Lodhia v Trust Company of Australia - [2005] FMCA 150

FEDERAL MAGISTRATES COURT OF AUSTRALIA

LODHIA v TRUST COMPANY OF AUSTRALIA

[2005] FMCA 150

BANKRUPTCY – Bankruptcy Notice – application to set aside – where proceedings to set aside judgment have been heard and are sought to be appealed – whether time for compliance should be extended – where no appeal filed or reasons for judgment available – where applicant claims the bankruptcy notice is issued in a name other than his own – whether the debtor is misdescribed or is a non existent person – where debtor has acknowledged he is person referred to in the notice – where he has conducted proceedings in the name contained in the notice – whether defect purely formal.

Bankruptcy Act 1966 (Cth), s.306(1)
Federal Court Act and Rules

Porter v OAMPS [2004] FMCA 272
Ahern v DCT (1987) 76 ALR 137
Re Baker; Ex parte Baker v Staples [1995] FCA 703
Collard v Warne [2001] FMCA 33
Trevor Peter McSwiney; Ex Part Mark Sidney Davies (unreported) FCA Beaumont J 24 November 1986
Re Wimborne; Ex parte the Debtor (1979) 24 ALR 494
Clyne v Deputy Commissioner of Taxation (1982) 42 ALR 703

Applicant:

CHANDRA KAND LODHIA

Respondent:

TRUST COMPANY OF AUSTRALIA LIMITED
(ACN 004 027 740)

File No:

SYG3546 of 2004

Delivered on:

23 February 2005

Delivered at:

Sydney

Hearing date:

15 February 2005

Judgment of:

Raphael FM

REPRESENTATION

Counsel for the Applicant:

Mr R Newton

Solicitors for the Applicant:

Hunter Lawyers

Solicitors for the Respondent:

Raj Lawyers

ORDERS

Application dismissed.
Applicant to pay the respondent’s costs to be taxed if not agreed pursuant to the Federal Court Act and Rules.

FEDERAL MAGISTRATES
COURT OF AUSTRALIA AT
SYDNEY

SYG3546 of 2004

CHANDRA KAND LODHIA

Applicant

And

TRUST COMPANY OF AUSTRALIA LIMITED
(ACN 004 027 740)

Respondent

REASONS FOR JUDGMENT

These proceedings have been brought by the debtor to set aside a Bankruptcy Notice numbered QN884 of 2004 issued by the Official Receiver for the Bankruptcy District of Queensland on 2 September 2004 and served on 13 November 2004. The bankruptcy notice requires payment of a judgment in the sum of $130,592.28 obtained in the District Court of New South Wales on 16 August 2004.

A Certificate of Judgment is annexed to the notice.
The affidavit in support of the application was not sworn by the debtor but by a friend and former business associate of his. It deposes to the fact that the proceedings in which the judgment was given were being defended and that a cross claim was being pursued. It deposes to the fact that the applicant had instructed his current solicitors to make application to set aside the judgment and the bankruptcy notice and to pursue the defence and cross claim previously filed on his behalf. That affidavit was sworn on 3 December. On 17 December a further affidavit was filed. This commences as follows:
“On 17 December 2004, I CHANDRAKANT LODHIA of 29 Richmond Crescent Nadi in the Fiji Islands, Businessman, say on oath:
1.I am the applicant herein.
2.The application has been brought in the name of Chandra Kand Lodhia as that is the name of the debtor appearing on the subject bankruptcy notice. In fact my correct name is Chandrakant Lodhia. I have never used the name “Chandra Kand Lodhia”. I am aways referred to as Chandrakant Lodhia or “Chandu” which is a nickname.
I have been similarly misdescribed in the proceedings brought by the respondent in the District Court of New South Wales, No.2409 of 2002.”
The affidavit goes on to give details of the conduct of the District Court proceedings, states that the applicant believed that those proceedings were being conducted by his brother on his behalf, details his complaint that he had been made to enter into a lease and guarantee wrongfully and states at:
[30]“I am swearing a similar affidavit for use in the District Court proceedings to set aside the bankruptcy notice. [The debtor in all probability means the judgment].
[31]I respectfully ask that the said bankruptcy notice be set aside. It is my intention to defend the District Court proceedings and/or prosecute cross claims therein as mentioned above.”
On 3 December 2004 Registrar Grant ordered that time for compliance of the bankruptcy notice be extended up to and including 21 December 2004 and there does not appear to be any dispute that the notice has been subsequently extended until these proceedings have been concluded.
On 15 February 2004 there was filed in court a copy of an affidavit sworn by Mark Geoffrey Doble, the solicitor for the respondent. That affidavit deposes to the fact that on 16 August 2004 Judge Garling dismissed the cross claim filed by the debtor in the District Court proceedings seeking damages against the creditor. No application had been made by the debtor in the District Court proceedings to reinstate the cross claim which was dismissed or to bring a further cross claim. He then deposes to the fact that a notice of motion filed by the debtor to set aside the judgment of 16 August 2004 at which he was represented by Counsel was dismissed by a Judicial Registrar and that a second notice of motion was heard by Norton DCJ over three days on 4, 7 and 8 February 2005. The applicant was again represented by Counsel. On 8 February 2005 Judge Norton dismissed the second notice of motion and ordered that the debtor pay the creditor’s costs.
Counsel for the debtor presented two arguments in support of the application. In regard to the first he indicated that an appeal would be filed against the judgment of Norton DCJ. No such appeal has been filed and I am told that a copy of the transcript of the judgment has not yet been obtained. Mr Newton was unable to tell me where he believed His Honour had erred in respect of the case which lasted three days and upon which evidence was called. In Porter v OAMPS [2004] FMCA 272 I discussed a situation which had some similarity to this one. However, in that case an appeal had been lodged and it was clear what the issues would be. I noted the dicta of the Full Bench of the Federal Court in Ahern v DCT (1987) 76 ALR 137 at [148] and the comments made by Kiefel J in Re Baker; Ex parte Baker v Staples [1995] FCA 703 when she applied the Ahearn principle to an application for an extension of time to comply with the bankruptcy notice. However, at [22] I expressed the following views:
“With respect, this approach appears to overlook the fact that the service of a bankruptcy notice simply marks the start of a process and that the commission of an act of bankruptcy, while undoubtedly of significance to the debtor, does not affect the actual status of the debtor: Byron v Southern Star Group Pty Ltd (1997) 73 FCR 264; Shephard v Chiquita Brands (South Pacific) Ltd [2001] FCA 1394; Re Geard; Ex parte Reid (unreported Sheppard J, 11 February 1994); Liew v JNS Technologies [1999] FCA 1428; Jenkins v National Australia Bank [1999] FCA 1758; Warner v Frost [1999] FCA 830. The Court in these cases when considering whether to grant an extension of time for compliance with a bankruptcy notice has been mindful of balancing the interests of creditors, noting the potential impact of a later act of bankruptcy in the event that the appeal is unsuccessful and proceedings continue. In Liew v JNS Technologies (supra) Kenny J referred to the comments of Heerey J in Re Nguyen; Ex parte Commissioner of Taxation (1995) 54 FCR 403 at 407:
“Extension of time for compliance with the bankruptcy notice may have important adverse consequences for the judgment creditor. For example, if a sequestration order is subsequently made the commencement of the bankruptcy may be later than would otherwise have been the case, which in turn may affect rights of recovery by the trustee in relation to property.”
An appropriate safeguard for debtors was seen to exist as the Court is always able to exercise its discretion and adjourn any petition for sequestration until after the appeal has been heard.”
I went on to conclude that I should not extend time for compliance with the bankruptcy notice in that case.
I considered that Mr Porter had a far stronger case for extending time for compliance with the bankruptcy notice than the debtor here. At the present time there is no appeal. I am totally unable to make any assessment of the validity of the decision of Norton DCJ even if I was minded to do so. It would be something I would be very reluctant to do. In the absence of an appeal and any evidence about the decision itself I would not be minded to grant an extension of time in this case.
The second argument put forward by Mr Newton for the applicant debtor is that the bankruptcy notice is invalid because it fails to comply with an essential requirement of the Bankruptcy Act 1966 (Cth) (‘the Act”) , namely, the requirement to identify the debtor. He argues that the person to whom this bankruptcy notice is addressed. namely “Chandra Kand Lodhia” does not exist. The bankruptcy notice having identified a non-existent debtor, it is fundamentally flawed and the error in identification is not a matter to which s.306 of the Act would respond.
As I understand the position from the submissions of Counsel, proceedings No 2409 of 2003 were brought against Mr Chandra Kand Lodhia as third defendant. The Notice of Grounds of Defence and Cross Claim filed on 22 August 2003 has as a second defendant and cross claimant Chandrakant Lodhia. The judgment which was entered on 16 August 2004 was entered against Chandra Kand Lodhia the person named in the statement of claim, and the application to set aside that judgment filed on 3 December 2004 was in the name of Chandra Kand Lodhia as third defendant as was the similar application filed on 17 December 2004, which was the application heard by Norton DCJ.

I am told that the lease which is the subject matter of the proceedings and the guarantee were made out in the name of Mr Chandra Kand Lodhia and the affidavit of service dated 13 November 2004 states as follows at [2]:
“I identified the person I served by the following conversation:
I asked, “Are you CHANDRA KAND LODHIA, the person referred to in this Bankruptcy Notice?”
The Respondent replied: “Yes”
As this stage I handed the Respondent the Bankruptcy Notice.”
Finally, as previously indicated in the affidavit of 17 December 2004, Chandrakant Lodhia says he is the applicant in proceedings brought in the name of Chandra Kand Lodhia.
I am not satisfied that the bankruptcy notice does misdescribe the debtor. I am of the view that the debtor’s actions in signing the lease and guarantee in the name under which he was sued, not seeking an amendment to the initiating proceedings against him in the District Court but pleading thereto, making application to the District Court to set aside the judgment in the name in which he was sued, identifying himself as the person named in the bankruptcy notice and identifying himself in the affidavit of 17 December 2004 as the applicant, constitute acceptance that the judgment and bankruptcy notice have been directed against the correct person, that being the person by whom the judgment debt is purportedly owed. I note that in Collard v Warne [2001] FMCA 33 Federal Magistrate McInnis said at [27] when considering a matter of some similarity to the one before me:
“It would be fanciful for a Court to disregard an Affidavit filed in the Country Court action where in the deponent Graham Alexander Collard deposes that he is “the First Defendant herein” and wherein the heading of that Affidavit refers to the First Defendant as “Mr Graham Collard.”
In Trevor Peter McSwiney; Ex Part Mark Sidney Davies (unreported) FCA Beaumont J 24 November 1986 His Honour said:
“As has been noted, it is submitted on behalf of the debtor that the bankruptcy notice is bad because of the wrong statement of the debtor’s christian name. The petitioner accepts the misdescription but submits that the defect would be cured by s.306(1) of the Bankruptcy Act 1966. In my opinion the defect is cured by s.306(1).”
His Honour then goes on to discuss the observations of Lockhart J in Re Wimborne; Ex parte the Debtor (1979) 24 ALR 494 at [500] and His Honour’s views expressed in Clyne v Deputy Commissioner of Taxation (1982) 42 ALR 703 at [706-7]. I note with interest that in that case there was also an identification of the debtor as the person named in the bankruptcy notice through the affidavit of service.
In my judgment it is not necessary to amend the Bankruptcy Notice under s.306(1) because I am of the view that the debtor is known by the name Chandra Kand Lodhia. But if it is to be considered necessary then I would grant such leave as is required. I am satisfied that in this particular case the defect is purely formal. I do not believe that this Bankruptcy Notice has the capacity to mislead the hypothetical debtor referred to by Lockhart J in Re Wimborne.
I dismiss this application. I order that the applicant debtor pay the respondent creditor’s costs to be taxed if not agreed pursuant to the Federal Court Act and Rules.

I certify that the preceding twelve (12) paragraphs are a true copy of the reasons for judgment of Raphael FM

Associate:

Date: