CATCHWORDS

Bankruptcy - failure to comply with bankruptcy notice based on default judgment -  whether Court should go behind the judgment - debt incurred for professional services rendered at request of the debtor in relation to a business - whether debtor contracted as agent for a company or personally - whether debtor merely manager of the business or conducting it on his own behalf as lessee - whether appointment of a receiver manager of the business and control of the proceeds from its realisation by the Family Court prevented execution on the judgment.

Matter No. SG 94 of 1994

DOUGLAS WILTSHIRE-SMITH v MELLOR OLSSON

VON DOUSSA, MOORE & R D NICHOLSON

ADELAIDE

6 JULY 1995

IN THE FULL COURT OF THE     ) 

                             )

FEDERAL COURT OF AUSTRALIA   )

                             )

SOUTH AUSTRALIA DISTRICT          )

                             )

REGISTRY                     )  No. SG 94 of 1994

                             )

GENERAL DIVISION             )

                             ON APPEAL FROM A SINGLE JUDGE OF THE FEDERAL COURT OF AUSTRALIA

                             BETWEEN:

                             DOUGLAS WILTSHIRE-SMITH

                                  Appellant

                             AND:

                             MELLOR OLSSON (REGISTERED)

                      MINUTES OF ORDER

JUDGES MAKING ORDER          :    VON DOUSSA, MOORE &

                                  R D NICHOLSON JJ.

WHERE MADE                   :    ADELAIDE

DATE OF ORDER                :    6 JULY 1995

THE COURT ORDERS THAT:

     The appeal be dismissed with costs.

Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

IN THE FULL COURT OF THE     ) 

                             )

FEDERAL COURT OF AUSTRALIA   )

                             )

SOUTH AUSTRALIA DISTRICT          )

                             )

REGISTRY                     )  No. SG 94 of 1994

                             )

GENERAL DIVISION             )

                             ON APPEAL FROM A SINGLE JUDGE OF THE FEDERAL COURT OF AUSTRALIA

                             BETWEEN:

                             DOUGLAS WILTSHIRE-SMITH

                                  Appellant

                             AND:

                             MELLOR OLSSON (REGISTERED)

                                  Respondent

CORAM: VON DOUSSA, MOORE & R D NICHOLSON JJ

PLACE: ADELAIDE

DATE : 6 JULY 1995

                    REASONS FOR JUDGMENT

THE COURT:    This is an appeal against a sequestration order made on 5 December 1994 by Branson J.  The respondent firm, Mellor Olsson, is the judgment creditor on whose petition the order was made. 

     Before Branson J the appellant unsuccessfully opposed the making of the sequestration order on the ground that he was not indebted to the respondent firm of legal practitioners who seek to recover professional fees.  The petition was based on an act of bankruptcy alleged to have occurred on 25 August 1994 when the appellant failed to comply with a 14 day bankruptcy notice.  The bankruptcy notice had been issued on 30 June 1994 and was served on 11 August 1994.  The bankruptcy notice was based on a default judgment for $1,794.00 obtained by the respondent in the Adelaide Magistrates Court in its Civil Division on 25 March 1993, some seventeen months earlier.  On 16 February 1994 the appellant had applied to the Adelaide Magistrates Court to have the judgment set aside.  The application was heard by Mr Prescott SM and dismissed.

     After the expiry of the 14 day period for compliance with the bankruptcy notice, the appellant sought an order in this Court to set aside the bankruptcy notice.  The application was heard by O'Loughlin J who dismissed it with costs.  His Honour did not construe the application as containing an application for an extension of time with which to comply with the bankruptcy notice but indicated that, even if such an application had been made, he would have dismissed it.  An application for leave to appeal from the decision of O'Loughlin J was also refused.

     The grounds of appeal are that the judgment debt on which the bankruptcy notice was based relates to a debt of Leighton Hill Pty Ltd (in liquidation) ("Leighton Hill") and is not a debt of the appellant; that O'Loughlin J and Branson J erred in exercising their discretions not to inquire into the judgment as the weight of documentary evidence before Mr Prescott and before each of the judges was that the debt belonged to Leighton Hill; and that a grave injustice occurred because the sequestration order was based on a debt owed by that company and not by the appellant.

     The evidentiary material placed in turn before Mr Prescott, O'Loughlin J, and Branson J was in each instance substantially the same.  In the course of argument before this Court the appellant has sought to challenge aspects of the decisions of each of the three judicial officers who have considered the matter.  Although this is not an appeal against the decision of O'Loughlin J, as Branson J adopted parts of O'Loughlin J's reasons for judgment as her reasons for making the sequestration order, the appeal indirectly raises for consideration the decision of O'Loughlin J.  Both judges recognised the undoubted jurisdiction of the Court in its bankruptcy jurisdiction to "go behind" a judgment for debt entered in other proceedings between the debtor and the judgment creditor.  O'Loughlin J summarised the power of the Court in the following way:

     "There is no doubt that this Court is entitled to go behind the Magistrates Court judgment and inquire into the validity of the debt - Petrie v Redmond (1942) 13 ABC 44.  For bankruptcy purposes, a judgment is only prima facie evidence of a debt - Ex Parte Lennox (1885) 16 QBD 315 at 329 - but a court will not do so as a matter of course - Wren v Mahony (1972) 126 CLR 212.  It is not sufficient for a debtor to express dissatisfaction with the results of earlier litigation.  Nor is it enough to make general accusations, such as the judgment creditors well knew that the debtor was merely acting as a representative of a limited liability company.

     I share the view expressed by Justice Pincus in Re V & J Removals Ex Parte Earl (unreported judgment, Federal Court, delivered 21 June 1985) that Wren v Mahony (supra) is authority for the proposition that a judgment debtor must satisfy the court that there are substantial reasons for questioning the validity of a judgment."

Branson J agreed with that summary.  The summary is in accordance with statements of principle in the majority judgments in Wren v Mahony (1972) 126 CLR 212: see Barwick CJ, with whom Windeyer and Owen JJ agreed, at 224-225.  In Elkhoury and anor v Farrow Mortgage Services Pty Ltd (in liq.) (1993) 114 ALR 541 at 548 a Full Court of this Court agreed with the conclusion of the primary judge that the Court should only exercise its discretion to go behind a judgment, entered without a trial of the proceeding, if persuaded that the judgment were infected "by an identifiable error of substantive law" so that its continued existence represented a miscarriage of justice.

     The nature of the discretion possessed by the Bankruptcy Court was explained by Barwick CJ in Wren v Mahony at 224-225:

     "The judgment is never conclusive in bankruptcy.  It does not always represent itself as the relevant debt of the petitioning creditor, even though under the general law, the prior existing debt has merged in a judgment.  But the Bankruptcy Court may accept the judgment as satisfactory proof of the petitioning creditor's debt.  In that sense that court has a discretion.  It may or may not so accept the judgment.  But it has been made quite clear by the decisions of the past that where reason is shown for questioning whether behind the judgment or as it is said, as the consideration for it, there was in truth and reality a debt due to the petitioning creditor, the Court of Bankruptcy can no longer accept the judgment as such satisfactory proof.  It must then exercise its power, or if you will, its discretion to look at what is behind the judgment: to what is its consideration.  It is not the law, in my opinion, that whether in any case the Court of Bankruptcy will consider whether there is satisfactory proof of the petitioning creditor's debt is a mere matter of its own discretion.  Nothing in Corney v Brien (1951) 84 CLR 343 lends support for such a view.  Rather the emphasis is upon the paramount need to have satisfactory proof of the petitioning creditor's debt.  The Court's discretion in my opinion is a discretion to accept the judgment as satisfactory proof of that debt.  That discretion is not well exercised where substantial reasons are given for questioning whether behind that judgment there was in truth and reality a debt due to the petitioner."

     Both O'Loughlin J and Branson J concluded that
substantial reasons did not exist "for questioning the validity of the judgment" entered in the Magistrates Court.  Neither of their Honours in their reasons canvassed the evidentiary material advanced by the parties.  The appellant submits that it should be inferred from their reasons that both  O'Loughlin J and Branson J accepted the judgment of the Adelaide Magistrates Court as satisfactory proof of the debt because all the information before each of them had been before Mr Prescott.  It is submitted that each of them erred in the exercise of the discretion by failing to consider the evidentiary material afresh to determine if there were substantial reasons for questioning whether there was a real debt owing by the appellant to the judgment creditor.

     O'Loughlin J said that he considered it a matter of importance that after the entry of the default judgment an application had been made to the Magistrates Court to set the judgment aside, which application was dismissed.  His Honour went on to say:

     "No information was placed before the court in these proceedings that would point to any irregularity in the proceedings before Mr Prescott.  Although I was informed from the bar table that the magistrate did not give any reasons for his decision, no challenge has been mounted about the manner in which he conducted the debtor's application to have the judgment set aside.  I have come to the conclusion that the debtor has failed to satisfy me that there are substantial reasons for questioning the validity of the judgment..."

Branson J expressly agreed with this part of the reasoning of O'Loughlin J in reaching her decision that there were no substantial reasons for questioning the validity of the
judgment.

     In the absence of reasons by the magistrate explaining why the application to set aside the default judgment was dismissed, it is difficult to know the extent to which the factual material before the Court was investigated and considered.  It is not known, for example, whether the application was dismissed simply because of delay which had occurred between the date judgment was entered and the date when the application was made to set it aside, or because the magistrate considered the explanation for the delay was inadequate.   Moreover, when the creditor's petition came on for hearing before Branson J there was, in our view, reason to question whether there had been an irregularity in the proceedings before Mr Prescott.  As will appear later in these reasons, the debt claimed by the judgment creditor related to a newsagency business which had been conducted by the appellant.  One of the grounds which the appellant has advanced at all stages to deny his liability to the judgment creditor is that by order of the Family Court made on 10 March 1993 in matrimonial proceedings between him and his former wife, a receiver of that business was appointed who was directed to discharge the debts of the business.  In his reasons for judgment O'Loughlin J said that the default judgment had been entered in the Magistrates Court on 3 February 1993, not 25 March 1993 as stated in the bankruptcy notice.  His Honour observed that the date of judgment therefore preceded by some five weeks the appointment of the receiver, the date of that appointment being described by his Honour as "a most important date".  It seems that his Honour took the view that as the judgment preceded the order of the Family Court, the terms of that order could not have affected the liability of the appellant to the respondent.

     Before Branson J, a copy of the Magistrates Court record was tendered by consent.  This established that the proceedings in the Magistrates Court had been commenced on 3 February 1993 and that the judgment had been entered on 25 March 1993 as stated in the bankruptcy notice, that is after the Family Court order.  In his affidavit in opposition to the creditor's petition the appellant deposed that:

     "Mr Prescott would not entertain any evidence relating to the Family Court matter..."

Absent reasons why the application to set aside the default judgment was dismissed, the only information before her Honour was the undisputed assertion of the appellant that the Family Court order upon which he relied had not been considered by Mr Prescott.

     In this circumstance, and as it appears that weight to some degree was given to the fact that the application to set aside the default judgment had been dismissed, we are left with an uneasy feeling that the exercise of the discretion to accept the default judgment as satisfactory proof of a debt due by the appellant to the judgment creditor may have been exercised upon a misapprehension that the appellant's arguments had been fully investigated before Mr Prescott.  In these circumstances we consider that this Court should undertake afresh a review of the evidentiary material that was placed before Branson J. 

     We turn to the evidentiary material.  There is a long history of litigation in this and other courts involving the appellant, the company Leighton Hill, the appellant's matrimonial disputes, and the newsagency business which the appellant "managed" at Shops 5 and 6 at 382 Salisbury Highway Parafield Gardens until the order of the Family Court was made on 10 March 1993.  Leighton Hill was acquired as a shelf company on 27 February 1990.  From 1 April 1990 the directors were the appellant's wife and his mother-in-law, who were also the shareholders of the company.  The appellant was the secretary of the company.  By a Business Contract Note dated 6 March 1990 Leighton Hill agreed to buy the newsagency business subject to certain special conditions including the approval of Leighton Hill as the  transferee of licences to operate a newsagency and lottery agency.  These special conditions were apparently never fulfilled even though the contract was settled as it became apparent to the parties that the licences for the newsagency and the lottery agency could not be held by a company.  The licences were transferred into the appellant's name and the appellant also became the lessee of Shops 5 and 6.  The purchase of the newsagency was wholly funded by Leighton Hill and its shareholders.  The landlord was Votino Bros. Pty Ltd ("Votino").  In other proceedings in this Court between the appellant and another firm of solicitors the appellant gave evidence that the lease and the licences were held by him on trust for Leighton Hill.  The substance of this evidence had been placed before each of the three judicial officers who have considered the present matter.  From the bar table before us the appellant repeated the assertion that he held the lease and licences as trustee for Leighton Hill.

     By 1991 substantial disputes had arisen between the appellant and Votino.  On about 23 August 1991 Votino distrained for rent.  Proceedings were issued in the Supreme Court of South Australia initially by the appellant as plaintiff against Votino seeking injunctive relief.  Subsequently Leighton Hill was joined as an additional plaintiff, and an interlocutory injunction was granted in favour of both the appellant and Leighton Hill.  Following the grant of the interlocutory injunction, proceedings were issued in the Commercial Tribunal concerning the dispute over the tenancy of Shops 5 and 6.  Those proceedings were brought by the appellant in his own name against Votino.  The respondent firm acted for the appellant in those proceedings.

     During 1992 the appellant made numerous attempts to sell the newsagency business and negotiated with an interested purchaser, PJ and J Shurven ("Shurven").  The sale did not go ahead as Votino refused to consent to the assignment of the lease of the shops until its disputes with the appellant were  resolved.  These disputes had not been resolved prior to the order of the Family Court on 10 March 1993. 

     The appellant instructed the respondent firm to act in connection with the proposed sale of the newsagency and the account for professional services, which was the subject of the proceedings in the Adelaide Magistrates Court, related to the proposed sale.  The account was rendered on 29 May 1992 by the respondent to the appellant at 150 Thirteenth Street, Mildura, Victoria, that being the registered office of Leighton Hill, but also, it seems, a point of contact for the appellant.

     The appellant informed this Court that the account from the respondent was disputed by him before 10 March 1993, apparently on the ground that the respondent's endeavours had not succeeded in persuading Votino to consent to the assignment of the lease to the intending purchaser.  The appellant asserted from the bar table that had the order of the Family Court not been made he would have continued to negotiate with the respondent (on behalf of Leighton Hill) and in all probability have reached a settlement.

     The appellant denies his indebtedness to the respondent on two distinct bases.  The first is that whilst the appellant gave instructions to the respondent to act in a variety of legal matters relating to the newsagency, and whilst the respondent in all instances rendered accounts to him personally, the respondent at all times knew that he was acting as an officer of Leighton Hill and as agent for the company.  The contracts for professional services were therefore between Leighton Hill and the respondent.  As evidence of this knowledge the appellant referred to the transcript of evidence in the Commercial Tribunal where a member of the respondent firm, in examining the former owner of the newsagency, put to him that he had sold the business in 1990 to "Leighton Hill Pty Ltd". The appellant also deposed that the various accounts for legal fees rendered to the appellant by the respondent had been paid either by Leighton Hill or by another company, Mildura Podiatry Services Pty Ltd ("Mildura Podiatry").  The only confirmatory evidence of such payments however is an entry in a cash statement at the foot of an account rendered to the appellant by the respondent on 18 September 1991 which acknowledges receipt by the respondent of $2000 from Mildura Podiatry which had been credited against the appellant's account.

     The second ground upon which the appellant denies his indebtedness arises from the terms of the order of the Family Court made on 10 March 1993 and from the appointment of Mr Peter Macks as the receiver and manager of the newsagency business pursuant to that order.

     The respondent filed an affidavit from Mr T J Mellor in answer to the first of the bases upon which the appellant denied his indebtedness.   Mr Mellor deposed that at all times the respondent received instructions from the appellant, and that at no time was it suggested that the client of the respondent was other than the appellant.  Mr Mellor noted that all the respondent's accounts were addressed to the appellant personally.  He also exhibited to his affidavit proceedings which were being prosecuted by the appellant in his own name in the Federal Court against Votino and various agents of that company.  The amended statement of claim in that action pleaded that the appellant was the lessee of Shops 5 and 6; that on 20 May 1990 the appellant had entered into a deed of assignment of the lease of the shops to him from Votino; and that in about May 1990 the appellant had entered into a management agreement with Leighton Hill whereby he agreed to manage the assets of the newsagency business on the premises of Shops 5 and 6.  The amended statement of claim went on to allege that the respondents had been guilty of misleading and deceptive conduct in that at the time of entering into the assignment of the lease the respondents had not informed the appellant that there would be an upgrading of the shopping centre and had given incorrect advice about the floor area of the shops and the costings of outgoings.  It was pleaded that, shortly after the appellant took possession, major upgrading work took place which caused a loss of trading profits to the appellant and that he also suffered loss by paying rent for a greater floor area than was appropriate, and on account of outgoings.  Damages were also claimed by the appellant for losses he alleged that he had suffered by reason of Votino's unreasonable refusal to consent to assignments of the lease of the shops to Shurven on various occasions from about July 1991.

     Mr Mellor exhibited to his affidavit an unsigned copy of a management agreement which he believed was that referred to in the amended statement of claim. 

     Mr Mellor's affidavit was first proffered before Mr Prescott and later became part of the evidentiary material before O'Loughlin J and Branson J.  Mr Mellor was never cross-examined on his assertion that at no time was it suggested that the client was other than the appellant.  It became common ground that the management agreement produced by Mr Mellor had been entered into between the appellant and Leighton Hill.

     Before this Court, when questioned about the terms of the management agreement, the appellant suggested that notwithstanding its terms he merely acted as an agent for Leighton Hill.  However, the material before the Court shows that the appellant relied upon the management agreement as the basis for asserting his personal entitlement to claim damages from Votino and the other respondents in that action.  Moreover, he acknowledged to this Court in argument that the management agreement recorded the terms on which the newsagency and lottery agency licences were transferred to him, rather than to Leighton Hill as required by the special conditions in the Business Contract Note, and that the management agreement evidenced the relationship between the appellant and Leighton Hill until it was brought to an end when the Family Court appointed the receiver manager. 

     The management agreement provides the best evidence of the relationship between Leighton Hill and the appellant.  A consideration of the management agreement shows that in conducting the newsagency from May 1990 the appellant was not acting merely as agent for Leighton Hill but was acting on his own behalf and primarily for his own benefit.  The management agreement, in which Leighton Hill is described as the Owner and the appellant the Manager provided:

     "...the Owner agrees to lease to the Manager on terms and conditions as detailed hereunder, AND the Manager agrees to manage on behalf of the Owner, the assets comprising plant and equipment, furniture and fittings, stock and goodwill located in premises known as Shops 5 & 6, Parafield Gardens Shopping Centre...being Parafield Gardens Newsagency registered Agency number 90, and registered Lotteries agency number 84.

     Terms and Conditions

     1.   ...

     2.   This Agreement is conditional upon the Manager securing approval from the Newsagency Administration Board of S.A. and the Lotteries Commission of S.A. as to the transfer of the authorised agencies from [the vendor of the newsagency] to himself, and in the event that approval is not given, this Agreement will lapse.

     3.   This agreement is also conditional upon the Manager obtaining an Assignment of Lease from [the vendor of the newsagency] to himself, and to pay all costs associated with that assignment, and to fulfill all conditions of the lease so assigned...

     4.   The Manager shall transfer the business name, Parafield Gardens Newsagency to his own name, and operate a bank account in that name.

     5.   The Manager shall be responsible for the opening of credit accounts with all suppliers, distributors and principals in his own name, as if he were the owner/operator of the business.

          The Owner shall not be responsible for any borrowings, whether trade creditors or not, overdraft facility, loans or leases taken out by the Manager in regards to operation of the business, and
shall not guarantee payment in any respect thereof.

     6.   The Manager shall be responsible for the payment of all expenses associated with the day to day management of the business, including rent and share of overhead expenses, insurance, electricity, bad-debts, telephone, all motor vehicle expenses, repairs to premises, equipment or motor vehicles, wages and all other employee costs, licence fees, depreciation on depreciable assets and all other expenses, including a fee for use of the Owner's assets employed in the business as detailed hereunder.

     7.   Fees payable for lease of the Owner's assets afore mentioned shall be fixed at a rate of $68,000 per annum for the full term of this agreement, payable quarterly in arrears or as otherwise directed by the Owner.

     8.   ...

     9.   Upon the Manager satisfactorily performing his duties as Newsagent, and upon payment of all expenses as afore mentioned, including the prompt payment of fees to the Owner, the Manager shall be entitled to retain all profits derived from the operation of the business for his own use, and shall be responsible for the payment of all income tax and any other taxes levied upon such profits, as if it were his own business enterprise.

     10.  ...

     11.  ...

     12.  The Owner covenants with the Manager as follows:

          a)   That the Manager paying the fees hereby stated, and duly and punctually observing and performing all conditions and provisions contained herein, shall and may expect to peaceably possess and enjoy the use of the Owner's assets for the term hereby granted without interference or interruption from the Owner or any other person lawfully claiming to represent them.

          b)   That the Manager shall be entitled to share in any capital gain so received by the Owner upon sale of the business, where such gain is calculated to be over and above that paid by the Owner at time of purchase, including goodwill, which can be reasonably demonstrated was the result of the expertise and diligence of the Manager's capability in running the business.

              ...

     13.  ...

     14.  ...

     15.  ...

The appellant acknowledged that he was primarily responsible for drafting this agreement, some of the terms of which are not without their difficulty.  Inconsistent notions are apparent from the opening provisions of the agreement.  On the one hand the Owner agrees to lease the assets (the description of which comprised the whole undertaking of the business), whereas on the other hand the agreement by the Manager to manage them on behalf of the Owner suggests rights and obligations on the Manager's behalf which are inconsistent with the rights and obligations normally resting upon a lessee. 

     However, by clauses 4, 5, 6, 7, 9 and 12(a) the terms and conditions make it clear that the true relationship between the parties is that of lessor and lessee of the business, not that of principal and managing agent.

     When this Court drew the appellant's attention to these clauses, he asserted from the bar table that no bank account in his name was opened in respect of the newsagency, and at all times the receipts and payments of the newsagency were made through an account in the name of Leighton Hill.  Nowhere in the documents is there evidence to support this assertion. There is no evidence relating to the financial aspects of the operation of the business.  There is nothing to suggest that the business was not being run so that the profits, after payment of the lease fees provided for in clause 7, were for the benefit of the appellant.  That the appellant was the party entitled to the ultimate profits of the business, and was the party liable to bear operating losses, is inconsistent with his assertion that he was merely the agent of Leighton Hill.

     In any event, the appellant's assertion that the respondent was aware of the relationship between the appellant and Leighton Hill must be assessed in light of the information possessed by the respondent at the time, insofar as that information is disclosed by the evidentiary material.  The evidentiary material discloses that the management agreement was before the respondent and the respondent was also aware of the proceedings in the Commercial Tribunal being prosecuted by the appellant in his own name.  It may be assumed that the respondent also knew that the lease and the agency licences, although paid for by Leighton Hill, were registered in the name of the appellant as required by the management agreement.

These matters would not have led the respondent to believe the relationship between the appellant and the Leighton Hill was that of agent and principal.

     The respondent's account to the appellant, the subject of the judgment in the Magistrates Court, related to attempts by the appellant to sell the business.  In attempting to make that sale, even though the appellant had an entitlement under clause 12(b) of the management agreement to share in capital gains, he was acting as legal owner and trustee of the assets of the business.  In instructing solicitors to act in relation to the proposed sale he did so in that capacity.  The normal rule is that a trustee who enters into a business transaction is personally liable under the contract, notwithstanding that the trustee stands to gain nothing personally from the transaction, and is entitled to complete indemnity from the assets of the trust: Octavo Investments Pty Ltd v Knight & Anor (1979) 144 CLR 360 at 367.

     There is nothing inconsistent between the conclusion that the appellant was acting on his own behalf in the conduct of the newsagency and the assertion made in the Commercial Tribunal that Leighton Hill purchased the newsagency business in 1990.  Plainly it had done so, but then leased the newsagency to the appellant.  The evidence provided by the cash statement endorsed on the respondent's account to the appellant dated 18 September 1991 that Mildura Podiatry advanced money that was credited to that account does not provide evidence which would justify a finding that the relationship between the appellant and Leighton Hill was otherwise than as stated in the management agreement.  That account related primarily to the proceedings in the Supreme Court for injunctive relief in August 1991.  In those proceedings Leighton Hill had been joined as a plaintiff as the landlord had sought to distrain against furniture and fittings which had been leased by Leighton Hill to the appellant.  By clauses 2 and 3 of the management agreement the core assets of the business had been registered in the name of the Manager, but were plainly owned beneficially for Leighton Hill, subject to the terms and conditions of the agreement.  The proceedings were in part to protect the reversionary interests of Leighton Hill.  Mildura Podiatry was a subsidiary of Leighton Hill, and as a related company, it would appear, gave financial support on behalf of Leighton Hill.  In all events the appellant treats Leighton Hill and Mildura Podiatry as companies representing the same interests. 

     If the matter were to be decided without regard to the order of the Family Court made on 10 March 1993, the evidentiary material before the three judicial officers who have considered the matter, and in particular before Branson J, does not support the assertion of the appellant that he was acting merely as the agent for Leighton Hill when he instructed the respondent.  On the contrary, the material shows that the appellant was acting on his own behalf and in pursuit of his own interests on those occasions when the respondent was instructed in connection with the management of the newsagency.  Insofar as instructions in respect of the particular account the subject of the action may have concerned not the management of the newsagency but the sale of its assets, the proper inference from the material is that he was acting as legal owner and trustee of those assets and incurred personal liability for the respondent's fees.  The material before the Court does not provide any substantial reason for questioning that behind the judgment there was in truth and reality a debt due by the appellant to the respondent.

     In the Family Court the proceedings between the appellant and his wife have involved numerous applications over property.  When the appeal first came on for hearing all that was before this Court about the Family Court proceedings was one order made by the Family Court on 10 March 1993 which the appellant had exhibited to an affidavit filed in support of the application in the Magistrates Court to set aside the default judgment.  The appellant in oral argument informed the Court that there was at least one other order of the Court dealing with the topic of the receiver manager of the newsagency, but that the order had been "withdrawn".  Assertions were also made to the Court about various aspects of the receivership, but no evidence about those matters was contained in the affidavits.  The appellant appeared in person, and counsel for the respondent, very fairly, stated that he did not wish to prevent the appellant informing the Court of relevant factual material.  On 18 May 1995 the Court gave leave to the appellant to adduce further evidence by affidavit dealing with the impact which the appointment of the receiver and manager of the newsagency had on his ability to pay the judgment debt at the date of issue of the bankruptcy notice.  The appellant availed himself of that leave, but as the further affidavit filed by him did not disclose information which the Court considered could be relevant, and which was likely to be readily available either on the Family Court file or in the public records at the Australian Securities Commission, the Court, with the consent of the parties, obtained additional information from these sources.  The parties have been provided with the opportunity to make submission on this information.

     It is apparent from the terms of the order of 10 March 1993 that the Family Court did not directly appoint a receiver manager to the newsagency business or to any other property of the parties to the marriage; rather, the Court by order authorised the wife to appoint a receiver manager to the newsagency.  She did so, apparently on 10 March 1993.  For the purposes of considering the appellant's argument we shall assume that the wife appointed Mr Macks as receiver manager of the newsagency business with the fullest authority which the order would permit (and there is no evidence to suggest otherwise).

     The order of 10 March 1993 relevantly provided:

     "IT IS ORDERED:

     1    That until further order the wife be at liberty to appoint one PETER IVAN MACKS, accountant, as receiver manager of Parafield Gardens Newsagency and further that the wife be at liberty to authorise the said PETER IVAN MACKS in his capacity as receiver manager to do all and any of the following things:

          (a)  take into his custody and under his control and protect all of the assets of the business "Parafield Gardens Newsagency" including but not limited to the following:

              (i)       the lease over the premises between Votino Bros Pty Ltd and the husband;

              (ii)      the lottery licence in the name of the husband;

              (iii)     the newsagents licence in the name of the husband;

              (iv)      the stock and equipment in the name of Leighton Hill Pty Ltd;

              (v)       goodwill;

          (b)  discharge rents, salaries and other current and accrued expenses of the said business so far as may be necessary for the orderly conduct of the said husband;

          (c)  take on, lease or hire, or acquire, any property necessary or convenient in connection with the orderly carrying on of the said business;

          (d)  insure any property or assets comprised in or related to the said business;

          (e)  engage or discharge employees in the proper course of the conduct of the said business;

          (f)  execute any document, bring or defend or compromise any proceedings or do any other act or thing in the names of and on behalf of the husband in respect of the said business;

          (g)  appoint a solicitor or other professionally qualified person to assist him in the conduct of the said business;

          (h)  apply to this Court for directions in relation to any matters arising in connection with the performance of his duties as manager of the said business;

          (i)  effect a sale of the assets of the said business and without limiting the generality thereof the assets of the said business to include all of the property described in paragraph 1(a) hereof."

The appellant took this Court only to sub-paragraphs 1(a) and 1(b) on which he based his argument.  There was doubt expressed whether sub-paragraph 1(b) correctly recorded the order of the Court.  At first sight the subject matter of that sub-paragraph, and the structure of paragraph 1 generally, would suggest that the phrase "orderly conduct of the said husband" should read "orderly conduct of the said business", but the appellant informed us that he raised that matter with a judge of the Family Court after the order was made and that he was informed that the order as sealed was correct.  There is an order of Murray J dated 16 June 1994 which declares that the order of 10 March 1993 in the form of the order placed before this Court is "the correct order", but it is possible that her Honour was considering some other aspect of the order.  It may be, as counsel for the respondent contends, that there has been a slip in the settling of the order.  We do not think it is necessary to resolve this uncertainty to determine the issues which arise in these proceedings.

     The substantive argument of the appellant is that whatever the contractual position might have been but for the order, the order by its terms and operation imposed the obligation to discharge the debt due to the respondent on the receiver manager; and if the appellant had hitherto been under a contractual obligation personally to the respondent, that liability was extinguished and replaced by the obligation imposed on the receiver manager.

     The order does not by its terms seek to modify or extinguish the rights of third parties with whom the appellant had had commercial dealings.  Moreover, the Family Court lacked jurisdiction to make an order which would have this effect: see Ascot Investments Pty Ltd v Harper & Anor (1981) 148 CLR 337 per Barwick CJ at 342 and Gibbs J (with whom Stephen J agreed) at 354.  Even if there were ambiguity in the scope and meaning of sub-paragraph 1(b) of the order, that sub-paragraph would have to be read down to avoid a meaning that exceeded the jurisdiction of the Family Court.

     The order properly understood does no more than empower the appointment of a receiver manager to take control of property of a party (or the parties) to the marriage, in particular of assets held in the name of the appellant, and to authorise payment by the receiver manager of various liabilities including accrued expenses.  The order does not oblige the receiver manager to pay all or any particular expenses.

     It was up to the receiver manager in his discretion to pay accrued expenses of the business if, and only so far as, it might be necessary for the orderly conduct of either "the husband" or "the business" depending on the correct meaning of the order.  That the receiver manager is so empowered recognises that the liabilities of either the appellant or of the business continued unaltered by the order and that if payment were not made to discharge accrued liabilities, the orderly conduct of the appellant or of the business could be disturbed by action by creditors seeking to enforce their rights, e.g. by distraining for rent, by terminating the lease or agencies for non payment, by resignation in the case of employees, and so on.

     The primary argument of the appellant based on the Family Court order must fail.  If there were a debt due by the appellant to the respondent for professional fees existing before the order was made, that liability was not and could not be extinguished by the order of the Family Court.

     The appellant has not demonstrated on the documentary material now before the Court that there is any substantial reason for questioning whether behind the default judgment in favour of the respondent there was in truth and reality a debt due to the respondent.

     There is however a further matter which arises from the reliance by the appellant on the order of 10 March 1993 which was not precisely articulated before us as a distinct issue for consideration and which was not raised before Branson J.  That issue is whether the order of the Family Court had the effect of restraining or preventing the appellant from paying or otherwise discharging liabilities incurred by him in connection with the conduct and operation of the newsagency business before the order was made.  For present purposes it should be assumed that an order to that effect would be within the jurisdiction of the Family Court if it were made for the purpose of protecting the property of a party to a marriage to maintain an existing situation until the Court could decide what should be done under a substantive application for maintenance or a property settlement: Sanders v Sanders (1967) 116 CLR 366 at 372.  If the order had the effect of so restraining or preventing the appellant on 30 June 1994, the question would arise whether the bankruptcy notice could properly be issued on that day and whether the failure to make payment in answer to the demand made by the bankruptcy notice after it was served constituted an act of bankruptcy. 

     This question requires consideration of whether execution on the judgment had been stayed within the meaning of s.40(1)(g) and 41(3)(b) of the Bankruptcy Act 1966 (Cth).  For the purpose of these provisions there need not be an express order of a court staying execution on the particular judgment on which the creditor relies: Re Seers (1955) 17 ABC 11, Penning v Steel Tube Supplies Pty Ltd (1988) 18 FCR 568 at 575-576.  It was held in Re Solomon; Ex parte Reid (1986) 10 FCR 423 by Beaumont J that the effect of the appointment of a receiver under a Mareva type order made under the Companies Code to take control of the debtor's property was to prevent the petitioning creditor at the time of the issue of the bankruptcy notice from being able to execute against any of the property of the debtor without leave of the Supreme Court and that, as leave had not been obtained, execution should be deemed to have been stayed.  That decision was approved and applied by a Full Court of this Court in Penning v Steel Tube Supplies Pty Ltd which held that the judgment underlying a
bankruptcy notice was deemed to have been stayed at the time of the issue of the bankruptcy notice by virtue of an order under s.50 of the Bankruptcy Act which had placed all property of the debtor under the control of a trustee.  See also Director of Public Prosecutions v Kunz (1993) 43 FCR 374 where a similar conclusion was reached as to the effect of an order pursuant to s.243E of the Customs Act 1901 (Cth) which restrained the property of the judgment debtor and directed the Official Trustee in Bankruptcy to take custody and control thereof.  In Re Solomon; Ex parte Reid Beaumont J at 425-426 summarised the relevant principles upon which these decisions rest:

     "It is well established that, for the purposes of s 41(3)(b), execution is deemed to have been stayed where a judgment creditor is not 'in a position to issue immediate execution upon it': per Bowen LJ in Ex parte Ide; Re Ide (1886) 17 QBD 755 at 760; Re Pannowitz; Ex parte Wilson (1975) 38 FLR 184 at 187-188; cf Re A debtor [1984] 1 WLR 1143 at 1153-1154.  It is also trite law that a judgment creditor may not, without leave of the court which appointed the receiver, levy execution against the property comprised in the appointment of the receiver: see O'Donovan, Company Receivers and Managers (1981), at p 321; Meagher, Gummow and Lehane, Equity Doctrines and Remedies (2nd ed 1983), at p 663.  Any attempt to interfere with that property is an interference with an officer of the court in the performance of his functions.  If done without leave of the court, it is a contempt of court.  It will not be permitted even if the property concerned is not yet in the actual possession of the receiver: see Ames v The Trustees of The Birkenhead Docks (1855) 20 Beav 332 at 353; 52 ER 630 at 638."

     In Re Solomon; Ex parte Reid, Penning v Steel Tube Supplies Pty Ltd and Director of Public Prosecutions v Kunz the orders in each case had the effect of placing all the property of the debtor (apart from an immaterial exception in the first case) under the control of an officer appointed by
order of the Court.  There remained no property against which the judgment creditor could execute and, moreover, the orders of the Court had the effect of restraining the judgment debtor from satisfying the judgment as any application of his property by him for that purpose would be inconsistent with the receiver's right to possession: see Penning v Steel Tube Supplies Pty Ltd at 574.  In the present case, the order of 10 March 1993 operated only in respect of the assets of the newsagency.  The order imposed no restraint in law upon the appellant making free use as he saw fit of his other property. The present case is therefore not covered directly by these decisions.

     It has been established that conduct by a judgment creditor which prevents a judgment debtor from paying the debt may operate to disentitle the judgment creditor from proceeding to immediate execution.  In In re Sedgwick, Ex parte Sedgwick (1888) 5 Morrell 262 Lord Esher MR at 263-264 said:

     "...there is an equity laid down - a just equity which goes to the extent only that if a creditor gives a notice requiring payment in seven days and actually and in fact prevents the debtor from paying, such creditor cannot rely upon the notice and it will be set aside.  The question is whether in the eyes of any person of ordinary fairness in business it will be said that the creditor has in a business sense prevented the debtor from paying.  But the possibility that he may have prevented him is not sufficient.  The question is whether the creditor has done something which prevents the debtor in fact from complying with the summons.  He may do so in different ways.  He may put a legal difficulty in the debtor's way, and although he puts no legal difficulty he may have done something which in fact may prevent payment.  The question must be whether he has in fact prevented the debtor from complying.  The fact that the creditor has made it more difficult for the debtor to pay than if the creditor had done nothing at all does not go to that extent."

A similar principle was recognised in In re Bond; Ex parte Capital and Countries Bank, Ltd [1911] 2 KB 988, in Re Wilson; Ex parte Jones (1916) 85 LJKB 1408; [1916-1917] All ER Rep 1060, and by a Full Court of this Court in Wallace v Trade Credits Ltd (1983) 72 FLR 252 at 254.  The onus in such a case is on the debtor to prove affirmatively that the claim in respect of which the bankruptcy notice was issued could and would have been paid but for some act or omission on the part of the creditor: Bracia Czeczowiczka v Otto Markus [1936] 1 All ER 944 at 949. 

     In the present case, however, it was not the act or omission of the respondent as judgment creditor that removed from his control assets which the appellant could otherwise have used to pay the respondent.  No "equity" of the kind referred to by Lord Esher MR could arise here as between the appellant and the respondent as payment was prevented by order of a court. In Re Solomon, Ex parte Reid, Beaumont J reached a similar conclusion on the facts of that case.  His Honour however went on to say, at 427-428:

     "No doubt, an 'equity' of the type envisaged by Lord Esher would disentitle a judgment creditor from proceeding to immediate execution but, in my view, this is not an exhaustive statement of the matters that may disqualify a judgment creditor from issuing a bankruptcy notice.  There is no reason, of logic or otherwise, to limit the operation of s 41(3)(b) to cases where the debtor can establish an 'equity'.  In my opinion, the existence of any relevant circumstance sufficient to disentitle a judgment creditor from proceeding immediately to execution falls within the implied prohibition contained in s 41(3)(b)."

The matter which Beaumont J held disentitled the judgment creditor in that case from issuing a bankruptcy notice was not conduct of the judgment creditor, but the appointment of the receiver by order of the Supreme Court under the Companies Code.  Once it is recognised that a petitioning creditor may be disqualified from issuing a bankruptcy notice by reason of a restraint imposed by order of a court on all the property of the judgment debtor thereby removing his ability to make payment, there is no reason why a court order imposed on some only of the property of the judgment debtor which has the same practical effect should not be recognised as a relevant circumstance sufficient to disentitle a judgment creditor from proceeding immediately to execution.  In our opinion such an order will have this consequence where in practical reality, although not strictly in law, the order "in any way prevent(s) the debtor from paying his debt" (In re Bond; Ex parte Capital and Countries Bank, Ltd at 991) or where it "deprives or may well deprive the judgment debtor of assets which he could otherwise use to pay the judgment creditor and thus comply with the bankruptcy notice" (Wallace v Trade Credits Ltd at 254).  To adapt the test proposed by Lord Esher MR in In re Sedgwick; ex parte Sedgwick cited above, the factual enquiry to determine the practical effect of the order is whether in the eyes of ordinary fairness in business it will be said that the order has in a business sense prevented the debtor from paying. 

     In making this enquiry we think it should be assumed that the appellant had a proprietary interest in the newsagency business as lessee, and, moreover, that under clause 12(b) of the management agreement he was entitled to share in any capital gain received by Leighton Hill upon sale of the business.  On that footing, the appointment of the receiver manager took the control of the appellant's interests in the business from him and effectively froze them until further order.

     For present purposes, we consider the position would be the same whether the appellant operated the business on his own behalf as lessee or merely as trustee holding the legal title to the assets of the business on behalf of Leighton Hill.  In the latter situation the appellant would be entitled to be indemnified in respect of his personal liability from the trust assets held by him over which he was entitled to a lien: Octavo Investments Pty Ltd v Knight at 367 and Jennings v Mather [1902] 1 KB 1 at 6,9.  See also Jacob's Law of Trusts in Australia, 5th ed., p.585, para.2104, and Ford and Lee, Principles of the Law of Trusts, 2nd ed., p.629, para.1403.1.  In our opinion, the removal from the trustee by court order of the power to deal with trust assets from which a trust debt could otherwise be paid has the consequence of disqualifying the creditor from issuing a bankruptcy notice in respect of a judgment on the trust debt if the court order has the effect of removing the trustee's ability to make payment, for example because the trustee's personal assets are insufficient to enable payment to be made. 

     The evidentiary material now before the Court shows that Mr Macks was appointed receiver manager of the newsagency business by the appellant's wife on 10 March 1993.  On 18 March 1993 Mr Macks was also appointed receiver manager of Leighton Hill by order of the Supreme Court of South Australia.  Mr Macks conducted the newsagency for a short time, then sold the business and all the assets employed in it.

     In the period from March to July 1993 the appellant was conducting litigation on a number of fronts.  On an application made by his wife in the Family Court, on 5 July 1993 Gun J had made a number of orders including injunctions relating to the former matrimonial home, and an order authorising the receiver manager to pay from the proceeds of the realisation of the business moneys due to a secured creditor.  Gun J further ordered:

     "That the balance of the moneys held by the receiver/manager be applied firstly in payment of any amounts payable by the receiver/manager in accordance with any law and that the balance after the payment of those amounts be held on behalf of the parties to abide further order of this Court PROVIDED THAT if a liquidator is appointed in respect of the company the said balance of the moneys held by the receiver/manager be paid to the liquidator."

     On 20 July 1993 Leighton Hill was placed in liquidation by order of the Supreme Court of South Australia.  Mr Macks was appointed liquidator.

     Mr Macks filed reports of his receiverships in the Family Court and in the Supreme Court of South Australia shortly
after 20 July 1993.  The content of each report is identical and covers the period to 20 July 1993.  At that date Mr Macks held $80,255 from the realisation of the business in his capacities as receiver manager of the business and Leighton Hill after paying expenses incurred during the short period of trading, expenses relating to the sale of the business, legal fees, meeting the balance of the claim by the secured creditor and providing for the receiver's remuneration. 

     In the receivership proceedings in the Supreme Court, an order was made on 30 August 1993 approving the report and accounts filed by the receiver manager for the period to 20 July 1993, fixing the receiver manager's remuneration at $25,581.10, to be paid out of the assets held by the receiver manager, and directing that the balance of the moneys held be paid to the liquidator of Leighton Hill and that Mr Macks thereupon be released as receiver and manager of Leighton Hill.

     The information before this Court does not disclose when the appropriate transactions occurred to transfer money held by Mr Macks in his capacities as receiver and manager to himself in his capacity as liquidator of the company, but presumably it happened shortly after the Supreme Court order.  When this happened, his roles as receiver manager, both of the business pursuant to the Family Court order and of Leighton Hill pursuant to the Supreme Court order, came to an end. 

     The primary submission of the respondent on this limb of the case is that upon the receivership of the business terminating at about the end of August 1993, the order of the Family Court made on 10 March 1995 ceased to have any relevant affect upon the appellant's ability to pay the judgment debt.  In our opinion the question cannot be so simply resolved.

     Upon the footing that the appellant had a proprietary interest in the newsagency business and a potential interest in any capital gains achieved on the sale of the business, those interests came under the control of the receiver manager pursuant to the Family Court order.  That order was made with the purpose and intent that it would preserve the assets of the appellant, together with the assets of his wife held through Leighton Hill, pending orders for property settlement.  The appointment of Mr Macks to fulfil dual roles was an expedient course for the purposes of the Family Court proceedings but, for other purposes, the appointment left unresolved the question of what interests each of the appellant and Leighton Hill had in the moneys got in by the receiver.  Those moneys in effect became a mixed fund and the respective interests of the appellant and Leighton Hill remained a matter to be resolved on the hearing of the property settlement claims.

     The order of Gun J made on 5 July 1993 was an interlocutory order.  It was not proceeded by a hearing on the merits to determine the extent of the interest if any of the appellant in the proceeds of the receivership nor, in our opinion, should paragraph 6 of the orders, set out above, be interpreted as a determination that the appellant had no interest in moneys paid to the liquidator.  In our opinion, insofar as the appellant had an interest in those moneys, that interest was not extinguished by the order of 5 July 1993.  It is apparent from orders made by the Family Court that the Court considered that it still exercised control over the moneys held by the liquidator, and it also seems, from Mr Macks' response to orders of the Family Court, that he acknowledged that to be the case.  Whilst the transfer of the balance of the receivership moneys to the liquidator pursuant to that order had the effect of bringing the receivership of the newsagency to an end, insofar as the appellant had an interest in those moneys it remained frozen pending the decision of the Family Court on the applications for property settlements.  Those applications were not finally heard and disposed of until November 1994, some months after the issue and service of the bankruptcy notice. 

     On 17 September 1993 Judicial Registrar Forbes in the Family Court heard an application by the appellant's wife for payment out to her of portion of the moneys held by the liquidator.  A ground for that application was that a house property of which the wife was the registered proprietor had been sold and the proceeds applied with the consent of the wife to partially discharge the debt due to the secured creditor of Leighton Hill.  The Judicial Registrar made an order the effect of which was to authorise the payment of $50,000 by the liquidator to the wife on the basis that she had become subrogated to the rights of the secured creditor.  In response to that order Mr Macks filed an affidavit in the Family Court proceedings saying that he was unable to pay more than $30,000 of the amount ordered as there were insufficient funds.  A summary of receipts and payments from the commencement of the liquidation to 29 September 1993 disclosed that the balance received by him as liquidator from the receiverships and managerships was $69,361.91 after payment of remuneration and expenses of the receiver/manager.  After paying $30,000 of the $50,000 so ordered to the wife and certain costs, he held $37,706.91 which he was required to hold on account of priority claims for group tax, for an employee who sought about $15,000 for wages and for the liquidator's expenses and remuneration.

     The appellant has informed the Court from the bar table that no priority claims have been paid by the liquidator, and that the claim by the employee for wages did not proceed.

     The appellant contends that from shortly after the appointment of the receiver/manager in March 1993 he has been without any other assets or income that would have enabled him to pay the judgment due to the respondent.  The effect of the appointment of the receiver/manager was to leave him unemployed and without access to a bank account.  His only assets at that time were $6,000 approximately in takings from the newsagency for the week preceding the appointment of the receiver/manager which he claimed as remuneration and a 1979 Mercedes Benz motor car registered in his wife's name.  The $6,000 was paid by the appellant to solicitors to defend him against contempt proceedings brought in the Federal Court which were heard in February and March 1993.  The motor vehicle was sold and the proceeds used to pay his solicitor's costs in the Family Court.  Those assets were exhausted by the end of April 1993 and the appellant asserts that since then he has been without the means to pay the judgment.  The appellant's argument is put broadly: he says that the practical effect of the Family Court order was to deprive him of his means of livelihood and to precipitate him into litigation which has wholly exhausted his means.  That argument goes far beyond the scope of the principle we have identified arising from ss.40(1)(g) and 41(3)(b) of the Bankruptcy Act.  That principle is invoked where the practical effect of the Court order is to deprive the judgment debtor of access to assets that could otherwise be used to pay the judgment creditor.  The principle assumes that there are assets in existence at the relevant time which would, but for the order, be available to the debtor for use to pay the debt.  In its broad form, the appellant's argument asserts that the Family Court order had the effect of depriving him of all assets long before the bankruptcy notice was issued.  If he were at that date without assets over which the order continued to impose a restraint, his inability to pay the debt would be due not to the continuing effect of the order but to his lack of means.

     The question which must be considered is a more narrow one, namely whether the continuing restraint imposed by order of the Family Court (the relevant order being that of Gun J dated 5 July 1993) over the proceeds of the receivership operated to prevent the appellant from gaining access to that portion of those funds in which he had an interest which could otherwise be applied to pay the debt when the bankruptcy notice was issued.

     The cross proceedings for property settlement by the appellant and his wife were each dismissed by Murray J on 22 November 1994 on the ground that there were no assets of the parties left to be distributed between them.  That decision indicates that at 22 November 1994 the appellant had no beneficial interest in moneys held by the liquidator which would have been available to him to meet the judgment debt and the company was also without net assets.  Had the bankruptcy notice been issued immediately before Murray J's decision, it could not have imposed any restrain upon the appellant's ability to pay the debt as it did not operate on assets that would otherwise have been available to him.

     There is no documentary evidence available that establishes precisely at 30 June 1994 whether the Family Court order continued to operate to freeze any asset that would otherwise have been available to the appellant.  However, a six-monthly return lodged by the liquidator of Leighton Hill with the ASC on 28 July 1994 for the period ending 19 July 1994 discloses that the liquidator was then holding $28,044.91 and that there was owing to the liquidator expenses of $1,798.64 and remuneration of $45,428.80.  In other words, the liquidator was owed some $19,000 more than the funds in hand.  The report also indicated that there were no other known assets to be got in.

     There is no report to this Court by the liquidator.  His explanation for this unsatisfactory outcome of the liquidation is not known.  We were informed from the bar table that the liquidator has been required to defend actions brought by the appellant which has greatly increased his costs of the liquidation.  The reason is not presently material.  The fact is that by 19 July 1994 there were no assets otherwise available to the appellant over which the Family Court order continued to operate.  The extent of the deficiency on that date was so great that it can be safely assumed as a probability that on 30 June 1994 there were also no assets otherwise available.

     In these circumstances, as a matter of fact, on the date when the bankruptcy notice was issued (and at material times thereafter) no order of the Family Court prevented the appellant in any relevant way from paying the judgment debt.  Rather, by that date whatever interest he may earlier have had in the proceeds of the receivership, either beneficially or as a trustee with a right of indemnity, had ceased to be of value as the proceeds had been fully expended in the course of the liquidation.  At 30 June 1994, the simple fact was that the appellant was without assets or other means to pay the debt, and the operation of the order of the Family Court had no continuing restraint on any asset which the appellant could otherwise have used to pay the demand in the bankruptcy notice.

     In response to leave given to the parties to make written submissions on information obtained by the Court from the ASC, the appellant filed a further affidavit sworn on 28 June 1995.  The subject matter of this affidavit falls outside the leave given, but the Court has read it nonetheless.  The affidavit details complaints which the appellant makes about the conduct of the receivership and liquidation of Leighton Hill and about several alleged causes of action by Leighton Hill which the appellant contends the liquidator, in breach of duty, has not pursued for the benefit of Leighton Hill.  The thrust of these complaints is that if the liquidator had properly performed his duties, other assets of Leighton Hill would have been got in, and could still be got in, to augment the funds available in the liquidation.

     These complaints concern alleged assets and causes of action of Leighton Hill, and it is not readily apparent how the applicant could have any beneficial interest in the proceeds of these alleged assets even if they were got in by

the liquidator.  In any event, all these matters are irrelevant at the present proceedings.  What must be decided in this matter is whether at the date of the issue of the bankruptcy notice there were assets otherwise available to the appellant to pay the judgment debt held by the receiver manager subject to the restraint imposed by the order of the Family Court.  The matters of complaint made by the appellant do not suggest this.

     It is a common situation for a debtor to assert that his or her impecuniosity is the result of wrongdoing by others, or an unfavourable judgment of a court, and that with time and the resources to pursue litigation or an appeal, the debtor would recover funds enough to meet all outstanding liabilities.  This situation, however, does not provide a ground for defending a creditor's petition brought against the debtor, save perhaps in an exceptional case where the petitioning creditor is the party against whom the debtor alleges the outstanding right of action or appeal.  It could not be suggested that this case is within that possible exception.

     We consider Branson J was correct to accept the judgment in the Adelaide  Magistrates  Court as sufficient proof of the 

appellant's indebtedness to the respondent and the          sequestration order was correctly made.  The appeal should be dismissed.

                             I certify that this and the

                             preceding pages are a true

                             copy of the Reasons for

                             Judgment of the Court

                             Associate:

                             Dated:

The appellant appeared in person

Counsel for the respondent   : Mr T J Mellor

Solicitor for the respondent: Mellor Olsson

Date of hearing              : 9 May, and 22 June 1995