Re Soudakoff, W. v Ex parte Crest Air Conditioning Pty Ltd
[1991] FCA 76
•13 MARCH 1991
Re: WALTER SOUDAKOFF
Ex parte: CREST AIR CONDITIONING PTY LIMITED
No. P2488 of 1990
FED No. 76
Bankruptcy
28 FCR 53
COURT
IN THE FEDERAL COURT OF AUSTRALIA
GENERAL DIVISION
BANKRUPTCY DISTRICT OF THE STATE OF NEW SOUTH WALES
Gummow J.(1)
CATCHWORDS
Bankruptcy - bankruptcy notice requiring payment to the Registrar of a New South Wales Local Court - change to rules of that Court after recovery of judgment and before issue of bankruptcy notice - provision no longer made for payment to Registrar - whether bankruptcy notice required payment in accordance with the Local Court judgment - whether notice bad.
Bankruptcy - application for issue of bankruptcy notice - provision of certificate of judgment - clerical error in certificate - effect on validity of bankruptcy notice.
Bankruptcy Act 1966, sub-s. 41 (2)
Bankruptcy Rules, R. 7
In re a Debtor (1908) 2 KB 692
Re a Debtor; Ex parte Bolam (1909) 26 WN (N.S.W.) 78
Re Martin (1971) 18 FLR 372
Re Mellick (1971) 19 FLR 1
Re Gyngell; Ex parte Speedo Group Limited, Federal Court of Australia, 11/12/90 unrep.)
Coleman v The Shell Company of Australia Limited (1943) 45 SR (N.S.W.) 27
La Macchia v Minister for Primary Industry (1986) 72 ALR 23
Maxwell v Murphy (1957) 96 CLR 261
Rodway v The Queen (1990) 169 CLR 515
HEARING
SYDNEY
#DATE 13:3:1991
Counsel and solicitors for Mr R.K. Eassie instructed
the petitioning creditor: by Messrs J.E. Mills and Associates
Counsel and solicitors for Mr R. Tregenza instructed
the debtor: by Messrs Constantine G. Paolis and Co.
ORDER
1. The petition dated 15 October 1990 be dismissed.
2. The petitioning creditor pay the costs of the debtor, including any reserved costs.
Note: Settlement and entry of orders is dealt with in Rule 124 of the Bankruptcy Rules.
JUDGE1
In this matter, the Court has had the assistance of considered and
thoughtful oral and written submissions by both counsel.
The creditor's petition is dated 15 October 1990. It relies for the act of bankruptcy upon failure to comply with the requirements of a bankruptcy notice issued 13 September 1990 and served upon the debtor on 25 September 1990.
By Notice of Opposition to Petition, dated 10 December 1990, the debtor denies commission of the act of bankruptcy relied upon by the petitioning creditor.
Paragraph 2 of the petition is in the following terms:
"The debtor is justly and truly indebted to Crest Air Conditioning Pty. Limited, in the sum of $12645.15 under the judgment recovered in the Local Court at Ryde on the twenty-fifth day of October, 1989 in the sum of $10,991.22 plus interest at the prescribed rate up to and including 9th October, 1990 amounting to $1,580.93 plus costs of attempting to enforce the judgment of $73.00. The consideration for such debt being the cost of supply and installation of ventilation and air conditioning systems by the creditor for the debtor at the debtor's request in May, 1989 being the balance of monies out-standing from Invoice No. 7705."
The bankruptcy notice issued upon an application dated 29 August 1990 which was made by the solicitor for the judgment creditor. The application, in accordance with Form 3, stated:
"I produce a certificate of the judgment under the seal of the Court certified by the Registrar against the judgment debtor obtained by default in the Local Court at Ryde in the State of New South Wales on the twentyfifth day of October, 1989."
Sub-rule 7 (2) of the Bankruptcy Rules ("the Rules") provides, in para. (a), that at the time when an application for the issue of a bankruptcy notice is filed, the applicant shall file one of the following documents in respect of the final judgment in question, namely:
"(i) an office, sealed or certified copy of the judgment or order;
(ii) a certificate of the judgment or order under the seal of the court or under the hand of an officer of the court;
(iii) a copy of the entry of the judgment or order certified by an officer of the court to be a true copy of that entry . . ."
As I have indicated, the application for issue of the bankruptcy notice, dated 29 August 1990, identified the judgment as one obtained on 25 October 1989. However, the certificate produced with the application and attached to the Court file states in para. 1:
"In this matter the plaintiff recovered judgment against the defendant on October 25th 1990."
The certificate itself is stated by the Registrar of the Local Court at Ryde, as given on "23/08/90". Thus, there is an internal contradiction in the certificate itself; also, the certificate is inconsistent with the description of it in the application for the bankruptcy notice. The petitioner and the debtor accepted that the judgment in question was indeed obtained on the date specified both in the application for the bankruptcy notice, and in the bankruptcy notice itself, namely 25 October 1989. Nevertheless, the debtor relies upon the disconformity between the certificate and the application for issue of the bankruptcy notice (and the bankruptcy notice) as assisting his case in opposing the petition. That is one ground upon which there was argument on the hearing of the petition.
The debtor, after the conclusion of oral argument, sought leave to add to the Notice of Opposition the following ground:
"4. That the Bankruptcy Notice be set aside as irregular as it was issued without there being filed with the Application for Issue of the Bankruptcy Notice pursuant to Rule 7 a certificate of judgment or other such document as is prescribed in paras. (i) - (v) of r. 7 (2) which was the certificate or judgment or other such document in relation to which the Bankruptcy Notice was to be issued."
I would grant such leave, but hold that there is no substance in the fresh ground. Counsel for the petitioning creditor pointed to several obstacles in the path of success for the debtor's case on this ground. It is sufficient to say that I accept the following submissions for the petitioning creditor:
(a) Sub-rule 7 (2) (a) requires that one of the specified documents be filed by the applicant at the time when the application for issue of the bankruptcy notice is filed; there is no requirement that the certificate be free from any errors on its face; here the application, dated 29 August 1990, stated the date of recovery of judgment was 25 October 1989 and the statement on the certificate that this date was 25 October 1990 was plainly a clerical error in the Local Court.
(b) It was for the Registrar (or in this case the Deputy Registrar) to decide whether he or she was satisfied that the application had been duly made and that the copies of the form of bankruptcy notice which had been furnished were in order for signature (sub-rule 7 (5)); the Deputy Registrar indicated that satisfaction by signing and stamping the copies and returning them to the applicant; there is no requirement that the Deputy Registrar be satisfied that the certificate of judgment which was filed with the application be free from any error.
(c) There was no defect in the observance of the procedures attending issue of the bankruptcy notice, and no failure to comply with the Rules, such as to make it necessary to seek the intervention of the Court under Rule 195.
For these reasons, the debtor fails in his submissions on this branch of the case.
The second ground arises in the following way. Sub-section 41 (2) of the Bankruptcy Act 1966 ("the Bankruptcy Act") requires the prescribed form of bankruptcy notice, inter alia, to require the debtor to pay the judgment debt or sum ordered to be paid "in accordance with the judgment or order . . ." These are words with a long legislative history, dating back at least to para. 4 (1) (g) of the Bankruptcy Act 1883 (Imp.) and, in New South Wales, to s. 4 of the Bankruptcy Act 1887 (N.S.W.) and para. 4 (1) (g) of the Bankruptcy Act 1898 (N.S.W.).
The bankruptcy notice issued on 13 September 1990 referred to the final order obtained in the Local Court at Ryde on 25 October 1989 and went on to require the debtor:
"(a) to pay the sum of Twelve thousand four hundred and fifty nine dollars and ninety five cents ($12,459.95) so claimed by the judgment creditor to the Registrar of the Local Court at 814 Victoria Road, Ryde 2112 in the State of New South Wales;
(Emphasis supplied). or;
(b) to secure the payment of the sum referred to in paragraph (a) to the satisfaction of the Federal Court of Australia or the judgment creditor or compound the sum so specified to the satisfaction of the judgment creditor."
The second issue that was debated before me is whether para. (a), which I have set out, answers the statutory requirement that the debtor be required to pay the judgment debt or some order to be paid "in accordance with the judgment or order" (emphasis supplied). The text of the certificate is relevantly in the following terms:
"1. In this matter the plaintiff recovered judgment against the defendant on OCTOBER 25th 1990 (sic) in the sum of 10,991.22
2. I am informed by the judgment creditor that $ NIL has been paid in respect of the judgment debt.
3. Interest is payable on the judgment debt at the rate of: 15% p.a.
4 The judgment creditor has incurred costs of attempting to enforce the judgment, recoverable against the judgment debtor, in the amount of $73.00"
The certificate states that what I have set out is a true and correct copy of the entry of the judgment in the records of the Local Court at Ryde. It will be apparent from the certificate that payment to the Registrar is not something required by the terms of the judgment itself.
The Local Courts (Civil Claims) Rules 1988 ("the Local Courts Rules") are made under the Local Courts (Civil Claims) Act 1970 (N.S.W.). At the time of the recovery of judgment on 25 October 1989, and until 26 April 1990, the Local Courts Rules provided, in Part 27 Rule 1, as follows:
"1. (1) The court may, on the application of any party to an action, or without any such application being made, when giving judgment in the action, order that the judgment debt (if any) be paid at such time, or by such instalments payable at such times, as it thinks fit.
(2) Subject to this Part, every judgment debt shall be payable forthwith.
(3) Subject to subrule (5), the amount of every judgment debt arising from an action shall be payable to the registrar where -
(a) it is payable in one sum; or
(b) an order for its payment by instalments requires the instalments to be paid to the registrar.
(4) Where the court or registrar orders payment of a judgment debt by instalments and does not require payment of the instalments to the registrar, the instalments are payable to the judgment creditor or at the judgment creditor's direction.
(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.
(6) Where the court makes an order under subrule (1) the order shall, while it remains in force, operate as a stay of enforcement of the judgment.
(7) Where a judgment creditor files an affidavit for the purpose of requiring the issue of any document for or in connection with the enforcement of a judgment, the affidavit shall, in any action (whether in a court or in any other Court) by the judgment debtor against the registrar for the wrongful issue of the document, be conclusive evidence in favour of the registrar that at the time of the issue of the document -
(a) where an amount is stated in the affidavit as having been paid in reduction of the judgment debt - that amount and no other amount had been paid; or
(b) where there is a statement in the affidavit that no amount has been paid in reduction of the judgment debt - no amount had been paid, by or on behalf of the judgment debtor in reduction of the judgment debt."
A further Rule was made with effect from 27 April 1990. This amended Part 27 by omitting sub-rule 1 (3) and omitting from sub-rule 1 (5) the opening words "Notwithstanding subrule (3)".
The result of this was that at the time of the application on 29 August 1990 for the issue of the bankruptcy notice and at the time of the issue of the notice on 13 September 1990, there was no provision in the Local Courts Rules for the method of payment of a judgment debt payable in full, other than the implicit indication in sub-rule 1 (5), as amended, that payment would be made to or at the direction of the judgment creditor.
Counsel for the debtor submitted that (i) in the absence of a direction as to payment in the judgment itself, the judgment should be interpreted as requiring payment in accordance with the Local Courts Rules and, by analogy, counsel relies upon what was said as to the procedures of other courts, in, inter alia, In re a Debtor (1908) 2 KB 692 and Re a Debtor; Ex parte Bolam (1909) 26 WN (N.S.W.) 78; (ii) at the time of recovery of the judgment in the Local Court, the relevant Rules provided that the judgment debt was payable to the Registrar; (iii) at the time of the issue of the bankruptcy notice, the relevant Rules no longer so provided, (following the amendment effective 27 April 1990) yet the bankruptcy notice stipulated payment to the Registrar of the Local Court at Ryde; and (iv) the requirement under the federal law that the debtor be required by the bankruptcy notice to pay the judgment debt or sum ordered to be paid "in accordance with the judgment or order" was ambulatory in character in the sense that what was required by the federal law in the present case was payment in accordance with the State law as it stood during the time for payment specified in the bankruptcy notice, that is to say from the date of service of the notice until the expiration of the period prescribed in it, and (v) it followed that the bankruptcy notice and thus the petition were bad.
There was some debate before me upon point (i) as I have described it above. On one view, the bankruptcy notice was bad simply because it required payment in accordance with a particular procedure and to a particular person whilst the judgment itself was silent on the point.
Counsel referred to various authorities concerned with the consequences of the requirement that the bankruptcy notice required a debtor to pay the judgment debt "in accordance with" the judgment. In Re a Debtor (1908) 2 KB 692 turned upon a bankruptcy notice based upon a County Court judgment; by the judgment, the defendant was ordered to pay the judgment debt to the Registrar, but the bankruptcy notice required payment to the judgment creditor. The Court of Appeal held that the bankruptcy notice did not require payment according to the terms of the judgment within the meaning of para. 4 (1) (g) of the British Bankruptcy Act of 1883.
Three decisions deal with bankruptcy notices based on judgments recovered in New South Wales District Courts. Re a Debtor; Ex parte Bolam (supra) was argued on the footing that the District Courts (Amendment) Act 1905 (N.S.W.), s. 44, had the result that a District Court judgment had to contain a direction that the amount of the judgment be paid into Court. The bankruptcy notice in question required payment to the debtor, and in setting aside the bankruptcy notice issued under para. 4 (1) (g) of the New South Wales Bankruptcy Act of 1898, Street J. held that the earlier English decision was "precisely in point".
However, it is to be noted that in fact sub-s. 44 (4) of the 1905 statute provided that where a judgment for the plaintiff had been given or entered up in a District Court, all such moneys whether payable in one sum or by instalments "shall be paid into Court". The obligation apparently was imposed directly in these terms by the legislation, not indirectly by the legislation requiring the Court order to take a particular form. It does not appear from the report of Re a Debtor; Ex parte Bolam (supra) whether in fact the District Court judgment in question did contain a direction that the amount of the judgment be paid into Court, or whether the obligation to do so arose simply by force of s. 44.
The matter is taken somewhat further by Re Martin (1971) 18 FLR 372. It concerned a petition based upon failure to comply with a bankruptcy notice which required payment of the District Court judgment to the petitioning creditor. The judgment simply ordered that "the defendants do pay the said sum"; sub-s. 100 (4) of the District Courts Act 1912 (N.S.W.) was in the same terms as sub-s. 44 (4) of the 1905 Act. Sweeney J. held that the bankruptcy notice did not comply with sub-s. 41 (2) of the Bankruptcy Act because notice did not require payment "in accordance with the judgment". His Honour also held that the debtor could have been misled by the bankruptcy notice in this form, and that the defect could not be regarded as merely formal for the purposes of sub-s. 306 (1) or properly cured by amendment under sub-s. 33 (1). Accordingly, the petition was dismissed. To the same effect is his Honour's earlier decision Re Mellick (1971) 19 FLR 1.
From these decisions has come the view (commented upon by Einfeld J. in Re Gyngell; Ex parte Speedo Group Limited, 11/12/90, unrep., p 4) that whilst a judgment in form may make no requirement as to the manner or method of payment of the judgment debtor, the judgment will, for the purposes of sub-s. 41 (2) of the Bankruptcy Act, be treated as so doing if provision as to the method or manner of payment is made by legislation or Rules of Court governing the procedures of the court in which the judgment is recovered.
There had been, it was submitted before me, a misapplication in the later decisions of In re a Debtor (1908) 2 KB 692, because in that case the requirement to pay the Registrar appeared on the face of the judgment. There is, to my mind, much force in that view. But to accept it would be to depart from a practice in this country which is long established, however uncertain its antecedents. I would not, as a judge at first instance, depart from the approach taken in the Australian bankruptcy decisions to which I have referred. Accordingly, I should accept point (i) in the series of steps taken in the argument by counsel for the debtor. There remains the question arising from counsel's point (iv).
The issue thus becomes one of whether the removal, by an amending rule taking effect on 27 April 1990, of the provisions in the Local Courts Rules for payment to the Registrar of the Local Court, had the result that under the relevant State law from 27 April 1990 there was no provision for payment to the Registrar, not only as regards judgments recovered on and after that date, but also as regards judgments recovered before 27 April 1990 but still unsatisfied at that date. The judgment in the present case fell into the latter category, having been obtained on 25 October 1989.
The issue as I have isolated it is not whether the amendments with effect on 27 April 1990 were retrospective in the sense of applying to facts or events which had occurred before 27 April 1990, such as payments already made to the Registrar, in such a way as to confer or impose or otherwise affect rights or liabilities defined by reference to those past events. Rather, the question is whether, in respect of a judgment recovered before 27 April 1990 and still unsatisfied, the rights and liabilities of the parties thenceforth were to be changed, such that future payments were not to be made to the Registrar; see the distinction drawn by Jordan C.J. in Coleman v The Shell Company of Australia Limited (1943) 45 SR (N.S.W.) 27 at 31, and by the Full Court of this Court in La Macchia v Minister for Primary Industry (1986) 72 ALR 23 at 26-27, 33-34.
In my view, the reasoning in these authorities is applicable to the situation with which the Court is presented in this case. I accept that the requirement as to payment "in accordance with" the judgment or order, as it appears in sub-s. 41 (2), is ambulatory in the sense I have described it. It would be a strange result if a bankruptcy notice was bad unless it required payment in a manner not in accordance with what the applicable law now required to discharge the judgment debt in question, but in accordance with what had been required at a past time.
It follows that subject to consideration of one further aspect of the matter, the notice in issue here was bad. I would not regard the defect as merely formal for the purposes of sub-s. 306 (1) or as having been susceptible of amendment under para. 33 (1) (b) of the Bankruptcy Act. I have already referred, in this connection, to Re Martin supra.
There was some discussion before me as to the correct construction of Part 27 Rule 1 of the Local Courts Rules as it stood before 27 April 1990. I have set out the text earlier in these reasons. In my view, the position was that every judgment debt was payable forthwith, subject to the stay effected by an order under sub-rule (1), which might provide for payment by instalments. The instalments were payable to or at the direction of the judgment creditor, unless the order for instalments required payment to the registrar. Payment of a judgment payable in one sum and not by instalments was to be to the registrar. But, in any case where payment was to be made to the registrar, any payment to or at the direction of the judgment creditor nevertheless would reduce the judgment debt, if accepted by or on behalf of the judgment creditor.
I accept that, as this case illustrates, changes in these provisions might have substantive consequences for the rights and liabilities of creditors and debtors, in particular, by reason of the inter-action between the Local Courts Rules and other laws, here the Bankruptcy Act. I appreciate also that the line between substance and procedure is, as Fullagar J. pointed out, not easy to draw, and when drawn often appears unsatisfactory; see Maxwell v Murphy (1957) 96 CLR 261 at 286.
But in my view the Local Courts Rules in question were concerned with enforcement or recovery of judgment debts by specified procedures, and, as it has been said, no one has a vested right in any form of procedure: Rodway v The Queen (1990) 169 CLR 515 at 521. Accordingly, and contrary to the submissions of its counsel, the petitioning creditor did not acquire before 26 April 1990 any substantive right to have the Registrar of the relevant Local Court receive payment which right would, whether at general law or pursuant to the Interpretation Act 1987 (N.S.W.), para. 30 (1) (b), still survive and so sustain the validity of a later bankruptcy notice expressed as requiring payment to that Registrar.
The petition should be dismissed with costs.
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