Re Djakovic, Nikola v Ex Parte Ostojic, Bosko
[1996] FCA 819
•16 SEPTEMBER 1996
IN THE FEDERAL COURT OF AUSTRALIA
SOUTH AUSTRALIA DISTRICT REGISTRY
GENERAL DIVISION
BANKRUPTCY DIVISION OF
SOUTH AUSTRALIA
No SB 877 of 1995
Re:
NIKOLA DJAKOVIC Applicant
Ex parte:
BOSKO OSTOJIC Petitioning Creditor
JUDGE: North J
PLACE: Melbourne (heard in Adelaide)
DATE: 16 September 1996
REASONS FOR JUDGMENT
On 5 June 1996, Nikola Djakovic, the applicant, applied under s.153B of the Bankruptcy Act 1966 (“the Act”) for an order that his bankruptcy be annulled. The section gives the Court power to annul a bankruptcy if it is satisfied that the sequestration order ought not to have been made. The Official Trustee appeared and neither supported nor opposed the application. Mr Margitich appeared to oppose the application on the ground that he is a creditor of Nikola Djakovic. He is a solicitor who previously acted for Nikola Djakovic and his fees remain unpaid.
The sequestration order was made on 19 June 1995 on the petition of Bosko Ostojic, the creditor, presented on 11 May 1995. The petition asserted that Nikola Djakovic was indebted to Bosko Ostojic in the sum of $2,600 due under a final judgment obtained in the Magistrates’ Court at Coober Pedy on 31 March 1994, together with $321 for costs and fees, a total of $2,921. The act of bankruptcy relied upon was the return unsatisfied of a warrant of recovery issued out of the Magistrates’ Court at Coober Pedy on 6 December 1994. Such act of bankruptcy is provided for by s.40(1)(d)(ii) of the Act.
The primary contention of Nikola Djakovic was that the sequestration order should not have been made because the judgment on which it relied should not have been made. To understand this argument it is necessary to refer to earlier proceedings in the Warden’s Court of South Australia, and to examine the relationship between those proceedings and the proceedings in the Magistrates’ Court at Coober Pedy.
PROCEEDINGS IN THE WARDEN'S COURT
Nikola Djakovic was in partnership with his brother and Bosko Ostojic in mining for opal at Coober Pedy. Nikola Djakovic and his brother each had a 30% interest in the partnership, and Bosko Ostojic had the remaining 40% share. The mining was conducted on a precious stones claim held in the name of Verica Djakovic, the wife of Nikola Djakovic. The claim was pegged in about April 1988. In about July 1988, Nikola and Verica Djakovic left Australia to visit their birthplace, Yugoslavia. They returned in December 1988. Bosko Ostojic expected that the mining enterprise would resume when Nikola Djakovic returned from Yugoslavia. Instead, Bosko Ostojic alleged, Nikola Djakovic excluded him from the mining enterprise after their return. Bosko Ostojic therefore commenced proceedings for an injunction in the Warden’s Court. It is most significant that proceedings were brought against Verica Djakovic only.
On the plaint note, Bosko Ostojic alleged:
“1.That they have not worked the claim for the period of seven months.
2.That I have done all the work and now they wont [sic] to kick me out, I have paid third of the expencies [sic], and they do not wont [sic] me to receive my fair share.
The complainant therefore prays that the court will allow me to mine this claim or give me my share and expencies [sic] or such other or further relief as shall be just.”
On the back of the plaint note was an affidavit in which the respondent deposed:
“I was a third partner in this claim. I did all the work and now they want to kick me out, after having their holidays in Yugoslavia, they have not paid me for my expencies [sic] or my share.”
In the course of the hearing before the Senior Warden, Mr Cannon SM, an issue arose as to who was responsible for the disappearance of opal worth $6,500 belonging to the partnership. Mr Cannon found that the opals had been misappropriated by Nikola Djakovic but he gave judgment in favour of Bosko Ostojic against Verica Djakovic for $3,051. The sum included $2,600, being the 40% partnership share of Bosko Ostojic of the opals worth $6,500 found to
have been misappropriated by Nikola Djakovic. On 13 April 1989, Mr Cannon gave ex tempore reasons for judgment in which he said:
“The plaintiff will have judgment in that sum and will have it against the claim holder because of [sic] the proceedings were conducted in her name and she is the one under the Mining Act who has responsibility for all opal removed from the mine. Judgment in favour of the plaintor against Verica Djakovic in the sum of $3,051.”
