Lawrence v Keenan

[1935] HCA 50

63 C.L.K.] OF AUSTRALIA.

153

[HIGH COURT OF AUSTRALIA.}

LAWRENCE .

Ap p e l l a n t ;

KEENAN

.

R e s p o n d e n t .

ON APPEAL FROM THE COURT OF RANKRUnTCY.

Bankruptcy—Property oj bankrupt divisible among creditors— Motor car under hire-

H. C. OF A.

purchase agreement— Repossession oj motor car bejore sequestration order— 1935

Relation back to commencement oj bankruptcy—A’o notice under moratorium

with respect to seizure— H'aiver oj notice— Bankruptcy Act 1924-1933 {No. 37

Br isba n e ,

oj 1924—No. ()(> oj 1933), secs. CO, 90, 91 (iv.)— Mortgagors Reliej Acts 1931­

J idy 4, 5, 9.

1932 ((,).) (22 Qeo. V. No. C—23 Oeo. V. No. 10), sec. 4.

Itich, Dixon

HI 1 -McTieman

33.

The claim or right of a bankrupt to property held by him under a hire- purcliaae ngi-eement and divisible amongst his creditors under sec. 91 (iv.) of the Bankruptcy Act 1924-1933 is the claim or right of the bankrupt to the property existing at the time that the sequestration order is made, and not a t the commencement of the bankruptcy by relation back.

The debtor as hirer had in his possession a motor car under a hire-purchase agreement with a motor firm as owner. The debtor took the car to the owner and pointed out that he was unable to pay the instalment then due on the car and the other instalments to fall due in the future. The debtor left the car with the orvner, who thereupon took possession of the car. No notice was given by the owner to the debtor under the Mortgagors Reliej Acts 1931­ 1932 (Q.). Subsequently a sequestration order was made against the debtor. The official receiver claimed passession of the car under sec. 91 (iv.) of the Bankruptcy .kct.

Held that as the notice required under the Mortgagors Relief Acts 1931­ 1932 had not been given to the debtor, the seizure on the part of the owner was ineffectual for any purpose, and that therefore the official receiver was entitled to deliverv up of the car.

Decision of the Court of Bankruptcy affirmed.

154 HIGH COURT

[1935.

H. c. OF A. Appeal from the Court of Bankruptcy, Central District, Queensland,

Between the 3rd and 6th May 1933 the debtor, Ernest Rudal

Lawrence Eley of Rockhampton, storekeeper, had an interview wdtli the

V.

K eenax.managing director of Denham Bros., Rockhampton, a creditor.

The debtor informed the managing director that he was unable to meet his account with Denham Bros., that he owed considerable sums of money to other creditors and had only a small amount of money with which to pay, and was unable to meet his engagements then due. The managing director advised the debtor to arrange an assignment of his estate for the benefit of his creditors. The debtor promised to do so, but in fact made no such arrangement. The debtor held a motor car under a hire-purchase agreement with James Lawrence trading as the Lawrence Motor Co. He had made payments under the agreement, and at this time five further instal­ ments were required to be made to complete the purchase of the car. About the 8th or 9th May of the same year, the debtor, in response to a letter concerning an instalment which had not been paid, took the car to the Lawrence Motor Co. and interviewed James Lawrence. The debtor informed Lawrence that he was unable to pay the instalment then due and the other instalments to fall due in the future. The debtor left the car with the Lawrence Motor Co. who then took possession of the car. No notice had been given by the Lawrence Motor Co. to the debtor under the Mortgagors Relief Acts 1931-1932 (Q.). The hire-purchase agreement was in the usual form, and made provision that if the hirer should do any act whereby his estate might become liable to proceedings in insolvency or upon any proceedings in insolvency being taken by or against him then the owner should be entitled to the re-delivery of the motor car or to take possession thereof and the owner should be entitled without any previous demand to determine the hiring and to retake possession of the motor car.

