| IN THE FEDERAL COURT OF AUSTRALIA | ) |
| GENERAL DIVISION | ) |
| BANKRUPTCY DISTRICT OF THE | ) No. NP 1338 of 1993 |
| STATE OF NEW SOUTH WALES | ) |
| RE : | CON RAFTOS
Debtor |
| EX PARTE: | FA1 WORKERS COMPENSATION LTD
Creditor |
| PLACE | : | SYDNEY |
| DATED | : | 17 AUGUST 1993 |
EX TEMPORE REASONS FOR JUDGMENT
Before the Court is a petition by FA1 Workers Compensation (NSW) Limited ("FAI"), a judgment creditor, seeking order for the sequestration of the estate of Mr Con Raftos ("the debtor"). The petition is based upon an alleged non-compliance with a Bankruptcy Notice dated 12 June 1992, whlch requires the debtor to pay the amount stated therein said to be due under a final judgment obtained by the judgment creditor in the Local Court of New South Wales on 17 October 1991:
| counter-claim set off for cost demand. |
". . .to the Judgment Creditor, (or his
agent whose name and address are Brian Thomas Agnew of Level 27, 135 King Street,
The debtor is then given the opportunity in the
usual way either to comply with the requirements of the notice
or to satisfy the Court of the existence of an appropriate
The debtor did not appear on the petition being called. Counsel for the petitioning creditor properly drew to my attention the question whether the Bankruptcy Notice, in the form I have indicated, complied wlth the provisions of s.41(2) of the Bankru~tcv Act 1966 ("the Act"), which section requires a bankruptcy notice, inter alia, to require the debtor named in it to pay the judgment debt or sum ordered to be paid, "...in accordance with the judgment or order".
The short question is whether in the present case the Bankruptcy Notice complies with that section. I should add that on 13 July 1990 Messrs Moray and Agnew, the solicitors for the petitioning creditor, wrote to the debtor instructing him that unless they received from him within a stipulated period a cheque in favour of FA1 for a stipulated amount, or evidence that the debtor was not indebted to the petitioning creditor, legal proceedings would be commenced immediately against him for recovery.
| Subsequently on 22 July 1993 an authority was executed under the common seal of the petitioning creditor Confirming that as at the date of the Bankruptcy Notice and continuing thereafter, Mr Agnew of Moray and Agnew, Solicitors, had the authority of the petitioning creditor to receive any payment made by Mr Raftos pursuant to the judgment obtained by the petitioning creditor at the Local Court at Downlng Centre, Sydney. I should say, having regard to the letter of 13 July 1990, that the amount outstanding in accordance with the judgment is $3093.81, together with interest, making a total of $3327.92. |
The Certificate of Judgment obtained from the Local Court in order to obtaln the issue of the Bankruptcy Notice stipulates that judgment was recovered on 17 October 1991 in the sum of $3093.81. It does not, however, in any way indlcate to whom that judgment is to be paid.
It has been long held that s.41(2) must be strictly complied with and failure so to do is not a defect that can be cured as a formal defect. Discussion of the matter usually commences with the decision of the Court of Appeal in In Re A Debtor [l9111 2 KB 718. That was a case where the judgment in fact required payment of the judgment debt to the judgment creditors, a firm of stock jobbers. The Bankruptcy Notice, on the other hand, required the debtor to make payment to the
| notice there was a certification by the solicitors that they | judgment creditors "or their solicitors". At the back of the |
had full authority to receive payment and to act for the
judgment creditors. |
| It was held that the notice was not a valid notice because it departed from the judgment. The Court of Appeal did not put this on the basis that the solicitors had no authority to receive the moneys and Cozens-Hardy MR made it |
| c l e a r t h a t h i s Lordship was n o t suggesting t h a t t h e s o l i c i t o r s |
| were | s t a t l n g t h a t which | was | n o t t r u e . | |
| The | authorities on t h e matter have been d e a l t w i t h |
| i n some d e t a i l i n t h e judgment | of Gummow | J i n In R e Soudakoff: |
| E x Dar t e | C r e s t A i r cond i t i on ina | P tv | Limited | ( 1 9 9 1 ) | 28 | FCR | 53, |
| and | t o | a | l a r g e | e x t e n t | t h a t | d i s c u s s i o n | r e l i e v e s | m e | of | t h e |
| n e c e s s i t y t o pursue | t h e h i s t o r y | of | t h e i s s u e . |
| The | p r e s e n t | problem | a r l s e s | a g a i n s t | t h e | p r o v i s i o n s | of |
| P a r t 2 7 | "Payment o f Judgment | Debt" of | t h e Local Courts | ( C i v i l |
| Claims) | Rules | (19881 ( " t h e Local | Court Rules" ) which | p r e s e n t l y |
p rov ides :
| " 1 . | (1) | The | c o u r t | may, | on | t h e | a p p l i c a t i o n |
| o f | any | p a r t y | t o an | a c t i o n , | o r wi thout | any |
| such | a p p l i c a t i o n | be ing | made, | when | g i v i n g |
| judgment | i n | t h e | a c t i o n , | o r d e r | t h a t | t h e |
| judgment | deb t | ( i f | any) | be p a i d | a t such |
| time, | o r by | such | i n s t a l m e n t s | payable | a t |
| such | times, | a s i t t h i n k s f i t . |
| (2) | Sub jec t | t o t h l s P a r t , | every judgment |
| deb t | s h a l l be | payable | fo r thwi th . |
| ( 4 ) | Where | t h e | c o u r t | o r | r e g i s t r a r | o r d e r s |
| payment | o f | a | judgment | deb t | by | i n s t a l m e n t s |
| and | does | n o t | r e q u i r e | payment | o f | t h e |
| i n s t a l m e n t s | t o | t h e | r e g i s t r a r , | t h e |
| instalments | a r e payable | t o t h e judgment |
| c r e d i t o r | o r | a t | t h e | judgment | c r e d i t o r ' s |
| d i r e c t i o n . |
(5) Any payment by o r on beha l f o f a
judgment d e b t o r made on account o f a
| judgment | deb t | t o o r a t t h e direction | o f |
| t h e | judgment | c r e d i t o r | s h a l l , | i f | accep ted |
| by o r on beha l f o f t h e judgment | creditor, |
operate t o reduce the judgment debt by the
amount o f the payment.
( 6 ) Where the court makes an order under
subrule ( 1 ) the order sha l l , while it remains i n force, operate a s a s tay o f enforcement o f the judgment.
| ( 7 ) Where a judgment | creditor f i l e s an |
| a f f i d a v i t for | the purpose | o f requiring | the |
| i s sue o f any document | for or i n connection |
| with the enforcement o f a judgment, | the |
affidavit sha l l , i n any action (whether i n
a court or i n any other Court) by the
judgment debtor against the registrar for conclusive evidence i n favour o f the the wrongful i ssue o f the document be
regis trar that a t the time o f the issue o f
t he document:
| ( a ) where an amount | i s stated i n the |
| reduction o f the judgment debt - that | a f f i d a v i t as having been p a i d i n |
amount and no other amount had been
paid; or |
| ( b ) where there i s a | statement | i n the |
| a f f i d a v i t | that | no | amount | has | been |
| p a i d | i n reduction | o f the ludgment |
debt - no amount had been p a i d ,
| by or on behalf o f the judgment | debtor i n |
| reduction o f the judgment | debt. " |
| Sub-rule | ( 3 ) , it w i l l be noted, was repealed prior |
| t o t h e events i n question here. | I t read: |
"(3 ) Sublect t o subrule (5), the amount o f every judgment debt arising from an action shall be payable t o the regis trar where
| ( a ) | it i s payable i n one sum; | or |
| ( b ) | an order for i t s payment by Instalments requires the instalments |
| t o be p a i d | t o the registrar." | |
| The words "notwithstanding subrule (3) | " originally |
appeared at the commencement of sub-r.(5).
Four questions seem to me to arise for decision.
These questions may be stated as follows.
1. If the judgment is silent as to the requirement for payment and the rules of the Court are similarly silent, how should a bankruptcy notice be framed so as to comply with s.41(2)?
2. Does Part 27 r.1 of the Local Court Rules provide in sub-r.(5) for the mode of payment of the judgment debt?
3. If the answer to the second question is yes, does a direction that payment be made either to the judgment creditor or the solicitor
| authorised comply with that rule? | |
4. Does the authority dated 22 July 1993, with or without the letter of 13 July 1990, assist the petitioning creditor?
In Re Soudakoff, Gummow J noted a submission made before him that the decision of Re A Debtor, to which I have referred, had been misapplied, because it was said the requirement to pay had to appear on the face of the judgment itself. His Honour indicated that he saw some force in that view, but that to accept it would be to depart from a long- established practice. His Honour said that he would not, as a judge of first instance, take that step and, for myself, I would say neither will I.
For the moment it must be accepted that the law in Australia is that s.41(2) will be complied with either where the Bankruptcy Notice requires payment in accordance with the manner expressly stipulated in the ludgment, or, in a case where there is no express stipulation in the judgment, it requires payment in accordance with a mode stipulated by the rules of the Court giving the judgment.
The problem in the present case is that the judgment
itself is not only silent as to the mode of payment, but a
question arises as to whether the rules of the Local Court are
| equally silent. I should say that if the rules as ultimately | construed are silent it seems to me that there are only then |
| two possibilities to ensure compliance with s.41(2). |
| The first is merely to leave the mode of compliance, the mode of payment, silent because the judgment itself is left silent. The second is to stipulate that payment must be made to the judgment creditor personally. On the whole, I think that the former is not correct and that the proper approach where both the rules and judgment are silent is that the Bankruptcy Notice should then stipulate that payment should be made to the judgment creditor, for where the judgment itself is silent and there being nothing in the rules to the contrary it seems to me to be implicit in the judgment that it requires payment to be made to the judgment creditor. |
| I turn then to consider whether the rules themselves deal with the matter in the present case. The rules are certainly not particularly helpful. Before the amendment was made deleting sub-r. ( 3 ) , it seems to me that the proper construction of the rules was that payment was to be made of a judgment to the Registrar in a case where instalments were not ordered to be paid. It is unnecessary to deal with the added complication of what was to happen if instalments were to be paid. |
| Sub-rule (5) then clearly looked at a case where payment was made of some part only of the judgment debt, or, | to use the words of sub-r. (5), the payment was "made on | |
| account of a judgment debt". |
| It is for this reason that sub-r.(5) is expressed in terms which reserve to the judgment creditor, or the person directed by the judgment creditor, the power of refusing to accept the amount offered. It is only if payment is made and accepted that the judgment debt will be reduced by the amount of the payment. |
When sub-r. (3) was deleted, no relevant amendment
was made to sub-r.(5). Counsel for the petitioning creditor |
| submitted that sub-r.(5) should now be construed as requiring |
| the payment to be made either to the judgment creditor or to some person directed by the judgment creditor. So to construe sub-r.(5) creates a difficulty, both in respect to the words "on account of a judgment debt" and also in respect of the words "if accepted". |
| That problem can be seen when one considers what would be said in a bankruptcy notice. Would it be adequate to stipulate that payment could be made either to the judgment creditor or to some person as directed by the judgment creditor, when at least the person the subject of that direction might refuse to accept the money tendered? It seems |
| debtor to whom a bankruptcy notice in those terms was | to me that that would lead to great confusion on the part of a | addressed. It is for this reason that Einfeld J in | |
| Gvnaell: Ex ~arte | Speedo Group Ltd (1990) 27 FCR 531 at 533, | |
| concluded that the Local Court rules in question made no requirement as to how the debt was to be paid. At 533-534, his Honour said: |
" I t seems that what has been achieved [by
the amendment t o Part 271 i s rea l l y t o remove altogether any provision a s t o how debts are t o be p a i d . I t merely says now
| that i f the debtor makes a payment | t o the |
credi tor , he gets credl t for the amount o f the payment b u t i t does not say how he
| mlght | s a t i s f y the judgment. |
| The reason why, a s i t seems t o me, | t h i s |
| bankruptcy not ice cannot | be | f i t t e d withln |
s u b r ( 5 ) , i s because the s u b rule i s premised upon a payment made by the debtor t o the creditor or a t the creditor's direct ion. That payment i s then
| consti tuted | a s | some | diminution | or | a |
complete extinction o f the judgment debt.
The bankruptcy notice on the other hand i s not premised upon any payment, and indeed,
makes the assumption that payment o f t he
Local Court judgment has not been made.
In t h i s particular case, the bankruptcy not ice seeks the whole o f the judgment obtained i n the Local Court p l u s i n t e res t and possibly some costs . I t does not seek t o give expression t o a suggestion that the debtor has o f fered a payment whlch the judgment creditor has directed i s t o go t o
| the Registrar o f the Local | Court. " |
| The | fac t s | i n Re | Gvnaell | were | qu i te | d i f f e r e n t from |
| those o f t h e present case and indeed it was i n one respect | unnecessary for h i s Honour t o consider whether sub-r.(5) | expressed a manner o f payment o f a judgment which was required |
| t o be reproduced i n the Bankruptcy Notice since, on any view o f t h e matter, t h e Bankruptcy Notice required payment t o be |
| made | t o t h e Registrar o f t h e Local | Court and | t h e judgment | d i d | |
| not so requlre nor d i d sub-r . (5) . |
| Here, however, | I | am o f t he view tha t t h e rules are |
| s i l e n t as t o how payment | under a judgment | o f t he Local | Court |
is to be made. The third and fourth questions, therefore, do not arise in the present case. I would only say that I see some difficulty with the submission that the authority and letter combined amounted to a direction on the part of the petitioning creditor, so as to comply with sub-r.(5) in the event that sub-r. (5) should be read as a direction as to how payment of a judgment debt was to be made. If ultimately I were incorrect as to the construction of the rules, I would not, however, be of the view that the Bankruptcy Notice complied with s.41(2). If follows accordingly that as the Bankruptcy Notice does not comply with s.41(2) the petition must be dismissed.
I certify that thls and the
preceding ten (10) pages
are a true copy of the Reasons
for Judgment herein of his Honour
Mr Justice H111.
Associate: T.~&+~~dr.ik
| Counsel and Solicitors | CR Newlinds instructed by |
| for Petitioning Creditor: | Moray and Agnew |
| Date of Hearing: | 17 August 1993 |
| Date Judgment Delivered: | 17 August 1993 |