Case: Sood v Crown Diagnostic Imaging Pty Ltd [2006] FCA 1721 ; (2006) 156 FCR 240
Outcome: followed
In Sood v Crown Diagnostic Imaging Pty Ltd [2006] FCA 1721 ; (2006) 156 FCR 240, Gyles J considered the "interplay" between the bankruptcy legislation and the Proceeds of Crime Act 2002 (Cth) ('the Commonwealth Act'). The question before his Honour was whether an order pursuant to s 18 of the Commonwealth Act effectively stays execution on an outstanding judgment against the party subject to that order for the purposes of ss 40(1)(g) and 41(3)(b) of the Bankruptcy Act (at [1]). Justice Gyles recognised at [11] that the concept of a "stay" has been ' stretched beyond recognition ' but proceeded to consider and apply existing authority to the effect that the test as laid down by the Full Court in Wiltshire-Smith was whether in the eyes of ordinary fairness in business it will be said that the order has, in a business sense, prevented the debtor from paying (at [12]). In this regard Mr Ollis says that if he had to make an application for leave to deal with the property the subject of the Supreme Court order, the creditor was not entitled to levy immediate execution. 13 Having considered a number of relevant authorities ( Sood at [12]), including Ling v Enrobook Pty Ltd (1997) 74 FCR 19, Re Ousley; Ex parte Commissioner of Taxation (1994) 48 FCR 131 , National Australia Bank Ltd v Pollak (2001) 186 ALR 44 and Commissioner of Taxation v Stuart-Jones [2000] FCA 1022 ; (2000) 102 FCR 296, Gyles J concluded at [13] that the ability of the debtor to seek an order permitting payments of the judgment debt pursuant to s 24 of the Commonwealth Act means that execution is not stayed in the relevant sense. The debtor had submitted, as Mr Ollis does here, that it is unrealistic to think that such an application could be made after service of the bankruptcy notice and prior to the time for compliance. His Honour rejected the submission. As his Honour concluded, where the debtor had the ability to seek an order permitting payment of the judgment debt, the payment is optional for the debtor in a practical sense. His Honour found nothing to indicate that the legislature contemplated that the Commonwealth Act would interfere with the ordinary operation of the bankruptcy law beyond the effect of the sections introduced to deal expressly with that topic. Justice Gyles noted the absence of locus standi of the creditor under the Commonwealth Act to vary the restraining order. However, that factor does not affect the logic of his Honour's reasoning or the debtor's ability to apply to vary the order. 15 In Sood , Gyles J referred to Stuart-Jones and Mathews J's indication that the operation of the restraining order as a stay was at least arguable (at [6]). After reviewing the cases since Stuart-Jones , his Honour came to a conclusion that differed from her Honour's indication. He placed some weight on the factor referred to but not taken into account by Mathews J, the ability of the debtor to make an application. That ability was, in his Honour's view, decisive (at [13]). Further, Gyles J was of the view that the restraining order is akin to a Mareva injunction in its effect, contrary to the view of Mathews J (at [13]). 17 Federal Magistrate Smith gave detailed consideration to the operation of the Assets Recovery Act and to the differences between that Act and the Commonwealth Act. His Honour concluded at [22] that there was nothing in the language of ss 10(1) or 12(1) or any other provision of the Assets Recovery Act to give rise to an implication that the Supreme Court does not have power to frame or vary a restraining order so as to make available to a person who is subject to the order sufficient of his assets to meet a debt owed to a bona fide creditor under a judgment. His Honour gave a number of examples which might be appropriate. He concluded that those sections encompass a discretion in the Supreme Court to allow the payment of specified debts which is at least as broad as that expressly conferred by s 24 of the Commonwealth Act. As Smith FM noted at [23], in the absence of express limitation, the fact that the scheme of the Assets Recovery Act envisages the payment of debts incurred by way of living expenses or legal expenses (s 10(5)) suggests that the Court also intended, in appropriate cases, to allow the payment of other creditors owed amounts under regularly obtained judgments rather than the contrary. His Honour followed the reasoning of Gyles J in Sood . 18 Mr Ollis contends that s 10 of the Assets Recovery Act, which provides for a restraining order, does not provide for a right on the part of the owner of the property to make an application in respect of it. Mr Ollis accepts that the Supreme Court order provides, in its terms, for liberty to him to apply to the Court. He submits, however, that such an application does not extend to setting aside or varying the Supreme Court order made under s 10. In that regard he submits that the Assets Recovery Act differs from the Commonwealth Act the subject of consideration in Sood . 19 I do not accept Mr Ollis' submission. 20 Section 10(1) of the Assets Recovery Act provides that the restraining order applies '... except in such manner or in such circumstances (if any) as are specified in the order '. Orders under s 10(1) may be made ex parte on the application of the New South Wales Crime Commission (s 10(2)). The Supreme Court order included liberty to Mr Ollis to apply, which therefore specified such an application as an exception to the order for the purposes of s 10(1). That exception encompassed an application to vary the order to permit, for example, disposition or dealing with property to which the order applies or varying the property the subject of the restraining order.