Re Cruickshank, Allan Urquhart Ex parte Green, Robert Andrew v Widdows, Ronald Dennis

[1980] FCA 165

Re: ALLAN URQUHART CRUICKSHANK
Ex parte: ROBERT ANDREW GREEN
And: RONALD DENNIS WIDDOWS (1980) 48 FLR 434
No. 213 1978 Part X
Bankruptcy

COURT

IN THE FEDERAL COURT OF AUSTRALIA

GENERAL DIVISION
BANKRUPTCY DISTRICT OF THE STATE OF VICTORIA
C.A. Sweeney J.(1)

CATCHWORDS

Bankruptcy - appeal against decision of trustee of a Deed of Arrangement partially rejecting the applicant's proof of debt based upon a Bill of Sale - held the Bill of Sale not invalid by reason of the provisions of s.82 of the Goods Act 1958 of the State of Victoria - The Court orders that the decision of the trustee be reversed and that he be directed to admit the proof.

Bankruptcy - Deed of arrangement - Partial rejection of proof of debt - Appeal against trustee's decision - Validity of bill of sale granted during currency of sheriff's "walking possession" of goods pursuant to writ of fieri facias - Property in goods subject of sheriff's possession - Goods Act 1958 (Vic.), s. 82 - Bankruptcy Act 1966 (Cth), ss. 104, 205 (1), 237 (2).

HEADNOTE

In June 1978, pursuant to a writ of fieri facias, the sheriff of the Supreme Court of Victoria seized the debtor's goods by entering into "walking possession" thereof. The following month the debtor granted a bill of sale in favour of one Bowring secured over certain of the goods seized by the sheriff. Bowring received the bill of sale bona fide and for valuable consideration.

In April 1979 the debtor executed a deed of arrangement, appointing the respondent as his trustee. Thereafter the sheriff withdrew from his "walking possession". In October 1979 Bowring lodged a proof of debt with the respondent in accordance with the provisions of the Bankruptcy Act 1966 claiming to be a secured creditor in the sum of $20,453.74 pursuant to the registered bill of sale. In April 1980 Bowring assigned his debt and interest in the bill of sale and the goods of the debtor over which such bill was secured to the applicant. This assignment was by deed of which notice was duly given to the respondent.

On 30th May, 1980, the respondent rejected the proof of debt lodged by Bowring so far as the sum of $20,453.74 was concerned on the grounds that at the time of the granting of the bill of sale the goods were bound by the writ of fieri facias. In his grounds of opposition to the present application, whereby the applicant sought an order reversing the decision of the respondent, the respondent relied upon s. 82 of the Goods Act 1958 (Vic.) and s. 205 (1) of the Bankruptcy Act 1966.

Held: (1) Property of a debtor seized by a sheriff pursuant to a writ of fieri facias does not cease to be the property of the debtor pending any sale by the sheriff, notwithstanding the continuance of the sheriff's "walking possession".

McQuarrie v. Jaques (1954), 92 CLR 262, followed.
(2) Therefore a bill of sale granted by the debtor and secured over goods the subject of the sheriff's seizure to a person who takes such a bill bona fide and for valuable consideration is a valid bill of sale.
(3) Decision of respondent rejecting in part the proof of debt reversed.

HEARING

Melbourne, 1980, June 24; September 8; October 30. #DATE 30:10:1980

APPLICATION.

Application pursuant to ss. 104 (1) and 237 (2) of the Bankruptcy Act 1966 for a review of the decision of the respondent trustee.

P. R. Hayes, for the applicant.

T. Irlicht (solicitor), for the respondent.

Cur. adv. vult.

Solicitors for the applicant: Moule, Hamilton & Derham.

Solicitor for the respondent: T. Irlicht.

D. LEVIN

ORDER

1. The decision of the respondent trustee partially rejecting the proof of debt of the assignor to the applicant be reversed and that the respondent be directed to admit the said proof of debt.

2. The costs of the applicant, of and incidental to the application, be paid out of the estate of the debtor, such costs to be taxed, if not agreed.

3. The respondent's taxed costs of and incidental to the application be paid out of the said estate.

4. Liberty is reserved to all parties to apply.

Orders accordingly.

JUDGE1

In this case Robert Andrew Green (the applicant) seeks an order reversing the decision of Ronald Dennis Widdows (the respondent) as trustee of a Deed of Arrangement of Allan Urquhart Cruickshank (the debtor) rejecting the proof of debt of Herbert Bowring (the assignor) in which he claimed to be a secured creditor in the sum of $20,453.74.

The proof of debt was lodged by the assignor on 6 October 1979, who claimed to be a creditor of the debtor in the said amount and to be a secured creditor in respect of it under a Bill of Sale Registered number 392960 dated 10 July 1978 (the bill of sale).

On 21 April 1980 the assignor entered into a deed of assignment in favour of the applicant, who was described therein as the transferee, in the following terms -

"1. In consideration of the payment of the sum of Twenty-one Thousand, Four Hundred and Fifty-seven Dollars ($21,457.00) now agreed to be paid by the Transferee to the Transferor, the Transferor Hereby Assigns to the Transferee the Debt due and owing to the Transferor by the Debtors (sic) and the full benefit and advantage thereof and the interest thereon accruing absolutely to hold the Debt unto the Transferee absolutely together with all the Transferor's right, title and interest if any in and to the said Conditional Bill of Sale and the said further Conditional Bill of Sale and in and to the chattels described in the Schedules thereunto and each of them.

