Re Sutherland-Cropper

[1985] FCA 324

Re: JONATHON VICTOR SUTHERLAND-CROPPER
No. W233 of 1984
Bankruptcy

COURT

IN THE FEDERAL COURT OF AUSTRALIA
BANKRUPTCY DISTRICT OF NEW SOUTH
WALES AND THE AUSTRALIAN CAPITAL TERRITORY
Beaumont J.

CATCHWORDS

Bankruptcy - stay of legal proceedings - Bankruptcy Act, 1966, s.60(1) - bankrupt convicted of obtaining property by false pretences - sentence deferred on entry into recognizance conditioned on payment of compensation - called up for sentence on breach by non-payment - whether process "in respect of non-payment of a provable debt" or "in consequence of his ... failure to comply with an order ... for (its) payment".

Words and Phrases - "for" - "in respect of".

HEARING

SYDNEY
#DATE 15:7:1985

ORDER

1. Order that the proceedings in the Local Court the subject of the notice to offender dated 22 April 1985 be stayed so far as such proceedings are based upon any alleged breach of the condition of the recognizance entered into by the bankrupt on 13 July 1984 that he pay compensation to Kuoni Travel Pty. Limited.

2. Reserve liberty to the bankrupt to apply for further relief on such notice, if any, as a judge may allow.

3. Order that the respondent pay the bankrupt's costs of this application.

Note: Settlement and entry of orders is dealt with in

Order 36 of the Federal Court Rules.

JUDGE1

Mr. Jonathon Victor Sutherland-Cropper, having been made bankrupt on his own petition on 26 March 1984, now applies for a stay of certain proceedings pending against him in the Local Court held at Sydney. The stay is sought pursuant to s.60 (1)(b) of the Bankruptcy Act, 1966 ("the Act") which is in the following terms:

"60. (1) The Court may ... upon such terms and conditions as it thinks fit-

(b) stay any legal process, whether civil or criminal ... against the person or property of the debtor-

(i) in respect of the non-payment of a provable debt or of a pecuniary penalty payable in consequence of the non-payment of a provable debt; or

(ii) in consequence of his refusal or failure to comply with an order of a court, whether made in civil or criminal proceedings, for the payment of a provable debt ..."

1. The present application arises in the following circumstances. On 13 July 1984, the bankrupt was convicted by a New South Wales Court of Petty Sessions (as it then was) of the offence of obtaining property by false pretences. He was then dealt with by the learned magistrate pursuant to the provisions of s.558 of the Crimes Act, 1900 (N.S.W.). So far as relevant, it reads:
   
   

"558. Deferring Sentence.

(1) A court before which a person comes to be sentenced for any offence may if it thinks fit defer passing sentence upon the person and order his release upon his entering into a recognizance ... in such amount as the Court directs, to be of good behaviour for such period as the court thinks proper and to come up for sentence if called upon.

...

(2) A recognizance mentioned in ... (1) shall be conditioned upon and subject to such terms and conditions as the court shall order ...

(6) A person may be called up for sentence and sentenced on the breach by him of any of the terms or conditions of a recognizance entered into by him under this section ..."

1. The "notice to offender" under s.558 given to the bankrupt by the Court of Petty Sessions indicates that on 13 July 1984, the bankrupt entered into a recognizance in the sum of $150.00 upon the following conditions:
   
   

"THE CONDITIONS of this recognizance are such that WHEREAS the Offender was on the thirteenth day of July, 1984, convicted at a Court, to wit, the court of Petty Sessions held before R. Evans at 302 Castlereagh St, SYDNEY in the said State of the offence of false pretences and was thereafter duly ordered to be released upon entering into a recognizance without sureties in the sum abovementioned conditioned that the said Offender be of good behaviour during a period of two years from such date aforesaid, and appear at the said Court or at such other place as may be appointed within the said State to receive sentence in respect of the said offence at any time if called upon to do so, and further to pay compensation in the sum of $6,443-00 to Kuoni Travel Pty Limited of 39 York Street, SYDNEY within six months. (Emphasis supplied.)

...

IF THEREFORE the Offender should fail in performing those conditions the recognizance entered into by himself will be forthwith levied on him ..."

