Herchenroder & Anor v Smith
[2003] FMCA 96
•4 March 2003
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| HERCHENRODER & ANOR v SMITH | [2003] FMCA 96 |
| BANKRUPTCY – Application to set aside a bankruptcy notice – where there is a claim for a debt due under judgment of District Court – where this judgment appealed – where application for special leave to appeal to High Court – whether the reference to payment of the debt being made to an address given as a PO Box invalidates the notice – whether the debtor would be confused – whether the error is one which can be rectified under s.360(1) of the Bankruptcy Act – whether time for compliance should be extended. |
Federal Court of Australia Act 1976 (Cth)
Bankruptcy Act 1966 (Cth), ss.41(2), 360(1)
Boorowa Shire Council v Stuart Edgar John Booth [2001] FMCA 31
Re Pugliese; Ex parte Chase Manhattan Bank of Australia Limited (1993) 44 FCR 536
Bank of Melbourne Limited v Hannon (Unreported) FCA, Northrop ACJ,
5 September 1997.
Sarikay v Victorian WorkCover Authority (1997) FCA 1372
Eastern Pastoral Company Pty Ltd v MacFarlane [1999] FCA 172
Bonds Industries Ltd v Sing [1999] FCA 1055
Lui v Schnabel [2002] FMCA 274
Ahearn v Deputy Commissioner of Taxation (Qld) [1987] 76 ALR 137
Byron v Southern Star Group Pty Ltd [1997] 73 FCR 264
| Applicant: | HERCHENRODER & ANOR |
| Respondent: | PHILLIP GORDON SMITH |
| File No: | SZ 68 of 2003 |
| Delivered on: | 4 March 2003 |
| Delivered at: | Sydney |
| Hearing date: | 4 March 2003 |
| Judgment of: | Raphael FM |
REPRESENTATION
| Counsel for the Applicant: | Mr K P Smark |
| Solicitors for the Applicant: | Hertzberg Heydon |
| Counsel for the Respondent: | Mr D L Warren |
| Solicitors for the Respondent: | Brian M Bigelow |
ORDERS
Application to set aside bankruptcy notice dismissed.
Time for compliance with bankruptcy notice extended until 7 March 2003.
Applicant to pay the respondent’s costs to be taxed if not agreed under the Federal Court of Australia Act 1976 (Cth) and pursuant to the Federal Court Rules.
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT SYDNEY |
SZ 68 of 2003
| HERCHENRODER & ANOR |
Applicant
And
| PHILLIP GORDON SMITH |
Respondent
REASONS FOR JUDGMENT
In this matter the applicant seeks the setting aside of a bankruptcy notice issued at the request of the respondent on 12 December 2002. The bankruptcy notice makes a claim for a debt due under a judgment of the District Court of New South Wales which was obtained against the debtors by confession.
Although the judgment was so obtained, it was the subject of an appeal to Sidis J who set it aside. That decision of Sidis J was itself appealed to the Court of Appeal which the court, constituted by Mason P, Bealey and Campbell JJA reversed the decision of Sidis J and left the judgment standing. The decision of the Court of Appeal is itself the subject of an application for special leave to appeal to the High Court of Australia.
There are two legs to the application before me today. The first is an attack upon the validity of the bankruptcy notice itself. The second is an application for the exercise of my discretion to extend the time for compliance with the bankruptcy notice until after the decision on the special leave application and presumably, if special leave is granted, until after the hearing and decision of the High Court.
The bankruptcy notice
The debtor's complaint about the validity of the bankruptcy notice lies in paragraph 4 of that notice which is in the form prescribed under s.41(2) of the Bankruptcy Act 1966 (Cth) (“the Bankruptcy Act”) and by rule 4.02 of the Bankruptcy Regulations. Paragraph 4 states:
“Payment of the debt can be made to: Brian C.N. Bigelow, Solicitor of (P.O. Box 13, Lismore, 2480).”
Mr Bigelow is not the creditor. The creditor's name and address are clearly given as Phillip Gordon Smith of 265 Mount Samson Road, Yugar, Queensland, in paragraph 1 of the notice. On page 7 of the notice it notes the following:
“The person who applied for this notice to be issued is: Brian C.N. Bigelow, Solicitor ... and whose address for service is: 35 Woodlark Street, Lismore, NSW, 2480.”
The debtor argues that the placing of a post office box address in part 4 of the bankruptcy notice is a fatal defect as it does not indicate a place at which the debt can be paid or compromised. The creditor argues that in this case I should not so find because the fact that Mr Bigelow's proper address is set out on page 7 of the notice means that the debtor would not be confused as to where he or she has to go in order to pay the debt or make the appropriate arrangements.
I dealt with a matter very similar to this in Boorowa Shire Council v Stuart Edgar John Booth [2001] FMCA 31. In that case the name of the creditor in paragraph 1 was the Boorowa Council and the place at which payment of the debt could be made was the Council, care of a post office box and then an address. On page 5 of the notice the address for service was also given as the Council at the address previously stated. That situation is slightly different from the one before me today.
