Lindholdt v Merritt Madden Printing
[2001] FMCA 59
•21 August 2001
FEDERAL MAGISTRATES COURT OF AUSTRALIA
LINDHOLDT v MERRITT MADDEN PRINTING [2001] FMCA 59
BANKRUPTCY – bankruptcy notice based upon judgment debt – whether execution of judgment debt stayed – whether stay should be taken to have been in force following non-compliance with instalment order
Australian Postal Corporation Act 1989, s.34
Bankruptcy Act 1966, ss.30, 41(3)(b), 41(6A)
Evidence Act 1995 (Cth), s.160
Federal Magistrates Court Rules 2001
Local Courts (Civil Claims) Act 1970 (NSW)
Local Courts (Civil Claims) Rules (NSW)
Boscolo v Botany Council (unreported, Federal Court of Australia, Full Court, 16 October 1996)
Re Browbank v Miller; ex parte Loniplus Pty Ltd (1985) 12 FCR 254
Re Frasersmith; ex parte J Blackwood & Son Ltd (1992) 36 FCR 144
Re Moss; ex parte Tour Finance Limited (1968) 13 FLR 101
Re Schekeloff; ex parte Schekeloff v Hopkins Group Pty Ltd (1989) 22 FCR 407
Wenkart v Abignano (unreported, Federal Court of Australia, Branson J, 5 March 1998)
Wiltshire-Smith v Mellor Olsson (1995) 57 FCR 572 at 586
| Applicant: | PEER LINDHOLDT |
| Respondent: | MERRITT MADDEN PRINTING PTY LTD |
| File No: | SZ 320 of 2001 |
| Delivered on: | 21 August 2001 |
| Delivered at: | Sydney |
| Hearing Date: | 7 August 2001 |
| Judgment of: | Driver FM |
REPRESENTATION
| Counsel for the Applicant: | Mr P Evans |
| Solicitors for the Applicant: | Peter J McCarthy & Associates |
| Counsel for the Respondent: | Mr J Johnson |
| Solicitors for the Respondent: | Duffield & Duffield |
ORDERS
The application is dismissed.
The applicant is to pay the respondent’s costs of the application, including any reserved costs. Those costs are payable pursuant to rule 21.10 of the Federal Magistrates Court Rules, and for purposes of rule 21.15 the Court certifies that it was reasonable to employ an advocate to appear in the proceeding.
Settlement and entry of these orders may be effected pursuant to Order 36 of the Federal Court Rules.
FEDERAL MAGISTRATES COURT OF AUSTRALIA AT SYDNEY
SZ 320 of 2001
PEER LINDHOLDT
Applicant
And
MERRITT MADDEN PRINTING PTY LTD
Respondent
REASONS FOR JUDGMENT
Introduction
This is an application by Peer Lindholdt to set aside a bankruptcy notice under sections 30 and 41(6A) of the Bankruptcy Act 1966 (Cth) (“the Bankruptcy Act”). The respondent opposes the application. Both the applicant and the respondent also seek costs. The proceedings were commenced in this Court on 19 June 2001 and, by reason of orders made by a registrar and myself pursuant to s.41(6A) of the Bankruptcy Act, the time for compliance with the bankruptcy notice was extended up to and including 21 August 2001.
In support of his application the applicant relies upon s.41(3)(b) of the Bankruptcy Act. The current legislation makes clear the principle established in earlier cases that bankruptcy notices cannot validly be issued if there is a stay on execution of the relevant judgment in effect: Re Moss; ex parte Tour Finance Limited (1968) 13 FLR 101. Where there is a stay on execution of the relevant judgment a bankruptcy notice, if issued, is liable to be set aside. The relevant date for considering the effect of the stay is the date of issue of the notice: Wenkart v Abignano (unreported, Federal Court of Australia, Branson J, 5 March 1998).
