Re Buchanan, A.R. v Ex parte Mervac Finance Ltd

[1991] FCA 503

Re: ALFRED RICHARD BUCHANAN
Ex parte: MERVAC FINANCE LIMITED
No. P928 of 1991
FED No. 503
Bankruptcy
103 ALR 715
(1991) 31 FCR 135

COURT

IN THE FEDERAL COURT OF AUSTRALIA

BANKRUPTCY DISTRICT OF THE STATE OF NEW SOUTH WALES AND THE AUSTRALIAN CAPITAL TERRITORY
GENERAL DIVISION
Beaumont J.(1)

CATCHWORDS

Bankruptcy - Bankruptcy notice - judgment creditor foreign corporation - whether notice invalid because did not require payment within jurisdiction.

HEARING

SYDNEY

#DATE 23:8:1991

Counsel and Solicitors for Debtor: J.R. Wilson instructed by

Ternes and Salier

Counsel and Solicitors for Creditor: J. Stevenson instructed by

Henry Davis York

ORDER

Declare that the bankruptcy notice herein is valid.

Costs reserved.

Note: Settlement and entry of orders is dealt with in rule 124 of the Bankruptcy Rules

JUDGE1

On the hearing of this creditor's petition for bankruptcy, based upon the alleged failure of the judgment debtor to comply with the requirements of a bankruptcy notice, a preliminary objection has been taken to the validity of the bankruptcy notice. The notice, so far as presently relevant, was as follows:

"WHEREAS MERVAC FINANCE LIMITED of 1 St Pauls Churchyard, London, United Kingdom (hereinafter referred to as 'the judgment creditor') has claimed that the sum of $1,616,553.72 together with interest thereon at the rate of 21 per centum per annum from 13 June 1990 which as at 6 August 1990 amounts to $50,223.89 making a total of $1,666,777.61 is due by you to it under a final judgment obtained by it against you in the Supreme Court of New South Wales at Sydney on the 13th day of June 1990, being a judgment the execution of which has not been stayed. THEREFORE TAKE NOTICE that within 14 days after service of this Notice on you, excluding the day on which this Notice is served on you, you are required -

(a) to pay the sum of $1,666,777.61 so claimed by the judgment creditor to the judgment creditor; or

(b) to secure the payment of the sum referred to in paragraph (a) to the satisfaction of the Federal Court of Australia or the judgment creditor or its agent whose name and address is Henry Davis York of Level 25, 135 King Street, Sydney, or compound the sum so specified to the satisfaction of the judgment creditor or its agent.

AND FURTHER TAKE NOTICE that if, within the period set out above, you fail either to comply with either of the abovementioned requirements of this Notice or to satisfy the Federal Court of Australia that you have a counter-claim, set-off or cross-demand equal to or exceeding the sum specified in paragraph (a) of this Notice, being a counter-claim, set-off or cross-demand that you could not have set up in the action in which the judgment was obtained, you will have committed an act of bankruptcy on which bankruptcy proceedings may be taken against you."

1. On behalf of the debtor, it is submitted that the notice is bad because it fails to nominate a place within the Commonwealth of Australia for payment of the judgment debt to be made by the judgment debtor to the judgment creditor. It will be noted that the notice gives a London address for the judgment creditor. The debtor contends that there is a principle, established in the decided cases, that a creditor can not ask his debtor to pay him at an address outside the Commonwealth of Australia.

2. Before going to the authorities, it is necessary to describe the relevant legislative scheme.
   The legislative scheme

3. By s.41(1)(a) of the Bankruptcy Act 1966 ("the Act") it is provided that a bankruptcy notice shall be in accordance with the prescribed form. By r.8, a bankruptcy notice shall be in accordance with Form 4. By Form 4, the following form, so far as presently relevant, is prescribed:
   

"WHEREAS (name and address of judgment creditor) (hereinafter referred to as 'the judgment creditor') has claimed that the sum of $ is due by you to him under a final judgment (or order) obtained by him against you in the Court of on the day of ,19 , being a judgment (or an order) the execution of which has not been stayed.

THEREFORE TAKE NOTICE that within days after service of this notice on you, excluding the day on which this notice is served on you, you are required -

(a) to pay the sum of $ so claimed by the judgment creditor to (here insert 'the judgment creditor' or, if the judgment or order requires payment to be made to a court or a person other than the judgment creditor, the name and address of the court or the other person to whom payment is required to be made); or

(b) to secure the payment of the sum referred to in paragraph (a) to the satisfaction of the (name of the court) or the judgment creditor (or his agent whose name and address are ) or compound the sum so specified to the satisfaction of the judgment creditor (or his agent):

AND FURTHER TAKE NOTICE that if, within the period set out above, you fail either to comply with either of the abovementioned requirements of this notice or to satisfy the (here insert the name of the Court) that you have a counter-claim, set-off or cross demand equal to or exceeding the sum specified in paragraph

(a), being a counter-claim, set-off or cross demand that you could not have set up in the action (or proceedings) in which the judgment (or order was obtained, you will have committed an act of bankruptcy on which bankruptcy proceedings may be taken against you."

