Elders Ltd v Lloyd
[2005] FMCA 1020
•22 July 2005
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| ELDERS LTD v LLOYD & ANOR | [2005] FMCA 1020 |
| BANKRUPTCY – Proceedings in connection with sequestration – petition and sequestration order – hearing of creditor's petition – tender of payment by debtor – whether election to accept tender by agent of creditor company – no election when agent merely receipted the promissory notes tendered. BANKRUPTCY – Proceedings in connection with sequestration – petition and sequestration order – hearing of creditor's petition – misnomer – incorrect spelling of debtor’s middle name – formal defect only. |
Bankruptcy Act 1966, ss.41, 46, 109, 306
Alexander Korda Film Productions Limited v Columbia Pictures Corporation Limited and Anor [1946] Ch 336
Allen v Royal Bank of Canada (1925) 134 LT 194
Australia and New Zealand Banking Group v Coutts [2003] FCA 968
Australia and New Zealand Banking Group v Foyster [2000] FCA 400
Australian Workers' Union v Bowan (1946) 72 CLR 575
Belshaw v Bush (1851) 11 CB 191
Blumberg v Life Interests and Reversionary Securities Corp. [1897] 1 Ch 171
Bowen, Re; Ex parte Australian Workers' Union (1945) 13 ABC 275
Bowes v Foster (1858) 2 H & N 779
Brien v. Dwyer (1978) 141 CLR 378
Buckley, Re; Ex parte James Hardie & Co. Pty Ltd (1976) 27 FLR 496
Commonwealth, The v Verwayen (1990) 170 CLR 394
Corney v Brien (1951) 84 CLR 343
Crowe v Hughes [1997] FCA 864
Debtor, Re a [1937] Ch 181
Edwards, Dunlop and Co v Harvey (1927) LR 37
Ell, Re; Ex parte Austin (1886) 4 NZLR 114
Geary, Re; Ex Parte Feez Ruthning and Co Qld (unrep, Fed Ct, Spender J, 16/8/1984)
Gentry, In re [1910] 1 KB 825
International Alpaca Management v Ensor [1999] FCA 72
Kirkwood, Ex parte; re Mason (1879) 11 ChD 724
McIntosh v Shashoua (1931) 46 CLR 494
McSwiney, Re; Ex parte Davies (unrep, Fed Ct, Beaumont J, 24/11/1986)
National Australia Bank Limited v KDS Construction Services Pty Ltd (1987) 63 CLR 668
Romer, Hass & Aslam, Re [1893] 2 QB 286
Sargent v ASL Developments Ltd (1974) 131 CLR 623
Scarf v Jardine (1882) LR 7 AC 345
Sweeting v Pearce (1861) 9 CB(NS) 534
Tropical Traders Ltd v Goonan (1964) 111 CLR 41
Ward and Ward, Re; Ex parte RW Brown and Company Pty Ltd (1991) 28 FCR 329
Wren v Mahoney (1972) 126 CLR 212
| Applicant: | ELDERS LTD |
| Respondents: | JOHN FREDERICK MAURICE LLOYD & RITA BEVERLEY LLOYD |
| File No: | MLG 219 of 2005 |
| Delivered on: | 22 July 2005 |
| Delivered at: | Melbourne |
| Hearing date: | 25 May 2005 |
| Judgment of: | Riethmuller FM |
REPRESENTATION
| Counsel for the Applicant: | Mr Dunne |
| Solicitors for the Applicant: | John Dunne & Associates |
| Counsel for the Respondent: | No appearance |
ORDERS
That the applicant have leave to amend the name of the first respondent by substituting ‘MAURICE’ for the name ‘MORRIS’.
That the estate of JOHN FREDERICK MAURICE LLOYD be sequestrated.
That the estate of RITA BEVERLEY LLOYD be sequestrated.
That the applicant’s costs of and incidental to the application be taxed and paid in accordance with section 109(1)(a) of the Bankruptcy Act.
FEDERAL MAGISTRATES |
MLG 219 of 2005
| ELDERS LTD |
Applicant
And
| JOHN FREDERICK MAURICE LLOYD RITA BEVERLEY LLOYD |
Respondents
REASONS FOR JUDGMENT
The applicant filed a creditors' petition on 24 February 2005 setting out that the respondent debtors owe the applicant creditor $43,623 for a debt for which they held no security. The petition alleges that the parties failed to comply with a bankruptcy notice issued pursuant to s.41 of the Bankruptcy Act founded upon a judgment debt.
