Murdaca v Accounts Control Management Services Pty Ltd
[2006] FMCA 1687
•9 November 2006
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| MURDACA v ACCOUNTS CONTROL MANAGEMENT SERVICES PTY LTD | [2006] FMCA 1687 |
| BANKRUPTCY – Sequestration Order – application for review – whether entitlement to issue bankruptcy notice based on order whether costs to be assessed – effect of ‘stay’ by local court after bankruptcy notice issued and served – whether final order. |
| Bankruptcy Act 1966, ss.40(1)(g), 41(3)(b), 52 |
| G J, Re; Ex parte G J [1905] 2 KB 678 Wiltshire-Smith v Olsson (1995) 57 FCR 572 Lindholt v Merritt Madden Printing Pty Ltd [2002] FCA 260 Moss Re; Ex parte Tour Finance Ltd (1968) 13 FLR 101 Williams, Re; Ex parte General Credits Ltd (1983) 68 FLR 202 Wren v Mahony (1972) 126 CLR 212 |
| Applicant: | ANTHONY MURDACA |
| Respondent: | ACCOUNTS CONTROL MANAGEMENT SERVICES PTY LTD (ACN 002 511 293) |
| File number: | SYG2328 of 2006 |
| Judgment of: | McInnis FM |
| Hearing date: | 7 November 2006 |
| Delivered at: | Sydney |
| Delivered on: | 9 November 2006 |
REPRESENTATION
| Applicant: | In person |
| Counsel for the Respondent: | Mr C Venegas |
| Solicitors for the Respondent: | Leonard Legal |
ORDERS
The Application for Review filed 9 October 2006 be dismissed.
The costs of the Respondent Creditor to the Application for Review be paid by the Applicant Debtor to be taxed according to the Federal Court scale and be paid out of the estate of the Debtor in accordance with the provisions of the Bankruptcy Act 1966.
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT SYDNEY |
SYG2328 of 2006
| ANTHONY MURDACA |
Applicant
And
| ACCOUNTS CONTROL MANAGEMENT SERVICES PTY LTD (ACN 002 511 293) |
Respondent
REASONS FOR JUDGMENT
(Revised from transcript)
In this matter the court reserved its decision on Tuesday, 7 November after hearing arguments advanced for and on behalf of both parties.
As a result of a busy court list and due to other court commitments it was not possible for the court to deliver an ex tempore decision on the day of hearing. It should be noted that the judgment which the court now delivers is effectively an ex tempore judgment.
The application before the court is an application for review of an order by a registrar which was made on 29 September 2006. On that date a sequestration order was made against the estate of Anthony Murdaca (the Debtor). The sequestration order was made upon a creditors petition filed by Accounts Control Management Services Pty Ltd (the Creditor).
It is important to note that an application for review of this kind is effectively a hearing de novo and the court is required to take into account and consider all the relevant material including the appropriate proofs required by the petitioning creditor and has in part for that purpose permitted the petitioning creditor to file in court updated affidavits of search and proof of debt. No issue is taken in this application in relation to the question of service of either the creditors petition, nor indeed the bankruptcy notice upon which the petition is based.
The chronology of events in this matter is particularly significant.
On 29 July 2005, the creditor obtained a judgment against the debtor in the local court of New South Wales. That judgment is recorded in an extract annexed to the bankruptcy notice as being for an amount of $13,255.45 exclusive of ‘costs to be assessed’. The judgment then prompted a bankruptcy notice to be issued by the creditor almost twelve months later on 6 July 2006. On 23 July 2006, a bankruptcy notice was served upon the debtor.
The chronology of events which I have just recited is not in dispute. What happened thereafter, however, has given rise to certain submissions being made by the debtor who I note is self-represented. On 2 August 2006, the local court of New South Wales issued what appears to be a notice of listing in the small claims division of that court. That notice of listing was a notice whereby a hearing of
6 September 2006 has been referred to in relation to an application for payment of the judgment debt by way of instalments. The reason for listing was that there was an objection to any instalment order. It is appropriate to note that in the notice of listing the court document sets out the following:
“PLEASE NOTE: AN EX-PARTE STAY OF PROCEEDINGS HAS BEEN GRANTED IN THIS MATTER UNTIL THE RETURN DATE OF THE NOTICE OF MOTION.”
On 4 August 2006, in proceedings number 2138 of 2006, the debtor sought to set aside the bankruptcy notice. That application was dismissed by the court on 15 August 2006. On 22 August 2006, the creditors petition was filed together with the usual supporting affidavits. It is perhaps noteworthy that in the sequestration order which is the subject of the application to review the learned Registrar noted that the date of the act of bankruptcy is 14 August 2006, though it is further noted that elsewhere the time for compliance with the bankruptcy notice was extended to 15 August 2006.
As indicated earlier, the local court had fixed the objection to instalment order for hearing on 6 September 2006. For reasons not readily apparent to this court it would appear that an order in fact was made on 7 September 2006. That order is referred to in affidavit material relied upon by the debtor. In any event, it would appear, according to material filed for and on behalf of the creditor, that there has been non-compliance with the instalment order made by the local court on 7 September 2006, and the non-compliance appears to relate to payments not made pursuant to the instalment order though due on
1 October, 8 October and 15 October 2006.
I have deliberately set out in some detail the chronology of events in this matter before proceeding to consider the issues sought to be relied upon, particularly by the debtor before this court. The debtor, having filed the application for review, sought in that application to rely upon the notice of objection filed by him on 25 September 2006. Indeed, in the application for review, the debtor states that the grounds of the opposition to the creditor's petition should be "upheld". In the application for review the debtor further states the following:
“3. The enforceability of the Local Court judgement Debt to remain and restricted in the State Common Law jurisdiction and may not include,
(a) the bankruptcy of the Applicant;
(b) the sale of the Applicant's Family Home to enforce the Local Court's Judgement.”
I should note that the debtor had also filed an interim application on
16 October 2006. That interim application resulted in orders being made by a Federal Magistrate on 24 October 2006. The orders made by the court on that date were as follows:
“1. All proceedings on the sequestration order made on 29 September 2006 stayed until 4 pm on 7 November 2006 or such later date when this court makes final orders in relation to the application for review of that order.
2. This order is conditional upon the applicant completing a statement of affairs in Form 3 of the Bankruptcy Regulations and delivering a copy to the Official Receiver and to the Trustee before 5 pm on 27 October 2006.
3. Liberty to any party to apply to the Court to discharge or vary this order on a date allowing 24 hours notice to the other parties.”
The court then went on to make an order in relation to costs in the following form:
“4. The parties’ costs in this application are their costs in the review application.”
It is not appropriate for the court to consider the powers purportedly exercised in the making of the order on 24 October 2006 and nor is any issue raised of any relevance concerning the nature and extent of the costs order. It is relevant to note that a statement of affairs which was a condition upon which the orders were made has now been filed and is an exhibit in these proceedings. It is also noteworthy that the court, upon first hearing the matter on 7 November 2006, out of an abundance of caution otherwise extended this stay which had been granted by the court on 24 October 2006 to enable the court to deliver its final order in this matter. The effect of the final orders made this day are to extinguish any stay.
The application before the court requires the court to clearly consider the material relied upon by the petitioning creditor. For present purposes I am satisfied that the creditor's petition has been appropriately served and note that it relies upon the bankruptcy notice to which reference was made earlier. The issues which are raised by the debtor do not seek in any way to challenge formalities including proof of debt or proof of service. To the extent that I am required to by law on a hearing de novo of this kind I find that the requirements of the Bankruptcy Act 1966 (the Bankruptcy Act) have been fulfilled in relation to the appropriate proofs required of the creditor.
The issue that was raised by the debtor is that the order made by the local court which I set out earlier in this judgment, namely, there being an ex parte stay of proceedings being granted effectively precludes the creditor from proceeding with this petition or otherwise proceeding to act upon the breach of the bankruptcy note requirement. Secondly, the debtor further argues that the bankruptcy notice in this instance is deficient to the extent that the creditor in that bankruptcy notice has merely relied upon what may be described as simply a ‘judgment’.
It was noted earlier that the extract of the judgment relied upon in the bankruptcy notice does set out the words "exclusive of costs to be assessed". As I understand the argument for the debtor, those words should be taken to mean that the judgment sought to be relied upon in the bankruptcy notice should not be regarded as a final order.
As indicated earlier, the alternative argument advanced by the debtor is that this court should not proceed to make a sequestration order in circumstances where the local court has made an ex parte stay order.
It is appropriate to deal with the issues. First, the issue of whether or not a creditor may issue a bankruptcy notice based solely on the question of an order excluding a costs order is a matter which has received appropriate attention by the courts when considering what is meant by a final order pursuant to s.40(1)(g)of the Bankruptcy Act.
I note that an order for payment of money may, of course, include an order for costs and can be a final order. However, I also note that as a matter of law in the event, as in the present case, those costs are untaxed, then they need not be included in the amount demanded in the bankruptcy notice. More significantly, for the present purposes, it is my view that the bankruptcy notice is valid and can be issued solely on the judgment debt on the claim if the creditor wishes to pursue that judgment in that form exclusive of costs which are to be assessed. (See G J, Re; Ex parte G J [1905] 2 KB 678). Therefore, I conclude that in the present case the reference to the judgment alone and the fact that the costs were not then assessed does not of itself invalidate the bankruptcy notice nor does it preclude a creditor from issuing a creditor's petition.
