Paterson, D.B. v Commonwealth of Australia
[1990] FCA 316
•15 JUNE 1990
Re: DAVID BRIAN PATERSON
And: COMMONWEALTH OF AUSTRALIA
No. N232 of 1990
FED No. 316
Bankruptcy
23 FCR 412
COURT
IN THE FEDERAL COURT OF AUSTRALIA
SOUTH AUSTRALIA DISTRICT REGISTRY
GENERAL DIVISION
BANKRUPTCY DISTRICT OF THE STATE OF SOUTH AUSTRALIA
Von Doussa J.(1)
CATCHWORDS
Bankruptcy - application to set aside bankruptcy notice - judgment debt for moneys improperly obtained as social security benefits - debtor sentenced to imprisonment for offences relating to the receipt of those benefits - imprisonment suspended pursuant to order under sub.s.20(1) of the Crimes Act 1914 upon the debtor entering into a recognizance - condition that the debtor make reparation of the benefits by monthly repayment - whether Commonwealth thereafter in a position immediately to issue execution on the judgment debt - bankruptcy notice set aside.
Bankruptcy Act 1966, paras.40(1)(g), and 41(3)(b)
Crimes Act 1914, sub.s.20(1)
Ex parte Ide; In re Ide (1886) 17 QBD 755
Re Seers (1955) 17 ABC 11
Re Pannowitz; Ex parte Wilson (1975) 38 FLR 184
Pantelich v. Cekic (unreported judgment 11 December 1989)
Re Moss; Ex parte Tour Finance Limited (1968) 13 FLR 101
Re Schekeloff; Ex parte Schekeloff v. Hopkins Group Pty Ltd (1989) 86 ALR 645
Adams v. Carr (1988) 81 ALR 151
Re Lenske; Ex parte Lenske (1986) 64 ALR 135
Re Ramsey; Ex parte Taylor (1981) WAR 260
Re Vittoria Di Giacomo; Ex parte Boral Steel Ltd (1983) 68 FLR 106
Re Sutherland-Cropper (1985) 61 ALR 713
HEARING
ADELAIDE
#DATE 15:6:1990
Counsel for the judgment debtor: Mr P.D. Gallasch
Solicitor for the judgment debtor: Dixon Gallasch Pty Ltd
Counsel for the judgment creditor: Mr J. Ruciak
Solicitor for the judgment creditor: Director of Public Prosecutions
ORDER
The bankruptcy notice issued on 29 March 1990 be set aside.
That the judgment creditor pay the judgment debtor's costs of this application.
Note: Settlement and entry of order is dealt with in Bankruptcy Rule 124.
JUDGE1
This is an application to set aside a bankruptcy notice which was issued on 29 March 1990. The bankruptcy notice was based on a final judgment obtained by the Commonwealth of Australia against the debtor in the Local Court of Adelaide on 22 March 1990 for the recovery of money improperly paid to the debtor as social security benefits. The judgment was for the amount claimed of $4,272.50, together with interest and costs of $368.19.
On 5 March 1990 the debtor appeared before a judge of the Central District Criminal court in Adelaide. He pleaded guilty to 22 offences against the Crimes Act 1914, and two offences against the Social Security Act 1947 relating to false statements which brought about the improper payment of benefits. On 2 April 1990 the judge sentenced the debtor. One penalty was imposed in respect of the various offences. The debtor was sentenced to 16 months imprisonment with a minimum term of 11 months imprisonment, and pursuant to sub.s.20(1) of the Crimes Act the debtor was released forthwith upon entering into a bond on condition that he be of good behaviour for three years and that he make reparation to the Commonwealth in the sum of $4,272.50 payable to the clerk of court in instalments of $170 per month commencing on 2 May 1990.
On 18 April 1990 the bankruptcy notice was served on the debtor.
Paragraph 40(1)(g) of the Bankruptcy Act 1966 provides for the service of a bankruptcy notice by a creditor who has obtained against the debtor a final judgment or order "being a judgment or order the execution of which has not been stayed . . ." See also para.41(3)(b). The requirement that execution on the judgment be not stayed has been consistently construed to mean that a person who may issue and serve a bankruptcy notice in compliance with the Act is a judgment creditor who has the right immediately to issue execution on the final judgment: Ex parte Ide; In re Ide (1886) 17 QBD 755, Re Seers (1955) 17 ABC 11 and Re Pannowitz; Ex parte Wilson (1975) 38 FLR 184. I discussed these authorities in Pantelich v. Cekic (unreported judgment 11 December 1989). The judgment creditor must be in a position to issue execution on the judgment at the time of issue of the bankruptcy notice, and that right must continue up to the time of service: Re Moss; Ex parte Tour Finance Limited (1968) 13 FLR 101 at 103 and Re Schekeloff Ex parte Schekeloff v. Hopkins Group Pty Ltd (1989) 86 ALR 645.
The question is whether the sentence imposed in the Central District Court on 2 April 1989, before the bankruptcy notice was served, had the effect of preventing the Commonwealth from issuing execution on the judgment, at least for so long as the debtor was not in default in making the instalment payments anticipated by the terms of the sentence.
The sentence was imposed on the debtor in pursuance of the power in para.20(1)(b) of the Crimes Act which reads:
"20(1) Where a person is convicted of an offence against the law of the Commonwealth, the court before which he is convicted may, if it thinks fit -
. . .
(b) sentence the person to a term of imprisonment but direct, by order, that the person be released, upon
his giving security of the kind referred to in
paragraph (a), either forthwith or after he has
served a specified part of the term of imprisonment."
The "security of the kind referred to in para.(a)" is relevantly, a reference to sub.para.(ii) thereof which, in context, empowers a court, if it thinks fit, to:
"(a) by order, release the person . . . upon his giving security, with or without sureties, by recognizance
or otherwise, to the satisfaction of the court, that
he will comply with the following conditions:
. . .
(ii) that he will make such reparation or
restitution, or pay such compensation, in
respect of the offence (if any), or pay such
costs in respect of his prosecution for the
offence (if any), as the court specifies in the
order (being reparation, restitution,
compensation or costs that the court is
empowered to require the person to make or
pay)-
(A) on or before a date specified in the
order; or
(B) in the case of reparation or restitution
by way of money payment or in the case of
the payment of compensation or an amount
of costs - by specified instalments as
provided in the order; . . ."
Sub-paragraph (ii) recognises that the condition for reparation is such "as the court specifies in the order" and is to be made on a date or by specified instalments "as provided in the order". The condition as to payment by way of reparation is a condition imposed by order of the court even though it becomes a condition of a recognizance: cf Adams v. Carr (1988) 81 ALR 151 at 157-158. That an obligation to make reparation arising pursuant to an exercise of power under sub.s.20(1) is an obligation arising under an order of the court is further emphasised by sub.s.20(2). An order for reparation or restitution is a process intended to enforce payment of a debt and is not normally considered as a penalty or punishment: Re Lenske; Ex parte Lenske (1986) 64 ALR 135.
Orders requiring the payment of judgment debts by instalments were held to constitute stays of execution in Re Ramsey; Ex parte Taylor (1981) WAR 260 and Re Vittoria Di Giacomo; Ex parte Boral Steel Ltd (1983) 68 FLR 106, but in those cases a rule of court and an Act respectively provided that the order for payment by instalments had the effect of a stay of execution. Even though there is no such statutory provision which applies in the present case, an order for reparation made under sub.s.20(1) of the Crimes Act which requires payment of the money due by the debtor to the Commonwealth by instalments has the effect that the Commonwealth is not able to issue execution on the judgment debt whilst the order remains in force and the debtor duly pays the instalments. The obligation in the debtor under that order to pay at the rate of $170 per month gives rise by implication to a correlative obligation on the Commonwealth not to call on the debtor to pay the debt immediately. To hold that the Commonwealth was, at the date of service of the bankruptcy notice on 18 April 1990, in a position to issue execution would be inconsistent with the terms of the reparation order.
As the Commonwealth was not in a position to issue execution at that time, the service of the bankruptcy notice was not valid, and the bankruptcy notice should be set aside.
The Commonwealth sought to avoid this result by arguing that Re Sutherland-Cropper (1985) 61 ALR 713 and Re Lenske; Ex parte Lenske establish that this Court has a general power to vary the operation of an order made in a State Court if that order would impinge on the operation of the Bankruptcy Act. In these cases orders were made under s.60 of the Bankruptcy Act which had the effect of staying the execution of warrants for imprisonment which had issued consequent upon non-compliance with reparation orders made when people were sentenced for offences against property. Section 60 by its terms bestows an express power on the court, the exercise of which is conditioned upon the presentation of a petition. The section has no operation in the present circumstances. The reasoning in the decisions gives no support for the broad proposition advanced by counsel. The decisions rest wholly on the express power in s.60. On the other hand, the authorities under para.40(1)(g) to which reference has been made demonstrate that strict compliance with the requirements of that section is required, not that the court has some ill-defined general power, not expressed in the Act, to modify orders made by other courts of competent jurisdiction.
The debtor also sought to support his application on the further ground that the Commonwealth, through its counsel, expressly agreed to the terms of the reparation order before the Central District Criminal Court, or alternatively should be found to have so agreed because counsel for the Commonwealth acquiesced in the making of the order. According to an affidavit filed by the solicitor who had the conduct of the proceedings in the Central District Criminal Court for the Commonwealth, counsel for the Commonwealth by what he said in submissions intended to convey to the sentencing judge that the Commonwealth was opposed to the making of an order for reparation. If that is so, some misunderstanding seems to have arisen as it is clear from the sentencing remarks that the learned judge did not understand the Commonwealth to oppose the making of a reparation order. It should be noted that the Commonwealth did not seek leave to appeal against the sentence imposed. Counsel for the debtor sought to have this application adjourned to enable him to apply to the sentencing judge for a copy of the transcript of the submissions of counsel to throw further light on what was said on this topic. As an adjournment would considerably delay the matter, I heard argument on the point whether the reparation order was itself enough to invalidate the service of the bankruptcy notice. For the reasons given, I hold that it is. I record that the competing factual assertions which would have to be resolved to determine the debtor's alternative contentions have not been explored.
What happened in this case demonstrates the importance of the prosecuting authority, if it opposes the making of a reparation order, not only to state that fact clearly to the sentencing judge, but to explain precisely why the making of a reparation order is opposed. There should then be no room for misunderstanding.
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