the respondents' costs. 5 On 21 September 1999 the Full Court dismissed an application for leave to appeal from Branson J's orders. Ms Williams and Mr Wilson then applied to the Court for orders to set aside the judgment of Sweeney J given in December 1992. That application was dismissed summarily by Beaumont J on 14 October 1999. An application for leave to appeal from Beaumont J's decision was dismissed by the Full Court on 20 March 2000. The fourth ground was that the decision of Sweeney J was gained "through perjury and fraud assisted by the Official Trustee in Bankruptcy after the Trustees' incompetence in handling the proof of debt." 6 No evidence was advanced in support of that contention. The substance of the complaint however seems to be that in the proceeding before Branson J, Ms Williams and Mr Wilson were endeavouring to canvass the findings made by Sweeney J on inquiries under ss 178 and 179 of the Act. Section 178 provides that if the bankrupt, a creditor or any person is affected by the act, omission or decision of the trustee he or she may apply to the Court and the Court may make such order in the matter as it thinks just and equitable. 7 Section 179 provides that the Court may, on the application of the Inspector-General, a creditor or the bankrupt, inquire into the conduct of a trustee in relation to bankruptcy and may do one or both of the following: (a) remove the trustee from office; or (b) make such order as it thinks proper. 8 Ms Williams referred to the undoubted power of a bankruptcy court to go behind the judgment which gives rise to a debt relied on by a petitioner. The bankruptcy notice upon which the petition in this proceeding is based relates to the orders for costs made by Branson J on 12 March 1999. Ms Williams sought to contend that it would be open to this Court to go behind Branson J's order, since her Honour did not inquire into the merits of the findings made by Sweeney J. She contended that if the Court did go behind her Honour's summary dismissal, it would be found that Sweeney J's decision was based on perjury or fraud. That, of course, would involve this Court, in effect, sitting on appeal from the decision of Branson J which has already been the subject of an application for leave to appeal unsuccessfully made to the Full Court, as I have said. 9 There can be no question but that if an application under ss 178 and 179 of the Act is unsuccessful, the ordinary course would be for the Court to order the unsuccessful applicant to pay costs. That is what her Honour did. There can be no question in my view but that there is a debt owing by Ms Williams for costs pursuant to the order made by Branson J and there is no reason for this Court to conclude that that order ought not to have been made. Accordingly, even if there had been evidence before me of perjury or fraud, and there had been any substance in such an allegation, my conclusion would have been the same, namely, that there is no basis for doubting that there is a debt due by Ms Williams to the petitioners. 10 So far as the first and third matters referred to in the notice of intention to oppose petition are concerned, those proceedings have now been disposed of. The appeal from the orders of Lindgren J has been dismissed and an application for special leave to appeal to the High Court has also been dismissed. The third matter referred to in the notice of intention to oppose was a proceeding before me in respect of which I had made orders on 22 August 2000. One aspect of that proceeding that remained outstanding was disposed of earlier today, so that that proceeding has now been fully resolved. 11 The final matter concerns the solvency of Ms Williams. That contention is based on evidence of the value of a parcel of real estate owned by Ms Williams, which is said to have a value of $150,000. The judgment debt on which the petition is based is in the sum of $22,500. Ms Williams sought to contend, therefore, that she was able to pay her debts from her assets. However, there was no suggestion that she has liquid funds available to pay that debt. Further, there are two other creditors in respect of costs orders who have supported the present petition. In addition, there are substantial other costs orders in favour of the Commonwealth and the Official Trustee in Bankruptcy. The aggregate of all of those orders is such that it may well be that there will be no surplus after those orders have been met from the proceeds of sale of the property. In the circumstances I am not satisfied that Ms Williams is solvent in any relevant sense such as to justify dismissal of the petition. 12 I am satisfied that Ms Williams committed the act of bankruptcy alleged in the petition. I am satisfied that the proof of the other matters of which s 52(1) of the Bankruptcy Act 1966 (Cth) requires proof. Accordingly, I make a sequestration order against the estate of Patricia Lorraine Williams. I order that the petitioning creditor's costs including any reserved costs be taxed and paid in accordance with the Act. I note that consent to act as trustee has been signed by Scott Pascoe of Simms Lockwood & Partners and has been lodged with the Official Receiver in Sydney. I note that the date of the act of bankruptcy was 13 June 2000. I certify that the preceding twelve (12) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Emmett.