Douglas v Dixon - [2003] FMCA 406

FEDERAL MAGISTRATES COURT OF AUSTRALIA

DOUGLAS v DIXON & ANOR

[2003] FMCA 406

BANKRUPTCY – Application to set aside Bankruptcy Notice – whether stay of order – judgment summons abandoned – certified judgment obtained – whether stay order on judgment summons continues to have effect – leave to obtain certified judgment and abandonment of judgment summons renders stay ineffective – meaning of ‘for the purpose of proving a judgment debt in bankruptcy’.

Bankruptcy Act 1966, ss.30, 41(6A), 41(7)

re Ramsey; ex parte Taylor (1981) WALR 260

Applicant:

OLIVER GEORGE DOUGLAS

Respondents:

GEORGE ALFRED DIXON and
JESSIE BAIRD DIXON

File No:

WZ 118 of 2003

Delivered on:

9 September 2003

Delivered at:

Melbourne

Hearing Date:

9 September 2003

Judgment of:

McInnis FM

REPRESENTATION

Counsel for the Applicant:

Mr D.E. Eley

Solicitors for the Applicant:

Eley Palmer

Counsel for the Respondents:

Mr S.M. Stocks

Solicitors for the Respondents:

Nicholson Clement

ORDERS

The application filed 11 July 2003 be dismissed.
The applicant shall pay the costs of the respondents pursuant to the Federal Court Scale to be taxed in default of agreement pursuant to Order 62 of the Federal Court Rules, including the costs of the respondents fixed in the sum of $200.00, being the reserved costs of the appearance at the hearing held on 4 September 2003.

FEDERAL MAGISTRATES
COURT OF AUSTRALIA AT
PERTH

WZ 118 of 2003

OLIVER GEORGE DOUGLAS

Applicant

and

GEORGE ALFRED DIXON and JESSIE BAIRD DIXON

Respondents

REASONS FOR JUDGMENT

(Revised from transcript)

This is an application to set aside a bankruptcy notice by Oliver George Douglas (the applicant) against George Alfred Dixon and Jessie Baird Dixon (the respondents). The application was filed on 11 July 2003. In the application it is claimed that the applicants rely upon ss.30, 41(6A) and 41(7) of the Bankruptcy Act 1966 (the Bankruptcy Act).
The details of the claim relied upon by the applicant are set out in a supporting affidavit of Oliver George Douglas sworn on 10 July 2003. There are certain attachments to that affidavit to which I shall refer presently. The applicant has also sought to rely upon a further affidavit sworn by him on 24 July 2003.
The respondents oppose the application and in support of the opposition to the application to set aside the bankruptcy notice have relied upon an affidavit of George Alfred Dixon sworn 24 July 2003.
It is convenient to note that the bankruptcy notice, which is now said to be in question, is what might be described as a second bankruptcy notice and there were two bankruptcy notices, one dated 26 July 2003 and a second dated 17 July 2002.
By way of background it is appropriate to refer to the proceedings between the respondents and the applicant which gave rise or is said to give rise to the bankruptcy notice dated 20 June 2003, which is said to be the notice which is sought to be set aside.
In the affidavit of George Alfred Dixon, to which I have referred, the deponent states that he and the second respondent had originally issued a summons in the Perth local court on 9 February 2000 seeking $20,000 plus interest, being moneys allegedly lent to the applicant. The summons sought repayment of moneys lent allegedly on 3 December 1997. The deponent states that despite an acknowledgment of debt on 3 December 1998 the applicant had filed a notice of intention to defend the proceedings. On 20 August 2000 application was made for summary judgment, which was heard and dismissed by the magistrate, who ordered that the defendant have leave to defend but do so on condition that he pay the sum of $5000 into court within 21 days.
It is common ground that the amount of $5000 so ordered was not in fact paid. Mr Dixon, in his affidavit, further deposes that on 10 November 2000 the applicant had filed a notice of appeal in the District Court of Western Australia, seeking to set aside the Magistrates Court order of 20 October 2000 and that on 18 June 2001 the applicant's appeal to the District Court was dismissed for want of prosecution.
Before the appeal was dismissed the applicant had obtained a stay of the prior orders of the local court to a disposition of his District Court appeal. On 11 July 2001 Mr Dixon and the second respondent filed a chamber summons in the local court at Perth seeking orders that the defendant's defence be struck out and judgment be entered for the plaintiffs. Without dealing with the precise grounds I simply add for the sake of completeness that Mr Dixon deposes that the grounds for the application were that as the District Court appeal had been dismissed any stay with respect to the local court proceedings should be at an end and as the $5000 ordered to be paid into court on

20 October 2000 had not been paid judgment should be entered in favour of the plaintiffs.
Orders were made in those terms on 9 August 2001. On 28 August 2001 the applicant again brought a further application to set aside the default judgment. It would seem that the Magistrates Court accepted that the applicant should be allowed to defend the action against him, but did so on the basis of payment within 48 hours of the sum of $5000.
The reasons for the decision of that court have been annexed to the Dixon affidavit. It is deposed that the applicant failed to pay any moneys into court and thereafter as a result of that failure to comply with the order an ex parte motion seeking judgment was filed on 24 August 2001. It would seem that as a consequence of that notice of motion there was confirmation of the order and those documents respectively are provided in the affidavit of Mr Dixon. Specifically exhibit B to his affidavit provides the notice of ex parte motion before the magistrate in chambers.
It is noteworthy that in that notice of motion the plaintiff moves that the judgment entered in the action on 9 August 2001 and stayed, subject to condition that the defendant pay $5000 into court within 48 hours of publication of reasons for decision, such reasons being published on 10 October 2001, should stand and the defendant's conditional leave to set aside judgment be withdrawn.
Annexure C to the affidavit is a certification by the clerk of the local court dated 15 October 2001, which recites and certifies that on 12 October 2001 the magistrate made the following order:
“The judgment entered in the action on 9 August 2001 and stayed subject to the condition the Defendant pay the sum of Five Thousand Dollars ($5000.00) into court by cash or bank cheque within forty eight (48) hours of publication of the reasons for decision, such reasons being published on 10 October 2001, should stand and the Defendant's conditional leave to set aside the judgment be withdrawn.”
After that, as a result, it is said, of the failure of applicant to satisfy any part of the moneys owing a judgment summons was issued and served upon the applicant. That summons required attendance by the applicant at the Perth court on 10 May 2002 to be examined. It would appear that the respondents were represented on that occasion and I am prepared to conclude that as a result of that hearing there were orders made in relation to payment of moneys then due and those orders included an order that there be payment in the sum of $200 per month.
The order that was made on that occasion also provided the following:
“1.The payment of 37,566.96 by monthly payments of $200.00, 1^st payment on 4/6/2002.
2.Examination otherwise adjourned until Friday 28 June 2002 at 10 am for production of:-
Any financial records including drafts for Interim Advance Corporation and Equity Alliance Pty Ltd.”
After that order had been made there was a request by solicitors then acting for and on behalf of the respondents that the judgment summons be withdrawn and abandoned. Specifically the solicitors for the respondents in correspondence to the local court dated 6 June 2002 state:
“Please withdraw the Judgment Summons listed for 28 June 2002 in the above matter.
Additionally, our client now wishes to abandon the Judgment Summons, so we therefore wish for it to be withdrawn.”
The local court by a letter dated 28 June 2002 referred to that correspondence and indicated that the summons examination on 10 May 2002 had been abandoned as requested. The examination on 28 June 2002 was struck out of the list. Significantly the letter refers to the following:
“In regard to your request for a certified copy of judgment for the purpose of proving a debt in bankruptcy, I draw your attention to the matter of Re: RAMSAY; Ex parte TAYLOR WALR 1981 pages 260-262. It would appear that leave of the Court is required in the circumstances.”
It is common ground that in response to that correspondence application was made and an affidavit filed in support of an application for leave to issue a certified copy of the judgment for the purpose of proving the debt in bankruptcy. In particular it is noted that there was a motion filed in the local court at Perth which seeks the following:
“1.The Judgment Summons listed on 10 May 2002 be abandoned.
2.There be leave to issue a Certified Copy of Judgment for the purposes of proving the Judgment Debt in bankruptcy.”
An affidavit in support of that ex parte motion was sworn by Sean Michael Stocks, 4 July 2002. The deponent to that affidavit refers to the chronology to which I have referred and states further:
“6.At the rate of repayment it will take 15 1/2 years for the outstanding debt, as at today's date, to be repaid, not allowing for any increase in the base sum owing by virtue of Section 142 Supreme Court Act 1935.
7.I have spoken to the Plaintiffs who have informed me and I verily believe that they no longer wish to proceed with the Judgment Summons in this action.
8.The reason for the request that the Judgment Summons be withdrawn are simply that as the Plaintiffs are currently in their late sixties, they are unlikely to be alive by the time the Judgment Debt is repaid, and that they consider the level of repayment as compared to the overall debt to be too low.
9.Additionally, the Plaintiffs have informed me and I verily believe they do not want the debt to be repaid at $200 per month but rather, they wish immediate enforcement of the debt against the Defendant.”
What occurred thereafter is that following on from that application to the court a letter dated 9 July 2002 was forwarded by the clerk of the local court referring to the motion which I have just recited. In that letter it is stated:
“On 8 July, 2002 the Magistrate made the following order(s):-
‘1. There be leave to issue a Certified Copy of Judgment for the purposes of proving the judgment debt in bankruptcy.”
It is claimed in the affidavit of Mr Dixon that following that correspondence neither he nor the second respondent took any steps to enforce the payment of $200 per month from the judgment debtor, the applicant in this matter.
The deponent then goes on to state that coincidentally neither did the judgment debtor pay any moneys whatsoever until after receipt of the bankruptcy notice dated 20 July 2003. He states that between the date of receipt of the first $200 payment received from the applicant on 1 June 2002 no other moneys, other than the $2600, had been received. He then refers to a certified copy of the judgment was issued in the Perth local court with a copy judgment dated 20 June 2002, but was not released until after the making of the court order of 9 July 2002.
Instructions were given to the solicitors to issue a bankruptcy notice against the judgment debtor. It was hoped, according to the deponent, that issuing the bankruptcy notice would make the applicant consider his position and pay the moneys but he failed to do so.
In brief terms it is suggested that based upon the first bankruptcy notice that the respondents were unable, according to the affidavit, to pursue or take further the step of a creditor's petition as the time, it was said, had expired to act upon that first bankruptcy notice a second bankruptcy notice was issued. I should indicate that I take the current application to be an application for the setting aside of the current bankruptcy notice, which is the later bankruptcy notice issued in this matter.
In any event the second bankruptcy notice was issued and in that second bankruptcy notice there is a certified copy of judgment. It refers to the remaining amount due of the judgment of order as being $37,398.96. In the certified copy of judgment it is stated:
“This Certificate is issued for the purpose of:
Proving the Debt in Bankruptcy.”
It is against that background that submissions were made by both parties. It is submitted for and on behalf of the applicant that there are two substantive issues which should encourage this court to set aside the bankruptcy notice. The first is what might be described as an assertion of compromise. That assertion is founded in the affidavit material of the applicant where the applicant states in paragraph 6 of the first affidavit the following:
“When I attended at the Judgment Summons hearing I was examined by Counsel for the respondents and with his consent orders were made that I repay the debt on the basis of $200 per month, with the first payment to be made on 4 June 2002. …”
That order is exhibited to the affidavit. The deponent goes on to say:
“My understanding was that based upon Counsel for the respondents agreeing that the manner of repayment of the debt was to be $200 per month and that being reflected in the Order, that the debt had been compromised on that basis.”
It is submitted in the circumstances that the uncontradicted evidence of the applicant is therefore that a compromise agreement was reached with the respondents' counsel in the judgment summons hearing. Reliance is placed upon paragraph 6, to which I have just referred. It is therefore further submitted that if a compromise agreement was reached then the debt, the subject of the bankruptcy notice, is not now presently due and payable.
In response Mr Stocks, for the respondents, submitted that a proper reading of the material would indicate that there has indeed been no compromise at all. Had there been a compromise, he submits, it would be unlikely that the court would then otherwise have simply adjourned until 28 June 2002 the further examination. In the circumstances he submits that there is no evidence of compromise at all, but rather an order was made at that point but subject to there being further adjournment of the examination, which was to take place on 28 June 2002.
Mr Dixon, in his affidavit, in referring to the suggestion that there had been some form of compromise states that despite the applicant's comments in paragraph 6 of his affidavit in support of the application that counsel for the respondents agreed that the manner of repayment of the debt be $200 per month it was simply a case that the applicant admitted he had the capacity to repay $200 per month, although the exact circumstances of his finances were vague.
