Anderson Rice (a firm) v Bride, Robert [1995] FCA 868

CATCHWORDS

BANKRUPTCY - creditor's petition and bankruptcy notice in name of firm - petition and notice following judgment - retirements and additions to firm after judgment - whether notice and petition entitle creditor to sequestration order

Bankruptcy Act 1966 (Cth) s 307

Re Hill: Ex parte Holt & Co [1921] 2 KB 831

Ex parte Blain; in re Sawers (1879) 12 Ch D 522

Ex parte Young, In re Young (1881) 19 Ch D 124

Ex parte Ide; in Re Ide (1886) 17 QBD 755

In Re Jameson & Sandys; Ex parte Cresswell & Jameson (1891) 8 Mor 278

Re Hobbs; Ex parte Hobbs (1892) 66 LT 144

Worcester City and County Banking Co v Firbank, Pauling & Co [1894] 1 QB 784

Re Wenham; Ex parte Battams [1900] 2 QB 698

Heinemann & Co v Hale & Co [1891] 2 QB 83

MacIver v G & J Burns [1895] 2 Ch 630

Russell v Cambefort (1889) 23 QBD 526

Madden v Kirkegard Ellwood & Partners [1983] 1 Qd R 649

Union Bank of Australia Ltd v Lohmann & Co [1916] VLR 530

Re John T Martin & Co; Ex parte Australian Continental Resources Ltd (1971) 18 FLR 450

In re a Judgment Debtor [1908] 2 KB 474

James v Federal Commissioner of Taxation (1955) 93 CLR 631

ANDERSON RICE (A FIRM) v ROBERT BRIDE

NO VG 19 OF 1995

JENKINSON, SACKVILLE and R D NICHOLSON JJ

MELBOURNE

1 NOVEMBER, 1995

IN THE FEDERAL COURT OF AUSTRALIA)

VICTORIA DISTRICT REGISTRY)

GENERAL DIVISION) NO VG 19 of 1995

ON APPEAL FROM A DECISION OF A JUDGE OF THE FEDERAL COURT OF AUSTRALIA

B E T W E E N: ANDERSON RICE (A FIRM)

Appellant

and

ROBERT BRIDE

Respondent

MINUTE OF ORDER

THE COURT: JENKINSON, SACKVILLE and R D NICHOLSON JJ

DATE OF ORDER:1 NOVEMBER, 1995

WHERE MADE: MELBOURNE

THE COURT ORDERS THAT:

1. The appeal be allowed.

2. Each of the orders made on 14 December 1994 in proceeding VP 944 be set aside.

3. In lieu thereof a sequestration order is made against the estate of the respondent debtor.

4. The costs of the appellant petitioning creditor of the petition be taxed and the appellants costs of the appeal be costs of the petitioning creditor in the application of s109 of the Bankruptcy Act 1966.

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 ) No. VG19 of 1995

GENERAL DIVISION )

On Appeal from a Single Judge of the Federal Court of Australia

BETWEEN: ANDERSON RICE (A FIRM)

Appellant

AND: ROBERT BRIDE

Respondent

CORAM: Jenkinson, Sackville and Nicholson JJ.

PLACE: Melbourne

DATE: 1 November, 1995

REASONS FOR JUDGMENT

JENKINSON J.

Appeal from an order by a judge of this court that a creditor's petition for a sequestration order under the Bankruptcy Act 1996 be dismissed.

The act of bankruptcy on which the petition was grounded was the respondent's failure to comply with the requirements of a bankruptcy notice. The final order on which the bankruptcy notice was grounded was an order of the Magistrates' Court of Victoria that the respondent pay $8,120.27 and costs fixed at $279.50 to the seven partners of a firm of solicitors, the name of which has at all material times been the name of the appellants, "Anderson Rice". When the petition was presented, and at all material times
thereafter, the petitioning creditors have been named in the petition as "Anderson Rice a firm", and in the title of the petition as "Anderson Rice (A Firm)". When the petition was presented seven persons were partners of the firm called Anderson Rice, four of them persons in whose favour the Magistrates' Court order had been made and three of them persons who entered into the partnership after the making of that order. Three of the seven in whose favour the Magistrates' Court's order was made retired from the firm before the petition was presented. In the proceeding in the Magistrates' Court the firm name was used in description of the plaintiffs. In the bankruptcy notice the name was used in description of the judgment creditors.

The learned judge who heard the petition found that there was no evidence on which he could base a conclusion that any of the new members of the firm had become a creditor of the respondent. That finding was not attacked on appeal. His Honour took the view that the expression "Anderson Rice" in the petition signified the seven persons who were members of the firm of that name when the petition was presented, that expression being a firm name in which s.307 of the Bankruptcy Act 1966 authorised those persons, but no others, to take proceedings under that Act. Because those seven persons were not the seven judgment creditors, his Honour dismissed the petition. It is a ground of the appeal that the firm name signified, in the petition, the seven persons who were members of the firm when the final order was made.

Section 307 provides:

"Any person or persons carrying on business under a firm name may take proceedings or be proceeded against under this Act in the firm name, but in that case the Court may, on the application of an interested person, order the name of the person or the names of the persons so carrying on business to be disclosed and verified in such manner as the Court directs."

Concerning that section I think apposite what Collins L.J. said, in In re Wenham; Ex parte Battams [1900] 2 Q.B. 698 at 709, of s.115 of the English Bankruptcy Act 1883 : "It is only by putting some slight strain on the words of the section that you can construe it to mean persons who were partners at one time, but who are not at the time the proceedings were taken". Section 115 provided:

"Any two or more persons, being partners, or any person carrying on business under a partnership name, may take proceedings, or be proceeded against under this Act in the name of the firm, but in such case the Court may, on application by any person interested, order the names of the persons who are partners in such firm or the name of such person to be disclosed in such manner, and verified on oath, or otherwise as the Court may direct."

A similar opinion had been expressed about a similar provision of the English Rules of Court 1875 by Cotton L.J. in Ex parte Young. In re Young (1881) 19 Ch. D. 124 at 134:

"By English law, previously to the rules made under the authority of the Judicature Acts, a firm had no such existence as enabled it to sue, or made it liable to be sued. It was a mere name under which certain persons or partners carried on their business, and the individual partners as such were alone capable of suing and being sued. The Orders under the

Judicature Act, which have the effect of an Act of Parliament, have no doubt varied the law in this respect; the question is, to what extent? In my opinion they apply only to persons who are, at the time of action commenced, partners in an existing firm, not to persons who have been partners in a firm which has been dissolved. In my opinion such persons can no longer properly be called partners. The partnership is at an end by the dissolution, and, though the persons who were members of it have authority to deal with matters in which the partnership was, at the time of its dissolution, engaged, for the purpose of winding them up, until such affairs are wound up, yet this, in my opinion, is, not because they are still partners, but because the authority of agency, which is given by the partnership contract, continues, notwithstanding the dissolution and end of the partnership, as regards matters commenced during the continuance thereof."

That reasoning may be thought more cogent in exposition of s.307 of the Bankruptcy Act 1966, the accidence of which proclaims the present tense in "carrying on business", than in exposition of Order XVI Rule 10 of the 1875 Rules, which was in these terms:

"Any two or more persons claiming or being liable as co-partners may sue or be sued in the name of their respective firms, if any; and any party to an action may in such case apply by summons to a Judge for a statement of the names of the persons who are co-partners in any such firm, to be furnished in such manner, and verified on oath or otherwise, as the Judge may direct."

Lord Selborne L.C. in the same case observed (19 Ch. D. at 131-132):

"The argument on this point did not convince me that the effect of a dissolution of partnership is to put an end to the partnership relation between the members of the dissolved firm as to their joint liabilities and assets, or as to transactions in dependence at the date of the dissolution; or that the name of the firm under which their business had been carried on may not, according to that mercantile usage of which the law does and ought to take notice, still continue to be applicable for any purposes for which the partnership relation may properly be said to continue. If this be so, the language of Order XVI., rule 10, would seem primá facie to be applicable to a joint partnership claim or liability by or against the members of a dissolved partnership; nor can I see, as at present advised, that the use of the present tense in this rule, or any part of the language or provisions of the other rules, would interpose any insuperable difficulty in the way of such a construction."

Lord Selborne's view prevailed, after rules had been framed in terms which virtually compelled the construction which he had preferred : see In re Wenham, supra, at 700-701, 704, 70-709. In Madden v. Kirkegard Ellwood and Partners [1983] 1 Qd. R. 649 a Full Court of the Supreme Court of Queensland adopted the same construction of that court's rules, which were in the same terms.

In In re Wenham, supra, a partnership of two persons, the firm name of which was "Wenham Brothers", was dissolved in November 1899. In December of that year action was brought against "Wenham Brothers" for recovery of a debt incurred by the firm before dissolution, and judgment for the plaintiff was entered later that month. In January 1900 a bankruptcy notice addressed to "Wenham Brothers" was issued and served on the two persons. At that time one of them was carrying on the business which had been that of the partnership under the name "Wenham Brothers". The bankruptcy petition founded on failure to comply with the requirements of that notice was for sequestration of the estate only of the other person. In considering whether there was a defect in the bankruptcy notice Lord Alverstone was not troubled by the tense of the participle in the phrase "being partners" in s.115. His opinion was ([1900] 2 Q.B. at 705):

"I think the words `being partners' are intended to mean `who have carried on business in partnership for the purpose of the liability which is sought to be enforced.' In my opinion dissolution does not enable partners to get rid of the liability to have proceedings taken against them under s.115 for the purpose of enforcing payment of a partnership debt. I think the true meaning of the 115th section is, that if persons have been partners in a business, then bankruptcy proceedings can be taken against them in the partnership name."

