All Saints v Tahatos
[2004] FMCA 477
•6 August 2004
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| ALL SAINTS v TAHATOS | [2004] FMCA 477 |
| BANKRUPTCY – Petition brought in a business name – based upon failure to comply with bankruptcy notice issued in business name and judgment in same name – was the petitioner a firm for purposes of s.307 Bankruptcy Act? – was original judgment valid? – was bankruptcy notice liable to be set aside? |
Federal Magistrates Court Rules 2001, rr 1.06(1), 31.05(1)(c)
Rules of the Supreme Court 1875 (Eng), O 16 r 10
Federal Court of Australia Act 1976
Federal Court Rules 1979
Bankruptcy Act 1966 (Cth), ss.52, 307
Business Names Act 1962 (NSW)
Acts Interpretation Act 1901, s.22(1)(a)
Bankruptcy Act 1883, s.115
Anderson Rice (a firm) v Bride 132 ALR 550
Re Hill: Ex parte Holt & Co (1921) 2KB 831
Re Hobbs; Ex parte Hobbs (1892) 66 LT 144
Madden v Kirkegard Ellwood & Partners [1893] 1 Qd R 649
Re Wenham: Ex parte Battams [1900] 2 QB 698
Re Oskar: Ex parte Commonwealth of Australia (1984) 55 ALR 717
Wilde v Australian Trade Equipment Co. Pty Ltd (1980-1981) 145 CLR 590
| Applicant: | ALL SAINTS GREEK ORTHODOX GRAMMAR SCHOOL |
| Respondent: | CON TAHATOS AND MRS K TAHATOS |
| File No: | SZ 1961 of 2004 |
| Delivered on: | 6 August 2004 |
| Delivered at: | Sydney |
| Hearing date: | 3 August 2004 |
| Judgment of: | Raphael FM |
REPRESENTATION
| Counsel for the Applicant: | Mr J Johnson |
| Solicitors for the Applicant: | Bryan Gorman & Co |
| Counsel for the Respondent: | Mr Jarrett |
| Solicitors for the Respondent: | Photios Vouroudis & Co |
ORDERS
The estates of Mr Con Tahatos and Mrs K Tahatos be sequestrated and that Hugh Thomas of Messrs Walker Wayland, 8/55 Hunter Street Sydney NSW 2000 be appointed trustee of their estates.
That the costs of the application be taxed in accordance with the Federal Court Act and Rules and be paid out of the estates of the bankrupts in equal shares.
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT SYDNEY |
SZ 1961 of 2004
| ALL SAINTS GREEK ORTHODOX GRAMMAR SCHOOL |
Applicant
And
| CON TAHATOS AND MRS K TAHATOS |
Respondent
REASONS FOR JUDGMENT
This case involves the interpretation of s.307 of the Bankruptcy Act 1966 (Cth) which is in the following form:
“Proceedings in firm name
Any person or persons carrying on business under a firm name may take proceedings or be proceeded against under this Act in the firm name, but in that case the Court may, on the application of an interested person, order the name of the person or the names of the persons so carrying on business to be disclosed and verified in such manner as the Court directs.”
Before me is an application in the name of All Saints Greek Orthodox Grammar School (the “school”) for a sequestration order against Mr C Tahatos and Mrs K Tahatos. The school is a physical entity which has its premises at the corner of Isabelle and Cecilia Streets Belmore in the state of New South Wales. It was registered on 23 October 1992 under the Business Names Act 1962 (NSW) with registration No M9489916. The business name extract was tendered to the court as Exhibit 1 and that indicates that the corporation carrying on the business of the school was the Greek Orthodox Parish and Community of Belmore and Districts All Saints Limited, a public company (the “company) with a company registration No 000493845.
On 15 September 2003 the school, as plaintiff, recovered judgment against the debtors as defendants in the Local Court of New South Wales in the sum of $17,490.71. On 20 January 2004 the Official Receiver for the Bankruptcy District of New South Wales issued Bankruptcy Notice No NN99 of 2004 against the debtors and there was attached to that Bankruptcy Notice a copy of the Certificate of Judgment Form 49 in respect of the proceedings between the school and the debtors.
No steps were taken by either of the debtors to set aside the judgment or to stay it or otherwise to interfere with its enforcement.
The school presented a petition seeking a sequestration order against the debtors in Form 150 on 25 June 2004. The basis of the petition was that the debtors had committed an act of bankruptcy by failing on or before 14 February 2004 to comply with the requirements of the Bankruptcy Notice previously referred to or to satisfy the court that they had a counter claim set off or cross demand equal to or exceeding the sum specified in paragraph 1 of the Bankruptcy Notice. The creditor’s petition referred to the fact that the Bankruptcy Notice was based upon a judgment obtained in the Local Court at Campbelltown on 15 September 2003.
When the matter came before me on 3 August 2004 there were some problems with the formalities required by the Rules. One of those formalities was that the requirements of Rule 31.05(1)(c) of the Federal Magistrates Court Rules 2001 (the “Rules”) had not been complied with because an affidavit of service of the Bankruptcy Notice had not been served upon Mr C Tahatos. What had happened was that in the affidavit of service which was served with his creditor’s petition there was included an affidavit of service of the Bankruptcy Notice upon his wife. Given that Mr C Tahatos does not deny that the Bankruptcy Notice was served upon him and that an affidavit of service of that Bankruptcy Notice is in the court file I cannot see that he has been prejudiced in any way by this failure to comply with the Rules and I would dispense with that requirement pursuant to Rule 1.06(1) of the Rules. The other formalities which related to affidavits of debt and search were complied with by the time the proceedings closed.
The argument put by the debtor (for only Mr C Tahatos was represented) is this:
The school is not a juristic person. It is only the trading name of the company. The school cannot put its name to a petition because only a juristic person is entitled to bring a petition as a creditor. A juristic person is either a natural or artificial person and a registered business name is neither of these. The debtor also argues that I should not make a sequestration order because the judgment upon which it is based is void and of no effect, it being a judgment in favour of a non-juristic person. Alternatively, I should set aside the Bankruptcy Notice being a notice issued by a non-juristic person supporting a judgment obtained by that person.
I was not provided with any evidence that an entity which owns and operates a business under a business name cannot sue in the Local Court of New South Wales in the name of that business. My researches through the Civil Claims Practice does not reveal any prohibition. There are special provisions for business names found in Part 35 of the Rules but they deal with persons who are sued in the name of the business. Noting as I do the comments of Jenkinson J in Anderson Rice (a firm) v Bride 132 ALR 550 at [554]:
“For good or ill, the use of firm names in constituting proceedings under the Bankruptcy Act 1966 is very common, as it is in curial proceedings generally.”
I am not convinced that the commencement of proceedings in the name of the school or the obtaining of a judgment in the name of the school constitutes an ineffective judgment in respect of which I should exercise my discretion not to make a sequestration order. The judgment has not been the subject of an application to set aside. It is a lawful decision and action taken in reliance upon it is lawful; Wilde v Australian Trade Equipment Co. Pty Ltd (1980-1981) 145 CLR 590 at [603] per Stephen, Murphy and Wilson JJ.
The Bankruptcy Notice follows the judgment, as it must do. The ability to issue a Bankruptcy Notice in the business name will stand or fall with the ability to issue a petition in that name. For as Jenkinson J said in Anderson Rice at [553]:
The word "proceeding" is defined by s.5(1) of the Bankruptcy Act 1966 to mean, unless the contrary intention appears, "proceeding under this Act". The expressions "proceedings" and "proceeded against" in s.307 are to be understood as comprehending the issue and service of a bankruptcy notice, as well as the presentation of a petition and the proceeding in the court upon that petition. The issuing of a bankruptcy notice is a ministerial act, not an exercise of judicial power (Re Moss; Ex parte Tour Finance Ltd. 1968) 13 FLR 101; Re Maddox; Ex parte The Debtor (1978) 36 FLR 392). But it is a step, taken at the instance of a creditor, in a proceeding under the Act (Re Wheeler and Reynolds (A Firm); Ex parte Kerr v. Crowe (1988) 20 FCR 185; Kleinwort Benson Australia Ltd. v. Crowl (1988)165 CLR 71 at 77), and in respect of that proceeding the power conferred on the court by the latter clause of s.307 is available.”
The question then can be simply put. Does s.307 restrict itself to firms constituted by one or more partners or can it be used by any organisation operating under a business name? The wording of s.307 is clear in that it covers not just a firm constituted by more than one person but a firm constituted by one person. It is equally clear that the word “person” for these purposes must be construed by reference to the Acts Interpretation Act 1901 s.22(1)(a) to denote a body corporate as well as an individual. There is no specific definition of the word “person” in the Bankruptcy Act.
Section 307 of the Act was considered in its historical context by Sackville and R D Nicholson JJ in Anderson Rice. At [557] to [558]. Their Honours follow through the wording of the various Acts in s.115 of the Bankruptcy Act 1883 which permitted:
"Any two or more persons, being partners, or any persons carrying on business under partnership name, may take proceedings, or be proceeded against under this Act in the name of the firm”. …
Their Honours also referred Rules of Court going back to Order 16 Rule 10 of the Rules of the Supreme Court 1875 (Eng). Their Honours also discussed the relevant authorities including that of Re Hill: Ex parte Holt & Co (1921) 2KB 831, Re Hobbs; Ex parte Hobbs (1892) 66 LT 144 and Madden v Kirkegard Ellwood & Partners [1893] 1 Qd R 649 before they said in relation to the statutory context of s.307 at [561]:
“Section 307 is to be understood in the Act as one of a number of sections in the Act dealing with partnerships. The words “firm” and “partnership” are not defined in the Act.”
And at [562]:
“In our opinion these provisions evince a legislative intention to facilitate the application of the Act to partnerships without the necessary involvement of all partners, subject of course to the precise terms of each section. In my opinion these provisions support, a reading of s.307 which would enable proceedings under the Act to be taken in the name of the firm. Such proceedings include the issue of a bankruptcy notice and the presentation of a creditor's petition.”
The views expressed by their Honours in Anderson Rice above certainly appear to be construing the section by reference to firms constituted by partnerships. But I am not satisfied that their Honours were saying that this interpretation excluded any other type of firm. Firstly, the definition of “firm” in the Macquarie Dictionary is “a business organisation or partnership”. This definition would not make the use of the word “firm” exclusive to partnerships. In the Encyclopaedic Australian Legal Dictionary under the heading “firm” there appears the following:
“1. An unincorporated body of persons (whether consisting of individuals or of corporations or partly of individuals and partly of corporations) associated together for the purposes of carrying on business: for example (VIC) Business Names Act 1962 s 4; (QLD) Business Names Act 1962 s 3(1).
2. An undertaking providing legal services to the public for reward comprising a sole practitioner or partners or a solicitor corporation, employed solicitors and other staff, and other assets including work in progress, goodwill and liabilities. The sole practitioner or partners carry on professional practice under a business or firm name. For some purposes, a ‘firm of solicitors’ includes solicitors who share remuneration as solicitors, whether or not on the same basis for each of them: for example (NSW) Legal Profession Act 1987 s 91.
3. The collective name for persons who have entered into partnership with one another: for example (NSW) Partnership Act 1892 s 4.”
It seems to me that the word “firm” as generally understood does not have to include partners and indeed that is not expected by s.307. A person who practices as a chartered accountant under the name “Jones & Co” would recognise his practice as a firm particularly if he employed a number of accountants who were not his partners. Persons who dealt with Jones & Co would believe that they were dealing with a firm, that is merely a description of the organisation. In Re Wenham: Ex parte Battams [1900] 2 QB 698 proceedings were allowed in a firm name against a dissolved partnership and judgment was permitted to be entered against any partner who was a partner at the relevant time and who had been served. I do not think, having regard to the wording of s.307 and the cases cited, that their Honours in Anderson Rice would have made any different decision if that firm had only been constituted by a single person as proprietor. It would be straining the language of s.307 to interpret it as applying only to firms which had at one time been partnerships even if they were no longer partnerships. The words simply do not give that indication.
We also know that today partnerships can be, and frequently are, made up of partners who have both corporate and personal status. It has never been suggested that the section should be limited to professional firms and the cases such as Re Hill establish otherwise. If a corporate entity carried on business in a firm name then it would seem to me that it is clearly covered by s.307. Is there anything in the authorities which this court is bound to consider that excludes from the definition of a firm the All Saints Greek Orthodox Grammar School? Is not the school an unincorporated body of persons consisting of a corporation (the proprietor) and individuals (the staff) associated together for the purpose of carrying on business? It seems to me that it is. If it was said by the debtor “that is all very confusing I do not know who to pay my debt to” the answer would be “make an application as required by the second part of s.307 and you will be told to pay your debt to the proprietor, the company”.
In my view any other analysis which restricts the word “firm” to an undertaking carried out by individuals or persons (including incorporated persons) who were at one time partners, cannot be sustained. In those circumstances the presentation of the petition in the firm name is permitted by s.307 of the Act and thus avoids the problem of a debt being owed to a non-juristic person considered by the Supreme Court of Western Australia in Re Oskar: Ex parte Commonwealth of Australia (1984) 55 ALR 717.
Having excused the breach of the Rules relating to the provision of an affidavit of service of the Bankruptcy Notice and having received up to date affidavits of debt and search, there being no submission by the debtors that the debt was not owed to the school or that they were solvent, I am satisfied of the matters required by s.52 and I order that the estates of Mr Con Tahatos and Mrs K Tahatos be sequestrated. Having received a Consent to Act from Hugh Thomas of Messrs Walker Wayland, 8/55 Hunter Street Sydney NSW 2000 I appoint him trustee of their estates. I note that the date of bankruptcy is 14 February 2004. I order that the costs of the application be taxed in accordance with the Federal Court Act and Rules and be paid out of the estates of the bankrupts in equal shares.
I certify that the preceding sixteen (16) paragraphs are a true copy of the reasons for judgment of Raphael FM
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