Armitage v Deputy Commissioner of Taxation - [2005] FMCA 553

FEDERAL MAGISTRATES COURT OF AUSTRALIA

ARMITAGE v DEPUTY COMMISSIONER OF TAXATION

[2005] FMCA 553

BANKRUPTCY – Application to set aside a bankruptcy notice – multiple adjournments – debtors petition presented – priority payment pursuant to s.109 of the Bankruptcy Act 1966 (Cth) ordered.

Bankruptcy Act 1966 (Cth), ss.32, 109
Federal Magistrates Act1999

Applicant:

JOAN DOROTHY ARMITAGE

Respondent:

DEPUTY COMMISSIONER OF TAXATION OF THE COMMONWEALTH OF AUSTRALIA

File Number:

MLG 1011 of 2004

Judgment of:

Hartnett FM

Hearing date:

18 April 2005

Delivered at:

Melbourne

Delivered on:

18 April 2005

REPRESENTATION

The Applicant:

No appearance by or on behalf of the applicant

Counsel for the Respondent:

Mr A.W. Ellis

Solicitors for the Respondent:

Legal Services Branch of the Australian Taxation Office

ORDERS

The application number MLG 1011 of 2004 (“the Application”) being dated 2 August 2004 to set aside bankruptcy notice number VN 161 of 2004 is dismissed.
The applicant pay the respondent's cost of the application, including reserve costs, such costs to be paid with priority under section 109 of the Bankruptcy Act 1966 (Cth) out of the estate number VIC 667/5/3 of the now-bankrupt applicant as if a sequestration order had been made in the application.

FEDERAL MAGISTRATES
COURT OF AUSTRALIA AT
MELBOURNE

MLG 1011 of 2004

JOAN DOROTHY ARMITAGE

Applicant

And

DEPUTY COMMISSIONER OF TAXATION OF THE COMMONWEALTH OF AUSTRALIA

Respondent

REASONS FOR JUDGMENT

On 9 February 2004 the respondent obtained against the applicant a default judgment in the Supreme Court of Victoria in the sum of $327,158.18. On 16 February 2004 the respondent issued a bankruptcy notice and service of same upon the applicant occurred on 13 July 2004. The applicant, Joan Armitage, on 2 August 2004 made application in this court to set aside the bankruptcy notice seeking in addition an extension of time for compliance with such notice. That application was first returnable on 12 August 2004. On that date Registrar Connard ordered that the further hearing of the application be adjourned to 7 September 2004 and the time for compliance with the notice was extended to 4 pm on 7 September 2004. I note that Registrar Connard had earlier ordered on the date of the filing of the application, being 2 August 2004, that the time for compliance with the notice was extended until that first return date of 12 August 2004 at 4 pm.
On 7 September 2004 Registrar Mussett further adjourned the hearing of the applicant's application to 23 September 2004, again extending the time for compliance with the bankruptcy notice to 4 pm on that date. A copy of that order was to be served by post by the respondent on the applicant at 60/680 Nicholson Street Fitzroy, as soon as practicable and an affidavit of service was to be filed prior to the next hearing. Costs of the respondent were reserved. In the earlier proceedings on 2 August 2004 and 12 August 2004 the court had ordered that costs be reserved. Pursuant to those orders and on 13 September 2004, the applicant was served with a sealed copy of the order of Registrar Mussett made 7 September 2004. An affidavit was sworn deposing to that service being effected by Ms Rita Lowe on 15 September 2004.
On 23 September 2004 Registrar Connard adjourned the further hearing of the application to 11 November 2004 and extended the time for compliance with the bankruptcy notice to 4 pm on that day. The respondent's costs were reserved and the respondent was to notify the applicant of the adjourned date.
On 11 November 2004 Registrar Mussett ordered the further hearing of the application to be adjourned to 2 December 2004 at 10.30 am and again extended the time for compliance with the bankruptcy notice to

4 pm on that day. Costs of the respondent were reserved. Again on 2 December 2004 Registrar Mussett adjourned the further hearing of the application to 10 February 2005 at 10.30 am, extending the time for compliance with the bankruptcy notice to 4 pm on that day. Costs of the respondent were reserved.
On 7 February 2005, and in the Supreme Court of Victoria at Melbourne in proceedings between the Deputy Commissioner of Taxation of the Commonwealth of Australia (Plaintiff) and Joan Dorothy Armitage (Defendant) Master Wheeler ordered that the application as contained in the defendant's summons filed 2 August 2004 was dismissed and the defendant was ordered to pay the Deputy Commissioner of Taxation's costs, including reserved costs. That application by Ms Armitage was to set aside the default judgment referred to in paragraph 1 herein.
On the 10th day of February 2005 Ms Armitage made application for a further adjournment in the bankruptcy proceedings and accordingly the matter was adjourned by Registrar Agnew to 24 February 2005 at 10.30 am with a further extension of time for compliance with the bankruptcy notice to 4 pm on that day. Costs of the respondent were reserved.
On 24 February 2005 the matter was adjourned to 3 March 2005 for the purpose of determining the question of costs. Registrar Agnew ordered that the respondent notify the applicant of the adjourned date and of its intention to seek an order for costs against the applicant. The costs of the respondent that day were reserved.
On the 1st day of March 2005 the applicant filed her own debtor's petition. On 3 March 2005 Registrar Agnew ordered the hearing of the application as to costs to be adjourned to 4 April 2005 at 9.45 am. The respondent's costs were reserved and notice of the order made that day was to be given both to the applicant, Ms Armitage, and to the Official Trustee.
On 4 April 2005 Registrar Efthim ordered that the further hearing of the application be adjourned to this day 18 April 2005 and that the Trustee of the bankrupt be notified of this order. Costs were reserved. The reason for the making of that order was that the bankrupt's Trustee in bankruptcy had then changed from the Official Trustee to Mr Loke Ching Wong. The matter proceeded this day before me, the Registrar having no power to award priority costs under delegations under s.103 of the Federal Magistrates Act 1999.
This day there was filed in the court an affidavit of Frank Rebechi sworn 15 April 2005 which is evidence of notification of today's date being forwarded to Mr Lok Ching Wong and to Ms Joan Dorothy Armitage. Both those persons were called this day and neither have attended the hearing. An affidavit of search was also filed, sworn by Ms Rita Lowe on 15 April 2005, that search being of the National Personal Insolvency Index in respect of the respondent debtor. I rely on the contents of both those affidavits.
Section 32 of the Bankruptcy Act 1966 (Cth) (the Act) provides as follows:
The Court may, in any proceeding before it, including a proceeding dismissed for want of jurisdiction, make such orders as to costs as it thinks fit.
Section 109 of the Act provides for priority payments and subject to the Act the Trustee must, before applying the proceeds of the property of the bankrupt in making any other payments, apply those proceeds in the order as set out in that section.
What has occurred in these proceedings is not ultimately a sequestration order upon a creditor's petition. The debtor herself filed a debtor's petition and is an undischarged bankrupt as a consequence thereof. Nevertheless, given the history of these proceedings, that being an application brought by the debtor to set aside a bankruptcy notice with numerous adjournments subsequent thereto at the instigation of the debtor before the debtor herself proceeding to file a debtor's petition, has resulted in considerable expense occasioned to the party issuing the bankruptcy notice. It is appropriate in these circumstances that the costs of those proceedings be made payable as a priority payment, albeit the bankruptcy is as a result of the filing the debtor's petition. The court has a general discretion as to costs in a matter such as this and in the exercise of that discretion the court determines it is appropriate that the costs be ordered to be paid as a priority payment.
I am mindful that the Trustee in bankruptcy has been served with a copy of the application sought this day and has determined that the matter should proceed undefended.

I certify that the preceding fourteen (14) paragraphs are a true copy of the reasons for judgment of Hartnett FM

Associate: Sophie Killen

Date: 18 April 2005