Bridge v Great Western Portland Cement & Lime Ltd [1932] HCA 61; (1932) 48 CLR 522 (8 December 1932)

HIGH COURT OF AUSTRALIA

Bridge Respondent, Appellant; and Great Western Portland Cement and Lime Limited Petitioner, Respondent.

H C of A

On appeal from the Court of Bankruptcy.

8 December 1932

Rich, Starke, Dixon, Evatt and McTiernan JJ.

Abrahams K.C. (with him Miller), for the appellant.

Spender, for the respondent.

Miller, for the trustee,

Abrahams K.C., in reply.

The following written judgments were delivered:—

Dec. 8

Rich, Dixon and McTiernan JJ.

This appeal is from an order made by the Federal Court of Bankruptcy sequestrating the estate of the appellant, who had executed a deed of assignment under Part XI. of the Bankruptcy Act 1924-1930 pursuant to a special resolution passed at a meeting of his creditors under sec. 162. The respondent, the petitioning creditor, did not assent to the deed. When the proceedings were commenced, Act No. 31 of 1932, which repeals sub-sec. 6 of sec. 162, had not come into force, and, because of the provisions contained in this sub-section, Judge Lukin was of opinion that such a creditor might present a petition founded upon the execution of the deed of assignment as an act of bankruptcy and that his debt was not released under sec. 165.

Apart from the provisions of sub-sec. 6 of sec. 162, we think that it would be clear that the provisions of Part XI. mean that, upon the debtor complying with a special resolution under sec. 162 (1) and executing a deed which fulfils the requirements of sec. 163, the liquidation of his debts is to proceed under that Part without a sequestration unless and until the Court in the exercise of the powers given by sec. 176 declares the deed to be void.

The claims of the creditors upon the debtor personally are converted into rights of proof against the assets assigned by the deed (see secs. 165, 166 and 169). By sec. 168 the execution of the deed by the debtor is to be deemed to be equivalent to an act of bankruptcy as on the date of the meeting of the creditors, and to a sequestration order. This means that the administration may proceed as in bankruptcy, with relation back to the meeting. Accordingly it would be quite plain, but for sec. 162 (6), that, except by the invocation of sec. 176, a creditor could not found a petition upon the deed as an act of bankruptcy; there would be no subsisting personal debt. This is fully borne out by sec. 52 (l), which deals with acts of bankruptcy arising from proceedings begun by a meeting of creditors under Part XI., and, in the case of a deed of assignment, is limited to the event of the assignment being declared void in pursuance of sec. 176. If it were otherwise, when a debtor called a meeting of his creditors and they resolved on a deed, he would commit an act of bankruptcy by failing to comply with the resolution and would commit another by complying with it. This would be a strange consequence of resorting to statutory provisions bearing the title "Compositions and Assignments without Sequestration," with which that Part is headed. But sec. 162 (6) provides: "If the trustee under the deed serves, in the prescribed manner, on any creditor, notice in writing of the execution of the deed and that the assents required for the validity of the deed have been obtained with an intimation that the creditor will not after the expiration of one month from the service of the notice be entitled to present a bankruptcy petition against the debtor founded on the execution of the deed or on any other act committed by the debtor in the course or for the purpose of the proceedings preliminary to the execution of the deed as an act of bankruptcy, that creditor shall not, after the expiration of that period, unless the deed becomes void, be entitled to present a bankruptcy petition against the debtor founded on the execution of the deed or any act so committed by the debtor as an act of bankruptcy." There can be no doubt that this provision is expressed upon the supposition that, although the deed is not declared void, a creditor may present a petition based upon its execution or some other act committed by the debtor in the course of taking advantage of Part XI. Further, the same supposition is carried into sec. 55 (1), although, but for the existence of sec. 162 (6), this would not be clear. But the question is whether this legislative supposition requires that an interpretation should be placed on the provisions of the Part which they would not otherwise receive. Such an interpretation would be in opposition to the language and to the natural meaning of these provisions, and would defeat the policy which is not only disclosed by them but is stated in the heading to the Part. A supposition of the Legislature appearing in a statutory provision is not the same as a declaration of legislative intention, although, of course, usually the latter is inferred from it. In this case, however, the provision does no more than show that the draftsman thought a petition might possibly be presented in circumstances which could not arise if the other provisions received their natural interpretation. Sec. 162 (6) has since been repealed, and in the circumstances this may be regarded as a recognition by the Legislature of its futility. We are entitled to take into account subsequent legislation upon such a question of interpretation as is involved in this case. The true conclusion, therefore, appears to be that sec. 162 (6) was expressed upon a mistaken supposition and did not express a positive legislative intention to which the remaining provisions should give way in spite of their clear meaning. For these reasons we think that the decision of Judge Lukin was wrong.

