Bennett v Talacko
[2016] VSCA 179
•28 July 2016
SUPREME COURT OF VICTORIA
COURT OF APPEAL
S APCI 2016 0024
| ALEXANDRA BENNETT, MARTIN TALACKO & ROWENA TALACKO | Applicants |
| v | |
| JUDITH GAIL TALACKO (as appointed representative of the estate of Jan Emil Talacko) | First Respondent |
| and | |
| JAN TALACKO (as executor of the estate of Helena Marie Talacko) | Second Respondent |
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| JUDGES: | ASHLEY, PRIEST and SANTAMARIA JJA |
| WHERE HELD: | MELBOURNE |
| DATE OF HEARING: | 16 June 2016 |
| DATE OF JUDGMENT: | 28 July 2016 |
| MEDIUM NEUTRAL CITATION: | [2016] VSCA 179 |
| JUDGMENT APPEALED FROM: | Talacko v Talacko [2015] VSC 624 (Sloss J) |
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PRACTICE AND PROCEDURE – Appeal – Money judgment in Australian court – Judgment creditors’ wish to enforce judgment in foreign country – Two applications for certificate under s 15(1) Foreign Judgments Act 1991 (Cth) – Certificates issued, in different language – Judgment debtor bankrupt at time applications made – Judgment amount a ‘provable debt’ – Whether applications ‘duly made’ – Whether applications precluded by s 15(2) Foreign Judgments Act 1991 (Cth) on basis s 58(3) of Bankruptcy Act 1966 (Cth) operated as a ‘stay on enforcement of the judgment’ – Whether applications not ‘duly made’ on basis s 58(3)(a) or (b) precluded application for a certificate – Whether applications not ‘duly made’ because not supported by affidavit – Certificates declared invalid by trial judge – Foreign Judgments Act 1991 (Cth) s 15 – Bankruptcy Act 1966 (Cth) s 58(3) – Supreme Court (Miscellaneous Civil Proceedings) Rules 2008 O 11 – Application for leave to appeal granted – Appeal allowed.
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| APPEARANCES: | Counsel | Solicitors |
| For the Applicants | Mr P H Solomon QC and Mr O M Ciolek | Brand Partners Commercial Lawyers |
| For the First Respondent | Mr L Glick QC and Mr J Masters | Strongman & Crouch Solicitors |
| For the Second Respondent | No appearance |
ASHLEY JA:
I have had the advantage of reading in draft the reasons for judgment of Priest and Santamaria JJA. With one addition, see [5] below, the totality of their Honours’ reasons describe the circumstances of the matter.
Their Honours arrive at opposite conclusions whether this appeal should succeed. In my opinion, for the reasons which follow, the applicants should have leave to appeal and the appeal should be allowed.
The question which must be decided, and no other question, is whether one or both of two certificates which the Prothonotary issued in purported compliance with s 15(1) of the Foreign Judgments Act 1991 (Cth) (‘the Foreign Judgments Act’) was issued in breach of that provision, either because an application seeking the issue of such certificate was made before ‘the expiration of any stay of enforcement of the judgment in question’; or else because, for some other reason, such application was not ‘duly made’.[1] It is the fact, at least since terms of settlement were signed on 23 February 2001 in proceeding No 7393 of 1998 (‘the 1998 proceeding’), that what may be called the J E Talacko interests have attempted, by a series of manoeuvres which have so far been almost completely successful, to retain certain of the fruits of restitution of properties in Europe[2] which successive judgments[3] have shown should be in the hands of J E Talacko’s siblings (and now their beneficiaries). But that circumstance, whilst it may be deplored, cannot be permitted to deflect attention from the questions of statutory construction which must be answered.
[1]This description of the second aspect of the construction issue follows the language of the first respondent’s notice of contention.
[2] Following the collapse of communist regimes in Eastern Europe.
[3]Talacko v Talacko [2008] VSC 128 (Osborn J); Talacko v Talacko [2009] VSC 349; Talacko v Talacko [2009] VSC 533 (Kyrou J) (‘the 2009 judgment’). See also Talacko v Talacko (No 2) (2010) 25 VR 613 and, more recently, a proceeding in which interests associated with J E Talacko were largely successful, the decision at first instance being presently under appeal: Talacko v Talacko [2015] VSC 287 (McDonald J).
Before passing to the first of those questions, I should mention the additional factual circumstance to which I earlier referred.
J E Talacko was made bankrupt by order of the Federal Court on 7 November 2011. The bankruptcy continues to this day. Although, by s 149(4) of the Bankruptcy Act1966 (Cth) (‘the Bankruptcy Act’), there is a discharge at the end of three years from the date on which the bankrupt filed his or her statement of affairs,[4] the trustee objected to the bankrupt’s discharge by notice dated 5 November 2014. The ground of objection was that J E Talacko had refused or failed to sign documents which would have transferred restituted properties in Slovakia to the trustee. The latter had required J E Talacko to sign pertinent documents in early September 2014. Receipt of those documents had been acknowledged by the bankrupt’s solicitor, Joseph Guss. In the event, the bankruptcy was extended to 22 November 2019.
[4]Which was on 22 November 2011, as revealed by documents provided to the Court subsequent to the oral hearing.
The meaning of s 15(2) of the Foreign Judgments Act
There is no doubt that the conception of a stay of enforcement of a judgment — ‘enforcement’ meaning, by s 3 of the Foreign Judgments Act, in the case of a money judgment, ‘enforcement by execution’ — may embrace one or other or both of a judicially ordered stay and a stay effected by statute. The reasons for judgment of Santamaria JA give examples of the latter.
But the question is not what possible meaning the language of s 15(2) might bear. Rather, it is what meaning the sub-section is to be given by the application of orthodox principles of statutory construction. For more than one reason, I consider that the correct meaning is that the sub-section refers to a judicially ordered stay in the proceeding the subject of the application for issue of documents
In the first place, it is the Registrar — in Victoria, the Prothonotary of the Supreme Court — who is to issue the documents. The status of a judgment, including its enforceability having regard to whether a stay has been ordered,[5] is precisely the kind of information available to the Prothonotary — because the court record will disclose the position. On the other hand, the Prothonotary might well not know of any statutory or other preclusion against execution which might exist.[6]
[5] As to which, see r 66.16 of the Supreme Court (General Civil Procedure) Rules 2015 (‘Chapter I’).
[6]Neither might the applicant, although in this matter it is the fact that the bankruptcy was known to the applicants.
Second, the phrase, ‘the expiration of any stay’, is, in my opinion, redolent of a judicially ordered stay on execution. I accept that a statute might prescribe something which could be described as a ‘stay’, the same ‘expiring’ in the event that the statute provided for its coming to an end in certain circumstances. But I respectfully consider, unlike Santamaria JA, that the provision which is in point in this matter is particularly apposite to describe the situation when a judicially ordered stay comes to an end.
Third, the only reason, so far as I can see, why the first respondent propounded the proposition that s 15(2) is intended to embrace the situation where there is a stay by operation of statute was that thereby the provisions of s 58(3) of the Bankruptcy Act could be given operation. But it is unnecessary to distort the apparent meaning of s 15(2) in order to ensure that s 58(3) of the Bankruptcy Act has full effect. Of this, more later.
Fourth, the first respondent’s submissions assumed that s 58(3) of the Bankruptcy Act imposes a ‘stay on enforcement’ for the purposes of s 15(2). But even if that term encompasses a statutory stay, it does not follow that the assumption was correct. In my opinion, see later, s 58(3)(a) does not apply to an application made under s 15(1); and neither, for a different reason, does s 58(3)(b). So the first respondent’s s 15(2) argument would fail for a second reason.
Fifth, in Victoria, rules of court are made under the authority of an Act of Parliament, and have statutory force. Unlike the situation in which a subordinate instrument is made without Parliamentary assent,[7] rules of court may have some utility in casting light upon the meaning of a statutory provision to which they relate. I would not push this consideration very far, but insofar as r 11.11(c)(i) of the Supreme Court (Miscellaneous Civil Proceedings) Rules 2008 (‘Chapter II’) refers to a certificate stating ‘that the proceeding is at an end except for enforcement of the judgment’, I consider that it supports the conclusion that the stay of enforcement to which s 15(2) refers is a judicially ordered stay. Moreover, insofar as the Rules provide for the filing of an affidavit — see r 11.10(3) — they provide that the affidavit is to ‘depose to such information as will enable the certificate to be granted’. This does not stand in support of an argument that the affidavit should state a circumstance — in this case, J E Talacko’s bankruptcy — which, as the first respondent would have it, would preclude, rather than enable, a certificate to be granted.
[7]As to which, see Jackson v Hall [1980] AC 854 and Kuwait Minister of Public Works v Snow & Partners [1983] 2 All ER 754.
Before departing from this issue, I make these further observations:
(1)The conclusion that I have reached does not depend upon acceptance of the applicants’ argument that s 15(2) makes use of a technical legal term, for which reason it should be presumed to bear that meaning absent contextual indication to the contrary.
(2)I have not been persuaded to a different construction by the first respondent’s reliance upon the concept of reciprocity as set out in the Foreign Judgments Act.
The concept is found in Part 2 of the Act, which is concerned with the circumstances in which, given the Governor-General’s satisfaction of substantial reciprocity of treatment, regulations made under the Act may provide that Part 2 extends to a particular country.[8]
The consequences, in the case of a country to which Part 2 does apply — and the Czech Republic is not such a country — are spelled out in ss 6 to 10 with respect to a foreign judgment brought into Australia. The utility of Part 2 is that a foreign judgment, once registered in a local court, and not thereafter set aside, becomes the judgment of the court. This obviates the necessity of proving the foreign judgment in a separate local proceeding.
I turn to Part 3 of the Act. It also contains other sections bearing upon the application of Part 2.[9] Section 15, however, stands apart. It has application whether or not the country in which an applicant seeks to use the documents referred to in that section is a country to which Part 2 of the Act applies.
In the event, where the foreign country is not a country named in the Regulations, reciprocity as described in ss 5(1) and 5(6) is not directly engaged. For the first respondent to point to a provision such as s 6(6) — whatever may be its operation in a matter to which Part 2 applies — is really beside the point in such a case. Moreover, the content of a s 15(1) application is not informed, in my view, by the particular requirements of an affidavit for use in this country which are set out in r 11.04 of Chapter II, the statutory authorisation for which is s 6(3).
(3)What I have said about reciprocity has addressed the argument advanced for the first respondent. The provisions of Part 2 of the Foreign Judgments Act aside, reciprocity is a pertinent consideration in private international law with respect to the recognition and enforcement of foreign judgments. So much is reflected by s 12 of the Foreign Judgments Act. In the present case, the Commonwealth Attorney-General apparently made a statement of reciprocity on 29 August 2012, which was submitted to the Czech court.[10]
[8]See s 5(1) and (6). The pertinent regulations are the Foreign Judgments Regulations1992 (Cth). See also James Allsop & Daniel Ward, ‘Incoherence in Australian Private International Law’, (Paper presented at the Sydney Centre for International Law Conference under the heading ‘Recognition and execution of foreign judgments’, 10 April 2013).
[9]See ss 11, 12 and 14; see also s 13, which deals with the converse of the situation dealt with by s 5(1).
[10]Deposition of Stephen Howells, 2 June 2014 [16]; Transcript of Proceedings, Talacko v Talacko (Federal Court of Australia, VID 201 of 2010, North J, 10 December 2012) 10 (S Howells).
The notice of contention
Kyrou J made final orders in the 1998 proceeding on 11 December 2009, having delivered reasons for judgment on 24 November that year. His Honour’s judgment was confirmed by the decision of this Court on appeal, and by the High Court’s refusal of special leave to appeal on 28 October 2011. The judgment was therefore final and conclusive on 28 October 2011. All that remained was the critically important practical step of enforcement of the judgment by execution.
But then J E Talacko’s bankruptcy intervened. As I have earlier foreshadowed, s 58(3) of the Bankruptcy Act then became relevant. The fact that an application for documents pursuant to s 15(1) of the Foreign Judgments Act was not precluded by s 15(2) does not mean, of itself, that s 58(3) of the Bankruptcy Act could not operate so as to prevent the making of a s 15(1) application. I think it is clear that it would do so if the making of the application, in respect of a ‘provable debt’, would infringe the absolute bar imposed by s 58(3)(a); or if the making of such an application constituted a fresh step in a proceeding or the commencement of a legal proceeding in respect of such a debt, and was made without the leave of the Court, contrary to s 58(3)(b). I pause to say that at the time when J E Talacko was made bankrupt, the applicants in the 1998 proceeding had, by reason of the final and conclusive judgment in their favour, a provable debt against his bankrupt estate in an amount exceeding €10 million.
According to the first respondent’s notice of contention, the applications made under s 15(1) were not ‘duly made’ because:
Ground 1 — Each of the requests of the applicants for the issue of:
(a)the document entitled ‘Certificate of Finality of Judgments and Orders’ and dated 4 July 2012 (the First Certificate); and
(b)the document entitled ‘Amended Certificate of Finality of Judgments and Orders’ and dated 23 February 2015 (the Second Certificate)
was not made by the filing of an affidavit deposing to such information as would enable the certificate to be granted, contrary to r 11.10(3) of the Supreme Court (Miscellaneous Civil Proceedings) Rules 2008, and accordingly was not an application that was duly made for the purposes of s 15(1) of the Foreign Judgments Act 1991 (Cth).
Ground 2 — The requests of the applicants for the issue of the First Certificate and the Second Certificate were fresh steps in a legal proceeding in respect of a provable debt which occurred without the leave of the Court for the purposes of s 58(3)(b) of the Bankruptcy Act 1996 (Cth), and accordingly were not applications that were duly made for the purposes of s 15(1) of the Foreign Judgments Act 1991 (Cth).
Ground 3 — In the alternative to ground 2, the requests of the applicants for the issue of the First Certificate and the Second Certificate constituted enforcement of a remedy against the person or the property of a bankrupt in respect of a provable debt for the purposes of s 58(3)(a) of the Bankruptcy Act 1966 (Cth), and accordingly were not applications that were duly made for the purposes of s 15(1) of the Foreign Judgments Act 1991 (Cth).
Each of those grounds thus focussed upon the competence of the applicants to make the applications, and not upon the issue of ‘the certificate’. The word ‘certificate’, used in the notice of contention, conveniently embraces issue of both a certified copy of the judgment and the certificate referred to in s 15(1)(b). I will use the word with that meaning hereafter.
The first respondent sought to make use of the term ‘duly made’ in a multiplicity of ways. Thus, it was submitted, an application was not ‘duly made’ if it was — (1) made in breach of s 15(2), because a statutory stay had not ‘expired’; (2) not supported by an affidavit; (3) made in breach of the bar imposed by s 58(3)(a) of the Bankruptcy Act; (4) made without obtaining leave of the Court under s 58(3)(b) of the Bankruptcy Act. The sole apparent purpose of propositions (1), (3) and (4) was to facilitate the application of s 58(3) (a) and/or (b) to the making of a s 15(1) application. But the attempt to press the term ‘duly made’ in s 15(1) into service in order to conclude that s 58(3)(a) and/or (b) have effect was misconceived. They have effect according to their tenor. Because the term ‘duly made’ appears to me to have its explanation within the Foreign Judgments Act itself, specifically s 15 (I will later explain what I mean by this), I would reject, without needing to go any further, notice of contention grounds 2 and 3.
Notwithstanding, however, my opinion that notice of contention grounds 2 and 3 should be rejected on the simple basis that the term ‘duly made’ has its explanation within the Foreign Judgments Act itself, specifically s 15, I should also deal with those grounds upon an assumption that my conclusion about the meaning of ‘duly made’ is incorrect.
It appears to be the case that each of those grounds assumes that s 58(3)(a) and/or (b) will inevitably apply so as to deny a judgment creditor competence to make an application under s 15(1) if the judgment debtor has become bankrupt. But I do not accept that this is so. Moreover, in my opinion, neither paragraph (a) nor (b) of s 58(3) applied in this case so as to deny the applicants’ competence to make the s 15(1) applications.
It is necessary to begin with the precise nature of the application which succeeded below. What the first respondent sought, inter alia, and what she achieved, was a declaration that the two certificates were invalid because the applications for those certificates were not ‘duly made’. The judge reasoned that the applications were not duly made because — (1) s 58(3) imposed a stay of execution for the purposes of s 15(2); and (2) (probably),[11] the applicants did not ‘wish to enforce’ the 2009 judgment in the Czech Republic. That sets the context in respect of which the possible application of s 58(3)(a) and/or (b) must be tested.
[11] See Talacko v Talacko (2015) 305 FLR 353, 392 [113].
I have already concluded that the first basis upon which the judge concluded that the applications were not ‘duly made’ does not accord with the true meaning of s 15(2). As to the second of them, I think it is clear that the applicants did ‘wish to enforce’ the 2009 judgment in another country. The circumstance that, it appears, there were various steps which would have to be successfully undertaken, if and when a s 15(1) certificate issued, before there could be any such enforcement in the Czech Republic does not mean that the relevant wish was not present.
That takes me to the matters raised by notice of contention grounds 2 and 3 — assuming, as I have said, that an application would not be ‘duly made’ if it was in conflict with s 58(3)(a) and/or (b),
I first consider the possible application of s 58(3)(a). It imposes an absolute bar against enforcement of any remedy in respect of a provable debt by a creditor against the person or property of a bankrupt. It does so by providing that it is not competent for a creditor to act in such a way.
The question which arises, in connection with s 58(3)(a), is whether application for, and the issue a certificate under s 15(1), is to be described as ‘enforce[ment] of any remedy which a creditor is not competent to take’. In my opinion, the answer to that narrow question is ‘no’.
Accepting that the applicants wished to enforce the 2009 judgment, the application for and issue of the certificates were steps which might, in the end, lead to enforcement of the remedy of execution. But any such application and any such issue were not, as a matter of plain language, themselves enforcement of that remedy. They were well antecedent to it. At some later stage, there might be action by the applicants, reliant upon one or other certificate, which could trigger the operation of s 58(3)(a), and so deny the applicants competence to proceed.[12] But it was not at this stage. The fact that, as it appears, the applicants sought to rely upon the first certificate[13] in certain proceedings in the Czech Republic no doubt confirmed their wish to enforce the 2009 judgment. But it did not convert the application for and the issue of either certificate into enforcement by execution when it was not. Enforcement — compelling the observance of a remedy — would necessarily require, as a first step, an order made by a court in another jurisdiction.[14] Viewed at the time when the applications under s 15(1) were made, that first step might or might not ever eventuate. Further, by issue of the certificates, the Supreme Court of Victoria could not enforce, and did not purport to enforce, the provable debt.
[12]So also, issue of a certificate would not be properly described, or re-described, as enforcement of a judgment if, after issue but before execution, a judgment debtor was made bankrupt.
[13]There was apparently such reliance when one of the Czech proceedings was before the Municipal Court of Appeal for the City of Prague, in October 2012. J E Talacko took no step in this Court to challenge the validity of that certificate until October 2014.
[14]Firebird Global Master Fund II Ltd v Republic of Nauru (2015) 326 ALR 396 raised the converse situation. French CJ and Kiefel J stated, at 407 [42] (emphasis added):
The effect of registration of the foreign judgment [under Part 2 of the Foreign Judgments Act] was to make it enforceable as a judgment of the Supreme Court. Registration, if valid, created new rights in favour of [the plaintiff] against [the defendant] and its property, which were then enforceable.
Thus, in my opinion, s 58(3)(a) did not preclude application for and the consequential issue of the certificates, this being a second reason why notice of contention ground 3 should be rejected.
I should add this, for completeness and not because it should be considered decisive. ‘Property’ is defined by s 5 of the Bankruptcy Act to include ‘real or personal property of every description whether situate in Australia or elsewhere’. But whether a court in the Czech Republic would be bound, or likely, to treat that definition as precluding recourse by a judgment creditor to real property situate in the Czech Republic was not known at the time of the applications for the issue of certificates under s 15(1). In the present case, that uncertainty would be further complicated by the applicants’ need to have J E Talacko’s gifting of some of the properties in the Czech Republic to his sons set aside.
For the reasons which I have attempted to explain, the precise nature of the proceedings brought by the applicants in the Czech Republic, and what has thus far transpired in those proceedings, is not pertinent to the question whether application for and the grant of the certificates was conduct which the applicants, by reason of s 58(3)(a) of the Bankruptcy Act, were not competent to take.
Priest JA has referred to evidence that the purpose of the certificates was to have the 2009 judgment ‘recognised’ in the Czech Republic, and to evidence that such a step, of itself, would not compel observance of that judgment. His Honour has concluded — if not directly, then at least implicitly — that not only did the applications for and the issue of the certificates not infringe s 58(3)(a), but that the taking of steps to achieve recognition of the 2009 judgment in the Czech Republic did not do so. It is unnecessary, for the purposes of my conclusion respecting the interaction between s 15(1) and s 58(3)(a), to go so far. But it seems to me, with respect, that the conclusion which is at least implicit in the reasons of Priest JA is correct.
I next refer to s 58(3)(b) of the Bankruptcy Act. In my opinion, the better view is that this sub-section was irrelevant to the s 15(1) applications and issue of the certificates. Once judgment in the 1998 proceeding was final and conclusive — that is, when the judgment of Kyrou J was ultimately confirmed — all that remained was execution; and that was the province of s 58(3)(a).[15] So understood, s 58(3)(b) simply did not arise for consideration in the context of the applications for and issue of certificates under s 15(1). This is a second reason why notice of contention ground 2 should be rejected.
[15]As to which see Fraser v Commissioner of Taxation (1996) 69 FCR 99, 111 (Beaumont J, with whom Black CJ and Tamberlin J agreed).
But assume that s 58(3)(b) did remain relevant. It is then necessary to refer to paragraph 3 of the orders made by North J in the Federal Court on 10 December 2012. Thus, with some explanatory interpolations—
Leave be granted nunc pro tunc from 7 November 2011 to the Applicants pursuant to s 58(3) of the Bankruptcy Act 1966 (Cth) to continue to take further steps, including defending or pursuing any appeal, up to judgment against [J E Talacko] in the Petition proceedings that have been lodged in their names in the District Court of Prague on 4 November 2011 and which have been assigned numbers 49 EXE 2107/2011-73 [ie the enforcement proceeding commenced by the applicants and their mother] and 48 EXE 522/2012-75 [i.e. the enforcement proceedings commenced by Jan Talacko as the executor of his mother, Helena Talacko] provided that no step be taken to enforce any judgment against [J E Talacko] without the prior leave of the Federal Court of Australia in its bankruptcy jurisdiction.
There are two possible interpretations of that order. The first — hardly revolutionary — is that it meant what, on its face, it said; and thus that it was only directed to the proceedings in the Czech Republic. So understood, that order would be entirely consistent with my opinion that s 58(3)(b) was irrelevant to the question whether a s 15(1) application could be competently made; that being so because there was now a final and conclusive judgment in the 2009 proceeding, and that only execution remained, which is the province of s 58(3)(a).
The alternative interpretation is that, although order 3 referred only to the proceedings in the Czech Republic, it was founded on an assumption that the Czech proceedings, though having their own identifiers, were but further steps in the 1998 proceeding; for which reason their continuation required leave under s 58(3)(b) — notwithstanding that there was now a final and conclusive judgment in that proceeding.
What I have called the second interpretation could be explained this way. If, in terms, order 3 had authorised the taking of further, but limited, steps in the 1998 proceeding, it might have been wrongly understood as having imposed no inhibition upon the applicants with respect to prosecution of the proceedings in the Czech Republic, the end point of which was intendedly a judgment or judgments susceptible of execution. Moreover, it would have been meaningless so far as the Czech authorities were concerned.
But whichever be the correct interpretation, it is clear that North J was astute to ensure that the proceedings in the Czech Republic did not de facto permit execution upon the 2009 judgment. In that respect, order 3 was crystal clear. It was known to, and consented to by, both the applicants and the trustee in bankruptcy.
