Penning v Steel Tube Suppliers Pty Ltd 18 FCR 568.

Federal Court of Australia|1995-12-20|Before: No VP, Olney J, Phillips J

BANKRUPTCY - Bankruptcy notice - creditor unable to issue warrant of seizure and sale without leave - other forms of enforcement of judgment available - whether execution of the judgment has been stayed.

Bankruptcy Act, ss 40(1)(g), 41(3), 54A, 54C, 54E. Judgment Debt Recovery Act 1984 (Vic) ss 6, 9. Supreme Court Rules (Vic) Rr 59.02, 66.02, 68.01, 68.02. Supreme Court Rules (Qld) O 47 r 3, 23, 24. re A Debtor (1908) 1 KB 344. re Pannowitz; ex parte Wilson 38 FLR 184, 6 ALR 287. re Browbank; ex parte Loriplus Pty Ltd 12 FCR 254. Penning v Steel Tube Suppliers Pty Ltd 18 FCR 568. Director of Public Prosecutions v Kunz 43 FCR 374. re Johnson; ex parte Johnson v Tonkin 123 ALR 607. re Overseas Aviation Engineering (GB) Ltd (1963) Ch 24. re Binstead; ex parte Dale (1893) 1 QB 199 re JUDITH EXELL; ex parte SUSAN MARTIN No VP 622 of 1995 Olney J Melbourne 20 December 1995

Coram: Olney J Place: Melbourne: Date: 20 December 1995 REASONS FOR JUDGMENT On the hearing of the creditor's petition in this matter the debtor has raised by way of a preliminary issue the question of whether the judgment relied upon in the bankruptcy notice which is said to have given rise to an act of bankruptcy was "a judgment or order the execution of which has not been stayed". Central to the matter in issue are the provisions of s 40(1)(g) of the Bankruptcy Act 1996 which entitles a creditor to serve a bankruptcy notice in respect of - a final judgment or final order, being a judgment or order the execution of which has not been stayed and s 41(3) which provides: S 41(3) A bankruptcy notice shall not be issued in relation to a debtor - (a) except on the application of a creditor who has obtained against the debtor a final judgment or final order within the meaning of paragraph 40(1)(g) or a person who, by virtue of paragraph 40(3)(d), is to be deemed to be such a creditor; (b) if, at the time of the application for its issue, execution of the judgment or order to which it relates has been stayed; or (c) ... THE JUDGMENT On 22 July 1985 in action no 2420 of 1985 in the Supreme Court of Victoria, the judgment creditor (as plaintiff) obtained judgment in default of appearance against the judgment debtor for the sum of $58,750 and $340 costs. On 7 July 1987 the judgment debtor filed a summons to have the judgment set aside but on 17 December 1987 Master Mahony dismissed the application with costs. However, the Master ordered that the judgment entered on 22 July 1985 be amended by the substitution of the sum of $54,250 for the sum of $58,750. The matter was then taken on appeal to a Judge of the Supreme Court and on 25 May 1988 Phillips J made orders dismissing the judgment debtor's application to set the judgment aside with costs and allowed the application of the judgment creditor to amend the amount of the judgment to $54,250. The judgment debtor appealed against the decision of Phillips J to the Full Court of the Supreme Court. The appeal was dismissed with costs on 17 February 1989. On 12 September 1989 Master Bruce taxed the costs awarded against the judgment debtor in the proceedings before Master Mahony, Phillips J and the Full Court, in a total sum of $11,253. For a period after the decision of Phillips J on 25 May 1988 a stay of execution was in force but no order or undertaking staying execution on the judgment was in force at the time of the judgment creditor's application for the issue of the bankruptcy notice nor has any such stay been in force at any subsequent date. THE BANKRUPTCY NOTICE The judgment creditor made application for the issue of the bankruptcy notice on 27 January 1995. The bankruptcy notice was issued on the same day. The judgment creditor's claim is recited in the bankruptcy notice in these terms: ... the sum of $128,005.43 and no more is due by you to her under a final order obtained by her against you in the Supreme Court of Victoria at Melbourne in proceeding no 2420 of 1985 on 22 July, 1985 being an order which was amended by the order of the Honourable Mr Justice Phillips on 25 May, 1988 in the Supreme Court of Victoria at Melbourne in proceeding no 2420 of 1985 the execution of which has not been stayed: Details of the amount of the judgment set out in the bankruptcy notice indicate that the judgment creditor's claim is for the sum of $340 for costs ordered on 22 July 1985 plus $54,250 being the amount of the judgment obtained on 22 July 1985 as varied, together with interest on $54,250 calculated from 23 July 1985 at the relevant rate applicable from time to time from that date until 27 January 1995. No claim is made is the bankruptcy notice for the costs taxed on 12 September 1989. The bankruptcy notice required the debtor to comply with the notice within 14 days of service. The judgment creditor asserts that service was effected on 21 March 1995 although due service is denied. The debtor has made no response to the bankruptcy notice. THE PETITION The judgment creditor caused a creditor's petition to be presented on 22 June 1995. The petition was issued on 27 June 1995. It alleges that the judgment debtor committed an act of bankruptcy on 4 April 1995 by her failure to comply with the requirements of the bankruptcy notice said to have been served on 21 March 1995. Service of the petition was effected pursuant to an order for substituted service. On 8 November 1995 the judgment debtor filed notice of her intention to appear at the hearing of the petition and to oppose the petition. The matter came before the Registrar on 9 November 1995 and was adjourned. On 24 November 1995 the judgment debtor filed amended grounds of opposition as follows: 1. That the judgment debtor has not committed an act of bankruptcy in that the Bankruptcy Notice herein has not been served upon her. 2. In the alternative to paragraph 1 hereof if the Bankruptcy Notice has been served upon the judgment debtor which is expressly denied the Bankruptcy notice herein is invalid in that more than six years has elapsed since the said judgment upon which the Bankruptcy Notice is based was obtained. 3. In the alternative to paragraph 1 hereof if the Bankruptcy Notice has been served upon the judgment debtor which is expressly denied and in the alternative to paragraph 2 hereof if the Bankruptcy Notice is valid which is expressly denied the judgment debtor is solvent.

When the petition came on for hearing on 6 December 1995 the only issue canvassed was that identified by paragraph 2 of the amended grounds of opposition. I do not understand the judgment debtor to have abandoned grounds 1 and 3. Rather as a matter of convenience the parties requested that ground 2 be dealt with as a preliminary issue. THE SUPREME COURT RULES Rule 68.02(1) of the General Rules of Procedure in Civil Proceedings 1986 (Supreme Court) (Victoria) provides: ... a warrant of execution to enforce a judgment shall not be issued without the leave of the Court in the following cases: (a) Where six years have elapsed since the judgment took effect; ... The term "warrant of execution" is defined for the purpose of Order 68 to mean: a warrant of seizure and sale, a warrant of possession and a warrant of delivery. (Rule 68.01) The first matter to consider is when is it that a judgment takes effect. Rule 59.02(1) provides that a judgment given or order made by the Court shall bear the date of and shall take effect on and from the day it is given or made unless the Court otherwise orders. Although authentication of a judgment in accordance with Order 60 is necessary before a judgment may be enforced, the date of authentication is irrelevant for present purposes as the judgment took effect on 22 July 1985. It is not disputed that the judgment had been authenticated before the judgment creditor made application for the issue of the bankruptcy notice. When the judgment creditor made application for the issue of the bankruptcy notice some 9˝ years after the judgment took effect leave to issue a warrant of execution had not been granted pursuant to Rule 68.02. The judgment debtor says that in the absence of such leave execution of the judgment was stayed by reason of the elapse of more than six years since the judgment took effect. A judgment of the Supreme Court for the payment of money (not being a judgment for the payment of money into Court) may be enforced by one or more of the following means: (a) warrant of seizure and sale; (b) attachment of debts under Order 71; (c) attachment of earnings under Order 72; (d) charging order under Order 73; (e) appointment of a receiver under Order 74; and (f) where Rule 66.05 applies, and subject to Rule 66.10- (i) committal; and (ii)sequestration. (Rule 66.02) The combined effect of Rules 66.02, 68.01 (definition of "warrant of execution") and 68.02(1)(a) is that at the time the judgment creditor made application for the issue of the bankruptcy notice, the judgment creditor was not entitled to enforce the judgment by issuing a warrant of seizure and sale but was entitled to enforce the judgment by one or more of the other means referred to in Rule 66.02.

