Parsons v Bunge [1941] HCA 4;

Parsons v Bunge [1941] HCA 4; - HCA 1941 case summary — Zoe

[6]

On 18th October 1940 the respondent presented a petition in bankruptcy against the appellant, founded on this debt, and also alleging the acts of bankruptcy set out in par. 4 (a), (b), (c), (d), of the petition. No order was obtained before presentation of the petition under reg. 14 of the National Security (War Service Moratorium) Regulations (1940 No. 194). When the matter came before the judge in bankruptcy his Honour, having some doubt as to the application of reg. 14 of the regulations to the circumstances of the case, made an order nunc pro tunc giving the respondent leave to issue the bankruptcy petition under consideration and proceeded to hear the matter. In the course of the hearing his Honour offered the appellant's counsel the right to call evidence and allowed him to cross-examine the respondent on the affidavit filed in support of the petition. Ultimately his Honour dealt with the allegations in the petition and found that the appellant had committed the acts of bankruptcy to which I have referred, and made a sequestration order. The appellant appeals against the order of sequestration. Orders nunc pro tunc may appropriately be made where the court possesses jurisdiction to deal with a matter, but jurisdiction cannot be conferred by antedating an order where jurisdiction does not otherwise exist (In re Keystone Knitting Mills' Trade Mark[1]). But reg. 14 does not require leave to be granted in the case of bankruptcy. The phrase "other legal process" in the rule, divorced from the context, would include a bankruptcy petition, which issues out of the court and cannot be withdrawn without the leave of the court (sec. 59). But the phrase, when read with the context, excludes process in the nature of bankruptcy which is designed to take a debtor's property into the possession of the court for its equitable distribution pro rata amongst his creditors. The rule in question is restricted to the persons specifically mentioned in clause 2 of reg. 14 and can have no operation in the way of protecting all the creditors of the particular member of the Forces or any female dependant of such member. This construction is supported by the fact that reg. 26 is inapplicable to specific periods of limitation provided in the Bankruptcy Act. And the special provisions of reg. 19 as to bankruptcy confirm the view that writs and other legal process are concerned only with the ordinary proceedings in courts of law as contrasted with the proceedings of a bankruptcy court.

[7]

It remains to consider whether there was an act of bankruptcy proved. The statutory affidavit in support of the petition was sufficient prima-facie evidence that the debtor had committed at least one act of bankruptcy, viz., that contained in sec. 52 (k) of the Bankruptcy Act. It is true that the debtor gave notice that he would oppose the making of the sequestration order as prayed and intended to dispute the statements in pars. 4 (a), (b), (c), (d), of the petition. At the hearing, however, he gave no evidence, but it was sought, by cross-examining the petitioning creditor, to prove that the evidence of the acts of bankruptcy was insufficient. I only propose to consider one of the acts of bankruptcy alleged, viz., that "at a meeting of his creditors he gave notice to his creditors that he was about to suspend payment of his debts." It is clear that, if Mr. Shaw, the debtor's solicitor, was his agent for the purpose of making an admission which would constitute the act of bankruptcy mentioned, there was sufficient proof of it. The question then is whether there is sufficient evidence that Mr. Shaw was acting as the debtor's agent in this regard. In circumstances which showed that the appellant was in an insolvent condition, Mr. Shaw called a meeting of the appellant's creditors. At the first meeting the appellant was not present. At this meeting, after Mr. Shaw had stated that he was acting as the appellant's solicitor, he further stated that the appellant "wanted him to go down to the" (military) "camp and fix up the sequestration of his estate." Mr. Shaw also said that "one creditor had issued a summons and the appellant was not prepared to prefer one creditor to another." This meeting was adjourned, and at the adjourned meeting the appellant himself was present and said that "Mr. Shaw was doing his business for him and he had left it in Mr. Shaw's hands." On this occasion also Mr. Shaw made the statement that he would go to the camp and "see what could be done in the way of sequestrating the estate." This evidence clearly proves that at this meeting Mr. Shaw was acting as the agent of the appellant and was thus authorized to make the statement which constitutes the act of bankruptcy.