The further point mentioned, but not decided, by the learned Judge, that the deed did not comply with sec. 163 (1) (a), is not in our opinion, well founded. The deed was in the form given in the First Part of the Third Schedule and, by sec. 163 (2), must have the same effect as if in the form in the Second Part. The latter Part expressly requires the trustee to hold subject to the provisions of Part XI., and this must be taken, as it is a form prescribed by the statute, to incorporate the requirements of sec. 163 (1) (a).

The appeal should be allowed with costs; the order of sequestration should be set aside and the matter remitted to the Federal Court of Bankruptcy to be dealt with consistently with the judgment of this Court.

Starke J.

This appeal is from an order of sequestration of the estate of Lionel James Archibald Bridge, a debtor, based upon a conveyance or assignment of his property to trustees for the benefit of his creditors generally (Bankruptcy Act 1924-1930, sec. 52 (a)). But the conveyance or assignment was made pursuant to sec. 162, which is included in Part XI. of the Act, providing for assignments without sequestration. It is, by sec. 168 (c), deemed for all purposes equivalent to a sequestration order against the debtor, and, by sec. 165, releases him from all provable debts and vests in the trustee all his property upon the trusts and for the purposes of the deed. And, by sec. 166, all parties to the assignment and all persons bound thereby are, in all matters relating to property conveyed and assigned by the deed or belonging to or vested in the debtor, subject to the jurisdiction of the Bankruptcy Court and liable to all the provisions of the Act as if a sequestration order had been made against the debtor and the creditors had proved and the trustee had been appointed a trustee in bankruptcy. Despite these enactments, there is found in sec. 162 (6) the following provision: "If the trustee under the deed serves, in the prescribed manner, on any creditor, notice in writing of the execution of the deed and that the assents required for the validity of the deed have been obtained with an intimation that the creditor will not after the expiration of one month from the service of the notice be entitled to present a bankruptcy petition against the debtor founded on the execution of the deed or on any other act committed by the debtor in the course or for the purpose of the proceedings preliminary to the execution of the deed as an act of bankruptcy, that creditor shall not, after the expiration of that period, unless the deed becomes void, be entitled to present a bankruptcy petition against the debtor founded on the execution of the deed or any act so committed by the debtor as an act of bankruptcy." It may be compared with sec. 198. The Act No. 31 of 1932, sec. 48, assented to on 31st May 1932, repealed sec. 162 (6), but the petition in bankruptcy was presented on 9th May 1932, before the passing of this later Act, though the order for sequestration was not made until 21st June 1932. (See Acts Interpretation Act 1901, secs. 8 and 9.) But it was very forcibly contended that the provisions of sec. 162 (6) are insensible, and wholly inconsistent with the objects and the other provisions of Part XI. of the Act. And the argument was reinforced by reference to the provisions of sec. 52 (l). Nothing can justify the argument except necessity, and, though sec. 162 (6) seems inconvenient, and possibly due to some mistake, that necessity is not apparent to me. The sub-section seems no more than a declaration that a creditor may, within a month of the service of the prescribed notice, notwithstanding the provisions of Part XI., present a petition in bankruptcy founded on the execution of the deed of assignment, which, it should be observed, would, apart from the provisions of Part XI., be an act of bankruptcy under sec. 52 (a). It enables a creditor to supersede administration of the debtor's property under the deed of assignment by administration under sequestration by the Court, which is not quite so senseless, useless or futile a proceeding as the argument suggested. Further, in my opinion, the contention that the deed did not comply with sec. 163 (1) (a) is untenable.

The appeal, I think, should be dismissed.

Evatt J.

In this case I have come to the conclusion that the appeal should not be allowed. I was, at first, impressed with the courageous argument of Mr. Abrahams that the provision contained in sec. 162 (6) of the Bankruptcy Act must be ignored, inasmuch as it could not be obeyed without nullifying the other provisions of Part XI. dealing with "Compositions and Assignments without Sequestration." But there is no escape from the plain fact that the sub-section enables a creditor to present a bankruptcy petition within the prescribed period.

This provision undoubtedly created an anomalous position, and it has recently been cured by the amending Commonwealth Bankruptcy Act. That Act was not, however, made retroactive, and I do not see how we can reverse the decision of Judge Lukin without taking it upon ourselves to perform a legislative function.

I should add that I have had the opportunity of reading the opinion of my brother Starke and I agree with it.

The appeal should be dismissed.

Appeal allowed with costs. Order of sequestration set aside. Matter remitted to Federal Court of Bankruptcy to be dealt with consistently with the judgment of the High Court.

Solicitors for the appellant, McDonell & Moffitt.

Solicitors for the trustee, J. J. Carroll & Son.

Solicitors for the respondent, Fred. C. Emanuel & Pearce.