FEDERAL COURT OF AUSTRALIA Reasonable Endeavours Pty Ltd v Dennehy [2002] FCA 1472 BANKRUPTCY - creditor's petition – judgment debt – notice of intention to oppose – whether settlement agreement as executed substituted the judgment debt with a different obligation so as to constitute accord and satisfaction or accord and conditional satisfaction – whether s 5(7) of the Limitations of Actions Act 1958 (Vic) applies - whether a bankruptcy notice or a creditor's petition is an action for the purposes of s 5(7) of the Limitations of Actions Act – whether a sequestration order should be made against the estate of the respondent debtor. Bankruptcy Act 1966 (Cth) ss 41(5), 43, 52(1)(c), 52(2) Supreme Court Act 1986 (Vic) s 101(1) Penalty Interest Rates Act 1983 (Vic) Limitations of Actions Act 1958 (Vic) ss 3(1), 5(4), 5(7), 24(3) Federal Court Rules O 62 Dennehy v Reasonable Endeavours Pty Ltd [2001] VSC 447, followed McDermott v Black (1940) 63 CLR 161, cited Commissioner of Taxation v Hadidi (1994) 51 FCR 453, cited Re Maddox; Ex parte the Debtor (1979) 24 ALR 279, referred to Reasonable Endeavours Pty Ltd v Dennehy (2001) 107 FCR 144, distinguished Re Moss; Ex parte Tour Finance Ltd (1969) 13 FLR 101, followed Commonwealth Bank of Australia v Sammut [2000] VSC 374, cited Re Wheeler & Reynolds; Ex parte Kerr v Crowe (1988) 20 FCR 185, followed REASONABLE ENDEAVOURS PTY LTD v GERARD PETER DENNEHY V 7018 OF 2002 MARSHALL J MELBOURNE 29 NOVEMBER 2002 IN THE FEDERAL COURT OF AUSTRALIA VICTORIA DISTRICT REGISTRY V7018 of 2002 BETWEEN: REASONABLE ENDEAVOURS PTY LTD (FORMERLY ASIACITI (AUSTRALIA) PTY LTD) (ACN 006 595 795) APPLICANT AND: GERARD PETER DENNEHY RESPONDENT JUDGE: MARSHALL J DATE OF ORDER: 29 NOVEMBER 2002 WHERE MADE: MELBOURNE THE COURT ORDERS THAT: 1. A sequestration order be made against the estate of Gerard Peter Dennehy. 2. The applicant's costs of and incidental to the petition, including any reserved costs, be taxed pursuant to O 62 of the Federal Court Rules and paid in accordance with Statute. 3. The date of bankruptcy be noted as 5 February 2002. Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules. IN THE FEDERAL COURT OF AUSTRALIA VICTORIA DISTRICT REGISTRY V7018 of 2002 BETWEEN: REASONABLE ENDEAVOURS PTY LTD (FORMERLY ASIACITI (AUSTRALIA) PTY LTD) (ACN 006 595 795) APPLICANT AND: GERARD PETER DENNEHY RESPONDENT JUDGE: MARSHALL J DATE: 29 NOVEMBER 2002 PLACE: MELBOURNE REASONS FOR JUDGMENT 1 By a creditor's petition filed on 12 April 2002, in the Federal Magistrates Court of Australia, the applicant, Reasonable Endeavours Pty Ltd (formerly Asiaciti (Australia) Pty Ltd), applied for a sequestration order against the estate of Mr Dennehy, the respondent, pursuant to s 43 of the Bankruptcy Act 1966 (Cth) ("the Bankruptcy Act"). The creditor's petition alleged that the respondent owed the applicant the sum of $627,074.63 pursuant to an order of the Supreme Court of Victoria ("the Supreme Court"), dated 28 November 1991 ("the 1991 judgment"). The petition relied on an alleged act of bankruptcy being the issue of, and non-compliance with, a bankruptcy notice served on the respondent on 15 January 2002. 2 On 27 May 2002, the respondent filed a notice of intention to oppose the creditor's petition. The grounds of opposition were as follows: "1. That the judgement debt alleged in the petition has been satisfied by, alternatively merged in, alternatively subsumed by a Settlement Agreement between the creditor and the debtor herein made in 1997; 2. That the Bankruptcy Notice VN 2030/01 dated 12 December 2001 on which the petition is founded is invalid for over-statement of the amount owing in accordance with the notice given by the debtor under section 41(5) of the Act dated 4 February 2002; 3. That the said Bankruptcy Notice is a nullity for failure to comply with section 41(2) of the Act, in that the notice mis-states the alleged debt by failing to take into account the effect of the said Settlement Agreement and the deposit of 600,000 shares in Rystar Communications Inc. referred to in the debtor's affidavit – the debtor will rely upon the unreported decision in St George Wholesale Finance Pty Ltd v Spalla [2000] FCA 1094; 4. That the said Bankruptcy Notice was reasonably capable of misleading the debtor as to the amount necessary to be paid to comply with the notice; 5. That the petition is an abuse of process for mis-statement of the amount in fact due and for failure to record or allow amounts or value received in respect of the alleged debt – the debtor will rely upon the unreported decision in St George Wholesale Finance Pty Ltd v Spalla [2000] FCA 1094; 6. That in all the circumstances set out above, or some of them taken together, pursuant to section 52(2)(b) of the Act there is other sufficient cause shown as to why a sequestration order should not be made." Findings of fact 3 On 21 November 1997, the applicant, the respondent and a Mr Briggs entered into a written agreement, inter alia, with respect to the 1991 judgment ("the 1997 settlement agreement"). Mr Briggs is a director of and Chief Executive Officer of the applicant. 