FEDERAL CIRCUIT COURT OF AUSTRALIA
| BEAMAN v BOND & ANOR | [2015] FCCA 2311 |
| Catchwords: PRACTICE AND PROCEDURE – Bankruptcy – application for annulment of bankruptcy – whether notice given to creditors – application for waiver of compliance with requirement to give notice to creditors – whether bankruptcy rules of court inconsistent with general rules of court. WORDS AND PHRASES – “must”. |
| Legislation: Bankruptcy Act 1966 (Cth), ss.33(1), 41(6A), 52(3), 73, 153B, 306 Federal Circuit Court of Australia Act 1999 (Cth), ss.57(1), 81 |
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- AGLC
- Beaman v Bond [2015] FCCA 2311
- Case
- [2015] FCCA 2311
- Decision Date
CaseChat Overview and Summary
The court was required to determine whether the applicant's failure to comply with rule 7.03 of the Federal Circuit Court (Bankruptcy) Rules 2006, which mandates that an applicant must give notice of an annulment application to known creditors in a specific form and at least seven days before the hearing, was a fatal flaw. This involved considering the mandatory nature of the word "must" within the rules and whether compliance with such mandatory requirements could be waived. The court also had to assess whether rule 1.06 of the Federal Circuit Court Rules 2001, which permits the court to dispense with compliance with its rules in the interests of justice, was inconsistent with the Bankruptcy Rules, and if not, whether the circumstances of the case warranted exercising that discretion to waive compliance with rule 7.03.
The court's reasoning centred on the interpretation of the word "must" in legislative instruments, which generally signifies an imperative obligation. Citing established authorities, the court affirmed that provisions requiring a specific procedure to be followed in court are typically mandatory. The applicant argued that rule 1.06 of the Federal Circuit Court Rules 2001, allowing the court to dispense with compliance, could be applied by virtue of rule 1.03(2) of the Bankruptcy Rules, which states that other court rules apply if not inconsistent with the Bankruptcy Rules. The court acknowledged that the key questions were whether rule 1.06 was inconsistent with the Bankruptcy Rules and, if not, whether dispensing with compliance with rule 7.03 was in the interests of justice.
The court made no final orders at this stage, instead directing the parties to confer regarding appropriate orders to reflect the conclusions reached in its reasons for judgment. The matter was adjourned to a directions hearing, and costs were reserved.
Orders
Orders of the court
1.
The parties are to confer with respect to appropriate orders to reflect the conclusions reached in the Reasons for Judgment.
2.
The matter be adjourned to a directions hearing at 10.00am on 4 September 2015.
3.
Costs reserved.
FEDERAL CIRCUIT COURT
OF AUSTRALIA
AT PERTH
PEG 169 of 2014
DIANNE ELIZABETH BEAMAN
Applicant
And
CRAIG DAVID BOND
First Respondent
DANIEL PETER JURATOWITCH IN HIS CAPACITY AS TRUSTEE OF THE BANKRUPT ESTATE OF CRAIG DAVID BOND
Second Respondent
REASONS FOR JUDGMENT
Introduction
1.
At the conclusion of the substantive hearing in this matter, in which the applicant, Ms Beaman, applies for the annulment of the bankruptcy of the first respondent, Mr Bond, under s.153B of the Bankruptcy Act 1966 (Cth) (“Bankruptcy Act”), Mr Hannan, co-Counsel for the applicant, rose, and in the best traditions of the Bar, raised an issue, potentially fatal to the applicant’s case, which all parties and the Court had overlooked. That issue was whether the requirements of r.7.03 of the Federal Circuit Court (Bankruptcy) Rules 2006 (Cth) (“FCC Bankruptcy Rules”) had been complied with, and whether notice had been given to creditors of the annulment application and of the hearing of the annulment application. It appears that everyone had, as Senior Counsel for the first respondent observed, “assumed that notice had been given”: Transcript, page 140. Notice had not, however, been given, and the question now arises as to whether the failure to serve notice of the application on creditors in the terms of r.7.03 of the FCC Bankruptcy Rules is a fatal omission, or one which might somehow be remedied.
Legislative provisions – annulment of bankruptcy
2.
Rule 7.03 of the FCC Bankruptcy Rules provides as follows:
(1) The applicant must give notice of the application to each person known to the applicant to be a creditor of the bankrupt or a creditor of the estate of the deceased person.
(2) The notice must be in accordance with Form 11.
(3) The applicant must serve the notice on each creditor at least 7 days before the hearing date fixed for the application.
3.
Rule 7.03 of the FCC Bankruptcy Rules appears in Part 7 of the FCC Bankruptcy Rules, Division 7.1 of which deals with annulment of bankruptcy. Rules 7.01 and 7.02 of the FCC Bankruptcy Rules provides as follows:
7.01 This Division applies to the following applications:
(a) an application under section 153B of the Bankruptcy Act for the annulment of a bankruptcy;
(b) …
7.02 (1) The application must set out the grounds on which the annulment is sought.
(2) The application must be served on the trustee at least 7 days before the hearing date fixed for the application.
4.
Section 153B(1) and (2) of the Bankruptcy Act provides as follows:
(1) If the Court is satisfied that a sequestration order ought not to have been made or, in the case of a debtor's petition, that the petition ought not to have been presented or ought not to have been accepted by the Official Receiver, the Court may make an order annulling the bankruptcy.
(2) In the case of a debtor's petition, the order may be made whether or not the bankrupt was insolvent when the petition was presented.
5.
There is no dispute that the requirements for the application set out in r.7.03 of the FCC Bankruptcy Rules have not been complied with.
The requirements and structure of r.7.03 of the FCC Bankruptcy Rules
6.
The requirements and structure of r.7.03 of the FCC Bankruptcy Rules, on its face, provide that the applicant “must”:
a) give notice of the application to persons known to be creditors of the respondent;
b) give notice in accordance with Form 11 of the FCC Bankruptcy Rules, which is in the following form:
Form 11 -- Notice to creditors of annulment application
(rule 7.03)
NOTICE TO CREDITORS OF ANNULMENT APPLICATION
IN THE [ name of Court ]
REGISTRY: [ name of Registry ]
No. of [ year ]
IN THE MATTER OF [ name of debtor or bankrupt estate ]
[ name of applicant(s) ]
Applicant(s)
[ name of respondent(s) ]
Respondent(s)
I, [ name ], * applicant/ * applicant's lawyer, give notice that [ name of debtor or person administering estate of deceased debtor ] will be applying for the annulment of the bankruptcy.
The application is to be heard at:
Time and date: [ to be inserted by Registry ]
Place: [ address of court ]
If a creditor wishes to take part in the hearing, the creditor must file and serve a notice of appearance at least 3 days before the hearing date stated above.
* Omit if inapplicable
The following information must appear at the foot of the first page of this notice.
Filed on behalf of (name and role of party)
Prepared by (name of person/lawyer)
Law firm (if applicable)
Telephone Fax
Address for service
(include State and postcode)
and
c) serve the Form 11 notice on each creditor at least seven days before the hearing date fixed for the application.
“Must” usually mandatory
7.
In statutes and legislative instruments the use of “must” is indicative of an imperative command, either positive or negative, depending upon the word or words which follow it in the relevant statutory provision. It expresses necessity in the sense of an obligation or requirement: The Shorter Oxford English Dictionary on Historical Principles, Volume II (Oxford: Clarendon Press, 1973), page 1376.
8.
