Quirey v The Queensland Principal Club

[1995] HCATrans 48

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
  Brisbane  No B37 of 1994

B e t w e e n -

MALCOLM MERVYN QUIREY

Applicant

and

THE QUEENSLAND PRINCIPAL CLUB

Respondent

Application for special leave to appeal

BRENNAN J
DEANE J
GAUDRON J

TRANSCRIPT OF PROCEEDINGS

FROM BRISBANE BY VIDEO LINK TO CANBERRA

ON FRIDAY, 10 MARCH 1995, AT 11.37 AM

Copyright in the High Court of Australia

MR J.A. GRIFFIN, QC:   May it please the Court, I appear with my learned friend, MR G.M. EGAN, for the applicant.  (instructed by Minter Ellison Morris Fletcher)

MR J.S. DOUGLAS, QC:   May it please the Court, I appear for the respondent.  (instructed by Nall Payne Craswell)

BRENNAN J:   Yes, Mr Griffin.

MR GRIFFIN:   Your Honours, I wish to start by briefly drawing attention to two matters which appear to be common ground between the parties.  First of all, it is common ground that the proper construction of rule 192 of the Rules of Racing, the rule under which the respondent acted, required the applicant to be a defaulter as at the date of the disqualification; that is to say, on 14 December 1992.  There is no doubt of course that the applicant was a defaulter at an earlier point in time when he failed to pay the bookmakers the credit debts, but he could not lawfully be disqualified under rule 192 unless he was a defaulter as at 14 December 1992.  The primary judge so held and we do not understand our learned friend to have challenged the proposition since that time.

It is also common ground that as at the date of the decision, the relevant debt had been released, notwithstanding that the composition of course had not run its course.  This is because the composition in clause 8 provided for the debts to be released coincidentally with the entry into the composition and the terms of the composition were applicable to all creditors, whether parties to the composition or not, by force of section 75(1) of the Bankruptcy Act.

May I turn to the argument.  The release of the debts in the composition in combination with section 75(1) of the Bankruptcy Act put the applicant in the same position as that of a person who obtains a discharge from bankruptcy.  Section 153 of the Bankruptcy Act provides, with certain exceptions not presently relevant, that on discharge from bankruptcy, all of the former debts of the bankrupt are released.  So the release in this case brought about by the composition is coextensive with the release that occurs on discharge from bankruptcy.  However, as distinct from the position in relation to bankruptcy, here the debts were released as at the date of the composition.

It is submitted that the fact that the debts were released in conjunction with the entry into the composition immediately distinguishes the older cases which his Honour Mr Justice Williams referred to at page 23 of the application book and which the respondent relies on in part III, paragraph 8, of its outline.

BRENNAN J:   But this can scarcely be a question of authority drawn from decisions on the Bankruptcy Act; it is a question of what is meant by a term employed in the Rules of Racing by those who are familiar with what is meant in that industry.

MR GRIFFIN:   Yes.

BRENNAN J:   Well, is somebody who has not paid his debts to the bookmakers a defaulter? 

MR GRIFFIN:   Yes, that is so.

BRENNAN J:   Well, is he or is he not, and how do we decide that?

MR GRIFFIN:   He is not because the term “default” requires one to address the relations between the parties - that is, between him and the bookmakers.  It cannot be looked at in isolation as the learned President said, and a default in payment cannot be treated as equivalent to non‑payment.  That is the broad meaning that the majority gave to the term.

DEANE J:   Does that mean that in the old days, you could not have a defaulter because you did not have a debt?

MR GRIFFIN:   No.

DEANE J:   When gambling debts were unenforceable?

MR GRIFFIN:   No, it would not, but by the same token, you could not have had a defaulter if there had been no obligation.  If the bookmaker had forgiven the debt, for example, or if with consideration he had agreed to take a larger figure at a later stage, there would be no default.

Where Mr Justice Williams referred to Jakeman v Cook, he was really referring to a case that raised a quite different matter from the present one.  Would your Honours look at page 23 of the application book where it can be seen, particularly from the second part of that quotation, that what his Honour was speaking of there was the circumstances in which there can be a contract to pay a debt which has been dealt with or discharged by bankruptcy.  What the Chief Baron was speaking about was the circumstances in which such a contract can be enforced. 

