Re Lewy, D. v Ex parte Lewy, D.

[1994] FCA 753

JUDGMENT No. ........ ..mu. I---------- 753 1/ 9Y

Re: -

Debtor

E x parte:	DENNIS L	m
Applicant

And r

~ P O n c k m t Creditor

N o . NN 2085 of 1994

R e :

Debtor

E x parte:  RONNIE LEOPOLD

Applicant

And:

- - .

wspondent Creditor

No. NN 2086 of 1994

R e :  GARY LKWg

Debtor

Bankruptcy notices were issued in these three matters on or about 20 June 1994, and the debtors make application for a declaration

And:  GARY L-

Applicant

And :	MOSS NOMINEES PTY LIMITED
ACN 000 853 494  - - - -

Respondent Creditor

EINFELD J SYDNEY 19 JULY 1994

that they have complied with the requirements of the bankruptcy notices or alternatively that the bankruptcy notices be set aside. They agree that there is little to choose between those forms of relief in this particular case. There is no express power in the Bankruptcy Act to make the declaration sought but the debtors argue that such relief is inherent within the context of section 30(l) (b) of the Bankruptcy Act in the light of the provisions of sections 40(l)(g) and 41(2)(a)(ii).

The bankruptcy notices are based upon judgments against the three debtors in the Supreme Court of New South Wales which are said to have taken effect on 16 May 1994. These judgments have now been appealed to the Court of Appeal. The notice of appeal is dated 10 June and appeal papers are to be settled shortly. Nonetheless the evidence brought on behalf of the debtors on these applications is that the Court of Appeal will be unable to hear or dispose of the appeals in much, if any, less than two years. There is evidence that the debtors intend to seek an expedited hearing.

On 4 ~ u l y stays of execution were granted in favour of the

debtors by the Court of Appeal on condition that the basic amount of the judgment be paid into an interest-bearing deposit in the names of the solicitors for the parties on trust. The evidence is that the agreed or ordered amount was lodged in a term deposit with the ANZ Bank in the appropriate names on 18 July for 90 days maturing on 16 October 1994 and bearing interest in that period at 5.25 percent. No doubt it is intended that that deposit will

be rolled over at the end of 90 days in the event that the Court of Appeal has not yet determined the matter and continually solled over until the appeal has been disposed of. Transactions on the account are to be made and only made on the signatures of partners of the respective firms of solicitors. It has been agreed between the parties, and between the parties and the bank, that the disposition of the funds in the account are to abide the decision of the Court of Appeal.

The bankruptcy notices state, and it is not disputed, that interest is accruing on the amount of the judgment at the rate of 10.5 per cent per annum from 16 May and had, just prior to the date of the bankruptcy notice, amounted to something just over $2650. The fact that interest on the bank deposit is accruing at a lower rate on a period of only three months indicates that by the end of 12 months the interest accruing in the joint trust account will be considerably closer to 10.5 percent than 5.25 percent would otherwise indicate. Hence, by the time of the disposition of the appeals the amount in the account ought to be

close to the amount that will then be owing if the appeals are	dismissed.
On the question of jurisdiction to make the declaration, the creditor cited a decision of Justice Jenkinson in Re Reicher: ex parte Commissioner of Taxation [l9901 34 FCR 206 where a similar type of application was refused. That case is only peripherally relevant here because there the security offeredwas not actually in place at the time of the application and a considerable amount
of activity would have been required if it ever had to be called on in order to enable the creditor to access the actual money owed. Moreover, there were problems arising under the Family Law Act in that case which gave the Family Court a role to play before the security was ever likely to be realisable.
On the other hand, in Re Sterlina ex Darte Esanda Limited [l9801 30 ALR 77 at 82-83, Justice Lockhart said, although in an entirely different context, that a bankruptcy notice may be set aside where the debt has been satisfied or paid or moneys have been paid into court in full or part satisfaction of the debt. There does not however, seem to be a reported case, at least not one which has yet been discovered by counsel, in favour of the declaration sought.
Accepting, for the purposes of the argument, that it is within the power of the Court to make the declaration, the problem arises that the making of such a declaration would not itself dispose of the bankruptcy notices though it might in fact render
unless they will dispose, entirely or significantly, of the them comparatively useless. Declarations are normally not made litigation and dispute between the parties.
The relief sought is opposed by the creditor on grounds which are not entirely clear to me. The creditor said that the costs ordered by the Supreme Court at the time of the judgment have not been paid into the interest-bearing deposit, although it agreed that the costs have not yet been taxed and moreover that the
bankruptcy notices do not claim costs as part of the debt on which bankruptcies are being sought. The creditor also agreed that the deposit made as a condition of the stay granted by the Court of Appeal means that the bankruptcy notice could never be turned into a petition for failure to comply with it. The best the creditor can say is that the bankruptcy notices are some form of insurance policy against unforeseen circumstances. For my part I cannot see what these circumstances could conceivably be, and none were suggested. In the seemingly impossible event that the debtors do not fully pay from the interest-bearing deposit the amount of the debt plus interest and perhaps costs at the time, fresh bankruptcy notices could and probably would have to be issued because the amount and circumstances of the debt would be considerably different than the present notices.
As it seems to me, the attitude of the creditor has an element of vindictiveness about it. Two of the debtors are engaged in a business operating in the city. Their financial situation as disclosed by the evidence is not all that strong and they say
Bankruptcy Registry is open to search by a member of the public that I should take judicial notice of the fact that the
who might, during the two year wait for the Court of Appeal's disposition of the appeals, be motivated to examine the affairs of the debtors and form some adverse conclusion against dealing with them in a financial sense by reason of the existence of the judgments, the bankruptcy notices, and the other matters
disclosed in the papers before the Court today.
Such a thing of course is possible although the idea that inquisitive members of the public can go searching around in court records about the unresolved and disputed private affairs of citizens is a matter of some disturbance if it is true. I can see, however, that the existence of outstanding bankruptcy notices, especially bankruptcy notices which have to all intents and purposes no chance of actually converting themselves into proceedings for sequestration, can be an irritant and a potential cause for mischief and embarrassment in circumstances which do nothing to secure the financial or other genuine interests of the creditor, whilst being to the potentially significant prejudice of the debtors.
There seems to me no reason why that situation should be permitted to stand and no prejudice to the creditor if it is not allowed to. On the grounds that the declaration would not dispose of the bankruptcy notices but would in fact leave the proceedings still nominally on foot, I therefore order that the bankruptcy notices be set aside.
been able to ascertain or perceive no particular reason why the The debtors apply for costs. As they have succeeded and I have creditor should have maintained the bankruptcy notices after the deposit of the judgment amount, it seems to me that the debtors should receive some costs. The difficulty is to determine what they might be.
It was legitimate for the creditors to issue the bankruptcy
notices so that the question is whether costs should be allowed on today's application for the setting aside of the bankruptcy notices. The actual applications were filed in the Court on 5 July, some 14 days before the deposit was made in the bank and indeed on the day on which the Court of Appeal granted the conditional stays. Those applications, as it seems to me, were wholly premature. On the other hand, the debtors have each today filed a second application, for the declaration, as an alternative to the setting aside of the bankruptcy notices. It came one day after agreement was reached on the bank deposit and the deposit was made. But the declarations have been refused.
In ordinary circumstances I think on the whole that I would probably have been prompted to grant the debtors their costs of today's hearing but excluding other costs leading up to it. However, as I would perceive it, that would be a rather messy type of taxation in a matter of very small compass. In the circumstances I think that the court's time and trouble should
would have to be made about small sums. In the circumstances I not be engaged in a matter of that kind where fine judgments order that the parties pay their own costs of the applications.

I cotiffy that thls and the 5 \)(

preceding pages are a true copy of the

FhSom for Judgm

1 Dated: .k & l * * 1447