NEWSTART 205 Pty Ltd v Thompson
[2001] FMCA 134
•13 December 2001
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| NEWSTART 205 PTY LTD v THOMPSON | [2001] FMCA 134 |
| BANKRUPTCY – Annulment of sequestration under s.153B of Bankruptcy Act 1966 (Cth) – whether ought to have been made – instalment order made after bankruptcy – nullity. PRACTICE AND PROCEDURE – Whether application under s.153B may be issued in creditor petition application after a sequestration order has been made. |
Re Pollock; ex parte Deputy Commissioner of Taxation (1991) 103 ALR 133
Re Williams (1968) 13 FLR 10
Re Ditfort; ex parte Deputy Commissioner of Taxation (1988) 19 FCR 347
Re Ginnane; ex parte Ginnane (1994) 60 FCR 429
Re Gollan; ex parte Gollan (1992) 40 FCR 38 at 40–41
Re Cummings v Claremont Petroleum Pty Ltd (1996) 185 CLR 124.
Bankruptcy Act 1966 s 153B
| Applicant: | NEWSTART 205 PTY LTD (ACN 002 284 086) |
| Respondent: | PATRICK JOSEPH THOMPSON |
| File No: | MZ 492 of 2001 |
| Delivered on: | 13 December 2001 |
| Delivered at: | Melbourne |
| Hearing Date: | 13 December 2001 |
| Judgment of: | McInnis FM |
REPRESENTATION
| Counsel for the Applicant: | Mr J Nolan |
| Solicitors for the Applicant: | Mendelsons |
| Mr P J Thompson: | Respondent in person |
ORDERS
THE COURT ORDERS THAT:
So much of the Rules of the Court be dispensed with which otherwise would prevent the Application filed 9 November 2001 being heard this day.
The Orders made herein on 26 November 2001 be amended by deleting 16 August 2001 as the date of the filing of the Application and inserting in lieu 9 November 2001.
The Application filed 9 November 2001 is dismissed.
The costs of NEWSTART 205 PTY LTD of the Application filed
9 November 2001 be taxed pursuant to Order 62 of the Federal Court Rules and paid out of the administration of the bankrupt estate of PATRICK JOSEPH THOMPSON with the same priority as if the costs were costs of the petition.
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT MELBOURNE |
MZ 492 of 2001
| NEWSTART 205 PTY LTD (ANC 002 284 086) |
Applicant
And
| PATRICK JOSEPH THOMPSON |
Respondent
REASONS FOR JUDGMENT
This is an application by PATRICK JOSEPH THOMPSON (the debtor) who is the applicant in an application filed in this court on 9 November 2001. Mr Thompson had been the respondent debtor in proceedings number MZ492 of 2001, which was a creditor’s petition by NEWSTART 205 PTY LTD (“ the creditor”).
The application before this court to which I have referred is an application which purports to seek orders pursuant to s.153B of the Bankruptcy Act 1966 (the Act), namely orders that sequestration orders made by the registrar of this court on 16 August 2001 be set aside. Otherwise the applicant relies, in making that application, upon the fact that an instalment order was made ex parte in the local court, Downing Centre, Sydney on 2 October 2001 where the court on that occasion, in relation to the creditor, made an instalment order which effectively meant that if that order were to be complied with there would be a time given to Mr Thompson to pay the amount owed to the creditor at the rate of $220 per week commencing on 1 November 2001.
When this matter was listed before me on 26 November 2001 Mr Thompson, who appears in person, did not appear in the court when the application was called on for hearing. Later that day it was explained to me that Mr Thompson had mistakenly attended another court. I accepted that explanation, and although in his absence I had decided to strike-out the application I was prepared in the circumstances to reinstate the application which I did on 26 November 2001. I then adjourned the application to this day and made other orders requiring Mr Thompson to serve both the creditor and trustee with his application, supporting affidavit, and sealed copy of the order made on 26 November 2001.
Upon this matter being called before me today Mr Nolan appeared for the creditor, and has indicated he also appears for the trustee in bankruptcy in this case. Mr Nolan relied upon an outline of argument and referred to a number of authorities, and has given a copy of that outline and authorities to Mr Thompson for his perusal. I had indicated to Mr Thompson that I was prepared to allow time for him to read the outline and consider the authorities which have been referred to in that outline. Mr Thompson declined and indicated that he wished to proceed with this application and have it heard and determined this day.