An affidavit verifying the debt was filed on the same date.
The male respondent was served with the bankruptcy notice on
27 August 2004 as is attested to by the service agent in an affidavit filed 24 February 2005. The female respondent was served with the bankruptcy notice on 29 September 2004, such service similarly being attested to by the service agent in an affidavit filed at the commencement of the proceedings.
On 19 April 2005 the male respondent entered an appearance on the petition.
Affidavits attesting to service of the petition on both of the respondents and an affidavit of search have been filed.
On 19 April 2005 Registrar Agnew made orders that the respondent file and serve a notice of opposition and any affidavits in support of such opposition by 3 May 2005, with the applicant to file and serve any affidavits in reply by 10 May 2005. Registrar Agnew adjourned the matter to 23 May 2005 when it came on before me.
Affidavits were filed by the male respondent, sworn 3 May and
18 April. There are two affidavits of 3 May, one being described as a supplementary affidavit.
In the affidavits the following objections are taken:
(a)That the first-named respondent does not exist (apparently on the basis that his name is spelt ‘Morris’ and ought to be spelt ‘Maurice’);
(b)An allegation that the creditor does not have its registered office at the address given;
(c)An allegation that the debt had been paid;
(d)That the creditors' petition cannot be taken to have been properly served until it is served on all people named in the petition;
(e)The petition is defective as it alleges that it relies upon a debt registered in the Magistrates' Court of Melbourne when the judgment was obtained from the County Court;
(f)That the judgment debt was obtained by fraud; and
(g)That there is no final judgment until all appeal avenues have been exhausted and the respondent is pursuing a further appeal.
On the first day that the matter was listed for hearing the respondents did not appear. Their son appeared seeking leave to appear on their behalf. He outlined the nature of the case that they intended to put. On that occasion I indicated to the respondents' son that as he was not a solicitor, and the respondents were absent, I was not prepared to grant him leave to appear and represent them.
I adjourned the proceedings until 11 am the next day to allow the respondents an opportunity to attend. The respondents did not attend on the second occasion (the respondents having been called three times on each day). On the second occasion the respondents forwarded to the Court a facsimile in the following terms:
I am writing to you in relation to the above matter and in particular to your Orders of today 23 May 2005.
My wife Rita Lloyd is not well and is unable to travel to Melbourne tomorrow and to this end I asked my son Stephen to attempt to get a lawyer to represent both me and my wife at the Court at 11.00 a.m.
Stephen has advised me that after a number of phone calls he was advised by solicitors that he had to be joking, that no one would be able to represent anyone at such short notice and that in order to bring themselves up to speed with the case an adjournment would have to be granted.
I seek such an adjournment to enable me to instruct a suitable solicitor to represent the both of us. Stephen told me that the computer at the Law Institute was down and they were not able to help with their referral service at this time.
It provides no explanation for the absence of the male respondent, nor any details with respect to the incapacity of the female respondent. The letter seeks an adjournment to instruct a suitable solicitor. The proceedings have been on foot for a considerable period of time.
In the absence of any appearance by the respondents and the limited material placed before me through the facsimile letter I am not satisfied that a further adjournment in this matter is appropriate.
The female respondent has not filed material, however appears to be the wife of the male respondent. In the circumstances of this case it appears that the applicant's petition, to the extent that it relates to the female respondent, rises or falls on the same basis that it would with respect to the male respondent.
Misnomer issue
The first issue raised relates to a misspelling of a middle name of one of the respondents. Formal defects do not invalidate proceedings. Section 306 of the Bankruptcy Act provides as follows:
(1) Proceedings under this Act are not invalidated by a formal defect or an irregularity, unless the court before which the objection on that ground is made is of opinion that substantial injustice has been caused by the defect or irregularity and that the injustice cannot be remedied by an order of that court.
(2) A defect or irregularity in the appointment of any person exercising, or purporting to exercise, a power or function under this Act or under a personal insolvency agreement entered into under this Act does not invalidate an act done by him or her in good faith.
There is no dispute in this case that it is clear that the debtor is the person named in the proceedings, and the nature of the misnomer (being the third name of the applicant) is in the form of a phonetic spelling which has the same pronunciation as the correct spelling. The affidavits filed by the debtor confirm that he is well aware that he is the person referred to in the proceedings.
Such defects are appropriately cured under section 306: see Re McSwiney ex parte Davies (unrep, Fed Ct, Beaumont J, 24 November 1986). A failure to describe the parties by precisely the same name as they have been referred to in other proceedings is a formal defect that would be cured by this section: see Re Bowen ex parte Australian Workers' Union (1945) 13 ABC 275 and Australian Workers' Union v Bowan (1946) 72 CLR 575. A similar misdescription of the debtor in a petition has been held to be a formal defect: in Ex parte Kirkwood; re Mason (1879) 11 ChD 724. Similarly, with a writ it would not invalidate the writ, but only amounts to a formal defect that does not invalidate the proceedings: Alexander Korda Film Productions Limited v Columbia Pictures Corporation Limited and Anor [1946] Ch 336.
The applicant should have leave to amend.
Address of creditor
The next issue raised is whether or not the creditor has its ‘registered office’ at the address given. There is no suggestion that the creditor does not have an office at the address listed. I am not satisfied that this is a defect, and even if it were is has not prejudiced the respondent. There is other evidence in these proceedings that the debtors purported to make payment (as set out below) at another office of the petitioning creditor.
This has caused no prejudice to the respondent.
Allegations of payment
The third defect alleged is that the debt has been paid. In this case it is alleged that the male debtor paid the debt by way of delivery of two promissory notes to the creditor for which he was issued a receipt. The two promissory notes are drawn in favour of the male debtor by the female debtor, both on the same day (6 April 2005), one in the sum of $20,000 and the other in the sum of $23,623. Both are expressed to be payable in the future (by a considerable period). Both are endorsed on the rear by the male debtor with the words "please pay Elders Limited".
The promissory notes were delivered to an office of the petitioning creditor and a pro forma receipt issued describing the promissory notes as ‘cheques’, and showing a ‘credit’ in the sum of the total of the promissory notes. The receipt was issued on 6 April 2005. The receipt had a section headed ‘Other Details’ to which had been added the word ‘Merchandise’. The person issuing the receipt signed it in the appropriate section.
There is no evidence as to who accepted the promissory notes or issued the receipt. However, on 12 April 2005 a letter was forwarded to the debtors for the applicant’s solicitors stating:
We note that this Petition is listed for hearing in the Federal Magistrates' Court on the 19th April, 2005, and we also note that you have contacted our client's branch office and delivered to them documents described as promissory notes in purported settlement of this matter. We note that our client has given a receipt acknowledging receipt of those documents and we understand that our client has returned them to you confirming that that is not an acceptable resolution of this proceeding.
It is not acceptable for the following reasons, firstly you would be aware that the original judgment was entered on the 19th May, 2004 and interest accrued until the date of the issue of the Bankruptcy Notice on the 23rd July, 2004 and interest has continued to accrue since that date. By our calculation the further interest outstanding is $3,787.01. We also note that there were costs associated with the County Court proceedings which have not been taxed since we have not been able to get any response from your son who appeared apparently on your behalf at the County Court proceeding. Those costs would be approximately $9,500.00 as we put to you in our letter of the 20th May, 2004 and the final matter outstanding would be the costs of the Application for Leave to Appeal to the Full Court again apparently conducted by your son on your behalf and we believe those costs would be in the order of $6,000.00. In both cases those costs figures would be inclusive of GST. We further note that none of those figures include any of the legal costs associated with the Bankruptcy Petition which would again be in the order of $3,500.00. We also note that there are separate Bankruptcy proceedings against your son Stephen John Lloyd who has not yet been served with a Petition and there are further costs associated with that proceeding of approximately $1,000.00 which would need to be taken into account if there is to be a general resolution of all matters outstanding.
Could we respectfully suggest that you urgently obtain some legal advice from an experienced Practitioner in this area so that your interests can be protected.
A question arises as to whether or not the petitioning creditor had accepted the tender of the promissory notes in payment of the debt.
There is no doubt that the promissory notes were tendered to the applicant and that an agent of the applicant accepted the documents and issued a receipt for them.
It is generally considered that acceptance of a cheque or promissory note is taken as constituting a conditional payment; that is conditional upon the instrument being honoured. The obligation is not discharged, but the right to sue with respect to it is considered to be suspended until payment is received. This has much commercial sense with respect to cheques and other instruments that are payable upon demand. The position was well set out in the High Court in National Australia Bank Limited v KDS Construction Services Pty Ltd (1987) 63 CLR 668 where the High Court said (at 676):
Generally speaking, when a cheque is given in payment of a debt, it operates as a conditional payment. The payment is subject to a condition that the cheque be paid on presentation. If it is dishonoured the debt revies. Though it is sometimes said that the remedy for the primary debt is suspended, the suspension is no more than a consequence of the conditional nature of the payment: Tilley v Official Receiver in Bankruptcy. The condition is a condition subsequent so that, if the cheque is met, it ranks as an actual payment from the time it was given. Subject to non-fulfilment of the condition subsequent, the payment is complete at the time when the cheque is accepted by the creditor: Thomson v Moyse [1961] AC 967.
It appears that a similar position follows with respect to other negotiable instruments: see Allen v Royal Bank of Canada (1925) 134 LT 194 and Belshaw v Bush (1851) 11 CB 191.
The onus of establishing that acceptance of a negotiable instrument constituted an accord and satisfaction in place of the original obligation rests upon the debtor: see Re Romer v Hass & Aslam [1893] 2 QB 286 per Bowen LJ at 300 and Kay LJ at 303. On the material presently available I am not satisfied that any apparent acceptance of the negotiable instrument could be considered to absolutely discharge the prior indebtedness by way of an accord and satisfaction. The mere acceptance of the notes and issue of a receipt is not sufficient, on its own, to evidence an agreement that the notes were taken in substitution for the debt.
In this case the promissory notes are not yet due for payment as they were not payable on demand. There is no doubt that a negotiable instrument can be drawn such that it is not payable upon demand, but only at a future date (see s.18 of the Bills of Exchange Act). In the past an answer to a question such as this (where the instrument had not been stamped) was that the instrument was invalid under s.45 of the Stamp Act (Vic): see Edwards, Dunlop and Co v Harvey (1927) LR 37 per Dixon AJ. However, such duty requirements are no longer in force. The instrument appears to be valid on its face.
If the promissory notes were accepted as payment then they are conditional payment and the primary debt would be suspended until the instruments are met or dishonoured on maturity. The date of maturity of the instruments is many months away.
It was clearly open to the creditor to reject the tender at the time. In McIntosh v Shashoua (1931) 46 CLR 494 Gavan Duffy CJ and Dixon J, as he then was, said (at 505):
The fact that after the presentation of the petition the debtor tendered payment of the assigned debt and the tender was refused cannot in this case affect the result. A petitioning creditor is entitled to refuse payment and proceed with the petition (In re Gentry [1910] 1 KB 825). The refusal of the tender in this case is consistent with the conclusion, if it does not strengthen it, that the petitioner truly desired to obtain a sequestration order.
This was the law for some time before McIntosh v Shashoua: See In re Gentry [1910] 1 KB 825; Re Ell; Ex parte Austin (1886) 4 NZLR 114; and Re a Debtor [1937] Ch 181.The principle has been applied in Re Geary; Ex Parte Feez Ruthning and Co Qld (unrep, Fed Ct, Spender J, 16 August 1984); Crowe v Hughes [1997] FCA 864; International Alpaca Management v Ensor [1999] FCA 72; Australia and New Zealand Banking Group v Foyster [2000] FCA 400 and Australia and New Zealand Banking Group v Coutts [2003] FCA 968.
It is also clear that where tender is made to an agent, such as a solicitor, it remains open to the creditor to reject the tender within a reasonable time: Re Buckley; Ex parte James Hardie & Co. Pty Ltd (1976)
27 FLR 496.
The question then becomes one of whether or not the provision of such documents to an agent of the respondent and the obtaining of a receipt is sufficient evidence of acceptance by a person with actual or implied authority to accept the negotiable instruments in payment of the debt. Prima facie an agent does not have authority to accept payment other than in legal tender: Sweeting v Pearce (1861) 9 CB(NS) 534; Blumberg v Life Interests and Reversionary Securities Corp. [1897]
1 Ch 171. Even if the contract provides for payment by cheque this does not include a post-dated cheque: Brien v Dwyer (1978) 141 CLR 378. Express authority is required to accept a bill of exchange.