2. The Transferor hereby insofar as it is or may be necessary to give effect to this Deed of Assignment irrevocably appoints the Transferee his Attorney to make such claims and take such actions as he may deem fit in the name of the Transferor to recover, receive and give effectual discharges for the Debt and the interest accruing thereon or the Bills of Sale or the proceeds of sale or possession of the said chattels and to share in any distribution made by the said Trustee."

Notice of this assignment was given to the respondent on 21 April 1980.

The respondent gave notice dated 30 May 1980 of partial rejection of the proof of debt in the following terms : -

"Take Notice that I, Ronald Dennis Widdows of 703 South Road Moorabbin, as Trustee of the estate of the abovenamed debtor have this day rejected your claim to be a secured creditor in the sum of Twenty Thousand Dollars, Four Hundred and Fifty-three Dollars and Seventy-four Cents ($20,453.74) or any other amount on the following grounds:

'That at the time of the granting of the said Bill of Sale the property in the goods and chattels of the debtor was bound pursuant to a Writ of Fieri Facias No. 3150 of 1978 issued out of the Supreme Court of Victoria in an action where Scandex Pty. Ltd. was the Plaintiff and Alan Cruickshank was the Defendant And Take Notice Further that I admit your claim in the said amount as an ordinary unsecured creditor subject to the proviso that any portion of that amount which represents interest in excess of eight per centum (8%) per annum is postponed in favour of other creditors.'"

The respondent stated his grounds of opposition to the application as follows : -

"1. That the said bill of sale is invalid by reason of provisions of Section 82 of the Goods Act 1958 of the State of Victoria by reason of the property in the goods in question being bound by a Writ of Fieri Facias in favour of a creditor at the time of the execution of the said Bill of Sale.

2. That the respondent in his capacity as trustee of the deed of arrangement of the debtor has a good title to the said goods free of any Bill of Sale in favour of the applicant possession of such goods having been given to the respondent pursuant to S 205(i) of the Bankruptcy Act by the sheriff who had possession of the said goods pursuant to the said Writ of Fieri Facias."

The parties agreed on the following facts : -

"1. That on 16th June, 1978 the Sheriff of the Supreme Court of Victoria seized the goods referred to in exhibit B (which contained a list of the goods, which included a mobile home);

2. That on 16th June, 1978 : -

(a) the goods referred to in exhibit B hereto were in the physical possession of the debtor;

(b) the Sheriff entered into walking possession of the goods referred to in exhibit B hereto (walking possession being the rights to the goods acquired by the Sheriff on seizure of the goods which he has notwithstanding that the goods remain in the physical possession of the debtor).

3. Between 16th June, 1978 and 22nd May, 1979: -

(a) the goods referred to in exhibit B hereto were in the physical possession of the debtor;

(b) the goods were in the walking possession of the Sheriff.

4. On 2nd May, 1979 and thereafter: -

(a) the goods referred to in exhibit B hereto were in the physical possession of the debtor;

(b) the respondent asserted the right to take possession of the goods."

The respondent, in an affidavit sworn on 12 August, 1980, deposed as follows: -

"1. That very shortly before the 24th November, 1978, I telephoned one Douglas Hall, an Officer of the Sheriff of the Supreme Court who was in charge of the execution under a Writ of Fieri Facias issued by Scandex Pty. Ltd. (now known as Trans-Austral Shipping Pty. Ltd.) against the abovenamed debtor Alan Urquhart Cruickshank. During that conversation, the exact date of which I do not recall, I said to him that I was about to obtain an authority under Section 188 of the Bankruptcy Act from Mr. Cruickshank and indicated to him that I would ask him to suspend the execution as soon as that authority was given to me. He replied that it would be perfectly alright, providing that I let him have the number of the Section 188 authority. Very shortly after the 24th November, 1980, I again telephoned the said Douglas Hall and told him the number of the Section 188 authority, which had been given to me by the Registrar in Bankruptcy. The said Douglas Hall assured me that in view of this information he would not take any steps to sell the debtors property. I also told him, during that conversation, that Mr. Cruickshank was likely to enter into a Deed of Arrangement under Part X of the Bankruptcy Act. He said to me that as soon as that Deed was entered into, I should let the Sheriff's office know.

2. That the Deed of Arrangement herein was executed on the 9th April, 1979.

3. That very shortly after the said 9th April, 1979 I telephoned the office of the Sheriff of the Supreme Court of Victoria, I do not recall the person I spoke to, but in substance I told that person that Mr. Cruickshank had entered into a Deed of Arrangement under Part X of the Bankruptcy Act. I was told that a note would be taken and that the Sheriff would not take any further steps in relation to the goods.

