Maurice Blackburn Cashman Pty Ltd v Grizonic
[2005] FMCA 1541
•3 November 2005
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| MAURICE BLACKBURN CASHMAN PTY LTD v GRIZONIC & ANOR | [2005] FMCA 1541 |
| BANKRUPTCY – Authority under Part X Bankruptcy Act 1966 (C’th) – two authorities signed within 6 months – first authority not effective – whether leave of Court required under s.188(4) – whether second authority valid under s.188. |
| Bankruptcy Act 1966, ss.40(1)(i), 188(1), (2), (2)(a),(2)(aa), (2A), (2AAA), (2E), (3), (4), (6), 189AAA & 208 Bankruptcy Regulations 1996, Reg.10.02(1) Acts Interpretation Act 1901, ss.28A & 29 |
| Grizonic v Maurice Blackburn Cashman (No.2) [2005] FMCA 942 Hooper v Ewins (1997) 79 FCR 389 Pretorius v Daltons Carpet Tiles Pty Ltd (1984) 1 FCR 346 Re De Kantzow; Ex parte De Kantzow (1992) 35 FCR 74 Re Saheed; Saheed v The Official Receiver (1993) 41 FCR 148 Pascoe & Anor v Leite & Anor [2005] FMCA 334 Cervantes Pty Ltd v Moutdis (2004) 212 ALR 619 St Leonards Property Pty Ltd v Stanley [2005] FMCA 497 |
| Applicant: | MAURICE BLACKBURN CASHMAN PTY LIMITED |
| First Respondent: | CLAUDIO GRIZONIC |
| Second Respondent: | CHRISTOPHER MEL CHAMBERLAIN |
| File Number: | SYG2937 of 2005 |
| Judgment of: | Barnes FM |
| Hearing date: | 12 October 2005 |
| Delivered at: | Sydney |
| Delivered on: | 3 November 2005 |
REPRESENTATION
| Counsel for the Applicant: | Mr J Johnson |
| Solicitors for the Applicant: | Maurice Blackburn Cashman |
| Counsel for the First Respondent: | Mr R. Killelea |
| Solicitors for the First Respondent: | Oliveri Attorneys |
| Solicitors for the Second Respondent: | KP Farmer & Associates |
ORDERS
That the part of the application of 12 October 2005 seeking a declaration that the authority signed by Claudio Grizonic on 10 October 2005 made naming and authorising Christopher Mel Chamberlain to call a meeting of creditors of Claudio Grizonic and to take control of the property of Claudio Grizonic is void or not effective for the purposes of Part X of the Bankruptcy Act 1966 on the ground that Claudio Grizonic did not have leave to do so under section 188(4) of the Bankruptcy Act 1966 is dismissed.
That the Applicant pay the costs of the First and Second Respondents in relation to that part of the application as agreed and in the absence of agreement as taxed.
That the matter be adjourned until 10:15am on 24 October 2005 on the basis that if an alternative hearing date is agreed and notified to the Court that date shall be vacated and Orders made in chambers fixing the hearing date and varying the dates for filing of documents in Orders 4, 5 and 6 hereof.
That the Applicant file and serve a schedule identifying the parts of the evidence in these proceedings and in related proceedings 1691 of 2005, 2364 of 2005 and 2522 of 2005 of this Court, (which have been ordered to be evidence in these proceedings on 12 October 2005), upon which it relies for the purpose of the application, by Wednesday
19 October 2005.That the Applicant file and serve its written outline of argument in support of the application by Wednesday 19 October 2005.
That the First Respondent file and serve its written outline of argument on the application by Friday 21 October 2005.
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT SYDNEY |
SYG2937 of 2005
| MAURICE BLACKBURN CASHMAN PTY LIMITED |
Applicant
And
| CLAUDIO GRIZONIC |
First Respondent
And
| CHRISTOPHER MEL CHAMBERLAIN |
Second Respondent
REASONS FOR JUDGMENT
This matter came before the Court by way of an application filed in Court on 12 October 2005 by the applicant, Maurice Blackburn Cashman Pty Limited. The applicant sought a declaration that the authority signed by the first respondent, Claudio Grizonic, on 10 October 2005 naming and authorising the second respondent, Christopher Mel Chamberlain to call a meeting of creditors of Mr Grizonic and to take control of his property was void or not effective for the purposes of Part X of the Bankruptcy Act 1966 (Cth) (the Act) on the ground that Claudio Grizonic did not have leave to do so under s.188(4) (Ground 1) of the Act. I gave judgment in relation to this part of the application on 14 October 2005 and indicated that I would publish my reasons when convenient.
The applicant is a petitioning creditor who, in separate proceedings in this Court, is seeking a sequestration order in relation to the first respondent. There is a lengthy background to these proceedings. Relevantly, on 28 June 2004 the applicant obtained judgment in the Local Court of New South Wales against the first respondent.
A bankruptcy notice was issued to the first respondent on 20 January 2005 at the request of the applicant. The first respondent applied to set aside the bankruptcy notice on 19 May 2005. On 28 June 2005 that application was dismissed by Raphael FM (Grizonic v Maurice Blackburn Cashman (No.2) [2005] FMCA 942). On 29 June 2005 what for convenience is described as the ‘first creditor’s petition’ was presented in this Court by the applicant.
On 30 June 2005 the first respondent signed an authority (the ‘first authority’) under s.188 of the Act in favour of Ivor Worrell. On 11 July 2005 Ivor Worrell executed that authority. Notice of the execution of the authority was entered upon the National Personal Insolvency Index on 19 July 2005. Pursuant to this authority a report to creditors was issued by Mr Worrell. The first creditor’s petition came before a Registrar of the Court on 28 July 2005. The Registrar made no orders, noting that the respondent had given an authority under s.188 and that s.189AAA applied. A meeting of creditors was convened but adjourned. On 19 August 2005 the adjourned meeting of the creditors of the first respondent was convened. No resolutions were passed.
The first creditor’s petition was re-listed for hearing on 25 August 2005. The matter was adjourned until 30 August. On 30 August 2005 Raphael FM granted leave to the applicant to file in Court returnable instanter a second creditor’s petition dated 30 August 2005. His Honour also ordered that an amended notice of intention to oppose the creditor’s petition filed by the first respondent be treated as an intention to oppose in both proceedings and that the two proceedings be heard and determined together. The applicant and first respondent were ordered to file and serve evidence and written submissions. Both creditor’s petitions were listed for hearing before me at 10:15am on 12 October 2005. Neither party filed written submissions.
Meanwhile, on 29 September 2005, in proceedings between the first respondent and Mr Worrell, Registrar Segal by consent declared that the first authority signed on 30 June 2005 was ‘not effective for the purpose of Part X within the meaning of s.188 of the Act’. It does not appear to be disputed that this was because the controlling trustee did not give the debtor the information prescribed by s.188(2AA) of the Act and Reg. 10.02(1) of the Bankruptcy Regulations.
When the matter came before me on 12 October 2005 counsel for Mr Grizonic initially sought an adjournment of the hearing of the creditor’s petitions on the basis that on 10 October 2005 he had authorised a trustee to be his controlling trustee under an authority (the second authority) which was said to be effective for the purposes of s.188 of the Act and to bring into effect s.189AAA. The relevant sections are as follows:
Section 188
Debtor may authorise trustee or solicitor to be controlling trustee
(1) A debtor who desires that his or her affairs be dealt with under this Part
without his or her estate being sequestrated and:
(a) is personally present or ordinarily resident in Australia;
(b) has a dwelling-house or place of business in Australia;
(c) is carrying on business in Australia, either personally or by means of an agent or manager; or
(d) is a member of a firm or partnership carrying on business in Australia by means of a partner or partners or of an agent or manager;
may sign an authority in accordance with the approved form naming and authorising a registered trustee, a solicitor or the Official Trustee to call a meeting of the debtor's creditors and to take control of the debtor's property.
(2) An authority signed by a debtor under this section is not effective for the purposes of this Part unless:
(a) if the person authorised is a registered trustee or solicitor–the person has consented in writing to exercise the powers given by the authority; and
(aa) if the person authorised is the Official Trustee–an Official Receiver has given the debtor written approval to name the Official Trustee in the authority; and
(b) the signature of the debtor to the authority and the signature of the trustee or solicitor to the consent are each attested by a witness.
(2AA) If the person authorised is a registered trustee or a solicitor, then, before the person consents to exercise the powers given by the authority, the person must give the debtor the information prescribed by the regulations.
(2AB) If the person authorised is the Official Trustee, then, before the Official Receiver gives approval to name the Official Trustee in the authority, the Official Receiver must give the debtor the information prescribed by the regulations.
(2A) The regulations may prescribe the circumstances in which a person (other than the Official Trustee or a registered trustee) is ineligible to act as a controlling trustee under this Part.
(2B) An authority signed by a debtor under this section is not effective for the purposes of this Part if, at the time the authority is signed, the person authorised:
(a) is not the Official Trustee or a registered trustee; and
(b) is ineligible, under the regulations, to act as a controlling trustee under this Part.
(2C) If the person authorised is a registered trustee or solicitor, the authority signed by the debtor under this section is not effective for the purposes of this Part unless, before the person authorised consents to exercise the powers given by the authority, the debtor gives to the person authorised:
(a) a statement of the debtor's affairs; and
(b) a proposal for dealing with them under this Part.
Note: Section 6A sets out requirements for statements of affairs.
(2D) If the person authorised is the Official Trustee, the authority signed by the debtor under this section is not effective for the purposes of this Part unless, before an Official Receiver gives approval to name the Official Trustee in the authority, the debtor gives to the Official Receiver:
(a) a statement of the debtor's affairs; and
(b) a proposal for dealing with them under this Part.
Note: Section 6A sets out requirements for statements of affairs.
(2E) A proposal for dealing with the debtor's affairs under this Part must include a draft personal insolvency agreement.
Note: Section 188A sets out requirements for personal insolvency agreements.
(3) An authority under this section that is effective for the purposes of this Part is not revocable by the debtor.
(4) Subject to subsection 192(1), a debtor cannot give an authority within 6 months of giving another authority, unless the Court grants leave to do so.
(5) A registered trustee or solicitor who consents to exercise the powers given by an authority must, within 2 working days of consenting, give a copy of:
(a) the authority; and
(b) the debtor's statement of affairs;
to the Official Receiver for the District in which the debtor resides.
(5A) For the purposes of subsection (5), a working day is a day that is not a Saturday, Sunday or public holiday in the place where the registered trustee or solicitor consented to exercise the powers given by the authority.
(6) When an authority becomes effective, the person authorised by it becomes the controlling trustee.
189AAA
Stay of proceedings relating to creditor's petition until meeting of debtor's creditors
(1) If:
(a)an authority signed by a debtor under section 188 has become effective; and
(b)either:
(i) a creditor’s petition was presented against the debtor before the authority became effective; or
(ii) a creditor's petition is presented against the debtor after the authority became effective but before the first or only meeting of the debtor's creditors called under the authority;
proceedings relating to that petition are, by force of this subsection, stayed until:
(c) the conclusion of the meeting; or
(d) the adjournment of the meeting;
whichever is the earlier.
(2) This section does not limit subsection 206(1).
In light of the fact that, if s.189AAA of the Act applies, proceedings relating to a creditor’s petition are stayed by force of that provision, the parties agreed that the question of the effectiveness of the second authority should be dealt with not by consideration of an application for an adjournment of the hearing in relation to the creditor’s petitions but rather by way of consideration of the first ground in the application of 12 October 2005. Ground 1 of this application raised the issue which both the applicant and first respondent wished to address (the effectiveness of the authority of 10 October 2005 and the operation of ss.188(4) and 189AAA of the Act). A completed controlling trustee authority and trustee declaration signed by each of the first and second respondents on 10 October 2005 was tendered. The legal representative for the second respondent tendered associated documentation including a draft personal insolvency agreement and a statement of affairs.
The applicant foreshadowed that if it was not successful in its application for a declaration based on ground 1 it intended to seek an order pursuant to s.208 of the Act releasing the property of Mr Grizonic from the control of the second respondent or a declaration that the authority signed by Mr Grizonic was a abuse of process and an order that it should be set aside. Such proceedings were to be dealt with at a later date.
An affidavit sworn by Jason Geisker, the solicitor with carriage of the matter for the applicant, on 12 October 2005 was filed in support of the application for a declaration. This affidavit annexed correspondence about the appointment of a controlling trustee under the second authority. The solicitors for the first respondent advised that a stay was sought under s.189AAA of the proceedings in relation to the creditor’s petition. The correspondence indicates that the applicant did not accept on the evidence provided that the second respondent was the controlling trustee and reserved its rights without notice to make an application to have any authority set aside. A copy of such intended application was faxed to the solicitors for the second respondent on
12 October 2005. However, after material was put before the Court as to compliance with the matters made essential by s.188 of the Act in relation to the second authority, counsel for the applicant did not pursue the argument that such prerequisites had not been met.
Rather, it was contended for the applicant that s.188(4) of the Bankruptcy Act was applicable and that the first respondent had ‘given’ an authority when he signed and delivered the document dated 30 June 2005 (albeit it was subsequently held not to be effective for the purpose of Part X). On this basis it was submitted that the first respondent could not give an authority such as he had purported to give to the second respondent within six months of giving the first authority unless the Court granted leave to do so. It is not in dispute that leave of the Court was neither sought or obtained prior to the first respondent giving the second authority. It was submitted for the applicant that as two authorities had been given within 6 months the second authority was void or not effective in the absence of leave of the Court under s.188(4).
The respondent contended that an authority is only ‘given’ when it becomes effective for the purposes of Part X of the Act and that as the first authority had been declared not to be effective it had not been ‘given’ within s.188(4). On this basis it was submitted that no leave was required for the giving of the second authority which was effective to bring into operation a stay of the proceedings relating to the creditor’s petitions under s.189AAA.
The applicant and first respondent each sought to rely on the decision of Branson J in Hooper v Ewins (1997) 79 FCR 389 in relation to the ability of a debtor to give a second authority when an earlier authority is not effective. It is relevant to consider the circumstances of that case. In November 1997 the debtors signed a authority pursuant to s.188 of the Bankruptcy Act. The petitioning creditor contended that this authority was invalid because the debtors had previously (in September 1997) signed a form of authority (in accordance with the approved form). It was argued that the November 1997 authority was invalid in the absence of leave of the Court under s.188(4).
The first authority named the Official Trustee as controlling trustee. The debtors had not obtained the prior approval of an Official Receiver to name the official Trustee in this authority. This failure meant that the first authority was never effective. However the petitioning creditor contended that an authority is ‘given’ within the meaning of s.188(4) when a document in the approved form, duly completed and signed by the debtor, is delivered to the person authorised thereby to act as controlling trustee so that the leave of the Court was required for the second authority. The same argument is put in this case. As in this case, the debtor in Hooper v Ewins contended that an authority is only ‘given’ when it becomes effective for the purposes of Part X of the Act (see s.188(2)). Subsections (1), (2), (3), (4) and (6) of s.188 are in the same form as was considered in Hooper v Ewins (although other subsections were inserted and amendments to Part X made by Act No.80 of 2004 as discussed below).
Branson J observed (at 391) that none of the explanatory memorandum relating to the amending Bill which introduced the present s.188(4) in 1996, the second reading speeches nor the report of the Senate Legal and Constitutional Committee on the Bill provided any assistance as to when an authority under s.188 is ‘given’ within the meaning of s.188(4) of the Act. In that case, because the debtors had not obtained the written approval of the Official Receiver to name the Official Trustee in the first authority as required under s.188(2)(aa) such authority had never been effective for the purposes of Part X of the Act. Similarly in this case, the first authority was never effective for the purposes of Part X of the Act because the requirements of s.188(2AA) were not met. While the reason for such lack of effectiveness is different the reasoning of Branson J about the meaning of ‘given’ in s.188(4) is in point.
Branson J considered whether, despite the fact that it was not effective the first authority was nonetheless given by the debtors within the meaning of s.188(4). As her Honour noted (at 391), while decisions on s.188 of the Act as it was before the coming into force of the amending Act which introduced s.188(4) provide some insight into ‘the mischief apparently intended to be addressed’, they should be approached ‘with caution’ so far as the construction of s.188(4) is concerned, as they were concerned with a section differently framed from the current s.188. Such authorities gave support to the notion that the calling of a number of meetings under different Part X authorities would be inconsistent with the broad purpose of Part X (see in particular Pretorius v Daltons Carpet Tiles Pty Ltd (1984) 1 FCR 346 at 352 and also see Re De Kantzow; Ex parte De Kantzow (1992) 35 FCR 74 and Re Saheed; Saheed v The Official Receiver (1993) 41 FCR 148). Branson J stated that it seemed to her that the present s.188(4) was intended to limit the power of the debtor to issue within a six month period more than one authority under s.188 of the Act “where such authorities can result in successive meetings of creditors being called”, the limitation in s.188(4) being that a second authority could only be given within such period with the leave of the Court. Counsel for the applicant relies on this part of the decision (as in this in this instance a creditors’ meeting was held under the first authority). However her Honour continued (at 392):
I see no reason to conclude that s.188(4) is intended to limit the ability of a debtor to sign an authority naming a solicitor or registered trustee as controlling trustee merely because, within a period of six months from the signing of such authority, the debtor signed a similar authority which did not ever become effective. That is, in my view, s.188(4) is intended to limit the power of a debtor to give successive effective authorities; it is not intended to prevent a debtor who has failed to obtain the consent of a solicitor or registered trustee, or to prevent a debtor, who has wrongly signed an authority naming the Official Trustee without having obtained the approval of an Official Receiver to do so, from later signing an authority which is, or is capable of becoming, effective.
On the facts before her, Branson J found that s.188(4) did not operate to limit the power of the debtors to sign the November 1997 authority naming a registered trustee as controlling trustee as the prior authority was not (nor could it ever be) effective. Her Honour also held that the second authority in Hooper v Ewins became effective upon the registered trustee consenting in writing to exercise the powers given by the authority (s.188(2)(a)). It was held to be a valid authority.
There is some difference between the circumstances in Hooper v Ewins and the present case, but that decision supports the proposition (as the first respondent contends) that s.188(4) as presently drafted is not intended to limit the ability of a debtor to sign a second authority where within the prior six months the debtor signed a similar authority ‘which did not ever become effective’. While no action was taken pursuant to the first authority in Hooper v Ewins, it was otherwise in Pascoe & Anor v Leite & Anor [2005] FMCA 334. In that case the debtors had executed a purported authority under s.188. After the controlling trustee called a meeting of creditors and despatched a report to the creditors pursuant to this authority it was discovered that the form known as “the controlling trustee authority and trustee declaration” had not been properly completed. The name and address of the registered trustee/solicitor/Official Trustee had not been filled in by the debtors. The petitioning creditor sought to stop the holding of the creditors’ meeting and continue with the petition. The debtors subsequently executed a further and fully completed authority. The issue then arose as to whether the debtors were required to obtain the leave of the Court under s.188(4) before giving second authority.
It was accepted by the parties in Pascoe v Leite that the failure to complete the form in relation to the first authority meant that it did not comply with the provisions of s.188(1). Relevantly, the debtors argued that the first authority was void ab initio and that hence there was no need to obtain leave of the Court pursuant to s.188(4) before giving the second authority (which then would have the effect of staying the creditor’s petition proceedings). The creditors accepted that the first authority was not valid but contended that it was nonetheless ‘effective’ for the purposes of s.189AAA, that it did not become void until the Court declared it to be void and that the purported subsequent authority could not be given without leave of the Court and was itself invalid. If this were so, the creditors could continue with their petition.
Federal Magistrate Raphael discussed the authorities referred to in Hooper v Ewins which preceded the introduction of s.188(4). He canvassed the possibility that the decision in De Kantzow (which upheld the validity of a second authority given to a registered trustee notwithstanding that there had been an earlier authority given to a solicitor pursuant to which a creditors’ meeting had been held which had not accepted a resolution to accept a composition proposed by the debtor) may have been thought to have enabled a bankrupt to make a series of appointments even if proposals contained in resolutions failed at creditors’ meetings. However his Honour also referred with approval to what Branson J stated in Hooper v Ewins at 392 as set out at para 15 above and agreed that, as held in Cervantes Pty Ltd v Moutdis (2004) 212 ALR 619, a stay of a creditor’s petition under s.189AAA is dependent upon the authority signed under s.188 becoming effective.
Federal Magistrate Raphael held that the first authority was not effective as the appropriate form had not been duly completed (the name and address of the proposed controlling trustee had not been inserted). Relevantly his Honour held (at [15]) that it could be inferred that the Bankruptcy Act1966 contemplated that a duly executed authority be a vital component of s.188 Bankruptcy Act 1966 and that it should be viewed as imposing an ‘essential preliminary’ to the exercise of power over the bankrupt’s affairs. He continued:
“On this view it cannot be said that effective authority is bestowed on a person simply because they carry out actions in the role of a trustee in bankruptcy and that the failure to comply renders the appointment voidable.”
Thus, the subsequent actions of the improperly appointed trustee (in that case calling a meeting and dispatching a report to creditors) did not have the effect of validating his appointment and the authority upon which it was based. His Honour concluded at [18]:
In those circumstances there was no effective authority given within six months of giving another authority. This means that the second authority has become effective and s.189AAA of the Act applies to the creditor’s petition as from 3 March 2005. There is now a stay upon the petition and I am unable to make the sequestration order sought.
Consistent with this view, the fact that action was taken pursuant to the first authority in this case would not validate the appointment and authority of the trustee. The authority never became effective. While Raphael FM did not expressly address the requirements of s.188(4) (other than in the reference with approval to what was stated by Branson J in Hooper v Ewins) the conclusion that the second authority had the effect of staying the proceedings involved acceptance of the proposition that there was no need to obtain the leave of the Court pursuant to s.188(4) before the second authority was given.
It was submitted for the applicant that in this instance the defect in the authority of 30 June 2005 was not on all fours with the nature of the defect in the first authority in Pascoe v Leite as in that instance the form had not been properly completed by the applicant and hence s.188(1) was not satisfied. In this case the defect in the first authority was, as was said to be apparent from the affidavit of Mr Grizonic of
16 September 2005 filed in the proceedings in which the court made the declaration of 29 September 2005, that the intended trustee had not given the debtor the prescribed information required under s.188(2AA) of the Bankruptcy Act 1966. It was suggested that s.188, as it was since the 2004 amendments, drew a distinction between giving an authority and the authority becoming effective and that if Parliament had intended that leave was needed only if the first authority was effective it would have said so.
However, as in the case of an improperly executed authority, a failure to comply with s.188(2AA) means that the controlling trustee is not properly appointed. A prerequisite to the controlling trustee’s consent to exercise the powers given by the authority has not been met, so the authority ‘signed’ by the debtor is not effective under s.188(2). This is so whether the defect is a failure to sign an authority which complies with s.188(1) or a subsequent failure to meet a prerequisite to the authority becoming effective (see ss.188(2) – (2E)).
