Dib v Green
[2009] FMCA 1174
•1 December 2009
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| DIB & ANOR v GREEN | [2009] FMCA 1174 |
| BANKRUPTCY – Bankruptcy Notice – can a legal assignee of a debt issue Bankruptcy Notice in the name of the assignor? – does the existence of a Power of Attorney from assignor assist? – where no evidence that assignee has obtained leave of Supreme Court to levy execution – is assignee a creditor for the time being entitled to enforce? |
| Conveyancing Act 1919 (NSW), s.12 Judicature Act 1873 (England and Wales) Oxford Dictionary of Laws 5th Ed 2002 Powers of Attorney Act 2003 (NSW), s.9 Bankruptcy Act 1966 (Cth), s.40(3)(d) Supreme Court Rules 1970 (NSW), Pt 44, r.2(1) Uniform Civil Procedure Rules 2005 (NSW), r.39.1(1)(a) Federal Magistrates Court (Bankruptcy) Rules 2006 |
| Kleinwort Benson Australia Ltd v Crowl (1988) 165 CLR 71 McCann v Parsons (1954) 93 CLR 418 |
| First Applicant: | MOHAMED DIB |
| Second Applicant: | SANAA DIB |
| Respondent: | MARTIN GREEN IN HIS CAPACITY AS LIQUIDATOR OF AHJ GROUP PTY LIMITED (IN LIQUIDATION) |
| File Number: | SYG 2496 of 2009 |
| Judgment of: | Raphael FM |
| Hearing date: | 10 November 2009 |
| Date of Last Submission: | 10 November 2009 |
| Delivered at: | Sydney |
| Delivered on: | 1 December 2009 |
REPRESENTATION
| Counsel for the Applicants: | Mr D Allen |
| Solicitors for the Applicants: | Bounce Legal |
| Counsel for the Respondent: | Ms N Obrart |
| Solicitors for the Respondent: | Kent Attorneys |
ORDERS
Bankruptcy Notice NN4441/09 is set aside.
The Respondent shall pay the Applicants’ costs to be taxed if not agreed pursuant to the Federal Magistrates Court (Bankruptcy) Rules 2006.
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT SYDNEY |
SYG 2496 of 2009
| MOHAMED DIB |
First Applicant
| SANAA DIB |
Second Applicant
And
| MARTIN GREEN IN HIS CAPACITY AS LIQUIDATOR OF AHJ GROUP PTY LIMITED (IN LIQUIDATION) |
Respondent
REASONS FOR JUDGMENT
On 3 April 2009 Martin Green, in his capacity as liquidator of AHJ Group Pty Limited (In Liquidation), obtained a judgment against Mohamed and Sanaa Dib. On 19 February 2009 Mr Green assigned the debt to Salah Eddine Dib by deed. The operative provisions of the deed were listed under four headings, Assignment, Covenants, Power of Attorney and Governing Law. It is only necessary to set out the assignment and the Power of Attorney.
Assignment
In consideration of the payment of $1.00 by the Buyer to the Seller (the receipt of which is acknowledged) the Seller as beneficial owner assigns to the Buyer absolutely all of the Seller’s right title and interest in the Debt together with all interest which has accrued or which may accrue in the future on the Debt and all amounts payable by the judgment debtor in respect of costs.
Power of Attorney
(1) The Seller for valuable consideration (the receipt of which is acknowledged) irrevocably appoints the buyer as the attorney of the Seller in the name the Seller to:
(a)demand, sue for, receive and give effectual discharges for the Debt;
(b)conduct any legal proceedings in relation to the Debt, including proceedings on appeal, as effectually as the Seller could or might;
(c)for any purpose from time to time, appoint any substitute, delegate or sub-attorney.”
(2) The Buyer must indemnify the Seller against all costs and expenses incurred in connection with anything done by the Buyer as the attorney of the Seller pursuant to cl 3(1).”
On 8 July 2009 Mr Green sent a copy of the Deed of Assignment to Mrs Dib.
It is not disputed for the purposes of these proceedings that the assignment is an assignment made and completed pursuant to s.12 of the Conveyancing Act 1919 (NSW) which section is in the following form:
“12 Assignments of debts and choses in action
Any absolute assignment by writing under the hand of the assignor (not purporting to be by way of charge only) of any debt or other legal chose in action, of which express notice in writing has been given to the debtor, trustee, or other person from whom the assignor would have been entitled to receive or claim such debt or chose in action, shall be, and be deemed to have been effectual in law (subject to all equities which would have been entitled to priority over the right of the assignee if this Act had not passed) to pass and transfer the legal right to such debt or chose in action from the date of such notice, and all legal and other remedies for the same, and the power to give a good discharge for the same without the concurrence of the assignor: Provided always that if the debtor, trustee, or other person liable in respect of such debt or chose in action has had notice that such assignment is disputed by the assignor or anyone claiming under the assignor, or of any other opposing or conflicting claims to such debt or chose in action, the debtor, trustee or other person liable shall be entitled, if he or she thinks fit, to call upon the several persons making claim thereto to interplead concerning the same, or he or she may, if he or she thinks fit, pay the same into court under and in conformity with the provisions of the Acts for the relief of trustees.”
