Wallace v Trade Credits Ltd

[1983] FCA 315

Re: JOHN VINCENT WALLACE
And: TRADE CREDITS LIMITED (1983) 72 FLR 252
No. G92 of 1983
Bankruptcy

COURT

IN THE FEDERAL COURT OF AUSTRALIA

NEW SOUTH WALES DISTRICT REGISTRY
GENERAL DIVISION
Bowen C.J.(1), McGregor(1) and Neaves(1) JJ.

CATCHWORDS

Bankruptcy - judgment for debt against guarantors - judgment for possession of land of two guarantors - bankruptcy notice issued against one other guarantor - whether judgment against the one other guarantor stayed by execution of judgment for possession against two guarantors - whether bankruptcy notice should issue against a judgment debtor where there has been execution against other judgment debtors.

Bankruptcy Act 1966 s.40(1) (g), s41(3) (b)

Bankruptcy - Judgment for debt against guarantors - Judgment for possession of land of two guarantors - Bankruptcy notice issued against a third guarantor - Whether judgment against the third other guarantor stayed by execution of judgment for possession against first two guarantors - Whether bankruptcy notice should issue against a judgment debtor where there has been execution against other judgment debtors - Bankruptcy Act 1966 (Cth), ss 40(1)(g), 41(3)(b).

HEADNOTE

The appellant was one of five guarantors to a loan granted by the respondent to World Cup Rodeo Pty Ltd.

Security for the loan was also given by two of the guarantors over three parcels of land.

The borrower defaulted in repayment of moneys due under the loan agreement and the guarantors failed to pay such money to the respondent.

On 16 July 1982 judgment was entered in the Supreme Court of New South Wales for the respondent against the five guarantors, including the appellant, for the debt. The judgment remained unsatisfied.

In August 1982 the respondent obtained possession of the three parcels of land, and caused to be issued a bankruptcy notice to the appellant.

The appellant applied to have the notice set aside. His application was rejected by a single judge and he appealed to the Full Court.

He argued that by entering into possession of the lands and selling parts of them, the respondent had taken a step equivalent to a procedure of execution and that such execution being still in progress was a bar to further execution such as the issue of the bankruptcy notice.

Held: (1) The so called act of execution was against the property of the other guarantors, whereas the bankruptcy notice was against the appellant.

(2) The issue of a bankruptcy notice is not itself a form of execution.

(3) Execution against the mortgagors had not deprived the appellant of assets thereby preventing him paying the judgment debt and accordingly there was no ground for holding that execution on the judgment precluded the issue of a bankruptcy notice.

(4) Appeal dismissed.

Re A Bankruptcy Notice (1898) 1 QB 383; and Re Bond; Ex parte Capital and Counties Bank Ltd (1911) 2 KB 988, referred to.

HEARING

Sydney, 1983, October 31; November 1. #DATE 1:11:1983

R. Cameron, for the appellant.

P. Evans, for the respondent. Cur. adv. vult.

Solicitors for the appellant: Thomas F. Byrnes.

Solicitors for the respondent: Dawson Waldron.

M.P.S.

ORDER

1. The appeal is dismissed.

2. The appellant is to pay the respondent's costs.

Appeal dismissed with costs.

JUDGE1

This is an appeal by JOHN VINCENT WALLACE (appellant) against an order made on 8 April 1983 by a judge of this court wherein he refused to set aside or stay the operation of a Bankruptcy Notice dated 24 August 1982 issued by the Deputy Registrar on the application of TRADE CREDITS LIMITED, judgment creditor (respondent) following entering of judgment in the Supreme Court of New South Wales against the appellant and others on 16 July 1982. The Bankruptcy Notice was issued in reliance on s.41 of the Bankruptcy Act 1966 (the Act) and asserted that execution on the judgment had not been stayed.

It appears from the evidence that pursuant to a loan agreement dated 31 December 1981, the respondent lent $550,000.00 to WORLD CUP RODEO PTY. LIMITED (borrower). In respect of this transaction there were five guarantors including the appellant. Security also was given for the loan by two of the guarantors, viz., Nickolas Marioulas and Sophia Marioulas (mortgagors) over three parcels of land at, respectively, Abbotsford, Linley Point and Ryde. The mortgage over the Abbotsford land was subject to an earlier mortgage to Mercantile Mutual Life Insurance Company Limited. The money was advanced to finance a business venture by the borrower, viz., the staging of the World Cup Rodeo in Melbourne and Sydney. The business venture was not successful. In fact, on 15 February 1982 the borrower defaulted in repayment of monies due under the loan agreement; and the guarantors, including the mortgagors, failed to pay such money to the respondent.

On 25 June 1982, the respondent was given leave by the Supreme Court of New South Wales to issue on or after 9 July 1982 a Writ of Possession in respect of the three properties at Abbotsford, Linley Point and Ryde. On 14 July 1982, the Writ was issued. On 16 July 1982 judgment was in the Supreme Court entered for the respondent against the five guarantors including the appellant for the debt, i.e. then the sum of $603,759,73 being principal and interest outstanding under the loan agreement at the date of judgment. This judgment remained unsatisified. Before 24 August 1982 the respondent was already in possession of the properties at Abbotsford, Linley Point and Ryde. On that day the Bankruptcy Notice already referred to was issued. It was served on 28 August 1982. We were told that a Sequestration Order has been made against Nickolas and Sophia Marioulas.

On 20 September 1982, the appellant applied to have the Bankruptcy Notice set aside. The application was adjourned on several occasions and time for compliance with the Bankruptcy Notice extended pending the determination of his application. On 12 October 1982, the respondent sold the Ryde property at public auction and realized a net amount of $65,851.30. It appears that steps may have been taken to prepare the other properties for sale but there was no evidence before the Judge at first instance as to whether a date had been set for any such sale or that any income had been received in respect of those other properties. The Bankruptcy Notice, as will have been seen, was issued before the sum was received at the auction and made no allowance for it. It is conceded that the interest calculation referred to in the Bankruptcy Notice has been correctly made.

The arguments advanced by the appellant to the Judge at first instance and to this Court included that the respondent, by entering into possession of the lands at Abbotsford, Linley Point and Ryde and by selling the land at Ryde had taken a step equivalent to a procedure of execution; that such execution still being in progress was a bar to further execution such as e.g. the issue of the bankruptcy notice.

We do not find it necessary to examine in detail the arguments so carefully presented on behalf of the appellant. We observe that the so called act of execution here was against the property of the mortgagors whereas the Bankruptcy Notice, whatever status it has, was against not the mortgagors but against the appellant.

If it is necessary to say so, we do not regard the issue of a Bankruptcy Notice a s itself a form of execution - cf. In re A Bankruptcy Notice (1898) 1 Q.B. 383 at pp.386,387. The basis upon which execution on a judgment debtor's goods by a judgment creditor, pursuant to a judgment obtained, precludes the issue of a Bankruptcy Notice by the judgment creditor relying on non payment of the judgment debt is that the taking of the goods thereby deprives or may well deprive the judgment debtor of assets which he could otherwise use to pay the judgment creditor and thus comply with the Bankruptcy Notice. See e.g. In re Bond; Ex parte Capital and Counties Bank Limited (1911) Z.K.B. 988 at p.991.

In our view, no ground has been made out that because execution has been issued against two of the guarantors, being the mortgagors, the judgment against the appellant is thereby stayed. That execution has not deprived the appellant of assets thereby preventing him paying the judgment debt. The judgment is not one the execution of which has been stayed within the meaning of s.40(1) (g) or s.41(3) (b). Hence it could not be successfully argued that proceedings on the Bankruptcy Notice should be stayed or that it should be set aside.

In our opinion, no error has been shown in the reasons advanced by the learned Judge at first instance against whose decision the appeal is brought.

The appeal is dismissed.

The appellant is to pay the respondent's costs.