Jafari v 23 Developments Pty Ltd
[2019] VSC 333
•21 May 2019
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMERCIAL COURT
COMMERCIAL LIST
S CI 2010 02148
| KOUROSH JAFARI (ON HIS OWN BEHALF AND AS TRUSTEE OF THE ESSENCE UNIT TRUST) | Judgment Debtor |
| - and - | |
| 23 DEVELOPMENTS PTY LTD (ACN 112 616 976) | Judgment Creditor |
| - and - | |
| JOHN ALDERUCCIO AND BRUNO ALDERUCCIO TRADING AS ‘Alderuccio Solicitors’ | Garnishee |
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JUDGE: | Derham AsJ |
WHERE HELD: | Melbourne |
DATE OF HEARING: | 28 February 2019 |
DATE OF JUDGMENT: | 21 May 2019 |
CASE MAY BE CITED AS: | Jafari v 23 Developments Pty Ltd |
MEDIUM NEUTRAL CITATION: | [2019] VSC 333 Revised 9 December 2019 |
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PRACTICE AND PROCEDURE – Execution – Garnishee summons – Garnishee summons issued in respect of a debt that will or is likely to become due or accrue to the judgment debtor between the day an order for the filing and service of a garnishee summons is made and the day for hearing named in the summons – Whether at the date of the hearing the debt had become due or was accruing to the judgment debtor from the garnishee – No debt due or accruing to the judgment debtor as no sum certain due or accruing – Roberts v Death (1881) 8 QBD 319; Webb v Stenton; Australian National Airways Pty Ltd (Garnishee) (1883) 11 QBD 518; Cairns v Walsh; The Victorian Railways Commissioners (Garnishees) (1891) 17 VLR 44; Vinall v De Pass [1892] AC 90; Re Australia and New Zealand Savings Bank Ltd; Mellas v Evriniadis [1972] VR 690; The Tile Centre v Symons; Ex Parte Krytsis [1972] VR 965; Clyne v Deputy Commissioner of Taxation (1981) 150 CLR 1 considered – Construction of Order 71 of the Supreme Court (General Civil Procedure) Rules 2015 (Vic).
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APPEARANCES: | Counsel | Solicitors |
| For the Judgment Debtor | Mr P G Willis SC | George Liberogiannis & Associates |
| For the Judgment Creditor | Mr M Clarke QC | Holman Webb |
| For the Garnishee | Ms S Josephs | Minter Ellison |
| For the Liquidator of 63 Buckley St Pty Ltd | Mr M Lhuede | Piper Alderman |
TABLE OF CONTENTS
Introduction........................................................................................................................................ 1
Background facts................................................................................................................................ 2
Garnishee rules................................................................................................................................... 5
Can the judgment debtor be heard............................................................................................... 12
Debt due or accruing....................................................................................................................... 17
Conclusion......................................................................................................................................... 21
HIS HONOUR:
Introduction
On 30 January 2019 the Court ordered that the first defendant, (judgement creditor), file a garnishee summons, in the form attached to the order, directed to John Alderuccio and Bruno Alderuccio (trading as ‘Alderuccio solicitors’) (Garnishee). The order was made pursuant to r 71.04(1) of the Supreme Court (General Civil Procedure) Rules 2015 (Vic) (Rules). In accordance with the requirements of the Rules, the order fixed the amount to be specified in the garnishee summons.[1]
[1]I will call the order the ‘summons order’.
The summons was issued the same day and required the Garnishee to attend before the Court on 28 February 2019. The application by the judgement creditor set out in the summons was for an order that –
(a) the Garnishee pay to the judgement creditor the debt due, or the debt which will become due, from the Garnishee to the plaintiff, Kourosh Jafari (judgement debtor); or
(b) so much of it as may be sufficient to satisfy a judgement recovered against the judgement debtor by the judgement creditor on 30 July 2019 in the sum of $219,393.59, interest accrued and accruing and the costs of the judgement creditor of the garnishee proceedings.
The sum required to satisfy the judgment, interest and costs was specified as at $247,393.32.
The garnishees’ summons was issued and served that day (30 January 2019). On the day of the hearing named in the summons, 28 February 2019, it became clear that the issue before the Court was whether the debt the subject of the summons had become due or had accrued to the judgment debtor from the Garnishee. In addition, there was dispute as to whether the judgement debtor was entitled to be heard on the return of the summons.
I have concluded that:
(a) the Court may permit the judgement debtor to give evidence or be heard where they have evidence or submissions which may be relevant to whether an order should be made upon the garnishee summons; and
(b) the garnishee summons should be dismissed as, at the date of the hearing there was no debt due or accruing by the Garnishee to the judgment debtor.
Background facts
By ex parte summons filed on 29 January 2019, the judgement creditor applied for leave to issue a garnishee summons pursuant to r 71.04(1) of the Rules. The application was supported by the affidavit of the solicitor for the judgement creditor, Bettina Louise Evert,[2] which disclosed the facts set out in [6] to [9] below.
[2]Sworn on 29 January 2019.
On 30 July 2018, Elliott J ordered the judgement debtor (the plaintiff, Jafari) to pay the sum of $219,393.59 to the judgement creditor (the first defendant, 23 Developments). The judgement debtor was also ordered to pay the cost of all defendants on a standard basis and the costs of the judgement creditor on its counterclaim on a standard basis. The judgement debtor had, at the time of the application to issue the garnishee summons, appealed the decision of Elliott J, but no stay of execution had been made pending the appeal.
