, Slee A+ Fes oy CATCHHORDS Bankruptcy - stay of legal proceedings - Bankyuste~ Act, 1966, s.6C0(1) - bankrupt convacted of obtaining property by false pretences - sentence deferred on entry into srecagnizance conditioned on payment of compensation - called up for sentence on breach by non-payment - whether process "in vespect of non-payment of a provable debt" or "in consequence of his ... failure to comply with an order ... for (1ts) payment". Words and Phrases - "for" - "in respect of". Pea: Jonathon Victor Sutherland-Cropper No. W233 of 1984 Beaumont, J. 15 July 1985. Sydnsy IN THE FEDERAL COURT OF AUSTRALIA } BANKRUPTCY DISTRICT OF NEN SOUTH ! No. W223 of } WALES AND THE AUSTRALIAN CAPITAL TFPRITORY RE: JONATHON VICTOR SUTHERLAND-CROPPEP Applicant -- MINUTES OF ORDER Judge making order: Beaumont, Jv ~ Date order made: 15 duly 1985. Where made: Sydney THE CCUPT ORDERS THAT: 1. Order that the proceedings in the Locai Court the subject of the notice to offender dated 22 April 1985 be stayed so far as such proceedings are based upon any alleged breach of the condition of the recognizance entered into by the bankrupt on 13 July 1984 that he pay compensation to Kuon1 Travel Pty. Limited. 2. Reserve liberty to the bankrupt to apply for further relief on such notice, if any, as a judge may allow. yr er et ee ee a a ee weeoot 3. Order that the respondent pay the bankrupt 5s or this application. Note: Settlement and entry of orders is dealt wita in Order 36 of the Federal Court Rules. re it, foot ' ~ 1 ' o . AER ae cermee neenni gS ee eteeee ene a eee " IN THE FEDERAL COURT OF AUSTRALIA ANKRUPTCY DISTRiCT OF NEW SOOTH let ) H )WALES AND THE AUSTPALTAN CAPITAL TERRITORY) RE: JONATHON VICTOR SUTHERLAND -CRCPPER Applicant CORAM: Beaumont, J. 15 July 1985 tm Be : - —_ REASONS FOR "JUDGMENT fly. Jonathon Victor Sutherland-Cropper, having been made "bankrupt on his own petition on 26 March 1984, now applies for a stay of certain proceedings pending against him in the focal Court held at Sydne;. The stay 15 w oughe pursuant to s.60(1)(b) of the Bankruptcy Act, 1969 ("the Act") which is in the following terms: "60. (1) The Court may... upon such terms and conditions as it thinks fit- (b) stay any lega> process, whether Clv1l or criminal ... against the person or property of the debtor- (1) in gcespect or the non-payment of a provable debt or of a pecuniary penalty payable an consequence of the non-payment of a provable EET TE TO ee Ry ee ee mea EE Ee nie tree rite a wee we wan debt: cr (11) in consequence or hrs refusal or farlure ta comply with an arder of a court, whethsr mads in civil or criminal proceedings, for che payment of a srovable dabt The presént application arises inthe following circumstances. On 13 July 1984, the bankrupt was convicted by a New South Wales Court of Petty Sessions (as it then was) or the offence of obtaining property by false pretences. He was then dealt with by the learned magistrate pursuant to the provisions of 5.553 cf the Crimes Act, 1900 (N.S.W-). So Far as relevant, it reads: "S58. Deferring Sentence. (1) A court before which a person comes to be sentenced for any offence may if 1t thinks fit defer passing sentence upon the person and order his release upon his entering unto aA recognizance ... in such amount as the Court directs, to be of good behaviour for such period as the court thinks proper and to come up for sentence if called upon. 2) A recognizance mentioned in... (1) hall be conditioned upon and subject to uch terms and conditions as tne court hall order ... (6) A person may be called up for sentence and sentenced on the breach by him of any of the terms or conditions of a recognizance entered into by him under this section ..." wer ee ne ee ea Se ere ee eee 8 -- ae ae eM w The "notices to offender" under 3.650 given to the bankrupt by the Court of Petty Sessrons indicates that on 13 he + July 1984, the bankrupt entered anto a cecognizance in tne sum of $156.00 upon the following conditions: "THE CONDITIONS of this recognizance ar2 such that WHEREAS the Offender was on the thirteenth day of July, 1984, convicted at a Court, to wit, the court of Petty Sessions held before R. Evans at 302 Castlereagh St, SYDNEY in the said State of the offence of false pretences and was thereafter duly ordered to be released upon entering into a recognizance without sureties ain the. .sun abovementioned conditioned that the said Offender he of gocd behaviour during a period of wo years from such dates aforesa:d, and appear at the said Court or at such other place as may be appointed within the said Stace ta receive- sentence in respect of the said offence at any time 1f called upon to do sc, and further to pay compensation in the sum or $6,443-00 to Kuoni Travel Pty Limited of 39 York Street. SYDNEY within Six months. (Emphasis supplied.) IF THEREFORE the Offender should fail ain performing those conditions the recognizance entered into by himself wili be forthwith levied on him..." - The offence, which occurred in October 1983, avosa out of the giving by the bankrupt of a cheque in the sum of $6,443.00 payable to Kuortl Travel Pty. Limited ("Kuoni") to obtain an airline ticket. The cheque was