Child & Henry Publishing Pty Ltd v Cairns, D

[1987] FCA 273

IN THE FEOEPAL COURT OF AUSTFALIA

)

DIVISION	GENERAL	)	QLD. PET. NO. 656 of 1986
BANKRUPTCY DISTRICT OF THE SOUTHERN )
)
DISTRICT OF THE STATE OF DUEENSLAND )

- RE : DAVID CAIRNS

FX PARTE: CHILD .& HENRY FUELISHING PTY. .LIMITED

SFEMDER J .

ERISEANE

'15 MAY 1 ? 8 7 .

%is 1 c 3. conte-ted creditor's petltion m whlch the

judgment .'ebtsr, DaTvvld Calms, s e c k to h a v e the Court go behind

the ]udgment debt rellej on in the petltlcn of Chi ld L Her.ry

Publisiung Pty. Llmited, on the ground that the debt upon sinich

the default ludgment was entered and which fwnds tne petltlor.

was properly owed by a company, David Calrns and Associates Pty.

Ltd. and not by David Calrns.

On 26 September 1983, Child & Henry Publishlnq Pty.

Limited obtained judgment in the sum of $63,540.43 and $359.00

c o s t s against the judgment debtor in the Supreme Court of New

2 .

' South Wales. A Bankruptcy Notice in respect of the total of that

amount was Issued out of the Bankruptcy District of the Southern

Distrlct of Queensland on 15 November 1985. An affidavit of

service deposing to service of that Bankruptcy Notlce on 9 March

1986 at an address in Cleveland, Brisbane, is sworn to. On 20

June 1986. one Bernard Luton deposes to the fact that no

affidavit of counter-clalm, set-off o r cross-demand has been

filed nor has there been a securing of the sum referred to in the

Eankruptcy Notlce to the satisfaction of the Court, nor any

application In that regard. There	was no	application to set
aside the Bankruptcy Notlce.

A Credltor's Petltlnn dated 12 June 1936 was Issued out

of the Federal Court anil sn affldavlt of SF~VICE of t're Fetltlnn

deposes to servlre cc 1C July 1956 at the zame 3dciress KI

Cleveland. T5e Credltor's Fetltlon was returnable before the

Federal Court on 1 9 Augist l?E6. On t h a t day a Notlce nf

Intention to Oppoze Petltlo? was fllrld by leavl~, notwlthstandlng

the requlrements of Rule 2 0 . The affldavlt materlsl In sugport

of the Notlce gf Kctlon to opFoze the cre~~tcr'z petltign wm3s

also not flied untll the tlme nf tke hesrlnu of the pet1tlc.n.

That materlal shows that a comFany, Dand Calrns and

Associates Fty. Ltd., was incorporated on 21 August 1978, with one of Its objects belnq the importlng and wholesaling of books.

David Cairns and his wife were the shareholders and director5 of

that company. Mr. Calrns deposes that in early 1981 at a time

when he had known a Mr. Henry for eight or nine years, Henry approached Cairns at 61 O'Connell Terrace, Bowen Hills, which was

3 .

the then place of business of the company, and an agreement was

made in relatlon to the distributorship of books. No written

contract containing the terms of that agreement was ever entered

into. He says that, at that time, a business card was given to

Mr. Henry which 1 s the business card of David Cairns and

Associates Pty. Ltd., Importers and Distributors, with David	L.
Calrns personally named in the lefthand corner. Mr. Calrns says

that it was the company which receive& books, then distributed

them on behalf of Child & Henry Publishlng Pty. Llmlted. He says

the ccmpany began to experlence financlal dlfflculties wlthln the

next few months, became Indebted to the credltor	and, in about
December 1981, ceased to trade.

Mr. Calms says that towards the middle of 1982 he flrst

lear~ed that the crelltor 573.5 looklnq to Mr. C31rn5 personally tc

Fay the debt. He clalms that at that tlme he haa never

perscnaliy conducted business with the creditor; the relationnhlp

was between the company and the credltor ancl that he had no

personal responzlblllty f o r any moneys owlnq by the cmpany. Mr.

Calms' present clalm 1 s therefore not new, but It 1 s one which

ho has, untll now, never pursrued to a determinatlon.

