Biritz v National Australia Bank

[2002] FMCA 214

FEDERAL MAGISTRATES COURT OF AUSTRALIA

BIRITZ v NATIONAL AUSTRALIA BANK [2002] FMCA 214

BANKRUPTCY – Review of Registrar’s sequestration order – grounds subject to unsuccessful appeal to Full Court of Federal Court – no basis to depart from Full Court or primary judge decision.

PRACTICE AND PROCEDURE – Appeal to Full Court seeking to set aside Bankruptcy Notice does not prevent filing of creditor’s petition.

Bankruptcy Act 1966

Erika Biritz v National Australia Bank Limited [2001] FCA 1635
Oliviera v Stafford (1989) 24 FCR 413

Applicant: ERIKA BIRITZ

Respondent: NATIONAL AUSTRALIA BANK

File No: MZ 480 of 2002

Delivered on: 26 August 2002

Delivered at: Melbourne

Hearing Date: 26 August 2002

Judgment of: McInnis FM

REPRESENTATION

Applicant: In person

Counsel for the Respondent: Mr P. Fary

Solicitors for the Respondent: Russell Kennedy

ORDERS

1. The Application of the Debtor filed on 19 July 2002 is dismissed.

2. The respondent-creditor's costs be taxed and paid in accordance with statute. 

FEDERAL MAGISTRATES
COURT OF AUSTRALIA AT
MELBOURNE

MZ 480 of 2002

ERIKA BIRITZ

Applicant

And

NATIONAL AUSTRALIA BANK

Respondent

REASONS FOR JUDGMENT

(Revised from transcript)

1. This is an application by Erika Biritz (the debtor) for review of a decision made by Registrar Wood on 2 July 2002.  On that date National Australia Bank Ltd (the creditor) was the applicant and Erika Biritz the respondent in a creditor's petition filed 17 May 2002.  That creditor's petition had relied upon a bankruptcy notice dated 3 August 2001 which had been issued by the creditor against the debtor.

2. The bankruptcy notice had relied upon a total amount of a debt owing of $14,295.90 and had annexed to it orders made by Master Cain of the Supreme Court of Victoria on 26 June 2001 which was an order following on from the taxation of costs and in turn was based upon an order made by Master Evans of the Supreme Court on 7 February 2001.  The order that was made by the registrar on 2 July 2002 was that a sequestration order be made against the estate of Erika Biritz.  The court further ordered that the applicant's costs of and incidental to the petition be taxed pursuant to order 62 of the Federal Court Rules and paid in accordance with statute.

3. As I indicated, it is from that order based upon the creditor's petition and bankruptcy notice to which I have referred that the debtor seeks orders from this court as follows:

   (1)That the sequestration order made against the estate of Erika   Biritz on 2 July 2002 be set aside.

   (2)Any further or other orders as the Honourable Court deems met.

   (3) That the respondent pay the applicant's costs of this application. 

4. Before the court on this day the debtor appears in person and the creditor is represented by Mr Fary of counsel.  The debtor has relied upon an affidavit in support of her application for review sworn 19 July 2002.  She has further relied upon an affidavit sworn by her on 22 August 2002.  The creditor in turn relies upon the affidavit of proof of debt which was before the registrar and that affidavit verifying paragraph 4 of the creditor's petition sworn by Leslie Andrew Fox on 17 May 2002.  There was a further affidavit of service in relation to the creditor's petition relied upon sworn by Geoffrey Mervyn Birch on 28 June 2002 and there are otherwise affidavits of searches and, as I have indicated, an affidavit of debt.  The affidavit of search was sworn 2 July 2002 by Kylie Maree Galafaro and an affidavit of debt sworn by Wayne Francis May 2 July 2002.

5. In addition, the creditor before this court relies further upon an affidavit of service sworn by Kylie Maree Galofaro on 13 August 2002 and an affidavit sworn by Leslie Andrew Fox on 8 August 2002.  Essentially, that is the material that is before the court on this application. 

6. It is significant to note that in this case there has been other litigation between the parties which had occurred prior to the filing of the creditor's petition to which I have referred.  The chronology in this matter appears to be that orders were made, as I have indicated, by Master Evans on 7 February 2001 and the order in relation to costs made by Master Cain of the Supreme Court on 26 June 2001.  It is clear that that matter then gave rise to the issuing of the bankruptcy notice dated 3 August 2001 which it is said was served upon the debtor on 11 August 2001.