4. That immediately after that discussion, I advised the abovenamed debtor that the goods were no longer in the Sheriff's possession and that he was to use same under my supervision. The said debtor agreed to this and did in fact use the goods, and is still using most of the goods under the Deed of Arrangement. Insofar as the mobile home is concerned, same has been stored at several addresses, with my approval, since November 24th 1978."

The respondent was not cross-examined upon his affidavit and I accept his evidence.

Section 82 of the Goods Act 1958 is in the following terms : -

"82. (1) A writ of fieri facias or warrant or other writ of execution against goods shall bind the property in the goods of the execution debtor as from the time when the writ is delivered to the sheriff to be executed, and for the better manifestation of such time it shall be the duty of the sheriff without fee upon the receipt of any such writ to indorse upon the back thereof the hour day month and year when he received the same: Provided that no such writ and no writ of attachment against the goods of a debtor shall prejudice the title to such goods acquired by any person in good faith and for valuable consideration unless such person had at the time when he acquired his title notice that such writ or warrant or any other writ by virtue of which the goods of the execution debtor might be seized or attached had been delivered to and remained unexecuted in the hands of the sheriff.

(2) In this section the term 'sheriff' includes any officer charged with the enforcement of a writ of execution."

In McQuarrie v. Jaques (1964) 92 C.L.R. 262 the High Court had to consider the sense in which the property in the goods of an execution debtor was bound by a writ of fieri facias. The case, in the words of Dixon C.J. (at p.269) obliged the Court to enter "one of the darker recesses of the bankruptcy law".

To illuminate that recess, the learned Chief Justice reviewed the authorities dealing with the conflicts between priorities when an execution had been levied upon what, under the doctrine of relation back, had come to be part of the property of the bankrupt. His Honour (at p.272) quoted the notes from Williams Saunders (1 Wms. Saund, 219, 85 E.R. 238): -

"'At common law the defendant's goods were bound from the teste of the fieri facias, and might be taken in execution by the sheriff, in the hands even of a person who had bona fide purchased them since the teste of the writ . . . And by the statute 29 Car. 2, c.3, s.16, it is enacted "that no writ of fieri facias, or other writ of execution, shall bind the property of the goods of the party against whom, &c. but from the time that such writ shall be delivered to the sheriff, &c. to be executed; and for the better manifestation of the said time, the sheriff, &c. shall on the receipt of such writ (without fee) indorse on the back thereof the day of the month and year whereon he received the same". The meaning of the expression, that the property of the goods is bound is, not that the property in them is altered, for such alteration does not, nor ever did, take place until actual sale of the goods under the writ; but that the defendant, from the time that they are bound, cannot dispose of them, unless in market overt, so as to prevent their being taken in execution . . . This time, since the above statute, is the delivery of the writ to the sheriff'."

His Honour set out the terms of s.299 of the Sale of Goods Act 1923-1953 (N.S.W.) which was in the same form as s.82 of the Victorian Act of 1958. He then (at p.273) adopted with approval the opinion given to the House of Lords by Patterson J. in Giles v. Grover (1832) 1 Cl. & F. 72 (6 E.R. 843) : -

"'But on full consideration it seems to me that this property vested in the sheriff by seizure is merely that which results from his being the appointed officer of the law, and to enable him to sell goods, and to raise the money, not that thereby the property is taken out of the debtor. The goods are in substance in custodia legis; the seizure made by the officer of the law is for the benefit of those who are by law entitled; it is made against the will of the debtor, and no property is transferred by any act of his to the sheriff. In this respect it differs from all cases of special property, and of charges on goods created by the debtor whilst he has the absolute dominion over the goods.'"

The respondent submitted that the writ of fieri facias prevented the debtor from enforcing any security over the goods covered by the bill of sale. In my opinion, this submission should be rejected. The property in the goods was not taken out of the debtor and he remained free to pledge it by way of security. The present case is not one in which a conflict has arisen between the judgment creditor relying upon his rights under the writ and the applicant relying upon the bill of sale. The sheriff, without demur on the part of the judgment creditor, has yielded up such rights as he had in favour of the respondent. It is now for the respondent to deal equitably with the proof of debt of the assignor. As between the debtor and the applicant, and as between the applicant and the other creditors of the debtor, there is no inequity involved in giving effect to the terms of the bill of sale and according to the applicant the benefit of the security created by it over the goods of the debtor.

The respondent also sought to rely upon s.205 of the Bankruptcy Act 1966 which deals with the duties of a sheriff, where notice in writing has been given to him of the signing of an authority under s.188 of the Act or of certain other events under Part X thereof. Quite apart from the fact that no such notice in writing was given in the present case, the section does not in my opinion govern the rights of the applicant. It deals with the duties of a sheriff and has nothing to say in relation to the duties of a trustee of a deed of arrangement, such as the respondent, in dealing with proofs of debt.

The Court orders that the decision of the respondent partially rejecting the proof of debt of the assignor in which he claimed to be a secured creditor of the debtor in the sum of $20,453.74 be reversed and that the respondent be directed to admit the said proof of debt. It is further ordered that the costs of the applicant, of and incidental to the application, be paid out of the estate, such costs to be taxed if not agreed, and that the respondent's taxed costs of and incidental to the application be also paid out of the estate.