Harris v Deputy Commissioner of Taxation
[2007] FMCA 290
•16 March 2007
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| HARRIS v DEPUTY COMMISSIONER OF TAXATION | [2007] FMCA 290 |
| BANKRUPTCY – Application to set aside bankruptcy notice – need for affidavit to be filed with application within time – power to excuse non-compliance. |
| Bankruptcy Act1966, ss.30, 41(5), 41(6A), 306 Federal Magistrates Court (Bankruptcy) Rules 3.02, 3.03 Federal Magistrates Act1999, ss.57, 81 Corporations Law, s.690(2) |
| La Pegna v DCT [2006] FMCA 1643 Guss v Johnstone (2000) 171 ALR 598 Hubner v ANZ Banking Group Ltd [1998] FCA 1779 Re Lentini; ex parte Lentini v CSR Limited (1991) 29 FCR 363 Adams v Lambert (2006) 3 ABC (NS) 835 David Grant & Co Pty Ltd v Westpac Banking Corporation (1995) 184 CLR 265 |
| Applicant: | GILLIAN FRANCES HARRIS |
| Respondent: | DEPUTY COMMISSIONER OF TAXATION |
| File number: | BRG 808 of 2006 |
| Judgment of: | Wilson FM |
| Hearing dates: | 15 December 2006 & 23 January 2007 |
| Date of last submission: | 13 February 2007 |
| Delivered at: | Brisbane |
| Delivered on: | 16 March 2007 |
REPRESENTATION
| Counsel for the Applicant: | Mr Nagle |
| Solicitors for the Applicant: | Michael Peters |
| Counsel for the Respondent: | N/A |
| Solicitors for the Respondent: | Gadens Lawyers |
ORDERS
The application filed 25 October 2006 be dismissed.
The applicant pay the respondent’s costs of and incidental to the application to be taxed, unless otherwise agreed.
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT BRISBANE |
BRG 808 of 2006
| GILLIAN FRANCES HARRIS |
Applicant
And
| DEPUTY COMMISSIONER OF TAXATION |
Respondent
REASONS FOR JUDGMENT
By application filed 25 October 2006, the applicant debtor sought orders:
a)that a bankruptcy notice that was served on her on 4 October 2006 be set aside; and
b)that time for compliance with the bankruptcy notice be extended.
The respondent took a preliminary point, that the application was incompetent, because although an application to set aside the bankruptcy notice was filed in this Court before the expiration of the time fixed for compliance with the requirements of the bankruptcy notice, an affidavit in support of that application was not filed until the following day. It was submitted that, unless the affidavit was filed with the application before the expiration of time, the application was incompetent and could not be entertained.
It is convenient to deal first with the preliminary point raised by the respondent. It relies heavily on the decision of Federal Magistrate Lucev in La Pegna v DCT [2006] FMCA 1643. Although the application brought by the debtor must fail on substantive grounds, that I deal with below, because I disagree with the decision of FM Lucev, in my view I should state my reasons therefore.
Section 41(6A) Bankruptcy Act1966 provides:
Where, before the expiration of the time fixed for compliance with the requirements of a bankruptcy notice:
(a)proceedings to set aside a judgment or order in respect of which the bankruptcy notice was issued have been instituted by the debtor; or
(b)an application has been made to the Court to set aside the bankruptcy notice;
the Court may, subject to sub-section (6C), extend the time for compliance with the bankruptcy notice.
It is common ground that the bankruptcy notice was served on
4 October 2006. 21 days was the time fixed for compliance. That expired on 25 October 2006. No application to set aside the judgment upon which the bankruptcy notice relied was filed on or prior to
25 October. Therefore, to activate s.41(6A) the applicant has to show that an application had been made to the court to set aside the bankruptcy notice on or before 25 October. Although in argument I raised the issue as to whether an application to set aside the bankruptcy notice, as distinct from an application for an extension of time within which to comply, had to be filed within any specified time, or whether it could be made at any time pursuant to s.30 Bankruptcy Act, it is not necessary for me to decide that issue. It is one that did not have the benefit of considered argument, and, having regard to my decision on the procedural point that was argued, is academic (see, however, Guss v Johnstone (2000) 171 ALR 598 at 610).
