McMinn v National Australia Bank
[2002] FMCA 120
•7 June 2002
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| McMINN & ANOR v NATIONAL AUSTRALIA BANK | [2002] FMCA 120 |
| BANKRUPTCY – Application to set aside bankruptcy notice whether founded on a “final judgment or order” – not a final order – bankruptcy notice set aside. Bankruptcy Act 1966, ss.40(1)(g), 40(3) Opie v Opie (1951) 84 CLR 362 Clyne v DCT 69 FCR 1 Re: Gibbs ex parte Triscott (1995) 64 FCR 80 |
| Applicants | ALAN WILLIAM McMINN & WILMA HELEN McMINN |
| Respondent: | NATIONAL AUSTRALIA BANK LTD |
| File No: | BZ 501 of 2001 |
| Delivered on: | 7 June 2002 |
| Delivered at: | Brisbane |
| Hearing Date: | 4 June 2002 |
| Judgment of: | Baumann FM |
REPRESENTATION
| Counsel for the Applicant: | R Lilley, appearing pro bono |
| Counsel for the Respondent: | B T Porter |
| Solicitors for the Respondent: | Thynne & McCartney |
ORDERS
The Bankruptcy Notice be set aside.
The Applicants’ pay the Respondent’s costs of and incidental to the application up to and including 5 November 2001, as agreed and failing agreement as taxed.
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT BRISBANE |
BZ 501 of 2001
| ALAN WILLIAM JOSEPH McMINN & WILMA HELEN McMINN |
Applicants
And
| NATIONAL AUSTRALIA BANK LIMITED |
Respondent
REASONS FOR JUDGMENT
Introduction
The parties have identified a discrete legal issue for determination in the context of current proceedings before the Court. The principal proceedings are an application to set aside an amended bankruptcy notice issued against ALAN WILLIAM JOSEPH McMINN and WILMA HELEN McMINN, who I will call (“McMinn”), by the National Australia Bank, (“ the Bank”).
Issue
The application to set aside the amended bankruptcy notice is set down for hearing before me in July. Both parties acknowledge that if I find that the judgment upon which the bankruptcy notice is based is not a final judgment within section 40(1)(g) of the Bankruptcy Act 1966 ("the Act"), then the application by McMinn must succeed. In this matter I was greatly assisted by the written submissions of counsel and the oral expansion on those submissions.
The brief procedural history
On 8 August 2001, the Bank obtained judgment by default against McMinn for $843,465.88, (“the default judgment”), as guarantors for the obligations of a company Golden Concepts Pty Ltd, the operators of a childcare centre on the Gold Coast. For the purposes of determining this discrete issue, it is not necessary to fully recite the history of the relations between the Bank and McMinn other than to say that McMinn made an application to the Supreme Court of Queensland to set aside default judgment on the basis essentially that:
(a)the Bank as mortgagee in possession had sold his security under value; and
(b)the Bank gave them negligent advice or made misleading and deceptive statements about finance availability.
Prior to the filing of the application to set aside the default judgment, an application to set aside the bankruptcy notice had been made and filed in this Court. The application to set aside the Supreme Court judgment was heard by Muir J on 25 January 2002, 29 January 2002, and 7 February 2002. The reasons for judgments are before me. The final order made in the matter by Muir J on 7 February was that:
“(1) The judgment dated 8 August 2001 be amended so as to be reduced to the amount of $290,000.
(2) The applicants be given leave to defend the proceedings.
(3)The applicants pay the respondent's costs of incidental to the application including reserve costs to be assessed on the standard basis before the defence be delivered within 28 days of today's date.”
On 7 February 2002, this Court ordered that the bankruptcy notice be amended pursuant to section 33(1)(b) of the Act to reduce the amount of the judgment relied upon to the amount of $290,000. Section 40(1)(g) of the Act, for the purposes of this discrete application, provides that a debtor commits an act of bankruptcy:
“If a creditor who has obtained against a debtor a final judgment or a final order being a judgment or order the execution of which has not been stayed……”
And, further, section 40(3)(b) of the Act provides that for the purposes of paragraph 40(1)(g) that:
“ A judgment or order that is enforceable as, or in the same manner as, a final judgment obtained in action shall be deemed to be a final judgment so obtained, and the proceedings in which or in consequence of which the judgment order was obtained shall be deemed to be the action in which it was obtained.”
Is the order of Muir J a final order?
McMinn's case
The applicant, McMinn, submits that:
a)the order allows McMinn to defend and cross-claim against the Bank, not only for the alleged sale and under value, but also for any other claim they might have, which McMinn asserts would extinguish the debt the subject of the bankruptcy notice;
b)to the extent that McMinn still has rights to prosecute claims in the Supreme Court litigation which arise out of and are connected with the loan facilities provided the judgment upon which the bankruptcy notice is based is not a final judgment, (see Opie v Opie (1951) 84 CLR 362);
c)McMinn has not exhausted their opportunity to defend the counter-claim;
d)it is not necessary to examine the reasons behind the order of Muir J as the order is clear and unambiguous, (see Commonwealth Bank of Australia v Muirhead (1997) 748 FCA);
e)and adopts the remarks of Spender J in Re Ryan ex parte Ryan v Jupiter's Management Limited (38 FLR 127 at 132), that section 40(3) has no application in this case.