I should add that paragraph to which I have referred was a paragraph to which objection was taken and in hearing that objection it was my view that there should be no weight given to that reference and the respondents should not be permitted to rely upon it. I simply read it for the purpose of this judgment, to indicate that there is at least a dispute and do nothing else. That much has been made clear by submissions. Again for the sake of completeness I should say for the purpose of this judgment that paragraphs 4, 23, 24, 41, 50, 51, 53 of the Dixon affidavit likewise were subject to successful challenge.
The court is then left with a reference in an affidavit upon which reliance cannot be placed and it is necessary therefore in the context of what can only be an assertion in paragraph 6 of the applicant's affidavit to properly attempt to characterise what had indeed occurred when the order was made, which appears now as exhibit OGD3 to the affidavit of Mr Douglas.
In my view the affidavit evidence of Mr Douglas does not go far enough to establish what could properly be described as a compromise. In my view what has occurred is that an order has been made based upon the summons then before the court and examination. I cannot draw any further conclusions beyond that point, as I simply do not have sufficient material. I can, however, look at the face of the order that has been produced by Mr Douglas and note that in fact the examination was otherwise adjourned to Friday, 28 June 2002. In those circumstances, if indeed there had been what may be described as a final compromise, one would expect there to be no further proceedings as the matter would be compromised. It is my conclusion that indeed there has been no compromise of a kind which would encourage this court to set aside the bankruptcy notice.
The second major submission raised for and on behalf of the applicant is that by virtue of the judgment summons order there has been a stay. It seems to me that in a sense there is a degree of common ground concerning the effect of the judgment summons order. The applicant refers quite properly to the decision of His Honour Wickham J in the Supreme Court of Western Australia in the decision of re Ramsey; ex parte Taylor (1981) WALR 260 and which of course had been noted in the correspondence from the clerk of courts to the respondents.
It is useful to set out the extracts from His Honour's judgment and in particular I refer to page 262 where His Honour states the following:
“There was no express stay by order of the court but I accept that is not necessary: Re Seers (1955) 17 ABC 11. Further, there is no express stay of subsequent warrants by the terms of the rule. The rule is designed to give the court control over warrants relating to the execution of a judgment for which a judgment summons has been issued. Any current warrant may only be reissued by leave of the magistrate and it seems to me that it would be an abuse of process for the creditor to issue a new warrant with a view to outflanking the control of the magistrate over a current warrant. The general intention of the legislation seems to be that as soon as proceedings are taken relating to execution against the person, then other modes of execution should not proceed without leave. This has been the practice of the Local Court, although the practice has been directed to the currency of the order of commitment rather than applied as from the date of the judgment summons.”
The rule that His Honour was referring to is Order 26 Rule 14 of the local court rules, which provides:
“Upon the issue of a judgment summons against a party upon a judgment or order of the court out of which the judgment summons is issued, the bailiff of such court shall lodge in court any warrant of execution against the goods or land of such party which may have been issued in the action, whether executed or not; but any such warrant, if not fully executed may be reissued by leave of the magistrate.”
I am told and accept that the rule has not altered since the decision in the Supreme Court in 1980 and is equally applicable to the present circumstances. It will be noted that that authority is the authority which is particularly relevant in the present case as, it is submitted and I accept, that in normal circumstances an order in response to the summons would act as a stay. It is submitted therefore on behalf of the applicants that the decision in re Ramsey is authority for the proposition that when a judgment summons order is made for execution against the person the enforcement of that debt is stayed while the judgment summons order is in place.
It is further submitted that in the present case all that has occurred is that an order has been made providing a certified copy of the judgment and that the order, that is, the order made upon the judgment summons, remains in place. I was referred to s.130(3) of the Local Courts Act 1904 which provides:
“(3)For the purposes of this section, the magistrate may direct any debt due from any person, in pursuance of any judgment order, to be paid by instalments, and may from time to time, vary or rescind such order.”

It is common ground that there has been no order made in this case rescinding the judgment summons order. The order could be subject to such an application. Instead, again it is common ground that what has occurred in the present case is that an order has been made granting leave to issue a certified copy of the judgment for the purposes of proving the judgment debt in bankruptcy.
Counsel for the applicant submitted that a proper interpretation of those words, "for the purpose of proving a judgment debt in bankruptcy", may simply mean proving a debt to a trustee who may or may not give the debt such priority as required under the Act but does not of itself provide an opportunity for the respondents to further pursue those remedies available under the Bankruptcy Act, namely the issuing and service of a bankruptcy notice and then, presumably, in the event of default or failure to comply with that notice, pursuing a creditor's petition.
It is further submitted in the present case that the applicant therefore has got the benefit of what is effectively a stay and in circumstances where there is effectively a stay of the judgment that of itself would defeat the basis or any proper basis upon which it could be said that the bankruptcy notice currently challenged should be able to stand. In other words by the order currently in place referring to a certified copy of judgment for the purpose of proving the debt in bankruptcy being issued does not of itself overcome the current status of the order which was made on the judgment summons and does not effectively remove that by way of rescission and therefore the stay, as I understand the submission, is said to be in full force and effect.
It is submitted for and on behalf of the respondents that that conclusion and the submissions advanced for and on behalf of the applicant provides a narrow interpretation of what has occurred. It is submitted that the respondents, whilst in the position where perhaps application could be made under s.130(3) of the Local Courts Act, could seek to rescind the order it is not necessary to do so and that what has been obtained is the leave of the Magistrates Court to not only issue a certified copy of judgment but to do so for the purpose of proving the judgment debt in bankruptcy. That includes, it is submitted, the issuing and service of a bankruptcy notice.
I take the submissions to be that by obtaining that leave the effect of a stay of the kind referred to by the Supreme Court of Western Australia in Ramsey's case, is overcome. Until such leave has been obtained, and indeed as I note required and perhaps suggested by the court - the stay remains in full force and effect. As I understand the submission therefore for the respondents the bankruptcy notice should remain, should not be set aside as the respondents, in all the circumstances, have in fact obtained the leave of the court sufficient to persuade this court in bankruptcy that there is no longer any stay in place, despite the fact that there may still appear to be on the material, subject to any rescission application, the judgment summons order in place to which I have referred.
In my view the principles behind the issue of a stay having the effect of depriving potential creditors of a judgment which could found the basis of a bankruptcy notice are clear and precise. It is clear that if there is a stay of an order then the creditors should not be in a position where execution can be undertaken of those orders which the creditors seek to found a bankruptcy notice. In my view the proper reading of the authority of re Ramsey indicates that in circumstances where there has indeed been a judgment summons issued in order to preserve and protect the position of the parties and to pursue that judgment summons it is necessary by implication that a stay be regarded as being in full force and effect.
In the present case, however, I am satisfied that the judgment summons, both by correspondence and by conduct, has been abandoned. I am satisfied that the creditors in the present case have evinced an intention to no longer pursue that judgment summons. Had they simply pursued the proceedings by evincing that intention to abandon the judgment summons I am further satisfied, having regard to the authority to which I have referred in re Ramsey, that that would not be sufficient. It is, in my view, significant and indeed essential that the creditors take one further step, that is, seek the leave of the Magistrates Court - for whom, in a sense, the stay is implied in order to protect the judgment summons proceedings before that court to actually obtain a certificate and to obtain a certificate in order to prove a judgment debt in bankruptcy.
In my view the creditors' conduct in these circumstances clearly indicates first, an abandonment of the judgment summons procedure; and second, a desire to obtain a certified copy of judgment for the purpose of proving the judgment debt in bankruptcy. I do not accept the interpretation of those words advanced for and on behalf of the applicant. In my view “for the purpose of proving a judgment debt in bankruptcy” includes and incorporates the issuing and service of a bankruptcy notice for the purpose of then proceeding, if it be the case, to a creditor's petition.
It is my conclusion that this application should be dismissed.

I certify that the preceding forty-five (45) paragraphs are a true copy of the reasons for judgment of McInnis FM

Associate:

Date: 9 September 2003