Bear v Official Receiver

65 CLR 307
1941 - 1209A - HCA

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(Decision by: Starke J)

Bear
v Official Receiver

Court:

Judges: Rich J

Starke JMcTiernan J
Williams J

Subject References:
Bankruptcy
Scheme of arrangement
Summary order for sequestration
Annulment and rejection of scheme

Legislative References:
Bankruptcy Act 1924 - ss 52(1); 161
Acts Interpretation Act 1901 - s 36(1)

Hearing date: 26 November 1941; 9 December 1941;
Judgment date: 9 December 1941

Sydney

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Decision by:
Starke J

Appeal from an order of the Court of Bankruptcy dated 21st August 1941 which rejected a composition or scheme of arrangement made under Part XI. of the Bankruptcy Act 1924-1933 and sequestrated the estate of the appellant. The appeal against the rejection of the composition or scheme of arrangement was not pressed, but it was contended that the Court of Bankruptcy had no jurisdiction to make the order for sequestration, or was in error in determining that it was entitled to make the order.

The scheme was rejected pursuant to the authority conferred by s. 161 (f) of the Act, and the sequestration order was made pursuant to the provisions of ss. 52 (l), 161 (h) and (i). By s. 52 (l) of the Act, a debtor commits an act of bankruptcy if a composition or scheme under Part XI. be rejected or annulled. The act of bankruptcy is deemed to have been committed on the date of the order of rejection or annulment, provided that, where a composition or scheme has been rejected or annulled, a sequestration order is made within seven days after the date of the order of rejection or annulment. By s. 161 (h), the court may in certain cases on the application of the registrar, any creditor, or of the debtor, annul the composition or scheme "and may, if it thinks fit, forthwith make a sequestration order in regard to the estate of the debtor, and proceedings may be had accordingly." Then sub-s. i provides:"If the composition or scheme is rejected or annulled, the order of rejection or annulment shall not take effect unless a sequestration order is made in pursuance of the last preceding paragraph, or is obtained by or against the debtor within seven days from the date of the order or within such further time as the court allows." In the case of the annulment of a composition or scheme of arrangement the court may make an immediate order of sequestration: the words are, "may, if it thinks fit, forthwith make a sequestration order." And notice to the debtor is not necessary to found its jurisdiction.

It is the debtor, it may be observed, who proposes the composition or arrangement, and though a creditor brings it before the court for consideration, still notice of the proceedings must be advertised and the debtor may be heard in favour of it (Act, ss. 157 (1), 161 (d) and (e)).

In my opinion, the court has a like jurisdiction if a composition or scheme be rejected. The jurisdiction is expressly given in the case of annulment by s. 161 (h), but it is a necessary implication from that section and s. 161 (i) that the like jurisdiction exists in the case of rejection. Neither the order for rejection or annulment is to take effect, which I take to mean as an act of bankruptcy, unless a sequestration order is made in pursuance of the last preceding paragraph, h, which predicates that such an order may accordingly be made by the court.

Still, in my opinion, the Court of Bankruptcy was not entitled in the circumstances of the present case to make a sequestration order against the appellant. Neither the registrar, a creditor, nor the debtor applied for a sequestration order, and the court acted on its own motion and without any notice whatever to the debtor. Notice to the appellant was not, I agree, necessary to found the jurisdiction of the court if any application had been made to it by any proper party. But I cannot assent to the proposition that the court can act of its own motion and without the intervention of any interested party. No-one assumed any responsibility for the sequestration order: Cf. In re Arthur Williams & Co ; Ex parte Official Receiver ^[F8] . Further, it is contrary to fundamental principles of justice that the subject should be affected in his person or his estate without being heard. And though notice to the appellant to show cause against a sequestration order was not, I think, in this case essential to jurisdiction, still the practice of the court to require notice before a subject is affected by a judicial order in person or in estate is so inveterate that only the most exceptional circumstances can justify the omission of such notice. There were no such circumstances here. The English Bankruptcy Acts of 1883 and 1914. are not the same as the Australian Act, but the following authorities are nevertheless in point: In re Burr; Ex parte Board of Trade ^[F9] ; In re Ponsford; Ex parte Ponsford ^[F10] , at p. 707; In re Pinfold; Ex parte Pinfold ^[F11] ; In re Flew; Ex parte Flew ^[F12] .

It is unnecessary to consider whether the Bankruptcy Court might allow further time for obtaining a sequestration order-Cf. ss. 161 (l), 52 (l) (ii)-for there is no-one who seeks such an order.

The appeal should be allowed and the order of the Court of Bankruptcy dated 21st August 1941 set aside in so far as it orders as follows:"And a sequestration order is hereby made against the said Benjamin David Bear and Mr. Arnold Victor Richardson an official receiver of this court is hereby constituted official receiver of the estate of the said Benjamin David Bear of 93 York Street Sydney. And it is further ordered that the applicant's costs of and incidental to the application be taxed and paid out of the estate."