Cervantes Pty Ltd v Moutidis
[2004] FMCA 1023
•14 December 2004
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| CERVANTES PTY LTD v MOUTIDIS | [2004] FMCA 1023 |
| BANKRUPTCY – Personal insolvency agreement – whether creditors petition should be stayed pursuant to s.189AAA of the Bankruptcy Act 1966 (the Act) – whether valid authority pursuant to s.188 of the Act – authority declared void – failure to specify authorised person – not an irregularity for purpose of s.306 of the Act – fundamental requirement that debtor nominates the authorised person. |
Bankruptcy Act 1966, ss.188, 189AAA, 306
| Applicant: | CERVANTES PTY LTD |
| Respondent: | ELIAS MOUTIDIS |
| File No: | MLG 1122 of 2004 |
| Delivered on: | 14 December 2004 |
| Delivered at: | Melbourne |
| Hearing Date: | 14 December 2004 |
| Ruling of: | McInnis FM |
REPRESENTATION
| Counsel for the Applicant: | Mr M. Sanger |
| Solicitors for the Applicant: | Daly & Kernahan |
| Counsel for the Respondent: | Mr F.J. Maiden |
| Solicitors for the Respondent: | Denis P O’Haire |
| Counsel for Supporting Creditor: | Mr D. Gillard |
| Solicitors for Supporting Creditor: | Property & Business Lawyers |
ORDERS
IT IS DECLARED that the form signed by the Debtor on 13 December 2003 entitled “Controlling Trustee Authority and Trustee Declaration” is void and of no effect.
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT MELBOURNE |
MLG 1122 of 2004
| CERVANTES PTY LTD |
Applicant
and
| ELIAS MOUTIDIS |
Respondent
REASONS FOR JUDGMENT
(Revised from transcript)
In this application a creditor's petition was filed on 30 August 2004. The matter has been the subject of procedural orders made by the court on 22 November 2004. The orders that were made on 22 November included an order that the application be adjourned and that the parties file and serve supporting material.
In the matter that came before the court this day, counsel for the debtor brought to the court's attention a document entitled Controlling Trustee Authority and Trustee Declaration (the authority) which purports to be an authority signed by the debtor pursuant to s.188 of the Bankruptcy Act 1966 (the Act).
It is clear that the completion of that form by a debtor is a process whereby the debtor signs an authority in accordance with the approved form naming and authorising a registered trustee, a solicitor or the official trustee to call a meeting of the debtor's creditors and to take control of the debtor's property. So much is evident from s.188 which provides:
(1)A debtor who desires that his or her affairs be dealt with under this Part without his or her estate being sequestrated and:
(a) is personally present or ordinarily resident in Australia;
(b) has a dwelling-house or place of business in Australia;
(c)is carrying on business in Australia, either personally or by means of an agent or manager; or
(d) is a member of a firm or partnership carrying on business in Australia by means of a partner or partners or of an agent or manager;
may sign an authority in accordance with the approved form naming and authorising a registered trustee, a solicitor or the Official Trustee to call a meeting of the debtor's creditors and to take control of the debtor's property.
(2)An authority signed by a debtor under this section is not effective for the purposes of this Part unless:
(a) if the person authorised is a registered trustee or solicitor—the person has consented in writing to exercise the powers given by the authority; and
(aa) if the person authorised is the Official Trustee—an Official Receiver has given the debtor written approval to name the Official Trustee in the authority; and
(b)the signature of the debtor to the authority and the signature of the trustee or solicitor to the consent are each attested by a witness.
(2AA) If the person authorised is a registered trustee or a solicitor, then, before the person consents to exercise the powers given by the authority, the person must give the debtor the information prescribed by the regulations.
(2AB)If the person authorised is the Official Trustee, then, before the Official Receiver gives approval to name the Official Trustee in the authority, the Official Receiver must give the debtor the information prescribed by the regulations.
(2A)The regulations may prescribe the circumstances in which a person (other than the Official Trustee or a registered trustee) is ineligible to act as a controlling trustee under this Part.
(2B)An authority signed by a debtor under this section is not effective for the purposes of this Part if, at the time the authority is signed, the person authorised:
(a) is not the Official Trustee or a registered trustee; and
(b) is ineligible, under the regulations, to act as a controlling trustee under this Part.
(2C)If the person authorised is a registered trustee or solicitor, the authority signed by the debtor under this section is not effective for the purposes of this Part unless, before the person authorised consents to exercise the powers given by the authority, the debtor gives to the person authorised:
(a) a statement of the debtor's affairs; and
(b) a proposal for dealing with them under this Part.
(2D)If the person authorised is the Official Trustee, the authority signed by the debtor under this section is not effective for the purposes of this Part unless, before an Official Receiver gives approval to name the Official Trustee in the authority, the debtor gives to the Official Receiver:
(a) a statement of the debtor's affairs; and
(b) a proposal for dealing with them under this Part.
(2E)A proposal for dealing with the debtor's affairs under this Part must include a draft personal insolvency agreement.
(3)An authority under this section that is effective for the purposes of this Part is not revocable by the debtor.
(4)Subject to subsection 192(1), a debtor cannot give an authority within 6 months of giving another authority, unless the Court grants leave to do so.
(5)A registered trustee or solicitor who consents to exercise the powers given by an authority must, within 2 working days of consenting, give a copy of:
(a) the authority; and
(b) the debtor's statement of affairs;
to the Official Receiver for the District in which the debtor resides.
(5A)For the purposes of subsection (5), a working day is a day that is not a Saturday, Sunday or public holiday in the place where the registered trustee or solicitor consented to exercise the powers given by the authority.
(6)When an authority becomes effective, the person authorised by it becomes the controlling trustee.
A new provision of the Act, s.189AAA, which commenced on
1 December 2004, provides for a stay of proceedings relating to a creditors petition until the meeting of debtors creditors in accordance with the terms of that section as follows:
SECT 189AAA Stay of proceedings relating to creditor's petition until meeting of debtor's creditors
(1)If:
(a)an authority signed by a debtor under section 188 has become effective; and
(b)either:
(i) a creditor's petition was presented against the debtor before the authority became effective; or
(ii) a creditor's petition is presented against the debtor after the authority became effective but before the first or only meeting of the debtor's creditors called under the authority;
proceedings relating to that petition are, by force of this subsection, stayed until:
(c)the conclusion of the meeting; or
(d)the adjournment of the meeting;
whichever is the earlier.
(2) This section does not limit subsection 206(1).
The stay of the creditor's petition is dependent upon the authority signed by a debtor under s.188 becoming effective.
Counsel for the petitioning creditor drew my attention to the authority which has been relied upon and has indicated that, although it appears to be signed by the debtor and witnessed on 13 December 2004, there is no name and address of any registered trustee, solicitor or official trustee inserted in that authority.
Part ‘B’ of the form, perhaps somewhat surprisingly, has been completed by Stirling Horne, who purports to be a registered trustee, and who purports to consent to exercise the powers conferred by the above authority.
On a proper and clear reading of the authority, it is clear to me that there is indeed no person named as being authorised by the debtor. Section 188 of the Act, combined with the operation of s.189AAA clearly contemplates that the appropriate form will be duly completed. It is fundamental to that process, in my view, that the name of the person authorised be inserted in the authority, otherwise the authority must be void and of no effect as it does not authorise anyone to do anything under the Act.
The mere fact that Part ‘B’ has been completed by a person purporting to be a registered trustee does not, in my view, give effect to the authority. It is not for a trustee or any other person to simply execute Part ‘B’ of the form and to thereby effectively self-nominate as the authorised person. Nomination of the authorised person must be undertaken for the purposes of the provisions that I have just referred to by the debtor. It is only the debtor who can provide the authority and it is only the debtor who can and should insert the name of the authorised person in the form.
In the current application counsel for the debtor had sought to persuade me that s.306 of the Act might apply on the basis that this was an irregularity which could be cured. In my view this is not an irregularity. It is a fundamental defect in the form. It is a form which fails to duly authorise the appropriate person.
It is perhaps significant to note that s.188 clearly provides the specific classes of persons to act in this matter. There is no doubt from the explanatory memorandum in relation to the introduction of this recent legislation that the intention of Parliament was to provide an alternative means by which debtors might avoid the consequences of a sequestration order, that is, by signing an authority of the kind contemplated by s.188 of the Act which has the effect of staying proceedings pursuant to s.189AAA. It is appropriate that where that opportunity is given the authority which is prescribed should be duly completed and indeed, properly completed. In my view, it is an essential requirement of that authority that the person authorised should be clearly named and that person ought to be a person specified by s.188, namely a registered trustee, a solicitor or the official trustee.
Accordingly, I declare that the form signed by the debtor on 13 December 2003 entitled ‘Controlling Trustee Authority and Trustee Declaration’ is void and of no effect.
I certify that the preceding twelve (12) paragraphs are a true copy of the reasons for judgment of McInnis FM
Associate:
Date: 14 December 2004
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