Greenbushes Ltd v Casey

[2002] FMCA 45

FEDERAL MAGISTRATES COURT OF AUSTRALIA

GREENBUSHES LTD v CASEY [2002] FMCA 45

BANKRUPTCY – Bankruptcy Notice – judgment for costs arising from dismissal of action in which debtor was named as executor; whether judgment is a nullity because no appointment as executor was ever made; whether debtor can be made bankrupt personally where the litigation was conducted in a representative capacity; whether bankruptcy notice was invalid because it did not annex the judgment dismissing the proceedings; whether an order for costs can found a Bankruptcy notice.

Trustees of the Franciscan Missionaries of Mary v Weir (2000) FCA 574; Re: Malcolm: ex parte the Registrar (1931(3ABC 90)); Marshall v Sundin Co Pty Ltd (1989) 16 NSWLR 463; Finnegan v Cementation Co Ltd (1953)1 QB 688; Darrington v Caldbeck (1990) 20 NSWLR 212; Byers v Overton Investments Pty Ltd (200) FCA 1761; Isaacs v Robertson (1985) (AC97); Cameron v Cole (1944) CLR 571; Jackson v Sterling Industries Ltd (1987) 162 CLR 612; Wren v Mahony (1972) 126 CLR 212; Re:Borg ex parte Paynes Properties Pty Ltd (1965) 6 FLR 377; Wilmot v Buckley & Ors (1984) 2 FLR 540; 56 ALR 589; Re: Gibbs ex parte Triscott (1995) 65 FLR 80; Thorpe v Bristile Ltd (1997) 80 FLR 330; Stec v Orfanos (1999) FCA 457.

Applicant: GREENBUSHES LTD

Respondent: GEOFFREY EDWARDS CASEY
(AS EXECUTOR OF THE WILL OF THE LATE CORAL ELIZABETH CASEY

File No: DZ 5 of 2000

Delivered on: 15 April 2002

Delivered at: Darwin

Hearing Date: 3 April 2001

Judgment of: Bryant CFM

REPRESENTATION

Counsel for the Applicant: Mr Young

Solicitors for the Applicant: Ward Keller Solicitors, Level 7, NT House, 22 Mitchell Street, Darwin, NT, 0800

Counsel for the Respondent: Mr McCormack

Solicitors for the Respondent: John McCormack Solicitors, Level 1, 67 Smith Street, Darwin, NT, 0800

ORDERS

1. A Sequestration order be made against the estate of GEOFFREY EDWARD CASEY.

2. The petitioning Creditors costs of and incidental to the petition including any reserved costs be taxed and paid pursuant to the Federal Court Rules and otherwise in accordance with the Bankruptcy Act 1966.

IT IS NOTED:
It is noted that the date of the Bankruptcy notice is the 13^th day of June 2000.

FEDERAL MAGISTRATES
COURT OF AUSTRALIA AT
DARWIN

DZ 5 of 2000

GREENBUSHES LTD

Applicant

And

GEOFFREY EDWARDS CASEY (as executor of the will of the late Coral Elizabeth Casey)

Respondent

REASONS FOR JUDGMENT

Introduction

1. GREENBUSHES LTD (“the creditor”) seeks a sequestration order against the estate of GEOFFREY EDWARD CASEY (“the debtor”) pursuant to Section 43 of the Bankruptcy Act 1966.

2. The creditor relies upon Section 40(1)(g) of the Bankruptcy Act 1966, namely that the creditor has obtained a final judgment or final order and the debtor has not complied with the requirements of a bankruptcy notice.

