McIntyre, I.B. v Perkes, R.D

[1990] FCA 454

Re: ITALA BELINDA McINTYRE and NEVILLE McINTYRE
Ex Parte: RAYMOND DAVID PERKES
Nos. NP2187 and 2188 of 1989
FED No. 454

COURT

IN THE FEDERAL COURT OF AUSTRALIA

BANKRUPTCY DISTRICT IN THE STATE OF NEW SOUTH WALES AND THE AUSTRALIAN CAPITAL TERRITORY
GENERAL DIVISION
Einfeld J.(1)

HEARING

SYDNEY

#DATE 28:8:1990

JUDGE1

This matter comes before the court as a creditor's petition by Raymond David Perkes (creditor) seeking a sequestration order against both Itala Belinda McIntyre and Neville McIntyre (debtors). In an ex tempore judgment I delivered in this matter on 6 March 1990, I pointed out that the substance of this dispute has a frighteningly long litigation history. Unfortunately, since that date, there has been further litigation in this matter. I cannot even express the hope, as has been done on previous occasions, that this judgment will dispose of the matter because an appeal, on another aspect of it, is already pending to the High Court of Australia. No doubt there will be an appeal from this judgment to a Full Court and to the High Court. This is a disgraceful misuse of public funds and facilities.

1. I will not here relate the facts and history of the dispute. They have been more than adequately covered in my judgment of 3 November 1989 in Re Carpenter; Ex parte Gye and in the judgments of a Full Court of this Court in related proceedings on 6 April 1990 and of Mr Justice Hill at first instance in those cases (unreported 27 September 1989), nos G694 and 695 of 1989.

2. Each of these parties is in debt to the other. The Full Court has said that one debt may be set off against the other. The substantive issue here is whether there is a remaining debt upon which a sequestration order can properly be pronounced as between the creditor and the debtors and, if so, what the debt is. These questions depend upon the date at which the respective judgment debts of the creditor and debtors are set off against each other.
   Was the bankruptcy notice validly served?

3. A preliminary issue was raised by the debtors as to the adequacy of the service of the bankruptcy notice. Both parties accept as a fact that service of the bankruptcy notice on the debtors took place within the Law Courts Building. Further, they do not dispute that the parties were in attendance at the time to answer an allegation in an affidavit (tendered in support of a notice of motion to which they were not a party) that they had, in breach of a Mareva injunction, left Australia. The parties disagree on the question of the validity of service in these circumstances.

4. Counsel for the debtors relied on an authority dated more than two centuries ago for the proposition that such service is invalid. The case he cited was Cole v Hawkins (1738) Andrews 275. This was a matter dealing with a motion of attachment against an attorney who had served a document on a party within a court's precinct. As such the case did not deal with the situation before me in this matter. The Court held in Cole v Hawkins that such service may be contempt of court because it may terrorise potential litigants and distract from the proper business of the court. Lord Chief Justice Lee specifically noted that this left open the question whether the service was void.

5. Even if Cole v Hawkins was authority for the proposition that service within the Court is invalid, it is doubtful whether it would be applied today. Already in 1931 Justice MacKinnon in R v Jones: Ex parte McVittie (1931) 1 KB 664 observed at 671:
   

His application is supported by a case - Cole v

Hawkins . . . . . almost 200 years old, which was based upon freedom of litigants who were to appear in the Court from being arrested. I regard that supposed

rule as being nowadays entirely obsolete . . . .

1. The debtor also relied on a more recent case of Re Janet Mary Tole Ex Parte G E Tole (1933) 50 WN (NSW) 216. As in the case of Cole v Hawkins, the Supreme Court there dealt with the question whether such service constitutes contempt of court and not whether it is invalid. That case can therefore do nothing to further the debtor's submission. It is interesting to note that Long Innes J in Tole stated that the reason for finding such service contempt of court is that it "obstructs the administration of justice by deterring parties resorting to the proper tribunal for the determination of their rights" (at 216). Certainly the reprehensibly long litigation history in this matter shows that these parties have not been so deterred.

2. The creditor submits that the service of the bankruptcy notice was valid. He relies on several cases as authority for this submission. The leading case is Baldry v Jackson (1976) NSWLR 19, in which Yeldham J surveyed the case law dealing with this issue and concluded that service within the court may amount to contempt of court if it has such a deterrent effect as to obstruct the administration of justice (at 25). However, his Honour continued: " . . . . . it does not follow . . . . that, even where process is served in such circumstances as to constitute a contempt, it should or would be set aside". His Honour quoted with approval a note in the Supreme Court Practice (NSW) 4th edition, page 22, namely: "Service here is valid although in some circumstances, which Lord Hewart C.J. (in McVittie) found hard to conceive, it might be a contempt of court . . . . . . ".

3. The creditor submitted that personal service within the court constitutes contempt only if the person upon whom service is made is in the court attending his/her own cause (Poole v Gould (1856) 1 H and N 99; Tole op cit), and pointed out that the debtors were not doing so at the time of service. It is unnecessary to rule on this submission because there is no application before the Court for a finding that anyone was in contempt of court. Furthermore, even if it did constitute contempt, the authorities make it clear that that does not per se render the service invalid. No other ground for invalidity of service is advanced. I hold that the service of the bankruptcy notice was valid.
   Is there a debt on which the debtors' estate may be sequestrated?

4. Turning to the substantive issue, namely what debt there is as between the creditor and the debtors, the only relevant debts arise from two judgments. The first one was entered in June 1982 in favour of Mrs McIntyre in the sum of $224,215 against five defendants, two of whom were the creditor and his partner Mr Gye (the McIntyre judgment). The second judgment took effect from June 1988 and is in favour of the creditor against both debtors in the sum of $214,600 (the Perkes judgment).

5. Two questions were raised in this connection - first, whether the Perkes judgment includes an order for costs; and second, at what date should the two judgments be set off? The debtor maintains that this should be done at the date the Perkes judgment took effect. The creditor submits it should be done at the date of the composition. The importance of the date at which set off is to take place lies in the fact that it is only until that date that interest on the respective judgments may be included.
   Does the judgment include an order for costs?

6. The Full Court of this Court in its judgment on 6 April 1990 refers to the Perkes judgment as requiring Mr and Mrs McIntyre to pay costs. However, neither in the bankruptcy notice, the affidavit of debt nor any of the other evidence tendered is there any reference to the inclusion of or the amount of the costs. The bankruptcy notice claims only the judgment debt of $214,600 plus interest outstanding. The only reference to costs is in the creditor's written submissions. He there relies, in support of his submission that costs should be included, on the judgment of Lockhart J in Pollnow v Madgwick, unreported 10 May 1989. This decision has no application to this submission. In my opinion, costs are not part of the judgment which may be used to sequestrate these debtors' estate.
   At what date should 'set off' take place?

7. Both parties rely on a paragraph from the judgment of the Full Court on 6 April 1990 in support of their respective (and opposing) submissions. At page 21 of the Reasons for Judgment, Justices Gummow and Von Doussa said in this connection:
   

One would ascertain in this case what was due from one party to the other at the time of the taking of the account by the trustee of each composition, and not have regard simply to the state of affairs at the time of the commencement of the compositions in 1985.

1. In what appeared to me were quite convoluted submissions, counsel for the creditor asserts that what their Honours had in mind when they stated this principle was that "the date to which interest can be claimed is the date of composition notwithstanding that the final quantification of the claim to be set off cannot be ascertained until a future date".

2. It is difficult to say just exactly what this means. Interest cannot accrue on a debt that has not been found to exist. If a later debt includes interest to a much later date than the composition, how can it be dissected backwards to see what it might have been at an earlier date? Whatever the submission means, it seems clear that it is in contradiction to what Gummow and Von Doussa JJ. held. For their Honours stated that the set off was not to have regard simply to the state of affairs at the time of the commencement of the compositions in 1985. I am not aware of any evidence as to when the trustee took the account of the composition but the debtor submits that this occurred on 28 June 1985. Assuming this to be the fact, because the Full Court's decision appears to require that I fix the date of set off as that date, it seems that the consequence of the Full Court's judgment is either that only those debts can be set off which exist at the time accounts were taken, or another date will have to be fixed in the case of later debts which do not.

3. Here the Perkes judgment sought to be set off only took effect from 24 June 1988. It could hardly be set off 3 years earlier than it was pronounced, and no sensible or proper final accounts could be taken on the basis of a speculation as to the outcome of future litigation. I also do not understand the Full Court to have required me to order a fresh accounting after the second debt was found and neither party has suggested that I do so. Hence in my view, there should either be no set off in these particular circumstances or the set off must be calculated from the date the Perkes judgment took effect. As the Full Court has determined that there must be a set off in this case, I am constrained to fix the date of set off as 24 June 1988, despite the difficulties this seems to pose to the Part X trustee.

4. The creditor further submits that the related judgment debt to be paid by Mr and Mrs McIntyre to Mr Gye is to be offset against the judgment in favour of Mrs McIntyre. I reject that submission. In my view, this is a different case and in that sense a different debt. The Full Court only ordered that the debts applicable to the individual creditors/debtors are to be set off.

5. It is not necessary for me to calculate the accrued interest on the McIntyre judgment because the consequence of my findings is that if a set off is to take place, there is a balance owing to the debtors in any event. Accordingly there is no debt to found a sequestration order and the petition should be dismissed. The creditor will pay the debtors' costs.