The official receiver applied by motion to Brennan J. at Rock­ hampton for an order that the motor car be delivered up to him. Brennan J. held that the hire-purchase agreement was within the ambit of sec. 91 (iv.) of the Bankruftcy Act, and that the official receiver had authority to repossess the car on payment of the amount

53 C.L.R.] OF AUSTRALIA.

155

(hi<* on it, or should be paid the difference between the value of the

H. C. OF A.

1935.

car anfl the amount due.

L.\w rexcef.

From this decision Lawrence now appealed to the High Court.

K e en a n .

Fahejj (with him Larcombe), for the appellant. The claim or right of the official receiver under sec. 91, par. iv., of the Bankruptcy Act is the claim which existed in the bankrupt at the time of the sequestration order. The wording of sec. 91 is conclusive on this point. The evidence of the act of bankruptcy is not sufficient to constitute an act of bankruptcy under sec. 52 (k). There was no notice on the part of the bankrupt to suspend payment within the meaning of sec. 52 {k). There should be a deliberate intent on the part of the bankrupt not to pay all creditors {Cropley's Ltd. v. Vickery (1) ). There mu.st be an intention and communication of that intention to the creditors. Notice to a single creditor is not so readily construed as an act of bankruptcy as notice to creditors generally. Trustee of I^ord Hill v.

Rowlands (2) ).

The oral statement made by a debtor to a creditor

that he is unable to pay his debts in full is not notice. Notice must be given formally and deliberately. There was no statement that the debtor intended to suspend payment. The notice must be deliberate and formal, and not something casual.

[R ich J. referred to Re Pike ; Ex parte the Official Assignee (3), and to Re Brady; Ex parte Official Assignee (4).]

The offer to pay a certain amount in the pound is not an act of bankruptcy (Re Walsh ; Ex parte The Trustee (5) ). The doctrine of relation back does not apply to hire-purchase agreements by reason of the provisions of sec. 91, par. iv., of the Act. There is a difference in the language used in par. iv. of sec. 91 which was introduced by the amending Act of 1932 and pars, i., ii. and iii. of sec. 91. Pars, i., li. and iii. refer to the commencement of the bankruptcy, and define with precision that they relate to property vested in the bankrupt at the commencement of the bankruptcy. The words “ at the commence-

(1) (1920) 27 C.L.R. 321, a t pp. 325,

(3) (1896) 17 L.R. (N.S.W.) B. & P.

32b.

34.

(2) (18(Hi) 2 Q.B. 124 ; 3 Mans. 13G.

(4) (1898) 19 L.R. (N.S.W.) B. & P. 6.

(.5) (1885) 52 L.T. 694.

156 HIGH COURT

[1935.

H. C. OF A. ment of the bankruptcy ” have not been included in par. iv. Conse­

quently the Legislature did not intend that the trustee as regards

Lawrence hire-purchase agreements should have any interest greater than

V.

K eenan.the bankrupt had at the time of the sequestration order. The

doctrine of relation back has been excluded from par. iv. If the doctrine of relation back applies, the evidence was not sufficient to establish any act of bankruptcy prior to the filing of the petition by the debtor.

Macrossan, for the respondent. The act of bankruptcy was committed by the debtor at an interview with the managing director of Denham Bros, at a date between the 3rd and 6th May 1933. The repossession by the appellant on the 9th May was an unlawful act under the Mortgagors Relief Acts, and no rights could accrue to the appellant. At the commencement of the bankruptcy the debtor had a right to purchase a car which was property within the meaning of the Bankruftcy Act. That right, therefore, devolved on the trustee for the benefit of the creditors. If that right were relinquished in favour of the appellant there would be a settlement under sec. 94 of the Bankruftcy Act. Under sec. 4 of the Mortgagors Reliej Act 1931, as amended by Part IV. of the Financial Emergency Relief Extension Act 1932, it was unlawful for the appellant to exercise his powers without having complied with the statute. The act of repos­ session is therefore unlawful and is a nullity. There is a statutory pro­ hibition which renders void the transaction {Cornelius v. Phillifs (1)). There was sufficient evidence of an act of bankruptcy. The interview between the managing director and the debtor was not informal or casual. There is an act of bankruptcy if from the conduct and words of the debtor the information is conveyed to creditors and it is understood by them that the debtor is about to suspend payment. A circular has been held to be an act of bankruptcy. The question is what effect would the communication have on the minds of the creditors {Crook v. Morley (2) ). There need be no formal written commimication; oral notice is sufficient. No particular form of notice is required {Chugh v. Samuel (3) ). The communication

(1) (1918) A.C. 199, at pp. 205, 211.