On 23 September 2009, at the request of Rodney Kent a solicitor, the Official Receiver issued a Bankruptcy Notice against Mohamed and Saana Dib. The Notice stated relevantly:
“1. MARTIN GREEN in his capacity as Liquidator of AHJ GROUP PTY LIMITED (IN LIQUIDATION)
(“the creditor”)
of: C/- Kent Attorneys
Suite 711
The Trust Building
155 King Street
SYDNEY NSW 2000claims you owe the creditor a debt of $72,454.94 as shown in the Schedule.
2. The creditor claims that the debt is due and payable by you. A copy of the judgments or orders relied upon by the creditor is attached. At the time of applying for this Notice, execution of the judgments or orders had not been stayed.
3. You are required, within 21 days after service on you of this Bankruptcy Notice:
(a) to pay to the creditor the amount of the debt; or
(b) to make an arrangement to the creditor’s satisfaction for settlement of the debt.
[NOTE:The number of days to be inserted is 21 or, if an order has been made under subparagraph 40(1)(g)(ii) of the Act, the number of days constituting the time fixed by the order.]
4. Payment of the debt can be made to:
MARTIN GREEN in his capacity as Liquidator of
AHJ GROUP PTY LIMITED (IN LIQUIDATION)
C/- Kent Attorneys
Suite 711, The Trust Building
155 King Street
SYDNEY NSW 2000[NOTE:The address must be within Australia]
…
___________________________________________
The person who applied for this notice to be issued is:
Rodney Kent
who confirms by the following signature that he or she is the creditor’s solicitor.
and whose address for service is:
C/- Kent Attorneys
Suite 711
The Trust Building
155 King Street
SYDNEY NSW 2000
Tel: (02) 8815 9800
Fax: (02) 8815 9899”On 16 October 2009 Mr and Mrs Dib filed an application in this court seeking to set aside the Bankruptcy Notice. The grounds of the application were contained in a document entitled “Applicant’s Outline for Hearing 10 November 2009”.
The respondent accepts that there has been an absolute assignment of the debt with the effect that the assignee can bring proceedings in his own name to recover the debt and the respondent also accepts that the assignor no longer has any right to take proceedings to recover the debt:
“It is submitted that this is the case in the present proceedings where the proceedings are brought by the assignee who has instructed its solicitors on record to bring proceedings in the name of the nominal Plaintiff Martin Green pursuant to Clause 3(1) of the Deed of Assignment. The indemnity as to costs is provided for in the Deed of Assignment clause 3(2).
The respondent denies that its action in issuing the bankruptcy notice in the name of the original creditor is misleading or confusing rendering the notice invalid; Kleinwort Benson Australia Ltd v Crowl (1988) 165 CLR 71.
A good starting point for considering whether the Bankruptcy Notice is valid is the High Court decision Norman v Federal Commissioner of Taxation (1963) 109 CLR 9 although cited by the respondent as supporting its position I am of the view that a considered reading of the decision of Windeyer J who discusses the law of assignment in some detail is more likely to undermine him. At [8] Windeyer J discusses the development of assignments of choses in action and the circumvention of the common law rule that debts were not assignable:
“[A]nother was by the assignor giving a power of attorney to the assignee to sue the debtor at law in the assignor’s name, without having to render an account… and courts of equity would come to the assistance of the assignee if the assignor refused to do whatever was necessary to enable to assignee to get the benefit of the assignment. Thus a recalcitrant assignor would be required, on having an indemnity for his costs, to permit his name to be used in an action to recover the debt… The common law courts recognise that an assignee might sue in the assignor’s name… Long before 1873 the development of common law processes and the impact of equity had pushed the common law prohibition of the assignment of chose in action back into history. Nevertheless the original doctrine survive, to this extent that, until the Judicature Act 1873 s.25(6) and the corresponding statutory provisions in Australia and elsewhere came into operation an assignee of a legal debt could not in his own name bring an action against the debtor to recover the debt. The original creditor must be the plaintiff on the record. He remained in law the owner of the chose in action. What the provision of the Judicature Act, 1873, did was to render unnecessary the previous circumlocutions. Debts and other legal choses in action were made directly assignable by the statutory method.”
