Beson, Robert v Dean, Robert William

[1997] FCA 1320

FEDERAL COURT OF AUSTRALIA

BANKRUPTCY  - Bankruptcy Act 1966 (Cth), s 41 - application to set aside bankruptcy notice - bankruptcy notice based on judgment of Supreme Court of New South Wales - benefit of judgment assigned - no leave to enforce judgment obtained - whether judgment is one in respect of which execution has been stayed - whether bankruptcy notice tainted by irregularities of form.

Bankruptcy Act 1966 (Cth), ss 40, 41
Conveyancing Act 1919 (NSW)
Supreme Court Act 1970 (NSW)

Supreme Court Rules 1970 (NSW)

Re Solomon;  Ex parte Reid (1986) 10 FCR 423, cited
Maclaine Watson & Co Ltd v International Tin Council [1988] Ch 1, cited.
Penning v Steel Tube Supplies Pty Ltd (1988) 18 FCR 568, followed
Wiltshire-Smith v Mellor Olsson (1995) 57 FCR 572, followed
Re Pannowitz; Ex parte Wilson (1975) 38 FLR 184, cited
Re Excell;  Ex parte Martin (1995) 134 ALR 623, cited
Re Richards;  Ex parte Sommers (1947) 14 ABC 112, cited
James v Federal Commissioner of Taxation (1955) 93 CLR 631, cited
Clyne v Deputy Commissioner of Taxation (1982) 42 ALR 703, cited

ROBERT BESON v
ROBERT WILIAM DEAN
NG 7808 of 1997

BRANSON J
SYDNEY
1 DECEMBER 1997

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY	NG 7808  of   1997

BETWEEN:	ROBERT BESON APPLICANT
AND:	ROBERT WILLIAM DEAN RESPONDENT
JUDGE(S):		BRANSON J
DATE OF ORDER:		1 DECEMBER 1997
WHERE MADE:		SYDNEY

THE COURT ORDERS THAT:

1. The bankruptcy notice in this matter be set aside.

Note:Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY	NG 7808 of 1997

BETWEEN:	ROBERT BESON APPLICANT
AND:	ROBERT WILLIAM DEAN RESPONDENT

JUDGE(S):	BRANSON J
DATE:	1 DECEMBER 1997
PLACE:	SYDNEY

REASONS FOR JUDGMENT

This is an application to set aside a bankruptcy notice or, alternatively, for an extension of time within which to comply with the notice.

On 20 June 1997,  the Official Receiver, on the application of Robert William Dean (“Mr Dean”),  issued a bankruptcy notice to Robert Bruce Beson (“Mr Beson”).  The bankruptcy notice was based upon a judgment of the Supreme Court of New South Wales in a matter in which Mr Beson was the second plaintiff and American Foods Pty Ltd was the first defendant.  The term of the judgment relevant to the bankruptcy notice is:

“1.That the second plaintiff pays to the first defendant the sum of $12,926.37.”

The bankruptcy notice recites that Mr Dean is the -

“...permitted assignee pursuant to s 52 of the Conveyancing Act and the written assignment of all chose in action from American Foods Pty Limited to Robert William Dean on 21 March 1997 and notified to Robert Bruce Beson in writing on 28 march [sic] 1997 and found to be valid assigment [sic] of the debt by Master Macready on 11 June 1997 in matter 1708 of 1997.”

It is accepted that the reference in the above passage from the bankruptcy notice to s 52 of the Conveyancing Act should be a reference to s 12 of the Conveyancing Act 1919 (NSW).

By an application dated 10 July 1997 (“the application”) made under s 41 of the Bankruptcy Act 1966 (Cth) (“the Act”), Mr Beson claims, in addition to an order for time for compliance with the bankruptcy notice to be extended, an order setting aside the bankruptcy notice, or an order adjourning the application to set aside the bankruptcy notice pending the determination of certain proceedings in other courts.   Orders extending the time for compliance with the bankruptcy notice have been made to allow the hearing and determination of the application.

In support of the claim that the bankruptcy notice should be set aside, Mr Aldridge, counsel for Mr Beson, contended as follows:

(a)the bankruptcy notice was not validly issued as paragraph (b) of s 41(3) of the Act was not satisfied in the circumstances of this case as Mr Dean has not sought or obtained leave from the Supreme Court of New South Wales to execute the judgment on which the bankruptcy notice is based;

(b)the bankruptcy notice is invalid as it contains an inappropriate reference to s 52 of the Conveyancing Act 1919 (NSW) and no reference to s 12 of that Act; and

(c)the bankruptcy notice is invalid as it includes a claim for interest purportedly pursuant to s 94 of the Supreme Court Act 1970 (NSW) (“the Supreme Court Act”): it is s 95, not s 94, of the Supreme Court Act which provides for the payment of interest on judgment debts.

In support of a claim that the bankruptcy notice be set aside, or alternatively that the time for compliance with the bankruptcy notice should be extended until the hearing and determination of certain proceedings before other courts, Mr Aldridge identified, first, proceedings in the Supreme Court of New South Wales between Mr Beson as plaintiff and American Foods Pty Ltd in which Mr Beson seeks damages from American Foods Pty Ltd for fraud and breach of fiduciary duty and further seeks to set aside the judgment upon which the bankruptcy notice is based, and secondly, a third party claim being pursued by Mr Beson against American Foods Pty Ltd in proceedings before the Local Court in which American Express International Pty Ltd is plaintiff and Mr Beson is defendant.  The claim for an order adjourning the application to set aside the bankruptcy notice pending the determination of the above proceedings was not pressed.

Paragraph (b) of s 41(3) of the Act provides as follows:

“A bankruptcy notice shall not be issued in relation to a debtor:
           . . .

(b)if, at the time of the application for its issue, execution of the judgment or order to which it relates has been stayed ...”

The judgment upon which the bankruptcy notice is based is a judgment of the Supreme Court of New South Wales in favour of American Foods Pty Ltd. It is accepted by Mr Beson that American Foods Pty Ltd has validly assigned to Mr Dean the benefit of the judgment. However, it is contended by Mr Beson that, in the circumstances of this case, the judgment is one in respect of which execution has been stayed within the meaning of s 41(3)(b) of the Act.

Consideration of the above contention involves reference to the Supreme Court Rules 1970 (NSW) (“the Supreme Court Rules”). The Supreme Court Rules make provision by Part 42 for the enforcement of judgments and orders of the Supreme Court. Part 42 rule 2(1) provides as follows:

“A judgment for the payment of money (not for the payment of money into Court) may be enforced by one or more of the following means -

(a)       levy of property;
           (b)       attachment of debts;
           (c)       charging order;
           (c)       appointment of a receiver;  and
           (e)       [not here relevant].”

Part 44 of the Supreme Court Rules is concerned with writs of execution. Rule 1 of Part 44 contains the following definition:

“‘writ of execution’ means -

(a)a writ for levy of property, a writ of possession, a writ of delivery, a writ of sequestration;  or

(b)       a writ in aid of a writ mentioned in paragraph (a).”

Rule 2(1) of Part 44 provides, so far as is here relevant, as follows:

“Notwithstanding Part 42, a writ of execution to enforce a judgment shall not be issued without the leave of the Court in the following cases -

(a)       ...

(b)where any change has taken place, whether by assignment, death or otherwise, in the persons entitled or liable to execution under the judgment;  ...”.

Mr Dean concedes that he does not have the leave of the Supreme Court of New South Wales to issue a writ of execution to enforce the judgment upon which the bankruptcy notice is based. 