4 As part of the 1997 settlement agreement, the respondent was to pay to the applicant, or its nominee, the following amounts "in full settlement of the judgment debt, interest on the judgment debt and costs": · $100,000 on or before 28 November 1997; * $300,000 before 19 December 1997; and * $100,000 on or before 30 June 1998. 5 In a letter to the respondent also dated 21 November 1997, Mr Briggs confirmed the progress payment structure which the applicant and the respondent had agreed to and stated that it was acceptable subject to: · the execution of the written settlement agreement; · the receipt of $100,000 on or before 28 November 1997; and · "(t)he restructuring of your personal affairs to place various assets under our administration is commenced before 15 December 1997, and at least partially completed before 31 December 1997." 6 On 12 December 1997, the respondent made the first payment due under the settlement agreement in the amount of $100,000. The payment was made some two weeks late. The two further payments referred to in the agreement were never made. 7 The respondent asserted that in addition to the 1997 settlement agreement, there was an oral agreement between Mr Briggs and the respondent that shares would be placed by the respondent under the administration of the Asiaciti Trust group of companies (of which the applicant is one) to secure his obligations under the agreement. Furthermore, no dealing in the shares would occur without the consent of Mr Briggs. 8 On 2 December 1997, Asiaciti Corporate Services Pty Ltd of Singapore ("Asiaciti") incorporated Victoria International Holdings Limited ("Victoria International"), a Samoan corporation. The directors of Victoria International were Westco Directors Ltd and Westco Securities Ltd. 9 In June 1998, Asiaciti also arranged the establishment of a superannuation fund in Samoa known as Magellan. The trustee of the fund was to be IRSS Nominees ("IRSS"), a Samoan corporation controlled by Asiaciti. 10 Victoria International and Magellan were established in accordance with instructions given by the respondent. The companies were established for the respondent's benefit. At all material times, there was one share in Victoria International, held by the company itself, on trust for the respondent and the respondent was the only member of Magellan. 11 On 16 December 1997, the respondent sent a facsimile transmission to Mr Briggs, advising Mr Briggs that he would "start transferring securities to (his) control." The letter further advised that 19 December 1997 would be the last day for the payment of the second instalment of $300,000 pursuant to the 1997 settlement agreement. 12 No steps were taken at that time, by the respondent, for securities to be transferred to the control of any company associated with Mr Briggs or to Mr Briggs himself. 13 On 3 September 1998, the respondent wrote to Mr Briggs advising him that securities had begun to be transferred to his office "over the past couple of months" and that 600,000 shares in a company known as "Rystar" would be delivered to him by the end of September. 14 On Sunday 13 September 1998 at 5.11 pm (Vancouver time), the respondent sent a facsimile transmission to Mr Briggs from the office of his Canadian lawyers, Thomas, Rondeau. The transmission consisted of the following: · a cover sheet; · a letter dated 13 September 1998 on the respondent's personal letterhead addressed to Mr Briggs ("the 13 September letter"); and · a letter dated 11 September 1998 on Thomas, Rondeau letterhead addressed to Mr Briggs, enclosing a sale agreement and a draft resolution of the directors of Victoria International ("the 11 September letter"). 15 The 13 September letter was in the following terms: "Dear Graeme, Could you please contact me RE: attached Letter, Contract and Proposed Resolution from Thomas, Rondeau Business Lawyers. My hotel number in Vancouver is …… Thank you, Gerry Dennehy" 16 The material parts of the 11 September letter stated: "We have today forwarded to you Sale Agreements for shares in Rystar Communications Ltd for execution by Victoria International Holdings Ltd. Also forwarded to you is a Resolution for execution by the aforementioned party. The above documents must be completed and signed in the appropriate location in accord with the memorandum and articles of the company. If the signatory is a designated sole signatory, that also must be confirmed and certified. Upon completion, the documents must be delivered to this office. A fax confirming the Federal Express or DHL waybill must be received by 5:00 pm on Sunday, September 13, 1998. All times referred to above are Vancouver times." 