Re Pallis, a Ex parte Koppen, L.R.

[1989] FCA 138

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JUDGMENT No. ........ ...... 138 y -... g9 -....-

C A T C H W O R D S

ESTOPPEL - creditor's petition - deed by way of settlement of

proceedings - late tender under deed refused - past late

payments accepted - right of creditor to issue further

bankruptcy notice on default	-	whether debtor induced to
believe default would	be overlooked - belief of debtor	-

whether relief against forfeiture applicable.

Bankruptcy Act 1966

Re: Alex

~~. . ~ ~ Pallis _ _ ~ _ _ _ _ ~ ~

Ex parte:  Leonard Ralph Roppen

Qld P1419 03 1988

PINCUS J.

BRISBANE

7 APRIL 1989

IN THE FEDERAL COURT	OF	AUSTRALIA	1
GENERAL DIVISION	1 QLD P1419 of 1988

BANKRUPTCY DISTRICT OF THE SOUTHERN	1
DISTRICT OF THE STATE OF QUEENSLAND	)

RE: ALEX PALLIS

Debtor

EX PARTE:  LEONARD RALPH KOPPEN

Creditor

MINUTES OF ORDER

MAKING JUDGE ORDER: PINCUS J.

OF DATE ORDER: 1989 7 APRIL

WHERE MADE:	BRISBANE
THE COURT:

1. declares that the bankruptcy notice issued on 7

September 1988 is valid;

2. declares that the sum mentioned in the said notice

is due by the debtor to the creditor;

3. orders that the costs of the proceedings be

creditor's costs in the petition.

- NOTE : Settlement and entry of orders is dealt with in

Rule 124 of the Bankruptcy Rules.

IN THE FEDERAL COURT OF AUSTRALIA 1

DIVISION	GENERAL	)	QLD P1419 of 1988
BANKRUPTCY DISTRICT OF THE SOUTHERN DISTRICT OF THE STATE OF QUEENSLAND )

RE: ALEX PALLIS

Debtor

EX PARTE:  LEONARD RALPH KOPPEN

Creditor

PINCUS J. 7 APRIL 1989

REASONS FOR JUDGMENT

This is an opposed creditor's petition. The first

ground taken is that the debtor has proffered the money he says is

due, but his tender has been refused. The second ground of

opposition is that the petition is founded on a bankruptcy notice which is bad because the judgment on which it is based has merged

in a subsequent contract. The two points are inter-related.

On 6 May 1987, judgment was entered in favour of the

creditor in the District Court in a sum with costs to be taxed.

After taxation, the total amount due under the judgment was

$31,219.17. The creditor issued a bankruptcy notice and followed

it with a petition for sequestration.

That petition was dismissed on 28 April 1988 in

consequence of the parties having made an agreement which was

embodied in a deed. Under it, the debtor promised to pay $15,000

(substantially less than the amount due) together with the

creditor's solicitor-and-client costs relating to the bankruptcy

proceedings. The latter costs were to be determined by a legal

costs assessor who was nominated in	the deed, and the debtor
promised to pay the expense	of obtaining the costs assessment.

The debtor thus came under an obligation on 28 April

1988 to pay $15,000 (instead of the sum due of $31,219.17) plus

certain costs, the latter requiring fifation. He had to pay

$8,000 on the day of the deed and	$2,000 per calendar month on the
28th day of each successive month until payment in	full.

Under the deed, in addition to agreeing to the dismissal

of the petition (which was done, as I have said), the creditor

agreed not to issue a further bankruptcy notice claiming the
balance of the moneys then due under the judgment "and proceeding

upon such Bankruptcy Notice to sequestration".

A critical provision of the deed is clause H, which

reads as follows:

"The	Debtor	acknowledges	that	in the event of their
[sic] being any	default	whatsoever	underlor	in

accordance with the terms of the within agreement,

the said	Debtor will thereupon be in breach of this
agreement	and the Creditor shall be at liberty to

repudiate the agreement and proceed issue to a

further Bankruptcy Notice and proceed generally	and
otherwise according to law".
The reference to repudiation is important. Under	the

deed, the creditor implicitly accepted a restriction of his

rights. It is true that the only express restriction is that the

creditor would not take bankruptcy proceedings, but one must imply
that he would not attempt to pursue recovery of the amount due by
any other means; otherwise, the deed makes no business sense. In
saying that in the event of there being any default, the creditor
should be at liberty to repudiate; clause H made it clear enough,

in my view, that in that event the creditor would be restored to

his former position, being entitled to ignore the deed. If there

was a merger of the creditor's	rights in the deed, it was subject
to a resolutive condition, enabling	the creditor to be put back to
his former position in	the event of default.

The subsequent history of the matter comes from two

affidavits, one from the debtor and the other from the creditor's

solicitor. The former is incomplete as	it refers to documents not
exhibited, but that deficiency is largely remedied	by the latter.

I have said that the first payment of $8,000 was made

and that left due $7,000 plus costs to be assessed and the

assessorrs fees.	The second payment, of $2,000, was due on 28 May
1988 and was paid three days late.	The third payment, of $2,000,

was also paid three days late and the fourth was paid seven days

late. Each of these payments was accepted and the debtor relies

upon that circumstance.

On 25 July 1988, the creditor's solicitors wrote drawing

..

4.

attention to the fact that the next payment was due on 28 July and

to the default clause. As I have mentioned, the 20 July payment

was made 7 days late.

The line taken by the debtor's counsel in argument was that an estoppel arose out of these events.	The letter of 25 July
from the creditor's solicitor, to which	I have referred, makes

that argument a little more difficult, but a greater problem for

the debtor is that the ultimate default which prompted the creditor to repudiate the deed was of quite a different character from the first three. On 24 August the debtor's solicitors wrote

to say that he would not	be able to pay	"the monthly sum	of
$2,000.00"	until	a	certain trawler was back at sea and that the

debtor expected to make a further payment within three weeks.

After presumably considering the matter, the creditor responded by

issuing a further bankruptcy notice claiming	$17,219.17	and that
was served on 15 September 1988.

Some explanation of these figures is necessary. The

monthly sum	of $2,000 mentioned in the letter	of 24 August was
probably not in	fact, on the papers, due.	There was only $1,000

due, unless the costs had been assessed by the nominated assessor;
there is no evidence that they had been.	However, if the debtor's

solicitors were in error in referring to a sum of $2,000, that

does not seem to me to save him, because at least $1,000 was due and he paid nothing. It is not absolutely clear whether any more

than $1,000 was due. According to Jones, affidavit, the

solicitor-and-client	costs mentioned in the deed were assessed at
$4,672.72 - when they were assessed	is not stated.

:  I ' . ,

5.

The amount mentioned in the bankruptcy notice,

$17,219.17, is the difference between the sum due under the

judgment and the amounts totalling $14,000 which were paid.

If within, say, a week of 28 August the creditor had

repudiated on the ground of non-payment	of	the sum due on 28
August, the	debtor's	argument might have had more strength, as

being based	on the contention that the debtor might have assumed
that his being several days late would not	be taken too seriously.
But the creditor did not issue the further	bankruptcy notice until

18 days after the due date and after the letter of 24 August

saying that the debtor expected to make a further payment within

three weeks. Assuming the debtor had become entitled to believe

that the creditor	was not insisting upon absolute punctuality,
that would	not have induced him unilaterally to defer a payment

for some weeks.

The debtor's affidavit does not say that he assumed,

having regard to the creditor's previous leniency, that the

creditor would take no repudiatory step with respect to the August

payment. In truth, the essence of the debtor's case (para.14 of

his affidavit) is that if he had known the creditor's true

attitude, he "could have with the threat	of	bankruptcy hanging
over me ceased	to make further payments". That	is true, but he

cannot complain of having been induced to pay the	money. because
he owed it.

In my opinion, there is nothing to show that the debtor

I	.. .	6.
was induced to believe	that	such a default as was made with

respect to the August payment would be overlooked; a belief of

that kind is necessary to ground such an estoppel as is alleged:

-	Bull v. Gaul [l9501 V.L.R.	377. See also Maclaine	v. Gatty 119211
1 A.C.	376 and Tropical Traders Limited	v.	Goonan (1964) 111

C.L.R. 41.

I have also given consideration to the question whether

the debtor can succeed by obtaining relief against the

"forfeiture" consisting in the creditor's having, by repudiation, revived the debtor's previous obligation: Legione v. Hateley

(1983) 152 C.L.R. 406. In my opinion, no question of a penalty

can arise in these circumstances. AS to relief against

forfeiture, that power is confined to interests of a proprietory
or at least possessory kind: Legione v. Hateley at p.445, per

Mason and Deane JJ.

Although the conduct of the creditor in repudiating

seems rather hard, as the debtor had paid the bulk of the money

then due under the deed, in	my opinion the creditor was legally
entitled to act as it did.	Peremptory conduct such as his issuing

a further bankruptcy notice instead of writing a warning letter

first does not necessarily vitiate legal rights.

In my opinion, then, the bankruptcy notice is good and

the tender of a lesser sum based on the view that the deed is

still operative is no answer to the creditor's petition.	I will
not make a sequestration order, however, until the debtor has	been

given an opportunity to pay the sum I have held to be due, namely

i

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that mentioned in the bankruptcy not i ce .