Re Wallace, John Vincent Ex Parte Trade Credits Ltd

[1983] FCA 62

I N THE HE2-L COURT OF AUSTRALIA)

)

NEW SOUTH WALES DISTRICT REGISTRY) N o . B 3814 of 1982

)

BANKRUPTCY	D I V I S I O N	1
I N THE MATTER O F THE BANKRUPTCY
ACT, 1966
-
- RE: VINCENT JOHN WALLACE

( A p p l i c a n t )

EX	PARTE:	TRADE	CREDITS	LIMITED
( R e s p o n d e n t )

J u d g e Making O r d e r : Smithers J.

D a t e of O r d e r :	8 A p r i l 1983
Where Made:	Sydney.

O R D E R

THE COURT ORDERS THAT:

1.        The application be dismissed

2. The applicant pay the respondent's costs of the

appl lcat ion.

..

I N 'I'HE FEDERAL COURT OF AUSTRALIA

1

NEW SOUTH WALES DISTRICT REGISTRY NO. B 3814 Of 1982

)

BANKRUPTCY DIVISION	1
I N THE MATTER O F THE BANKRUPTCY
ACT, 1966
-
RE:
- J O H N VINCENT WALLACE

(Appl icant )

EX PARTE: TRADE CREDITS LIMITED

(Respondent)

Coram: Srnlthers J.

8 Apri l 1983

REASONS FOR JUDGMENT

I n these p roceed lngs t he app l i can t , a d e b t o r , h a s

a p p l i e d t o the Cour t for a n o r d e r s e t t l n g a s i d e a Bankruptcy

Notlce served upon h i m by the respondent , o r a l t e r n a t i v e l y

s t a y l n g t h e o p e r a t l o n of the Notlce.

On 31 December 1981 pursuant t o a l o a n a g r e e m e n t

between World Cup Rodeo Pty . L td . as bor rower ; the respondent

a s l ende r and mortgagee; and the debtor, Cecll Ian Hainlng and

F a y E n l d H a l n l n g a s g u a r a n t o r s a n d N l c k o l a s N a r i o u l a s a n d

2.

Sophia Marloulas as guarantors the sald Nlckolas Marloulas and

Sophia Mar loulas en te red In to a mortgage t o secure repayment

t o t h e r e s p o n d e n t of t h e s u m o f $ 5 5 0 , 0 0 0 . 0 0 l e n t b y t h e

r e s p o n d e n t t o World Cup Rodeo Pty. Ltd. T h e money was

borrowed t o f inance a bus iness venture by World Cup Rodeo P t y .

L td . , name ly t he s t ag ing o f t he World Cup Rodeo I n Melbourne

and Sydney. Pursuant to the loan agreement the respondent

t o o k t h e m o r t g a g e s e c u r i t y o v e r t h r e e propertles owned by the

mortgagors known as "Abbotsford", "Linley Polnt" and "Ryde" .

The b u s l n e s s venture w a s no t success fu l and by ea r ly

1982 World Cup Rodeo Pty. Ltd. was i n d e f a u l t I n repayment of

moneys due under the loan agreement. The mor tgagor s f a l l ed t o

pay such moneys t o the respondent .

On 25 June 1982, upon app l i ca t lon by t he r e sponden t

I n t h e Supreme Court of New S o u t h Wales, the Cour o rde red t

t h a t on or a f t e r 9 J u l y 1 9 8 2 t h e r e s p o n d e n t h a v e l e a v e t o

i s s u e a w r l t of p o s s e s s l o n i n respect of t h e t h r e e propertles.

On 1 4 J u l y 1 9 8 2 s u c h writ was i s s u e d . On 16 J u l y 1 9 8 2

judgment w a s e n t e r e d for the r e s p o n d e n t a g a l n s t f i v e

defendants inc luding the mor tgzgors and the appl icant for t h e

sum of $546 ,829 .65 w l th mte res t a t the ra te of 25 per centum

the reon i n r e s p e c t of the pe r lod from 15 February 1982 t o 16

July 1982. This sum c o m p r l s e d t h e p r l n c l p a l sum and i n t e r e s t

outstanding under the loan agreement a t t h e d a t e o f ludgment.

3 .

No payment be lng made t h e B a n k r u p t c y N o t i c e was

I ssued and da ted 24 August 1982. On 2 0 September 1982 t h e

d e b t o r f l l e d t h i s a p p l i c a t l o n t o h a v e t h e B a n k r u p t c y N o t l c e

s e t a s l d e . The appl lca t ion has been ad-~ourned severa l tunes

and t h e o p e r a t l o n o k the Notice has been stayed pending the

d e t e r m i n a t l o n o f t h i s a p p l i c a t i o n .

On 1 2 October 1982 the respondent sold one of the

p r o p e r t i e s , " R y d e " a t p u b l i c a u c t l o n a n d r e a l i s e d a n e t t

amount of $65,851.30. It appears tha t s teps have been taken

t o p r e p a r e t h e o t h e r p r o p e r t l e s f o r s a l e b u t t h e r e i s no

ev idence before the Cour t as to whether a da t e has been s e t

f o r s a l e . I t a p p e a r s t h a t no income has been rea l ized by t h e

respondent f rom such propert ies . The Eankruptcy Notlce clalms

t h e f u l l amount o f t he ~udgmen t deb t and i n t e re s t ca l cu la t ed

i n r e s p e c t t h e r e o f t o t h e d a t e o f t h e n o t l c e . I t is conceded

t h a t s u c h i n t e r e s t was c o r r e c t l y c a l c u l a t e d . The Bankruptcy

Notice makes no r e f e r e n c e t o t h e s t e p s t a k e n by the respondent

t o o b t a l n p o s s e s s i o n o f t h e p r o p e r t i e s .

I t was c o n t e n d e d o n b e h a l f o f t h e applicant t h a t

what had occurred I n r e l a t i o n t o t h e r e d u c t i o n by t h e

respondent ln to h i s p o s s e s s i o n o f t h e l a n d s t h e s u b j e c t o f t h e

m o r t g a g e w a s e q u l v a l e n t t o a p r o c e d u r e o f e x e c u t i o n b y a

c r e d l t o r , and t ha t , such execution being stlll I n p rogres s , lt

was a b a r t o f u r t h e r e x e c u t l o n s u c h a s t h e s e r v i c e of a

bankruptcy no t ice . Mi l le r v . Parne l l Cl8151 128 E.R. 1078, I n -

4.

r e Chl ld , Ex Parte C h l l d 118921 2 Q.B. 7 7 and I n r e a Debtor

E x F o r t e Sml th C19021 2 K.B. 260 w e r e r e f e r r e d t o .

I t was urged that , lnasmuch as as t h e a p p l i c a n t was

~ o i n t l y a s well a s ' s e v e r a l l y l l a b l e f o r t h e sums due t o t h e

respondent under the loan agreement , a process of execut ion

under taken by the respondent i n r e s p e c t t h e r e o f a g a i n s t t h e

mortgagees enured t o the a p p l l c a n t I n t h e same way and to the

same ef fec t a s It d i d t o the mortgagors. I t w a s urged tha t

t h e order for posses s ion , the wrlt of possesslon, and actual

p o s s e s s i o n , had b e e n t a k e n b y t h e r e s p o n d e n t before t h e

s e r v i c e of t h e Bankrup tcy No t i ce or t h e d a t e t h e r e o f , a n d

f i rs t t h a t s u c h p rocedures cons t i t u t ed p rocesses of execu t lon

a g a l n s t t h e m o r t g a g o r s whlch r e d u c e d t h e d e b t d u e b y t h e

mortgagors and thus the amount due under the loan agreement

a l though by an unascer ta ined amount and secondly tha t tha t

execut lon was a form of execut ion s t i l l proceeding and while

p r o c e e d i n g , was a bar t o a n y o t h e r f o r m o f e x e c u t i o n l n

respect of t h e debt t o t h e r e s p o n d e n t .

I n r e s p e c t o f the a l l e g e d r e d u c t i o n of t h e debt due

u n d e r the loan agreement the s l t u a t l o n has t o be looked a t as

a t t h e date of the Bankruptcy Notice namely 24 August 1982.

A t t h a t d a t e t h e r e s p o n d e n t h a d p o s s e s s i o n o f t h e s e c u r l t l e s

b u t had received no f l n a n c l a l b e n e f i t therefrom. The t o t a l

s u m owing was n o t r educed . The sum due under a mortgage 1s

n o t r e d u c e d u n t l l m o n e y s a r e r e c e l v e d i n p a r t i a l o r t o t a l

5.

d i s c h a r g e t h e r e o f . F u r t h e r , o n c e d e f a u l t h a s o c c u r r e d , a

mortgagee i s e n t i t l e d t o p u r s u e a l l h l s r e m e d i e s c o n c u r r e n t l y

- Halsbury 4th Ed. V o . 3 2 p a r a . 785.

It is no d o u b t t r u e t h a t the o b t a l n i n g o f the w r l t

of posses s ion was a n e x e r c l s e I n t h e n a t u r e o f e x e c u t i o n , b u t ,

it was execut ion of a mortgagee's judgment for possesslon, and

not execut ion under a ~ u d g m e n t f o r t h e d e b t a r l s i n g u n d e r the

loan agreement . In thls connec t ion t he app l l can t sough t t o

a p p l y t h e p r i n c i p l e tha t a c r e d l t o r who has l s s u e d a writ of

f i fa canno t s e rve a Bankruptcy Notice because he i s I n t h e

p o s l t l o n of a c r e d i t o r wlth a ~udgment upon which executlon

h a s been s t ayed . See p e r Lord Ph l l l lmore J. i n , I n r e Bond,

Ex pa r t e Cap i t a l and C a u n t r l e s Bank Llmlted c19111 2 K.B. 988

a t 991. But t h a t l e a r n e d ~ u d g e p o i n t e d o u t t h a t this r u l e was

b a s e d o n t h e p r i n c i p l e t h a t a c r e d i t o r m u s t n o t s e l z e a

d e b t o r ' S g o o d s l n e x e c u t l o n a n d t h e r e b y p r e v e n t h l m f rom

p a y i n g t h e d e b t , a n d a t t h e same t ime s e r v e h l m w l t h a

b a n k r u p t c y n o t i c e f o r t h e p u r p o s e of maklng h i m b a n k r u p t .

There was no s u c h s l t u a t i o n e x i s t l n g o n 24 August 1982 . A t

t h a t s t a g e t h e r e s p o n d e n t had acqul red possess lon of t h e l a n d s

c o n s t i t u t i n g t h e m o r g t g a g e security. Th i s d l d n o t h l n g t o

p reven t the appllcant from u s l n g h l s money t o d l s c h a r g e t h e

whole or par t o f the debt. And a s p o i n t e d o u t a b o v e i n t h e

absence of f i n a n c l a l r e t u r n t o the respondent f rom those lands

t h e d e b t was not reduced .

6 .

I understood it t o be u r g e d a l s o t h a t t h e a p p l i c a n t

b e l n g e n t l t l e d t o c o n t r i b u t l o n f r o m the mor tgagor s a s 3o in t

gua ran to r s with hlm of the mortgage debt , h is a c c e s s i b i l l t y t o

s u c h c o n t r l b u t l o n I n respect of a n y p a r t of the guaranteed

debt which he might' have pald was reduced by posses s ion reason of t h e

respondent ' S p u r s u l t of i t s secu r l ty by t ak ing of

t he m o r t g a g e d l a n d s . B u t h e t a p p l l c a n t ' S e n t i t l e m e n t t o

c o n t r l b u t i o n IS n e c e s s a r i l y sublec t t o t h e r e s p o n d e n t ' s

e n t l t l e m e n t t o p u r s u e c o n c u r r e n t l y a l l the r emed ies a r i s ing

under the loan agreement and the mor tgage en tered In to

p u r s u a n t t h e r e t o . The r e d u c t i o n I n t o p o s s e s s i o n b y the

mortgagee of the secu r i ty g lven by t he mor tgagor s d ld no thmg

t o impede the a b l l i t y of t h e a p p l l c a n t t o d l s c h a r g e t h e

l l a b i l i t y i n hlm whlch was of c o u r s e s e v e r a l as w e l l a s J o i n t ,

t o pay the sum l e n t b y t h e r e s p o n d e n t t o World Rodeo Pty . L td .

T h e a p p l i c a n t h a v l n g c o n c e d e d t h a t t h e amount of

$603 ,759 .73 for whlch t h e c l a l m 1 s made i n t h e b a n k r u p t c y

n o t i c e was t h e sum ac tua l ly due by t he p r lnc lpa l deb to r and by

t h e a p p l i c a n t o n 24 A u g u s t 1982, It 1 s my Judgment tha t t h e

appl lca t lon should be d l smlssed wlth c o s t s .

ccrctfy that thts and the &

preceding pages are a true copy of the

reasons for Judgment herefn of His Idfanor

Mr. Justice -

..