Croft v Becton Investments Management Ltd (No.2) - [2010] FMCA 419

FEDERAL MAGISTRATES COURT OF AUSTRALIA

CROFT v BECTON INVESTMENTS MANAGEMENT LTD (No.2)

[2010] FMCA 419

BANKRUPTCY – Sequestration order – review of sequestration order of Registrar – whether failure to serve originating process – whether default judgment on which bankruptcy based a nullity.

PRACTICE AND PROCEDURE – BANKRUPTCY – Extension of time to file application to set aside sequestration order – factors for consideration.

EVIDENCE – Whether affidavit to be admitted into evidence where deponent unavailable for cross-examination.

Bankruptcy Act 1966 (Cth), ss.32, 52, 153B
Federal Magistrates Act 1999 (Cth), ss.64(6), 104(2) and (3)
Federal Magistrates Court (Bankruptcy) Rules 2006 (Cth), r.2.03(1)
Magistrates Court (Civil Proceedings) Rules 2005 (WA), rr.9(1), 103(3), 105

Arvanitis v Citigroup Pty Ltd [2010] FMCA 415
Craig v Kanssen [1943] KB 256
Deputy Commissioner of Taxation v Barnes & Anor (No. 2) [2008] FMCA 1229
Jones v Dunkel (1959) 101 CLR 298
O’Meara v Hitwise Pty Ltd & Anor (2007) 160 FCR 518; [2007] FCAFC 114
Pattison v Hadjimouratis (2006) 155 FCR 226; [2006] FCAFC 153
Rafaraci v Pearce [2003] FCA 1307
Re Ditfort; Ex parte Deputy Commissioner of Taxation (NSW) (1988) 19 FCR 347
Re Marsh & Anor; Ex parte Marsh & Anor v Paramount Leisure Products Pty Ltd (1991) 32 FCR 482
Re Willshire-Smith; Ex parte Randle & Taylor Services Pty Ltd (1994) 48 FCR 371
Westlawn Finance Ltd v Bennell [2009] FMCA 915

Applicant:

RODNEY KIM CROFT

Respondent:

BECTON INVESTMENTS MANAGEMENT LTD

File Number:

PEG 67 of 2009

Judgment of:

Lucev FM

Hearing dates:

14 July, 4 August, 10 November and 14 December 2009

Date of Last Submission:

14 December 2009

Delivered at:

Perth

Delivered on:

18 June 2010

REPRESENTATION

The Applicant:

In person, and later Mr J. C. Vaughan (of Counsel)

Solicitors for the Applicant:

Murfett Legal

The Respondent:

Mr J. D. Maclaurin (of Counsel)

Solicitors for the Respondent:

Marks & Sands Lawyers

ORDERS

The sequestration order made by Registrar Jan on 4 May 2009 be set aside.
The respondent’s creditor’s petition dated 20 November 2008 be dismissed.

FEDERAL MAGISTRATES
COURT OF AUSTRALIA AT
PERTH

PEG 67 of 2009

RODNEY KIM CROFT

Applicant

And

BECTON INVESTMENTS MANAGEMENT LTD

Respondent

REASONS FOR JUDGMENT

Applications – for an extension of time and amended substantive application

This is an application for review[1] under s.104(2) and (3) of the Federal Magistrates Act 1999 (Cth)[2] of the sequestration order[3] and order for costs made by a Registrar of this Court against the estate of the applicant, Rodney Kim Croft,[4] on 4 May 2009 under ss.52 and 32 of the Bankruptcy Act 1966 (Cth).[5] There is also an application for an extension of time in which to file the Review Application.[6]
[1] “Review Application”.
[2] “FM Act”.
[3] “Sequestration Order”.
[4] “Mr Croft”.
[5] “Bankruptcy Act”.
[6] FM Act, s.104(2)(b).

Orders sought

Following amendment, the Review Application seeks the following orders:
1.The Sequestration Order made by Registrar Jan on 4 May 2009 be set-aside.
2.The Respondent’s Creditor’s Petition dated…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

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Details

Case: [2010] FMCA 419
Decision Date: 18 June 2010

CaseChat Overview and Summary

The case of Croft v Becton Investments Management Ltd (No.2) involved a dispute over a sequestration order made against the applicant, Croft, by the Registrar on 4 May 2009. The application to set aside this order was brought before the court. The primary issue was whether the sequestration order should be set aside due to a failure to serve the originating process on Croft, and whether the default judgment on which the bankruptcy was based was a nullity. Additionally, the court had to consider the extension of time to file the application to set aside the sequestration order and the admissibility of an affidavit where the deponent was unavailable for cross-examination.

The court examined whether the failure to serve the originating process on Croft constituted a procedural error that rendered the sequestration order invalid. It was argued that the Registrar’s decision to make the order was based on a default judgment which Croft was unaware of, and therefore, the order was a nullity. The court also considered the factors relevant to extending the time to file the application to set aside the sequestration order. These factors included the length of the delay, the reason for the delay, and whether Croft had a bona fide case to set aside the order. Finally, the court addressed the issue of the affidavit's admissibility, given that the deponent was unavailable for cross-examination.

The court found that the sequestration order should be set aside because there was a failure to serve the originating process on Croft, which led to the default judgment being a nullity. The court granted the extension of time to file the application to set aside the sequestration order, considering the reasons for the delay and the merits of the case. The affidavit was admitted into evidence despite the deponent's unavailability for cross-examination, as it was deemed to be in the interests of justice to do so. Consequently, the sequestration order made by the Registrar on 4 May 2009 was set aside, and the respondent’s creditor’s petition dated 20 November 2008 was dismissed.

The final orders of the court were that the sequestration order made by the Registrar on 4 May 2009 be set aside and that the respondent’s creditor’s petition dated 20 November 2008 be dismissed. This decision highlighted the importance of procedural fairness in bankruptcy proceedings and the court’s discretion in considering extensions of time and the admissibility of evidence under exceptional circumstances.

Orders

Orders of the court

The sequestration order made by Registrar Jan on 4 May 2009 be set aside.

The respondent’s creditor’s petition dated 20 November 2008 be dismissed.

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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