Hastings Deering (Qld) Pty Ltd v Re Wright, J.F.

[1987] FCA 398

C A T C H W O R D S

BANKRUPTCY - going behind judgment.

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PARTNERSHIP - change In composition - onus on creditor dealing

wlth partner.

Partnership Acts 1891-1965 (Q.)

Re: John Frederick Wriqht & Anor.

Ex parte: Hastinqs Deerinq (Oueensland) Pty. Ltd.

Qld P754 of 1987

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IN THE FEDERAL COURT OF AUSTRALIA )

I DIVISION GENERAL ) QLD P754 of 1987

BANKRUPTCY DISTRICT OF THE SOUTHERN 1

I	DISTRICT OF THE STATE OF OUEENSLAND	1
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I RE: JOHN FREDERICX WRIGHT L NDSAY and GEORGE W IGHT

Debtors

EX PARTE: HASTINGS DEERING (OUEENSLAND) PTY. LTD.

Creditor

MINLTTES OF ORDER

MAKING JUDGE ORDER: PINCUS J.

DATE OF ORDER:	27 JULY 1987
WHERE MADE:	BRISBANE
THE COURT ORDERS THAT:

1.	The petition be adjourned to	a date to be flxed by
the Registrar.
2 .	Costs be reserved.

NOTE:

Settlement and entry of orders is dealt wlth in

Rule 124 of the Bankruptcy Rules.

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IN THE FEDERAL COURT	OF AUSTRALIA	)
GENERAL DIVISION	) QLD P754 of 1987

~ BANKRUPTCY DISTRICT OF THE SOUTHERN )

DISTRICT OF THE STATE OF OUEENSLANE )

RE: JOHN FREDERICK WRIGHT and LINDSAY GEORGE WRIGHT

Debtors

M PARTE: HASTINGS DEERING (OUEENSLAND) PTY. LTD.

Creditor

PINCUS J. 27 JULY 1987

REASONS FOR JUDGMENT

This 1 s a creditor's petition for a sequestratlon order,

based on a judgment debt. One of the judgment debtors has already been made bankrupt without opposltion, but the other debtor says that he is not truly liable and that I should go behind the

judgment. The two men were in partnershrp.

The question. to put it briefly, 1 s whether the ludgment

debtor in question is liable as a partner for a debt incurred

after dissolution of the partnership, on the ground that he dld

not notify the creditor of the dissolution. It is one whlch is

strangely bereft of modern authority.

I had hoped to dispose of the matter finally, as it

seems unlikely the debtor has ny substantial funds. However, Mr.

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Keller for the debtor said, and it seems to me likely to be

correct, that information from employees of the judgment creditor

who had personal knowledge of the dealings in question might throw	.
light upon the issue; the only representative of the judgment

creditor who gave evidence (Mr. Ashton, the current credit

manager) has no personal knowledge of the relevant dealings.

Owing to the paucity of the evidence, it is necessary for me to

treat the question as one for disposition in a preliminary way and

to determine only whether there is ground for going behind the

judgment. The following findings are, in this sense, provisional

only.

It is unclear whether the two men I shall mention, or

those men and their wives, constituted the partnership; since that

is of no present consequence, I shall consider the male partners

only.

On 20 October 1983, Mr. J.F. Wright, who 1 s now

bankrupt, and Mr. L.G. Wright, whom I have called “the debtor”,

applled to’the judgment creditor for a 30 day trading account.

They disclosed to the creditor that they were trading then	as
“Riterock Quarry Contractors“. After making some enquiries, the

creditor approved the opening of the account, but placed a limit

of $2,000 on it. Parts and services were supplied from that time

on.

However, at the end of that financial year (on 30 June

1984). the debtor ceased to be a member of the partnership. There

is no evidence that the creditor was notified. However, some

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appropriate steps were taken, namely that three hlre purchase

agreements, which the partnership had with Hastings Deering

Finance & Investment Co. Limited, were assigned from the old

partnership to the new, by documents executed in October 1984.

Hastings Deering Finance & Investment Co. Limited consented to

those assignments in writing and it has been argued by Mr. Keller

that it is likely that the judgment creditor had knowledge of the

change In the composition of the partnershlp about that time. He

polnts to the admitted fact that the two companies, the judgment

creditor and that just named, are part of the same group, and that

they operate out of the same premises. However, Mr. Ashton says

that they have a "different managerial structure and staff".

There is not sufficient basls for a finding that the judgment

creditor became aware, because of the dealings with Its associated

company, of the change in the partnershlp, although it must be

conceded that there 1 s a possibility that It dld s o .

At some time during 1985, probably about the mlddle of

that year, the contlnulng partners arranged to have the records at

the Commlssioner of Corporate Affairs altered appropriately to

disclose the retlrement, but there 1 s no evidence, nor reason to

assume, that the creditor became aware of that.

The debt in question became due in June 1986, some two

.: years after the debtor ceased to be a partner. I deduce this from

exhibit 1, although the effect of that document is rather obscure.

Mr. Keller took the point that the debt was a sum of

over $20,000, well in excess of the agreed credit limit. There is

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no evidence as to how that extra credit came to be allowed, or

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whether any step was taken, within the hierarchy of the judgment

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creditor, formally to approve so considerable an extension of

credit.

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The creditor relied upon s.39(1) of the Partnership Acts

1891-1965 (Q.) which reads as follows:

“Where a person deals with a firm after a change in

its constitution he is entitled to treat all

apparent members of the old firm as still being

members of the firm until he has notice of the

change. ‘I

Subsections ( 2 ) and ( 3 ) deal with the same subject, but

do not affect thls case.

“Apparent members” in the subsection has been held to

mean “members who are apparently members to the person who is

dealing with the firm”: Tower Cabinet & Co. Ltd. v. Inqram C19493

2 K.B. 397 at 403. Here, there is no direct evidence as to what

appeared to those who gave the partnershlp credit in 1986, but the

Court is asked, on behalf of the creditor, to infer that matters

must have appeared to them then as they had done since 1983. The

inference is a posslble but not an inescapable one. I regard the

apparent change in credit arrangements as tendmg to weaken the

inference, just as Derrington S. did in C.S.R. Limited v. Armitacre

(unreported, 5 September 1984, Supreme Court of Queensland, p.12).

It may be, of course, that no one can be found who dealt with the

firm on behalf of the judgment creditor in 1986, but there is no

evidence that that is so. Once the conclusion is reached, which

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was adopted in the Tower Cabinet case and also in C.S.R. Limited

I	v. Armitaqe (above), that the question of apparent membership for
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the purpose of s .39 (1 ) must be judged as of the date of the
dealing in question, the absence of any direct evidence as to what
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I	appeared to the creditor to be the membership of the firm in 1986
!	must tell against it. The only information from its side on that
I	precise question is that Mr. Ashton has found nothing in the
I	company's records on the point.
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It is worthwhile noting that the effect of the

Partnership Acts may have been to alter what previously was

regarded as the law on this topic. The old cases of Parkins v.

Carruthers 3 Esp. 248, 170 E.R. 604, and Farrar v. Delfmne (1844)

1 Car. & Kir. 580, 174 E.R. 946, are authorities for the view

that where a person is known at any time to have been a partner in

a firm, the creditor is entitled to rely upon that In dealings

with that person until, by notice or surmise, he becomes aware

that the person is no longer a member of the firm. The

Partnership Acts, however, as noted above, may place an additional

onus on the creditor, to show what appeared to It to be the

composition of the partnership at the time of the relevant

dealing. Thus, whereas previously there need only have been

shown a failure by the disputed partner to give notice of the

h.;	change in the partnership, the creditor needs now to prove that the disputed partner was still apparently a member of the firm at
the time of the relevant dealing. If the creditor is a
substantial organisation with changing personnel, that can create
difficulties for it.

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If the parties desire to add nothing further to the

evidence presently avdilable, unsatisfactory though it is, I

shall, albeit reluctantly, reach a final conclusion on that. But

in the circumstances, I have determined merely to make a

preliminary finding that here is substantial reason for

questioning "whether behind that judgment there was in truth and

reality a debt due to the petitioner" - Wren v. Mahonev (1972) 126

C.L.R. 212 at p.225, per Barwick C.J.

The petition will be adjourned, with that intimation, to

a date to be fixed, and the costs reserved. It can be relisted by

arrangement with the Registrar.

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