Lewis v Nortex Pty Limited

Federal Court of Australia (Full Court)|2013-06-03|Before: Yates JJ

background 75 The service of the bankruptcy notice has its origin in lengthy proceedings conducted in the Supreme Court of New South Wales (the Supreme Court). 76 The proceedings were commenced by Lamru Pty Limited (Lamru) in relation to the operation of the first respondent (Nortex) and the Nortex Unit Trust. Relief was sought and obtained against the appellant and a company controlled by him called Kation Pty Limited (Kation). Nortex was the sole trustee of the Nortex Unit Trust. Kation and Lamru were the only entities that held interests in the trust. Kation held a 60% interest and Lamru held a 40% interest. Nortex's sole function was to carry on the trading activities of the Nortex Unit Trust. 77 Nortex was placed into liquidation on 3 September 1997. The second respondent is its sole liquidator (the Liquidator). The trust deed which established the Nortex Unit Trust provided that, if the trustee was a corporation that had entered into liquidation, the office of trustee would, by reason of that fact, be "determined and vacated". No new trustee of the Nortex Unit Trust was appointed after Nortex was placed in liquidation. The appellant accepts, as he did before the primary judge, that Nortex remained at least a bare trustee of the trust fund of the Nortex Unit Trust. The primary judge held, correctly, that the Liquidator's powers and functions included such powers and functions as were necessary to deal with the ongoing obligations of Nortex as trustee of the Nortex Unit Trust.

The appeal 88 The notice of appeal contains ten grounds. At the commencement of oral argument, counsel for the appellant informed the Court that grounds 6, 7 and 8 of the notice of appeal were not pressed. In written submissions filed at an earlier time, counsel for the appellant had noted that ground 5 would be resolved in light of the decision in Lewis v Lamru Pty Ltd (2012) 207 FCR 1. That decision was delivered before the hearing of this appeal, the result being contrary to the arguments of the appellant. Counsel for the appellant, when asked during the hearing, denied that ground 5 was also abandoned, saying that it "tied in with" the other grounds and he would explain why. No explanation of how ground 5 could survive that decision became apparent. Accordingly, we proceed on the basis that the earlier decision resolves that ground against the appellant. The remaining grounds of appeal were directed to the appellant's principal contention before the primary judge which was that, although the Bankruptcy Act permits more than one final judgment order to be relied upon to found a bankruptcy notice, each of the judgments or orders must be "on the same account". 89 The appellant submitted that a bankruptcy notice issued by two named creditors breaches an essential condition of the Bankruptcy Act. He submitted that any proceeding to enforce the orders in paragraphs 3(e) and 4(c) may be brought by the Liquidator in the name of Nortex, whereas any proceeding to enforce the order in paragraph 4(d) must be brought by the Liquidator in his own name. Thus, he submitted, the claims the subject of the bankruptcy notice were claims on "separate accounts". As such, there was no "joint obligation" payable to the respondents contemplated by the provisions of ss 40(1)(g) or 41 of the Bankruptcy Act, to the extent that reliance could be placed on more than one judgment. He submitted that Nortex and the Liquidator did not constitute a "creditor" for the purposes of s 40(1)(g). They rely on different orders. Moreover, they rely on those different orders in different capacities. Having been issued by two named creditors with claims on separate accounts, the bankruptcy notice was issued in breach of an essential condition of the Bankruptcy Act. 90 The principle on which the appellant relies is one articulated in DJ Sweeney Holdings Pty Ltd v McLeod (2011) 253 FLR 1. In that case, the Federal Magistrates Court of Australia (now the Federal Circuit Court of Australia) held that a bankruptcy notice was bad - and could not ground a creditor's petition - where the notice was based on separate debts owing to separate creditors. The court found the position to be otherwise in the case of several joint creditors named in the one bankruptcy notice. 91 In the present case, the primary judge was not asked to examine the correctness of that principle or the decision in Sweeney itself. Nevertheless, in his Honour's analysis, the final orders on which the bankruptcy notice was based required all payments to be made to or through the Liquidator acting in his capacity as liquidator of Nortex. At [14], his Honour said: … The fact that some payments are to be made directly into the Trust Fund and others are to be held in a separate account (at least for an interim period) makes no difference to the capacity in which the liquidator is to receive the payments and the capacity in which he is to act thereafter. The terms of the orders make that sufficiently clear. Attention to the source of the liquidator's authority confirms it. 92 In this appeal, neither the Liquidator nor Nortex challenged the correctness of the decision in Sweeney. Rather, they contended that the relevant orders did not involve payment on separate accounts. They supported the reasoning and conclusion of the primary judge on that question.

