Lewis v Nortex Pty Ltd (in liq)

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FEDERAL COURT OF AUSTRALIA

Lewis v Nortex Pty Limited (in liquidation) [2013] FCAFC 56

Citation: Lewis v Nortex Pty Limited (in liquidation) [2013] FCAFC 56
Appeal from: Lewis v Nortex Pty Limited (in liq) [2012] FCA 621
Parties: PETER LAWRENCE LEWIS v NORTEX PTY LIMITED (IN LIQUIDATION) (ACN 002 903 362) and BRIAN RAYMOND SILVIA IN HIS CAPACITY AS LIQUIDATOR OF NORTEX PTY LIMITED (IN LIQUIDATION)
File number: NSD 954 of 2012
Judges: DOWSETT, JAGOT AND YATES JJ
Date of judgment: 3 June 2013
Catchwords: BANKRUPTCY AND INSOLVENCY – validity of a bankruptcy notice which identified a company and its liquidator as the “creditor” – whether each of the judgments or orders relied on to found a bankruptcy notice must be “on the same account” – whether the relevant orders involved payment on different accounts – capacity in which the liquidator was to receive money payable under the relevant orders
Legislation: Acts Interpretation Act 1901 (Cth) ss 2, 23
Bankruptcy Act 1924 (Cth)
Bankruptcy Act 1966 (Cth) ss 30, 40, 41, 44
Bankruptcy Legislation Amendment Act 2002 (Cth)
Bankruptcy Legislation Amendment Bill 2002
Bankruptcy Act 1869 (Imp) ss 6, 7
Bankruptcy Act 1914 (Imp)
Corporations Act 2001 (Cth) s 477 
Cases cited:

Adams v Lambert (2006) 228 CLR 409 cited
DJ Sweeney Holdings Pty Ltd v McLeod (2011) 253 FLR 1 cited
Ebert v The Union Trustee Co of Australia Ltd (1960) 104 CLR 346 cited
Ex parte Chinery (1884) 12 QBD 342 cited
Ex parte Jones [1913] WN 263 cited
Ex parte Kibble; In re Onslow (1875) 10 LR Ch App 373 cited
Ex parte Muirhead (1876) 2 ChD 22 considered
GPW Aussie Exports v Latin & Anor (1998) 85 FCR 324 cited
Illawarra Credit Union Ltd v Objniczak (unreported, Federal Court NG 7300 of 1998, 26 May 1998) cited
In re a Debtor [1929] 2 Ch 146 considered
In re a Debtor [1952] 1 Ch 192 cited
Inre Andrew [1875] 1 Ch D 358 cited
In re Low; Ex parte Argentine Goldfields Ltd (1891) 1 QB 147 considered
James v Abrahams (1981) 34 ALR 657 cited
Kation Pty Ltd v Lamru Pty Ltd; Lewis v Nortex Pty Ltd (in liq) (No 5) [2010] NSWCA 294 cited
Kleinwort Benson Australia Ltd v Crowl (1988) 165 CLR 71 cited
Klewer v Walton (2004) 2 ABC(NS) 344 cited
Lewis v Lamru Pty Ltd  (2012) 207 FCR 1
Mason v Mason [1933] P 199 considered
Re Anderson; Ex parte Alexander (1927) 27 SR(NSW) 296 cited
Re Arkell; Ex parte Arkell (1889) 61 LT 90 cited
Re Bond; Ex parte HongKongBank of Australia Ltd (1991) 33 FCR 426 cited
Re Monckton; Ex parte Robinson (1951) 15 ABC 193 cited
Re Williams; Ex parte Englefield [1919] VLR 566 considered
Secretary of State for Trade and Industry v Frid [2004] 2 AC 506 cited
Shelley v Shelley (No 1) [1952] P 107 cited
Vogwell v Vogwell (1939) 11 ABC 83 cited

Halsbury’s Laws of England (3rd ed) vol 2
McDonald, Henry and Meek, Australian…

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Details
Case
[2013] FCAFC 56
Decision Date

CaseChat Overview and Summary

In the case of Lewis v Nortex Pty Ltd (in liq), the primary issue revolved around the validity of a bankruptcy notice issued by the Liquidator of Nortex Pty Ltd to Mr Lewis. The dispute centered on whether the bankruptcy notice was validly issued under the provisions of the Bankruptcy Act 1966 (Cth), specifically whether the orders underpinning the bankruptcy notice were related to the same account and whether the Liquidator was the appropriate party to receive payments under those orders. The case was heard in the Federal Court of Australia, where the primary judge, Perram J, ruled that the bankruptcy notice was void as it did not comply with the statutory requirements.