Two further interrelated matters should be mentioned. First, on 10 December 2012, North J was made aware by applicants’ counsel that ‘comprehensive certification of the finality and enforceability’ of the 2009 judgment had been obtained and provided to the court in the Czech Republic. His Honour could have been in no doubt that the certification related to the Czech proceedings which, in the end, were intended to lead to a favourable judgment or judgments susceptible of execution. It is implicit in paragraph 3 of his Honour’s orders that he did not consider that seeking and obtaining ‘certification’ of the 2009 judgment had been beyond the competence of the applicants by reason of s 58(3)(a).
Second, in terms, order 3 ensured that there could not be de facto execution on the 2009 judgment via the proceedings in the Czech Republic. His Honour’s order constrained the applicants not to execute upon any favourable judgment; and that was known to the trustee.
One might speculate what the utility of the proceedings in the Czech Republic could be in those circumstances. The answer might be that if an order was made which restituted the ‘gifted’ properties to the estate of J E Talacko, albeit in proceedings between the applicants and J E Talacko’s sons, it could result in enlargement of the bankrupt’s estate against which the applicants had a provable claim — this being in the interest of both the trustee and the applicants. It was, I note, stated in the course of oral argument in this Court that there was a time bar against the trustee himself now pursuing such a claim in the Czech Republic. That this is the case — its consequence being to further insulate the Czech properties from becoming part of the bankrupt’s estate, and so available to meet the applicants’ provable debt — is deposed to by paragraph 12 of the affidavit of Joseph Hlavicka, the applicants’ Czech lawyer, sworn 9 November 2012.[16]
[16]Subject to the operation of a time bar under Czech law, the trustee may have been able to pursue in that country a claim that the ‘gifting’ of the properties by J E Talacko to his sons was void, in reliance on s 120 of the Bankruptcy Act. The ‘gifting’ took place in May 2009, J E Talacko was made bankrupt on 7 November 2011, and the donees were ‘related entities’ within s 5.
I need say nothing about s 58(3)(b) so far as it refers to the commencement of legal proceedings in respect of a provable debt. That is because, first, notice of contention ground 2 raises no argument that what was done was the commencement of a proceeding; and second, because that is plainly not the way in which the matter was approached before North J.
The next matter requiring consideration is the first respondent’s notice of contention ground 1: that neither application was ‘duly made’ because an affidavit was not filed as required by r 11.10(3) of Chapter II of the Rules. In my opinion, the words ‘duly made’ in s 15(1) — which, as I have said, the first respondent sought to deploy in no less than four ways — have a function which is essentially directed to the prohibition in sub-s (2). An application could not be ‘duly made’ if its making was in contravention of that subsection.
Then there is the fact that para (b) of s 15(1) directs attention to the Rules. It does not do so, however, with respect to the application, but only with respect to the matters which a certificate must state. Those matters are set out in r 11.11(c)(i) to (v) of Chapter II. All the matters, save for (v), which is a catch all, are matters of which the Prothonotary can be apprised by recourse to documents held by the Court, including reasons for judgment and any later judgment of the Court of Appeal or of the High Court.
If I was wrong in concluding that the words ‘duly made’ have nothing to say about a litigant’s failure to file an affidavit, then I would be of opinion that such failure, though non-compliant, was inconsequential. That is so because the point of the affidavit, as I earlier observed, is to depose to information as will enable the certificate to be ‘granted’[17] — not information the effect of which will be (or might be) to preclude grant; or information which is irrelevant to such grant. The pertinent information is the kind of information which — see r 11.11(c) — is available to the Prothonotary (by undertaking a little more work) regardless that it is not deposed to in an affidavit.
[17]The word used by r 11.10(3) — by contrast with s 15(1) which makes issue of a certificate mandatory where an application is duly made.
The improbability that the affidavit required by r 11.10(3) should be accounted as having more than formal significance is underlined, I think, by the non-exhaustive list of matters which appears in s 17(1) of the Foreign Judgments Act under the heading ‘Rules of Court’. All items on the list pertain to procedures under Part 2 of that Act.
It follows from what I have already said that in my opinion the function of the affidavit, as described in r 11.10(3), would not require disclosure that the judgment debtor had become bankrupt. That is because issue of a certificate, of itself, would not infringe the barrier set up by s 58(3)(a); and because the better view is that s 58(3)(b) has no place at that point.
I should add this: r 11.10(1) of Chapter II states that an application under s 15(1) may be made without notice to any person. An applicant, in such circumstances, must be candid in disclosing information relevant to the ‘grant’ of a certificate. But that obligation cannot make relevant something which is not.
Other matters
Two further matters require mention.
First, an argument was pursued by the first respondent that, if her submissions were not accepted, there would be an inconsistency of operation between two Commonwealth statutes. But as I construe the interrelationship between s 15 of the Foreign Judgments Act and s 58(3) of the Bankruptcy Act, that is simply not so.
Second, whilst the appeal should be allowed, it is necessary to give close consideration to the precise orders which ought be made in lieu of the orders made by the judge. Particular issues arise by reason of — (a) the judge’s order that the applicants notify the relevant court in the Czech Republic of the declarations of invalidity of the two certificates; and (b) the language of the first certificate.
As to matter (a), the applicants having complied with the particular orders, the first respondent should now inform the Czech court of the contrary conclusion reached by this Court.
That leads on to matter (b). Obviously enough, the applicants’ advisers were sufficiently concerned about the form of the first certificate to have it superseded by the second. Regardless that, as I have concluded, J E Talacko’s bankruptcy was irrelevant to the application for and issue of the certificates, it was of course important that neither certificate be framed in a way that might be misunderstood.
The first certificate, dated 4 July 2012, drawn by the applicant’s then counsel, described the 2009 judgment and orders as being ‘final, binding and enforceable’. It stated that the provisions of, inter alia, the Bankruptcy Act operated upon parties to proceedings under that Act within its terms, but did not operate ‘to affect the finality or the binding and enforceable effect’ of the 2009 judgment and orders. It made no reference to J E Talacko’s bankruptcy.
In a notarised deposition dated 2 June 2014, counsel stated[18] that he had drawn the certificate at the request of the Prothonotary. The latter and his staff had carefully considered it, made alterations, and then the Prothonotary had signed it.
[18]The deposition was made in connection with proceedings in the Czech Republic. Much of it was taken up meeting assertions made by Joseph Guss, J E Talacko’s solicitor, upon which assertions J E Talacko was relying to defeat the applicants’ proceedings in the Czech Republic.
The Prothonotary described, in the certificate, what it was that made the 2009 judgment and orders ‘final, binding and enforceable’. It was the sequence of trial and appellate judgments culminating in the unsuccessful High Court special leave application. The Prothonotary stated that he had ‘examined the Register and records of the Court’ in order to give the certificate.
The second certificate, dated 23 February 2015, omitted reference to the 2009 judgment being ‘enforceable’. In lieu of the recitation that the judgment and orders were ‘final, binding and enforceable’, there was substituted a recitation that the same were ‘final, conclusive and binding’, and it was certified that the judgment and orders were ‘at an end except for enforcement’. The circumstances mentioned in the preceding paragraph were relied upon to show why it was that the judgment and orders were of that character. There was now no reference to the Bankruptcy Act in the certificate. The certificate was stated to be ‘an amendment and replaces in its entirety’ the first certificate.
Although the Prothonotary carefully explained the matters which caused him to certify that the 2009 judgment was ‘final, binding and enforceable’, I think that, together with the reference to the Bankruptcy Act (which led nowhere) the first certificate was capable of misleading the reader. It was, I think, capable of being read to imply that the Bankruptcy Act generally was of no relevance to the 2009 judgment. On the other hand, the second certificate plainly identified itself as
replacing the first certificate in its entirety. For that reason, and because of the potential for the first certificate to mislead in the way which I have mentioned, I consider that the applicants should be required to inform the relevant Czech court that — (a) whilst the first certificate has not been declared invalid, they no longer rely upon it; (b) they do rely upon the second certificate, which likewise has not been declared invalid; and (c) insofar as the first certificate might have been understood to suggest that the Bankruptcy Act, generally, was irrelevant to the 2009 judgment, that is not the case. I add that I have no doubt that this court can and should protect the integrity of its processes. But, having regard to all the circumstances which I have mentioned, I think that it is unnecessary, by the orders in lieu, to declare the first certificate invalid.
PRIEST JA:
Introduction
In February 2001, Jan Emil Talacko (‘J E Talacko’) agreed to compromise proceedings brought by his sister Helena, and his brother Peter’s children and wife, with respect to a dispute concerning interests in real property that had been owned by his parents. He reneged on that agreement. His personal representative — J E Talacko having died — continues to renege on that agreement, and seeks to frustrate enforcement in the Czech Republic of the judgment of Kyrou J given on 24 November 2009.[19] The defence of the application in this Court is the latest step directed towards evading the honour of the agreement.
[19]Talacko v Talacko [2009] VSC 533.
Santamaria JA, whose reasons for judgment I have had the considerable advantage of reading in draft, has concluded that the present application for leave to appeal cannot succeed. Despite the force of his Honour’s reasoning, I cannot agree. In my view, the application for leave to appeal should be granted and the appeal allowed. It is necessary that I state my reasons. Given his Honour’s thorough
treatment of the relevant history, however, and his Honour’s analysis of the issues, save to the extent necessary to expose my own reasoning, I need not recapitulate those matters in great detail.
Key individuals and events
Although they are comprehensively described in the reasons of Santamaria JA, it is convenient at this point briefly to set out the key individuals and events.
Anna and Alois Talacko owned real property in the Czech Republic, Slovakia and Germany (‘the properties’), confiscated by the communists in Czechoslovakia and East Germany after the Second World War.
They had three children: J E Talacko, Helena Talacko and Peter Talacko.
J E Talacko married Judith Talacko (the first respondent). They had two sons: David Talacko and Paul Talacko.
Helena Talacko had two children: Anna Talacko and Jan Talacko (the second respondent).
Peter Talacko had three children: Alexandra Bennett, Martin Talacko and Rowena Bennett (the first, second and third applicants).
The first respondent, Judith Talacko — J E Talacko’s wife — is the appointed representative of his estate. The second respondent, Jan Talacko — Helena Talacko’s son — is the executor of her estate. (The estate of Helena did not respond to the present application.)
In proceedings brought in the Supreme Court, it was alleged that J E Talacko had failed to honour agreements reached with his siblings, Helena and Peter, in the early 1990s, to share interests in the properties (which had been restituted). Those proceedings settled when the parties entered into Terms of Settlement dated 23 February 2001. J E Talacko did not, however, honour the settlement. Osborn J determined that J E Talacko had breached the Terms.[20] Kyrou J then dealt with the remaining issues in the proceeding, including the plaintiffs’ entitlement to judgment for equitable compensation pursuant to the Terms.
[20] Talacko v Talacko [2008] VSC 128.
On 11 December 2009, Kyrou J made orders (in effect) that J E Talacko pay his sister, Helena Talacko, and his brother’s three children, the present applicants Alexandra Bennett, Martin Talacko and Rowena Bennett, the total sum of €10,073,818, by way of equitable compensation (for convenience, ‘the compensation judgment’).[21]
[21] Talacko v Talacko [2009] VSC 533.
Almost two years later, on 4 November 2011, the applicants commenced a proceeding in the Czech Republic to have the compensation judgment recognised.
On 7 November 2011 — that is, three days after the proceeding was commenced in the Czech Republic — J E Talacko was made bankrupt on the petition of his sister and his brother’s three children, the present applicants.
On 4 July 2012, the Prothonotary issued the first certificate under the Foreign Judgments Act 1991 (Cth).
J E Talacko died intestate on 3 November 2014.
The Prothonotary issued the second certificate under the Foreign Judgments Act on 23 February 2015.
The impugned judgment
It is also convenient to summarise the findings of the primary judge.
Judith Talacko, the first respondent, brought an application seeking to challenge the exercise of power by the Prothonotary to issue certificates under the Foreign Judgments Act at the request of the present applicants, and the validity of the certificates issued. Principally, the first respondent submitted that s 58(3) of the Bankruptcy Act 1966 (Cth) operated to impose a stay of execution for the purposes of s 15(2) of the Foreign Judgments Act.[22]
[22] Talacko & Ors v Talacko (2015) 305 FLR 353, 356-7 [2] (Sloss J) (‘Reasons’).
The present applicants contended that no order had been made staying the compensation judgment.[23] They argued that even if s 58(3) of the Bankruptcy Act required them to obtain leave to enforce the judgment against J E Talacko, their application to obtain a certificate under s 15(1) of the Foreign Judgments Act was not a proceeding to enforce the judgment against him, but rather an application by which they seek to have the judgment ‘recognised’ by the courts in the Czech Republic. They also relied on the orders made by North J in the Federal Court on 10 December 2012, granting leave nunc pro tunc to pursue the petition proceedings in the Czech Republic, as giving them leave to continue the proceeding to have the judgment recognised.[24]
[23]The proceeding before the primary judge also concerned a costs order made by Wood AsJ on 28 October 2009. For convenience, however, I will continue to refer only to the compensation judgment (which, in any event, represented the major component of the outstanding liabilities).
[24] Reasons 381 [77].
Favouring the arguments of the first respondent, Sloss J determined that s 58(3) of the Bankruptcy Act does operate so as to impose a stay of execution of the compensation judgment debt for the purposes of s 15(2) of the Foreign Judgments Act.[25]
[25] Ibid 381 [78], 385 [89].
Further, Sloss J was of the view that the power conferred on the Prothonotary under s 15(1) of the Foreign Judgments Act is predicated upon, and only enlivened when, ‘an application is duly made by a judgment creditor who wishes to enforce in a country a judgment that has been given in an Australian court’. If, as the present applicants contended, they do not seek to execute upon or enforce the compensation judgment, but merely to ‘recognise’ it, the act of recognition being said by them to be something other than ‘enforcement’ or ‘execution’ of the judgments, then the qualifying words in s 15(1) would not be satisfied, and their application could not be regarded as one that is ‘duly made’.[26] Her Honour was not satisfied that the applicants were competent to make application for the two certificates issued by the Prothonotary. Thus, there being no ‘duly made’ application before the Prothonotary, the Prothonotary’s power to issue certificates under s 15(1) of the Foreign Judgments Act, and the certificates were issued in error.[27]
[26] Ibid 392 [113].
[27] Ibid 393 [114].
Grounds of appeal and contentions
For the sake of ease, it is also appropriate to set out the grounds of appeal and the first respondent’s contentions.
The grounds of appeal are:
1. The trial judge erred in finding that s 58(3)(a) of the Bankruptcy Act 1966 (Cth) operated to impose a stay of enforcement for the purposes of s 15(2) of the Foreign Judgments Act 1991 (Cth) of the orders of the Honourable Justice Kyrou made on 11 December 2009 and the costs order of the Honourable Associate Justice Wood made on 28 October 2009.
2. The trial judge erred in finding that the power conferred on the Prothonotary under s 15(1) of the Foreign Judgments Act 1991 (Cth) cannot be enlivened if a judgment creditor, who does not in fact ‘seek to execute upon or enforce’ in a country a judgment that has been given in an Australian court, applies under that provision for the issue of a certified copy of the judgment and a certificate with respect to that judgment.
By a Notice of Contention, first respondent contends that the judgment should be affirmed on grounds of fact or law which were not raised for decision below
1. Each of the requests of the applicants for the issue of:
(a)the document entitled ‘Certificate of Finality of Judgments and Orders’ and dated 4 July 2012 (the First Certificate); and
(b)the document entitled ‘Amended Certificate of Finality of Judgments and Orders’ and dated 23 February 2015 (the Second Certificate)
was not made by the filing of an affidavit deposing to such information as would enable the certificate to be granted, contrary to r 11.10(3) of the Supreme Court (Miscellaneous Civil Proceedings) Rules 2008, and accordingly was not an application that was duly made for the purposes of s 15(1) of the Foreign Judgments Act 1991 (Cth).
2. The requests of the applicants for the issue of the First Certificate and the Second Certificate were fresh steps in a legal proceeding in respect of a provable debt which occurred without the leave of the Court for the purposes of s 58(3)(b) of the Bankruptcy Act 1966 (Cth), and accordingly were not applications that were duly made for the purposes of s 15(1) of the Foreign Judgments Act 1991 (Cth).
3. In the alternative to ground 2, the requests of the applicants for the issue of the First Certificate and the Second Certificate constituted enforcement of a remedy against the person or the property of a bankrupt in respect of a provable debt for the purposes of s 58(3)(a) of the Bankruptcy Act 1966 (Cth), and accordingly were not applications that were duly made for the purposes of s 15(1) of the Foreign Judgments Act 1991 (Cth).
The Foreign Judgments Act and the Bankruptcy Act
In order to understand the competing arguments concerning the implications of J E Talacko’s bankruptcy, it is necessary to consider the terms of s 15 of the Foreign Judgments Act and s 58(3) of the Bankruptcy Act.
So far as relevant, s 15 of the Foreign Judgments Act provides:[28]
[28] Emphasis added.
15 Issue of certificates of judgments obtained in Australian courts
(1)Subject to this section, where an application is duly made by a judgment creditor who wishes to enforce in a country a judgment that has been given in an Australian court, the Registrar of the court must issue to the judgment creditor:
(a) a certified copy of the judgment; and
(b) a certificate with respect to the judgment containing such particulars, including:
(i)the causes of action to which the judgment relates; and
(ii)the rate of interest (if any) payable on any amount payable under the judgment;
as are prescribed by the regulations or by Rules of Court.
(2)An application may not be made until the expiration of any stay of enforcement of the judgment in question.
…
And s 58(3) of the Bankruptcy Act provides:[29]
58 Vesting of property upon bankruptcy--general rule
…
(3)Except as provided by this Act, after a debtor has become a bankrupt, it is not competent for a creditor:
(a) to enforce any remedy against the person or the property of the bankrupt in respect of a provable debt; or
(b) except with the leave of the Court and on such terms as the Court thinks fit, to commence any legal proceeding in respect of a provable debt or take any fresh step in such a proceeding.
…
[29] Emphasis added.
Were the Prothonotary’s certificates caught by the Bankruptcy Act?
The first certificate under the Foreign Judgments Act was issued by the Prothonotary on 4 July 2012, and the second on 23 February 2015. I need not repeat the circumstances surrounding their issue, since they have been the subject of comprehensive treatment by Santamaria JA in his reasons.
Putting to one side whether the application for the issue of the certificates was, or was not, ‘duly made’ (which is the subject of the first contention) — a matter to which I will return — in addition to the arguments which found favour with the primary judge, the first respondent’s contentions include, first, that the applications for the issue of the certificates were fresh steps in a legal proceeding in respect of a provable debt which occurred without the leave of the Court for the purposes of s 58(3)(b) of the Bankruptcy Act (the second contention); and, secondly (and alternatively), that the applications for issue of the certificates constituted enforcement of a remedy against the person or the property of a bankrupt in respect of a provable debt for the purposes of s 58(3)(a) of the Act (the third contention). Accordingly, so it was contended, in either case the applications were not ‘duly made’ for the purposes of s 15(1) of the Foreign Judgments Act.
I do not accept the first respondent’s submissions. In my opinion, the applications for, and the issue of, the certificates by the Prothonotary did not fall foul of s 58(3) of the Bankruptcy Act.
By virtue of s 58(1) of the Act, when a debtor becomes a bankrupt his or her property vests in the trustee in bankruptcy. Section 82(1) provides that (generally speaking) ‘all debts and liabilities, present or future, certain or contingent, to which a bankrupt was subject at the date of the bankruptcy, or to which he or she may become subject before his or her discharge by reason of an obligation incurred before the date of the bankruptcy, are provable in his or her bankruptcy’.
It is clear that one of the primary purpose underlying s 58(3) of the Bankruptcy Act is the protection of creditors.[30] By its terms, however, it does not operate as a stay of proceedings. Subsection (3)(a) merely provides that once a debtor becomes bankrupt it is not ‘competent’ to ‘enforce any remedy’ against him or her, or against his or her property, with respect to a provable debt. As Beaumont J (with whom Black CJ and Tamberlin J agreed) observed in Fraser v Commissioner of Taxation:[31]
… a central feature of the established scheme of bankruptcy is an equitable or rateable distribution of property amongst all unsecured creditors. Any mechanism to secure this objective can allow for the recovery of assets by one person only and that is the trustee, acting on behalf of the general body of creditors. In exercising that function, the trustee will need to make administrative decisions, or judgments, from time to time. But it is for the trustee alone to make those judgments, in the interests of creditors as a whole; even if, where appropriate, the trustee may take into account their expressed wishes. The point is that there is no scope here for any role to be played by individual creditors acting on their own initiative; and if litigation is to be instituted with a view to the recovery of assets, it is the trustee’s function, and responsibility, to be the dominus litis and thus entirely in charge of the litigation to the exclusion of individual creditors. In other words, the relevant scheme of the legislation, specifically that of s 58(3), is that individual creditors have no right to decide to pursue, or not pursue, the assets of the bankrupt with a view to the satisfaction of individual debts.
[30] In Re McMaster; Ex parte McMaster (1991) 33 FCR 70, 72–3, Hill J said:
The modern bankruptcy law serves three purposes. The first is to ensure that the assets of the bankrupt are distributed rateably among creditors. The second, which is interrelated to the first, is to ensure that one creditor does not obtain an undue advantage over other creditors. The third is to bring about the discharge of the debtor from future liability for his existing debts, so that the debtor may start afresh ...
[31] (1996) 69 FCR 99, 114 (‘Fraser’).
As Beaumont J made clear, once a sequestration order is made, there is no scope for individual creditors to act on their own initiative. If litigation is to be instituted with a view to the recovery of assets, it is entirely the function and responsibility of the trustee to maintain such litigation to the exclusion of individual creditors. As will become clear, J E Talacko’s trustee in bankruptcy was aware of enforcement proceedings in the Czech Republic, and consented to orders in the Federal Court which sought to advance those proceedings.
In my view, the application for, and provision of, the Prothonotary’s certificates is not ‘to enforce any remedy against the person or the property of the bankrupt in respect of a provable debt’, but simply to have a judgment of the Supreme Court ‘recognised’ in a foreign jurisdiction. In Fraser, Beaumont J drew attention to the important structural differences between s 58(3)(a) and (b). He said:[32]
It will be recalled that, under this provision, except as provided by the Act, once a debtor has become a bankrupt, it is not competent for a creditor ‘to enforce any remedy against the person or property of the bankrupt in respect of a provable debt’. There is an important structural difference from s 58(3)(b), namely, that there is no exception provided (ie, the grant of leave to proceed). The bar imposed by s 58(3)(a) is absolute if the circumstances specified are shown to exist. …
[32] Ibid 108–9.
Beaumont J later concluded that:[33]
… the absolute bar imposed by s 58(3)(a) should be construed so as to apply only to the enforcement of remedies, including extra-curial remedies, as distinct from the institution of legal proceedings and their maintenance up to the point of recovery of judgment. The institution and maintenance of such proceedings will, of course, be subject to the different constraints imposed by s 58(3)(b), unless leave be granted under that provision.
[33]Ibid 111–2 (emphasis added). See also Clyne v Commissioner of Taxation(No 3) (1984) 154 CLR 589, 595 (Gibbs CJ, Murphy Brennan Dawson JJ); Bradley v Stanek (Unreported, 5 March 1999, Queensland Court of Appeal, Pincus and McPherson JJA, and Mackenzie J).
Importantly, when making these observations, Beaumont J considered that to ‘enforce’ a remedy was ‘to compel observance of’ that remedy.[34] With respect, that view plainly is correct.
[34] Fraser, 111.
As I understand the evidence, the purpose of obtaining the Prothonotary’s certificates is to have the compensation judgment recognised in the Czech Republic. The burden of the evidence is that such a step of itself does not compel observance of the compensation judgment. Rather, it is a precursory step to enforcement. In other words, before the compensation judgment may be enforced, it must first be recognised. So understood, the issue of the certificates did not infringe s 58(3)(a). For s 58(3)(a) to be engaged, in my opinion there would need to be an endeavour to compel observance of the compensation judgment once recognised.