Consideration 93 The primary judge was correct in the conclusion to which he came. 94 It is clear that the orders in paragraphs 3(e) and 4(c) require payments into the trust fund. At the time that the bankruptcy notice was issued, the only person to whom the payments required by these orders could have been made was the trustee of the Nortex Unit Trust. The trustee was Nortex. However, the affairs of Nortex in liquidation were controlled by the Liquidator. In his capacity as liquidator of Nortex, the Liquidator was empowered by s 477(2)(m) of the Corporations Act 2001 (Cth) to do all acts in the name of and on behalf of Nortex and to do all such other things as are necessary for winding up the affairs of the company, including distributing its property. The "affairs" and "property" to which that section refers would include the affairs of Nortex in its capacity as trustee of the Nortex Unit Trust and the property that it holds as trustee. It follows that the only person who could have required the payments to be made was the Liquidator acting in his capacity as liquidator of Nortex. 95 It is also clear that the sums to be paid under the order made in paragraph 4(d) were to be received by the Liquidator as part of the trust fund, albeit that they represented money to be applied in accordance with the orders made by the Supreme Court. The Liquidator was required to place that money into an interest-bearing account. The order provides for an alternative means of payment (namely, into court). It is not suggested that the alternative means of payment was engaged in this case. The fact that the Liquidator was required to place the money into an interest-bearing account does not alter the fact that that debt was one owed to the Liquidator in his capacity as liquidator of Nortex in its capacity as trustee, and that the money so received constituted trust funds. 96 At [19], the primary judge observed that the order made in paragraph 4(d) represented a way of addressing Lamru's entitlement as a beneficiary under the Nortex Unit Trust, with which the appellant had interfered. His Honour continued: … Orders directing or resulting in payment to Lamru are no less orders in vindication of the interests held in the Nortex Unit Trust, and a discharge of the continuing obligations of its trustee (Nortex) and of the trustee's liquidator, than are Orders 3(e), 3(f) and 4(c). 97 That observation is, with respect, a correct characterisation of the orders and of the nature of the payments required to be made under them. 98 No different conclusion is required because the orders made in paragraphs 4(e) and (f) contemplated that various applications might be made to the Supreme Court in relation to the sums required to be paid under paragraph 4(d). At the time of the bankruptcy notice, all payments required to be made by the relevant orders were to be made to and received by the Liquidator as trust funds to be applied by the Liquidator in the liquidation of Nortex. The sums required to be paid under paragraph 4(d) of the orders did not lose that identity simply because applications could be made as to how, ultimately, they might be required to be disbursed. 99 As the primary judge said (at [17]): … There was no suggestion that the liquidator could do so in any capacity other than as the liquidator of Nortex, as the continuing trustee of the Nortex Unit Trust. The liquidator also has sufficient standing to enforce the obligation to make those payments. Any such action would be taken as the liquidator of Nortex. 100 As to the bankruptcy notice generally, the primary judge concluded (at [21]): … [T]he claim represented by the bankruptcy notice is a claim by the same interest in all relevant respects. It is a claim for payment due to make good unlawful appropriations for the Nortex Unit Trust. The claim may be made by the liquidator, acting in that capacity and in the name of Nortex (in liquidation). It follows that the principal argument of the applicant should not be accepted. 101 No error has been demonstrated in his Honour's reasoning or conclusion. It follows that the appellant's principal contention must be rejected.

Disposition 102 The appeal should be dismissed with costs. Nortex and the Liquidator filed, with leave, a notice of contention. Given the conclusion reached above, it is not necessary to deal with that matter. I certify that the preceding twenty-nine (29) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justices Jagot and Yates.

Bankruptcy Legislation Amendment Act 2002(Cth)

(Imp) Corporations Act 2001(Cth)s 477

Bankruptcy Act 1966(Cth)ss 30, 40, 41, 44

THE APPEAL 16 The grounds set out in the notice of appeal are as follows: 1. His Honour erred in law in determining as he did in paragraph [14] of the Judgment, that each of Orders 3(e), 3(f)[sic], 4(c) and 4(d) made by Justice Hamilton in the Supreme Court of New South Wales, as amended by the Court of Appeal and reflected in the document annexed to Bankruptcy Notice number BN 763 issued on 8 February 2012 (the "Bankruptcy Notice"), all require payments to be made to or through the Second Respondent acting in his capacity as liquidator of the First Respondent. 2. His Honour erred in law in determining that each of orders 3(e), 3(f)[sic] and 4(c), on the one hand, and order 4(d) on the other hand were each enforceable by the First Respondent and the Second respondent in the same capacity and interest. 3. His Honour erred in law in failing to determine that, on the one hand, orders 3(d), 3(e) and 4(c) required payment to the First Respondent as bare trustee for the Nortex Unit Trust whereas order 4(d) required payment to the Second Respondent as trustee for Lamru Pty Limited and himself. 4. His Honour erred in law in determining that the claim represented by the Bankruptcy Notice is a claim by the same interest in all relevant respects. 5. His Honour erred in law in determining that the document attached to Bankruptcy Notice was a "final judgment or final order" as required by section 41 of the Bankruptcy Act 1966. 6. His Honour erred in law in failing to determine that the Bankruptcy Notice was invalid by reason of section 41(2) of the Bankruptcy Act 1966 in that the Bankruptcy Notice failed to distinguish between the principal debt and post-judgment interest in accordance with the form prescribed under regulation 4.02 of the Bankruptcy Regulations 1966. 7. His Honour erred in law in applying the reasons given by Justice Foster in Lewis v Lamru Pty Limited; In the matter of Lewis [2011] FCA 768 at [37] to [41] in relation to the appellant's submission in relation to the non-compliance with section 41(2) of the Bankruptcy Act. 8. His Honour erred in law in failing to determine that the Bankruptcy Notice was objectively misleading or confusing as to the requirements for compliance with the Bankruptcy Notice, in that the attachment to the Bankruptcy Notice, under the heading "Note to Debtor", required the debtor to make a decision as to how much, and to whom, he was required to pay in order to comply with the Bankruptcy Notice. 9. His Honour ought to have found that the Respondents had failed to satisfy a matter made essential by the Bankruptcy Act 1966 in respect of the issue of a Bankruptcy Notice in that the respective claims of the First Respondent and the Second Respondent were on separate accounts and that they could not jointly apply for and have issued by the Official Receiver a Bankruptcy Notice in the form in which it was issued. 10. His Honour ought to have set aside the Bankruptcy Notice. 17 At the commencement of the hearing of the appeal, grounds 6, 7 and 8 were abandoned. Grounds 1, 2, 3 and 4 all seem to address the capacity in which the liquidator was to receive moneys payable to him pursuant to the orders in the Supreme Court proceedings. In particular, Mr Lewis asserts that the liquidator received, or would receive any money pursuant to orders 3(e) and 4(c) in a different capacity from that in which he was to receive any payment pursuant to order 4(d). Ground 5 claims that the orders attached to the bankruptcy notice did not constitute a "final judgment or order" as required by ss 40 and 41 of the Bankruptcy Act. Ground 9 seems to relate back to grounds 1 to 4, asserting that the bankruptcy notice was not in accordance with the requirements of the Bankruptcy Act in that the "respective claims of [Nortex] and the [liquidator] were on separate accounts and that they could not jointly apply for and have issued by the Official Receiver a Bankruptcy Notice in the form in which it was issued". Order 10 asserts a conclusion said to follow from the various grounds. 18 Two primary themes emerge from the submissions on appeal. The first involves the proper construction of ss 40(1)(g) and 41(1) following an amendment to the latter subjection which came into effect on 5 May 2003 (the "Amendment"). The second theme is the nature of the liquidator's interest, if any, in any amount payable or paid to him pursuant to order 4(d). 19 In oral submissions counsel for Mr Lewis focussed on the capacity of a creditor to obtain and serve a bankruptcy notice based on two judgment debts owing to one creditor, but not in "the same interest". In DJ Sweeney Holdings Pty Ltd v McLeod (2011) 253 FLR 1, a federal magistrate held that s 41(1) authorized multiple creditors to obtain and serve a bankruptcy notice only if their claims were "in the same interest". This seems to have meant that the debt was, or the debts were owed to them jointly. Counsel did not concede that the liquidator could, in any circumstances, obtain and serve a bankruptcy notice for the amount payable pursuant to order 4(d). See paras 10 and 11 of Mr Lewis's written submissions. However he did not really articulate the basis for that position. This matter is relevant to ground 5. 20 At para 14 of their written submissions Nortex and the liquidator submit: The respondents accept that, subject to the right of separate judgment creditors to join in issuing one bankruptcy notice based upon their respective debts under section 40(1), where a creditor holds a judgment debt against the debtor in one capacity and another judgment debt against the same debtor in another capacity, the judgment creditor must either issue one bankruptcy notice making plain that he is issuing the notice in two different capacities, or the creditor must issue a separate bankruptcy notice in respect of each debt. Secretary of State v Frid [2004] 2 AC 506 at [14]-[16], [19] and [26]. This is because set off is available only between parties in the same interest and the bankrupt cannot set off a debt owed to a trustee in that capacity against a debt owed to him by the trustee personally or in some other capacity Ebert v Union Trustee Co of Australia Ltd (1960) 104 CLR 346. 21 I have been unable to find in Frid any support for the proposition concerning bankruptcy notices. Indeed, the case was not concerned with bankruptcy notices. It rather concerned a process of the kind contemplated by s 86 of the Bankruptcy Act, involving the offsetting of mutual obligations in order to arrive at an amount to be proven in the bankruptcy. 22 As to the second theme, Nortex and the liquidator submit that a liquidator is entitled to get in the assets of the company, regardless of how he or she may be obliged to dispose of those assets once they are recovered. Thus the liquidator might recover an amount which is distributable amongst creditors generally, and might also recover an asset which is subject to a charge, in respect of which the liquidator may have to account to the chargee. Thus it is said that the liquidator was entitled to serve a bankruptcy notice based upon the order that the fund be paid to him, regardless of how it was to be applied by him. This submission seems to assume that because the liquidator is entitled to get in Nortex's assets, he is entitled to enforce the order for payment contained in order 4(d), and that such entitlement confers a right to obtain and serve a bankruptcy notice based on that "debt". The basis for those assumptions has not been articulated.

