Komesaroff, Morris v Law Institute of Victoria

[1997] FCA 893

FEDERAL COURT OF AUSTRALIA

BANKRUPTCY - debt owed to Law Institute of Victoria - after petition filed Victorian statute abolishes law Institute and substitutes new corporate entity - application for a substitute new entity as petitioning creditor - application granted

Bankruptcy Act 1966 (Cth) ss 47(7), 52(5)

Legal Practice Act 1966 (Vic) ss 13(1)(c), 13(1)(e) Pt 3 Sch 2

Elyard Corporation v DDB Needham Sydney Pty Ltd (1995) 133 ALR 206

McIntosh v Shashoua (1931) 46 CLR 494

Growden v Wiltshire (1935) 52 CLR 286

McNamara v Langford (1935) 45 CLR 267

Hyams v Elder Smith Goldsbrough Mort Limited (1976) 133 CLR 637

MORRIS KOMESAROFF v LAW INSTITUTE OF VICTORIA
NO VP 634 of 1996

JUDGE:	HEEREY J
PLACE:	MELBOURNE
DATE:	25 AUGUST 1997

IN THE FEDERAL COURT OF AUSTRALIA	)
)
VICTORIA DISTRICT REGISTRY	)  VP 634 of 1996
)
GENERAL DIVISION	)

BETWEEN:	MORRIS KOMESAROFF Debtor
AND:	LAW INSTITUTE OF VICTORIA Petitioning Creditor

JUDGE:	HEEREY J
PLACE:	MELBOURNE
DATE:	25 AUGUST 1997

MINUTES OF ORDER

THE COURT ORDERS THAT:

1. The creditor’s petition be amended by substituting Victorian Lawyers RPA Ltd as petitioning creditor.

1. A sequestration order be made against the estate of the debtor. 

1. Subject to the order for costs made on 18 August 1997 in favour of the debtor, the applicant creditor’s costs, including reserved costs, be taxed and paid from the estate of the respondent debtor in accordance with the Bancruptcy Act 1966.

The Court notes that the date of the act of bankruptcy is 8 May 1996.

Note:Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

IN THE FEDERAL COURT OF AUSTRALIA	)
)
VICTORIA DISTRICT REGISTRY	)   VP 634 of 1996
)
GENERAL DIVISION	)

BETWEEN:	MORRIS KOMESAROFF Debtor
AND:	LAW INSTITUTE OF VICTORIA Petitioning Creditor

JUDGE:	HEEREY J
PLACE:	MELBOURNE
DATE:	25 AUGUST 1997

REASONS FOR JUDGMENT

The debt on which the petition is founded is an order for costs taxed by Master Bruce in the Supreme Court of Victoria on 13 November 1992.  The debtor had brought proceedings against the petitioning creditor claiming damages for loss allegedly suffered as a result of the petitioning creditor refusing to grant a practising certificate to the debtor.  On 24 September 1991 in the Supreme Court Brooking J dismissed the debtor’s claim and on 10 March 1992 the Full Court of the Supreme Court dismissed the debtor’s appeal.  In both cases the debtor was ordered to pay the costs of the Petitioning Creditor.  The costs before Brooking J were taxed $10,883.80 and before the Full Court at $3,693.70.

On 21 August 1995 a bankruptcy notice was issued against the debtor.  It was served on 16 October. 

The debtor took proceedings seeking to set aside that notice. On 8 May 1996 Olney J upheld the validity of the bankruptcy notice and determined that the debtor did not have a counter-claim within the meaning of s 41(7) of the Bankruptcy Act 1966 (Cth) (the Act). His Honour also granted an extension of time to 24 May to comply with the notice. However the Full Court on 7 April 1997 held that Olney J did not have the power to grant the extension. The Full Court otherwise confirmed his Honour’s orders. The effect of the Full Court’s decision was that on the expiration of 8 May there had not been compliance with the requirement of the notice and an act of bankruptcy was committed.

To go back in time, the petition was filed and served on the debtor on 24 July 1996.

The petition came on for hearing before me on 7 and 8 July 1997. Judgment was reserved. On 11 August I made an order under the slip rule as from 8 July 1997 extending the time of the petition for a further twelve months pursuant to s 52(5) of the Act:  see Elyard Corporation v DDB Needham Sydney Pty Ltd (1995) 133 ALR 206.

In the meantime there were major changes to the organisation of the legal profession in Victoria as a consequence of the Legal Practice Act 1996 (Vic) (the L P Act). The Law Institute of Victoria was replaced by a company called Victorian Lawyers RPA Limited, referred to in the L P Act as “the Society”. The Society was incorporated as a company limited by guarantee on 22 December 1996. In Pt 3 of Sch 2 to the L P Act it was provided that on the “commencement day” (defined as 1 January 1997) the Institute was abolished. Amongst other things it was provided by cl 13(1)(c) and (e) as follows:

(c)       All rights, property and assets that, immediately before the commencement, were vested in the Institute (other than the Solicitors’ Guarantee Fund and any rights attaching to the Fund, money deposited with the Institute under section 40(2A) of the old Act and investments of that money and any rights in connection with arrangements under s 53A of the old Act) are, by force of the sub-clause, vested in the Society

...

(e)       The Society is, by force of the sub-clause, substituted as a party to any proceeding pending in any court or tribunal to which the Institute was a party immediately before that day, rather than a proceeding relating to the Solicitors’ Guarantee Fund, money deposited with the Institute under s 40(2A) of the old Act, investments of that money and arrangements under s 53A of the old Act.

By a notice of motion dated 16 April 1997 the petitioning creditor sought leave to amend the title of the petition by substituting “Victorian Lawyers RPA Limited” as the petitioning creditor in place of “Law Institute of Victoria”.  The issues raised by this motion were the principal items in dispute on the hearing of the petition.

I am satisfied that leave should be granted.  It is not to the point, as the debtor argued, that the substituted petitioning creditor was not in existence at the date of the act of bankruptcy, or indeed at the date of the petition.  I am satisfied the debt was in existence and was owed by the debtor from 13 November 1992.  That debt became payable to Victorian Lawyers RPA Limited on 1 January 1997 as a consequence of the operation of the L P Act 1996: see McIntosh v Shashoua (1931) 46 CLR 494, Growden v Wiltshire (1935) 52 CLR 286. It is the debt which must be owed at the date of the petition: McNamara v Langford (1935)  45 CLR 267, Hyams v Elder Smith Goldsbrough Mort Limited (1976) 133 CLR 637 at 639. But the debt need not necessarily be owed then to the party who has sought to be substituted as petitioning creditor.

Victorian Lawyers RPA Limited will accordingly be substituted as petitioning creditor. This leave is necessary because cl 13(1)(e) of Pt 3 of Sch 2 would not be applicable. That provision could not validly amend any proceedings whatsoever to which the Institute was a party immediately before 1 January 1997. Read literally, cl 13(1)(e) would mean any court or tribunal anywhere in the world. The provision has to be read down so as to apply to courts or tribunals over which the Victorian Parliament has jurisdiction. Accordingly it would not extend to a proceeding in the Federal Court, even if it were in the Victoria District Registry of the Court.

There will be orders granting leave to amend the petition by substituting Victorian Lawyers RPA limited as petitioning creditor.  There will be an order for sequestration and an order that the debtor pay the costs of the petitioning creditor in accordance with the Act.

I certify that this and the preceding two (2) pages are a true copy of the Reasons for Judgment herein of the Honourable Justice Heerey

Associate:

Dated:            

Counsel for the Applicant:	J A Nolan
Solicitor for the Applicant:	Tresscocks & Maddox
Counsel for the Respondent:	The debtor appeared in person
Date of Hearing:	7 - 8 July 1997
Date of Judgment:	25 August 1997