Furthermore, in my view, the applications made to the Prothonotary for issue of the certificates was neither the commencement of a legal proceeding in respect of a provable debt, nor to take any fresh step in such a proceeding, requiring leave of the court under s 58(3)(b). It is enough to observe in this regard that a ‘proceeding’ connotes notions of an action or matter, or some application or initiating process, by which the jurisdiction of a court is invoked.[35] The certificates sought from the Prothonotary did not possess that character. But if I am wrong about that, in my view orders made by North J in the Federal Court were effective to grant leave to the applicants under s 58(3)(b) of the Bankruptcy Act to apply for, and for the Prothonotary to issue, the relevant certificates under s 15 of the Foreign Judgments Act.
[35]Braeside Bearings Pty Ltd v HJ Brignell and Associates (Boronia) [1996] 1 VR 17, 20 (Tadgell JA); Lillas and Loel Lawyers Pty Ltd v Celona (2014) 43 VR 1, 8 [32] (Priest JA). See also Fraser, 111.
On its face, order 3 of the orders made by North J on 10 December 2012 — the orders having been made by consent — embraces to two proceedings in the District Court of Prague, bearing the numbers 49 EXE 2107/2011–73 and 48 EXE 522/2012–75. These two proceedings (conveniently, ‘the enforcement proceedings’), are brought ultimately for the purpose of enforcing the compensation judgment for the total sum of €10,073,818.[36] We were informed by counsel that proceeding number 49 EXE 2107/2011–73 is brought by the applicants, Alexandra Bennett, Martin Talacko and Rowena Talacko (Peter Talacko’s children); and proceeding number 48 EXE 522/2012–75 is brought by the second respondent, Jan Talacko (Helena Talacko’s son, and the executor of her estate, who does not respond to the present application for leave to appeal).
[36] Talacko v Talacko [2009] VSC 533.
It will be remembered that the enforcement proceedings were commenced in the Czech Republic on 4 November 2011. Three days later, on 7 November 2011, J E Talacko was declared bankrupt on a petition brought by the applicants (and others).[37] In a hearing before North J a little more than a year later, on 10 December 2012, the present applicants were represented by counsel and counsel also appeared for J E Talacko’s trustee in bankruptcy. When explaining the import of the proposed consent orders to North J, the following significant exchanges occurred between his Honour and counsel for the applicants:[38]
[37] As at the hearing
[38] Emphasis added.
HIS HONOUR: … Perhaps you can take me through the orders, could you?
[COUNSEL]: Yes. Your Honour, what we’re seeking to do is to be able to have expressed in a money terms order, orders for costs in proceedings and appeals which gave rise to the judgment given by Kyrou J and then subject to appeal to the Court of Appeal and to the High Court which was expressed in money terms and because it was expressed in money terms was able to be the subject of proceedings in a foreign jurisdiction. We want to do the same with the costs orders. …
HIS HONOUR: And presently you are prevented from doing that because the respondent has been made bankrupt.
[COUNSEL]: Yes, your Honour.
HIS HONOUR: And as a result all proceedings against him have been stayed.
[COUNSEL]: And there is only one — there is a limitation upon those proceedings for which we can be granted leave and that’s confined … through 58(3) [of the Bankruptcy Act].
HIS HONOUR: What does 58(3) say?
…
[COUNSEL]: Two parts, your Honour, the matters about which we can’t seek leave and that is concerning property of the debtor and those that we can proceed or seek leave to proceed in, in relation to matters that are connected with a provable debt.
HIS HONOUR: So this is taking a fresh step in a proceeding.
[COUNSEL]: Yes, your Honour.
HIS HONOUR: In relation to a provable debt. So the judgments, the money judgments obtained from the Supreme Court are provable debts.
[COUNSEL]: They are. We contend for that and our learned friend certainly doesn’t dispute that.
HIS HONOUR: And so this is within 58(3)(b) a fresh step in the proceedings and why would I grant leave?
[COUNSEL]: Well, your Honour ---
HIS HONOUR: I mean this is a section that is there to protect creditors, correct?
[COUNSEL]: Yes.
…
It will be seen from this exchange that the structural difference between ss 58(3)(a) and (b) were tacitly acknowledged. It was also acknowledged that leave could not be sought to avoid the consequences of s 58(3)(a) (that is, that following bankruptcy it is ‘not competent … to enforce any remedy’), but that leave could be sought under s 58(3)(b) to take a ‘fresh step’ in a proceeding in ‘relation to a provable debt’.
As the discussion unfolded before North J, counsel for the applicants made plain that he asked that ‘leave extend only to the point of judgment’. The following exchange then occurred with respect to proposed consent order 3:[39]
HIS HONOUR: All right. So then, paragraph 3.
[COUNSEL]: And ---
HIS HONOUR: This is the proceedings overseas.
[COUNSEL]: Your Honour, there are two different sets of petitions proceedings that have been lodged in the District Court in Prague. The first — and in each case, a separate petition was filed on behalf of the first applicant and a separate one for the second to fifth. The first set of petition proceedings, which are the ones that are the subject of proposed order number 3, have been described by the Czech attorneys as execution proceedings but what they’re aimed at is seeking to have recognised and then, according to law, enforced the judgment of Kyrou J in the Supreme Court of Victoria. And that required us to provide a comprehensive certification of the finality and enforceability of that judgment in Australia and also a reciprocity statement from the attorney.
And we did that after some considerable effort, I might hasten to add, and the court in the Czech Republic accepted that we had satisfied those requirements and, otherwise, that the application for recognition and enforcement of Kyrou J’s judgment satisfied the requirements and prohibitions of the rules of private international law, so far as they apply under Czech law. The point about it is that even … having obtained a favourable judgment in these petitioned proceedings, that doesn’t give us execution, as it were, because the defendant had succeeded in divesting properties to his sons. …
[39] Emphasis added.
This exchange makes clear that the leave sought under s 58(3)(b) — which was to be embodied in proposed consent order 3 — was directed to the ‘proceedings overseas’ concerning the ‘two different sets of petitions proceedings that have been lodged in the District Court in Prague’. Although described by the Czech attorneys as ‘execution proceedings’, what the proceedings are ‘aimed at is seeking to have recognised and then, according to law, enforced the [compensation] judgment of Kyrou J in the Supreme Court of Victoria’. Obtaining a favourable judgment in the petition proceedings does not give ‘execution’. Importantly, as I have mentioned, J E Talacko’s trustee — whose function and responsibility it is to maintain litigation for the recovery of assets to the exclusion of individual creditors — was represented by counsel, and that the trustee consented to the orders ultimately made.
Order 3 must, in my view, be read in light of the exchanges I have set out. Counsel for the applicants made it plain that the applicants desired to have the compensation judgment — expressed in money terms — recognised in the Czech Republic. North J then made an order under s 58(3)(b) of the Bankruptcy Act, in contemplation that what the applicants were seeking to do was take a ‘fresh step’ in the proceedings within the meaning of 58(3)(b) of the Act. Counsel had made it clear, in effect, that obtaining recognition of the compensation judgment did not give the applicants ‘execution’. It is against that background that North J ordered:[40]
Leave be granted [now for then] from 7 November 2011 to the Applicants pursuant to s 58(3) of the Bankruptcy Act 1966 (Cth) to continue to take further steps, including defending or pursuing any appeal, up to judgment against [J E Talacko] in the Petition proceedings that have been lodged in their names in the District Court of Prague on 4 November 2011 and which have been assigned numbers 49 EXE 2107/2011–73 [i.e. the enforcement proceeding commenced by the applicants and their mother] and 48 EXE 522/2012-75 [i.e. the enforcement proceedings commenced by Jan Talacko as the executor of his mother, Helena Talacko] provided that no step be taken to enforce any judgment against [J E Talacko] without the prior leave of the Federal Court of Australia in its bankruptcy jurisdiction.
[40] Emphasis added.
In my view, properly understood, North J gave the applicants leave under s 58(3)(b) of the Act to continue to take steps in the enforcement proceedings —concerned with the recognition of the compensation judgment — ‘up to judgment’. His Honour’s order contemplated, however, that no step be taken to ‘enforce any judgment’ — by which I understand his Honour to mean seek execution, or compel observance, of judgment — without the prior leave of the Federal Court. So understood, in my view his Honour’s order authorised the applications for issue of the certificates as a step towards obtaining recognition of the compensation judgment in the Czech proceedings, that being a ‘further step[s] … up to judgment’.
Indeed, one might readily understand the reasons why the trustee in bankruptcy would consent to, and North J would make, an order that permitted recognition of the compensation judgment in the Czech Republic. As already observed, once J E Talacko became bankrupt, his property vested in the trustee in bankruptcy;[41] and all his debts and liabilities, present or future, certain or contingent, to which he was subject at the date of the bankruptcy, or to which he might become subject before his discharge by reason of an obligation incurred before the date of the bankruptcy, were provable in his bankruptcy. At the very least, the compensation judgment made J E Talacko subject to a judgment debt, which was provable in his bankruptcy (and may have involved an interest in property). It must have been considered convenient by the trustee to have the potential liability of the bankrupt’s estate with respect to the provable debt flowing from the compensation judgment crystallised through its being recognised in the Czech Republic, so that an orderly administration of J E Talacko’s estate might take place. Indeed, had the trustee not thought such a course desirable, presumably he could have sought an order under s 60(1)(b) of the Bankruptcy Act to stay any further legal process relating to the compensation judgment. He did not do so. Rather, as I have said, he consented to further steps being taken — short of ‘enforcement’ — to facilitate the taking of ‘further steps’ in the Czech republic ‘up to judgment’.
[41]Section 5 of the Bankruptcy Act defines property to mean ‘real or personal property of every description, whether situate in Australia or elsewhere, and includes any estate, interest or profit, whether present or future, vested or contingent, arising out of or incident to any such real or personal property’.
For the sake of completeness, I should observe that I can see no incongruity between the words of s 15(1) of the Foreign Judgments Act — in particular, ‘where an application is duly made by a judgment creditor who wishes to enforce …’ — and a conclusion that the application for the certificates was not to ‘enforce a remedy’ within s 58(3)(a) of the Bankruptcy Act. Undoubtedly, the applicants wished to enforce the compensation judgment (if only to prove it as a debt in the bankruptcy). Presumably that is why, having had J E Talacko declared bankrupt, they sought permission of the federal Court to continue the proceedings in the Czech Republic ‘up to judgment’.
For these reasons, the application for, and provision of, the Prothonotary’s certificates did not fall within s 58(3)(a) of the Bankruptcy Act, since they did not ‘enforce’ a ‘remedy’ against the person or the property of J E Talacko in respect of a provable debt; and, if regarded as a step in a proceeding, effective leave had been given by North J pursuant to s 58(3)(b) to take such a step.
Were the applications for the certificates duly made?
Of course, the principal contention advanced by the first respondent is that, for a variety of adumbrated reasons, the applications for, and the issue of, the certificates by the Prothonotary under the Foreign Judgments Act were not ‘duly made’ within the meaning of s 15(1) of that Act.
I reject that contention. In my opinion, the relevant applications were duly made within the meaning of the statutory language.
Section 15(1) provides that where an application is ‘duly made’ by a judgment creditor who wishes to enforce in another country a judgment that has been given in
an Australian court, the Registrar[42] of the court must issue to the judgment creditor a certified copy of the judgment and a ‘certificate with respect to the judgment containing such particulars … as are prescribed by the regulations or by Rules of Court’.
[42]By s 5, ‘Registrar’ in relation to a court, ‘means the person who holds, in relation to that court, the office of, or the office equivalent to the office of, Registrar or Clerk’. There is no suggestion that the Prothonotary does not fall within this definition.
By subsection (2), an application ‘may not be made’ under sub-s (1) for a certificate with respect to the judgment until ‘the expiration of any stay of enforcement of the judgment in question’. In the course of this application, a deal of effort was devoted to persuading the Court that the expression ‘any stay of enforcement’ in s 15(2) of the Foreign Judgments Act embraced only a judicial stay. In my view, however, the meaning of the expression does not admit of much in the way of sustained argument or deep analysis. To my mind, when construed in the context of the statute as a whole, as a matter of ordinary language the ‘stay’ referred comprehends only a judicially imposed stay (or similar). At the risk of some repetition, as I earlier endeavoured to explain, by its terms s 58(3)(a) of the Bankruptcy Act does not impose a stay of enforcement. Rather, s 58(3)(a) merely provides that it is not competent for a creditor to enforce any remedy. Although the judgment creditor is not competent to enforce the judgment debt, its enforcement is not altogether shut out, since ample powers of enforcement remain in the hands of the trustee (albeit that those powers must be exercised consonantly with the constraints imposed by the Bankruptcy Act).
