Re Dimitrios Efstratiou Ex Parte: Kevin Michael Pipkin [1985] FCA 229 (28 June 1985)

FEDERAL COURT OF AUSTRALIA

Re: DIMITRIOS EFSTRATIOU
Ex Parte: KEVIN MICHAEL PIPKIN
No. SA 498 of 1982
Bankruptcy

COURT

IN THE FEDERAL COURT OF AUSTRALIA
SOUTH AUSTRALIA DISTRICT REGISTRY
GENERAL DIVISION
BANKRUPTCY DISTRICT OF THE
STATE OF SOUTH AUSTRALIA
Wilcox J.

CATCHWORDS

BANKRUPTCY - Application for directions as to disposal of moneys received from debtor of bankrupt - Authority by bankrupt directing debtor to pay moneys to bank - Whether authority constituted equitable assignment of debtor - Whether debt assigned at law - Grapes harvested from properties the subject of contracts to purchaser - Contract not completed - Whether bankrupt held proceeds of sale of grapes on behalf of purchasers or was merely debtor of purchasers.

William Brandt's Sons and Company v Dunlop Rubber Company Limited (1905) A.C. 454, Re Davies Deed of Arrangement (1931) 3 A.B.C. 190, Cossill v Strangman (1963) N.S.W.R. 1695 referred to.

Bankruptcy Act 1966 s.134(4)

HEARING

ADELAIDE
28:6:1985

ORDER

1. The trustee of the estate of Dimitrios Efstratiou, a bankrupt, namely Kevin Michael Pipkin is to pay to the Australia and New Zealand Banking Group Limited the sum of seven thousand dollars ($7,000.00).

2. The trustee is to pay to Konstantinos Bendihavas and Kaliopi Bendihavas the sum of sixteen thousand and sixty-eight dollars and thirty-eight cents ($16,068.38).

3. The trustee is to pay to Panagiota Karantzalis the sum of three thousand two hundred and ninety-four dollars and eighty-seven cents ($3,294.87).

4. In each case those sums are to be paid out of the forty thousand dollars ($40,000.00) received on behalf of the trustee from Tolley Scott and Tolley Limited.

5. The balance of the monies received from Tolley Scott and Tolley Limited are to be treated as part of the bankrupt estate of Dimitrios Efstratiou.

6. That costs of the trustee of and incidental to the said application be taxed and paid out of the estate.

NOTE: Settlement and entry of orders is dealt with in
Order 36 of the Federal Court Rules.

DECISION

The trustee of the bankrupt estate of Dimitrios Efstratiou has made application to the Court pursuant to s.134(4) of the Bankruptcy Act 1966 seeking directions in respect of the disposal of certain moneys which have come into his hands as a result of a payment to his solicitors by Tolley Scott and Tolley Limited.

2. The bankrupt formerly carried on business in partnership with one Pantelimin Matheos as a grape grower. In February 1980 the two partners were indebted to the Bank of Adelaide in the sum of $4,971.27. On 6 February 1980 Mr Efstratiou signed a document on behalf of himself and his partner which was addressed to Tolley Scott and Tolley and which was in the following form:

"I Dimitrious EFSTRATIOU & Pantelimin MATHEOS
of P.O. Box 670, BERRI authorize and direct
you to pay to The Bank of Adelaide, (LOXTON.)
for credit of my account with that Bank all
moneys becoming due to me on account of fruit
delivered by me to you in the 1980 Season and
also all rebates on packing charges thereon.

This order is irrevocable and may not be
cancelled or varied without the written
consent of the said Bank."

Mr Efstratiou's signature was witnessed by a person who is not identified. The authority was sent to Tolley Scott and Tolley at about that time and it was returned signed on behalf of that company and dated 28 March 1980, the signature being in respect of the following endorsement on the authority:

"We acknowledge receipt of the original copy of
the above Order which has been noted in our
records for the necessary attention and
certify that we hold no prior claim against
the abovementioned fruit.