An appeal against the decision of Mr Cannon was instituted by Verica Djakovic and was determined by Justice Matheson in the Supreme Court in early May 1991. He allowed the appeal because Verica Djakovic had not been given notice of the misappropriation issue prior to the hearing, and therefore had no opportunity to cross-examine Bosko Ostojic on his allegations, and no opportunity to call witnesses on the issue. Justice Matheson ordered that the plaint be reheard by another Warden.
The rehearing took place before another Warden, Mr Gurry SM. The central issue in that hearing was whether Nikola Djakovic had misappropriated the partnership opals. The respondent party to the plaint remained Verica Djakovic alone. In his handwritten reasons for decision, given on 24 December 1991, Mr Gurry said:
“.... the claim holder Verica Djakovic never ever personally worked the claim. She is the wife of Nikola Djakovic, the de facto respondent in these proceedings.”
Further, he said:
“The claim holder Verica Djakovic was the claim holder in name only. She was never personally involved in working the claim. From
here on in these reasons for decision a reference to the respondent is to be taken as a reference to Nikola Djakovic.”
And later he said:
“The central issue in this case is whether I can be satisfied on the balance of probabilities that the respondent and his brother Zivan cheated the applicant by removing 13 ounces of the best opal from the parcel and keeping it for themselves.”
On the central issue, Mr Gurry found in favour of Bosko Ostojic. Verica Djakovic did not give evidence but Nikola Djakovic did. He denied that he had misappropriated the partnership opals. This evidence was disbelieved, and judgment was given for the sum of $4,091, comprising $2,600 being Bosko Ostojic’s share of the misappropriated opals, $760 being the balance of the proceeds of the sale of some other partnership opals, $500 expenses of the partnership, and $231 for certain expenses relating to the hearings. At the end of his judgment Mr Gurry said:
“There will therefore be judgment for the applicant in the amount of $4,091. The judgment in that amount will be against both Nikola Djakovic and Verica Djakovic. In all the circumstances it is appropriate that they should be jointly and severally liable for the judgment debt.”
This judgment was taken on appeal to the Supreme Court. On 13 November 1992, Justice Debelle allowed the appeal and varied the judgment of Mr Gurry by deleting the reference to Nikola Djakovic, so that the order did not operate against him. It is not clear whether Justice Debelle gave any reasons for his decision. In any event, no such reasons were in evidence before me. But it seems plain enough that Nikola
Djakovic could not be the subject of orders by Mr Gurry because the plaint was not brought against him.
From this history, it is clear that the proceedings in the Warden’s Court were between Bosko Ostojic and Verica Djakovic. Nikola Djakovic was never a party to any proceedings in the Warden’s Court. Two things are curious about the proceedings in the Warden’s Court. It is curious that Nikola Djakovic was never made a party to proceedings which, in the end, were concerned with allegations about the misappropriation by him of the partnership opals, and claims against him arising out of the partnership agreement. Perhaps the reason is that the original relief sought in the proceeding by Bosko Ostojic was an injunction to prevent his exclusion from the claim. The claim holder may have been seen as the proper respondent for such relief. The other curiosity is that Verica Djakovic was ever the subject of the judgment in the Warden's Court. The findings were that Nikola Djakovic misappropriated the partnership opals, and that he had failed to pay partnership expenses. It is not clear how Verica Djakovic could have been found to have any responsibility for these matters. She did not misappropriate the opals, and was not a partner in the mining enterprise. Her only role was as nominal owner of the precious stones claim.
On 15 September 1993, Bosko Ostojic obtained an order for sequestration against Verica Djakovic, based upon the judgment of Mr Gurry in the Warden’s Court. In her bankruptcy, Verica Djakovic disclosed assets of $105. She was discharged from bankruptcy on 11 April 1994.
PROCEEDINGS IN THE MAGISTRATE'S COURT
On 26 November 1993, Bosko Ostojic commenced proceedings in the Magistrates’ Court at Coober Pedy against Nikola Djakovic, claiming the same amounts of $2,600 for his 40% partnership share of the missing opals, $760 balance of his 40% partnership share of the proceeds of sale of certain other opals, and $500 expenses of the partnership. Each of these amounts had formed part of the judgment against Verica Djakovic given by Mr Gurry. Although there is no direct evidence of the reason that Bosko Ostojic commenced the Magistrates’ Court proceedings, it seems likely that the reason was that he was left with no judgment against Nikola Djakovic and the judgment against Verica Djakovic had proved valueless. On 31 March 1994, Mr Carter SM heard the claim against Nikola Djakovic in the Magistrates' Court and gave judgment against him for $2,600 plus costs of $244 and witnesses’ fees of $25. It is probable that the $2,600 awarded was the 40% partnership share of the $6,500 worth of missing opals. No evidence of any reasons of Mr Carter were put in evidence before me.
