Is a “stay of enforcement” of a judgment within the meaning of s 15(2) of the Foreign Judgments Act brought about by s 58(3) of the Bankruptcy Act?

Talacko v Bennett [2017] HCA 15, 3 May 2017

Unanimously allowing an appeal against a decision of the Victorian Court of Appeal [1], the High Court [2] held that the majority in the Court of Appeal had erred in interpreting s 15(2) of the Foreign Judgments Act 1991 (Cth) and the effect of s 58(3) of the Bankruptcy Act 1966 (Cth).

The central issue was whether a “stay of enforcement” of a judgment within the meaning of s 15(2) of the Foreign Judgments Act was brought about by s 58(3) of the Bankruptcy Act.

Section 15 of the Foreign Judgments Act provides that a judgment creditor may not make an application to enforce in a country a judgment that has been given in an Australian court ‘until the expiration of any stay of enforcement’. Section 58(3) of the Bankruptcy Act provides that when a debtor has become bankrupt ‘it is not competent for a creditor to enforce any remedy against the person.’Land owned by Anna and Alois Talacko (who had 3 children; Jan Emil, Peter and Helena) in pre-WW2 Czechoslovakia and post-WW2 East Germany was seized after the end of Communist rule in then Czechoslovakia in 1989. Jan Emil (being the only eligible sibling to apply) was successful in having the five Prague properties restored to him. In 2009 the Supreme Court of Victoria (Kyrou J) found that Jan Emil had reneged on an agreement with the others to share the proceeds of the properties and ordered him to pay approximately 10 million Euros

Land owned by Anna and Alois Talacko (who had 3 children; Jan Emil, Peter and Helena) in pre-WW2 Czechoslovakia and post-WW2 East Germany was seized after the end of Communist rule in then Czechoslovakia in 1989. Jan Emil (being the only eligible sibling to apply) was successful in having the five Prague properties restored to him. In 2009 the Supreme Court of Victoria (Kyrou J) found that Jan Emil had reneged on an agreement with the others to share the proceeds of the properties and ordered him to pay approximately 10 million Euros in equitable compensation. Jan Emil was made bankrupt in 2011 and the majority in the Court of Appeal held that the bankruptcy did not preclude the issue of a certificate to the others to allow them to enforce the 2009 judgment in the Czech Republic against Jan Emil (who died intestate on 3 November 2014). The plurality judges in the High Court (Kiefel CJ, Bell, Keane, Gordon and Edelman JJ) held that s 15(2) of the Foreign Judgments Act prohibited the making of an application in relation to a judgment that could not, by Australian law, be enforced by execution. They identified several provisions in Commonwealth legislation where the use of the word ‘stay’ was not confined to stays imposed by courts. The “use of the word “any” in relation to “stay” is some, though perhaps not a decisive, indication of a legislative intention to comprehend any legal impediment to execution upon the judgment.” at [66]

The plurality judges in the High Court (Kiefel CJ, Bell, Keane, Gordon and Edelman JJ) held that s 15(2) of the Foreign Judgments Act prohibited the making of an application in relation to a judgment that could not, by Australian law, be enforced by execution. They identified several provisions in Commonwealth legislation where the use of the word ‘stay’ was not confined to stays imposed by courts. The “use of the word “any” in relation to “stay” is some, though perhaps not a decisive, indication of a legislative intention to comprehend any legal impediment to execution upon the judgment.” at [66]”It is impossible to conceive of any good reason why a judgment that cannot lawfully be executed under Australian law should be allowed to be executed in another country at the behest of an Australian court.” at [69]. There was no reason to conclude that s 15(2) was only concerned with stays ordered by a court and not stays resulting from the operation of a statute. Section 58(3) of the Bankruptcy Act constituted one such statutory stay.

“It is impossible to conceive of any good reason why a judgment that cannot lawfully be executed under Australian law should be allowed to be executed in another country at the behest of an Australian court.” at [69]. There was no reason to conclude that s 15(2) was only concerned with stays ordered by a court and not stays resulting from the operation of a statute. Section 58(3) of the Bankruptcy Act constituted one such statutory stay.

Excluding the operation of s 58(3) of the Bankruptcy Act from the reach of s 15(2) of the Foreign Judgments Act would undermine “an essential feature” of the Bankruptcy Act by enabling a judgment creditor to take individual action for the purpose of obtaining payment of a debt due to them, thus obtaining an unfair advantage over other creditors: at [72].

Gageler J agreed with the plurality judges and the observations made by Nettle J.

Nettle J was of the view that the words of s 15(2) of the Foreign Judgments Act yielded a constructional choice between a narrow understanding of “stay of enforcement [by execution]” and a more expansive interpretation of the words “stay of enforcement [by execution]” that embraces in personam anti-enforcement mechanisms. Nettle J identified Santamaria JA’s observation that if a foreign country had enacted a law like s 58(3) of the Bankruptcy Act, a judgment of a court of that country would not be enforceable in that country and could not be enforced in this country by registration. Such a judgment would not be a “final and conclusive judgement” according to the common law of Australia and consequently could not be sued upon in this country.