It seems to me that his Honour is here indicating that the effect of a legal assignment is to pass all right title and interest in the property assigned to the assignee. There is not only no necessity for the assignee to sue in the name of the assignor, there is nothing which the assignor holds that gives him any right in the property. The respondent points to the remarks of the High Court; Dixon CJ, McTiernan, Fullagar, Kitto and Taylor JJ in McCann v Parsons (1954) 93 CLR 418 where it is said:
“When an assignee of a chose in action desired to sue in the assignor's name he received some recognition and protection at common law. He was allowed to use the assignor's name notwithstanding his and the defendant's objection, subject to certain terms.”
But this case related to the rights of the Government Insurance Office to bring proceedings by way of appeal on the part of its insured defendant. There is no indication in the sentence quoted whether their Honours are referring to legal or equitable assignees and in the circumstances I do not think that the views there expressed are of much assistance. Nor do I think the respondent is assisted by what fell from Smart J in Purdon v Purdon [2007] NSWSC 141 at [112] where his Honour makes reference to Norman at (e) and (f) and then says at (k):
“(k)An equitable assignment, whether absolute or not, of the whole of a legal chose in action does not entitle the assignee to sue in his own name but the assignor must be a party to the suit either as plaintiff or defendant.
(l)If the assignee does not succeed in obtaining the use of the assignor’s name as plaintiff then on proving the failure or refusal of the assignor to sue or allow the use of his name, the assignee may subject to any necessary leave to amend, join the assignor as defendant: Norman at 27.”
However, the former remarks take the matter no further than Norman and the latter refer solely to equitable assignments. The effect of a statutory assignment under the Judicature Act 1873 (England and Wales) was considered by Lord Esher in Read v Brown (1888) 22 QBD 128 at [131] where his Honour said:
“…The debt is transferred to the assignee and becomes as though it had been his from the beginning; it is no longer to be the debt of the assignor at all, who cannot sue for it, the right to sue being taken from him; the assignee becomes the assignee of a legal debt and is not merely an assignee in equity, and the debt being his, he can sue for it, and sue in his own name.”
Read v Brown was considered by the Supreme Court of Western Australia Court of Appeal Malcolm CJ Kennedy and Pidgeon JJ in Carob Industries Pty Ltd (In Liq) v Simto Pty Ltd [2000] WASCA 362 where Malcolm CJ said at [27]:
“In my opinion, the effect of an assignment under s20 of the Property Law Act is that there is a divesting of legal title correlative to the transfer of the right, so that if notice has been duly given, the debt or chose in action no longer belongs to the assignor and he cannot take proceedings to recover it: Bacon v Yatchaw Irrigation and Water Supply Trust (1898) 23 VLR 485.”
And at [33] his Honour referred to Hobbs v Rawson (1961) WAR 79 and to the views expressed there by Virtue J:
“Now once there has been a perfected legal assignment, any action must be in the name of the assignee and not in the name of the assignor: Hughes v Pumphouse Hotel Co [1902] 2 KB 190, at p193-p194. See also Bacon v Yatchaw Irrigation Trust (1898) 23 VLR 485.”
These views were confirmed by the Supreme Court of Western Australia Court of Appeal in APT Finance Pty Limited v Bajada [2008] WASCA 73 per Pullin JA and Newnes AJA who said at [29]:
“If express notice in writing of an assignment of a debt is given to the debtor then, but only then, the assignee obtains the legal right and the legal remedy to the debt: McIntosh v Shashoua (1931) 46 CLR 494 at 514 (Evatt J). Once there has been a perfected legal assignment any action must be in the name of the assignee and not in the name of the assignor, as the assignor no longer has any right to sue for the debt: Hughes v Pump House Hotel Co Ltd [1902] 2 KB 190; Bacon v Yatchaw Irrigation & Water Supply Trust (1898) 23 VLR 485; Hobbs v Rawson [1961] WAR 79 at 86 (Virtue J), Carob Industries Pty Ltd (In Liq) v Simto Pty Ltd[2000] WASCA 362 [27].”
Having at [26] drawn a distinction between a legal and equitable assignment.
These decisions would appear to recognise that the assignment of a chose in action or a debt is no different to the sale of an item. Once the sale has been completed the vendor has no interest in the property sold and no one would expect him to sue to recover for any damage to it by, e.g., a bailee from the purchaser. Even if the purchase price is unpaid the vendor has no right in the property (excepting reservation of title clause), his rights in the property have been converted to the right to sue for the purchase price.
It follows from the above that I accept the applicant’s contention that the proper applicant for the bankruptcy notice and proper person to whom the money claimed under that notice should be paid is the assignee and not the assignor. The next question is whether or not the existence of a power of attorney makes any difference. A power of attorney is described in the Oxford Dictionary of Laws 5th Ed 2002 as:
“A formal instrument by which one person empowers another to act on his behalf, either generally or in specific circumstances.”
A power of attorney is a form of agency. It gives a third party the right to exercise the powers of the donor. Section 9 of the Powers of Attorney Act 2003 (NSW) is in the following form:
“9 Powers conferred by prescribed power of attorney
“(1) Subject to this Act, a prescribed power of attorney confers on the attorney the authority to do on behalf of the principal anything that the principal may lawfully authorise an attorney to do.