(2) (1891) A.C. 316, a t p. 321.

(3) (1905) A.C. 442, a t pp. 446, 447.

53 C.L.R.]

OF AUSTRALIA.

was made seriously, and the inference is that an act of bankruptcy

. . *

193o

was committed under sec. 52 {k).

Under the hire-purchase a^eement

’' ’

the flebtor had the absolute right to purchase the car by paying the

L aw rbx ck

r.

balance of the instalments. If there were no valid repossession the

K een AX.

debtor’s right continued. If there be no relation back, there was the debtor’s right to purchase which is property under sec. 4 of the Bank­ ruptcy Act. Property includes choses in action. The debtor had a

contractual right to complete the purchase of the car.

ec. 91,

par. iv., keeps alive the right of a purchaser, and the debtor had that right at the commencement of the bankruptcy. Sec. 91, par. i.,

also keeps that right alive.

The hire-purcha.se agreement should be

construed in the favour of the debtor and against the appellant.

Fahey, in reply.

The car was repossessed with the consent and

acquiescence of the debtor. In those circumstances the transaction amounted to an abandonment by the debtor, and not to a seizure under sec. 4 of the Mortgagors Relief Acts. The circumstances show that the debtor realized that he could not go on with the payments about to fall due, and he determined the hiring. The debtor waived his right of notice under the Mortgagors Relief Acts. Where the legislature enacts something which gives a right to an individual, that individual may waive the right. Sec. 4 is intended for the relief of an individual mortgagor. Sec. 5, sub-sec. 3, shows that if the mortgagor does not within 14 days apply to the Court for relief the mortgagee may proceed with his remedy. I t therefore depends on the mortgagor 'W'hether he w'ill require observance of the Act or not on the part of the mortgagee. The exercise of the powers in the section means the exercise of the powders against the wdll of the mortgagor. There has been a w’aiver in this case {Equitable Life Assurarice of the United States v. Bogie (1) ). The Mortgagors Relief Act is an act for the benefit of an individual, and any rights conferred by that Act may be waived {Connell v. Phoenix Aerated H’o/er Co. (2) ).

Cur. adv. vult.

(1) (190;')) 3 C.L.R. 878, a t pp. 883, 896, 897 905.

(2) (1915) 34 N.Z.L.R. 666.

lo8 HIGH COURT

[1935.

H. C. OF A.

T h e Co u r t delivered the following written judgm ent:—

1935.The bankrupt, whose estate is now vested in the respondent, the

Lawrenceofficial receiver, was until a few days before the order of sequestration

V.

K eenan. in possession of a motor car which he had obtained under a hire-

purchase agreement from the appellant, a garage proprietor carrying

July 9.

on business at Rockhampton.

The agreement provided for a payment of £80 upon delivery of the car to the hirer and for payment of twenty monthly instalments of rental or hire of £8 10s., making in all £250. Upon payment of this amount in full, the property was to pass to the hirer, who, however, did not engage to buy it and in the meantime was a bailee only, and entitled at any time to return the chattel and determine the bailment. Although the agreement bound the appellant to sell the car in the event of the hirer paying up the instalments of hire at any time, a condition of the agreement provided that until payment in full of the rental the car should continue to be the property of the appellant. The condition also provided that, if, as we construe it, before such payment in full, the hirer made default in paying an instalment, or did or suffered some other things that are specified, including exposing himself to insolvency proceedings and becoming the subject of such proceedings, thereupon the appellant should be entitled to the redelivery of the car and should be entitled to deter­ mine the hiring and to retake possession of the car. We think it clear that this clause gave the appellant an election to determine the hiring and did not operate so that ipso facto, on the occurrence of any of the specified defaults or events, the bailment came to an end. Of the instalments the hirer, the bankrupt, paid all but five. The fifth last fell due on 1st May 1933 and this he failed to meet. In response to a letter from the appellant the bankrupt called upon him on 9th May, and informed him that he was unable to pay the instalment and did not expect to be able to pay any more. There­ upon the appellant obtained possession of the car. There is a dispute as to whether the bankrupt spontaneously surrendered the car, or whether it was retaken in the exercise of the power reserved to the appellant by the agreement. The evidence on the subject is exiguous and unsatisfactory, but, having regard to the correspondence, we

