Re Browbank, M. & Anor v Ex parte Loniplus Pty Ltd

[1985] FCA 556

Re: MICHAEL BROWBANK and NEIL MILLER
Ex Parte: LONIPLUS PTY. LIMITED
No. B3641 of 1985
Bankruptcy

COURT

IN THE FEDERAL COURT OF AUSTRALIA
GENERAL DIVISION
BANKRUPTCY DISTRICT OF NEW SOUTH WALES AND THE AUSTRALIAN CAPITAL TERRITORY
Beaumont J.

CATCHWORDS

Bankruptcy - Application to set aside bankruptcy notice - default judgment said to be obtained irregularly - whether Notice bad because, although no stay of execution granted, it should be treated as stayed within s.41(3)(b) of Bankruptcy Act, 1966.

HEARING

SYDNEY
#DATE 29:10:1985

ORDER

Bankruptcy Notice No. 3641 of 1985 be set aside.

Note: Settlement and entry of orders is dealt with by Bankruptcy

Rule 124 of the Bankruptcy Act, 1966.

JUDGE1

This is an application by the judgment debtors, Michael Browbank and Neil Miller, to set aside a bankruptcy notice issued on the application of their judgment creditor, Loniplus Pty. Limited. The bankruptcy notice was based upon a judgment obtained by default in the District Court of New South Wales at Penrith on 6 April 1984.

1. The debtors' assert that the judgment was entered irregularly. On 23 May 1985, their solicitors wrote to the solicitors for the judgment creditor as follows:
   
   

"We have been handed your two letters of demand dated 14th May 1984.

We note that a notice to plead facts was filed on 5th March 1984 and served on your client company at its registered office on 15th March 1984.

It appears that judgement should not have been entered.

We propose that unless judgement is set aside by the Court, or unless you consent to judgement being set aside, a notice of motion will be filed on the basis of the fact that the Court irregularly allowed Judgement to be entered up notwithstanding the fact that the notice to plead facts had been filed and served."

1. The solicitors for the judgment creditor responded by letter dated 28 May 1984:
   
   

"We refer to your letter of the 23rd instant and advise that we are seeking instructions from our client company concerning the matters raised therein.

We advise that we will take no steps to enforce judgment without further advice to you, pending receipt of instructions from our client."

1. It appears that no further communication took place between the parties or their solicitors until service of the bankruptcy notice in August 1985. The solicitors for the debtors say that the correspondence cited induced them to believe that the solicitors for the petitioner would not seek to enforce the judgment. However, the debtors made no attempt to set aside the judgment or to otherwise pursue the matter at that stage.

2. In support of their present application, the debtors rely upon the provisions of s.41(3)(b) of the Bankruptcy Act, 1966 so far as they prohibit the issue of a bankruptcy notice if at the time of the application for its issue, execution of the judgment to which it relates "has been stayed." It is well established that if such a stay is in force at the time of issue or service of the bankruptcy notice, the notice will be bad (see Re Moss; Ex parte Tour Finance Ltd. (1968) 13 FLR 101 at p 103).

3. In the present case, no order granting a stay was made or even sought. The question here is whether, in the events which transpired, the provisions of s.41(3)(b) nonetheless apply.

4. In Re Pannowitz; Ex parte Wilson (1975) 6 ALR 287, in analysing the authorities on the question which now arises, Riley, J. said (at p 291):
   
   

"In none of those cases had execution in fact been stayed. In each the defect in the creditor's case was simply that he had not put himself in the position of being able to issue execution. @For this purpose execution is considered to be stayed if, at the date of the issue of the notice, the judgment creditor is not entitled to issue immediate execution on the judgment': 3 Halsbury, 4th ed, par 262; for example where the judgment creditor must be taken to have agreed to suspend his right to execution: Re a Debtor (1908) 1 KB 344, where see especially at 349 per Fletcher Moulton L.J."

1. Fletcher Moulton L.J. there held that the phrase "execution had not been stayed" should not be confined to its strict literal sense, i.e. a formal stay order, saying that it extended to any case:
   
   

"...when there are circumstances under which the Court would, if applied to, prevent the issue of execution..."

1. In that case, the debtor was able to rely on an agreement, evidenced by conduct, not to enforce the judgment to which the bankruptcy notice related. But the present debtors cannot establish any such agreement from the correspondence cited. Further, the letter dated 28 May 1985 does not even constitute a promissory estoppel for present purposes (see Legione v. Hateley (1983) 46 ALR l per Mason and Deane, JJ. at p 25).

2. However, the discretion given to the District Court by s.156(3) of the District Court Act, 1973 (N.S.W.) will be exercised "where the applicant for a stay demonstrates a reason or an appropriate case to warrant the exercise of discretion in his favour" (see Alexander v. Cambridge Credit Corporation Ltd., Supreme Court of New South Wales, Court of Appeal, unreported, 4 September 1985 at p 16).

3. In the present circumstances, in my view, the debtors have made out a case for the intervention of the District Court by granting an interim stay of execution pending their application to set aside the judgment on the ground that it had been irregularly entered. If such an irregularity or a breach of good faith were established, the debtors would be entitled to a permanent stay or alternatively, to have the judgment set aside (see Ritchie's Supreme Court Procedure (N.S.W.) at p.2856). But, short of a permanent stay, I think that, on the material then available, the debtors would have been entitled to a temporary stay pending the hearing of their application to set the judgment aside.

4. It follows, in my view, that for the purposes of s.41(3)(b), execution of the judgment should be treated as if stayed. The notice is therefore bad and will be set aside.