The Bank's case
The respondent Bank submits that:
(a)this case is distinguishable from Commonwealth v Muirhead because in this case there has been a "full and detailed hearing of all the applicant's claims, and a precise determination of the sum due by Muir J”;
(b)it is both permissible and proper to look carefully at the reasons given by Muir J because it will show that he rejected the possibility of the applicants succeeding in anything other than the under value claim;
(c)McMinns have had the opportunity as envisaged by Opie's case;
(d)the amended judgment (while not a "judgment") as defined under the Uniform Civil Procedure Rules (Qld) was an enforceable money order and the mere fact that the amended judgment might be a subsequently defeasible order, does not necessarily mean that it was not final, (see Clyne v DCT, 69 FCR 1at 7);
(e)even if not a final judgment pursuant to section 40(1)(g), the amended judgment falls within extension of the meaning of final judgment in section 40(3)(b) of the Act.
Conclusions
The order of Muir J is clear. It gives the applicant the right to defend unconditionally. The right is not limited to any particular area of defence or counter-claim. It does not restrict the applicant to only the under value claim. It is not necessary for me to examine the reasons given by Muir J because this order is unambiguous, in my view. In this respect, I respectfully follow the observations of the Full Court in Muirhead where they say:
“In accordance with ordinary rules of construction, resort may be had to the reasons for judgment (which do not however form part of the judgment itself) to resolve ambiguity arising from the terms of the order. On one view, however, the use here sought to be made of the reasons of McPherson JA are not to render more clear the terms of the order that the appellants have leave to amend as they may be advised but to attempt to deny it any effect.”
The order of Muir J provides McMinn with the opportunity to defend, set off or counter-claim. It was not in issue before me that the applicants have chosen to do so. Any such claims need to be fully and finally determined by the appropriate forum, the Supreme Court of Queensland. Whilst Muir J examined the issues in the interlocutory proceedings, the evidence purporting to support the applicant's claims has not been tested in the usual way at trial. A trial is the only way in which these claims can receive a full and detailed determination. I agree with the observations of Vaughan Williams LJ in Re GJ ex parte GH referred to by McTiernan J in Opie v Opie, which were that:
“ What has been held essential to constitute a "final judgment" within sub-s(1)(g) is that there must have been something amounting to a cause of action which has been dealt with on the basis of a cause of action, at any rate to this extent, that the debtor has had the opportunity of setting up a counter-claim, set off or cross-demand. And, if the debtor has not had the opportunity of doing that, the judgment or order does not come within the term final judgment as used in sub-s (1)(g).”
Spender J, who dealt initially with the matter of Muirhead, made some observations about whether the summary judgment of Thomas J in that matter (in the light of the Court of Appeal's judgment to give them leave to defend), meant the Thomas J judgment founding the bankruptcy notice was not a final one. He said:
“It is clearly not an interlocutory judgment. It is final in that sense. Notwithstanding that the application the appeal to the Court of Appeal was concerned with posed the question of whether a judgment for summary judgment should be a confirmed, it was still open for some other ground to be argued by the Muirheads as a defence to that claim, or even as a cross-claim to that claim. Having regard to what I see as the paramount consideration of the bankruptcy law of this area, namely that a person should not be exposed to bankruptcy proceedings if in truth, at the end of the day, there might be a balance of account in his favour, it would seem to me to be wrong to permit bankruptcy proceedings to be based on a summary judgment application in circumstances where the Court of Appeal has agreed that there may be circumstances of defence or a cross-claim in relation to the claim by the CBA Bank, on which the summary judgment was obtained.”
The effect of section 40(3)(b) of the Act is to extend the meaning of the expression “final judgment or final order” in section 40(1)(g), but:
“That subsection only applies to certain judgments or orders which would not otherwise amount to final judgments or final orders; it does not purport to make something which is not a judgment or order, but which is only deemed to be that, a judgment or order for the purposes of section 40(1)(g). (See Drummond J in Re Gibbs ex parte Triscott (1995) 64 FCR 80 at 87 to 88.)”
A similar distinction was drawn by Spender J in Ryan ex parte Ryan v Jupiter's Management (op cit), where he says at page 132:
“Section 40(1)(g) itself draws a distinction between final judgments and final orders and between actions and proceedings. An action is a civil proceeding commenced by writ and generally means proceeding in one of the common law Courts as opposed to a suit in equity. Actions were divided into real, personal and mixed. A plaintiff at common law had to sue for one or other of certain forms of actions or writs. It is in the light of these considerations, in my opinion, section 40(3)(b) deems as final judgments in an action, judgments or orders of a certain quality obtained in proceedings which are not actions. Such an interpretation is in harmony with the other subparagraphs of section 40(3). “
In my view, it is not necessary to consider the extension of definition afforded by section 40(3)(b) in this matter, as the order of Muir J in the Supreme Court proceedings, is an order clearly under section 40(1)(g). The issue is if it is a final order. My view, for the reasons given in these concluding remarks, is that it is not. As a result the current application by the applicants to set aside the bankruptcy notice must succeed.
I will so order and hear submissions on any application for costs.
I certify that the preceding fifteen (15) paragraphs are a true copy of the reasons for judgment of Baumann FM
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