The judgement debtor (Jafari) had another proceeding in Court against Alderuccio Solicitors, the Garnishee (Alderuccio Proceeding).[3] Alderuccio Solicitors were the first defendants in the proceeding and a company called 63 Buckley Street Pty Ltd was the second defendant (63 Buckley St). The Alderuccio proceeding settled on 22 January 2009 and in consequence of the settlement orders were made by Bell J dismissing the proceeding and ordering a mediation. The order for a mediation required the parties to attend a mediation to be held before an Associate Judge on 30 January 2019. In the part of the order headed ‘Other Matters’, Bell J recorded, so far as presently relevant:
The proceeding and the claims which are the subject of this proceeding has been settled as between the plaintiff and (subject to the next paragraph) the first defendants on the one hand and the plaintiff and second defendant on the other.
The issue of the division of the settlement sum between the plaintiff and the second defendant has not been agreed between them. The parties seek that the matter be set down for a mediation between the plaintiff and the second defendant.
If the plaintiff and the second defendant cannot agree as to the division of the settlement sum between them, the first defendant will pay the settlement sum into Court.
The legal representatives of the plaintiff and the second defendant have agreed that neither seeks to assert a lien or other right over any settlement sum.
Minutes of consent signed by or on behalf of the parties were provided to the court on 18 January 2019 and are to remain on the file.
[3]Kourosh Jafari (On His own behalf and as Trustee of the Essence Unit Trust) v Alderuccio Solicitors (Supreme Court of Victoria, S CI 2011 01274, commenced 22 March 2011).
63 Buckley St is, and was at the date of the orders of Bell J, in liquidation. Ms Evert stated in her affidavit that she had been advised by the liquidators’ solicitors that a mediation had been organised for 30 January 2019 and it was hoped that the judgement debtor (Jafari) and 63 Buckley St could agree upon a division of the settlement sum between them at the mediation so that an amount due by the Garnishee to the judgment debtor would be ascertained. If that did not occur, the settlement sum was to be paid into Court, as referred to in the order of Bell J. Ms Evert also stated in her affidavit that because of confidentiality of the terms of settlement, she was not aware of the amount of the settlement sum. She stated, however, that she believed it to be more than the judgement debt owing to the judgement creditor, plus interest.
On 24 January 2019, Ms Evert wrote to the solicitor for the judgement debtor, asking that he provide an undertaking to keep any money that the judgement debtor received from the settlement sum in his trust account until finalisation of the appeal from the decision of Elliott J. She received no reply to that email.
The garnishee summons was issued on 30 January 2019 and was returnable before the Court on 28 February 2019. Pursuant to r 71.06 of the Rules it identified the debt in respect of which it was filed as follows:
The debt in respect of which this summons is filed and served is the settlement sum due or accruing due to the judgment debtor by the garnishees referred to in the order of Bell J made on 22 January 2019 in proceeding S CI 2011 01274 in which Kourosh Jafari (on his own behalf and as trustee of the Essence Unit Trust) are plaintiffs, the garnishees are first defendants and 63 Buckley Street Pty Ltd (ACN 099836 361) (in Liq) is second defendant.
The summons to the Garnishee was stated to be for the hearing of an application by the judgment creditor for an order that the Garnishee:
(a) pay to the judgment creditor the debt due from you to the judgment debtor or the debt which will become due from you to the judgment debtor on 30 January 2019; or
(b)pay to the judgment creditor in such amount or amounts and at such time or times as the Court may direct the debt due from you to the judgment debtor; or
(c)so much thereof as may be sufficient to satisfy a judgment recovered against the judgment debtor by the judgment creditor in the Court on 30 July 2019 for $219,393.59, interest accrued and accruing on the judgment and the costs of the judgment creditor of the garnishee proceedings. The sum required to satisfy the judgment, interest and costs is $247,393.32…
The limited information available to the judgment creditor about the debt due or accruing or becoming due or accruing had the result that the prescribed form of summons was modified.[4]
[4]Form 71A prescribed by r 71.06(2). Rule 1.13(3) of the Rules provides that if the Rules prescribe a form for use, that form shall be used with any necessary variation or modification.
On the return of the summons on 28 February 2019, there were appearances for the judgement creditor, the judgment debtor, the Garnishee and 63 Buckley St. It emerged that the garnishee summons had been served during the course of the mediation. The mediation was then adjourned to a date to be fixed, there having been no agreement as to the division of the settlement sum between the judgment debtor and 63 Buckley St. The date for the payment of the settlement sum into Court had not then arrived. In addition, the Solicitor for the liquidators of 63 Buckley St informed the Court that there was a ‘drop dead’ date by which agreement must be reached as to the division of the settlement sum or it was to be paid into Court by the Garnishee, as indicated in the order of Bell J referred to above.
In these circumstances, the judgement debtor contended that he had a right to appear before the court and in the exercise of that right submitted that the garnishee summons should be dismissed. Counsel for the judgement creditor contended that the judgment debtor had no right to appear on the return of the summons, and that the summons should not be dismissed. Because the judgement creditor had no notice of the application by the judgement debtor that the garnishee summons be dismissed, I gave leave to the judgement creditor to file and serve a written submission as to:
(a) the standing of the judgement debtor to appear at the return of the garnishee summons, and to make submissions; and
(b) whether the garnishee summons should be dismissed or other orders made.
