Pratley v Racine - [2005] FMCA 1203

FEDERAL MAGISTRATES COURT OF AUSTRALIA

PRATLEY v RACINE & ANOR

[2005] FMCA 1203

BANKRUPTCY – Application to set aside bankruptcy notice.

Bankruptcy Act 1966 (Cth)
Magistrates' Court Civil Procedure Rules 1999
Victorian Civil and Administrative Tribunal Act 1998

Elyard Corp Pty Ltd v DDB Needham Sydney Pty Ltd (1995) 18 ACSR 807
Kyriackou v Shield Mercantile Pty Ltd (2004) FCA 49
Romano v Peldan [2003] FCA 767
Townsville City Council v Tait [2004] FMCA 260

Applicant:

ANTONY JOHN PRATLEY

Respondents:

BRIAN RACINE & LYNETTE RACINE

File Number:

MLG 306 of 2005

Judgment of:

Riethmuller FM

Hearing date:

21 June 2005

Date of Last Submission:

21 June 2005

Delivered at:

Melbourne

Delivered on:

22 June 2005

REPRESENTATION

Counsel for the Applicant:

Mr Sandbach

Solicitors for the Applicant:

Novatsis & Alexander

Counsel for the Respondents:

Mr Gardiner

Solicitors for the Respondent:

Hall & Wilcox

ORDERS

The Bankruptcy Notice No. VN 362 of 2005 be set aside.
There be no order as to costs.

FEDERAL MAGISTRATES
COURT OF AUSTRALIA AT
MELBOURNE

MLG 306 of 2005

ANTONY JOHN PRATLEY

Applicant

And

BRIAN RACINE AND LYNETTE RACINE

Respondents

REASONS FOR JUDGMENT

(Revised from Transcript)