Before dealing with the background to the creditor's petition it is appropriate that I simply outline the chronology of the proceedings as this raises an important issue as to whether or not an application, pursuant to s.153B of the Bankruptcy Act, is an application which can simply be commenced after a sequestration order has already been made and after the time period for review and/or appeal in relation to that order has elapsed. In this case the proceedings taken by the creditor relied upon a creditor's petition which in turn referred to a bankruptcy notice. That notice had relied upon a default judgment obtained by the creditor against Mr Thompson at the local court at Sydney on 25 May 2000. The sum of the judgment was then said to be $17,636.29.
I do not need to deal with the issue of service of the bankruptcy notice, save and accept that on the material there certainly appears to be a failure to comply with the bankruptcy notice, or a failure by Mr Thompson to satisfy the court by proper evidence that he had a counterclaim, set-off or cross demand equal to or exceeding the sum claimed in the bankruptcy notice, and accordingly had committed an act of bankruptcy on 30 April 2001. It is not in issue in this case, and indeed has been agreed that on 14 May 2001 Mr Thompson applied to the local court at Sydney to set aside the default judgment, and on 14 June 2001 that application was dismissed with costs. Mr Thompson sought review of that decision on 8 August 2001, and on 13 September 2001 his review application was dismissed with a further order for costs.
Mr Thompson has indicated to this court that upon receiving the order of the registrar dated 16 August 2001, approximately the week after that order was made, he sought some advice although he did not seek to review and/or appeal the decision. Instead, and I interpolate, acting upon the advice he made application for an order from the registrar of the local court of New South Wales for an instalment order. That application and order was granted as indicated on 2 October 2001, which is well outside the time period for an appeal.
The preliminary issue, therefore, that arises in an application of this kind is whether or not Mr Thompson should have issued an application in separate proceedings if he wished to proceed on the basis of an application pursuant to section 153B of the Bankruptcy Act. In my view he should not have issued the application as part of the creditor’s petition application after a sequestration order had been made.
In the alternative if he wished to seek to appeal from the order made by the registrar on 16 August 2001 I am satisfied that the proper course would be to seek an extension of time within which to appeal, and to then provide the court with appropriate affidavit material consistent with the authorities which would suggest not only that there is a reason for the extension of time being granted, but also that in all the circumstances that there would be a good prospect of success, and in that regard I've been referred to and rely upon the decision of Re Pollock ex parte Deputy Commissioner of Taxation (1991), 103 ALR 133.
In the present case I have received submissions from Mr Nolan of counsel for the creditor and trustee and note for the present purposes no strong objection is taken to the matter proceeding, and that rules which may otherwise prevent the application being dealt with and heard this day would need to be dispensed with to allow the matter to proceed this day. In my view this is not a practice which should be adopted in cases of this kind. To simply dispense with rules to enable application to be heard is not a practice which should be followed as a matter of routine, nor should it be assumed that it is a practice which would be followed in other cases. However, having regard, in this particular case, to the lack of opposition to that course being followed, and making due allowance for the fact that Mr Thompson is unrepresented, I am prepared in this instance to make an order dispensing with so much of the rules of the court that would otherwise prevent this application being heard this day. Having made that order it is appropriate that I then consider the material before me relied upon by Mr Thompson, and indeed the submissions made for and on behalf of the creditor and trustee by Mr Nolan.
An application made to this court pursuant to s.153B of the Bankruptcy Act is an application made in circumstances where I accept that there is an onus upon the applicant in this matter, Mr Thompson, to establish not only the sequestration order should not have been made but also that he is solvent. It is useful to set out the terms of section 153B of the Act as follows:
“153B If the court is satisfied that a sequestration order ought not to have been made, or in the case of a debtor's petition that the petition ought not have been presented, or ought not to have been accepted by the Official Receiver, the court may make an order annulling the bankruptcy.”
It has been submitted by Mr Nolan, and I accept, that in the present case the existence of the instalment order to which I have referred, even if the order were taken to be valid, which I note is not conceded, would not constitute a ground for setting aside the sequestration order. I have already been referred to the decision of Re Pollock, where it was held that the existence of an instalment order at the time of the hearing of the petition did not preclude the court from making a sequestration order.
