Re: Carew-Reid, Stephen F & Ex Parte: Buckeridge, Leonard Walter

[1997] FCA 1483

FEDERAL COURT OF AUSTRALIA

BANKRUPTCY - creditor’s petition - whether a costs order of the Court of Petty Sessions is capable of immediate execution prior to registration as a judgment of the Local Court so as to amount to a final order within the meaning of s 40(1)(g) of the Bankruptcy Act 1966 (Cth) - whether the judgment debtor absented himself within the meaning of s 40(1)(c)(iii) - whether s 40 (1)(c)(iii) requires that the sole intent of the judgment debtor in absenting himself be an intent to defeat or delay his creditors.

Bankruptcy Act 1966 (Cth) ss 40(1)(c)(iii) and (g), 306(1)
Justices Act 1902 (WA) ss 55 (3), (4)

Re Stubberfield; Ex parte Paradise Grove Pty Ltd (1995) 134 ALR 169 applied
Ex parte Ide; In re Ide (1886) 17 QB 755 applied
Re a Debtor [1912] 3 KB 242 applied
Re John Perkins Seers (1955) 17 ABC 11 applied
Re Pannowitz; Ex parte Wilson (1975) 38 FLR 184 applied
Ex parte Woodall; In re Woodall (1884) 13 QBD 479 applied
Re Grieve; Ex parte Dainford (Federal Court of Australia, Spender J, 11 March 1985, unreported) applied
Abigroup v Abigano (1992) 39 FCR 74 applied

Re Fazzolare; Ex parte Fazzolare and Westpac Banking Corporation (Federal Court of Australia, Tamberlin J, 7 March 1997, unreported) applied
Re Richards; Ex parte Sommers (1947) 14 ABC 112 applied
Re Vassis; Ex parte Leung (1986) 64 ALR 407 applied
Barton v Deputy Commissioner of Taxation (1974) 131 CLR 370 applied

Ramsbottom v Lewis (1808) 170 ER 957 applied
Ex parte Goater; Re Finney (1874) 30 LT 620 applied
Re Dionisio & Co (1888) 14 VLR 326 applied

RE: STEPHEN F CAREW-REID EX PARTE: LEONARD WALTER BUCKERIDGE
WP 1451 of 1996

LEE J
PERTH
19 MARCH 1997

LIMITED DISTRIBUTION

IN THE FEDERAL COURT OF AUSTRALIA
WESTERN AUSTRALIAN DISTRICT REGISTRY	WP 1451 of 1996

BETWEEN:                 RE: STEPHEN F CAREW-REID
  Judgment Debtor

AND:  EX PARTE: LEONARD WALTER BUCKERIDGE
  Judgment Creditor

JUDGE:	LEE J
DATE OF ORDER:	19 MARCH 1997
WHERE MADE:	PERTH

THE COURT ORDERS THAT:

1. The order of the Court dated 14 August 1996 be varied as to item 2 by replacing it with: “There be no order as to costs including any reserved costs”.

1. Subject to the filing of affidavits of continuing debt and of a registry search conducted today, a sequestration order be made against the debtor on the ground set out in par 4(b) of the amended creditor’s petition.

1. The costs of the preparation and presentation of the petition and the costs relating to the amendment of the petition and thereafter are to be taxed and paid to the petitioning creditor out of the debtor’s estate.

Note:Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

LIMITED DISTRIBUTION

IN THE FEDERAL COURT OF AUSTRALIA
WESTERN AUSTRALIAN DISTRICT REGISTRY	WP 1451 of 1996

BETWEEN:	RE: STEPHEN F CAREW-REID Judgment Debtor
AND:	EX PARTE: LEONARD WALTER BUCKERIDGE Judgment Creditor

JUDGE:	LEE J
DATE:	19 MARCH 1997
PLACE:	PERTH

EX TEMPORE REASONS FOR JUDGMENT

This is a petition under the Bankruptcy Act1966 (Cth) (“the Act”) for an order sequestrating the estate of Mr Carew-Reid (“the judgment debtor”).

On 24 August 1995, the judgment debtor was served with a bankruptcy notice dated 23 August 1995 (“the bankruptcy notice”) issued by the petitioning creditor. The bankruptcy notice was based on an order made in a Court of Petty Sessions on 18 August 1995 that the judgment debtor pay costs to the petitioning creditor in the sum of $2112.

On 6 September 1995, the judgment debtor sought leave in the Supreme Court of Western Australia to appeal from the order made by the Court of Petty Sessions and on 1 November 1995, the judgment debtor applied to the Supreme Court for a stay of the Petty Sessions order for the payment of costs pending determination of the application for leave to appeal and the appeal. The application for a stay was dismissed on 5 December 1995.

On 2 November 1995, the judgment debtor filed in this Court, an application to set aside the bankruptcy notice and an application to extend time for compliance with the bankruptcy notice.  On 6 November 1995, orders were made that the time for compliance with the bankruptcy notice be extended until determination of the appeal proceeding in the Supreme Court or further order.  The order was made subject to continued diligent conduct of the appeal proceeding by the judgment debtor.

In due course the order of the Court was varied to fix the expiration of the time for  compliance with the bankruptcy notice at 4.00 pm on 23 August 1996.  On 30 August 1996, the petitioning creditor presented his petition.  The ground relied upon for the making of the sequestration order was described as follows:

“4.The Debtor, within 6 months before the presentation of this petition, committed the following act of bankruptcy, namely that he failed to comply on or before 23rd day of August 1996 with the requirements of a Bankruptcy Notice duly served on him in [sic] the 24th day of October 1995, or to satisfy the Court that he had a counter claim, set-off or cross-demand equal to or exceeding the sum specified in paragraph (a) of the Bankruptcy Notice, being a counter claim, set-off or cross demand that he could not have set up in the action in which the judgment was obtained.”  

In December 1996 an order was made permitting the petitioning creditor to effect substituted service of the petition and in February 1997 leave was granted to amend the petition by inserting an additional ground in the following terms:

“4.The Debtor, within 6 months before the presentation of this petition, committed the following act of bankruptcy, namely:

...

...departed from his dwelling house or usual place of business or otherwise absented himself with intent to defeat or delay his creditors.”

Turning to the first ground relied upon by the petitioning creditor, s 40(1)(g) of the Act reads as follows:

“40.     (1)  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 or, by leave of the Court, elsewhere, a bankruptcy notice under this Act and the debtor does not:

(i)where the notice was served in Australia - within the time specified in the notice; or

(ii)where the notice was served elsewhere - within the time fixed for the purpose by the order giving leave to effect the service, comply with the requirements of the notice or satisfy the Court that he or she has a counter-claim, set-off or cross demand equal to or exceeding the amount of the judgment debt or sum payable under the final order, as the case may be, being a counter-claim, set-off or cross demand that he or she could not have set up in the action or proceeding in which the judgment or order was obtained;”

In determining whether an order satisfies the requirement of s 40(1)(g) that it be a “final judgment or final order, being a judgment or order the execution of which has not been stayed”, it is necessary that the order be capable of immediate execution at the time the bankruptcy notice is issued: See: Re Stubberfield; Ex parte Paradise Grove Pty Ltd (1995) 134 ALR 169; Re Ide; Ex parte Ide (1886) 17 QB 755 at 759 per Bowen LJ; Re a Debtor (1912) 3 KB 242 at 247 per Farwell LJ; Re John Perkins Seers (1955) 17 ABC 11 at 13 per Clyne J; Re Pannowitz; Ex parte Wilson (1975) 38 FLR 184; Ex parte Woodall (1884) 13 QBD 479; Re Grieve; Ex parte Dainford (Federal Court of Australia, Spender J, 11 March 1985, unreported) at 6; Abigroup v Abigano (1992) 39 FCR 74 at 80; Re Fazzolare; Ex parte Fazzolare and Westpac Banking Corporation (Federal Court of Australia, Tamberlin J, 7 March 1997, unreported) at 5.

The requirement that execution of the judgment not be stayed, refers not only to cases where the judgment has been stayed by an express order of the Court, but also to cases where the judgment creditor is not in a position to issue immediate execution.  In such cases, execution is deemed to be stayed: Re Pannowitz at 188 per Riley J; Re Richards; Ex parte Sommers (1947) ABC 112, Ex parte Woodall; Abigroup v Abigano at 80.

In respect of the costs order obtained by the petitioning creditor in the Court of Petty Sessions, before execution of that order could be effected it was necessary that a certified copy of the order be obtained from the clerk of that Court and registered as a judgment in a court of competent jurisdiction, in this particular case, the Local Court (See: ss 55(3), (4) Justices Act 1902 (WA)).

