Ramsay Health Care Australia Pty Ltd v Compton  HCA 28
BANKRUPTCY COURTS exercising jurisdiction under s 52 of the Bankruptcy Act 1966 (Cth) making a sequestration order against the debtor’s estate, may now be more willing to ‘go behind’ a judgment in order to be satisfied that the debt relied upon by the petitioning creditor is truly owing.
The appeal below concerned a primary judge’s decision to refuse the Respondent’s (debtor) application for such an investigation.
The High Court upheld the decision of the Full Federal Court, holding that the trial judge erred in not exercising the power to ‘go behind’ the judgment in this case.
The Appellant creditor, Ramsay, unsuccessfully argued that the discretion to ‘go behind’ had not been enlivened as there was no event of fraud, collusion or miscarriage of justice. Ramsay further proposed that the expression ‘miscarriage of justice’ refers, in this context, only to circumstances which impeach the judgment such that the judgment should never have been obtained. (see ).
The High Court’s Reasoning
The High Court noted that the Bankruptcy Court does not exist to enforce judgments; it is the duty of the Court to investigate whether the debt exists (at ). This enables – and means – a Court should, go behind a judgment.
Nonetheless, there has to be a substantial reason to ‘go behind’. In the present case, the liquidator swore an affidavit that he thought the debt went the other way in that it was owed by the creditor to the debtor. This was considered a substantial reason.
This case could make the bankruptcy list a little longer as the Court deals with applications by debtors to go behind the judgment.
It also means that any appointed trustee in bankruptcy might only have a temporary appointment.
To access the full judgment, follow this link – http://www8.austlii.edu.au/cgi-bin/viewdoc/au/cases/cth/HCA/2017/28.html?context=1;query=%20hca%2028;mask_path=
- Section 52 Bankruptcy Act 1966 (Cth)
- Collusion or fraud
- Miscarriage of justice
- Investigate whether debt exists
- Substantial reason