Rasile v Ground and Foundation Supports Pty Ltd
[2003] FMCA 568
•5 December 2003
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| RASILE v GROUND & FOUNDATION SUPPORTS PTY LTD | [2003] FMCA 568 |
| BANKRUPTCY – Application for extension of time for compliance with Bankruptcy Notice – determination as to whether the Bankruptcy Notice should be set aside and whether the Court should set it aside in the knowledge that the Supreme Court of Western Australia is seized of the matter in issue, that being the interpretation of s.141 of the Supreme Court Act – whether it would be appropriate for the Court to defer its determination to enable the Supreme Court to interpret and construct the relevant section – whether there was any prejudice to the respondent and whether there was any irreparable prejudice to the applicant if an extension of time is not granted – judgment debt – Application dismissed. |
Bankruptcy Act 1966 (Cth), s.41(3)(b)
Supreme Court Act 1935 (WA), ss.40(1)(g), 141, 141(1), 141(2)
Property Law Act 1969 (WA), s.20(1)
Supreme Court Rules 1971, Order 47, Rule 13(1)(a), Order 47, Rule 3(1), Order 47, Rule 3(2)(c), Order 47, Rule 3(3),
Federal Court Rules 1976
Bankruptcy Rules, Rule 40
In the State of Carter; Re Ascot Timber Co Pty Ltd v Carter [1928] VLR 290
Solic v Bertrossa [1969] VR 594
Forster v Baker [1910] 2 KB 636
Kayley v Hothersoll [1925] 1 KB 607
Cawood v Cawood (2000) FCA 1786
Abigroup Ltd v Abignano (1992) 39 FCR 74
Reasonable Endeavours Pty Ltd v Dennehy (2001) 107 FCR 144
Stanley v English Fibres Industries (1899) 68 LJQB 839
WF Harrison & Co Ltd v Burke (1956) 2 All ER 169
Grey v Australian Motorists & General Insurance Co Ltd (1976) NSWLR 669
International Leasing Corp (Vic) Ltd v Aitken (1966) 85 WN (Pt 1) (NSW) 766
In Re Hill; Holt and Co
Halsbury's Laws of England, 4th edition, Volume 6
| Applicant: | GIANFRANCO RASILE |
| Respondent: | GROUND & FOUNDATION SUPPORTS PTY LTD |
| File No: | WZ 112 of 2003 |
| Delivered on: | 5 December 2003 |
| Delivered at: | Perth |
| Hearing Date: | 2 December 2003 |
| Judgment of: | Bryant CFM |
REPRESENTATION
| Counsel for the Applicant: | Mr Prentice |
| Solicitors for the Applicant: | Mossensons |
| Counsel for the Respondent: | Mr Donovan |
| Solicitors for the Respondent: | McCallum Donovan Sweeney |
ORDERS
THAT the Application filed the 7 July 2003 be dismissed.
THAT:
(a)in the event a sequestration order being made on the Application of the Respondent within six months of this date, costs (including reserved costs) be allowed with the priority prescribed by Rule 40 of the Bankruptcy Rules;
(b)in the event of no sequestration order being made within a period of six months on the Respondents' Application, the debtor pay the Respondents costs (including reserved costs);
(c)costs be taxed if not agreed in accordance with the Federal Court Rules.
THAT there be liberty to the Respondent to apply.
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT PERTH |
WZ 112 of 2002
| GIANFRANCO RASILE |
Applicant
And
| GROUND & FOUNDATION SUPPORTS PTY LTD |
Respondent
REASONS FOR JUDGMENT
Application
On the 7 July 2003 the applicant Gianfranco Rasile (“Rasile”) filed an Application seeking that the Bankruptcy Notice issued on the 13 March 2003 and deemed to have been served on the Applicant on the 17 June 2003 be set aside. An interim order was sought that the time for compliance with the Bankruptcy Notice be extended. A number of Court appearances followed and consequently the time for compliance with the Bankruptcy Notice was extended on several occasions to 4pm on the 3 December 2003 which was the date of the hearing and then to the 5 December 2003, the date of judgment.