In my opinion, when read (as it must be) with sub-s (1), sub-s (2) in context means no more than that an application for a certificate cannot be ‘duly made’ until ‘the expiration of any stay of enforcement of the judgment in question’. The expression ‘duly made’ has no wider meaning and bears no broader connotation. Thus, once any stay of enforcement of a judgment has expired — but not before — an application for a certificate may be ‘duly made’.
Contrary to this view, Santamaria JA has concluded that an application is ‘duly made’ when it has been made properly, in the sense that it is made ‘in due form’. His Honour points out that s 15(1) of the Act specifies some of the matters that must be contained in a certificate (such as ‘the causes of action to which the judgment relates’ and ‘the rate of interest (if any) payable on any amount under the judgment), and that s 17 permits the making of rules of court ‘prescribing all matters necessary or convenient to be prescribed for carrying out or giving effect’ to the Act. In turn, r 11.10(3) of the Supreme Court (Miscellaneous Civil Proceedings) Rules 2008 provides that an application under s 15 of the Act shall be supported by an affidavit. The Rules specify what must be contained in the certificate, that the affidavit must depose ‘to such information as will enable the certificate to be granted’ (including the matters specified by s 15(1) of the Act as well as other matters). Santamaria JA also draws attention to the fact that Rules of court made under the authority of an Act of Parliament are of statutory force, and that subordinate legislation gives way only in the presence of inconsistent parliamentary legislation. Further, his Honour points out that the Prothonotary does not have any power to dispense with compliance with the requirements of the Supreme Court (General Civil Procedure) Rules 2005.
Notwithstanding the force of these observations, in my view an application for a certificate under s 15 is ‘duly made’ upon the ‘expiration of any stay of enforcement of the judgment in question’. As I have said, in its statutory context the expression ‘duly made’ carries no wider meaning, and is not the equivalent expression of made ‘in due form’.[43] My view is fortified by the fact that s 15(1) provides it is the certificate with respect to the judgment which must contain the
particulars as are prescribed by the … by Rules of Court,[44] not the application for the certificate. Furthermore, to my mind the argument that the application was not duly made because the compensation judgment was not ‘enforceable’ at the time that the application was made is unpersuasive. At the time that the applications for the certificates were made the compensation judgment was enforceable as an order of the Supreme Court in the sense that it had not been set aside or judicially stayed. Once the sequestration order was made, the judgment did not cease to be enforceable. Indeed, subject to the provisions of the Bankruptcy Act, the compensation judgment remained enforceable as, at the very least, a debt provable in the bankruptcy. It had not been the subject of a judicially imposed ‘stay’, as it might have been (had there been grounds to do so), under s 60(1)(b) of the Act. The provisions of s 58(3)(a) of the Act simply meant that it was not ‘competent’ for the judgment creditors to themselves enforce any remedy against the person or the property of the bankrupt in respect of that provable debt, the enforcement of any such debt being the responsibility of the trustee.
[43]I have derived little or no assistance from judicial interpretation of the term ‘duly made’ used in different statutory contexts. See, for example: The University of Adelaide v District Council of Mitcham [1937] SASR 288; Gardziel v Gardziel [1961] Tas SR 64, 68; F J Bloemen Pty Ltd v The Commissioner of Taxation of the Commonwealth of Australia; Simons v The Commissioner of Taxation of the Commonwealth of Australia (1981) 147 CLR 360; Ace Waste Pty Ltd v Brisbane City Council [1999] 1 Qd R 233; Brodyn Pty Ltd t/as Time Cost and Quality v Davenport [2003] NSWSC 1019; R v Blessington (2005) 190 FLR 47; Hitachi Ltd v O’Donnell Griffin Pty Ltd [2008] QSC 135; John Holland Pty Limited v Roads and Traffic Authority of New South Wales & Ors [2007] NSWCA 19.
[44] See also the matters specified in s 17(1).
Given the foregoing, in my opinion the trial judge erred in in holding that s 58(3)(a) of the Bankruptcy Act operated to impose a stay of enforcement for the purposes of s 15(2) of the Foreign Judgments Act.
Conclusion
For the reasons above, the judgment of the primary judge must be set aside.
I would grant the application for leave to appeal and allow the appeal.
SANTAMARIA JA:
Introduction
Before World War II, a Czech couple owned several properties located in
what is now known as the Czech Republic, in Slovakia and in Germany. These properties were expropriated by the communists. The couple came to Australia and lived here with their three children. In 1989, the collapse of communism opened the way to the restitution of the properties. Their parents having died, the three children agreed to apply for their restitution and to share them or the proceeds of them. In the event, one of the sons managed to secure all the available properties in his own name, and denied any entitlement in his brother and sister. In 1998, the excluded children (or their estates) commenced proceedings in the Supreme Court against him. At a mediation, the claim was compromised as a result of which the plaintiffs and the defendant were to share in the fruits of the restitution.
As it happened, the defendant failed to perform his part of the compromise. Further, he conveyed his family home in Melbourne to his wife and, later, gave the European properties to his two sons. As a result, the plaintiffs had the proceedings reinstated. They secured orders that the defendant had breached the terms of the compromise and that he pay them equitable compensation, which was assessed at approximately €10 million.
Thereafter, the plaintiffs commenced proceedings in the Czech Republic to enforce the judgment of the Supreme Court of Victoria and to have the transfer of the properties to the sons set aside.
Immediately thereafter, the Federal Court of Australia declared the defendant bankrupt.
In order to facilitate their proceedings in the Czech Republic, the plaintiffs successfully applied to the Prothonotary of the Supreme Court for the issue of certificates under s 15 of the Foreign Judgments Act 1991 (Cth) (‘the Foreign Judgments Act’). In this proceeding, the representative of the defendant contended that the certificates should be declared invalid and set aside by reason, inter alia, of s 58(3) of the Bankruptcy Act 1966 (Cth) (‘the Bankruptcy Act’), which provides that, without the leave of the Court, ‘it is not competent for a creditor to enforce any remedy against the person or the property of’ a bankrupt in respect of a provable debt. The application to set aside the certificates was successful. The primary judge held that s 58(3) of the Bankruptcy Act operated so as to impose a stay of execution of the judgment debt for the purposes of s 15(2) of the Foreign Judgments Act.[45]
[45] Talacko v Talacko (2015) 305 FLR 353 (Sloss J) (‘Reasons’).
For the reasons below, the application for leave to appeal should be granted and the appeal dismissed.
The properties of Alois and Anna Talacko
Before World War II, Anna and Alois Talacko were resident in what is now the Czech Republic. They owned several properties, including five properties in the centre of Prague, 0.8 hectares of land in suburban Kbely and 17.44 hectares of land on the outskirts of Prague at Řepy, a 368 hectare private forest plantation at Sucha, Slovakia, and an apartment building and adjacent vacant land in Dresden, Germany.
The applicants contended that s 58(3) of the Bankruptcy Act was not, in this case, a ‘stay of enforcement of the judgment’. Section 58(3)(a): (1) has the effect of being cumulative upon a debtor becoming a bankrupt, and is not necessarily consequent upon a court order; (2) operates immediately and automatically upon a debtor’s bankruptcy to prevent a creditor from enforcing a remedy in respect of a provable debt and involves no measure of judicial discretion; and (3) operates not on or in respect of a court order or judgment, but in respect of the creditor, by denying that person’s competence to enforce a remedy.
Properly construed, the applicants said, the term ‘stay of enforcement of [a] judgment’ under s 15(2) of the Foreign Judgments Act does not comprehend the denial, effected by s 58(3)(a) of the Bankruptcy Act, of the competence of a creditor ‘to enforce any remedy’ against a bankrupt in respect of a provable debt. Accordingly, s 15(2) was not engaged in this case and they were entitled to apply for a certificate under s 15(1) of the Foreign Judgments Act.
But, it seems to me that this reasoning is fallacious; it is an example of petitio principii. It helps itself to its conclusion by using that conclusion as one of its premises.
The critical question identified by the parties is what Parliament intended by its use of the expression ‘any stay of enforcement of the judgment in question’. The answer to that question is reached by customary techniques of statutory interpretation: text, context and purpose.[74] It is not reached by asserting the conclusions (a) that Parliament was using the term ‘stay’ in a technical sense; and (b) that technical sense was a judicial stay imposed by a court upon the execution or enforcement of one of its own judgments.
[74]Military Rehabilitation and Compensation Commission v May (2016) ALJR 626, 629 [10] (French CJ, Kiefel, Nettle and Gordon JJ) referring to Project Blue Sky Inc v Australian BroadcastingAuthority (1998) 194 CLR 355, 381–2 [69]–[71] (‘Project Blue Sky’); Alcan (NT) Alumina Pty Ltd v Commissioner of Territory Revenue (2009) 239 CLR 27, 46–7 [47];
It may be accepted that the word ‘stay’ has a particular reference to legal proceedings. However, the phrase ‘any stay of enforcement of the judgment in question’ is unqualified; it does not refer expressly to the judicial stay of such proceedings. There is nothing in the text of the provision that requires that limitation. On the contrary, the presence of the word ‘any’ is itself inconsistent with the narrow meaning that the applicants would give to the expression.
The introductory words ‘the expiration of’ do not restrict the meaning of ‘stay’ to a judicially imposed stay. Certainly, a judicial stay may expire; but, that is not the only basis upon which such stays can terminate: they can be lifted, amended or revoked. A stay imposed by statute can also expire.[75]
[75]In Hudson v Sigalla [2015] FCAFC 140, the Full Court of the Federal Court (Allsop CJ, Jagot and Katzmann JJ) held that, upon the annulment of a person’s bankruptcy, leave is no longer required for a creditor to sue that person.
The word ‘stay’ is used frequently in federal legislation, often in contexts related to that of the Foreign Judgments Act. Its use is not confined to stays imposed by the courts; there is nothing to support the assertion that it has a settled technical meaning confined to judicially imposed stays. For example, s 60 of the Bankruptcy Act is entitled ‘Stay of legal proceedings’.[76] Under that heading, s 60(1) confers jurisdiction on the court, at any time after the presentation of a petition, to ‘stay any legal process … against the person or property of the debtor’. (Section 58(3) places restraints upon proceedings against the bankrupt.) Section 60(2), however, provides that actions by a person who subsequently becomes a bankrupt are stayed upon the person’s becoming bankrupt; the stay is imposed directly by the provision, not by court-order. There are cognate provisions in the Corporations Act 2001 (Cth). Part 5.4B deals with winding up in insolvency or by the court. Division 1A is entitled ‘Effect of a winding up order’. It includes s 471B which is entitled ‘Stay of proceedings and suspension of enforcement process’. Section 471B itself does not include the word ’stay’. Yet, (without any reference to a court order), it imposes restraints on proceeding against a company and upon enforcement process when a company is being wound up.[77]
[76] Section 60 of the Bankruptcy Act provides:
Stay of legal proceedings
(1)The Court may, at any time after the presentation of a petition, upon such terms and conditions as it thinks fit:
(a)discharge an order made, whether before or after the commencement of this subsection, against the person or property of the debtor under any law relating to the imprisonment of fraudulent debtors and, in a case where the debtor is imprisoned or otherwise held in custody under such a law, discharge the debtor out of custody; or
(b)stay any legal process, whether civil or criminal and whether instituted before or after the commencement of this subsection, against the person or property of the debtor:
(i)in respect of the non-payment of a provable debt or of a pecuniary penalty payable in consequence of the non-payment of a provable debt; or
(ii)in consequence of his or her refusal or failure to comply with an order of a court, whether made in civil or criminal proceedings, for the payment of a provable debt;
and, in a case where the debtor is imprisoned or otherwise held in custody in consequence of the non-payment of a provable debt or of a pecuniary penalty referred to in subparagraph (i) or in consequence of his or her refusal or failure to comply with an order referred to in subparagraph (ii), discharge the debtor out of custody.
(2)An action commenced by a person who subsequently becomes a bankrupt is, upon his or her becoming a bankrupt, stayed until the trustee makes election, in writing, to prosecute or discontinue the action.
[77]For other examples of non-judicial ‘stays’ provided for in Commonwealth legislation, see eg Insurance Act 1973 (Cth), s 91; Life Insurance Act 1995 (Cth) s 161; Bankruptcy Act s 189AAA; Cross-Border Insolvency Act 2008 (Cth) s 16; Federal Court of Australia Act 1976 (Cth) s 58DD. The same use of the word ‘stay’ is evident in many state enactments.
On occasion, courts have held that the use of the word ‘stay’ in legislation is not confined to judicially imposed stays.[78] Further, courts have referred to the operation of s 58(3) of the Bankruptcy Act (which will be discussed below) as imposing a stay.[79]
[78]Re Seers (1955) 17 ABC 11, 12–3 (Clyne J) where the Court held that the words ‘and execution thereon not having been stayed’ in s 52(j) of the Bankruptcy Act1924 (Cth) are not ‘restricted only to cases where there has been an express stay by order of the court’. See also Penning v Steel Tube Supplies Pty Ltd (1988) 18 FCR 568; Re Johnson; Ex parte Johnson v Tomkin (1994) 53 FCR 70, 76 (Spender J).
[79]Foots v Southern Cross Mine Management Pty Ltd (2007) 234 CLR 52, 59 [15] (‘the stay in s 58(3)’), 76 [67] (‘the stay contained in s 58(3) of the Bankruptcy Act’).
Consideration of the purpose of the Foreign Judgments Act also conduces to an interpretation of s 15(2) of the Act that has the word ‘stay’ as including stays other than those imposed by courts. As indicated above, a principal purpose of the Foreign Judgments Act is to implement a system of reciprocity.[80] Where the courts of some foreign jurisdiction recognise and enforce Australian judgments, Australian courts will recognise and enforce the judgments of that jurisdiction on a reciprocal basis. The purpose of reciprocity will be relevant in the construction of the Act.
[80] Section 5 of the Foreign Judgments Act provides:
Application of this Part on the basis of reciprocity of treatment.
(1) If the Governor-General is satisfied that, in the event of the benefits conferred by this Part being applied to money judgments given in the superior courts of a country, substantial reciprocity of treatment will be assured in relation to the enforcement in that country of money judgments given in all Australian superior courts, the regulations may provide that this Part extends in relation to that country.
As was noticed at [182] above, s 6(6)(b) of the Foreign Judgments Act provides that a foreign judgment may not be enforced in Australia if ‘it could not be enforced in the country of the original court’. Assume that a foreign country had a statute containing a provision that corresponded to s 58(3). Such a provision would prevent the enforcement in that country of a local judgment against a judgment debtor who had become bankrupt. By reason of s 6(6)(b), that judgment would be similarly unenforceable in Australia. Section 15(2) should be given an interpretation that reflects the principle of reciprocity that is expressed in the Act. The purpose of reciprocity is advanced by construing the provision as ensuring that judgments which are not enforceable in Australia by reason of a stay are placed in a position that corresponds to those of foreign jurisdictions in Australia which are not to be registered here if they are not enforceable in the country of the original court.
Accordingly, the expression ‘any stay of enforcement of the judgment in question’ should be construed as applying to all stays howsoever imposed by law and should not be construed as applying only to a stay imposed by a court upon the enforcement of one of its own judgments.
Notice of contention
As indicated above, the primary judge held s 58(3) imposed a stay of execution of the judgment debt for the purposes of s 15(2) of the Foreign Judgments Act and, thus, where a judgment debtor was an undischarged bankrupt, an application by a judgment creditor could not be ‘duly made’ under s 15(2) of Foreign Judgments Act.[81]
[81] See, in particular, Reasons 385 [89].
In her notice of contention, the first respondent advanced three separate arguments for saying that each of the first and second certificates was invalid — and should be set aside — because neither resulted from ‘an application [that had been] duly made by a judgment creditor’. For their part, the applicants responded that the conclusion that the certificates were invalid because they had not been made should not be assumed. Even if they had not been duly made (which was not conceded), they would be invalid only if, upon its proper construction, the Foreign Judgments Act mandated invalidity which, they said, it did not.
The first respondent gave three particulars of her contention that the certificates had not been duly made: (1) in contravention of the General Civil Procedure Rules, the application for each certificate had not been supported by an affidavit; (2) if the requests for the certificates were properly characterised as fresh steps in a proceeding, the applicants had not been competent to take them as they did not have the leave of the court under s 58(3)(a) of the Bankruptcy Act; and (3) if the requests for the certificates were properly characterised as steps taken by way of enforcement of any remedy, the applicants were also incompetent to take them by reason of s 58(3)(b) of that Act.
It will be useful to deal with these particulars in reverse order. The first question is whether the steps were properly characterised as steps taken by way of enforcement of a remedy. In the circumstances, the applicants were not competent to take them. As a result of that incompetence, the Prothonotary was not empowered to issue the certificates and his doing so amounted to a jurisdictional error, whether or not one treats the request to make them as not being ‘duly made’.
Section 58(3)(a) of the Bankruptcy Act itself stayed the enforcement of the judgment
Section 58(3)(a) is not cast in terms that provides expressly for a ‘stay’. Rather, it provides that, once a debtor has become a bankrupt, it is not competent for a creditor to enforce any remedy against the person or property of the bankrupt in respect of a provable debt.
The loss of competence is general. A judgment creditor is no longer competent to bring any other proceedings by way of enforcement of the remedy, including an application for the issue of a certificate under s 15 of the Foreign Judgments Act. The powers in Part 2 of that Act are conferred in aid of the enforcement of remedies. Similarly a judgment creditor is no longer competent to invoke those rules of Court that make provision for the enforcement of its judgments.[82]
[82]Section 3(5) of the Supreme Court Act 1986 provides that a ‘judgment in any proceeding must be enforced in accordance with Chapter 1 of the Rules of the Supreme Court and not otherwise’. See General Civil Procedure Rules OO 66–74. Similarly, s 58(3)(a) of the Bankruptcy Act would prevent the enforcement of remedies under O 41.10 of the Federal Court Rules 2011 (Cth).
In their submissions in response to the notice of contention, the applicants referred to the limitation contained in s 15(2) of the Foreign Judgments Act which prevents the making of an application for a certificate until the expiration of any stay of enforcement of the judgment in question. The applicants said that there had been no stay under s 15(2) and that, therefore, there was nothing preventing the application for and the making of the certificate. However, that argument presumes that the only limitation on the power of the Court to make and issue a certificate is found in the Foreign Judgments Act. On the contrary, in so far as J E Talacko was bankrupt, the application for the certificate involved the enforcement of remedies against (the property of) a bankrupt and could not be competently made by reason of s 58(3) of the Bankruptcy Act.
Modern bankruptcy law effects several purposes. Particularly, it ensures (a) that the assets of the bankrupt are ‘distributed rateably’ among his or her creditors; (b) that one creditor ‘does not obtain an undue advantage over other creditors’ and (c) it brings about the ‘discharge of the debtor from future liability’ so that he or she can start afresh.[83]
[83] Re McMaster; Ex parte McMaster (1991) 33 FCR 70, 72–3 (Hill J).
Once a sequestration order is made, a creditor’s right of action is converted into a right to prove in the bankruptcy.[84] In Clyne v Deputy Commissioner of Taxation, Gibbs CJ, Murphy, Brennan and Dawson JJ said:
The effect of the bankruptcy however is that the debtor is no longer obliged to pay his creditors; indeed he is disabled from doing so. If he offered payment they could not safely accept it; their right is a right of proof against the estate.[85]
[84] Ex parte Trustee of Property of Cork (1932) 5 ABC 1, 6 (Lukin J).
[85] (1984) 154 CLR 589, 594–5.
Section 58(3) works to achieve the purposes of bankruptcy law by drawing a distinction in respect of the ‘provable debts’ of a bankrupt.[86] One the one hand, it deals with the enforcement of remedies against a bankrupt; on the other, it deals with the commencement or continuation of proceedings against a bankrupt. The first limb of s 58(3) provides that ‘it is not competent for a creditor’ to enforce remedies against the person or property of a bankrupt; the second limb provides that, it is not competent for a creditor ‘except with the leave of the Court and on such terms as the Court thinks fit’ to commence or continue any proceeding against the bankrupt. The first limb creates an absolute bar; the second provides that the relevant step can be taken, but only with leave of the court. In Fraser v Deputy Commissioner of Taxation (Cth), Beaumont J (with whom Black CJ and Tamberlin J agreed) referred to the distinctions between the two limbs of s 58(3) and said:
the absolute bar imposed by s 58(3) should be construed so as to apply only to the enforcement of remedies, including extra-curial remedies, as distinct from the institution of legal proceedings and their maintenance up to the point of recovery of judgment. The institution and maintenance of such proceedings will, of course, be subject to the different constraints imposed by s 58(3)(b), unless leave be granted under that provision.[87]
[86]Section 3 provides: ‘provable debt means a debt or liability that is, under this Act, provable in bankruptcy’. Section 82(1) provides: ‘Subject to this Division, all debts and liabilities, present or future, certain or contingent, to which a bankrupt was subject at the date of the bankruptcy, or to which he or she may become subject before his or her discharge by reason of an obligation incurred before the date of the bankruptcy, are provable in his or her bankruptcy.’ ‘The scope and operation of [s 58(3)] turns on the proper interpretation of s 82 and the concept of provable debt’: Foots v Southern Cross Mine Management Pty Ltd (2007) 234 CLR 52, 59 [13] (Gleeson CJ, Gummow, Hayne and Crennan JJ).
[87]Fraser v Deputy Commissioner of Taxation (Cth) (1996) 69 FCR 99, 111–2. See also Thomson Reuters, McDonald, Henry and Meek Australian Bankruptcy Law and Practice, vol 1 (at 8-4067) [58.3.15].
As the primary judge observed:
once a sequestration order is made, the rights of a judgment creditor are converted into a right to prove in the distribution of the bankrupt’s estate and share in the distribution of his estate then vested in the trustee. Further, once the judgment creditor’s rights have been converted into a right to prove, the judgment creditor is no longer competent to enforce any remedy against the person or the property of the bankrupt whilst the bankruptcy is on foot. That is because during the bankruptcy, s 58(3)(a) operates to bar the enforcement of remedies by a creditor in respect of a provable debt, such that a creditor is no longer able to maintain an action for a debt or otherwise enforce remedies against the person or the property of the bankrupt which may affect his estate. And in the case of s 58(3)(a), unlike s 58(3)(b), no power is conferred on the court to give leave to allow remedies to be enforced against the person or the property of the bankrupt.[88]
Under the legislation, ‘individual creditors have no right to decide to pursue, or not to pursue, the assets of the bankrupt with a view to the satisfaction of individual debts’.[89]
[88] Reasons 382–3 [82].
[89] Fraser v Deputy Commissioner of Taxation (1996) 69 FCR 99, 114 (Beaumont J).
The judgment of Kyrou J entitled the applicants to enforce it against J E Talacko. However, when he became bankrupt, they were no longer competent, by reason of s 58(3) of the Bankruptcy Act, to enforce the judgment.
The order of a superior court of record is valid until set aside.[90] However, the Prothonotary is an administrative officer who does not perform the judicial functions of the Court.[91] In Plaintiff S157/2002 v The Commonwealth, Gaudron, McHugh, Gummow, Kirby and Hayne JJ, referring to the Migration Act 1958 (Cth), said a decision affected by jurisdictional error cannot be regarded as ‘a decision ... made under this Act’.[92] They went on to say
This Court has clearly held that an administrative decision which involves jurisdictional error is ‘regarded, in law, as no decision at all’.[93]
The decision of the Prothonotary to issue a certificate under the Act where the applicant was not competent to request it was a jurisdictional error.
[90] New South Wales v Kable (2013) 252 CLR 118.
