McKinnon v Commonwealth Bank (No.2) - [2004] FMCA 209

FEDERAL MAGISTRATES COURT OF AUSTRALIA

McKINNON & ANOR v COMMONWEALTH BANK (No.2)

[2004] FMCA 209

BANKRUPTCY – Application to set aside bankruptcy notice – notice against two debtors – whether notice should have been served on both at same time – whether judgment against debtors stayed – whether notice abuse of process – application to set aside dismissed.

Supreme Court Act 1986 (Vic), s.101

Penalty Interest Rates Act 1983 (Vic), s.2

Bankruptcy Act 1966, ss.40(1)(g), 41(1)

First Applicant:

JEANETTE BEVERLEY DAWN McKINNON

Second Applicant:

DONALD NEIL MCKINNON

Respondent:

COMMONWEALTH BANK OF AUSTRALIA

File No:

MZ 317 of 2004

Delivered on:

29 March 2004

Delivered at:

Melbourne

Hearing Date:

29 March 2004

Judgment of:

Phipps FM

REPRESENTATION

The Applicant appeared in person

Counsel for the Respondent:

Mr A.W. Ellis

Solicitors for the Respondent:

Ryrie Bridges

ORDERS

THAT the Application be dismissed.
THAT the Applicants pay the Respondent’s costs including costs reserved to be taxed in accordance with the Federal Court Rules.

FEDERAL MAGISTRATES
COURT OF AUSTRALIA AT
MELBOURNE

MZ 317 of 2004

JEANETTE BEVERLEY DAWN McKINNON

First Applicant

and

DONALD NEIL McKINNON

Second Applicant

and

COMMONWEALTH BANK OF AUSTRALIA

Respondent

REASONS FOR JUDGMENT

This is an application to set aside a bankruptcy notice. The application was filed on 15 March 2004 in the Federal Court of Australia and subsequently transferred to this court. It is an application by both Jeanette Beverley Dawn McKinnon and Donald Neil McKinnon.
The bankruptcy notice was issued by the Official Receiver on 10 October 2003. It requires the applicants to pay the sum of $281,994.35. It is based on a judgment of the Supreme Court of Victoria of 27 June 2001 which was judgment for the respondent against the applicants in the sum of $222,985.29. The balance of the amount claimed is interest of $59,009.06 calculated in accordance with s.101 of the Supreme Court Act 1986 (Vic) at the rate prescribed by s.2 of the Penalty Interests Rate Act 1983 (Vic).
The bankruptcy notice has been the subject of an application by either the first-named applicant, Jeanette McKinnon, or both applicants in the Federal Court. The bankruptcy notice was served on the second applicant on 28 October 2003 and on the first applicant on 24 February 2004. I say that statement subject to dealing with arguments which are put in relation to that. Application was made to Registrar Mussett for an extension of time for compliance with the bankruptcy notice which was refused. An application for review of the decision of the Registrar was made and that was dealt with by Weinberg J. He refused to review the decision. An application for leave to appeal from the interlocutory order of Weinberg J was refused by Ryan J on 24 March 2004.
The attack on the bankruptcy notice is threefold. First is service. The notice was served on the second-named applicant on 28 October 2003 and not served for a considerable amount of time on the first-named applicant. Prior to service on the first-named applicant a creditor's petition had been issued against the second applicant. The applicant submits that service should have been on both applicants at the same time. She relies on what appears in the transcript of the argument before Ryan J on 24 March 2004 where a similar point appears to have been raised.
His Honour's reasons do not refer to the question of service. What appears in the transcript is that the point was raised. His Honour said nothing about it, other than to consider it as a point. He said nothing in his reasons.
There is no basis for saying that because service was separated by a period of time there is something wrong with the service of the notices of bankruptcy.
In the affidavits in support of the application nothing is said about the manner or mode of service. I have been referred to an affidavit of service in the file relating to the creditor's petition against the second respondent. It was served personally. In his reasons for judgment on 24 March 2004 Ryan J states that the bankruptcy notices have been served and the dates on which they were served.
The next basis of the application is that the execution of the judgment of the Supreme Court of Victoria had been stayed. What that is based on is a letter written by the solicitors for the applicant to the registry of the High Court at a time when an application for special leave to appeal was on foot in the High Court. That undertook not to execute the judgment until the application for special leave to appeal had been dealt with. The application for special leave was dealt with by the High Court on 3 October 2003 and it was dismissed. The applicants argue that the High Court proceedings are not yet finished. They argue that there is some way some defect or invalidity in the High Court proceedings because Hayne J, they allege, was part of the court constituting the bench on 3 October 2003 and they allege that he holds Commonwealth Bank shares and that in some way makes the decision invalid.
The transcript of the proceedings before the High Court show that it was determined by the Chief Justice, Gleeson CJ, and Gummow J, both of whom in response to questions from the first-named applicant said they did not hold any Commonwealth Bank shares. As I have already said in refusing an application for adjournment, it is not for this court to look into the validity or otherwise of a High Court decision. The fact is that on 3 October 2003 the application for special leave to appeal was dismissed. There is no basis for saying that subsequent to

3 October 2003 the judgment was stayed.
The bankruptcy notice was issued on 28 October 2003. The relevant provisions of the Bankruptcy Act 1966 are subsection 40(1)(g). Subsection 40(1)(g) provides that a debtor commits an act of bankruptcy when a creditor who has obtained judgment, a final judgment or final order, the execution of which has not been stayed, has served on the debtor a bankruptcy notice and it has not been complied with. Section 41(1) provides that an Official Receiver may issue a bankruptcy notice on the application of the creditor who has obtained against the debtor a final judgment or order that is of the type described in paragraph 40(1)(g) and is for an amount of at least $2000.
The judgment debt in this case satisfies the necessary description. Judgment has not been stayed. There is no basis for saying there is some defect in the bankruptcy notice for that reason.
There is a final submission that there is an abuse of process. Partly that appears to be based on the argument that the judgment has been stayed, and partly based on the alleged conduct of the bank. Arguing for both applicants Ms McKinnon says that the applicants are solvent. That is not a relevant matter in determining whether or not a bankruptcy notice should be set aside. Solvency may be an issue on the hearing of a creditor's petition, but it is not a matter which affects the validity of a bankruptcy notice.
In the course of Ms McKinnon's argument there were attacks made on the validity of the judgment itself. They were all arguments which would be dealt with by the appeal process. The appeal process is over. There appeared to be an argument that the bank was in some way still a secured creditor, although there is no material which supports that allegation. If the bank is still a secured creditor that does not stop it issuing a bankruptcy notice.
There is no basis for setting aside the bankruptcy notice. The application to set aside the bankruptcy notice is dismissed.

I certify that the preceding fourteen (14) paragraphs are a true copy of the reasons for judgment of Phipps FM

Associate:

Date: