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Sami v Shantilal Brother's (Fiji) Ltd [2001] FJLawRp 13; [2001] 1 FLR 59 (6 February 2001)

NARAYAN SAMI v SHANTILAL BROTHERS (FIJI) LIMITED

High Court Civil Appellate Jurisdiction

Bankruptcy – advertisement of a receiving order - whether an Official Receiver is required to advertise a receiving order in a local newspaper given the absence of a specific requirement in the Bankruptcy Act – whether an additional requirement to advertise can be prescribed under subsidiary legislation and, if so, whether it is inconsistent with the provisions of the Act - Bankruptcy Act ss11, 13, 20(2), 31(3), 146(5); Bankruptcy Act 1914 (Imp) s11; Bankruptcy Rules 1915 (Imp) rr.186(2), 188

Practice and procedure - stay of receiving order – whether magistrate erred in refusing to stay receiving order - factors to consider – public interest in protecting innocent third persons from dealing with a debtor without notice – conditions imposed

Upon a refusal by a magistrate to stay a receiving order, the Appellant appealed. The Bankruptcy Act required that a receiving order be advertised in the Gazette. There was no statutory requirement for advertisement in a local newspaper. Counsels formulated two (2) questions for argument: (1) Whether or not the Official Receiver has a discretion on advertising (in a newspaper) a receiving order? (2) If yes, does the Court have a discretion to exercise a power to stop advertisement of a receiving order and ought it to do so in this case? In order to maintain the status quo and ensure that the appeal was not rendered nugatory the High Court granted an interim stay order pending appeal outcome. The Court also ordered the Official Receiver be served and he appears as amicus to assist the Court. The Court held that an additional requirement can be prescribed under subsidiary legislation, and was not inconsistent with provisions requiring advertisement in a gazette. The Court considered various reasons given by the magistrate for not staying a receiving order, including the absence of any denial of the judgment debt or proof of the existence of any counter-claim, set-off or cross-demand sufficient to extinguish the judgment debt, and the requirement of finality and the wider public interest in exposing and controlling an insolvent debtor. The Official Receiver confirmed that the debtor had attended at the office of the Official Receiver, and had been made aware of a requirement to file a Statement of affairs, but had not complied. The Court considered the debtor's blatant disregard of his statutory duty undeserving of exceptional indulgence by the Court of a stay order.

Held-(1) There is no inconsistency between the practice of an Official Receiver advertising of receiving order in a local newspaper and the absence of a specific requirement in the Bankruptcy Act to so advertise. Read with ss20(2), 31(3) of the Act which require advertising an order adjudging a debtor bankrupt and the annulment, there is no element of discretion on the part of the Official Receiver in advertising a receiving order in a local newspaper.

(2) Given that the undoubted purpose of advertising a receiving order is to protect innocent third persons from dealing with the debtor without notice, a stay of advertisement or of a receiving order must be considered an exceptional indulgence requiring a high degree of satisfaction and stringent terms and conditions to ensure that the debtor's remaining assets and resources remain unencumbered, and are not secreted away or wasted.

(3) A blatant disregard of a debtor's elementary statutory duty to file a Statement of Affairs following the making of a receiving order, cannot be legitimised or excused by the grant of an exceptional indulgence such as a stay of proceedings.

The magistrate was entirely correct in her refusal of a stay of proceedings. Appeal must be dismissed as entirely unmeritorious.

Cases referred to in Judgment
Ex parte Rabbidge [1878] UKLawRpCh 128; (1878) 8 Ch D 367
Hills v Stanford and Anor [1904] NZGazLawRp 33; (1904) 23 NZLR 1061
Re A Debtor ex parte Official Receiver (1901) 84 LT 666
Re Fidow (a debtor) [1989] NZHC 298; (1989) 2 NZLR 431

Gavin O'Driscoll for the Appellant
Prem Narayan for the Respondents
Wendell Archibald for the Official Receiver

Fatiaki, J

This appeal concerns a refusal by the Magistrates' Court, Suva to stay a receiving order granted against the Appellant on the basis of a bankruptcy notice issued against him pursuant to a consent judgment entered in the Respondent's favour in the Magistrates' Court.

The grounds of appeal which are seven (7) in number, raises various errors in law and in fact that are said to have been committed by the learned magistrate in refusing the Appellant's stay application.

None of these grounds were specifically pursued before me and it transpired from discussions with Appellant's counsel that the Appellant's main grievance was the clear 'ex parte' direction in the magistrate's final sentence of her judgment:

'... (that) the official receiver be served a copy of this decision or sealed order and (is) directed herein to proceed with the requirements of advertisement forthwith.'

In the result, with the agreement of counsels, the following two (2) questions were formulated for argument:

'(1) Whether or not the Official Receiver has a discretion on advertising (in a newspaper) a receiving order?

(2) If yes, does the Court have a discretion to exercise a power to stop advertisement of a receiving order and ought it to do so in this case?'

In order to maintain the status quo and ensure that the appeal was not rendered nugatory an interim stay order was granted pending judgment in this appeal. The Official Receiver was also ordered to be served with the appeal papers and appeared as amicus to assist the Court. I am grateful for his assistance in this appeal.

The requirement to advertise a receiving order is provided for in the following terms by Section 13 of the Bankruptcy Act (Cap.48):

'Notice of every receiving order, stating the name address and description of the debtor, the date of the order, the court by which the order was made, and the date of the petition shall be gazetted in the prescribed manner.'

This section, the learned Official Receiver has very properly pointed out in his written submissions, 'differs slightly' from the requirement under the equivalent section of the Bankruptcy Act 1914 (Imp) namely Section 11, which additionally requires a receiving order to be 'advertised in a local newspaper'.

Notwithstanding the difference in wordings, the Official Receiver nevertheless writes '... advertising in a local newspaper is assumed to be required'. Furthermore this long-standing 'practice of advertising in a local newspaper (in Fiji) appears to have arisen as a consequence of Rule 186 of the Bankruptcy Rules 1915 (Imp)' which, by Section 146(5) of the Bankruptcy Act (Cap.48):

'... are declared to be in force in Fiji and shall be read with and considered part of this Act:

Provided that –

(b) it shall be lawful for any court to construe the said rules ..., provided always that any such construction shall not be inconsistent with the provisions of this Act.'

It is clear from the foregoing that the advertisement of a receiving order in a local newspaper in this country is an 'additional' practice not expressly required or mandated by the Bankruptcy Act (Cap.48) but is, nevertheless, undertaken by the Official Receiver in substantial compliance with the requirement of Rule 186(2) of the Bankruptcy Rules 1915 (Imp) which provides:

'The Official Receiver shall forthwith send notice (of the receiving order) to such local paper as the Board of Trade may from time to time direct, or in default of such direction as he may select.'

The question thus resolves itself into the much more general one i.e. given the absence of a specific requirement in the Bankruptcy Act (Cap.48) to advertise a receiving order in a local newspaper can such an additional requirement be prescribed under subsidiary legislation and, if so, would it be 'inconsistent with the provisions of the Act'?

After careful consideration I am driven to the clear conclusion that the answers to the questions posed above are 'Yes' and 'No' respectively.

In arriving at this conclusion I have considered the following: The text of Section 13 of our Act whilst differently worded to Section 11 of the Imperial Act is not exclusive as to the requirement to advertise a receiving order which is to be '... in the prescribed manner'. In this latter regard the Interpretation Act (Cap.7) defines 'prescribed' as meaning 'prescribed by the Act in which the word occurs or by any subsidiary legislation'.

Secondly, the 'additional' requirement of advertising in a local newspaper plainly advances the purpose of advertising a receiving order by reducing the potential mischief that was clearly noted by James L.J. when his lordship observed in Ex parte Rabbidge [1878] UKLawRpCh 128; (1878) 8 Ch D 367 at 372:

'It is much to be regretted that the advertisement of adjudications (in bankruptcy) are so often postponed. These delays are a source of great mischief. It may be very hard on a debtor, who has been adjudged a bankrupt, not to stay the advertisement of the adjudication, if he has a bona fide ground for appealing; but, on the other hand, great hardship may be done to other (innocent) persons if the adjudication is not advertised.'

Finally as is recorded in the headnote to Hills v Stanford and Another [1904] NZGazLawRp 33; (1904) 23 NZLR 1061:

'Rules and forms made and prescribed under a provision (empowering the making of rules) may be looked to and considered in interpreting an ambiguous provision of the statute itself; and where a practice prescribed by such rules has been followed for a number of years, that is also a fact which may be taken into consideration in interpreting the statute.'

In this case the 'practice' of advertising receiving orders in a local newspaper is a longstanding one of unquestionable utility and ought in my view, to be sustained in the absence of any obvious inconsistency between it and the statutory requirements of the Bankruptcy Act (Cap.48) which merely lays down a minimum non-exclusive requirement to advertise a receiving order in the Fiji Gazette.

This view coincides with and is reinforced by the requirements of Sections 20(2) and 31(3) which deal with the advertising of an order adjudging a debtor bankrupt and the annulment thereof. In both instances the Bankruptcy Act requires a notice to be 'advertised in a local newspaper in the prescribed manner'. In my view there is no element of discretion on the Official Receiver's part in the advertising of a receiving order.

I turn next to consider the second of the questions posed in the appeal which is plainly an appeal against the refusal of the trial magistrate to exercise her discretion to stay proceedings after the receiving order was made. Such a power is conferred by Sections 11 and 105 of the Bankruptcy Act (Cap.48) and Rule 188 of the Bankruptcy Rules 1914 (Imp.).

This aspect of the appeal is bound to fail unless it can be clearly demonstrated that the magistrate's refusal was plainly wrong in law and/or was motivated by irrelevant considerations or over-looked material considerations.

In that regard the learned magistrate in her decision sets out several reasons for rejecting the stay application including the absence of any denial of the judgment debt or proof of the existence of any counter-claim, set-off or cross-demand sufficient to extinguish the judgment debt, and the requirement of finality and the wider public interest 'in exposing and controlling an insolvent debtor'.
Given that the undoubted purpose of advertising a receiving order is to protect innocent third persons from dealing with the debtor without notice, a stay of advertisement or of a receiving order must be considered an exceptional indulgence upon which the court should require a high degree of satisfaction before it grants a stay and, even where a stay is granted, stringent terms and conditions ought to be imposed so as to ensure that the debtor's remaining assets and resources remain unencumbered, and are not secreted away or wasted.

In this latter regard the Appellant deposed before the learned magistrate:

'11. THAT if the Receiving Order is published in the daily newspaper all my remaining creditors will file their claims and in this event the judgment creditor (Respondent) stands to loose the sums owed to him as I do not possess properties which are worth to cover all my creditors.

12. THAT no useful purpose will be obtained if the Receiving Order is published in the daily newspapers.'

In rejecting such a basis in Re Fidow (a debtor) [1989] NZHC 298; (1989) 2 NZLR 431, Fisher J. said after considering several cases, at p.445:

'I conclude that the likelihood of little or no available assets for unsecured creditors in this matter is not of itself a reason for declining an adjudication. It is simply a matter to be taken into account in the exercise of my overall discretion.'

In similar vein in Re A Debtor ex parte Official Receiver (1901) 84 LT 666 Stirling L.J. in setting aside the stay order in that case observed at p.669:

'I cannot say that that (i.e. that the publicity of advertising the receiving order would ruin the prospects of the debtor in connection with a new company which was coming out) is any reason for staying so much of the order as relates to Section 16 - namely, the furnishing of a statement of affairs and giving complete information to the Official Receiver with regard to the assets of the debtor ... And it seems to me that it is absolutely necessary that that portion at least of the consequences which follow from the making of the receiving order should come into operation. Otherwise the public official who guards the interest of the public is left without the proper information which would enable him to act.'

In this present case the Official Receiver confirms that 'the debtor attended at (his) office and has been made aware that he is required to file a Statement of affairs, but has not done so'.

Such a blatant disregard of a debtor's elementary statutory duty following the making of a receiving order, cannot be legitimised or excused by the grant of an exceptional indulgence such as a stay of proceedings. The public interest must also be considered.

The learned magistrate was entirely correct in her refusal of a stay of proceedings and this appeal must be and is hereby dismissed as entirely unmeritorious.

Application dismissed.

Marie Chan