Simon v Vincent J O'Gorman Pty Ltd

SIMON v. VINCENT J. O'GORMAN PTY. LTD. (1979) 41 FLR 95
Bankruptcy - Jurisdiction - Judgments and Orders

COURT

FEDERAL COURT OF AUSTRALIA

GENERAL DIVISION
Franki(1), Fisher(2), Lockhart(3) JJ.

CATCHWORDS

Bankruptcy - Sequestration order - Order wrongly made - Whether appeal lies to Federal Court of Australia - Power of court - Whether court may go behind judgment on which order based - Judiciary Act 1903 (Cth.), s. 44 - Bankruptcy Act 1966 (Cth.), ss. 37, 38, 39 (2) (a), 40 (1) (g), 41 (7), 52, 154.

Jurisdiction - Appeal - Bankruptcy - Sequestration order - Order wrongly made in first instance - Whether appeal lies to Federal Court of Australia - Power of court - Whether court may go behind judgment on which order based - Judiciary Act 1903 (Cth.), s. 44 - Bankruptcy Act 1966 (Cth.), ss. 37, 38, 39 (2) (a), 40 (1) (g), 41 (7), 52, 154.

Judgments and Orders - Default summonses - Judgments entered in default of appearance - First judgment against registered company - Second judgment later against natural persons - One same obligation and one same cause of action - Whether court of appeal may go behind judgments - Whether second judgment can stand.

HEADNOTE

The first respondent (O'Gorman) carried on the business of wholesale butchers. Prior to 14th October, 1969, O'Gorman supplied meat on credit to the two appellants who conducted in partnership two businesses, one at Parramatta and the other at Lidcombe. On 14th October, 1969, Simon's Meats Pty. Ltd. (the company) was incorporated as a company and the two appellants were directors and shareholders of the company, the first appellant being chairman and managing director of it. During the period December 1969 to January 1970 O'Gorman delivered to the Parramatta and Lidcombe shops meat or small goods on credit and in March 1970 O'Gorman brought an action against the company in the District Court of New South Wales by way of a default summons claiming for goods sold and delivered during the December 1969 to January 1970 period. Judgment was signed against the company in April 1970. In September 1970 a second default summons relating to the same goods the subject of the first summons and claiming the same amount for goods sold and delivered was issued against the appellants personally. O'Gorman obtained final judgment in default of appearance against the appellants in the District Court at Sydney in November 1971. Early in 1973 the appellants were served with a bankruptcy notice based on that judgment and on 14th December, 1973, the Federal Court of Bankruptcy made an order sequestrating the estate of the appellants. The appellants lodged an appeal from the making of the sequestration order to the High Court of Australia in January 1974 and the High Court referred the appeal to the Federal Court of Australia in April 1979 pursuant to s. 44 of the Judiciary Act 1903.

Held: per curiam (allowing the appeal) the sequestration order of the Federal Court of Bankruptcy of 14th December, 1973, in respect of the estate of both appellants should be set aside and in lieu thereof the petition should be dismissed with costs because: (1) An appeal lies to the Federal Court from the sequestration order of the Federal Court of Bankruptcy because it is alleged that the order had been wrongly mde in the first instance. The court has jurisdiction to go behind the judgment which formed the basis of the order and to inquire whether it was founded on a real debt.

Wren v. Mahony (1972), 126 CLR 212; Re Schierholter; Ex parte Geis (1978), 32 FLR 22, followed.

Re Deriu (1970), 16 FLR 420, distinguished.

Re Norris: Ex parte Norris (1890), 7 Morr 8; Re Edgar; Ex parte Davidson and Michael Hunt's Health Club Pty. Ltd. (1973), 2 ALR 649; Re McDonald (1893), 14 LR (NSW) B. & P 11; Cameron v. Cole (1944), 68 CLR 571; Bear v. Official Receiver (1941), 65 CLR 307; Re Hawkins; Ex parte Troup, (1895) 1 QB 404; Re Flatau; Ex parte Scotch Whisky Distillers Ltd. (1888), 22 QBD 83; Re Morris (1871), 2 VR (I. E & M.) 2; Re Cole; Trustee in Bankruptcy v. Public Trustee, (1931) 2 Ch 174; Re Meiklejohn; Ex parte Barnard, (1961) Qd R 70; Re Vojnovski; Ex parte Malcolm, (1970) ALR 355, considered.

(2) Although it may be unusual for an appeal to remain on foot without being prosecuted for some five years, it is not for the respondents to complain as they failed to tender any evidence of prejudice.

Re Bett (1949), 14 ABC 199, referred to.

(3) There was but one cause of action arising out of one antecedent obligation and therefore there could be but one judgment. The creditor was not entitled to enter judgment against the appellants and the judgment thus obtained did not provide a sound basis for the relevant bankruptcy notice.

Buckingham v. Trotter (1901), 1 SR (NSW) 253; Clarkson Booker Ltd. v. Andjel, (1964) 2 QB 775; London General Omnibus Company Ltd. v. Pope (1922), 38 TLR 270; Petersen v. Moloney (1951), 84 CLR 91, applied.

HEARING

Sydney, 1979, August 15-16; November 2. #DATE 2:11:1979

APPEAL.

Appeal from the Federal Court of Bankruptcy (Riley J.).

The facts are set out in the judgment of Lockhart J. and also of Franki J.

G. R. Barr, for the appellants.

P. Biber (solicitor), for the first respondent.

G. J. Lawrie, for the second respondent.

Cur. adv. vult.

Solicitors for the appellants: Meyer-Thoene & Chen.

Solicitors for the first respondent: J. W. Milne & Berry.

Solicitor for the second respondent: Alan R. Neaves (Commonwealth Crown Solicitor).

E. F. FROHLICH

JUDGE1

November 2.

The following written judgments were delivered.

FRANKI J. This is an appeal from a sequestration order made by a judge of the Federal Court of Bankruptcy in respect of the estate of both appellants, Otto Simon and Kathy Eva Simon. The order was made on 14th December, 1973, and thereafter an appeal was lodged by both appellants to the High Court of Australia. On 5th April, 1979, the High Court, pursuant to s. 44 of the Judiciary Act 1903 (Cth.), ordered that the matter be referred to this Court and that the costs of the proceedings in the High Court, including those of the day when the matter was referred, be in the discretion of this Court. (at p97)

The appeal to the High Court was dated 4th January, 1974, but no stay was obtained although in February 1975 an affidavit is before us which was filed seeking a stay and alleging that the appellants were unable to prosecute the appeal because of lack of funds. (at p97)
The first respondent, Vincent J. O'Gorman Pty. Ltd. ("O'Gorman") carried on the business of stock buyers and wholesale butchers and supplied meat to butcher shops. The second respondent was the official receiver at the relevant time. It was common ground that prior to 14th October, 1969, O'Gorman had supplied meat on credit to the two appellants who conducted in partnership two businesses, one at Parramatta and the other at Lidcombe. (at p97)
On 14th October, 1969, a company, Simon's Meats Pty. Ltd., ("the company") was incorporated and the two appellants were directors and shareholders of that company, the first appellant being chairman and managing director. Meat was supplied by the first respondent to the two businesses during the week ended 24th December, 1969, and the three weeks following and, on 10th March, 1970, the first respondent brought an action against the company in the District Court of New South Wales by way of a default summons claiming money payable for goods sold and delivered amounting to $2,078.98 and giving credit for $150. It is clear that the $150 was received by way of a cheque drawn by the company and bearing the name of Simon's Meats Pty. Ltd. dated 10th March, 1970. It appears that the company did not have funds to satisfy the judgment. About the time of the issue of the default summons correspondence took place between the solicitors for O'Gorman and the solicitor for the company. Four letters from O'Gorman's solicitors to the solicitor for the company are dated 6th, 18th and 23rd March, 1970, and 18th May, 1970. Each of these letters is headed "Re: Vincent J. O'Gorman Pty. Ltd. v. Simon's Meats Pty. Ltd." The first letter refers to several telephone conversations between the solicitors and contains a statement that: "Our client is adamant that we are to proceed to the issue of a summons herein." The second letter refers to the company's cheque for $150 and says: "We enclose herewith our trust receipt for same." It also continues: "A summons has been prepared and has been lodged with the District Court." The letter of 23rd March, 1970, refers to Mr. Simon being in contact with O'Gorman and concludes: "Should your client make default in the payments before mentioned we will not hesitate in seeking our client's instructions to proceed to the issuing of winding-up proceedings." In the letter of 18th May, 1970, reference is made to the judgment against the company, which is said to have been signed on 22nd April, 1970, and the letter conveys information that: "We were instructed to threaten it with winding up proceedings." This letter also contains certain threats of proceedings against Mr. Simon under ss. 303 and 304 of the Companies Act, 1961 (N.S.W.), and suggests that he might want "to reconsider this matter and make a greater effort than he obviously has made in attempting to satisfy the creditors of his company". There is also a letter of 19th May, 1970, from O'Gorman's solicitors to a firm of accountants which again refers to the possibility of proceedings being issued against Mr. Simon under ss. 303 and 304 of the Companies Act. It is interesting to note that s. 303 (3) at the relevant time dealt in substance with the case of an officer of a company who was knowingly a party to contracting a debt provable in the winding up, which the company, at the time the debt was contracted, had "no reasonable or probable ground of expectation" of being able to pay. It is also relevant to note that s. 304 dealt in substance with the responsibility of a person who was knowingly a party to carrying on of the business of a company where any business had been carried on with intent to defraud creditors of the company. These threats would have been quite extraordinary if O'Gorman had not thought that the company was the principal in the relevant transactions. (at p98)
O'Gorman then issued a second default summons on 11th September, 1970, out of the District Court against the two appellants claiming the same amount of $1,928.98 in respect of causes of actions which included one for money payable by the defendants to the plaintiff for goods sold and delivered by the plaintiff to the defendants. No particulars were given of the amount although it was said "particulars of which are within the knowledge of the defendants". (at p98)
Default judgment was signed against the two appellants on 8th November, 1971, for $1,871.88 and costs. It is not clear why the amount of the judgment differed from the amount claimed. It was common ground that both judgments were based upon the same transactions. Application was made on 17th November, 1972, to a judge of the District Court to have the second judgment set aside and the first appellant appeared in person upon that application. The application was refused. On 16th February, 1973, an application for a new trial was heard by another judge of the District Court but that application was also refused. A further application was heard by another judge of the District Court on 23rd March, 1973, who dismissed that application. An application to the Federal Court of Bankruptcy under s. 41 (7) of the Act was dismissed on 27th March, 1973. At all relevant times the first appellant claimed that the debt was that of the company. (at p98)
The first appellant relied on two arguments. The first was that in the relevant transactions the first appellant had authority to bind the company, he had the intention to do so, he disclosed the existence and name of the principal and credit was granted by O'Gorman to the company. The second argument was that, if the company were an undisclosed principal, then, at least after judgment was obtained against the company and whilst that judgment stood, it was not possible for O'Gorman to proceed against the appellants in relation to a debt which could only have arisen out of the same transaction as that in respect of which the judgment against the company still existed. (at p99)
There was evidence from Mr. Simon that he had handed a card showing his name as chairman and managing director of the company to Mr. O'Gorman the managing director of O'Gorman. Whilst Mr. O'Gorman did not deny this he indicated that he did not recall it. There was also some evidence from the first appellant that he had a conversation with Mr. O'Gorman at the end of October 1972 in which he said to Mr. O'Gorman: "I am no longer trading as a partnership but as a company proprietary limited and I am the managing director of the company, Simon's Meats Pty. Ltd." He also said Mr. O'Gorman took the card and said: "That is all right, so we know how we stand." Mr. O'Gorman, at least, did not concede that this conversation took place or that the card was handed to him by Mr. Simon. (at p99)
It is somewhat difficult to form any firm view who the learned trial judge thought was the more truthful or reliable witness but, in the view I take, this Court is not concerned to assess the truth or otherwise of any disputed issues because the ultimate result of this appeal depends on a question of law. (at p99)
There is nothing in the evidence from which the precise terms can be ascertained of the offer and acceptance which gave rise to the contract pursuant to which meat was apparently supplied and from which the alleged debt arose. I draw what seems to me to be the only reasonable inference, that at the relevant time, the first appellant had power to order meat as agent for the company. There was no contest, and there can be no real doubt, that in the relevant period the trading at the two businesses was being carried on by the company and not by the partnership. I consider that the company must have been either: 1. the undisclosed principal in relation to the transactions, or 2. the disclosed principal in relation to the transactions, or 3. not a party to the transactions. The main issue before this Court was whether, in relation to the supply of meat in the relevant period, there was a debt owing by the partnership to the respondent sufficient to satisfy the requirements of s. 52 of the Bankruptcy Act 1966 (Cth.) ("the Act"). The court, in the circumstances of this appeal, should exercise its power to look at what is behind the judgment upon which the bankruptcy notice was based rather than accept that judgment as satisfactory proof of the petitioning creditor's debt. See Wren v. Mahony (1972) 126 CLR 212, at p 224 (at p99)
When the proceedings were commenced against the company, and when judgment was obtained against it, the respondent apparently held one of two views, either that the original contracts were made with the company as a disclosed principal (in which case the appellants were not subject to any liability) or that the original contracts were made with the company by transactions entered into by one or other of the appellants as agent for the company, an undisclosed principal. There is no suggestion that the second appellant had any part in the making of any relevant contract and, therefore, if O'Gorman did not accept the fact that the company was the principal, and no agent had acted in the matter, it must have been proceeding upon the basis that the first appellant had entered into the transaction as the company's agent. At least by the time judgment was obtained against the company O'Gorman must have accepted one of these two alternatives. It is clear that, at the time when the action which gave rise to the judgment debt upon which the bankruptcy notice was founded was commenced against the appellants, a judgment existed against the principal, in this case the company, for a debt arising out of precisely the same transactions. (at p100)
It seems well established that a debt enforceable by action does not exist in these circumstances. In Buckingham v. Trotter (1901) 1 SR (NSW) 253 Darley C.J. in delivering judgment of the Full Court said: "The principle to be adduced from the authorities is that in the case of principal and agent the election to sue one or the other is not concluded until after final judgment has been obtained in the action against one or the other, but after obtaining this final judgment against the one so long as it remains on record, no action is maintainable against the other lest such second action bring about the inconvenient results alluded to by Lord Cairns in Kendall v. Hamilton (1879) 4 App Cas 504 " (1901) 1 SR (NSW), at p 261 . (at p100)
The passage I have just cited from Buckingham v. Trotter was cited with approval in the joint judgment of Dixon J. (as he then was) and Fullagar and Kitto JJ. in Petersen v. Moloney (1951) 84 CLR 91, at pp 103-104 . In considering the position of principal and agent the court said, citing from Morel Brothers and Co. Ltd. v. Earl of Westmorland (1903) 1 KB 64 : "In such a case a final election to treat either as liable would preclude the plaintiff from proceeding against the other, and it is a wellsettled general principle that, while the commencement of an action against one of two persons alternatively liable does not, the entry of judgment against one of them does, constitute a final and irrevocable election" (1951) 84 CLR, at p 102 . The court, before citing the passage set out above from Buckingham v. Trotter, expressed the view that where an action has proceeded to judgment the relevant principle is that:

"There must not be more than one judgment where there is only one

antecedent obligation"

(1951) 84 CLR, at p 103

. (at p101)

The same approach was taken in Clarkson Booker Ltd. v. Andjel (1964) 2 QB 775 where Willmer L.J., with whose judgment Davies L.J. concurred, said in relation to a case where a contract had been made by an agent as agent for an undisclosed principal that if judgment had been obtained against the principal the plaintiffs would, of course, have been precluded from subsequently taking proceedings against the agent for their cause of action would have been merged in the judgment obtained against the principal. Russell L.J. said: ". . . if judgment is obtained against either principal or agent, this is more than election, though frequently referred to as election: the judgment supersedes the contractual right against either, and if obtained against the agent precludes action against the principal even if the plaintiff was ignorant of his existence and therefore unable to elect" (1964) 2 QB, at p 795 . The same principle is set out in Bowstead on Agency (14th ed.), p. 372, where London General Omnibus Company Ltd. v. Pope (1922) 38 TLR 270 is cited, and it is said: "The liability of an agent on any contract made by him on behalf of his principal is discharged by the obtaining of judgment against the principal." (at p101)
The application of the principle just considered makes it unnecessary to discuss whether any election sufficient to bar proceedings had been made before judgment (see generally Clarkson Booker Ltd. v. Andjel). (at p101)
I was concerned with the lapse of time which had taken place since the appeal was filed. However, apart from the question of possible lack of funds, nothing is before us to show why the appeal had not been disposed of earlier and it was not submitted that the granting of the appeal would cause any prejudice. (at p101)
Although at the suggestion of this Court an affidavit was filed by the first appellant setting out the events which have happened since the sequestration order, the paragraphs of that affidavit relating to that period were not read to the court, nor did any party seek to place evidence relating to that period before the court. In the result there is no evidence before us concerning the position in relation to the estates of the appellants since the sequestration order was made. It was submitted on behalf of the official receiver, who was joined by the appellants as a party to the appeal, that it may be that the official receiver would in some way be prejudiced but no details of that prejudice was before us in evidence. The position of the official receiver was considered by Clyne J. in Re Bett (1949) 14 ABC 199 . (at p101)

Counsel for the official receiver cited a judgment of Gibbs J. in Re Deriu (1970) 16 FLR 420 in which it was said that in circumstances where a sequestration order ought not to have been made because the debtor was not indebted to the petitioning creditor, the proper way of getting rid of the sequestration order was to annul it under s. 154 of the Act. However, in that case his Honour was considering an application for rescission under s. 37 of the Act and not an appeal from the making of a sequestration order. In all the circumstances I consider that if we decide that the sequestration order was wrongly made we should uphold the appeal in such a way as to avoid the consequences and stigma of bankruptcy attaching to the appellants and possibly affecting the rights of any other creditors. The order which was made by the High Court in Wren v. Mahony was: "Appeal allowed with costs. Order of the Court of Bankruptcy set aside and in lieu thereof order that the petition be dismissed with costs" (1972) 126 CLR, at p 238 . A similar order was made by the Full Court of this Court in Re Schierholter; Ex parte Geis (1978) 32 FLR 22 . Both appellants appealed by filing the one notice of appeal, but there is evidence before us that, although the solicitors still remain on the record for both appellants, the second appellant does not wish to pursue the appeal. Since the order made by the trial judge was that the court "hereby makes a sequestration order against the estate of the debtors", it is appropriate to make an order that the appeal be allowed. (at p102)
I would order that the appeal be allowed and that the sequestration order of the Federal Court of Bankruptcy be set aside and in lieu thereof order that the petition be dismissed and that the first respondent pay the costs, including any reserved costs, of the appellants of the proceedings before the trial judge, of the proceedings in the High Court and of the appeal to this Court. (at p102)

JUDGE2

FISHER J. In this matter I have had the advantage of reading in draft form the reasons of each of my brothers Franki and Lockhart. I agree that the appeal should be allowed and I agree generally with their reasons for arriving at this conclusion. Moreover I would adopt the statement of relevant facts set out by Lockhart J. and his reasons for dismissing the first ground of appeal. (at p102)

In respect of the second ground of appeal, I would for my part prefer to base my conclusions solely on the fact that at the relevant time a good defence was available, namely the plea of judgment recovered. In consequence of this defence judgment should not have been entered against the appellants for the debt upon which the relevant bankruptcy notice was founded. In these circumstances it is not necessary to rely upon the common law doctrine of election except in the sense that the creditor had a choice of which party to pursue to judgment. (at p102)
This defence of judgment recovered is stated in Bullen, Leake and Jacob Precedents of Pleadings (12th ed.) as follows at p. 1145: "A judgment recovered by the plaintiff in an action in an English court of record merges the original cause of action and affords a good defence to a second action for the same cause." At p. 1149 a passage appears which has particular application to the circumstances of this matter: "One who has a claim which he may enforce at his election against either of two different persons may, by suing one of them to judgment, determine his election and prevent himself from afterwards suing the other of them in respect of the same claim." (at p103)
The respondent Vincent J. O'Gorman Pty. Ltd. ("the creditor") entered judgment in the earlier proceedings against Simon's Meats Pty. Ltd. ("the company"), in circumstances where there was but one cause of action, albeit enforceable in the alternative against the company or the appellants. This entry of judgment, in my opinion, in the circumstances concludes the matter. It is therefore unnecessary to speculate whether the appellant Otto Simon ("Otto Simon") contracted on his own behalf (or on behalf of the partnership of his wife and himself) or as agent for a principal whether disclosed or undisclosed. I am also not obliged to consider the challenges to the findings of the trial judge or matters crucial to the question of election, namely whether the creditor became aware of the relationship between Otto Simon and the company, and if so when, and whether it had sufficient knowledge of the relevant facts when it "elected" to sue the company in the first instance. It suffices for the reasons that follow that there was one obligation which produced only one cause of action, and the creditor, having obtained judgment on that cause of action against the company, could not enter judgment on the same cause of action against the appellants. This is an application of the maxim "causa transit in rem judicatam" in circumstances where the debt merges in and is extinguished by the judgment. (at p103)
The first extract from Bullen, Leake and Jacob sets out the law as applicable in English courts. The following principles are in my opinion supported by authority: There shall not be more than one judgment on one entire debt, the cause of action in respect of which has merged in the judgment: Hammond v. Schofield (1891) 1 QB 453, at p 457 ; Moore v. Flanagan (1920) 1 KB 919, at pp 925-926 ; Clarkson Booker Ltd. v. Andjel (1964) 2 QB, at pp 788-789, 795 . The law does not countenance the co-existence of two judgments in respect of the same debt or cause of action: Kendall v. Hamilton (1879) 4 App Cas, at p 515 . In a principal and agent situation, a final judgment obtained against the agent, whilst it remains on foot prevents the third party from suing the principal even though he was unaware of the principal at the time of judgment, and the judgment remains unsatisfied: Kendall v. Hamilton (1879) 4 App Cas, at p 514 . The consequences are the same if the undisclosed principal is sued in the first instance: London General Omnibus Company Ltd. v. Pope (1922) 38 TLR 270 . (at p104)
This is also the law in Australia as was established by the High Court in Petersen v. Moloney (1951) 84 CLR 91 per Dixon J. (as he then was) and Fullagar and Kitto JJ., who after referring to Morel Brothers and Co. Ltd. v. Earl of Westmorland (1903) 1 KB 64 and Moore v. Flanagan (1920) 1 KB 919 said: "In each of those cases the plaintiff had obtained judgment against one of two defendants, of whom one but not both might have been liable, and then, without setting aside or seeking to set aside that judgment, had sought judgment against the other. This offended against the rule stated by Atkin L.J. (as he then was) in Moore v. Flanagan that 'a plaintiff cannot sue an agent to judgment and then sue the principal' (1920) 1 KB, at p 928 . The plaintiff in this case is not offending against that rule. It is to be noted that, although the rule is often stated in terms which would seem to make it depend on election, Vaughan Williams J. (as he then was) in Hammond v. Schofield (1891) 1 QB 453 said: 'The basis of this defence is not the election or unconscious election, if there can be such a thing, of the plaintiff, but the right of the cocontractor when sued in a second action on the same contract to insist, though not a party to the first action, on the rule that there shall not be more than one judgment on one entire contract' (1891) 1 QB, at p 457 . This passage is quoted by Scrutton L.J. in Moore v. Flanagan. Moore v. Flanagan was not, and this case is not, a case of 'cocontractors', but the same rule is applicable and it must rest on the same basis. There must not be more than one judgment where there is only one antecedent obligation. What Vaughan Williams J., said in Hammond v. Schofield seems to be in accord with what Lord Cairns said in Kendall v. Hamilton (1879) 4 App Cas 504 . In Buckingham v. Trotter (1901) 1 SR (NSW), at p 261 Darley C.J., speaking for the Full Court, said: 'The principle to be deduced from the authorities is that, in the case of principal and agent, the election to sue one or the other is not concluded until after final judgment has been obtained against the one or the other, but, after obtaining this final judgment against the one, so long as it remains of record, no action is maintainable against the other, lest such second action brings about the inconvenient results alluded to by Lord Cairns in Kendall v. Hamilton'" (1951) 84 CLR, at pp 103-104 . (at p104)
The crux of this statement of the law appears to be that when there is but one cause of action arising out of one antecedent obligation, there can be but one judgment. Thus in circumstances where a third party has the right to pursue a cause of action in the alternative against a number of persons, judgment against one extinguished the cause of action. It is otherwise, of course, if a number of remedies are available arising out of the one antecedent obligation, in that different remedies may be available against different parties. The crucial fact is that even though a number of rights may accrue in favour of the third party, such rights are alternative and not cumulative where there is only one cause of action, and the pursuit of one to judgment exhausts the remedy. It therefore becomes necessary to be satisfied on the facts of this matter of the nature of the rights which the creditor had to enforce its claim to recover the cost of the goods sold by it. Its rights against the appellants and the company may be joint, joint and several or alternative. (at p105)
The trial judge found that the creditor entered into only one contract, (or perhaps more correctly a series of contracts each in respect of the sale of a parcel of meat) but with only one person, namely the appellant Otto Simon. There was but one obligation, namely the obligation of Otto Simon or the partnership to pay for each parcel of meat. The creditor was entitled to think that it had made a contract with that appellant, and only that appellant. Upon Otto Simon failing to pay the agreed price, the creditor had one cause of action and one remedy, namely to claim against Otto Simon the cost of the goods sold. Ultimately however the creditor became aware, in consequence of receipt of the company's cheques, of its existence, and doubtless suspected that for some reason it was obliged to pay, and was paying, the debts of the partnership. The most obvious explanation probably was that the company had had the benefit of the purchases, the same having been made on its behalf by the appellant Otto Simon. The creditor then "elected" to sue the company on the cause of action arising out of its dealings with Otto Simon, although it had not had any dealings with the company from which a direct obligation could arise. (at p105)
The trial judge found that these proceedings were brought under a misapprehension and in ignorance of the actual contractual relationship that existed. However, a judgment having been obtained, these findings are nothing to the point. They may have relevance on an application to set aside the judgment. Moreover if the creditor was or should have been aware of the existence of the company at the time of the contracts of sale this factor does nothing but strengthen the case against the creditor. I proceed however on the basis of accepting the trial judge's findings. (at p105)
The crucial matter is that there was but one obligation and one cause of action in respect of which there was a judgment. The company in correspondence and otherwise did not dispute the creditor's right to enforce this obligation against it. However, the obligation remained the original obligation which arose in consequence of the dealings between the company and Otto Simon. It was neither an additional obligation nor a new cause of action. The creditor had reason to believe that it had an additional right of enforcement of that obligation and cause of action and it acted on this belief. The attitude of the company confirmed that this belief was correct. But no new obligation arose from this additional right of enforcement and the creditor was only entitled to enforce the original obligation, albeit against a new party. Once enforced to the stage of judgment, the obligation would as a matter of law merge in the judgment. No additional cause of action could accrue in the circumstances in favour of the creditor. (at p106)
In the present matter it was conceded, and in my opinion correctly conceded, that the goods the subject of the second summons against the appellants, were the same goods the price of which was claimed in the first summons against the company. There were additional causes of action pleaded as against the appellants, namely for money lent and on accounts stated, but these claims were acknowledged to be without foundation and can be ignored. It follows that even accepting all the trial judge's findings the cause of action for the price of the goods having merged into the judgment against the company and consequently having ceased to exist, there is during the subsistence of the judgment, no cause of action available to the creditor upon which to sue the appellants. It might be otherwise if the creditor succeeded in having this first judgment set aside. (at p106)
On the other hand it was strongly argued that the proper finding was that the male appellant entered into the contracts as agent for an undisclosed principal, the company. In this case without doubt the right against the company was in the alternative: Kendall v. Hamilton (1879) 4 App Cas 504 and London General Omnibus Company Ltd. v. Pope (1922) 38 TLR 270 . The creditor accepted this situation and the apparent benefits thereof when it sued the company. Alternatively, the creditor may have believed that for some reason it had an additional right in respect of its existing cause of action, namely to sue the company on the obligation entered into by Otto Simon. In neither instance did it acquire or could it acquire an additional cause of action. In each case the right to sue the company was an alternative right, and there was no joint or joint and several liability on the part of the appellants and the company. (at p106)
In the circumstances the creditor was not entitled to enter the judgment against the appellants and the judgment thus obtained does not provide a sound basis for the relevant bankruptcy notice. It follows that a sequestration order should not have been made. (at p106)
The appeal must therefore be allowed and the sequestration order set aside. In lieu thereof the order should be that the petition be dismissed and that the first respondent pay the costs, including any reserved costs, of the appellants of the proceedings before the trial judge, and the High Court and of the appeal to this Court. I would make no order for the costs of the second respondent. (at p107)

JUDGE3

LOCKHART J. This is an appeal from an order of the Federal Court of Bankruptcy (Riley J.) made on 14th December, 1973, sequestrating the estates of Otto Simon and Kathy Eva Simon ("the appellants"). The act of bankruptcy was the failure of the appellants to comply with the requirements of a bankruptcy notice dated 9th January, 1973, and served on them on 7th February, 1973. The bankruptcy notice was based on a final judgment obtained by the petitioning creditor, Vincent J. O'Gorman Pty. Ltd. ("the first respondent"), against the appellants in the District Court of the Metropolitan District at Sydney on 8th November, 1971, in the sum of $1,871.88 for debt and costs to be taxed. There is no evidence before us as to whether those costs had been taxed when the bankruptcy notice was issued. The appellants take no point that this affects the validity of the bankruptcy notice. (at p107)

The appellants assert that they were never indebted to the first respondent for the judgment debt on the ground that, although there was a debt due to the first respondent for goods sold and delivered, it was owed by a company controlled by the appellants known as Simon's Meats Pty. Ltd. ("the company"). This issue was heard by Riley J. in 1973 and his Honour held that it was the appellants who were the debtors of the first respondent. The appellants contend before this Court that his Honour was in error in reaching that conclusion. (at p107)
Alternatively, they contend that as the first respondent sued the company and obtained a final judgment against it before it sued the appellants and obtained the final judgment against them which founded the bankruptcy notice in this case, both actions being for the recovery of the price of the same goods, the first respondent is barred from suing the appellants; and in those circumstances no sequestration order ought to have been made. (at p107)
Before turning to these questions, I will deal with a preliminary question raised by the respondents. They contend that the appeal is misconceived on the ground that no appeal lies from the making of a sequestration order, the person made bankrupt being confined to making an application to the court for annulment of or discharge from his bankruptcy. (at p107)
The argument is said to be based on the decision of Gibbs J. in Re Deriu (1970) 16 FLR 420 where a bankrupt applied for an order under s. 37 of the Bankruptcy Act 1966 (Cth.) ("the Act") to rescind a sequestration order made against him, upon a creditor's petition, on the ground of his failure to comply with a bankruptcy notice. (at p108)
Section 37 provides: "The Court may rescind, vary or discharge an order made by it under this Act or suspend the operation of such an order." (at p108)
The bankrupt alleged that he was never indebted to the petitioning creditor. Gibbs J. held that the court had jurisdiction to go behind the default judgment in the District Court on hearing the application for rescission under s. 37, and to inquire whether it was founded on a real debt. He held that the judgment was not founded on a real debt and that the petitioning creditor had not been entitled to a sequestration order. Section 154 (1) of the Act provides that where a court is satisfied, inter alia, that a sequestration order ought not to have been made, the court may make an order annulling the bankruptcy. His Honour held that he was satisfied that the sequestration order ought not to have been made and annulled the bankruptcy. He said that the rescission of a sequestration order does not put an end to the bankruptcy and relied for that conclusion on the reasons for judgment of Williams J. in Cameron v. Cole (1944) 68 CLR 571, at p 610 and the terms of s. 43 (2) of the Act which provide:

"(2) Upon the making of a sequestration order against the

estate of a debtor, the debtor becomes a bankrupt, and continues

to be a bankrupt until -

(a) he is discharged by force of section 149 of this Act;

(b) he is discharged by order of the Court; or

(c) the sequestration order is annulled." (at p108)

His Honour was considering a different question to the one before us. His Honour did not say that there was no power in the court to rescind a sequestration order under s. 37; but rather that, in the circumstances of the case before him, as the rescission of the sequestration order would not put an end to the bankruptcy, "the proper way of getting rid of the sequestration order is by annulling it under s. 154". (at p108)
The question before us is quite different namely, whether this Court, on hearing an appeal against the making of a sequestration order, can uphold the appeal. There is nothing in his Honour's reasons for judgment in Re Deriu (1970) 16 FLR 420 which bears on this question. (at p108)
Where an order has been correctly made in the first instance and a party seeks to introduce evidence of events that have subsequently happened which would justify the court in making an order for rescission of the original order, generally the proper course is to apply for an order for rescission under s. 37; but if the order had been wrongly made in the first instance the usual course of appealing against it should be followed: see Re Norris; Ex parte Norris (1890) 7 Mor 8, at p 10 and Re Edgar; Ex parte Davidson and Michael Hunt's Health Club Pty. Ltd. (1973) 2 ALR 649 . (at p109)

The original order which is the subject of the application for rescission, variation, discharge or suspension under s. 37 should be taken out before the court hears an application under s. 37: see Re McDonald (1893) 14 LR (NSW) B & P 11 . (at p109)
These cases demonstrate the fundamental distinction between the rescission of an order under the express statutory power conferred by s. 37 and orders made on an appeal from the original order. (at p109)
The distinction is further emphasized by s. 39 (2) (a) of the Act which, at the time the appeal was instituted in the present case, expressly provided for an appeal to the High Court "from a sequestration order made by the court". Sections 38 and 39 of the Act were repealed by the Bankruptcy Amendment Act 1976, which commenced on 1st February, 1977, and substituted a new s. 38 vesting this Court with jurisdiction to determine appeals in bankruptcy matters: see also Cameron v. Cole per Williams J. (1944) 68 CLR, at p 604 and Bear v. Official Receiver (1941) 65 CLR 307 . (at p109)
In my opinion an appeal lies from the making of a sequestration order by the Federal Court of Bankruptcy in this case. (at p109)
In Wren v. Mahony (1972) 126 CLR 212 the High Court ordered that an appeal by the bankrupt against the making of a sequestration order be allowed, that the order of the Federal Court of Bankruptcy be set aside and in lieu thereof that the petition be dismissed. The Full Bench of this Court made an order to the same effect in Re Schierholter; Ex parte Geis (1978) 32 FLR 22 . These decisions confirm the view I have reached notwithstanding that the point asserted by the respondents does not appear to have been argued in either case. (at p109)
It was contended by the respondents that the appeal ought to be dismissed in the discretion of the court as more than five years have passed since the making of the sequestration order and, in the meantime, the debtors' property has been under the control of the second respondent, as the trustee of their estates. (at p109)
Certainly the case is unusual. The sequestration order was made on 14th December, 1973, and it is now 1979. An appeal was lodged from the making of the sequestration order to the High Court of Australia on 4th January, 1974. An affidavit was filed on behalf of the appellants in the Federal Court of Bankruptcy apparently in support of some application to stay the proceedings on the sequestration order pending the resolution of the appeal to the High Court. That affidavit was sworn by the male appellant on 6th February, 1975. We do not know the fate of any application for stay except that no stay was ordered. On 5th April, 1979, the High Court referred the appeal to this Court pursuant to s. 44 of the Judiciary Act (Cth.). (at p110)
The evidence does not enable us to say why the appellants took no steps to prosecute their appeal to the High Court between 1973 and 1979, except that there is some suggestion on the evidence that they lacked the financial means to prosecute the appeal. (at p110)
Unusual though it may be for an appeal to remain on foot without being prosecuted for some five years, it is not for the respondents to complain as they did not take any steps to have the appeal dismissed for want of prosecution, as they could have done. (at p110)
We asked the respondents if they wished to apply to tender any evidence of prejudice that may be suffered by them if the appeal were to be allowed; but no such application was made; nor was any submission made that any prejudice would be sustained. (at p110)
For these reasons I am satisfied that the appeal is competent and ought to be determined on its merits. (at p110)
The appellants contend that the debt was due by the company, not by the appellants themselves. (at p110)
The Federal Court of Bankruptcy, and later this Court, has jurisdiction upon the hearing of a petition to go behind a judgment and inquire whether it was founded on a real debt: see Corney v. Brien (1951) 84 CLR 343 and Wren v. Mahony (1972) 126 CLR 212 . (at p110)
The jurisdiction arises because s. 52 (1) of the Act requires that, at the hearing of a creditor's petition, the court shall require proof, inter alia, of the fact that the debt or debts on which the petitioning creditor relies is or are still owing. Sir Garfield Barwick referred in Wren v. Mahony to: "the dominant place the mandatory words of s. 52 (1) occupy in relation to the making of a sequestration order and that the resolution of the question whether or not the proof of the petitioning creditor's debt is satisfactory does not concern only the immediate parties to the petition" (1972) 126 CLR, at p 223 . (at p110)
The basis and rationale of the jurisdiction is clearly expressed by Lord Esher in Re Hawkins; Ex parte Troup (1895) 1 QB 404 in these words: "We have said that the Court will go behind the judgment, and I think the cases shew that the Court will go behind a judgment by consent. I am also of opinion that a judgment obtained by a compromise does not of itself stop the Court from going behind it. We have tried to say that the Court will go into the whole transaction, because the question is not one of a dispute between the two parties; it is a matter which will affect, and materially affect, the rights of all the creditors who are not before the Court when it has to determine whether a receiving order should or should not be made, which will or may result in the debtor being made a bankrupt. The Court will go into the whole matter, and see whether upon the whole it is fair to the whole body of creditors that the man, on the particular transaction between himself and the petitioning creditor, should have a receiving order made against him. In the same way, when a creditor comes to prove in bankruptcy the Court will go behind the judgment, and inquire into the whole transaction which preceded it. To make a man a bankrupt is obviously a strong interference with the rights of the general body of his creditors. Each creditor is materially affected to the extent that he cannot by his own diligence get the whole of his debt. From the moment of bankruptcy, though he be the most diligent of the creditors, he has to go into equal competition with the most idle" (1895) 1 QB, at pp 408-409 . (at p111)
The circumstances in which the court will inquire into the validity of a judgment debt are not closed; but it is clear that the court will not inquire as a matter of course into that question: see Re Flatau; Ex parte Scotch Whisky Distillers Ltd. (1888) 22 QBD 83 ; Re Hawkins; Ex parte Troup (1895) 1 QB 404 ; Re Morris (1871) 2 VR (IE & M) 2 ; Re Monks (1886) 12 VLR 712 ; Re Cole; Trustee in Bankruptcy v. Public Trustee (1931) 2 Ch 174 ; Wren v. Mahony (1972) 126 CLR 212 . (at p111)
Circumstances tending to show fraud, collusion or miscarriage of justice or that a compromise was not a fair and reasonable one are the most frequent examples of the exercise by the court of this jurisdiction: see Corney v. Brien (1951) 84 CLR 343 ; Re Meiklejohn; Ex parte Barnard (1961) Qd R 70 . (at p111)
The courts are reluctant to exercise this jurisdiction where the judgment was entered after a full investigation of the issues at a trial where both parties appeared and had ample opportunity to put their case to the court; see Corney v. Brien; Re Vojnovski; Ex parte Malcolm (1970) ALR 355 ; Wren v. Mahony. (at p111)
In the present case Riley J. allowed the appellants to fully explore whether the judgment was founded on a real debt. Evidence was led by the appellants and by the first respondent, each of whom was represented by counsel. It was contended on behalf of the first respondent before this Court that the inquiry, whether the judgment was founded on a real debt, ought not to have been conducted as there was no suggestion here of fraud or collusion and the appellants had ample opportunity in the District Court to apply to set aside the judgment. (at p111)
The judgment was signed on 8th November, 1971. Application was made by the appellants on 17th November, 1972, to set aside that judgment, the application being heard by his Honour Judge Leslie of the District Court. His Honour referred to the fact that the judgment was entered after a hearing at Penrith District Court on 8th November, 1971. The male appellant appeared in person before his Honour that day and either made submissions or gave evidence or both. His Honour held that the male appellant was guilty of delay in applying to set aside the judgment and that, although the defence that the true debtor was the company, not the appellants themselves, was one which "in strict terms . . . may be a defence if it is made out" nevertheless was not one which was "very meritorious". His Honour dismissed the application. (at p112)
On 16th February, 1973, the appellants applied to the District Court (Godfrey-Smith J.) for a new trial. The appellants were present, evidence was called and his Honour held that there had been no evidence placed before him which would in any way alter the position arrived at by Judge Leslie. (at p112)
Another application for a new trial was made by the appellants. This time it was heard by Judge Loveday on 23rd March, 1973, and was dismissed by his Honour. (at p112)
Shortly after service upon the appellants of the bankruptcy notice, and before they had committed an act of bankruptcy, it seems they filed an affidavit to the effect that they had a counterclaim, set-off, or cross demand of the kind referred to in ss. 40 (1) (g) and 41 (7) of the Act. The Federal Court of Bankruptcy (C.A. Sweeney J.) treated the matter on 27th March, 1973, as an application by the appellants under s. 41 (7) of the Act, the first respondent being represented by counsel, but there being no appearance by or on behalf of the appellants. His Honour dismissed the application. (at p112)
On 21st November, 1973, the appellants filed in the Registry of the Federal Court of Bankruptcy a notice of intention to oppose the petition presented by the first respondent on the ground that: "there is no money payable by Otto Simon and Kathy Eva Simon to the petitioner and no goods were sold and delivered by the petitioner to Otto Simon and Kathy Eva Simon and that the amount claimed in the said petition is a debt owed by Simon's Meats Pty. Ltd., a company incorporated in New South Wales on 14th October, 1969". (at p112)
The petition came into the list on a number of occasions and was fully heard by Riley J. who found against the appellants and made a sequestration order against their estates. (at p112)
In my opinion Riley J. was entitled to determine the question whether the appellants were in truth indebted to the first respondent for the reasons given by the High Court in Corney v. Brien (1951) 84 CLR 343 and Wren v. Mahony (1972) 126 CLR 212 . (at p112)
I turn to the facts relating to the question whether it was the appellants or the company who were indebted to the first respondent. (at p112)
The appellants carried on a butchery and smallgoods business in partnership from two premises, one at Parramatta the other at Lidcombe, the former under the name of O. and K. Simon (but sometimes as Continental Butchery, being the name of the business as it was when they took it over) the latter as A.W.A. Butchery and Smallgoods. (at p113)
The company was incorporated on 14th October, 1969. At all material times it had a paid-up capital of $3, one share held by Mr. Simon another by Mrs. Simon and the third by their daughter. The appellants were directors of the company. Although the evidence is not very full, it seems that the company took over the partnership business conducted at both premises. Mr. Simon gave evidence that the partnership ceased to trade at or about the time of the takeover. (at p113)
The debt due to the first respondent was for meat or smallgoods purchased from it and delivered to the Parramatta shop during the period December 1969 to January 1970 for a value of $626.53 and during the same period to the Lidcombe shop to the value of $1,452.45, a total of $2,078.98. There was evidence before his Honour that the company made payments to the first respondent over the period December 1969 to March 1970, those payments being accepted by the petitioning creditor in reduction of what it claimed to be the indebtedness of the appellants and what the appellants claimed to be the indebtedness of the company. (at p113)
Mr. Simon gave evidence before his Honour that on a Monday morning at the end of October 1969, he spoke to Mr. Vincent O'Gorman, the managing director of the first respondent at premises known as the Country Hall at Homebush, and took with him some business cards, a specimen of which is in evidence, and describes Mr. Simon as chairman and managing director of the company and contains the addresses and telephone numbers of the Parramatta and Lidcombe premises. He said that he told Mr. O'Gorman that the partnership of his wife and himself was no longer carrying on business; but that the business was now carried on by the company which his wife and he had formed and of which he was the managing director. He said that Mr. O'Gorman was content to do business with the company. (at p113)
Mr. O'Gorman gave evidence. He did not specifically deny that the conversation took place or that, if it did, it was in the terms alleged by Mr. Simon; but he said that he did not think he had been given the business card. He said elsewhere in his evidence that at no stage until the commencement of legal proceedings was he aware that there had ever been a connexion between the company and the first respondent. (at p113)
Mr. Simon said that when the partnership was conducting the business it periodically received delivery dockets from the first respondent in one or other of the trading names used by the partnership; and that, after the company was incorporated and carried on business, the dockets were received in the company's name; yet he could produce none. (at p114)
Mr. Simon said that he told Mr. Peter Boyden, the sales manager of the first respondent, on the same day that he spoke to Mr. O'Gorman at the Country Hall at Homebush, and gave him a business card also and told him that the company would be trading in future. (at p114)
Mr. Boyden swore an affidavit in which he said, amongst other things, that since the beginning of 1968 he had never had any conversation with either of the appellants or anyone else acting on their behalf relating to the granting of any credit, and that he dealt with Mr. Simon in relation to various purchases of meat on a credit basis, but this was pursuant to a weekly credit arrangement already entered into by Mr. Simon and authorized by Mr. O'Gorman on behalf of the first respondent. Mr. Boyden was not called to give oral evidence at the hearing, apparently due to some arrangement between the parties that he need not attend for cross-examination as he was away at country sales. (at p114)
Accordingly, the conversation to which Mr. Simon deposed as having occurred between himself and Mr. Boyden was not denied by Mr. Boyden, the evidence of Mr. Simon having been given in the course of his cross-examination. (at p114)
At one stage during his cross-examination Mr. Simon said that on the first occasion he saw Mr. O'Gorman, at a time when the business was conducted, on any view of the evidence, by the partnership of himself and his wife, his understanding of the matter was that he personally was being granted credit by the first respondent. He said in cross-examination that he acted on that credit ever since. (at p114)
His Honour held that there was no contractual relationship established between the first respondent and the company. His Honour accepted that part of Mr. Simon's evidence which I have just referred to about the granting of credit. He said that there was in his opinion a contractual relationship between the first respondent and the appellants. (at p114)
His Honour's reasons for judgment are brief. He said nothing as to the credit of any witness; but to reach the conclusion he did, he must have accepted Mr. O'Gorman as a truthful witness and rejected Mr. Simon on critical matters. The particular passage from the evidence of Mr. Simon as to the extension of credit which was in terms adopted by his Honour was, of course, against Mr. Simon's own interest and could not constitute a general acceptance by his Honour of the credibility and reliability of Mr. Simon. (at p114)
I have not set out all the relevant evidence bearing on the question of the identity of the party contracting with the first respondent; but there was ample evidence before his Honour to found the conclusion that the contract was with the appellants, given the rejection of the evidence of Mr. Simon, which I have mentioned earlier. (at p115)
There was evidence of a course of trading by Mr. Simon, as the representative of himself and his wife in partnership, with the first respondents and the granting of credit to them and the continuance of that relationship covering also the period of the company's existence notwithstanding that cheques drawn by the company in reduction of the account with the first respondent were accepted by it from time to time over the period December 1969 to March 1970. That fact is not in itself inconsistent with the case of the first respondent. (at p115)
In my opinion the evidence of Mr. O'Gorman, when read as a whole, amounts to a denial of any conversation with Mr. Simon when the existence of the company and the question of the company taking over the business previously conducted by the partnership was brought to his attention. Mr. O'Gorman's evidence is in substance that at all times the dealings of the first respondent were with the appellants and not with the company. (at p115)
His Honour had the advantage of seeing and hearing the witnesses who gave evidence before him. In my opinion, no ground has been established for interfering with his Honour's decision, the case depending essentially upon questions of credibility. (at p115)
However, where the matters that fall for determination depend on inferences to be drawn from facts which have been found and are no longer in contest or facts that are agreed or otherwise not in dispute, an appellate court is in as good a position as the trial judge to decide on the proper inferences to be drawn from those facts; but giving respect and weight to the conclusion of the trial judge: see Warren v. Coombes (1979) 53 ALJR 293 and the cases cited therein. (at p115)
We were asked to infer from the fact that cheques were drawn and paid by the company on its account and received by the first respondent over the period December 1969 to March 1970 that the first respondent must be treated as recognizing the company as the contracting party. As I have said already those facts are not inconsistent with the case for the first respondent, namely that the proper contracting parties were the appellants. It is not uncommon in business for payments to be made by persons other than those with whom the relevant contract has been made. (at p115)
I turn to the second question, being the question primarily relied on by the appellants, namely that, on the assumption that the first question is answered against them so that the proper contracting party is taken to be the appellants themselves, nevertheless they in fact contracted, as agents for the company, the company being an undisclosed principal in the sense of a principal whose existence is undisclosed, rather than one whose existence is known to the other party but whose identity is not disclosed. The appellants contended that by issuing the default summons out of the District Court against the company and prosecuting it to judgment, the first respondent is barred from suing the appellants. The appellants' case is put in the alternative. First, it is said that these acts constitute an unequivocal act of election by the first respondent barring it from proceeding against the appellants. Alternatively, it is said that the same acts gave rise to one cause of action which the first respondent could have pursued against the company or the appellants; but, on recovering judgment against the company, the cause of action was extinguished. I turn first to the argument based on the doctrine of election. (at p116)

The principles relating to the doctrine of election are expounded by Stephen J. in Sargent v. A.S.L. Developments Ltd. (1974) 131 CLR 634, at pp 641-648 . (at p116)
For the doctrine of election to operate, there must be both some element of knowledge on the part of the "elector" and words or conduct sufficient to constitute the making of an election as between the two inconsistent rights which he possesses: see Craine v. Colonial Mutual Fire Insurance Co. Ltd. (1920) 28 CLR 305, at p 326 ; United Australia Ltd. v. Barclays Bank Ltd. per Lord Atkin (1941) AC 1, at pp 30-31 . (at p116)
There is a division of opinion as to the nature of the knowledge which the elector must possess, and the time at which he must possess it, for the doctrine to operate. The authorities have been reluctant to regard the issue of the writ as the relevant time, and generally treat the relevant time as being the signing of judgment. (at p116)
The first respondent contracted with the appellants, not the company; but it was the company's cheques that were accepted by the first respondent in reduction of the indebtedness of the appellants over the period December 1969 to March 1970. Although the first respondent did not contract with the company, there can be no doubt that by the time the first respondent's solicitors issued the default summons against the company on 10th March, 1970, they did so deliberately asserting a claim that the contracting party was the company. The cause of action expressed in the default summons was the common money count for goods sold and delivered. A credit of $150 was given to the company in the default summons, that credit representing a cheque drawn by the company on its account and paid from that account. Judgment was signed against the company on 22nd April, 1970. (at p116)
The instructions for the issue of the default summons were given to the first respondent's solicitors by a Miss Grace, a senior clerk employed by the first respondent. She was uncertain as to who should be sued. The first respondent's solicitor suggested to her that she see who paid the accounts most recently, and her inquiries revealed that this was the company. The summons was then issued against the company. Before this, the solicitor had discussed the question of liability with Mr. O'Gorman and Miss Grace. (at p117)
After the issue of the summons there were discussions between the solicitors for the first respondent and the solicitors for the company to resolve the dispute, including discussions as to the possibility of the company executing a charge in favour of the first respondent to secure the indebtedness. (at p117)
On 23rd March, 1970, after the issue of the summons, but before judgment was signed against the company, the first respondent's solicitors wrote to the company's solicotors setting out what, on their instructions, were the terms of an agreement reached between Mr. Simon on behalf of the company and someone on behalf of the first respondent. In this letter, the solicitors for the first respondent stated: "Further to our letter of 18th March, 1970, we have to advise that the summons herein was served upon your client on 17th March, 1970. It appears that your client reacted immediately, as Mr. Simon contacted our client on the following day. On this occasion the parties discussed the debt herein and came to some agreement as to the manner in which the debt will be repaid. (at p117)
"It was agreed between the parties that: 1. The defendant pay our client through this office a sum of $150 monthly. Payments are to be made on or before the 19th of each and every month until the debt is satisfied. 2. The defendant will pay a sum of $500 into this office in the course of the next month, apart from the payment mentioned in par. 1. above, a sum of $500. 3. The defendant will pay eight per cent flat interest per annum upon the debt herein from the date the debt arose till the date that same is satisfied. Interest will be calculated from 16th January, 1970. (at p117)
"It is our intention to proceed to signing judgment when the time arises. Your client will, of course, be responsible for our costs and disbursements in this matter. Should your client make default in the payments before mentioned we will not hesitate in seeking our client's instructions to proceed to the issuing of winding-up proceedings. This should be made perfectly clear to your client." (at p117)
Although the evidence is not entirely clear, it seems that after judgment was signed against the company it proceeded into liquidation; and it was that event which led to the issue of the second default summons on 11th September, 1970, this time against the appellants personally. It is common ground that the second summons relates to the same goods the subject of the first summons and claims the same amount of money, notwithstanding that there is added to the second summons the common money counts for money lent and accounts stated. It was common ground that nothing turned on the fact that these additional common money counts were added, as no money was lent by the first respondent to the appellants nor were any accounts stated between the appellants and the first respondent. Riley J. held that the action brought by the first respondent against the company was brought under a misapprehension and in ignorance of the actual contractual relationship that existed and did not constitute an election to pursue one of two alternative remedies. (at p118)
Whilst giving due and careful weight to this finding of his Honour, I have come to the conclusion that at the time the summons was issued by the first respondent against the company on 10th March, 1970, the first respondent had decided to sue the company as being the party with whom it had the relevant contract. In my opinion the knowledge of the solicitors, and their acts in and about the issue of the first summons, and the signing of judgment must be imputed to the first respondent itself and it is bound by those acts: see Sargent v. A.S.L. Developments Ltd. per Stephen J. (1974) 131 CLR, at p 649 . (at p118)
In my opinion the act of the first respondent in suing the company and proceeding to sign judgment against it on 22nd April, 1970, were deliberate and unequivocal acts evidencing an assertion by the first respondent that the company was indebted to it, the indebtedness arising out of a contract between them. (at p118)
The right of the first respondent to sue the company could arise only if Mr. Simon were in truth the agent for the company. (at p118)
The evidence is rather meagre as to the agency of Mr. Simon. The company was incorporated and Mr. Simon was one of the three shareholders. He was also chairman and managing director. The company had a bank account and used the funds in it to pay the first respondent certain of the liabilities of the appellants. Notwithstanding the absence of balance sheets and other documentary evidence verifying the fact that Mr. Simon regarded the company as the principal in his business dealings, especially those with the first respondent, in my opinion the evidence warrants the conclusion that, as between the company and Mr. Simon, he was treated as the company's agent, with the concurrence of his wife as another director of the company. Hence in my opinion, Mr. Simon did contract with the first respondent for the company as an undisclosed principal. (at p118)
I turn to the alternative argument advanced on behalf of the appellants. (at p118)
Where there is one cause of action which a person may pursue in the alternative against more than one person, judgment recovered against one extinguishes the cause of action. The cause of action merges in the judgment. The position is different where the same facts give rise to more than one cause of action which may be pursued against different persons: see Kendall v. Hamilton per Lord Cairns (1879) 4 App Cas, at pp 514-515 ; Clarkson Booker Ltd. v. Andjel (1964) 2 QB 775 . (at p119)
This principle and the doctrine of election are not the same. In some cases the same facts may give rise to the application of either principle; but the distinction between the two must not be elided: see Buckingham v. Trotter (1901) 1 SR (NSW) 253 . (at p119)
In my opinion there was but one cause of action which the first respondent pursued against the company. After judgment was signed against the company, that cause of action merged in the judgment. It could not co-exist with a cause of action on the same facts against the appellants. (at p119)
For these reasons the appellants have established that the first respondent was barred from suing the appellants and that the sequestration order ought not to have been made. (at p119)
In my opinion the appeal should be allowed, the sequestration order of the Federal Court of Bankruptcy made on 14th December, 1973, set aside and in lieu thereof, the petition should be dismissed. The first respondent should pay the costs of the appellants of the petition including reserved costs, the costs of the proceedings in the High Court (the High Court having ordered that the costs of proceedings in that court be in the discretion of this Court) and the costs of the appeal to this Court. Otherwise there should be no order as to the costs of any party. (at p119)

ORDER

Orders accordingly.

[1979] FCA 112

02 NOVEMBER 1979