James v Abrahams

Federal Court of Australia|1997-12-05|Before: Carr J, Nicholson JJ, Burchett J

REASONS FOR JUDGMENT BURCHETT J I have had the advantage of reading the reasons for judgment to be delivered by Carr J. I am in general agreement with those reasons, and would, as his Honour proposes, dismiss the appeal with costs. However, I would wish to state for myself why I think the appellant's claim to priority for his equitable estate in the land in question in this case should be rejected. That claim, which lay at the heart of the appeal, turns on a collision between competing equities. It is first necessary to outline some facts, though only in a skeletal way. The appellant, who is a solicitor, wished to purchase Lot 31 on Plan 3717, being the whole of the land in Certificate of Title volume 2050 folio 119, known as No 14 Beagle Street, Mosman Park near the city of Perth, in order to amalgamate it with land already owned by him for the purposes of a scheme of subdivision. He decided not to make an offer himself, presumably for fear the owner would assume the property had a special value for him as an adjoining proprietor, and he arranged for one Newby, a builder who was at the time carrying out building works for him, to make the offer in Newby's own name. On 23 June 1994 that offer was accepted. A contract having been entered into, under which Newby was the purchaser, settlement was effected on 22 December 1994, when the land was transferred to Newby. All moneys required to effect the transfer were provided by the appellant, except that part of the purchase price was secured upon first and second mortgage. However, the appellant's interest was not noted on the title in any way, and no caveat was lodged to protect it. The moneys obtained by mortgage, to which I have referred, were so obtained by a first mortgage in the sum of $180,000, by the terms of which Newby was named as mortgagor and both the appellant and Newby were named as borrowers, and a second mortgage in the sum of $60,000 by the terms of which again Newby was named as mortgagor and both the appellant and Newby were named as borrowers. On about 30 June 1995 the appellant paid out the second mortgage, and in August 1995 the appellant and Newby borrowed from the National Australia Bank the sum of $180,000 to pay out the first mortgage, security being taken by the Bank over the land in respect of that sum and also in respect of an overdraft in the sum of $50,000 provided "for the conduct of [Newby's] business as a master builder". On 27 July 1995, the appellant had executed two documents of guarantee and indemnity in respect of amounts owed by two customers of the National Australia Bank, being Newby (in respect of the sum of $180,000) and Newby's company TC Newby Pty Ltd (in respect of the sum of $50,000). Plainly, the documents of 27 July 1995 related to the transactions underlying the giving of security to the Bank in respect of the same sums of $180,000 and $50,000. After the acceptance of Newby's offer to purchase the land in June 1994, but before the settlement of the purchase on 22 December 1994, Newby applied to the respondent, a supplier of building materials, to establish a credit account for the purposes of his business as a building contractor. That was by the filling in on 16 August 1994 of a printed application form, his signature to which was witnessed on 19 August 1994 by the appellant. The terms set out in this form included a clause 15, which provided relevantly as follows: "The Applicant [Newby] ... do[es] hereby agree that for the purposes of securing the liability and obligations hereunder of ... the Applicant ... the Applicant ... do[es] hereby charge with the due and punctual payment and the due and punctual and complete performance by [Newby] ... of all [his] liabilities, and obligations hereunder all [his] real property both present and future and ... the Applicant ... do[es] hereby consent to the Company [ie the respondent] lodging a caveat or caveats noting its interest hereunder." The respondent accepted this application for credit, and thereafter allowed credit to Newby. On 3 November 1995, the respondent lodged a caveat to protect its interest pursuant to clause 15 in the land to which I have referred. It was not then, or at any time of allowing credit to Newby, aware that the appellant claimed any interest in the land. Nor is there any evidence that the lodgment of the caveat provoked any response during the ensuing several months, either from the appellant or from Newby, denying the respondent's right to an equitable charge over the land. There is credible evidence that in November 1995 the caveat was mentioned to Newby at a meeting of his creditors without eliciting any such denial, and indeed he showed the land as an asset of his in his statement of affairs. The outstanding debts claimed by the respondent to have been secured under cl 15 were incurred over the period 8 August 1995 to 5 February 1996. On 1 February 1995, the appellant had agreed to sell to William and Barbara Butler ("the Butlers") a lot in the then still unregistered amalgamation and resubdivision of the lands at 14 and 16 Beagle Street. This agreement was subject to the purchasers "entering into contract with TC Newby Master Builder within 14 days of acceptance to carry out refurbishments and extensions to the residence as agreed". The Butlers did enter into a contract with Newby who went into possession as their builder on about 24 February 1995, and a large sum was expended on the work between then and August of that year. Thereafter, settlement did not take place, apparently because of the lodgment of the respondent's caveat. On 25 March 1996, the appellant obtained, in a proceeding of which no notice was given to the respondent, a declaration that Newby held the land at 14 Beagle Street on trust for him. Later, in June 1996, a sequestration order was made against Newby. On 23 August 1996, Walsh J of the Supreme Court of Western Australia dismissed with costs an application for interlocutory relief in respect of the caveat, which the appellant had brought for the purpose of his sale to the Butlers. The costs were subsequently taxed, and those costs are the basis of the bankruptcy notice in the present case. An appeal from Walsh J's decision was dismissed by the Full Court of the Supreme Court of Western Australia on 13 September 1996. It is in these circumstances that the appellant's claims arising out of the caveat fall for consideration. Unless the appellant's equitable interest as beneficial owner of the land takes priority over the respondent's interest under its equitable charge, none of the alleged counter-claims or cross-demands can succeed. The fundamental principle was stated by Kitto J in Latec Investments Limited v Hotel Terrigal Pty Limited (in liquidation) (1965) 113 CLR 265 at 276, a passage cited in Meagher, Gummow and Lehane, Equity Doctrines and Remedies 3rd ed (1992) at 226: "In all cases where a claim to enforce an equitable interest in property is opposed on the ground that after the interest is said to have arisen a third party innocently acquired an equitable interest in the same property, the problem, if the facts relied upon as having giving rise to the interests be established, is to determine where the better equity lies. If the merits are equal, priority in time of creation is considered to give the better equity. This is the true meaning of the maxim qui prior est tempore potior est jure: Rice v Rice (1853) 2 Drew. 73, at p. 78 [61 ER 646, at p 648]. But where the merits are unequal, as for instance where conduct on the part of the owner of the earlier interest has led the other to acquire his interest on the supposition that the earlier did not exist, the maxim may be displaced and priority accorded to the later interest." What Kitto J said in Latec Investments formed the basis of the later decision of the High Court in Heid v Reliance Finance Corporation Proprietary Limited (1983) 154 CLR 326. There Mason and Deane JJ referred (at 341, in a passage which was adopted by the Court of Appeal of New Zealand in Australian Guarantee Corporation (NZ) Ltd v CFC Commercial Finance Ltd [1995] 1 NZLR 129 at 135-136) to a "general and flexible principle that preference should be given to what is the better equity in an examination of the relevant circumstances." They continued: "It will always be necessary to characterize the conduct of the holder of the earlier interest in order to determine whether, in all the circumstances, that conduct is such that, in fairness and in justice, the earlier interest should be postponed to the later interest. ... To say that the question involves general considerations of fairness and justice acknowledges that, in whatever form the relevant test be stated, the overriding question is '... whose is the better equity, bearing in mind the conduct of both parties, the question of any negligence on the part of the prior claimant, the effect of any representation as possibly raising an estoppel and whether it can be said that the conduct of the first or prior owner has enabled such a representation to be made ...': Sykes, Law of Securities, 3rd ed. (1978), p. 366 ... ." In considering the prior owner's conduct, Gibbs CJ (with whom Wilson J agreed) said (at 338) that failure to lodge a caveat "was not in itelf fatal", while Mason and Deane JJ said (at 342) that "the mere failure of the holder of a prior equitable interest in land to lodge a caveat does not in itself involve the loss of priority which the time of the creation of the equitable interest would otherwise give". These statements, of course, leave it open to hold that a failure to lodge a caveat may, when combined with other circumstances, prove to be the final straw, and indeed may be much more than a straw. That is in accordance with what Barwick CJ (with whom McTiernan and Owen JJ agreed) said in J. & H. Just (Holdings) Pty Limited v The Bank of New South Wales (1971) 125 CLR 546 at 555: "the failure to lodge a protective caveat cannot properly be said necessarily to be such an act or default [ie an act or default having a postponing effect]." (Emphasis added.) Barwick CJ had said as much at 554. Also, Gavan-Duffy and Starke JJ, in a dissenting judgment which prevailed on appeal to the Privy Council and is cited by Mason and Deane JJ in Heid v Reliance Finance Corporation Pty Ltd at 339, said in Lapin v Abigail (1930) 44 CLR 166 at 197, as part of their reasoning leading to the conclusion that the interest of the prior equitable owners ought to be postponed, "they reinforced the apparent absolute ownership of [the transferee of the legal estate] by neglecting the well-known method of protecting their rights and interests by means of a caveat pursuant to the provisions of the Real Property Act 1900." And when the matter came before the Privy Council, as Abigail v Lapin (1934) 51 CLR 58, Lord Wright (at 69-70) expressly left open the effect of the Torrens "system of registration of legal titles and for protection of equitable interests by caveats". On the other hand, a well explained failure to lodge a caveat, unaccompanied by any significant circumstances adverse to the holder of the prior interest, was insufficient to postpone that interest in Jacobs v Platt Nominees Pty Ltd [1990] VR 146, discussed in L A McCrimmon, Protection of Equitable Interests under the Torrens System: Polishing the Mirror of Title (1994) 20 Mon LR 300 at 307-308. Although the prima facie rule of the priority of the creation of his interest protects the beneficiary whose trustee improperly creates a subsequent equitable interest in someone else, as is made clear in Meagher, Gummow and Lehane, op. cit. at 226-228, the evidence which I have outlined seems to me to show that here the merits are not equal. Where that is so, the Court must examine the situation, according to the authorities I have been discussing, in order to ascertain which is the better equity. Such an examination is here entirely favourable to the respondent. The appellant chose, as he himself swore when he verified his statement of claim in his proceedings for declaratory relief against Newby, to make it appear that the acquisition of the land was not by him but by Newby. It was "[i]n order to negotiate a favourable price for the purchase of the land [that he] requested [Newby] to submit an offer for the purchase of the land in [Newby's] name". Newby being a builder, his offer to purchase would have been likely to have been clothed in verisimilitude. When it was accepted, the appellant continued to use Newby as his agent, a substantial loan being obtained for the purpose of completing the purchase on the basis that Newby was to be the mortgagor. Since Newby was the mortgagor, although he did not actually hold the certificate of title, the Bank would have held it as mortgagee and on the basis that, subject to the Bank's charge, Newby was entitled to it as mortgagor/registered proprietor. The appearance of absolute ownership in Newby was reinforced when the appellant also permitted Newby to utilize the land as security for an overdraft associated with his business as a master builder. That presumably benefited the appellant, as well as Newby, because, as it seems, of their close business relations; the contract of sale to the Butlers specifically provided for substantial building work to be done, not by a builder of the Butlers' choice, but by Newby. Among the cases in this area, as was noted by Lord Wright in Abigail v Lapin at 71 and by Mason and Deane JJ in Heid v Reliance Finance Corporation Pty Ltd at 340, it is seldom seen that the conduct of the person whose equity is postponed "takes or can take the form of a direct representation to the person whose equity is preferred". More often, the person whose equity is postponed, having foolishly armed someone else with the power to misrepresent the position, is ignorant of what occurs. But here, the appellant personally witnessed the document by which Newby gave security to the respondent. At the time, some of the events must have been fresh in his mind, and others of them occurred with his concurrence thereafter. Although it is true that there is no evidence expressly affirming his advertence to the terms of the document he witnessed, neither is there any evidence from him that he was not aware of those terms. In my opinion, given the closeness of his relations with Newby who was a builder, while he was a solicitor who, at least on occasion, did act for Newby, and in the absence of any evidence from him on the point, the conclusion should be drawn that he was aware at any rate of the general nature of the document, which was of a kind commonly containing just such a clause as cl 15. Although I think the modern law has come to see the question more in terms of the broad principle stated by Kitto J in Latec Investments Limited as applicable "in all cases", and accepted by Mason and Deane JJ in Heid v Reliance Finance Corporation Pty Ltd, rather than in terms of categories with separate rules (cf S Rodrick, The Response of Torrens Mortgagors to Improper Mortgagee Sales (1996) 22 Mon LR 289 at 309), categorisation can assist analysis, and it is helpful to see that the first category stated in Meagher Gummow and Lehane, op. cit. at 228, of cases where priority in time may be overcome, relates to cases of agency. Here, Newby acquired the land by an offer made in the role of an agent, and never shook off that role. Later events additionally armed him to misrepresent, but they did not transform his trusteeship into an office unrelated to the agency from which it arose. In my opinion, the circumstances in evidence lead inevitably to the conclusion that the appellant's equitable interest, assuming he had such an interest which was prior in time, has been postponed to the respondent's equitable security protected by the caveat. As I have said, I agree with Carr J that the appeal should be dismissed with costs.

I certify that this and the preceding six (6) pages are a true copy of the Reasons for Judgment herein of the Honourable Justice Burchett

WESTERN AUSTRALIA DISTRICT REGISTRY WAG 92 of 1997

ON APPEAL FROM A JUDGE OF THE FEDERAL COURT OF AUSTRALIA

REASONS FOR JUDGMENT CARR J: Introduction This is an appeal from a decision of Sundberg J dismissing an application for a declaration under s 41(7) of the Bankruptcy Act 1966 (Cth). The appellant sought a declaration that he had a counter-claim, set-off or cross demand that could not have been established in certain proceedings in the Supreme Court of Western Australia in which the respondent had obtained a judgment. A bankruptcy notice based on that judgment, and issued at the respondent's request, had been served on the appellant. Factual background The appellant is a solicitor. On a date which is not disclosed by the evidence, but which was on or before 22 December 1994 the appellant provided the funds for the purchase of land at 16 Beagle Street, Mosman Park ("the Land"). The appellant caused title to the Land to be registered in the name of one Terence Charles Newby on 22 December 1994. The contract for the purchase of the Land was made on 28 June 1994. Mr Newby was (and may still be) a building contractor. The appellant proposed to develop the Land, together with two adjacent parcels, by a subdivision. On 16 August 1994 Mr Newby applied in writing ("the Credit Application") to open an account with the respondent's "Metro Brick" Division. On 19 August 1994 the appellant witnessed Mr Newby's signature to the Credit Application. However, there is no evidence expressly directed to whether the appellant read that document. The respondent accepted the Credit Application. One of the terms of the Credit Application provided, in effect, that Mr Newby charged all his real property "both present and future" with the due and punctual payment and the due and punctual and complete performance by him of all his liabilities and obligations under the credit arrangements with the respondent and consented to the respondent lodging a caveat or caveats noting its interest ("the Charge"). On 22 December 1994, Mr Newby executed two mortgages of the Land. In each of those mortgages the appellant and Mr Newby were named as the borrowers. In February 1995 the appellant sold one of the lots in the subdivision to a Mr and Mrs Butler for $245,000. On 27 July 1995, Mr Newby executed a further mortgage of the Land to National Australia Bank Ltd. On the same date, the appellant executed a document constituting a guarantee and indemnity in favour of that bank in respect of a "basic liability" of Mr Newby to it of $180,000. That document refers to a mortgage as being part of the security documentation. I think it is reasonable to infer, and I do, that the mortgage referred to in the guarantee and indemnity was the mortgage of the Land executed by Mr Newby on 27 July 1995. On 3 November 1995 the respondent lodged a caveat over the title to the Land claiming an equitable interest under the Charge given by Mr Newby. The amount then due under the Charge was about $25,000. On 25 March 1996 the applicant obtained, by way of summary judgment, a declaration from the Supreme Court of Western Australia that Mr Newby held the Land on trust for him and an order that Mr Newby transfer the Land to him. The respondent was not given notice of those proceedings. On 3 May 1996 the appellant sold another of the lots, to a Mr and Mrs Burnett. Because of the respondent's caveat, the appellant was unable to make title to the lot sold to the Butlers, and on 24 May 1996 they issued proceedings against the appellant in the Supreme Court of Western Australia ("the Supreme Court Proceedings") for specific performance and damages. In June 1996 Mr Newby was declared bankrupt. On 11 June 1996, in the Supreme Court Proceedings, the appellant issued a third party notice against the respondent claiming that the respondent had no equitable interest in the Land, seeking removal of the caveat and damages for its wrongful maintenance. He also joined the Registrar of Titles as second third party to those proceedings. The appellant then applied for an interlocutory injunction to require the respondent to remove its caveat and to restrain it from lodging any further caveat over the Land. The basis of that application was that the respondent did not have, so the appellant contended, a caveatable interest in the Land. On 11 June 1996 Walsh J heard that application and held that the respondent had a caveatable interest by virtue of the Charge. His Honour dismissed the application for an interlocutory injunction and ordered the appellant to pay the respondent's costs. Those orders were entered on 23 August 1996. The costs were subsequently taxed (on 17 October 1996) in the sum of $5002. The bankruptcy notice was based on the order for costs made by Walsh J. On 13 September 1996 Walsh J's decision was upheld by the Full Court of the Supreme Court of Western Australia. On 24 April 1997 the applicant filed a statement of claim in the third party proceedings referred to above. The statement of claim refers to the sale to Mr and Mrs Butler, the lodging of the caveat, the declaration that Mr Newby held the Land on trust for the appellant and the sale to Mr and Mrs Burnett. In summary, the appellant pleads in the statement of claim that the respondent had no caveatable interest in the Land and that its wrongful refusal to withdraw the caveat caused loss to the appellant. The loss is said to have flowed both from the fact that Mr and Mrs Butler had commenced proceedings against the appellant and the fact that Mr and Mrs Burnett had issued notices of default and subsequently terminated their contract with the appellant. The appellant claims that the respondent's conduct amounted to unconscionable conduct contrary to the provisions of s 51AA of the Trade Practices Act 1974 (Cth). The appellant claims from the respondent an indemnity against Mr and Mrs Butler's claim and damages for breach of s 51AA of the Trade Practices Act. The action has not yet been heard. In the meantime, the respondent obtained the issue of a bankruptcy notice on 6 December 1996. That notice was served on the appellant on 14 February 1997. On 28 February 1997 the appellant filed the application for the declaration referred to above. The Statutory Framework At the time when the bankruptcy notice was issued (6 December 1996) section 41(7) of the Act provided: "Where, before the expiration of the time fixed for compliance with the requirements of a bankruptcy notice, the debtor has filed with the Registrar an affidavit to the effect that he has such a counter-claim, set-off or cross demand as is referred to in paragraph 40(1)(g), and the Court has not, before the expiration of that time, determined whether it is satisfied that the debtor has such a counter-claim, set-off or cross demand, that time shall be deemed to have been extended, immediately before its expiration, until and including the day on which the Court determines whether it is so satisfied." The sub-section was amended by Act No. 44 of 1996 with effect from 16 December 1996. The amendment was to omit the words "filed with the Registrar an affidavit to the effect that he" and to substitute the words "applied to the Court for an order setting aside the bankruptcy notice on the ground that the debtor". The appellant's application for the declaration described above was filed on 28 February 1997. As his Honour explained, by reference to James v Abrahams (1981) 34 ALR 657 at 661-662, the filing of an affidavit of the type described in s 41(7) did not constitute an application to set the bankruptcy notice aside. It operated as an automatic extension of time for compliance with the bankruptcy notice until the Court considered the matter. If the Court was satisfied that the debtor had a counter-claim, set-off or cross demand of the type referred to in the sub-paragraph then a declaration to that effect had the result that the bankruptcy notice was spent. If the Court determined that it was not so satisfied, the time for compliance with the bankruptcy notice expired and the act of bankruptcy had been committed. The case was conducted at first instance and on appeal on the assumption that s 41(7) in its unamended form applied to the matter. It was also conducted on the assumption that the appellant had applied to set aside the bankruptcy notice. I do not think that the first assumption was correct. The second assumption, in my opinion, was a sensible one. The bankruptcy notice, although issued before the above amendments came into effect, was not served until 14 February 1997. In my view, s 41(7) in its then amended form governed any deemed extension of the time for compliance with the bankruptcy notice. It was no longer a condition of that extension that an affidavit to the requisite effect be filed with the Registrar. As at 28 February 1997 s 41(7) required, as a condition precedent to any deemed extension of the time for compliance with a bankruptcy notice, that the debtor had applied to the Court for an order setting aside that notice. The appellant's application was, in terms, for the declaration described above. It made no mention of setting aside the bankruptcy notice. Unless the application were treated as an application to set aside the bankruptcy notice, the consequences could be quite harsh and unfair. The bankruptcy notice served on the appellant was (subject to consideration below of other objections raised by the appellant) in the form prescribed at the date of its issue. That form did not change until 16 December 1996 when new rules came into effect. The bankruptcy notice expressly set out (by way of a note) the particular procedure of filing an affidavit, being the procedure referred to in s 41(7) before its amendment. The note also stated that upon compliance with that procedure, the time for complying with the bankruptcy notice would be deemed to have been extended until the Court determined whether it was satisfied that the appellant had a counter-claim, set-off or cross demand. It seems to me that a proper course for us to take is to treat the application filed by the applicant as being in substance an application to set aside the bankruptcy notice, although it is not expressed in those terms. The declaratory relief sought in the application would have had the result that the bankruptcy notice was "spent" as the Full Court of this Court explained in James v Abrahams. To distinguish an application which, if successful, would have had that effect, from an application to set aside the bankruptcy notice would, in my view, be over-technical in the present circumstances and, worse still, would work a potential injustice. The course which I propose is similar to that which Neaves J took in Re Lentini; Ex parte Lentini v CSR Limited (1991) 29 FCR 363. The respondent did not seek to argue that no application had been made to set aside the bankruptcy notice. In fact its counsel, during argument in the appeal, expressly referred to the application at first instance as being an application to set aside the bankruptcy notice. I now turn to summarise the proceedings at first instance. The Proceedings at First Instance The issue before Sundberg J was whether he was satisfied that the appellant had a cross-demand which satisfied the requirements of s 41(1)(g) of the Act. The appellant contended that his affidavit material established a prima facie case of a cross demand based on one or more of four causes of action. First, the claim based on s 51AA of the Trade Practices Act, secondly a claim for compensation under s 140 of the Transfer of Land Act 1893 (WA). Section 140 of that Act provides that a person who lodges a caveatwithout reasonable cause is liable to compensate anyone who sustains damage thereby. The third cause of action was said to arise out of the respondent's negligence in refusing to remove the caveat when requested to do so. The fourth cause of action was a claim that the respondent had induced or procured a breach of the contract between Mr and Mrs Butler and the appellant. His Honour noted that there was no evidence to support this fourth claim. In relation to the first three claims his Honour found that the appellant did not have an arguable or a prima facie case in respect of any of the causes of action relied upon. The Appeal The appellant relied upon three grounds of appeal. In summary, the appellant contended that the learned primary judge erred in: . failing to consider or rule on the question whether the appellant had established a prima facie case for a counter-claim or cross demand against the respondent in the Supreme Court Proceedings on the basis that his interest in the Land was a prior unregistered interest to the respondent's later unregistered equitable charge over the Land, and in failing to so find; . failing to find that the appellant had established a prima facie case in respect of his cross demand or counter-claim pursuant to s 51AA of the Trade Practices Act; and . failing to find that the bankruptcy notice was defective in form. The alleged defects were that the bankruptcy notice failed properly to describe the order made by Walsh J as an amount due in respect of costs under that order, as quantified by taxation. The appellant contended that the notice was defective because it failed to refer to the order and the certificate of taxation as the basis for the notice. [This point was not taken by the appellant at first instance, but we granted the appellant leave generally to argue that the form of the bankruptcy notice was insufficient, reserving any costs consequences.] I shall proceed to deal with the grounds of appeal, in the above sequence. The Priority Point What I have termed "the priority point" is put by the appellant on the following basis: . the Land was purchased by Mr Newby with funds provided by the appellant; . Mr Newby held the Land (both before he became registered proprietor of it and upon such registration) as trustee for the appellant; . the appellant's equitable interest as beneficiary has priority over the respondent's equitable interest as chargee because it was earlier in time (having been created, so it was contended, upon Mr Newby's acquisition of the Land); . assuming the foregoing, the respondent's caveatable interest would be extinguished; and . the appellant had a prima facie case that he had a cross-demand sounding in damages arising out of the respondent's failure to withdraw its caveat so that the sales to Mr and Mrs Butler and to Mr and Mrs Burnett could proceed. The appellant also contended that in those circumstances he would have a cross-demand for costs in the Supreme Court Proceedings. If, and to the extent that the primary judge may not have dealt with what I have described as "the priority point", it ill-befits the appellant to complain. At the hearing at first instance the appellant's counsel passed up a document headed "Applicant's Summary of Argument". Nowhere in that document is there any mention of the priority point. The essence of the appellant's summary of argument was that he claimed a cross-demand against the respondent "... by virtue of its refusal to lift its caveat despite a series of proposals whereby the Respondent would not lose its security". The appellant contended that by reason of those circumstances it had established a prima facie case for its claim to damages. It is true that, in the course of oral submissions, counsel for the appellant said during exchanges with his Honour, that there was "a very real argument" that by reason of the appellant's "prior equitable interest" he would be entitled to any equity that might be left in the property after discharge of the moneys secured by the mortgages. When asked whether that point had not already been decided against the appellant in the Supreme Court, counsel submitted that such was not the case. He contended that Walsh J and the Full Court had decided only that there was an interest capable of being supported by a caveat. It was, so counsel contended, "quite a different question from the question ... whether or not the interest should be removed in favour of a superior interest". Counsel submitted that the question of priority "... was never addressed in the cases of Walsh J and the Full Court". Counsel further submitted to his Honour that because the appellant had paid the purchase price for the Land he became its owner in equity at the same instant when Mr Newby acquired any interest in the Land. Being first in time, so counsel argued, the appellant had a prima facie case for the relief which it sought in the Supreme Court Proceedings. Counsel for the respondent referred his Honour to the fact that the question of priority had not been raised in the applicant's outline and for that reason he had not come to Court with submissions which were before the Full Court of the Supreme Court on that point. Counsel for the respondent submitted that the question of priority had been decided both by Walsh J and the Full Court in favour of the respondent. The primary judge referred to various paragraphs of the statement of claim filed on behalf of the appellant in the third party proceedings referred to above. They included the following: "10. The whole of the monies from the Burnett sale would have been paid to the National Australia Bank in part satisfaction of its mortgage over the whole of the land. Even if Bristile had a caveatable interest (which is denied) no monies would have been available to be paid to Bristile from the Burnett sale. 11. Thorpe advised Bristile of [the judgment declaring the trust in his favour] and required that the caveat be withdrawn because Bristile had no caveatable interest in the land." His Honour dealt with this matter in the following terms: "The contention in pars 10 and 11 of the statement of claim that the respondent had no caveatable interest is contrary to the decision of Walsh J and the Full Court, who also held that the respondent was justified in refusing to withdraw the caveat ..."

Having regard to the way in which the appellant had put his case, it is not at all surprising that his Honour did not, in his reasons, expand further on the priority issue. Apart from the exchanges in oral argument, the appellant advanced claims based on s 51AA of the Trade Practices Act, s 140 of the Transfer of Land Act, negligence and inducement to breach of contract. His Honour dealt at greater length with each of those claims, save for the inducement claim in respect of which his Honour simply found that there was no evidence. There is no appeal against his Honour's conclusions in respect of the claims other than his Honour's finding that the appellant did not have a prima facie case based on s 51AA of the Trade Practices Act. In any case, I do not consider that the applicant has established a prima facie case based on his alleged priority of interest in the Land. On the facts of the present matter and the contentions advanced on behalf of the appellant, at the very instant when Mr Newby acquired any interest in the Land, two equitable interests arose, namely, the appellant's interest as owner in equity, having provided the purchase price and the respondent's interest as chargee. The appellant contends that his interest must be earlier in time than the respondent's interest and thus have priority. I do not see why that should necessarily be the case. If anything, I would have thought that equity would have regarded the respective equitable interests to have been created simultaneously. I cannot imagine that equity would give priority to the appellant in the present circumstances. The appellant caused Mr Newby to become registered as the proprietor of the Land on 22 December 1994. He thereby clothed him with the outward indicia of full ownership of the Land. The evidence before us (see AB 141-165) shows that the goods which the respondent supplied to Mr Newby, and in respect of the purchase price for which it claims to be secured as equitable chargee, were supplied between 8 August 1995 and 5 February 1996. It was not until 11 March 1996 that the appellant issued proceedings in the Supreme Court against Mr Newby for a declaration that Mr Newby held the Land on trust for the appellant and for an order that Mr Newby execute a transfer of the Land to the appellant. As mentioned above, no notice of these proceedings was given to the respondent whose caveat had by then been registered for some four months. Mr Newby must have filed a memorandum of appearance fairly promptly, because within three days of the writ of summons being issued, the appellant filed a statement of claim, a chamber summons for summary judgment (returnable on 25 March 1996) and an affidavit in support of that summons. On 25 March 1996 the Supreme Court entered summary judgment for the relief sought in the writ. I do not think that in those circumstances the appellant has established a prima facie cross-demand on the basis that he is entitled to damages based on his claim to priority. In the Full Court of the Supreme Court, the appellant argued that as a bare trustee, Mr Newby had no interest in the Land, as a consequence of which his dealings with the respondent could not give rise to any caveatable interest in the Land on behalf of the respondent. The Full Court (see in particular Malcolm CJ's reasons for judgment) rejected that submission on two bases. The first was that, even assuming that Mr Newby was in the position of a bare trustee, the respondent had acquired an interest in the Land as a bona fide chargee for value, taking without notice. His Honour cited with approval an extract from Meagher, Gummow and Lehane: Equity, Doctrines and Remedies, 3rd ed (1992) at 104 where the learned authors expressed the view that a sole beneficiary under a bare trust may not assert his interest against a bona fide purchaser for value of the legal title without notice. Malcolm CJ (with whom Pidgeon and Owen JJ agreed) after reviewing the authorities rejected as "without foundation" the contention that Mr Newby as a bare trustee had no legal or equitable interest in the Land. The second basis upon which Malcolm CJ rejected the appellant's submission was that the evidence showed that Mr Newby was not a bare trustee in any event. That evidence included the two mortgages (referred to above) executed by Mr Newby on 22 December 1994 in which the appellant and Mr Newby were named as the borrowers and the further mortgage executed by Mr Newby on 27 July 1995 in favour of National Australia Bank Ltd. As Malcolm CJ noted, those circumstances showed that the trust, to the extent that it was an express trust or otherwise, was a trust to purchase and sell land at the direction of Mr Thorpe. I respectfully agree with the Chief Justice's conclusions. Applying to this matter the test explained by the High Court of Australia in Ebert v The Union Trustee Co of Australia Ltd (1960) 104 CLR 346 at 350 (and in numerous subsequent cases), in my view, the appellant has not shown that he has a prima facie case based on the priority for which he contends. I should add that Sundberg J rejected the appellant's asserted prima facie case for compensation under s 140 of the Transfer of Land Act, essentially on the basis that the appellant was claiming damages against the respondent for refusing to withdraw (and maintaining) the caveat without reasonable cause. His Honour pointed out that Western Australia is one of the legislatures which has not extended the protection of this section to cover loss resulting from the wrongful maintenance of a properly lodged caveat. His Honour referred to the state of the authorities and found that the applicant's complaint was not within the ambit of that section. As mentioned above, there is no appeal against that conclusion. Section 51AA of the Trade Practices Act Section 51AA of the Trade Practices Act provides that a corporation must not, in trade or commerce, engage in conduct that is unconscionable within the meaning of the "unwritten law" of the States and Territories. As Sundberg J pointed out: "The notion running through all the cases dealing with the "unwritten law" of unconscionability is that one party to a transaction must suffer some special disadvantage of which the other takes advantage. See Blomley v Ryan (1956) 99 CLR 362 at 415, 405." His Honour noted that the applicant was a solicitor and that there was nothing in the evidence which suggested any special disadvantage on his part. At first instance, the appellant had sought to rely, by way of analogy, on s 51AB(2)(b). Section 51AB(1) provides that a corporation shall not, in trade or commerce, in connection with the supply or possible supply of goods or services to a person, engage in conduct that is, in all the circumstances, unconscionable. Section 51AB(2) provides that for the purpose of determining whether a corporation has contravened sub-s(1) the Court may have regard to various matters, one of which (par (b)) is: "whether, as a result of conduct engaged in by the corporation, the consumer was required to comply with conditions that were not reasonably necessary for the protection of the legitimate interests of the corporation;" The appellant had submitted that the respondent's use of its caveat to extract from the applicant payment of money due under the Charge was analogous to a corporation's insistence upon unnecessary conditions. His Honour said that several matters made this supposed analogy inapposite. The first was that s 51AA(2) provides that the section does not apply to conduct that is prohibited by s 51AB. Secondly, as his Honour pointed out, the matters which are the subject of the paragraphs of s 51AB(2) are not instances of unconscionable conduct. All the subsection provides is that the Court "may have regard to" those matters when determining whether a corporation has engaged in unconscionable conduct. Thirdly, as his Honour also pointed out, each paragraph is directed to the position of the "consumer" of the goods or services vis-a-vis the corporation; for example their respective bargaining strengths, conditions forced on the consumer, the consumer's ability to understand the transaction documents, and undue influence exercised over the consumer. His Honour concluded: "In those circumstances, it is not appropriate to reason from any analogy between the respondent's use of its caveat in order to extract from the applicant payment of the money due under the charge and a corporation's imposition of unnecessary conditions on a consumer (s 51AB(2)(b)) that the respondent's conduct is unconscionable under s 51AA even in the absence of any special disadvantage on the part of the applicant." On appeal, the appellant's counsel chose not to address us on this point, but simply referred us to his written submissions. In essence, the written submissions amounted to the following: . the appellant had shown a prima facie case of a cross demand against the respondent by virtue of its refusal to lift its caveat despite a series of proposals whereby the respondent would not "lose its security"; and . "that the Learned Judge erred in law in undertaking too great an analysis of the appellant's case as: (a) the only material which the Learned Judge had before him was presented on affidavit material. (b) much of the evidence put forward was disputed or denied by the parties."

In my view, there is nothing in the second complaint set out above. His Honour did not make any factual findings. On the contrary, it would appear that his Honour assumed, for the purpose of reaching his conclusions, that the appellant would make out his factual claims. As to the first complaint, his Honour's conclusion was based on the legal propositions which I have summarised above. In his written submissions, counsel for the appellant does not seek to identify any legal error in that reasoning. I agree, respectfully, with that reasoning and I do not think that the appellant has made out this ground of appeal. The Form of the Bankruptcy Notice The appellant contended that the bankruptcy notice was defective. This contention was not put forward at first instance, but, as mentioned above, the appellant was given leave to argue this ground of appeal. The defect which the appellant identified was that the bankruptcy notice referred only to the orders of Walsh J but did not refer to the taxation of costs "as being the source of the quantification" of the debt. The relevant portions of the bankruptcy notice were as follows: "WHEREAS Bristile Limited of 1st Floor, 66 Kings Park Road, West Perth in the State of Western Australia (hereinafter referred to as "the Judgment Creditor") has claimed the total sum of $5,095.19 is due by you to the Judgment Creditor under a final judgment obtained by the Judgment Creditor against you in the Supreme Court of Western Australia on the 23rd day of August 1996 being a judgment the execution of which has not been stayed and which sum is the total of:

the sum of $5,002.00 being the judgment sum as at the 23rd day of August 1996;
the sum of $93.19 being interest on the said sum of $5,002.00 calculated from the 24th day of August 1996 to the 15th day of November 1996 at the rate of 8% per annum; the foregoing interest is due by you to the Judgment Creditor pursuant to the provisions of Section 142 of the Supreme Court Act 1935 as amended and the Judgment Creditor abandons any further claim for interest herein for the purpose of compliance with the Bankruptcy Notice." The appellant relies upon the authority of Re Gibbs; Ex parte Triscott (1995) 133 ALR 718 at 721 where Drummond J observed: "The source of the debtor's liability to make the payment demanded in respect of a judgment or order for costs is the judgment or order; but because nothing is payable in respect of that liability until the costs have been quantified by taxation, the notice must refer to both the judgment or order and to the taxing officer's determination, if it is to be valid in form." Re Gibbs went on appeal (unreported, 16 October 1996, Judgment No 895 of 1996). The Full Court's reasons for judgment are expressed as being those of the Court, although they contain some first person pronouns. At p 5 the Full Court set out the relevant recitals to the bankruptcy notice in that matter which included the following: "... pursuant to a final judgment obtained by the Judgment Creditor against you in the Supreme Court of Queensland at Brisbane on the 7th day of April 1992 being a judgment the execution of which has not been stayed pursuant to which judgment a certificate of taxation was issued in the Supreme Court of Queensland held at Brisbane on the 24th day of September 1992." The Full Court then said this (at pp 5-6): "The learned trial Judge acknowledged that the source of the liability to make the payment was the judgment or order of the Court of Appeal. He further noted that, as an obligation to discharge that liability by payment did not arise until the costs had been quantified by taxation, the bankruptcy notice was required to refer to both the judgment or order and the taxing officer's certificate." His Honour then continued: 'This notice complies with the requirements of s 41. It correctly identifies the judgment of 7 April, 1992 as the source of the debtor's liability to pay the amount demanded in respect of costs and it refers to the certificate of taxation that issued pursuant to the judgment on 24 September, 1992. I do not think the notice can fairly be said to have misled the debtor in any relevant respect, even though it did not, in express terms, refer to the amount demanded by the notice as the amount for which the certificate of taxation referred to in the notice had issued.' Unlike the circumstances which arose in Re McGregor; McGregor v Clancy and Triado Pty (1991) 100 ALR 431 where the certificate of the taxing officer of the Family Court was deemed, under the rules of that Court, to be "a judgment for debt immediately due and payable", there was here both an order of the Court of Appeal disposing of an issue between the appellant and the respondent and a certificate of a taxing officer which quantified the amount payable by the respondent pursuant to that order. Both the order and the certificate of taxation are sufficiently identified in the bankruptcy notice. We therefore agree that it was not defective in form." It is common ground that, although Walsh J's judgment ordering the appellant to pay the respondent's taxed costs was given on 23 August 1996, those costs were not taxed until 17 October 1996. The question is whether the bankruptcy notice was defective by not referring to the certificate of the taxing officer. Sections 41(1) and (2) of the Bankruptcy Act, in the form in which they were when the bankruptcy notice was issued, provided that the notice "be in accordance with the prescribed form" and that the prescribed form be such that the notice required the debtor to pay "the judgment debt or sum ordered to be paid in accordance with the judgment or order". Rule 8 of the Bankruptcy Rules then provided that for the purposes of s 41(1)(a) a bankruptcy notice was to be in accordance with Form 4. Form 4, at that time relevantly provided: "WHEREAS (name and address of judgment creditor) (hereinafter referred to as "the judgment creditor") has claimed that the sum of $ is due by you to him under a final judgment (or order) obtained by him against you in the Court of on the day of , 19 , being a judgment (or an order) the execution of which has not been stayed:" The respondent submits that in the case of an order for costs, the only effective judgment or order is the order of the Court itself (here the order of Walsh J). The respondent contends that the taxing officer's certificate "merely quantifies the amount to be paid pursuant to that order." There are authorities to the effect that a bankruptcy notice is defective if it merely refers to the certificate of taxation as being the final judgment recited in it: Re Cartwright; Ex parte Cartwright v Barker [1975] 2 All ER 970; Wilmot v Buckley (1984) 2 FCR 540at 543. As Beaumont J pointed out in that case, the source of the applicant's liability for costs is the judgment which ordered him to pay those costs. The present case is one where the source of the liability has been correctly referred to (Walsh J's order of 23 August 1996) but without reference to the subsequent taxation of the costs which Walsh J had ordered the appellant to pay. The leading judgment in Cartwright v Barker was that of Goulding J. At p.972 in his Lordship's reasons for judgment, it can be seen that he, in turn, placed reliance on two earlier Court of Appeal decisions, namely Re Faithfull (1885) 14 QBD 627 and Re Alexander [1892] 1 QB 216. In the report of Re Faithfull (at 629) it can be seen that in the bankruptcy notice in that matter the unpaid balance of costs owing was described as the amount of the balance due on a final judgment obtained against Mr Faithfull in the Chancery Division on 17 November 1883. That was the date upon which Chitty J made various orders including an order that Mr Faithfull pay the plaintiff's costs of the action. Those costs were not taxed until 23 January 1884. A registrar had set aside the bankruptcy notice on the ground that the judgment of 17 November 1883 was not a final judgment because, under one of its other provisions, there had to be an assessment of damages. The Court of Appeal unanimously allowed the appeal and ruled that the bankruptcy notice was to stand. No member of the Court of Appeal seemed to think that there was any significance in the fact that the bankruptcy notice did not refer to the taxation of the costs. At p 634 Brett MR said: "... and an order for the payment of costs when taxed, which is part of the judgment, is a final judgment for the costs. The costs when taxed are then a debt due in respect of a final judgment." At the same page, Cotton LJ said: "I am of the same opinion. The question is whether the appellant is "a creditor who has obtained a final judgment" against the respondent. Is this order a judgment at all? Clearly it is. It is the final judgment at the trial of an action, though it contains a direction to make certain inquiries. It is a final judgment at the trial that the defendant had broken his covenant, and that there ought to be a perpetual injunction to restrain him from committing further breaches, and it is accompanied by an order for the payment by the defendant of the costs of the action. In my opinion that is a final judgment for the payment of the taxed amount of the costs." It is not apparent from the report of Re Alexander whether the bankruptcy notice served in that matter referred to the certificate of taxation. It is implicit that the bankruptcy notice was based on the judgment of 10 June 1891 when the defendant was ordered to pay costs to be taxed. At pp 218-219 Lord Esher MR said: "North, J., did not stay the taxation of the costs, or reserve the question of costs, but he made an out and out order that the costs should be paid by the defendant as soon as they had been taxed. That was a final judgment for the costs. No further direction had to be given by the Court; nothing remained to be done but to tax the costs, and, so soon as they had been taxed, the judgment was an absolutely final one upon which execution could at once be issued ... In my opinion the order for payment of costs is a final judgment which will support a bankruptcy notice." At p 220 Kaye LJ said: "In my opinion, the judgment for costs is as final as any judgment can be, and I have no doubt it was intended by the judge to be a final judgment." One of the leading cases in this particular area of bankruptcy law is James v Federal Commissioner of Taxation (1955) 93 CLR 645. James is usually cited as authority for the propositions that a bankruptcy notice is invalid if it is capable of misleading the debtor and that the Court cannot inquire whether the debtor has in fact been misled or not. The Court observed (at p 644): "In this case it is probable that he was not misled. It is sufficient that he could be misled." Strictly speaking, it might be argued that the basis for the Court's decision on the "misleading of the debtor" point was confined to the fact that the bankruptcy notice in James was capable of misleading the debtor as to the manner in which he might have secured or compounded for the debt. [The High Court found another defect, namely that the bankruptcy notice required payment of the debt at a particular place, whereas there was no such requirement in the judgment upon which the bankruptcy notice was founded. But that is not relevant to the present point.] However, subsequent cases have applied the ratio decidendi in James as extending to defects which are capable of misleading the debtor on other pertinent matters - see, for example Kleinwort Benson Australia Ltd v Crowl (1988) 165 CLR 71; Clyne v Deputy Commissioner of Taxation (1982) 42 ALR 703 at 706. I think that it is interesting and useful to note that the bankruptcy notice in James, like the bankruptcy notice in the present matter, was founded upon an order for costs against the debtor and referred only to that order, without any reference to the subsequent taxation of those costs. A justice of the High Court had, on 20 June 1955, struck out a writ of summons in proceedings brought by Mr James and ordered him to pay the defendants' (judgment creditors') costs "limited to one day". The costs were taxed and allowed at Ł292.2.11d That was the amount claimed in the bankruptcy notice. The sum was described as being the amount due on a final order obtained on 20 June 1955. I acknowledge that the High Court in James found that it was not necessary to consider all of the objections raised to the validity of the notice (see p 637). However, among the numerous grounds relied upon by the eminent counsel who appeared for the debtor, there was no point taken to the effect that the bankruptcy notice did not refer to the taxation of the costs. The case was argued over two days and it is almost inconceivable that if there were something in the point, it was overlooked by counsel and the Full Court of the High Court constituted by Williams, Kitto and Taylor JJ. The passages upon which the appellant relies in Re Gibbs at first instance and on appeal were obiter dicta because the bankruptcy notice in that case referred both to the judgment for costs and the taxation of those costs. There does not appear to be any other binding or persuasive authority on the point. While I acknowledge that the matter is not free from doubt, in my view it was sufficient compliance with Form 4 to refer to the judgment of Walsh J. The form required the respondent to identify the final judgment which it had obtained against the appellant. It was obliged to identify that final judgment in terms of the Court and the date. A model bankruptcy notice might well refer to both the "source" judgment and the subsequent taxation which quantified the debt. But, in my view, that does not make defective a bankruptcy notice which refers only to the original judgment, being the minimum requirement of the Bankruptcy Act and the Rules. With all due respect to Drummond J and the Full Court in Re Gibbs, I do not think that it was necessary to add a reference to the certificate of taxation. That certificate simply quantifies the amount owing under the final judgment. If I am wrong in that regard and the omission is a defect, then the question is whether it is a defect which causes the notice to be a nullity. As mentioned above, the test is whether the debtor could be misled, not whether in fact he was misled.

I accept the respondent's submission that, in deciding this issue, the Court may look at facts extraneous to the notice itself: Re Wimborne (1979) 24 ALR 494 at p 499, a decision of Lockhart J. Counsel for the respondent referred us to paragraph 5 of an affidavit sworn by Mr B M Kay, the respondent's credit manager. The relevant paragraph was as follows: "5. I am informed by Bristile's solicitors and verily believe that the Debtor attended personally on the taxation of the said Bill of Costs and did not object to the signing of the allocatur". Furthermore counsel for the respondent told us from the bar table that he in fact attended the taxation of costs and that the appellant was there. In written submissions, filed after the hearing of the appeal, the appellant objected to paragraph 5 of Mr Kay's affidavit as being "inadmissible hearsay comment". I do not think that this part of the appellant's further written submissions fell within the leave granted by us to file and serve further submissions. As no objection was taken to the evidence to which I have referred immediately above and as the appellant has chosen not to file any affidavit refuting the allegation that he was present at the taxation of the costs and did not object to the allocatur, I think that we can safely find that Mr Thorpe was in fact present at the taxation of the costs and did not object to the allocatur. As Lockhart J observed in Re Wimborne (at p 500): It is clear from the cases to which I have referred that, although the courts draw a definite distinction between the possibility of the debtor being misled and the question whether he was misled in fact, the latter being an impermissible field of inquiry, it is the capacity of the bankruptcy notice to mislead the debtor to whom the notice is directed that matters, not some hypothetical debtor." I would respectfully follow the course which Lockhart J took in Re Wimborne. The factual circumstances of that case are similar enough to the circumstances of the present matter. If, contrary to the conclusion which I have expressed above, the bankruptcy notice in the present matter was defective in not referring to the taxation of costs, the appellant could not have been misled by any such mis-statement. Accordingly s 306 of the Bankruptcy Act saves the bankruptcy notice from invalidity. Interest on the Costs Order In yet further "submissions in reply" the appellant complained that interest was claimed in the bankruptcy notice from 24 August 1996, notwithstanding that costs "weren't calculated as owing until 17 October 1996". Once again, I consider that this objection did not fall within our grant of leave to file further submissions. However, in my view, there is nothing in the point. Section 142 of the Supreme Court Act 1935 (WA) relevantly provides that every judgment debt shall carry interest from the date of the judgment. It is not necessary to refer to the manner in which the rate of such interest is prescribed from time to time. Interest on taxed costs pursuant to s 142 of the Supreme Court Act runs from the date of judgment and not from the date of the certificate of taxation: see Seaman "Civil Procedure Western Australia" at paragraph 66.57.1 and the authorities referred to in that paragraph, and in particular the decision of Walsh J in State Planning Commission v Della Vedova (1992) 7 WAR 81. The judgment upon which the bankruptcy notice was founded was entered on 23 August 1996 and it is apparent from the bankruptcy notice that interest was calculated from 24 August 1996. There is no substance in the appellant's submission. Conclusion For the above reasons, I would dismiss the appeal with costs.

I certify that this and the preceding nineteen (19) pages are a true copy of the Reasons for Judgment of Justice Carr

GENERAL DISTRIBUTION IN THE FEDERAL COURT OF AUSTRALIA

western australia DISTRICT REGISTRY wag 92 of 1997

REASONS FOR JUDGMENT R D NICHOLSON J: I have had the advantage of reading in draft the reasons for judgment of Carr J. I agree with those reasons and the conclusions which they reach in relation to the priority point and s 51AA of the Trade Practices Act (1974) (Cth). These reasons address the remaining issue concerning the form of the bankruptcy notice. A bankruptcy notice is a creature of statute. It is created by and for the purposes of the Bankruptcy Act 1966 (Cth) ("the Act"). The first reference which occurs to it in the Act is in s 40(1)(g) which provides a debtor commits an act of bankruptcy in a number of cases including: "(g) if a creditor who has obtained against the debtor a final judgment or final order, being a judgment or final order, being a judgment or order the execution of which has not been stayed, has served on the debtor in Australia or, by leave of the Court, elsewhere, a bankruptcy notice under this Act and the debtor does not: (i) where the notice was served in Australia - within the time specified in the notice; or (ii) where the notice was served elsewhere - within the time fixed for the purpose by the order giving leave to effect the service; comply with the requirements of the notice or satisfy the Court that he or she has a counter-claim, set-off or cross demand equal to or exceeding the amount of judgment debt or sum payable under the final order, as the case may be, being a counter-claim, set-off or cross demand that he or she could not have set up in the action or proceeding in which the judgment or order was obtained;" It will be observed the paragraph requires "a final judgment or final order". However it must be a final judgment or final order with which the debtor can "comply" or "satisfy the Court that he or she has a counter-claim, set-off or cross demand equal to or exceeding the amount of the judgment debt or sum payable under the final order, as the case may be ...". On the face of it the order made by Walsh J on 23 August 1996 dismissing the application for an interlocutory injunction and ordering "the Defendant pay the First Third Party's costs of the application to be taxed" would not place the debtor in the position where he could comply or satisfy the Court as to a counter-claim set-off or cross demand. The obligation for payment in that order is expressed to be in terms of an amount subject to a condition subsequent - namely the act of taxation. The requirements of a bankruptcy notice are set out in s 41 and reg 4.02. Without canvassing each of those provisions, it is sufficient to state they require the notice to be referable to a fixed quantum of debt. In compliance with s 41(1) a notice cannot be issued by an Official Receiver unless there is a final judgment or order for a known quantum. By operation of s 41(2) that quantum of indebtedness must be stated in the notice. The clear requirement of these statutory provisions is that the bankruptcy notice is one which is quantified in the sense it refers to a final judgment or final order which makes available to the debtor the options provided for in par 40(1)(g). The order of Walsh J made on 23 August 1996 was not, on its face, of that type. However, that was not what the bankruptcy notice in the present matter relied solely upon. The terms of the notice are set out in the reasons for judgment of Carr J. The notice refers to the final judgment being that of Walsh J given on 23 August 1996 but then quantifies the total sum at $5095.19 being the sum said to be due under that judgment together with interest. This is not therefore a case where it could be said the debtor had not been faced with a notice not compliant with par 40(1)(g), provided it is correct the final judgment relied upon is the source of authority for the obligation to pay the debt. A bill of costs does not itself give rise to any final judgment or order. The taxing of a bill is the act of a registrar rather than a judge. The outcome of the taxation process is certification that a bill of costs has been taxed at a certain sum. Apart from the effect of any Rule of Court, a certificate cannot satisfy the requirements of "final judgment or final order". In Western Australia interest in the Supreme Court runs from the date of the substantive judgment: State Planning Commission v Della Vedova (1992) 7 WAR 81 applying Hunt v R M Douglas (Roofing) Ltd [1990] 1 AC 398 at 415‑416 per Lord Ackner. The reasoning in Hunt was that a judgment for "costs to be taxed" is treated in the same way as judgment for damages to be assessed, so where the amount ultimately is ascertained it is treated as if it were mentioned in the judgment - no further order being required. In my view this is confirmatory of a judgment for "costs to be taxed" being the relevant final judgment or order for the purposes of par 40(1)(g) of the Act. Carr J has canvassed the authorities cited in argument and I am unable to add anything to his development of them. In the light of those authorities and the first principles deriving from the statutory provisions shaping the nature of a bankruptcy notice, I am unable to see why the bankruptcy notice at issue in this proceeding was defective. It made reference to the relevant final judgment. The debtor was fully informed by the notice for the purposes of the operation of ss 40‑42 of the Act. He was informed of the amount of taxed costs which, following taxation, merged in the judgment of Walsh J. I agree with Carr J it was not necessary for the bankruptcy notice to refer to the taxation of costs provided the figure resulting from that taxation was referred to in the notice.

For these added reasons I concur with the reasons of Carr J and with the conclusion he reaches that the appeal should be dismissed with costs. I certify that this and the preceding three (3) pages are a true copy of the Reasons for Judgment herein of the Honourable Justice R D NICHOLSON

Bankruptcy Act 1966(Cth)ss 41(1)(g), 41(7), 306

Transfer of Land Act 1893(WA)s 140

Trade Practices Act 1974(Cth)

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