Relevant history
The respondent, Ground & Foundation Supports Pty Ltd (GFS Pty Ltd) is a subcontractor in the construction industry carrying out geo-technical foundation work. In about April 2000 GFS Pty Ltd entered into a subcontract with Gianfranco Constructions to carry out retaining and foundation work on a multi story building to be built in Bennett Street, East Perth. Pursuant to that subcontract GFS Pty Ltd was to be paid for it’s work by Gianfranco Constructions. Springs Apartments Pty Ltd (“Springs Apartments”) was the owner and developer of the site. The works were completed by GFS Pty Ltd in about May 2000 but Gianfranco Constructions failed to pay GFS Pty Ltd any amount at all for the work done pursuant to the contract. Springs Apartments agreed to pay the fee payable to GFS Pty Ltd for the work performed by GFS Pty Ltd and paid part of the contract price pursuant to that agreement.
GFS Pty Ltd commenced proceedings in the District Court of Western Australia at Perth against Gianfranco Constructions and Springs Apartments Pty Ltd. The applicant Rasile, a director and principal of Gianfranco Constructions was joined as the third defendant by consent.
GFS Pty Ltd alleged in the proceedings that Gianfranco Constructions and Springs Apartments Pty Ltd had failed to pay the balance of the contract price and were indebted to GFS Pty Ltd in the sum of $109,178.50. The matter was listed for trial in the District Court of Western Australia on the 25 to the 28 February 2002.
By letter dated the 25 January 2002 the solicitors for Gianfranco Constructions and Rasile made an offer to GFS Pty Ltd to settle the matter. The letter was sent to GFS Pty Ltd’s then solicitors. Thereafter there were various communications by and between the solicitors which resulted in settlement and the eventual filing of a consent to judgment pursuant to Order 43 Rule16(1) of the Rules. The consent judgment was signed and the solicitors for the respective parties appeared before the Court on the 25 February 2002 and orders were made, interalia that Rasile be joined as the third defendant, the claim against Springs Apartments be dismissed and the claim by GFS Pty Ltd against Gianfranco Constructions and Rasile was adjourned sine die. Rasile maintained that GFS Pty Ltd had contractual obligations with him and not Gianfranco Constructions.
The judgment was not entered until the 2 December 2002. One of the conditions of settlement was that the consent judgment was to be held in escrow until the earlier of nine months from the date of settlement and four weeks from either judgment being entered in Supreme Court action C1B2286-2001 or Rasile reaching agreement with Springs Apartments.
The Supreme Court action concerns a claim by Rasile against Springs Apartments for the sum of approximately $1.829 million being the amount which Rasile alleges is outstanding on the building contract entered into by him for the multi story development at Bennett Street.
Prior to the consent judgment being entered GFS Pty Ltd and Springs Apartments reached an agreement whereby interalia GFS Pty Ltd would agreed to it’s claim against Springs Apartments being dismissed. Terms of such agreement were later reduced to writing to incorporate a deed of settlement and release dated the 28 March 2002.
The deed of settlement provided inter alia, that in consideration of and subject to the dismissal, Springs Apartments granted to GFS Pty Ltd a put option to require Springs Apartments to acquire the judgment debt from GFS Pty Ltd in accordance with the terms and conditions of the deed of settlement. GFS Pty Ltd subsequently attempted to exercise the put option. When it did, Springs Apartments was unable to pay the exercise price pursuant to the put option.
On the 29 November 2002 a deed of variation was entered into by and between GFS Pty Ltd and Springs Apartments which provided inter alia for the assignment of the judgment debt to Springs Apartments. Pursuant to the assignment contained in the deed of variation, a notice of assignment dated 29 November 2002 was issued on behalf of Springs Apartments to Rasile. No money was ever paid by Springs Apartments to GFS Pty Ltd in relation to the deed and the assignment. Further, neither of Gianfranco Constructions and Rasile have paid any money whatsoever in relation to their consent judgment to GFS Pty Ltd or Springs Apartments.
On the 13 December 2002 Springs Apartments issued a Bankruptcy Notice against Rasile in respect of the consent judgment. Rasile applied to set aside the Bankruptcy Notice in the Federal Magistrates Court. There was concern about the validity of the assignment and Springs Apartments agreed to an order that the Bankruptcy Notice be set aside.