1. By s.41(2) of the Act, it is provided:
   

"The prescribed form of bankruptcy notice shall be such that the notice -

(a) requires the debtor named in it, within a specified time (being the time referred to in subparagraph 40(1)(g)(i) or (ii), whichever is appropriate) to -

(i) Pay the judgment debt or sum ordered to be paid in accordance with the judgment or order; or

(ii) secure the payment of the debt or sum to the satisfaction of the Court or the creditor or his agent, if any, specified in the notice or compound the debt or sum to the satisfaction of the creditor or his agent, if any, specified in the notice; and

(b) states the consequences of non-compliance with the requirements of the notice."

The authorities

1. Halsbury's Laws of England, 4th ed., Vol. 3 at 169-170, in discussing the requirement in a bankruptcy notice that the debtor pay the judgment debt, states that -
   

"A creditor cannot ask his debtor to pay him at an address outside the realm."

(See also, to the same effect, Williams and Muir Hunter on Bankruptcy, 19th ed. at 580.)

1. The authorities given by Halsbury for this statement are Coke upon Littleton, Sheppard's Touchstone and Thorn v City Rice Mills (1889) 40 ChD 357.

2. In Coke upon Littleton, s.340, p 210A, in the context of feoffment in mortgage, it is said in the text:
   

"...For he is bound to seek the feoffee if he be then in any other place within the realm of England...in this case it behooveth him that made the obligation to seek him to seek to whom the obligation is made if he be in England..."

1. The commentary is as follows:
   

"'Within the realm of England' For if he be out of the realm of England he is not bound to seek him, or to go out of the realm unto him. And for that the feoffee is the cause that the feoffor cannot tender the money, the feoffor shall enter into the land as if he had duly tendered it according to the condition."

1. In Sheppard's Touchstones cap. 6, 135, the following is said:
   

"But in cases where there is no place set down for the doing of the thing contained in the condition, if the thing to be done be a corporal service, as to pay money, or any such like thing, the party that is to do it must at his peril seek out the person to whom it is to be done, if he be infra regnum Angliae; but if he be not within the kingdom, he is not bound to seek him, and yet the condition is not broken."

1. In Thorn v City Rice Mills, above, it was held that where there is a condition for payment of a sum at a time and place certain, the condition is not broken by non-payment at the time unless the demand for payment is made at the specified place. North J. (at 359) cited, with approval, the above passage from Sheppard. Thorn was a case of local performance. The debenture provided for payment at a bank in Cannon Street London or at the registered office of the company issuing the debenture. The question was whether there had been default under the debenture: the plaintiff then sought the appointment of a receiver of the company's assets. Interest due was not paid by the company but the plaintiff had made no demand for it either at the bank or the company's registered office.

2. North J. said (at 360):
   

"The law is laid down in the same way in a recent text-book, to which I refer, not as an authority, but as a convenient compendium. It is stated in Leake on Contracts...: 'If no certain place be appointed in the contract for performance, and it require the presence of the promisee, it must, in general, be made or tendered to him, wherever he may be; subject to the condition in some cases of his appointing a proper place.' Now in the present case, in my opinion, a place is fixed for payment, and it comes under the exception. And there is this to be noticed, that there are two places named, and it is for the person to whom payment is to be made to fix the place at which he will be paid; until he has selected the place at which he will be paid there can be no default. In my opinion there having been no demand by the creditor at either place, no default has been made by the company."

1. In In re Stogdon (1895) 2 QB 534, a bankruptcy notice stated the address of the creditor who issued it to be "White's Club, St. James', S.W." The creditor did not reside at the club, and he was in fact out of England during the whole of the seven days limited by the notice for the payment of the debt. There was evidence that, if the debtor had gone to the club, he would have been referred to the creditor's London solicitor, who held a general power of attorney for the creditor, and could have received payment of the debt on his behalf. It was held that the notice was invalid. Lord Esher M.R. said (at 535-6):
   

"In my opinion regard must be had to the substance and meaning of the Bankruptcy Act and Rules, and not merely to the words. Unless the requirements of the Act and Rules are complied with in substance, they are not complied with at all. Here I think the creditor gave no address such as is required by the Act and the Rules. None of the things which the debtor is required by the bankruptcy notice to do could be done by him at White's Club, and therefore his omission to do them did not constitute an act of bankruptcy."

