Baycorp Collections PDL (Australia) Pty Ltd v Reese

[2014] FCCA 591

FEDERAL CIRCUIT COURT OF AUSTRALIA

BAYCORP COLLECTIONS PDL (AUSTRALIA) PTY LTD v REESE [2014] FCCA 591

Catchwords:
BANKRUPTCY – Creditor’s petition – where debtor one of two joint debtors – where debtor presents debtor’s petition prior to hearing of creditor’s petition – reference by Official Receiver pursuant to s.55(3B) of the Bankruptcy Act1966.

Legislation:

Bankruptcy Act 1966, ss.57, 57(3AA), 57(3B).

Clyne v Deputy Commissioner for Taxation (1984) 154 CLR 589
Official Receiver of the Bankruptcy District of Victoria v Walia (1997) 79 FCR 299
Re Grady; ex parte BBC Hardware Ltd (unrep. Fed Ct of Aust. Spender J, QP 256 of 1996, 13 May, 1996)
Re: Johnson and Johnson ex parte Westpac Banking Corporation & Ors (unrep. Fed Ct of Aust. Cooper J, QP 526 of 1995, 20 September, 1995)

Applicant: BAYCORP COLLECTIONS PDL (AUSTRALIA) PTY LTD

Respondent: ROCHMAN REESE

File Number: BRG 108 of 2014

Judgment of: Judge Jarrett

Hearing date: 13 March 2014

Date of Last Submission: 14 March 2014

Delivered at: Brisbane

Delivered on: 26 March 2014

REPRESENTATION

Counsel for the Applicant: Ms Scott

Solicitors for the Applicant: ClarkeKann Lawyers

No appearance for the Respondent

ORDERS

1. Direct that the Official Receiver accept the joint debtors’ petition presented by the debtor Rochman Reese jointly with Sofan Chan on 11 March, 2014.

2. The time of the commencement of the bankruptcy of each debtor named in the joint debtors’ petition presented by Rochman Reese jointly with Sofan Chan on 11 March, 2014 shall be the date upon which the Official Receiver accepts the petition pursuant to the direction set out in (1) hereof.

3. The creditor’s petition filed on 6 February, 2014 be dismissed.

4. The petitioning creditor’s costs, including reserved costs if any, of the petition filed on 6 February, 2014 be taxed and paid from the estate of the respondent debtor in accordance with the Bankruptcy Act1966.

FEDERAL CIRCUIT COURT
OF AUSTRALIA
AT BRISBANE

BRG 108 of 2014

BAYCORP COLLECTIONS PDL (AUSTRALIA) PTY LTD

Applicant

And

ROCHMAN REESE

Respondent

REASONS FOR JUDGMENT

1. On 22 March, 2013 judgment for $34,970.46 was given by the Local Court of New South Wales at Sydney for the petitioning creditor against Rochman Reese.

2. The petitioning creditor caused a bankruptcy notice to be issued against the debtor.  It was served on him on 23 September, 2013.

3. By 14 October, 2013 Mr Reese had failed to comply with the requirements of the bankruptcy notice.

4. On 6 February, 2014 the petitioning creditor issued a creditor’s petition against the debtor.  It was given a first court date of 13 March, 2014.

5. On 11 March, 2014 the debtor, together with Sofan Chan, presented a joint debtors’ petition to the Official Receiver. The Official Receiver, as required by s.57(3B) of the Bankruptcy Act1966, referred the  debtor’s petition to the Court for a direction to accept or reject it.

6. On 13 March, 2014 the creditor’s petition which was pending before a Registrar, was transferred to me because the Registrar does not have power to deal with referrals made pursuant to s.57(3B) of the Act. On that day, the petitioning creditor’s solicitor, for the first time, became aware of the pending debtor’s petition.

7. When the reference from the Official Receiver and the creditor’s petition came before me, I offered the petitioning creditor’s solicitor the opportunity to make submissions, in writing if necessary, as to whether the Court should direct the Official Receiver to accept or reject the debtor’s petition.  The petitioning creditor’s solicitor took up the opportunity to take instructions and, if necessary, make written submissions.  Initially the petitioning creditor took a neutral stance concerning the debtors’ petition.  However, subsequently, the petitioning creditor changed its mind and opposed a direction that the Official Receiver accept the petition.  Short submissions were delivered to support that stance.

8. Section 57 of the Act deals with debtor’s petitions by joint debtors who are not partners. Subject to s.57(3AA) and s.57(3B), the Official Receiver must accept a properly submitted petition: s.57(4) of the Act and see also Official Receiver of the Bankruptcy District of Victoria v Walia (1997) 79 FCR 299.

9. Section 57(3B) of the Act provides:

   57  Debtor’s petition by joint debtors who are not partners

   …

   (3B)The Official Receiver must refer a debtor’s petition to the Court for a direction to accept or reject it if there is at least one creditor’s petition that:

   (a)  is pending against at least one of the debtors (whether or not the creditor’s petition also relates to other persons); and

   (b)does not relate only to all the joint debtors who presented the debtor’s petition.

10. As Finklestein J pointed out in Walia (above):

    …if a debtor's petition complies with the requirements of s 55(2) and is not the subject of a reference under s 55(3B) the debtor is entitled to be made a bankrupt and no question can arise that requires the consideration of the Court. If the presentation of the petition is an abuse of process the Court has power to annul the bankruptcy: compare Re Bond (1888) 21 QBD 17; Re Betts; Ex parte Official Receiver [1901] 2 KB 39; Re A Debtor; Ex parte The Debtor v Allen (An Infant by His Father and Next Friend N G Allen) [1967] Ch 590.

11. That dicta was expressed in respect of s.55(3B) of the Bankruptcy Act, but given the similarity between s.55 and s.57 generally, and s.55(3B) and s.57(3B) specifically, there is no reason to think that the approach described by Finkelstein J above does not apply to joint debtor’s petitions covered by s.57 of the Bankruptcy Act.

12. The notion that the Official Receiver can be directed to reject a petition on a reference under s.57(3B) because the petition is an abuse of process is not inconsistent with the notion that a debtor is entitled to be made a bankrupt if the debtor’s petition otherwise complies with the requirements of s.57 of the Act.

13. Authorities that deal with s.55(3B) of the Bankruptcy Act make it clear that a debtor’s petition will be an abuse of the process provided by s.55 of the Act where the debtor presents a petition for the purpose of making it impossible for a creditor to obtain a sequestration order on a pending petition and for the further purpose of shortening the period of relation back, possibly placing property which otherwise would vest in the trustee beyond his reach: Clyne v Deputy Commissioner for Taxation (1984) 154 CLR 589 at 599. Again, there is no reason to think that such an approach does not apply to joint debtors’ petitions covered by s.57 of the Bankruptcy Act

14. The effect of the acceptance of the debtors’ petition in this case will be to shorten the relation back period.  Shortening the relation back period by some four months may possibly place property which otherwise would vest in the trustee beyond the trustee’s reach, but there is no evidence to support such a view.  Indeed, the petitioning creditor does not suggest that is so. 

15. It is relevant to consider that the creditor’s petition was first in time: Re Grady; ex parte BBC Hardware Ltd (unrep. Fed Ct of Aust. Spender J, QP 256 of 1996, 13 May, 1996) and Re: Johnson and Johnson ex parte Westpac Banking Corporation & Ors (unrep. Fed Ct of Aust. Cooper J, QP 526 of 1995, 20 September, 1995).

16. However, there is nothing before me to suggest that there is any advantage that would accrue to the petitioning creditor or the debtor’s creditors generally by the making of an order directing the Official Receiver to reject the debtor’s petition.

17. The petitioning creditor’s submissions do not advance any ground upon which it might properly be said that the joint debtors’ petition should be rejected.

18. In the circumstances, I direct the Official Receiver to accept the debtors’ petition presented by the debtor on 11 March, 2014.

19. By s.57(3C) of the Bankruptcy Act, the Court must specify the time of the commencement of each bankruptcy that results from acceptance of the debtor’s petition. For that purpose, I specify that the time of the commencement of the bankruptcy of each debtor named in the joint debtors’ petition shall be the date upon which the Official Receiver accepts the petition pursuant to this direction.

20. Whether the Official Receiver is directed to accept the joint debtor’s petition or reject it, the petitioning creditor seeks its costs of the creditor’s petition filed on 6 February, 2014.  I intend to dismiss the creditor’s petition but it is appropriate that the petitioning creditor has its costs of and incidental to that petition.

I certify that the preceding twenty (20) paragraphs are a true copy of the reasons for judgment of Judge Jarrett delivered on 26 March 2014

Associate: 

Date:  26 March 2014