R v Commercial Bank of Australia Limited [1921] HCA 3

Sec. 49 of the Insolvency Act 1915 (Viet.) provides that a creditor may pre sent a petition to a Judge of the Supreme Court praying that the estate of his debtor, whose debt amounts to not less than £50, may be sequestrated, alleging as the ground for such petition any one or more of certain specified acts or defaults, called "acts of insolveney"; among them being (8) That excoution or other process issued on a judgment decree or order obtained in

ny Court in favour of any creditor in any proceeding instituted by such 'reditor has been returned unsatisfied in whole or in part, Provided that the debtor has been called upon to satisfy such judgment decree or order by the officer or other person charged with the execution thereof and has failed to do so." 'The section also provides that the petitioning ereditor's debt must ~ ot be a secured debt unless he states in his petition that he will be ready to sive up the security for the benefit of the creditors or unless he is willing to sive an estimate of the value of his security, in which latter case he may be Admitted as a petitioning ereditor to the extent of the balance of the debt due to him after deducting the value so estimated. See. 57 provides that Il set out "the nature and amount of

'every order nisi for sequestration sh the petitioning creditor's debt and the act or acts of insolvency relied on."

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Held, that the requirement of sec. 49 (8) in respect of the return of the weit in comple] with iter bn prof that the cxoordon has sae rte' taeda wicks or in Yet a that ibs Sul return is not a matter relevant to be considered. i

1a, se, tht in enting oot in an orer ist tho ot ot ea fn oe, 40(, te eulcent with regard tothe rquloment a Ea shall have eon returned" unaatled in whola or in part roa Uae RE HE

An order nisi, which was made on 18th May 1920, appointed Thursday 3rd June 1920 as the day on which cause might be shown agains the onder

nisi being made absolute, but in the office copy of the order nisi which was served on the debtor the date stated was "Thursday 3rd May 1920."

Held, that the order nisi might properly be enlarged,

An onder nisi for compulsory sequestration on the ground mental ia sec. 49 (8) of the Znsoloency dct 1915 was discharged on the ground tht the Petitioning creditor's debt was soured debt and ought to have been died as cuch inthe petition and thatthe case was not a proper one for amend bot the diehange was without prejudice to future proceedings hy the plo ing creditor.

el, that in order to support a subsequent order nisi on the same grand it was not necessary that there should be a fresh demand for payment ora fresh return by the sherif

Rule 7 of Part I. of the Rules of the Supreme Court in Insolvency 1916 (Viet,) provides that "all orders made by a single Judge exercising the powers of theSupreme Court, either in disposing of orders nisi for compulsory sequstm: tion oF otherwise in insolveney, may be signed by the associate of such Judes, and all orders of the Full Court upon appeal may be signed by the Chie Clerk." Rule 13 provides that "the associate of any Judge of the Supreme Court making an order nisi for sequestration . . . may sign office copies for service under sec. 58" of the Insolvency Act 1915. *!

Held, that under rule 7 an associate of Judge may properly sign an one made by that Judge enlarging an order nisi for compulsory sequestration

Held, als, that even if the signing of an office copy of an order made hy 'one Judge enlarging an order nisi for compulsory sequestration made bY other Judge by the associate of the Judge making the onder of

{snot authorized by rule 13, an abjection founded on such an irregularity is « technical objection which under sec. 59 is waived by the filing of notice of objections.

'The petitioning creditor's debt was a judgment debt against a firm of which the debtor was a partner. 'The petition set out that the debt of the firm to the petitioning creditor, which was the banker of the firm, was part of a much larger debt for which the creditor held certain securities the estimated value of which was stated. One B, had under a special agree. rent guaranteed the account of the firm with the creditor up to a certain 'sum, and it was a term of that agreement that the creditor should be entitled to place all payments made under the agreement to.a suspense account and should not be bound to give credit in account in reduction of the 'firm's indebtedness for the sums so paid, but might at any time at the ereditor's fiseretion appropriate any sums so paid in and towards satisfaction of the indebtedness of the firm, and that until such appropriation such sums should be held by the creditor as security for the payment of the firm's indebtedness. In compliance with a demand by the creditor, B. had paid up the whole of such sum to the creditor, and the latter paid it into @ suspense account 'under the terms of the agreement and refused to pay it to the eredit of the debtor's account as B. requested the creditor to do. 'The amount of the sum so paid by B., if added to the estimated value of the seourities, woul have 'practically wiped out the whole indebtedness of the firm,

Held, that tho circumstances with regard to the payment by B, to the 'ereditor afforded no ground for refusing to make the order nisi absolute,

Decision of the Supreme Court of Victoria: In re King; Ex parte Com- mercial Bank of Australia Lid. (No. 2}, (1920) V.LLR, 490; 43 ALT, 3, affirmed.

Appeat from the Supreme Court of Victoria. On 18th May 1920 an order nisi was made by Hood J. placing the estate of Rofi Courtney King under sequestration. The order nisi,

• which was based upon a petition presented by the Commercial Bank of Australia Ltd. as petitioning creditor, was dated 14th May, and was supported by an affidavit sworn on the same day by the general 'manager of the Bank. The petition alleged that King was indebted tothe Bank in the sum of £313 2s. 10d. in respect of a judgment for £308 185. 10d. and £4 4s. costs recovered in the Supreme Court on 2rd January 1920 in an action instituted by the Bank against Courtney King, Smith & Co., in which action King had been indi- Vidually served as a partner in the firm and had failed to appear. 'twas further set forth that this debt was unsecured except in so far as it was secured by certain liens and promissory notes, the total

H.C. oF A. value of which security was estimated by the Bank at £5,600; that 102l- these were held as security for a total debt by Courtney King, Smith Kise & Co, amounting to £9,600 11s. 3d., inclusive of the sum of

Comatinctar, £313 28. 10d. above referred to; that the proportion of the said

BAxK or "security attributable to this sum of £313 2s, 10d. was £182 12s, Lro. and that the Bank claimed to be admitted as a petitioning creditor

• in respect of the balance, namely, £130 10s. 10d. The act of insol-

vency alleged in the petition was that execution issued on the judgment against King already referred to had been retumed unsatisfied " in whole or in part," and that the respondent had been called upon to satisfy the judgment by the officer changed with such execution and had failed to do so, a writ of fieri facias issued on the said judgment having been returned unsatisfied "in whole" and the said respondent having on 24th January been called upon to satisfy the said judgment by the sheriff's officer charged with the execution thereof and having failed to do so. 'The affidavit in sup- port of the petition verified the facts stated therein as to the nature of the petitioning ereditor's debt and as to the securities held by the Bank, their estimated value and the proportion attributable to that debt. It also stated that the act of insolvency committed by King was that execution issued on a judgment obtained in the Supreme Court by the Bank in a proceeding instituted by it has been retumed unsatisfied "in whole," and that the respondent had been called upon by the officer charged with the execution of the judgment to satisfy it and had failed to do so.

Notice of intention to oppose the order nisi and to dispute the act of insolvency and the Bank's debt upon various grounds * set, out in the notice was duly filed by the respondent pursuant to sec, 59 of the Insolvency Act 1915 (Vict.). 'The objections were substantially as follows: (1) that the order nisi in alleging the act of insolvency set out that execution had been retumed "unsatisfied in whole," whereas it should under see. 49 (8) of the Insolvency Act 1915 have stated that it had been 'retumed, "unsatisfied in whole or in part"; (2) that the onder nisi did not sufficiently identify the judgment in respect of which the execution had issued ; (3) that, as the petition set out that the judgment had been returned "unsatisfied in whole or in part," there -