THE ISSUE The matter for the Court's determination is whether in the circumstances of the case the judgment relied upon was a judgment within the meaning of s 40(1)(g) of the Bankruptcy Act and further whether by virtue of the provisions of s 41(3) the bankruptcy notice should not have been issued. In specific terms the question if whether the words - "execution of the judgment ... has not been stayed" apply in a case in which the only impediment to enforcing the judgment is the absence of leave of the Court, pursuant to Rule 68.02(1)(a) to issue a warrant of seizure and sale. THE MEANING OF EXECUTION IN s 40(1)(g) AND s 41(3). Execution of a judgment may be stayed in a number of ways. In the Supreme Court of Victoria (and in the County Court) the Court has power to order a stay of execution of a judgment (Rule 66.16). Under the Bankruptcy Act the production to a creditor of a sealed copy of a declaration under s 54A which has been accepted by the Registrar under s 54C has the effect during the relevant period of rendering it incompetent for the creditor to apply for the issue of enforcement process in respect of a debt owed by the debtor or to enforce a remedy against the debtor's person or property in respect of the debt. (s 54E(2)). This effect clearly amounts to a stay of execution. Section 6 of the Judgment Debt Recovery Act 1984 (Vic) provides that service of an application for an instalment order on a judgment creditor operates as a stay of the enforcement or execution of the judgment and s 9 provides that while an instalment order is in force and is being complied with, the instalment order operates as a stay of enforcement or execution of the judgment in respect of which the instalment order was made. A stay ordered pursuant to Rule 66.16, a stay resulting from the operation of s 54E(2) of the Bankruptcy Act and a stay resulting from the operation of s 6 or s 9 of the Judgment Debt Recovery Act would clearly be a stay of execution of the type contemplated by s 40(1)(g) and s 41(3) of the Bankruptcy Act. However, there is authority for the proposition that the words used in s 40(1)(g) and s 41(3) are not restricted to cases where there is an express order or statutory enactment staying execution on a judgment (re A Debtor (1908) 1 KB 344; Pannowitz; Ex parte Wilson (1975) 38 FLR 184; 6 ALR 287; re Browbank; Ex parte Loriplus Pty Ltd 12 FCR 254; Penning v Steel Tube Suppliers Pty Ltd 18 FCR 568; Director of Public Prosecutions v Kunz 43 FCR 374; re Johnson; Ex parte Johnson v Tonkin 123 ALR 607). The test which has been consistently applied in both English and Australian courts is whether at the relevant time the creditor is in the position to issue immediate execution on the judgment. In re Johnson; Ex parte Johnson v Tonkin a bankruptcy notice was set aside in a case where after the issuing of the notice but before service six years had expired from the date of judgment. The relevant rules of court governing the issuing of execution in respect of the judgment provided that a judgment for the payment of money may be enforced by various forms of execution and that execution may be issued at any time within six years from the date of the judgment (Supreme Court Rules (Qld) O 47, rr 3, 23). Order 47 r 24 provides that when six years have elapsed since the date of the judgment the party claiming to be entitled to execution may apply to the Court or a Judge for leave to issue execution. Rule 24 is not restricted in its operation to only nominated forms of execution. In this respect the Queensland rule differs from the corresponding rule applicable in Victoria in that in the latter case the restriction applies to only one of several methods of enforcing the judgment. The concept of "execution" in s 40(1)(g) and s 41(3) of the Bankruptcy Act must be the same in both sections and derives its meaning from the context in which it appears. The meaning of the word cannot be affected by the provisions of any State law or Rules of Court. In re Overseas Aviation Engineering (GB) Ltd (1963) Ch 24 the English Court of Appeal had occasion to construe the term "execution" in the Administration of Justice Act 1956 (UK). At 39 Lord Denning MR said: The word "execution" is not defined in the Act. It is, of course, a word familiar to lawyers. "Execution" means, quite simply, the process for enforcing or giving effect to the judgment of the court; and it is "completed" when the judgment creditor gets the money or other thing awarded to him by the judgment. That this is the meaning is seen by reference to that valuable old book Termes de la Ley, where it is said: "Execution is, where judgment is given in any action, that the plaintiff shall recover the land, debt, or damages, as the case is; and when any writ is awarded to put him in possession, or to do any other thing whereby the plaintiff should the better be satisfied his debt or damages, that is called a writ of execution; and when he hath the possession of the land or is paid the debt or damages, or hath the body of the defendant awarded to prison, then he hath execution". And the same meaning is to be found in Blackman v Fysh (1892) 3 Ch 209, when Kekewich J said that execution means the "process of law for the enforcement of a judgment creditor's right and in order to give effect to that right". In cases when execution was had by means of a common law writ, such as fieri facias or elegit, it was legal execution; when it was had by means of an equitable remedy, such as the appointment of a receiver, then it was equitable execution. In either case it was "execution" because it was the process for enforcing or giving effect to the judgment of the court. At 46 of the report Harman LJ asked rhetorically: Now what is execution but the enforcement of a judgment or order? In Pannowitz, Riley J had occasion to consider the meaning of "execution" in s 40(1)(g). At ALR 296 he said: I turn therefore to the meaning of the word "execution" in s 40(1)(g). It will have the same meaning in s 41(3)(b). In 16 Halsbury 3rd ed 2-3 it is said that: "The word execution in its widest sense signifies the enforcement of or giving effect to the judgments or orders of courts of justice. In a narrower sense, it means the enforcement of those judgments or orders by a public officer under the writs of fieri facias ..." (etc). See also Re Overseas Aviation Engineering (GB) Ltd [1962] 3 All ER 12; [1963] Ch 24 at 39-40 per Lord Denning MR and at 46 per Harman L.J. The question then is whether in s 40(1)(g) the word "execution" has the wider or the narrower meaning. His Honour then proceeded to refer to a comment made by Lord Esher MR in re Binstead (1893) 1 QB 199 at 204 where the Master of the Rolls in considering the then English equivalent of s 40(1)(g) interpolated obiter : Execution, it does not say enforcement.

