National Australia Bank Limited v Sanchez

[2013] FCCA 898

FEDERAL CIRCUIT COURT OF AUSTRALIA

NATIONAL AUSTRALIA BANK LIMITED v SANCHEZ [2013] FCCA 898

Catchwords:

BANKRUPTCY – Creditor’s petition – where notice of opposition – where errors in orders for substituted service – where orders amended Bankruptcy notice – where debtor previously sought to have bankruptcy notice set-aside – whether debtor estopped from making objections – whether to make sequestration order.

Legislation:
Bankruptcy Act 1966 (Cth) ss.41(7), 52

Port of Melbourne Authority v Anshun Pty Ltd (1981) 147 CLR 589
Henderson v Henderson (1843) 67 ER 313
Meriton Apartments Pty Limited v Industrial Court of New South Wales [2009] NSWCA 434
AMP Finance v Burns (No 2) (2005) 6 ABC(NS) 434
Re James and Another; Ex parte Carter Holt Harvey Roofing (Australia) Pty Ltd (No2) (1994) 51 FCR 14
Adams v Lambert (2006) 228 CLR 409

Applicant: NATIONAL AUSTRALIA BANK LIMITED

Respondent: MICHAEL ANGEL SANCHEZ

File Number: SYG 794 of 2013

Judgment of: Judge Raphael

Hearing date: 15 July 2013

Date of Last Submission: 15 July 2013

Delivered at: Sydney

Delivered on: 15 July 2013

REPRESENTATION

Counsel for the Applicant: Mr J. Hynes

Solicitors for the Applicant: Turks Legal

Solicitors for the Respondent: Bowles Lawyers

ORDERS

1. Notice of opposition dismissed.

2. A Sequestration Order be made against the estate of Michael Angel Sanchez.

3. The Applicant’s costs (including any reserved costs) be taxed (in accordance with the Federal Circuit Court (Bankruptcy) Rules 2006) and paid from the estate of the Respondent in accordance with the Act.

4. Under the Bankruptcy Regulations a copy of this sequestration order be given to the Official Receiver in Sydney within 2 days.

THE COURT NOTES:

1. That the date of the act of bankruptcy is 12 March 2013.

2. A consent to act as a trustee has been signed by Mr David J F Lombe and has been lodged with the Official Receiver in Sydney.

FEDERAL CIRCUIT COURT OF AUSTRALIA

AT SYDNEY

SYG 794 of 2013

NATIONAL AUSTRALIA BANK LIMITED

Applicant

And

MICHAEL ANGEL SANCHEZ

Respondent

REASONS FOR JUDGMENT

1. There comes before me today the hearing of a petition brought by the National Australia Bank Limited against Mr Michael Sanchez.  Mr Sanchez has filed a notice of grounds of opposition to the petition and I have had the opportunity of hearing submissions from his solicitor, Mr Bowles, and from counsel for the bank, Mr Hynes. 

2. The grounds of opposition relate to the jurisdiction of this Court in regard to the bankruptcy notice.  The notice was numbered BN9337 of 2011.  It was not able to be served upon Mr Sanchez in the normal way and the decision was taken not to utilise the provisions of regulation 16.01 of the Bankruptcy Regulations 1996 (Cth) but to seek an order for substituted service from the court. Such an order was obtained from Registrar Morgan. The order was dated 9 July 2012 and it contains what the letter says are two substantive errors. The first is that the first order of the court states:

   “Service of bankruptcy notice number BN933 of 2012[sic], issued 14 December 2011 … may be affected by the following means …”

3. The second concern of the debtor is that in order 5 it states that:

   “The copies of the Bankruptcy Notice for service and proof of service all be amended by deleting the words in paragraph 1 of page 2 of the notice “after service on you of this Bankruptcy Notice” and substituting “after 8 August 2012”.”

4. It is stated by the debtor that he is unaware of bankruptcy notice 933 of 2012 and that, in addition, the amendment referred to in paragraph 5 was carried out in respect to the bankruptcy notice by a deletion of those words referred to and also the additional word “days”.  He argues that this was sufficient to mislead him and, thus, rendering the notice invalid.

5. Before I turn to the consideration of those two grounds of opposition, a more fundamental problem arises. This is not the first time that the bankruptcy notice in question has been the subject of proceedings in this court. On 29 August 2012, which was incidentally the final day for compliance with the notice, Mr Sanchez, through his then solicitors, Levitt Robinson, made application to set aside the bankruptcy notice pursuant to s.41(7) of the Bankruptcy Act 1966 (Cth).[1]  The application was adjourned pending resolution of certain proceedings that Mr Sanchez had separately brought against the bank. 

   [1] The “Act”.

6. Those proceedings were dismissed in a judgment of Macready AsJ handed down on 19 February 2013.  His Honour’s judgment gave detailed consideration to the submissions made on the part of the bank that the proceedings themselves could be classed as an abuse of process, as considered by the High Court in Port of Melbourne Authority v Anshun Pty Ltd (1981) 147 CLR 589 at 598 per Gibbs CJ, Mason and Aickin JJ. Their Honours considered the principles set out by Sir James Wigram VC in Henderson v Henderson (1843) 67 ER 313:

   “where a given matter becomes the subject of litigation in, and of adjudication by, a Court of competent jurisdiction, the Court requires the parties to that litigation to bring forward their whole case, and will not (except under special circumstances) permit the same parties to open the same subject of litigation in respect of matter which might have been brought forward as part of the subject in contest, but which was not brought forward, only because they have, from negligence, inadvertence, or even accident, omitted part of their case. The plea of res judicata applies, except in special cases, not only to points upon which the Court was actually required by the parties to form an opinion and pronounce a judgment, but to every point which properly belonged to the subject of litigation, and which the parties, exercising reasonable diligence, might have brought forward at the time.”

