IN THE FEDERAL COURT OF AUSTRALIA VICTORIA DISTRICT REGISTRY a tT RICT REGISTRY BANKRUPTCY DIVISION No VP 1367 of 1992 BETWEEN: GARY WILLIAM BEESEY (Debtor) EX PARTE: ANZ BANKING GROUP LIMITED ACN 005 357 522 (SUCCESSOR AT LAW TO NATIONAL AL ROYAL BANK LIMITED) (Creditor) Coram: Ryan J Place: Melbourne Date: 31 March 1993 EX TEMPORE REASONS FOR _ JUDGMENT Ryan J: On 26 July 1991, the petitioning creditor, the ANZ Banking Group Limited, ("the Bank") as successor to the National Mutual Royal Bank Limited, obtained judgment in the County Court against the debtor and his wife in the sum of $66,265.88. In reliance on the judgment debt, a bankruptcy notice was served on the debtor, Mr Beesey, on 12 May 1992), requiring the debtor to pay the judgment debt or to secure the Payment of the judgment debt to the Satisfaction of this Court or the judgment creditor, or compound the sums so specified to the satisfaction of the judgment creditor. Subsequently the solicitor for the judgment creditor prepared an agreement in this form: a "THIS AGREEMENT made the day of 1992 BETWEEN AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED A.C.N. 005 357 522 oF 700 Springvale Road, Mulgrave in the State of Victoria (hereinafter referred to as "the Bank") of the first Part AND GARY WILLIAM BEESEY and CAROL BEESEY both of Studley Avenue, Kew in the said State AND RICHARD ARTHUR MERTON and KATHLEEN MERTON both of 21 Bonvue Road, North Balwyn in the said State (hereinafter referred to jointly and severally as "the Borrowers") of the second part EREAS A. The Bank issued Writ No. MC912153 of 1991 in the County both Defendants under the same on 26 July, 1991 for the sum of Sixty six thousand two hundred and sixty five dollars eighty eight cents ($ 66,265.88) B. The Bank has issued and served Bankruptcy Notices on GARY WILLIAM BEESEY and CAROL BEESEY Cc. The Bank issued Writ No. MC912152 of 1991 in the County Court of Victoria at Melbourne against RICHARD ARTHUR MERTON and KATHLEEN MERTON and obtained judgment against the secondnamed Defendant on 4 October, 1991 for the sum of Sixty eight thousand two hundred and seventy nine dollars ninety six cents ($ 68,279.96) D. The Bank has issued Writ No. MC 921841 in the County Court of Victoria at Melbourne against RICHARD ARTHUR MERTON and served same. agreement to the same. NOW IT IS AGREED AS FOLLOWS: 1. The Borrowers shall make the following repayment program by payments to the Bank of:- (i) Ten thousand dollars ($10,000.00) by 26/05/92 (ii One thousand dollars ($ 1,000.00) by 30/06/92 ii One thousand dollars ($ 1,000.00) by 31/07/92 One thousand dollars ($ 1,000.00) by 31/08/92 {v) Four thousand dollars ($ 4,000.00) by 30/09/92 (vi) Four thousand dollars ($4,000.00) by 31/10/92 and (vii) Nineteen thousand dollars ($19,000.00) by 14/11/92 2. In the event that all payments are made on the due dates as set out above the Bank shall accept the total sum of Forty thousand dollars ($ 40,000.00) in full and final payment of all its claims under the actions referred to above. Ss Time shall be of the essence of the terms and conditions of this Agreement and in the event of any default in payment beyond three (3) working days from the date on which the payment falls due the whole of the moneys claimed in the actions referred to above less any amounts paid subsequently shall therefor [sic}) become due and payable without any notice of default requiring to be given by the Bank to the Borrowers. 4. The parties hereby agree that subject to Payment of the settlement sum the Bank shall release and forever discharge the Borrowers from all claims under the actions referred to above." That agreement was forwarded to the debtor's solicitor, under cover of a letter dated 25 May 1992, which was in these terms, omitting formal parts: "I refer to recent discussions and now attach herewith agreement in duplicate for execution by your clients. Please note that the first repayment is due by 26 May 1992." On 15 June 1992, the agreement was returned to the Bank's solicitor, executed by all the borrowers, including the debtor. It had not been dated. The agreement as executed was accompanied with a cheque for $10,000 made