3. The judgment was obtained in the following circumstances:

   (a)On the 15 May 1996 the debtor lodged caveats against an Exploration Licence, Exploration Retention Licence or Mining Tenement to the Mining Registrar, as executor of the estate of the late Coral Elizabeth Casey claiming in MLN 16, MCN 897 and MLN 1035.  The persons claiming an interest were said to be “Geoffrey Edward Casey (as executor of the estate of the late Coral Elizabeth Casey), and Walter Edward Casey”

   (b)On the 18 June 1997, the creditor who claimed to be the holder of the mining leases in question instituted a Plaint Initiating Proceeding in the Mining Warden’s Court in Darwin under Section 146(1)(a) of the Mining Act seeking amongst other things that the caveats be removed.  The first defendant was named as Walter Edward Casey and the second defendant was named as Geoffrey Edward Casey (as executor of the will of the late CE Casey)

   (c)Walter Edward Casey and Geoffrey Edward Casey then filed a Plaint in the Mining Warden’s Court and on 13 June 1997 judgment was given in favour of the creditor.  On 23 September 1997 Stipendiary Magistrate Lowndes made a further order that the plaintiff, that is Walter Edward Casey and Geoffrey Edward Casey pay the costs of the applicant creditor on a solicitor/client basis.

   (d)On 10 October 1997 the debtor and Walter Edward Casey appealed the decision of the Mining Warden’s Court to the Supreme Court of the Northern Territory

   (e)On 15 April 1998 Mildren J dismissed the appeal of Walter Edward Casey who did not appear.  On 19 June 1998, His Honour dismissed the debtor’s appeal and ordered costs

   (f)The notice of appeal filed by the debtor was headed “Walter Edward Casey – First Appellant”, Geoffrey Edward Casey (as executor of the will of the late Coral Elizabeth Casey – Second Appellant”.  The document is signed by the debtor as “Geoffrey Edward Casey – Second Appellant”

   (g)On 29 October 1998, an order was made in the Supreme Court in Plaint number LA19/1997 that the first and second appellants pay the first respondent’s costs in the sum of $12, 454.73.  The first respondent is the creditor.

4. A bankruptcy notice was issued on 18 April 2000 for $13, 491.40 (representing costs of $12, 454.73 and interest).  It is common ground that the amount of the judgment debt has not been paid.

5. The bankruptcy notice described the debtor as “Geoffrey Edward Casey (as executor of the will of the later Coral Elizabeth Casey)”.

6. The bankruptcy notice was served on 23 May 2000.  The time for compliance was 21 days after service and was the 13 June 2000.  The act of bankruptcy was constituted by non-compliance with the notice and a creditor’s petition was presented on 17 November 2000 (within 6 months of the act of bankruptcy pursuant to Section 44(1) of the Act).

7. The original affidavit of CJ Lalor, a director of the creditor who was authorised to make such affidavit on behalf of the creditor, failed to verify paragraphs (3) and (4) of the petition and accordingly on the 16 January 2001 Registrar Fisher ordered, inter alia, the creditor to file and serve an affidavit verifying paragraph (3) and (4) of the petition.  This order was complied with in an affidavit filed on 19 February 2001 by Christopher John Lalor.

8. The petition was served on the debtor on 29 January 2001.

Issues

1. In the Notice of Intention of the Debtor to Appear at the Hearing, the debtor asserted that:

   (i)The presentation of the petition was outside the 6 months period allowed by Section 44(1)(c) of the Act; and

   (ii)The debtor was not the executor of the will of the later Coral Elizabeth Casey.

2. At the hearing the debtor did not pursue the argument that the petition was outside the 6 months period and clearly that argument could not have succeeded.

3. At the hearing the creditor continued to rely upon his assertion that as the judgment was obtained against him in a representative capacity (as executor of the will of the later Coral Elizabeth Casey) and that he was in fact not executor of the estate nor ever had been, that his estate could not be sequestrated.  He also raised an issue as to a formal defect in the petition.

4. It is convenient for me to deal with the latter point first.  The creditor argued that the petition was invalid in that there was a formal defect because it was signed by Penelope Dawn Stevens of the firm of Ward Keller, the solicitors for the creditor and not by an officer of the corporation being the creditor, in respect of whom proof of authority to act on behalf of the corporation had been established.

5. The bankruptcy notice was signed by Penelope D Stevens “who confirms by the following signature that she is the solicitor for the creditor”.