subsequently dishonoured. It appears that the magistrate was informed IE tases Sr enn ee a ae ieee ee ie en are eee me ~ rere, He or the bankruptcy of the applicant arter his conviction but before tha magistrate dealt with him under 5.553. THe bankrupt. claiming shat he 15 unable to do so. has not paid the compensation of $6,443.00 the subject of one of the conditions of his reco a nizance. Kuonz has lodgad a proof of debt in that amount an the bankrupct's estate. This application was pronpted by a "notice to offender to appear for breach of recognizance" dated 22 April 1985 signed by the Clerk of the Local Court, Sydnay and addressed to the bankrupt and to Kuoni in these terms: "WHEREAS IT APPEARS that you have not complied with the conditions ort the recognizance pursuant to Section 558 af the Crimes Act, 1900, entered into by you on the thirteenth day cf July 1984, in respect of an offence of false pretences heard at Local Court before R. Evans Magistrate on the thirteenth day of July 1984, in that you have failed to pay the sum of $6,443.00 for compensation to Kuon1 Travel Pty Ltd on or before the 12th January, 1985 TAKE NOTICE THAT YOU ARE HEREBY REQUIRED to be and appear at the Local Court Court House ... nefore such Magistrate as may be then there for SENTENCE in respect of the said firstmentioned charge." AS ultimately framed, the princival relief now sought by the bankrupt, which is opvosed by the respondent officee of police who was the informant in the Court of Petty Sessions, is as rolliows: LUTE Ge nee eee Re er te eee - . san - = 1s commencing with the Bankruptcy In determining the construction of 3.60(1)(b), uw "1. That any legal process acainst applicant whereby he 15 called ucon apoear for sentence of in anv way to recelve sentence 1n eespect of 5 conviction for false pratences, except any such process issued or continued by ¢sason o§ his failure to he cf good behavisuc during the period of two years freom 1? July 1984 pursuant to his recognizance of that date. be permanently stayed. ct tot py 0 0 2. Such further or other orders as this Honourable Court thinks rit." useful, I think, to look at the history of the provision, Amendment Bill, 1979 which antroduced provision as follows (as c1.35): "C1.25: Stav of leqal preceedings 94. The Court will be able to stay any legal process, whether civil or criminal, against the person or property of the debtor in respect of a provable dabt and to discharge him out of custody imposed because of failure to pay a provable debt (Bill cl.35). The purposes of these amendments are:- - to covercoma the use of criminal procedures to collect provable debts when bankruptcy proceedings have intervened; - to ansure that legal proceedings against bankrupts for the cscovery of provable debts are brought pursuant to the Bankruptcy Act; - 'to ensure that bankrupts are net held in custody for the non-payment of TET Ae RED ene A i Siem me eee eg tee sem . oe ~e explanatory msmorandum accompanying the debts provable in bankruptcy; and - to resrove an uncertainty as to the ambit of the present s. 60. (See Commissioner for Moto: Transport v Trazn (1972) 127 C.L.R. 296 and BD. St. L. Kelly: Debt Peccvery in Austsalia pp. 150 and 161)." The former s.60(1) provided that the Court migat "discharge an order made against the property or person of a debtor under any law relating to the imprisonment of fraudulent debtors and stay any action, execution or other civil legal process against the property or person of the debtor and -discharge him out of custody". The limited operation of this precursor of the present provision was 1llustrated in Train, a case of summary conviction for the offence of farling to pay civil charges imposed by statute. Although the State Act provided for imprisonment in default of payment of the charges, it was held that s.60(1) was net available because the order committing a road transport operator to prison was not an order against his person made "under any law relating to the imprisonment of fraudulent debtors"; nor had he been placed in custody as a result of any "execution or other civil legal process against (his) person", since only criminal process was involved. The constitutional validity of the present 5.60(1) was upheld in Storev v. Lane (1981) 147 C.L.R. 549. There, ee ee ee ee mae ee the applicant was convicted on two charges laid under 3.113 ef the Inau trial Conciliation and Arbitration Acs. 1961 (Q.) of having paid a lesser amount of wages than that pPrescribea by an awarca an ti fe) Ay > <1 hyira) fa w B I=fon cr Oo iy wfy ej employee an amount of holiday way. Section $7(5) of that Act provides that the Court shall, ain addition to any penalty imposed upon a defendant, "order the vayment by him of all moneys earned by the employee .. during any veriod of employment or, if payable in respect of any holiday or leave »». Which have become dus ...". On the first charge, the applicant was convicted under 3.113. He was fined $100.00 _- : plus costs" of $18.00 and was ordered tc pay the amount of wages underpaid, namely $2,051.96. It was directed that in default of payment of the total of $2,169.96 within 28 days, the applicant should be imprisoned for 51x months. (By s.97(9), an order made by an industrial magistrate under that section is enforceable as if it were an order made by such industrial magistrate sitting as a Court of Petty Sessions, and the ovwrovisions of The Justices Act of 1886 (Q.), as amended, are rendered applicable. Undec those provisions, a justice 1S empowered to direct that a person ordeced to pay a sum of money shall be imprisoned in defaulr - of payment.) The applicant was also convicted on the second charge under s.113. He was fined and ordered to pay unpaid holiday pay; in defauht of payment, it was directed that he be imprisoned for six months, to be cumulative with any other period of imprisonment. He defaulted in making the ER re Fee nee eset em ee eR PRR en ree . wee payrents ordered ana, having been committed to prison accordingiy, hé@ sought to Xe discharged from custody Pursuant to s.o0{1). After holding that 5.60(1) was valid. Gibbs, C.d., with whom the other msmbers of the Court agreed, dealt with the application of the provision in that case as follows 'at p.558): "In my opinion it is unnecessary to remit the application back to the Suoreme Court. _. OF course, under s.60(1)(b) the court has a discretion to exercise, but it seems to me clear that in the circumstances of the present case, where the applicant 1s bankcupt, and unable to comply with the orders made by the industrial magistrate, the Court should exercise the power under 5.60(1)(b) and discharge him out of the custody in which he has been placed as a result of the orders made on his conviction on the first and second charges." In the present case, it is common ground that, for the purposes of s.60(1), the debt owed by the bankrupt toa Kuoni 1S 4 provable debt. In particular, 1t is not suggested that the imposition of the condition of the recognizance that the bankrupt pay -Ehat debt within six months 15 a penalty or a fine within the meaning of s.82(3)} = (cf. Be Higgins, unreported, Spender, J., 23 November 1984). Before turning to the construction of 5.60(1) (ROE ee Ue rine en eet ee cee cee ne - - ee ere rtselz, it 158 necessary to consider the precise legal character of what was done on 12 July 1964 and, what 1s now proposed in the application pending in the Local Court. AS to the hearing ,on 13 Juiy 1984, it 1s plain enough that che bankrupt was not then sentenced (see Geiffitns v. The Sucen (1977) 137 C.L.R. 293; Frodsham v. Q'Gorman £15795] 1 N.S.W.L.R. 683). On that occasion, a conviction having hbesn enetered, the only order made by the magistrate was that pursuant to s.558(1) the bankrupt be released upon entering unto a recognizance to be of good behavicur. Fucther, pursuant to 5.558(2), the magistrate made a condition of the _ recognizance that the bankrupt --pay -compensation to Kuon. The payment of compensation was framed as a condition cr the recsoqnizance and may be distinguished from a direction to an - - offender to pay compensation to an aggrieved person pursuant to s.554(3) of the Crimes Act (see also 5.437). at any rate, the only order then made was one for the release of the bankrupt and although his position was changed by that order, it was not changed adversely (Griffiths per Aickin, J. at p.345). * The application now pending in the Local Couct, which is the matter of present concern, 15 of a different character. That Court 15 empowered by 5.558(6) of the Crimes Act to call up the bankrupt for sentence and to sentence him for breach of any condition of the recognizance. This application ais thus clearly a legal [Rr rerertnentenne Se etna mnente inierear ee me ere Sn et Ree me wee - - - " P SV 1G. nrocess of a criminal nature for the purcoses of 5.60(1)(b}. But can a1t be said, ain the language of ¢.60(1)(b?'1) that this 15 such a process against the perscn of the debtor "in respect of" the non-ravment of a provable debt? Oc, in the language of 3,060(1)(b){11), is 1t) such process "in cansequence of his refusal or failure to comply with an order ... for the payment of (such) debt"? In my opinion, the wresent case may be daistin- guished from cases such as Train and Storey. There, 2s would be the case 1f a direction had been made here under 3.554(3) cf the Crimes Act that the offender pay compensation to an aggrieved person, the circumstances fall squacely within the language of 5.60(1)(b)(11). What was here involved was process "in consaquence cor his cefusal or failure to comply with an order of a court ... made in... criminal proceedings for the payment of a provable debt". But, in my view, no such order was made here. The application now pending in the Local Court is of 2 different character. That court is empowered by 35.558/'6) of the Crimes Act to call up the bankrupt for sentence and to sentence him on breach of any condition of the recognizance. Although this application is clearly a legal process of a criminal nature for the purposes of s5.60(10(b)(1i), ut cannot be said, in the language of s.6(1)(b)(12), that it 1s Il. a process "For the payment of (the) debt". The ordinary meaning of the proposition "foc" in this context 15 "an orcer to obtain" (see the Macquarie Dictionary where the example of "a sult for damages" is given). In my view, a aistinction should be drawn for present purposes between an order for the payment of a debr on the one hand and an order made in proceedings involving the debt on the other tsee Cottan v. Partridge £18421 11 L.gJ.C.P. 161 at p.167). The application pending in the Local Court 15, 1m my opinion, made in order to obtain the sentencing of the bankrupt. -ERe-1s not made in order to obtain payment of the amount owed to Kuoni. It follows that 5.50(1)(b) (ii) has no application here. Alternatively, the bankrupt submits that the application in the Local Court falls within s.60(1)(b)(1) as a process against the person of the debtor "in respect of the non-payment of a provable debt". It is submitted on behalf of the respondent that the Local Court application does, not have that character. Rather, he says, that step should be seen 45 something done in yrespect of the offence of obtaining property by false pretences or in respect of the sentence for that offence. In so submitting, the respondent concedes that the phrase "In yespect of" 15, capable of having a wide meaning. In my view, the concession 15 properly made. It -has been said that the phrase has the ""wides nossible meaning of an Sxpression intended to convey some connexion ce relation between the two subject matters to wnich the words refer" (per Mann, C.J. in Trustees Executor Lt bee] > IC $9) i) a Sy Co, Ltd. v. Reiliv £19419 V.L.R. 110 at p.lll; and see State Government Insurance Office v. Rees (1979) 14¢ C.L.R. 549 at p.561). The question is thus one of nexus. =n my opinion, the application now before the Local Court does have a ufficient nexus with the non-payment of the debt owed to Kuoni ta justify its description as a pracess against the person of the debtor ""in respect of" the non-payment of the debt. True it is, as the respondent contends, that the offence involved is one of obtaining property by false pretences and the process now in train is for sentence for that offence. But the breach of the condition of the recognizance to pay compensation is the circumstance which has activated the santencing process. Without that breach, the quéstion of sentence would not have now arisen for consideration, and it must follow that ths current process should he seen as something instituted against the bankrupt "with respect to" that debt. Such an interpretation would be consistent with the object of the amendment to s5.60(1) envisaged by the Me) tte oa eee ee ee ree ee ee - explanatory memorandum accompanying the Bill, that ais to say, that a bankrust should not be exposed to liability in any respect unaer the criminal lav by raason of his faalure to pay a debt whicno 15 provable in his estate. It follows, in my view, that, subject to questions of diser o cr ee is}@om o p it) terms and conditions, aif any, to be imposed, the oresent case falls within the language of s.60(1)(b)(i). ty It may be accepted, as the respondent submits, that the grant of stay along the lines now scught could have a considerable impact upon the sentencing process. In —- particular,- 1t would seem likely that the magistrate vas influenced in his decision to defer sentence by the consideration that he proposed to stipulate that one of the - - conditions of the bankrupt's recognizance be that the amount an question be paid to Kuoni within the time specified. The grant of the stay sought would probably undermine that sentencing process. But I do not think that this is a matter of sufficient weight to justify the refusal of the stay. In the first place, the magistrate was informed of the bankrupt's inability to make the payment to Kunol1 before he provided for the payment as a condition of the - recognizance. It may be said therefore that the sentencing process was flawed from its inception. Moreover, the stated objective of s5s.60(1) 3s. to interfere ian and aven to frustrate the ordinary criminal process in the circumstances there stated. That legislative policy can only be given — ON te ee eens een ee ee nn Siting ~ i¢. effect to 1n a case such as the present by grantioay the stay sought, I prepose co grant relief accordingly. is w ke K w a] The question renains of the precise form of to be granted and, in particular, what terms, 1f any, should be imposed upon the grant of that relief. Since it 15 appropriate that' the order to be made should not restrain the prosecution from proceeding upon any breach of the condition of the recognizance that the bankrupt be of good behaviour, I make the following orders: ~ 1. Order that the proceedings in the Local Court the subject of the notice to offender dated 22 April 1985 be stayed so far as such voroceedings are based upon any alleqed breach of the condition of the recognizance entered into by the bankrust on 13 July 1984 that he pay compensation to Kuoni Travel Ptv. Limited. 2., Reserve liberty to the bankrupt to apply for fucther relief on such notice, if any, as a judge may allow. ~ 3. Order that the respondent pay the bankrupt's costs of this application. a »cu.ty . Cithis end the 13 preceaing pages ars a uue copy of the reasons far judgment herein of The Honourable Mr Justice Beaumo , se SW Dated 19-7 -SS Associate