Kerr in His Capacity as trustee of the Bankrupt Estate of Cross v Akcan
[2017] FCCA 1128
•19 June 2017
FEDERAL CIRCUIT COURT OF AUSTRALIA
| KERR IN HIS CAPACITY AS TRUSTEE OF THE BANKRUPT ESTATE OF CROSS & ANOR v AKCAN | [2017] FCCA 1128 |
| Catchwords: BANKRUPTCY – Review of sequestration order made by a registrar – re‑hearing – formal requirements for a sequestration order met – whether a certificate of taxation must be signed, dated and sealed on its face to constitute an order of the Court considered – review application dismissed. |
| Legislation: Acts Interpretation Act1901 (Cth), s.25(C) Bankruptcy Act 1966, ss.40, 41, 43, 52 Federal Court of Australia Act 1976 (Cth) |
| Cases cited: Coshott v Prentice (No.2) [2016] FCA 1531 Kerr (Trustee), in the matter of Cross (Bankrupt) v Bechara [2015] FCA 284 Koon Wing Lau v Calwell (1949) 80 CLR 533 Linke v TT Builders Pty Ltd (No.3) [2015] FCA 1054 |
| Applicants: | DAVID JOHN KERR IN HIS CAPACITY AS TRUSTEE OF THE BANKRUPT ESTATE OF GABRIEL CROSS & ANOR |
| Respondent: | FERIDUN AKCAN |
| File Number: | SYG 2425 of 2016 |
| Judgment of: | Judge Driver |
| Hearing date: | 26 May 2017 |
| Delivered at: | Sydney |
| Delivered on: | 19 June 2017 |
REPRESENTATION
| Counsel for the Applicant: | Mr A Spencer |
| Solicitors for the Applicant: | Norton Rose Fulbright Australia |
| Counsel for the Respondent: | Mr J Johnson |
| Solicitors for the Respondent: | Streeter Law |
ORDERS
The amended application for review filed on 15 March 2017 is dismissed.
| FEDERAL CIRCUIT COURT OF AUSTRALIA AT SYDNEY |
SYG 2425 of 2016
| DAVID JOHN KERR IN HIS CAPACITY AS TRUSTEE OF THE BANKRUPT ESTATE OF GABRIEL CROSS & ANOR |
Applicants
And
| FERIDUN AKCAN |
Respondent
REASONS FOR JUDGMENT
Introduction and background
By an amended application filed on 15 March 2017, the respondent debtor (Mr Akcan) seeks review of a sequestration order made by a registrar on 24 November 2016. The original review application was lodged on 15 December 2016 and there is no issue as to the timeliness of that application.
The sequestration order was made in respect of an amended Creditor’s Petition filed on behalf of Mr Kerr (trustee) who is the trustee of the bankrupt estates of each of Gabriel Cross and Rosabelle Cross (bankrupts).
The following statement of background facts is derived from the trustee’s submissions filed on 19 May 2017.
The trustee became trustee of the estates of the bankrupts on 28 June 2014. Two of the significant creditors of those estates are Maria Bechara, a solicitor who had previously acted for the bankrupts, and Mr Akcan, who is the brother of Rosabelle Cross. Mr Akcan was the successful plaintiff in Supreme Court of NSW litigation against the bankrupts during which, for some time, the bankrupts were represented by Ms Bechara.
The trustee became trustee after meetings of creditors chaired by the previous trustee Mr Reidy on 27 June 2014 at which the creditors of each of the bankrupts resolved to appoint him as trustee. Ms Bechara and Mr Akcan were unhappy with the conduct and outcome of those meetings and ventilated their dissatisfaction in correspondence with the trustee. They threatened to commence proceedings, however never took that step.
Ultimately, the trustee commenced proceedings against Ms Bechara, Mr Akcan and a third respondent, Mr Petrucco, for declarations directed at resolving various controversies between the trustee and those other parties.
The substantive issues were heard before her Honour Jagot J in the Federal Court of Australia in Sydney (Federal Court) on 11 and 12 February 2015 and on 26 March 2015, and as against Ms Bechara and Mr Akcan the trustee was entirely successful. Orders were made that Ms Bechara and Mr Akcan pay the costs of the trustee as agreed or taxed[1].
[1] See Kerr (Trustee), in the matter of Cross (Bankrupt) v Bechara [2015] FCA 284 and Kerr (Trustee), in the matter of Cross (Bankrupt) v Bechara (No.2) [2015] FCA 444.
Separately, in proceedings in this Court in Sydney (Federal Circuit Court), Ms Bechara and Mr Akcan sought leave to take further steps in the Supreme Court of NSW proceedings and in certain proceedings in the Court of Appeal. The trustee appeared on that application and ultimately obtained orders for costs in those proceedings against Ms Bechara and Mr Akcan.
On 22 December 2015, two bills of costs were filed:
a)the first was a bill of costs in the Federal Court[2]; and
b)the second, a bill of costs in the Federal Circuit Court[3].
[2] Exhibited to the affidavit of Alison McManus made on 7 April 2017 (McManus) Tab 1.
[3] McManus Tab 1.
Copies of both of those bills were sent by email to the address [email protected] (Mr Akcan’s Hotmail address)[4] as well as to Ms Bechara’s email addresses. Both bills were also posted to 30 Bayview Road, Canada Bay NSW 2046[5].
[4] Affidavit of Cleo Parissis at [4].
[5] Parissis at [5].
On 28 January 2016, a letter from the Registrar of the Federal Court in relation to the bill filed in the Federal Court was sent to the trustee’s solicitor and to Mr Akcan’s Hotmail address advising that an estimate had been made of the approximate total for which, if the bill were to be taxed, a certificate of taxation would be likely to issue for $131,600, drawing attention to the rules that govern a failure to object to the bill and advising as to how a notice of objection should be filed if appropriate[6]. The letter also directed the trustee’s solicitors as to the suggested form for a draft certificate of taxation which was to be lodged in the event that no objection was made.[7]
[6] McManus Tab 2.
[7] McManus Tab 2.
On 22 February 2016, the trustee’s solicitors filed a draft certificate of taxation in the sum of $131,600 in the Federal Court[8]. On 25 February 2016, a two page document issued from the Federal Court[9]. The first page of that document headed “Notice of Filing” bore the seal of the Federal Court and the signature of Mr Warwick Soden above the heading “Registrar” and was dated 25 February 2016. The second page was a copy of the certificate of taxation bearing the seal of the Federal Court (Federal Court Certificate).
[8] McManus Tab 4.
[9] McManus Tab 4.
On 9 March 2016 a letter from the Registrar of the Federal Circuit Court estimating the costs in the Federal Circuit Court to be $13,256, was received by the trustee’s solicitors. On that same day, a copy was emailed to Mr Akcan’s Hotmail address[10].
[10] McManus Tab 3.
On 15 March 2016, a copy of the Federal Court Certificate was emailed to Mr Akcan’s Hotmail address[11].
[11] McManus Tab 4.
On 24 March 2016, a reply to the email which had served the Federal Court Certificate was received from Mr Akcan enclosing a letter from him disputing the trustee’s entitlement to the amount claimed in the Federal Court Certificate together with some supporting documents[12]. On 28 March 2016 Mr Akcan advised “I will be appealing the decision”[13].
[12] McManus Tab 5.
[13] McManus Tab 7.
Further correspondence was exchanged with Mr Akcan.
On 8 April 2016, a further certificate of taxation in relation to the Federal Circuit Court costs issued and on that same day a copy was sent to Mr Akcan by email at his Hotmail address. That certificate contained an error and an amended certificate was forwarded on 9 June 2016, reflecting that the certified costs were those of the current trustee rather than the trustee and Mr Reidy as had appeared on the earlier certificate.
On 10 May 2016, the Official Receiver issued Bankruptcy Notice BN 190172 (Bankruptcy Notice) on the application of the trustee. The Bankruptcy Notice claimed $131,600 “as per attached final judgment/s or final order/s”. A copy of the Federal Court Certificate was attached to the Bankruptcy Notice[14].
[14] Affidavit of Joshua Kwong page 12.
Prior to 30 November 2016 Mr Akcan was the director of two companies:
a)Akcan Pty Ltd, which has its registered office at 30 Bayview Road, Canada Bay and has a principal place of business at Shop 3001, Top Ryde City. Mr Akcan holds all of the issued shares in Akcan Pty Ltd[15]; and
b)Diamond House Pty Ltd, which had its registered office at 30 Bayview Road, Canada Bay up until 29 May 2016 when it was changed to Shop 3001, Top Ryde City which was also its principal place of business. On the same day, Mr Akcan’s residential address as a director of Diamond House was changed to Shop 3001, Top Ryde City.
[15] McManus Tab 12.
On 19 July 2016, orders were made in the Federal Court permitting service of the Bankruptcy Notice to be effected by means which were described as follows:
(a)By pre-paid ordinary post addressed to the Respondent at 30 Bayview Road, Canada Bay in the State of New South Wales 2014;
(b)By pre-paid ordinary post addressed to the Respondent at Diamond House, Shop 3001, Top Ryde City Shopping Centre, Cnr Devlin Street and Blaxland Road, Ryde in the State of New South Wales 2112; and
(c)By email to the Respondent at [email protected] stating that ‘The attached bankruptcy notice number BN190172 issued 10 May 2016 has been posted to 30 Bayview Road, Canada Bay in the State of New South Wales 2014 and Diamond House, Shop 3001, Top Ryde City Shopping Centre, Cnr Devlin Street and Blaxland Road, Ryde in the State of New South Wales 2112 and attaching a scanned copy of the bankruptcy notice.
Pursuant to order 3 of the orders made on 19 July 2016, the Bankruptcy Notice was deemed to be served on Mr Akcan on 2 August 2016.
On 21 July 2016, a copy of the orders was served on the Official Receiver and the Bankruptcy Notice was duly amended and endorsed by that office to reflect the effect of order 3[16]. On 21 July 2016, copies of the endorsed Bankruptcy Notice were forwarded by pre-paid post to 30 Bayview Road, Canada Bay and to Diamond House at Top Ryde. A further copy was emailed to Mr Akcan’s Hotmail address accompanied by an email in the form required by the order[17].
[16] Kwong at [1] and [2].
[17] Kwong at [2].
Mr Akcan did not pay the amount claimed in the Bankruptcy Notice by 23 August or at all[18].
[18] Affidavit of the trustee sworn 7 September 2016 verifying the Creditor’s Petition.
On 8 September 2016 the trustee filed a Creditor’s Petition in the Federal Circuit Court together with supporting affidavits relying upon Mr Akcan’s failure to comply with the Bankruptcy Notice.
On 26 October 2016 orders[19] were made permitting substituted service of the Creditor’s Petition in the following terms:
(a) By sending them by pre-paid ordinary post addressed to the Respondent at Diamond House, Shop 3001, Top Ryde City Shopping Centre, Cnr Devlin Street & Blaxland Road, Ryde NSW 2112; and
(b)By sending them by pre-paid ordinary post addressed to the Respondent at 30 Bayview Road, Canada Bay NSW 2014; and
(c)By handing them to any person apparently over the age of 16 years but, if this is not possible, by leaving them in the letterbox or affixing them to the front door in an envelope addressed to the Respondent at Diamond House, Shop 3001, Top Ryde City Shopping Centre, Cnr Devlin Street & Blaxland Road, Ryde NSW 2112; and
(d)By handing them to any person apparently over the age of 16 years but, if this is not possible, by leaving them in the letterbox or affixing them to the front door in an envelope addressed to the Respondent at 30 Bayview Road, Canada Bay NSW 2014; and
(e)By scanning them and sending them by email to [email protected].
[19] Affidavit of Steven Olynyk made on 10 November 2016, Annexure SO1.
The orders further provided that service would be deemed to be effected five days after compliance with the latest element of service in accordance with the preceding five subparagraphs.
Proof of compliance with:
a)orders 5(a), (b) and (e) is contained within the Olynyk affidavit;
b)order 5(c) is contained in the Flint1 affidavit; and
c)order 5(d) is contained in the Flint2 affidavit.
The Creditor’s Petition was amended by leave to reflect the amendment of the date of the act of bankruptcy.
The review
In Zdrilic v Hickie[20] the Full Court of the Federal Court considered the procedural requirements of the review of sequestration order made by a Registrar in the Federal Circuit Court. A review of an exercise of power by the Registrar proceeds by way of a hearing de novo.[21] Quoting Totev v Sfar[22], their Honours observed that the Court must be satisfied of all of the matters required to be proved by s.52(1) of the Bankruptcy Act 1966 (Cth) (Bankruptcy Act)[23].
[20] [2016] FCAFC 101.
[21] Ibid at [16].
[22] (2008) 167 FCR 193.
[23] Ibid at [27]-[29].
In support of the Creditor’s Petition (as amended) the trustee relies upon the following material:
a)the affidavit of Cleo Parissis made on 12 February 2016;
b)the affidavit of Alison McManus made on 7 April 2017 (McManus), to which is exhibited a bundle of documents;
c)the affidavit of service of the Bankruptcy Notice made by Joshua Kwong on 6 September 2016;
d)the affidavit of service of the Creditor’s Petition made by Steven Olynyk on 10 November 2016;
e)the affidavit of Hayley O’Kell made on 23 November 2016;
f)the affidavit of Steven Olynyk made on 11 April 2017;
g)the affidavit of Nada Flint made on 7 November 2016 (Flint1);
h)a further affidavit of Nada Flint made on 7 November 2016 (Flint2);
i)the affidavit of Nada Flint made on 10 November 2016 (Flint3);
j)the affidavit of Nada Flint made on 23 November 2016 (Flint4);
k)the affidavit of Alison McManus made on 18 May 2017 (McManus2); and
l)updated affidavits of search and debt tendered in court by leave at the trial of this matter on 26 May 2017.
The trustee’s evidence was completed by a copy of a letter from then Attorney-General, Robert McClelland dated 11 March 2011 to Mr Warwick Soden concerning his most recent appointment as a registrar of the Federal Court of Australia for a term of five years, to which is annexed a copy of the Instrument of Mr Soden’s appointment[24].
[24] Exhibit A1.
None of the deponents were required for cross-examination and, save for the issue raised in the review application, Mr Akcan does not dispute that the Court is, prima facie, entitled to make a sequestration order. I am satisfied, subject to consideration of the issue raised in the review application, that a sequestration order should be made.
Consideration of the issue
The issue raised in the amended review application is, in effect, a ground of opposition to the making of a sequestration order. The issue is in the following terms:
There is no available act of bankruptcy as contemplated by S40(1)(g) of the Bankruptcy Act 1966 as there was not at the time of the issue of the bankruptcy notice relied upon by the Applicant a final judgment or order of the Federal Court of Australia in proceeding number NSD 1113 of 2014 being a validly issued certificate of taxation signed and dated by a taxing officer in accordance with the Federal Court Rules 2011 and therefore the bankruptcy notice is a nullity.
Mr Akcan submits that there was no available act of bankruptcy existing at the time of presentation of the Creditor’s Petition on 28 October 2016; at the time of the amendment of the Creditor’s Petition on 24 November 2016 or at time of the making of the sequestration order by the Registrar Ng on the same date. Consequently, there is said to have been no jurisdiction in the Registrar, or for that matter the Federal Circuit Court, as identified to make a sequestration order[25].
[25] Bankruptcy Act, s.43(1)(a).
The evidence of the available act of bankruptcy is contained in the affidavit of Joshua Kwong. A copy of the Bankruptcy Notice, Bankruptcy Notice No: BN 190172 issued 10 May 2016, appears commencing at page 11 of that affidavit[26].
[26] The Bankruptcy Notice is also annexed to the first affidavit of Mr Olynyk.
The final judgment or order relied upon for the purposes of the issue of the Bankruptcy Notice[27], is the document at pages 13 – 14 of the same affidavit.
[27] Bankruptcy Act, ss.40(1)(g) and 41(1).
Mr Akcan notes that it is conspicuous that the Certificate of Taxation in proceeding NSD 1118 of 2014 was not signed by the “Taxing Officer” as contemplated by rule 40.32 of the Federal Court Rules 2011 (Federal Court Rules)[28].
[28] page 14.
Mr Akcan notes further that it is equally conspicuous that the document at page 13 is described as a “Notice of Filing” and that:
a)it appears to be a document lodged electronically on 22/02/2016 9:35:12am AEDT and had been accepted for filing in accordance with the Federal Court Rules;
b)the acceptance for filing appears to have been reflected by a signature of the Principal Registrar, Warwick Soden on 25 February 2016 at 12:14:12pm AEDT;
c)there is no direct evidence that Mr Soden was the “Taxing Officer”[29];
d)whilst the Notice of Filing forms part of the Certificate of Taxation[30], this does not support any suggestion that it has been executed in the manner specifically contemplated by rule 40.32 (1) of the Federal Court Rules to give rise to any suggestion that it, being the Certificate of Taxation, thereafter has “the force and effect of an order of the Court”[31].
[29] Although it was conceded at the trial that any Registrar could be a taxing officer.
[30] Federal Court Rules, rule 20.24.
[31] rule 40.32(2).
Mr Akcan submits that in the circumstances there was no relevant final judgment or order as contemplated by the Bankruptcy Act upon which the Bankruptcy Notice could be founded and therefore no act of bankruptcy and therefore no jurisdiction for the Federal Circuit Court to make the sequestration order.
Mr Akcan’s argument finds apparent support in an unpublished judgment by Bereton J of the Supreme Court of NSW forming part of the extensive Coshott litigation. Subsequently, in Prentice v Fewin Pty Limited, in the matter of Prentice[32] at [7] Bromwich J noted that Bereton J had set aside a certificate of taxation because it was not signed by the registrar in accordance with rule 40.32 of the Federal Court Rules. At [45] of that case, Bromwich J said:
In any event, there was no requirement for a certificate of taxation, once issued in accordance with r 40.32 to also be entered as an order under r 39.31, or meet the order authentication requirements in r 39.35, or indeed any of the requirements or other provisions in Division 39.4 for the reasons discussed in Coshott v Prentice (No.2) at [105].
[32] [2017] FCA 490.
Mr Akcan’s difficulty is that a certificate of taxation in the same form was considered by Bromwich J in Coshott v Prentice (No.2)[33] and was found to comply with rule 40.32. I was told by counsel in these proceedings that that decision is subject to appeal before the Full Federal Court. I was not asked to await the outcome of that appeal and see no need to. The decision of Bromwich J, while not strictly binding on me, is a highly persuasive authority that I should follow unless I were persuaded that it was clearly wrong. That is obviously not a view that should be lightly taken by a judge of the Federal Circuit Court in respect of the interpretation by the Federal Court of its own Rules. For the reasons which follow, I have concluded that the judgment by Bromwich J is not clearly wrong and that I should follow it.
[33] [2016] FCA 1531.
Rules 39.33 - 39.35 of the Federal Court Rules contain general provisions relating to the entry of orders. They provide for the preparation by a party of a draft to be lodged with the Registrar and for that draft order to be “authenticated” by the Registrar signing the order and the seal of the Court being affixed. Plainly, certificates of taxation, whilst dealt with by different provisions of the Federal Court Rules are otherwise dealt with analogously.
Rule 40.32 of the Federal Court Rules provides as follows:
(1)A Taxing Officer is to issue a sealed certificate of taxation, in accordance with Form 132, that must be served, within 14 days after the date it is issued, by the party who filed the bill, on the party responsible for payment of the costs.
(2)A certificate of taxation has the force and effect of an order of the Court.[34]
[34] See also Linke v TT Builders Pty Ltd (No.3) [2015] FCA 1054.
“The word ‘issue’ involves the idea of something passing from one person to another, sending forth, delivering.”[35]
[35] Koon Wing Lau v Calwell (1949) 80 CLR 533 at 568 per Latham J.
In Coshott v Prentice (No.2), Bromwich J noted:
The scheme for certificates of taxation is plainly designed to dispense with a requirement of separate entry of certificates of taxation as orders, removing a layer of needless cost and delay. Were that not so there would be no purpose in r 40.32(2) providing “A certificate of taxation has the force and effect of an order of the Court”. There is no apparent reason why, when a certificate of taxation has issued in accordance with r 40.32, it is necessary to go through a separate and duplicate process of entry as an order in accordance with r 39.31, or a duplicate process of dating, signing and sealing as an order in accordance with r 39.35.
The letter from the Registrar of the Federal Court on 28 January 2016, gave notice in writing of the estimate made under sub rule 40.20(1) of the Federal Court Rules, which in the absence of an objection determined the amount for which a certificate of taxation would issue[36].
[36] Rule 40(4) of the Federal Court Rules.
There was no objection and a draft certificate of taxation was filed in the Federal Court on 22 February 2016[37]. In those circumstances, in my view, the certificate only needed to be authenticated to take on the force and effect of an order of the Federal Court.
[37] Noted under the Notice of Filing.
Against any suggestion of departure from the approved form, the trustee calls in aid s.25(C) of the Acts Interpretation Act1901 (Cth):
Where an Act prescribes a form, then strict compliance with the form is not required and substantial compliance is sufficient.
Rule 2.12 of the Federal Court Rules also provides as follows:
A requirement in these Rules that a document be in accordance with an approved form is complied with if the document:
(a) is substantially in accordance with the approved form and any practice notes issued by the Chief Justice; or
(b) has only those variations that the nature of the case requires.
I accept that a certificate of taxation which is substantially in accordance with the approved form is still a certificate of taxation and has the requisite force and effect of an order of the Federal Court.
Rule 2.24 of the Federal Court Rules provides that where a document is accepted by the registry, the registry is to insert a Notice of Filing as the first page of the document. The fact that a Notice of Filing has been attached indicates that the document was accepted. Pursuant to rule 2.24(2) of the Federal Court Rules the Notice of Filing is taken to be part of the document for the purposes of the Federal Court of Australia Act 1976 (Cth) and the Federal Court Rules.
The Notice of Filing forms part of the Federal Court Certificate so that the Federal Court Certificate was dated, sealed and signed on 25 February 2016[38] under the Federal Court Rules. It was made available in that form to the solicitors for the trustee.
[38] See the date on the Notice of Filing.
The Notice of Filing forming part of the Federal Court Certificate bears the seal of the Federal Court and the signature of Warwick Soden, Registrar. Pursuant to Schedule 1 of the Federal Court Rules, “taxing officer” means a Registrar. At the time that the Federal Court Certificate issued, Mr Soden was a Registrar of the Federal Court, having been appointed with effect from 3 April 2011. It was by this means that the Certificate of Taxation was authenticated and took effect as an order of the Federal Court.
Conclusion
I conclude that the trustee in these proceedings was and remains entitled to the sequestration and other orders made by a registrar of the Federal Circuit Court on 24 November 2016. I will order that the review application as amended on 15 March 2017 be dismissed.
I will hear the parties as to costs.
I certify that the preceding fifty-five (55) paragraphs are a true copy of the reasons for judgment of Judge Driver
Associate:
Date: 19 June 2017
3
8
5