ARGUMENTS AND CONCLUSIONS
Mr Beazley, who appeared as counsel for Nikola Djakovic, argued that the liability of Verica Djakovic and Nikola Djakovic to Bosko Ostojic was alternative liability so that the act of entering judgment against Verica Djakovic in the Warden’s Court was an election to treat her as liable. That act of election was irrevocable and precluded Bosko Ostojic from proceeding against Nikola Djakovic in the Magistrates’ Court. This argument was based on a passage in a joint judgment of
Dixon, Fullagar and Kitto JJ in Petersen v Moloney (1951) 84 CLR 91 at 102, as follows:“The case is clearly one of alternative liability. Either Moloney or Pulbrook might be liable to the plaintiff, but both could not be. In such a case a final election to treat either as liable would preclude the plaintiff from proceeding against the other, and it is a well-settled general principle that, while the commencement of an action against one of two persons alternatively liable does not, the entry of judgment against one of them does, constitute a final and irrevocable election: see Morel Bros & Co Ltd v Earl of Westmoreland ((1903) 1 KB 64; (1904) AC 11).”
On the following page, their Honours suggest that the result follows not as a consequence of an election, but because “There must not be more than one judgment where there is only one antecedent obligation.” Mr Beazley frankly acknowledged the difficulty in the first step in this argument. It is not possible to say that the liability of Verica Djakovic was liability in the alternative to the liability of Nikola Djakovic. It is not possible to say that there was only one antecedent obligation. The judgment of Mr Gurry against Verica Djakovic was given on the basis of findings which demonstrate an exclusive liability on Nikola Djakovic, who was not party to the plaint, and no liability on Verica Djakovic. Mr Bennett, who appeared on behalf of Bosko Ostojic, was not able to explain the basis of liability against Verica Djakovic.
Although it was put forward at one stage in the argument, Mr Beazley ultimately did not contend that the doctrine of res judicata operated so that the judgment against Verica Djakovic precluded the action against Nikola Djakovic. This concession was clearly correct. The parties in the Warden’s Court were different from the parties in the
Magistrates’ Court, and the cause of action against Nikola Djakovic was different from the cause of action, if any, against Verica Djakovic.
Mr Beazley then contended that the principle enunciated in Port of Melbourne Authority v Anshun Pty Ltd (1981) 147 CLR 589 meant that Bosko Ostojic was estopped from proceeding in the Magistrates’ Court because he had litigated the issue of the misappropriation of the $6,500 worth of opals in the Warden’s Court against Verica Djakovic, and the claim against Nikola Djakovic should have been litigated in the same proceedings. This argument does not reflect the application of the principle in Anshun at all. Anshun was concerned with subsequent proceedings which raised issues between the same parties where such issues should have been raised in the earlier proceedings. Anshun had nothing to say about subsequent proceedings brought by the same applicant against a different respondent, even if arising out of the same events. The principle enunciated in Anshun was directed to preventing multiplicity of actions between the same parties where it was unreasonable not to raise in the prior proceedings issues sought to be raised in the subsequent proceedings. The principle has no operation where subsequent proceedings are taken against a different respondent.
The final argument for Nikola Djakovic relates to the events of 25 May 1995. On that day, he consented to orders in the Magistrates’ Court at Coober Pedy that he pay the judgment debt by instalments of $50 per month and the warrant of sale previously issued in execution of the judgment be set aside. The petition was presented on 11 May 1995 and the sequestration order was made on 19 June 1995. Mr Beazley contended that the orders of 25 May 1995 operated as a stay of the order
of the Magistrates’ Court within the meaning of s.40(1)(g) of the Act. This section provides that an act of bankruptcy is committed by the failure of a debtor to respond to the service of a bankruptcy notice. Such a bankruptcy notice must relate to a judgment, the execution of which has not been stayed. This argument is entirely misconceived because the act of bankruptcy relied upon for the purpose of making the sequestration order was the return unsatisfied of a warrant of sale on 6 December 1994. This constituted an act of bankruptcy under s.40(1)(d)(ii) of the Act. Section 44(1)(b)(ii) of the Act makes it a condition of the presentation of a creditor’s petition that, in addition to the existence of an act of bankruptcy, there must be a debt payable “either immediately or at a certain future time”. As a result of the order for payment by instalments, the debt was not payable immediately at the date of presentation of the petition. But an order for payment of a judgment by instalments, made between the presentation of the creditor’s petition and the making of the sequestration order, renders a debt payable at a future time, as required by s.44(1)(b)(ii) for the presentation of a creditor’s petition: Re Sceckhold; Ex parte Sargood Gardiner Ltd (1933) 5 ABC 195; Re Agrillo; Ex parte the Bankrupt (1977) 29 FLR 484; Re Efstratiadis v Commonwealth of Australia (1990) 22 FCR 167.