Otherwise I reserved my decision as to the validity of the garnishee summons.
In accordance with the orders made on 28 February 2019, the judgement creditor filed a written submission addressing the relevant matters, together with a further affidavit of the Bettina Louise Evert, which revealed that the judgement debtor (Jafari) and the liquidator of 63 Buckley St had failed to agree upon a division of the settlement sum and in consequence the sum of $400,000.00 had been paid into Court.
Garnishee rules
The procedure relating to the attachment of debts is contained in Order 71 of the Rules. It is designed to enable execution to be levied upon the property of the judgement debtor by the judgement creditor taking a debt owing by a third person (the garnishee) to satisfy the judgement debt.[5] The object and intention of the process is to render ‘debts’ as a form of property available for execution.[6] It is a species or method of execution.[7]
[5]The Tile Centre v Symons; Ex Parte Krytsis [1972] VR 965, 969–70 (‘Tile Centre’).
[6]Ibid.
[7]Sampson v The Seaton and Beer Railway Company; The London and South Western Railway Company (Garnishees) (1874) LR 10 QB 28, 30; White, Son & Pill v Stennings [1911] 2 KB 418, 427 (Vaughan Williams LJ) (‘White’); Tile Centre (n 5) 970.
Upon service of the garnishee summons (on the garnishee) it operates as an injunction and prevents the garnishee from paying the debt to the judgement debtor until the hearing of the application for the garnishee order. Until then, the summons binds the debt in the hands of the garnishee and creates a charge in favour of the judgement creditor.[8] If on the hearing of the garnishee summons an order is made that the garnishee pay the debt to the judgment creditor. Upon making the payment the garnishee gets a good discharge of its indebtedness to the judgment debtor.[9]
[8]See r 71.08, below, and N. Joachimson v Swiss Bank Corp [1921] 3 KB 110, 131 (Atkin LJ) (‘Joachimson’); LexisNexis, Civil Procedure Victoria (online at 14 May 2019) [71.02.20].
[9]See r 71.12 of the Rules and see Choice Investments Ltd v Jeromninon; Midland Bank Ltd (Garnishee) [1981] QB 149, 155 (‘Choice Investments’).
Rule 71.01(1) includes definitions of garnishee, judgment, judgment creditor and judgment debtor. The relevant definitions are:
garnishee means a person from whom a judgment creditor claims—
(a)that a debt is due or accruing to the judgment debtor on the day an order for the filing and service of a garnishee summons is made; or
(b)that a debt will or is likely to become due or accrue to the judgment debtor between the day an order for the filing and service of a garnishee summons is made and the day for hearing named in the summons; [emphasis added][10]
judgmentincludes an order;
judgment creditor means a person entitled to enforce a judgment for the payment of money other than a judgment for the payment of money into court;
judgment debtor means a person required by a judgment to pay money otherwise than into court.
[10]The word 'garnishee' is derived from the Norman-French and denotes one who is required to 'garnish', that is to furnish a creditor with the money to pay off a debt: Choice Investments (n 9) 154.
Rule 71.02 provides:
A debt may be attached under this Order if the debt—
(a)is due or accruing to the judgment debtor from the garnishee on the day an order for the filing and service of a garnishee summons is made; or
(b)becomes due or accrues to the judgment debtor from the garnishee between the day an order for the filing and service of a garnishee summons is made and the day for hearing named in the summons. [emphasis added]
Paragraph (a) of this rule makes clear that the procedure applies to a debt which is ‘due or accruing’ to the judgement debtor from the garnishee on the day the order is made for the issue of the summons (summons order).[11] A debt ‘due’ is a debt which is due and payable (in respect of which the creditor could immediately sue), and a ‘debt accruing’ is a debt which is due, in the sense that it is represented by an existing obligation (an actual present debt), but not immediately payable.[12] Thus, it has been held that a debt is not ‘accruing due’ if it is payable only on the performance of a condition precedent.[13] In Webb v Stenton[14] Lindley LJ expressed the meaning of a debt due or accruing to the judgment debtor as follows:
I should say, apart from any authority, that a debt legal or equitable can be attached whether it be a debt owing or accruing; but it must be a debt, and a debt is a sum of money which is now payable or will become payable in the future by reason of a present obligation, debitum in presenti, solvendum in futuro. An accruing debt, therefore, is a debt not yet actually payable, but a debt which is represented by an existing obligation.
[11]It is not sufficient that the debt is due or accruing on the day of service of the summons. The rule makes clear that it must be due or accruing on the day of the ‘summons order’. Cf Universal Guarantee Pty Ltd v Derefink [1958] VR 51, 53.
[12]Webb v Stenton; Australian National Airways Pty ltd (Garnishee) (1883) 11 QBD 518, 527-528 (Lindley LJ) (‘Stenton’); Re Australia and New Zealand Savings Bank Ltd; Mellas v Evriniadis [1972] VR 690, 692 (‘Evriniadis’); Clyne v Deputy Commissioner of Taxation (1981) 150 CLR 1, 15 (Mason J).
[13]Nicholson v McDonald [1936] VLR 233; Evriniadis (n 12) 693. The effect of decision as it applies to bank accounts has been overcome by the specific provision of r 71.03 of the Rules.