[14]

The verifying affidavit and a supporting affidavit purport to state the effect of documents creating mortgages and charges without producing those documents or verified copies and to state the result of searches in the Registrar-General's Office without producing a copy of the documents found there or any extract therefrom in accordance with the Evidence Act 1928, sec. 60. In this form, I regard all this matter as inadmissible. The affidavits, however, further state that the appellant's solicitor at a meeting of his creditors stated the effect of the documents creating mortgages or charges and said that the appellant would not make any payment on account of his debts, as one creditor had issued a summons, and that at a later meeting of his creditors the appellant admitted, in answer to questions from his creditors, that he had given the mortgages and charges mentioned by his solicitor. A party's admissions are of course admissible to prove the contents of documents. But it is for the court to satisfy itself that the precise language of the party did amount to an admission, and the affidavit in this case puts the deponent's interpretation upon the appellant's language without setting forth the precise words. An admission tendered in this form should not be received in evidence. Indeed, the petitioning creditor, when cross-examined on his affidavit, said that he could not then recollect the statement to the effect that the appellant would suspend payment of his debts. But there is other evidence which is admissible and sufficient, I think, to establish an act of bankruptcy. Notices calling meetings of creditors to consider the appellant's affairs had been issued. They were given by the appellant's solicitor. The first stated that he was instructed to call a meeting of the appellant's creditors, who were requested to supply a note of the appellant's indebtedness to them. The second stated that, as requested by creditors at the first meeting, an approximate statement of assets and liabilities was enclosed and that the meeting of creditors had been adjourned until a specified date. At the first meeting, the solicitor attended and explained the position of the appellant's affairs, but the appellant himself was not present. At the adjourned meeting, the appellant was present and was questioned as to his affairs. It is sworn by the petitioning creditor, who was crossexamined on his verifying affidavit, that the appellant said at the meeting of creditors when he was present that his solicitor was doing his business for him, that he could say very little, and that he left it in his solicitor's hands. The solicitor at the first meeting informed the creditors that the appellant owed over £15,000, that his assets amounted to about £7,800, including land valued at £4,688, over which there was a mortgage of about £4,165, and 2,045 sheep and seventeen cattle, valued at about £1,942, over which the appellant had given two stock mortgages to a creditor on 18th July 1940, that he had assigned his interest under his father's will to the same creditor, that a considerable part of his farming plant was held under hire-purchase, and that the appellant would not make any payment on account of his debts as one creditor had issued a summons. Such statements, coupled with the notices mentioned, were a plain notice to the creditors at the meetings that the appellant was about to suspend payment of his debts. But it was said that an act of bankruptcy was a personal act or default which could not be committed by the particular act of an agent who had not been authorized to commit it and of which the debtor had no cognizance (Ex parte Blain; In re Sawers[6]). In the present case, however, a solicitor or agent was sent to a meeting of creditors to represent the debtor, the appellant, and to make statements for and on his behalf. They are thus the debtor's statements and bind him just as if he made them himself. It follows that the appellant committed an act of bankruptcy in notifying a meeting of his creditors, through his solicitor, that he was about to suspend payment of his debts.

[21]

A bankruptcy petition is presented to the court, which then seals two copies. A sealed copy is served on the debtor. Although such a document would be a legal process issued out of a court, it would not be apt to describe it as having been issued in respect of a liability of a soldier under a contract. It is grounded upon the existence of an act of bankruptcy which has occurred within six months of the presentation of the petition. It is therefore issued in respect of the alleged insolvency of the debtor and for the purpose of obtaining a sequestration order which will enable his estate to be administered for the benefit of his creditors generally. The debtor must be indebted to the petitioning creditor or creditors in a liquidated sum of £50, and one of the purposes behind the presentation of the petition is, no doubt, to obtain payment of the debt or debts or so much thereof as the debtor's estate will be able to pay in due course of administration, but the liability of the debtor under a contract even for £50 or over is not in itself a justification for the presentation of a petition. There must be an available act of bankruptcy. The liability referred to in the regulation is one which is only enforceable against the member of the Forces by the other party to the contract. But, once a bankruptcy petition has been presented, it cannot be withdrawn without the leave of the court. When a debtor commits an available act of bankruptcy any creditor or creditors to whom the debtor owes the above sum can present a petition, so that, if a person has obtained judgment in an action of tort against a member of the Forces for £50, he can present the petition without the leave of the court, and, upon the making of the sequestration order, a creditor claiming a debt under a contract could prove in the administration of the estate. Clause 2 of the regulation provides that the court must be satisfied that, having regard to all the circum-stances of the case, it would be inequitable to the other party to the contract to give a member of the Forces the benefit of a regulation and it would not inflict hardship on the member. This provision shows that the draftsman contemplated a writ or other legal process in which the only interests to be considered were those of the parties to the contract. Preferences can only be avoided under sec. 95 of the Bankruptcy Act within six months of their creation, and a bankruptcy has relation back to the first available act of bankruptcy committed within six months next preceding the date of the presentation of the petition. It is therefore evident that all the creditors are interested in the question whether leave should be given to issue the petition or not, and it would not be sufficient to inquire if it was inequitable to the petitioning creditor or creditors to refuse the application. It would also be difficult to hold in any case that the issue of the petition would not inflict hardship on the member, whereas in the case of a writ there could be no hardship if the member was in a position to pay. Consideration of the regulations contained in the rule as a whole shows that they were intended to provide relief mainly in respect of bilateral transactions based upon contracts, whether the transaction was a simple contract or a mortgage, bill of sale, or lease, and that the only persons whose interests were to be considered were those of the parties thereto. Reg. 26 provides (so far as material) that, in calculating the time fixed by any Act within which any remedy may be pursued, account shall not be taken of any period during which any proposed proceedings thereunder are stayed. This regulation would be difficult to apply to the periods mentioned in secs. 55 (1) (c) and 95 of the Bankruptcy Act, seeing that there could be creditors outside the operation of the regulations, such as judgment creditors in respect of a tort, or cestuis que trust in respect of ascertained damages for breach of trust, whose rights to present a petition would not be stayed. Usually a creditor can only present a bankruptcy petition after he has obtained a judgment and the debtor has committed an act of bankruptcy under sec. 52 (e) or (j). If a creditor had obtained a judgment prior to the date mentioned in reg. 26 in respect of a contract, the regulation would prevent his issuing execution or a bankruptcy notice in respect thereof without the leave of the court. The member of the Forces would therefore receive ample protection under the regulation without seeking to stretch it to cover the presentation of a bankruptcy petition. Acts of bankruptcy, other than those mentioned in sec. 52 (e), (f) and (j), are based on the debtor's own voluntary act; and there would appear to be no reason why, for instance, a member of the Forces who was insolvent and who voluntarily created a preference in favour of one creditor should be protected against the consequences of such an act to the prejudice of his creditors generally.

[27]

