Paton v Pericic
[2008] FMCA 1504
•11 November 2008
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| PATON & ANOR v PERICIC | [2008] FMCA 1504 |
| BANKRUPTCY – Application for review to set aside sequestration order – application to set aside bankruptcy notice – s.41(7) deemed extension of time considered. |
| Bankruptcy Act 1966 (Cth) Retail Leases Act 2003 (Vic) Bankruptcy Rules 2006, rule 4.06 |
| Re Brink (1980) 30 ALR 433 Totev v Sfar (2008) FCAFC 35 |
| Applicants: | DENNIS PATON AND SHIRLEY MAY PATON |
| Respondent: | CHERYL PERICIC |
| File Number: | MLG 560 of 2008 |
| Judgment of: | Hartnett FM |
| Hearing date: | 28 July 2008 |
| Delivered at: | Melbourne |
| Delivered on: | 11 November 2008 |
REPRESENTATION
| Counsel for the Applicants: | Mr T. Connard |
| Solicitors for the Applicants: | Barry Kenna and Co |
| Counsel for the Respondent: | Mr J.A. Ribbands |
| Solicitors for the Respondent: | T.F. Grundy Lawyer |
ORDERS
That compliance with rule 4.06 of the Bankruptcy Rules 2006 be dispensed with.
That the application for review of the sequestration order of Registrar Luxton made on 19 June 2008 be dismissed.
That the decision and orders of Registrar Luxton on 19 June 2008 be affirmed.
That the Applicants costs be paid out of the estate of the bankrupt in accordance with the Bankruptcy Act 1966.
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT MELBOURNE |
MLG 560 of 2008
| DENNIS PATON AND SHIRLEY MAY PATON |
Applicants
And
| CHERYL PERICIC |
Respondent
REASONS FOR JUDGMENT
On 19 June 2008, a sequestration order was made against the estate of the debtor Ms Pericic by Registrar Luxton. In a separate proceeding and on the same date, the debtor's application to set aside the bankruptcy notice on which the sequestration order was founded was dismissed. By application for review filed 25 June 2008, Ms Pericic sought review of both decisions. The application for review before the court is in the nature of a hearing de novo.
There proceeded before the court on the date of hearing in essence two applications, the first being a creditors' petition in which Mr Connard appeared on behalf of the applicant creditors, and being number MLG 560 of 2008, and a related matter in which the applicant creditors are the respondent to an application to extend time for compliance with a bankruptcy notice. The matters are wholly interrelated. On the hearing of this matter, counsel for Ms Pericic sought and obtained leave to rely upon an affidavit sworn by her dated 21 July 2008. Such affidavit was not before Registrar Luxton at the time of the making of his orders on 19 June 2008.
History
On 21 September 2007 and at VCAT, in effect a default judgment was obtained against the debtor in the creditors' counter-claim filed in an action brought against the creditors by the debtor which was dismissed on 20 August 2007. The judgment obtained by the creditors in their counter-claim was, on 15 January 2008, registered in the Magistrates' Court of Victoria at Ringwood and it is that judgment which the bankruptcy notice issued on 5 March 2008 was founded. Ms Pericic's application for review to VCAT of the VCAT judgment dated
21 September 2007was dismissed on 26 February 2008.
On 17 April 2008 the bankruptcy notice, number VN390/2008, was served on the debtor. The 8 May 2008 was the final date for compliance with that notice and on that day Ms Pericic, the respondent debtor, issued County Court proceedings and filed an application in this court to set aside the bankruptcy notice. On 13 May 2008, the creditors' petition issued and the debtor's application to set aside the bankruptcy notice was served on the creditors' solicitor; this being the 26th day after service of the bankruptcy notice. On 29 May 2008, the creditors' petition and the debtor's application to set aside were adjourned to 19 June 2008, with Registrar Luxton ordering on 19 June 2008 that:-
i)the application to set aside the bankruptcy notice be dismissed;
ii)that there be no deemed extension of time to comply with the requirements of the bankruptcy notice;
iii)the applicant to pay the respondent's costs.
The second order made by Registrar Luxton on 19 June 2008 in matter number MLG 560 of 2008 wherein Dennis Paton was the first-named applicant, Shirley May Paton, the second-named applicant, and Cheryl Pericic, the respondent, the court ordered that:-
i)a sequestration order be made against the estate of Cheryl Pericic; and
ii)the applicant creditors' costs of and incidental to the petition be taxed pursuant to order 62 of the Federal Court Rules and paid in accordance with the statute. The court noted that the date of the act of bankruptcy was 8 May 2008.
There was no order extending time for compliance with the bankruptcy notice. Unless there is a deemed extension of time pursuant to s.41(7) of the Bankruptcy Act 1966 (Cth) (“the Act”) the debtor has committed an act of bankruptcy and the creditor is entitled to a sequestration order. No grounds of opposition were filed in the creditors' petition hearing. All necessary proofs were before the court.
Subsection 40(1)(g) of the Act provides that a debtor will commit an act of bankruptcy in the following case:
(g) if a creditor who has obtained against the debtor a final judgment or final order, being a judgment or order the execution of which has not been stayed, has served on the debtor in Australia or, by leave of the Court, elsewhere, a bankruptcy notice under this Act and the debtor does not;
(i) where the notice was served in Australia – within the time specified in the notice; or
(ii) where the notice was served elsewhere – within the time fixed for the purpose by the order giving leave to effect the service;
comply with the requirements of the notice or satisfy the Court that he or she has a counter-claim, set-off or cross demand equal to or exceeding the amount of the judgment debt or sum payable under the final order, as the case may be, being a counter-claim, set-off or cross demand that he or she could not have set up in the action or proceeding in which the judgment or order was obtained;
and subsection 41(7) of the Act provides:
Where, before the expiration of the time fixed for compliance with the requirements of a bankruptcy notice, the debtor has applied to the Court for an order setting aside the bankruptcy notice on the ground that the debtor has such a counter-claim, set-off or cross demand as is referred to in paragraph 40(1)(g), and the Court has not, before the expiration of that time, determined whether it is satisfied that the debtor has such a counter-claim, set-off or cross demand, that time shall be deemed to have been extended, immediately before its expiration, until and including the day on which the Court determines whether it is so satisfied.
Consideration
I accept Counsel for the applicant creditors submission that in order for the counter-claim, set-off or cross-demand to be one that the debtor "could not have set up in the action or proceeding in which the judgment or order was obtained", there must have been a legal barrier to the claim being made in the proceeding in which the judgment was obtained. In Re Brink (1980) 30 ALR 433 at 437, Lockhart J said:-
The words “that he could not have set up the action or proceeding in which the judgment or order was obtained” mean which he could not by law set up in the action.
As submitted by Counsel for the applicant creditors there was no legal barrier to Ms Pericic's claim being raised in the VCAT proceedings. In paragraph 5 of his affidavit sworn on 8 May 2008 in proceeding number MLG 527 of 2008, the respondent debtor's solicitor Mr Grundy says that the matters pleaded "arise from the same circumstances leading to the order being made by VCAT". VCAT has jurisdiction to hear and determine the debtor's claim, the debtor commencing proceedings in VCAT for the very matters that she now wishes to litigate in the County Court. The debtor's VCAT application was dismissed on 20 August 2007. VCAT subsequently dismissed the debtor's application to set aside the order of 21 September 2007 with the reasons dated 26 February 2008 being an exhibit PDJ6 to the affidavit of Patrick Dunnell sworn 19 June 2008. In paragraphs 15 and 16 of its reasons, the tribunal said:
(15) Nor am I able to make out a claim on the merits which would prompt me to say that there is a claim of substance of the applicant which is not being allowed to surface. Mr Ribbands asserted to the contrary, but I cannot agree.
(16) If there is such a claim I am quite satisfied that the applicant has had many occasions on which to advance it, but, for one reason or another, has not done so.
The debtor's claim could have been and was raised in the proceeding in which the judgment was obtained. Although the debtor now seeks to expand her claim to include a claim for unconscionable conduct, as set out in her affidavit of 21 July 2008, this is a matter in respect of which VCAT clearly has jurisdiction (see section 80 of the Retail Leases Act 2003 (Vic)). This claim could have been raised by her in the proceeding in which judgment was obtained.
The respondent counsel argued that the claim being one of unconscionability was not judiciable before VCAT. Mr Connard, counsel for the applicants, argued that VCAT did have jurisdiction. Mr Ribbands referred to the unconscionability claim as set out in
Ms Pericic’s affidavit being:
“…in essence a misuse of economic power and duress imposed upon by what is perceived or what is described as in effect a bullying landlord who failed to comply with his obligations under the lease to attend to repairs because he had an ulterior motive, in that he had a stated or express desire to sell the freehold with the business but of course he had a tenant in the business who didn't want to sell, so that's in essence the nature of the claim.”
The court was taken to section 89 of the Retail Leases Act 2003 (Vic) subsection (4). That provides as follows:
(4) Subject to section 23(4) (key money and goodwill payments prohibited), a retail tenancy dispute other than–
(a) an application for relief against forfeiture; or
(b) a claim under Part 9 (Unconscionable Conduct)–
is not justiciable before any other tribunal or a court or person acting judicially within the meaning of the Evidence Act 1958.
Ms Pericic argues that she had a claim before VCAT and that her proceedings were dismissed because of the misconduct or mishandling of those proceedings by a person who acted on her behalf, not being a legal practitioner. Ms Pericic felt all her avenues had been exhausted before VCAT. Her application was effectively dismissed by way of self‑executing orders. It is not sufficient for the debtor to issue proceedings in the County Court on the basis that she felt all her avenues were exhausted in VCAT. That is not a legal barrier. VCAT clearly has jurisdiction to hear what was most recently promoted in the County Court proceedings as an unconscionability argument arising out of the lease. The Retail Leases Act 2003 (Vic) sets out that VCAT has such jurisdiction.
The respondent says in paragraph 4 of her affidavit sworn 21 July 2008 that she decided not to reapply to VCAT but to pursue the respondents for damages in the County Court. In paragraph 5 she recites the nature of her general claim against the applicants, and in the final sentence says:
I also formed the view that VCAT members would take a dim view of any further application I may have made to VCAT due to the problems experienced with the application dismissed by Senior Member Cremean.
That does not evidence a legal barrier but rather a choice made by the respondent. The claim for damages she has made in the County Court is a claim in relation to which VCAT has jurisdiction.
As to the arguments concerning s.41(7) of the Act Counsel for the applicants argued that following the bankruptcy notice being issued, the 21-day period for compliance commenced and on the last day, being 8 May, an affidavit was filed by the debtor accompanied by an application to set aside the bankruptcy notice in proceedings numbered 527 of 2008. That application was intended to constitute an application under section 41(7) of the Act. In order to obtain the deemed extension, the debtor was required to file an affidavit that demonstrated two things: (1) that there was a counter-claim, set-off or cross-demand and (2) that it could not have been raised in any other proceeding where the judgment was obtained.
The authorities are clear that a deemed extension is not granted where those matters are not established. Whilst the court should adopt a benevolent construction of the material the affidavit filed needs to contain evidence which goes to establish that there is a real or effective counter-claim, set-off or cross-demand, and if it does not, then the affidavit does not comply with the requirements of section 41(7) of the Act. Where the affidavit fails to provide the necessary material as the affidavits do in this matter then the application to set aside the bankruptcy notice must fail and correspondingly there can be no deemed extension of time for compliance with the notice. The application was not a bona fide application. This leads to the making of orders on the creditors’ petition.
For the foregoing reasons, the application to review, filed by the respondent debtor is dismissed. The matters required to be established by Rule 4 of the Bankruptcy Rules 2006 (“the Rules”) are not in issue. I dispense with compliance with the requirements of Rule 4.06 of the Rules and I will make the usual orders to dispose of the application to review filed the 25 June 2008 (Totev v Sfar (2008) FCAFC 35).
I certify that the preceding sixteen (16) paragraphs are a true copy of the reasons for judgment of Hartnett FM
Deputy Associate: Kate Gray
Date: 11 November 2008
0