This is an application to set aside a bankruptcy notice issued by the respondent with respect to two judgment orders of the Victorian Civil and Administrative Tribunal (‘VCAT’). The application has some degree of urgency, as a result I am delivering oral reasons.
The notice sets out the usual matters and in the schedule describes the claims as being for $1,100 and $95,848. Annexed to the bankruptcy notice are two documents described as Form 4 Certified Extracts, being certified extracts issued by a Registrar of the Magistrates’ Court of Victoria at Melbourne with respect to entries made in the register of the Magistrates’ Court at Ringwood in February 2005.
The actual terms of the certified extract are brief in each case and it is appropriate that I set them out in full. They are as follows:
ANTONY J PRATLEY to pay
BRIAN RACINE
LYNETTE RACINE
Claim $ 95848.00 and Interest $ 0 Costs $ 0
ANTONY J PRATLEY to pay
BRIAN RACINE
LYNETTE RACINE
Claim $ 0 and Interest $ 0 Costs $ 1100.00
The actual orders of VCAT are in more usual terms. There was an order on a building dispute claim and a counterclaim that the person with the benefit of the order be paid the sum of $95,848. There was an earlier order from VCAT with respect to the costs on an interlocutory matter of $1,100. Both of these orders were originally annexed to a bankruptcy notice first served upon the applicant but later withdrawn as a result of the applicant's objections that the earlier notice only annexed the VCAT orders and did not annex an order of the Magistrates’ Court of Victoria.
This gives rise to the first point, which is that the order from VCAT with respect to the sum of $1,100 was an order for costs, whereas it is described in the certified extract as being an order on a claim for $1,100, with costs being set at nil. During the course of argument, I raised with counsel the appropriateness of a certified extract being annexed to a bankruptcy notice rather than the order itself. It is a difficult issue in the context of VCAT as the tribunal itself is not a court and does not issue orders that are immediately enforceable with respect to money matters.
Section 121 of the Victorian Civil and Administrative Tribunal Act 1998 provides as follows:
(1) A person to whom payment is to be made under a monetary order may enforce the order by filing in the appropriate court-
(a) a copy of the order certified by a presidential member or the principal registrar to be a true copy; and
(b) that person's affidavit as to the amount not paid under the order.
(2) No charge is to be made for filing a copy of an order or an affidavit under this section.
(3) On filing, the order must be taken to be an order of the appropriate court, and may be enforced accordingly.
(4) In this section- "appropriate court" means a court that would have jurisdiction to enforce a debt of the equivalent amount to the amount required to be paid under a monetary order.
There is no dispute here that the Magistrates’ Court of Victoria was the appropriate court, as referred to in section 121. It also appears clear that the order from VCAT must be filed with the Magistrates’ Court of Victoria before it becomes enforceable, but that once that occurs, the order may be enforced as if it were in fact an order of the Magistrates’ Court of Victoria.
I am told from the bar table that orders in the more usual sense - by which I mean orders in the form that is commonly issued by the superior courts and indeed the Federal Magistrates Court - are not issued by the Magistrates’ Court of Victoria in the usual course. It appears that the system in that court is to have a computer register, and what is commonly issued is the certified extract which is annexed to the bankruptcy notice. This is provided for by rule 25.04 of the Magistrates' Court Civil Procedure Rules 1999, which provides as follows:
25.04
(1) An order may be drawn up by a party and verified by the registrar if a party so desires.
(2) Except where a special form of order is prescribed by these Rules, a certified extract from the court record of any order shall be sufficient for any purpose for which an order is required.
I have taken some time in the limited time between hearing this matter and giving this extempore judgment to attempt to locate any cases that deal directly with the question of whether or not a certified extract under such a provision is sufficient for the purpose of a bankruptcy notice. Whilst in some of the Federal Court of Australia cases that appear on the internet there is reference to certified extracts being relied upon, it does not appear that the point has been taken in other proceedings.
Presumably the certified extract would be sufficient in accordance with rule 25.04 of the Magistrates' Court Civil Procedure Rules 1999 at least if it accurately reflected the judgment it relied upon. It may be that the better course with respect to VCAT matters would be to annex a copy of the VCAT order and the certified extract or other document confirming the registration of that order in accordance with section 121 of the Act so as to ensure that there is no doubt as to the order being enforced and its enforceability.
Similar problems can be seen in some of the cases that deal with the difficulties of costs orders where there is a subsequent assessment or taxation of costs by a registrar from which an interlocutor must ultimately issue, quantifying those costs. That, however, is not the direct issue before me today. The question arises as to whether or not the notice is defective when relying upon a certified extract that describes the $1,100 as being a judgment with respect to a claim rather than an order for costs.
I note from the authorities that there is a very strict interpretation taken of bankruptcy matters. It is important that the notice comply with the Act, and an underlying principle is that a debtor not be left in a position where they could potentially be misled by the terms of the bankruptcy notice. It is obviously essential to such notices that the debtor know who it is that is seeking payment, the amount of payment, and the basis upon which the payment is being sought. Indeed, there have been cases where an incorrect reference to the relevant rule or section with respect to the calculation of interest has been sufficient to cause the courts to conclude that a notice is not valid.
In this case I find that the incorrect entry in the certified extract on its face creates such uncertainty that it appears that the notice, for that reason, would not be valid. It was argued before me that this was cured by the fact that the Magistrates’ Court of Victoria, after the date of the notice, made an order under what was described as being under the ‘slip rule’ so as to correct the register from which the certified extract issued.
It was also argued that the result of such a correction under the ‘slip rule’ is that the order, as corrected under the ‘slip rule’, is taken to have always been the order that was in force. In particular, reliance was placed upon Elyard Corp Pty Ltd v DDB Needham Sydney Pty Ltd (1995) 18 ACSR 807 at 820:
Effect of order under slip rule
In my view it is clear, as Sheppard J has observed, that where an order is properly made under the slip rule, its effect is that the “clerical mistake” or “error” in the original judgment or order is eradicated so that the original judgment or order is treated as having been always made as corrected. With respect, I think that his Honour was correct in holding that Shaddock is authority for this view. In Shaddock, the order which the High Court made on 22 October 1982 under the slip rule was as follows:
Order that there be included in the order of the court made 28 October 1981 after the words “judgment for the plaintiffs in the sum of $173,938” the words “and interest in the sum of $62,713”.
The effect of this was that the judgment of the High Court pronounced on 28 October 1981 and entered in an amount of $173,938 had become a judgment pronounced on 28 October 1981 and entered for $236,651.So long as it remained unpaid, the full amount of $236,651 carried interest on judgment from the date of the entry of the judgment pronounced on 28 October 1981, not the date of the entry of the order which was made under the slip rule on 22 October 1982. The contrary construction of the slip rule and of the order made under it would signify that no interest would have accrued in respect of the intervening period. Indeed, in accordance with that construction, the court could never, at least in reliance merely on the slip rule, overcome the problem of the non-accrual of interest in respect of the period intervening between the date of the judgment or order being corrected and the order correcting it (cf Nicol v Allyacht Spars Pty Ltd (No 2) (1988) 165 CLR 306 ; 81 ALR 272 which was not a slip rule case).All the cases seem to have assumed that when an order under the slip rule is made, the correction speaks as from the date of the original judgment or order. Illustrations can be found in other cases like Shaddock in which the correction has been by way of the inclusion of interest previously omitted in a judgment or order (cf Tak Ming Co Ltd v Yee Sang Metal Supplies Co [1973] 1 All ER 569 (PC); Kewside Pty Ltd v Warman International Ltd (1990) ATPR 41-012 (Fed C of A, French J)).A further illustration is found in Re Bickford Joinery Pty Ltd (1974) 7 SASR 438. On 14 May 1973 Hogarth J approved a scheme of compromise and arrangement under s 181 of the Companies Act 1962 (SA), a copy of which appeared as a schedule to the order. Unfortunately, owing to a typographical error, cl 12 commenced “This scheme shall terminate on 12 March 1973”. There was evidence that the date always intended was 12 March 1974. The meeting of creditors at which the scheme had been approved had occurred and, as already noted, his Honour's order was made, in each case after 12 March 1973. His Honour ordered on 7 March 1974 pursuant to the slip rule that “1974” be substituted for “1973” in cl 12 of the scheme. His Honour clearly assumed that the effect of this was that the scheme's currency as a court-approved scheme would be from 14 May 1973 to 12 March 1974 rather than only from 7 March 1974 to 12 March 1974.
It appears to me, however, that whilst the legal effect of the original order had continued throughout - that is, that there was a requirement to pay $1,100 for costs - a correction under the slip rule does not create such a legal fiction as to presume that throughout that whole period, the document annexed to the bankruptcy notice, despite what is set out on its face, should in fact be read in the alternative form, that is, as referring to an order for costs of $1,100 rather than an order for a claim of $1,100. I do not find that argument persuasive and reject it with respect to overcoming the difficulty with the bankruptcy notice.
I have also considered whether or not it would be the case that the debtor ought to be considered to be estopped from raising this issue in the context of this case: that is, where the debtor has received a previous bankruptcy notice which had the orders from VCAT annexed to it, and objected to that notice on the basis that there was nothing annexed from the Magistrates’ Court of Victoria confirming the fact that section 121 had been complied with so as to make the orders enforceable. The judgment creditors have gone back to the court, obtained the documents, and then issued the subsequent notice.
However, if it is not a valid notice and a nullity, whether or not the debtor is estopped from raising the issue does not create something from which, in my view, there is nothing that is valid.
For these reasons I propose to set aside the bankruptcy notice.
It is appropriate that I also, however, provide reasons with respect to other issues that have been raised and argued, as they are likely to occur again. The most significant is whether or not costs on an interlocutory application ought to be considered a final order sufficient to be used to support a bankruptcy notice. In this case the costs order of $1,100 from the VCAT was with respect to an interlocutory application and not with respect to the overall final orders in the matter.