oli C.L.K.] OF AUSTRALIA.

l.}‘j

think the proper conclusion is that the car was retaken pursuant

to the power of repossession, the bankrupt acquiescing. On 11th

LawrenceI'.

May l!t‘33 a sequestration order was made on the bankrupt’s own

petition. It is said that the bankruptcy commenced by relation

K een an .

back on 3rd May 1933, because, on that day, as it is alleged, the

Rich J

Dixon J.

bankrupt committed an act of bankruptcy under sec. 52 (k) of the .uc^raan J. that he had suspended or was about to suspend payment of his debts. It is, however, disputed whether the evidence establishes such a notice.

Upon this state of facts the respondent, the official receiver, claimed that he was entitled to the motor car, on paying up or offering to pay up the five remaining instalments of hire. He accordingly offered to pay the recpiired sum, and commenced proceed­ ings in bankruptcy to recover the car or the net money equivalent. The proceedings came before Brennan J. in the Supreme Court at Rockhampton. He decided that the official receiver was entitled to the car subject to the payment of the five remaining instalments of hire, and ordered the appellant to deliver it to him, or to pay its value after the deduction of that amount of hire unpaid. From that order the present appeal is brought. The ground of his Honor’s ilecision, as we understand it, was that an act of bankruptcy had been committed on 3ril May 1933 ; that the bankruptcy had commenced, therefore, on that date, and that sec. 91 (iv.) of the Bankruptcy Act 1924-1934 operates to vest in the official receiver or trustee the claim or right of the bankrupt under a hire-purchase agreement as from the commencement of the bankruptcy.

We do not think that under sec. 91 (iv.) the claim or right with which it deals becomes as at the commencement of the bankruptcy part of the property of the bankrupt divisible amongst his creditors. Sec. GO provides that upon sequestration the property of the bankrupt shall vest in the official receiver and shall be divisible among the creditors of the bankrupt. Sec. 90, which deals with relation back, does not itself refer to property, but is concerned only with fixing the commencement of the bankruptcy. Sec. 91, in effect, defines the property of the bankrupt which vests imder sec. 60. In the case of property or rights of the description contained in pars, i..

160 HIGH COURT

[1935.

H.C. OF A. ii. and iii. of the section, the definition expressly fixes the

1935.commencement of the bankruptcy as at the time at which the

Lawrencedescription is to be applied. But par. iv., which was introduced

V.

in 1932 by amendment, contains no such expression.

The paragraph

K eenan.

is as follows ;

“ The claim or right of the bankrupt to property

Rich J

Dixon J.

under any contract, bill of sale, hire-purchase agreement, mortgage

McTieman J.

or lien made by or with the bankrupt or debtor on his trustee discharging or offering to discharge any legal liability with respect thereto.”

The omission of any reference to the commencement of the bankruptcy in this very inartificially drawn provision may be due to design or to carelessness in drafting. We suspect that the latter is the cause, but reasons of policy may be suggested which would be ample to account for the absence of any relation back in the case of hire-purchase agreements. But, in any case, a Court must construe the language actually used by the legislature and give effect to the intention it expresses. So construing sec. 91 (iv.) and sec. 60, we cannot doubt that their combined operation is to vest only the right or claim of the bankrupt which exists at the time of sequestration.

In the present case the appellant retook possession of the car before the date of sequestration. According to the tenor of the agreement, retaking possession of the car would, we think, terminate the bailment and all rights of the bankrupt in reference to the car, including his right to purchase it by paying the remaining instalments of hire. The reasons given by Brennan J., therefore, cannot in our opinion be supported. But the matter does not stop there. For the question arises whether the agreement can take effect according to its tenor ; whether the appellant was lawfully entitled to retake possession of the car as the terms of the agreement provided. We have come to the conclusion that he was not so entitled.

Under the Queensland Mortgagors Relief Acts 1931-1932, it is unlawful to exercise any power of rescission or of entry into possession under a hire-purchase agreement with respect to chattels, unless a month’s notice is given to the hirer that it is intended to exercise such a power (see sec. 2, definitions of “ mortgage ” and of “ hire-purchase agreement,” sec. 4 (1) (a) and sec. 5). The hirer may on receipt of such a notice apply to the Supreme Court for relief, and, if he does not, the power may be exer­ cised. The agreement in the present case purports to exclude the

53 C.L.R.] OF AUSTRALIA.

161

operation of all legislative provisions of such a nature. I t was

made after the commencement of the Mortffoqors Relief Act 19.31,

'

L awrenceV.

but before 18th October 1932, when the amending provisions were

enacted by the Financial Emergency Relief Extension Act 1932,

K e e n a n .

and it is therefore included within the Acts (see sec. 3).

We have

Rich J. Dixon J.

felt somewhat puzzled as to the effect of sec. 18, which provides that Mcxieraan J.

stipulations negativing the application of the Acts shall not prevent

the Court from making an order. For it is limited to preserving

the power of the Courts to make an order, and does not deal w'ith the

question w'hether the parties may contract out of sec. 5 which

requires a month’s notice. But we do not think that the provision

implies that the requirement of notice may be waived by contract,

and, having regard to the character of the Act and the fact that it

deals only with transactions of mortgage and hire-purchase which

are on foot at the time when the original Act or the amendments

were enacted, we think that nothing less than clear expression or

necessary implication would warrant the conclusion that a contractual

stipulation should have effect purporting to exclude the application

of legislation of this nature.

The result is that, as the appellant did not give a month’s notice of his intention to take possession of the car, it was unlawful for him to do so. The acquiescence of the bankrupt in the appellant’s retaking the car did not amount to a voluntary surrender, and was in fact based, as he sw'ore, upon the misapprehension that he could do nothing else but allow it. What the appellant did remained, as we have already said, a purported exercise of the power of entry into possession. As it w'as unlawful, the retaking of the car must be treated in law' as completely ineffectual. Neither on the ground of default, nor on the ground of the hirer’s exposing himself to insolvency proceedings, if he had then already done so, could the appellant take the car until he had given a month’s notice. At the date of the sequestration order, therefore, the hire-purchase agreement subsisted, and the right or claim of the bankrupt under it vested in the official receiver who, it w'as not denied, proceeded under sec. 91 (iv.) to offer “ to discharge any legal liability with respect thereto.”

For these reasons w'e think the appeal fails.

VOL. LIII.

11

162 HIGH COURT

[1935.

H . C. OP A. gec_ 9 1 ( i v ) presents difficulties of application in cases where

under the terms of the agreement, either by reason of the hirer’s

Lawbencedefault, or of some other event, the owner of the chattel is at the

V.

K eenan. time of the sequestration entitled as against the hirer to determine Bich J.the bailment and retake possession if he should elect to do so. A

M c x S a n J, particular difficulty arises out of the provision so often contained

in hire-purchase agreements, that the hiring may be determined upon the bankruptcy of the hirer, a provision the validity of which has been impugned as inconsistent with sec. 91 (iv.) or with the policy it embodies. But in the present case of necessity none of these difficulties has yet arisen and they may never arise.

We think the appeal should be dismissed with costs.

Appeal dismissed with costs.

Solicitors for the appellant, Chambers, McNab d: Co. for Grant & Stumm, Rockhampton.

Solicitors for the respondent, Cannan & Peterson for Rees R. &

Sydney Jones, Rockhampton.

B. J. J.