Cottrell v Wilcox [2002] FCA 1115

FEDERAL COURT OF AUSTRALIA

Cottrell v Wilcox [2002] FCA 1115 BANKRUPTCY – application under s 153B of the Bankruptcy Act 1966 for an order annulling the bankruptcy – discretionary power of Court to annul a bankruptcy - whether the Court must be satisfied that the sequestration orders should not have been made – facts unknown at the date of the sequestration order – applicant provided no evidence of solvency

Bankruptcy Act 1966 (Cth) s 153B Federal Court Rules O 77 r 43, O77 r 44 Wilcox v Cottrell [2001] FCA 1357 cited Cottrell v Wilcox [2002] FCAFC 232 cited Stankiewicz v Plata [2000] FCA 1185 referred to Cottrell v Wilcox [2001] FCA 866 cited IN THE MATTER OF DAVID MERVYN COTTRELL DAVID MERVYN COTTRELL v JOHN ALFRED WILCOX N 7140 of 2002 BRANSON J 3 SEPTEMBER 2002 SYDNEY

IN THE FEDERAL COURT OF AUSTRALIA

NEW SOUTH WALES DISTRICT REGISTRY N 7140 of 2002

IN THE MATTER OF DAVID MERVYN COTTRELL

BETWEEN: DAVID MERVYN COTTRELL

APPLICANT

AND: JOHN ALFRED WILCOX

RESPONDENT

JUDGE: BRANSON J

DATE OF ORDER: 3 SEPTEMBER 2002

WHERE MADE: SYDNEY

THE COURT ORDERS THAT: 1. The application be dismissed. 2. The trustee's costs be taxed and paid in accordance with the Bankruptcy Act 1966 (Cth).

IN THE FEDERAL COURT OF AUSTRALIA

NEW SOUTH WALES DISTRICT REGISTRY N 7140 of 2002

IN THE MATTER OF DAVID MERVYN COTTRELL

BETWEEN: DAVID MERVYN COTTRELL

APPLICANT

AND: JOHN ALFRED WILCOX

RESPONDENT

JUDGE: BRANSON J

DATE: 3 SEPTEMBER 2002

PLACE: SYDNEY

REASONS FOR JUDGMENT 1 On 21 September 2001 Conti J ordered that a sequestration order be made against the estate of David Mervyn Cottrell ("the applicant") (Wilcox v Cottrell [2001] FCA 1357). An appeal against the order of Conti J was dismissed by the Full Court on 14 March 2002 (Cottrell v Wilcox [2002] FCAFC 232). The applicant has now applied to the Court under s 153B of the Bankruptcy Act 1966 (Cth) ("the Act") for an order annulling his bankruptcy. The ground upon which the applicant seeks to have his bankruptcy annulled is that the judgment debt upon which the creditor's petition was founded was set aside by the Wagga Wagga Local Court on 31 January 2002. I accept that the judgment debt was set aside on that day. 2 The Trustee has prepared, and filed and served, a report containing the information required by O 77 r 44 of the Federal Court Rules. It is not clear that the applicant has complied with the requirement of O 77 r 43 to notify each of his creditors known to him of his application. The applicant has provided proof that he notified Goddard Elliott, the solicitors for the judgment creditor, and his Trustee of this application. The applicant denies that he has creditors apart from Goddard Elliott, solicitors. 3 The power of the Court under s 153B of the Act to annul a bankruptcy is a discretionary power. However, for the discretion to arise in the circumstances of this case, it is necessary for the Court to be satisfied that the sequestration order ought not to have been made. In this case the Full Court has dismissed an appeal against the sequestration order. For this reason, only proof of facts unknown at the date of the sequestration order will demonstrate that the sequestration order ought not to have been made. 4 The Full Court in Stankiewicz v Plata [2000] FCA 1185 at [19]-[20] summarised the relevant principles as follows: "In Re Williams (1968) 13 FLR 10, Gibbs J explained the approach to be taken to the then equivalent of s 153B of the Bankruptcy Act (at 23): 'In determining the question whether the sequestration order ought not to have been made, the court is entitled to consider not only the case as disclosed at the time the order was made, but as it would have been disclosed had all the true facts been before the Court on the making of the order. If the Court is satisfied that the order ought not to have been made, it is not bound as a matter of course to annul the order, but must consider in the light of all the circumstances of the case whether the order ought to be annulled.' (Citations omitted.) In Re Ditford; ex parte Deputy Commissioner of Taxation (1988) 19 FCR 347, Gummow J observed (at 350) that the "true facts" which are to be considered include those known at the hearing of the annulment application to have existed at the time the sequestration order was made, but exclude those facts that have occurred since the order was made. See also Re Ginnane; ex parte Ginnane (1994) 60 FCR 429, at 445-446; Re Gollan; ex parte Gollan (1992) 40 FCR 38, at 40-41." 5 The fact that the judgment debt upon which the creditor's petition was based has been set aside by the Wagga Wagga Local Court is a fact which has occurred since the date of the sequestration order. The decision of the Full Court to which I have referred and the authorities upon which the decision relies establish that the setting aside of the judgment debt is not itself relevant on this application. However, the applicant, as I understand him, places reliance on the circumstances which resulted in the Wagga Wagga Local Court setting aside its earlier judgment. It is not entirely clear whether the true facts concerning these circumstances were before Conti J at the time that he made the sequestration order. Nor is it clear whether, if they were, the decision of the Full Court in Cottrell v Wilcox [2001] FCA 866, an appeal against a sequestration order made against the applicant's estate by Conti J on 29 November 2000, would have prevented Conti J from attaching any weight to them. 6 I have not found it necessary to determine these issues. Even if it be assumed that the sequestration order made on 21 September 2001 ought not to have been made, the Court has a discretion to annul, or alternatively not to annul, the applicant's bankruptcy. 7 An important factor relevant to the proper exercise of the Court's discretion is the applicant's solvency. The applicant has not, despite my invitation to do so, sought to prove that he is solvent. I am unable, therefore, to be satisfied that he is solvent. 8 The report of the Trustee discloses the Trustee has received proofs of debt in the applicant's bankruptcy from the following: Goddard Elliott, solicitors $21,434.00 Mason Sier Turnbull, solicitors $15,128.00 Jacob Toyota $7,351.00 James G. Sloan, solicitor $1,227.00 ------------ TOTAL: $45,140.00