Re Gyngell, D. Ex Parte Speedo Group Ltd

[1990] FCA 788

Re: DAVID GYNGELL
Ex Parte: SPEEDO GROUP LIMITED
No. N P2426 of 1990
FED No. 788
Bankruptcy
27 FCR 531

COURT

IN THE FEDERAL COURT OF AUSTRALIA

BANKRUPTCY DISTRICT OF THE STATE OF NEW SOUTH WALES
GENERAL DIVISION
Einfeld J.(1)

CATCHWORDS

Bankruptcy - no provision in judgment of Local Court as to the person to whom debt should be paid - bankruptcy notice issued by judgment creditor requiring payment to registrar - effect of removal of Part 27, rule 1(3) of Local Court (Civil Claims) Rules which required payment of judgment debt to registrar - meaning of subrule (5) in absence of subrule (3).

Re Robert Leslie Stokes Einfeld J, 11 December 1990, unreported

Local Court (Civil Claims) Rules Part 27, rule 1 subrules (3) and (5)

HEARING

SYDNEY

#DATE 11:12:1990

JUDGE1

This matter has come before the court as a result of the initiative of the Deputy Registrar in Bankruptcy arising out of the form of the bankruptcy notice issued by the judgment creditor, Speedo Group Limited, against the judgment debtor. Speedo obtained a judgment in the Local Court at Lidcombe on 30 April 1990. This was certified by the registrar of that court on 15 May 1990 in the form of a statement that Speedo obtained judgment against the debtor and that the judgment carries interest.

1. The certificate of judgment itself makes no provision as to how this judgment is to be satisfied in the sense of to whom it is to be paid. Rule 1 of Part 27 of the Local Court (Civil Claims) Rules made provision as at 26 April 1990 for the payment of a judgment debt to a registrar - see subrule (3) subject to subrule (5). Subrule (5) provided:
   

(5) Notwithstanding subrule (3), any payment by or on behalf of a judgment debtor made on account of a judgment debt to or at the direction of the judgment creditor shall, if accepted by or on behalf of the judgment creditor, operate to reduce the judgment debt by the amount of the payment.

1. On its face, subrule (5) would seem primarily designed to deal with the payment of part only of the judgment debt. At the same time, nothing in Part 27, as it was at that time, would have rendered a payment of the full amount of the judgment debt to the judgment creditor, if accepted by the judgment creditor, as other than a full satisfaction of the judgment, even though it had not been paid to the registrar. Partly this is because subrule (3) made provision for payment to the registrar specifically subject to subrule (5).

2. In other words, it cannot be that subrule (3) deals with full payment and subrule (5) only deals with part payment. Otherwise there would be no meaning to the words "subject to subrule (5)" in subrule (3), and the words "notwithstanding subrule (3)" in subrule (5). As subrule (3) only dealt with full payment, except where there had been a order for payment by instalments requiring the instalments to be paid to the registrar, it must be that subrule (5) has some operation when the debt was paid in one sum. That means that in the days and weeks before the judgment in question in this case was obtained, there was an option to pay judgment debts either to the registrar or to the judgment creditor. The rules ought then to have operated on the basis that a judgment debt was to paid to a registrar, but if the payment of the whole or part was made to a judgment creditor it would be effective to reduce or extinguish the amount of the judgment.

3. That indeed was the justification for my decision in the matter of Re Robert Leslie Stokes No NP 2530 of 1990 delivered earlier today, in which the judgment was obtained prior to April 1990, and where the bankruptcy notice made provision for the payment of the judgment debt direct to the judgment creditor.

4. However, with effect from 27 April 1990, the rule was amended. Subrule (3) was omitted altogether and subrule (5) had omitted from it the words "notwithstanding subrule (3)". In other respect subrule (5) remained the same. According to Jackson and Byron's Local Courts (Civil Claims) Practice published by the Law Book Company at page 3301, this amendment was designed to remove the requirement that a judgment debt be paid to a registrar.

5. The bankruptcy notice in this present case requires that the judgment debt plus accrued interest and costs be paid to the registrar of the Local Court at Lidcombe. The deputy registrar in bankruptcy, at whose instance the matter comes before this court today, is of the view that the bankruptcy notice is bad because, in relation to judgments given after the amendments to Part 27 came into effect, which includes this judgment, a judgment debt must be paid to the judgment creditor and expressed as such in the bankruptcy notice.

6. The cases to which my attention has been drawn substantially decided the precise opposite of what is now actually being argued, namely, that a bankruptcy notice founded upon a judgment debt legally required to be paid to a registrar was bad if it required payment to the creditor. This is a case where the bankruptcy notice requires payment to a registrar and the argument against its validity is that it should have required payment to the judgment creditor.

7. All this is based upon the correct interpretation to be given to section 41(2)(a)(i) of the Bankruptcy Act which provides taht a bankruptcy notice must requre the debtor to pay the judgment debt in accordance with the judgment. As I have already observed, this judgment in form makes no requirement as to how the debt is to be paid at all.

8. The argument by counsel for the judgment creditor is that under the rule operating at the time this judgment was obtained in the Local Court, a payment by a judgment debtor made either to "or at the direction of" the judgment creditor (the words of subrule (5)) will operate to reduce and presumably to extinguish the judgment debt. He says then that a bankruptcy notice which directs or requires the judgment debtor to pay the amounts of the judgment to the registrar of the Local Court at Lidcombe amounts to "the direction of the judgment creditor" in relation to the payments of the judgment debt.

9. As often happens in circumstances such as this, amendments to rules, sometimes to legislation itself, which are designed to simplify matters appear to have complicated it. As I said earlier, in the original form of the rule operating up to 26 April 1990, the correct interpretation appears to have been that all judgment debts in Local Courts were to be paid to registrars but if some or all of any particular debt was paid to a creditor, this would operate so as to reduce or extinguish the judgment debt. If the whole debt was paid, it would no doubt make impossible any enforcement procedures. Now the provision is that any payment by a judgment debtor made at the direction of the judgment creditor, shall, if accepted by the judgment creditor, operate to reduce the judgment debt by the amount of the payment. If the whole debt is paid, nothing will be left to enforce.

10. The bankruptcy notice in this case seems to me to have nothing at all to do with subrule (5). The bankruptcy notice says to the debtor that he is required to pay the amount of the debt to the regisrar but if he fails to do so or fails to satisfy this court that he has a counter claim or set off of an approporiate kind, he will have committed an act of bankruptcy such as to found bankruptcy proceedings.

11. It does not appear to me, with respect, that the amendments to Part 27 of the Local Court (Civil Claims) Rules have achieved what the authors of the Law Book Company's Practice say. It seems that what has been achieved is really to remove altogether any provision as to how debts are to be paid. It merely says now that if the debtor makes a payment to the creditor, he gets credit for the amount of the payment but it does no say how he might satisfy the judgment.

12. The reason why, as it seems to me, this bankruptcy notice cannot be fitted within subrule (5), is because the subrule is premised upon a payment made by the debtor to the creditor or at the creditor's direction. That payment is then constituted as some diminution or a complete extinction of the judgment debt.

13. The bankruptcy notice on the other hand is not premised upon any payment, and indeed, make the assumption that payment of the Local Court judgment has not been made. In this particular case, the bankruptcy notice seeks the whole of the judgment obtained in the Local Court plus interest and possibly some costs. It does not seek to give expression to a suggestion that the debtor has offered a payment which the judgment creditor has directed is to go to the registrar of the Local Court.

14. I do not think that is the way in which this bankruptcy notice can be read. Whatever the meaning of subrule (5) now, in the absence of subrule (3), particularly whatever Part 27 now provides in respect of the payment of a judgment debt, I do not think that this bankruptcy notice can be constituted as or contains the type of direction of the creditor to which subrule (5) refers.

15. The courts have made it quite clear that bankruptcy notices will be void unless they require the payment of the judgment debt in precise accordance with the judgment. In this respect, the amendments to Part 27 have wrought a significant anomaly. The judgment of the Local Court, certified by its registrar, does not make provision as to how the debt is to be paid, subrule (3) having removed the requirement that it be paid to the registrar, and subrule (5) merely saying that any payment which is made to or at the direction of the judgment creditor shall operate to reduce the judgment debt. This anomaly makes it quite clear that further amendment of the rules is necessary, for it is difficult to know precisely what the Local Court now orders in relation to the payment of judgment debts.

16. One thing seems to be quite clear: the removal of subrule (3) prior to the obtaining of this judgment must mean that the payment of this debt is not required to be made to the registrar of the Local Court at a matter of law. As this bankruptcy notice contains that requirement, it must be held to be invalid. It follows that the petition in this case will have to be dismissed.