Thereafter another Bankruptcy Notice was issued in respect of the consent judgment and served on Rasile on the 11 February 2002. The second Bankruptcy Notice was issued by GFS Pty Ltd. The then solicitors for Rasile contacted the solicitors for GFS Pty Ltd. When advised that the second Bankruptcy Notice would be opposed on the basis that GFS Pty Ltd had assigned the judgment debt to Springs Apartments. GFS Pty Ltd was concerned about the question of validity of the assignment and so withdrew the second Bankruptcy Notice.
Thereafter a deed was entered into by and between GFS Pty Ltd and Springs Apartments on the 3 March 2003 by which Springs Apartments assigned the judgment back to GFS Pty Ltd. The parties entered into this deed for the purpose of putting an end to all uncertainty in relation to the consent judgment, the initial assignment and Bankruptcy Notices.
On the 6 March 2003 a notice of assignment pursuant to the deed dated 3 March 2003 was served on Rasile by post. Thereafter Rasile continued his failure to pay the judgment debt and so GFS Pty Ltd issued another Bankruptcy Notice on the 13 March 2003 in relation to the consent judgment. Rasile has now applied to the Federal Magistrates Court to set aside this latest Bankruptcy Notice and this is the matter that is presently before the Court.
District Court proceedings
Rasile applied to set aside the consent judgment by issuing a fresh writ being District Court action 1821-2003. GFS Pty Ltd accepts that Rasile acted correctly as a matter of procedure by applying to set aside the judgment in this way but opposed the application and entered an Appearance. Rasile claimed that the consent judgment should be set aside because it was obtained as a consequence of fraudulent misrepresentation, mistake and misleading and deceptive conduct. The alleged events relied upon by Rasile all occurred prior to the consent judgment. The application was argued before Commissioner Reynolds on the 12 September 2003. Judgment was given on the 12 November 2003. Commissioner Reynolds identified the applications as being to stay execution of the consent judgment under Order 47 Rule 13(1)(a). Pursuant to this provision the discretion to grant a stay can only be executed if the Court is satisfied that “by reason of special circumstances it is inexpedient to enforce the judgment or order”.
The arguments relied upon to support the application by Rasile before Commissioner Reynolds were as follows: firstly that GFS Pty Ltd had not obtained leave to issue execution pursuant to section 141(2) of the Supreme Court Act 1935 (the Supreme Court Act). Secondly, that the assignment of the judgment debt from Springs Apartments back to GFS Pty Ltd carries with it all set offs and counter claims that Rasile may have against Springs Apartments and thirdly that Rasile has a good claim against GFS Pty Ltd that the consent judgment be set aside. Commissioner Reynolds noted that while Rasile had previously questioned the validity of the assignment by GFS Pty Ltd to Springs Apartments on the basis that it was entered into prior to the consent judgment being entered, the submissions made on his behalf in this application were based upon the assignment being valid. Commissioner Reynolds noted that the decision did not turn upon the validity of the assignment and he therefore did not consider it’s validity.
He noted that if the assignment by GFS Pty Ltd to Springs Apartments was of no effect then the assignment by Springs Apartment back to GFS Pty Ltd had no valid foundation and is also of no effect. In that case the history of the assignment would be irrelevant and GFS Pty Ltd would simply continue to be entitled to issue execution. If the assignment by GFS Pty Ltd and Springs Apartments is valid then it was the opinion of Commissioner Reynolds that the later assignment of Springs Apartments back to GFS Pty Ltd did not shackle GFS Pty Ltd with any set off or counter claim that Rasile may have against Springs Apartments. Commissioner Reynolds proceeded on the basis that both assignments were valid without deciding the point.
Section 141 of the Supreme Court Act relevantly provides as follows:
"141(1) As between the original parties to a judgment or order, execution may issue at any time within six years from the recovery of the judgment or the date of the order."
In the following cases, namely:
a)where six years has lapsed since the judgment or the date of the order, or any changes taken place by death or otherwise in the parties entitled or liable to execution; and
b)the party alleging himself to be entitled to execution may apply to the Court or a Judge for leave to issue execution accordingly; and a Court or Judge may, be satisfied that the party so applying is entitled to issue execution, make an order to that effect, or may order that any issue or question necessary to determine the rights of the parties shall be tried in any of the ways in which any question in an action may be tried. In either case any Court or Judge may impose such terms as to costs or otherwise as shall be just.
Order 47, Rule 3(1) of the Supreme Court Rules provide as follows:
"47 .3 Application for leave to issue writ of execution
3(1) where is it necessary to obtain leave to issue a writ of execution, the application maybe made ex parte unless the Court directs that it be made by summons".
Order 47, Rule 3(2)(c) of the Supreme Court Rules provides as follows:
"3. Application for leave to issue writ of execution.
(2) An application for leave to issue execution must be supported by an affidavit -
(c) stating where any change has taken place by death or otherwise in the parties entitled or liable to execution, the change which has taken place since the date of the judgment or order."
Order 47, Rule 3(3) of the Supreme Court Rules provides as follows:
"3. Application for leave to issue writ of execution.
(3) The Court in granting leave to issue a writ of execution may impose terms."
An application for leave to issue execution must be supported by an affidavit stating where any change has taken place by death or otherwise in the parties entitled or liable to execution, the change which has taken place since the date of the judgment or order.
The Court in granting leave to issue a writ of execution may impose terms.
In relation to Order 47 Rule 3(3) Seaman in his commentary on the Supreme Court Rules says:
“[47.3.3] change of parties by assignment An assignee of a judgment has no absolute right to execute upon it and the Court will normally be concerned that he or she is entitled as a matter of legal right to issue execution: In the state of Carter; Re Ascot Timber Co Pty Ltd v Carter [1928] VLR 290 at 292;(1928) 34 ALR 199; Solic v Bertossa [1969]VR 594 at 595. The assignee must show that he or she is the assignee of the whole of the judgment debt: Forster v Baker [1910]2 KB 636 at 641, 642. However in exercising it’s discretion as to how far execution should issue on the application of an assignee, the Court may have regard to set offs or counter claims which the judgment debtor may have against him or her; Kayley v Hothersoll [1925] 1KB 607 at 613, 615”.
In the District Court proceedings, Counsel for Rasile argued that GFS Pty Ltd was initially entitled to issue execution as of right however, it surrendered that right by assigning the judgment debt to Springs Apartments. On assigning the judgment debt GFS Pty Ltd no long had any interest or right to the judgment debt. Springs Apartments could not have issued execution against Rasile without first obtaining leave of the Court pursuant to section 141(2) of the Supreme Court Act. Springs Apartments never obtained such leave. Further, if such leave was sought the Court could have regard to set offs and or counter claims which the Rasile had against Springs Apartments. Rasile is currently claiming approximately 1.829 million from Springs Apartments in a Supreme Court action which is close to being entered for trial. Rasile argued that the assignment of the judgment debt from Springs Apartments back to GFS Pty Ltd is subject to the set off and or counter claim to which Rasile is entitled against Springs Apartments. GFS Pty Ltd cannot now be in a better position than Springs Apartments against Rasile. Further, this history constitutes a change in the parties entitled to issue execution as provided in section 141(2) of the Supreme Court Act.
Commissioner Reynolds dismissed the application for a stay and dealt with the various issues as follows:
a)He found that section 141(2) of the Supreme Court Act did not apply in this case. He found that the consent judgment was entered in favour of GFS Pty Ltd and it is GFS Pty Ltd that had issued execution against Rasile. For the purposes of section 141(2) no change had taken place in the party entitled to execution. He found that all that the section required is that the party at the point in time when execution is issued is the same party in whose favour the judgment was entered. The section is not concerned with any changes that may have occurred by way of assignment or otherwise in between. In his opinion the issue as to whether or not GFS Pty Ltd was shackled with any set off and or counter claim that Rasile may have against Springs Apartments because of the assignment is a separate issue;
b)Commissioner Reynolds found that the result of the assignment by Springs Apartments to GFS Pty Ltd was simply to return the judgment debt that GFS Pty Ltd had earlier assigned to Springs Apartments back to GFS Pty Ltd with nothing more and nothing less. The judgment debt was returned by Springs Apartments to GFS Pty Ltd free of all set offs and counter claims that Rasile may have against Springs Apartments in relation to the Supreme Court Action which Rasile has against Springs Apartments;
c)In determining the merits of Rasile’s action seeking orders inter alia, that the agreement pursuant to which the consent judgment was filed be set aside and rescinded and that consent judgment be set aside, it was necessary to consider whether the circumstances of the action were capable of constituting “special circumstances” for the purposes of Order 47 Rule 13(1)(a). He considered that whether or not he should exercise his discretion to order a stay depended on whether or not Rasile had a reasonable prospect of success in the action to set aside the consent judgment. After considering the evidence constituted by affidavits by the solicitors and the correspondence passing between them, he found that it was clear that GFS Pty Ltd was not prepared to agree that any monies payable or paid by Springs Apartments would be set off against monies paid by Gianfranco Constructions or Rasile. He thus concluded that Rasile’s actions to set aside the consent judgment had little, if any, prospect of success and such prospect fell well short of being sufficiently strong enough to out weigh GFS Pty Ltd’s entitlement to immediately execute on the consent judgment; and
d)He further noted that it appeared to be uncontroversial that no money whatsoever had been paid to GFS Pty Ltd by Springs Apartments, Gianfranco Constructions or Rasile in relation to the works performed by GFS Pty Ltd. He also noted that there was no suggestion on the evidence presented that if the consent judgment was satisfied by reason of execution or Rasile making payment, then GFS Pty Ltd would be unable later to satisfy any judgment entered against it in Rasile’s action to set aside the consent judgment.
That decision was almost immediately appealed to the Supreme Court of Western Australia. As it was an interlocutory judgment, leave to appeal was required and an application for leave and for a stay of execution was listed for hearing before The Honourable Justice Johnson on the 20 November 2003. The reasons for judgment of Her Honour were not available but both counsel conceded that the transcript that was before the Court made it sufficiently clear as to the basis of Her Honour’s decision.
The sole point on which leave was sought was the interpretation of section 141(1)(2) and Commissioner Reynold’s interpretation of that section. Rasile complains that Commissioner Reynolds was wrong in his conclusion that all the section requires is that the party at the point in time when execution is issued, is the same party in whose favour the judgment was entered. Rasile contends that the change referred to section 141(2) is a change in the parties entitled or liable to execution. Subsection (2) extends to any change in the parties whether or not there has been a change back to the original party. It is common ground that this section and this point has not been the subject of any previous judicial construction and that there was no authority on point. Johnson J found that there was an arguable point and gave leave to appeal, however she was not prepared to exercise her discretion to stay the execution of the judgment.
Her Honour Justice Johnson ordered that:
(i)The applicant have leave to appeal that part of the decision of the District Court dated 12 November 2003 on the grounds set out in the draft notice of appeal dated 18 November 2003 and filed herewith;
(ii)The stay of execution be dismissed; and
(iii)The cost of the application be reserved.
The draft notice of appeal makes it clear that the only matter being agitated on the appeal is a matter to which I have referred to in paragraph 24 of these Reasons, namely that by reason of the first assignment and notwithstanding the second assignment, at all material times leave was required pursuant to section 141(2) of the Supreme Court Act before the respondent was entitled to execute on the judgment debt and that no application had been made by Springs Apartments or GFS Pty Ltd for leave to execute. Evidence on behalf of the applicant which was not contradicted was that the appeal would not be heard before March 2004.
The present proceedings
Although both parties concede that the issue now before the Supreme Court arises for determination in this Court, Rasile submits that I should not determine the point but simply extend the time for compliance with the Bankruptcy Notice until the determination of the appeal. Rasile contends that this course should be followed because the matter in issue is now the construction of section 141 of the Supreme Court Act and it is more appropriate for the Supreme Court to interpret that section.
The respondent seeks that the issue of the validity of the Bankruptcy Notice be determined, or that in the alternative, time for compliance not be extended.
The respondent makes the point that the application itself contains no grounds and that one needs to turn to the affidavits to glean the arguments in support of the application to set aside the Bankruptcy Notice. The respondent correctly points out that the allegations of mistake, fraud and misleading and deceptive conduct have now been abandoned and that the argument before this Court is the same argument as before the Supreme Court and relates to the construction of section 141of the Supreme Court Act.
Section 40(1)(g) of the Act, so far as it is relevant, provides that a debtor commits an act of bankruptcy:
"(g) if 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, has served on the debtor in Australia, … a Bankruptcy Notice under this Act …………."
Section 41(3)(b) of the Bankruptcy Act 1966 (Cth) (“the Act”) relevantly provides:
"A Bankruptcy Notice shall not be issued in relation to a debtor:-……….
(b) if at the time of the application for the issue of the Bankruptcy Notice, execution of a judgment or order to which it relates has been stayed……..”
Rasile contends, and the respondent appears to concede, that the authorities make it clear that the failure to seek leave of the Supreme Court to apply for a warrant of execution (where required) means that execution of the judgment is stayed for the purposes of sections 40(g) and 41(3)(b) thus rendering the Bankruptcy Notice invalid .(see Cawood v Cawood (2000) FCA 1786; Abigroup Ltd v Abignano (1992) 39 FCR 74; Reasonable Endeavours Pty Ltd v Dennehy (2001) 107 FCR 144)
Both parties agree that in the exercise of the discretion whether or not to extend time for compliance with the bankruptcy, it is appropriate to consider:
a)the existence of some reasonable prospect of success on appeal from the decision of Commissioner Reynolds;
b)lack of prejudice to the respondent; and
c)any irreparable prejudice to the applicant if the time for compliance is not extended.
The respondent seeks a determination from this Court a decision as to whether the Bankruptcy Notice should be set aside, alternatively if the Court decides not to determine the validity of the Bankruptcy Notice, then the Court should exercise it’s discretion not to extend time for compliance. Both the parties accept that this Court can deal with the question of whether the Bankruptcy Notice should be set aside. The issue is whether the Court should do so in the knowledge that the Supreme Court of Western Australia is seized of the matter in issue, namely the construction of section 141 of the Supreme Court Act, and should defer a consideration to enable the Supreme Court to interpret and construct the section.
I am conscious that this matter does involve the interpretation of a section of a Supreme Court Act and that it might be preferable for the construction of that to be interpreted by a superior Court, in particular the Supreme Court of Western Australia. However this Court is seized of the issue by virtue of section 40(1)(g) of the Act and, if Rasile continues with the appeal then a decision made by this Court is in no way a barrier to the Supreme Court determining the issue and coming to a different conclusion. As a practical matter a determination by this Court is even more appropriate in the event that the discretion to extend the time to comply with the Bankruptcy Notice is not exercised. If a decision on the extension of time is not made favourably to Rasile, it would leave it open to the respondent to act upon the Bankruptcy Notice to issue a creditors petition and seek a sequestration order. Furthermore, the respondent has raised another issue which was not raised before Commissioner Reynolds. In these circumstances, I propose to deal with the issue to set aside, and in the event that I reach the conclusion that the Bankruptcy Notice should not be set aside, I will deal with the question as to whether the time for compliance should be extended.
The invalidity argument
The respondent raised for the first time a contention that the assignment was invalid. If correct, the respondent contends that the result of the invalidity is that there has not been in any event, a change in the parties entitled or liable to execution. The respondent contends that although the parties as between themselves accepted the assignment of the debt to Springs Apartments and subsequent reassignment back to GFS Pty Ltd as valid, as a matter of law the assignment was invalid.
The respondent contends that by virtue of the provisions of section 20(1) of the Property Law Act 1969, an assignment of a debt or other legal chose in action is only effective in law if express notice in writing has been given to the debtor. The legal right to that chose in action only operates from the date of that notice.
In this case, a written agreement was entered into by the respondent and Springs Apartments on 28 March 2002 whereby the respondent was granted a put option whereby the respondent could require Springs Apartments to acquire the relevant judgment debt. That option was exercised on 4 July 2002. The original deed was varied on
29 November 2002. The required notice to the applicant was given on the 29 November. The respondent contends that the notice was ineffective because it purported to assign a judgment debt that did not then exist as the judgment had not then been entered and was not entered until 2 December 2002.
The respondent contends that the requirement to stipulate the correct date with respect to the notice of an assignment at law provided to the debtor is a strict one (see Stanley v English Fibres Industries (1899) 68 LJQB 839 at 840; WF Harrison & Co Ltd v Burke (1956) 2 All ER 169 at 171; Halsbury’s Laws of England, 4th edition, Volume 6 para 20 at pp 14-15; Grey v Australian Motorists & General Insurance Co Ltd (1976) NSWLR 669 at 681; International Leasing Corp (Vic) Ltd v Aitken (1966) 85 WN (Pt1) (NSW) 766 and 795 ). In this case, it is contended, the assignment of the judgment debt was wrongly stated in the notice provided to the applicant in that the notice referred to the assignment of a judgment that did not then even exist and, as such, was ineffective.
The notice given under section 20(1) of the Property Law Act 1969 (WA) and dated the 29 November 2002 says:
“take notice that GFS assigns absolutely all right, title and interest it has to the Judgment Debt (being judgment in District Court Action number 2503 of 2000) and further passes and transfers effective as of the date of this Notice stated below the legal right to the debt, all legal and other remedies. for the debt and the power to give good discharge for the debt without the concurrent of GFS to:
i)Springs Apartments Pty Ltd (ACN 085 131 068) of Shop 3 18 Royal Street East Perth Western Australia”.
The respondent submits that at the time the assignment was made GFS Pty Ltd did not have any interest in the judgment debt to assign. What it had was an interest pursuant to a deed dated the 28 March 2002 to hold a consent judgment in the sum of $115,000 from Rasile and Gianfranco Constructions Pty Ltd in escrow until the earlier of certain events none of which it is conceded, had occurred by the 29 November 2002. Thus it is submitted by the respondent that the Notice of Assignment was ineffective and invalid because it referred to a judgment debt which was not in effect and which was not entered until the 2 December 2002, a few days after the notice was given. Thus the respondent contends, the purported notice of assignment of the original debt was invalid, the reassignment was unnecessary and in the event there has been no change under section 141(2) of the Supreme Court Act which might allow for any argument such as raised by Rasile.
Rasile contends that the invalidity is a technical point raised by lawyers and that there was never any misleading of various parties who understood at all times what the assignment meant. This he contends is made clear by the fact that no point was ever taken by Rasile that the Notice was ineffective and he is the party affected by it.
I prefer the argument of Rasile on this point. The gravamen of the cases cited is to ensure that the debtor has notice of the assignment and is not mislead by incorrect information as to dates and amounts. True it is that technically it is not a judgment debt that is being assigned but rather a right to enter judgment in the event of the occurrence of certain events. However, there is no evidence that the debtor was mislead or was ever in doubt about the meaning of the assignment. I find therefore that the assignment and subsequent reassignment are valid.
The construction argument
In short the argument by Rasile is that in order to give meaning to section 141(2) there must be a requirement for leave to be obtained to execute on a judgment whenever there is a change by assignment of the judgment debt. Rasile contends that once the assignment was made then leave was required and this was not overcome by another assignment back to the original judgment creditor. He submits that if there was no requirement for leave, one would never know the validity of the right to execute, whereas where there has been no assignment the validity is obvious because it arrises from the Court’s records. Rasile contends that section 141(2) needs to be read together with section 141(1) and subsection (2) qualifies subsection (1).
On the construction argument, the respondent contends that section 141(1) relates to the original parties to a judgment or order and enables them to issue execution at any time (without leave) provided that execution is sought within six years from the recovery of the judgment or the date of the order. The respondent contends that subsection (1) should be read alone, and that subsection (2) deals with cases that do not fall within subsection (1). The respondent contends that applying subsection (1), the respondent is the original party to a judgment or order and that the date of the judgment or order was within six years and thus no leave is required and there is no need to go further.
The respondent contends that subsection (2) deals with the position where six years have elapsed since the judgment or date of the order or there has been a change in one or both of the parties entitled or liable to execution. That change it is submitted by the respondent, means that the time of execution the parties are different to the original parties to the judgment or order. That is not the case here and subsection (2) has no application. The respondent contends that the use of the words any change has taken place…in the parties entitled or liable to execution, does not require the granting of leave where at the time of execution the parties are unchanged from the original parties.