The providing of a solicitor's address as the address at which payment can be made is permitted. Re Pugliese; Ex parte Chase Manhattan Bank Australia Limited (1993) 44 FCR 536; Bank of Melbourne Limited v Hannon (Unreported) FCA, Northrop ACJ, 5 September 1997. It is also clear that a post office box cannot constitute an address for service for the purposes of order 7, rule 6(1) of the Federal Court Rules. Sarikay v Victorian WorkCover Authority (1997) FCA 1372. The purpose of the address has been considered in a number of cases including Eastern Pastoral Company Pty Limited v MacFarlane [1999] FCA 172 where it was described as an address:
“… at which the creditor can be found in order, among other things, to notify the debtors where the documents might be served and where the debt might be paid.”
In Bonds Industries Limited v Singh [1999] FCA 1055, Emmett J described it at [13] in the following manner:
“A judgment creditor in a bankruptcy notice must give an address or addresses where he may be found. The address stated must be one at which the debtor may, during the currency of a notice, make payment of the amount claimed in the notice or, one where he may make arrangements to secure or compound the debt. The test for adequacy of such an address must satisfy the demands of commonsense in the highly ordered and busy world in which we live, tempered by a consideration of the implications of a bankruptcy notice and the serious consequences that can flow from non-compliance with its requirements.”
The question of the appropriate address is also discussed by Foster J in Foot v Midwest Finance Pty Limited (1997) 78 FCR 306 at 307 where His Honour said:
“Clearly, the underlying rationale of these cases is that the bankruptcy notice must make clear to the debtor what he or she must do to comply with its requirements. It must avoid the consequences of committing an act of bankruptcy. If he or she is left uncertain in this regard then the notice is rendered invalid and non-compliance with it does not have that serious result.”
I would have had no difficulty in agreeing with Mr Smark that the notice was invalid if Mr Bigelow's address for service given on page 7 of the notice had been in the same form as the address noted in paragraph 4 or, for example, if he had added his DX number and had not set out the actual street address. But I am of the view that the applicant in this case was unlikely to have been misled in any way by paragraph 4 and that the failure to provide a street address in that paragraph is a matter of form which can be rectified pursuant to s.306(1) of the Bankruptcy Act.
I note that in this lengthy litigation between the parties Mr Bigelow has been acting for some considerable time for the respondents. Mr Warren, who appears on their behalf drew my attention to some correspondence passing between the solicitors for the parties prior to the issue of the bankruptcy notice. Mr Bigelow's headed notepaper also clearly gives his address and the very PO box number that is contained in the bankruptcy notice.
It has not been proved that the applicants ever saw any copies of this correspondence but I am prepared to draw an inference that their solicitor would have provided them with copies in order to obtain their instructions on the very important matters contained therein. The existence of such letters would go towards a finding that the applicants were not confused by the manner in which the bankruptcy notice was drawn. I would not set aside the bankruptcy notice on these grounds.
Discretion
An application to extend time for compliance with a bankruptcy notice on the grounds that an appeal is pending is one which frequently comes before the court. I dealt with such applications recently in Lui v Schnabel [2002] FMCA 274. In that case I considered the authorities and in particular the decision of Ahearn v Deputy Commissioner of Taxation (Qld) [1987] 76ALR 137 and an important decision of Lehane J in Byron v Southern Star Group Pty Limited [1997] 73 FCR 264. That was a decision which did not follow the Ahearn dicta which was to the effect that a Court exercising jurisdiction in bankruptcy should not proceed to sequestrate the estate of a debtor where an appeal is pending against the judgment relied on as the foundation for the bankruptcy proceedings provided that the appeal is based on genuine and arguable grounds.
As I pointed out in Lui the difference between Byron and Ahearn was that Byron was a case where the appeal was for special leave to the High Court. I am of the view that the discretion to extend the time for compliance with a bankruptcy notice should only very reluctantly be exercised in the case of an application to appeal where the appeal is not the first appeal from the original judgment upon which the bankruptcy notice was based unless there are some exceptional circumstances.
I note that in this case the judgment was obtained by confession, it was set aside on the grounds of some technicality relating to the manner in which it was pleaded, and that the setting aside took place as a result of her Honour exercising her discretion. The Court of Appeal came to the view that her Honour's discretion has miscarried in this instance. I've heard no suggestion that the underlying debt is not owed. I note that no application for a stay was made to the Court of Appeal, and although the correspondence which Mr Warren has tendered indicates that discussions have ensued concerning a payment in lieu of a stay and the debtor's solicitors have made reference to an application for a stay to the High Court, this has not yet occurred.
I take all these matters into account. I also take into account Mr Smark's submission that the procedures for the application for special leave are on course and that he anticipates, although he is not acting for the applicants in that appeal, that the application may be heard in May or June of this year.
The Courts have long held that the issuing of a bankruptcy notice is only a step along the road to sequestration and that there are matters which may not persuade a Court to grant an extension of time for compliance with the terms of a bankruptcy notice but which may persuade the Court on the hearing of a petition to adjourn that petition. I think in this case that is the appropriate step. I will therefore dismiss this application.
I will extend the time for compliance with the bankruptcy notice until 7 March 2003 to give the applicants an opportunity to comply. I order that the applicant pay the respondent's costs to be taxed if not agreed under the Federal Court Act and pursuant to the Federal Court rules.
The parties have made representations to me concerning my costs order in this matter. I have considerable sympathy for Mr Smark's point but I think costs should follow the event. He was, in the end, unsuccessful in both of his applications and it's appropriate that his clients pay the respondent's costs.
I certify that the preceding eighteen (18) paragraphs are a true copy of the reasons for judgment of Raphael FM
Associate:
Date:
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