The central legal questions that the court had to address were whether each judgment or order relied upon to ground a bankruptcy notice must pertain to the same account and whether the payments were to be received by the creditor in the capacity required by law. The primary judge found that the orders in question did not all pertain to the same account and that the Liquidator was not the creditor in the proper sense, as required by the statute. The orders specified payments into a trust fund, and the Liquidator was to manage these funds in his capacity as liquidator, not as a creditor.

The reasoning of the court was grounded in the interpretation of the relevant sections of the Bankruptcy Act and the Corporations Act 2001 (Cth). The court held that the orders required payments to be made into the trust fund and that these payments were to be received by the Liquidator, not as a creditor, but in his capacity as liquidator. This interpretation led to the conclusion that the bankruptcy notice was not valid as it did not conform to the statutory requirements for a valid bankruptcy notice. Consequently, the court ruled that the bankruptcy notice was void and should be set aside.

Following the decision, the appeal was dismissed, and the appellant was ordered to pay the respondents' costs. The final orders were entered in accordance with Rule 39.32 of the Federal Court Rules 2011, ensuring that the procedural aspects of the case were duly followed.

Orders

Orders of the court

1. The appeal be dismissed.

2. The appellant pay the respondents’ costs.

Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

Background

Background to the litigation

Full text does not contain this section.

Evidence

Evidence Before The Court

Full text does not contain this section.

Decision

Reasons for decision

In those circumstances, I conclude that the regime established by ss 40(1)(g) and 41 is premised upon there being only one judgment creditor claiming one or more judgment debts, in the case of multiple debts, all being in the one right. The present bankruptcy notice is not a notice of the kind contemplated by the Bankruptcy Act. Non-compliance with it will not be an act of bankruptcy. In my view the bankruptcy notice is void and should be set aside.A CREDITOR WHO HAS OBTAINED A FINAL JUDGMENT OR FINAL ORDER There is a line of cases which suggests that in determining whether a person is competent to obtain the issue of a bankruptcy notice one looks to the identity of “the principal in whose interest (bankruptcy proceedings) are necessary”. See Halsbury’s Laws of England (3rd ed) vol 2 p 273. The fourth edition of Halsbury deals with legislation which seems to differ substantially from the Bankruptcy Act. The cases have some factual similarity to the present case. In Ex parte Muirhead (1876) 2 Ch D 22 a husband, as petitioner in a divorce case, obtained a decree of dissolution of marriage. The jury also awarded him, as against the co-respondent, damages in the amount of £5,000. The Court ordered that such sum be paid into court. It was then discovered that the co-respondent was living abroad, so that the order for damages could not be enforced against him. After the decree had become absolute, the petitioner obtained a variation of the order, so that it required payment of the amount of the damages to him, he undertaking to pay it into court to abide any further order. The petitioner then presented a bankruptcy petition against the co-respondent, the act of bankruptcy being his remaining out of England with intent to defeat or delay his creditors. At 25, Cockburn LCJ observed that the order had not “created a good petitioning creditor’s debt”. His Lordship continued at 25-26:It is quite clear that the award of damages by a jury in an action at law, without a judgment, or an award of damages by a jury in such a proceeding as this suit in the Court of Divorce, without an order of the Court giving effect to the verdict, would not afford a ground of action, or constitute a good petitioning creditor’s debt; but it is said that the order of last June has the effect of a judgment, and converts that which would not be a good petitioning creditor’s debt into a good petitioning creditor’s debt. Now in order to constitute a good petitioning creditor’s debt, you must have that which may be the immediate subject of an action at law or suit in equity. What have we here? An order for payment of a sum to which Captain Otway had no title at law or in equity. It would be necessary for him, if the co-respondent were to pay him the amount, to pay it into the registry of the Court of Divorce, to be dealt with as the Court should direct. It was not the intention of the order, nor is it the effect of the order, that the money shall be presently paid as compensation to the Petitioner, Captain Otway. He is merely to receive the money and pay it into Court, and he can take no process for the purpose of enforcing the payment for his own benefit. The only process which the Divorce Court would award him, if it could get the defendant within its jurisdiction, would be a process to compel the latter to pay the money to him for the purpose of being paid into Court, there to be made available as the Court should direct. Under those circumstances, I think the expression used by Mr Benjamin the other day is a very good and apt one – he is simply the conduit pipe of the Court, or, to use an expression still better adapted to the circumstances of the case, and which was used yesterday by the Master of the Rolls, he is in the position of a receiver. If the Court, instead of ordering the money to be paid, in accordance with the usual practice of the Court, into the registry, has the power (upon which I must not be understood as pronouncing any opinion) of ordering payment in this way, that is, to order it to be paid to the Plaintiff in the suit, or to any other party, for the purpose of its being brought into the registry – as to which I see no difference between the position of the plaintiff in the suit and any other person whom the Court might employ for the purpose – it is clear that such a person is only a receiver, and could not apply the money to his own use, but would be bound to bring it within the power of the Court, in order that the Court might exercise its functions with respect to it. That being so, it appears to me that this is not a good petitioning creditor’s debt. It certainly is not at law a good petitioning creditor’s debt, nor, as far as I understand the matter, is it a good debt in equity. It is nothing more than an order to bring the money into Court, and when it is brought into Court non constat that the plaintiff, who up to the time of getting the verdict was dominus litis will get a single shilling of it. It is in the power of the Court to direct that the whole amount shall be applied to the maintenance of the wife and children. It is impossible to say under these circumstances, where a man has not a present and certain interest in the debt, that he has such a debt as can be made the foundation of bankruptcy proceedings.