The respondent contends that the fact that there were assignments, and the question of the validity of those assignments, is irrelevant if at the time of execution the party seeking to execute and the party liable, are the original parties to the judgment, as it is plain from the record how the validity of the right to exercise exists.
The only authority cited on this point is In Re Hill; Holt and Co. In that case, judgment had been obtained by a firm Holt and Co who at the time of judgment had consisted of four persons. Subsequently a Bankruptcy Notice had been issued in the name of Holt and Co and a petition subsequently issued. Between the time of judgment and the filing of the petition one of the members of the firm dropped out and the firm consisted then of three members. It was argued by the debtor that as there had been a change in the membership of the firm leave ought to be obtained to issue execution to enable a Bankruptcy Notice to be issued by the partners of the firm. This argument was rejected by the Court.
The authority however is not directly relevant because the matter was determined on the basis that the judgment and the petition were in the firm name and surviving partners of the firm were at liberty to issue the Bankruptcy Notice and present the petition.
In this case the decision of Commissioner Reynolds which is the subject of leave to appeal, was made on the basis that there had been valid assignments albeit that at the time of execution the parties seeking execution were the same as the original parties to the judgment. I agree with the interpretation given to section 141 by Commissioner Reynolds in the District Court. In my view section 141(1) does, as submitted by the respondent, provide for execution without leave as long as it occurs within six years of judgment or date of the order and is between the original parties to the judgment or order.
Subsection (2) should in my view be read independently to subsection (1) and deals (relevantly here) with the situation where either six years have elapsed since the judgment or the date of the order or there is a change in the parties entitled or liable to execution at the time that execution is sought. Whether there have been changes between the date of judgment or order and execution does not appear to be a relevant issue and as long as subsection (1) is satisfied. I therefore construe the section in favour of the respondent. Accordingly, I find no basis on which the Bankruptcy Notice should be set aside.
Extension of time for compliance with the Bankruptcy Notice
Success of the appeal
It is difficult to say any more than was said by Her Honour Justice Johnson J, namely, it is arguable as there is no authority to support the contentions of either party. On this basis leave to appeal was granted.
Is there any prejudice to the respondent?
In my view there is prejudice to the respondent in extending the time for compliance. There are various issues for the respondent. First, there is no dispute as to the debt itself or to the fact that no payment has been received. The respondent is thus in a position where the only argument is about execution and the respondent can rightly contend that it is entitled to a judgment that has not been paid for approximately three years. Secondly, Rasile clearly wishes to delay execution because of his action against Springs Apartments and Rasile would like that resolved before paying GFS Pty Ltd. Thirdly, whilst Johnson J gave leave to appeal to Rasile, she did not exercise her discretion to grant a stay of execution.
Any irreparable prejudice to the applicant if an extension of time is not granted
I find myself in the same position as Her Honour Justice Johnson in relation to the issue of evidence. She pointed to the fact that Rasile had not filed any evidence to the fact that he was able or unable to repay the judgment debt. She pointed out that if payment was made, or some evidence was available that he could meet the debt, there may not be a sequestration order. She was not satisfied that there was any evidence that if execution was allowed to proceed, there would necessarily be a sequestration order. The only argument as to prejudice seemed to be that a sequestration order might inhibit Rasile’s capacity to proceed with the action against Springs Apartments. However, if a sequestration order is made the trustee can pursue the action on behalf of the applicant.
Whilst it is contended by Rasile that the respondent would suffer no prejudice if time were extended because he could simply withdraw the current notice and seek leave to execute (and then if leave were granted, issue a fresh notice), the respondent has a judgment, the judgment itself is not in dispute, and these proceedings have now been on foot for some considerable time I am therefore not prepared to exercise my discretion to extend the time for compliance with the Bankruptcy Notice and the application filed the 7 July 2003 should be dismissed.
I certify that the preceding sixty (60) paragraphs are a true copy of the reasons for judgment of Bryant CFM
Associate: Peter Smith
Date: 5 December 2003
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