L.E. Avery and H.R. AVERY-EVANS v O'Mara Constructions - [2003] FMCA 113

FEDERAL MAGISTRATES COURT OF AUSTRALIA

L.E. AVERY & H.R. AVERY-EVANS v O’MARA CONSTRUCTIONS

[2003] FMCA 113

BANKRUPTCY – Bankruptcy notice – application to set aside – whether a judgment in New South Wales over 10 years old is deemed stayed – whether bankruptcy notice can be founded on such a judgment – whether prior execution has any relevance.

Bankruptcy Act 1966 (Cth), ss.40(1)(g), 41(3)(b)

Limitation Act 1969 (NSW), s.17
Supreme Court Rules (NSW), o.44

Re O’Keefe; Ex parte Australia Factors Ltd (1963) 19 ABC 101

Re Munson; Ex parte Deputy Commissioner of Taxation (1977) 29 FLR 479 at 482

Re Seers (1955) 17 ABC 11
Wiltshire-Smith v Mellor Olsson (1995) 57 FCR 572
Re Exell; Ex parte Martin (1995) 62 FCR 337
Reasonable Endeavours Pty Ltd v Dennehy (2001) 107 FCR 144
Cawood v Cawood [2000] FCA 1786
Abigroup Ltd v Abignano (1992) 39 FCR 74

Applicants:

LANGER EDWARD AVERY
HELEN RUTH AVERY-EVANS

Respondent:

O’MARA CONSTRUCTIONS PTY LTD

File Nos:

SZ 1141 of 2002

SZ 1142 of 2002

Delivered on:

9 April 2003

Delivered at:

SYDNEY

Hearing date:

1 April 2003

Judgment of:

Raphael FM

REPRESENTATION

Counsel for the Applicant:

Mr B Skinner

Solicitors for the Applicant:

Deacons

Counsel for the Respondent:

Mr A Lo Surdo

Solicitors for the Respondent:

Colin Biggers & Paisley

ORDERS

Bankruptcy notices N1290 and N1291 of 2002 set aside.

FEDERAL MAGISTRATES
COURT OF AUSTRALIA AT
SYDNEY

SZ 1141 of 2002

SZ 1142 of 2002

LANGER EDWARD AVERY
HELEN RUTH AVERY-EVANS

Applicants

And

O’MARA CONSTRUCTIONS PTY LTD

Respondent

REASONS FOR JUDGMENT

In these two matters the applicants each seek to set aside a bankruptcy notice issued by the Official Receiver. Both notices were issued on 25 June 2002. Mr Avery’s notice is numbered N1290 of 2002 and Mrs Avery’s is numbered N1291 of 2002. Both bankruptcy notices seek payment of the same debt in the sum of $125,270.79. There is annexed to both bankruptcy notices a copy of the Supreme Court of New South Wales Judgment in Matter No 16682 of 1991 which states that the judgment takes effect on 21 February 1992. The bankruptcy notices were served pursuant to an order for substituted service made in this court on 25 September 2002.
The single point upon which it is sought to set aside both notices is that they were issued more than ten years after the date upon which the judgment became effective. It is argued that in these circumstances the notices do not comply with the provisions of s.41(3)(b) of the Bankruptcy Act 1966 (Cth) (“The Act”) which relevant provides:
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 …”
Section 40(1)(g) of the Act, so far as it material, provides that a debtor commits an act of bankruptcy:
“If a creditor who has obtained against the debtor a final judgment or final order, being a judgment or order the execution of which has not been stayed, is served on the debtor in Australia … a bankruptcy notice under this Act …”
It is common ground that enforcement of this judgment within New South Wales is governed by Part 44 of the Rules of the Supreme Court. Part 44 Rule 2 is in the following form:
“[44.2] Leave for issue: general
(1) Notwithstanding Part 42, a writ of execution to enforce a judgment shall not be issued without the leave of the Court in the following cases-
(a)where 10 years or more have elapsed since the date of taking effect of the judgment;
…
(3)A person may, unless the Court otherwise orders, move for leave for the purposes of this rule without filing or service notice of the motion.”
It is also common ground that after the expiration of ten years from the date upon which the judgment took effect no leave under the provisions of this rule was sought by the judgment creditor. However, it is agreed that a writ of execution did issue in or about 1992 and that such writ was satisfied insofar as goods were seized and sold, even though they did not do more than pay off approximately $15,000.00 of the outstanding debt.
Mr Skinner, who appeared on behalf of the applicants, argues that the effect of Order 44 Rule 2 RSC (NSW) is to place a stay upon the execution of the judgments against the debtors and therefore the creditor is not a person who is in a position to issue execution. (Re O’Keefe; Ex parte Australian Factors Ltd (1963) 19 ABC 101 at 103). The bankruptcy notice is invalid because it demands payment of a sum for which execution cannot issue (Re Munson; Ex Parte Deputy Commissioner of Taxation (1977) 29 FLR 479 at 482.
Mr Skinner argues that the existence of a satisfied writ of execution is irrelevant in these circumstances because that is no bar to the issue of a subsequent writ. In order for the debtor to put itself in a position to issue execution on the judgment at the time when it issued the bankruptcy notice (Re Seers (1955) 17 ABC 11) it would have had to have sought leave from the Supreme Court of New South Wales.
Mr Lo Surdo who appeared on behalf of the respondent argued that the meaning of the word “execution” in s.40(1)(g) of the Act is wider than the references to execution in Order 44 Rule 2 which limits itself to four forms of writ and writs in aid of those writs. The respondent argues that the only effective method of staying execution other than a clear order of the court to that effect is if execution is prevented by reason of the Limitation Act 1969 which, in New South Wales, is controlled by s.17 of the Limitation Act and in relation to a judgment allows an action on a judgment for a period of twelve years from the date upon which the judgment first becomes enforceable.
It is clear from Wiltshire-Smith v Mellor Olsson (1995) 57 FCR 572 at 584 that:
“For the purposes of these provisions (ss.40(1)(g) and 41(3)(b) of the Act) there need not be an express order of a court staying execution on the particular judgment on which the creditor relies.”
The respondent’s argument was put most clearly in Re Exell; Ex parte Martin (1995) 62 FCR 337 where His Honour said:
“There is in my view no logical reason, as a matter of policy, why a creditor who has available a variety of methods of enforcement a judgment should have his right to issue a bankruptcy notice foreclosed because one means of execution is not presently available to him.”
The decision in Re Exell was considered and distinguished in Reasonable Endeavours Pty Ltd v Dennehy (2001) 107 FCR 144. This case was on all fours with the one presently before me save that there had been no previous execution. I am satisfied that the existence of a previously satisfied writ of execution will not avail the respondent because the ability to issue execution is to be looked at upon the date of the issue of the bankruptcy notice (Re Seers supra). In those circumstances the case provides persuasive authority, subject only to the contrary views of Olney J in Exell. Marshall J’s judgment is short. It deals with the authorities including, in particular, that of Cawood v Cawood [2000] FCA 1786 in which Sackville J considered a number of relevant cases including that of the Full Court in Abigroup Ltd v Abignano (1992) 39 FCR 74. I am satisfied that this is a decision which I should follow. Reasonable Endeavours makes it clear that the failure to seek leave of a Supreme Court to apply for a warrant of execution means that the execution of the judgment was stayed for the purposes of ss.40(1)(g) and 41(3)(b) thus rendering the bankruptcy notices invalid.
I set aside the bankruptcy notices. I will hear the parties on costs.

I certify that the preceding eleven (11) paragraphs are a true copy of the reasons for judgment of Raphael FM

Associate:

Date: