Autobarn Pty Ltd v Griffin
[2006] FMCA 1172
•31 August 2006
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| AUTOBARN PTY LIMITED & ANOR v GRIFFIN | [2006] FMCA 1172 |
| BANKRUPTCY – Defective bankruptcy notice – consideration of defect at hearing of petition – judgment creditors in relation to discrete judgments incorrectly appear as joint judgment creditors to a discrete debt – error in entering judgment by court registry – error corrected after service of bankruptcy notice and before hearing of petition – defect in notice in breach of s.41 of the Bankruptcy Act 1966 – defect in bankruptcy notice capable of misleading and causing confusion – defects not formal or irregular or capable of being saved by s.306 of the Act – petition dismissed. |
| Bankruptcy Act 1966, ss.41, 44, 306 |
| National Australia Bank Limited v Westbrook, in the matter of [2000] FCA 246 Adams v Lambert [2006] HCA 10 Anthony Christopher Hansen Ex Parte Anthony Christopher Hansen; Mortgage Guarantee Company of Australia Limited [1984] 4 FCR 590 |
| First Applicant: | AUTOBARN PTY LIMITED |
| Second Applicant: | AUTOBARN LOGISTICS PTY LIMITED |
| Respondent: | PHILIP GREGORY GRIFFIN |
| File Number: | MLG449 of 2006 |
| Judgment of: | O’Dwyer FM |
| Hearing date: | 14 August 2006 |
| Delivered at: | Melbourne |
| Delivered on: | 31 August 2006 |
REPRESENTATION
| Counsel for the Applicants: | Mr Galvin |
| Solicitors for the Applicants: | Gadens Lawyers |
| Counsel for the Respondent: | Mr Day |
| Solicitors for the Respondent: | Woods & Day Solicitors |
ORDERS
That the petition presented on 30 March 2006 be dismissed with costs.
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT MELBOURNE |
MLG449 of 2006
| AUTOBARN PTY LIMITED |
First Applicant
| AUTOBARN LOGISTICS PTY LIMITED |
Second Applicant
And
| PHILIP GREGORY GRIFFIN |
Respondent
REASONS FOR JUDGMENT
Introduction
This proceeding comes before the Court on an application by Autobarn Pty Limited (the applicant) seeking a sequestration order against the estate of Philip Gregory Griffin (the respondent). It is to be noted that the petition presented to the Court on 30 March 2006 named two applicants; namely, Autobarn Pty Limited and Autobarn Logistics Pty Limited (the two Autobarn companies), but the applicant sought at this hearing to amend the application to name only the applicant.
By a Notice Stating Grounds of Opposition the respondent set out the following grounds:
i)the bankruptcy notice is false and misleading in a material respect in that the judgment creditors are incorrectly described;
ii)the bankruptcy notice is false and misleading in a material respect in that the debts alleged to be owing to the applicants are misstated in the bankruptcy notice;
iii)the requisites of a bankruptcy notice have not been complied with;
iv)the bankruptcy notice is capable of misleading the respondent in a material respect; and
v)the bankruptcy notice has failed to properly identify the judgment creditors and their respective judgment debts.
Background
On 20 May 2005 joint judgment in default of appearance was entered at the Registry for the NSW District Court in favour of the two Autobarn companies against two named defendants, one of whom is the respondent, in a sum of $109,290.29 plus costs fixed in the sum of $1,982.60, making a total of $111,272.89.
However, there is no dispute between the parties that there were discrete claims by each of the two Autobarn companies against each of the named defendants to proceedings in the District Court. There was a discrete claim in the sum of $111,272.89 by the applicant against the respondent and also a discrete claim against the respondent by Autobarn Logistics Pty Limited for a much lesser sum of approximately $10,000.
A bankruptcy notice (the notice) was served on the respondent on
4 March 2006, which notice incorrectly described the judgment creditors as the two Autobarn companies and which also annexed a copy of the incorrect default judgment.
The mistake in entering the judgment debt in the joint names of the two Autobarn companies has been acknowledged by the Registry of the District Court when it amended its register to now show the discrete debt owed by the respondent to the applicant.
The applicant seeks to rely on a notice issued on 23 February 2006 which itself seeks to rely on a judgment correctly entered on 19 June 2006, some four months after the issue of the notice.
The respondent had earlier made an application to set aside the notice served on him, which application was dismissed for being out of time. Although the applicant initially argued that the question of the validity of the notice was res judicata, it later conceded that the respondent is not barred at this hearing from arguing the bankruptcy notice is defective and, as a consequence, a nullity, as the earlier dismissal of the application to set aside did not consider the merits of the respondent’s present submission that there is a substantial defect (see National Australia Bank Limited v Westbrook, in the matter of Westbrook [2000] FCA 246 per Gray J at [15]). In addition, it is noted the respondent was also unsuccessful in setting aside the original judgment.
Contentions
The applicant today sought a sequestration order based upon the discrete debt owed by the respondent to the applicant as evidenced by the amended entry of judgment in the District Court; that discrete debt being of $111,272.89 as at 20 June 2005.
The applicant contends that the notice was based upon a judgment entered in the District Court of New South Wales, that it was properly served, and that the attempt to have it set aside was unsuccessful.
It was contended, therefore, that the notice could not be impugned and that an act of bankruptcy was committed on 25 March 2006 by the respondent when he failed to pay the demand made on him. As I understand the applicant’s case, it relies, rather simplistically in my view, upon the fact that the notice reflects an entry of judgment in the District Court and is therefore beyond being impugned – an argument that ignores the reality that the entry was wrong in the first instance.
Further, on the premise that the bankruptcy notice could not be impugned the petition, it was argued, presented after the committal of the act of bankruptcy is a valid petition and supportive of the sequestration order sought.
In response the respondent submitted that the bankruptcy notice was affected by substantial defects. First, there was a misidentification of the judgment creditor as two were named when only one should have been; secondly, there was a misdescription and confusion about the money owed to the appropriate judgment creditor; and thirdly, or consequential upon the other defects, the notice was capable of misleading and confusing the respondent.
In respect of the misdescription of the judgment creditor, the respondent sought to buttress that argument by relying on s.41 of the Bankruptcy Act 1966 (the Act). Section 41 provides that the Official Receiver may issue a notice in respect of a judgment creditor.
Unlike s.44 which allows for creditors to join together to present a petition, s.41 does not allow two or more creditors who have discrete debts to join together in having a notice issued. In naming the two Autobarn companies as the judgment creditors where there are two discrete debts owed to each, it was submitted, was a substantial and fatal defect in the notice. I agree with this contention. The naming of the two Autobarn companies as joint judgment creditors for the sum stipulated is in breach of the Act.
In my view, the error in how the Registry of the District Court of New South Wales entered the judgment was one that was perpetuated by the applicant to the applicant’s ultimate disadvantage. When it was apparent to the applicant that the error had been made, the applicant in relatively short time (12 days) was able to have the Registry of the District Court correct the error, but this was well after both the issue and service of the notice relied on in support of the petition. I note the applicant waited some 8 months from the origin date of entry of judgment until the issue of the notice. An argument, as put by the applicant, that its hands were tied and that it was, in effect, forced to rely, and was entitled to rely, on the incorrect entry in order not to be prejudiced by delay whilst having the judgment corrected, in light of the time taken to issue the notice relative to that taken to rectify the judgment as set out above, cannot be sustained. In my view, it was imperative for the applicant to have corrected the Registry’s entry prior to the issue of the notice. The applicant should have been aware of the error and, as it proved, had the capacity to effect a speedy rectification of the incorrect entry. It did not, and must now bare the consequences.
Section 306 of the Bankruptcy Act 1966, in my view, has no application to remedy this substantial defect in the notice. The notice has a misdescription of the appropriate judgment creditor. This defect is not a formal defect or irregularity within the purview of s.306 (see Adams v Lambert [2006] HCA 10).
In my view, the notice is also capable of misleading and confusing the respondent. The proceedings in the District Court made discrete claims by each of the two Autobarn companies against the respondent.
The fact that the notice named them as joint creditors for an amount different from that which they were entitled to claim has the potential to confuse and mislead the respondent.
Also, in the context of considering the potential for a misdescription of a judgment creditor to mislead a debtor, his Honour Beaumont J in Anthony Christopher Hansen Ex Parte Anthony Christopher Hansen; Mortgage Guarantee Company of Australia Limited [1984] 4 FCR 590 at [12] made this relevant observation:
“It is essential to the validity of a bankruptcy notice that the judgment debtor be in no reasonable doubt as to the identity of the judgment creditor. …The judgment debtor could thus have been misled as to the identity of the party with whom he had to deal in order to comply with the requirements of the bankruptcy notice.”
Further, although not argued before me, I make the observation that s.41(2) of the Act states that a bankruptcy notice must be in the form prescribed by the regulations and that reg.4.02 states that, for the purposes of ss.41(2), the form set out in Form 1 in Schedule 1 of the Regulations is prescribed. That form requires a copy of the judgment relied upon by the creditor be attached to the bankruptcy notice. In this instance, the applicant seeks to rely on a judgment other than the one a copy of which was attached to the notice. It is, in my view, another example of how the notice does not comply with a requirement of the Act which is made essential by the Act. It is also illustrative of the apparent confusion implicit in the notice by an inappropriate reference to another creditor whose debt is discrete from the one that forms the basis of the notice.
Conclusion
Having regard to the above, the notice upon which the petition is based is a nullity. It follows therefore that the petition presented to the Court on 30 March 2006 based on that notice should be dismissed with costs.
I certify that the preceding nineteen (19) paragraphs are a true copy of the reasons for judgment of O’Dwyer FM
Associate:
Date: 31 August 2006
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