Ex parte: DONALD ALAN KEITH NEAL and COLIN JOHN TAYLOR

And: DUNCAN PROPERTIES PTY. LTD.

No. BN41 of 1993

FED No. 338

Number of pages - 15

Bankruptcy - Bills of Exchange - Estoppel

(1993) 114 ALR 659

COURT

IN THE FEDERAL COURT OF AUSTRALIA



BANKRUPTCY DISTRICT OF THE STATE OF QUEENSLAND

GENERAL DIVISION

Drummond J

CATCHWORDS

Bankruptcy - Creditor grants contractual stay of execution in consideration of a cash payment and the indorsement of foreign bill of exchange to the creditor by an associate of the debtors - creditor cannot issue valid bankruptcy notice while stay is in effect - bankruptcy notice set aside

Contractual obligation on debtors' associate to ensure creditor receives proceeds of bill when due - obligation conditional upon creditor presenting bill - bill not presented on maturity date - creditor must provide reasonable notice of date on which it will present the bill - creditor cannot take advantage of its own omission to present bill which prevents debtors' associate performing its obligation

Bill indorsed by creditor to bank as agent for collection - bill not back in creditor's hands when bankruptcy notice issued - only if debtors exposed to possible liability of being required to pay both on the bill and in respect of the judgment debt will the failure of the creditor to regain possession of bill from indorsee bank before issuing bankruptcy notice invalidate the notice.

Bills of Exchange - interest in bill of exchange assigned in equity prior to negotiation of bill - presumption that bill of exchange is conditional payment only applies when bill tendered to discharge pre-existing liability.

Estoppel - bill of exchange denominated in $US payable in Canada - indorser contractually bound to ensure indorsee receives proceeds of bill whenever - indorsee represents to indorser that bill will not be presented if a specified sum of $AUS is placed in trust account of indorser's Australian solicitor - indorser consequently does nothing to ensure $US sum is available in Canada to meet bill on presentation - no detriment as no chance of funds being available to meet bill - added legal costs incurred by indorser in organising payment of $AUS - sufficient detriment to found estoppel where no undertaking by indorsee to indemnify indorser against additional costs.

Bankruptcy Act 1966 (Cwth) - ss. 40(1)(g); 41(3).

Bills of Exchange Act 1909 (Cwth) - ss. 36, 43 and 60(2).

Aldercrest Developments Ltd. v Hamilton Co-Axial Ltd. (1970) 13 DLR (3d) 425

Carpentaria Investments Pty. Ltd. v Airs and Arnold (1972) QdR 436

Re Charge Card Services Ltd. (1989) Ch 497

Commonwealth v Verwayen (1990) 170 CLR 394

Davis v Reilly (1898) 1 QB 1

Re A Debtor; Ex parte the Debtor (1908) 1 KB 344

De Lione v Turco (1982) QdR 224

Laurinda Pty. Ltd. v Capalaba Park Shopping Centre Pty. Ltd. (1989) 166 CLR 623

Legione v Hateley (1983) 152 CLR 406

Re Lomax; Ex parte the City Bank (1983) BC (N.S.W.) 66

National Australia Bank Limited v K.D.S. Constructions Services Pty. Ltd. (1987) 163 CLR 668

Richardson v Richardson (1867) LR 3 Eq 686

Siebe Gorman and Co. Ltd. v Barclays Bank Ltd. (1979) 2 Lloyds Rep 142

Whistler v Forster (1863) 143 ER 441

Re Williams; Ex parte General Credits (1983) 68 FLR 202

HEARING

BRISBANE, 20-21 April 1993



#DATE 11:5:1993

Counsel for the debtors: B.J. Clarke

Solicitors for the debtors: Hill and Taylor

Counsel for the creditor: P.J. Dunning

Solicitors for the creditor: Tobin and Co.

ORDER

THE COURT ORDERS THAT:



1. The bankruptcy notice issued on 11 January, 1993 be set aside.



2. The creditor pay the debtors' costs of and incidental to the



application to be taxed, other than costs of the hearing of 26 March, 1993.



3. The debtors pay the creditor's costs of the hearing of 26



March, 1993 to be taxed.



Note: Settlement and entry of orders is dealt with in Rule 124 of the Bankruptcy Rules.

JUDGE1

DRUMMOND J This is an application by the debtors, Messrs. Neal and Taylor, to set aside a bankruptcy notice on the ground that its issue was not authorised by s. 40(1)(g) and contravenes s. 41(3) of the Bankruptcy Act 1966.

  1. The debtors rely on a Deed of Compromise dated 22 October, 1992. According to the recitals in the Deed, the debtors were then indebted to the creditor, Duncan Properties Pty. Ltd., for $662,065.00, the total of a Supreme Court judgment for $472,200.00 and a District Court judgment for $189,865.00. A bankruptcy notice was served on the debtors in July 1992 and, following non-compliance with the demand therein contained, a petition was subsequently served on them. The debtors staved off the hearing of the petition by entering into the Deed of Compromise.

  2. Clause 7.3 of the Deed provides:

"Upon the execution of this Agreement by all parties, the District Court proceedings, ... (and) the Supreme Court proceedings, ... shall be stayed ... until Duncan Properties receives all of the monies owing to it under this Agreement, or until default by Amartec, Taylor or Neal of any of their obligations pursuant to the terms of this Agreement, whichever is the sooner."



  1. Clause 8.2 provides:

"Upon the execution of this Agreement by all parties Duncan Properties shall request the Court to discontinue the Bankruptcy proceedings by consenting to an order that the same be dismissed."



  1. Clause 1 defines these various proceedings:

"'District Court proceedings' means the proceedings issued in the District Court of Queensland at Brisbane by Duncan Properties against inter alia Neal, Taylor ...". "'Supreme Court proceedings' means the proceedings issued in the Supreme Court of Queensland at Brisbane by Duncan Properties against inter alia Neal, Taylor ...". "'Bankruptcy proceedings" means the Creditors Petition Number 2150 of 1992 issued by Duncan Properties against Neal and Taylor."



  1. Clause 9.2 provides:

"Subject to Amartec and Neal and Taylor carrying out their obligations under this Agreement, Duncan Properties hereby releases and forever discharges Neal and Taylor from all claims, rights, and demands which Duncan Properties has against them arising out of or which are in any way connected with the facts, matters and circumstances of the Supreme Court proceedings and the District Court proceedings."



  1. Upon Amartec Pty. Ltd., Neal and Taylor complying with their respective obligations under the Deed, in view of clause 9.2 and recital D, the creditor would be bound to discontinue the Supreme and District Court actions that were stayed pursuant to clause 7.3.

  2. Clause 10 provides:

"In the event of default by Amartec, Taylor or Neal of any of their obligations pursuant to the terms of this Agreement then this Agreement may be rescinded by Duncan Properties and thereupon Duncan Properties ... shall be entitled to continue with the Supreme Court proceedings and District Court proceedings and Duncan Properties shall be entitled to commence bankruptcy proceedings against Neal and Taylor."

  1. The benefits that the creditor got, for its part, under the Deed were:

(a) by clause 5 it was provided:



"Neal and Taylor shall on or before 5.00 pm the 22 nd day of October, 1992 deliver to the office of Duncan Properties' Solicitors a bank cheque or bank cheques to the total value of ... $AUS50,000.00 payable to Duncan Properties."



(b) by clause 7.1 it was provided:



"Neal and Taylor shall pay by bank cheque payable to Duncan Properties' Solicitors legal costs and disbursements of Duncan Properties ... in respect of ... the bankruptcy proceedings ... (and) the Supreme Court proceedings."



  1. I have mentioned provisions of the Deed that refer to Amartec. This is a company associated with the debtors in that Mr. Neal is one of its directors. The third benefit the creditor was to receive was a bill drawn for USD72,500.00 by a Canadian company, Euro Scotia Funding Ltd., on, but never accepted by, another Canadian company, Montreal Trust Co. of Halifax, Nova Scotia and payable to the order of Amartec. Although this was a foreign bill, being both drawn and payable in Canada (although negotiated to the creditor in Australia), the debtors did not argue that the creditor as holder had failed, as appears to be the case, to have the bill attested with a protest for dishonour by non-payment, or that the creditor's failure to present this bill until 22 December discharged Amartec and all other parties from liability on it: cf. ss. 56(2) and 50 of the Bills of Exchange Act 1909. I therefore pass over these matters.

  2. The arrangement concerning the bill required Amartec to transfer it to the creditor. Clause 2 provides:

"Amartec and Neal and Taylor shall on or before 5.00pm 3 November, 1992 deliver to the office of Duncan Properties' Solicitors the Due Bill together with the following documents:



(i) copy of written advice by Amartec to Euro Scotia whereby notice is given to Euro Scotia of the assignment of Amartec's interest in the Bill;



(ii) letter from Euro Scotia addressed to Amartec whereby Euro Scotia acknowledges receipt of the said notice and Euro Scotia agrees that the proceeds of the Bill will be paid to Duncan Properties when due under the terms of the Bill."



  1. Clause 3 provides:

"At the time of delivery of the Bill on Duncan Properties' Solicitors the Bill shall be endorsed on the reverse side thereof with the words: 'Pay to the order of Duncan Properties Pty. Ltd.' and such endorsement shall be signed by two authorised Directors of Amartec Pty. Ltd. under the Common Seal of Amartec ..."



  1. Clause 4.2 provides:

"Amartec hereby assigns to Duncan Properties its interest in the Bill and shall sign all such documents and do all such acts as may be necessary from time to time for Duncan Properties to receive the full proceeds of the Bill when due."



  1. It is not necessary that there be a court order staying enforcement of a judgment debt before the debtor can say that the issue of a bankruptcy notice is not authorised by s. 40(1)(g) or that its issue is prohibited by s. 41(3). If circumstances exist in which the debtor would be entitled to obtain from the Court a stay of execution on a judgment debt, that will be sufficient to prevent the creditor issuing a valid bankruptcy notice: Re A Debtor; Ex parte the Debtor (1908) 1 KB 344 at 349. Such circumstances will include those in which the creditor has agreed with the debtor not to enforce the judgment for a time. That will amount to a stay for the purpose of these two sections, so long as the contractual restraint on enforcement of the judgment operates: Re Williams; Ex parte General Credits Ltd. (1983) 68 FLR 202 at 206-207. So long as the stay provided for by clause 7.3 of the Deed remained in force, it was not open to the creditor to issue a valid bankruptcy notice demanding payment by the debtors of either of the judgment debts.

  2. The debtors submit that even though the bill was dishonoured, that did not involve any default by Amartec or the debtors of any of their obligations pursuant to the Deed within the meaning of that expression in clauses 7.3 and 10. They further submit that, that being so, the creditor was not entitled to give the notice of 8 January, 1993 rescinding the Deed and the stay provided for by clause 7.3 therefore remained in force as at 11 January, 1993, along with the rest of the agreement, when the bankruptcy notice, now attacked, was issued.

  3. This argument was advanced on two bases: firstly, it was said that there could be no default merely because the bill was not paid on presentation because none of Amartec, Neal or Taylor, who were parties to the Deed, was bound by the Deed to ensure that the creditor was paid. Secondly, it was submitted that, since by clause 13 of the Deed time was of the essence of the agreement, even if Amartec, Neal and Taylor were bound to ensure that the creditor was paid the proceeds of the bill, their obligation was to do that on 16 December, 1992; because the creditor did not present the bill until 22 December, 1992, their obligation therefore became an obligation to see that the creditor was paid within a reasonable time after 16 December. It was then said that a reasonable time had not passed when the creditor purported to cancel the Deed on 8 January, 1993.

  4. In answer, it was said that the Deed should be interpreted as imposing an obligation on Amartec, Neal and Taylor to ensure that the creditor got the USD72,500.00. Alternatively, it was submitted that the Deed was ambiguous in that it was open to either that interpretation or the one advanced by the debtors and the first, as the construction most conforming with commercial common sense, should be preferred.

  5. It was further submitted by the creditor that the agreement was conditional upon the bill being paid and could be cancelled when that did not occur. Reference was made to the proposition that payment by cheque or bill of exchange is only effective as a payment if the cheque or bill is met on presentation. But the cases which establish that there is a presumption that a negotiable instrument is only accepted as payment conditionally upon the bill being honoured are all cases in which the cheque or bill was tendered in payment of a pre-existing liability: Re Charge Card Services Ltd. (1989) Ch 497 at 511-512. The statement in National Australia Bank Ltd. v K.D.S. Construction Services Pty. Ltd. (1987) 163 CLR 668 at 676 is consistent with this and Re Lomax; Ex parte the City Bank (1893) 3 BC (N.S.W.) 66, a decision relied on by the creditor, was just such a case. This case is not like that: Amartec was, prior to executing the Deed, under no liability to the creditor in satisfaction of which it could be said the bill was provided by Amartec. The bill was given by Amartec in return for the creditor's promise to stay proceedings against Neal and Taylor, not in satisfaction of the judgment debt, which was a debt owed only by Neal and Taylor. Moreover, Re Charge Card Services Ltd. also establishes that there is no general principle of law that, whenever a method of payment is adopted which involves a risk of non-payment by a third party, there is a presumption of fact that it is taken as a conditional payment only, so that the risk of non-receipt of the cash is on the paying party: see (1989) Ch at 511-512 and (1987) Ch at 165-166. The creditor cannot rely on any presumptions but must establish its claims to the benefit of a promise that it would receive the USD72,500.00 by showing that accords with the true meaning of the Deed.

  6. It was further submitted that Amartec, as indorser of the bill, must be taken by force of s. 60(2) of the Bills of Exchange Act 1909 to have promised the creditor that the bill would be paid according to its tenor. But that Amartec may have been in default of this obligation imposed by the Act upon dishonour of the bill and might then have been sued on it by the creditor does not mean that Amartec was also in default of its obligations under the agreement for the purposes of clauses 7.3 and 10. Whether that is so is also governed by the true construction of the Deed.

  7. Although little of the circumstances surrounding the making of the Deed was in evidence before me, there is I think considerable force in the debtors' primary argument that it did not cast on any of Amartec or the debtors an obligation to ensure that the creditor actually received the bill proceeds, even though it was clearly the expectation of the parties, as indicated by clauses 7.3, 8.3, 4.1 and 6, that the creditor would receive an amount equal to the USD72,500.00 for which the bill was drawn.

  8. It is clause 4.2, however, that makes the debtors' primary submission untenable.

  9. Clause 2 provides for delivery to the creditor of the bill indorsed over to it by Amartec. Indorsement and delivery is the means, long antedating the development of procedures in equity and at law for the assignment of choses in action, whereby a party entitled to the benefit of a bill of exchange payable to order can transfer to another all the rights associated with the bill: see Whistler v Forster (1863) 143 ER 441 at 444 and 445 and ss. 36 and 43 of the Bills of Exchange Act 1909. However, a bill of exchange is not only a chattel, it is also a chose in action and a bill of exchange can still be assigned both at law and in equity, even though the negotiation of a bill confers wider advantages on the holder than such an assignment: Siebe Gorman and Co. Ltd. v Barclays Bank Ltd. (1979) 2 Lloyd's Rep 142 at 158 and Aldercrest Developments Ltd. v Hamilton Co-Axial Ltd. (1970) 13 DLR (3d) 425 at 426.

  10. It would necessarily take some time for the bill here in question to be indorsed and delivered by Amartec to the creditor. Clause 2 allowed the period from 22 October to 3 November, 1992 to Amartec to do that. However, according to its terms, clause 4.2 operated upon execution of the Deed on 22 October, 1992 as an immediate equitable assignment of the whole of Amartec's interest in the bill to the creditor: Siebe Gorman and Co. Ltd. v Barclays Bank Ltd. at 162-163; Richardson v Richardson (1867) LR 3 Eq 686 at 693 and 694. The clause thus serves a distinct and separate purpose from that effected by the negotiation of the bill by Amartec to the creditor provided for by clauses 2 and 3. Clause 4.2 also contained what the debtors described in their argument as a "covenant for further assurance": the closing words of clause 4.2 no doubt operate as a promise by Amartec to take all steps necessary to vest in the creditor title to the bill as assignee at law. But insofar as by those words Amartec promised to "do all such acts as may be necessary ... for Duncan Properties to receive the full proceeds of the Bill when due" that promise goes beyond a mere "covenant for further assurance" and while not a promise by Amartec to pay the proceeds to the creditor, it does amount to a promise by Amartec to ensure that the creditor would receive the USD72,500.00 for which the bill was drawn when the bill became due. The bill though drawn prior to the date of the Deed was not dated with the date on which it was made, but it was expressed on its face to be payable on 16 December, 1992. The bill thus became due on that date for the purposes of clause 4.2. Subject to one important qualification, it would follow that non-receipt by the creditor of the USD72,500.00 on that date, 16 December, would constitute default by Amartec within clauses 7.3 and 10 of the Deed, a default which would have entitled the creditor to issue its notice of cancellation of the Deed on 8 January, 1993 and thereafter to take fresh bankruptcy action against the debtors, as has now been done.

  11. The qualification I have referred to is this: Amartec was bound by clause 2 of the Deed to deliver the bill, indorsed to the creditor, to the creditor's Brisbane solicitors by 3 November, 1992. It was the creditor who was bound to ensure that the bill was presented for payment in Halifax on 16 December. As a matter of construction, clause 4.2 must, I think, be read as obliging Amartec to do all things, other than things that the creditor itself had to do to ensure payment of the bill, which might be necessary to ensure that the creditor received an amount equal to the proceeds of the bill on 16 December, 1992. Doing all things necessary to ensure that the creditor received the proceeds of the bill might well require Amartec to find funds equivalent to USD72,500.00 and to have them paid to the creditor, should the proceeds of the bill not be received by or on behalf of the creditor for any reason other than a failure, for which the creditor was responsible, to do what the creditor had to attend to, in order to obtain those proceeds.

  12. Although the bill was due for payment on 16 December, it was not, in fact, presented for payment in Halifax until 22 December, 1992. The reason for this delay was the inaction of the Canadian bank which the creditor's Brisbane bank had engaged as agent to collect the proceeds of the bill. As between Amartec and the creditor, it is delay for which the creditor alone is responsible.

  13. For the reasons given, while Amartec was obliged to ensure the creditor received the proceeds of the bill when it became payable on 16 December, 1992, Amartec was not in default of that obligation when the funds did not then materialise because it was necessary, before Amartec could be in default, for the creditor to present the bill for payment in Halifax, something not done due to the failure of the Canadian agent of the creditor's own collecting bank to present the bill for payment until 22 December, 1992. An alternative basis upon which this conclusion follows from the failure, for which the creditor is responsible, to present the bill until 22 December, 1992, is by the application of the principles discussed in Carpentaria Investments Pty. Ltd. v Airs and Arnold (1972) QdR 436 at 459.

  14. The creditor was not therefore entitled to cancel the Deed by its notice of 8 January, 1993, either on the ground there asserted, viz., "by reason of (the) failure (of Amartec, Neal and Taylor) to pay the total sum to our client pursuant to the Deed of Settlement", the total sum presumably being a reference to all the payments the creditor expected to receive under the Deed, or on the ground that Amartec was in default of its obligation under clause 4.2 to ensure that the creditor received the proceeds of the bill on 16 December, 1992.

  15. The debtors did not suggest that the creditor's failure to present the bill for payment on 16 December, 1992 discharged Amartec from its obligations under clause 4.2. Their argument proceeded on the basis that time for performance by Amartec of its obligation under clause 4.2 was expressly made of the essence of the agreement by clause 13 (something that was in any event provided for by clause 10). They submitted that Amartec was absolved from having to ensure that the creditor received the bill proceeds on 16 December, 1992 by the creditor's own failure to present the bill for payment on that date, while the agreement thereafter remained on foot, the creditor could not cancel it, even if it did not receive the bill proceeds, unless and until the creditor gave the debtors a notice effective to fix a new date. After that date the debtors would be in default of their promise in clause 4.2, if the creditor still had not then received the proceeds of the bill. It was submitted that no such notice had ever been given. A notice, to be effective for the purpose in question, must nominate a period reasonable in all the circumstances within which the recipient must perform the obligation and must give the recipient warning that the party giving the notice may rescind the contract if the notice is not complied with: Laurinda Pty. Ltd. v Capalaba Park Shopping Centre Pty. Ltd. (1989) 166 CLR 623 at 652-4 and 646. The only thing that could possibly be regarded as a notice effective for this purpose was the facsimile of 22 December, 1992 sent by the creditor's solicitor. But it cannot be read as informing the debtors that the creditor was fixing a particular period expiring after 16 December, 1992 and within which the debtors were required to comply with clause 4.2, in default of which the creditor would regard itself as entitled to rescind the Deed. The facsimile really has nothing at all to do with that: rather is it a notice to the debtors that if payment of AUD100,000.00 to the creditor's solicitor did not take place by 3.00 p.m. that same day, a payment which had earlier been discussed between the parties as a substitute for the exercise by the creditor of its rights under the bill, then the creditor would proceed to present the bill for payment later that day in the expectation that it would be dishonoured. The facsimile is, moreover, headed "without prejudice", a heading that is justified because the facsimile contains a proposal which, if accepted, would result in the creditor not presenting the bill and freeing Amartec of its liability as indorsee. Even if this facsimile could be regarded as a notice of the kind that the creditor was required to give before it could be entitled to cancel the Deed as it purported to do on 8 January, 1993, I do not think the time that passed between the receipt of the facsimile by the debtors' solicitor in Brisbane and the time when the creditor indicated that the bill would be presented in Halifax - a theoretical maximum of 37 hours but certainly much less than that - was sufficient to enable the facsimile to make it of the essence of Amartec's obligation under clause 4.2 to ensure that the creditor would receive an amount equal to USD72,500.00 on the date mentioned in the facsimile, 22 December, 1992.

  16. Amartec was thus not in default of its obligations under the Deed (and neither were the debtors). The creditor was not entitled to cancel the Deed on 8 January, 1993 and has not taken action to do so since that date. The Deed, including the stay provided for by clause 7.3, remains in force. The bankruptcy notice is bad.

  17. It was also submitted by the debtors that even if they had breached clause 4.2 when the bill was not paid on 16 December, 1992 (as was asserted by the creditor) and that in consequence, the creditor would otherwise have been entitled to rescind for that breach, the creditor was estopped from rescinding on 8 January, 1993 because, prior to any breach, it had represented to the debtors that it would not present the bill for payment if the debtors were to pay into the trust account of the creditor's solicitor the sum of $100,000.00. It was submitted that the debtors, in reliance on this representation, sought to organise the payment of the $100,000.00, an effort which resulted in them incurring legal costs which they would not otherwise have incurred. It was finally submitted that the creditor could not resile from this position and insist upon its strict rights under the Deed without first giving the debtors a warning of its changed intention sufficient to enable the debtors to arrange things so that they could perform their obligations under the Deed. The relevant principles that govern what the debtor's have to establish to set up this promissory estoppel are those referred to in Legione v Hateley (1983) 152 CLR 406 at 432-435 and 437 and The Commonwealth v Verwayen (1990) 170 CLR 394 at 441-442.

  18. I accept Mr. Neal's evidence that on 15 December, 1992 the creditor indicated orally through its solicitor that it would be content to accept a telegraphic transfer of $100,000.00 to its solicitor's trust account instead of presenting the bill in Halifax. There is no suggestion in the evidence that a time by which this transfer was to be made was then fixed or even discussed (although the creditor's solicitor, on 16 December, 1992, did write to the debtors' solicitor to seek advice as to when the transfer could be expected). At about 11.00 a.m., Brisbane time, on 17 December, the debtors' solicitor received, in response to earlier requests, a facsimile from the creditor's solicitor advising that the bill had been delivered to the Royal Bank of Canada in Halifax as agent for the creditor's Queensland bank, that the creditor confirmed that upon the $100,000.00 in cleared funds being received into its solicitor's trust account, the solicitor would immediately advise the Royal Bank of Canada to mark the bill "paid" and that it would then arrange for the bill to be handed back to the drawer, Euro Scotia Funding Ltd.. This facsimile was received by the debtors' solicitor when it was about 10.00 p.m. on 16 December, 1992, Halifax time, i.e., when it was too late for the creditor sensibly to be understood as saying it would accept the telegraphic transfer of the $100,000.00 only if that was received by 16 December, 1992, the time the creditor contended was limited by the Deed for payment of the bill, and without prejudice to the creditor's right to insist on payment by that date. Importantly, the creditor did not in this facsimile fix any time or date by which the transferred funds would have to be lodged in its solicitor's trust account if the creditor was to refrain from presenting the bill.

  19. There were further discussions and correspondence between the parties on 17 December after receipt by the debtors' solicitor of this facsimile concerning Euro Scotia Funding Ltd.'s insistence on a letter from the creditor's solicitor to the Royal Bank of Canada that directed it to mark the bill "paid" immediately upon receipt of advice from the creditor's solicitor that the $100,000.00 had been received. The next thing that happened was that at about 1.55 p.m. Brisbane time that same day, i.e., in the early hours of 17 December, 1992, Halifax time, the creditor's solicitor sent a facsimile to the debtors' solicitor asserting that the debtors were in default of the Deed and advising that if the $100,000.00 was not received in their trust account by 3.00 p.m. that afternoon, the creditors would proceed with "all actions involving the parties as expeditiously as possible". The assertion that the debtors were then in default was made when the creditor's principal, Mr. Duncan, knew that its Halifax agent had not then presented the bill for payment, although the debtors were not told that.

  20. In view of the course of events between 15 December and receipt at about 11.00 a.m. on 17 December, 1992 of the facsimile from the creditor's solicitor to which I have first referred, I do not think it was open to the creditor to say thereafter that it was entitled to insist on the bill being met by 16 December, 1992 in Halifax as it purported to do by the facsimile despatched at about 1.55 p.m. on 17 December.

  21. I think that the creditor by its actions in this period represented to the debtors that it would not insist upon its right under clause 4.2 to require Amartec to ensure the creditor received the USD proceeds of the bill by 16 December, 1992 if the debtors were to arrange to have $100,000.00 transferred into the trust account of the creditor's solicitor by an unspecified but short time after 16 December. Mr. Neal says this is how he understood the creditor's actions.

  22. The evidence that the debtors acted to their detriment comes from Mr. Neal who says that, in reliance upon this representation by the creditor, the debtors did not take any steps to have arrangements made for Montreal Trust Co., the drawer of the bill, "or any entity other than Euro Scotia" to meet Euro Scotia's bill on presentation. Prima facie, this was a detriment sufficient to estop the creditor from ignoring its representation that it would not insist upon its rights under clause 4.2 against Amartec, at least until it gave Amartec reasonable notice of its intention to revert to those rights. Cf. Verwayen at 442. But I am satisfied that Euro Scotia never had anything like sufficient funds in the hands of the drawee of the bill, Montreal Trust Co., to meet the bill and never had access to sufficient funds held by anyone else to enable the bill to be met. Moreover, Mr. Neal says nothing at all about what alternative sources of funds might have been available to Amartec in the period 16 December, 1992 to January 1993 to ensure that the bill was met. I therefore find that although Amartec and the debtors acted in reliance on the creditor's representation as to its willingness to accept $100,000.00 by doing nothing to try to ensure that the bill would be met on presentation, any efforts they might have made in that behalf would have been unsuccessful. I am not prepared to find that either Amartec or the debtors in fact suffered any detriment by relying in this way on the creditor's representation: they suffered nothing by being deprived, by choosing to act on the representation, of an opportunity which would have yielded them nothing.

  23. Mr. Neal also says that they incurred legal costs which they would not otherwise have incurred. A person who incurs even a very small amount of legal costs in reliance on a representation said to found an estoppel has been held to suffer a sufficient detriment for the purposes of making out a claim to the benefit of the estoppel: Di Lione v Turco (1982) QdR 224. But it is now established that a central element of the doctrine of equitable estoppel is that there must be a proportionality between the remedy and the detriment which is its purpose to avoid: Verwayen. An undertaking by the creditor to pay the additional legal costs the debtors incurred in reliance on the representation would have been enough to preclude a finding of estoppel against the creditor: Verwayen, at 441-2. Despite the debtors' reliance on incurring these costs as a detriment sufficient by itself to support an estoppel, the creditor was content to argue that there was no sufficient detriment and it offered no such undertaking. I therefore accept the debtors' submission that the creditor was estopped from turning around and insisting on 16 December upon compliance by Amartec by later that same day with clause 4.2. For this reason also, the creditor was not entitled to cancel the Deed on 8 January, 1993.

  24. The debtors submitted that even if the Deed was properly rescinded on 8 January, the debtors having procured delivery of the bill to the creditor pursuant to the compromise agreement and the creditor having indorsed the bill in blank and delivered it to its bank, the rights of the creditor in respect of the judgment debt were suspended not merely until the bill was dishonoured, but until the bill "was regained by the judgment creditor from the bank", something that only occurred on 12 January, 1993, the day after the bankruptcy notice was issued. It was submitted that, as at the date of issue of the bankruptcy notice, the effect of all this was that execution of the judgment debt in respect of which the bankruptcy notice was issued was then stayed and so the issue of the notice was bad.

  25. The debtors relied on Re A Debtor; Ex parte the Debtor (1908) 1 KB 344 and Davis v Reilly (1898) 1 QB 1. In Re A Debtor, the creditor who had the benefit of a judgment debt had issued a bankruptcy notice against the debtor; he then took a bill from the debtor in return for giving the latter time to pay the amount owing by him under the judgment. The creditor indorsed the bill in blank to his bank and asked the bank to discount it and credit his overdrawn account with the proceeds. The bank declined to do this but later demanded that the creditor reduce his overdraft and also threatened to sue the debtor on the bill of which the bank was indorsee. The bank presented the bill at maturity for payment, but it was dishonoured. The creditor issued a new bankruptcy notice in respect of the judgment debt and only after that got the bill back from the bank. The creditor subsequently presented a petition based on non-compliance with the bankruptcy notice. The Court of Appeal set aside the receiving order made against the debtor on this petition. Because the creditor had indorsed the bill over to his bank and because the bank was entitled to a lien over the bill and insisted on exercising that lien, the bank could sue the debtor on the bill and retain the proceeds for its own benefit. If the creditor were, in such case, to be permitted to take action against the debtor in respect of the debt for which the bill was originally given to the creditor, the debtor could in effect be pursued twice over on the transaction underlying the bill, once by the action on the bill by the bank and a second time, by action taken in respect of the debt itself by the creditor. See page 350. It is this possibility that a person who gives a bill to another may be liable twice over that brings into play the principle the debtors seek to rely on here. But that possibility can only exist where the bill is taken by a creditor from the debtor, either in satisfaction of an antecedent debt or (as was the case in Re A Debtor) in exchange for the suspension by the creditor of the exercise of rights he may have against the debtor to call up that debt. Only in that situation will there be any reason to bar the creditor from suing on the debt or taking bankruptcy action in reliance on the debt while another, as indorsee of the bill from the creditor, also has title to sue the debtor on that bill. See pages 350 and 352.

  26. Davis v Reilly was also a case in which there was a possibility that the debtor would have to pay twice over: the debtor accepted a bill drawn on him by the creditor for the price of goods sold and delivered to him by the creditor. The creditor indorsed the bill over to a third party and the bill was dishonoured on presentation. While the third party remained the holder of the bill, the creditor sued the debtor for the price of the goods. There was nothing at that time to stop the third party from also suing the debtor on the bill. The creditor was held not entitled to sue for the price while the bill was outstanding in the hands of the third party, i.e., while someone other than the creditor had the right to sue the debtor on the bill.

  27. Here, the judgment debt in respect of which the creditor issued the bankruptcy notice now challenged was a debt due only by Neal and Taylor. Amartec was never indebted to the creditor. But the issue of this bankruptcy notice has not occurred in circumstances in which the debtors are exposed to the possibility of double liability, once in respect of the debt and a second time, in respect of the bill. While they are liable on the notice in respect of the debt if the Deed no longer operates, they are not themselves liable on the bill. They are not parties to it. If Amartec were now to be sued by the bank on the bill, the debtors would not be liable to Amartec in respect of the bill. There is no reason to infer on the evidence before me that the debtors would be liable to indemnify or otherwise reimburse Amartec in respect of anything it might pay out to the bank if the bank were to sue Amartec on the bill.

  28. There is thus no reason why the rule in Re A Debtor should prevent the creditor from pursuing the debtors in respect of the debt by taking the bankruptcy action now under challenge even if it had no claim to the benefit of the bill.

  29. In any event, although it still holds the bill as indorsee from the creditor, I do not think the bank can be regarded as having any right to sue on the bill for its own benefit, a necessary requirement before the rule in Re A Debtor can apply. No doubt the bank could, if it wished, assert a lien over the bill that has been indorsed to it, the creditor being a net debtor to the bank in respect of its three accounts. But the bank is not bound to assert that lien and this case cannot be disposed of on the assumption that it has done that. The evidence of the bank officer, Mr. Howard Smith, shows clearly that, notwithstanding the fact that it is indorsee of the bill, the bank does not intend to assert its lien over the bill and still holds the bill solely as the creditor's agent for collection. That the bank is perfectly entitled to do this is made clear by National Australia Bank v KDS Construction Services Pty. Ltd. (1987) 163 CLR 668 at 679. Of course, if a bank has a lien over bills handed to it by its customer and chooses to assert that lien, the customer cannot prevent the lien from attaching by saying, without the bank's concurrence, that the bills are handed to the bank solely for the purpose of collection. The passage in Paget's "Law of Banking", 10th Ed., at pp 424-4 to which I was referred by the debtors, is authority only for the proposition that a bank which has a lien over bills handed to it by its customer is entitled to enforce that lien, unless it is precluded from doing so by a binding agreement with the customer. This passage is not directed to the case here, viz., a case in which the bank has decided not to assert the lien which it no doubt could assert over the bill delivered to it by the creditor.

  30. I therefore reject the argument that the creditor was not entitled to issue the bankruptcy notice on 11 January, 1993 because the creditor's bank and not the creditor was then the holder of the bill.

  31. I will order that the bankruptcy notice referred to in the debtor's notice of motion be set aside on the ground that the Deed of Compromise, including the stay provided for by clause 7.3, remains in force and on the further ground that the creditor continues to be estopped from denying that that stay has ceased to operate until it undertakes to pay the legal costs the debtors incurred in seeking to make the arrangement for the transfer of the $100,000.00 to the creditor's solicitors to which I have referred.