In the absence of any evidence with respect to a person who received the documents it is not possible for the Court to make any determination as to the actual authority of the person. No lack of authority was alleged in the solicitor’s letter. Indeed, the solicitor only takes issue with the tender on the basis that there were other unquantified sums owing.
It is appropriate to analyse the facts in order to determine whether the applicant elected to accept the tender of the promissory notes: see, for example, the analysis undertaken in Crowe v Hughes [1997] FCA 864 and Re Buckley; Ex parte James Hardie & Co. Pty Ltd (1976) 27 FLR 496 per Riley J at 508.
In order to determine whether an election has been made it is necessary to consider:
a)Whether the facts and circumstances giving rise to the election were known to the person with the right of election; and
b)whether the conduct was unequivocal.
In Sargent v ASL Developments Ltd (1974) 131 CLR 623 Stephen J (with whom McTiernan ACJ agreed) said:
28. In the present appeals I conclude that, contrary to the appellants' contentions, all that need be established in order for the doctrine of election to apply is knowledge by the vendors of the facts giving rise to inconsistent legal rights; the appellants are to be taken to know of their rights of rescission conferred by cl. 16 and, of course, of their right to enforce the contracts according to their terms. If they then knew of the relevant facts giving rise to the rights of rescission, that is, the existence of a planning scheme affecting the lands sold, that is enough to invoke the doctrine. Their own interpretation or understanding of the nature or extent of their contractual rights will be irrelevant, so that it matters not at all whether they were aware of the existence of cl. 16 or of its effect as it came to be enunciated in Wolczyk v. Barr (1970) 92 WN (NSW) 518; it is enough that they knew of facts which have brought cl. 16, as so interpreted, into operation.
29. The words or conduct ordinarily required to constitute an election must be unequivocal in the sense that it is consistent only with the exercise of one of the two sets of rights and inconsistent with the exercise of the other; thus for a lessor to continue to receive rent under a lease will be consistent only with his rights as lessor and inconsistent with the exercise of a right to determine the lease (Viscount Dilhorne in the Kammins Ballroom’s Case (1971) AC, at p 873 ; Herring C.J. in the Coastal Estate’s Case (1965) VR, at p 436 ; Kitto J. in Tropical Traders Ltd. v. Goonan (1964) 111 CLR 41, at p 56 ). However, less unequivocal conduct, only providing some evidence of an election, may suffice if coupled with actual knowledge of the right of election (Elder's Trustee Case (1941) 65 CLR, at p 618 ). There need be no expressed intention to elect, nor will an express disclaimer of such an intention be of any avail in preserving one right if in fact there be an exercise of another inconsistent right (Croft v. Lumley (1858) 6 HL Cas 672 (10 ER 1459); Matthews v. Smallwood [1910] 1 Ch, at p 786 ). For an election there need be no actual, subjective intention to elect (Scarf v. Jardine (1882) 7 AC, at p 361 ), an election is the effect which the law attributes to conduct justifiable only if such an election had been made (per Kitto J. in Tropical Traders Ltd. v. Goonan (1964) 111 CLR, at p 55 ); cf. S. Kaprow & Co. Ltd. v. Mclelland & Co. Ltd., per Wrottesley L.J. [1948] 1 KB 618, at pp 629-630..
Similarly, in Tropical Traders Ltd v Goonan (1964) 111 CLR 41 Kitto J (at [10]) said:
… election is [not] a matter of intention. It is an effect which the law annexes to conduct which would be justifiable only if an election had been made one way or the other: Scarf v. Jardine (1882) 7 App Cas 345, at p 361 ; Craine v. Colonial Mutual Fire Insurance Co. Ltd. (1920) 28 CLR 305, at p 325 .