[14]Stenton (n 12) 527 (Lindley LJ); Referred to with approval in Evriniadis (n 12) 693.
Paragraph (b) of the rule was new when introduced in 1986 and is a provision not considered by authority so far as I have found. This provision extends the operation of the procedure for attachment under Order 71 to a debt which is not a debt due or accruing to the judgement debtor from the garnishee on the day the order for the filing and service of the garnishee summons is made. It must, however, be a debt which becomes due or accrues to the judgement debtor from the garnishee between the day the order is made and the day for hearing named in the summons.
The Rules also provide for the application for the ‘summons order’ to be made ex parte and requires that the Court fix an amount to be specified in the garnishee summons for the purpose of r 71.06 having regard to, amongst other things, the amount due under the judgment on the date of the order, the amount of interest accrued and accruing on the judgment debt and the costs of the garnishee proceedings.[15] In addition, the Rules require that where a ‘summons order’ is made in respect of a debt not yet due or accruing to the judgment debtor from the garnishee, the day for hearing named in the summons shall be not more than 30 days after the date of the order.[16] These requirements were satisfied in making the summons order in this case.
[15]r 71.04(1)–(3) of the Rules.
[16]r 71.04(4) of the Rules.
The Rules also provide that a ‘summons order’ must not be made unless it is shown by affidavit that the judgment is unsatisfied, either wholly or to a stated extent, that, as the case requires, a debt is due or accruing to the judgment debtor from the garnishee, or a debt will or is likely to become due or accrue to the judgment debtor from the garnishee.[17] Where the situation is that a debt will or is likely to become due or accrue to the judgment debtor from the garnishee, the affidavit must give particulars identifying the transaction between the judgment debtor and the garnishee under which the debt will or is likely to become due or accrue and state the date or likely date it will become due or accrue.[18] These requirements were also satisfied in the application for the summons order.
[17]r 71.05(1) of the Rules.
[18]r 71.05(2) of the Rules. The affidavit may contain statements of fact based on information and belief if the grounds are set out: r 71.05(3).
The garnishee summons is required by the Rules to identify each debt in respect of which it is filed and to state the following matters:[19]
[19]r 71.06 of the Rules.
(a) where the debt is due or accruing to the judgment debtor from the garnishee, that upon service of the summons the debt shall be attached and bound in the hands of the garnishee to the extent of the amount specified in the summons;
(b) where the debt is not yet due or accruing to the judgment debtor from the garnishee, that in the event that the debt becomes due or accrues before the day for hearing named in the summons the debt shall be attached and bound in the hands of the garnishee to the extent of the amount specified in the summons when it becomes due or accrues;
(c) that on the day for hearing named in the summons the judgment creditor will apply for an order that the garnishee pay to the judgment creditor the debt attached to the extent of the amount specified in the summons.
Once again, the garnishee summons in this case complied with these requirements and the requirements for service of the summons on the garnishee personally and on the judgment debtor, with a copy of each affidavit used on the application for the ‘summons order’.[20]
[20]r 71.07 of the Rules.
Rule 71.08, 71.09, 71.10 and 71.11 then provide, so far as presently relevant:
71.08 What debts attached, when and to what extent
(1)A debt due or accruing to the judgment debtor from the garnishee in respect of which an order for the filing and service of a garnishee summons is made shall, upon service of the summons on the garnishee, be attached and bound in the hands of the garnishee to the extent of the amount specified in the summons.
(2)A debt not yet due or accruing to the judgment debtor from the garnishee in respect of which an order for the filing and service of a garnishee summons is made shall, in the event that the debt becomes due or accrues before the day for hearing named in the summons, be attached and bound in the hands of the garnishee to the extent of the amount specified in the summons when it becomes due or accrues. [emphasis added]
…
71.09Payment to judgment creditor
(1)Subject to Rules 71.10 and 71.11, the Court, on the hearing of a garnishee summons, may order the garnishee to pay to the judgment creditor—
(a)the debt attached to the extent specified in the garnishee summons; or
(b)so much of the debt attached to the extent so specified as is required to satisfy the judgment in respect of which the summons is filed and served together with interest, any money recoverable under section 107(1) of the Service and Execution of Process Act 1992 of the Commonwealth and such costs of the application as may be specified in the order.
…
In the case of a debt referred to in r 71.08(1) (one which is due or accruing to the judgment debtor), as soon as the garnishee summons is served on the garnishee it prevents the garnishee from paying the debt to the judgment debtor until the garnishee summons is heard and dismissed.[21] The garnishee summons binds the debt in the hands of the garnishee, creating a charge in favour of the judgment creditor.[22] It is only when an order is made under r 71.09 that the garnishee is liable to pay the judgment creditor.[23]
[21]Choice Investments (n 9) 155.
[22]Joachimson (n 8) 131 (Atkin LJ); Choice Investments (n 9) 155.
[23]Choice Investments (n 9), 155. The word ‘attached’ is derived from the Norman-French and freezes the debt in the hands of the garnishee.
On the other hand, where the debt is one not yet due or accruing to the judgment debtor from the garnishee, r 71.08(2) makes quite clear that it will only be attached and bound in the hands of the garnishee if it becomes due or accrues before the day for hearing named in the summons.
Then rr 71.10 and 71.11 provide:
71.10Dispute of liability by garnishee
If on the hearing of the garnishee summons the garnishee disputes liability to pay the debt attached, the Court may—
(a) determine the question of liability; or
(b) give directions for the trial of the question.
71.11 Claim by other person
Where it appears to the Court that any person other than the judgment debtor may be entitled to the debt attached or to a charge or lien upon it, the Court may order that notice of the application be given to that person and then determine the entitlement or give directions for its determination.
Rule 71.10 is adapted from Order 45 r 4 of the former rules with no change of substance. Rule 71.11 is adapted from Order 45 r 5 and removes any limitation on the source of the information that another person may be entitled to the debt or to a charge or lien upon it. Under Order 45 r 5 of the former rules, the prerequisite to giving notice to a third person was that ‘it is suggested by the garnishee that the debt…belongs to some third person’, etc. The decisions in Roberts v Death[24] and Cairns v Walsh; The Victorian Railways Commissioners (Garnishees) (‘Cairns v Walsh’)[25] effectively removed that limitation from the previous rule, as to which see below ([39] to [43]).
[24](1881) 8 QBD 319 (‘Roberts’).
[25](1891) 17 VLR 44 (‘Cairns’).
It was established under the old rules that an order nisi (the equivalent of the ‘summons order') will be made even though the amount of the debt due by the garnishee to the judgement debtor is not stated in the affidavit in support of the application.[26] What must have appeared under the old rules was that there was ‘some debt’ due or accruing from the garnishee to the judgement debtor.[27] That debt must have been due or accruing at the date of the application for the order nisi.[28] It followed that the garnishee summons itself need only specify ‘some debt' due or accruing from the garnishee to the judgement debtor. The burden then fell on the garnishee to dispute the debt.[29]
[26]De Pass v The Capital and Industries Corporation Ltd; Vinall (Garnishee) [1891] 1 QB 216, 218–20 (‘De Pass’) affirmed on appeal Vinall v De Pass [1892] AC 90 (‘Vinall’). Under the old rules, which were different in substance and form from the current Rules, the equivalent to the application for a ‘summons order’ (as I have called it) was called an order nisi (which means ‘unless’). That order required the garnishee to show cause why he should not pay to the judgment creditor the debt due from him to the judgement debtor or so much thereof as may be sufficient to satisfy the judgment and the costs of the garnishee proceedings: see ord 45, r 1(2) of Ch 1 of the Rules of the Supreme Court, made by Supreme Court (General Rules of Procedure in Civil Proceedings) 1985 (Vic), SR No. 109. If the order nisi was made absolute, the garnishee became liable to pay the judgement creditor the amount of the debt due to the judgment debtor, or so much of it as was sufficient to pay the judgement debt and the costs of the garnishee proceedings.
[27]Ibid.
[28]Hetherington v Driscoll; The Board of Land and Works (Garnishee) (1891) 17 VLR 356 (‘Hetherington’); White (n 7).
[29]Ord 45, rr 1, 3; De Pass (n 26) 218, 219–20; Vinall (n 26) 96 (Halsbury LC); Rippon v Cresswell: Giles (Garnishee) (1888) 9 ALT 193, 194–5 (‘Cresswell’).
The logic behind these findings may be dependent on the particular form of the applicable rules. In Victoria, Order 45 followed the legislation in the United Kingdom first introduced by the Common Law Procedure Act 1854 and later re-enacted as Order 45 of the Rules of Court. The Victorian Order 45 r 1 provided that among the conditions precedent to an order nisi was that ‘a third person is indebted to the judgement debtor and is within the jurisdiction’. Once that was shown (together with the other conditions) the Court could order that ‘all debts accruing from the third person (hereinafter in this Order called the “garnishee”) to the judgment debtor be attached to answer’ the judgment in favour of the judgment creditor.
The current Rules are more specific. Rule 71.02, set out above, refers to ‘a debt may be attached… if the debt’ is due or accruing or becomes due or accrues before the date name in the garnishee summons. Whether it was the intention of the makers of the new rules (initially the Judges of this Court, but later confirmed by Act of Parliament) to change the law in this respect is unclear and, as it turns out, unnecessary to decide in this case.
Can the judgment debtor be heard
On the day of the hearing named in the garnishee summons, Mr Peter Willis SC sought to appear for the judgement debtor and to be heard. He contended on the authority of the decision of the Full Court of the Supreme Court of Victoria in Cairns v Walsh[30] that it is the duty of the Court to ascertain whether there is a debt due or owing, and the Court is able to go into the facts from anything shown by anyone.[31] In that case it was argued, on the authority of the observation of Holroyd J in Edwards v Jones,[32] that the judgement debtor has no right to be heard on the application. Higinbotham CJ said of this proposition:[33]
… I should with great respect venture to differ from him. It is contrary to the decision in Roberts v Death, and, I think, to principle. It is the duty of the Court to ascertain whether there is a debt due or owing, and I think it would be a mistaken rule if the Court were not enabled to go into the facts from anything shown by anyone.
[30]Cairns (n 25).
[31]Ibid 49 (Higinbotham CJ).
[32](1888) 14 VLR 224.
[33]Cairns (n 25) 49.
The Full Court in Cairns v Walsh admitted further evidence in the appeal by the trustees in bankruptcy of the judgment debtor, but dismissed the appeal. The position of the trustees of the judgment debtor in that case was a little different from the position of the judgment debtor in this case. The trustees were, in the words of Higinbotham CJ, ‘specially empowered to attend to protect the interests of other creditors’[34] of the judgement debtor.
[34]Cairns (n 25) 51 (Higinbotham CJ)
Counsel for the judgement creditor, Mr Marcus Clarke QC, responded that the issue before Higinbotham CJ was whether the Court was entitled to look at an affidavit put forward by the judgement debtor to contradict an admission made by the garnishee as to the alleged debt at the hearing of the application for an order absolute.[35] Higinbotham CJ said:[36]
The case of Roberts v Death[37] shows that although the debtor cannot show cause against a garnishee order nisi, he can inform the Court by affidavit that the fund claimed is trust money, and the Court will then not make the order absolute.
[35]Cairns (n 25) 49.
[36]Ibid.
[37]Roberts (n 24).
Mr Clarke QC then submitted on behalf of the judgment creditor that the judgement debtor had put no affidavit before the Court and had chosen not to inform the Court of any facts by affidavit. What is contained in the terms of settlement (in the proceeding before Bell J) is a matter for the parties to those terms to put forward, and those parties are the garnishee, 63 Buckley St and the judgement debtor. Having chosen not to inform the Court of the facts (by putting the terms of settlement in evidence, for example), it was submitted the judgement debtor is not entitled to be to be heard and make submissions.
Mr Clarke QC also submitted that although the judgement debtor is required to be served with the garnishee summons (see r 71.07(1) of the Rules), that person is not a party to the application.[38] Having regard to the relevant rules and the prescribed form of garnishee summons, I think that it is strictly correct that the judgment debtor is not a party to the garnishee application. But that may not affect the ability of the judgment debtor to appear and be heard if there is a matter relevant to:
[38]MG Charley Pty Limited v FH Wells Pty Ltd: Bank of New South Wales (Garnishee) (1964) 80 WN (NSW) 754, 755.
(a) the right of the judgment creditor against the judgment debtor;
(b) the liability of the garnishee to the judgment debtor;
(c) the capacity in which the judgment debtor is entitled against the garnishee, as arose in Roberts v Death (as to which see below);
(d) the intervention of a third party’s rights to the debt in question;
(e) whether the debt is due or accruing or subject to a condition precedent.
Roberts v Death, upon which the Court in Cairns v Walsh relied, arose from the strict application of the then rules, which limited the ability of the Judge or Master hearing the garnishee summons to take notice only of statements or evidence given by the garnishee. The facts were that Roberts obtained a judgement against Death who in turn, in his own name, obtained a judgement against Castle; Roberts obtained a garnishee order nisi under which he sought to attach the judgement debt due from Castle to Death. Before the hearing of the garnishee summons, the solicitors for Death wrote to the solicitor for Roberts and informed him that Death was trustee for a Mrs Wells and that the money which Death had recovered by judgement from Castle belonged solely to Mrs Wells.
At the hearing of the garnishee summons, the garnishee, Castle, appeared in person, admitted his debt and made no suggestion that the money was trust money and belonged in truth to Mrs Wells. The Master refused to hear any statement by Death’s solicitors that the judgement debt owed by Castle was trust money belonging to Mrs Wells and ordered Castle to pay Roberts, the judgment creditor. That was because the relevant rule was expressed as follows:
Whenever in proceedings to obtain an attachment of debts it is suggested by the garnishee that the debt sought to be attached belongs to some third person, or that any third person has a lien or charge upon it, the Court or Judge may order such third person to appear, and state the nature and particulars of his claim upon such debt.[39]
[39]The quoted rule is in fact taken from Order 45, r 5 of the Rules of the Supreme Court of Victoria 1984, which is equivalent to Order XLV, r 6 of the Rules of Court 1875 under consideration in Roberts v Death (n 24), each of which is derived from s 30 of the Common Law Procedure Act 1854 (23 & 24 Vict, c.126).
The judgment debtor and Mrs Wells as beneficiary sought to overturn the order and on appeal to the Court of Appeal succeeded. Brett LJ said:[40]
The Equity Court, as it seems to me, would never have allowed the money of a cestui que trust to be applied to pay the debt of the trustee, and I can see nothing which should prevent a judge from saying, when the matter is called to his attention, that a garnishee order shall not under these circumstances be made absolute. Although it is true the suggestion to that effect cannot be made by the cestui que trust under either rule 6 or 7, still it seems to me that a Court of Equity would listen to such a statement on the proceedings for a garnishee order, and would either, if there was no dispute as to the fact, then make an order that the money should be paid over to the cestui que trust, or decline to make the garnishee order absolute, or if there was a dispute as to whether the money was trust money, would consider it reasonable to order the money to be paid into Court to abide the event of an inquiry.
….
The point of practice, however, which we hold is that where the money sought to be attached under the garnishee proceedings is trust money, or said to be such on any reasonable ground, the cestui que trust is not to be damaged because the garnishee will not act, but he has a right to come forward (not indeed under rules 6 and 7, but apart from such rules) and to inform the Court that the money is trust money belonging to him, and that therefore the garnishee order ought not to be made….
[40]Roberts (n 24) 323.
Cotton LJ agreed but went further in relation to the application of the Rules, finding that the suggestion that the judgment belonged beneficially to Mrs Wells was able to be made under r 7, because under that rule the Court could hear ‘any other person whom, by the same or any subsequent order of the Court or a Judge may order to appear’.[41] That gave power to the Court or Judge to cite anyone else, and to inquire as to the nature of his claim. Lindley LJ was also of the same opinion and may be taken to have agreed with the reasoning of both Brett LJ and Cotton LJ.
[41]Roberts (n 24) 324.
The decision in Roberts v Death is very much concerned with the ambit of the old garnishee rules and of the consequences of the fusion of law and equity by the Judicature Act 1873 (UK). It is interesting as a lesson in thinking ‘outside the box’ of the particular rules in question. It may apply to this case in two ways. First, it exposes an overarching principle applicable by virtue of the equitable jurisdiction of the Court where trustee and beneficiary are involved. Second, it shows the importance of the Court being alive to whether in substance and fact there is a debt due or accruing to the judgment debtor from the garnishee at the date of the hearing. Whether that is pointed out by the garnishee or the judgment debtor is of no consequence if it turns out that it is the fact.
Another decision that shows the circumstances in which the judgment debtor may be heard is Hetherington v Driscoll.[42] In that case, the alleged debt due or accruing from the garnishee to the judgment debtor arose under a contract providing for progress payments 14 days after the making of a certificate. At the time of the order nisi no moneys were payable to the judgment debtor by the garnishee. The matter came before the Full Court of the Supreme Court of Victoria on a review of a decision of the Justices under the Justices Act 1890 (Vic) by the judgment debtor, who claimed to be a person aggrieved by the order and thus entitled to review the decision. The evidence concerning the alleged debt was given by the judgment debtor. The judgment creditor objected. Higinbotham CJ again applied Roberts v Death saying:[43]
The debtor will be heard by the Court to show that there has been fraud, or in cases where injustice will be done by not allowing him to appear… If the order is made improperly, and if a sum of money, not yet become a debt within the Statute, is ordered to be paid by the garnishee to the judgement creditor, the judgement debtor is in fact aggrieved by that order, and he may take advantage of that to correct the mistake.
[42]Hetherington (n 28).
[43]Roberts (n 24) 357-8.
Having thus allowed the judgment debtor to appear to review the Justices’ decision, the Court overturned the decision on the ground that there was no evidence that the garnishee was indebted to the judgement debtor on the day on which the order nisi for attachment was made.
In the case before me, the judgement debtor did not seek to introduce any evidence at all. Save for two matters, all the evidence before me comprised the evidence given on behalf of the judgement creditor on the application for the ‘summons order’. The first additional matter was that the mediation ordered by Bell J had not concluded and that there was no agreement between the judgement debtor and 63 Buckley St as to the division of the settlement sum, whatever that settlement sum amounted to. The second matter was that there was a ‘drop dead’ date under the terms of settlement by which, if there were no agreement as to its division, the settlement sum had to be paid into Court. All that the judgement debtor sought to do was to bring the Court’s attention to authorities relevant to the question whether there was a debt due or accruing at the time of the hearing, being one that had become due or accrued to the judgement debtor from the garnishee between the day the ‘summons order’ was made and the day for hearing named in the garnishee summons. What the judgement debtor sought to do was to draw the facts together and apply the relevant law to those facts in a way which assisted the Court in coming to a just decision, or one that avoids an injustice.
It seems to me to be undeniable that in these circumstances it is appropriate for the judgement debtor to appear and bring matters to the attention of the Court that will avoid an injustice being done. I therefore hold that the judgement debtor was entitled to appear and make the submission in fact made.
Debt due or accruing
The next issue is whether between the day the ‘summons order’ was made (30 January 2019) and the day for hearing named in the garnishee summons (28 February 2019) there was a debt that had become due or accrued to the judgment debtor from the Garnishee.
At the hearing of the garnishee summons, it was common ground that the mediation between the judgment debtor and 63 Buckley St had not concluded and that there had been no agreement as to the division of the settlement sum between them. There was no evidence before the Court from the Garnishee, or anyone else, concerning the amount of the settlement sum or the terms of the settlement. The evidence before the Court was the evidence given at the time of the application for the ‘summons order’. In addition, there was undisputed information from the Bar table that the mediation had been adjourned and that there was a ‘drop dead’ date by which agreement must be reached or the settlement sum was to be paid into Court by the Garnishee.
The judgement debtor submitted, therefore, that it had not been shown that there was, at the date of the hearing, a debt due or accruing to the judgement debtor from the Garnishee. All that had been shown is that there was an undifferentiated amount of money to be paid in proportions to be agreed at the mediation. In these circumstances, it was submitted that no order could be made under r 71.09 of the Rules for payment because there was no debt ‘attached’ within the meaning of that Rule.[44] That was because there was no debt, that is a ‘sum certain’ that had become due or accrued to the judgment debtor from the Garnishee.[45]
[44]Hetherington (n 28).
[45]Alexander v Ajax Insurance Co Ltd [1956] VLR 436 (‘Alexander’).
The judgement creditor submitted that it was not necessary for it to advance evidence as to the precise amount due in circumstances where the garnishee knows the facts and ought to inform the Court.[46] The judgement creditor also submitted that there is no evidence that the judgement debtor needs to do anything to trigger an obligation by the Garnishee to pay pursuant to the terms of settlement. If the judgement debtor does absolutely nothing, the evidence establishes that the garnishee is obliged to pay the sum agreed under the terms of settlement (which turns out to be the sum of $400,000) into Court by a particular date.
[46]Reference was made to Cresswell (n 29) 194-5; De Pass (n 26) 218-20; Vinall (n 26).
The judgement creditor further submitted that:
(a) the debt was accruing by the Garnishee to the judgement debtor, under the terms of settlement, in settlement of a claim between the judgement debtor, as plaintiff, and the Garnishee, as defendant, in the Alderuccio Proceeding. There was a present obligation to pay a sum certain in the future;
(b) there remains a dispute between the judgement debtor and 63 Buckley St as to the division of the settlement sum between them. This brought into play r 71.11 of the Rules (see above at [29]). Under the equivalent provision in the old rules, O 45 r 5, whenever it was suggested by the Garnishee that the debt sought to be attached belonged to a third person, or that third person had a lien or charge upon it, the Court could order the third person to appear and give particulars of the claim upon the debt;
(c) the new rule, although it contains no reference to a suggestion by the Garnishee, does not alter the previous practice as to the obligation of the Garnishee to inform the Court of the interest of a third party in the debt sought to be attached, or the authority of the Court in dealing with the claim of a third party to the debt;
(d) in this case, the settlement sum has been paid into Court by the Garnishee. The judgement debtor and 63 Buckley St claim to be entitled, in part, to the sum paid into Court. Having paid the money into Court, the Garnishee has no obligation to fulfil;
(e) it is therefore appropriate to make orders amending the summons to add, in the alternative, that upon payment by the Garnishee of the settlement sum into Court in accordance with the order made by Bell J on 22 January 2019 in the Alderuccio proceeding, that money should stand to the credit of the judgement debtor to satisfy the judgment debt he owes to the judgement creditor, together with interest and costs to be paid to the judgement creditor pursuant to r 71.11 and/or 71.13 and the summons as so amended be referred to Bell J for further hearing and determination.
There seems to me to be a difference between the onus on the judgment creditor as to the evidence to be given on an application for an attachment order under the current rules and the evidence that was called for on such a hearing under the former rules. Under the old rules, once the judgement creditor had established the jurisdictional facts required for the issue of an order nisi, the burden shifted to the garnishee to dispute the debt, or indebtedness, established.
Where the particular debt is one falling within r 71.02(b) of the Rules, that is a debt which must become due or accrue to the judgement debtor between the date of the ‘summons order’ and the day of hearing, who is it that must establish that the debt has become due or accrued to the judgment debtor? On one hand, it could be said that the burden must fall on the judgement creditor to advance evidence that establishes that fact, just as it is the judgement creditor’s burden to establish that a debt is due or accruing in order to bring the matter within r 71.02(a) of the Rules. On the other hand, casting the burden on the garnishee is not an unjust result because it is likely to be peculiarly within its’ knowledge whether the debt has fallen due between the day on which the ‘summons order’ was made and the day of hearing named in the garnishee summons.
Whichever way it is viewed, the question in this case on the facts before the Court is whether it can be said that there is a debt that has become due or accrued to the judgement debtor between the day of the ‘summons order’ and the day of the hearing named in the summons. In my view, so far as the terms of settlement are known (and these are only known from what appears in the order made by Bell J) there is no debt that has become due or accrued to the judgement debtor unless and until the amount of the settlement sum to be paid to the judgement debtor is ascertained.
The reasoning that supports this conclusion is derived from the learning referred to above and that reviewed by Sholl J in Alexander v Ajax. In particular, in Webb v Stenton[47] Lindley LJ expressed the meaning of a debt due as a sum of money which is now payable and a debt accruing as a sum of money that will become payable in the future by reason of a present obligation. It is implicit in these statements that there is an ascertained amount of money in each case.
[47]Stenton (n 12) 527; Referred to with approval in Evriniadis (n 12) 693.
In Alexander v Ajax, Sholl J considered at length the history of the expression ‘debt or liquidated demand’ in the rule that preceded r 21.03 of the Rules (O 13 r 3 of the former rules). In the process he elucidated the meaning of a ‘debt’. It is not necessary here to go into the detailed history of the meaning. It is sufficient to say that for present purposes it essential that the debt be for a ‘sum certain’.[48]
[48]See Alexander (n 45) at 445 where Sholl J quotes from Chitty on Pleading, (5th Edition, 1831) Vol 1, 123-4.
In this case, the sum due by the Garnishee to the judgment debtor is uncertain. It could be $1.00 or $399,999.00 or any number between. What then is susceptible to attachment? Not the whole settlement sum because another person (63 Buckley St) is entitled to an equally uncertain share of it.
This reasoning also shows that r 71.11 is not applicable in this case because there is no sum certain that is ‘the debt attached’ within the meaning of that rule. It is therefore not appropriate to make the amendments to the garnishee summons sought by the judgment creditor or to make any order under that rule leading to any determination.
Conclusion
I conclude that:
(a) the Court may permit the judgement debtor to give evidence or be heard where they have evidence or submissions which may be relevant to whether an order should be made upon the garnishee summons; and
(b) the garnishee summons should be dismissed as, at the date of the hearing named in it, there was no debt due or accruing by the Garnishee to the judgment debtor.
I will hear the parties as to the costs of the garnishee summons at a time to be arranged with my Associate.
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