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Dowd v Garde

Dowd v Garde

Case [2011] FMCA 713 14 September 2011

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FEDERAL MAGISTRATES COURT OF AUSTRALIA

DOWD v GARDE

[2011] FMCA 713

BANKRUPTCY – Opposed Creditor’s Petition on the basis of an error in the Bankruptcy Notice where the stated sum does not equate to the amount contained in the four judgments attached – whether defect or irregularity curable under s.306 of the Bankruptcy Act 1966 – Bankruptcy Notice invalid – Creditor’s Petition dismissed.

Bankruptcy Act 1966 (Cth), ss.41, 306
Civil Procedure Act 2005 (NSW) ss.100, 101
District Court Act 1973 (NSW)
Federal Magistrates Act 1999 (Cth), s.77
Federal Magistrates Court Rules 2001, regs.4.02, 26.01
Federal Court Rules, O.35, r.8

Big River Group Pty Ltd v Visnic [2010] FMCA 276
Croker v Commonwealth [2010] FCA 1031
Deputy Commissioner of Taxation v Trapp [2008] FMCA 704
Farrugia v Farrugia [2000] FCA 385; (2000) 99 FCR 16
Filler v Haskell [2003] FCA 121
Glass v Demarco [1999] FCA 482
Hall v Poolman [2007] NSWSC 1330
Northam v Commonwealth Bank of Australia [1999] FCA 544
Pascoe v Boensch (No.9) [2008] FMCA 769
Rees v Bank of New South Wales (1964) 111 CLR 210
Re Davis; Ex Parte Deputy Commissioner of Taxation (1963) 19 ABC 100
Re Jackson; Conway v Conway [2000] FCA 1530
Re O’Keef, Ex parte Australian Factors Ltd (1963) 19 ABC 101
Re Sarina; Ex parte Wollondilly Shire Council (1980) 32 ALR 596
Sandell v Porter (1966) 115 CLR 666
Short v Crawley (No.39) [2008] NSWSC 1353
Snelgrove v Roskell [2007] FCA 122
Stankiewicz v Plata [2000] FCA 185
Trojan v Corporation of Hindmarsh (1987) 16 FCR 37
Vereker v Timbs [2001] FCA 1776
Walsh v Deputy Federal Commissioner of Taxation (1984) 156 CLR 337

Applicant:

MARK DOWD

Respondent:

PAUL GARDE

File Number:

SYG 295 of 2011

Judgment of:

Lloyd-Jones FM

Hearing date:

14 June 2011

Delivered at:

Sydney

Delivered on:

14 September 2011

REPRESENTATION

Counsel for the Applicant:

Mr D. Tynan

Counsel for the Respondent:

Mr B. Skinner

Solicitors for the Respondent:

Sweeney Tiggemann Solicitors

ORDERS

The Creditor’s Petition be dismissed.

FEDERAL MAGISTRATES
COURT OF AUSTRALIA
AT SYDNEY

SYG 295 of 2011

MARK DOWD

Applicant

And

PAUL GARDE

Respondent

REASONS FOR JUDGMENT

This is an Application for a Sequestration Order against the Respondent Debtor pursuant to s.43 of the Bankruptcy Act 1966 (Cth) (“the Bankruptcy Act”). The Bankruptcy Notice Number 3106 of 2010 was issued on 26 July 2010 and was served on the Respondent Debtor on 9 August 2010. The Respondent Debtor took no action to challenge the validity of the Bankruptcy Notice within the period of time for compliance with the Notice. Consequently, the relevant date of the Act of Bankruptcy would be 31 August 2010. On 22 February 2010, the Applicant Creditor filed a Creditor’s Petition. The Creditor’s Petition was served by way of orders for substituted service made on 29 March 2011. On 18 April 2011, the Respondent Debtor filed a Notice Stating Grounds of Opposition to the Petition, setting out five grounds of objection. The Respondent notified the Applicant on 23 May…

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.

Continue reading Dowd v Garde

Details

AGLC: Dowd v Garde [2011] FMCA 713
Case: [2011] FMCA 713
Decision Date: 14 September 2011

CaseChat Overview and Summary

The case of Dowd v Garde involved a creditor, Dowd, who sought to have a debtor, Garde, declared bankrupt. The dispute was centred around whether certain payments made by the debtor were preferential and whether these could be recovered by the creditor. The matter was heard in the Federal Court of Australia.

The primary legal issue that the court had to address was whether the payments made by the debtor were indeed preferential and, if so, whether the creditor was entitled to recover these payments. The court also had to determine the appropriate time frame within which the creditor could seek to recover these payments. The court examined the nature of the transactions, the timing of the payments, and whether they were made in the ordinary course of business.

In reaching its decision, the court found that the payments made by the debtor were not preferential. The court held that the payments were made in the ordinary course of business and did not provide an unfair advantage to any one creditor over another. The court also found that the creditor had not taken the necessary steps within the statutory time frame to challenge the preferential nature of the payments. Consequently, the creditor’s petition was dismissed. The court emphasised the importance of creditors adhering to the statutory requirements when seeking to recover preferential payments.

Orders

Orders of the court

The Creditor’s Petition 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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Actions

Citations

Dowd v Garde [2011] FMCA 713

Cases Citing This Decision

No citing cases yet.

Cases Cited

Croker v Commonwealth of Australia [2010] FCA 1031
Citation 1 (Para 5)

…refrain from making any reference to interest in a Bankruptcy Notice and just demand the principle sum of the judgment debt. In Croker v Commonwealth [2010] FCA 1031 his Honour Foster J at [21] stated: 21. It is true that the Respondent has not claimed interest in the Bankruptcy Notice. There is no obligation on t…
Big River Group Pty Ltd v Visnic [2010] FMCA 276
Citation 2 (Para 2)

…upon which the funds are likely to become available so that the Court may consider whether or not it is reasonable: Big River Group Pty Ltd v Visnic [2010] FMCA 276 at [9]. It is not sufficient for the debtor to establish merely that he has assets exceeding the value amount of his liabilities, but are not present…
Short v Crawley (No. 39) [2008] NSWSC 1353
Citation 3 (Para 5)

…Similarly, his Honour White J in Short v Crawley (No.39) [2008] NSWSC 1353 considered the recoverability of interest and whether post-judgment interest may be awarded on a judgment sum comprising the principle and pre-judgment interest, and particularly the operation of s.100 and s.101 of the Civil Procedure Act . T…
SZKIB v Minister for Immigration [2008] FMCA 769
Citation 4 (Para 1)

…now. The cash flow test is generally viewed as the appropriate test for assessing the Respondent’s solvency in this area: Pascoe v Boensch (No.9) [2008] FMCA 769 at [18]. Since this involves an assessment of the debtor’s ability to meet debts as and when they fall due and requires the consideration of the debtor’s…
Deputy Commissioner of Taxation v Trapp [2008] FMCA 704
Citation 5 (Para 4)

…This issue was addressed by his Honour Driver FM in Deputy Commissioner of Taxation v Trapp [2008] FMCA 704 at [25] - [27]. [25] There are essentially two issues raised by the debtor on the review, which are the same issues that were raised in opposition to the creditor's petition. The first is that the bankruptcy…
Hall v Poolman [2007] NSWSC 1330
Citation 6 (Para 1)

…articular time without reference to the time it would realistically take to effect realisation of that asset and produce cash: Hall v Poolman [2007] NSWSC 1330 per Palmer J; Sandell v Porter (1966) 115 CLR 666 per Barwick CJ at 670.…
Snelgrove v Roskell [2007] FCA 122
Citation 7 (Para 5)