In The Commonwealth v Verwayen (1990) 170 CLR 394 Brennan J affirmed the statements in Sargent, saying:
Election consists in a choice between rights which the person making the election knows he possesses and which are alternative and inconsistent rights: Evans v. Bartlam [1937] 2 All ER 646, at pp 652,653; Tropical Traders Ltd. v. Goonan (1964) 111 CLR 41 at p 55; Kammins Co. v. Zenith Investments [1971] AC 850 at p 883. A doctrine closely related to election, and sometimes treated as a species of election, is the doctrine of approbation and reprobation. This doctrine precludes a person who has exercised a right from exercising another right which is alternative to and inconsistent with the right he exercised as, for example, where a person ‘having accepted a benefit given him by a judgment, cannot allege the invalidity of the judgment which conferred the benefit’: Evans v. Bartlam, per Lord Russell of Killowen at p 652. An election is binding on the party who makes it once it is made overtly – or, at all events, not later than on the communication of the election to the party or parties affected thereby: Newbon v. City Mutual Life Assurance Society Ltd. (1935) 52 CLR 723 at p 733; Scarf v. Jardine (1882) 7 App Cas 345 at pp 360-361. It is binding whether or not others who are affected by the election have acted in reliance on it. In this respect, election is to be distinguished from estoppel: Khoury v. Government Insurance Office (N.S.W.) (1984) 165 CLR 622 at p 633.
The fact that a person may require some reasonable time to decide what election to make was acknowledged by Blackburn LJ in Scarf v Jardine (1882) LR 7 AC 345 at 360 to 361 as follows:
… where there is a right to elect the party is not bound to elect at once; he may wait and think which way he will exercise his election, so long as he can do so without injuring other persons …
… The principle, I take it running through all the cases as to what is an election is this, that where a party in his own mind has thought that he would choose one of two remedies, even though he has written it down on a memorandum or has indicated it in some other way, that alone will not bind him; but so soon as he has not only determined to follow one of his remedies but has communicated it to the other side in such a way as to lead the opposite party to believe that he has made that choice, he has completed his election and can go no further; and whether he intended it or not, if he has done an unequivocal act mean an act which would be justifiable if he had elected one way and would not be justifiable if he had elected the other way - the fact of his having done that unequivocal act to the knowledge of the persons concerned is an election.
Put simply, does the issuing of the receipt by the applicant’s employee or agent show that the applicant elected to accept the negotiable instruments as payment. The receipt demonstrates that the instrument was received by the applicant at its branch office (not the office nominated in the bankruptcy notice). The receipt erroneously describes the instruments as ‘cheques’. The document also sets out the ‘other details’ as being ‘Merchandise’, presumably indicating that the receipt relates to merchandise. There is no evidence of any conversation at the time of the tender as to the nature of the documents or the issue of a receipt (unlike the evidence in Re Buckley; Ex parte James Hardie & Co. Pty Ltd (1976) 27 FLR 496).
The exercise of an election is a significant step which must be made with knowledge of the facts giving rise to the election. It would be unrealistic to imply actual or ostensible authority to an agent of a large company, at an office other than the office nominated for payment in the bankruptcy notice, to make such an election in the circumstances of this case. There is no basis for imputing to the relevant agent the knowledge of the facts and circumstances giving rise to the election. Nor could it reasonably be said that an agent, in the circumstances here, would have apparent, implied or ostensible authority to make the election.
If the agent were receiving the promissory notes, so as to allow the applicant to consider making an election, then it would be reasonable for a receipt to be issued, acknowledging that the documents were received. It is clear from the misdescription of the instruments as cheques that the receipt can not be considered a specific document. It is a printed form that was not particularly suitable for the transaction. It does not, on its face show an election (or even a representation thereof) to accept the promissory notes as payment.
The only other conduct that is referred to in evidence is the letter sent soon after by the applicant rejecting the tender.
I am not satisfied that in this case the evidence shows that the applicant made an election to accept the promissory notes as payment of the debt. Thus, this is not a basis for resisting the application.
Failure to serve a joint debtor
The allegation that there is some defect because the bankruptcy notice is against more than one person and not all persons have been served appears to me to be groundless.
It is open to the creditors to proceed against any or all of the joint debtors. It is also open to them to join the debtors in the one proceedings as provided for in sec 46 of the Act:
46. Petition against 2 or more joint debtors
(1) A creditor's petition may be presented against 2 or more joint debtors, whether partners or not.
(2) Where there are 2 or more respondents to a creditor's petition, the Court may make a sequestration order against one or more of them and dismiss the petition in so far as it relates to the other or others.
It is clear that the creditor cannot proceed against a debtor that has not been served. However this does not preclude the creditor from proceeding against the debtors who have been served: see s.46(2) and more generally Re Ward and Ward; Ex Parte RW Brown and Company Pty Ltd (1991) 28 FCR 329.