1. Stogdon was followed in In re Beauchamp (1904) 1 KB 572. Again this was a local matter only. Vaughan Williams L.J. said (at 583-4):
   

"It is plain that it is not sufficient for the creditor merely to give an address where he can be heard of; it must be an address where he can be paid, or where by agreement the debt can be secured or compounded.

Now what does this mean? Suppose a creditor gives as his address his home where he permanently lives. Is he bound to remain at home all day, or never to go out without leaving word where he proposes to go, but, for the matter of that, might not succeed in going? This is impossible. What then are the necessary conditions of the address? We think that the address must be of a place where the creditor is to be found during the seven days, and this is so whether that address is of the residence or of the place of business of the creditor; and we think that, if the address given in the bankruptcy notice is such an address at the date of the service of the notice, occasional absence of the creditor from that address, even for a whole day, will not render the bankruptcy notice inefficient, unless the absence is such as to deprive the debtor of a reasonable opportunity of paying the debt or securing it or compounding for it according to the terms of the notice."

1. In In re A Debtor (1912) 1 KB 53, a French firm obtained a final judgment against the debtor, who resided in England, and served upon him a bankruptcy notice requiring him to pay the amount due on the judgment to the creditors or one or either of them carrying on business at the address of the firm in Paris. It was held that the notice was bad.

2. After referring to Coke and Sheppard, Cozens-Hardy M.R. said (at 57):
   

"Now can it be said that this bankruptcy notice required payment of the debt 'in accordance with the terms of the judgment'? In my opinion it cannot. It interposes a place of payment which is not, according to the common law of this country, a place in which payment could be properly required, namely, Paris, a place which is out of the jurisdiction. I think, therefore, that on that short ground this bankruptcy notice was wrong and cannot be supported, because it does not require the judgment debtor to pay the judgment debt in accordance with the terms of the judgment. The creditors have no right to impose an additional term not, according to the common law of this country, consistent with the judgment which has been pronounced."

1. He went on to reject a suggestion (at 57) that there were no means by which a foreign creditor could serve a good bankruptcy notice upon his English creditor, saying (at 59):
   

"I think, therefore, no difficulty whatever need arise in the case of foreign creditors. They have only to say, in the words of the bankruptcy notice, 'Pay me the proper amount at some address in London,' and to have at that address a duly constituted and proper agent duly authorized to receive payment on behalf of the plaintiff."

1. In In re Couve; Ex parte S. Menkin (Incorporated) (1920) 20 SR 236, a bankruptcy notice was issued by a foreign corporation directing payment to be made to the judgment creditor "C/o R.S. Lambton, Solicitor, 2 Bond Street, Sydney". It was held that the solicitor was authorised to receive payment of the judgment debt. After considering Beauchamp, Re A Debtor and Stogdon, it was held that the notice was good.

2. In James v Federal Commissioner of Taxation (1955) 93 CLR 631, it was held that unless a judgment requires a debtor to pay the creditor at a particular place, a bankruptcy notice under s.53 of the Bankruptcy Act 1924 should not so require. The High Court referred (at 640) to Re A Debtor, above and to the decision in Pepper v McNiece (1941) 64 CLR 642, dealing with the validity of a bankruptcy notice, where it was held that, in the Commonwealth, the realm does not mean the State in which the judgment is obtained but Australia generally. Of the reasoning in Re A Debtor, Williams, Kitto and Taylor JJ. said (In James at 642):
   

"Their Lordships were discussing two bankruptcy notices one of which gave the address of the creditors as 'of' an address in Paris and the other the address of the creditors as carrying on business in London. Neither notice required the debtor to pay the creditor at a particular place. The remarks were made with reference to the right of a creditor to describe himself as of an address within the realm and to notify the debtor that he could pay the debt there. They held that a foreign creditor would be within the realm for the purpose of the notice, even if he was not there in person during the seven days, provided he had an agent at the address given during this period duly authorized to receive payment. They were not discussing the question whether a judgment creditor could appoint an exclusive place for payment within the realm and refuse a tender of payment elsewhere. There is nothing in the judgments to suggest that a debtor would not comply with a bankruptcy notice issued on behalf of a creditor abroad who appoints an agent within the jurisdiction to receive the debt if the debtor preferred to go to the creditor at his foreign address and pay him there."

1. Re A Debtor and James were considered by Gibbs J. in Re Martin; Ex parte Government Employees Finance and Industrial Loan Corporation (1969) 13 FLR 353 at 355-6 in holding invalid a bankruptcy notice under the Act founded on a judgment recovered in the Supreme court of New South Wales by a foreign creditor requiring payment of the judgment debt to a specified agent in Australia. Gibbs J. said (at 356):
   

"In my opinion, when a judgment is given in favour of a foreign creditor, although it is right to say that the judgment does not require the debtor to pay the creditor outside Australia, it is wrong to say that the obligation imposed by the judgment is to pay an agent of the creditor within Australia. The truth is that the obligation imposed is to pay the creditor if he is within Australia but presence within Australia by an agent will be sufficient. To require the debtor to pay an agent is therefore not to require him to pay in accordance with the judgment."

