Philips Electronics Australia Ltd v Roberts
[2006] FMCA 911
•7 July 2006
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| PHILIPS ELECTRONICS AUSTRALIA LTD v ROBERTS | [2006] FMCA 911 |
| BANKRUPTCY – Application for leave to issue a bankruptcy notice – applicant an assignee of judgment debt – whether leave of the Court giving the judgment for execution on the judgment a pre-requisite to the issue of a bankruptcy notice considered. PRACTICE AND PROCEDURE – Observations and the jurisdiction of the Court to deal with the application and the desirability of doing so. |
| Bankruptcy Act 1966 (Cth), ss.40, 41 Uniform Civil Procedure Rules 2005 (NSW) |
| Beson v Robert William Dean [1997] FCA 1320 DL Collections v Nguyen [2006] FMCA 427 Re Exell; ex parte Martin (1995) 134 ALR 623 Re Pannowitz; ex parte Wilson (1975) 38 FLR 184, Re Richards; ex parte Sommers (1947) 14 ABC 112 Re Seers (1955) 17 ABC 11 Re Woodall; ex parte Woodall (1884) 13 QBD 479 |
| Applicant: | PHILIPS ELECTRONICS AUSTRALIA LIMITED |
| Respondent: | JOHN EDWARD ROBERTS |
| File Number: | SYG779 of 2006 |
| Judgment of: | Driver FM |
| Hearing date: | 27 June 2006 |
| Delivered at: | Sydney |
| Delivered on: | 7 July 2006 |
REPRESENTATION
| Solicitors for the Applicant: | Ms Chater Deacons Lawyers |
| Counsel for the Respondent: | Mr Tregenza |
| Solicitors for the Respondent: | Kalantzis Lawyers |
ORDERS
The application filed on 16 March 2006 is dismissed with costs.
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT SYDNEY |
SYG779 of 2006
| PHILIPS ELECTRONICS AUSTRALIA LIMITED |
Applicant
And
| JOHN EDWARD ROBERTS |
Respondent
REASONS FOR JUDGMENT
Introduction and background
By application filed on 16 March 2006 Philips Electronics Australia Limited (“Philips”) seeks interim orders that it be granted leave, as assignee of a judgment made by the District Court of New South Wales in proceedings number 2677 of 2005 on 20 September 2005, to issue a bankruptcy notice against Mr John Edward Roberts. In later submissions, Philips contends that the application is brought in reliance upon the general power of the Court contained in s.30 of the Bankruptcy Act 1966 (Cth) (“the Bankruptcy Act”) and that the reference to the orders being sought on an interlocutory basis was an error. The orders are sought as final orders.
The application for leave to issue a bankruptcy notice appears misguided. Bankruptcy notices are issued by the Official Receiver as part of an administrative process and, if a creditor is entitled to have a bankruptcy notice issued under the Bankruptcy Act, the leave of the Court is not required. Conversely, if an creditor is not entitled to have a bankruptcy notice issued by the Official Receiver, the Court would be unable to grant any leave for a bankruptcy notice to be issued.
In substance, Philips seeks to clarify its ability to obtain a bankruptcy notice as an assignee of a judgment debt. I accept that the Court has jurisdiction, based upon s.30 of the Bankruptcy Act and s.16 of the Federal Magistrates Act 1999 (Cth), to declare the rights of the parties in relation to this matter.
Essentially, Philips seeks a declaration that it is a “creditor” as against Mr Roberts within the meaning of s.40(3)(d) of the Bankruptcy Act on the ground that it is an assignee of the judgment made by the District Court of New South Wales. By proceeding in this manner Philips seeks to avoid a later controversy as to its capacity to have a bankruptcy notice issued in its favour. However, this is not a process that I would wish to encourage, as it is tantamount to asking the Court to give an advisory opinion.