It is the case that, unlike ss.188(2)(a) and (2AA) which refer to ‘powers given by the authority’, s.188(4) imposes a restriction on ‘giving’ an authority. Section 188(4) should be seen in light of s.188(3) which provides that an authority that is ‘effective’ for the purposes of Part X is not revocable by the debtor. This is consistent with the view that it is only where a prior authority is effective that the debtor cannot give another authority without leave of the Court. Also relevant is s.188(6) which provides that ‘when’ an authority becomes effective, the person authorised by an authority becomes the controlling trustee. Consistent with this provision (which was in force at the time of Hooper v Ewins), if an authority (for whatever reason) does not become effective, the person authorised by it never becomes the controlling trustee. Hence any actions by such person are of no effect (Pascoe v Leite).
I am not persuaded that the fact that the debtor has signed and delivered a form of authority which never became effective means that he or she has ‘given’ an authority for the purposes of s.188(4). Section 188 does not draw a distinction between giving an authority and an authority being effective as contended. Insofar as it is contended that giving an authority is equivalent to signing an authority, this is not supported by the language of s.188 (see ss.188(1) and (2)) or by the fact that under s.40(1)(i) there is an act of bankruptcy if a debtor “signs an authority under s.188”. This suggests that there is a distinction between an authority being given and an authority being signed. I do not find the provisions of the Acts Interpretation Act 1901 (in particular ss.28A and 29 which were referred to by counsel for the applicant) to be of assistance as they relate to Acts that require or permit a document to be served on a person using expressions such as ‘serve’, ‘give’ or ‘send’.
As already observed, at the time of Hooper v Ewins subsections 188(1), (2), (3), (4) and (6) were in the same terms as they are now. In that context Branson J considered, but did not accept, the contention that an authority is given within the meaning of s.188(4) when a document in the approved form duly completed and signed by the debtor is delivered to the person authorised thereby to act as a controlling trustee. That is precisely the same argument that is put in this case. Branson J concluded, consistent with the argument put by the first respondent in this case, which I accept, that an authority is only given when it becomes effective for the purposes of Part X of the Act (see s.188(2)). I consider that, despite the post-Hooper v Ewins amendments to the Act this decision is directly relevant to the construction of s.188(4). While there have been some changes in other parts of s.188 and other provisions in Part X of the Act since Hooper v Ewins these are not such as to persuade me that in the context of the present s.188 and Part X, an authority is given within s.188(4) if it is not an effective authority. My attention was not drawn to anything in the subsequent amendments to the Act that would lead me to the view that it is no longer the case that s.188(4) applies only if the first authority is effective. Pascoe v Leite was decided after such amendments. It supports this view. I consider that the decisions in Hooper v Ewins and Pascoe v Leite are correct and should be followed. If the first authority is not effective (whether this is because of failure to comply with a prerequisite to signature of the form, a defect in the form itself or a failure to meet a subsequent requirement) it is not ‘given’ for the purposes of s.188(4).
Because the first authority never became effective, actions pursuant to such authority (such as the calling of a creditors’ meeting and consideration of resolutions) could be of no effect. Further, there was a declaration of the Court that the authority of 30 June 2005 was not effective ‘for the purposes of Part X’ made before the second authority was given. Hence there was no doubt about the status of the first authority at the time the second authority was given. In those circumstances, consistent with what Branson J held in Hooper v Ewins, I am of the view that, read in the context of Part X, s.188(4) is intended to limit the power of a debtor to give successive effective authorities and an authority is not given under s.188 until it is ‘effective’. This is consistent with the amendments of 2002 and 2004 (see for example those provisions that state that an authority signed by a debtor is not effective unless certain things occur at that time or before the person authorised consents to exercise the powers given by the authority).
As the first authority was not effective and therefore was not ‘given’, leave of the Court under s.188(4) was not necessary for the debtor to give the authority which he signed on 10 October 2005. It is not suggested that there is any defect in the form completed by the debtor in relation to the second authority or in meeting the requirements of s.188 in relation to that authority (cf St Leonards Property Pty Ltd v Stanley [2005] FMCA 497). The application for a declaration that the authority of 10 October 2005 was void or not effective in the absence of such leave should be dismissed.
I certify that the preceding twenty-nine (29) paragraphs are a true copy of the reasons for judgment of Barnes FM
Associate:
Date: 3 November 2005.
2
8
3