Riley J later commented in relation to the Bankruptcy Act: Nothing would have been easier for the draftsman of the 1966 section than to say "the enforcement of which has not been stayed" if that was what was intended.

He then referred (at ALR 297) to other provisions of the Bankruptcy Act which he said illustrated the draftsman's awareness of the distinction between execution and other methods of enforcing judgments and orders. He then concluded: Bearing in mind those other provisions of the Act, and the reiteration in the cases of the principle that s 40 must be strictly construed, I am of opinion that in s 40(1)(g) "execution" bears the narrower of the two meanings described in the passage set out above from Halsbury.

So far as I am aware Pannowitz is the only case in which this particular issue has been addressed and although other aspects of the judgment have been referred to in other cases (e.g. Penning at 577, Browbank at 255) no analysis of the reasoning in Pannowitz has been reported. In Pannowitz the Court was called upon to answer a number of questions referred to it by the Registrar in relation to a bankruptcy notice. The judgment which the creditor sought to rely on was an order of the Bankruptcy Court obtained by consent declaring that a sum of money paid by the bankrupt to another person was the property of the bankrupt and ordering the other person to pay the sum in question to the Official Receiver. Riley J was of the opinion that the order was a final judgment or final order within the meaning of s 40(1)(g), that the person ordered to pay the money was a debtor and that the Official Receiver was a creditor within the meaning of s 40. His Honour then turned to consider the question: ... is the order ... a judgment or order the execution of which could be stayed? Although this is the form of the question as it appears at ALR 289 and at FLR 186 it would seem that the real question calling for an answer and the one which Riley J actually answered was whether the judgment was one the execution of which has not been stayed. This is obvious from the sentence which is reported at ALR 295 lines 45-6: It remains to consider the effect in this case of the words "the execution of which has not been stayed" under s 40(1)(g). It was in the course of his answer to this question that his Honour expressed the view referred to above as to the meaning of "execution". However, his ultimate conclusion was that the Bankruptcy Act as it then stood made no provision for the enforcement of the orders of the Bankruptcy Court by any process of execution. At ALR 299-300 he said: If the Bankruptcy Court is intended by the present Act to have the power of enforcing its orders by, for example, writs of fieri facias, that intention is nowhere expressly stated and must be found implied in s 30(1)(b), in which the power to make "declaratory orders and orders granting injunctions and other equitable remedies" is expressly conferred. One has only to look at ss 26-28 of the High Court Procedure Act 1903-1973, ss 25, 31, 53-55 of the Judiciary Act 1903-1973 and Order 45 of the Rules of the High Court - or, for instance, ss 98, 99 of the New South Wales Supreme Court Act 1970 and Pts 42 et seq of the Rules of the New South Wales Supreme Court - to realize the complexity of the matters, not only of procedure but of substance, for which one would expect provision to be made if judgments and orders are to be enforceable by writs of execution. The Bankruptcy Act and the Rules made under it are silent on such matters. I think the conclusion must be that the power to issue such writs is not impliedly conferred on the court by 30(1)(b). Accordingly, I answer the Registrar's Question (5) by saying that the order of 10 October 1973 cannot be enforced by a writ of execution, and s 40(1)(g) refers only to final judgments and final orders which can be so enforced.

With respect, it would seem that the ultimate conclusion expressed in this passage was in no way dependent upon the adoption of any particular construction of "execution". Indeed the Judge's comments would have been applicable a fortiori in respect of forms of execution other than those referred to by him. Whilst it is with some diffidence that one would disagree with Riley J on a question of the construction of the Bankruptcy Act, it does appear that his opinion concerning the meaning of "execution" in s 40(1)(g) was based upon the obiter comment of Lord Esher MR in re Binstead in 1893, and was not consistent with the views of Lord Denning MR and Harman LJ in re Overseas Aviation Engineering. In Binstead the issue was whether an order for costs made by the Divorce Court was a final judgment. At that time the English equivalent of s 40(1)(g) referred only to a final judgment and not also to a final order. The obiter remark made by Lord Esher MR which is otherwise unexplained appears to have been made to reinforce his view that the order in question was not a judgment within the meaning of the relevant Act. Furthermore, Riley J's view on the meaning of "execution" was not germane to the decision in the particular case. In my opinion the decision in Pannowitz is not a binding authority in relation to the meaning of "execution" in s 40(1)(g) of the Bankruptcy Act. Rather, I am of the view that the term should properly be construed in accordance with the dicta of Lord Denning MR and Harman LJ as expressed in re Overseas Aviation Engineering. It follows therefore that whilst execution of the judgment relied upon by the judgment creditor by means of a warrant of seizure and sale is stayed, other methods of execution have not been stayed. There is in my view no logical reason, as a matter of policy, why a creditor who has available a variety of methods of enforcing a judgment should have his right to issue a bankruptcy notice foreclosed because one means of execution is not presently available to him. CONCLUSION In the sense that the term "stay of execution" is commonly understood, the effect of Rule 68.02 is not to impose a stay of execution of the judgment. Whilst in the absence of leave one method of execution is not available it leaves unaffected other legitimate processes of execution. In my opinion, for the purposes of s 40(1)(g) and s 40(3) of the Bankruptcy Act, execution of the judgment in question has not been stayed. It follows that the bankruptcy notice in this proceeding is not invalid by reason that it was issued after six years had elapsed since the judgment took effect. I certify that this and the preceding 14 pages are a true copy of the Reasons for Judgment of the Honourable Justice Olney

Heard: 13 December 1995 Place: Melbourne Judgment: 20 December 1995 Appearances: Mr P.J.Macnish (instructed by Harwood Andrews) appeared for the judgment creditor. Mr L. Green (instructed by Meltzer Green) appeared for the judgment debtor.

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