f Re guoluig IN THE FEDERAL COURT OF AUSTRALIA) a ) NEW SOUTH WALES DISTRICT REGISTRY) No. B 3814 of 1982 ) BANKRUPTCY DIVISION ) , IN THE MATTER OF THE BANKRUPTCY ACT, 1966 RE: JOHN VINCENT WALLACE (Applicant) EX PARTE: TRADE CREDITS LIMITED (Respondent) Judge Making Order: Smithers J. Date of Order: 8 April 1983 Where Made: Sydney. ORDER THE COURT ORDERS THAT: 1. The application be dismissed. 2. The applicant pay the respondent's costs of the application. IN tHE FEDERAL COURT OF AUSTRALIA ) ) NEW SOUTH WALES DISTRICT REGISTRY ) No. B 3814 of 1982 ) ) BANKRUPTCY DIVISION IN THE MATTER OF THE BANKRUPTCY ACT, 1966 RE: JOHN VINCENT WALLACE (Applicant) EX PARTE: TRADE CREDITS LIMITED (Respondent) Coram: Smithers J. 8 April 1983 REASONS FOR JUDGMENT In these proceedings the applicant, a debtor, has applied to the Court for an order setting aside a Bankruptcy Notice served upon him by the respondent, or alternatively staying the operation of the Notice. On 31 December 1981 pursuant to a loan agreement between World Cup Rodeo Pty. Ltd. as borrower; the respondent as lender and mortgagee; and the debtor, Cecil Ian Haining and Fay Enid Haining as guarantors and Nickolas Marioulas and Sophia Marioulas as guarantors the said Nickolas Marioulas and Sophia Marioulas entered into a mortgage to secure repayment to the respondent of the sum of $550,000.00 lent by the respondent to World Cup Rodeo Pty. Ltd. The money was borrowed to finance a business venture by World Cup Rodeo Pty. Ltd., namely the staging of the World Cup Rodeo in Melbourne and Sydney. Pursuant to the loan agreement the respondent took the mortgage security over three properties owned by the mortgagors known as "Abbotsford", "Linley Point" and "Ryde". The business venture was not successful and by early 1982 World Cup Rodeo Pty. Ltd. was in default in repayment of moneys due under the loan agreement. The mortgagors failed to pay such moneys to the respondent. On 25 June 1982, upon application by the respondent in the Supreme Court of New South Wales, the Court ordered that on or after 9 July 1982 the respondent have leave to issue a writ of possession in respect of the three properties. On 14 July 1982 such writ was issued. On 16 July 1982 judgment was entered for the respondent against five defendants including the mortgagors and the applicant for the sum of $546,829.65 with interest at the rate of 25 per centum thereon in respect of the period from 15 February 1982 to 16 July 1982. This sum comprised the principal sum and interest outstanding under the loan agreement at the date of Judgment. No payment being made the Bankruptcy Notice was assued and dated 24 August J]982. On 20 September 1982 the debtor filed this application to have the Bankruptcy Notice set aside. The application has been adjourned several times and the operation of the Notice has been stayed pending the determination of this application. On 12 October 1982 the respondent sold one of the properties, "Ryde" at public auction and realised a nett amount of $65,851.30. It appears that steps have been taken to prepare the other properties for sale but there is no evidence before the Court as to whether a date has been set for sale. It appears that no income has been realized by the respondent from such properties. The Bankruptcy Notice claims the full amount of the judgment debt and interest calculated in respect thereof to the date of the notice. It 1s conceded that such interest was correctly calculated. The Bankruptcy Notice makes no reference to the steps taken by the respondent to obtain possession of the properties. It was contended on behalf of the applicant that what had occurred in relation to the reduction by the respondent into his possession of the lands the subject of the mortgage was equivalent to a procedure of execution by a creditor, and that, such execution being still in progress, it was a bar to further execution such as the service of a bankruptcy notice. Miller v. Parnell [1815] 128 E.R. 1078, In re Child, Ex Parte Child [1892] 2 Q.B. 77 and In re a Debtor Ex Parte Smith [1902] 2 K.B. 260 were referred to. It was urged that, inasmuch as as the applicant was jointly as well as 'severally liable for the sums due to the respondent under the loan agreement, a process of execution undertaken by the respondent in respect thereof against the mortgagees enured to the applicant in the same way and to the same effect as it did to the mortgagors. It was urged that the order for possession, the writ of possession, and actual possession, had been taken by the respondent before the service of the Bankruptcy Notice or the date thereof, and first that such procedures constituted processes of execution against the mortgagors which reduced the debt due by the mortgagors and thus the amount due under the loan agreement although by an unascertained amount and secondly that that execution was a form of execution still proceeding and while proceeding, was a bar to any other form of execution in respect of the debt to the respondent. In respect of the alleged reduction of the debt due under the loan agreement the situation has to be looked at as at the date of the Bankruptcy Notice namely 24 August 1982. At that date the respondent had possession of the securities but had received no fanancial benefit therefrom. The total sum owing was not reduced. The sum due under a mortgage is not reduced until moneys are received in partial or total discharge thereof. Further, once default has occurred, a mortgagee is entitled to pursue all his remedies concurrently - Halsbury 4th Ed. Vo. 32 para. 785. It is no doubt true that the obtaining of the writ of possession was an exercise in the nature of execution, but, it was execution of a mortgagee's judgment for possession, and not execution under a judgment for the debt arising under the loan agreement. In this connection the applicant sought to apply the principle that a creditor who has issued a writ of fi fa cannot serve a Bankruptcy Notice because he is in the position of a creditor with a judgment upon which execution has been stayed. See per Lord Phillimore J. in, In re Bond, Ex parte Capital and Countries Bank Limited [1911] 2 K.B. 988 at 991. But that learned judge pointed out that this rule was based on the principle that a creditor must not seize a debtor's goods in execution and thereby prevent him from paying the debt, and at the same time serve him with a bankruptcy notice for the purpose of making him bankrupt. There was no such situation existing on 24 August 1982. At that stage the respondent had acquired possession of the lands constituting the morgtgage security. This did nothing to prevent the applicant from using his money to discharge the whole or part of the debt. And as pointed out above in the absence of financial return to the respondent from those lands the debt was not reduced. I understood it to be urged also that the applicant being entitled to contribution from the mortgagors as joint guarantors with him of the mortgage debt, his accessibility to such contribution in respect of any part of the guaranteed debt which he might have paid was reduced by reason of the respondent's pursuit of its security by taking possession of the mortgaged lands. But the applicant's entitlement to contribution is necessarily subject to the respondent's entitlement to pursue concurrently all the remedies arising under the loan agreement and the mortgage entered into pursuant thereto. The reduction into possession by the mortgagee of the security given by the mortgagors did nothing to impede the ability of the applicant to discharge the liability in him which was of course several as well as joint, to pay the sum lent by the respondent to World Rodeo Pty. Ltd. The applicant having conceded that the amount of $603,759.73 for which the claim is made in the bankruptcy notice was the sum actually due by the principal debtor and by the applicant on 24 August 1982, it 1s my judgment that the application should be dismissed with costs. certify that this and the awe preceding pages are a true copy of the reasons for Judgment herein of His Honor Mr. Justice - Syrottiay \ > Asgittate Part TA (483 ALB eth