Commonwealth of Australia v Croker
[2010] FMCA 852
•2 November 2010
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| COMMONWEALTH OF AUSTRALIA v CROKER | [2010] FMCA 852 |
| BANKRUPTCY – Opposed creditors petition – whether the evidence of an alleged counter-claim is of any significance considered – previous determination of relevant issues by the Federal Court. |
| Bankruptcy Act 1966 (Cth), ss.40, 41, 43, 44, 52 Bankruptcy Legislation Amendment Act 2010 (Cth) Federal Court Rules Federal Magistrates Court (Bankruptcy) Rules 2006 (Cth) Judiciary Act 1903 (Cth), ss.55ZF, 55ZG Vexatious Proceedings Act 2008 (NSW), s.8 |
| Attorney-General (NSW) v Croker [2010] NSWSC 942 Croker v Commonwealth [2010] FCA 1031 Croker v Department of Families, Housing, Community Services and Indigenous Affairs [2010] FCA 1136 Shephard v Chiquita Brands South Pacific Ltd [2004] FCAFC 76 |
| Applicant: | COMMONWEALTH OF AUSTRALIA |
| Respondent: | CLAYTON ROBERT CROKER |
| File Number: | SYG 2094 of 2010 |
| Judgment of: | Driver FM |
| Hearing date: | 2 November 2010 |
| Delivered at: | Sydney |
| Delivered on: | 2 November 2010 |
REPRESENTATION
| Solicitors for the Applicant: | Mr N Gouliaditis Australian Government Solicitor |
| The Respondent appeared in person |
ORDERS
A sequestration order is made against the estate of Clayton Robert Croker.
The applicant creditor’s costs, including any reserved costs, be taxed and paid in accordance with the Bankruptcy Act 1966 (Cth).
Pursuant to s.52(3) of the Bankruptcy Act 1966 (Cth), all proceedings under the sequestration order are to be stayed for a period of 21 days.
The Court notes that the date of the act of bankruptcy is 22 September 2010.
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT SYDNEY |
SYG 2094 of 2010
| COMMONWEALTH OF AUSTRALIA |
Applicant
And
| CLAYTON ROBERT CROKER |
Respondent
REASONS FOR JUDGMENT
By a creditor’s petition presented on 23 September 2010, the applicant (the Commonwealth) seeks a sequestration order against the estate of the respondent (Mr Croker). After having heard the parties on
2 November 2010 I decided that the relief sought by the Commonwealth should be granted for the reasons advanced by it. These are the reasons for that judgment given orally.
The “act of bankruptcy” relied on by the Commonwealth is a failure to comply with Bankruptcy Notice number NN2706 of 2010 (“the Bankruptcy Notice”) which was issued by the Official Receiver on
28 June 2010 and served upon Mr Croker on 2 July 2010.
Section 40(1)(g) of the Bankruptcy Act 1966 (Cth) (“the Bankruptcy Act”) states that a debtor commits an act of bankruptcy:
… if a creditor who has obtained against the debtor a final judgment or final order, being a judgment or order the execution of which has not been stayed, has served on the debtor in Australia … a bankruptcy notice under this Act and the debtor does not:
(i) … within the time specified in the notice; or
(ii) …
comply with the requirements of the notice or satisfy the Court that he or she has a counter-claim, set-off or cross demand equal to or exceeding the amount of the judgment debt or sum payable under the final order, as the case may be, being a counter-claim, set-off or cross demand that he or she could not have set up in the action or proceeding in which the judgment or order was obtained; …
At the time the Bankruptcy Notice was issued, s.41(1)(b) of the Bankruptcy Act authorised the Official Receiver to issue a bankruptcy notice on the application of a creditor who has obtained against a debtor two or more final judgments or final orders that are of the kind described in s.40(1)(g) and taken together are for an amount of at least $2,000.
The total amount listed as owing by Mr Croker to the Commonwealth in the Bankruptcy Notice is $51,705.61. That amount is the total due under six separate costs orders relating to various proceedings in this Court, the Federal Court of Australia, and the Supreme and District Courts of New South Wales. In the present case, the costs orders are final orders that individually and in aggregate exceed $2,000.
On 22 September 2010 the Federal Court dismissed an application by Mr Croker to have the Bankruptcy Notice set aside: Croker v Commonwealth [2010] FCA 1031 (NSD911/2010). Orders were made in those proceedings extending the time for compliance with the Bankruptcy Notice until that date.
On 23 September 2010 the current proceeding was commenced. Section 43(1) of the Bankruptcy Act relevantly states that where:
(a) a debtor has committed an act of bankruptcy; and
(b)at the time when the act of bankruptcy was committed, the debtor:
(i)was personally present or ordinarily resident in Australia …
…
the Court may, on the petition presented by a creditor, make a sequestration order against the estate of the debtor.
Section 44(1)(a) authorises the presentation of a creditor’s petition only if, relevantly, “there is owing by the debtor to the petitioning creditor a debt that amounts to $5,000 or two or more debts that amount in the aggregate to $5,000”. That condition is satisfied in this case (see above).
Section 52 relevantly states that:
(1)At the hearing of a creditor's petition, the Court shall require proof of:
(a)the matters stated in the petition (for which purpose the Court may accept the affidavit verifying the petition as sufficient);
(b)service of the petition; and
(c)the fact that the debt or debts on which the petitioning creditor relies is or are still owing;
and, if it is satisfied with the proof of those matters, may make a sequestration order against the estate of the debtor.
(1A)If the Court makes a sequestration order, the creditor who obtained the order must give a copy of it to the Official Receiver.
(2)If the Court is not satisfied with the proof of any of those matters, or is satisfied by the debtor:
(a)that he or she is able to pay his or her debts; or
(b)that for other sufficient cause a sequestration order ought not to be made;
it may dismiss the petition.
(3)The Court may, if it thinks fit, upon such terms and conditions as it thinks proper, stay all proceedings under a sequestration order for a period not exceeding 21 days.
I am satisfied that the evidence relied on by the Commonwealth is in the form required by rules 4.02, 4.04 and 4.05 of the Federal Magistrates Court (Bankruptcy) Rules 2006 (Cth), and that that evidence establishes that the criteria in ss.43(1) and 52(1) of the Bankruptcy Act are satisfied in this case.
The opposition
On 28 October 2010, pursuant to directions made by Registrar Ng on 25 October 2010, Mr Croker filed a “Notice Stating Grounds of Opposition to Petition” (“the opposition”), along with a supporting affidavit (“the supporting affidavit”). The grounds in the notice are:
1. The Respondent has not committed any act of Bankruptcy pursuant to the Bankruptcy Act 1966 (Cth) as the commission brought by the Applicant is defective and/or there are several counter-claim, set-off or cross-demand against the Commonwealths of the kind described in s.40(1)(g) of the Act.
2. The judgment of the honourable Foster J of the 22/9/201 states:-
“The amount of each individual order for costs exceeds $2,000.00 in every case. Section 41(1)(b) of the Bankruptcy Act 1966 (Cth) (the Act) authorises the issue of a bankruptcy notice if the applicant for the issue of such a notice is the beneficiary of two or more final judgments or orders that are of the kind discussed in s.40(1)(g) of the Act and, when taken together, are for an amount of at least $2,000.00. In the present case, the costs orders are final orders that individually and in the aggregate exceed $2,000.00.”
3. The assented Bankruptcy Act 1966 (Cth) as amended at the time of the judgment was individually and in the aggregate the sum of $5,000.00.
4. The judgment of the honourable Rares J of 8/10/2010 in Croker v Department of Families, Housing, Community Services & Indigenous Affairs [2010] FCA 1136 emphasizes the allegations of the acts and omissions of a Commonwealth agency that constitute the cause of action or actions that would be a counter-claim, set-off or cross-demand against the Commonwealths of the kind described in s.40(1)(g) of the Act, well in [excess] of the amount claimed in the commission.
5. The appeal is well on foot and on the 20/10/2010 the [C]ourt ordered that a notice to all Attorneys-General pursuant to the Judiciary Act 1903 (Cth) – Section 78B be filed that involves a matter arising under the Constitution or involving its interpretation.