MULTIPLE CREDITORS AND MULTIPLE DEBTS 23 The question of the proper construction of ss 40(1)(g) and 41(1) addresses the following questions: whether two or more judgment creditors, having judgment debts owed to them severally, may unite in obtaining and serving a bankruptcy notice; and whether a judgment creditor may obtain and serve a bankruptcy notice based upon two or more judgment debts, owed to him or her in different capacities. 24 Section 40(1)(g) of the Bankruptcy Act provides that a debtor commits an act of bankruptcy: if a creditor who has obtained against the debtor a final 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 the 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 … . 25 Section 41(1) provides: An official receiver may issue a bankruptcy notice on the application of a creditor who has obtained against the debtor: (a) a final judgment or final order that: (i) is of the kind described in paragraph 40(1)(g); and (ii) is for an amount of at least $5,000; or (b) two or more final judgments or final orders that: (i) are of the kind described in paragraph 40(1)(g); and (ii) taken together are for an amount of at least $5,000. 26 Sections 40(1)(g) and 41 operate in conjunction. The former provides for the obtaining and service of a bankruptcy notice by a judgment creditor and the required response by the judgment debtor. Section 41 authorizes and regulates the issue of bankruptcy notices by the Official Receiver and also deals with the judgment debtor's response. Prior to 5 May 2003, it seems to have been accepted that a bankruptcy notice could relate to only one judgment debt. Thus, save in the case of joint creditors, there could be no question of more than one judgment creditor seeking the issue of the same bankruptcy notice. Similarly, it followed that one judgment creditor could not obtain and serve a bankruptcy notice based on two or more judgment debts, one or more owed to him or her in one capacity and one or more owed to him or her in a different capacity. Such debts would presumably be pursuant to separate judgments or orders, even if made in the same proceedings. Perhaps curiously, s 44 then provided that creditors could aggregate their debts in order to satisfy the requirement that the "creditor" be owed $2,000 or more as a pre-requisite to presenting a petition in bankruptcy. That figure has now been increased to $5,000. 27 The Amendment was effected by the Bankruptcy Legislation Amendment Act 2002 (Cth) which amended s 41(1) by adding s 41(1)(b), so that a bankruptcy notice could be issued on the application of a creditor having two or more judgment debts totalling at least $2,000.00 (now $5,000). Although s 41(1), as amended, contemplates the issue of one bankruptcy notice based on two or more judgment debts, it still refers to an application by "a creditor" and to a creditor who has obtained "two or more final judgments or orders". Nortex and the liquidator submit that s 23(b) of the Acts Interpretation Act 1901(Cth) (the "Acts Interpretation Act') operates so that the words "a creditor" in both ss 40(1)(g) and 41 should be read as including "creditors". Section 23(b) provides that words in the singular number include the plural and vice versa. The Acts Interpretation Act applies "subject to any contrary intention" (s 2(2)). 28 In Sweeney the federal magistrate referred to the decision of Goldberg J in GPW Aussie Exports v Latin & Anor (1998) 85 FCR 324. That case, which was decided prior to the Amendment, concerned the validity of a bankruptcy notice based upon three judgment debts owed to one judgment creditor. In support of the validity of the notice, the judgment creditor relied upon the decision of Beaumont J in Illawarra Credit Union Ltd v Objniczak (unreported, Federal Court NG 7300 of 1998, 26 May 1998). Beaumont J had held that s 23(b) of the Acts Interpretation Act applied to s 41(1) so as to permit the issue of a bankruptcy notice based on more than one judgment debt. Goldberg J refused to follow that decision, relying upon a line of authority which he considered to be "too well established to enable me as a single Judge to reconsider the matter". In particular, his Honour referred to a review of the authorities in the judgment of Foster J in Re Bond; Ex parte HongKongBank of Australia Ltd (1991) 33 FCR 426. Goldberg J pointed out at 325 that the line of authority had its genesis in the decision of In re Low; Ex parte Argentine Goldfields Ltd (1891) 1 QB 147. 29 In Low, the Court of Appeal held that a bankruptcy notice could not be based on two judgment debts owed to one judgment creditor. The Court gave three reasons for reaching this conclusion. The first was that the relevant section referred to only one debt. The second was that another section made specific provision for the presentation of a petition by two or more creditors, as does s 44 of the Bankruptcy Act. The Court concluded that given the express reference to two or more creditors acting together for that purpose, the absence of any express reference to two or more debts being included in a bankruptcy notice indicated that such inclusion was not authorized. Finally, it was said that the debtor had a right to pay off, or raise a counter-claim, set-off or cross demand to one debt, and so prevent its being used to support a petition in bankruptcy, and that the relevant legislation should not be construed in such a way as to deprive the debtor of that right. 30 Prior to the decision in Low there had been at least two English decisions to the effect that two or more creditors could present a debtor's summons based on separate debts. The debtor's summons seems to have been the predecessor of the bankruptcy notice. Section 6 of the Bankruptcy Act 1869 (Imp) provided that a creditor, or two or more creditors could present a petition in bankruptcy if the judgment debtor had committed an act of bankruptcy. Section 6(6) provided that one such act of bankruptcy was failure to comply with a debtor's summons. A debtor's summons was issued by the Court pursuant to s 7, provided that the creditor had satisfied it that the debt was due. The debtor could then seek to satisfy the Court that he or she was not so indebted, or that the summons should be set aside upon other grounds. The primary difference between the debtor's summons and the bankruptcy notice seems to have been that the former could be issued for a debt other than a judgment debt. 31 In Ex parte Kibble; In re Onslow (1875) 10 LR Ch App 373, James and Mellish LJJ concluded that several creditors could join in presenting a debtor's summons. However the Court considered such a course to be inconvenient. It also considered that if it were adopted, all creditors would "stand or fall together". In re Andrew [1875] 1 Ch D 358, a decision of the Court of Appeal, is to similar effect. The latter decision was applied by Cussen J in Re Williams; Ex parte Englefield [1919] VLR 566. At that time bankruptcy in this country was regulated by state legislation. The Victorian legislation provided for a debtor's summons rather than a bankruptcy notice, and was presumably in much the same form as was the English legislation at the time of the decisions in Kibble and Andrew. Cussen J considered that there were marked differences between the English legislation, as applied in Low and the Victorian legislation but did not identify the relevant differences. Apparently for reason of such differences, his Honour did not follow Low. Whilst referring to Andrew, he based his decision upon the application of the Victorian version of s 23(b) of the Acts Interpretation Act. 32 The Bankruptcy Act 1924 (Cth) (the "1924 Act") established federal jurisdiction in bankruptcy. In the second edition of McDonald Henry and Meek, Australian Bankruptcy Law and Practice (Law Book Company of Australia Ltd, 1940) at 104, Low is cited as authority for the proposition that two or more judgments could not be included in one bankruptcy notice. That position seems to have obtained until the Amendment. Section 23(b) of the Acts Interpretation Act has, in varying forms, been in existence since 1901. 33 In its present form s 41(1) clearly authorizes the issue and service of one bankruptcy notice for two or more judgment debts owed to one judgment creditor. As I have said, two questions arise for present purposes, namely: whether s 41(1) now authorizes two or more judgment creditors to obtain and serve one bankruptcy notice based on debts owed to each of them severally; and whether s 41(1) authorizes one judgment creditor to obtain and serve one bankruptcy notice based on one or more judgment debts owed to him or her in one "right", and one or more judgment debts owed to him or her in some other "right".

A CREDITOR WHO HAS OBTAINED A FINAL JUDGMENT OR FINAL ORDER 55 There is a line of cases which suggests that in determining whether a person is competent to obtain the issue of a bankruptcy notice one looks to the identity of "the principal in whose interest (bankruptcy proceedings) are necessary". See Halsbury's Laws of England (3rd ed) vol 2 p 273. The fourth edition of Halsbury deals with legislation which seems to differ substantially from the Bankruptcy Act. The cases have some factual similarity to the present case. In Ex parte Muirhead (1876) 2 Ch D 22 a husband, as petitioner in a divorce case, obtained a decree of dissolution of marriage. The jury also awarded him, as against the co-respondent, damages in the amount of £5,000. The Court ordered that such sum be paid into court. It was then discovered that the co-respondent was living abroad, so that the order for damages could not be enforced against him. After the decree had become absolute, the petitioner obtained a variation of the order, so that it required payment of the amount of the damages to him, he undertaking to pay it into court to abide any further order. The petitioner then presented a bankruptcy petition against the co-respondent, the act of bankruptcy being his remaining out of England with intent to defeat or delay his creditors. At 25, Cockburn LCJ observed that the order had not "created a good petitioning creditor's debt". His Lordship continued at 25-26: It is quite clear that the award of damages by a jury in an action at law, without a judgment, or an award of damages by a jury in such a proceeding as this suit in the Court of Divorce, without an order of the Court giving effect to the verdict, would not afford a ground of action, or constitute a good petitioning creditor's debt; but it is said that the order of last June has the effect of a judgment, and converts that which would not be a good petitioning creditor's debt into a good petitioning creditor's debt. Now in order to constitute a good petitioning creditor's debt, you must have that which may be the immediate subject of an action at law or suit in equity. What have we here? An order for payment of a sum to which Captain Otway had no title at law or in equity. It would be necessary for him, if the co-respondent were to pay him the amount, to pay it into the registry of the Court of Divorce, to be dealt with as the Court should direct. It was not the intention of the order, nor is it the effect of the order, that the money shall be presently paid as compensation to the Petitioner, Captain Otway. He is merely to receive the money and pay it into Court, and he can take no process for the purpose of enforcing the payment for his own benefit. The only process which the Divorce Court would award him, if it could get the defendant within its jurisdiction, would be a process to compel the latter to pay the money to him for the purpose of being paid into Court, there to be made available as the Court should direct. Under those circumstances, I think the expression used by Mr Benjamin the other day is a very good and apt one - he is simply the conduit pipe of the Court, or, to use an expression still better adapted to the circumstances of the case, and which was used yesterday by the Master of the Rolls, he is in the position of a receiver. If the Court, instead of ordering the money to be paid, in accordance with the usual practice of the Court, into the registry, has the power (upon which I must not be understood as pronouncing any opinion) of ordering payment in this way, that is, to order it to be paid to the Plaintiff in the suit, or to any other party, for the purpose of its being brought into the registry - as to which I see no difference between the position of the plaintiff in the suit and any other person whom the Court might employ for the purpose - it is clear that such a person is only a receiver, and could not apply the money to his own use, but would be bound to bring it within the power of the Court, in order that the Court might exercise its functions with respect to it. That being so, it appears to me that this is not a good petitioning creditor's debt. It certainly is not at law a good petitioning creditor's debt, nor, as far as I understand the matter, is it a good debt in equity. It is nothing more than an order to bring the money into Court, and when it is brought into Court non constat that the plaintiff, who up to the time of getting the verdict was dominus litis will get a single shilling of it. It is in the power of the Court to direct that the whole amount shall be applied to the maintenance of the wife and children. It is impossible to say under these circumstances, where a man has not a present and certain interest in the debt, that he has such a debt as can be made the foundation of bankruptcy proceedings. 56 Mellish LJ said at 27-28: It is admitted that if the second order had not been made, but only the first order, there would be no good petitioning creditor's debt, and for a very obvious reason, that although the effect of the order would be to make the sum certainly payable, it would leave it entirely uncertain for whose benefit the sum would be ultimately received, and therefore it would not be a liquidated debt due either at law or in equity to any particular person. Then, does the second order alter the case? I have great difficulty in seeing how it can. There is no real difference in this case between the right at law and the right in equity. The right is given by the statute, and the Court, whether it be a Court of Law or a Court of Equity, must determine the meaning of the statute; and after the second order was made the sum still remained in the same position as it was under the first order, that is to say, it remained the sum of which neither the whole nor any fixed portion is certain to be ultimately received by Captain Otway. Neither, in my opinion, is he a trustee. I quite agree that if a sum is due at law to a person as a trustee, and he is acting in accordance with his trust in presenting a petition, he may present that petition, and there would be in that case a good petitioning creditor's debt; but here I cannot see that any sum is due at law any more than in equity. It appears to me that the Court whether at law or in equity must look at the terms of the Divorce Act, and looking at the terms of the Divorce Act, I cannot help seeing that there is no certain sum due to Captain Otway. 