That is quite different from what is suggested in the present case.  What is being suggested here is that Mr Quirey should simply go ahead and pay the bookmakers.  There is no suggestion that there should be some quid pro quo for that, and so Jakeman v Cook really has no relevance.  What is relevant is the case that Mr Justice Williams then referred to of Ex parte Barrow, because in that case there was a composition as opposed to a bankruptcy.  The question was whether, while the composition was on foot, it was open to the debtor to make an agreement with one of his creditors to pay him out in full.  The proposed agreement was supported by consideration.  The Court of Appeal held that the agreement was invalid for two reasons:  firstly, it was contrary to the provisions of the Bankruptcy Act in that it constituted a variation of a composition without a further resolution of the creditors.  Secondly, it was a fraud on the other creditors to deal with and pay one particular creditor in full.  It seems that there is no reason why that decision is not applicable to the situation in the instant case, with the consequence, of course, that the applicant cannot lawfully pay the bookmakers in full until his composition has been finalised.

That is the position adopted by the respondent in its outline of submissions and could I take your Honours to page 2 of that outline, paragraph 8.  It is stated:

The applicant will be legally able to clear those debts, and seek the restoration of that privilege, after working out the composition with his creditors in December this year ‑

Now, if that is correct, the applicant is in limbo until December 1995.  In the intervening period of time, there is simply no way in which he can extricate himself from disqualification in the manner the majority suggest he can, that is, by paying the bookmakers.  Because he cannot pay the bookmakers, it would be a variation of the composition and it would be a fraud on the other creditors. 

Now, how has the situation arisen?  Well, we submit that it has arisen because of the failure to interpret the word “defaulter” correctly in rule 192.  The majority equated default in payment with non-payment and the two are different concepts.

GAUDRON J:   But is that not an interpretation that is fairly open?

MR GRIFFIN:   In our submission, it is not open, with respect, your Honour, because once one draws attention to the word “default”, one cannot ignore the legal relations between the parties.

GAUDRON J:   But, you are drawing attention to it in a particular context, that is the context of the racing industry.  You are not drawing attention to it in a legal context.

MR GRIFFIN:   No, that is true.

GAUDRON J:   Indeed, in a context in which I think these debts used to be regarded as debts of honour.

MR GRIFFIN:   Yes, but the fact that they were not legally enforceable did not mean that there was not an obligation and it was an obligation which existed.  The only point about it was that it could not be enforced in the court.  To take this case, assume that the bookmakers had agreed to accept twice the amount of the bets in 1994.  Now, on the interpretation of the majority, the applicant would be in default as at 14 December 1992 and the reason for that would simply be that he had not paid.

DEANE J:   But that would be a different case and a different question.  There, one can see how some people might not regard your client as a defaulter.  But if, because he had put up that he did not have any money, he had persuaded the bookmaker to accept $100 instead of $4,000, the ordinary person would say it was utterly absurd to say he was not a defaulter, where he said to the bookmaker, “I can’t pay you and I won’t pay you but I’ll give you $100 if you give me a release”.

MR GRIFFIN:   Well, in my submission, if the bookmaker gave him a release then he would not be a defaulter.

DEANE J:   Well, I appreciate that is the argument, but I do not think it really helps to say what the position would be if he offered twice the debt in three years’ time and the bookmaker said, I will take it, because there you would be in a grey area possibly.

MR GRIFFIN:   Yes.  As your Honours have seen, the majority in the Court of Appeal were induced to take the course that they did as a result of an examination of the Racing and Betting Act and the rules of racing made under that Act, and they drew inferences from both the Act and ‑ ‑ ‑

BRENNAN J:   Rules of racing are not made under the Act; rules of racing are recognised by the Act.