Relevant facts
The following facts are not in dispute:
·on 31 January 2001 the respondent obtained judgment against the applicant in the New South Wales Local Court in Sydney for the sum of $25,313.14;
·on 15 March 2001 an order was made by the registrar of the Local Court for payment of the judgment debt by instalments of $600 per month to commence on 6 April 2001;
·the order required payments to be made to the respondent’s solicitors at their office address in Elizabeth Street, Sydney;
·it was noted on the order that if the judgment debtor was late in making, or failed to make, any one payment, the judgment creditor could request the registrar to cancel the order, whereupon action might then be taken to collect any balance owing;
·on 3 April 2001 the respondent’s solicitor received the notice of the registrar’s instalment order and on that day he caused to be filed at the Local Court a notice of objection to payment by instalments;
·on 9 April 2001 the respondent’s solicitor received a cheque for $600 from the applicant which had been collected from the GPO box of the solicitors that morning;
·on 24 April 2001 the solicitor for the respondent, by letter supported by an affidavit, sworn on 26 April 2001, notified the registrar of the Local Court that the judgment debtor had failed to comply with the instalment order in that he had failed to pay the sum of $600 on or before 6 April 2001, and requested that the instalment order be rescinded and a certificate of judgment be issued;
·a certificate of judgment for the judgment debt was issued by the Local Court pursuant to the Local Courts (Civil Claims) Act 1970 (NSW) and part 26, rule 7 of the Local Courts (Civil Claims) Rules (“the Local Court Rules”) on 7 May 2001;
·on 1 June 2001 the issue of non-compliance with the instalment order came before the registrar who declined to make any order other than to award costs in favour of the judgment creditor, apparently on the basis that the matter was not properly before him;
·the bankruptcy notice was issued shortly afterwards on 1 June 2001.
The applicant’s case
The applicant relies upon his affidavit made on 19 June 2001. In that affidavit the applicant deposes, inter alia, that on 4 April 2001, in compliance with the terms of the instalment order, he forwarded by registered post a cheque drawn in favour of the judgment creditor for the sum of $600 to the address of the judgment creditor’s solicitors as required by the instalment order. This is verified by annexure G to the applicant’s affidavit which is a customer receipt issued by Australia Post for the registered article, clearly addressed to the respondent’s solicitors at their street address and accepted by Australia Post on 4 April 2001.
The applicant further deposes that enquiries which he has made of Australia Post disclose that the cheque was not delivered to the nominated address of the solicitors but was instead delivered to their post office box at the general post office on 6 April 2001. This is verified by annexures C and D to the applicant’s affidavit. Annexure C is a fax from the GPO Private Box Centre in George Street, Sydney confirming that the postal article was received at the GPO Private Box Centre late on the evening of 5 April 2001 and that a card was “then issued” to advise the box holder that there was an article awaiting collection. Australia Post confirms that the postal article was available for collection on 6 April 2001 and that the item was collected and a signature obtained on 9 April 2001. Annexure D is the Australia Post delivery receipt verifying that the postal article was received by Australia Post at the GPO Box Centre on 5 April 2001 and collected by the recipient on 9 April 2001.
The applicant further deposes that he sought the hearing at the Local Court on 1 June 2001 in order to dispute that there had been non-compliance with the instalment order. At that time the applicant did not have available all of the evidence from Australia Post and it was not at that time apparent to the applicant that the cheque had been delivered to the GPO Private Box Centre rather than to the street address of the respondent’s solicitors. The deputy registrar who heard the matter accepted that the respondent’s solicitors had not received the cheque until 9 April 2001 and, apparently on that basis, decided that there was nothing for him to hear and that the judgment creditor was entitled to the cancellation of the instalment order.
Mr Evans, for the applicant, submitted that the applicant is entitled to a presumption of regularity, namely that his registered postal article would be delivered in accordance with his instructions in the ordinary course of the post. Secondly, Mr Evans submitted that whether or not the stay which arose from the instalment order was actually in force when the bankruptcy notice was issued on 1 June 2001, a stay should be taken to have been in force on the basis that, if the registrar of the Local Court had been apprised of all the circumstances on that day, he would have granted a stay.
The respondent’s case
The respondent relies upon the affidavit of Grant William Prichard, sworn on 7 August 2001. Mr Prichard was the solicitor for the respondent in the proceedings before the Local Court. Mr Prichard deposes that his firm’s mail box is generally cleared each business morning by about 9.00am to 9.30am and that on 6 April 2001 he received mail that had been collected from the firm’s mail box on that morning. He did not receive the cheque from the applicant on that day but deposes that on 9 April 2001 he received a cheque for $600 from the applicant in the mail that had been collected on that morning. Annexed to Mr Prichard’s affidavit are a copy of the instalment order issued by the Local Court and the affidavit he swore on 26 April 2001 for the purposes of seeking the rescinding of the instalment order pursuant to the Local Court Rules. That affidavit states simply that the judgment debtor failed to comply with the instalment order in that the judgment debtor failed to pay the sum of $600 on or before 6 April 2001.
In his submissions Mr Johnson, for the respondent, submitted that the stay was lifted once non-compliance had occurred and the solicitor for the judgment creditor deposed to that fact in his affidavit filed in the Local Court. That much is clear from part 27, rule 3 of the Local Court Rules. It is equally clear that when the matter came on before the registrar on 1 June 2001 the Local Court had treated the stay as already having been lifted as it had by that stage issued a certificate of judgment, which could not be done if a stay had been in force. It followed that there was nothing for the registrar to decide on that day and for that reason no orders were made on 1 June 2001 apart from the order for costs.
On this basis the respondent’s case is that there was no stay in force at the time the bankruptcy notice was issued and, accordingly, the applicant’s application to set aside the bankruptcy notice must fail.
Consideration of the issues
For the purposes of s.41(3)(b) of the Bankruptcy Act execution is deemed to be stayed where a judgment creditor is not in a position to issue immediate execution on it. The relevant test is not whether there has been a formal stay order on the judgment (although that would be enough) but whether the judgment creditor could in practice issue immediate execution as at the date of issue of the notice: Wiltshire-Smith v Mellor Olsson (1995) 57 FCR 572 at 586. It follows that a bankruptcy notice can be set aside under s.41(3)(b) where it is established that execution could not be issued on the judgment because it was irregularly entered and should be set aside: Re Browbank v Miller; ex parte Loniplus Pty Ltd (1985) 12 FCR 254. That case is authority for the proposition that, where there is irregularity in relation to a judgment debt, execution of the judgment can be treated as being stayed even if no stay was at the relevant time in force.
The onus of proof of the existence and operation of the circumstances said to constitute the stay is on the debtor who is seeking to have the bankruptcy notice set aside or declared invalid: Boscolo v Botany Council (unreported, Federal Court of Australia, Full Court, 16 October 1996, per Jenkinson J).
Subject to what is said in paragraph 11 above, a bankruptcy notice is not stayed or set aside by reason of orders made for payment of the judgment debt by instalments and staying execution which are made after the service of the notice. The question is whether there was a stay at the date of the issue of the notice or at the latest, the date of its service on the debtor: Re Schekeloff; ex parte Schekeloff v Hopkins Group Pty Ltd (1989) 22 FCR 407.
The factual circumstances in this matter are somewhat troubling. I accept the applicant’s evidence that he attempted to comply with the instalment order by posting his cheque to the respondent’s solicitors at their street address on 4 April 2001. The applicant is entitled to a presumption of regularity in the postal service but that presumption, like any other, is rebuttable on the evidence. Even if there were no evidence available, I would be bound by s.160 of the Evidence Act 1995 (Cth), which would establish delivery of the cheque on 10 April 2001.
It seems clear that Australia Post erroneously delivered the registered postal article to the solicitor’s GPO box instead of to their street address. The documents from Australia Post suggest, but do not specifically state, that a card notifying the solicitors of the arrival of the postal article was placed in their private box some time on 6 April 2001. It is clear that the item was not collected on 6 April 2001. The item was collected on the following Monday, being 9 April 2001. The evidence from the respondent indicates but does not clearly establish that the card notifying the availability of the item for collection was not placed in the solicitor’s post office box until after the mail was collected on 6 April 2001. I find that, on the balance of probabilities, the respondent’s solicitors were not aware of the arrival of the cheque until 9 April 2001 when they cleared the post office box and found the Australia Post card in it. I find that the cheque was not delivered in accordance with the terms of the instalment order until it was taken from the GPO to the solicitors’ office on 9 April 2001. Accordingly, the solicitors were strictly correct in asserting that the instalment payment had been made late. It was the fault of Australia Post that the payment was delivered late. It is up to the applicant to decide whether he has a claim against Australia Post, having regard to the terms of s.34(2) of the Australian Postal Corporation Act 1989. The existence of such a claim may be a relevant consideration on the hearing of a creditor’s petition. The proceedings before me were conducted on the basis that there was no such claim but that position could change.