17 The reference to the deadline of 5.00 pm, 13 September, Vancouver time is curious because the facsimile transmission was not sent until 5.11 pm, Vancouver time, on that same day. Clearly, Asiaciti was being requested to act urgently. At 5.11 pm on 13 September, Vancouver time, it would have been about 8.11 am, Monday 14 September in Singapore. 18 The sale agreement and accompanying resolutions were signed on behalf of the directors of Victoria International in Singapore and sent back to Thomas, Rondeau. 19 Mr Briggs was not present in Singapore at the time of receipt of the facsimile transmission from the respondent. Another officer of Asiaciti handled the transactions and attended to the facsimile transmission. There is no satisfactory admissible evidence that anyone at Asiaciti contacted the respondent about his letter dated 13 September 1998. 20 In his oral evidence before the Court, the respondent said that he did not want Victoria International to act on the proposed sale agreement and that he intended to tell Mr Briggs that he should not arrange the sale. The respondent said that he didn't telephone Mr Briggs about this because it was a Sunday. Yet he admitted that it would have been a Monday in Singapore. 21 I do not accept the respondent's evidence that he did not want the shares to be sold. It is inconsistent with his sending of the 11 September letter to Mr Briggs. That letter requested urgent action in relation to the sale. Further, I carefully observed the respondent's demeanour when giving his evidence that he did not want the shares to be sold and I was not convinced as to its truthfulness. 22 There is no reliable, admissible evidence as to what happened to the 600,000 Rystar shares. However, there is no evidence that the applicant benefited in any way from the sale. There is also no evidence that the applicant acted negligently or in breach of any fiduciary duty with respect to the sale. 23 I also do not accept that Mr Briggs or Asiaciti acted in breach of any fiduciary duty owed to the respondent in respect of the sale. The facsimile transmission required urgent action and that action was taken by Asiaciti. If the respondent had not wanted the sale agreement to be transacted he should not have sent the facsimile transmission or, at the very least, he should have said so in his 13 September letter. 24 The better view of the evidence is that the respondent intended the Rystar shares to be sold and so requested Asiaciti to expedite the facilitation of that sale. 25 On 29 May 1998, Mr Rondau wrote to Asiaciti enclosing an agreement by which the respondent purported to transfer 750,000 shares in a Canadian company called Terramin Resources Inc ("Terramin") to IRSS as trustee for Magellan, with the respondent as the beneficiary. 26 On 23 July 1998, Mr Rondau wrote to Asiaciti confirming approval by the Vancouver Stock Exchange of the transfer of the 750,000 Terramin shares and an additional 150,000 shares. 27 No documents were otherwise received by Asiaciti concerning Terramin (apart from the correspondence from Mr Rondau referred to in the two preceding paragraphs). 28 The applicant did not receive any documents concerning Terramin. Nor did it receive shares in Terramin. There is no evidence of any involvement in the transfer of the Terramin shares of the applicant, Mr Briggs, Asiaciti or any company in the Asiaciti group. There is, however, evidence that as at 8 May 1999, Magellan held Terramin shares in trust for the respondent. The Supreme Court proceeding 29 On 23 November 2001, Pagone J in the Supreme Court of Victoria, granted the applicant leave to issue a warrant to execute the 1991 judgment; see Dennehy v Reasonable Endeavours Pty Ltd [2001] VSC 447 ("Dennehy"). Such leave was required because more than six years had elapsed since the 1991 judgment took effect. 