MOSS v Downey

[2005] FMCA 1923

FEDERAL MAGISTRATES COURT OF AUSTRALIA

MOSS v DOWNEY [2005] FMCA 1923

BANKRUPTCY – Substitution of Creditor.

Bankruptcy Act1966, s.49

Dean v QUF Industries Limited 1981 51 FLR 317

Applicant Debtor: CHRISTOPHER MOSS

Respondent Creditor: JAMES PATRICK DOWNEY

File Number: MLG 849 of 2005

Judgment of: McInnis FM

Hearing date: 19 December 2005

Delivered at: Melbourne

Delivered on: 19 December 2005

REPRESENTATION

Counsel for the Applicant: Mr. S. Tisher

Solicitors for the Applicant: ATO Legal Services

Counsel for the Respondent: Mr. B. Fitzgerald

Solicitors for the Respondent: The Law Offices of Barry Fried Solicitors

ORDERS

1. Erin Holland, the Deputy Commissioner of Taxation of the Commonwealth of Australia, be substituted on the Petition as the Applicant Creditor.

1. The hearing of the Petition be adjourned to 1 February 2006 at 3 pm.

1. The Debtor shall file and serve any further affidavits to be relied upon on or before 19 January 2006.

1. The Petitioning Creditor, as substituted, shall file and serve any further affidavits to be relied upon on or before 27 January 2006.

1. The costs of this motion be reserved. 

FEDERAL MAGISTRATES
COURT OF AUSTRALIA AT
MELBOURNE

MLG849/2005

CHRISTOPHER MOSS

Applicant

And

JAMES PATRICK DOWNEY

Respondent

REASONS FOR JUDGMENT

1. By notice of motion the Deputy Commissioner of Taxation seeks amongst others an order pursuant to s.49 of the Bankruptcy Act1966 (“the Act”).  The order sought is that the Deputy Commissioner be substituted on the petition as the applicant creditor. 

2. In this case, a creditor's petition was filed on 14 July 2005. The notice of motion before the Court this day also seeks other orders in relation to what might be described as the consequences which would flow if the application pursuant to s.49 of the Act were granted.

1. The notice of motion is supported by two affidavits.  Both are sworn by Amanda Jayne Atkin.  The first, an affidavit sworn 10 November 2005, and the second, an affidavit sworn 9 December 2005.  It is perhaps noteworthy that the second affidavit appears to correct errors that have arisen in the first affidavit and for present purposes it is sufficient to note that the records of the Deputy Commissioner of Taxation in relation to the debtor appear to show an indebtedness of some $414,164.18. 

1. The notice of motion is opposed. 

2. Section 49 of the Act provides discretion to the Court to substitute for the petition creditor and other creditor who also claim to be owed a debt. It provides:

   “49 Change of petitioners

   Where a creditor’s petition is not prosecuted with due diligence or where for any other reason the Court considers it proper to do so, the Court may permit to be substituted as petitioner or petitioners another creditor or other creditors to whom the debtor is indebted in the amount required by this Act in the case of a petitioning creditor, and the petition may be proceeded with as if the substituted creditor or creditors had been the petitioning creditor.”

3. It is clear that in matters of this kind, the intent and purpose of the provision is to enable the substituted creditor to continue the proceedings which may have been commenced by another creditor, that is, to continue the petition. 

4. The section itself clearly provides the opportunity for a creditor to be substituted in this instance and as stated by the Federal Court in Dean v QUF Industries Limited 1981 51 FLR 317 at 321. The importance from a practical point of view of s.49 is referred to by the Court as follows:

   “It helps avoid the multiplicity of petitions in that it reduces the circumstances in which it is necessary for another creditor to file an independent petition to protect his position against the possibility that the petitioner in a pending petition may be paid out or may otherwise fail to proceed.  It gives other creditors a degree of protection against dilatoriness on the part of a petitioner or collusion between petitioner and debtor to defeat or delay creditors.”

5. That passage does not mean in every case the protection required must be made out on the affidavit material. In my view, a proper interpretation of s.49 is that it does provide for a process whereby there is an avoidance of a multiplicity of petitions. In this case, the application for the substitution of the Deputy Commissioner as the petitioning creditor or as the applicant is opposed and the grounds of opposition are set out in a notice of intention to oppose, substitute a petition, which I note was filed in Court on 6 December 2005.

1. I further note that during the course of submissions counsel for the debtor has sought to rely upon a number of affidavits sworn by the debtor and they include affidavits which have been filed on 3 October 2005, 6 December 2005 and two affidavits filed 19 December 2005.

2. In the notice of intention to oppose the substituted petition the grounds referred to include the following:

   (1) The “Authorisation of Official Receiver” dated 5 November 2004 was not served on the Respondent / Debtor, with the result that the subsequent purported service of the said bankruptcy notice was never effective service as required by the Bankruptcy Act and the Bankruptcy Regulations.

   (2) The act of bankruptcy which, it is presumed, is sought to be relied upon by the National Australia Bank was not committed within 6 months before the substitution, if any, of the National Australia Bank as petitioning creditor. 

3. A further reference in the notice is made to deficiencies in the affidavit of Ms Atkin which I am satisfied have now been cured by the subsequent affidavit.  There are other references to there being a lack of demand made upon the debtor by the Australian Taxation Office and there is further in the material a suggestion that the respondent debtor is not indebted to the creditor, namely National Australia Bank.

4. Dealing with the issue of whether not the authorisation of official receiver dated 5 November 2004 was not served on the respondent debtor.  I note and accept the submissions made before the Commissioner that in this case the current regulations do not make that a requirement.  Even if it were a requirement and it is noted that affidavit material relied upon by the initial petitioning creditor includes an affidavit of service sworn by Peter Graham Woods, 24 May 2005, which verifies services of the Bankruptcy notice including the authorisation of Official Receiver.  Even if I accept for the present purposes as appears to be clearly deposed to by the debtor that that document was not served upon the debtor than I find in the present case that at the very least that is simply an issue of fact to be determined upon the hearing of the creditor's petition.

1. In any event on the material before me, I am satisfied that the regulations no longer make the service of that authorisation necessary.  In either event that is a matter which can properly be dealt with before the hearing of the creditor's petition.  Likewise, in my view, the issue of whether or not indeed there is any indebtedness to the National Australia Bank or indeed the issue of solvency are both issues which can and should properly be dealt with upon the hearing of the creditor's petition.

2. On the material before me it is sufficient to justify making the order that the Commissioner of Taxation be substituted on the petition as the applicant pursuant to s.49 of the Bankruptcy Act. I am satisfied that there is evidence of a debt owing. It is appropriate to avoid the multiplicity of petitions to make the order and other issues raised by way of opposition to this application are issues which can properly form part of the proceedings upon the hearing of a creditor's petition.

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

Deputy Associate:  Brooke Evans

Date:  19 December 2005