It is submitted, and I accept, that if the existence of an instalment order would not prevent the making of a sequestration order it could not then be the case that the later existence of such an order would be grounds to set aside a sequestration order. It is further submitted, and I accept, that in any event an instalment order of its very nature demonstrates that a debtor cannot pay his debts as and when they fall due, and requires a substantial period of time to repay the debt by instalments.
In the present case I have further been referred to the decision of the Full Court of the Federal Court in the matter of Stankiewicz v Plata (2000) FCA1185 (unreported decision delivered on 22 August 2000). In the joint judgment of the court, as I understand it, their Honours referred to the principles to be applied by courts in relation to applications under s.153B of the Bankruptcy Act. Their Honours say as follows, at paragraphs 19 and 20,
“19 In Re Williams (1968) 13 FLR 10 – Gibbs J explains the approach to be taken to the then equivalent of s.135B of the Bankruptcy Act (at 23):
‘In determining the question whether the sequestration order ought not to have been made the court is entitled to consider not only the case as disclosed at the time the order was made, but as it would have been disclosed had all the true facts been before the court on the making of the order. If the court is satisfied that the order ought not to have been made it is not bound as a matter of course to annul the order but must consider, in the light of all the circumstances of the case, whether the order ought to be annulled.’
In Re Ditfort ex parte Deputy Commissioner of Taxation (1988), 19 FCR 347, Gummow J observed (at 350) that the ‘true facts’ which are to be considered include those known at the hearing of the annulment application to have existed at the time the sequestration order was made, but exclude those facts that have occurred since the order was made. See also Re Ginnane; ex parte Ginnane (1994), 60 FCR 429, at 445–446; Re Gollan; ex parte Gollan (1992) 40 FCR 38 at 40–41.”
In the present case it is my view that there is insufficient information and indeed no proper basis upon which this court, in applying those principals to which I have referred, could exercise its discretion to make orders pursuant to section 153B of the Bankruptcy Act.
I am satisfied that the instalment order made by the local court, in the light of the chronology and the fact that a sequestration order had already been made is in fact a nullity. I am satisfied further that in a case of this kind, where a sequestration order has been made, that Mr Thompson did not have standing to seek an order of that kind from the local court. I have been referred to and apply what the High Court said in Cummings v Claremont Petroleum Pty Ltd (1996) 185 CLR 124 at page 137. In that case, the court held that a bankrupt loses standing to make any application in respect of judgment once he has become a bankrupt.
It is submitted by Mr Nolan, and I accept, that the same lack of standing applies to a bankrupt judgment debtor applying for an instalment order. Hence in the present case, notwithstanding the order I've made in this particular instance allowing the application to proceed, it is my view on the material before me that the application should be dismissed.
I add for the sake of completeness that even if I were minded to make orders treating this application as if it were an application to review the sequestration order of the registrar, and was satisfied that there were proper grounds to extend time then my conclusion would be the same in that in my view on the material before me there is a sufficient basis upon which a sequestration order could properly be made. Obviously there may be other technicalities and requirements particularly in relation to s.52 of the Act which this court would then need to consider at the time of hearing, but in the circumstance of this case to grant an indulgence of that kind would be futile.
In any event, the only reason given advanced to this court for the failure to seek a review and/or appeal is that the applicant was otherwise engaged in activities which do not appear to be related to these proceedings or the pursuit of his application. In all the circumstances it is my view that it is appropriate in this matter to therefore make the following orders, that:
1.So much of the rules of this court be dispensed with which otherwise would prevent the application filed by the applicant on 9 November 2001 being heard this day.
2.The Orders made herein on 26 November 2001 be amended by deleting 16 August 2001 as the date of the filing of the Application and inserting in lieu 9 November 2001.
3.The application filed 9 November 2001 be dismissed.
4.The costs of NEWSTART 205 PTY LTD of the Application filed 9 November 2001 be taxed pursuant to Order 62 of the Federal Court Rules and paid out of the administration of the bankrupt estate of PATRICK JOSEPH THOMPSON with the same priority as if the costs were costs of the petition.
Pursuant to Order 62 of the Federal Court Rules, I direct that the reasons for decision be transcribed and upon review shall constitute my reasons for judgment in this matter
I certify that the preceding twenty (20) paragraphs are a true copy of the reasons for judgment of McInnis FM
Associate:
Date: 13 December 2002
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