The use of “must” in each of the three sub-rules of r.7.03 of the FCC Bankruptcy Rules, means that there is a strong prima facie position that each of the sub-rules must ordinarily be complied with, and that creditors must be given notice in the form and within the time specified in r.7.03: Posner v Collector for Inter-State Destitute Persons (Victoria) (1946) 74 CLR 461; [1947] ALR 61; CLR at 490 per Williams J; Kosovich v Mancini (1982) 31 SASR 272 at 275 and 276 per Millhouse J; Australian Fisheries Management Authority v PW Adams Pty Ltd (1995) 61 FCR 314; (1995) 134 ALR 51; (1995) 39 ALD 481; (1995) 22 AAR 261; FCR at 332 per Sheppard J (with whom Tamberlin J FCR at 334 and Lehane J FCR at 336 agreed).
9.
In dealing with migration legislation which required that applications “must” be lodged within a certain time limit, the Federal Court, having cited Posner and Kosovich as authority for the proposition that “must” is a word of absolute obligation, went on to observe that:
[s]uch an interpretation also accords with the principle that enactments requiring that a specified procedure be followed in courts are usually mandatory and not merely directory.
Wang v Minister for Immigration & Multicultural Affairs (1997) 71 FCR 386; (1997) 151 ALR 717; (1997) 45 ALD 104; FCR at 391 per Merkel J.
10.
In Broad Spectrum Training Pty Ltd & Ors v Bidding Buzz Limited & Ors [2010] FMCA 932; (2010) 244 FLR 335 (“Bidding Buzz”) the Federal Magistrates Court, having set out the passages from the authorities cited above, observed that:
The above authorities strongly indicate that the use of the word “must” in the phrase “must advise” imposes an obligation on the Court to exercise the required function, namely, to advise the parties to use the dispute resolution process, being mediation in this case.
Bidding Buzz at [40] per Lucev FM.
Whether compliance with otherwise mandatory requirement might be waived
11.
The applicant submitted that compliance with r.7.03 of the FCC Bankruptcy Rules might be waived by reason of the terms of r.1.03 of the FCC Bankruptcy Rules which provides as follows:
(1) These Rules apply to a proceeding to which the Bankruptcy Act applies.
(2) The other rules of the Court apply, so far as they are not inconsistent with these Rules, to a proceeding to which the Bankruptcy Act applies.
This proceeding is a “proceeding to which the Bankruptcy Act applies” in that it is an annulment application under s.153B of the Bankruptcy Act.
12.
The reference to the “other rules of the Court” in r.1.03(2) of the FCC Bankruptcy Rules is not defined, but can presently only mean the Federal Circuit Court Rules 2001 (Cth) (“FCC Rules”), as they are the only other relevant rules of this Court.
13.
Rule 1.06 of the FCC Rules provides as follows:
(1) The Court may in the interests of justice dispense with compliance, or full compliance, with any of these Rules at any time.
(2) If, in a proceeding, the Court gives a direction or makes an order that is inconsistent with any of these Rules, the direction or order of the Court prevails in that proceeding.
14.
The following questions arise:
a) whether the requirements of r.7.03 of the FCC Bankruptcy Rules are mandatory and admit of no exception, or whether there are provisions under which otherwise mandatory compliance with the FCC Bankruptcy Rules, and in particular r.7.03, might be waived, and if so, in what circumstances, and whether the circumstances of this case warrant such waiver;
b) whether the provisions of r.1.06(1) of the FCC Rules allowing for compliance to be dispensed with, are “not inconsistent” with the FCC Bankruptcy Rules; and
c) whether, if r.1.06(1) of the FCC Rules is not inconsistent with the FCC Bankruptcy Rules, it is in the interests of justice to dispense with compliance with r.7.03 of the FCC Bankruptcy Rules.
Cases and observations on the cases
Mahmoud v The Owners’ Corporation Strata Plan 811 [2006] FMCA 879 (“Mahmoud”)
15.
In Mahmoud the Federal Magistrates Court was dealing with an application for annulment of a bankruptcy in which there was no evidence that anyone other than the applicant or the Trustee had been given notice of the application to annul the bankruptcy as required by r.7.03 and Form 11 of the then
Background
Background to the litigation
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Evidence
Evidence Before The Court
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Decision
Reasons for decision
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Ratio Decidendi
Legal Principle Established
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