7. As Mr Hynes reminds me in his helpful written submissions, whether such an estoppel will arise is “based on the reasonableness of the conduct of a litigant”;  Meriton Apartments Pty Limited v Industrial Court of New South Wales [2009] NSWCA 434. Macready AsJ found that the failure of Mr Sanchez to run the current claim in certain proceedings brought in 2010 by the bank was unreasonable such that an Anshun estoppel precluded the claim from being brought.  The importance of this decision was that, coming as it did one month before the hearing before Registrar Wall in this court, I am of the view that the debtor should have been well aware of the nature of Anshun estoppel and the importance of ensuring that any submission that he had as to why the bankruptcy notice should be set aside should have been argued before the registrar. This did not happen. The registrar’s decision was made on the basis of an application under s.41(7) of the Act.No submissions were made to him with regard to any problems in the form of the bankruptcy notice or its validity.  Those arguments which have today been raised so forcefully by Mr Bowles were available to the debtor’s then solicitors.  They have not improved since that time. 

8. In AMP Finance v Burns (No 2) (2005) 6 ABC(NS) 434, I considered a very similar point. As here, it was argued that Anshun did not apply because what was being put forward was that the notice itself was invalid and that this invalidity persisted notwithstanding the opportunity to raise it had past.  At [14], I said:

   “It was argued for the debtor that Anshun did not really apply as the effect of the complaint made about the notice was to make that notice void. But the point about Anshun estoppel is that it prevents me hearing any argument upon the notice. I must be deaf to any such entreaties. To make a determination that the notice is void is to hear the cause. Once I have accepted that an Anshun estoppel operates I have no right to do that.”

9. That was the view which I came to in 2005.  The case has been reported, it was not appealed and there is no indication that since that date it has been doubted in this court or overruled in a superior court.  It would be inappropriate to resile from that view, which in any event, I still believe is correct.  The respondent argues that I am not correct in my view.  He says that the decision in Re James and Another; Ex parte Carter Holt Harvey Roofing (Australia) Pty Ltd (No2) (1994) 51 FCR 14[2] is more apposite. That was a case where Olney J was asked to consider whether the existence of a cross-claim could constitute “sufficient cause” under s.52(2) not to make a sequestration order. After noting that when the debtor sought to raise the cross-claim in an application to set aside the bankruptcy notice before Hill J there was not adequate evidence to satisfy the judge under s.41(7). His Honour opined at p19-20:

   “I have no difficulty with the proposition that upon the hearing of the petition the debtors may seek to raise a claimed set-off or cross-demand as the basis for seeking to persuade the Court of the existence of a sufficient cause to dismiss the petition, and this notwithstanding that in doing so they have raised an issue which was a live issue in the proceedings under s 41(7). Had it been necessary for Hill J to enter upon a consideration of the strength of the claimed set-off or cross-demand in order to reach a conclusion as to whether the debtors had a set-off or cross demand that would be a sufficient answer to the bankruptcy notice, different considerations may well have arisen, but that case is not this case, and I am of the opinion that it is open to the debtors to now seek to oppose the petition on the ground that there exists matters which override the prima facie considerations which arise from the formal proof of the matters specified in s 52(1).”

   [2] “Re James”.

10. Re James  not a case where the party seeking relief had failed to raise a point he could have raised.  He did raise it but not effectively.  Olney J exercised his discretion to allow it to be raised at the petition stage.  He was not taken to Anshun.  I believe these two cases can be distinguished and that I should exercise my discretion not to permit the matter to be argued.  As a result, I would have to dismiss the Notice Stating Grounds of Opposition.

11. However, in case this matter is the subject of an appeal and the court above believes it may have some assistance from knowing my views on the grounds pleaded, I would say that all other things being equal, I would have upheld the first ground of the Notice of Opposition.  Notice BN933 of 2012 is very far from notice BN9337 of 2011 and notwithstanding the views of the High Court in Adams v Lambert (2006) 228 CLR 409, I would maintain that a debtor might be confused as to the authority of the document annexed to the order for substituted service.

12. I would, however, not extend that view to the second complaint of the debtor, having seen a photocopy of the amended bankruptcy notice in which the line excluding the words “after service of you of the bankruptcy notice” appears.  I take the view that a reasonable debtor would not be confused as to the date upon which he is required to comply with the notice.  The line is faint through the word “days”, and the words “after 8 August 2012” are printed very clearly so that the notice would read “you are required [21] days after 8 August 2012 to either: …”. 

13. Having dismissed the notice of opposition, I have heard the formal matters required of me in connection with this application. I am satisfied that the respondent committed the act of bankrupt alleged in the petition. I am satisfied with the proof of the other matters required by s.52 of the Act. I make a sequestration order against the estate of Michael Sanchez. I order that the applicant’s costs including any reserved costs be taxed and paid from the estate of the respondent in accordance with the Act. Under the Bankruptcy Regulations, a copy of the sequestration order be given to the Official Receiver in Sydney within two days. The court notes that the date of the act of bankruptcy is 12 March 2013, and I note that a consent to act as a trustee has been signed by D. J. F. Lombe and has been lodged with Official Receiver in Sydney.

I certify that the preceding thirteen (13) paragraphs are a true copy of the reasons for judgment of Judge Raphael

Associate: 

Date:  23 July 2013