Oncu v Durunesil - [2006] FMCA 590

FEDERAL MAGISTRATES COURT OF AUSTRALIA

ONCU & ANOR v DURUNESIL

[2006] FMCA 590

BANKRUPTCY – Review of order by registrar setting aside a bankruptcy notice – whether judgment debt owed jointly or severally considered.

Federal Magistrates Act 1999 (Cth), s.104
Industrial Relations Act 1996 (NSW), s.106

Bekir Durunesil and Anor v Ravbun Oncu and Ors [2005] NSWIR Com 22
Hubner v ANZ Banking Group Ltd [1999] FCA 385; (1999) 88 FCR 445
Re McLeod; ex parte Beneficial Financial Corporation Limited (unreported, SN267 of 1995)

First Applicant:

Second Applicant:

BESIME ONCU

RIZA ONCU

Respondent:

BEKIR DURUNESIL

File Number:

SYG777 of 2006

Judgment of:

Driver FM

Hearing date:

11 April 2006

Delivered at:

Sydney

Delivered on:

11 April 2006

REPRESENTATION

Counsel for the Applicants:

Mr Sneddon

Solicitors for the Applicants:

A I Legal

Counsel for the Respondent:

Mr J Johnson

Solicitors for the Respondent:

Sally Nash & Co

INTERLOCUTORY ORDERS

The matter be listed for further directions at 3.30pm on 23 May 2006.
The order setting aside the bankruptcy notice and the costs order made by Registrar Hedge on 28 March 2006 are set aside.
The time for compliance with the bankruptcy notice be extended until 23 May 2006.
Costs of the hearing before the registrar and costs of today’s proceedings are reserved.

FEDERAL MAGISTRATES
COURT OF AUSTRALIA AT
SYDNEY

SYG777 of 2006

BESIME ONCU

First Applicant

RIZA ONCU

Second Applicant

And

BEKIR DURUNESIL

Respondent

REASONS FOR JUDGMENT

(revised from transcript)