In Re Frasersmith; ex parte J Blackwood & Son Ltd (1992) 36 FCR 144, his Honour Beaumont J held that a bankruptcy notice based on a judgment of the New South Wales Local Court which was the subject of an order under part 27 of the Local Courts Rules for payment by instalments was not a valid notice as the order operated as a stay of enforcement on the judgment, even though the debtor had failed to pay an instalment. His Honour held that this was so because the enforcement was stayed until the affidavit required by rule 3(3) of part 27 of the Local Court Rules had been filed. In the present case, the required affidavit was sworn on 26 April 2001 and filed on that day or shortly thereafter. Clearly, it was filed prior to 1 June 2001 when the bankruptcy notice was issued because a certificate of judgment for the judgment debt requested by the solicitors at the same time was issued by the Local Court on 7 May 2001. Having filed the affidavit required by rule 3(3) of part 27 of the Local Court Rules and having obtained the certificate of judgment pursuant to part 26, rule 7 of those Rules and the Local Courts (Civil Claims) Act 1970, the respondent had done all that was necessary to remove the stay on the judgment supporting the bankruptcy notice and, on 1 June 2001 when the bankruptcy notice was issued, there was nothing preventing the respondent creditor issuing an appropriate form of execution of the debt.
It follows that the applicant has failed to satisfy me that, at the time of the issue of the bankruptcy notice, execution of the judgment debt had been stayed. The result is a hard one for the applicant, who has been brought undone by the actions of Australia Post and by the technical application of the Local Court Rules and the Bankruptcy Act. The situation would have been different if I could have been satisfied that the solicitors had been put on notice of the delivery of the cheque to their GPO box on 6 April 2001 and that they had failed to collect the item on that day. That would have indicated that the solicitors had improperly asserted non-compliance with the terms of the instalment order and that the Local Court, if it had been apprised of the facts, would have made orders either reinstating the operation of the instalment order or granting a specific stay on execution of the judgment. There is, however, no evidence that the respondent’s solicitors have acted improperly. It is clear that the respondent was opposed to the instalment order in the first place and that the solicitors, on instructions, had moved to set it aside. No doubt they seized the opportunity to escape from the confines of the instalment order when the opportunity presented itself. A creditor is entitled to take advantage of a window of opportunity if the window, in truth, exists.
The applicant was aware of the respondent’s attitude and it was open to him, on being notified of the alleged non-compliance with the instalment order, to seek a further instalment order and a specific stay order from the Local Court. He has not done so. Instead, the applicant chose to dispute the assertion of non-compliance with the original instalment order. I have found that the asserted non-compliance was properly based upon the facts and, if the registrar of the Local Court had been similarly apprised of all the facts, I think that he would have reached the same conclusion. In the circumstances, it is by no means likely that the registrar would have granted a further stay on the execution of the judgment on 1 June 2001 if he had been made aware of all the facts that I have before me now.
In all the circumstances, therefore, I must dismiss the application. The respondent is also entitled to an order for costs in accordance with the Federal Magistrates Court Rules.
Orders
(1)The application is dismissed.
(2)The applicant is to pay the respondent’s costs of the application, including any reserved costs. Those costs are payable pursuant to rule 21.10 of the Federal Magistrates Court Rules, and for purposes of rule 21.15 the Court certifies that it was reasonable to employ an advocate to appear in the proceeding.
(3)Settlement and entry of these orders may be effected pursuant to Order 36 of the Federal Court Rules.
I certify that the preceding nineteen (19) paragraphs are a true copy of the reasons for judgment of Driver FM
Associate:
Date: 21 August 2001
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