I do not think the words of s.307 apt to comprehend persons who in the past carried on business under a firm name. And I think that a provision such as s.42 of the Partnership Act 1958 (Vic.) is not an aid to the construction of s.307. Section 42, which ends with a priviso not presently relevant, commences thus:

"After the dissolution of a partnership the authority of each partner to bind the firm and the other rights and obligations of the partners continue notwithstanding the dissolution so far as may be necessary to wind up the affairs of the partnership and to complete transactions begun but unfinished at the time of the dissolution but not otherwise."

That section no doubt affords former partners, whose retirement resulted in dissolution, authority to join in procuring the issue of a bankruptcy notice and to join in presenting a petition for sequestration. But the existence of such authority gives no indication of the legislative intention which animated the draftsman of a provision such as s.307, which is concerned merely with procedural nomenclature and disclosure of the identities of the persons comprehended by a particular collective name.

The word "proceeding" is defined by s.5(1) of the Bankruptcy Act 1966 to mean, unless the contrary intention appears, "proceeding under this Act". The expressions "proceedings" and "proceeded against" in s.307 are to be understood as comprehending the issue and service of a bankruptcy notice, as well as the presentation of a petition and the proceeding in the court upon that petition. The issuing of a bankruptcy notice is a ministerial act, not an exercise of judicial power (Re Moss; Ex parte Tour Finance Ltd. 1968) 13 F.L.R. 101; Re Maddox; Ex parte The Debtor (1978) 36 F.L.R. 392). But it is a step, taken at the instance of a creditor, in a proceeding under the Act (Re Wheeler & Reynolds (A Firm); Ex parte Kerr v. Crowe (1988) 20 F.C.R. 185; Kleinwort Benson Australia Ltd. v. Crowl (1988) 165 C.L.R. 71 at 77), and in respect of that proceeding the power conferred on the court by the latter clause of s.307 is available. If a doubt as to identities of those persons, or the identity of that person, comprehended by the "firm name" of the creditors, or creditor, troubles a debtor served with a bankruptcy notice, the debtor may invoke the exercise of that power. So, too, could a debtor served with a bankruptcy notice addressed to a "firm name", if doubt as to the identities of the persons intended by the creditor to be comprehended by that firm name were entertained by the debtor.

For good or ill, the use of firm names in constituting proceedings under the Bankruptcy Act 1966 is very common, as it is in curial proceedings generally. And the impression has become widespread among Australian lawyers that the use of those names is in all circumstances permissible. It may reasonably be thought that in a high proportion of proceedings so constituted the precise identification of the person or persons comprehended by a firm name is of no interest to the parties. The prescribed form of a bankruptcy notice, ordained by paragraph 41(1)(a), requires disclosure of the judgment creditor's address and an address for service. If a debtor's request at either of those addresses for such an identification is not promptly satisfied, he may in my opinion make the application to the court contemplated by s.307, and also at the same time file an application, of the kind contemplated by paragraph 41(6A)(b), to set aside the bankruptcy notice. A bankruptcy notice which specifies no agent in paragraph (b) thereof and which does not afford the debtor information by use of which he is enabled to learn the identity or identities of the person or persons comprehended by a firm name fails to enable him to know to whom he may pay the debt or to whose satisfaction payment may be secured or composition may be made, and in my opinion may be set aside on that ground. While the application under s.307 remains undetermined, the pendency of an application to set aside the bankruptcy notice will enliven the powers to extend the time for compliance conferred by paragraphs 41(6A) and 41(6B). In those circumstances I am not prepared to dissent from the conclusion of the other members of the court that s.307 authorises the use of a firm name in a proceeding under the Act as a collective name for a person, or for several persons, who at a time relevant to the subject matter of the proceeding carried on business under the name, notwithstanding that at the institution of the proceeding business was not being carried on under that name by the same person or persons and no other.

This being an appeal stricto sensu (Petreski v. Cargill (1987) 18 F.C.R. 68), and sequestration of the respondent's estate being the order which, on the evidence before him considered in accordance with the conclusion of this court, the learned trial judge should have made, this court ought to make such an order, leaving to the operation of Division 5 of Part VII of the Act any events which may have occurred, and any circumstances which may have appeared, since the orders under appeal were made. The circumstance that more than 12 months has now elapsed since the presentation of the petition does not preclude the making of a sequestration order now, because the petition was dismissed before the expiration of that period : see s.52(4) and Deputy Commissioner of Taxation v. Clyne 1984) 4 F.C.R. 156.

I would order that the appeal be allowed, that each of the orders made on 14 December 1994 in the proceeding numbered VP944 of 1994 be set aside, that in lieu thereof there be made a sequestration order against the estate of the respondent debtor on the ground of his failure to comply on or before 24 April 1994 with the requirements of a bankruptcy notice and an order that the costs of the appellant petitioning creditor of the petition be taxed, and that the appellant's costs of the appeal be costs of the petitioning creditor in the application of s.109 of the Bankruptcy Act 1966.

I certify that this and the 9 preceding pages are a true copy of the Reasons for Judgment of the Honourable Justice Jenkinson.

Associate

Dated: 1 November, 1995

IN THE FEDERAL COURT OF AUSTRALIA)

VICTORIA DISTRICT REGISTRY )

GENERAL DIVISION )NO VG 19 of 1995

ON APPEAL FROM A DECISION OF A JUDGE OF THE FEDERAL COURT OF AUSTRALIA

B E T W E E N: ANDERSON RICE (A FIRM)

Appellant

and

ROBERT BRIDE

Respondent

CORAM: JENKINSON, SACKVILLE and R D NICHOLSON JJ

DATE: 1 NOVEMBER, 1995

PLACE: MELBOURNE

REASONS FOR JUDGMENT

SACKVILLE & NICHOLSON JJ:

This is an appeal from an order of a Judge of the Court, dismissing a creditor's petition for sequestration orders against the estate of the respondent. The petition had been presented in the name of "Anderson Rice (A Firm)". However, his Honour dismissed the petition on the ground that the members of the firm of Anderson Rice (who practised as solicitors) had changed between the date the judgment upon which the petition was based had been obtained and the date the petition was filed. The appeal involves a consideration of the scope and application of s307 of the Bankruptcy Act 1966 ("the Act") which reads:

"Any person or persons carrying on business under a firm name may take proceedings or be proceeded against under this Act in the firm name, but in that

case the Court may, on the application of an interested person, order the name of the person or the names of the persons so carrying on business to be disclosed and verified in such manner as the Court directs".

Reasons of primary judge

The findings and the reasoning of the judge at first instance were as follows. The creditor's petition was filed giving the name of the petitioning creditor as "Anderson Rice (A Firm)". The petition stated that the debtor was truly indebted to the "Petitioning Creditor" in the sum of $12,578.14, which sum was owed pursuant to an order obtained in the Magistrates' Court at Melbourne on 21 June 1990. (The judgment was for $8,120.27 plus costs of $279.50 and had increased to $12,578.14 because of interest accruing on the judgment.) The Judge at first instance accepted that the judgment in the name of the firm constituted the partners of the firm, as at the date of the judgment, joint and several creditors in respect of the sum for which judgment was entered.

The creditor's petition was issued by the appellant on 19 September 1994. At that date the firm of Anderson Rice was still constituted by seven partners, but the identity of the seven partners had changed from the date at which judgment was entered. Three partners had retired and three new partners had joined the firm. His Honour found, and it is not contested on appeal, that there was no evidence upon which it could be found that the incoming partners had become judgment
creditors by assignment of the debt or of any interest in it.

At the commencement of his reasons his Honour said that there was a danger in assuming that, because proceedings were taken in a firm name, the firm was in some way equated to a corporation or other legal person. From this proposition, his Honour reasoned that the persons who had been admitted to the partnership between the date of judgment and the date of the creditor's petition were not judgment creditors at the date when the judgment was obtained. As some of the partners were not judgment creditors, his Honour concluded he could not make a sequestration order. He also declined to stand over or adjourn the proceedings because the respondent had filed an amended notice of his intention to appear on 15 November 1994 which had set forth very clearly the issue of the composition of the firm. His Honour considered inadequate attention had been paid to this issue on the part of those representing the appellant.

In reaching his decision his Honour considered the authority of Re Hill; Ex parte Holt & Co [1921] 2 KB 831, which had been relied upon for the appellant in argument before him. In that case a judgment had been obtained in the name of a firm at a time when the firm had four partners. Between that date and the time the petition was presented, one of the partners had retired. The Divisional Court held there had not been a change requiring leave of the Court. At 834 Horridge J said:

"At the time when the judgment was recovered by Holt & Co the persons who were entitled to enforce it were the four persons who were at that time the members of the firm. On the retirement of Guinness the persons entitled to enforce the judgment were still the members of the firm of Holt & Co. By virtue of s38 of the Partnership Act 1890, there was for this purpose no change in the firm. That section provides: "After the dissolution of a partnership, the authority of each partner to bind the firm, and the other rights and obligations of the partners, continue notwithstanding the dissolution so far as may be necessary to wind up the affairs of the partnership, and to complete transactions begun but unfinished at the time of the dissolution.""

In that case his Lordship went on to say that the surviving or continuing partners of the firm were at liberty to issue a bankruptcy notice and to present a petition and that he would not assume they lacked authority to do so. In the present case His Honour distinguished Re Hill on the ground that no issue had arisen there concerning the admission of new partners to the firm.

Bankruptcy Notice

It will be observed that in His Honour's reasons the constitution of the firm as at the date of the bankruptcy notice was not the subject of findings. It appears from the papers on the appeal and was not contested as an issue of fact, that the bankruptcy notice was issued against the respondent on 31 March 1994 for the sum of the judgment debt including costs together with interest, being a total sum of $12,578.14. By that date two members of the firm at the date of judgment had retired and three new partners had been appointed.

In the bankruptcy notice the judgment creditor was described as "Anderson Rice (A Firm)". Notice was given to the judgment debtor to pay the sum "to the judgment creditor" or to secure the payment of that sum to the satisfaction of the Federal Court "or the judgment creditor" or "compound the sum so specified to the satisfaction of the judgment creditor". The notice further stated that it was issued on the application of "Anderson Rice, solicitors for the judgment creditor", whose address for service was then given. Additionally, it was stated that the debt to which the notice related was that which was due to the judgment creditor "under an order obtained by the judgment creditor against the respondent in the Magistrates Court of Victoria at Melbourne on the 21st day of June 1990...". It is apparent therefore that, if his Honour's reasoning was correct, it would have been open to the respondent to have challenged the validity of the bankruptcy notice, on the ground that the judgment creditor referred to in it included some persons who were not the beneficiaries of the judgment as at the date of the judgment.

Grounds of appeal

The grounds of appeal, which are numerous, seek to overturn the decision of his Honour in three broad respects: firstly, on the ground that his reasoning relating to the change in the constitution of the firm was in error; secondly, that he failed to take into account s306(1) of the Act; and thirdly, that he failed to consider s33(1)(b) of the Act. In the view which we take of the matter it is unnecessary for consideration to be given to the second and third grounds.

Statutory authority

On the first ground it is appropriate to refer to the legislative history of s307 of the Act. It was preceded by s33 of the Bankruptcy Act 1924. Although not materially different to s307 of the Act, that section read:

"Any persons, being partners, or any person carrying on business under a partnership name, may take proceedings or be proceeded against under the Act in the name of the firm, but in that case the Court may, on application by any person interested, order the names of the partners, or of the person so carrying on business to be disclosed and verified in such manner as the Court directs."

Section 33 was based on s119 of the Bankruptcy Act 1914 (Eng) which, in turn, had been preceded by s115 of the Bankruptcy Act 1883: The latter section read as follows:

"Any two or more persons, being partners, or any persons carrying on business under partnership name, may take proceedings, or be proceeded against under this Act in the name of the firm".

Section 115 was accompanied by a provision in Bankruptcy Rule 262, that a receiving order made against a firm was to operate as if it were a receiving order made against each of the persons who, at the date of the order, was a partner in that firm: Encyclopedia of the Laws of England vol 2, 1906 at 56.

Rules of Court

These statutory provisions have their counterparts in rules of court. Order 42 r4(2) of the Rules of the Federal Court of Australia provides:

"(1)An action by or against two or more persons claiming as partners or against two or more persons claimed to be liable as partners and who carry on business in partnership within Australia may be brought in the partnership name.

(2) The partnership name shall be that obtaining at the time the cause of action arose.

(3) Where the proceeding is commenced pursuant to sub‑rule(1), unless the Court otherwise orders, it shall continue in the partnership name, and not in the names of the individual partners."

Order 41, r4(3)(1) is as follows:

"At any stage of the proceeding any party may, by notice in writing, require the partnership to furnish it with the names and places of residence of those persons who were partners of the partnership at the time the cause of action arose."

An early predecessor of this rule was O16 r10 of the Rules of Supreme Court 1875 (Eng) which provided:

"any two or more persons claiming or being liable as co‑partners may sue or be sued in the name of their perspective firms, if any; and any party to an action may in such case apply by summons to a Judge for a statement of the names of the persons who are co-partners in any such firm, to be furnished in such manner, and verified on oath or otherwise, as the Judge may direct".

The Rules of Supreme Court 1891 (Eng) introduced O48a, which
is the predecessor of O81 of Rules of Supreme Court (Rev) 1962 and the present Rules of Supreme Court O81. Rules of Supreme Court O48a(2) made provision to the effect of the former O16 r10, but also provided for service on any one or more of the partners, or at the principal place of the partnership business upon any person having at the time of service the control or management of the partnership business. It further stated that such service would be deemed good service upon the firm provided that, in the case of a partnership dissolved to the knowledge of the plaintiff before the commencement of the action, the writ was required to be served upon every person within the jurisdiction sought to be made liable (r3). Rule 4 provided that, where a writ was issued against a firm and served as directed by r3, every person upon whom it is served should be informed by notice in writing given at the time of the service whether he was served as a partner or as a person having the control or management of the partnership business or in both characters. In default of such a notice the person was deemed to be served as a partner.

Prior Authority

Authority is informative but not decisive of the issue raised on this appeal.

The terms of O16 r10 of the English rules were considered in Ex parte Blain; In re Sawers (1879) 12 Ch D 522. James LJ said (at 533):

"I cannot help thinking that some difficulty may arise with regard to that provision of the Judicature Rules which enables partners to be sued in the name of the firm, because we have not yet introduced into our law the notion that a firm is a persona. What I mean is this, supposing there to have been an entire change in the constitution of the firm, and that, although the name of the firm continued, the firm at the time when the action was brought consisted of entirely different persons from those of whom it consisted at the time when the contract was made; for instance, if A, B, and C were the partners at the time of the action, and E, F and G at the time of the contract."

Brett LJ expressed his agreement and added that it may be that under such circumstances the firm could not be sued.

The Rule was further considered in Ex parte Young, In re Young (1881) 19 Ch D 124. There a writ had been served personally on a continuing partner but not on a retired partner. When execution against the continuing partner did not achieve satisfaction, the plaintiff served the retired partner with a debtor's summons founded on the judgment debt without seeking leave of the Court to issue execution against him. It was held the judgment would not support the debtor's summons. Lord Selborne LC considered that the question whether the provision of O16 r10 applied, not only to a partnership existing at the time when the writ was issued but also to a partnership dissolved before the issue of the writ in respect of a cause of action arising during its existence, was open to query. If it did, he considered the judgment in the action was not per se binding on any member of the dissolved firm who was not served with the writ as a partner or who had not admitted on the pleadings that he is or has been judged to be a partner. Cotton LJ was of the view that O16 r10 did not apply to a partnership dissolved before the issue of the writ. Brett LJ considered that, while the rule authorised proceedings against the members of such a partnership in respect of a cause of action arising during the existence of the firm, a judgment was not enforceable against a former partner in the absence of service. Execution could not issue without leave.

In Ex parte Ide; In re Ide (1886) 17 QBD 755, it was held that if judgment was entered against a firm, execution could issue against the property of the firm. However, execution could not issue against the private property of any member of the firm without leave of the court, unless the member had been actually served as a partner with the writ or had appeared in his own name or had admitted on the pleadings to being a partner.

In In Re Jameson & Sandys; Ex parte Cresswell & Jameson (1891) 8 Mor 278, an action was brought against a firm in the firm name and the writ served on the surviving partner. Judgment followed the writ and was against the firm. That was accepted by Lord Esher MR as a judgment against the surviving partner. His Lordship said (at 281) that: "under the new rules it may be that it was a judgment against any one who was a member of the firm at the time". Fry LJ (at 282) also accepted that the effect of a receiving order against a firm was that it affected the persons "who at the date of the receiving order were partners in that firm".

In Re Hobbs; Ex parte Hobbs (1892) 66 LT 144, a petition in the name of each of two former partners of a firm was signed by one only of the former partners. The petition was held to be good in form, in that it was presented by two persons in respect of a joint debt and signed by one of them and on behalf of himself and the other (so held by Lord Esher MR). Bowen LJ said that the question whether s115 of the Bankruptcy Act 1883 (Eng) enabled proceedings in bankruptcy to be taken in a firm name when the firm had been dissolved did not arise for decision. This was because the petition was really one by two persons and signed by one on behalf of each of them. Fry LJ agreed.

In Worcester City and County Banking Co v Firbank, Pauling & Co [1894] 1 QB 784, it was held O48a applied to all partnerships carrying on business within the jurisdiction. Lord Esher MR (at 788) followed Fry LJ in Heinemann & Co v Hale & Co [1891] 2 QB 83, in accepting that the rules must be construed together as forming a code. In MacIver v G & J Burns [1895] 2 Ch 630, at 635, Lindley LJ accepted the new rules altered the law, as laid down in Russell v Cambefort [1889] 23 QBD 526, to enable foreigners resident abroad and carrying on business in partnership to be sued in the firm name and judgment obtained against them and executed against the firm's assets in the country.

In Re Wenham; Ex parte Battams [1900] 2 QB 698, B brought an action against "Wenham Bros", a dissolved partnership constituted by J and T, in respect of a debt arising before the dissolution of the partnership. The writ was served personally on both J and T and judgment obtained. Application was then made by B for a bankruptcy notice addressed to "Wenham Bros" and also served upon J and T. The judgment debt remaining unpaid, a bankruptcy petition was presented against J alone alleging the act of bankruptcy as the non-compliance with the bankruptcy notice. The Registrar refused to make the receiving order and dismissed the petition. He did so on the ground it was defective in form being addressed to J whereas the bankruptcy notice was addressed to the firm. In the Divisional Court, Wright and Darling JJ held the bankruptcy notice was good, having followed the judgment. As it had been served personally on J, a receiving order could properly be made against him. Wright J said:

"If this question had arisen in the year 1881 we might have had to hold, having regard to the judgments of Lord Selborne LC and Cotton LJ in Ex parte Young, In re Young, that the action could not be brought against the firm in the firm name, so as to bind John Wenham by the judgment, because the partnership had been dissolved before the issue of the writ in that action. But since then O[48]a has been framed for the purpose of meeting the difficulty, and the changes which are effected by the rules of that order point strongly to the conclusion that it was expressly intended to alter the provisions of the former rules which dealt with the matter, and to provide a convenient procedure by enabling co-partners at the time of the accruing of the cause of action, leaving the question of fact, whether a person was a partner when the cause of action accrued, to be decided in the action. So far, therefore, everything was rightly done in the present case".

On appeal it was accepted that the effect of O48a, rr1, 3 and 4 was to establish that, where service had been effected upon a partner and judgment obtained after such service or where the partner had appeared, the judgment was one which could be enforced against the partner personally.

However, an additional point arose on the appeal, namely whether or not there was such a defect in the bankruptcy notice founded on the judgment as to invalidate the bankruptcy proceedings. The point involved consideration of s115 of the Bankruptcy Act (1883) (Eng).

Lord Alverstone MR concluded that dissolution of a partnership did not enable partners to get rid of the liability to have proceedings taken against them under this section for the purpose of enforcing payment of a partnership debt. He considered the true meaning of the section was that, if persons had been partners in a business, bankruptcy proceedings could be taken against them in the partnership name. In other words, his Lordship considered that the words "being partners" in s115 were intended to mean "who have carried on business in partnership for the purpose of the liability which is sought to be enforced". Rigby LJ expressed no opinion on s115. Although the headnote to the case states that Rigby LJ concurred with Alverstone MR in the views expressed by the former concerning s115, this is not the case. Rigby LJ based his reasoning on the application of O48a and
the fact that judgment against Wenham Bros operated under the circumstances to charge J separately so that a bankruptcy notice could properly be founded on it. Collins LJ was of the opinion that the section only contemplated proceedings by or against persons who were partners at the time of the proceedings. However, these observations were obiter dicta, because Collins LJ concluded that whether that was the meaning or not, any technical defect in the bankruptcy notice had not caused any "substantial injustice" and was capable of amendment. In the result, the Court of Appeal affirmed the decision of the Divisional Court.

It was in this state of authority that Hill (supra) was decided. In addition to the passage cited in the reasons of his Honour, previously referred to, Horridge J said:

"The judgment was obtained in the name of Holt & Co. The bankruptcy notice was in the name of that firm, and the petition was presented in the name of that firm. The firm of Holt & Co originally consisted of four members and the surviving or continuing partners of the firm were quite at liberty to issue the bankruptcy notice and to present that petition. I shall not assume that they had not authority to do so."

Salter J agreed with the reasons for judgment of Horridge J. It is that reasoning which the appellant contends is applicable to the facts before his Honour.

Australian authority is limited. In Madden v Kirkegard Ellwood & Partners [1983] 1 Qd R 649, Re Wenham (supra) was followed. It was held that, pursuant to O54 r1 of the Rules of Supreme Court (Qd), an action could be brought against partners in the name of their firm even after dissolution of the partnership if the cause of action had accrued before dissolution. The Court declined to follow the contrary decision of Hood J in Union Bank of Australia Ltd v Lohmann & Co [1916] VLR 530, in which Re Wenham (supra) was not cited to the judge.

The authorities establish that provisions equivalent to O48a permit an action to be brought against the members of a firm in the name of the firm, notwithstanding that the firm has been dissolved after the cause of action has accrued. But that still leaves the question of whether s307 of the Act permits a bankruptcy notice or petition to be issued in the name of a firm, where the members of the firm have changed after the date the liability sought to be enforced was incurred. (In this case, the parties are agreed that the liability was incurred on 21 June 1990, the date the judgment was obtained in the Magistrates Court.)

On the reasoning of Lord Alverstone MR in Re Wenham, s307 of the Act should be construed as referring to the firm as comprised by the persons who were partners at the date the liability was incurred. In order to conclude whether this is the correct interpretation of s307, it is necessary to have regard to further matters. These include the legislation regulating partnerships (insofar as relevant), the context in which s307 itself appears and the reasons for giving the section a restricted or broad construction.

Partnership Act

It will be recalled that in the passage earlier cited from Horridge J in Hill (supra), reference was made to s38 of the Partnership Act 1890. Section 42 of the Partnership Act 1958 (Vic) is in substantially the same terms:

Provided that the firm is in no case bound by the acts of a partner who has become bankrupt but this proviso does not affect the liability of any person who has after the bankruptcy represented himself or knowingly suffered himself to be represented as a partner of the bankrupt."

Notwithstanding the distinction drawn in s41 of the same Act between the dissolution of a partnership and retirement, it was accepted in argument on the appeal for both parties that a retirement from a partnership or the appointment of a new partner created a dissolution of a partnership for the purposes of s42.

Section 42 therefore applied in respect of those partners who, at the date of judgment, were members of the partnership, but who had ceased to be partners at the date of the bankruptcy notice and the creditor's petition. Accordingly, s42 gave retired partners the authority to accept payment or composition of the debt with the debtor. However, s42 did not have the effect of conferring authority on new partners of the firm Anderson Rice to accept payment or composition of the debt. Had the debtor approached a new partner of the firm, that partner would not have had authority, in the absence of some special arrangement, to effect a composition of the debt. Nor, of course, does s42 address the problem, (not involved in the present proceedings), where there is a complete change of partners as was posited by James LJ in Blain (supra).

Statutory context

Section 307 is to be understood in the Act as one of a number of sections in the Act dealing with partnerships. The words "firm" and "partnership" are not defined in the Act. Section 45(1) provides that a creditor of a partnership may present a petition against the partnership if the creditor is entitled to present a petition against any one of the members of the partnership in respect of a partnership debt. Section 45(2) further provides that a creditor who is entitled to present a petition against a partnership may present a petition against any of the members of the partnership without including the others. Section 56 of the Act provides for a debtor's petition against a partnership to be presented by all the members of the partnership or by a majority of them resident in Australia at the time of the presentation of the petition. Section 308(b) provides that subject to the Act and for the purposes of the Act "a partnership may act by any of its members or a duly authorised agent".

In our opinion these provisions evince a legislative intention to facilitate the application of the Act to partnerships without the necessary involvement of all partners, subject of course to the precise terms of each section. In my opinion these provisions support, a reading of s307 which would enable proceedings under the Act to be taken in the name of the firm. Such proceedings include the issue of a bankruptcy notice and the presentation of a creditor's petition.

Content of section

This legislative intention is supported by the mechanism established by s307 for identifying the persons carrying on business under a firm name. This mechanism provides protection to any debtor in respect of whom proceedings are taken under the Act in a firm name. There is an express right established by the section for an interested person to apply for an order that the name or names of the persons carrying on business in the firm name be disclosed and verified in such manner as the Court directs. Parliament has thus provided a means of protection where firm names are used in proceedings under the Act. A debtor wishing to know who has authority to accept payment or to compromise the debt is entitled to invoke the procedure established by s307. In this way, the debtor can overcome any difficulty that otherwise could be created by a lack of identity between the members of the firm at the date the liability was incurred and at the date of the bankruptcy notice or petition.

A More Limited Construction?

It is well established by authority that bankruptcy notices are to be strictly construed and that the notice must be one requiring the debtor to pay the judgment debt in accordance with the terms of the judgment: In Re A Judgment Debtor [1908] 2 KB 474 at 476-7, 478 and 481. The foundation for these propositions is that the penal consequences attendant on bankruptcy require it. In that case a bankruptcy notice requiring the debtor to pay P and S and giving their private addresses was held to be calculated to embarrass the debtor because it did not follow the judgment, which had been obtained by the creditors in their trading capacity as a firm.

The application of these principles to a bankruptcy notice is further seen in James v Federal Commissioner of Taxation (1955) 93 CLR 631. It was there held that a notice failed because it wrongly sought to restrict the debtor to paying the debt to the creditors at one particular place and because it did not notify the debtor that he had the option of securing or compounding the debt to the creditors' satisfaction. The judgment, being an order that the plaintiff pay the costs of the action to the defendants, was followed in the bankruptcy notice and was not bad because it failed to include the words "or any of them".

The judicial approach referred to follows from the requirement of the Act in s41(1)(a) of the Act that a bankruptcy notice be in accordance with the prescribed form. Section 41(2) provides:

"The prescribed form of bankruptcy notice shall be such that the notice -

(a) requires the debtor named in it, within a specified time (being the time referred to in sub-paragraph 40(1)(g)(i) or (ii), whichever is appropriate) to -

(i) pay the judgment debt or sum ordered to be paid in accordance with the judgment or order; or

(ii)secure the payment of the debt or sum to the satisfaction of the Court or the creditor or his agent, if any, specified in the notice or compound the debt or sum to the satisfaction of the creditor or his agent, if any, specified in the notice; and

(b) states the consequences of non-compliance with the requirements of the notice."

The construction of s307 to which we have referred involves no departure from the principles applied in cases such as Re a Judgment Debtor and James. The debtor is not misled in any way. As is recognised in James, at 639, it is the duty of the debtor to seek out the judgment creditor and to pay the judgment debt to the creditor, if the creditor is in Australia. If the debtor wishes to ensure that the debt is paid to a person authorised to receive it, the steps available to him or her include making an application to the Court of the kind contemplated by s307. Similarly, if the debtor wishes to discuss composition of the debt, he or she has the means available to ascertain which persons have authority to make a composition on behalf of the firm specified in the bankruptcy notice or the petition.

Of course in practice, a bankruptcy notice will often specify an agent with whom the debtor may deal. In the present case, the bankruptcy notice stated that it was issued on the application of "Anderson Rice, Solicitors for the Judgment Creditor". Had the debtor sought to discuss composition of the debt with a member of the firm who was not a member of the firm obtaining the judgment, the parties would have had authority to act as agent for the judgment creditor. No difficulty or embarrassment would have been occasioned to the creditor.

However, for the reasons given, even if the bankruptcy notice had not identified an agent of the judgment creditor, s307 does not operate in a fashion which causes difficulty or confusion to the debtor. The section should be construed, consistently with the opinion expressed by Lord Alverstone MR so as to allow both a bankruptcy notice and a creditor's petition to be issued in the name of the firm that has obtained judgment against the debtor under that name. This is so notwithstanding that the composition of the firm has changed since the date the judgment was obtained.

Conclusion

It follows that the first ground of appeal is made out and that the appeal should be allowed.

I certify that this and the preceding 21 pages are a true copy of the Reasons for Judgment of their Honours Justice R Sackville and Justice R D Nicholson

Associate:

Date: 1 November, 1995

APPEARANCES

Counsel for the Appellant: Mr K Baker

Solicitors for the Appellant: Anderson Rice

Counsel for the Respondent: Mr K Howden

Solicitors for the Respondent: Holding Redlich

Date of Hearing: 14 June 1995

Date of Judgment: 1 November 1995

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