federal court of australia

BANKRUPTCY – application under O 35 r 7 to set aside sequestration order made in the absence of the debtor – petition not served on debtor personally – order annulling the bankruptcy under s 153B of the Bankruptcy Act – order under O 35 r 7 appropriate where there has been no administration of the estate pursuant to the sequestration order.

Bankruptcy Act 1966 (Cth), s 153B

Federal Court Rules, O 35 r 7

THE AUSTRAL BRICK COMPANY PTY LIMITED v TOME DASKALOVSKI

NG 7245 of 1998

Judge:               EMMETT J

Place:               SYDNEY

Date:                23 JUNE 1998

THE COURT ORDERS THAT:

1.      The bankruptcy be annulled pursuant to section 153B of the Bankruptcy Act 1966 (Cth).

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

EX TEMPORE REASONS FOR JUDGMENT

HIS HONOUR:   On 6 March 1998 a petition was presented by the Austral Brick Company Pty Limited (“the Petitioner”) seeking an order for the sequestration of the estate of Tome Daskalovski (“the Debtor”).  The petition was based on an act of bankruptcy consisting of failure to comply with a bankruptcy notice in respect of a judgment debt in the sum of $24,935.26.  The petition came before Registrar Quinn on 6 April 1998 when there was evidence in the form of an affidavit of service of one Tony Andrews sworn 4 February 1998.  In that affidavit, Mr Andrews said that on 23 March 1998 at 5.50pm he had served the Debtor personally at 17 Grainger Street, Lambton, 2305.  On the basis of that evidence and the other evidence before the Registrar, she made an order for the sequestration of the estate of the Debtor.

On 28 April 1998 the Debtor applied to the Court for an order that the sequestration order be set aside pursuant to Order 35 Rule 7 of the Federal Court Rules or such other power as the Court has to set aside the order.  The basis upon which that application was made is that the petition had not in fact been served personally on the Debtor.  The Debtor relies on an affidavitsworn by himself in which he said that at the time when the petition is alleged to have been served he was not at the premises at 17 Grainger Street, Lambton but was in fact at football training at some other location.

The Debtor's evidence was corroborated by the evidence of his wife and of one Jedda Lee Bendow who is employed as a secretary receptionist by one of the occupiers of 17 Grainger Street, Lambton.  That evidence satisfies me that on the date alleged by Mr Andrews an envelope was left with Ms Bendow containing the petition.  It did not in fact come to the Debtor's attention until after 16 April 1998, when his solicitor told him that a sequestration order had been made.

The Debtor subsequently filed a statement of affairs as required by the Bankruptcy Act 1966 (Cth) (“the Act”).  In the statement of affairs, the Debtor disclosed that he had creditors comprising the debt of the Petitioner together with a debt due to Gaywood Doors of $8636.42.  The statement of affairs also showed assets having a value of $79,880 and a secured debt of $18,000.  It also showed an income in the past 12 months of $32,600.  Further, there is also evidence before me that the Debtor’s solicitor presently holds bank cheques furnished to him by the debtor in respect of the amounts owing to the two creditors to whom I have made reference above.  In the circumstances I am satisfied that the sequestration order ought not to have been made and accordingly I propose to make an order pursuant to section 153B of the Act annulling the bankruptcy. 

I should add that I would have been satisfied that the Court has jurisdiction and power pursuant to Order 35 Rule 7 to make an order setting aside the sequestration order made in the absence of the Debtor in circumstances where the Debtor was not served with the petition.  However, it seems to me inappropriate to make an order under that rule where the estate has already been administered in bankruptcy, as is the case here. 

The Act,and the rules made under the Actwhich have now been incorporated into the Federal Court Rules, provide for the protection of creditors in the event of an order being made under section 153B.  There is no similar regime applicable specifically for the setting aside of an order or a judgment pursuant to Order 35 Rule 7.  That is not to say that, in an appropriate case, the power contained in Order 35 Rule 7 ought not to be exercised.  However, such a power would normally be exercised in circumstances where the matter comes before the Court very soon after the order has been made and before there has been any administration in bankruptcy pursuant to a sequestration order.

Associate:

Dated:              23 June 1998