6. The question of who can sign a bankruptcy notice was dealt with by the Full Court of the Federal Court of Australia in Trustees of the Franciscan Missionaries of Mary v Weir (2000) FCA 574. In that case the petitioning creditor was a body corporate. The bankruptcy notice was signed by a solicitor employed by the firm of solicitors Sally Nash & Co and indicated that she was authorised to sign on behalf of Ms Nash. The matter came before the Full Court as a case stated for determination as a result of conflicting decisions of Judges of the Federal Court on the issue. In paragraph 10 of the judgment, the Full Court said as follows:

   “in the final analysis, the fundamental question is simply whether the prescribed form requires the personal signature of the applicant for the issue of the bankruptcy notice.  In our opinion, the language of the form should not be construed as having that confining effect.  It is unnecessary to consider how a corporate applicant, whether as creditor or as authorised agent, could have applied for the issue of a bankruptcy notice had we held otherwise.”

7. In this case the bankruptcy notice and the petition were signed by Ms Stevens confirming that she was the solicitor for the creditor.  In this case it is clear that the solicitor signing the bankruptcy matter was the solicitor for the creditor.  There is thus no basis for the objection to either the bankruptcy notice or the petition made by the debtor, and I do not need to consider, as the Full Court did in Trustees of the Franciscan Missionaries of Mary v Weir (supra) the question of whether if there had been a defect it was a mere matter of form or failure to comply with an important or essential provision of the Act.

8. I now turn to the main part of the debtors case.  The debtor submitted that despite the litigation he had engaged in, apparently on behalf of the estate of the later Coral Elizabeth Casey, as executor, that he had never at any time been executor of the estate and that no grant of probate had ever been made.  He conceded and asserted that he had no authority to conduct proceedings on behalf of the estate.  This situation he argued, rendered the proceedings in the Warden’s Court and the Supreme Court a nullity.

9. Further, and alternatively, he argued that the order against him for costs was consequently a nullity and could not found a bankruptcy notice.

10. He submitted that a person affected by an order of the Court that is a nullity is entitled to have it set aside, but that if it is a nullity there is no need for an order of the Court to set it aside and that every proceeding that is founded on it is also incurably bad. He argued that the ability of the Court to look behind a judgment under Section 52 of the Bankruptcy Act is limited to whether the Court accepts that a judgment relied upon is satisfactory proof of the indebtedness of the debtor and that the power cannot be exercised to apply or re-interpret a judgment to the detriment of the debtor. This he said, led to the conclusion that there is sufficient reason not to exercise the discretion to treat a judgment as satisfactory proof of a debt where there are substantial reasons for doubting whether there really is a debt due to creditor. He asserted that a warrant of execution could not have been issued in respect of the judgment, and as there was no power to enforce the order it is not a judgment which should found a bankruptcy notice.

11. In short he argued that the judgment was against him as executor and that as he is not the executor then the judgment is null and void.  He argued that the Court cannot vary the judgment and that there was an obligation on the creditor to obtain an enforceable judgment against an individual and that the representative capacity in which he litigated should have been investigated in the beginning and that there was some neglect on the part of the creditor in not doing so.  He submitted that it was not for this Court to go behind the representative capacity of the judgment and that the only way that the judgment could be enforceable against him, and thus found a bankruptcy notice, would be if the creditors had varied the judgment so that he was liable in his personal capacity and not in a representative capacity.

12. The creditor accepts that there is no evidence before the Court which conclusively establishes that the debtor was the executor of his mother’s estate or that a grant of probate has ever been made.

13. The creditor’s submissions were that even if the debtor acted without authority throughout the proceedings in the Mining Warden’s Court and the Supreme Court, the orders were not a nullity which may be ignored.  The creditor submitted that the order must stand until set aside and until then remains a final order sufficient to found the petition.  As the debtor had not sought to set aside the order then it stands as a final order.

14. Section 7 of the Bankruptcy Act (1966) sets out the debtors to whom the Act applies. It has been held that an executor or administrator in his representative capacity was not a debtor within the meaning of the Act Re: Malcolm: ex parte the Registrar (1931(3ABC 90)) at page 93. That case stands for the proposition that the executor merely as such is not personally liable for the debts of the testator. Rights of action to enforce payments of debts survive the testator and his executor becomes answerable only so far as he had assets in the estate of the deceased before debts of any description, due from the deceased. The debts have not thereby become his personal debts and in regard to them he does not become a debtor. However, whilst it was said that he could not be made bankrupt in his representative capacity, the case goes on to indicate that an executor may become liable “on his wilful default or on his contracts or on his carrying on the business of the testator, thereby making the debts owing thereon his personal debts and himself personally a debtor, but not in a representative capacity”.

