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Deputy Commissioner of Taxation versus Clyne

4 FCR 156

(Judgment by: Jenkinson J)

Re: Deputy Commissioner of Taxation
And: Peter Leopold Clyne

Court:
Federal Court of Australia, Bankruptcy District of the State of New South Wales and the Australian Capital Territory

Judges: Toohey J

Jenkinson JWilcox J

Legislative References:
Bankruptcy Act 1966 - The Act

Judgment date: 16 November 1984

Judgment by:
Jenkinson J

Questions reserved by a single judge exercising jurisdiction in bankruptcy. During the hearing of a creditor's petition St. John J. reserved several questions, pursuant to s.25(6) of the Federal Court of Australia Act 1976, for the consideration of a Full Court, and adjourned the hearing of the petition in the mean time. The special case transmitted, in compliance with Order 50 Rule 2 (c), by the learned judge is in these terms:

"1.
On the 4th January, 1983, the Deputy Commissioner of Taxation ('the petitioning creditor') presented a petition against Peter Clyne ('the judgment debtor'). Annexed hereto and marked 'A' is a copy of the said petition.
2.
The hearing of the said petition, after a number of adjournments, commenced before this Court on the 19th September, 1983, before his Honour Mr. Justice Beaumont.
3.
On the 7th October, 1983, a sequestration order was made by his Honour.
4.
The matter was appealed to a Full Court of this Court, and then to the High Court of Australia, and on the 31st July, 1984, the High Court set aside the said sequestration order, and remitted the matter to this Court to proceed in accordance with its judgment. Annexed hereto and marked 'B' is a copy of the said judgment incorporating the Orders made by the Court.
5.
Between the 4th January, 1983, and the 4th January, 1984, no order was sought or made in accordance with the provisions of Section 52(5) of the Bankruptcy Act.
6.
On the 12th October, 1984, this Court (Mr. Justice Sweeney) ordered that the petition be adjourned to a date to be fixed by the Registrar for hearing before any Judge of this Court.
7.
The petition came on for hearing before me on the 25th October, 1984, and evidence was given by the petitioning creditor including evidence that the amount claimed in the petition was still owing.
8.
The judgment debtor then submitted that I have no jurisdiction to proceed with the matter and that the petition must be dismissed, on the ground that it has lapsed - Bankruptcy Act, Sections 52(4) and 52(5).
9.
The petitioning creditor then applied to me (without prejudice to his submission that no extension was required) to extend the period at the expiration of which the petition would lapse to 3rd January, 1985.
10.
The judgment debtor then submitted that I had no power to extend the period as requested by the petitioning creditor.
11.
Both parties then requested me, pursuant to Section 25(6) of the Federal Court of Australia Act 1976 to reserve the following three questions for the consideration of a full Court of this Court.

(a)
Whether within the meaning of Section 52(4) of the Bankruptcy Act 1966 a sequestration order was made on the petition of the petitioning creditor on 7th October, 1983.
(b)
If the answer to question 1 is no, whether I have power to extend the period at the expiration of which the petition would lapse to 3rd January, 1985.
(c)
Whether the creditor's petition has now lapsed within the meaning of Section 52(4)."

Annexure "B" to the special case consists of the reasons for judgment delivered in the High Court of Australia in the appeal to which paragraph 4 of the special case refers, as well as the orders made by that Court. Those reasons are reported sub. nom. Clyne v. Deputy Commissioner of Taxation and Ors. (No. 3) (1984) 58 A.L.J.R. 398 .

This Court was informed that on 12 October 1984 Sweeney J. made an order annulling the bankruptcy which resulted from the acceptance of the judgment debtor's own petition, to which reference is made in those annexed reasons for judgment. But no reference to that order is to be found in the special case. The omission was not remarked during the hearing of the questions reserved. The preferable course would, I think, be to resume the hearing, so that the parties might be invited to make any submissions they desired to advance concerning the effect of the omission, and any applications either desired to make in respect of the omission. The other members of the Court having taken a different view, I will abstain from proposing, or concurring in an order disposing of the questions. But, being presently of the opinion that the answer to the question whether the petitioning creditor's petition has lapsed by virtue of the operation of s.52(4) of the Bankruptcy Act 1966 must be the same whether or not the other bankruptcy has been annulled, I will state my reasons for that opinion.

Sub-sections (4) and (5) of s.52 of the Bankruptcy Act 1966 are in these terms:

"52(4)
A creditor's petition lapses at the expiration of -

(a)
subject to paragraph (b), the period of 12 months commencing on the date of presentation of the petition; or
(b)
if the Court makes an order under sub-section (5) in relation to the petition - the period fixed by the order,

unless, before the expiration of whichever of those periods is applicable, a sequestration order is made on the petition or the petition is dismissed or withdrawn.
52(5)
The Court may, at any time before the expiration of the period of 12 months commencing of the date of presentation of a creditor's petition, if it considers it just and equitable to do so, upon such terms and conditions as it thinks fit, order that the period at the expiration of which the petition will lapse be such period, being a period exceeding 12 months and not exceeding 24 months, commencing on the date of presentation of the petition as is specified in the order."

