O'Farrell v Network Entertainment Pty Ltd
[2005] FMCA 1936
•20 December 2005
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| O’FARRELL v NETWORK ENTERTAINMENT PTY LTD | [2005] FMCA 1936 |
| BANKRUPTCY – Application to set aside bankruptcy notice – whether the bankruptcy notice is invalid on the grounds that the interest provision is wrongly described in the bankruptcy notice – where the alleged fault is the use of new provisions of the Civil Procedure Act 2005 (NSW) – whether the time for compliance with the bankruptcy notice should be extended. |
| Bankruptcy Act 1966 (Cth), s.41(2) Bankruptcy Regulations 1966 (Cth), Rule 402 Civil Procedure Act 2005 (NSW), s.101 District Court Act 1973 (NSW), s.85 |
| Australian Steel Co (Operations) Pty Limited v Lewis (2000) 109 FCR33 General Motors Acceptance Corp Australia v Marshall (2002) 124 FCR 210 Herchenroder & Anor v Smith [2003] FMCA 96 Byron v Southern Star Group Pty Limited [1997] 73 FCR 264 Kalfus v Cassis [2005] 214 ALR 655 |
| Applicant: | KARL JOHN O’FARRELL |
| Respondent: | NETWORK ENTERTAINMENT PTY LIMITED (SUBJECT TO DEED OF COMPANY ARRANGEMENT) |
| File Number: | SYG 3573 of 2005 |
| Judgment of: | Raphael FM |
| Hearing date: | 20 December 2005 |
| Date of Last Submission: | 20 December 2005 |
| Delivered at: | Sydney |
| Delivered on: | 20 December 2005 |
REPRESENTATION
| Solicitor for the Applicant: | A Di Francesco |
| Counsel for the Respondent: | TGR Parker S. C. |
ORDERS
Application be dismissed.
Any bankruptcy petition presented on the basis of failure to comply with the Bankruptcy Notice is to be returnable before and for hearing.
Applicant to pay respondent’s costs to be taxed if not agreed according to Federal Court Act and Rules.
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT SYDNEY |
SYG 3573 of 2005
| KARL JOHN O’FARRELL |
Applicant
And
| NETWORK ENTERTAINMENT PTY LTD (SUBJECT TO DEED OF COMPANY ARRANGEMENT) |
Respondent
REASONS FOR JUDGMENT
The applicant debtor seeks to set aside a bankruptcy notice numbered NN4449/05 issued on 16 November 2005 or alternatively seeks an extension of time for compliance with that order until after a decision by the High Court of Australia as to whether or not to accept for hearing an appeal against a decision of the Court of Appeal of New South Wales in the proceedings upon which the debt, the subject of the bankruptcy notice, is based.
The grounds upon which the applicant seeks to set aside the notice is what could be described as a point in the nature of that considered by the Full Bench of the Federal Court in Australian Steel Co (Operations) Pty Limited v Lewis (2000) 109 FCR 33 as affirmed by the Full Bench and General Motors Acceptance Corp Australia v Marshall (2002) 124 FCR 210. Those cases held that where a judgment provides for interest and the interest provision is wrongly described in the bankruptcy notice, the bankruptcy notice is invalid by virtue of the failure to strictly comply with the provision of the Bankruptcy Act 1966 (Cth), namely the accurate reproduction of the form of bankruptcy notice prescribed under subsection 41(2) of the Bankruptcy Act by Rule 402 of the Bankruptcy Regulations.
In this case, the alleged fault is the use of the new provisions, and in particular s.101, of the Civil Procedure Act 2005 (NSW) to indicate the right to claim interest and the rate of interest to be charged. The Civil Procedure Act 2005 came into force on 15 August 2005. The judgment in this case was recovered on 28 May 2004 out of the District Court of New South Wales. The certificate of judgment which is annexed to the bankruptcy notice sets out an amount of interest calculated in accordance with the Uniform Rules. Mr Di Francesco, who appears for the debtor, argues that this is incorrect and the proper way in which to describe the interest is that it should be calculated in accordance with s.85 of the District Court Act1973 (NSW) up to 15 August and thereafter section 101, although he accepts that the rate of interest is the same. He submits that if I find that this is what should have happened, then on the authority of Australian Steel Co and General Motors Acceptance Corp, I should find the bankruptcy notice to be invalid.
Mr Parker, SC, who appears on behalf of the respondent creditor, has referred me to s.101 of the Civil Procedure Act as well as schedule 6 which deals with savings, transitional and other provisions. In particular, Mr Parker refers me to Regulation 5 and Regulation 10 of those regulations. Regulation 5 is a standard form of regulation which indicates that the Uniform Rules apply to proceedings commenced before the commencement of the Act in the same way as they applied to proceedings commenced on or after the commencement, but Regulation 10 is in the following form:
10. Subject to this schedule and the regulations:
(a) Anything begun before the commencement of this Act or the Uniform Rules under a provision of the old legislation for which there is a corresponding provision in this Act, may be continued and completed under the old legislation as if this Act had not been enacted, and:
(b) Subject to paragraph (a), anything done under a provision of the old legislation for which there is a corresponding provision in this Act for the Uniform Rules (including anything arising under paragraph (a), is taken to have been done under the corresponding provision of this Act or the Uniform Rules, as the case requires.
I do not think that regulation 5 has any relevance to this case. As Mr Di Francesco says, the proceedings that were begun have now concluded. They were concluded in the District Court by the judgment that I have referred to and that judgment was affirmed by the Court of Appeal of New South Wales. There are no further proceedings to be carried out under the District Court Act. On the other hand, the "general saving 10(b)" would appear to me to save the situation for the creditor. All that has happened is that the District Court, in its certificate of judgment, has referred to a provision in the new Act for which there was a provision in the old Act and the bankruptcy notice has done no more than follow the form of the judgment in order to indicate to the debtor the basis upon which the interest is claimed.
As Mr Parker pointed out, schedule 5 to the new Uniform Rules is the interest rate schedule and that commences on 1 July 1972. So there must have been an intention in the drafters of this legislation that a successful party in proceedings could claim interest under s.101 of the Act for a period well before the commencement of the Uniform Rules and Procedures. To adopt a purposive approach which is that preferred by the Acts Interpretation Act and the High Court, it seems this legislation was intended to smooth the path of transfer between three separate Acts, those of the Supreme, District and Local Courts into one and I am satisfied that "general saving 10" achieves the object of ensuring that the description of the basis upon which the interest is calculated and the calculation thereof is not misdescribed in the notice.
Mr Di Francesco makes an argument for me to extend the time for compliance with the bankruptcy notice until his client's application for special leave to appeal is heard by the High Court. He tells me that this should occur no later than 10 March which is not a very long way away. The difficulty I have with acceding to his request is that I previously expressed a view in Herchenroder & Anor v Smith [2003] FMCA 96 that these extensions should not be given where the appeal involved is an appeal to the High Court by way of an application for special leave unless there are some rather exceptional circumstances that might take the matter out of the norm described by Lehane J in Byron v Southern Star Group Pty Limited [1997] 73 FCR 264. In this particular case the applicant brought proceedings in the District Court and the learned District Court judge found against him on what Mr Parker has described as factual grounds. The appeal to the Court of Appeal was totally unsuccessful and their Honours were unable to find any reason for disturbing the views expressed by the learned District Court judge.
Mr Di Francesco's argument in the High Court is an important argument concerning the validity of impressions made by witnesses upon judicial officers but I cannot say that it is an argument that is assured either of a decision to grant special leave, or success on appeal. This situation is contrasted with that which occurred in Kalfus v Cassis [2005] 214 ALR 655 where a similar application came before Driver FM. The circumstances there were somewhat unusual in that the case had gone up to the Court of Appeal on two occasions and on both occasions the decision of the first instant judge had been reversed. In a split decision the court imposed its own judgment of Mr Kalfus in place of the decision of the Supreme Court finding in his favour. Thus the appeal by way of special leave to the High Court was arguably the first opportunity for Mr Kalfus to argue against a judgment that had imposed a monetary obligation upon him. Driver FM referred to the case of Herchenroder & Anor v Smith [2003] FMCA 96 at [29] of his decision (by footnote) and did not disagree with the views which I had expressed there. Likewise, I do not disagree with the decision to which he came in Mr Kalfus' case. They are simply not the same circumstances.
I would therefore not be inclined to further extend the time for compliance with this bankruptcy notice. I note that this applicant did not seek a stay of execution either from the District Court or the Court of Appeal. I accept what Driver FM says in Kalfus that this is not necessarily fatal but it is a point to be taken into account. I note the amount of money outstanding is quite considerable and in all those circumstances I would propose to dismiss the application. However, I would urge the respondent creditor not to issue a sequestration application prior to this matter being considered by the High Court in the next three months. I cannot enforce that request, but I can order that if such an application is made and a petition is filed then it be brought before me for hearing when I shall further consider the appropriate steps which should be taken in regard to it.
I order that the applicant pay the respondent's costs to be taxed if not agreed according to the Federal Court Act and Rules.
I certify that the preceding nine (9) paragraphs are a true copy of the reasons for judgment of Raphael FM
Associate:
Date: 23 December 2005
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