I see no prejudice to the respondent debtors by the fact that the creditor is not proceeding against another of the joint debtors on this occasion. Similarly, the fact that a bankruptcy notice or proceedings include a person who is an undischarged bankrupt, whilst it would be irregular against that person, appears to me to remain regular with respect to the debtors who are not undischarged bankrupts.
Incorrect description of judgment
The next issue is that the creditor's petition is incorrect as it refers to a judgment ‘registered in the Magistrates Court in Melbourne’, when in fact the only judgment is from the County Court of Victoria.
A copy of the actual judgement was annexed to the bankruptcy notice; it was therefore without defect. It is that notice that is relied upon by the creditors in this proceeding.
The details of the County Court proceedings, and an appeal to the Court of Appeal of Victoria are set out in the affidavit material filed by the respondent.
Clearly, the respondents were well aware of the judgment and would not have been prejudiced by this even in isolation. To the extent that leave to amend the petition may be required to cure this error, I grant leave as I see no prejudice with respect to this issue.
Allegation of fraud
The next allegation is that the judgment debt was fraudulently obtained. The court has power to go behind a judgement obtained by fraud: see s.56; Corney v Brien (1951) 84 CLR 343 and Wren v Mahoney (1972) 126 CLR 212.
The evidence in this regard is set out in the affidavits of the respondent, and appears to be complaints with respect to the proceedings in the state courts, which were dealt with by the Court of Appeal of the Supreme Court of Victoria.
A copy of the judgment of the Court of Appeal in this matter was tendered. The applicant's appeal to the Court of Appeal (or application for leave to appeal to the Court of Appeal) was dismissed. It is not an appropriate case for me to consider looking behind the judgment where:
a)the judgment has been obtained through the County Court and an application for leave to appeal dismissed by the Court of Appeal of Victoria; and
b)none of the matters raised show that the judgment was obtained by fraud or collusion.
The matters sought to be agitated are all matters that have been, or could have been agitated before the Victorian State Courts in this matter.
I therefore find that this is not a ground for opposing the creditor's petition.
There is no evidence of an application having been made in the County Court or Court of Appeal to set aside the judgment on the basis of fraud or other defect. This would be the appropriate course in such a case.
Allegation judgment is subject to appeal
The final matter is an allegation that there is no final judgment until all matters for appeal have been exhausted, and this plainly mis-states the law. A judgment becomes final upon pronouncement (in this case pronouncement and entering in the County Court of Victoria). Whilst it is open to a debtor to obtain an extension of time within which to comply with a bankruptcy notice (to allow for an appeal), this is not a basis upon which to oppose a sequestration order: see s.41(6C).
Another issue raised was an allegation that the debt will be covered by the value of contract for the supply of seed potatoes that the respondents have with the creditor. The fact that in the future the petitioning creditor may become liable to the respondents under a contract for the supply of produce is not an answer to an allegation that the petitioning creditor has an unmet debt and evidence of an act of bankruptcy.
When one considers the totality of the large number of errors of the applicant it leaves one with considerable disquiet with respect to the proceedings. I note that the Court of Appeal of Victoria, when considering the appeal from the original judgment said:
7.The statement of claim does not in fact disclose a cause of action and it is unfortunate that at some time this was not adverted to and corrected. However, I am quite satisfied from the material before this Court that the matter was fully understood at the trial and that there was no doubt that the claim in fact was for money due on a running account in relation to goods sold and delivered together with interest on the outstanding sum pursuant to an agreement. From what we were told by Mr Lloyd this morning, there is no doubt that he understood that at trial and indeed frankly admitted that the family or the defendants owe $25,000 and the real dispute relates to the amount of interest.
However, to the extent that there is a dispute, it is as to the amount of interest, not the primary debt, which remains owing.
I am satisfied that the respondents have committed acts of bankruptcy as alleged, that service was effected, and that the debt remains owing. I am not satisfied that there are circumstances that would found the exercise of any discretion not to make a sequestration order.
I therefore make orders for the sequestration of the estates of the respondents.
I certify that the preceding sixty-five (65) paragraphs are a true copy of the reasons for judgment of Riethmuller FM
Associate:
Date:
2
17
0