During May 1980 , Tolley Scott and Tolley paid to the Bank of Adelaide at Loxton certain cheques but these did not cover the whole of the debt which was owing by the partners to the bank. It appears that Mr Matheos left any active participation in the partnership in early 1980. I have been informed that he is not now in the area, or indeed in South Australia, and it turns out that he was at the time an undischarged bankrupt. No claim is made by Mr Matheos and I think that nothing turns upon the fact that he was involved with Mr Efstratiou as a partner at that time.

3. During late 1979 and 1980, Mr Efstratiou and Mr Matheos entered into two separate contracts in respect of the purchase of vineyards. The first of these in point of time was with Mr Konstantinos Bendihavas and Mrs Kaliopi Bendihavas. The contract was executied on 13 September 1979. Under the contract, Mr and Mrs Bendihavas contracted to sell to Mr Efstratiou and Mr Matheos a property described as section 300 in Crown lease 34, Berri Irrigation Area and section 714 Crown lease 894, Berri Irrigation Area. The purchase price was $60,000. The completion of the transaction required the consent of the Minister of Lands and the contract by para.14 was made subject to the Australia and New Zealand Bank agreeing, on or before the date of the Minister's consent, to grant a loan of not less than $15,000 to the purchaser and to the purchaser obtaining the said loan on or before the date of settlement. There was a further special condition typed into the contract which was in this form:

"The Vendor grants to the purchasers working
possession on the signing hereof and payment
of the deposit monies together with the use of
the orchard plant and equipment on condition
that until the consent of the Minister of
Lands is given, and settlement of this sale is
made the purchaser may not without the consent
in writing of the Vendor (a) sell or dispose
of any of the plant and equipment or (b) pull
out any of the vines or trees now growing, and
that all fruit harvested will be sold in the
joint names of vendor and purchaser, and the
proceeds paid into the Bank of Adelaide,
Loxton, and upon settlement being made the
Vendor will make over to the purchaser all
proceeds received, but if settlement be not
made the Purchaser will be paid fair and
reasonable out of pocket expenses for
harvesting the said fruit."

4. Apparently the loan referred to in para.14 was never granted and the Minister's consent was neither applied for nor granted. The contract went off because of the default of the purchasers. In the meantime, however, grapes had been harvested from the property by Mr Efstratiou, perhaps with the assistance of Mr Matheos, and delivered to Tolley Scott and Tolley. The value of the grapes from this property has been agreed to be $16,068.38.

5. In February 1980, the exact date does not appear, Mr Efstratiou and Mr Matheos entered into a further contract in respect of the purchase of a property. The vendor, in relation to this property, was Mrs Panagiota Karantzalis, the property being described as irrigation perpetual soldiers leases numbers 1360 and 1478, sections 444 and 445 and 765 Loveday. The contract contained a special condition in relation to the vendor granting to the purchasers working possession which condition is almost identical with the special condition which had been contained in the contract with Mr and Mrs Bendihavas, the only difference being the omission of any reference to the proceeds being paid into the Bank of Adelaide, Loxton. Pursuant to the liberty given to them under this special condition, Mr Efstratiou, with the possible assistance of Mr Matheos, harvested grapes which were delivered to Tolley Scott and Tolley, and which it is agreed had a value of $3,294.87.

6. By reason of the events to which I have referred, various claims were made to Tolley Scott and Tolley as to the disposition of the moneys which were payable for grapes delivered by Mr Efstratiou. That company, understandably, was reluctant to pay out any of the claimants until the matter was resolved. On 6 August 1982 a sequestration order was made against the estate of Mr Efstratiou. Thereafter there were negotiations by the trustee of his estate with Tolley Scott and Tolley, which eventually resulted in a payment to the trustee's solicitors of the sum of $40,000.

7. The assets of the Bank of Adelaide have now become vested in the Australia and New Zealand Banking Group Limited and that company claims to be entitled to the sum of $7,000 out of the fund of $40,000 now held by the trustee. The figure of $7,000 is acknowledged by the trustee to be a correct calculation of the amount payable pursuant to the authority given in February 1980 in order to pay off the debt, subject to credit for amounts subsequently received and subject to the debiting of interest incurred.

8. Mr and Mrs Bendihavas claim to be entitled to recover out of the fund of $40,000 the value of the grapes taken from their property and delivered to Tolley Scott and Tolley and Mrs Karantzalis makes a similar claim in respect of the grapes taken from her property. I should have said that, in the case of the sale by Mrs Karantzalis, as in the sale by Mr and Mrs Bendihavas, the consent of the Minister of Lands was never sought or obtained and the transaction was never completed.

9. Counsel appearing on behalf of the Australia and New Zealand Banking Group puts his submission in two alternative forms. First he says that the document signed by Mr Efstratiou and delivered to the bank constituted an equitable assignment of the debt which either presently existed or was shortly thereafter to arise from Tolley Scott and Tolley to Mr Efstratiou. He refers to the principle considered by the House of Lords in William Brandt's Sons and Company v Dunlop Rubber Company Limited (1905) A.C. 454 and, in particular, the speech of Lord McNaughton in which reference is made to the necessary content of an equitable assignment. At pp.461-462 Lord McNaughton emphasized that the form of the document did not necessarily require the use of the word "assignment". At p.462, his Lordship said this:

"An equitable assignment does not always take
that form. It may be addressed to the debtor.
It may be couched in the language of command.
It may be a courteous request. It may assume
the form of mere permission. The language is
immaterial if the meaning is plain. All that
is necessary is that the debtor should be
given to understand that the debt has been
made over by the creditor to some third
person. If the debtor ignores such a notice,
he does so at his peril. If the assignment be
for valuable consideration and communicated to
the third person, it cannot be revoked by the
creditor or safely disregarded by the debtor."

It is significant that, in the present case, the order which was delivered to Tolley Scott and Tolley in relation to the bank was stated to be irrevocable, and that it was stated that it might not be cancelled or varied without the written consent of the bank. It is true that the document does not use the word "assign" but, as Lord McNaughton pointed out, this is not critical. I think that the meaning is quite plain and that the person to whom the document was addressed, namely the winery, would have no doubt that the debt had been made over by the signatory to the order to the bank.

10. It is true, as was pointed out by counsel for the trustee, that the amount payable by the winery may well exceed the debt to the bank and, indeed, the evidence now available shows that this was the position. However, I do not think that the fact that part of the moneys which may have been paid pursuant to the authority would have been held by the bank on behalf of the signatory to the order affects the assignment of the moneys which were owing to the bank at the time.

11. The significance of an equitable assignment in relation to bankruptcy is demonstrated by the decision of Lukin J. in Re Davies Deed of Arrangement (1931) 3 ABC 190, in which an equitable assignment was held to be effective to require the trustee under a deed of inspectorship to pay to the assignee the moneys which he had received. Lukin J. applied the decision in Brandt's; and it seems to me that the situation discussed in that case is on all fours with the present case. In my view, the bank has made out its claim of an equitable assignment.

12. During the course of argument reference was made to the question whether the document also constituted an assignment at law of the chose in action constituted by the debt owed by Tolley Scott and Tolley to the bankrupt and his partner. Mr Stokes, on behalf of the bank, referred me to the decision of Walsh J. in Cossill v Strangman (1963) N.S.W.R. 1695. The facts of that case have some similarity to those of the present. A document had been delivered by a debtor to his creditor, in which he acknowledged his debt and in which he authorized a third party -- being a person owing money to him -- to pay the amount of that debt to his creditor. He did not use the word "assign"; the document spoke in terms of authorization. Notwithstanding that fact Walsh J. held that the document constituted an assignment at law because it complied with the requirements of s.12 of the Conveyancing Act 1919 (N.S.W.). According to his Honour's decision the essentials of such an assignment were that the documents indicate the existence of the debt and constitute an irrevocable authority or assignment or transfer of the interest in that debt. Notice, of course, has to be given to the person affected.