15. The creditor concedes that proceedings commenced by an executor in the Northern Territory before probate are liable to be set aside.  The position of executors appointed by a will before a grant of probate has usually been distinguished from cases where a plaintiff commences proceedings without letters of administration.   In Marshall v Sundin Co Pty Ltd (1989) 16 NSWLR 463 Yaldin J distinguished between both At page 470 he referred to Finnegan v Cementation Co Ltd (1953)1 QB 688 as authority to the proposition that it was settled law that actions commenced in a representative capacity whilst a plaintiff does not have letters of administration are a nullity. In Finnegan v Cemetation Co Ltd (supra) Jenkins LJ said that it was:

    “settled law that an action commenced by a plaintiff in a representative capacity which the plaintiff does not in fact possess is a nullity.”

16. The reasoning of Yaldin J in Marshall v Sundin Co Pty Ltd (supra) was expressly followed by Young J in Darrington v Caldbeck (1990) 20 NSWLR 212.

17. Both of those cases involved the applicability of the Wills, Probate and Administration Act which is similar to Section 51 of the Administration and Probate Act (NT).

18. The decision in Marshall v Sundin (supra) and Darrington v Caldbeck (supra) was followed by Emmett J in Byers v Overton Investments Pty Ltd (200) FCA 1761.

19. The debtor then argued that if an act is void in law it is a nullity and there is no need for an order of the Court to set it aside.  Every proceeding which is founded on it is also incurably bad.  The debtor relied upon Isaacs v Robertson (1985) (AC97).  In that case, the Privy Council said at page 102:

    “Their Lordships would, however, take this opportunity to point out that, in relation to an order of a Court of unlimited jurisdiction, it is misleading to seek to draw distinctions between orders that are “void” in the sense that they can be ignored with impunity by those persons to whom they are addressed, and orders that are “voidable” and may be enforced unless and until they are set aside.  Dicta that refer to the possibility of there being such a distinction between orders to which the descriptions “void” and “voidable” respectively have been applied can be found in opinions given by the judicial committee of the privy council in the appeal Marsh v Marsh (1945) AC 271 at 284 and MacFoy v United Africa Co Ltd (1962) AC 152 at 160, but in neither of those appeals nor in any other case to which Counsel has been able to refer their Lordships has any order of the Court of unlimited jurisdiction been held to fall into a category of Court orders that can simply be ignored because they are void ipso facto, without there being any need for proceedings to have them set aside.  The cases that are referred to in these dicta do not support the proposition that there is any category of orders of a Court of unlimited jurisdiction of this kind; what they do support is the quite different proposition that there is a category of orders of such a Court which a person affected by the order is entitled to apply to have set aside ex debito justitiae in the exercise of the inherent jurisdiction of the Court without his needing to have cause to the Rules that deal expressly with proceedings to set aside orders for irregularity and give to the Judge a discretion as to the order he will make.  The judges in the cases which have drawn a distinction between the two types of orders have cautiously refrained from seeking to lay down a comprehensive definition of defects that bring an order into the category that attracts ex debito justitiae the right to have it set aside, save that it specifically includes orders that have been obtained in breach of rules of natural justice.

    The contrasting legal concepts of voidness and violability form part of the English law of Contract.  They are inapplicable in orders made by a Court of unlimited jurisdiction in the course of contentious litigation.  Such an order is either irregular or regular.  If it is irregular it can be set aside by the Court that made it upon application to that Court; if it is regular it can only be set aside by an appellate Court upon appeal if there is one to which an appeal lies.”

20. The same point has been made in Cameron v Cole (1944) CLR 571 at 590 and by Wilson and Dawson JJ in Jackson v Sterling Industries Ltd (1987) 162 CLR 612 at 620 referring to an order made in an erroneous exercise of jurisdiction:

    “The principle remains, however, that the order of a competent Court must be obeyed whilst it remains in force”.