Legal proceedings were lnstltuted by the creditor

against David Cairns. His solicitors wrote on 5 May 1983 saying, In part, that the Statement of Claim "...ought more properly be dlrected to David Cairns & Associates Pty. Ltd. the Company wlth whom your cllent Company originally contracted."

4.

The material shows that after the letters of 5 May and

19 May 1983, wherein the assertion is made that it is a company

debt and not that of David Cairns personally, the sollcitors for

the judgment credltor wrote to the then solicitor for Mr. Cairns,

informing him that, If no defence was filed by the end of May,

then he had instructlons to enter judgment.

A judgment in default was 2btalned in the Supreme Court

of New South Wales on 26 September 1983. Mr. Calrns says he was

nct in a posltion financlally to defend the proceedings.

Mr. Calrns says he had no furthPr contact with the

~udwent creditor untll in May 1985 he learned from Mr. Henry's

wlfe that the credltor had obtalned ~udgment agalnst Calrns

persc?ally. P. few hours later, at the Parkro:?ai Xotel In

Brisbane, he again says he dlsputed the debt, that It was 3

company debt and n o t a debt which he was perzonally liable to

pay. Mr. Cslrns asserts that, although he became aware in May 1985 tb-at the Judgment had been entered against him personally,

he dld not seek legal redress f o r rhe reason that he was not

then flnanc1slly able to do s o . It 1 s not irrelevsnt to n o t e ,

however, that not only were no steps taken over now more than

rhrre gear5 to Ch411?naJ? the ] u d ~ l w t i t against him, or h a x it set

aside, he took no steps in respect of the Bankruptcy Notice, and

took no steps concerning the Petition until the hearing of it.

5.

Notwithstanding the extraordinary standing-by of the

judgment debtor, if there are substantial reasons for questioning

whether there 1s in truth and reality a debt behind the Petition,

then the Court will go behlnd it.

Latham C.J., with whom McTiernan and Rich JJ. aqreed,

sald in Petrie v. Redmond C19431 St.R.Qd. 71 at pp.75-76:-

"The court 1 s entitled to qo behind the ludgment

and Inquire Into the validity of the debt where

there has been fraud, collusion o r miscarrlaqe of justice ... Also the court looks with susplcicn on consent judgments and deflult judgments. T h y Court also strives to prevent creditors frcm bemq defrauded by colluslve o r dishonest proceedlngs by friends of the debtor or other people. The Bankruptcy Court does not examme every ludgment

deht. Special clrcumstances must be estabilshed

befnre It wlil do so. It 1 s impcssible to lay

down ary qeneral rule. "

Simllariy, l n Hr-J v . Mahony (1 ' 972) 126 C.L.!?. 2 1 2 , Barwlzk C.J.

sa14 at 2 2 7 , in a Iusqment aqreed in by Wlndeper and Oven JJ.. that the Court wlll not "as a matter of ccurse inqulre ir.to the

valldlty of 3 l u d ~ e n t debt. "

Lockharr: J. in Slmon v. O'Gorman Pty.Ltd. (i97?) 37

A.L.!?. 61!, whlch was a default ludqment case, sald at 633 that

the Colurt "wlll not inqulre as a matter of course" Into the

validity of the ludqment debt.

It is therefore necessary to consider whether there are

substantlal reasons for questioning the existence of the debt.

6

There is in existence a letter on 7 September 1979, some

two years before there was ny arrangement concerning

distributlon of books, wherein Mr. Murray Chlld wrote to Mr.

David Cairns, David Cairns & Associates Pty. Ltd., 61 O'Connell Terrace, Bowen Hills. There is the business card in the name of David Cairns and Associates Pty.Ltd. which Mr. Cairns says he gave to Mr. Henry In early 1981.

On the other hand, it is clear that the statements of

account by the judgment credltor concerning books were addressed

In every case to The Proprletors, Davld Calrns ani Assoclates, 67

O'Connell Terrace, Bowen H1115 Qld.,4006. There are sone elght

statements of account, twelve credlt notes and thlrty-one

involces, all of whlch	are	addressed	to	Davld	Calms and
Asnoclates.

