Ikon Management Pty Ltd v Hladin
[2009] WADC 119
•17 AUGUST 2009
JURISDICTION : DISTRICT COURT OF WESTERN AUSTRALIA
IN CHAMBERS
LOCATION: PERTH
CITATION: IKON MANAGEMENT PTY LTD -v- HLADIN [2009] WADC 119
CORAM: REGISTRAR KINGSLEY
HEARD: 17 JULY 2009
DELIVERED : 17 AUGUST 2009
FILE NO/S: CIVO 51 of 2009
BETWEEN: IKON MANAGEMENT PTY LTD
Judgment Creditor
AND
JOHN RICHARD HLADIN
Judgment Debtor
Catchwords:
Practice - Application to stay a Means Enquiry hearing - Whether a compensation order pursuant to the Sentencing Act is provable in bankruptcy
Legislation:
Bankruptcy Act 1958 (Cth)
Cheques Act 1986 (Cth)
Civil Judgment Enforcement Act 2004
Sentencing Act 1995
Result:
Application dismissed
Representation:
Counsel:
Judgment Creditor : Mr R Cywicki
Judgment Debtor : Mr B G Grubb
Solicitors:
Judgment Creditor : Aherns Lawyers
Judgment Debtor : Metaxas & Hager
Case(s) referred to in judgment(s):
Corporate Affairs Commission (SA) v Karounos (1984) 9 ACLR 405
Federal Commissioner of Taxation v Gosstray [1986] VR 876
Gaffney v Federal Commissioner of Taxation (1998) 81 FCR 574
Lofthouse v Commissioner of Taxation (2001) 164 FLR 106
Lyford v Carey (1985) 3 ACLC 515
REGISTRAR KINGSLEY: Pursuant to s 119(1) Sentencing Act 1995 the judgment creditor ("Ikon") lodged a certified copy of a compensation order made by his Honour Judge Groves against the judgment debtor ("Hladin"). When lodged the compensation order is taken to be a judgment of the Court (s 119(2) Sentencing Act). Ikon then made application to the Court for an enforcement order pursuant to Pt 4 Div 1 Civil Judgment Enforcement Act 2004. On that application the Court issued a Notice of Means Enquiry which was served on Hladin.
Hladin now seeks to have the Means Enquiry stayed as an abuse of process on the basis that the obligation giving rise to the compensation order falls within s 82 of the Bankruptcy Act 1966 as a provable debt.
The compensation order
In January 2004 Hladin stood charged that, on various dates between 3 September 1999 and 6 September 2000, he committed 50 counts alleging that he, with intent to defraud, gained a benefit. On each of those 50 counts Hladin pleaded guilty.
In relation to Ikon Pty Ltd the facts were that Hladin, and the directors of Ikon Pty Ltd and another company WEJ, were associates that held common interests in motor vehicles. None of the companies were licensed as a motor vehicle dealer.
During the month of May 2000 Hladin independently approached the directors of Ikon and WEJ asking them if their companies would be interested in providing short‑term loans for the purpose of purchasing second‑hand motor vehicles. Each of the directors agreed and Hladin instructed each director on how much they were to make their cheques out for, and to whom the cheques were to be made out to. Hladin instructed the director of WEJ to make his cheques out, in some of their business arrangements, to Ikon and also instructed a director of Ikon to make cheques out to WEJ.
The directors of WEJ and Ikon were not aware of the true nature of the relationship Hladin had created between the two companies. As a result the two directors proceeded to direct funds into each others' respective companies: in other words, cheques of WEJ went to Ikon and cheques from Ikon went to WEJ. Each director believed that the payments received from the other company were the result of profits earned from the sale of motor vehicles. A chance meeting sometime in August 2000 between the two directors of WEJ and Ikon led to discussion that saw the ruse created by Hladin being uncovered.
At the hearing in January 2004 the prosecutor sought an order for restitution in the sum of $156,000 in favour of Ikon. In sentencing Hladin on 3 March 2004 his Honour Judge Groves made the restitution order in favour of Ikon in the sum of $156,000.
Cheques Act1986
On of the arguments raised by Hladin's counsel in the course of his submissions was that s 71 of the Cheques Act 1986 was relevant. Section 71 provides that the drawer of a cheque undertakes that due presentment the cheque which has been paid and that if the cheque is dishonoured the drawer will compensate the holder who is compelled to pay the cheque. Hladin's counsel said in submissions that the Cheques Act made the amount of $156,000 a provable debt.
The argument is that s 71 Cheques Act created an obligation to pay on the cheque by virtue of the statutory undertaking. That obligation predates Hladin's bankruptcy. Section 82 Bankruptcy Act refers to obligations incurred before the date of bankruptcy are provable in the bankruptcy.
