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The High Court of Australia has recently made a decision that a Judgment Creditor cannot apply for a Certificate in which to enforce a Judgment overseas.
In March 1992 several properties in central Prague were transferred to Jan Emil, a Melbourne resident, following the death of a family member. In 1998 Jan Emil's sister and children of the deceased sought equitable relief in the Supreme Court of Victoria on the basis that it was agreed that the surviving family would have an equal benefit to the properties.
This decision was subsequently appealed and following lengthy court proceedings Justice Kyrou, of the Court of Appeal, found that the Plaintiffs were entitled to equitable compensation pursuant to a Terms of Settlement Agreement that was finally reached in 2001. Following this successful appeal the Plaintiff commenced proceeds in the Czech Republic to enforce the Orders made by Justice Kyrou for payment of the equitable compensation and upon request of the Plaintiffs the Supreme Court of Victoria issued a "Certificate of Finality of Judgment and Orders" which would effectively allow the Plaintiffs to commence proceeds pursuant to the Foreign Judgments Act (Cth).
The Plaintiffs subsequently commenced bankruptcy proceedings against Jan Emil with Orders made in November 2011 by the Federal Court of Australia. Following the death of Jan Emil shortly after these proceedings, the widow sought to have the Certificate of Finality of Judgment and Orders set aside.
The matter was then listed for hearing in the High Court with the main question being whether the prevention of the execution of a Judgment brought about by s58(3) of the Bankruptcy Act 1966 (Cth) is a "stay of enforcement" within the meaning of s15(2) of the Foreign Judgments Act (Cth).
Sections of the applicable Acts are provided below:
Bankruptcy Act 1966 - Section 58
(3) Except as provided by this Act, after a debtor has become a bankrupt, it is not competent for a creditor:
(a) to enforce any remedy against the person or the property of the bankrupt in respect of a provable debt; or
(b) except with the leave of the Court and on such terms as the Court thinks fit, to commence any legal proceeding in respect of a provable debt or take any fresh step in such a proceeding.
Foreign Judgments Act 1991 - Section 15
(2) An application may not be made until the expiration of any stay of enforcement of the Judgment in question.
The High Court noted the purpose of s15(2) is to prevent the possibility of a foreign Court acting upon a Certificate to allow the execution of a Judgment that would effectively not be enforceable under Australian law.
The High Court further noted that to exclude s58(3) from the reach of s15(2) would be to undermine the Bankruptcy Act because it would effectively enable a Plaintiff to take action for the purpose of obtaining payment of a debt due to them and therefore obtaining an unfair advantage over other Creditors.
The decision by the Court means there is an equitable distribution of a bankrupts estate among Creditors. While there is still a possibility that a Judgment Debtor may still enter into bankruptcy or liquidation so as to prevent enforcement against assets held overseas, a Judgment obtained in Australia will still be paid by the Trustee in bankruptcy where there are tangible assets (including overseas assets).
This article is not legal advice.