Under Part 46 of the Supreme Court Rules, leave of the Court is required for the attachment of debts. Part 47 of the Supreme Court Rules provides that an application for a charging order under Part V of the Judgment Creditors’ Remedies Act 1901 (NSW) is to be made by motion to the Supreme Court. It is not suggested that Mr Dean has obtained the leave of the Supreme Court pursuant to Part 46 of the Supreme Court Rules or that he has obtained a charging order under Part 47 of the Supreme Court Rules. Similarly, the power of the Supreme Court under s 67 of the Supreme Court Act to appoint a receiver by way of equitable execution is a discretionary power (see Maclaine Watson & Co Ltd v International Tin Council [1988] Ch 1) and it is not suggested that Mr Dean has taken any steps pursuant to Part 29 of the Supreme Court Rules to obtain an order appointing a receiver.

For the execution of a judgment to have been stayed, within the meaning of s 41(3)(b) of the Act, it is not necessary for there to have been an express order of a court staying execution on such judgment (Penning v Steel Tube Supplies Pty Ltd (1988) 18 FCR 568 at 575-576; Wiltshire-Smith v Mellor Olsson (1995) 57 FCR 572 at 584-585). In the Wiltshire-Smith Case, the Full Court approved the following passage from the judgment of Beaumont J in Re Solomon;  Ex parte Reid (1986) 10 FCR 423 at 425-426:

“It is well established that, for the purposes of s 41(3)(b), execution is deemed to have been stayed where a judgment creditor is not ‘in a position to issue immediate execution upon it’: per Bowen LJ in Ex parte Ide; Re Ide (1836) 17 QBD 755 at 760;  Re Pannowitz; Ex parte Wilson (1975) 38 FLR 184 at 187-188; cf Re A debtor [1984] 1 WLR 1143 at 1153-1154.”

I do not consider it necessary in the circumstances of this case to give consideration to the conflicting authorities on the issue of whether the term “execution” is used in s 41(3)(b) of the Act in its widest sense or in a narrower sense (cf Re Pannowitz;  Ex parte Wilson at 194 and Re Exell;  Ex parte Martin (1995) 134 ALR 623 at 630). On either view of the meaning of the term “execution” in s 41(3)(b) of the Act, Mr Dean is not in a position to issue immediate execution upon the judgment on which the bankruptcy notice is founded. He needs either the leave of the Supreme Court or a further order of the Supreme Court before he can enforce the judgment The grant of such leave, or the making of such further order, is a matter within the discretion of the Supreme Court (Re Richards;  Ex parte Sommers (1947) 14 ABC 112).

The judgment upon which the bankruptcy notice is based is, in my view, a judgment the execution of which is, in the circumstances of this case, deemed to have been stayed for the purposes of s 41(3)(b) of the Act. The bankruptcy notice was thus issued in disregard of the requirements of s 41(3)(b) that a bankruptcy notice shall not be issued in relation to a debtor “if, at the time of the application for its issue, execution of the judgment .. has been stayed”.

The bankruptcy notice will therefore be set aside.

I record that I would not have been prepared to set aside the bankruptcy notice by reason of the inaccurate references to s 52 of the Conveyancing Act 1919 (NSW) and s 94 of the Supreme Court Act. Such inaccurate references are, in my view, defects of form, and not of substance, which could not, in the circumstances of this case, have misled or embarrassed Mr Beson (see James v Federal Commissioner of Taxation (1955) 93 CLR 631 at 644; Clyne v Deputy Commissioner of Taxation (1982) 42 ALR 703 at 706-707).

I do not consider it appropriate in the circumstances to give consideration to the alternative claim of Mr Beson that the time for compliance with the bankruptcy notice should be extended pending the hearing and determination of certain proceedings in other courts.  The relevance of those proceedings to any future bankruptcy notice that might be issued by Mr Dean should be assessed only when such notice has been issued.

I certify that this and the preceding five (5) pages are a true copy of the Reasons for Judgment herein of the Honourable Justice Branson.

Associate:

Dated:             

Counsel for the Applicant:	Mr M Aldridge
Solicitors for the Applicant:	Robinson Creais
The Respondent appeared in person
Date of Hearing:	28 October 1997
Date of Judgment:	1 December 1997