Re Thompson, C. v Ex parte R & I Bank of Western Australia Ltd

[1993] FCA 1040

IN THE FEDERAL COURT) OF AUSTRALIA GENERAL DIVISION )

BANKRUPTCY DISTRICT )	1
OF THE STATE OF	1
WESTERN AUSTRALIA	) NO. WB 71 OF 1993 RE: CHRISTOPHER THOMPSON

Debtor

EX PARTE: R. & I. BANK OF

WESTERN AUSTRALIA LTD.

Creditor

MINUTE OF ORDER

JUDGE W I N G ORDER:	LEE J.
DATE OF ORDER:	15 DECEMBER 1993
WHERE MADE:	PERTH
THE COURT ORDERS THAT:

1.        The sequestration order of 19 January 1993 be annulled.

1. The creditor's petition be dismissed.

in Rule 124 of the Bankruptcy Rules.

1. The petitioner pay one half of the debtor's costs of the application to annul the bankruptcy.

Note:  Settlement and entry of orders is dealt with

IN THE FEDERAL COURT)

OF AUSTRALIA	)
GENERAL DIVISION
BANKRUPTCY DISTRICT )	1
OF THE STATE OF	)
WESTERN AUSTRALIA	) NO. WB 71 OF 1993 RE: CHRISTOPHER THOMPSON

Debtor

EX PARTE: R. & I. BANK OF

WESTERN AUSTRALIA LTD.

Creditor

CORAM: LEE J.
DATE : 15 DECEMBER 1993

PLACE: PERTH

REASONS FOR JUDGMENT

This is an application under s.153B of the Bankru~tcy

Act 1966 ( "the Act" ) for an order annulling a sequestration order made in the absence of the debtor upon the hearing of a creditor's petition on 19 January 1993. The creditor's petition was presented on 12 November 1992. The debtor seeks to satisfy the Court that the sequestration order ought not to have been

made.

The petition was grounded upon an act of bankruptcy said to have been committed under para.40(l)(g) of the Act on 2 November 1992 when the debtor failed to comply with a bankruptcy notice served upon him on 19 October 1992.

Section 40(l)(g) of the Act provides, inter alia, that it' is an act of bankruptcy by a debtor if the debtor fails to comply with the requirements of a bankruptcy notice served under the Act by a creditor who has obtained against the debtor a final judgment, belng a judgment the execution of which has not been stayed.

The issue in this matter is whether the final judgment to which the bankruptcy notice referred had been stayed at the time of service of the notice.

The creditor commenced proceedings against the debtor and the debtor's wife by a plaint filed in the Local Court at Perth on about 30 March 1990 ("the first plaint"). The defendants to the first plaint were the debtor and his wife as first defendants and, as second defendant, the guarantor of the debt for which the debtor and his wife were sued as joint and several debtors. A summons was issued by the Local Court upon entry of the first plaint and served on the second defendant and

on the debtor's wife but not served on the debtor. A Notice of	Intention to Defend the creditor's claim was filed by the
debtor's wife.
On 23 April 1991 a second plaint ("the second plaint") was filed by the creditor in the Local Court at Perth against the debtor relying upon the same cause of action. A summons was issued upon entry of the second plaint and the summons was served on'the debtor on 24 April 1991. Judgment in default of notice of intention to defend was entered against the debtor on the second plaint within fourteen days of service of the summons upon the debtor. On 19 August 1991 a summons in aid of execution was issued in the Local Court commanding the debtor to appear before the Court for examination by the creditor in aid of execution of the judgment obtained in the proceeding commenced by the second plaint.
It is uncertain as to why the second plaint was issued but counsel for the creditor pointed out that it may have resulted from a misapprehension by solicitors for the creditor of the creditor's right to serve the debtor with process under the first plaint. Why the provisions of the Rules of the Local Court were not used to effect service of the first plaint on the debtor is unknown. It is apparent that filing the second plaint was irregular in so far as the creditor purported to commence concurrent proceedings in the Local Court against the debtor in
respect of the same cause of action.
On 2 September 1991 a defence was filed on behalf of the debtor and his wife by solicitors acting for them in the proceeding commenced by the first plaint.
On the return of the summons for examination of the debtor on 20 September 1991 the Magistrate was informed by the debtor that a defence had been filed on behalf of the debtor and his wife. On becoming aware that there were concurrent plaints against the debtor in respect of the one matter and that as of that date a defence had been filed by the first defendants to the first plaint and a default judgment entered against the debtor as the defendant to the second plaint, the Magistrate declined to proceed with the summons for examination and ordered that the two plaints in the one cause be joined. The question to be addressed now is, what was the effect of that order, given that the order contained no express terms staying the execution of the judgment obtained in the second plaint?
I have reached the conclusion that in purporting to join the plaints it was the intention of the Magistrate that the creditor not be able to take any step to execute the judgment obtained under the second plaint without further order of the Local Court. Given the inconsistent consequences that would
prosecute the defence filed on behalf of the debtor on the first result from a joinder, namely the right of the debtor to
plaint and the right of the creditor to execute the judgment entered against the debtor in respect of the same claim in the second plaint, it is clear that only a further order of the Local Court could resolve that inconsistency if any step was sought to be taken to execute the default judgment that was now part of the joined plaints. Any request for the issue of process to execute

the judgment would bring up both plaints and require the Court to consider whether execution of the judgment could be permitted.

The reasons for that conclusion are twofold. First,

if that had not been the Magistrate's intention there would have been no need to join the two plaints. Secondly, the act of joinder was an acknowledgment by the Court that there had been a misuse of its process in the issue of the second plaint and was an attempt to remedy that abuse.

The purpose of directing the joinder was to ensure that no further process would issue under the second plaint until the Local Court had the opportunity to consider, by virtue of the joinder, what order, if any, should be made.

Although express words to that effect were not used,
the object of the Magistrate's order was to effect a stay of

execution of the judgment. The authorities are clear that

para.40(l)(g) of the Act notwithstanding that an express order	execution may be stayed within the meaning of that term in	for a stay has not been made by a court. (See: R e S e e r s (1955)
17 A.B.C. 11; R e S o l o m o n ; E x P a r t e R e i d (1986) 66 A . L . R . 571.)
It follows that the bankruptcy notice served by the creditor on the debtor was not grounded upon a judgment that had not been stayed as required by the Act. Therefore, the failure of the debtor to approach the Court in respect of the notice, or to make arrangements as required by the notice or otherwise comply with the notice did not amount to an act of bankruptcy under the Act.
Therefore, the petition presented by the creditor was not supported by a ground on which a sequestration order could be made. The sequestration order made on the petition on 19 January 1993 was an order that ought not to have been made. It follows that under s.153B of the Act the sequestration order should be annulled.

There will be an order that the sequestration order of

19 January 1993 be annulled and that the creditor's petition be

dismissed. There will be a further order that the petitioner pay one half of the debtor's costs of the application to annul the

the application for the reason that had he taken prompt steps	bankruptcy. The debtor is not entitled to the entire costs of
when the purported bankruptcy notice was served upon him, a substantial part of the costs of this application would have been avoided.

I certify that the preceding

six (6) pages are a true copy of the

Reasons for Judgment of his Honour M r Justice Lee.

Associate: ?. U

Date:  \ y . \2.\993

Counsel for the Debtor: H.N.H. Christie

Solicitors for the Debtor: Legal Aid Commission

of Western Australia

Counsel for the Creditor: F. Romanin

Solicitors for the Creditor: Dwyer Durack

Date of Hearing:  15 December 1993

Date of Judgment: 15 December 1993