Ask Funding Ltd v Anne
[2014] FCCA 2741
•3 November 2014
FEDERAL CIRCUIT COURT OF AUSTRALIA
| ASK FUNDING LTD v ANNE | [2014] FCCA 2741 |
| Catchwords: BANKRUPTCY – Creditor’s Petition – where non-compliance with bankruptcy notice – bankruptcy notice reliant upon judgment – where bankruptcy notice followed judgment – where judgment and bankruptcy notice named the debtor using a name she had changed prior to the proceedings leading to the judgment – whether bankruptcy notice defective because debtor’s current name not used to describe her in the notice – whether service irregular – whether execution of judgment stayed because bankruptcy notice and judgment in old name – whether execution of judgment stayed because of order of Supreme Court establishing a trust for the proceeds of sale of certain property – sequestration ordered. |
| Legislation: Bankruptcy Act1966 (Cth), ss.44, 52 |
| Anne v Ask Funding Ltd (No.2) [2014] FCCA 1840 BironCapital Ltd v Anstee [2005] FMCA 1100 Commonwealth Development Bank of Australia v Tancock [2001] FMCA 37 Investec Bank (Australia) v Balamovic [2009] FMCA 441 Matheson v Scottish Pacific Business Finance Pty Ltd [2005] FCA 670 Re Button; Ex parte Moss (1905) 1 KB 602 Re Fredericke and Whitworth; Ex parte Hibbard [1927] 1 Ch 253 Re Grahame; Ex parte White (1940) 11 ABC 141 Re O’Leary; Ex parte Bayne [1985] FCA 33 Re Scott; Ex parte Moore [1892] 2 BCNSW 55 |
| Applicant: | ASK FUNDING LTD |
| Respondent: | PATRICIA ANNE |
| File Number: | BRG 736 of 2014 |
| Judgment of: | Judge Jarrett |
| Hearing date: | 30 October 2014 |
| Date of Last Submission: | 30 October 2014 |
| Delivered at: | Brisbane |
| Delivered on: | 3 November 2014 |
REPRESENTATION
| Counsel for the Applicant: | Mr Forde |
| Solicitors for the Applicant: | DibbsBarker |
| The respondent appeared in person |
ORDERS
A sequestration order be made against the estate of Patricia Anne.
The petitioning creditor’s costs of and incidental to the petition, including reserved costs, if any, be taxed in accordance with the Federal Court Rules (Bankruptcy) Rules 2005.
| FEDERAL CIRCUIT COURT AT BRISBANE |
BRG 736 of 2014
| ASK FUNDING LTD |
Applicant
And
| PATRICIA ANNE |
Respondent
REASONS FOR JUDGMENT
(revised from the transcript)
This is an application for the making of a sequestration order against the estate of Patricia Anne, formerly known as Patricia Ann McBride.
These proceedings have a long history.
They commence with a summary judgment given in the District Court of Queensland in favour of the petitioning creditor against the respondent and upon which the bankruptcy notices to which I will subsequently refer are based. There has been an appeal from that decision and a judgment – a lengthy judgment – from the Court of Appeal in which the summary judgment was upheld.
The petitioning creditor caused a bankruptcy notice to be issued against the respondent based upon the judgment of the District Court. There was an application to set aside that bankruptcy notice by the respondent. I dismissed that application.
In the meantime, the petitioning creditor had its costs in the proceedings in the State courts assessed. It caused a second bankruptcy notice to be issued on 16 October, 2013 addressed to the respondent. It relied upon the judgment and the costs orders as assessed. The respondent commenced an application to set aside that bankruptcy notice, essentially upon the same grounds as her application to set aside the first bankruptcy notice. The second application, too, was dismissed by me but not before there was an interlocutory judgment given with respect to the respondent’s request to issue certain subpoena.
The petitioning creditor now presses a creditor’s petition. The respondent opposes the petition. On 15 October, 2014 she filed a notice stating her grounds of opposition to the petition. On 24 October, 2014 she filed an amended notice stating her grounds of opposition to the petition setting out some 15 grounds of opposition to the petition.
The first ground of opposition is that the second bankruptcy notice is invalid as it incorrectly identifies the debtor as Patricia Ann McBride. The identity of the debtor is something which has continuously troubled the debtor in these proceedings.
The genesis of the dispute between the parties is an agreement for the petitioning creditor to lend to the debtor funds to assist her to fund some matrimonial type litigation. At the time the loan was struck the debtor was known as Patricia Ann McBride. It is not entirely clear whether it was Ann or Anne but it was one of them. The loan documents and accompanying documents use both. Soon after the first advance was made to the respondent’s use, she changed her name so that McBride was deleted from her name and she became known as Patricia Anne. She registered her change of name with the Registrar of Births, Deaths and Marriages (Qld).
The respondent takes the position that any proceedings issued in her former name or something like her former name must be necessarily invalid. However, she is clearly wrong about that. The proceedings in the District Court used her old name but she appeared in those proceedings and sought to defend them notwithstanding that she had changed her name. She took the judgment in the District Court on appeal and appeared in the Court of Appeal on behalf of the person against whom the judgment in the District Court went. If the District Court judgment was not against the debtor before me now then who was it against? If it was not the debtor who is before me now, what business is it of the person who now appears and is known as Patricia Anne, to take the judgment of the District Court on appeal. Moreover, what interest does she have in applying, on two occasions, to have bankruptcy notices based upon that judgment and issued in the name of Patricia Ann McBride set aside? And, on the second of those occasions, to attempt an appeal against that decision.
Her argument about identity has no merit. The debtor before me known as Patricia Anne is clearly the person against whom the judgment in the District Court went and is clearly the person against whom the bankruptcy notices were issued and is clearly the person against whom the creditor’s petition has now been issued. In the two previous decisions that I have given on this matter I referred to the authorities that bear upon the question of whether a misdescription in the name of a debtor in a bankruptcy notice is fatal to the bankruptcy notice. Whilst important, the authorities reveal that a misdescription may not be critical depending upon the circumstances of the case. Errors in the name of the debtor can be corrected. The ultimate test appears to be that stated by Kiefel J, when a judge of the Federal Court in Matheson v Scottish Pacific Business Finance Pty Ltd [2005] FCA 670:
[10] Mr Matheson has referred me to the definition of ‘legal name’ in Black’s Law Dictionary, 8th edn, ed BA Garner, West Pub Co, USA (2004) pg 1048 as ‘a person’s full name as recognised in law’. That does not however mean that a court document such as a bankruptcy notice or petition is void if the full legal name of the person is not provided. There is no doubt that Mr Matheson is the person named in the District Court proceedings and in these proceedings and that he has understood that to be the case. He has represented himself and appeared. There was no ambiguity created by the bankruptcy notice or petition. In any event if there was an irregularity in the mode of description, it is of a formal nature and one that can be validated by s 306(1) of the Bankruptcy Act: Re Draper; Ex parte Australian Society of Accountants (1989) 154 FCR 41. A ‘formal defect or an irregularity’ within the meaning of that section is one that could not reasonably mislead the debtor: Re Wimbourne; Ex parte The Debtor (1979) 24 ALR 494. In my opinion, the petition notice does not cause any injustice as it was not likely to mislead the debtor.
In this case the debtor is clearly not misled by the misnomer, if that is what the description of her name in the bankruptcy notices and the petition amounts to. She clearly understands that it is she against whom the judgment has gone and the bankruptcy notices have been issued and the creditor’s petition has been issued. There is nothing in the point. That ground of opposition fails.
The second ground of opposition is that the bankruptcy notice was issued in circumstances where there was a failure of the duty of candour to the Official Receiver. I do not really understand what that ground means and Ms Anne’s argument to advance that ground did not make it any clearer. There is no evidence before me which would suggest that there was anything placed before the Official Receiver which would mean that the issue of the bankruptcy notice was obtained by fraud or some form of misrepresentation. Any suggestion by the debtor to that effect is scandalous. There is simply no evidence to support it.
The third ground of opposition is that the alleged proof of service of the bankruptcy notice was obtained by misconduct on the part of the petitioning creditor. Again, despite the voluminous affidavits that have been filed by the respondent in these proceedings, I do not understand that argument. The bankruptcy notice was served upon the debtor in a way in which was provided by the Bankruptcy Regulations1996. Moreover, I dealt with the question of service of the bankruptcy notice upon the respondent in my last judgment and determined that matter against her (Anne v Ask Funding Ltd (No.2) [2014] FCCA 1840).
In the present application, the respondent has argued that sending the bankruptcy notice by email to the address [email protected] was not a proper discharge of the petitioning creditor’s duties under the Bankruptcy Regulations because that address was not her last known address. But in my view that is a nonsense. The address that was used by the petitioning creditor’s solicitor was an email address used by the respondent to correspond with that solicitor. There is no question that Patricia Anne, the respondent to this petition, used the relevant email address for the purposes of communication. Her point seems to be that the person named in the bankruptcy notice, Patricia Ann McBride, never used that email address but as I say, the argument is a nonsense because Patricia Ann McBride and Patricia Anne are the same person and that person used the relevant email address. There is a plethora of evidence to that effect. There is nothing in the point. That ground of opposition fails.
The next ground of opposition is that the issue of the bankruptcy notice is an abuse of process as it was the second bankruptcy notice issued by the same judgment creditor in circumstances where there was an earlier bankruptcy notice which had “been proceeded with and found to be valid by the Court, and a Cost’s Order granted, the second instance Bankruptcy Notice was issued within the time that the first notice could have founded a creditor’s petition, and that there has been no election on the part of the petitioning creditor and the Court was not notified”.
The gravamen of that complaint seems to be that a creditor cannot issue two bankruptcy notices in relation to the same debt against the same debtor without it being an abuse of process. The authorities, however, are against that proposition. There can be two bankruptcy notices issued against the same debtor in respect of the same debt. Again, the test is whether what has occurred is apt to mislead the debtor: Anne v Ask Funding Ltd (No.2) at [34]; Re Fredericke and Whitworth; Ex parte Hibbard [1927] 1 Ch 253; Re Grahame; Ex parte White (1940) 11 ABC 141.
Here the debtor cannot be misled by what has occurred. Whilst it is right to say that at the time the second bankruptcy notice was issued an act of bankruptcy committed by reason of noncompliance with the first bankruptcy notice was available to found a sequestration order, the petitioning creditor chose not to proceed on that act of bankruptcy and issued a second bankruptcy notice. Whilst it was based on the same judgment from the District Court, it was for a larger amount. Costs had been assessed and they were included in the second bankruptcy notice. More interest had accrued and that was included in the second bankruptcy notice as well. On my rough arithmetic, the effect of that was to put the amount owed by the debtor to the petitioning creditor above the $5000 threshold required to properly found a creditor’s petition. That needs a little further explanation. The petitioning creditor in this case is a secured creditor and, unless the secured creditor is willing to surrender his or her security in respect of the debt, a secured creditor can only issue a petition for the sequestration of a debtor if the indebtedness to the secured creditor exceeds the value of the security held by the petitioning creditor by the requisite amount. That is to say, it is only the margin by which the debt exceeds the value of the security held by the petitioning creditor that is relevant for the purposes of determining whether there is a sufficient debt to found the petition.
Whilst I have not performed the arithmetic it occurred to me that, in relation to the first bankruptcy notice, the amount owed by the debtor to the petitioning creditor may not have been enough to exceed the security held by the petitioning creditor and so, absent a surrender of the security for the benefit of all unsecured creditors, a petition based on the first bankruptcy notice could not have succeeded. However, once the costs and interest were added there is an excess of debt over the value of the security of some $21,000. That is sufficient to support the making of a sequestration order.
Another matter needs to attract some comment in relation to that issue. The petitioning creditor holds security over a fund which is presently retained by reason of an order of the Supreme Court of Queensland. In working out whether the petitioning creditor is an unsecured creditor for an amount that exceeds the statutory minimum for the making of a sequestration order, the petitioning creditor has assumed that the respondent will be entitled to half of the fund.
The fund secured by the orders of the Supreme Court is the subject of argument between the respondent and her former de facto spouse. The respondent argues that of the fund that is presently remaining, she is entitled to more than half of it. She says that is so because:
a)that is the way the de facto property proceedings will work out in the Supreme Court – she will be entitled to more of the property available for distribution in those proceedings than will her former de facto spouse; and
b)since the fund was created by the order of the Supreme Court, both parties to the proceedings in that court have drawn on the fund – her de facto husband more than she so that, of the fund that remains, she is entitled to more of it than he is.
If her argument is correct, and bearing in mind that the petitioning creditor in this case holds security over the balance of that fund to the credit of the debtor, then there may not be a sufficient debt to found the making of a sequestration order. However, Counsel for the petitioning creditor pointed me to authorities which provide guidance as to how to deal with that issue. There are many of them and it comes down to this: a petitioning creditor that holds security for its debt is entitled to make an estimate of the value of his or her security for the purposes of the making application for a sequestration order. Provided the Court is of the view that the estimate is genuine, and is not arbitrary or capricious, the Court will not inquire into the estimate. The Court will make no determination about the accuracy of the estimate: Re Scott; Ex parte Moore [1892] 2 BCNSW 55; Re Button; Ex parte Moss (1905) 1 KB 602; Re O’Leary; Ex parte Bayne [1985] FCA 33; Commonwealth Development Bank of Australia v Tancock [2001] FMCA 37; Biron Capital Ltd v Ansteee [2005] FMCA 1100 and Investec Bank (Australia) v Balamovic [2009] FMCA 441.
Here, the petitioning creditor has estimated the value of its security by concluding that, of the fund that remains secured by the order of the Supreme Court, each of the parties to that proceeding is likely to be entitled to half of it. That is as good a starting point as any. There is nothing capricious or arbitrary about that. Indeed, it may well be the case that, ultimately, those proceedings are decided on the basis that the parties in that case are entitled to share their property equally.
Whether payments have been made out of the fund or not so as to upset that equilibrium when it comes to hand out what is left of the fund is not something which is to the knowledge of the petitioning creditor and, as the authorities show, a secured creditor is entitled to make their estimate on the basis of the facts that are known to them, not on the basis of facts which might not be known to them but about which they might be told by the debtor.
I am satisfied by the evidence of Mr Templeton that the estimate of the value of the petitioning creditor’s security is genuine. If it is indeed accurate, there will be a balance owed by the debtor to the petitioning creditor which is not subject to the security and that balance, seemingly, will be sufficient to support the making of a sequestration order. That ground of opposition has no merit.
The next ground of opposition is that the bankruptcy notice is an abuse of process in circumstances where the judgment debt is “Based on a false case and the petitioning creditor has taken a judgment of a false case to the Federal jurisdiction and sought to invoke Bankruptcy powers of the Court”. That ground, I think, is allied with the following grounds:
6}that the Petitioning Creditor obtained the judgment relied on in the District Court by fraud and/or misconduct.
7}That there is in reality, no real debt owed to the petitioning creditor.
And
8}That the alleged debt is not a liquidated sum payable immediately or at some certain future time.
The gravamen of those complaints seems to be an assertion by the debtor that, through some sleight of hand, the petitioning creditor has convinced the District Court and the judges of the Court of Appeal and me that the petitioning creditor was owed money when, in truth, it never was.
To understand this complaint, it is necessary to know a little about the petitioning creditor. There was, initially, a body which provided litigation funding called Impact Funding Limited. In September, 2005, the respondent initially borrowed $20,000, $18,400 of which was deposited to her then solicitor’s trust account. The balance was expended in fees and charges related to the loan. She sought to borrow a second amount, this time from the petitioning creditor. That company was originally known as Big Kev’s Limited, changed its name to Impact Capital Limited in 2005 and subsequently to Ask Funding Limited in 2008. At a time that is not revealed by the evidence, the petitioning creditor purchased all of the shares in Impact Funding Limited.
In February, 2006 the respondent borrowed an amount of $51,283.78 from the petitioning creditor. Of that sum, $21,283.78 was paid to Impact Funding Limited to repay what the respondent owed to that company for its loan made in September, 2005. The balance was paid to the respondent’s then solicitors ($28,200) and for fees and charges ($1,800).
In that way, the petitioning creditor became entitled to pursue the amount advanced in two tranches – the first in September, 2005 and the second in February, 2006. Its cause of action was based either on the contractual documents that were signed between the petitioning creditor and the debtor at the time or alternatively, on the basis of money paid at the request of the respondent debtor or to her use. Whatever the cause of action was it is irrelevant now because those causes of action have merged in the judgment of the District Court.
In my view, the respondent’s complaint that there is no debt owed is fanciful. Those grounds of opposition have no merit. The respondent has not established the necessary circumstances that would persuade this Court to go behind the judgment given by the District Court. I have already considered issues of that nature twice before – in more depth, perhaps, in my first judgment than the second but they have been considered before and yet again, I refuse to go behind the judgment of the District Court. There is no basis for doing so.
The next ground of opposition is that the bankruptcy notice was not properly served. I have already dealt with that in my earlier decision (Anne v Ask Funding Ltd (No.2) (above)).
The next ground of opposition is that the “Petitioning Creditor failed in its duty of candour in obtaining the substituted service Order for the service of the Creditor’s Petition”. Again, I do not understand the argument. Ms Anne has made a complaint that all of the affidavits that were filed in these proceedings by the petitioning creditor for use by it in an application for an order for substituted service have not been served upon her. That might be so but there is no requirement for those documents to have ever been served on her. An application for substituted service is, by its very nature, ex parte. That is, without notice to the other side. And once the order for substituted service is made the order itself provides for what is to be served on the person who is the subject of the order.
The order in this case did not require service of the supporting affidavits that were utilised to secure the order for substituted service. The petitioning creditor has done nothing wrong. There was no lack of candour. If the respondent was interested in seeing what was in those affidavits, she could have, of course, searched the Court file at any point in time. Again, there is nothing which obliges the petitioning creditor to provide her with those documents and she took me to no authority to suggest that what she said about that was correct. There was, in my view, no lack of candour in obtaining the substituted service order. It seemed to be a perfectly sensible application.
The next ground of opposition is that the creditor’s petition has not been properly served. I am satisfied that the creditor’s petition has been properly served. There is an affidavit of service to that effect.
Finally, she argues that, in the alternative, there is no unsecured debt pursuant to s.44 of the Bankruptcy Act 1966 to found a creditor’s petition. That raises the argument which I dealt with earlier about the estimate made by the secured creditor of the value of its security. I am satisfied, as at the date of the hearing of the petition, that the debt claimed by the petitioning creditor was owed.
I am satisfied that the unsecured portion of that debt is more than $5000.
The final three grounds of opposition by the respondent have no merit. The correct judgment is attached to the bankruptcy notice, the bankruptcy notice is not to be “treated as being stayed owing to an irregularity in relation to the judgment debt”. I am not satisfied that there was any error of law or miscarriage of justice that led to the giving of the judgment against the respondent.
I am satisfied of the other matters of which I need to be satisfied under s.52 of the Bankruptcy Act 1966.
I should record that I am satisfied that the respondent has not complied with the bankruptcy notice served on her and that she has committed an act of bankruptcy. The Court notes that the date of bankruptcy is 24 February 2014.
It is appropriate in all the circumstances to make a sequestration order.
I certify that the preceding forty (40) paragraphs are a true copy of the reasons for judgment of Judge Jarrett
Associate:
Date: 25 November 2014
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