Re; Gardiner, B.G. & S.L.
[1991] FCA 362
•20 MARCH 1991
Re: BERNARD GEORGE GARDINER and SUZANNE LEONIE GARDINER
No. NB 3712 of 1990
FED No. 362
Bankruptcy
COURT
IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY
GENERAL DIVISION
Wilcox J.(1)
CATCHWORDS
Bankruptcy - Validity of bankruptcy notice - Application to set aside bankruptcy notice - Bankruptcy notice claiming sums of money arising under two separate costs orders in a single proceeding - Application of principle that a bankruptcy notice should be referrable to only one final judgment or order - "channelling" of one order into another.
Bankruptcy Act 1966, s.40(1)(g)
Re Stephenson; Ex parte Cintee Nominees Pty Ltd (1988) 18 FCR 375 In re Wheeler (1982) 1 WLR 175
HEARING
SYDNEY
#DATE 20:3:1991
Counsel for the Creditors: B.J. Skinner
Solicitors for the Creditors: Cropper and Parkhill
Counsel for the Debtors: R.E. Montgomery
Solicitors for the Debtors: McGirr James Hall and Associates
ORDER
The bankruptcy notice issued on 12 December 1990 be set aside.
The creditors pay to the debtors their costs of the application to set aside the bankruptcy notice.
Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
JUDGE1
This is an application to set aside a bankruptcy notice which was issued out of the Court on 12 December 1990. The bankruptcy notice was addressed to two people: Bernard George Gardiner and Suzanne Leonie Gardiner ("the debtors"). The persons who issued the bankruptcy notice were four in number. They were apparently the executors of the estate of the father of both themselves and the first named debtor.
The bankruptcy notice claimed a total sum of $29,344.79. Particulars of this claim were set out in the bankruptcy notice. Under the letter "A", an amount of $21,125.97 was claimed, together with interest thereon at various rates from 29 November 1988 to 20 November 1990.
It appears from evidence which has been tendered today that in a proceeding between the parties in the Equity Division of the Supreme Court of New South Wales an order was made on either 3 or 4 June 1986 whereby the debtors were ordered to pay certain costs. Those costs were subsequently taxed. It appears from a certificate of taxation dated 31 October 1990 that the costs were taxed on 1 August 1989 and allowed at the sum of $21,125.97. It would seem that it is this order for costs which is the subject of item "A" in the bankruptcy notice.
Item "B" in the bankruptcy notice refers to a sum of $518, together with interest thereon at various rates from 10 July 1989 to 20 November 1990. There has been tendered today a document entitled "Minutes of Order" which was entered on 31 October 1990 in the Equity Division of the Supreme Court. These Minutes of Order bear the same number as the number of the proceeding previously referred to, and they include an order that the defendants, that is to say the debtors, pay the plaintiffs' costs of a motion then disposed of. It appears from a certificate of taxation dated 31 October 1990 that those costs were assessed on 10 July 1989 to be $518. Evidently this is the amount referred to in item "B".
After setting out particulars of the two items the bankruptcy notice goes on:
"making a total of $29,344.79 is due by you to the judgment creditors under final judgments obtained by the judgment creditors against you in the Supreme Court of New South Wales, Sydney Registry, Equity Division for costs which were taxed on 1 August, 1989 and 10 July, 1989 pursuant to the judgments granted on 4 June, 1986 and 22 May, 1989."
Counsel for the debtors submits that the bankruptcy notice is bad for a number of reasons, seven in all. However, he advanced one particular reason in the first instance, suggesting that, if this argument is correct, it will be unnecessary for the Court to deal with the other matters. As it seemed to me that there was some force in this first argument, I deferred hearing submissions on the other matters until after counsel for the creditors had responded to the point which was raised. In the event, I am of the view that this point is well taken; so I need not concern myself with the other points.
The point which is taken by counsel is that this bankruptcy notice offends the principle that a bankruptcy notice must refer to only one final judgment or order. Section 40(1)(g) of the Bankruptcy Act 1966 provides that a debtor commits an act of bankruptcy:
"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 fixed by the Registrar by whom the notice was issued; 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 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 could not have set up in the action or proceeding in which the judgment or order was obtained."
This paragraph and its predecessors, both in Australia and the United Kingdom, have always been interpreted as requiring that a bankruptcy notice refer to only one final judgment or order: see Re Lowe; ex parte Argentine Gold Fields Limited (1989) 1 QB 147, Re Application for issue of a Bankruptcy Notice; ex parte Tinson (1946) 14 ABC 41.
The principle has been subjected to one gloss, by the decision of the United Kingdom Court of Appeal in Re Wheeler (1982) 1 WLR 175. In that case the Court was concerned with a bankruptcy notice which sought payment of the sum of 20,000 pounds, being the amount of an interim certificate for costs. The interim certificate related to the taxation of a composite bill of costs covering an order for costs made in favour of plaintiffs in the principal proceeding, as a result of their succeeding in the principal proceeding, together with orders made by the trial judge on the same day by which he dismissed three outstanding procedure summonses. The solicitors for the plaintiffs took the view that all four orders might properly be the subject of a single bill of costs. They presented a bill on that basis. Without any objection from the debtors' then solicitor, the bill was commenced to be taxed. Before taxation was completed, the taxing officer gave an interim certificate covering the sum of 20,000 pounds and this certificate was used to support a bankruptcy notice. Objection was taken to the bankruptcy notice on the basis that it offended the rule about a bankruptcy notice referring only to a single order. But the Court of Appeal held that the principle was not offended in the particular case. At p 182 Lawton L.J., giving judgment on behalf of the Court, referred to a submission of counsel for the creditors that the four orders made by the trial judge:
"had been channelled into one order requiring the payment by the debtor and Mr Argent of the sum of 20,000 pounds; that, as a result of that channelling into the interim certificate, there was in the end only one final order, which was for the payment of the sum of 20,000 pounds; and that as the bankruptcy notice made it clear what was the origin of the debt upon which the bankruptcy notice was based, there was compliance with the provisions of both section 1(1)(g) and section 2."
His Lordship upheld this argument.
It seems to me that the position in Wheeler is distinguishable from that in the present case. It is true that, in the present case, both orders arise out of a single proceeding in the Supreme Court of New South Wales, involving the same parties and bearing the same proceeding number. However, the orders were made on different days, days separated by a period of almost three years. They were the subject of separate taxations which were carried out at different times. There was no act, either of the Court or of the parties, which could answer the description of "channelling" one order into another.
Counsel for the creditors accepts that each of the orders referred to in the bankruptcy notice was a final order. Of course he has to do so, otherwise the amount claimed by the bankruptcy notice would be excessive. But he justifies the aggregation of the two orders into a demand for a single payment of $29,344.79 on the basis that both orders arose out of the same proceeding and involved the same parties.
This is not a good answer to the debtors' objection. Authority for that statement is to be found in the decision of Jenkinson J. in Re Stephenson; ex parte Cintee Nominees Pty Limited (1988) 18 FCR 375. In that case his Honour was concerned with the same question as that confronting me. Three separate costs orders were made in the Heidelberg Magistrates Court, during the course of a single proceeding. The orders not having been complied with, the party in whose favour they were made issued a bankruptcy notice in which he claimed the sum of money which represented the aggregation of the value of the three orders, together with interest. Jenkinson J. referred to the decision in Wheeler, holding that, in the case before him, there was no indication that anything in the nature of the channelling of several orders into one order had occurred. He applied the general principle to which I have already referred; so holding that the bankruptcy notice was bad. His Honour did not consider that it was sufficient that the separate orders had been made in the course of a single proceeding.
I cannot distinguish Stephenson from the present case. It seems to me that the two cases are on all fours and that I should follow the decision of Jenkinson J., which accords with the line of authority illustrating the principle.
Accordingly, I uphold this ground of objection to the bankruptcy notice. As I say, I have not considered the other grounds and express no view as to whether or not they are well founded.
The order I make is that the bankruptcy notice be set aside and that the creditors pay the debtors costs of the application.
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