21. At no stage has the debtor applied to set aside the orders.

22. A Court exercising jurisdiction in bankruptcy is entitled to look behind a judgment; Wren v Mahony (1972) 126 CLR 212.

23. The Court then has a discretion whether to accept the judgment as satisfactory proof of debt.  If there are substantial reasons for questioning whether behind that judgment there was in truth and reality a debt, the discretion should be exercised in favour of the creditor.

24. In the exercise of that discretion, I take account of the fact that the judgment debt arose not from a debt flowing from a cause of action which was a nullity, but from an order for costs made against the debtor on the dismissal of his appeal.  The proceedings from which the cost order, the subject of the bankruptcy notice flowed, were proceedings brought by the debtor.  The debtor was unsuccessful in those proceedings.  Had the point then been raised by the creditor that the proceedings were being prosecuted on behalf of the estate where no representative capacity existed, a dismissal of the proceedings would follow.  In this case they were dismissed for a different reason but the effect was the same, namely, that the proceedings brought by the debtor were unsuccessful and the Court in the exercise of its inherent power to order costs against an unsuccessful litigant, did so.  The judgment debt thus arose from unsuccessful litigation on the part of the debtor and not from the cause of action which may later have been established to be a nullity.

25. I am satisfied that the orders of the Supreme Court of the Northern Territory should stand until otherwise set aside and a discretion to go behind those orders should not be exercised in this case where the orders flow from a dismissal of the debtors claims and the consequent cost order.

26. Prior to judgment the parties were invited to file further written submissions on the issue of evidence of discretion to go behind the judgment if it was found voidable.  Both did so.

1. The debtor made further submissions on two points which had not previously been raised. The first is whether the order for costs founding the Bankruptcy notice was a final order pursuant to Section 40(1)(g) of the Bankruptcy Act. The debtor asserts that an order for legal costs is not a final judgment and cites cases in support of that proposition.

2. However, the Debtor does not refer to the most recent and thorough discussions of the law, and this submission is misconceived .  An order for payment of costs is a final order – assuming those costs were quantified; Drummond J and the Full Court in Re Gibbs Ex parte Triscott (1995) 65 FCR 80, Thorpe v Bristile Ltd (1997) 80 FCR 330 and Stec v Orfanos (1999) FCA 457 (Full Court delivered 15 April 1999) In this case an order was made for payment of costs in a quantified sum.

3. The second issue raised by the debtors later submissions was that the Bankruptcy notice was invalid because the original judgment which dismissed the proceedings and ordered costs was not annexed.

4. The decisions of Drummond J and the Full Court in Re  Gibbs Ex parte Triscott (1995) 65 FCR 80 and another Full Court of the Federal Court decision, Thorpe v Bristile Ltd (1997) 80 FCR 330 are the most recent and thorough discussions on the subject.

5. Factually both cases seems to have been based on orders that the debtor pay costs and a subsequent quantification of those costs in a certificate of taxation.  In Re Gibbs the Bankruptcy notice referred to both the original judgment and the certificate quantifying the costs.  In Thorpe v Bristile Ltd the notice referred only to the original judgment but contained the quantification of costs.  That was held to be sufficient.

6. At first glance, these cases suggest that, at least the original judgment must be referred to.  For example, in Re Gibbs at 84A Drummond J. observes that

   “A Bankruptcy notice will be bad if it identifies the certificate of taxation, rather than the judgment under which the costs are authorised to be taxed, as the final judgment: Re Cartwright; Ex parte Cartwright v Barker (1975) 1 WLR 573; (1975) 2 All ER 970 and Wilmot v Buckley (1984) 2 FCR 540 at 543”.

7. However, a closer reading reveals that the actual Rules of the court which has made the costs determination will be crucial.  At 91C Drummond J. discussed Beaumont J.’s decision in Wilmot v Buckley & Ors (1984) 2 FLR 540 where a certificate of taxation was held to be insufficient to found a Bankruptcy notice. In that case the original oral order was never perfected and was thus ineffective. There was thus no final judgment or order and the certificate of taxation also was ineffective. Drummond J. referred to Beaumont J.’s observation that another procedure was available under the relevant rules of the court where costs were unpaid for 4 days; entry of judgment for the costs, but that procedure was unnecessary where the original judgment was perfected. At 91G-92A Drummond J. clearly suggest that the entry of judgment for costs would also have been sufficient to come within s40(1)(g) and s40(3)(b) of the Act even without the original perfected order or, in other words, the entry of judgment for costs would have been a final judgment or final order.

8. Under the Supreme Court Rules of the Northern Territory there is a similar provision to entry of judgment for costs and the rules appear to provide, even in the case of an authenticated judgment, for the party with the benefit of a costs order to obtain taxation by the Taxing Master and then to authenticate that further order and execute it as any other order of the court.

9. Rule 63.54 “Order on Taxation” provides at subrule (2):-

   “The Taxing Master (defined at r63.01(1) to include another officer of the Court directed to conduct a taxation) may, after the conclusion of the taxation of the bill, make a final order in respect of the amount at which he allows the costs or of his disallowance of the costs.”

   Sub-rule (5) provides that

   “an order under this rule shall be authenticated and filed in accordance with Order 60.”

10. Rule 63.55 provides for a review of such an order if sought within 14 days but that has never been sought in this case.

11. Order 60 contains the general rules relating to authentication of judgments and order and the order of Taxing Master Keyte on 29 October 1998 was made pursuant to it.

12. Order 66 “Enforcement of Judgments and Orders” provides at r66.02:

    i)A judgment for payment of money not within sub-rule (2) [relating to payment in to Court] may be enforced by:

    (a) warrant of seizure and sale;

    (b) attachment of debts…;

    (c) attachment of earnings…;

    (d) charging order…;

    (e) appointment of a receiver…”

    or committal; or sequestration or any combination of these means.

13. The Supreme Court Act s9(1) defines “judgment” to include “a decree, order, declaration etc.”

14. Rule 63.12 also provides that:

    “Where costs are taxed otherwise than under a judgment or order for costs [e.g. where no such order is required pursuant to r63.11], an order of the Taxing Master for payment of an amount found to be due may be enforced in the same manner as a judgment for payment of money.”

15. This provision is strictly redundant having regard to Order 66 and the definition of “judgment”.  It cannot mean, in the absence of express words, that where there is a judgment or order for costs that an order of the Taxing Master may not be enforced in the same manner as a judgment for money.

16. I am satisfied, the order of the Taxing Master fulfils all of the criteria of a final order enumerated at 93E-F in Drummond J.’s judgment in Re Gibbs

    “…the order must be made by a court or tribunal in a proceeding between the person  who later issues the Bankruptcy notice and the person served with it; the order must give rise to an obligation on the part of the person to be served with the Bankruptcy notice to pay a sum of money certain in amount so that the debtor will know what he has to tender to satisfy the obligation when served with a Bankruptcy notice and it must be final in the sense that it finally disposes of the matter with which it deals, even though  it does not dispose of the action or proceeding in which it was made; it must also be able to be enforced by execution.”

17. The final order relied on is the Taxing Master’s order. This is consistent with s40(1)(g) and s40(3)(b) and with the approach outlined in Re Gibbs. The cases dealing with certification of taxing can be distinguished because such a certificate is not relied on here.  Until set aside the order of the Taxing Master, as an order of a court of unlimited jurisdiction, must stand.  The alleged defect in placing the amount in item 1 in the notice “Amount of judgment or order” is not a defect.  The same happened in Stec v Orfanos (1999) FCA 457 (Full Court,

    
    

    15 April 1999) and the notice was held to be valid.   In Stec v Orfanos the allocatur of the taxing officer has held to be a final judgment or final order without more, and thus in practical terms identical to the order by Taxing Master Keyte.

18. The order for costs was a final order and the certified order was taken out and was annexed to the bankruptcy notice.  I am satisfied that the bankruptcy notice is not thereby invalid, and a sequestration order should be made.

I certify that the preceding fifty-two (52) paragraphs are a true copy of the reasons for judgment of Bryant CFM

Associate: 

Date: