Accounts Control Management Services Pty Ltd v Elmer
[2007] FMCA 733
•27 April 2007
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| ACCOUNTS CONTROL MANAGEMENT SERVICES PTY LTD v ELMER | [2007] FMCA 733 |
| BANKRUPTCY – Creditor’s petition – whether submission of debt proposal under s.185F, but not an agreement – accepted precludes the making of a sequestration order. |
| Bankruptcy Act 1966; Part IX, 52(2), 185F, 185K |
| Townsville City Council v Tait [2004] FMCA 260 CSR Limited v Muscat & Anor [2002] FMCA 257 |
| Applicant: | ACCOUNTS CONTROL MANAGEMENT SERVICES PTY LTD |
| Respondent: | GAIL LEANNE ELMER |
| File number: | BRG 239 of 2007 |
| Judgment of: | Wilson FM |
| Hearing date: | 27 April 2007 |
| Date of last submission: | 27 April 2007 |
| Delivered at: | Brisbane |
| Delivered on: | 27 April 2007 |
REPRESENTATION
| Counsel for the Applicant: | N/A |
| Solicitors for the Applicant: | Patane Lawyers |
| Counsel for the Respondent: | No appearance |
| Solicitors for the Respondent: |
ORDERS
A Sequestration Order be made against the estate of GAIL LEANNE ELMER.
That the applicant creditor’s costs (including reserved costs if any) be taxed and paid from the estate of the respondent debtor in accordance with the Bankruptcy Act 1966.
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT BRISBANE |
BRG 239 of 2007
| ACCOUNTS CONTROL MANAGEMENT SERVICES PTY LTD |
Applicant
And
| GAIL LEANNE ELMER |
Respondent
REASONS FOR JUDGMENT
On 3 January 2007, the applicant creditor recovered judgment against the respondent debtor in the sum of $8,896.99. On 15 February 2007, the respondent was served with a bankruptcy notice and failed to comply with it. Accordingly, an act of bankruptcy was committed on
8 March 2007.
On 28 March 2007, a creditors’ petition was presented by the applicant, seeking a sequestration order against the estate of the respondent. On 29 March 2007, the day after the filing of the creditors’ petition, the debtor submitted a proposal to creditors for consideration under Part IX of the Bankruptcy Act. That proposal is recorded in the NPII.
No debt agreement has yet been ratified by the creditors of the respondent. The applicant seeks to proceed with the making of a sequestration order and the question that arises is whether the filing of a proposal by the respondent precludes that course. The applicant’s documents are otherwise in order.
I observe that the amount claimed in the creditors’ petition differs from that claimed in the bankruptcy notice, but the difference is constituted by the amount of interest claimed in the bankruptcy notice, which is not pursued in the creditors’ petition. In my view the difference between the documents is not such as to mislead the debtor.
The issue for consideration by the court requires reconciling ss.185F and section 185K of the Bankruptcy Act. Section 185F provides:
“185F (1) After acceptance of a debt agreement proposal for processing is recorded in the National Personal Insolvency Index:
(a) a creditor cannot apply for enforcement of, or enforce, a remedy against the debtor’s person or property in respect of a frozen debt; and
(b) a sheriff must not take action, or further action, to execute, or sell property under, any process issued by a court to enforce payment of a frozen debt owed by the debtor; and
(c) a person who is entitled under a law of the Commonwealth, or of a State or Territory of the Commonwealth, to retain or deduct money from money that is or will be owing or payable to the debtor must not retain or deduct money;
until any of the following events occurs:
(d) the deadline arrives;
(e) the proposal is rejected by the creditors at a meeting;
(f) the proposal lapses.
(2) Subsection (1) does not prevent a creditor from:
(a) starting a legal proceeding in respect of a frozen debt; or
(b) taking a fresh step in such a proceeding (except to enforce a judgment).
A debt agreement proposal has been accepted for processing in the National Personal Insolvency Index. That means that a creditor can no longer apply for the enforcement of a remedy against the debtor in respect of a frozen debt. The term “frozen debt” is defined in s.185 of the Act, and would encompass the debt owed by the respondent to the applicant. Thus, by s.185F of the Act, the present applicant is precluded from applying for enforcement of its debt against the respondent. The applying for and the making of a sequestration order does not, in my view, amount to enforcement of a remedy against the estate of the debtor.
That is made clear in judgments referred to by the solicitors for the applicant, including Townsville City Council v Tait [2004] FMCA 260 and CSR Limited v Muscat & Anor [2002] FMCA 257. It also accords with an ordinary understanding of the making of a sequestration order which is to garner the assets of a debtor for distribution amongst his or her creditors, rather than as the enforcement by any one of them against the debtor personally.
Section 185K of the Act provides:
“185K. (1) While a debt agreement is in force and details of it are entered on the National Personal Insolvency Index, a creditor cannot:
(a) present a creditor’s petition against the debtor; or
(b)proceed further with a creditor’s petition that was presented against the debtor before details of the debt agreement were entered in the Index; or
(c)enforce a remedy against the debtor’s person or property, or start or take a fresh step in legal proceedings, in respect of a debt that would have been provable had the debtor become bankrupt when details of the debt agreement were entered in the Index.
(2) Paragraph (1)(c) does not prevent a creditor from enforcing a remedy against the debtor or the debtor’s property for a liability under one or more of the following:
(a) a maintenance agreement;
(b) a maintenance order;
(c) a proceeds of crime law.
That section, as its terms make clear, precludes the presentation of a creditors’ petition, but that step is not precluded until a debt agreement is “in force”. That has not yet occurred in the present case. One would expect that, if the legislature intended that a creditor could not present a petition against the debtor whilst a debt agreement proposal was being considered, that step would have been set out in s.185F(1) of the Act. The fact that it is not reinforces my view that, whilst a debt agreement proposal is pending, but has not been accepted by the creditors, there is nothing to stop a creditor from presenting a petition against the debtor.
The proposal may or may not be accepted by the creditors. Further, the debtor has remedies available to her. She could have appeared today and sought to persuade the court that a sequestration order should not be made, as she was entitled to do by s.52(2)(b) of the Act. That is, if the respondent had filed material showing that the debt proposal was in the best interests of the creditor and was likely to be accepted, she may have been able to persuade the court that a sequestration order ought not be made on the petition of the present applicant.
The respondent has chosen not to appear or oppose the making of a sequestration order. In those circumstances, it seems to me that the mere filing of a debt agreement proposal does not preclude the making of a sequestration order, and I make a sequestration order against the estate of the respondent.
I order that a Sequestration Order be made against the estate of GAIL LEANNE ELMER, that the respondent pay the applicant’s costs to be taxed and paid from the estate and I note that the date of the act of bankruptcy was 8 March 2007.
I certify that the preceding twelve (12) paragraphs are a true copy of the reasons for judgment of Wilson FM
A/Associate: Kristy Glover
Date: 17 May 2007
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