When is a judgment debt not a judgment debt?

This week's TGIF considers the case of Compton v Ramsay Health Care Australia Pty Ltd [2016] FCAFC 106, where the Court exercised its power to "go behind" a judgment upon which a petitioning creditor relied as proof of a debt that was owed.

WHAT HAPPENED?

On 4 June 2015, a creditor filed a creditor's petition in the Federal Court seeking a sequestration order against the estate of the debtor, after the debtor failed to comply with a bankruptcy notice. The bankruptcy notice required payment of a judgment order made by the Supreme Court of New South Wales in the amount of $9,810,312, arising from a personal guarantee provided by the debtor.

In the Supreme Court proceeding, the debtor did not dispute the quantum of the claim. Rather, he contended that although he had signed certain pages, those pages were signed to signify his assent to a separate guarantee and one which would not expose him to personal liability.