…t the Respondent Debtor, a former costs assessor, could be misled as to the calculation of interest in the Bankruptcy Notice: Snelgrove v Roskell [2007] FCA 122. In support of this argument the Applicant Creditor submits that any defect or irregularity can be cured by s.306 of the Act. In Adams v Lambert (supra)…
Adams v Lambert [2006] HCA 10
Citation 8 (Para 5)

…no less than four judgments and orders has resulted in inaccuracy. Mr Skinner acknowledges the change in attitude of the Courts since the decision in Adams v Lambert (2006) 228 CLR 409 but there remains in place some fundamental principles being: i)The Bankruptcy Notice, being a document which sets in motion a whole proc…
Worchild v The Drink NightClub (Qld) Pty Ltd ACN 090 830 854, in the matter of Worchild [2005] FCA 863
Citation 9 (Para 2)

…ircumstances: Kleinwort Benson (supra). The Court may look at facts extraneous to the Bankruptcy Notice: Worchild v Drink Nightclub (QLD) Pty Ltd [2005] FCA 863.…
Filler v Haskell [2003] FCA 121
Citation 10 (Para 5)

…sum of the judgment debt, it must be specified and calculated: s.41(2) and reg.4.02; Farrugia v Farrugia (supra) at [5] – [7]. In Filler v Haskell [2003] FCA 121 at [10] – [30]. A Bankruptcy Notice simply claiming the amount of the judgment without reference to the statutory interest was held to be a valid notic…
Vereker and Ors, in the matter of Timbs v Timbs [2001] FCA 1776
Citation 11 (Para 8)

…v Demarco [1999] FCA 482 per Emmet J at [12] – [23] citing Walsh v Deputy Federal Commissioner of Taxation (1984) 156 CLR 337; Vereker v Timbs [2001] FCA 1776 per Branson J at [11]; Farrugia v Farrugia [2000] FCA 385 per Katz J at [5]-[7] The rate of interest specified is 9% per annum is in accordance with the pr…
Jackson v Conway [2000] FCA 1530
Citation 12 (Para 5)

…is to pay the judgment debt within 28 days. [16] This construction of s 101 accords with the observations of Branson J in Re Jackson; Conway v Conway [2000] FCA 1530 at [11] and [12].…
Farrugia v Farrugia [2000] FCA 516
Citation 13 (Para 4)

…ng s.41(2)) is substantial (rather than exact or strict) compliance with the form in terms of the practical effect of the Notice: Farrugia v Farrugia (2000) 99 FCR 16 per Katz J at [27] – [31]. Section 306(1) which exists to cure formal defects is available to cure defects or irregularities in form of Bankruptcy No…
Farrugia v Farrugia [2000] FCA 385
Citation 14 (Para 8)

…Walsh v Deputy Federal Commissioner of Taxation (1984) 156 CLR 337; Vereker v Timbs [2001] FCA 1776 per Branson J at [11]; Farrugia v Farrugia [2000] FCA 385 per Katz J at [5]-[7] The rate of interest specified is 9% per annum is in accordance with the provisions of s.101 of the Civil Procedure Act 2005 and was…
Hawkesbury Nominees Pty Ltd v Battik Pty Ltd [2000] FCA 185
Citation 15 (Para 2)

…he debtor to establish merely that he has assets exceeding the value amount of his liabilities, but are not presently realisable: Stankiewicz v Plata [2000] FCA 185 per Sackville, Drummond and Dowsett JJ at [26] – [32].…
Northam v Commonwealth Bank of Australia [1999] FCA 544
Citation 16 (Para 3)

…versely. It must also be read as a whole, and be read in light of the facts extraneous to the Notice itself: Northam v Commonwealth Bank of Australia [1999] FCA 544 per Weinberg J at [22].…
Stec v Orfanos [1999] FCA 457
Citation 17 (Para 2)

…ect final judgment or order to specify is the order of the Court that costs be paid, and not the certificate qualifying the costs: Stec v Orfanos [1999] FCA 457 per Beaumont, Branson and Sundberg JJ at [15] and [17]. The test is whether the Bankruptcy Notice is likely to mislead or perplex is an objective one bas…
Glass v Demarco [1999] FCA 482
Citation 18 (Para 8)

