Caporale v The Owners SP58631

[2009] FMCA 941

FEDERAL MAGISTRATES COURT OF AUSTRALIA

CAPORALE v THE OWNERS SP58631 [2009] FMCA 941

BANKRUPTCY – COSTS – Application for an extension of time to comply and to set aside Bankruptcy Notices – matters settled prior to hearing except for costs – creditor pursued appropriate course to recover outstanding levies – costs awarded to creditor.

Strata Schemes Management Act 1996 (NSW)

Murdaca v Accounts Control Management Services Pty Ltd [2007] FCA 964
Re Kim Schekeloff, Ex Parte Kim Shekeloff v the Hopkins Group Pty Ltd and Rainer Pty Ltd [1989] FCA 91

Applicant: ROSA CAPORALE

Respondent: THE OWNERS SP58631

File Number: SYG 1706 of 2009

Applicant: GIUSEPPE CAPORALE

Respondent: THE OWNERS SP58631

File Number: SYG 1707 of 2009

Judgment of: Lloyd-Jones FM

Hearing date: 3 September 2009

Delivered at: Sydney

Delivered on: 25 September 2009

REPRESENTATION

Counsel for the Applicants: Mr M Wilson (Solicitor)

Solicitors for the Applicants: Bayside Solicitors

Counsel for the Respondent: Mr J Prowse (Solicitor)

Solicitors for the Respondent: MCW Lawyers

ORDERS

1. The application in respect of SYG1706/2009 filed on 17 July 2009 is dismissed.

2. The application in respect of SYG1707/2009 filed on 17 July 2009 is dismissed.

3. The applicants pay the respondent’s costs to be agreed or, in the absence of agreement, as assessed.

FEDERAL MAGISTRATES
COURT OF AUSTRALIA AT
SYDNEY

SYG 1706 of 2009

ROSA CAPORALE

Applicant

And

THE OWNERS SP58631

Respondent

SYG 1707 of 2009

GIUSEPPE CAPORALE

Applicant

And

THE OWNERS SP58631

Respondent

REASONS FOR JUDGMENT

Background

1. The applicants, husband Giuseppe Caporale and wife Rosa Caporale, have filed separate proceedings in the Federal Magistrates Court seeking similar orders from the Court in relation to two separate Bankruptcy Notices.  Mr Caporale’s Bankruptcy Notice is numbered NN 2592 of 2009 and Mrs Caporale’s is NN 2595 of 2009 (in Federal Magistrates Court proceedings SYG1706 of 2009).  At the hearing of 3 September 2009, I heard both matters at the same time as the facts were substantially the same.

2. On 17 July 2009, the applicants filed applications for an extension of time to comply with the Bankruptcy Notices, to complete their payment arrangements, that the Notices be set aside and finally that the amounts stated in the Notice be reviewed. On the same date, Hannigan R made an order that time for compliance with the Notices be extended to 4 August 2009.  Both proceedings were adjourned and the Bankruptcy Notices extended a number of times until the matter came before me for hearing on 3 September 2009. 

3. On 3 September 2009, Mr Prowse for the respondent notified the Court that he had just been given two bank cheques in relation to Mr and Mrs Caporale’s debts and in satisfaction of the outstanding amounts in both Bankruptcy Notices.  Therefore, the only issue to be resolved was that of costs of the parties.

Respondent’s submissions on costs

1. Mr Prowse submits that the applications as filed were hopeless and bound to fail.  He relied on Re Kim Schekeloff, Ex Parte Kim Shekeloff v the Hopkins Group Pty Ltd and Rainer Pty Ltd [1989] FCA 91 as authority for the proposition that a Notice cannot be set aside because of an instalment order granted after service of the Notice. In this case, Mr and Mrs Caporale applied in the Local Court for such an instalment order. Mr Prowse submits that on the basis that this ground is hopeless, the creditor is entitled to its costs even though the debt has been paid.

2. Mr Prowse indicated that the debt was in relation to strata levies which were due and payable every quarter pursuant to the Strata Schemes Management Act 1996 (NSW) and that the ownership body sent notices to all unit holders confirming amounts due and payable. The levies in question were not paid since February 2008 and accrued from that date. Mr Prowse submits that Mr and Mrs Caporale were at all times aware of their obligation to pay the levies and failed to do so. He submits that the respondent is entitled to take such enforcement actions as open to it, especially for a debt of this size (approximately $35,000). Mr Prowse submits that with a history of non-payment, the respondent is entitled to assume that Mr and Mrs Caporale would be unable to meet their debts as and when they fell due.

3. Mr Prowse submits that Mr and Mrs Caporale sought and obtained an instalment order made in the Local Court at Sutherland to repay the debt of over 18 months.  This occurred when the respondent sought to enforce its rights and receive payment, which is a statutory obligation of the unit holders.  There has been no application made on hardship grounds to the respondent under the Strata Schemes Management Act.  Consequently, this recovery action is justifiably open to the respondent.  As Mr & Mrs Caporale provided Mr Prowse with two bank cheques for the complete debt just before the hearing, he submits that this calls into question the bona fides of the application before the Court.

Applicants’ submissions on costs

1. Mr Wilson, for Mr and Mrs Caporale, filed his Notice of Appearance for both matters at the commencement of the hearing on 3 September 2009.  It followed that Mr and Mrs Caporale did not have the benefit of a solicitor to prepare their respective applications, which Mr Wilson submits explains their lack of form and substance.

2. However, Mr Wilson referred to the decision in Murdaca v Accounts Control Management Services Pty Ltd [2007] FCA 964 per Branson J and especially at [15] which states:

   In my respectful view, the correctness of the decision in Schekeloff is open to reasonable question. It is at least arguable, in my view, that a debtor does not commit an act of bankruptcy by not complying with a demand to pay a judgment debt which becomes unenforceable during the period allowed for compliance with the demand – albeit that the debt had been due and payable at the dates of issue and service of the bankruptcy notice.

   Mr Wilson submits that Mr and Mrs Caporale’s applications have merit based on Branson J’s reasons. 

3. Mr Wilson submits that in Murdaca, the Bankruptcy Notice was filed and served on the debtor within the time for compliance which had been extended.  An application to pay by instalments was filed and accepted by Branson J, which is similar to the matter currently before this Court.  Mr Wilson submits that the Bankruptcy Notices were used as a collective tool rather than to invoke the Court’s jurisdiction.  The type of debt, which is strata levies, is of the very nature which requires the creditor to be aware that the debtor owns real property.  In the matter before this Court there are six properties that the levies are issued against. 

4. Default judgments/orders were made on 13 and 15 May 2009.  The Bankruptcy Notices issued on 19 June 2009 would indicate that there were no previous attempts to enforce the judgments.  Mr Wilson argues that the first time Mr & Mrs Caporale became aware of the judgments was when they were served with the respective Bankruptcy Notices.  At this point, they filed their application to pay by instalments, which was accepted by the Local Court.  There was a stay of enforcement on those judgments.  Mr Wilson submits that since then, the judgments have been paid in full which would evidence that the Bankruptcy Notices were issued in haste. 

Consideration

1. It has been brought to the Court’s attention that the date of compliance with the Bankruptcy Notices was extended by Hedge R on 11 August until the adjourned date of 18 August 2009.   However when the matter was before the Duty Registrar on 18 August 2009 and referred to this Court to obtain a hearing date, no extension order was made.  Mr Wilson indicated that his clients were unrepresented on that occasion and it could have been an oversight that they did not seek an extension of time until the scheduled hearing.  Consequently, he requested the Court to rectify the situation and extend the time for compliance until the hearing today.  I indicated that I would extend the time for compliance with the Bankruptcy Notices to 3 September 2009. 

2. I note the respective arguments made by both sides and have formed the view that the payment of levies is a statutory obligation pursuant to the Strata Schemes Management Act with payments due and payable each quarter.  This cannot be accepted as an oversight on the part of Mr and Mrs Caporale because the unit owners issue relevant notices every quarter as required under that Act.  These levies have not been paid since February 2008 with default judgments obtained in May 2008 for non-payment for at least four consecutive quarters.  Evidence has not been placed before the Court in respect of the contents of the levy notices but usual practice and the requirements of the Strata Schemes Management Act is that arrears are contained in such notices.  In the circumstances I have formed the view that the obligation to meet strata levies on a quarterly basis should have been known by Mr and Mrs Caporale and which was brought to their attention in the levy notices issued during that period.  In the absence of any evidence to the contrary, I must accept that this was the situation in the circumstances.  Consequently, the unit owners have pursued a legitimate course to recover outstanding levies and should recover their costs.

I certify that the preceding twelve (12) paragraphs are a true copy of the reasons for judgment of Lloyd-Jones FM

Associate: 

Date:         25 September 2009