[91]The Foreign Judgments Act confers jurisdiction to issue a certificate upon the ‘Registrar’. Section 3 of the Act defines ‘Registrar’ (unless the contrary intention appears): ‘in relation to a court, means the person who holds, in relation to that court, the office of, or the office equivalent to the office of, Registrar or Clerk’. In Victoria, the Prothonotary of the Court is the Registrar for the purposes of jurisdiction conferred on the Registrar by the Foreign Judgments Act. See O 11.11 of the Miscellaneous Civil Proceedings Rules.
[92] Plaintiff S157/2002 v The Commonwealth (2003) 211 CLR 476, 506.
[93]Ibid (citations omitted). In support of this proposition, the High Court referred Minister for Immigration and Multicultural Affairs v Bhardwaj (2002) 209 CLR 597, 614–5 [51].
In the event that the applicants persuaded any lower court or other institution (such as a delegate of Parliament) to take some step, such as issuing a certificate under the Foreign Judgments Act, it would be open to whatever court that supervised that lower court or institution to set that step aside. It would be set aside either by an appellate court; or, it would be set aside on the exercise of judicial review.[94]
[94]Ousley v The Queen (1997) 192 CLR 69, 80 (Toohey J); 87 (Gaudron J);98–100 (McHugh J); 121 (Gummow J). See also Love v Attorney-General (NSW) (1990) 169 CLR 307; George v Rockett (1990) 170 CLR 104.
In the present case, given that it was not competent for the applicants to enforce any remedy against the person or property of J E Talacko, the primary judge was correct in exercising the supervisory jurisdiction of the Court over its officials and in setting aside the first and second certificates.
It can be added that, where a judgment creditor requests a certificate under the Foreign Judgments Act in respect of a judgment debtor who is bankrupt, then, by reason of s 58(3)(a) of the Bankruptcy Act, the request would not be competent, and, thus, the application not duly made.[95] Consideration of the question whether the fact that an application is not ‘duly made’ results in the invalidity of any certificate can be deferred until after consideration of the other particulars found in the notice of contention.
[95]The Oxford English Dictionary gives the following meaning to ‘duly’: ‘In a manner agreeable to obligation or propriety; as is due; rightly, properly, fitly’.
As indicated above, the applicants contended that s 15(2) of the Foreign Judgments Act applies only to stays that are provided for by courts. If that were correct, applications for the issue of certificates under the Act would not be inhibited where the judgment debtor was bankrupt unless the judgment debtor or trustee in bankruptcy approached the court and requested a stay upon enforcement of the order on the basis that s 58(3) made it incompetent for the judgment creditor to enforce any remedies. But, the court would refuse any such application on the basis that it was, at best, supererogatory or, at worst, unnecessary. Any court would reason that its intervention was unnecessary as the remedy sought had already been secured by operation of s 58(3)(a) itself.
Whether the requests were fresh steps in a legal proceeding: the Federal Court order
Before the primary judge, the applicants had contended that the application to the Prothonotary (Registrar) for a certificate was not an attempt to enforce a judgment within s 58(3)(a) of the Bankruptcy Act, but rather involved a fresh step in an existing proceeding, namely the 1998 Proceeding, which was justified under s 58(3)(b).
Section 58(3)(b) provides that a judgment creditor is not competent to take such a fresh step ‘except with the leave of the Court and on such terms as the Court thinks fit’.
It will be recalled that, on 10 December 2012, North J made orders in respect of the bankruptcy whose estate had been sequestrated on 7 November 2011. Those orders are extracted above.[96]
[96] See [147] above.
Paragraph 1.1 of those orders refers to the taking of further steps in the 1998 Proceeding. The applicants did not contend that paragraph 1 of the order gave them leave nunc pro tunc to apply for the first certificate.[97]
[97]Nor could they have reasonably done so. Paragraph 1.1 of the order gave them leave to ‘[c]ommence an application in the Supreme Court of Victoria Costs Court against [J E Talacko] for the assessment of their costs in Supreme Court of Victoria proceeding 7393 of 1998 and to obtain an order in money terms for those costs’. Paragraphs 1.2 and 1.3 gave them leave to commence an application for taxation of the plaintiffs’ costs in Court of Appeal proceedings 3849 of 2008 and S APCI 2010 0002 respectively, and paragraph 1.4 gave them leave to commence an application for taxation of the plaintiffs’ costs in High Court of Australia proceeding No M26 of 2011.
Notwithstanding the contention of the applicants that paragraph 3 of the order should be construed as authorising the application made in respect of the first certificate, paragraph 3 refers to the taking of further steps in the enforcement proceeding in the Czech Republic. It was not directed to the taking of any fresh step in the 1998 Proceeding.[98]
[98]Counsel for the first respondent submitted that the effect of paragraph 3 of the order of the Federal Court was to permit the applicants to pursue their enforcement proceedings in the Czech Republic under the general rules of private international law, but without the benefit of a certificate issued under the Foreign Judgments Act and without the right to enforce any favourable judgment. See M Davies, A S Bell and P L G Brereton, Nygh’s Conflict of Laws in Australia (LexisNexis Butterworths, 9th ed, 2014) 895; Lord Collins of Mapesbury et al (eds) , Dicey, Morris and Collins: The Conflict of Laws (Sweet and Maxwell, 15th ed, 2012) 673.
In the circumstances, no leave was granted under s 58(3)(b). Thus, if the requests for the certificate were fresh steps in the 1998 Proceeding, the applicants were not competent to make them. It matters not that the application might be described as not ‘duly made’. The issue of the certificates was invalid for jurisdictional error and the primary judge was right to set them aside.
The applications for the certificates were not supported by an affidavit
Finally, in her notice of contention, the first respondent drew attention to the failure of the applicants to satisfy the requirements for the issue of a certificate. Section 15 of the Foreign Judgments Act confers power upon the Registrar ‘where an application is duly made by a judgment creditor’. Section 17(1) of the Act authorises the making of rules of court prescribing:
all matters necessary or convenient to be prescribed for carrying out or giving effect to this Act, including …
(b)prescribing the matters to be proved on an application for the registration of a judgment and for regulating the mode of proving those matters.
Rule 11.10(3) of the Miscellaneous Civil Proceedings Rules provides that an application under s 15 of the Foreign Judgments Act shall be supported by an affidavit. The applicants had not supported their applications for the first and second certificates with an affidavit. Thus, it was contended that the applications had not been ‘duly made’. As a result, it was said, the Prothonotary had no power to issue them and they should be set aside.
The applicants contended that the validity of each of the certificate does not necessarily depend upon whether the application for it was ‘duly made’ by a judgment creditor within the meaning of s 15(1) of the Foreign Judgments Act; a certificate may be valid, they said, notwithstanding that the application for it failed in some way to conform to law. They said, rightly, that whether a failure to conform to the Foreign Judgments Act results in invalidity depends upon the proper construction of the Act.[99] The applicants drew attention to the what they describe as ‘the orthodox dichotomy’: they asked whether the requirement that an application for a certificate be ‘duly made’ is ‘merely a procedural condition for the exercise of the Registrar’s statutory power, rather than an essential preliminary to its exercise’? They said that it was not a purpose of the Foreign Judgments Act that a certified judgment and certificate be invalid if issued by the Registrar subsequent to an application that is not ‘duly made’.
[99]Counsel referred to Project Blue Sky (1998) 194 CLR 355, 388–9 [91] (McHugh, Gummow, Kirby and Hayne JJ).
Meaning must be given to each word in the relevant provision. Section 15(1) of the Foreign Judgments Act confers jurisdiction where an application is ‘duly made’. An application is ‘duly made’ when it has been made properly, made ‘in due form’. Section 15(1) of the Foreign Judgments Act itself specifies some of the matters that must be contained in a certificate such as ‘the causes of action to which the judgment relates’ and ‘the rate of interest (if any) payable on any amount under the judgment. As indicated at [225] above, s 17 of the Foreign Judgments Act empowers the making of rules of court. Rule 11.10(3) of the Miscellaneous Civil Proceedings Rules provides that an application under s 15 of the Foreign Judgments Act shall be supported by an affidavit. Rule 11.11(c) specifies what must be contained in the certificate. Rule 11.10 of the Miscellaneous Civil Proceedings Rules specifies that the affidavit must depose ‘to such information as will enable the certificate to be granted’. Under the relevant rules of Court, that information includes the matters specified by s 15(1) of the Foreign Judgments Act as well as other matters.
Rules of court made under the authority of an Act of Parliament are of statutory force.[100] Subordinate legislation gives way only in the presence of inconsistent parliamentary legislation. The General Civil Procedure Rules confer power on the Court to dispense with compliance with any of their requirements. Section 75(2) of the Constitution Act1975 defines the Court to consist of ‘the Judges of the Court, the Associate Judges of the Court and the judicial registrars of the Court’. The Prothonotary does not have any power to dispense with compliance with the requirements of the General Civil Procedure Rules.
[100] SS Hontestroom v SS Sagaporack [1927] AC 37, 47 (Lord Sumner).
In so far as no affidavit was before the Prothonotary when he made the certificates, neither was ‘duly made’.[101] The question then arises whether Parliament intended to invalidate any certificate that was not duly made? The matter is not addressed expressly in the Foreign Judgments Act. In Project Blue Sky, McHugh Gummow, Kirby and Hayne JJ said:
An act done in breach of a condition regulating the exercise of a statutory power is not necessarily invalid and of no effect. Whether it is depends upon whether there can be discerned a legislative purpose to invalidate any act that fails to comply with the condition. The existence of the purpose is ascertained by reference to the language of the statute, its subject matter and objects, and the consequences for the parties of holding void every act done in breach of the condition. Unfortunately, a finding of purpose or no purpose in this context often reflects a contestable judgment. The cases show various factors that have proved decisive in various contexts, but they do no more than provide guidance in analogous circumstances. There is no decisive rule that can be applied; there is not even a ranking of relevant factors or categories to give guidance on the issue.[102]
[101]In the present case, the applicants provided a draft certificate to the Prothonotary. That draft certificate recited that the judgment of Kyrou J was ‘FINAL, BINDING AND ENFORCEABLE’. That statement was false. Its falsity was exacerbated by a further statement that suggested that the Bankruptcy Act was not an impediment to enforcement.
[102] Project Blue Sky (1998) 194 CLR 355,388–9 [91] (citation omitted).
In my opinion, compliance with r 11.10 of the Miscellaneous Civil Proceedings Rules is a condition precedent to the exercise by the Prothonotary of the power to issue a certificate. The Foreign Judgments Act makes provision for the enforcement overseas of a judgment given in Australian courts. Apart from ensuring that the certificate is duly made, Australian courts have no power to regulate the procedures that foreign courts might adopt in deciding whether to act upon a certificate made in an Australian court. It is not to be assumed that the validity of the certificate could be attacked collaterally in some foreign jurisdiction where it was being deployed in aid of enforcement proceedings. The making of a certificate is itself not a judicial act. The consequences of a certificate being used by authorities outside Australia are very significant. Further, under r 11.10(1) of the Miscellaneous Civil Proceedings Rules, the application for a certificate can be made ex parte; in that case the judgment debtor has no standing to be heard on the making of the certificate. Moreover, as the present case demonstrates, the judgment debtor may not even know of the existence of a certificate until confronted by it in a foreign court or tribunal. Other things to one side, it is difficult to see how the Prothonotary could stipulate the matters provided for by r 11.11(c) of the Miscellaneous Civil Proceedings Rules unless those matters had been deposed to before him.
The situation is a fortiori where the application was made in contravention of s 58(3)(a) or without leave under s 58(3)(b) of the Bankruptcy Act.
Conclusion
The certificates should not have been made as any application for them was barred by s 15(2) of the Foreign Judgments Act by reason of the judgment debtor’s bankruptcy. Section 58(3) constituted a ‘stay of enforcement of the judgment’ in the 1998 Proceeding. Further, the bankruptcy of the judgment debtor also meant that the enforcement procedures provided by the Foreign Judgments Act were not available by reason of s 58(3)(a) of the Bankruptcy Act. Finally, in so far as the applications for the certificates were not ‘duly made’ in either case, the Prothonotary had no power to issue them, and they were invalid.
The application for leave to appeal should be granted and the appeal dismissed.
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