Mske Pty Ltd v Krasulak
[2005] FMCA 300
•15 March 2005
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| MSKE PTY LTD v KRASULAK | [2005] FMCA 300 |
| BANKRUPTCY – Threshold issue – whether Bankruptcy Notice validly issued – technical defects – whether formal defects or not. |
| Applicant: | MSKE PTY LTD (ACN 010 014 392) |
| Respondent: | PETER TARAS KRASULAK ALSO KNOWN AS PETER KEELE |
| File Number: | BZ 447 of 2003 |
| Judgment of: | Baumann FM |
| Hearing date: | 30 November 2004 |
| Delivered at: | Brisbane |
| Delivered on: | 15 March 2005 |
REPRESENTATION
| Counsel for the Applicant: | Mr Ulrich |
| Solicitors for the Applicant: | Gregg Lawyers |
| Counsel for the Respondent: | Mr Fary |
| Solicitors for the Respondent: | Lewenberg & Lewenberg Solicitors |
ORDERS
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT BRISBANE |
BZ 447 of 2003
| M.S.K.E. PTY LTD (ACN 010 014 392) |
Applicant
And
| PETER TARAS KRASULAK ALSO KNOWN AS PETER KEELE |
Respondent
REASONS FOR JUDGMENT
The Respondent, PETER KEELE, opposes the Creditor’s Petition presented 14 August 2003 by M.S.K.E. Pty Ltd (“the Creditor”) which seeks a Sequestration Order.
Although the Debtor says that the Bankruptcy Notice was not properly served, a determination of that issue would require cross examination of a number of witnesses, and I agreed that it would be an efficient use of Court time if a number of the “technical” grounds of opposition could be dealt with before the Debtor (who resides in Victoria) and a number of witnesses were required to come personally to Brisbane for a hearing.
The hearing which proceeded before me on 30 November 2004, was conducted on submissions only – the Court having received and considered written submissions, supplemented by oral argument, from each party.
Grounds of Opposition
Apart from the issue of service, not fully agitated before me at this stage, the grounds of opposition included:-
a)The Bankruptcy Notice is founded on an order the execution of which was stayed at the time of the application for the issue of the Bankruptcy Notice by reason of section 799 of the Uniform Civil Procedure Rules 1999 (Qld) in breach of ss.40 (1) (g) and 41 (3) (b) of the Bankruptcy Act 1966 (Cth) (“the Act”).
b)The Bankruptcy Notice contains the following defects:-
i)It and the copy served on the Respondent did not have annexed the orders made on 23 May 2003;
ii)The address for the Creditor in paragraph 1 of the Bankruptcy Notice and for payment in paragraph 4 of the Creditor’s Petition are expressed to be “c/-” an address.
iii)Paragraph 3 of the Bankruptcy Notice does not follow the prescribed form in that it provides “after service of you on this Bankruptcy Notice” (underlining added) rather than “after service on you of this Bankruptcy Notice”.
I should mention that the grounds of opposition also rely on a claim that there is not “in truth and reality” a debt and finally, that “for other sufficient cause” the Court ought to dismiss the Creditor’s Petition. Again these issues were effectively left for further argument on another day – it being agreed that if any of the more “technical” grounds of opposition succeed, the Petition must be dismissed.
Background Facts
On 5 June 1996, Concord Ukrainian Credit Union Ltd (“Concord”) commenced proceedings against the Debtor in the Supreme Court of Queensland. It seems that judgment by default was given by Fryberg J against the Debtor for $106, 763.46 on 27 June 1997 (“the judgment debt”).
On 31 March 1999, Concord entered into a “Debt Sale Agreement” with the Petitioning Creditor whereby Concorde did assign its interest in the judgment debt to M.S.K.E. Pty Ltd.
On 1 May 2003, an application was filed in the Supreme Court of Queensland to apply for the following orders:-
“1. That judgment entered by this Honourable Court on 27 June 1997 be amended from Concorde Ukrainian Credit Union Ltd to M.S.K.E. Pty Ltd (ACN 010 014 392);
2.That judgment entered by this Honourable Court on 27 June 1997, be amended to Peter Taras Krasulak also known as PETER KEELE”.
On 31 may 2003, Phillippides J made orders in terms of the application.
A Bankruptcy Notice was issued on 4 June 2003 and purportedly served upon the Debtor on 19 July 2003.
Legislative Framework
Section 40 (1) (g) of the Act provides:-
“if a creditor who has obtained against the debtor a final judgment or final order, being a judgment or order the execution of which has not been stayed, has served on the debtor in Australia or, by leave of the Court, elsewhere, a bankruptcy notice under this Act and the debtor does not:
i) where the notice was served in Australia – within the time specified in the notice; or
ii) where the notice was served elsewhere – within the time fixed for the purpose by the order giving leave to effect the service;…”
Section 41 (3) (b) of the Act provides (relevantly):-
“A bankruptcy notice shall not be issued in relation to a debtor:
if, at the time of the application for its issue, execution of the judgment or order to which it relates has been stayed…”
Rule 799 of the Uniform Civil Procedure Rules 1999 (Qld) provides as follows:-
(1) “An enforcement creditor may start enforcement proceedings without leave at any time within 6 years after the day the money order was made.
(2) In addition to another law requiring a court’s leave before an order may be enforced, an enforcement creditor requires a court’s leave to start enforcement proceedings if—
(a)it is more than 6 years since the money order was made; or
(b)there has been a change in an enforcement creditor or enforcement debtor, whether by assignment, death or otherwise.
(3) An application for leave to start enforcement proceedings may be made without notice to any person unless the court orders otherwise.
(4) On an application for leave to start enforcement proceedings, the applicant must satisfy the court—
(a)as to the amount, including interest, owing at the date of the application; and
(b)if it is more than 6 years since the money order was made—as to the reasons for the delay; and
(c)if there has been a change in an enforcement creditor or enforcement debtor—as to the change that has happened; and
(d)that the applicant is entitled to enforce the order; and
(e)that the enforcement debtor against whom enforcement is sought is liable to satisfy the order.”
Has Execution of the Judgment Been Stayed?
The Debtor submits that:-
a)The judgment which formed the basis for the Bankruptcy Notice was a judgment “the execution of which had been stayed at the time of the application for the issue of the Bankruptcy Notice. Accordingly it could not found a Bankruptcy Notice”; and
b)Relies upon the decision in Reasonable Endeavours Pty Ltd vDennehey (2001) 107 FCR 144, where Marshall J held that a Bankruptcy Notice issued more than 6 years after entry of the judgment was invalid because the Applicant Creditor had failed to get leave of the Supreme Court of Victoria in accordance with the Rules.
The Creditor sways that at the time of the issue of the Bankruptcy Notice, there was 23 days before “the 6 year limit on enforcing the judgment would have expired on 27 June 2003”.
I agree with this submission. The decision in Reasonable EndeavoursPty Ltd v Dennehey is distinguishable on the facts. In that case, an application for the issue of a Bankruptcy Notice was not made until after the expiry of the requisite 6 year time limit.
In the present case, at the time of the issue of the Bankruptcy Notice, leave of a Court was not necessary to begin Enforcement Proceedings (see Rule 799 (1) of Uniform Civil Proceedings Rules).
The application dealt with by Phillipides J, was an application under Rule 799 (2) (b) as there had been “a change in an Enforcement Creditor or Enforcement Debtor, whether by assignment, death or otherwise”. It was not an application under Rule 799 (2) (a), as 6 years had not expired since the order was made.
As a result I am satisfied that the issue of the Bankruptcy Notice on
4 June 2003 was in accordance with the requirements of section 41 (3) (b) of the Act.
Defects in Notice
Other than the contention that the Bankruptcy Notice served on the Debtor “did not have annexed the orders made on 23 May 2003” (which is a factual dispute to be determined at a later date), the Debtor says that the Notice is otherwise defective for the reasons set out at paragraph 4(b)(ii) and (iii) of these reasons.
I was appropriately directed in the Debtor’s submissions to the High Court decision in Kleinwort Benson Australia Ltd v Crowl (1988) 165 CLR 71 and the Full Court decision in Australian Steel Co (Operations) Pty Ltd v Lewis (2000) 109 FCK 33. It is clear from these decisions and more recent comments by the Full Court that a purposive approach must be adopted in deciding, if a defect occurs, whether it is a substantive irregularity or a formal defect. Clearly a requirement which is made essential by the prescribed Notice must be completed with – and if not, the Notice is invalid.
In request of the alleged defects I find that:-
a)The use of “c/-” in both paragraph 1 and paragraph 4 of the Creditor’s Petition is not a failure to comply with an essential term of the Notice. As Gyles J in Australian Steel v Lewis (2000) FCA 1915 reminds us:-
“The backdrop after all is that “it is the duty of a Debtor to seek out the judgment Creditor, and pay the judgment debt to the Creditor if he is in Australia” (James v FederalCommissioner of Taxation (1955) 93 CLR 631 at 639).
The purpose of paragraphs 1 and 4 in the Form are to do just that. It is to allow the Debtor to seek out his Creditor and pay him.
I do not believe any confusion arises (see also Lee v Smith (2002) FMCA 59).
b)The error in paragraph 3 of the Bankruptcy Notice is clearly a typographical error. It is true that the words used in the Notice are not exactly as prescribed. However I am not satisfied that those words are an essential term of the Notice or that it is capable of confusing the Debtor. It is a defect which is a mere formality and curable under section 306 (1) of the Act.
It follows from what I have decided that the grounds agitated before me on 30 November 2004 have no merit. As a result the remaining grounds relied upon may be proceeded with, and I will hear argument as to the appropriate direction to make.
I certify that the preceding twenty-three (23) paragraphs are a true copy of the reasons for judgment of Baumann FM
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