13. It seems to me that the same view can be taken of the present document. The equivalent provision in South Australia is s.15 of the Law of Property Act 1936. That section is in almost identical terms to s.12 of the New South Wales Act. If it were necessary to do so, I would hold that the document constituted an assignment at law of the debt. It is not really necessary to determine that question, having regard to my view about equitable assignment.

14. In relation to the claims made on behalf of the vendors of the two properties, the critical question in each case is the proper construction of the relevant special conditions. Those special conditions are relevantly indistinguishable, and the two claims can therefore be considered together. The argument that was put on behalf of the trustee is that the special conditions did not constitute Mr Efstratiou and Mr Matheos as agents or trustees of moneys received by them from the winery in relation to grapes taken from the properties of the respective vendors, but merely created an independent obligation, enforceable by action for debt or for damages, to pay to the relevant vendors an amount calculated by deducting from the proceeds received from the winery a fair and reasonable sum for the out-of-pocket expenses of harvesting the fruit. It was put that the vendors thus had a claim against the estate of the debtor, that is the bankrupt, for which they were entitled to prove in bankruptcy; but they had no claim directly against the fund of $40,000.

15. I do not think that this is the proper construction of the special condition. The relevant portion of the special condition states that: "All fruit harvested will be sold in the joint names of vendor and purchaser". The condition then goes on to deal with the payment of the proceeds, into the bank in one case, and in each case about the method of adjustment in the event of settlement, or in the event of settlement not being made. It seems to me that the proper construction of the special condition is that the vendors were conferring upon the purchasers authority to harvest the grapes growing on land still leased by the vendor and to deliver those grapes to a winery for sale. However, the sale was to be in the joint names of the vendor and purchaser. And that indicates to my mind that the vendors maintained a claim to the proceeds of the sale, and were not simply content to have a right as a creditor in due course if the settlement went off.

16. It appears that when Mr Efstratiou delivered the grapes to the winery he did not reveal the interest of the vendor, but this cannot affect the position as between Mr Efstratiou or his trustee and the respective vendors. The trustee has received moneys which include as elements the proceeds of sale of the grapes. The trustee is in no better position than Mr Efstratiou would have been had the moneys been paid to him. He would have been in the position of having received moneys in respect of a sale made in the joint names of the respective vendors and himself and his partner. In the one case he would have been obliged to pay the proceeds into a particular bank account but in each case he would have held that money on behalf of the vendors and purchasers until such time as it was known whether settlement would take place or not. If settlement was achieved than the purchaser would become entitled to the whole of the proceeds. It is interesting that the special condition refers to the vendor "making over" to the purchaser all proceeds received, thus indicating an intention that the vendor will take some active part in the adjustment at that time. If settlement falls through, then the purchaser is to be paid only fair and reasonable out-of-pocket expenses and the vendor is to have the balance. I think that the clear intent was that the parties would hold the proceeds on behalf of each of them pending settlement and make the appropriate adjustment at the time of settlement.

17. The correct way of looking at the matter, in my view, is to say that the trustee in bankruptcy has become possessed of moneys which were not part of the property of the bankrupt, but which, in the events that have occurred, are being held on behalf of the vendors. The trustee holds those funds as trustee on behalf of the respective vendors and not as part of the bankrupt estate of Mr Efstratiou. Under those circumstances I am of the opinion that these claims also succeed.

18. The formal directions I make are: that the trustee of the bankrupt estate of Dimitrios Efstratiou, Kevin Michael Pipkin, is to pay to the Australia and New Zealand Banking Group Limited the sum of $7,000, to Konstantinos Bendihavas and Kaliopi Bendihavas the sum of $16,068.38 and to Panagiota Karantzalis the sum of $3,294.87. In each case those sums are to be paid out of the sum of $40,000 received by the solicitors on behalf of the trustee from Tolley Scott and Tolley Limited. The balance of the moneys received from Tolley Scott and Tolley Limited are to be treated as part of the bankrupt estate of Dimitrios Efstratiou.