Deputy Commissioner of Taxation versus Clyne

4 FCR 156

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(Judgment by: Toohey J, Wilcox J)

Re: Deputy Commissioner of Taxation
And: Peter Leopold Clyne

Court:

Judges:
Toohey JJenkinson J

Wilcox J

Legislative References:
Bankruptcy Act 1966 - The Act

Judgment date: 16 November 1984

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Judgment by:
Toohey J
Wilcox J

Following upon the decision of the High Court of Australia in Clyne v. Deputy Commissioner of Taxation (1984) 58 ALJR 398 application was made to this Court by the Deputy Commissioner for an annulment of the statutory sequestration order against Mr. Clyne consequential upon the presentation by him of a debtor's petition. That application was granted by Sweeney J. His Honour ordered that the hearing of the Deputy Commissioner's creditor's petition, in relation to which a sequestration order had been pronounced on 7 October 1983 but set aside by the High Court, be adjourned to a date to be fixed by the Registrar before any judge of the Court. In the event, it came before St. John J. on 25 October 1984 when evidence was given on behalf of the petitioning creditor, including evidence that the amount claimed in the petition was still owing. However, Mr. Clyne submitted that, pursuant to s.52 of the Bankruptcy Act 1966, the petition had lapsed so that the Court had no jurisdiction to proceed with the matter.

Relevantly s.52 provides:

"(1)

. . .

(2)

. . .

(3)

. . .

(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whichever of those periods is applicable, a sequestration order is made on the petition or the petition is dismissed or withdrawn.

(5)

The Court may, at any time before the expiration of the period of 12 months commencing on 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."

Counsel for the Deputy Commissioner, without prejudice to his submission that no extension was required, sought an order from St. John J. extending the period at the expiration of which the petition would lapse to 3 January 1985 - it having been initially presented on 4 January 1983 - but Mr. Clyne submitted that the Court had no power to extend time. Thereupon, pursuant to s.25(6) of the Federal Court of Australia Act 1976, and at the request of both parties, his Honour reserved for the consideration of a Full Court of this Court three matters:

"(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)."

This Stated Case now comes before us.

The primary matter raised by the Stated Case is whether, under the circumstances and by force of s.52(4), the creditor's petition has lapsed. The reasons for judgment in the High Court make no reference to this matter. The comment is made on behalf of the creditor that it would be surprising for the Court to have remitted the matter if there had been any question in the mind of their Honours as to the continued life of the petition. The relevant dates were referred to in the judgments and the Bench included members with considerable experience in bankruptcy matters. However, the matter is not the subject of any express determination in the High Court and, as the creditor concedes, it is open to the debtor to take the point in this Court.

Section 52(4) provides for the lapse of a petition unless "a sequestration order is made on the petition" within twelve months or time is extended. The petition was presented on 4 January 1983 and a sequestration order was made within twelve months of that date, namely on 7 October 1983 . That sequestration order has now been set aside by the High Court as being beyond power but that does not mean that the order was a nullity. The Federal Court is a superior court of record: see s.5(2) of the Federal Court of Australia Act. An order of a superior court of record which is, for any reason, irregular is not a nullity, but merely voidable: see Cameron v. Cole (1943) 68 CLR 571 at pp.590- 591, 598, 599 and 604-605; Taylor v. Taylor (1979) 143 CLR 1 at pp.7-8. This approach was implicitly adopted by the majority Justices in the High Court in this case when they referred at p.400 to decisions where a second sequestration order had erroneously been made on a petition founded on a debt provable in the existing bankruptcy. They went on:

"It was held that the creditor had no legal right to the second sequestration order which should be rescinded. The proper course was, in our opinion, to annul rather than to rescind the order."

Annulment would, of course, have been unnecessary if the second order, which was - for the same reasons as in the present case - beyond power, had been a nullity when made. One of the two events specified in s.52(4) as necessary to prevent lapse of the petition did occur.

Mr. Clyne submits that the requirement of the sub-section is for a valid sequestration order. He argues that, were it not so, the life of the petition would be extended indefinitely. This is the result of the view we take but it need not occasion concern; the Court maintains control over the petition and may make such orders, including an order substituting a new creditor or dismissing the petition, as the circumstances require. The alternative position, which may accord to a debtor immunity in respect of a particular petition in relation to which an irregular order had been made, possibly with important consequences in respect of the commencement of the bankruptcy and the assets available for distribution to his creditors, is much more difficult to reconcile with the principles underlying the Act.

Question 1 in the Stated Case should be answered in the affirmative in which event Question 2 does not arise. Question 3 should be answered in the negative.