The next issue raised by the debtor is the question of the extent to which the stay order made by the local court ought to preclude the creditor form pursuing the petition in this matter. The chronology of events which I set out earlier is significant when considering this issue. Those dates referred to above in this judgment include specifically
6 July 2006 when the bankruptcy notice was issued and 23 July 2006 when the bankruptcy notice was served. It is clear in my view without considering whether there is a tension between this Federal Court as a court of bankruptcy and the local court that the time of the stay is generally regarded to be relevant as at the date of issue of a bankruptcy notice. (See s.41(3)(b) and Wiltshire-Smith v Olsson (1995) 57 FCR 572 at 584, 585 and Lindholt v Merritt Madden Printing Pty Ltd [2002] FCA 260 at paragraphs 23 and 24 per Weinberg J and Moss Re; Ex parte Tour Finance Ltd (1968) 13 FLR 101 (Moss)). I am further satisfied that when considering the words ‘the execution of which has not be stayed’, also refer to the time that the bankruptcy notice is served and to a stay of execution which may have continued in force up to the time of service of a bankruptcy notice. (See Moss and Williams, Re; Ex parte General Credits Ltd (1983) 68 FLR 202).
It is clear to me on the chronology of events and having regard to the authorities to which I have just referred that even if it were to be assumed that a stay of execution by the local court in the manner described in the affidavit material could potentially have the effect of preventing the further hearing determination of the petition. It is noted that order was made after both the service and the issuing of the bankruptcy notice. In my view, having regard to the authorities to which reference has been made and the relevant provisions of the Bankruptcy Act the Local Court order cannot preclude this court from proceeding to determine whether it should or should not act upon the petition.
The court has the usual discretion to consider whether a sequestration order should be made and in this instance, whether it is appropriate to simply dismiss the application for the review of the order which is already in existence. In exercising that discretion the court is required to take into account the various matters referred to in the Bankruptcy Act, including amongst others, the issue of solvency. The debtor has not produced to this court evidence which would establish solvency at the relevant time as defined, that is an ability to pay the debts as and when they arise.
The statement of affairs whilst revealing that the debtor is in receipt of a disability pension, otherwise refers to assets which ultimately can only be characterised as including one substantive asset, namely a property. It is not appropriate for me to otherwise analyse the materials safe to say that the income of the debtor appears to be a sum of $505.00 per fortnight and the assets include a car valued at $300.00 and the residence to which I have referred already estimated to have a net value of approximately $140,000.00.
In my view, there is no issue that has been properly raised concerning solvency of the debtor. I am otherwise satisfied that the requirements of s.52 of the Bankruptcy Act have been established. To the extent that it may have been argued during the course of the proceeding, it is not appropriate in this instance for this court to go behind the judgment of the local court relied upon in the bankruptcy notice which in turn then triggered the creditors petition. The power of the court to go behind the bankruptcy notice is referred as being a matter of course for discretion.
In the High Court decision of Wren v Mahony (1972) 126 CLR 212 at 225, the court relevantly states in that decision, the following:
“ … The court's discretion in my opinion is a discretion to accept the judgment as satisfactory proof of the debt. That discretion is not well exercised where substantial reasons are given for questioning whether behind that judgment there was in truth and reality a debt due to the petitioner.”
Lest there be any doubt in the present case, applying the relevant principles to the circumstances set out in the affidavit material relied upon by the debtor it is my concluded view that there is no basis in that law for this court going behind the judgment. I am satisfied for reasons given, that the judgment relief upon in the bankruptcy notice can properly be characterised as a final judgment albeit that it does not include reference to costs yet to be assessed.
I am further satisfied for the reasons given, that any purported stay granted by the local court ex parte on 2 August 2006, have in regard to the chronology of events cannot have an impact upon the right of the petitioning creditor to pursue this application based on a bankruptcy notice issued prior to the stay, that is on 6 July 2006, and likewise served prior to the stay, namely 23 July 2006. I rely upon the authorities referred to earlier in this judgment.
It follows therefore, that the application for review should be dismissed with costs. The formal orders of the court are:
(1) The Application for Review filed 9 October 2006 be dismissed;
(2)The costs of the Respondent Creditor to the application for review be paid by the Applicant Debtor to be taxed according to the Federal Court scale and paid out of the estate of the debtor in accordance with the provisions of the Bankruptcy Act 1966.
I certify that the preceding twenty-three (23) paragraphs are a true copy of the reasons for judgment of McInnis FM
Associate:
Date: 9 November 2006
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