Rules 3.02 and 3.03 of the Federal Magistrates Court (Bankruptcy) Rules 2006 relevantly provide:
An application to set aside a bankruptcy notice must be accompanied by:
(a) a copy of the bankruptcy notice; and
(b) an affidavit stating:
(i) the grounds in support of the application; and
(ii) the date when the bankruptcy notice was served on the applicant; and
(c) a copy of any application to set aside the judgment or order in relation to which the bankruptcy notice was issued and any material in support of that application.
An application for an extension of time for compliance with a bankruptcy notice must be accompanied by:
(a) a copy of the bankruptcy notice; and
(b) an affidavit stating:
(i) the grounds in support of the application; and
(ii) the date when the bankruptcy notice was served on the applicant; and
(c) a copy of any application to set aside the judgment or order in relation to which the bankruptcy notice was issued and any material in support of that application.
On 25 October 2006 the applicant’s application was filed, but the supporting affidavit was not filed until the following day. Put simply, the respondent’s argument was that without an accompanying affidavit, there was no valid application, as required by the Rules. In the absence of a valid application, it was submitted that s.41(6A)(b) was not engaged.
In La Pegna v DCT FM Lucev was confronted with an application filed prior to the expiration of the time for compliance with a bankruptcy notice, but an affidavit in support filed six days later. His Honour formulated the issue for determination at paragraph [30] of his Reasons as follows:
“The question arises as to what constitutes an application, and whether absent an affidavit setting out the grounds of the application there is in fact an application, or an application in accordance with the Bankruptcy Act. This is intertwined with the question of whether a failure to file the affidavit in support of the Application is a formal defect or irregularity, and this issue must be considered before determining whether time for compliance ought to be, or can be, extended.”
His Honour declined to follow Hubner v ANZ Banking Group Ltd [1998] FCA 1779 apparently on the basis that Dowsett J had not properly analysed whether the failure to file an affidavit was a formal defect or irregularity. His Honour distinguished Re Lentini; ex parte Lentini v CSR Limited (1991) 29 FCR 363 on the ground that it was decided under the former Bankruptcy Rules 1968. His Honour approached the matter by asking whether the failure to file an affidavit with the application was a formal defect or irregularity, as that phrase was construed by the High Court of Australia in Adams v Lambert (2006) 3 ABC (NS) 835, and if so, whether it should be excused by s. 306 Bankruptcy Act. In this regard FM Lucev said, at [44]:
It appears to me that the appropriate approach in this matter is to endeavour to apply the principles set out in Adams dealing specifically with the approach to s.306(1) of the Bankruptcy Act, rather than following Hubner or Hubner Appeal wherein no detailed consideration was given to the question of what constitutes a formal defect or irregularity under s 306(1).
In my view this approach confuses the requirements of the Bankruptcy Act with the requirements of the Federal Magistrates Court (Bankruptcy) Rules made pursuant to the Federal Magistrates Act1999 (s.81). Section 306 Bankruptcy Act is concerned with proceedings under that Act. All that is required by s.41(6A)(b) of the Bankruptcy Act is that an “application” has been made to the Court. The term ‘application’ is not defined in the Act. It does not require that application to be supported by an affidavit. Therefore, it cannot be said that an affidavit is an essential requirement “under the Bankruptcy Act” as his Honour concluded at paragraph [53] of his reasons. In those circumstances, it is not relevant to look to s. 306 Bankruptcy Act and ask whether the contemporaneous filing of an affidavit is something that is made essential by the Bankruptcy Act.
Nor can this approach be supported by reference to s.41(5) Bankruptcy Act. That subsection requires the debtor to give specific notice within the time allowed for compliance with the bankruptcy notice. That notice could be given in either an application or a supporting affidavit. Further, the requirement to give such notice is something expressly required by the Act. Therefore, support for his Honour’s application of s.306 of the Act to Rules 3.02 and 3.03 cannot be derived from s.41(5) of the Act.
The respondent’s argument gains no support from the decision of the High Court of Australia in David Grant & Co Pty Ltd v Westpac Banking Corporation (1995) 184 CLR 265. There, the relevant legislation expressly required an affidavit to be filed with the application to set aside the statutory demand (s.690(2) Corporations Law).
Rather, one should look to the Federal Magistrates Act and the Federal Magistrates Court (Bankruptcy) Rules to see if the stated requirement (in Rules 3.02 and 3.03) to file an affidavit with the application is something that cannot be excused. In this regard, reference should be made to s.57 Federal Magistrates Act which provides:
(1) Proceedings in the Federal Magistrates Court are not invalidated by a formal defect or an irregularity, unless the Federal Magistrates Court is of opinion that:
(a) substantial substantial injustice has been caused by the defect or irregularity; and
(b) the injustice cannot be remedied by an order of the Federal Magistrates Court.
(2) The Federal Magistrates Court or a Federal Magistrate may, on such conditions (if any) as the Federal Magistrates Court or Federal Magistrate thinks fit, make an order declaring that the proceeding is not invalid:
(a) by reason of a defect that it or he or she considers to be formal; or
(b) by reason of an irregularity.
In La Pegna at [34] FM Lucev referred to s.57(1) but did not apply it. In my view, it was this section, rather than s.306 Bankruptcy Act which governed whether the failure to file an affidavit contemporaneously with the application, ought be excused.
If that be the correct approach, the decision of Dowsett J in Hubner endorsed by the Full Court, must be followed. The failure of the applicant to file her affidavit together with the application was, in those circumstances, a formal defect or irregularity.
In deciding whether to excuse the irregularity, the facts of the case need to be examined. The only evidence on the subject is from the applicant. The respondent does not seek to argue that the filing of the supporting affidavit one day late has caused it any prejudice, nor that excusing the irregularity would result in substantial injustice.
In her affidavit filed 15 November 2006, the applicant deposes to attempting to file the documents on 24 October, but says that she arrived in Brisbane (after having driven from the Gold Coast) shortly after the registry had closed. She again attempted to file the documents on 25 October 2006 but says that registry staff refused to accept her affidavit for filing as it was not signed on every page. She was told to return to the Gold Coast and have the Justice of the Peace witness her signature on each page. The application was accepted for filing on
25 October. The applicant returned with her affidavit properly sworn and filed it on 26 October.
In those circumstances, it is clear in my view that the respondent’s preliminary point fails, and I would make whatever order is necessary to enable the applicant to argue her application on its merits.
The bankruptcy notice is based on a default judgment of the District Court of Queensland entered on 24 August 2006. The applicant applied, by application filed 13 November 2006, to set aside the judgment. That application was dismissed on 7 December 2006 because of the non appearance of the applicant.
A further application to set aside the judgment was filed on
14 December 2006. It was argued before McGill DCJ on 19 January 2007. The argument was heard on the merits. His Honour dismissed the application. In the course of his reasons, his Honour said:
“Accordingly, the situation in this case is that the defendant really cannot show that there is any real prospect that if the judgment is set aside and the matter goes to trial, there would be any prospect of the defendant’s succeeding. The defendant has, in effect, failed to show even an arguable defence on the merits.”
Having failed to set aside the judgment upon which the bankruptcy is based, inevitably leads to the conclusion that the application to set aside the bankruptcy notice should be dismissed. The matter was argued before me before the application to set aside the judgment was heard in the District Court. I adjourned my consideration of the application to avoid the risk of inconsistent results being reached by this Court and the District Court of Queensland on the point of whether the applicant had an arguable defence to the proceedings brought against her by the respondent. That point having been decided against the applicant means that there are no grounds upon which the applicant can rely to set aside the bankruptcy notice. Counsel for the applicant conceded that if the applicant failed in the District Court, her application in this court should be dismissed. The applicant does not rely on any technical arguments about the form of the bankruptcy notice, or as to service etc.
The orders I will make are as follows:
a)The application filed 25 October 2006 be dismissed.
b)The applicant pay the respondent’s costs of and incidental to the application to be taxed, unless otherwise agreed.
I certify that the preceding twenty-two (22) paragraphs are a true copy of the reasons for judgment of Wilson FM
Associate: Lynnette Chin
Date: 16 March 2007
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