(2) A prescribed power of attorney has effect subject to compliance with any conditions or limitations specified in the instrument creating the power.”
And Section 43 states:
“43 Attorney may execute instruments and do other things in own name
(1) An attorney under a power of attorney may, in the exercise of the power:
(a) execute any assurance or instrument with the attorney’s own signature and, where sealing is required, with the attorney’s own seal, or
(b) do any other thing in the attorney’s own name.
(2) An assurance or instrument executed, or thing done, in accordance with subsection (1) is as effectual in law as if executed or done by the attorney with the signature and seal or, as the case may be, in the name, of the principal.”
Powers of Attorney were included in notices of assignment because of the problems which existed prior to the Judicature Act in relation to bringing proceedings in law by an assignee. The grant of a power remains important where only an equitable assignment has taken place. This is understandable. If an assignment remains an equitable one because notice of it has not been served upon the debtor then it is essential that the assignee has the power to sue in the name of the person that the debtor believes is his creditor. But once notice has been served and the legal assignment is perfected the power becomes otiose. If there is nothing left in the hands of the assignor then he cannot grant an agent rights to do anything with the property he formerly owned. I am of the view that the inclusion in this Deed of Assignment of the Power of Attorney does not assist the respondent because there is nothing to which the power attaches. This conclusion renders redundant the respondent’s argument that having giving the assignee an indemnity for his costs the assignee can enforce the judgment in the name of the nominal creditor. The cases cited, Dyktynski v BHPTitanium Minerals Pty Ltd (2004) 60 NSWLR 203 and Project 28 Pty Ltd (formerly Narui Gold Coast Pty Ltd) v Barr [2005] NSWCA 240 are both cases where the “nominal” plaintiff had a residual interest in the subject matter of the proceedings and there was no question of a legal assignment.
Finally, it seems to me that in the circumstances of this case the debtor has a complete answer by applying the dicta of the Full Bench of the Federal Court; Davies Burchett and Gummow JJ in McIntyre v Gye & Anor [1994] 51 FCR 472 where at [476] the court noted:
“For the purposes of s 40(1)(g), a person shall be deemed to be a creditor who has obtained a final judgment or final order if that person is ``for the time being entitled to enforce'’ that final judgment or final order: s 40(3)(d). In Re Richards; Ex parte Sommers (1947) 14 ABC 112, Clyne J explained that under earlier legislation the only person who could issue a bankruptcy notice was the judgment creditor himself and that under a provision such as s 40(3)(d) a legal assignee of a judgment debt could be deemed a creditor who had obtained a final judgment. Nevertheless, as his Honour also held, such a legal assignee must be in a position, at the time of the issue of the bankruptcy notice, to issue immediate execution upon the judgment. This conclusion was said to follow from the words now appearing in s 40(1)(g), ``the execution of which has not been stayed'’. See also Australian Workers’ Union v Bowen (1946) 72 CLR 575 at 583. If at the time of the application for its issue, execution in fact has been stayed, a bankruptcy notice shall not be issued on the application: s 41(3)(b).
Part 44 r 2(1) of the Supreme Court Rules made under the Supreme Court Act 1970 (NSW) (the Supreme Court Act) provides that in certain circumstances a writ of execution to enforce a judgment shall not be issued without the leave of the Supreme Court. These include the case:
where any change has taken place, whether by assignment, death or otherwise, in the persons entitled or liable to execution under the judgment.
If a creditor who has taken a judgment debt as a legal assignee has not obtained the requisite leave, a bankruptcy notice cannot be issued at the instance of that assignee: Re Richards; Ex parte Sommers at 115. Furthermore, an assignee who has taken part of the judgment debt under an equitable assignment thereof should not be given leave to issue execution; there should be but one execution upon the one judgment debt: Forster v Baker [1910] 2 KB 636; Austra1ian Workers’ Union v Bowen.
Section 40(3)(d) is still in the same form in the Bankruptcy Act 1966 (Cth) and Pt 44 r.2(1) of the Supreme Court Rules 1970 (NSW) has now found its way into the Uniform Civil Procedure Rules 2005 (NSW) as Rule 39.1(1)(a). There is no evidence before me that Mr Dib, the assignee, ever sought leave of the Supreme Court to execute and was therefore not in a position to issue a bankruptcy notice in these proceedings.
The applicant is correct that this bankruptcy notice should be set aside. I shall so order. The respondent shall pay the applicant’s costs to be taxed if not agreed pursuant to the Federal Magistrates Court (Bankruptcy) Rules 2006.
I certify that the preceding twelve (12) paragraphs are a true copy of the reasons for judgment of Raphael FM
Associate:
Date: 1 December 2009
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