JUDGMENT No. 2s! QS seal sock tore CATCHWORDS BANKRUPTCY - creditor's petition - judgment debt - name of petitioning creditor a firm name - judgment entered in firm name - change of identity of partners between entry of judgment and filing of petition - no evidence of assignment of debt from retiring partners to newly admitted partners - whether petition should be dismissed - whether hearing of petition should be adjourned. Bankruptcy Act 1966 s 307. Re Hill; Ex parte Holt & Co [1921] 2 KB 831. ROBERT BRIDE V. ANDERSON RICE (A FIRM). NO. VP 944 of 1994 Judge: GRAY J. Place: MELBOURNE Date: 14TH DECEMBER 1994 94. RECEIVED - 6 FEB 1995 FEDERAL COURT OF AUSTRALIA PRINCIPAL IN THE FEDERAL COURT OF AUSTRALIA ) GENERAL DIVISION ) No. VP 944 of 1994 BANKRUPTCY DISTRICT OF THE STATE ) OF VICTORIA ) BETWEEN: ROBERT BRIDE Debtor -and- ANDERSON RICE (A FIRM) Petitioning Creditor JUDGE: Gray J. PLACE: Melbourne DATE: 14th December 1994 REASONS FOR JUDGMENT The creditor's petition in the present matter has been filed, giving the name of the petitioning creditor as "Anderson Rice (A Firm)". Section 307 of the Bankruptcy Act 1966 permits any person or persons carrying on business under a firm name to take proceedings in the firm name. There is a danger, however, in assuming that because proceedings can be taken in a firm name, a firm is in some way equated to a corporation or other legal person. -2- The petition is based on a judgment of a Magistrate's Court, which was obtained in the firm name on 21ist June 1990. At that date, there were seven partners in the firm. At the date on which the petition was filed in this Court, there were also seven partners in the relevant firm. The identity of the seven persons, however, was not entirely the same as the identity of the seven who were partners at the time when the judgment was obtained. Some partners had retired and some new partners had been admitted. I accept the proposition, put by counsel for the petitioner, that a judgment in the name of a firm which has a number of partners is a judgment creating those partners as joint and several creditors in respect of the sum for which judgment has been entered. As I have said, there is a danger in trying to treat the firm as a legal entity. It is very clear that the persons who have been admitted to the partnership, between the date of the judgment and the date of filing the petition in this Court, were not judgment creditors at the date when the judgment was obtained. There has been no material filed to suggest that they became judgment creditors by assignment of the debt or of any interest in it. Counsel for the petitioner has suggested that I should assume from a course of dealing that the outgoing partners have assigned their interests in any ongoing debts to incoming partners. The difficulty of that is that I do not have any evidence as to any course of dealing. I have -3- evidence as to only one case and I have an affidavit which in a very formal and sparse way purports to verify the statement in the petition that the debtor is justly and truly indebted to the petitioning creditor in the sum claimed. It seems to me a more likely explanation that no relevant mind has been turned to the question of who were the appropriate creditors in the preparation of this petition. Counsel for the petitioner placed reliance on the judgment of a Divisional Court of the King's Bench Division in Re Hill; Ex parte Holt & Co [1921] 2 K.B. 831. In that case, there had been a judgment obtained in the name of a firm at a time when there were four partners in the firm. In between the time of obtaining judgment and the time of presenting a bankruptcy petition, one of those partners retired. The issue was whether there had been a change in the parties entitled to execution within the meaning of a provision of the rules of court which required the leave of the court if such a change occurred. The Divisional Court held that there had not been a change requiring such leave. At p. 834, Horridge J said: "At the time when the judgment was recovered by Holt & Co. the persons who were entitled to enforce it were the four persons who were at that time the members of the firm. On the retirement of Guinness the persons entitled to enforce the judgment were still the members of the firm of Holt & Co. By virtue of s. 38 of the Partnership Act, 1890, there was for this purpose no change in the firm. That section provides: "After the dissolution of a partnership, the authority of each partner to bind the firm, and the other rights and obligations of the partners, continue notwithstanding the dissolution so far as may be necessary to wind up the affairs of the partnership, and to complete -4- transactions begun but unfinished at the time of the dissolution."" His Lordship went on to say that the surviving or continuing partners of the firm were at liberty to issue a bankruptcy notice and to present a petition and that he would not assume that they lacked the authority to do so. The distinction between that case and the present is that in that case no issue of the admission of new partners arose. In the present case, the petition is presented by seven persons in the name of the firm. Some of those seven persons were not partners in the firm at the date when the judgment was obtained and therefore were not at that date creditors of the judgment debtor. If they have since become creditors of the judgment debtor, there is no evidence as to how they did so and indeed no evidence that they have done so at all. It seems to me, therefore, that I could not make a sequestration order against the judgment debtor in this proceeding. The question arose whether I should stand over or adjourn the proceeding, in order to enable the petitioning creditor to produce further evidence, and perhaps consider the question of amendment of the name in which the petition was brought. I declined to grant such an adjournment or to stand over the proceeding. I did so on the basis that, on 15th November 1994, the debtor filed an amended notice of his intention to appear, which set forth very clearly the issue -5- that was to be raised with respect to the composition of the firm at the various dates. Insufficient attention -appears to have been paid to that issue. I should not reward that insufficiency of attention by allowing the petitioning creditor an opportunity to deal with the issue now. Accordingly, I propose to dismiss the petition. The order of the Court in matter number VP 944 of 1994 is: 1. The petition is dismissed. 2. The petitioning creditor pay the debtor's costs of the petition, including any reserved costs. Counsel for the petitioning creditor: Mr. J.L.R. Francis Solicitors for the petitioning creditor: Anderson Rice Counsel for the debtor: Mr. K.G. Howden Solicitors for the debtor: Holding Redlich Date of Hearing: 14th December 1994 Date of Judgment: 14th December 1994 I certify that this and the preceding four (4) pages are a true copy of the reasons for judgment of his Honour Justice Gray Date: /+ @./79S