T h ~ r e is no evidence that at any t l l r c dlwlng the

currency of the deallnas reiatlng to the dlstrlbutlon gf b m k that Mr. Calms, or anybody elze, wrote to, o r contacted, the

supplier of bcoks, lnformln? It that the addrossee referrcd to In

all the statennpnts of sccount, Invoices and credit notes, was

erroneously describe? and that the books had been recelve? by,

and were to be pald for by, a company.

Only two payments were made in respect of books supplied

by the judgment creditor. The first was in April 1982 for the

amount of $6,058.22 drawn on Davld Cairns .S Associates PIL No.2

A/c and the second was on 24 May 1982 for $100.00 drawn on the

account of David Cairns & F-ssociates Pty. Ltd.. As noted by

Lockhart J. in Simon v. O’Gorman Ptv. Ltd. (1979) 27 A.L.R. 619

at 637, (wlth which observation McGregor J. agreed in Re Draper; Ex parte Brosalco Ptv.Ltd. (1983) 48 A.L.R. 656 at 661,) “it is

not uncommon in business for payments to be made by persons other

than those wlth whom the relevant contract has been made.“

There 1s. in my view, a document of significant

evidentiary value, which is headed “Supply Agreement” dated 21st

January 1981. That agreement is said to be between Chlld & Henry

Publishing Pty. Ltd. of 27 King Road, Hornsby, N.S.M. and David

Cairns & Associates of 67 O’Connell Terrace, Bowen Hills,

Queensland. Mr. Cairns asserts that no entity such as Davld

Cairns & hsociates exlsted, that It was his lntentlon and understanding that the dlstrlbutor was the company, and further

that the Supply Agreement related speclflcally to two books.

Thls docllment, In ~ t s context o t the desllngs between

the petltlonlng credltor and Mr. Calms. evidences that Mr.

Calrns, In relation to the supply of some books from the

petltloning credltor, acted on hls own behalf and not as an aTent

for a disclosed prlnclpal, Davld Cairns and Assoclate5 Pty.Ltd.

The parties are identlfled in the document as Child and

Henry Publishins Ptg.Ltd. and Davld Cairns and Associates. It is

signed on behalf of Child and Henry Publishing Pty.Ltd. by

Mr. Child. The company name, underneath which is typed William

Murray Knox Chlld, Director, appears on the left of the page, and

8.

Mr. Child's signature to the right. Underneath the typed words

"David Cairns and Assoclates" on the left of the page are

hand-printed the words "David	Cairns", to the right	of whlch
appears Mr. Cairns' signature.

On May 2 , 1985, Mr. Cairns executed a deed. The deed

recited: -

"WHEREAS :

(a) On the Twenty-sixth day of September, 1983

the Supreme Court of New South Wales gave

judgment to the Judqment Creditor agalnst

the Judsment Debtor for the sum of SIYTY

THREE THOTJSAND FIVE HUNDRED AND FC)RTY

DOLLFLF.5 FORTY THREE C m (63,540.43) for

clalm for moneys owing for goods sold and

delivered together with THREE HUNDF.ED AND

FIFTY MINE D O L W ( $ 3 5 9 . 0 0 ) for costs and

Interest o q the sald claim at the rate of

15.5 per centum per annun from the dste .~f

~udgment untll payment.

( t . 1 The Judgment Debtor has acknowledged the

debt and has reached certaln agr??ments wlth

the Judqment Credltor as set out herein:-"

and there are then set out certaln steps

Mr. Cairns says that he slgned this deed after Mr. Henry

had said to hlm, "I suggest you s13n thls otherwise we will bankrupt you immedlately and there is nothing you can do aboclt it." He says that he signed because he believed he had "no

alternative other than so to do." I cannot help but observe

that, had he not signed the deed and bankruptcy proceedings then

issued, perhaps the question of the existence of the debt would

have surfaced much earlier than it has.

On the whhole of the material, in my oplnion, the Court

should not go behlnrl the Iudqment. Far from suggesting that

there 3re substantial reasons for questloninq %hether there 1 s a

debt "in truth and reality", the evidence leaves me mth the

clear view that Mr. Cairns is really and truly indebted to the

petitloning credltor.

I will he2.r the partles further.