6. The prospects of success of the appeal are high the Respondent has set aside 3 commissions from a Commonwealth agency previously, them being:
i. Croker v Federal Commissioner of Taxation [2002] FMCA SZ0168 [sic];
ii. Croker v Federal Commissioner of Taxation [2002] 50 ATR 617;
iii. Croker v Federal Commissioner of Taxation [2003] FCAFC 23; [2003] 52 ATR 226; and
iv. Croker v Federal Commissioner of Taxation [2005] FCA 127; [2005] 58 ATR 327.
7. And alleges the learned judge has error.
8. The judgment of the [C]ourt below failed to go behind the judgment debts which are allegedly based on a general principle, of the validity of the judgment debt and will only be inquired into when there is evidence of fraud or collusion or miscarriage of justice (see Re Beauchamp [1904] 1 KB 572, Re Flatau (1889) 22 QBD 83 and Re Howell (1915) 84 LJKB 1399). The miscarriage of justice is alleged (emphasis added).
9. The petition has been brought prematurely; it was filed before the Respondent’s notice of appeal was filed in the Federal Court of Australia.
Grounds already determined by Foster J
In his judgment dismissing Mr Croker’s application to set aside the Bankruptcy Notice, Foster J dealt with four grounds pressed by Mr Croker in arguing that the Bankruptcy Notice was invalid.
First, his Honour rejected Mr Croker’s argument that he had a “counter-claim, set-off or cross demand” equal to or greater than the amount claimed in the Bankruptcy Notice, within the meaning of ss.40(1)(g) and 41(3)(a) of the Bankruptcy Act (at [20]).
a)Mr Croker asserted before Foster J that various proceedings against the Commonwealth were on foot in which damages were sought (at [5]). Foster J noted that Mr Croker had failed to identify the relevant proceedings (at [18]) and accepted the Commonwealth’s evidence that in fact only one proceeding involving Mr Croker as a party was still on foot (at [9]).
b)However, that proceeding, which was an appeal from the Administrative Appeals Tribunal to the Federal Court, was not actually a claim for damages against the Commonwealth and in any event involved an amount less than $2,000 (at [11]), which did “not qualify as a counter-claim, set-off or cross demand in an amount equal to or exceeding the amount of the debt upon which the Bankruptcy Notice is founded” (at [18]).
Secondly, Foster J rejected Mr Croker’s argument that the Bankruptcy Notice was defective because the Commonwealth had not claimed interest on the debt claimed. His Honour held that a judgment creditor is free to refrain from making any reference to interest in a bankruptcy notice (at [21]).
Thirdly, his Honour rejected Mr Croker’s arguments that the Bankruptcy Notice was defective because the address shown for the creditor was a post office box. Foster J held that the Bankruptcy Notice was in the correct form and not misleading. Further, he held that Mr Croker never intended to pay the amount claimed in any event (at [25]).
Fourthly, Foster J rejected Mr Croker’s argument that the Commonwealth had contravened the model litigant protocols in the Legal Services Directions 2005 issued by the Attorney-General under s.55ZF(1) of the Judiciary Act 1903 (Cth). His Honour held that the directions were not enforceable by Mr Croker (s.55ZG(2)), the issue of non-compliance with the directions could not be raised in any proceeding except by, or on behalf of, the Commonwealth (s.55ZG(2)), and, in any event, the Commonwealth had at all relevant times acted appropriately as a model litigant (at [27]).
Mr Croker’s opposition appears to raise grounds identical to the first, second and fourth grounds regarding the validity of the Bankruptcy Notice that were argued before Foster J.[1]
[1] see paragraph 1 of the opposition and paragraphs 7-13, 17-18 of the supporting affidavit. In fact, paragraphs 7-13 of the supporting affidavit appear to be taken from the earlier affidavit filed in the proceedings before Foster J and extracted by his Honour at [5].
Those three grounds have already been determined by Foster J. Further, it should be noted that:
a)Mr Croker has presented no evidence to support any counter-claim, set-off or cross-demand for the purposes of s.40(1)(g) of the Bankruptcy Act.
b)The only proceeding involving Mr Croker that Foster J held was still on foot (as at the time of the Foster J’s decision) was discontinued by Mr Croker on 8 October 2010.[2]
c)On 22 July 2010, Fullerton J of the Supreme Court of New South Wales made an order under s.8(7)(b) of the Vexatious Proceedings Act 2008 (NSW) prohibiting Mr Croker from instituting proceedings in New South Wales without leave: Attorney-General (NSW) v Croker [2010] NSWSC 942 at [10].