the order nisi in setting out the estimated value of the securities eld by the Bank stated it as £5,000 whereas the petition stated it 45 $5,600; (5) that, as in the affidavits in support of the petition it was stated that the judgment was " unsatisfied in whole" whereas the petition stated that it was "unsatisfied in whole or in part," the petition was not properly verified ; (6) that the Bank had omitted tosstate in the petition and in the affidavit in support thereof that one Archibald McGregor Black had guaranteed the account of Courtney King, Smith & Co. in the sum of £4,000 in all, that subse- quently the Bank had called up anil received from Black this sum 'and that, although directed by Black to do so, the Bank had failed to appropriate that sum in reduction of the amount alleged to be owing by Courtney King, Smith & Co. or to value the security of the guarantee, the effect of which would have been to reduce the debt owing to the Bank to Jess than £50 ; (7) that there had been neither afresh demand for payment nor a fresh return to the writ of execu- tion by the sheriff ; (8) that the return to the writ of execution was false; (9) that King was not given a reasonable time within which to comply with the demand of the sherifi's officer, and therefore that he could not be said to have failed to do so; (10) that the matter was res judicata by reason of the decision of Cussen J. in the previous proceedings ; (11) that it would be unjust and inequitable to sequestrate King's estate as the Bank would not be prejudiced by the discharge of the order nisi; (12) that the petition was not made bond fide and with a view to getting the Bank's debt paid or to the distribution of King's assets among his creditors ; and (13) that the petition was unfounded, vexatious, malicious or oppressive 'and was made with ulterior motives. The order nisi was made returnable on Thursday 3rd June 1920, but ina document signed by the associate of Hood J., which pur- Ported to be an office copy of the order nisi and which was served on King, the return day was stated as "Thursday 3rd May 1920." On Thursday 3rd June counsel for the Bank appeared before Schutt 4, and moved the order absolute. There was no appeatance for King, but it was brought to the attention of Schutt J. that in the document above referred to the return day was wrongly stated.

'was a variation between the petition and the order nisi; (4) that H.C. or A.

Schutt J. thereupon enlarged the order nisi until 10th June (In ye King; Ex parte Commercial Bank of Australia Ltd. (1)). 4 doo. ; 'ment purporting to be an office copy of the order of Schutt J enlarging the order nisi signed by his associate was served upon King. ; On the order nisi coming on for hearing on 10th June, two pre liminary objections were taken by counsel for King, the first that the original order of Schutt J. of 4th June enlarging the onder nisi was signed by the associate of Schutt J. instead of by Schult J, himself, and the second that the document purporting to be an office copy of the order of Schutt J. enlarging the order nisi which was served on King was not a proper office copy inasmuch as it was signed by the associate of Schutt J. instead of by the associate of Hood J. Schutt J. overruled both of these objections, holding that the first was met by the provision in rule 7 of Part I. of the Rules of the Supreme Court in Insolvency 1916 (Viet.), and that the second was a technical objection, which, under sec. 59 of the Insoleeney Act 1915, King had waived by filing his notice of objections. r Evidence was then given from which the following facts appeared: - 'The judgment referred to in the petition was obtained on 23nd January 1920 in an action in which the writ of summons was issued under the provisions of the Instruments Act 1915. King applied for leave to appear and defend the action, but on 22nd January this application was refused by Mann J., who, however, granted leave to appeal from such refusal, Judgment having been signed, a writ of fieri facias was issued on the same day, and Thomas Wood, an officer of the sheriff, was entrusted with the execution thereof, He was unable to see King on that day though he endeavoured to do so, but on the next day, 24th January, he interviewed King, who, in answer to his demand, stated he was not going to satisfy the judgment as his lawyer was appealing, and added, later on, "I eould pay it but I won't." Notice of appeal to the High Court against the decision of Mann J, was in fact given on 27th January, and, security having been lodged, the appeal was on the same day "daly instituted " within the meaning of the Rules of the High Court, which - operated as a stay against all proceedings under the onder appealed from. On 28th January a return was made by the sheriff to the writ (1) (1920) V.LR, 210; 41 AL, 147,

of fri focias in these words : "The within-named Roff Courtney 8. ©. or A. King has no real or personal estate whereof I can cause to be made 182! the money within requized oF any part thereof as T am within Kin commanded." A petition for the sequestration of King's estate, Cousens dated 10th February, based upon this demand and return, was then BAN oF presented by the Bank, and an order nisi dated 11th February was tp. made by Hood J. Notice of objections was filed by King, and the onder nisi came on for hearing before Cussen J., who discharged the 'onder but with the proviso that such discharge should be without prejudice to fresh proceedings by the Bank after the appeal to the High Court had been disposed of. The only matters decided by Cussen J. were that the debt of the Bank was a secured debt and ought to have been described by it as such in the petition and order nisi before him, and that he ought not to allow an amendment of the proceedings so as to cure this defect. 'The refusal of the application foramendment was based upon the fact that the appeal to the High Court was then pending. 'That appeal was dismissed on 12th May (King v. Commercial Bank of Australia Ltd. (1) ), and these proceed- ings were then Inunched by the presentation of a new petition dated Mth May, as already stated, no fresh demand having been made by: the Bank and the judgment debt remaining unpaid, the Bank still relying on the same facts as constituting an act of insolveney on the partof King. As to the alleged guarantee of Black, the only evi- dence was that on 22nd December 1919 Black had paid the sum of 41,134 5s, to the Bank, that on 5th June 1920 he had asked the Bank to pay the amount to the credit of Courtney King, Smith & o,, and that the Bank had refused to do so but had paid the amount tothe credit of a suspense account in Black's name under " the special agreement." Schutt J. overruled all the objections, and on 17th June 1920 made the order nisi absolute. From the order of Schutt J. of 4th June 1920 enlarging the order nisi made by Hood J. on 18th May 1920, and from the order of Schutt J.of 17th June 1920 making that: order nisi absolute, King appealed 'o the Full Court. On the hearing of the appeal, by consent of the parties, the

H.C.or A. guarantee given by Black was put in evidence. By it Black. ee agreed (jnter alia) to pay to the Bank all advances, loans or credits Kixo and all debts then owing or payable or thereafter to become

Conmeencrax. Wing or payable by Courtney King, Smith & Co. to the Bank in

BESE oF "case that firm should make default in payment thereof or of any Lo. part thereof on demand in writing, provided that the amount ~~ ultimately payable by King thereunder should not exceed the sum

of £4,000 and interest thereon until payment ; that the guarantee should be a continuing guarantee, and should extend to cover and be a security for every and all future sum or sums of money at any time due to the Bank upon the general balance of the firm's account; that Black would not by reason of any payment which might be made by him under the guarantee prove for or claim any dividend out of the estate of the firm in the event of any member of the firm becoming insolvent in competition with the Bank; that the Bank should be entitled to place all payments made at any time by Black toa suspense account in his name, and should not be bound to give credit in account in reduction of the firm's indebtedness for the sums so paid, but the Bank might at any time at its diseretion appropriate any sums so paid in and towards satisfaction of the indebtedness of the firm, and until such appropriation such sums should be held by the Bank as security for the payment of the firm's indebtness ; that the guarantee should remain in foree until it was determined as to future advances by notice in writing; and that upon the determination of liability under the guarantee it should be cancelled and retained by the Bank, 'There were also put in evidence a letter from the Bank to Black dated 3rd December 1919 demanding immediate payment of the £4,000 and interest in terms of the guarantee, and a receipt given by the Bank to Black dated 22nd December 1919 for payment of £4,134 15s. with an intimation that that amount had been placed to the credit of a suspense account in terms of the guarantee. The Full Court dismissed the appeal: Zn re King; Ex parte Commercial Bank of Australia Ltd. (No. 2} (1). From that decision of the Full Court King now appealed to the High Court. 'The grounds of appeal were substantially as follows ~ (1) (0920) VLR, 490; 43 ALT, 3

2 That the certified office copy of the said order nisi which "appointed an impossible and past date, namely, Thursday 3nd " May 1920, as the time when cause might be shown against the said

'onder nisi being made absolute was bad in law and should have been discharged.

3, That the order purporting to have heen made herein on 4th Tune 1920 did not comply with the provisions of the Insolvency Act 1915 and the Rules of the Supreme Court in Insolvency 1916 made thereunder and was wrongly signed.

4, That what purported to be a true and office copy of the said onder dated 4th June 1920 did not comply with the said Act and Rules and was wrongly signed and certified.

5. That the act of insolvency alleged in the said order nisi and in the said affidavit is not an act of insolvency under the said Act orat all and the act of insolvency alleged was not committed by the appellant.

