MERCEDEZ-BENZ Financial Services Australia Pty Ltd v Hobson

[2017] FCCA 1060

FEDERAL CIRCUIT COURT OF AUSTRALIA

MERCEDEZ-BENZ FINANCIAL SERVICES AUSTRALIA PTY LTD v HOBSON & ANOR [2017] FCCA 1060

Catchwords:
BANKRUPTCY – Creditor’s petition – County Court of Victoria costs order –where respondents did not file any material – where the Certificate of Judgment from County Court of Victoria referred to ‘defendant’ not ‘defendants’ – where the applicants used the wrong creditor’s petition form – consideration of s.306(1) of the Bankruptcy Act 1966 (Cth) – errors did not cause substantial injustice to Respondents – sequestration orders made.

Legislation:

Bankruptcy Act 1966, ss.40, 43, 44, 47(1), 47(1A) 52, 156A, 306(1)

Federal Circuit Court (Bankruptcy) Rules 2016, r.4.06.

Cases cited:

Adams v Lambert [2006] HCA 10

Hubner v ANZ [1999] 88 FCR 445

Kleinwort Benson Australia Ltd v Crowl (1988) 165 CLR 71

Applicant: MERCEDEZ-BENZ FINANCIAL SERVICES AUSTRALIA PTY LTD

First Respondent: SHIRLEY AGNUS HOBSON

Second Respondent: DAVID FRANCIS HOBSON

File Number: MLG 237 of 2017

Judgment of: Judge Hartnett

Hearing date: 12 May 2017

Delivered at: Melbourne

Delivered on: 19 May 2017

REPRESENTATION

Counsel for the Applicant: Mr Devanny

Solicitors for the Applicant: In House Counsel Mercedez Benz Financial Services Australia Pty Ltd

The First Respondent: No appearance

The Second Respondent: No appearance

ORDERS

1. A sequestration order be made against the estate of SHIRLEY AGNUS HOBSON.

2. A sequestration order be made against the estate of DAVID FRANCIS HOBSON.

3. The Applicant creditor’s costs be taxed and paid from the estates of Shirley Agnus Hobson and David Francis Hobson in accordance with the Bankruptcy Act 1966 (Cth).

AND THE COURT NOTES THAT:

A.The date of the act of bankruptcy of the estate of SHIRLEY AGNUS HOBSON is 19 December 2016.

B.The date of the act of bankruptcy of the estate of DAVID FRANCIS HOBSON    is 28 December 2016.

FEDERAL CIRCUIT COURT
OF AUSTRALIA
AT MELBOURNE

MLG 237 of 2017

MERCEDEZ-BENZ FINANCIAL SERVICES AUSTRALIA PTY LTD

Applicant

And

SHIRLEY AGNUS HOBSON

First Respondent

DAVID FRANCIS HOBSON

Second Respondent

REASONS FOR JUDGMENT

1. The Applicant filed a Creditor’s petition (‘the petition’) on 6 February 2017. The Applicant seeks a sequestration order pursuant to s.43 of the Bankruptcy Act 1966 (Cth) (‘the Act’) against the estates of Shirley Agnus Hobson and David Francis Hobson. The Respondents, whilst being served with all relevant Court documents, have filed no appearance, notice stating grounds of opposition to the petition and/or affidavit evidence in these proceedings. The Respondents have not challenged any affidavit evidence relied upon and filed by the Applicant. They have not attended at Court throughout the proceedings.

Background

1. On 6 September 2016, the County Court of Victoria gave the Applicant judgment in default of appearance, against the First and Second Respondents, in the sum of $279,877.56 being the sum of $261,274.52 for the outstanding claim plus $15,191,04 for interest and $3,412.00 for costs (‘the judgment’). The court issued a Form 28 Filing Confirmation Notice.

2. On 23 September 2016 the County Court of Victoria issued a ‘Certificate of Judgment’ which verified the details of the default judgment but erroneously recorded that the judgment of the court was ‘the defendant pay the plaintiff’ instead of  ‘the defendants pay the plaintiff’.

3. On 26 October 2016, the official receiver issued a Bankruptcy Notice against the Respondents in the amount of the judgment.

4. The Bankruptcy Notice was served on the First Respondent on 27 November 2016 and the Second Respondent on 7 December 2016. The necessary  affidavits of personal service are before the Court.

5. Neither Respondent complied with the requirements of the bankruptcy notice within the time specified and accordingly, pursuant to s.40(1)(g)(i) of the Act, committed acts of bankruptcy on 19 December 2016 and 28 December 2016 respectively, as argued by the Applicant.

6. The petition presented was then lodged and was within 6 months of the date of the commission of the acts of bankruptcy, as alleged, in accordance with s.44 of the Act. The petition was presented in the old Form 6, as opposed to the new Form B6, but otherwise complied with the requirements of the Federal Circuit Court (Bankruptcy) Rules 2016 (‘the Rules’).

7. Part 2 of the petition contains the affidavit verifying the petition affirmed by Ms Jenny Crapper on 6 February 2017.

8. A consent to act as trustee signed by Robert Woods was filed on 7 February 2017 in accordance with s.156A of the Act.

9. The petition was served personally on the Respondents together with a consent to act as trustee signed by Mr Robert Woods. Again, the necessary affidavits of service are before the Court.

10. The petition was set down for hearing on the 14 March 2017. Registrar Ryan ordered on that day that the petition be dismissed. Such dismissal was on the basis of the act of bankruptcy not having occurred, due to the defective (as referred to in paragraph three above) Certificate of Judgment issued by the County Court of Victoria.

11. On 23 March 2017 the Applicant filed an application to review. On that date was also filed an affidavit sworn by Ms Rebecca Quinton. Ms Quinton is the solicitor for the Applicant. Her affidavit evidence, unchallenged, is as follows:-

    “…

    2. The applicant obtained a judgment in the County Court of Victoria against both defendants on 6 September 2016 for a total of $279,877.56.

    3. A certified extract produced by the County Court of Victoria misstated this judgment as being against the ‘defendant’ whereas in reality the judgment was regularly entered against both defendants, who are the respondents to this proceeding.

    4. Bankruptcy notices were personally served annexing the certified extract on 27 November 2016 in the case of the First Respondent and 7 December 2016 in the case of the Second Respondent.

    5. The bankruptcy notices were not complied with and acts of bankruptcy occurred on 19 December 2016 and 28 December 2016 respectively.

    6. The petition in this proceeding was presented on 6 February 2017 and subsequently served together with a consent to act filed  by Robert Woods.

    …”

12. On 2 May 2017 the Court ordered as follows:-

    “1. The application for review filed 23 March 2017 is adjourned for hearing on the 12 May 2017 at 9.30am.

    2.  The solicitors for the Applicant serve a copy of these orders upon the Respondents and provide proof of same to the Court on the adjourned hearing date.

    3. Costs reserved.”

    The Court is satisfied on the affidavit evidence before it that order number 2 above was complied with.

13. An affidavit of debt affirmed by Ms Crapper on 11 May 2017 and an affidavit of search affirmed by Ms Quinton on 11 May 2017, are also before the Court in accordance with r.4.06(3) and (4) of the Rules. They are relied upon by the Applicant and go to the amount particularised in the bankruptcy notice bearing file number BN203230 remaining still wholly due and unsatisfied. Earlier affidavits of search and debt were filed by the Applicant in respect of earlier hearing dates.

14. The Applicant also relies upon an affidavit sworn by Ms Quinton on 11 May 2017. The evidence as contained in that affidavit is relevantly as follows:-

    “…

    3. On 6 September 2016, I, on behalf of the applicant filed a Form 60G with the County Court of Victoria via online filing system Citec seeking judgment against the first respondent and the second respondent for the sum of $279,877.56.

    4. On 6 September 2016 the Court granted the applicant's application and awarded judgment against the first respondent and the second respondent for the sum of $279,877.56 (‘the Default Judgment’) issuing a Form 28 Filing Confirmation Notice.

    …

    5. On 23 September 2016, I, on behalf of the applicant filed a Certificate of Judgment form with the County Court of Victoria via online filing system Citec (‘the Initial Certificate of Judgment’). The Initial Certificate of Judgment verified the details of Default Judgment save that the initial Certificate of Judgment inadvertently and incorrectly stated that ‘the defendant pay the plaintiff as follows’.

    6. On 23 September 2016, the Court reviewed and approved the Initial Certificate of Judgment and issued a Form 28 Filing Confirmation Notice.

    …

    7. The applicant thereafter relied upon the Initial Certificate of Judgment to proceed with a bankruptcy notice and later a creditor's petition bearing proceeding number MLG 237 of 2017 against the respondents (‘the Creditor’s Petition’).

    8. On 14 March 2017, at the hearing of the Creditor's Petition, I appeared on behalf of the applicant and became aware that wording of the Initial Certificate of Judgment differed to the wording of the Default Judgment in so far as it stated that ‘The defendant pay the plaintiff’ as opposed to ‘The first defendant and second defendant pay the plaintiff’ which was set out in the Default Judgment (‘the Error’)

    9. In order to rectify the Error, on 17 March 2017, the applicant re-filed a Certificate of Judgment form with the County Court of Victoria via online filing system Citec with the corrected wording ‘the First Defendant and Second Defendant pay the plaintiff’(‘the amended certificate of judgment’).

    10. The Court thereafter reviewed and approved the Amended Certificate of Judgment issuing a Form 28 Filing Confirmation Notice.

    …

    11. From my review of the online records of the County Court published via Court Connect, I verily believe that the Orders of the Court on 6 September 2016 provided, inter alia that ‘The defendants, Shirley Hobson and David Hobson, pay the plaintiff claim of $261,274.52, interest of $15,191.04 and costs of $3,412.00, total $279,877.56’.

    …”

Consideration

1. In accordance with s.52(1) of the Act, the Court must be satisfied with the proof of those matters stated in the petition; service of the petition upon the Respondents; and the fact that the debt is still owing. The Court is satisfied that the affidavits relied on by the Applicant and referred to above satisfy the aforementioned elements required to make a sequestration order.

2. The petition was presented using the incorrect form and therefore did not satisfy the requirement of s.47(1A) of the Act, which is as follows:-

   “(1A) If the rules of court prescribe a form for the purposes of this subsection, the petition must be in the form prescribed.”

3. However, s.306(1) of the Act states:-

   “Formal defect not to invalidate proceedings

   (1)  Proceedings under this Act are not invalidated by a formal defect or an irregularity, unless the court before which the objection on that ground is made is of opinion that substantial injustice has been caused by the defect or irregularity and that the injustice cannot be remedied by an order of that court.”

4. The Court is satisfied that the Respondents did not suffer substantial injustice by the incorrect form of petition being presented and accepts the proceedings are not invalidated by this irregularity.

Defective Certificate of Judgment

1. Did the First and Second Respondents commit acts of bankruptcy on 19 December 2016 and 28 December 2016 respectively, by failing to comply with s.40(1)(g)(i) of the Act in respect of a Bankruptcy Notice with a defective attachment?

2. As made clear by the Full Court of the Federal Court in Hubner v ANZ [1999] 88 FCR 445 at [17]-[20] (Cooper, Keifel and Tamberlin JJ), there is no irregularity in issuing a bankruptcy notice in the name of joint debtors. Their Honours held:

   “The essential requirement of the bankruptcy notice is that payment is claimed in accordance with the judgment.[1] In addition, there is nothing in the context of the Act which prevents the application to it of s23 of the Acts Interpretation Act 1901 (Cth) which deems references to the singular to include the plural.”[2]

   [1] Kleinwort Benson Australia Ltd v Crowl (1988) 165 CLR 71, 80

   [2] Hubner v ANZ [1999] 88 FCR 445, 21 (Cooper, Keifel and Tamberlin JJ)

3. The bankruptcy notice without attachment was correct in all its stated particulars. However it annexed a defective, as to one part, Certificate of Judgment. The Full Court of the High Court held in Adams v Lambert [2006] HCA 10 at [22] (‘Adams’) that a document attaching to a bankruptcy notice forms part of the notice.

4. The amount specified in the annexed Certificate of Judgment was correct. The Certificate of Judgment referring to the ‘defendant’ instead of the ‘defendants’ or ‘the first and second defendant’ was defective. It did not alter the underlying judgment which on its face and in substance made payment of the amount specified in the Certificate of Judgment a joint obligation of the defendants, here the Respondents.

5. A consideration of the validity of the Bankruptcy Notice turns upon the application of s.306 of the Act (as set out in paragraph 18 above). There is, on the facts of this case, no evidence that any substantial injustice has been caused to the Respondents. The question that remains is whether the defect in the annexed Certificate of Judgment invalidates the Bankruptcy Notice.

6. There is always a potential for error in a bankruptcy notice. Section 41 of the Act deals with one such error and is as follows:-

   “  …

   (5)  A bankruptcy notice is not invalidated by reason only that the sum specified in the notice as the amount due to the creditor exceeds the amount in fact due, unless the debtor, within the time allowed for payment, gives notice to the creditor that he or she disputes the validity of the notice on the ground of the misstatement.

   (6)  Where the amount specified in a bankruptcy notice exceeds the amount in fact due and the debtor does not give notice to the creditor in accordance with subsection (5), he or she shall be deemed to have complied with the notice if, within the time allowed for payment, he or she takes such action as would have constituted compliance with the notice if the amount due had been correctly specified in it.

   …”

1. The decision of Adams is particularly relevant to the Court’s consideration. The High Court said therein:-

   “[18]…The questions whether the defect or irregularity is a formal defect or irregularity, and whether substantial injustice has been caused and cannot be remedied, are separate and distinct, the latter question arising only if the former is answered in the affirmative. It may be accepted that, if a defect could cause substantial injustice, it may not easily be classified as a formal defect or irregularity. But the absence of claimed injustice does not conclude the separate question that arises under s.306 about whether the defect of irregularity is a formal defect or irregularity.

   …

   [26] The question of construction raised by the words ‘a formal defect or an irregularity’ is one to be decided by reading s.306 in the context of the whole Act, informed by the general purpose of the legislation, and the particular purpose of the provisions relating to bankruptcy notices.

   …

   [27] If as in the present case, what is in question is an error in the form of a misdescription of a statutory provision, then a consideration of the general purpose of the Act, and the particular purpose of the legislative scheme relating to bankruptcy notices, leads readily to a conclusion that if the error could reasonably mislead a debtor as to what is necessary to comply with the notice it is not merely a formal defect of irregularity. Any error is capable of misleading somebody about something.”

2. The Court considers the defect in the annexed Certificate of Judgment could not have reasonably mislead the Respondents, on the facts of this case, as to what it was that was necessary to comply with the notice. They were jointly defendants who are married and reside at the same address. The Bankruptcy Notice set out in detail and accurately those precise sums including a pre and post interest component owing to the Applicant by the Respondents. Payment by them or either of them was required. That was the judgment of the court. I consider the defect in the Certificate of Judgment does not render the Bankruptcy Notice invalid.

3. Being satisfied that the First and Second Respondents have committed acts of bankruptcy, the Court shall make a sequestration order against the estate of Shirley Agnus Hobson and the estate of David Francis Hobson.

I certify that the preceding twenty-eight (28) paragraphs are a true copy of the reasons for judgment of Judge Hartnett

Date: 19 May 2017