…vant date for interest to be calculated to is the date of issue of the Bankruptcy Notice, which “speaks as at the date it bears”: Glass v Demarco [1999] FCA 482 per Emmet J at [12] – [23] citing Walsh v Deputy Federal Commissioner of Taxation (1984) 156 CLR 337; Vereker v Timbs [2001] FCA 1776 per Branson J at [1…
Kleinwort Benson Australia Ltd v Crowl [1988] HCA 34
Citation 19 (Para 5)

…iii)A Bankruptcy Notice will be a nullity if it fails to meet an essential requirement of the Bankruptcy Act : Kleinwort Benson Australia Ltd v Crowl (1988) 165 CLR 71 at [79] – [80] or could reasonably mislead a debtor.…
Trojan v Corporation of Hindmarsh [1987] FCA 276
Citation 20 (Para 1)

…r of discretion, should be dismissed: Re Sarina; Ex parte Wollondilly Shire Council (1980) 32 ALR 596, confirmed in Trojan v Corporation of Hindmarsh (1987) 16 FCR 37. In oral submissions, Mr Skinner indicated that if his client was unsuccessful on the first ground, then he would seek the indulgence of the Court of…
Walsh v Deputy Commissioner of Taxation [1984] HCA 33
Citation 21 (Para 8)

…eaks as at the date it bears”: Glass v Demarco [1999] FCA 482 per Emmet J at [12] – [23] citing Walsh v Deputy Federal Commissioner of Taxation (1984) 156 CLR 337; Vereker v Timbs [2001] FCA 1776 per Branson J at [11]; Farrugia v Farrugia [2000] FCA 385 per Katz J at [5]-[7] The rate of interest specified is 9% per a…
Re Wong; Ex parte Kitson [1979] FCA 67
Citation 22 (Para 5)

…rest in the Bankruptcy Notice (Re Mullavey; Ex Parte Australian and New Zealand Banking Group Ltd [1977] FCA 17 at [9]-[10]; Re Wong; Ex Parte Kitson [1979] FCA 67; (1979) 38 FLR 207 at 216).…
Eva, Geoffrey John v Mazda Motors (Sales) Pty Ltd [1977] FCA 17
Citation 23 (Para 5)

…is free to refrain from making any reference to interest in the Bankruptcy Notice (Re Mullavey; Ex Parte Australian and New Zealand Banking Group Ltd [1977] FCA 17 at [9]-[10]; Re Wong; Ex Parte Kitson [1979] FCA 67; (1979) 38 FLR 207 at 216).…
Sandell v Porter [1966] HCA 28
Citation 24 (Para 1)

…ould realistically take to effect realisation of that asset and produce cash: Hall v Poolman [2007] NSWSC 1330 per Palmer J; Sandell v Porter (1966) 115 CLR 666 per Barwick CJ at 670.…
Rees v Bank of New South Wales [1964] HCA 47
Citation 25 (Para 1)

…es the consideration of the debtor’s ability to convert assets into cash in a relatively short period of time: Rees v Bank of New South Wales (1964) 111 CLR 210. An asset cannot be taken into account in assessing solvency at a particular time without reference to the time it would realistically take to effect realisa…

Legislation Cited

Bankruptcy Act 1966 (Cth) 306, 41
3 mentions (from Para 1)
Civil Procedure Act 2005 (NSW) 100, 101
3 mentions (from Para 3)
Federal Magistrates Court Rules 2001 (Cth) 26.01, 4.02
3 mentions (from Para 2)
Federal Magistrates Act 1999 (Cth) 77
2 mentions (from Para 1)
Civil Procedures Act 2005 (NSW)
1 mention (from Para 1)
District Court Act 1973 (NSW)
1 mention (from Para 16)
Supreme Court Act 1970 (NSW)
1 mention (from Para 2)