This argument may be simply dealt with. Section 71 of the Cheques Act is directed to the drawer of a cheque and on the facts Hladin was never the drawer of a cheque. The drawer of the cheque was Ikon.
The compensation order
The compensation order was made on 3 March 2004. Hladin was discharged from bankruptcy on 18 April 2004. Relying on Lyford v Carey (1985) 3 ACLC 515 and Corporate Affairs Commission (SA) v Karounos (1984) 9 ACLR 405 and Gaffney v Federal Commissioner of Taxation (1998) 81 FCR 574, Hladin's counsel argues that the compensation order is a contingent debt provable by a creditor under s 82(1) of the Bankruptcy Act. Hladin's counsel argues that as the compensation order is provable in Hladin's bankruptcy, it may not now be pursued against him pursuant to s 58(3) of the Bankruptcy Act. Section 58(3) of the Bankruptcy Act provides that after a debtor has become bankrupt it is not competent for a creditor to enforce any remedy against the person or property of the bankrupt in respect of a provable debt. Thus Hladin's counsel argues the Means Enquiry is an abuse of the Courts process and should be permanently stayed.
Hladin's counsel argues that the obligation by Hladin to pay Ikon $156,000 arose between 1999 and 2000 and prior to his bankruptcy on 17 April 2001. Hladin's counsel argues the liability to pay $156,000 arose pursuant to the compensation order made on 3 March 2004 relevantly prior to Hladin's discharge from bankruptcy on 18 April 2004, but is as a result of the prior obligation.
Ikon's counsel argues that the liability to pay the compensation order arose at the date the compensation order was made. That liability was incurred during Hladin's bankruptcy and is therefore no different from any other debt incurred personally by a judgment debtor during his bankruptcy.
Section 82 Bankruptcy Act provides that all debts and liabilities present or future, certain or contingent, to which a bankrupt was subject, at the date of the bankruptcy, or to which he or she may become subject before his or her discharge, by reason of an obligation incurred before the date of bankruptcy, are provable in his or her bankruptcy. Section 82 refers to contingent liabilities to which a bankrupt was subject at the date of bankruptcy by reason of an obligation incurred before the date of bankruptcy. Contingent liabilities are not defined in the Bankruptcy Act. In Lofthouse v Commissioner of Taxation (2001) 164 FLR 106 from par 23 Warren J considered the expression of contingent liability. At par 27 Warren J cited Franklyn J in Lyford v Carey (supra) that the expression contingent liabilities imports the necessity that there be an existing obligation at the date of bankruptcy, an obligation (which may itself as its performance be suspended by the conditions of the contingency), out of which a liability to pay money will arise on the happening of the contingency. At par 31 quoted from Tadgell J in Federal Commissioner of Taxation v Gosstray [1986] VR 876 at 879:
"The notion that a contingent debt must be founded on an existing obligation is strengthened when is realised that a monetary claim for it, if made the subject of a proof, is to be stated as on the date of the bankruptcy. If when the proof is lodged the contingency has not happened, the amount of the claim must be estimated as accurately as possible. If however, a claim were made not founded on an obligation of the bankrupt existing at the date of bankruptcy which could ripen into a debt upon a contingency, the proper conclusion, in my view, would be not that the provable claim should be assessed at nil but there was no claim on the bankrupt estate at all." [Citations omitted]
In this matter any liability to pay was dependant upon the conviction of Hladin and then depended upon the exercise of discretion by the Court that restitution be made. It being a discretion in the Court the Court may refuse to make a declaration or may make the declaration, limited to part only of any of the debt.
In my opinion, whilst the offences occurred before the date of bankruptcy the compensation order which gave rise to a liability is not a contingent debt or a contingent liability to which the bankrupt was subject at the date of bankruptcy. The obligation is not incurred until after conviction and an order for restitution is made.
This is consistent with the view of Franklin J in Lyford's case and Corporate Affairs Commission (SA) vKarounos (supra) that the circumstances as they existed at the date of bankruptcy did not give rise to any obligation incurred at that time. The term obligation in s 82 Bankruptcy Act cannot be properly used to describe what is no more than an vulnerability to a criminal prosecution and conviction, which might, in turn, give rise to a compensation order. Decisions need to be made to prosecute Hladin, for a conviction to be entered and upon conviction the Court exercising its discretion to make a compensation order. In my opinion these facts point to the conclusion that there was no obligation by Hladin before the date of bankruptcy.
Conclusion
That being the case I am of the opinion there is no ground to stay the Means Enquiry. I will hear counsel on the question of re-listing the Means Enquiry and on costs.
0
3
4