57 His Lordship went on to observe that, nonetheless, the sum might well be a debt provable in any bankruptcy. 58 In Ex parte Jones [1913] WN 263, the debtor was the co-respondent in a divorce suit against whom the petitioner obtained an order for costs. The costs were taxed. The Court then ordered that the co-respondent pay the amount of the taxed costs to the solicitor for the petitioner. That amount was not paid and the solicitor took out, in his own name, a judgment summons against the debtor. Phillimore J held that the summons was fatally flawed. His Lordship's reasons do not appear in the report. 59 Muirhead and Jones were decided pursuant to legislation which referred only to final judgments and not to final orders, a distinction which was of some importance in bankruptcy proceedings. See Ex parte Chinery (1884) 12 QBD 342. The reference to final orders was introduced by the Bankruptcy Act 1914 (Imp). However, both Muirhead and Jones have been followed in cases decided after the 1914 legislation. In In re a Debtor [1929] 2 Ch 146, Lord Hanworth MR said, at 152: The principle raised seems to me to have been the basis of the judgment of Phillimore J in Ex parte Jones, where he pointed out that the right party had not been put forward as principal to initiate proceedings against the debtor. Also, in Ex parte Muirhead … I think that in the judgment of Cockburn LCJ there is the same intention to indicate that the person at whose suit proceedings are taken must be the principal, the person in whose interests those proceedings are necessary. 60 In re a Debtor itself concerned an order directing payment by a co-respondent to the solicitors for the petitioner of the costs of a divorce suit, upon the solicitor's undertaking to lodge in Court any sum so received. The amount was not paid, and the solicitors issued a bankruptcy notice and subsequently, a petition. At 151-152 Lord Hanworth said: Now looking at the order of October 24, which is the basis of the bankruptcy notice, can it be said that it is a "final order" within the meaning of the section? It directs payment to the solicitor of a certain sum on their undertaking to lodge it in Court. Why was it to be paid into Court? In order that it may be the subject of a further and future order. Mr Tindale Davis pointed out the manner in which the sum could be paid out and handed us the form of an order for payment out, from which it appears that the order is one which must be made by the registrar. It is clear, therefore, that further proceedings will be necessary to get the money out of Court, and I think it is also clear that the order of October 24, in its own terms, did not finally determine the right of the petitioner, or anyone else, in respect of the sum to be paid. In my opinion, therefore, the order is not a "final order". 61 His Lordship then turned to the "second point raised" to which I have already referred in connection with the decisions in Muirhead and Jones. 62 Lawrence LJ said at 153: The order of October 24 is neither a final judgment nor a final order. By it the debtor was ordered to pay a certain sum representing the petitioner's costs of the divorce proceedings to the petitioner's solicitors on their express undertaking to lodge the sum when received by them in Court. The order was made in that form because at that time it was not known whether the petitioner would ultimately become entitled to these costs. It might turn out that any moneys paid by the debtor under the order would ultimately have to be returned to him. The order did not purport finally to determine the rights of the parties to the sum mentioned in it, and was in substance and in form a purely interlocutory order. It was contended before us on behalf of the petitioning creditors, however, that after the decree nisi had been made absolute the title of the solicitor's costs became indefeasible and that thereupon the order ought to be treated as a final order. In my opinion this contention is fallacious. It is true that if the order had been complied with the solicitors would after decree absolute probably have had no difficulty in obtaining an order for payment out to them of the amount paid into Court, and that in the present circumstances they would probably have no difficulty in obtaining a final order for payment of the costs either to the petitioner or to themselves instead of into Court. But that fact does not, in my opinion, operate to convert the order of 24 October, from an interlocutory order into a final order. 63 Sankey LJ said: I agree, and I prefer to rest my judgment on the ground that the order of October 24 was not a final order. It was an interlocutory order, a step in proceedings; it was a necessary step, but not a final step. 64 Mason v Mason [1933] P 199 concerned an order made against a husband for payment of the wife's costs to her solicitor. The solicitor sought a garnishee order in respect of unpaid costs. At 202-203 Lord Merrivale said: As to the first objection to the garnishee order nisi, what has to be determined is whether the wife's solicitors were persons who had obtained a judgment or order against the husband for recovery or payment of money - that is, were they his creditors? The order relied on is that of March 10 1933 that the husband "do within seven days pay to Messrs White and Co, the solicitors of the wife, the sum of £366.1s.4d, being with the sum of £170 still in Court and £170 already paid out the amount of the wife's costs as taxed and certified". An affirmative answer to the question I have formulated would seem to involve a conclusion that the solicitors and the wife had each obtained a judgment or order against the alleged debtor. If so, each would be a competent applicant for the garnishee order and entitled under the terms of [the Rules] upon affidavit by himself or his solicitor "to attach the moneys due to the debtor". In the everyday practice of this Division the application by the solicitor for payment by the husband of the wife's costs is taken to be the application of the wife. If this were not so, it would seem that the wife's solicitor, with no misconduct on his part as a solicitor, might be personally condemned in the costs of an unsuccessful application. In my view the person who is entitled to take garnishee proceedings is the actual creditor. A somewhat similar question arose in the Court of Appeal in 1929: In re a Debtor. … There, upon an order in divorce for payment by the co-respondent to the solicitors of the petitioner of the petitioner's costs of the suit, the solicitors proceeded in bankruptcy against the co-respondent, and it was objected that they were not creditors. The judgment of the Court did not proceed upon this ground, but in the course of the judgment of Lord Hanworth MR these words occur: "the person at whose suit proceedings are taken must be the principal, the person in whose interest those proceedings are necessary. In my opinion the petitioning husband in this case was the person who was really the principal, for whose indemnity legal proceedings were necessary. The solicitors were merely acting as a necessary part of the machinery, under which the sum enured for the benefit of the petitioner; but they were not the principals as against the debtor." This was not a decision on the present state of facts, but it appears to me to support the contention raised on the part of the husband in the present case, and my conclusion upon this matter is that the solicitors were not entitled to become applicants as of their own right … . 65 See also Shelley v Shelley (No 1) [1952] P 107. 66 In Australia this line of cases was applied by Clyne J in Re Monckton; Ex parte Robinson (1951) 15 ABC 193. At 195 his Honour said, concerning the facts of the case: The decree nisi ordered that the respondent should pay the petitioner's costs into Court and that such costs, unless otherwise ordered, should be paid out to the petitioner or her solicitor after the decree nisi had been made absolute. 67 His Honour held that the order was not a final order until the decree nisi became absolute and that, even at that time, the wife's solicitor would not become a creditor of the husband, the order for costs being by way of indemnity to the wife and not to her solicitor. Tamberlin J also applied these cases in Klewer v Walton (2004) 2 ABC(NS) 344. That judgment was affirmed on appeal (at [2004] FCAFC 284), but this aspect of the case was apparently not raised on appeal. 68 There appears to be one, very early English decision which may be to contrary effect. It is the decision of a Divisional Court (Field and Cave JJ) in Re Arkell; Ex parte Arkell (1889) 61 LT 90. However the decision seems to have turned upon the precise wording of the order, and a failure by the judgment creditor to adopt that wording in the bankruptcy notice. In In re a Debtor (supra) Lord Hanworth MR (at 152-3) and Sankey LJ (at 154) distinguished Ex parte Arkell, largely by reference to its facts. 69 Orders 4(d), (e) and (f) have the effect that the liquidator is to hold any amount payable pursuant to order 4(d) pending final order. It is difficult to distinguish that position from the positions dealt with in these cases. They demonstrate that order 4(d) is not a final judgment or order for the purposes of the Bankruptcy Act. In my view there is nothing surprising about that conclusion. As I have previously observed, the liquidator's position seems to me to be that of stakeholder, although Lord Chief Justice Cockburn's use of the terms "conduit" and "receiver" may be more appropriate. As the cases demonstrate it follows that the liquidator is not yet a judgment creditor pursuant to order 4(d), at least for the purpose of obtaining and serving a bankruptcy notice. In those circumstances there is no person with whom Mr Lewis might make arrangements for payment as contemplated by the bankruptcy notice, and no person against whom he might seek to establish a counter-claim, set-off or cross demand. 70 This line of cases was not referred to in argument. Indeed, Nortex and the liquidator suggest in their written submissions that Mr Lewis had abandoned ground 5 which asserted that there was no final judgment. In fact, in Mr Lewis's written submissions it is said that ground 5 would be resolved by the then anticipated decision of a Full Court constituted by the same Judges as constitute the Full Court in this case. That judgment was, in fact, published prior to the hearing of this appeal. At the beginning of the hearing in this case, counsel for Mr Lewis was expressly asked if he abandoned ground 5. He replied that he did not abandon it, and that it was "tied in with the others", presumably those grounds which he was pursuing. As I have previously observed, grounds 1 to 4 deal with the different capacities in which the liquidator was acting and the consequences thereof. Although counsel for Mr Lewis may not have actually demonstrated how ground 5 related to grounds 1 to 4, it seems likely that he was referring to the outstanding issue concerning the entitlement of Lamru or the liquidator to any amount payable pursuant to order 4(d). 71 In my view order 4(d) is not a final order for the purposes of ss 40(1)(g) or 41. Further, the liquidator is not, for those purposes, a judgment creditor for the amount to be paid pursuant to that order.

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