[2] see Croker v Department of Families, Housing, Community Services and Indigenous Affairs [2010] FCA 1136 (Rares J).
Additional grounds
The opposition also raises several new grounds.
At paragraphs 2 and 3 of the opposition, Mr Croker alleges that Foster J was in error to assert that s.41(1)(b) of the Bankruptcy Act authorises the issue of a bankruptcy notice “if the applicant for the issue of such a notice is the beneficiary of two or more final judgments or orders that are of the kind discussed in s.40(1)(g) of the Bankruptcy Act and, when taken together, are for an amount of at least $2,000” (at [1]). While it is true that, at the time Foster J’s judgment was delivered, the amount in s.41(1)(b) had been increased by legislative amendment to $5,000, that amendment only applied to bankruptcy notices issued on or after 11 August 2010 (and therefore does not apply in this case).[3] In any event, despite Mr Croker’s assertions to the contrary (supporting affidavit at paragraphs 14-17), the Bankruptcy Notice satisfies even this higher threshold.
[3] see Bankruptcy Legislation Amendment Act 2010 (Cth), Sch 4, items 1 and 4(1).
What is said in paragraph 4 of the opposition is unintelligible. The judgment referred to has no significance to this proceeding (see paragraphs 13.b) and 18.b) above).
At paragraphs 7 and 8 of the opposition, Mr Croker alleges that the trial judge “has error” and, further, “failed to go behind the judgment debts … where there is evidence of fraud or collusion or miscarriage of justice”. It is not this Court’s role to review Foster J’s judgment. In any event there was no evidence of fraud, collusion or miscarriage of justice in relation to any of the judgment debts in the proceedings before Foster J.
At paragraphs 5, 6 and 9 of the opposition, Mr Croker refers to the Notice of Appeal filed on 28 September 2010 (NSD1276/2010) from the judgment of Foster J, stating that it involves a constitutional matter and has high prospects of success. He further states that the current proceeding was commenced “prematurely”, since it was filed before the appeal was instituted.
This proceeding was not commenced prematurely. An act of bankruptcy was committed by Mr Croker when he failed to comply with the Bankruptcy Notice by 22 September 2010. The Commonwealth was at that stage entitled to commence this proceeding, and is entitled to continue prosecuting it.
There is no power for the Court in this proceeding to further extend the time for compliance with a bankruptcy notice under s.41(6A) of the Bankruptcy Act once an application to set aside a bankruptcy notice has been “finally determined”.[4] Although an appeal has been filed, it does not operate as an automatic stay of the judgment of Foster J.[5]
[4] Shephard v Chiquita Brands South Pacific Ltd [2004] FCAFC 76 at [40] (Hill and Marshall JJ) and [54] (Sackville J)
[5] Federal Court Rules, Order 52 rule 17. Nor does the appeal trigger s.41(7) of the Bankruptcy Act: at [45] (Sackville J).
In any event, to the extent such issues are relevant, it does not appear to me that the appeal raises any constitutional issues. I note also that on 20 October 2010, Emmett J granted the parties liberty to apply for orders that any appeal from a sequestration order made by this Court be heard at the same time as the current appeal from the judgment of Foster J.
I reject the grounds in the notice of objection to the sequestration order. I am satisfied that Mr Croker did commit the act of bankruptcy alleged in the petition, and I am also satisfied with the proof of the other matters, at which s.52(1) of the Bankruptcy Act requires proof.
I will make a sequestration order against the estate of Clayton Robert Croker. I order that the applicant creditor’s costs, including reserved costs, be taxed and paid in accordance with the Bankruptcy Act. Pursuant to s.52(3) of the Bankruptcy Act, I will order that all proceedings under the sequestration order be stayed for a period of 21 days. I note that the date of the act of bankruptcy is 22 September 2010.
I certify that the preceding twenty-eight (28) paragraphs are a true copy of the reasons for judgment of Driver FM
Associate:
Date: 8 November 2010
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