FEDERAL COURT OF AUSTRALIA Wilson v Official Trustee in Bankruptcy [2000] FCA 282 BANKRUPTCY – application under s 99 of the Bankruptcy Act 1966 (Cth) ('the Act') for an order that a proof of debt be expunged – where purported assignment of the debt in question – where no notice of assignment given to debtor – whether effective assignment of chose in action in equity – whether assignee of an equitable interest a creditor for the purpose of s 82 of the Act – whether relevant that two certificates of judgment admitted Bankruptcy Act 1966 (Cth), ss 44(1), 82, 99 Conveyancing Act 1919 (NSW), s 12 McIntosh v Shashoua (1931) 46 CLR 494, referred to Re Carpas; Ex parte White (1931) 3 ABC 264, considered ERNEST ARTHUR WILSON (DECEASED) v OFFICIAL TRUSTEE IN BANKRUPTCY & NSW BOOKMAKERS CO-OPERATIVE LTD N 8070 OF 1999 EMMETT J 2 MARCH 2000 SYDNEY IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY N 8070 OF 1999 BETWEEN: ERNEST ARTHUR WILSON (DECEASED) APPLICANT AND: OFFICIAL TRUSTEE IN BANKRUPTCY FIRST RESPONDENT NSW BOOKMAKERS CO-OPERATIVE LTD SECOND RESPONDENT JUDGE: EMMETT J DATE OF ORDER: 2 MARCH 2000 WHERE MADE: SYDNEY THE COURT ORDERS THAT: 1. The application be dismissed. 2. The applicant pay those costs of each respondent incurred on and from 10 January 2000. 3. There be no other order as to the costs of the application. Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules. IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY N 8070 OF 1999 BETWEEN: ERNEST ARTHUR WILSON (DECEASED) APPLICANT AND: OFFICIAL TRUSTEE IN BANKRUPTCY FIRST RESPONDENT NSW BOOKMAKERS CO-OPERATIVE LTD SECOND RESPONDENT JUDGE: EMMETT J DATE: 2 MARCH 2000 PLACE: SYDNEY REASONS FOR JUDGMENT 1 On 23 April 1996, Ernest Arthur Wilson was made bankrupt by an order of this Court. On 7 May 1992 a proof of debt was lodged in the bankruptcy on behalf of the second respondent, the NSW Bookmakers Co-operative Society Limited ("the Society"). That proof of debt claimed a sum of $11,700.00 The particulars furnished in the attachment to the proof of debt were as follows: "Judgment obtained in proceedings No 2164 of 1981 in the District Court of New South Wales at Newcastle by William Andrew Dederer for the sum of $9,750.00 with interest of $1,950.00 which judgment debt was assigned to NSW Bookmakers Co-operative Society Limited on 1 January 1986." For reasons that will appear below the date of that assignment appears to be erroneous. The trustee admitted the proof of debt. 2 Mr Wilson recently died. Prior to his death, however, an application was brought under section 99 of the Bankruptcy Act 1966 (Cth)for an order that the proof of debt be expunged. To deal with the contentions that have been advanced on behalf of the bankrupt's estate it is necessary to recount some of the circumstances that led to the alleged indebtedness. 3 On 4 June 1982, judgment was entered against Mr Wilson in favour of Mr Andrew Dederer in the District Court at Newcastle in the sum of $11,100.00 and costs of $225.00. The certificate of judgment dated 26 October 1982 records that on 8 March 1982 $1,350.00 had been paid in respect of the judgment. That seems somewhat curious since the judgment is said to have been entered on 4 June 1982. The judgment arose out of wagering transactions alleged to have been entered into between Messrs Wilson and Dederer. 4 Mr Dederer was apparently a registered bookmaker and claimed the amount allegedly owing was the result of a wager placed with him by Mr Wilson that was lost. There was apparently a dispute as to whether or not the wager was in fact placed as alleged. That matter appears to have been resolved one way or another in the District Court proceedings. 5 It appears that Mr Dederer himself got into financial difficulties. He was a member of the Society and one of the arrangements which existed between members of the Society and the Society was that the Society, in effect, guaranteed payment of debts of its members incurred as a result of bookmaking activities. It appears that the Society made payments on behalf of Mr Dederer as a result of which Mr Dederer became indebted to the Society. 6 On 30 April 1985 a deed was entered into between Mr Dederer and the Society. The deed recited that the Society had obtained judgment against Mr Dederer in the sum of $76,369.74, that a bankruptcy petition had been presented to the Court by the Society and that the debtor had proposed an arrangement to the Society for payment of his indebtedness. By the deed, Mr Dederer agreed to pay instalments of the debt and the Society agreed to seek leave to withdraw its petition. 