payable to the Bank and drawn by Timeless Pty Limited. The cheque was accepted by the Bank and was honoured on presentation. According to an affidavit sworn by the Bank's solicitor, he forwarded the undated agreement under cover of a letter dated 15 June 4992; to the Bank for it to execute. There is no evidence that the Bank, in fact, executed the agreement but the inference which I draw is that it was duly executed by the Bank. At all events, subsequent payments were made, purportedly pursuant to the agreement, on 10 July 1992 of $2000. agreement subsequently executed in the manner which I have just described. On the other hand, counsel for the Bank have been said to constitute such a compounding was conditional, first, upon the execution of a written agreement within the period of 14 days specified in the bankruptcy notice and, secondly, upon due Payment of the instalment specified in the agreement on each of the various dates on which one of those Payments was required. In my view, the debt was compounded when agreement was reached between solicitors, even if that agreement be regarded as conditional on execution of a written document and upon payment of money specified in the agreement. The question of whether a debt has been compounded has to be determined at the expiration of the time for compliance specified in the bankruptcy notice. Thus in Re Deane; ex parte Van Reesema (1961) 20 A.B.C. 259, Virtue g observed, at 262: "The availability of the notice must be judged on the position at the date when compliance with it was required, and nothing occurring subsequently would effect the matter. To hold that a judgment creditor was entitled to rely on a bankruptcy notice under the Similarly, on the view which I take of the events that have happened, it was not open to the Bank, on 26 May 1992, to rely on the bankruptcy notice. The fact that conditions subsequent Bank to issue a fresh bankruptcy notice; see, for example, Re Feast; ex parte Feast, (1887) 4 Mor. 37 and Re Debtor; ex parte London & Country Discount Co (1909) 16 Mans. 205 where Bigham J observed at 206: "The question we have to decide in this case ig whether at the date when the bankruptcy notice was served, 23 October, the company had a good petitioning debt. Undoubtedly there had been in the previous March a good petitioning creditor's debt. The company had recovered final judgment for £127 958 and 2d against the debtor and had issued a bankruptcy notice founded on that judgment; but after that, on 9 was also a promise to give a cheque and it also contained a promise to pay 3 guineas costs. It was not therefore nudum pactum. The cheque was consideration. It was a negotiable instrument and therefore more advantageous than the judgment debt which was not negotiable. What was left therefore, then, was an agreement to give a cheque to pay 3 guineas costs, and to pay the balance of the old debt by certain instalments. On 23 October, the state of things was therefore this: the 3 guineas costs were due, also two instalments under the agreement, these sums together amount only to £20 138. It is clear, therefore, that there was not enough to make a good petitioning creditor's debt. The appeal must be allowed." In my view, that passage can be paraphrased to apply to the th -6- facts in the present case, in the sense that the effect of the agreement which I have found was reached between the solicitor for the Bank and the solicitor for the debtors, was to contract. Clearly enough, a breach of that contract had, according to the terms of the agreement, the effect of, pro tanto, reviving the judgment debt, but in order to quantify the new debt, it is necessary to have regard to amounts paid pursuant to the agreement. For these reasons, it is no longer open to the Bank to rely on the bankruptcy notice and the petition must be dismissed. I certify that this and the preceding five (5) pages are a true copy of the Ex Tempore Reasons' for Judgment of his Honour Mr Justice Ryan Associate: Q td A) wll Date: lg Anat IAQ Counsel for the debtor: Ms M Gordon Solicitor for the debtor: McHenry Harris Counsel for the creditor: Mr G Skene Solicitor for the creditor: William Weston