7. Before Kenny J of the Federal Court there was an application for review of a registrar's decision on 18 September 2001 (Erika Biritz v National Australia Bank Limited [2001] FCA 1635). That decision was a decision by the registrar which had dismissed an application pursuant to s.40(1)(g) of the Bankruptcy Act and was then, as I have indicated, the subject of an application for review before Kenny J. Kenny J delivered a decision of 20 November 2001. For the present purposes it is convenient in this application to recite the background referred to in Her Honour's judgment. Her Honour states that:

   “On 11 August 2001, the respondent, National Australia Bank Limited (‘the Bank’) served a bankruptcy notice (VN 1305/01) on the applicant, Mrs Erika Biritz. The notice was issued pursuant to s 41 of the Bankruptcy Act 1966 (‘the Act”). By the bankruptcy notice the Bank claimed that Mrs Biritz owed it a debt of $14,295.90. A schedule to the notice stated that the debt consisted of a judgment or order in the amount of $14,131.25 and ‘interest accrued since the date of judgment or order’ in the amount of $164.65. Copies of the authenticated orders made by the Supreme Court of Victoria (‘the Supreme Court’) accompanied the notice.

   On 3 September 2001, Mrs Biritz applied to this Court to set aside the bankruptcy notice issued against her.  The application was supported by an affidavit sworn by her on 3 September 2001, together with a number of exhibits. …  On 18 September 2001, a Registrar of the Court dismissed Mrs Biritz’s application with costs.

   On 4 October 2001, Mrs Biritz filed a notice of motion in the Court seeking, amongst other things, an order that the Registrar’s order of 18 September 2001 be set aside.  The motion was supported by an affidavit sworn by Mrs Biritz on 4 October 2001.”

8. In the decision of Kenny J Her Honour then considered the issue which had been the substantive issue before her namely whether or not the court should deal with this matter where there appears, at least on the face of it, to be material of more than one judgment debt.  In paragraph 14 Her Honour states:

   “The Court has jurisdiction to set aside a bankruptcy notice by virtue of s 30(1) of the Act, where such an order is necessary for the purpose of carrying out or giving effect to the Act in a particular case….

9. Her Honour refers to Oliveira v Stafford (1989) 24 FCR 413 at 430 per Gummo J. Her Honour goes on to say:

   “Further, the express power in s 41 of the Act to extend time for compliance with the requirements of a bankruptcy notice has been said to carry with it the power to set aside the notice itself.  See Re Sterling: Ex Parte Esanda Ltd (1980) 30 ALR 77 at 83, referred to in Re Briggs; Ex Parte Briggs v Deputy Commissioner of Taxation (WA) (1986) 12 FCR 310 at 311-312: Re Hutchins; Ex parte WA;; (unreported, Federal Court of Australia, Spender J, 6 May 1998) and Wenkart v Abigano [1999] FCA 354 at [22].

   A bankruptcy notice may be set aside if it on more than one judgment debt.  As Moore J said in Cummings v Raeffaele (2000) 175 ALR 107 at [2]:

   There is now a consistent line of authority in this court that a bankruptcy notice is a nullity if it relies on more than one judgment debt:  see most recently, Owners of Strata Plan No 5459 v Mason (1999) 91 FCR 92; Commonwealth Bank of Australia v Horvath (Junior) (1999) 161 ALR 441 ...; GPW Aussi Exports v Latin (1998) 85 FCR 324 … and Catalano v Commonwealth Bank of Australia (Fed C of A, Sundberg J, 3 July 1997, BC9703156, unreported) … Whilst the decision of Beaumont J in Illawarra Credit Union v Olejniczak (Fed C of A, 26 May 1998, BC9802465, unreported) is to the contrary, the solicitor appearing for the judgment creditor did not suggest that I decline to follow this line of authority.

   In this case, the bankruptcy notice is based on two costs orders in respect of which there was one taxation producing a single assessment of the costs to be paid.  In these circumstances, decisions in this Court establish that the two orders for costs are ‘channelled’ into the one order as to taxation, and the bankruptcy notice is valid.  The line of authority was also explained and applied by Moore J in Cummings v Raeffaele.  At [16]. His Honour said,

   In Re Wheeler (a debtor) [1982] 1 WLR 175 and Catalano, bankruptcy notices were held valid where it was found that several costs orders had been ‘channelled’ into one order by a common certificate of taxation.  The possibility that several orders can be ‘channelled’ into one order which may found a valid bankruptcy appeared to be left open in Re Stephenson; Ex parte Cintee Nominees Pty Ltd (1988) 18 FCR 375 … and Re Gardiner (Fed C of A, Wilcox J, 20 March 1991, unreported), and was affirmed in Re Walker; Ex parte Noble Einsiedel Pty Ltd (Fed C of A, Northrop J, 16 April 1992, unreported).  In Horvath Finkelstein J accepted (at 445) that ‘channelling’ was an accurate description of what happened in Re Wheeler, but disagreed with the notion that a certificate of taxation can have the effect of reconstituting several costs orders into one order for the purposes of a bankruptcy notice.  However, His Honour noted the need for uniformity of decision-making by judges at first instance administering bankruptcy laws, and indicated that he would not therefore depart from the line of authority founded by Re Wheeler.”

   Adopting this analysis, the order made by Master Cain on 26 June 2001 ‘channelled’ the two costs orders made on 7 February 2001 by Master Evans in favour of the Bank against Mrs Biritz.  I accept the respondent’s submission that the bankruptcy notice is not invalid for this reason.”

10. The decision of her Honour was the subject of an appeal which was lodged at the Full Court of the Federal Court of Australia.  The notice of appeal would appear to have been filed by the debtor with the Full Court of the Federal Court following an extension of time order that was made by the Chief Justice of the Federal Court.  The notice of appeal which was filed in fact appears to be a notice of appeal filed 19 February 2002.  I should add, however, that it is clear from a perusal of the file, which I have been invited to consider during the course of submissions, that the debtor had in fact filed with the court an application for extension of time to file and serve a notice of appeal on 19 December 2001.

11. That application was supported by an affidavit sworn by the debtor on the same day and it would appear that orders were subsequently made by the Chief Justice of the Federal Court granting an extension of time.  It would then appear that what occurred thereafter was that the notice of appeal filed 19 February 2002 was relied upon by the debtor and, for the sake of completeness, I indicate that notice of appeal was filed pursuant to the order made by the Chief justice on 13 February 2002.

12. I should also add for the sake of completeness that in fact on the file there is a stamped copy of a notice of appeal which was filed 19 December 2001.  That would appear to me to be consistent with what the debtor said and I accept for the purpose of the application that the debtor had in fact on 19 December 2001 made application for extension of time to file and serve a notice of appeal and provided a notice of appeal, but consistent with the orders made by the Chief Justice on 13 February 2002 had provided further and better particulars of the notice of appeal and did so in the notice which was then filed on 19 February 2002.

13. When the matter was heard by the Full Court on 30 May 2002 the Court delivered a decision which effectively upheld the decision and reasoning of Her Honour Kenny J on 20 November 2001.  In its reasons for decision the Full Court at paragraph 12 referred to the English Court of Appeal case of In re Wheeler (A Debtor) [1982]

    
    

    1 WLR 175 and stated:

    “There may be a question as to the correctness of this decision. There is no reported instance of the case being followed in England.  It's been applied in Australia in Catalano v Commonwealth Bank of Australia (Sundberg J 3 July 1997 unreported) and Cummings v Raeffaele (2000) 175 ALR 107, but was doubted in Commonwealth Bank v Horvath Junior (1999) 161 ALR 441.  The case presents this difficulty.  Speaking generally, in the absence of specific provision in legislation or rules, a certificate or allocator by a taxing master is not a judgment or order for the payment of money.  Re Crump; Ex parte Crump (1891) 64 LT 799.  The obligation to pay costs is to be found in the judgment where the costs are ordered.  So the certificate may not be ‘in the end only one final order’.  As it turns out, however, it is not necessary to come to any final view on this issue, for any difficulties that might exist in the general case do not arise in relation to costs orders made in the Supreme Court of Victoria.

    In the Supreme Court a party may become liable to pay costs because an order for their payment is made or because the rules make provision to that effect.  An example of a case where the rules provide for the payment of costs is on the acceptance of an offer of compromise.  In such a case the costs may be taxed under O 63.10 and according to O 63.11(1) the amount can be recovered as if on a judgment.  However, when costs are taxed the taxing master no longer issues a certificate as in the past.  Now, the result of the taxation must be stated in the form of an order (O 63.56(1)) which is to be authenticated and filed in the ordinary way (O 63.56(4)).  Moreover, the Taxing Master may, after the conclusion of the taxation of any bill, make a final order with respect to the amount which he or she allows the costs; (O63.56(2)).  Accordingly, where there has been a taxation of a composite bill covering a number of costs orders that result in a single sum for costs which is recorded in the order, there ‘is in the end only one final order’.  So the notice is not invalid on this ground.”  

14. Other grounds of appeal were raised and dealt with by the Full Court and in the circumstances the court then dismissed the appeal with costs.  Before this court the debtor has relied upon, as I have indicated, affidavit material in support of the notice for review.  In particular, the affidavit in support of the application for review sworn 19 July 2002 (the substantive affidavit) raises a number of grounds upon which it is said this court should set aside the sequestration order made by the registrar on 2 July 2002.

15. The debtor in the substantive affidavit and in submissions to this court relies upon a number of grounds which are set out in paragraph 5 of the substantive affidavit as follows: 

    “5. The contents of the above mentioned Creditors Petition are so capable of mislead that it makes the Petition invalid and of no effect because –

    i.The NAB did not contain a final order on 26 June, 2001 against myself in the Supreme Court of Victoria at Melbourne, it simply just had its costs taxed and allowed by a Master as to the sum of $14,131.25 but that particular certificate of taxation being referred to in the Bank’s Petition did not oblige myself the said Erika Biritz to pay that sum or any sum whatsoever.

    The Supreme Court Rules in Civil Procedure pursuant to the relevant provisions under Order 63, clearly states that no payment for costs (any costs) can be enforced or received by anyone without an Order being made by the Supreme Court for the payment of costs.  The Supreme Court Rules similarly applies in this circumstances like the Federal Court Order under rule 62.7(2).

    ii.Certificate of Taxation is not a Final order nor a final judgment which is capable of falling within the meaning of the Principal requirement pursuant to the Bankruptcy Act 1966, section 40(1)(g).

    iii.The bank Petition wrongly described myself as a Debtor who owes to the NAB any sum whatsoever, I am not indebted to the bank in any way.

    iv.The Creditors Petition asserted an act of bankruptcy on or before 20 November 2001 within the period which I allegedly had to comply with the Bankruptcy Notice, when in fact I had Federal Court proceedings on foot in the Full Court as from 19 December 2001 under proceeding No. V1271 of 2001.

    v.Further and alternatively the Creditors Petition is invalid because it has been signed, sealed and delivered on 17 May, 2002 on behalf of the NAB when on that date the Bank did not have any legal capacity to apply for a Sequestration Order to be made against my estate.

    vi.In the alternative, the Petition was invalid and of no effect because it falsely stated that the NAB does not hold security over my property.”

16. Essentially, it is argued that the creditor had not obtained a final order on 26 June 2001.  It is submitted for and on behalf of the creditor that those submissions based upon that ground, which would appear on my reading of the material to include (i), (ii) and (iii) in paragraph 5 of the affidavit to which I have referred, cannot be sustained having regard to the decision made by Kenny J on 20 November 2001 which was then the subject of an unsuccessful appeal to the Full Court of the Federal Court on 30 May 2002.

17. In my view, adopting the language which has been referred to in both the decision of Kenny J and the decision of the Full Court the submission for and on behalf of the creditor in relation to that ground is clearly correct and the application to this court on that ground would fail.  It is not for this court to provide further reasons beyond adopting the reasons given by the Full Court of the Federal Court of Australia which in turn had upheld the reasoning of Kenny J. 

18. The debtor, however, further relied upon a suggestion that she in fact in this case is wrongly described as a debtor who owes the creditor any sum whatsoever and asserted in her affidavit that she is not indebted to the bank in any way.  It is submitted for and on behalf of the creditor that the affidavit material before the registrar and before this court in support of the creditor's petition is sufficient to establish the debt and sufficient to establish that the debtor is in fact a person who is indebted to the bank in the sum claimed in relation to the bankruptcy notice which in turn is the foundation for the creditor's petition.

19. In my view, that submission is clearly correct on the material as there is sufficient material upon which it can be properly said that the debtor is a person who owes the creditor the sum claimed and is, on the basis of the affidavit material to which I have referred, properly indebted to the bank. 

20. There is a further issue raised, however, by the debtor, and that is that in circumstances of this kind the bank, that is, the creditor, should have revealed that there was security held by it over a property owned by the debtor.  Specifically, the debtor relies upon what is asserted in her substantive affidavit to be security held by the creditor over four properties which I will briefly refer to as 41 Kembla Street, Cheltenham, 39 Kembla Street, Cheltenham, 3–5 Paxton Drive, Glen Waverley, and Unit 92, Acapulco Building, Surfers Paradise in the state of Queensland.

21. The assertion is made that in the circumstances of this case the failure to disclose that security is a fatal defect in relation to the creditor's petition and a matter which should have been brought to the attention of the registrar.  However, in response to that allegation in the substantive affidavit of the debtor, the creditor relies upon the affidavit to which I have referred sworn by Leslie Andrew Fox on 8 August 2002.  In that affidavit at paragraph 13 the deponent refers to searches being undertaken of the properties to which I have referred in the debtor's substantive affidavit.  Save and except for the Queensland property, about which details were not obtained, it would appear, and I accept to be the evidence, that in each and every one of the properties referred to there was in fact no material upon which it could be suggested that security was in fact in place over property owned by the debtor.

1. The debtor further relied upon a debenture which is exhibit ‘EB3’ to the substantive affidavit as evidence of there being a security provided by her in person.  That debenture, which is dated 19 August 1988, is sealed by a company Litchurch Pty Ltd.  It is said by the debtor that at all times that company is a company which she controlled and was a company which acted as trustee for the Biritz Family Trust.  That assertion, however, does not assist, in my view, in examining the document and drawing the conclusion which I have been invited to draw by the debtor.

2. In my view, that debenture, on a proper reading of it, does no more than provide a security in relation to the company named which I understand is common ground is a company that was in fact deregistered in 1992.  The debtor further in her affidavit material relies upon, as I understand it - and I note this by way of submissions as well as in the affidavit material - a suggestion that at the time when the creditor's petition was filed, that is, as at 17 May 2002, her appeal from the decision of Kenny J had yet to be determined by the Full Court. Indeed, it is clear that court had not considered the appeal certainly by that date and did not consider it until 30 May 2002.

3. I accept for the present purposes that the reason behind the filing of the creditor's petition on 17 May 2002 would be to ensure that that creditor's petition was filed within the six-month period as prescribed in the Bankruptcy Act from the date of the act of bankruptcy which in this case is 20 November 2001. Some comfort is given to the debtor by reliance upon s.41(7) of the Bankruptcy Act which clearly, in my view, provides an opportunity for an extension of the time for compliance with the bankruptcy notice. That extension is a time which runs immediately before the expiration of the bankruptcy notice until the day on which the court determines it is so satisfied, that is, so satisfied as to whether a debtor has a counterclaim set-off or a cross-demand.

4. The extension of time by virtue of the operation of that section would, in my view, clearly have given to the debtor time in which to comply, that is, time until and including the day on which Kenny J determined the issue that was then before the court; that is, 20 November 2001. There is nothing in the material that I can find, nor is there any provision in the Bankruptcy Act which would suggest that the mere filing of an application to the Full Court of the Federal Court by way of an appeal from the decision of Kenny J would act in a way to extend the time for compliance or would otherwise deprive a creditor of rights to at least file a creditor's petition which it has done on 17 May 2002 within the period of time provided in the legislation.

5. It is clear, in my view, that whilst the debtor may have a genuine and sincerely-held grievance about the chronology of events which led to the filing of the creditor's petition just prior to the delivery of the Full Court's decision, that filing of a creditor's petition is not, in my view, a basis upon which it could be said that the decision by the registrar, which was ultimately made on 2 July 2002, should be held to therefore be invalid or, in other words, reviewed in a manner favourable to the debtor.  It does mean, however, that if the Full Court decided the matter in favour of the debtor, then the creditor's petition would then have been fruitless and no doubt would have been either withdrawn or dismissed with appropriate orders.

6. The fact is that the debtor's appeal before the Full Court was unsuccessful.  The creditor's petition therefore remained current and was able to be pursued relying, as it did, upon the bankruptcy notice which had been the subject of unsuccessful challenge by the debtor to which I have already referred. 

7. In the circumstances in my view, the issues raised by the debtor then cannot be sustained in this court. I am satisfied further on the available material and the affidavit material to which I have referred that there has been compliance with other provisions of the Bankruptcy Act and in particular I am satisfied that s.52 has been satisfied. In all the circumstances the appropriate order of this court is that the application of the debtor which was filed on 19 July 2002 should be dismissed.

I certify that the preceding twenty-eight (28) paragraphs are a true copy of the reasons for judgment of McInnis FM

Associate: 

Date:  26 August 2002