It appears clear to me that costs orders, even if it be an interlocutory application that the costs relate to, are in fact the final orders with respect to that part of the dispute between the parties. Orders made with respect to costs in such circumstances are as final as those orders can ever be. One never returns to those orders later in the proceedings or at some other stage to convert them from interlocutory to final orders. They are enforceable forthwith, unless the court orders a stay, and can be pursued (and in commercial cases regularly are pursued) during the course of the proceedings.
Argument was raised with respect to the analogy of a personal injuries proceeding or other proceedings where there may be an indigent applicant or plaintiff. However, in those cases it is open to the courts, and from time to time courts do make orders, to stay the enforcement of the costs orders.
My views with respect to the costs of interlocutory applications are supported by comments of Coker FM in the Townsville City Council v Tait [2004] FMCA 260, relying upon Re: Gibbs ex parte Triscott (1995) 65 FLR 80, a decision of the Federal Court. Similar results appear from the decisions of Re Skinner's and Smith's Application (1982) 45 ALR 553 and Litherland, Re; Ex parte Showerama Products Pty Ltd (1985) 5 FCR 137.
It was also argued that there was at one stage two bankruptcy notices on foot and that for this reason the notice ought to be set aside. I have had regard to the decision of the Federal Court in Romano v Peldan [2003] FCA 767 and have come to the conclusion that in the context of this case it could not be said that the debtor was misled or that it was inappropriate that there was, for a short period, technically two bankruptcy notices alive with respect to the same judgment debts. The judgment debtor, when served with the second notice, also received a letter confirming the withdrawing of the first, and therefore there would not have been a period where he was actually aware that the two notices were on foot. In any event, on the authority of Romano, even if he was aware that there had have been two notices on foot at the same time, that would not have invalidated them.
The next issue is the allegation that the court was misdescribed as being the ‘Melbourne Magistrates’ Court’ in the schedule, column one, rather than the ‘Magistrates’ Court of Victoria’.
It seems to me that there can only be one court that could possibly be referred to by Melbourne Magistrates’ Court, the court who issued the certified extract that is attached, and that was the Magistrates’ Court of Victoria at Melbourne. However, it certainly would have been far better to describe it appropriately.
The next issue is in respect to the signing clause. The signing clause stated:
The person who applied for this notice to be issued is:
Gerard Magner of Hall and Wilcox
who confirms by the following signature that he the creditor's authorised agent
The clause obviously omitted the word "is" between the words "he" and "the". It appears to me that the form of words underneath Mr Magner's signature are sufficient for a reasonable reader to understand the import of the words even if, as counsel for the respondent sets out, the verb is missing. It would not be uncommon in Australia for many people whose grasp of English is as a second language, to use similar forms of words and be well understood. To apply a requirement of the Queen's English or complete compliance with Fowler's Modern English Usage would be more than what is necessary.
The final matter that was raised was an argument that because of an offer made by the judgment debtor to the judgment creditors the bankruptcy notice was not appropriate, as some form of bona fide attempt to make payment had been made. The terms of the offer are set out in the applicant’s affidavit as follows:
3.On 23 March 2005 I instructed my solicitor to make an offer to the judgment creditor to pay $50,000.00 by 26 April 2005 and the balance of $46,948.00 would be secured by a charge over land that is owned by me and that is already on the market for sale. The estimated valuation of that land, based on the sale price of the adjoining lot, is $180,000.00…
It appears to me that this is not tantamount to payment of the debt. The offer is not in a form that is enforceable in any specific period of time, and indeed, had the terms of it been carried out by the judgment debtor in the interim, regardless of the attitude of the creditor, he could easily have attended by today with a bank cheque for a sufficient sum.
I also note that if it is to be interpreted (as was argued by Counsel for the respondent) as being an offer to recover from the sale of one property the amount of equity stated, then after rateably allowing for the mortgage debts, the amount that appears to be available in the property would be less than the sum that would be required.
For these reasons I am not satisfied that this issue would be a matter that would stand in the way of the petition.
[Further argument ensued as to costs]
In this matter it is a technical defect alone that has brought the bankruptcy notice undone. There have been a variety of views expressed by different members of the Federal Court of Australia as to how strict or liberal the interpretations should be with respect to bankruptcy notices. However, the binding authorities require a particularly strict application of the rules.
In this case, however, the cause of the difficultly confronting the judgment creditor was conduct of the Magistrates’ Court of Victoria rather than conduct of the judgment creditor. It was conduct that came about as a result of conceding to protestations by the debtor that annexing the actual orders being enforced was not sufficient. As Weinberg J said in Kyriackou v Shield Mercantile Pty Ltd (2004) FCA 490, I too conclude with some reluctance that the appeal must be allowed.
However, given the circumstances leading to the application and the conduct of the parties and the conduct of the Magistrates’ Court of Victoria, it appears to me that this is the type of case where it is more appropriate that there be no order for costs. I therefore make no order with respect to costs in the matter.

I certify that the preceding thirty-three (33) paragraphs are a true copy of the reasons for judgment of Riethmuller FM

Associate:

Date: