Kourtis, Constantinos v Commonwealth Bank of Australia

[1997] FCA 1229

FEDERAL COURT OF AUSTRALIA

BANKRUPTCY - Application to set aside bankruptcy notice - Whether execution of judgement to which the bankruptcy notice relates has been stayed - Whether agreement between the creditor and debtor to that effect - Construction of deed of settlement - Assignment of charge over Supreme Court proceedings - Whether evidence of an agreement to delay bankruptcy proceedings or other forms of recovery pending the completion of the Supreme Court proceeding

Bankruptcy Act 1966 (Cth) s 41(3)(b)

Penning v Steel Tube Supplies Pty Ltd (1988) 18 FCR 568 cited
Re Williams; Ex parte General Credits Ltd (1983) 68 FLR 202 cited

KOURTIS v COMMONWEALTH BANK OF AUSTRALIA
No VG 7399 of 1997

JUDGE:        NORTH J
PLACE:        MELBOURNE
DATE:          18 AUGUST 1997

IN THE FEDERAL COURT OF AUSTRALIA
VICTORIA DISTRICT REGISTRY	VG 7399  of   1997

BETWEEN:

CONSTANTINOS KOURTIS
FIRST APPLICANT

PHILIA KOURTIS
SECOND APPLICANT

AND:

COMMONWEALTH BANK OF AUSTRALIA
RESPONDENT

JUDGE(S):

NORTH J

DATE OF ORDER:

18 AUGUST 1997

WHERE MADE:

MELBOURNE

THE COURT ORDERS THAT:

1. The application is dismissed with costs.

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	VG 7399 of 1997

BETWEEN:

CONSTANTINOS KOURTIS
FIRST APPLICANT

PHILIA KOURTIS
SECOND APPLICANT

AND:

COMMONWEALTH BANK OF AUSTRALIA
RESPONDENT

JUDGE(S):	NORTH J
DATE:	18 AUGUST 1997
PLACE:	MELBOURNE

EX TEMPORE REASONS FOR JUDGMENT

This is an application to set aside a bankruptcy notice, issued on 19 May 1997, served by the Commonwealth Bank of Australia (the Bank) against the applicants, Mr Constantinos Kourtis and Mrs Philia Kourtis. The bankruptcy notice was based on a judgment of the Supreme Court of Victoria in the sum of $220,000 less certain payments made since the date of the judgment. The amount outstanding at the time of the service of the bankruptcy notice was alleged to be $102,516.17. Mr Woodhouse, who appeared on behalf of the applicants, relied on the provisions of s 41(3)(b) of the Bankruptcy Act 1966 (Cth) as the basis for the application to set aside the notice. That section reads as follows:

“41(3) A bankruptcy notice shall not be issued in relation to a debtor;
......

(b) if, at the time of the application for its issue, execution of the judgment or order to which it relates has been stayed;”

It is established that execution of a judgment is stayed for the purposes of this section even where there is no express order to that effect: see Penning v Steel Tube Supplies Pty Ltd (1988) 18 FCR 568, at 575-576. A judgment may be stayed for the purposes of this section if there is an agreement in existence between the creditor and the debtors to that effect: Re Williams; Ex parte General Credits Ltd (1983) 68 FLR 202, at 206-207. The issue in this case is whether there was an agreement in existence at the date of the application for the issue of the bankruptcy notice that execution of the Supreme Court judgment be stayed. I therefore turn to the facts.

On 14 December 1995, the Bank and Mr and Mrs Kourtis agreed to a judgment of the Supreme Court of Victoria in the sum of $220,000. On the same day, the parties executed a deed of settlement. The deed provided for Mr and Mrs Kourtis to pay the said sum in satisfaction of a larger debt by a payment to be made on 15 June 1996. It also provided that, in case of default of compliance with this obligation, Mr and Mrs Kourtis would deliver up possession of land which secured a mortgage, the failure to pay amounts due under the mortgage being the basis of the judgment debt. Clause 6 of the deed of settlement provided as follows:

“Mr and Mrs Kourtis agree to execute charges in favour of the Bank over choses in action being their claim against Mr Green in Supreme Court proceeding No 8497 of 1995 and any further or other claim or claims which they bring in any jurisdiction in relation to their allegation that their copyright in the film entitled ‘The Minotaur’ was breached and in relation to any other claim for loss and damage which they might bring arising out of or  relating to the film.”

Mr and Mrs Kourtis failed to pay the amount due under the deed of settlement on 15 June 1996. The land referred to in the deed of settlement was ultimately sold and the proceeds of sale were applied to reduce the debt to the amount which is presently outstanding. The settlement of the sale of the land was concluded on 20 November 1996. About a week later, the Bank sent to the solicitor for Mr and Mrs Kourtis a deed of charge, pursuant to clause 6 of the deed of settlement, for execution by Mr and Mrs Kourtis. There was, apparently, no response to that request except, perhaps, by telephone from the solicitors for Mr and Mrs Kourtis. In any event, on 9 December 1996, the Bank’s solicitor wrote to the solicitors for Mr and Mrs Kourtis, in part as follows:

“I am writing to confirm that once the Bank receives the signed Deed, it will not take any enforcement action in relation to the balance of moneys owing pending the outcome of the proceeding referred to in the Deed.”

The letter went on to request that the deed of charge be executed and returned to the Bank. On 3 January 1997, the solicitor for the Bank again wrote to the solicitors for Mr and Mrs Kourtis, in part as follows:

“As the Bank has not received the signed Deed nor payment of the balance of money owing under the Agreement dated 14 December 1995, I have been instructed to enforce the judgment obtained on 14 December 1995 in respect to the balance owing.”

On 9 January 1997, Mr and Mrs Kourtis executed the deed of charge and had it delivered to the Bank. The bankruptcy notice was issued on 19 May 1997 and served on the debtors on 1 June 1997.

Mr Woodhouse contended that clause 6 of the deed of settlement executed on 14 December 1996 contained a promise by the Bank not to take further proceedings to enforce the judgement debt, in the event of a default by Mr and Mrs Kourtis in complying with the deed of settlement, until the conclusion of the Supreme Court proceedings which were the subject of the charge set out in clause 6. He contended that the letter sent by the Bank on 9 December reflected that agreement when it said that, if the deed was signed and returned, no further enforcement action would be taken “pending the outcome of the proceeding referred to in the Deed”.

I am not able to accept this argument. The terms of clause 6 of the deed of settlement and, indeed, of the deed in totality, do not evidence an agreement to delay bankruptcy proceedings or other forms of recovery pending the completion of the Supreme Court proceeding. The deed of settlement simply provides for additional security in the case of default by way of assignment of the choses in action. In my view, clause 6 of the deed of settlement goes no further than providing for the execution of such choses in action. It does not expressly, or by implication, or taken together with the other terms of the deed of settlement, suggest that the Bank would defer enforcement action pending the outcome of the Supreme Court proceeding. The Bank’s letter of 9 December 1996 is not, in itself, a contractual document and has no contractual significance. At the highest, it indicates a unilateral intention on the part of the Bank to delay its right to take additional steps to recover the debt outstanding pending compliance with the obligations already set out in the deed.

For those reasons, Mr and Mrs Kourtis have not persuaded me that the Bank made any agreement to defer bankruptcy proceedings until the completion of the Supreme Court proceedings which were the subject of the charge set out in clause 6 of the deed of settlement. Consequently, the basis asserted for the setting aside of the bankruptcy notice has not been established. The application must therefore be dismissed.

I certify that this and the preceding three (3) pages are a true copy of the Reasons for Judgment herein of the Honourable Justice North

Associate:

Dated:            20 October 1997

Counsel for the Applicant:	Mr P. Woodhouse
Solicitor for the Applicant:	Jonathan Wong
Counsel for the Respondent:	Mr G. Carroll
Solicitor for the Respondent:	Australian Government Solicitor
Date of Hearing:	18 August 1997
Date of Judgment:	18 August 1997