1. Gibbs J. went on to say (at 357):
   

"It should be added that the proviso to s.53 of the Bankruptcy Act 1924, as amended (which reproduces a provision which first appeared in England in 1913) has been replaced by the different words of s.41(2), which make it plain beyond a doubt that if the judgment requires payment to a creditor the notice will not be valid if it requires payment to an agent. Where a foreign creditor has obtained a judgment which obliges the debtor to pay him in Australia, it therefore seems to me that the notice should require payment to the creditor, and should give as the address of the creditor a place in Australia at which there is in fact a person duly authorized to receive payment, but that the notice ought not to specify the agent, and ought not to require payment at a particular place."

1. In Re Haritos; Ex parte Hill (1968) 15 FLR 378, a bankruptcy notice under the 1924 Act which did not contain a correct statement of the judgment creditor's address, was held invalid. Gibbs J. referred to, inter alia, Beauchamp, above, and said (at 380):
   

"It is a matter of substance that the notice should give the creditor's address to enable the debtor to attempt to procure the agreement of the creditor to the securing or compounding of the debt, notwithstanding the fact, pointed out by Cozens-Hardy M.R. in Re Persse, that the creditor cannot be forced to compound or take security."

1. See also Nugent v Brialkim Pty. Ltd. (1985) 61 ALR 713 per Lockhart J. at 726-8.

2. In Re Bunn; Ex parte Bunn (1989) 20 FCR 393, an order of the Family Court required payment to the judgment creditor but the bankruptcy notice required payment to her solicitors (at 395). The notice was held to be bad. Neaves J. said (at 402):
   

"It is submitted on behalf of the petitioner that the bankruptcy notice, on its proper construction, does not require payment of the debt to be made to the firm of solicitors named but rather identifies the solicitors as being the agent of the petitioner authorised to receive payment of, and give a discharge for, the debt. I am unable to accept that this is the true meaning of the bankruptcy notice. It seems to me that the notice can only be read as requiring the debtor to pay the debt to the solicitors at the address stated and as informing him that, unless he does so, or satisfies the alternative requirements of the notice, he will commit an act of bankruptcy. So construed, the bankruptcy notice is clearly invalid as the requirement to pay the debt to the solicitors is not in accordance with the order of the Family Court of Australia on which the notice is founded. That order does not require payment to the petitioner's solicitors: it requires payment to the petitioner."

The argument for the judgment creditor

1. On behalf of the judgment creditor, it is submitted that the notice complies with the Act and the Rules but that, if there be held to be a defect, it is a formal one only and, as a consequence of s.306(1) of the Act, did not invalidate the notice.
   Was the notice defective?

2. It is true, as the judgment creditor contends, that the notice is in the prescribed form. But the prescribed form does not, in terms, address the possibility that a judgment creditor may be a foreign person. In that event, it is necessary to adapt the prescribed form so as to provide, in the case of payment, for an appropriate method of payment (see Downey v Prior (1960) 103 CLR 353 per Kitto J. at 362). As the decided cases cited above show, in the case of a foreign corporation, an appropriate method would be to require payment to an agent of the judgment creditor at an address within the Commonwealth.

3. It may be accepted that no such stipulation was made, in express terms, in para (a) of the notice. But in para.(b), the agent and an address were specified. In my opinion, read as a whole, the notice makes it reasonably clear, as a matter of necessary implication, that payment made to the agent would constitute compliance with the requirements of the notice. It will be recalled that, in para.(b) of the notice, it was stated that the agent had authority to secure the payment of the sum in question or to compound it. It is implicit in the grant of that authority, in my opinion, that the agent also had authority to receive the sum by way of payment in full. That is to say, the former authority is greater than the latter in the sense that, in the former case, the agent is authorised to negotiate a position with respect to the judgment debt, whereas in the latter case, the agent is merely authorised to receive its payment. In my view, the latter is necessarily included in the former and this would be apparent on any reasonable reading of the notice. To summarise, the judgment debtor was informed explicitly, by para.(b) of the notice that if he wished to secure or compound the judgment debt, he could do so by negotiating with the nominated agent who had an active authority in that behalf. He was also informed, by necessary implication, that if he wished to pay the debt he could make payment to the agent who also had a passive authority to receive payment.

4. In the result, I am of the view that the notice is valid. There will be a declaration accordingly.