1. The offence, which occurred in October 1983, arose out of the giving by the bankrupt of a cheque in the sum of $6,443.00 payable to Kuoni Travel Pty. Limited ("Kuoni") to obtain an airline ticket. The cheque was subsequently dishonoured. It appears that the magistrate was informed of the bankruptcy of the applicant after his conviction but before the magistrate dealt with him under s.558. The bankrupt, claiming that he is unable to do so, has not paid the compensation of $6,443.00 the subject of one of the conditions of his recognizance. Kuoni has lodged a proof of debt in that amount in the bankrupt's estate.

2. This application was prompted by a "notice to offender to appear for breach of recognizance" dated 22 April 1985 signed by the Clerk of the Local Court, Sydney and addressed to the bankrupt and to Kuoni in these terms:
   
   

"WHEREAS IT APPEARS that you have not complied with the conditions of the recognizance pursuant to Section 558 of the Crimes Act, 1900, entered into by you on the thirteenth day of July 1984, in respect of an offence of false pretences heard at Local Court before R. Evans Magistrate on the thirteenth day of July 1984, in that you have failed to pay the sum of $6,443.00 for compensation to Kuoni Travel Pty Ltd on or before the 12th January, 1985

TAKE NOTICE THAT YOU ARE HEREBY REQUIRED to be and appear at the Local Court Court House ... before such Magistrate as may be then there for SENTENCE in respect of the said firstmentioned charge."

1. As ultimately framed, the principal relief now sought by the bankrupt, which is opposed by the respondent officer of police who was the informant in the Court of Petty Sessions, is as follows:
   
   

"1. That any legal process against the applicant whereby he is called upon to appear for sentence or in any way to receive sentence in respect of his conviction for false pretences, except any such process issued or continued by reason of his failure to be of good behaviour during the period of two years from 13 July 1984 pursuant to his recognizance of that date, be permanently stayed.

2. Such further or other orders as this Honourable Court thinks fit."

1. In determining the construction of s.60 (1)(b), it is useful, I think, to look at the history of the provision, commencing with the explanatory memorandum accompanying the Bankruptcy Amendment Bill, 1979 which introduced the provision as follows (as cl.35):
   
   

"Cl.35: Stay of legal proceedings

94. The Court will be able to stay any legal process, whether civil or criminal, against the person or property of the debtor in respect of a provable debt and to discharge him out of custody imposed because of failure to pay a provable debt (Bill cl.35). The purposes of these amendments are:-

- to overcome the use of criminal procedures to collect provable debts when bankruptcy proceedings have intervened;

- to ensure that legal proceedings against bankrupts for the recovery of provable debts are brought pursuant to the Bankruptcy Act;

- to ensure that bankrupts are not held in custody for the non-payment of debts provable in bankruptcy; and

- to remove an uncertainty as to the ambit of the present s. 60.

(See Commissioner for Motor Transport v. Train (1972) 127 C.L.R. 396 and D. St. L. Kelly: Debt Recovery in Australia pp. 160 and 161')."

1. The former s.60 (1) provided that the Court might "discharge an order made against the property or person of a debtor under any law relating to the imprisonment of fraudulent debtors and stay any action, execution or other civil legal process against the property or person of the debtor and discharge him out of custody". The limited operation of this precursor of the present provision was illustrated in Train, a case of summary conviction for the offence of failing to pay civil charges imposed by statute. Although the State Act provided for imprisonment in default of payment of the charges, it was held that s.60 (1) was not available because the order committing a road transport operator to prison was not an order against his person made "under any law relating to the imprisonment of fraudulent debtors"; nor had he been placed in custody as a result of any "execution or other civil legal process against (his) person", since only criminal process was involved.

2. The constitutional validity of the present s.60 (1) was upheld in Storey v. Lane (1981) 147 CLR 549. There, the applicant was convicted on two charges laid under s.113 of the Industrial Conciliation and Arbitration Act, 1961 (Q.) of having paid a lesser amount of wages than that prescribed by an award and of having failed to pay an employee an amount of holiday pay. Section 97(5) of that Act provides that the Court shall, in addition to any penalty imposed upon a defendant, "order the payment by him of all moneys earned by the employee .. during any period of employment or, if payable in respect of any holiday or leave ... which have become due ...". On the first charge, the applicant was convicted under s.113. He was fined $100.00 plus costs of $18.00 and was ordered to pay the amount of wages underpaid, namely $2,051.96. It was directed that in default of payment of the total of $2,169.96 within 28 days, the applicant should be imprisoned for six months. (By s.97(9), an order made by an industrial magistrate under that section is enforceable as if it were an order made by such industrial magistrate sitting as a Court of Petty Sessions, and the provisions of The Justices Act of 1886 (Q.), as amended, are rendered applicable. Under those provisions, a justice is empowered to direct that a person ordered to pay a sum of money shall be imprisoned in default of payment.) The applicant was also convicted on the second charge under s.113. He was fined and ordered to pay unpaid holiday pay; in default of payment, it was directed that he be imprisoned for six months, to be cumulative with any other period of imprisonment. He defaulted in making the payments ordered and, having been committed to prison accordingly, he sought to be discharged from custody pursuant to s.60 (1).

3. After holding that s.60 (1) was valid, Gibbs, C.J., with whom the other members of the Court agreed, dealt with the application of the provision in that case as follows (at p.558):
   
   

"In my opinion it is unnecessary to remit the application back to the Supreme Court. Of course, under s.60 (1)(b) the court has a discretion to exercise, but it seems to me clear that in the circumstances of the present case, where the applicant is bankrupt, and unable to comply with the orders made by the industrial magistrate, the Court should exercise the power under s.60 (1)(b) and discharge him out of the custody in which he has been placed as a result of the orders made on his conviction on the first and second charges."

1. In the present case, it is common ground that, for the purposes of s.60 (1), the debt owed by the bankrupt to Kuoni is a provable debt. In particular, it is not suggested that the imposition of the condition of the recognizance that the bankrupt pay that debt within six months is a penalty or a fine within the meaning of s.82(3) (cf. Re Higgins, unreported, Spender, J., 23 November 1984).

2. Before turning to the construction of s.60 (1) itself, it is necessary to consider the precise legal character of what was done on 13 July 1984 and, what is now proposed in the application pending in the Local Court. As to the hearing on 13 July 1984, it is plain enough that the bankrupt was not then sentenced (see Griffiths v. The Queen (1977) 137 CLR 293; Frodsham v. O'Gorman (1979) 1 NSWLR 683). On that occasion, a conviction having been enetered, the only order made by the magistrate was that pursuant to s.558 (1) the bankrupt be released upon entering into a recognizance to be of good behaviour. Further, pursuant to s.558(2), the magistrate made a condition of the recognizance that the bankrupt pay compensation to Kuoni. The payment of compensation was framed as a condition of the recognizance and may be distinguished from a direction to an offender to pay compensation to an aggrieved person pursuant to s.554(3) of the Crimes Act (see also s.437). At any rate, the only order then made was one for the release of the bankrupt and although his position was changed by that order, it was not changed adversely (Griffiths per Aickin, J. at p.345).

3. The application now pending in the Local Court, which is the matter of present concern, is of a different character. That Court is empowered by s.558(6) of the Crimes Act to call up the bankrupt for sentence and to sentence him for breach of any condition of the recognizance. This application is thus clearly a legal process of a criminal nature for the purposes of s.60 (1)(b). But can it be said, in the language of s.60 (1)(b)(i) that this is such a process against the person of the debtor "in respect of" the non-payment of a provable debt? Or, in the language of s.60 (1)(b)(ii), is it such process "in consequence of his refusal or failure to comply with an order ... for the payment of (such) debt"?

4. In my opinion, the present case may be distin guished from cases such as Train and Storey. There, as would be the case if a direction had been made here under s.554(3) of the Crimes Act that the offender pay compensation to an aggrieved person, the circumstances fall squarely within the language of s.60 (1)(b)(ii). What was there involved was process "in consequence of his refusal or failure to comply with an order of a court ... made in ... criminal proceedings for the payment of a provable debt".

5. But, in my view, no such order was made here. The application now pending in the Local Court is of a different character. That court is empowered by s.558(6) of the Crimes Act to call up the bankrupt for sentence and to sentence him on breach of any condition of the recognizance. Although this application is clearly a legal process of a criminal nature for the purposes of s.60(10(b)(ii), it cannot be said, in the language of s.6 (1)(b)(ii), that it is a process "for the payment of (the) debt".

6. The ordinary meaning of the proposition "for" in this context is "in order to obtain" (see the Macquarie Dictionary where the example of "a suit for damages" is given). In my view, a distinction should be drawn for present purposes between an order for the payment of a debt on the one hand and an order made in proceedings involving the debt on the other (see Cottam v. Partridge (1842) 11 LJCP 161' at p 167). The application pending in the Local Court is, in my opinion, made in order to obtain the sentencing of the bankrupt. It is not made in order to obtain payment of the amount owed to Kuoni. It follows that s.60 (1)(b)(ii) has no application here.

7. Alternatively, the bankrupt submits that the application in the Local Court falls within s.60 (1)(b)(i) as a process against the person of the debtor "in respect of the non-payment of a provable debt".

8. It is submitted on behalf of the respondent that the Local Court application does not have that character. Rather, he says, that step should be seen as something done in respect of the offence of obtaining property by false pretences or in respect of the sentence for that offence. In so submitting, the respondent concedes that the phrase "in respect of" is capable of having a wide meaning.

9. In my view, the concession is properly made. It has been said that the phrase has the "widest possible meaning of an expression intended to convey some connexion or relation between the two subject matters to which the words refer" (per Mann, C.J. in Trustees Executors & Agency Co. Ltd. v. Reilly (1941) VLR 110 at p 111; and see State Government Insurance Office v. Rees (1979) 144 CLR 549 at p 561).

10. The question is thus one of nexus. In my opinion, the application now before the Local Court does have a sufficient nexus with the non-payment of the debt owed to Kuoni to justify its description as a process against the person of the debtor "in respect of" the non-payment of the debt. True it is, as the respondent contends, that the offence involved is one of obtaining property by false pretences and the process now in train is for sentence for that offence. But the breach of the condition of the recognizance to pay compensation is the circumstance which has activated the sentencing process. Without that breach, the question of sentence would not have now arisen for consideration, and it must follow that the current process should be seen as something instituted against the bankrupt "with respect to" that debt.

11. Such an interpretation would be consistent with the object of the amendment to s.60 (1) envisaged by the explanatory memorandum accompanying the Bill, that is to say, that a bankrupt should not be exposed to liability in any respect under the criminal law by reason of his failure to pay a debt which is provable in his estate. It follows, in my view, that, subject to questions of discretion and the terms and conditions, if any, to be imposed, the present case falls within the language of s.60 (1)(b)(i).

12. It may be accepted, as the respondent submits, that the grant of stay along the lines now sought could have a considerable impact upon the sentencing process. In particular, it would seem likely that the magistrate was influenced in his decision to defer sentence by the consideration that he proposed to stipulate that one of the conditions of the bankrupt's recognizance be that the amount in question be paid to Kuoni within the time specified. The grant of the stay sought would probably undermine that sentencing process. But I do not think that this is a matter of sufficient weight to justify the refusal of the stay. In the first place, the magistrate was informed of the bankrupt's inability to make the payment to Kunoi before he provided for the payment as a condition of the recognizance. It may be said therefore that the sentencing process was flawed from its inception. Moreover, the stated objective of s.60 (1) is to interfere in and even to frustrate the ordinary criminal process in the circumstances there stated. That legislative policy can only be given effect to in a case such as the present by granting the stay sought. I propose to grant relief accordingly.

13. The question remains of the precise form of relief to be granted and, in particular, what terms, if any, should be imposed upon the grant of that relief. Since it is appropriate that the order to be made should not restrain the prosecution from proceeding upon any breach of the condition of the recognizance that the bankrupt be of good behaviour, I make the following orders:
    
    

1. Order that the proceedings in the Local Court the subject of the notice to offender dated 22 April 1985 be stayed so far as such proceedings are based upon any alleged breach of the condition of the recognizance entered into by the bankrupt on 13 July 1984 that he pay compensation to Kuoni Travel Pty. Limited.

2. Reserve liberty to the bankrupt to apply for further relief on such notice, if any, as a judge may allow.

3. Order that the respondent pay the bankrupt's costs of this application.