7 A further instrument bearing the date 30 April 1985 is in evidence. That instrument is expressed to be a deed of assignment between Mr Dederer as assignor and the Society as assignee. The deed evidences assignment by Mr Dederer to the Society of all of Mr Dederer's right, title and interest in the several debts set out in the schedule: "absolutely to call in collect and compel payment thereof and out of the moneys to be so realised in the first place to pay the costs charges and expenses incurred in realisation and in the next place to retain and apply a reduction of moneys then due by the assignor to the assignee." One of the debts described in the schedule was as follows: "Richard Wilson $9,975.00 together with interest from 19.8.82" 8 The reference to August 1982 appears to be a mistake. That date appears to have no relevance to the arrangements between Mr Dederer and Mr Wilson. It may be that it can be explained by reference to another date in the same schedule. 9 On 11 June 1985 the solicitors for the Society, Marshall Marks Dezarnaulds & Jones, wrote to Mr Wilson. The letter was addressed to him at 240 Main Street, Wolli, 2462. It is common ground that that was not the address of Mr Wilson at the time. His address was apparently 140 Main Street, Wolli. By the letter the solicitors relevantly said as follows: "We act on behalf of NSW Bookmakers Co-Operative Society Limited. Our client has been advised by Mr W. A. Dederer that you are indebted to him in the sum of $11,692.00 together with interest payable pursuant to a court judgment. Such debt has been assigned to our client and we now enclose a notice signed by Mr Dederer in respect of same." 10 There was enclosed with that letter a document in the following terms: "NOTICE To: Ernest Arthur Wilson, I, William Andrew Dederer hereby give you notice that by an assignment dated 30th April, 1985 I have assigned absolutely to the NSW Bookmakers Co-Operative Society Limited a debt or some [sic] of $11,692.00 plus interest due and owing by you to me and I require you to pay the same to the N.S.W. Bookmakers Co-Operative Society Limited accordingly. DATED this 30th day of April, 1985. [Signed: W.A. Dederer.]" 11 There is evidence before me from Mr Wilson, in the form of an affidavit sworn before his death, in which he denied ever having received the letter and the notice. There is also evidence before me that the letter was never returned to the sender. In the view which I have formed it is unnecessary for me to make a firm finding as to whether or not the letter was ever received by Mr Wilson. 12 Following the making of the sequestration order on 23 April 1986, Mr Wilson was apparently served with a bankruptcy notice dated 7 March 1986 issued on behalf of the Society. It appears that the Society thereafter became aware of the earlier sequestration order and on 10 July 1986 the Society's solicitors wrote to the Official Receiver's office saying as follows: "RE: ERNEST ARTHUR WILSON – NO. 426 OF 1986 DEDERER AND N.S.W. BOOKMAERS CO-OPERATIVE SOCIETY LIMITED We act in connection with the recovery of moneys due by the abovenamed debtor pursuant to a judgment of the District Court of New South Wales made on 8th September, 1983 in favour of Andrew Dederer. A Proof of Debt will, in due course, be lodged in the bankruptcy. In the meantime, we should be pleased if you would note the interest of our client and advise us if it is anticipated that a dividend will be paid in the bankruptcy. We look forward to hearing from you at your earliest convenience." 13 By letter of 28 July 1986, the Official Receiver's office acknowledged the communication from the Society's solicitors, noted their interest, and said that it appeared that a dividend would be paid to creditors at a later date. 14 On 15 July 1988, the Official Receiver dispatched communications to prospective creditors of Mr Wilson. Communications were sent both to the Society and to Mr Dederer care of the Society's solicitors. The notice was expressed to be "notice to creditors of intention to declare dividend", and was relevantly in the following terms: "It appears that you may be a creditor of the estate but you have not lodged any proof of debt. If you wish your debt to be considered for inclusion in this dividend you must lodge your proof of debt with me on or before 12 AUGUST 1988." The notice specified the address for return of completed proofs of debt. 15 On 11 August 1988, the Society's solicitors wrote to the Official Receiver referring to the notice of intention to declare a dividend in the Estate of Mr Wilson and enclosed a proof of debt "on behalf of our client". The heading was "NSW Bookmakers Co-operative Society Limited - Ernest Arthur Wilson". Enclosed with that letter was a proof of debt dated 8 August 1988. The proof of debt was in the name of Andrew Dederer, care of the Society's solicitors. It was signed by one Ian Buxton. The proof of debt claimed a sum of $16,494.57 "in accordance with the particulars specified in the judgment annexed hereto". The particulars in the proof of debt for the nature of the debt were left blank. The copy of the proof of debt that is in evidence does not have a judgment attached. 16 On 16 August 1988, the Official Receiver wrote to Mr Wilson enclosing amongst other things copy of the proof of debt lodged in the name of Andrew Dederer. The letter contained the following: "Would you also provide me with your comments in respect of the proof of debt lodged by Mr. Dederer, as I noted that this creditor is not disclosed in your statement of affairs." 