Commonwealth Bank of Australia v Rex Edwards [2001] FCA 1384

FEDERAL COURT OF AUSTRALIA

Commonwealth Bank of Australia v Rex Edwards [2001] FCA 1384

COMMONWEALTH BANK OF AUSTRALIA v REX EDWARDS N 7340 of 2001 SACKVILLE J SYDNEY 25 SEPTEMBER 2001

IN THE FEDERAL COURT OF AUSTRALIA

NEW SOUTH WALES DISTRICT REGISTRY N7340 OF 2001

BETWEEN: COMMONWEALTH BANK OF AUSTRALIA

APPLICANT

AND: REX EWARDS

RESPONDENT

JUDGE: SACKVILLE J

DATE OF ORDER: 25 SEPTEMBER 2001

WHERE MADE: SYDNEY

THE COURT ORDERS THAT: 1. A sequestration order be made against the estate of the debtor, Rex Edwards. 2. The creditor's costs, including reserve costs if any, be taxed and paid from the estate of the debtor in accordance with the Bankruptcy Act 1966 (Cth). 3. The Court notes that the date of the act of bankruptcy is 13 June, 2001. 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 N7340 OF 2001

BETWEEN: COMMONWEALTH BANK OF AUSTRALIA

APPLICANT

AND: REX EDWARDS

RESPONDENT

JUDGE: SACKVILLE J

DATE: 25 SEPTEMBER 2001

PLACE: SYDNEY

REASONS FOR JUDGMENT 1 This is a petition for a sequestration order against the estate of the debtor. The creditor's petition identifies the act of bankruptcy as the failure of the debtor to comply with a bankruptcy notice served on him on 17 April 2001. The bankruptcy notice itself was founded upon a judgment of the District Court of New South Wales, given on 7 March 2000 against the debtor in the sum of $300,600.03. 2 The debtor has appeared in person to oppose the making of the sequestration order. He does so, as I understand him, on the ground that the judgment of the District Court was erroneous and that in truth he was never indebted to the creditor. 3 The evidence adduced on behalf of the creditor establishes to my satisfaction the act of bankruptcy. The evidence also establishes that the judgment debt is current and that the other formal requirements of the Bankruptcy Act 1966 (Cth) have been satisfied. 4 Before dealing with the issues raised by the debtor, it may be helpful to briefly outline the history of the dealings between the creditor and the debtor that have culminated in the hearing of this petition. 5 By a deed of mortgage dated 19 February 1988 between the creditor on the one hand and the debtor and his wife on the other, the debtor and his wife mortgaged their interest in land at 152/154 Belmont Street, Alexandria ("the Property") to secure advances made by the creditor's predecessor namely, the State Bank of New South Wales. On 27 September 1990, the creditor served a notice pursuant to s 57(2)(b) of the Real Property Act 1900 (NSW). The debtor and his wife failed to comply with that notice. 6 By summons dated 14 June 1991, the creditor commenced proceedings in the Supreme Court of New South Wales for possession of the Property against the debtor and his wife. The creditor obtained a judgment for possession of the Property on 22 April 1992. Following further proceedings between the parties, the creditor took possession of the Property pursuant to a writ of possession on 28 February 1994. The Property was later sold and the proceeds of sale applied in reduction of the indebtedness of the debtor and his wife to the creditor. 7 On 22 February 1996, the creditor filed a statement of liquidated claim in the District Court of New South Wales against the debtor and his wife seeking recovery of the shortfall pursuant to the mortgage. The debtor's wife was not served with the statement of the claim and accordingly, no judgment with respect to the shortfall was ever entered against her. On 15 October 1998, the debtor filed a defence with respect to the District Court proceedings. 8 On 7 March 2000, the District Court proceedings were heard before his Honour Judge Patten. The debtor gave evidence in the course of the proceedings. In the result, his Honour gave judgment for the creditor against the debtor for the sum to which I have referred. It follows that the judgment debt is the product of a contested hearing in the District Court of New South Wales. It is important that there has never been any appeal against the judgment of the District Court. 9 As I have already indicated, the judgment debt formed the basis for the issue of the bankruptcy notice. It is the non-compliance with that bankruptcy notice that constitutes the act of bankruptcy on which the creditor relies. 10 The debtor has read some affidavits in support of his opposition to the sequestration order being made. It is not easy either from the affidavit evidence or from the debtor's explanation to understand fully the matters that he has put. In substance, however, the debtor suggests that a substantial portion of the moneys the creditor claims to have lent him were never received by him. The debtor further says that significant sums of money were, in some unexplained fashion, removed from his account or accounts. For these reasons the debtor contends that the judgment of the District Court was in error and that he is not indebted to the creditor for any sum whatsoever. 11 A reading of the affidavit verifying the grounds of defence in the District Court proceedings suggests that the issues that have been raised by the debtor today are essentially those that were raised in the District Court proceedings. Plainly the learned District Court Judge did not consider that any of the defences had been made out. So far as I can follow the contentions being advanced by the debtor, there is nothing that he has put today that was not either put to the District Court at the hearing in March 2000, or could not have been put by the debtor at that hearing. 12 Nothing has been advanced by the debtor that amounts to an arguable case that the judgment of the District Court was erroneous. I should add that the debtor repeatedly referred to his intention to institute proceedings in the Equity Division of the Supreme Court of New South Wales, presumably to challenge one or other of the judgments obtained against him. Precisely that intention was communicated to the District Court in March 2000. The debtor acknowledges that he has taken no steps to date to institute any such proceedings. His explanation for not doing so was less than convincing. 13 The authorities establish that there are some circumstances in which a court dealing with a bankruptcy petition may go behind the judgment debt: see, for example, Wren v Mahony (1972) 126 CLR 212 and Corney v Brien (1951) 84 CLR 343. There is nothing in the material relied on by the debtor that would justify going behind the judgment of the District Court. No other basis has been advanced by the debtor to resist making the sequestration order. 14 Accordingly, a sequestration order should be made against the estate of the debtor. I make the following orders: 1. A sequestration order be made against the estate of the debtor, Rex Edwards. 2. The creditor's costs, including reserve costs if any, be taxed and paid from the estate of the debtor in accordance with the Bankruptcy Act 1966 (Cth). 4. The Court notes that the date of the act of bankruptcy is 13 June, 2001. I certify that the preceding fourteen (14) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Sackville.