The evidence
The application is supported by the affidavits of Ian Chalmers made on 14 March 2006 (filed on 16 March 2006) and Mitchell Mathas made on 15 May 2006 (filed in court on 16 May 2006). I received both affidavits in evidence. I accept from that evidence that by way of an agreement dated 27 April 2005 a corporation called Australia Company Number 003 154 667 Pty Limited ACN 003 154 667 (formerly Philips Medical Systems Australasia Pty Limited ACN 003 154 667) purported to assign all of its assets (including the judgment) to Philips. On
28 January 2005 Philips gave notice of the assignment to Mr Roberts by way of letter dated 22 December 2005, served upon his lawyer. Philips thereby claims to be a creditor of Mr Roberts as the assignee of the judgment for $301,876 given in favour of Philips Medical Systems against Mr Roberts in the District Court of New South Wales in proceedings number 2677 of 2005.
Submissions
The application is opposed by Mr Roberts upon that basis that Philips has not demonstrated that it has been granted leave to execute upon the judgment in the District Court pursuant to Part 39.1 of the Uniform Civil Procedure Rules 2005 (NSW) (“Uniform Civil Procedure Rules”). Mr Roberts refers to s.40(1)(g) of the Bankruptcy Act which provides, relevantly, that a debtor commits an act of bankruptcy if the debtor fails to comply with the requirements of a bankruptcy notice within the prescribed time provided that the bankruptcy notice is issued to 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. Further, he refers (as does Philips) to s.40(3)(d) of the Bankruptcy Act which relevantly provides that if a person is entitled to enforce a judgment then the person is deemed to be a creditor for the purposes of s.40(1).
Mr Roberts does not dispute that an assignee of a judgment debt may issue a bankruptcy notice: Abigroup Ltd v Abignano (1992) 32 FCR 174; 112 ALR 597. In that case, the Full Federal Court found that a person who had not himself obtained the relevant judgment was nevertheless entitled to issue a bankruptcy notice as long as he was a person who had taken all steps which entitled him to reap the fruits of the judgment. However, Mr Roberts disputes that Philips has taken all steps to entitle it to reap the fruits of the District Court judgment. Mr Roberts submits that, pursuant to rule 39.1(1) of the Uniform Civil Procedure Rules, a writ of execution may not be issued except by leave of the (District) Court if there has been a change in the persons entitled or liable to execution under the judgment whether by assignment, death or otherwise. In this case, Mr Roberts submits that leave of the District Court to execute on this judgment is required in order for Philips to have the benefit of the deeming provision in s.40(3)(d) of the Bankruptcy Act and there is no evidence that leave has been granted.
In reply, Philips submits that the words in s.40(3)(d) do not allow only those creditors who are able to enforce a judgment by way of writ to seek the issue of the bankruptcy notice. Rather, the words “entitled to enforce a final judgment” refer to the party who is entitled at law at the relevant time to the benefits of the judgment or who is entitled to seek the Court’s processes to obtain the fruits of the judgment and is not a shorthand manner of referring to “enforce the judgment by writ”. In short, there is no reason of policy, principle or practice to read in the additional words contended by Mr Roberts. Philips submits that it has established the legal assignment of the judgment debt in accordance with s.12 of the Conveyancing Act 1919 (NSW) and that the validity of the assignment is not disputed.
Reasoning
The words in s.40(1)(g) of the Bankruptcy Act, “the execution of which has not been stayed” require that the person issuing the bankruptcy notice should be in a position to issue immediate execution on the judgment or order at the time of the application for the issue of the notice. Execution may be stayed notwithstanding that there is not an express stay by order of the Court: Re Seers (1955) 17 ABC 11. If execution on a judgment has been stayed s.41(3)(b) of the Bankruptcy Act prevents the Official Receiver from issuing a bankruptcy notice.
There is conflicting authority about the width of the meaning of the word “execution” and hence, about the kinds of impediment to the enforcement of a judgment which prevents the issue of a valid bankruptcy notice based upon it. The question is whether one takes a wide or a narrow view of the word “execution”. In its narrow sense it means the enforcement of a judgment or order by a public officer under a writ of fieri facias. The broader meaning signifies any enforcement of or giving effect to judgments or orders of courts.
As is noted in Butterworth’s Bankruptcy Law and Practice at page 10,126:
Some rules of court require an assignee of the judgment creditor to obtain leave of the Court to enforce the judgment. Where a judgment debt has been assigned and the applicable court rules require leave of the Court for the assignee to issue execution upon the judgment, the bankruptcy notice issued without leave is invalid.
The authority referred to by the learned authors is Re Woodall; ex parte Woodall (1884) 13 QBD 479; Re Richards; ex parte Sommers (1947) 14 ABC 112; and Beson v Robert William Dean [1997] FCA 1320.
The authority of these decisions appears not to have been doubted to date. Beson was recently applied in this Court in DL Collections v Nguyen [2006] FMCA 427 at [5]-[8]. Significantly, in Beson v Dean Branson J said:
I do not consider it necessary in the circumstances of this case to give consideration to the conflicting authorities on the issue of whether the term “execution” is used in s.41(3)(b) of the Act in its widest sense or in a narrower sense (cf Re Pannowitz; ex parte Wilson at 194 and Re Exell; ex parte Martin (1995) 134 ALR 623 at 630. On either view of the meaning of the term “execution” in s.41(3)(b) of the Act, Mr Dean is not in a position to issue immediate execution upon the judgment on which the bankruptcy notice is founded. He needs either leave of the Supreme Court or a further order of the Supreme Court before he can enforce the judgment. The grant of such leave, or the making of such further order, is a matter within the discretion of the Supreme Court (Re Richards; ex parte Sommers (1947) 14 ABC 112).
The judgment upon which the bankruptcy notice is based is, in my view, a judgment the execution of which, in the circumstances of this case, deemed to have been stayed for the purposes of s.41(3)(b) of the Act. The bankruptcy notice was thus issued in disregard of the requirements of s.41(3)(b) that a bankruptcy notice shall not be issued in relation to a debtor “if at the time of the application for its issue, execution of the judgment … has been stayed”.
The position has not in my view been altered by the enactment of the Uniform Civil Procedure Rules. Rule 39.1 provides as follows:
(1) A writ of execution may not be issued in the following circumstances except by leave of the court:
(a) if there has been any change in the persons entitled or liable to execution under the judgment, whether by assignment, death or otherwise,
(b) if the judgment is against the assets of a deceased person coming to the hands of an executor or administrator after the judgment took effect, and the writ is against those assets or any of them,
(c) if a person’s entitlement under the judgment is subject to fulfilment of a condition,
(d) if the writ is a writ for the possession of land,
(e) if the writ is against property in the hands of a receiver appointed by the court,
(f) if the writ is against property in the hands of a sequestrator,
(g) if the writ is in aid of another writ of execution.
Note: See also section 134 of the Civil Procedure Act 2005 with respect to stale judgments.
(2) If leave is required, it may be applied for in the notice of motion for the issue of the writ of execution.
(3) The motion for leave must be supported by the following evidence:
(a) evidence that the applicant is entitled to proceed to execution on the judgment,
(b) evidence that the person against whom execution is sought to be issued is liable to execution on the judgment,
(c) if the judgment is for the payment of money, evidence as to the amount due on the date of the motion,
(d) if subrule (1) (a) applies, evidence as to the change which has taken place,
(e) if subrule (1) (b) or (c) applies, evidence that a demand to satisfy the judgment has been made on the person liable to satisfy it and that the person has not satisfied it.
(4) Subrule (1) does not limit the operation of any other Act or law that requires leave for the issue of a writ of execution.
It must be acknowledged that rule 39.1 deals only with writs of execution, and not more generally with the enforcement of judgments. The Uniform Civil Procedure Rules make provision for other means of enforcing judgments, although not by “execution” on the judgment. On the present state of the authorities, I consider that I should follow Beson and DL Collections. Any further attempt to secure a broad interpretation of the term “execution” in ss.40(1)(g) and 40(3)(b) of the Bankruptcy Act will require consideration by a superior court.
Philips is unable to enjoy the fruits of the judgment obtained in the District Court as assignee without the leave of the District Court. That is a matter within the discretion of the District Court. Until such time as that leave has been obtained, the judgment in the hands of Philips as assignee must be taken to have been stayed for the purposes of s.40(1)(g) and s.41(3)(b) of the Bankruptcy Act. Accordingly, Philips cannot take advantage of the deeming provision in s.40(3)(d).
The application should be dismissed with costs. I will so order.
I certify that the preceding seventeen (17) paragraphs are a true copy of the reasons for judgment of Driver FM
Associate:
Date: 7 July 2006
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