17 In a draft affidavit prepared by Mr Wilson prior to his death, which was admitted without objection, Mr Wilson said that shortly after receiving the letter from the Official Trustee, he located Mr Dederer at the races and had a conversation as follows: WILSON: "Andy, I want to talk to you about the proof of debt you have put in against me." DEDERER: "Dick, I can't talk to you now but I am going to Sydney Airport to-morrow [sic] as I am going overseas. I am importing furniture. I will talk to you there." 18 Subsequently Mr Wilson met Mr Dederer, and a further conversation took place as follows: WILSON: "Andy, you know I do not owe you this money, I would have said if that had been the horse I backed. I have been betting with you for years." DEDERER: "I'm in debt myself, the NSW Bookmakers Co-Operative has got a judgment against me." WILSON: "I don't know if you put the wrong horse down as a bet I had by accident or on purpose. I don't care as I can not be sure. I told you from the start I won't be paying you as I do not owe what you have claimed and I have paid what I owed as I said I would." DEDERER: "Dick, I may have made a mistake and I will send the trustee a letter and withdraw the claim." 19 On 17 January 1989, the Official Receiver received an undated communication purportedly signed by Mr Dederer saying as follows: "I Andy Dederer make no further claim on the Estate of Ernest Arthur Wilson. The claim of $16,496 has been settled." At the foot of the proof of debt dated 8 August 1988, the notation in handwriting "withdrawn" appears. 20 On 23 April 1989, Mr Wilson was discharged from bankruptcy. However, the administration of his estate continued. There was litigation between Mr Wilson and the Official Trustee, the details of which, as I apprehend the situation, are not presently relevant except insofar as they may explain why the next relevant event in the narrative was in 1992. 21 On 10 April 1992, the trustee forwarded a further notice to creditors of his intention to declare a dividend. In particular, a copy of the notice was sent to the Society care of its solicitors. It was in the following form: "Take notice that the Official Receiver… intends to declare a dividend in this matter. It appears you may be a creditor of the estate but you have not lodged any proof of debt. If you wish your debt to be considered for inclusion in this dividend you must lodge your proof of debt on or before the 8th May 1992." 22 On 7 May 1992, the Society's solicitors wrote to the Official Receiver referring to the notice to creditors of intention to declare dividend and enclosing a proof of debt "on behalf of our client, NSW Bookmakers Co-operative Society Limited". The proof of debt enclosed was that to which I have already made reference. 23 On 12 May 1992, the Official Receiver wrote to the Society's solicitors referring to the proof and saying as follows: "This debt was not disclosed by the bankrupt in his statement of affairs. Accordingly, I request that you kindly substantiate your client's claim by providing copies of the judgment and assignment referred to in the statement of account." 24 The Society's solicitors responded on 13 May 1992 saying that they "would be in touch with you soon regarding the documents requested". However it was not until 21 August 1992 that the Society's solicitors wrote to the Official Receiver enclosing the following documents: · Certificate of Judgment in proceedings 2164 of 1981 in the District Court of NSW; · Copy of the Deed of Assignment dated 30 April 1985; and · Copy of the Notice of Assignment alleged to have been given to Mr Wilson. 25 The Certificate of Judgment enclosed with the letter of 21 August 1992 is a certificate that in an action in the District Court at Newcastle Andrew Dederer recovered judgment against "Dick Wilson" on 8 September 1983 for $9,750.00 and interest at $1,950.00. The certificate was dated 2 August 1985. The inconsistency between the two certificates has not been explained by the evidence before me. One conjecture is that the original judgment was a default judgment and that the subsequent judgment was entered following a trial. As I understand the position, it is common ground that there was in fact a trial that led to a judgment in the District Court. 26 On 27 November 1992, the Society's solicitors wrote to the Official Receiver inquiring in effect when a dividend would be paid. The Official Receiver responded on 2 December 1992 indicating that payment was delayed pending proceedings in this Court in which an order was sought expunging the proof of debt lodged by the major creditor. 27 On 18 November 1994, a further letter was written by the Society's solicitors requesting an indication as to when the administration would be complete. The response of 21 November 1994 indicated that litigation continued that interfered with the final administration of the estate. 28 On 21 June 1995, the Official Receiver wrote again to the Society's solicitors referring to the proof of debt and indicating that Mr Wilson disputed the claim on the grounds that he was not advised of the assignment from Mr Dederer to the Society. On 27 June 1995 the Society's solicitors wrote again to Mr Wilson purporting to give notice of the assignment of the debt. On the same day a copy of that notice was sent to the Official Trustee. Against the background of those facts I must consider the contentions advanced on behalf of the bankrupt's estate. Several alternative bases have been advanced as to why the proof should be expunged. The first, logically, is that, by reason of a number of circumstances, I should conclude that there is some doubt as to the authenticity or effectiveness of the deed of assignment. The suggestion is that an inference should be drawn that the deed of assignment was not in fact signed on 30 April 1995. The matters relied upon are as follows. 29 First the proof of debt originally lodged was in the name of Mr Dederer. Second, the deed of assignment is not actually executed on behalf of the Society although provision is contained in the deed for that purpose. In the correspondence between the Society's solicitors and the Official Receiver relating to the first proof of debt, no mention was made of the assignment. The bankruptcy notice issued in Mr Dederer's name. When the Official Receiver requested evidence of the assignment, some three months elapsed before the Society's solicitors forwarded copies of the assignments and other supporting documents. I do not consider that those matters are such as to lead to an inference that the deed of assignment was executed other than on the date it bears. No grant was made by the Society and accordingly there was no need for the deed of assignment to be executed by it. 30 There is evidence before me that there was correspondence between Mr Dederer's solicitors and the Society's solicitors in August 1985 relating to the assignment. In particular, Mr Dederer's solicitors sought an appropriate indemnity from the Society before permitting proceedings to be commenced in the name of Mr Dederer. Thus, it appears that, for whatever reason, a decision was made to enforce the debt in the name of Mr Dederer, notwithstanding the assignment. Be that as it may, I am not prepared to draw the inference that the assignment was executed otherwise than on 30 April 1985, the date it bears. 31 Next, it was contended on behalf of the estate of the bankrupt that because there was no notice actually given to Mr Wilson of the assignment, the assignment was not effective at law pursuant to section 12 of the Conveyancing Act1919 (NSW). Section 12 relevantly provides as follows: "Any absolute assignment by writing under the hand of the assignor (not purporting to be by way of charge only) of any debt or other legal chose in action, of which express notice in writing has been given to the debtor… shall be, and be deemed to have been effectual in law (subject to all equities which would have been entitled to priority over the right of the assignee if this Act had not passed) to pass and transfer the legal right to such debt or chose in action from the date of such notice, and all legal and other remedies for the same, and the power to give a good discharge for the same without the concurrence of the assignor…" 32 The Society says, however, that whether or not notice was actually given to Mr Wilson, the assignment was sufficient to give the Society standing to prove in the bankruptcy. It is surprising that there is no direct authority on the question. 33 The practice of the Court of Chancery formerly made it generally necessary for an assignee to sue in the assignor's name or to make the assignor a party to the proceedings as defendant so that the rights of all persons interested might be bound and so that the party proceeded against would be protected from further suit or molestation in respect of the same matter. It appears, however, that that practice was not so rigidly applied in petitions by creditors in bankruptcy or in the winding up of companies. Thus, the assignee in equity of a legal debt can present a petition in bankruptcy against the debtor without joining the assignor as a co-petitioner - see McIntosh v Shashoua (1931) 46 CLR 494 at 507. 34 The effect of a sequestration or winding up order was to make the property of the debtor or of the company available for the discharge of his or its liabilities. The relevant legislation enabled a creditor who had a debt, whether due at law or in equity, to petition for such an order. That is certainly the case in relation to the Bankruptcy Act 1966 (Cth)as it presently stands. Under section 44(1) a creditor's petition shall not be presented against a debtor unless there is owing by the debtor to the petitioning creditor a debt that amounts of $2000 or more and that debt is a liquidated sum due "at law or in equity". The inverse of that prohibition is that a creditor who does have a debt in excess of $2000, being a debt due at law or in equity, has standing to petition for a sequestration order. Section 82 is the governing provision in relation to the proof of debts. It provides that subject to Division 1 of Part 6 of the Act "all debts and liabilities present or future, certain or contingent, to which a bankrupt was subject at the date of the bankruptcy… are provable in the bankruptcy." There is, of course, nothing in the language of section 82 that restricts the term, "debts and liabilities", to debts due only at law and not in equity. 35 In Re Carpas; Ex parte White (1931) 3 ABC 264, Henchman J considered a bankruptcy petition on the ground that, at a meeting of creditors, the debtor was requested to surrender his estate for administration by the presentation of his own petition and had refused to do so. In the course of his judgment Henchman J referred to a debt collector who was an assignee of the debtor's debt. His Honour observed that the assignee did not have a good petitioning debt because the assignor had retained a beneficial interest in the debt and had not made an absolute assignment. The inference appears to be that, had there been an absolute assignment then the debt would be provable notwithstanding the absence of notice. 36 I consider that an assignee who has taken an absolute assignment of a debt owing at law, but who has not yet given formal notice to the debtor of the assignment so as to perfect his legal entitlement to sue at law, is nevertheless a creditor for the purpose of section 82 of the Bankruptcy Act 1966 (Cth). In other words the debt is a debt or liability within the meaning of section 82 and therefore can be the subject of proof. Clearly, if some conflict arose between assignor and assignee, it would be necessary for evidence to be advanced to the trustee to enable him to resolve that conflict. However, so long as the trustee is satisfied, by evidence of the assignment that an assignment had been effected at least in equity, the trustee would be entitled, in my view, to treat the assignee as the person entitled to submit a proof in the bankruptcy. 37 It is common ground before me that the proof of debt lodged in the name of Mr Dederer is to be taken to have been withdrawn. It may be that the letter received from Mr Dederer on 17 January 1989 was written without any authority from the Society. By the time that letter was written, of course, the debt had been assigned absolutely, such that Mr Dederer had no proprietary interest in the debt other than as a bare trustee. However, it is clear that no one now seeks to press the proof of debt lodged in the name of Mr Dederer. Rather the Society, or alternatively those advising it, decided to change the approach by submitting a proof in the name of the Society itself. 38 Another ground advanced on behalf of the bankrupt's estate concerned the two certificates in relation to the judgment in the District Court. As I have said, the conflict has not been satisfactorily explained. However, it appears that nothing turns on that matter. Whether the original judgment was set aside or not, does not appear to matter. The amount for which the proof was lodged would not be, as I understand it, relevantly different, depending upon which judgment was relied upon. In any event there is a certificate from an officer of the District Court in relation to the later judgment and that is the judgment upon which the proof of debt is founded. 39 In all of the circumstances I do not consider that any of the attacks on the proof of debt has been made out. Accordingly, I consider that the application should be dismissed. 40 The respondents have asked for their costs of the application. It will be apparent from the narrative that I have already engaged in that the matter has proceeded with some element of confusion. Who is to blame for that is not totally clear. It may well be that some of the argument, if not all of it, could have been avoided if all of the information relating to the assignment had been made available to Mr Wilson at an earlier time. 41 On 23 December 1999 the Society's solicitors wrote to Mr Wilson setting out in fairly concise terms the basis of their claim. They suggested that the application to expunge the proof of debt be withdrawn no later than 10 January 2000. Thus at latest from 10 January 2000, it was clear to the applicant that the Society's claim was based on the assignment. That claim has now been upheld. 42 In the circumstances I consider that the appropriate order is that the applicant pay the costs of the respondents with effect from 10 January 2000 and that there be no other order as to the costs of the application. I certify that the preceding forty-two (42) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Emmett. Associate: Dated: 15 March 2000 Solicitor for the Applicant: The applicant appeared in person Solicitor for the First Respondent: Mr Murray for the Australian Government Solicitor Counsel for the Second Respondent: Mr Sharpe Solicitor for the Second Respondent: Marshall Marks Kennedy Date of Hearing: 2 March 2000 Date of Judgment: 2 March 2000