MR GRIFFIN:   Yes, that is correct, your Honour; referred to in the Act and recognised by the Act.  But they drew inferences from both the Act and the rules as to the meaning which should be ascribed to the word “defaulter” and gave it the widest possible meaning that they could.  The correct approach, in our submission, is the approach of the learned President, whose starting point was not the Racing and Betting Act, but the Bankruptcy Act, and it is our submission that the majority ignored both the specific provisions and the objectives sought to be achieved by the Bankruptcy Act, with the consequence that they reached a decision which represents an unwarranted derogation of the rights of the applicant, and they were led to a meaning of the word “defaulter” which, in our submission, is wider than any possible legitimate meaning of the word in that it ignores the relations between the relevant parties.  It is submitted that if the majority had paid similar attention to the Bankruptcy Act as that which they paid to the Racing and Betting Act, then as at 14 December 1992 the applicant could not properly be termed “a defaulter”.

Your Honours, we should say that we agree with the statement of the first special leave question in the respondent’s outline, namely, the question whether the applicant’s status was affected by the combined effect of the release under section 75(1) of the Bankruptcy Act.  The approach of the majority was to confine such effect to the applicant and his creditors and to say that whilst there was no continuing legal obligation by the applicant to his creditors, the applicant was nonetheless a defaulter within the meaning of rule 192.  In other words, it was open to third parties to ignore the composition and the force given to it by section 75(1) of the Bankruptcy Act and to treat the applicant as a defaulter on the footing that, for whatever reason, the debts had not been paid in full.

So one major significant disparity which emerges between the majority and the President is that the majority do not accept that the release under section 75(1) has an effect on the applicant’s status, whereas the learned President does.  And it is submitted that, with respect, this conflict in itself is enough to warrant the grant of special leave.

Your Honours, there are many authorities which state that a major object of the bankruptcy legislation is to give the debtor a fresh start.  It is submitted that if the Court of Appeal judgment is allowed to stand, it erodes the rights of the applicant, that is the rights he has obtained by force of section 75(1), and to that extent the decision undermines the objects of the bankruptcy legislation.  As the materials before the Court indicate, the limitation of the rights afforded by section 75(1) has serious consequences to this applicant.

Your Honours, there are a number of serious questions of law raised which have serious implications, in our submission, in the administration of insolvency law.  They are the questions identified in ‑ ‑ ‑

BRENNAN J:   What has this got to do with insolvency law?  The question is whether or not a bankrupt who has not paid the bookmakers is welcome in the ring.  Is that not the question?

MR GRIFFIN:   No, the question is, is he properly to be described as a defaulter.

BRENNAN J:   That is right.

MR GRIFFIN:   And if it is correct to say, as the learned ‑ ‑ ‑

BRENNAN J:   Under rule 192 of the Rules of Racing, not for any purpose associated with his legally-enforceable debts.

MR GRIFFIN:   Well, in our submission, he cannot be described as a defaulter unless he has a present obligation.

BRENNAN J:   Well, you have made that point already.

MR GRIFFIN:   Yes.  So, your Honours, the word “default” is commonly used in a wide range of circumstances to trigger a variation of legal rights and entitlements and the proper meaning to be attributed to it, especially against the background of the bankruptcy legislation, is of crucial significance, in our submission.  Allied to that is the question of whether a wide interpretation of the word where it appears in the rules of this statutory tribunal or the rules that this tribunal administers can be sustained when that interpretation leads to a derogation of rights accorded under the federal laws of bankruptcy.

The question arises whether the Commonwealth has not covered the field of the alteration to debtor/creditor relationships in circumstances in which there has been a resort to bankruptcy processes and as part of that issue the question arises whether the alteration of rights brought about by resort to the legislative process impacts only on the debtor and his creditors or whether it brings about an alteration of status which is required to be recognised by any body which is applying the law.  Your Honours, those are our submissions, with respect.

BRENNAN J:   Thank you, Mr Griffin.  We need not trouble you, Mr Douglas.  There is no reason to doubt the correctness of the decision of the Court of Appeal in this matter.  Accordingly, special leave is refused.

MR DOUGLAS:   If the Court please, I ask for costs of the application.

BRENNAN J:   Do you have anything to say about that, Mr Griffin?

MR GRIFFIN:   I cannot resist that, if the Court pleases.

BRENNAN J:   Very well.  It will be refused with costs.

AT 11.54 AM THE MATTER WAS CONCLUDED