6, That the evidence showed that the respondent on or about 2nd December 1919 had received from one Archibald MeGregor Black the sum of £4,134 15s. and that, though directed by the said Black s0 to do, it had or has wholly failed to appropriate or apply sich sum to the credit of the current account of Courtney King, Smith & Co. or in reduction of the amount of £9,600 11s. 3d. alleged to be owing by Courtney King, Smith & Co. to the respondent.

7. That in the said petition and in the affidavit in support of the Petition the respondent: wrongfully omitted to state, or wrongfully Withheld from the learned Judge who made the order nisi, the fact of the receipt of the said sum of £4,134 15s, in respect of the liability of Courtney King, Smith & Co. to it, and wrongfully failed to value the security of the money so paid to it, and wrongfully failed to offer to give up such security or the said sum of £4,134 15s, or any part of it,

8. That the evidence showed that, having regard to the said Payment of £4,134 15s, and to the said estimated value of the said Security, namely, £5,600, the respondent was not entitled to be Admitted as a petitioning creditor in any sum at the time of the Presentation of the said petition, or alternatively was not so entitled

at the date of the making of the said order absolute, and the said order absolute should therefore have been discharged.

9. That all or sufficient of the facts set out in the notice of objee tions herein were proved ; and the facts so proved show thaton 2th January 1920, the date of the demand by the sheriff's officer upon which the alleged act of insolvency on which the said order nisi was based, the appellant had obtained leave to appeal against the decision of his Honor Mr. Justice Mann, that an appeal to the High Court of Australia was then being instituted and was in fact duly instituted before the completion of the said act of insolvency, that the respon- dent was aware of the appellant's intention to appeal, and that the appellant informed the sheriff's officer that he could satisfy the judgment but that, as he was appealing to the High Court, he would not do so.

10, That the appellant did not fail to satisfy the said judgment, and no reasonable opportunity was at any time afforded the appellant to satisfy the said judgment; or the learned primary Judge should have granted the application of the appellant made by his counsel to be permitted to pay the amount of the said judgment.

11. That the return endorsed on 28th January 1920 on the said writ of fieri jacias, namely, " The within-named Roff Couriney King has no real or personal estate whereof I can cause to be made the money within required or any part thereof as 1 am within commanded " was false, and no facts occurred or were proved to warrant the making of such return,

12. That the said Full Court did not exercise the diseretion vested in them by law in dealing with the said appeal, or altematively improperly exercised such discretion.

13, That it was unjust and inequitable to sequestrate the estate of the appellant, and the respondent would not have been and would not be prejudiced substantially or at all by the discharge of the said order nisi.

14. That the said petition was not made bond fide and with view to get the respondent's debt paid or to the distribution of the assets of the appellant amongst his creditors, and such creditor - were not interested in the said petition, or alternatively it was it the interest of such creditors to have the said order nisi dis

15, That the said petition was unfounded, vexatious, malicious and oppressive and was made with ulterior motives or objects.

Cohen K.C. (with him Robertson and Dean), for the appellant. Tn. order to bring the case within see. 49 (8) of the Insolvency Act 1915 it is necessary to show that there was a failure by the debtor to pay the debt when called upon to do so, and also that there was a retum of nulla bona to the writ of execution justified by the facts. It must be shown that the return is true (In re Rylah ; Ex parte Colonial Bank of Australasia Ltd. (1) ). The petitioning creditor has not discharged the onus which is upon him unless he shows that the sheriffs officer has done everything reasonable to find out whether the debtor has property which will satisfy the debt. [Counsel referred to Gyfford v. Woodgate (2); Leonard v. Simpson (3).] The payment by Black to the Bank was in pursuance of a demand for payment under the guarantee, The provision in the guarantee for payment into a suspense account was intended to apply in the event only of partial payments. But when the whole amount was paid the relationship between the Bank and Black came entirely to an end. The direction by Black to pay the money to the eredit of the account of Courtney King, Smith & o, deprived Black of any right to the money, and the Bank was bound to comply with the direction, 'The result of such com- pliance would have been that no sufficient debt to support: the proceedings would remain, for the securities are valued at £5,600, leaving a debt of £4,000, which would have been wiped out by the £4,000 paid by Black. The Court should, in the exercise of its discretion, have refused to make the order absolute; for under the circumstances connected with this payment of £4,000 the sequestration of the appellant's estate will not benefit the Bank. The Bank can by merely crediting that sum to the account of Courtney King, Smith & Co, pay itself in full

{Starke J. referred to Dowling v. Colonial Mutual Life Assurance Society Ltd (4).]

The money paid by Black to the Bank was in such a position that the appellant had an interest in it, and it was therefore a security which the Bank should have valued or offered to give up. There

() 24 VLR, 844; 20 ALT, 277. (3) 2 Bing. N.C, 176. (2) 11 Bast, 296, @ Sock, obo.

'was no act of insolvency within sec. 49 (8) of the Insolveney det alleged in the order nisi, for the statement therein is that the writ of fieri facias was returned "unsatisfied in whole" whereas it should have been stated that it was returned "unsatisfied in whole or in part." The statement that the writ was retumed unsatisfied in whole does not negative the fact that it was returned satisfied in part, and it is necessary to negative that fact in order to establish the act of insolvency. No amendment should be allowed so as to make the allegation in the order nisi correspond with the actual return (In re Caskie and Gane (1)). The insertion in the office copy of the order nisi of an impossible and past day as the day when eause might be shown against the order nisi being made absolute was such a substantial error that the Court should have discharged the order nisi, and should not have enlarged it (In re Bayne (2)). The fact that in that case the error was in the order nisi itself makes no difference, for all that the debtor sees is the office copy, [Counsel referred to secs. 52 and 58 of the Insolvency Act 1915,] The order made by Schut J. enlarging the order nisi should have been signed by him and not by his associate. 'That is not one of the orders which rule 7 of Part I. of the Rules of the Supreme Court in Insol- vency 1916 permits to be signed by an associate. The office eopyof that enlarging order should, under rule 13 of those Rules, have been signed by the associate of Hood J., who made the order nisi, and not by the associate of Schutt J. This was not a technical objection such as should be held to have been waived under sec. 59 by the filing of notice of objections. (See In re Newbigging (3).) 'The original order nisi of 11th February 1920 having been discharged, there should have been a fresh demand for payment in order to support the present proceedings.

Pigott and Lowe, for the respondent, were not called upon.

Kxox C.J. In this case the first ground taken by counsel for the appellant is that the return of nulla bona to the writ of execution was not a correct return. Mr. Cohen alleged that: the evidence showed either that the return was untrue or that it was made recklessly without any proper ground of belief in its truth. Om

'that objection I think it is clear that the requirement of sec. 49 (8) H.C. oF A. 'of the Insolvency Act 1915 in respect of the retum of the writ is i 'complied with if there be proof that the execution has issued and Kine jas been returned unsatisfied in whole or in part. 1 do not think Coxancy that the truth or falsity of the return is a matter relevant to be Base or AUSTRALtA 'considered. Presumably the Legislature considered that the retum 1". might safely be treated as correct, and it has used words which sor oa. 'admit of only one meaning. In that view of the matter I cannot 'agree with the decision in In re Rylah; Ex parte Colonial Bank of Australasia Ltd. (1), that on the motion to make absolute an order 'nisi for sequestration the question whether the return to the writ 'of execution is true or false may be investigated. I think that that 'ase was wrongly decided, as the only requirement of the Act is 'that the return should show that the execution is unsatisfied in 'whole or in part. It is said that that is an insufficient protection to the debtor, but, as my brother Gavan Duffy pointed out in argu- ment, the protection of the debtor is secured by the proviso to the section, which runs as follows: "Provided that the debtor has been called upon to satisfy such judgment dectee of order by the 'officer or other person charged with the execution thereof and has failed to do so." 'The petitioner cannot rest on the return to the 'writalone : he must prove, in addition to a return of the writ unsatis- fied in whole or in part, a refusal or failure on the part of the judgment debtor to pay the debt when demanded by the person charged with the execution of the writ. For these reasons I think that there is to foree in this objection. With regard to the other objections taken by Mr. Cohen, I see no 'eason to doubt that the decision of the Full Court of the State and that of Schutt J. were correct.

Solicitor for the appellant, C. E. Coy. Solicitors for the respondent, J. Mf. Smith & Emmerton.