In my opinion the evidence was sufficient to prove at least one of the alleged acts of bankruptcy, namely, that at a meeting of his creditors on 2nd August 1940 convened by his solicitor on his behalf the appellant gave notice to his creditors that he was about to suspend payment of his debts. The appellant was not personally present at this meeting, but he was present at the adjournment of the meeting held on 9th August. At that meeting he said that his solicitor was doing his business for him and that he could say very little as he had left everything to his solicitor. In his presence his solicitor said the appellant wanted him, if permitted by the military authorities, to go to the camp in order to arrange for the sequestration of his estate. At the meeting held on 2nd August, after giving details of the assets and liabilities of the appellant which showed that he was hopelessly insolvent and unable to pay his debts, the solicitor said that the appellant was not making any payment of his debts as one creditor had issued a summons and that he would treat all creditors alike. This was a plain notice to the creditors that the debtor was about to suspend payment of his debts. It was pointed out by Bowen L.J. in In re Lamb; Ex parte Gibson and Bolland[11] that "we have in each case to ask ourselves, and in each case to answer the question, what is the reasonable construction which those who receive this statement of the debtor would have a right, under the circumstances of the debtor's case to assume, and would assume, to be his meaning as to what he intends to do with respect to paying, or suspending payment of, his debts" - See Moy v. Briscoe & Co. Ltd.[12]. The solicitor's statement was made at a convened meeting of creditors, and a statement to the creditors generally is more readily construed as a notice of suspension than if it is made to a single creditor: See Cropley's Ltd. v. Vickery[13]. In fact Mr. Moore for the appellant did not argue seriously to the contrary. His point was, to quote the words of Brett L.J. in Ex parte Blain[14], that "a man cannot commit an act of bankruptcy by a particular act of his agent which he has not authorized and of which act he has no cognizance." In several cases the act of bankruptcy under discussion has been held to have been committed by an agent on behalf of a debtor: See In re Wolstenholme; Ex parte Wolstenholme[15]; In re Lamb; Ex parte Gibson and Bolland[16]; In re Johns; Ex parte Spears[17]; In re Burns; Ex parte Bird[18]. In Re J. A. Bagley[19] Long Innes J. said: "I have no doubt that a debtor of sound mind may commit an act of bankruptcy by his agent, providing that he has specially authorized the commission of that act; for instance a debtor may by his agent give notice of suspension of payment." If his Honour meant that it was necessary for the debtor to give his agent express isolated authority to give notice of the intended suspension of payment, I think he went too far, because in my opinion a debtor can commit this act of bankruptcy by an agent where the general authority is wide enough to include the doing of acts or the making of statements which will amount to such a notice. In the present case the appellant authorized his solicitor to summon a meeting of his creditors, to put the whole of his financial position before them and to represent him at the meeting. The solicitor was therefore authorized to disclose that the debtor's business affairs were in such a condition that he was unable to pay his debts and was about to suspend payment thereof. Indeed, the evidence showed he had in fact suspended payment. In any event the statement about sequestrating his estate made by the solicitor at the adjourned meeting was under all the circumstances a sufficient notice. The evidence was therefore sufficient to establish this act of bankruptcy, and it is really unnecessary to consider whether it was sufficient to establish the other three.

[28]

The respondent in par. 10 of his affidavit stated that at the adjourned meeting on 9th August the debtor was present and made certain admissions in answer to questions from creditors. When a deponent in an affidavit is relating a conversation, it is essential that he should state the substance of what was said, and, so far as possible, should state who made the different statements contained in the conversation in exactly the same way as if he was being examined orally in the witness-box. For a deponent to say that a person admitted certain matters is to attempt to place his own interpretation on what was said and to usurp the function of the court. In the present case it is possible that the word "admitted" may have been used to mean "said" or "stated." A person can make admissions as to the contents of documents out of court which are admissible in evidence against him (Slatterie v. Pooley[20]; Dent v. Moore[21]). If the admission of the paragraph was objected to, it should have been rejected. Since it is not clear that the paragraph was objected to, but it is evident if this had been done the defect could have been cured at the hearing, it is now too late to raise this point for the first time (Yorkshire Insurance Co. v. Crane[22]; McIntosh v. Sashoua[23]). Even if the paragraph was objected to and should have been rejected, the authority of the solicitor was wide enough to make the admissions on behalf of the debtor with respect to the documents which are contained in par. 9 of the respondent's affidavit, and these admissions were just about sufficient, in the absence of any evidence to the contrary, to prove the three acts of bankruptcy under discussion. Dr. Coppel contended that par. 4 of the affidavit of Malcolm Clark, solicitor, wherein he swore that on 7th November 1940 he made searches at the office of the Registrar-General at Melbourne and ascertained that on 18th July the debtor had created the mortgages referred to in par. 4 (b) and (c) of the petition, was evidence of such facts. If the affidavit had set out a copy of the whole of the relevant entries in the register, or an extract or, in other words, an exact copy of part of such entries, this would have been evidence of the contents of such entries or of the extracted parts thereof under secs. 44 and 60 of the Evidence Act 1928, but it is impossible to hold, as Dr. Coppel contended, that this paragraph of the affidavit amounted to an extract from such register. The affidavit, therefore, did not prove anything, and it is unnecessary to decide to what extent the entries made in the register pursuant to sec. 69 of the Instruments Act 1928 would be evidence to prove the commission of the acts of bankruptcy alleged in par. 4 (b) and (c) of the petition. But, for the reasons already given, there was other evidence sufficient to justify the making of the order.

At a glance

Court

Decision date

Before

Source

Judgment (39 paragraphs)

Parsons v Bunge [1941] HCA 4; (1941) 64 CLR 421 (14 March 1941)

Parties

Legislation Cited (5)

Cases Cited (1)