The judgment debtor submitted that the Bankruptcy Act 1966 evinced a legislative intention to curtail the period during which uncertainty might endure as to whether an act of bankruptcy should result in a sequestration order upon the petition of a creditor. To understand the expression "a sequestration order" in s.52(4) as comprehending a sequestration order which is set aside on appeal would be to frustrate that intention, according to the judgment debtor's submission, and to produce the result that the petition on which such a sequestration order had been made would not be subject to lapse, whatever the duration of the period during which it continued pending. Such a result could not have been intended by the legislature, it was submitted. Further, the judgment debtor submitted, the reasons for the order setting aside the sequestration order in this case demonstrated that the latter order was a nullity, so that it was to be treated, in relation to the operation of s.52(4), as if it had never been made. Some of the passages, in the reasons for judgment of the members of the High Court who heard the appeal to which paragraph 4 of the special case refers, upon which the judgment debtor relied in support of that submission are these:

"It seems to us for a number of reasons that it is not possible for the court in those circumstances to make a sequestration order while the bankruptcy which resulted from the acceptance of the debtor's petition continues to exist."
"And there are other reasons which support the conclusion that a sequestration order cannot be made in circumstances such as the present, while the bankruptcy which resulted from the acceptance of the debtor's petition remains on foot."

(Clyne v. Deputy Commissioner of Taxation (No. 3) (1984) 58 A.L.J.R. 398 at 400 , 401, per Gibbs CJ., Murphy, Brennan and Dawson JJ.)

" . . . the Federal Court lacks jurisdiction to make a sequestration order in these circumstances."

(58 A.L.J.R. at 403, per Deane J.)

A legislative intention to restrict the period during which a creditor's petition may continue pending is to be discerned in sub-sections (4) and (5) of s.52. The means adopted to give effect to that intention may be open to question: in Re Draper; Ex parte Brosalco Pty. Ltd. (1983) 48 A.L.R. 656 McGregor J. held that s.52(5) did not preclude the exercise, more than twelve months after the presentation of a creditor's petition, of a power, which his Honour held to be conferred by s.33(1)(c), to order that the period at the expiration of which the petition would lapse should be a period of twenty four months from the date of presentation of the petition, but the judgment debtor submitted that s.52(5) did preclude the exercise of any such a power. If McGregor J. were in error on both points - as to neither of which is it necessary to express an opinion - and sub-sections (4) and (5) of s.52 operate to deny courts exercising jurisdiction in bankruptcy power to prevent or, perhaps one should say, undo, after the expiration of twelve months from the date of presentation of a creditor's petition, the lapse of that petition, which was pending at the expiration of that period and upon which no sequestration order had been made before the expiration of that period, yet that manifestation of the legislative intention would not in my opinion afford any clear guidance as to whether the words "a sequestration order is made on the petition", in s.52(4), comprehend the making of a sequestration order which is subsequently set aside on appeal. An intention to circumscribe the power of courts exercising jurisdiction in bankruptcy to enable a petition to remain on foot before a hearing which results in a sequestration order or dismissal or withdrawal of the petition has taken place does not in my opinion betoken an intention also to deny or to circumscribe that power in the uncommon circumstances to which the setting aside of a sequestration order on appeal gives rise.

The construction of the sub-sections ought not, I think, to be much influenced by any presumption concerning legislative intention in relation to those uncommon circumstances.

The natural meaning of the final clause of s.52(4) is that the occurrence of one or other of three actual events is specified within an ascertainable period of time. The sub-section as a whole declares a legal consequence of the passage of a period of time without the occurrence of any of those three actual events in that period. There is in my opinion nothing in the legislative context to suggest that any of those three actual events are to be understood as of significance in s.52(4) only if the legal effect of the event continues undisturbed by subsequent order of a court. The three events are selected, it would seem, because the occurrence of any of them signifies a normal termination of a proceeding the duration of which it is intended by the legislature to control. There is in my opinion nothing in s.52(4), or elsewhere in the Act, to suggest that in sub-section (4) or (5) of s.52 an attempt has been made to exercise that control, after the proceeding has terminated upon the occurrence of one of those three events, in relation to the unusual supervenient events to which sections 37(1), 38 and 154(1) may give rise.

Even if the sequestration order made by Beaumont J. were characterised as void ab initio , as the judgment debtor submitted, that might not preclude a conclusion that a sequestration order had been made, for the purposes of s.52(4), before the expiration of the period of twelve months commencing on the date of presentation of the petition. But in my opinion that characterisation cannot be given to the order: Cameron v. Cole (1943) 68 C.L.R. 571 at 590 -591 (per Rich J.), 598-599 (per McTiernan J.), 604-6-7 (per Williams J.); Latham C.J. contra, at 584-586.


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