30 At [4] of his judgment, Pagone J said: "There was no dispute between the parties concerning the quantum of the amount due. The orders of Ormiston, J. on 28 November 1991 were that the defendant pay the sum of $339,719.26 and the plaintiff's costs of and incidental to the proceeding: see Exhibit MJA 1 to Annell's affidavit of 8 May 2001. It was common ground that the defendant had paid the sum of $100,000 on 12 December 1997, and the amount calculated (and not contested) as being due as at 3 May 2001, was $610,348.35…" 31 At [15], his Honour said: "Mr. Bigmore Q.C., who appeared for the defendant with Mr Minahan, submitted that the proper construction of the settlement agreement was as an agreement by the plaintiff to accept the defendant's promises contained therein (partly executed and partly executory) in conditional satisfaction of the debts concerned, rather than an agreement by the plaintiff to accept nothing less than full performance. In my view, that is not the proper construction of the agreement. It is true that the agreement contains promises by the defendant, but in my view, the proper construction of the settlement agreement is that the plaintiff agreed to accept performance of the promises, rather than the mere giving of the promises, in conditional satisfaction of the debts concerned. It was also submitted for the defendant that the settlement agreement was characterisable as an "accord and conditional satisfaction" not as an "accord executory", and that the plaintiff had erroneously submitted that the defendant must establish an "accord and satisfaction" when (so it was said) establishment of an "accord and conditional satisfaction" is sufficient. If this construction of the settlement agreement is accepted for the purposes of argument, the question still left unanswered is what the settlement agreement so construed "is sufficient" for. If the proper construction of the settlement agreement leaves in force the judgment debt, a finding that its proper construction is that it is an "accord and conditional satisfaction" results in the settlement agreement being but one factor to take into account in the exercise of the Court's discretion in deciding whether to grant leave. Whether a settlement agreement properly characterised as an "accord and conditional satisfaction" will be sufficient to prevent leave to issue execution after six years must depend upon all of the circumstances relevant to the "accord and conditional satisfaction". In my view, the circumstances surrounding the performance of the settlement agreement would not justify a conclusion that it would be inequitable or unjust for execution to issue in the circumstances which obtain. The settlement agreement itself has not been performed by the defendant according to its terms. The best that may be said on behalf of the defendant is that some other arrangement was entered into in relation to the holding of securities but his conduct in relation to those securities does not give me confidence that equity or justice is on his side." 32 At [19], Pagone J said: "The parties have given some effect to the arrangement described in that letter. The initial payment was made, albeit late. Some securities owned or held for the benefit of Mr. Dennehy were placed under the administration of companies controlled or associated with Mr. Briggs and the plaintiff: shares in a company called Rystar were placed with Victorian International Holdings Limited ("V.I.H.L.") and shares in a company called Terramin Resources Inc. were placed on trust in a fund known as the Magellan Superannuation Fund ("Magellan"). V.I.H.L. and Magellan were established through Mr. Briggs for Mr. Dennehy as a means of providing either security or comfort for discharge of the obligations to pay the balance of the $500,000 offered in November 1997." 33 Order 3 of the orders made by Pagone J provided: "The Plaintiff is granted leave to issue a warrant of execution of the judgment of Justice Ormiston made 28 November 1991, for the amount of that order less $100,000.00 paid on 12 December 1997." The quantum of the bankruptcy notice 34 The bankruptcy notice claimed that the respondent was indebted to the applicant in the amount of $627,074.63, constituted as follows: · amount of judgment or order - $339,719.26; · interest accrued since date of judgment - $387,355.37; and · less payments made since the judgment - $100,000. 35 The interest amount was claimed pursuant to s 101(1) of the Supreme Court Act 1986 (Vic) ('Supreme Court Act') at applicable rates under the Penalty Interest Rates Act 1983 (Vic) and covered the period up to and including 5 December 2001. 36 By written contentions, counsel for the respondent submitted that the applicant did not have leave to issue a bankruptcy notice claiming more than the judgment amount less $100,000, that is, $239,719.26. It was submitted that, therefore, the bankruptcy notice is invalidated as the $627,074.63 specified in the notice, as the amount due to the applicant, exceeds the amount in fact due under the order of 16 November 2001. Counsel relied on the terms of the order of Pagone J, together with s 41(5) of the Bankruptcy Act. Section 41(5) provides that: "A bankruptcy notice is not invalidated by reason only that the sum specified in the notice as the amount due to the creditor exceeds the amount in fact due, unless the debtor, within the time allowed for payment, gives notice to the creditor that he or she disputes the validity of the notice on the ground of the mis-statement." 37 The order of Pagone J did not have the effect contended for by counsel for the respondent in that it did not give leave for a bankruptcy notice of a particular type to be issued. Rather, the order gave leave to the applicant to issue a warrant of execution of the 1991 judgment less the 12 December 1997 payment. 38 Interest on the judgment, as counsel for the applicant submitted, flows as a consequence of the provisions of s 101(1) of the Supreme Court Act. That sub-section relevantly provides that: "Every judgment debt carries interest at the rate for the time being fixed under section 2 of the Penalty Interest Rates Act 1983 from the time the judgment was given…" 39 I reject the contention of the respondent's counsel that a reasonable person in the position of the respondent would have been perplexed by the alleged inconsistency between general leave to execute and specific leave to execute for the amount of the judgment debt less $100,000. Accord and (Conditional) Satisfaction 40 Counsel for the respondent formally submitted that the 1997 settlement agreement delimited the rights of the applicant as against the respondent. Counsel contended that the effect of that agreement was to substitute the judgment with an obligation on the respondent to restructure his personal affairs and to pay the applicant the sum of $500,000. It was said that the agreement constituted an accord and satisfaction or, alternatively, an accord and conditional satisfaction, which gave the applicant a right of election to maintain the settlement agreement, in the event of default, and enforce it or sue on the original obligations the subject of the agreement. 41 It was contended that no clear and unequivocal election has been made by the applicant. 42 In response to this submission, counsel for the applicant submitted that the principles of accord and (conditional) satisfaction are only relevant to the issue of whether the debt on which the applicant relies is still owing. Counsel referred to s 52(1)(c) of the Bankruptcy Act which provides that: "At the hearing of a creditor's petition, the Court shall require proof of: … (c) the fact that the debt or debts on which the petitioning creditor relies is or are still owing; and, if it is satisfied with the proof of those mattes, may make a sequestration order against the estate of the debtor." 43 I reject the respondent's submissions based on accord and (conditional) satisfaction. They are, in essence, submissions as to the proper construction of the settlement agreement, which were made to, and rejected, by Pagone J. I share his Honour's view and agree with the reasons for that view, which he stated at [15] and ff in Dennehy, that the applicant did not agree to anything less than full performance of the terms of the agreement, but rather, it agreed to accept the performance of the respondent's promises in conditional satisfaction of the debt. 44 Consequently, I agree with the submission put on behalf of the applicant that the 1997 settlement agreement did not constitute an agreement, the execution of which would release the respondent from the obligation under the judgment debt plus statutory interest. In the instant circumstances there was to be no discharge of the debt unless and until the respondent's promise, in particular to make all instalment payments, was performed; see McDermott v Black (1940) 63 CLR 161 at 184-185, per Dixon J. See also Commissioner of Taxation v Hadidi (1994) 51 FCR 453 at 459-460. 45 In my opinion, the 1997 settlement agreement did not contemplate that there would be a release of the judgment debt unless and until all three instalments were paid. 46 It follows from the above that I also necessarily reject the submission that the settlement agreement constitutes an accord and conditional satisfaction, giving the applicant a right of election in default. However, I accept the submission of counsel for the applicant that the action of the applicant in applying to the Supreme Court for the issue of a warrant of execution and to this Court for a sequestration order shows that it has elected to sue on the original obligations under the 1991 judgment, in a clear and unequivocal way. 47 I have no doubt, as a result of the foregoing analysis, that the judgment debt is "still owing". Implied term and fiduciary duty 48 Counsel for the respondent contended that it was an implied term of the settlement agreement that the applicant would account to the respondent in respect of any dealing in the respondent's assets. The evidence discloses no such dealing. In so far as Mr Briggs or any company in the Asiaciti group was so involved, no relevant agency or fiduciary relationship has been established. In particular, having regard to my earlier findings of fact, no dealing with any shares of the respondent occurred without the respondent's consent, or the consent of a person with apparent authority to act on his behalf, that is, his lawyer in Canada, Mr Rondau. Termination in futuro 49 At paras 30 and 31 of their written contentions, counsel for the respondent submitted that: "Further and alternatively, the purported reliance on the original obligation by the applicant amounts to more than mere termination of the Settlement Agreement in futuro since it seeks to revive a right pre-existing the Settlement Agreement rather than merely maintain an action for damages arising out of the alleged repudiation of the Settlement Agreement. The applicant seeks in effect to rescind the Settlement Agreement ab initio or treat it as a nullity (with the possible self serving exception of seeking to treat it as providing some form of acknowledgement). However, it is submitted that it is not an arrangement which can simply be dealt with by means of bringing the obligations to perform to an end since there are on-going incidents, including the absolute releases granted by the terms of the Settlement Agreement and the transfer of shares to, and their subsequent disposal by the applicants agents and/or nominees. As a matter of principle in cases where a party seeks to rescind a contract, in effect, the circumstances must permit restitutio in integrum (Fullers' Theatres Ltd v Musgrove (1923) 31 CLR 524. Carter par [1040]. Further the principle applies in another way, in so far as a party seeking to terminate may not act in a manner inconsistent with termination by seeking to retain benefits accruing pursuant to the agreement in question. Here the applicant and its nominees, the Briggs Group, retain the assets still held and do not account in respect of the Rystar sale. It is no answer to say no worth was received in respect of that sale since that is to say nothing more than that the applicant and the Briggs Group failed to ensure that the asset were not released without authority or payment." 50 I consider that those submissions are misplaced. Indeed they were not developed beyond the written contentions. No additional funds have been paid to the applicant other than the payment of $100,000 on 12 December 1997. The mere placing of securities under the administration of Asiaciti interests does not displace the obligation to pay the $400,000, a figure constituted by the unpaid second and third instalments referred to in the 1997 settlement agreement. Failure to take into account Rystar shares in the amount owing 51 It was submitted on behalf of the respondent that there was a failure to take into account the sale of the 600,000 Rystar shares in the amount allegedly owing to the applicant. Having regard to my findings at [14] to [24] above, I do not consider that the applicant, or any entity or person associated with the applicant, has received any benefit from the sale of the Rystar shares. There is, therefore, no reason to discount any amount owing by reference to the sale of the Rystar shares. Consequently, there has been no overstatement of the debt due on account of a failure to make an allowance for a benefit derived from the sale of the Rystar shares. Overstatement of interest 52 It was submitted on behalf of the respondent that the bankruptcy notice overstates the claim in respect of which the applicant is entitled to issue execution by about five years' worth of interest. That submission is grounded in the provisions of s 5(7) of the Limitation of Actions Act 1958 (Vic) ("the Limitation Act"). 53 Section 5(7) of the Limitation Actprovides that: "Save as otherwise expressly provided an action shall not be brought to recover any arrears of interest in respect of any sum of money whether payable in respect of a specialty, judgment, legacy, mortgage or otherwise, or any damages in respect of such arrears, after the expiration of six years after they became due." 54 Section 3(1) of the Limitation Act defines the term "action" to include "any proceeding in a court of law". Counsel for the applicant submitted that a bankruptcy notice is not a proceeding in a court of law. He referred to the judgment of Lockhart J in Re Maddox; Ex parte the Debtor (1979) 24 ALR 279 at 283-284 to support that submission. Lockhart J held that the issue of a bankruptcy notice by a Registrar is not a step in a proceeding. Similarly, it was contended that the issuing of a bankruptcy notice by the Insolvency and Trustee Service, Australia, on behalf of the Official Receiver in Bankruptcy, is not an "action" for the purposes of the Limitation Act. 55 It was further submitted by counsel for the applicant that the issue of the creditor's petition in the Court is an action as so defined in the Limitation Act, but it is not an action to recover any arrears of interest in respect of a judgment. It is, counsel submitted, an action which seeks the making of sequestration order against the respondent, which may not necessarily result in any arrears of interest in respect of a judgment being recovered. 56 In response, counsel for the respondent contended that the critical question is whether s 5(7) of the Limitation Actdisentitles the applicant to issue execution in respect of part of the interest on the judgment in the applicant's favour. To support the submission, counsel relied upon my observations in Reasonable Endeavours Pty Ltd v Dennehy (2001) 107 FCR 144 at [16] to [20] in the context of a creditor being in a position to issue immediate execution upon a final judgment. 57 The issue addressed in my earlier reasons is not an issue which is relevant to the instant matter. The critical question is whether the bankruptcy notice wrongly states the amount of interest owing. It is said, on the respondent's behalf, that it does so wrongly state because s 5(7) of the Limitation Act only allows a claim to be made with respect to interest on a judgment debt for a period of six years after the judgment. I do not consider that to be a correct statement of the effect of s 5(7) of the Limitation Act. It speaks of "an action" not being "brought". As the bankruptcy notice is not an action, it is not prevented from being "brought" by anything contained in s 5(7). The creditor's petition is not an action of the type referred to in s 5(7), but one that seeks the sequestration of an estate. The role of the Court in hearing such a petition is to determine whether an act of bankruptcy has occurred and not whether arrears of interest can be received; see Re Moss; Ex parte Tour Finance Ltd (1969) 13 FLR 101 at 105 to 106; see also Re Maddox at 284 per Lockhart J. For an illustration of another type of proceeding not affected by s 5(7), see Commonwealth Bank of Australia v Sammut [2000] VSC 374. 58 Although a bankruptcy notice is a proceeding for some purposes under the Bankruptcy Act, it is not a step in any proceeding in the Court and is certainly not a proceeding for the purposes of the Limitation Act; see Re Wheeler & Reynolds; Ex parte Kerr v Crowe (1988) 20 FCR 185 at 190, per Spender J. 59 Prior to the conclusion of the hearing on 7 November 2002, I asked counsel for both the applicant and the respondent to make additional written submissions on the construction of s 5(7) of the Limitation Act. 60 Counsel for the applicant submitted, in his additional written submission, that "interest" which accrues under s 101(1) of the Supreme Court Act is not covered by the expression "arrears of interest" under s 5(7). This was said to be because interest under the Supreme Court Act does not fall into arrears. Counsel contrasted that situation with one which applies pursuant to an obligation to pay interest under a loan where the loan falls into arrears for failure to pay a fixed interest instalment. 61 Counsel for the applicant also contended that the legislative history of s 5(7) shows that it was not intended to apply to interest on judgments pursuant to statute. 62 The predecessor provision to s 5(7) was contained in the Limitation of Actions Act 1955 (Vic) ("the 1955 Act"). The 1955 Act was based on the Limitation Act 1939 (UK) ("the UK Act"). The UK Act contained a provision partly akin to s 5(7) of the Bankruptcy Act. It was in the following terms: "An action shall not be brought upon any judgment after the expiration of twelve years from the date on which the judgment became enforceable, and no arrears of interest in respect of any judgment debt shall be recovered after the expiration of six years from the date interest became due." (emphasis supplied) 63 In Halsbury's Statutes of England, vol 19 at 64, the following explanation was given about the operation of the relevant provision in the UK Act: "This sub-section only applies to the enforcement of judgments by suing on them and does not apply to the execution of judgments for which leave of the Court is required after six years have elapsed." 64 Counsel for the applicant contended that the rationale described in Halsbury's applied with equal force to the Limitation Act. Section 5(4) of the Limitation Act provides a fifteen-year limitation period for an action upon any judgment from the date on which the judgment became enforceable. Reading ss 5(4) and 5(7) together produces the result that an action is not able to be brought on any judgment after the expiration of fifteen years from the date on which the judgment became enforceable, but that if leave is given to apply for the execution of a judgment (as occurred before Pagone J), such leave applies to the whole of the judgment including interest on the judgment. That is because statutory interest is part of the judgment. 65 I consider that the additional written submissions, advanced by counsel for the applicant and referred to in the immediately foregoing paragraphs, provide further support for the view that s 5(7) of the Limitation Act does not mean that the bankruptcy notice is only permitted to take into account the first six years of interest owing on the judgment. Those submissions were not challenged, in any persuasive way, by the written submissions in reply by counsel for the respondent. 66 Having regard to the Court's view that s 5(7) of the Limitation Actdoes not affect the applicant's right to issue a bankruptcy notice seeking payment of interest in the amount claimed, it is unnecessary for the Court to consider whether the effect of s 5(7), contended for by the respondent, has been nullified by the operation of s 24(3) of the Limitation Act. 67 Section 24(3) of the Limitation Actprovides that: "24. Fresh accrual of action on acknowledgment or part payment (3) Where- (a) any right of action has accrued to recover any debt or other liquidated pecuniary claim or any claim to the personal estate of a deceased person or to any share or interest therein; and (b) the person liable or accountable therefore acknowledges the claim or makes any payment in respect thereof- the right shall be deemed to have accrued on and not before the date of the acknowledgment or the last payment: Provided that a payment of a part of the rent or interest due at any time shall not extend the period for claiming the remainder then due, but any payment of interest shall be treated as a payment in respect of the principal debt." 68 It was contended by counsel for the applicant that the respondent's part payment of the debt on 12 December 1997 revived the cause of action which may have been in part extinguished if one accepts the respondent's views on the operation of s 5(7) of the Limitation Act. Counsel for the respondent submitted to the contrary. However, I consider that it is a debate which, on a true construction of s 5(7), does not arise for consideration. General discretion 69 Counsel for the respondent advanced five reasons why the Court should exercise its discretion under s 52(2) of the Bankruptcy Act not to make a sequestration order "for sufficient cause". Those reasons are set out at para 45 of the respondent's written contentions as follows: "(a) The arrangements under the settlement agreement have led to a change in the circumstances of the respondent and the applicant and those changes remain in place and the applicant does nothing to either account for them or otherwise unwind them; (b) The agreement by which the applicant settled the original judgment debt (amongst others) affords the applicant rights of recovery and would afford the proper occasion for the accounts between the parties to be taken and reconciled; (c) In view of the sale of the Rystar shares, the retention of other assets by the applicant's associates and/or agents and the excessive claim for interest on the judgment debt, the bankruptcy notice grossly overstates the amount in fact due; (d) the debtor has never received an accounting from the petitioning creditor; and (e) Even now the state of the evidence before the Court is such that the true level of the indebtedness, if any, is unclear." 70 Each ground advanced in favour of the exercise of the s 52(2) discretion is rejected. The respondent remains in breach of his obligation to make further payments to the applicant under the 1997 settlement agreement. The applicant has received nothing in respect of the Rystar share sales. There is no basis, in good conscience, for the exercise of any discretion in favour of the respondent. 71 Given that the Court has declined to dismiss the creditor's petition, it is appropriate for a sequestration order to be made against the estate of the respondent as debtor. I certify that the preceding seventy-one (71) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Marshall. Associate: Dated: 29 November 2002 Counsel for the Applicant: Mr J Delany Solicitor for the Applicant: Minter Ellison Counsel for the Respondent: Mr G Bigmore QC with Mr S Minahan Solicitor for the Respondent: Septimus Jones & Lee Date of Hearing: 6 and 7 November 2002 Completion of Written Submissions: 19 November 2002 Date of Judgment: 29 November 2002