Ratio Decidendi

Legal Principle Established

In this appeal, neither the Liquidator nor Nortex challenged the correctness of the decision in Sweeney. Rather, they contended that the relevant orders did not involve payment on separate accounts. They supported the reasoning and conclusion of the primary judge on that question.CONSIDERATION The primary judge was correct in the conclusion to which he came. It is clear that the orders in paragraphs 3(e) and 4(c) require payments into the trust fund. At the time that the bankruptcy notice was issued, the only person to whom the payments required by these orders could have been made was the trustee of the Nortex Unit Trust. The trustee was Nortex. However, the affairs of Nortex in liquidation were controlled by the Liquidator. In his capacity as liquidator of Nortex, the Liquidator was empowered by s 477(2)(m) of the Corporations Act 2001 (Cth) to do all acts in the name of and on behalf of Nortex and to do all such other things as are necessary for winding up the affairs of the company, including distributing its property. The “affairs” and “property” to which that section refers would include the affairs of Nortex in its capacity as trustee of the Nortex Unit Trust and the property that it holds as trustee. It follows that the only person who could have required the payments to be made was the Liquidator acting in his capacity as liquidator of Nortex. It is also clear that the sums to be paid under the order made in paragraph 4(d) were to be received by the Liquidator as part of the trust fund, albeit that they represented money to be applied in accordance with the orders made by the Supreme Court. The Liquidator was required to place that money into an interest-bearing account. The order provides for an alternative means of payment (namely, into court). It is not suggested that the alternative means of payment was engaged in this case. The fact that the Liquidator was required to place the money into an interest-bearing account does not alter the fact that that debt was one owed to the Liquidator in his capacity as liquidator of Nortex in its capacity as trustee, and that the money so received constituted trust funds. At [19], the primary judge observed that the order made in paragraph 4(d) represented a way of addressing Lamru’s entitlement as a beneficiary under the Nortex Unit Trust, with which the appellant had interfered. His Honour continued:… Orders directing or resulting in payment to Lamru are no less orders in vindication of the interests held in the Nortex Unit Trust, and a discharge of the continuing obligations of its trustee (Nortex) and of the trustee’s liquidator, than are Orders 3(e), 3(f) and 4(c). That observation is, with respect, a correct characterisation of the orders and of the nature of the payments required to be made under them. No different conclusion is required because the orders made in paragraphs 4(e) and (f) contemplated that various applications might be made to the Supreme Court in relation to the sums required to be paid under paragraph 4(d). At the time of the bankruptcy notice, all payments required to be made by the relevant orders were to be made to and received by the Liquidator as trust funds to be applied by the Liquidator in the liquidation of Nortex. The sums required to be paid under paragraph 4(d) of the orders did not lose that identity simply because applications could be made as to how, ultimately, they might be required to be disbursed.