The costs order was not so registered until 22 October 1996 almost fourteen months after the bankruptcy notice had been served on the judgment debtor.  The question to be answered is whether prior to registration as a judgment of the Local Court the costs order of the Court of Petty Sessions was capable of immediate execution.

It is plain that the only manner of enforcement of the costs order was as provided in the Justices Act.  Notwithstanding that the petitioning creditor had a right under the Justices Act to register the order as a judgment of the Local Court permitting recovery as a judgment debt of the amount ordered to be paid and that registration of the order as a judgment was a simple procedure, until the procedure provided by the Justices Act had been completed the order of the Court of Petty Sessions was not capable of execution as a judgment.

It follows that the bankruptcy notice was invalid at the time of issue and non-compliance with the notice did not constitute an act of bankruptcy. Invalidity of the bankruptcy notice was not a matter that could be cured by the application of s 306(1) of the Act. Notwithstanding that registration of the order as a judgment in the Local Court required no more than a procedural step, invalidity of the bankruptcy notice was a defect of substance, not of form, and s 306(1) could have no application.

I turn now to the second ground on which the amended petition relies. Section 40(1)(c)(iii) of the Act states that:

“40. (1)       A debtor commits an act of bankruptcy in each of the following cases:

...

(c)       if, with intent to defeat or delay his or her creditors:

(i)he or she departs or remains out of Australia;

(ii)he or she departs from his or her dwelling house or usual place of business;

(iii)he or she otherwise absents himself or herself; or

(iv)begins to keep house.”

The ground relied upon by the petitioning creditor was that the judgment debtor within six months before presentation of the petition had absented himself with intent to defeat or delay his creditors. The evidence relied upon by the petitioning creditor was that immediately before the presentation of the petition the judgment debtor had refused to surrender to his bail and present himself for trial on an indictment presented at the District Court of Western Australia, and by doing so, had absented himself from all persons having an interest in his whereabouts. In material presented to the Court, the judgment debtor by his own statement, admitted that he had been in hiding since at least 19 August 1996. These acts are sufficient for the purposes of s 40(1)(c)(iii) of the Act to show that the judgment debtor had absented himself.

As to the matter of the judgment debtor’s intent in so acting, although the material put before the Court may provide reason to doubt whether the debtor was capable of forming the relevant intent, in the absence of direct evidence of absence of capacity, the Court should rely on the relevant presumption.

Despite the fact that at the time he absented himself, it is likely that the principal intention of the judgment debtor was to avoid standing trial on a criminal charge, s 40(1)(c) does not require that the sole intent of the debtor behind the committing of the relevant act be an intent to defeat or delay creditors: Re Vassis; Ex parte Leung (1986) 64 ALR 407 at 412 per Burchett J; Barton v Deputy Commissioner of Taxation (1974) 131 CLR 370 at 375 per Stephen J.

It must be presumed that the action of the judgment debtor was done with full knowledge, that in so acting, in addition to avoiding standing trial, he was also creating a difficulty for creditors pursuing him for claims of which he was well aware and had not discharged.  The requisite intent may be proved indirectly, by proving circumstances which must necessarily cause delay, and which the debtor must be presumed to have foreseen and intended as a necessary consequence of his or her own deliberate acts: Ramsbottom v Lewis (1808) 170 ER 957; Ex parte Goater; Re Finney (1874) 30 LT 620; Re Dionisio & Co (1888) 14 VLR 326.

In the circumstances, I am satisfied that the petitioning creditor has made out a ground for the making of a sequestration order and that it is appropriate to make such an order, subject to the filing of an affidavit of continuing debt and of search of the bankruptcy register. 

Item 2 of my order of 14 August 1996 will be varied by replacing it with an order that there be no order as to costs including reserved costs.  With regard to the sequestration order the petitioning creditor is to have the costs of the preparation and presentation of the petition and costs relating to the amendment of the petition and thereafter, such costs to be paid out of the debtor’s estate.

I certify that this and the preceding five (5) pages are a true copy of the Reasons for Judgment herein of the Honourable Justice Lee

Associate:

Dated:            19 March 1997

Counsel for the Judgment Creditor:	N D Dillon
Solicitor for the Judgment Creditor:	Corrs Chambers Westgarth
Date of Hearing:	19 March 1997
Date of Judgment:	19 March 1997