After the hearing of this case the solicitor for Bosko Ostojic, with the consent of counsel for Nikola Djakovic, contacted my associate to bring to my attention the decision of Cummings v Claremont Petroleum NL (1996) 70 ALJR 616. This case was decided by the High Court on 20 June 1996 and reported in the August edition of the Australian Law Journal Reports. I then permitted Bosko Ostojic’s solicitor to file written
submissions on the effect of that case. The solicitors for Nikola Djakovic filed written submissions in response.
In the submissions, it was argued for Bosko Ostojic that Cummings established that Nikola Djakovic had no standing to bring the application for annulment under s.153B of the Act. Cummings was concerned with the question of whether a bankrupt was entitled to institute an appeal after the date of the sequestration order against a judgment pronounced against the bankrupt in civil proceedings. The majority (Brennan CJ, Gaudron and McHugh JJ) held that although the right of appeal was not property which vested in the trustee under s.58(1) of the Act, the bankrupt could not institute the appeal because the judgment was enforceable only against property vested in the trustee and, hence, the bankrupt had no standing to bring an appeal. This reasoning has no application to this case. The applicant is not seeking to appeal against a decision of a court. The Act expressly provides that where it “does not specify by whom an application under the Act may be made, ... the application may be made by ... any person interested in that matter” (s.303). Section 153B does not specify by whom an application for annulment may be made. If granted, the annulment removes the restrictions placed on the bankrupt and the property of the bankrupt. Thus, the bankrupt is “a person interested”: Re Steer (1945) 13 ABC 216.
For the reasons stated, I am not satisfied that the sequestration order in this case ought not to have been made, and I therefore dismiss the application for annulment of the bankruptcy of Nikola Djakovic. I will hear the parties on the question of costs.
I certify that this and the preceding eleven (11) pages are a true copy of the reasons for judgment of his Honour Justice North.
Associate:
Dated: 16 September 1996
Counsel for the applicant: B. Beazley
Solicitors for the applicant: Proud & Co
Solicitor for the petitioning creditor: J. Bennett
Creditor in person: I. Margitich
For the Official Receiver on behalf of
the Official Trustee in Bankruptcy: K. Axford
Date of hearing: 7 August 1996
Date of judgment: 16 September 1996
IN THE FEDERAL COURT OF AUSTRALIA
SOUTH AUSTRALIA DISTRICT REGISTRY
GENERAL DIVISION
BANKRUPTCY DIVISION OF
SOUTH AUSTRALIA
No SB 877 of 1995
Re:
NIKOLA DJAKOVIC Applicant
Ex parte:
BOSKO OSTOJIC Petitioning Creditor
MINUTES OF ORDER
JUDGE: North J
PLACE: Melbourne (heard in Adelaide)
DATE: 16 September 1996
THE COURT ORDERS THAT:
The application for annulment of the bankruptcy of Nikola Djakovic is dismissed.
The determination of the question of costs is adjourned to a date to be fixed.
NOTE: Settlement and entry of orders is dealt with by Rule 124 of the Bankruptcy Rules.
C A T C H W O R D S
BANKRUPTCY - Application for annulment - Whether sequestration order ought to have been made - Sequestration order based on unsatisfied execution of judgment against applicant - Another judgment in local court against wife of applicant - Whether applicant and wife liable in the alternative so that the creditor was precluded from proceeding against applicant where he had obtained judgment against wife first - Whether creditor estopped from proceeding against applicant where he had litigated the same issue against the applicant's wife - Whether debt payable at a future time where payable by instalments at date of bankruptcy proceedings - Whether bankrupt has standing to bring annulment application
Bankruptcy Act 1966 ss. 40, 44, 153B, 303
Cummings v Claremont Petroleum NL (1996) 70 ALJR 616;
Petersen v Moloney (1951) 84 CLR 91;
Port of Melbourne Authority v Anshun (1981) 147 CLR 589;
Re Agrillo; Ex parte the Bankrupt (1977) 29 FLR 484;
Re Efstratiadis v Commonwealth of Australia (1990) 22 FCR 167;
Re Sceckhold; Ex parte Sargood Gardiner Ltd (1933) 5 ABC 195;
Re Steer (1945) 13 ABC 216.
Re NIKOLA DJAKOVIC; Ex parte BOSKO OSTOJIC
No SB 877 of 1995
Before: North J
Place: Melbourne (heard in Adelaide)
Date: 16 September 1996
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