I have before me an application for review pursuant to s.104 of the Federal Magistrates Act 1999 (Cth) of a decision of Registrar Hedge made on 28 March 2006. I understand that the review application was made orally on that day upon the Registrar ordering that bankruptcy notice NN800 of 2006 be set aside. The Registrar, I am told, also ordered the parties to bear their own costs.
The Registrar's orders stemmed from an application filed on 16 March 2006 seeking an order that the bankruptcy notice be set aside, plus costs. I am told that upon the return of that application, an application was orally made and was granted for the time for compliance with the bankruptcy notice to be extended up and until 28 March 2006.
There are three issues for me to resolve. The first is whether the order made by the Registrar should be set aside. Secondly, if the answer to that question is yes, whether the respondent creditor should be put to an election in respect of the bankruptcy notice as to whether the debtors, Besime Oncu or Riza Oncu, should be the subject of the notice; and thirdly, if the answer to that question is no, whether the debtors should be granted a further extension of time to comply with the bankruptcy notice.
I have before me as evidence the bankruptcy notice (exhibit A3), a driver's licence for Riza Oncu (exhibit A2), and an appointment for hearing and letter dated 11 April 2006 (exhibit A1) relating to an application to set aside the judgment supporting the bankruptcy notice. I also have before me the affidavit of Besime Oncu and Riza Oncu filed on 16 March 2006 in support of the application filed on that day.
The dispute between the parties centres upon the question of whether the judgment debt is a joint or several one. The representatives have taken me to two decisions of the Federal Court relevant to that issue. The first is the decision of Branson J in Re McLeod; ex parte Beneficial Financial Corporation Limited (unreported, SN267 of 1995) decided on 5 October 1995, and the second is the decision of the Full Court in Hubner v ANZ Banking Group Ltd [1999] FCA 385, (1999) 88 FCR 445. I accept from those decisions, in particular what Branson J says in Re McLeod at page 6 of the online decision and what the Full Court says in Hubner at pages 447 and 448 of the reported judgment, that if a joint debt exists a bankruptcy notice may properly be issued in respect of that debt. Conversely, if the debtors are not jointly liable but are severally liable, a creditor’s petition cannot be issued in respect of the debt and neither can a bankruptcy notice be issued.
Although no reasons are available for the Registrar's decision setting aside the bankruptcy notice, I understand that the Registrar based her decision on the proposition that the debt in this case is arguably not a joint debt but a debt severally owed by the two debtors.
In order to deal with the question of whether the Registrar's decision was correct, it is necessary to consider the judgment debt. That is based upon a decision of the Industrial Relations Commission of New South Wales constituted by Backman J. The decision was made on 11 February 2005, and it is reported as Bekir Durunesil and Anor v Ravbun Oncu and Ors [2005] NSWIR Com 22. It is apparent from the reasoning of her Honour that the two debtors the subject of the bankruptcy notice were alleged to owe the debt in the same capacity. Curiously, the orders made at paragraph 74 of the judgment are that the third and fourth respondents, namely the present debtors, jointly or severally pay to the first applicant, the present creditor, the sum of $14,879, and the fifth order made is to similar effect. It is unclear whether Backman J intended to make an order in those terms or intended to say that the debt was a joint and several debt.
It appears to me that whatever the answer to that question may be, the debt was treated by the creditor as a joint liability. Unless there is some invalidity in the orders made by Backman J, the creditor was entitled to so treat it. The certificate of judgment attached to the bankruptcy notice names both debtors as the defendant. That indicates strongly, in my view, that the certificate treats them as joint debtors. Likewise, the bankruptcy notice names both as the debtor.
I conclude that the bankruptcy notice is valid upon the basis that the judgment established a joint liability whether or not it established at the same time, or alternatively, several liabilities, and that, assuming the judgment was properly made, the creditor was entitled to and has treated the liability flowing from the judgment as a joint liability.
It follows, and I find, that the Registrar should not have set aside the bankruptcy notice, and I order that the order made by the Registrar on 28 March 2006 setting aside the bankruptcy notice be itself set aside, together with the Registrar's order that the parties bear their own costs.
The second question is whether the creditor should be put to an election. In the light of the finding that I have made that the judgment establishes a joint liability, no election is called for.
The third and final question is whether the debtors should be given a further extension of time to comply with the bankruptcy notice. The evidence, while sparse, is that tomorrow there will be a form of hearing pursuant to s.106 of the Industrial Relations Act 1996 (NSW) in order to seek to set aside the judgment debt. Although I do not know what arguments will be advanced by the debtors, there appear to be at least two potential issues. One is an issue of procedural fairness. The debtors were represented before the IRC by a solicitor who was unfortunately struck off prior to the completion of the IRC proceeding. It is apparent from the reasons of Backman J that there was a history of non-participation in those proceedings, which may or may not have been the fault of the debtors or their then solicitor or both. It also appears from those reasons that the creditor sought to bring the hearing of the proceedings to the attention of the debtors directly by communicating with them at what was understood to be their residential address. Exhibit A2 casts some doubt on whether the address used was the correct one. I note that the affidavit of the debtors themselves at paragraph 7 conflicts with that evidence.
Another issue which may be raised is whether the orders made by Backman J were properly made. I am not aware of any previous instance where an order is expressed in terms of the debt being joint or several.
Those are issues that properly call, in my view, for a further extension of time to comply with the bankruptcy notice.
I will order that the time for compliance with the bankruptcy notice be extended until 23 May 2006 and I will direct that this matter be listed for further directions at 3.30 pm on that day.
On the question of costs, the creditor seeks an order for costs, having succeeded in having the order of the Registrar set aside. The debtors seek either an order that the parties bear their own costs or that the costs be cost in the cause, bearing in mind that they have been successful in obtaining an extension of time. The substantive issues in relation to the bankruptcy notice are not yet entirely resolved bearing in mind that there is a pending application to set aside the judgment debt.
In those circumstances it is appropriate, in my view, to reserve the question of the costs of today's proceedings and of the costs of the prior proceedings before the Registrar. I will so order.

I certify that the preceding seventeen (17) paragraphs are a true copy of the reasons for judgment of Driver FM

Associate:

Date: 24 April 2006