Re Borg, C.C. Ex parte Australian Securities Commission
[1993] FCA 440
•02 JULY 1993
CARMEL CHARLES BORG
Ex parte: AUSTRALIAN SECURITIES COMMISSION
No. ACTP31 of 1993
FED No. 440
Number of pages - 8
Bankruptcy
COURT
IN THE FEDERAL COURT OF AUSTRALIA
GENERAL DIVISION
BANKRUPTCY DISTRICT OF THE AUSTRALIAN CAPITAL TERRITORY
Neaves J(1)
CATCHWORDS
Bankruptcy - Bankruptcy notice - Notice issued at the request of the Australian Securities Commission - Notice founded on final order for costs obtained by Corporate Affairs Commission (ACT) - Notice requiring payment to Australian Securities Commission - Whether Australian Securities Commission entitled to enforce order for costs obtained by Corporate Affairs Commission - Whether Securities Commission in a position to issue execution upon that final order - Whether notice required payment of amount claimed "in accordance with the judgment or order" on which it was founded.
Bankruptcy Act 1966 (Cth), ss.40(1)(g), 40(3)(d), 41(1)(a), 41(2) and 41(3)(a)
Bankruptcy Rules, r.8 and Form 4 in Schedule 1
Corporate Affairs Commission Ordinance 1980 (ACT), s.7(2)
Companies Act 1981 (Cth), s.227A
Corporations Law, s.1336A
Australian Securities Commission Act 1989 (Cth), ss.11(1A), 262(2)
National Companies and Securities Commission Act 1979 (Cth), ss.45(1), 45(6) and 45(10)
Abigroup Pty Ltd v Agignano (1992) 112 ALR 497
HEARING
CANBERRA, 13 May 1993
#DATE 2:7:1993
Counsel for the Australian : Mr T.M. Howe
Securities Commission
Solicitor for the Australian : Australian Government
Securities Commission Solicitor
Counsel for the debtor : Mr D.A. Hassall
Solicitors for the debtor : Phillips Fox
ORDER
The Court orders that:
1. The petition be dismissed
2. The Australian Securities Commission pay the debtor's costs, including any reserved costs, of and incidental to the petition.
Note: Settlement and entry of orders is dealt with in rule 124 of the Bankruptcy Rules.
JUDGE1
NEAVES J Before the Court is a petition presented on 5 February 1993 by the Australian Securities Commission ("the ASC") seeking the making of a sequestration order against the estate of Carmel Charles Borg ("the debtor"). The petition asserts that the debtor was at the date of the commission of the act of bankruptcy specified in par.4 of the petition ordinarily resident in Australia, that the debtor is justly and truly indebted to the ASC in the sum of $37,088.35 for unpaid legal costs and that the ASC does not, nor does any person on its behalf, hold any security over the property of the debtor or any part of it for the payment of the amount specified.
Paragraph 4 of the petition reads:
"The debtor, within 6 months before the presentation of this petition, committed the following act of bankruptcy: the Australian Securities Commission obtained against the debtor a final order the execution of which has not been stayed and served on the debtor a bankruptcy notice under the Bankruptcy Act and the debtor has not within the time fixed by the Registrar by whom the notice was issued complied with the requirements of the notice or satisfied the court that he has a counterclaim, set-off or cross demand equal to or exceeding the amount of the sum payable under the final order being a counter-claim set-off or cross demand that he could not have set up in the action in which the order was obtained."
The petition does not otherwise identify the bankruptcy notice to which par.4 refers; it does not state the date of service of the bankruptcy notice; and it does not specify the date of the commission of the act of bankruptcy on which the petition is founded. No affidavit verifying par.4 of the petition was filed or served with the petition.
The ASC asserts that the bankruptcy notice referred to in par.4 of the petition is the bankruptcy notice issued on 18 September 1992 at the request of the ASC and served on the debtor on 22 September 1992. That bankruptcy notice, which was addressed to the debtor, referred to the ASC as "the judgment creditor" and recited that the judgment creditor had claimed the sum of $36,132.52, "being the amount of $25,670.50 certified in the Certificate of Taxation issued by the Supreme Court of the Australian Capital Territory on the 14th day of September 1992 in action number SC 1971 of 1986 together with interest of $12,462.02 calculated from the 22nd day of December 1989 until the 17th day of September 1992 in accordance with the Rules of the Supreme Court of the Australian Capital Territory 1933 less $2,000.00 paid by (the debtor) in September 1992". The notice further recited that the amount of $36,132.52 was -
"due by you to it under a final order obtained by the Corporate Affairs Commission of the Australian Capital Territory as the delegate of the National Companies and Securities Commission against you in the Supreme Court of the Australian Capital Territory on the 22nd day of December 1989 and enforceable by the Australian Securities Commission as successor to the National Companies and Securities Commission in accordance with section 1336A of the Corporations Law and subsection 11(1A) of the Australian Securities Commission Act 1989 being an order the execution of which has not been stayed."
The notice required the debtor, within 14 days after service of the notice upon him, excluding the day on which the notice was served -
"(a) to pay the sum of $36,132.52 so claimed by the judgment creditor and no more to the judgment creditor; or
(b) to secure the payment of the sum referred to in paragraph
(a) to the satisfaction of the Federal Court of Australia or the judgment creditor or compound the sum so specified to the satisfaction of the judgment creditor".
The debtor opposes the making of a sequestration order on a number of grounds. One of those grounds concerns the validity of the bankruptcy notice on which the petition is founded.
The Bankruptcy Act 1966 (Cth) relevantly provides (s.40(1)) that a debtor commits an act of bankruptcy -
"(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 fixed by the Registrar by whom the notice was issued; 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 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 could not have set up in the action or proceeding in which the judgment or order was obtained."
Section 40(3)(d) provides that a person who is for the time being entitled to enforce a final judgment or final order for the payment of money is, for the purposes of s.40(1)(g), to be deemed to be a creditor who has obtained a final judgment or final order.
A bankruptcy notice is to be in accordance with the prescribed form (s.41(1)(a)). Section 41(2) provides that the prescribed form of bankruptcy notice is to be such that the notice requires the debtor named in it, within a specified time (being the time referred to in sub-par.40(1)(g)(i) or (ii) whichever is appropriate), to pay the judgment debt or sum ordered to be paid "in accordance with the judgment or order". A bankruptcy notice is not to be issued in relation to a debtor except on the application of a creditor who has obtained against the debtor a final judgment or final order within the meaning of par.40(1)(g) or a person who, by virtue of par.40(3)(d), is deemed to be such a creditor (s.41(3)(a)). The prescribed form of bankruptcy notice (see Bankruptcy Rules, r.8 and Form 4 in Schedule 1) requires the judgment debtor to pay the sum claimed to the judgment creditor or, "if the judgment or order requires payment to be made to a court or a person other than the judgment creditor", to that court or other person, the name and address of that court or other person being required to be inserted in the notice.
The final order on which the bankruptcy notice was founded was pronounced in a proceeding (SC 1971 of 1986) commenced in the Supreme Court of the Australian Capital Territory ("the Supreme Court") by summons dated 28 November 1986 issued at the suit of the Corporate Affairs Commission ("the CAC"), being the body established by that name by the Corporate Affairs Commission Ordinance 1980 (ACT). The summons, which was subsequently amended pursuant to leave granted in that behalf, sought an order pursuant to s.227A of the Companies Act 1981 (Cth) ("the Companies Act") that the debtor be prohibited for a period of 5 years from the date of the summons from being a director or promoter of, or from being in any way (whether directly or indirectly) concerned in, or taking part in the management of, a corporation.
On 22 December 1989, the Supreme Court ordered that the debtor be prohibited from being a director or promoter of a corporation for a period of three years from that day and that the debtor "pay the costs of this matter, those costs to be taxed". It was not until 27 June 1991 that a bill of costs for taxation was filed. The costs were subsequently taxed but it was not until 14 September 1992 that a certificate of taxation issued. The certificate stated that, pursuant to the order made on 22 December 1989, "the costs of the Australian Securities Commission" had been taxed and allowed at the sum of $25,670.50. It does not appear from the material before the Court whether the certificate of taxation was served on the debtor. However, after a lapse of only three days, namely on 17 September 1992, the ASC filed an application for the issue of the bankruptcy notice on which it now relies.
As appears from what is said above, the body to which the bankruptcy notice required the debtor to pay the sum claimed was the ASC. The order made by the Supreme Court on 22 December 1989, however, required that the amount of the costs, when ascertained by taxation, be paid by the debtor to the CAC. The costs ordered to be taxed and paid were clearly the costs of the CAC and the reference in the certificate of taxation to the costs being "the costs of the Australian Securities Commission" was clearly incorrect. Such a statement by the taxing officer could not have the effect of varying the order made by the Court.
On the face of the documents, therefore, the bankruptcy notice, contrary to s.41(2) of the Bankruptcy Act and the prescribed form, required the debtor to pay the amount claimed otherwise than "in accordance with the judgment or order".
In apparent recognition that it was necessary to explain on the face of the bankruptcy notice how it was that the amount claimed was required to be paid to the ASC when the order for costs was obtained by, and required payment to, the CAC, the bankruptcy notice recited that the CAC had obtained the order for costs as the delegate of the National Companies and Securities Commission ("the NCSC") and referred to s.1336A of the Corporations Law and s.11(1A) of the Australian Securities Commission Act 1989 (Cth) ("the ASC Act"). Those sections were said to operate to make the final order obtained by the CAC "enforceable by the Australian Securities Commission as successor to the National Companies and Securities Commission". That language suggests that the ASC was relying upon s.40(3)(d) of the Bankruptcy Act. That provision, however, operates in only limited circumstances: Abigroup Ltd v Abignano (1992) 112 ALR 497 at pp 501, 509.
In regard to the assertion that the CAC was acting as the delegate of the NCSC, it is to be noted that, at the relevant time, s.227A of the Companies Act provided that an application for an order of the kind sought in the summons might be made "by the Commission". That expression referred, not to the CAC, but to the NCSC established by the National Companies and Securities Commission Act 1979 (Cth) (the NCSC Act") (see the Companies and Securities (Interpretation and Miscellaneous Provisions) Act 1980 (Cth), s.9 and the Companies Act, s.3(3)). Prior to the repeal of the NCSC Act with effect from 31 July 1992 by s.14 of the Corporations Legislation Amendment Act 1991 (Cth) ("the CLA Act"), s.45(1) of the NCSC Act conferred on the NCSC a power, by writing under its common seal, to delegate to an authority of a Territory any functions or powers that were conferred or expressed to be conferred on it by or under any Act. Section 45(6) of the NCSC Act provided that any act or thing done in the exercise of a power by a delegate of the NCSC was to have the same force and effect as if it had been done by the NCSC. Section 45(10) provided that where a person purported to exercise a power conferred or expressed to be conferred on the NCSC by or under any Act, it was to be presumed, unless the contrary were established, that the person was duly authorized by a delegation under s.45(1) to exercise the power.
Reference should also be made to s.7(2) of the Corporate Affairs Commission Ordinance which, at the relevant time, provided that the CAC might exercise any powers that were conferred on the NCSC by or under any Act, being powers that were delegated to it pursuant to any Act. The Court was informed that, by an instrument of delegation executed under its common seal and dated 23 January 1984, the NCSC delegated to the CAC its power under s.227A(1) of the Companies Act.
The reference in the bankruptcy notice to s.1336A of the Corporations Law is a reference to a provision which was inserted by the Corporations Legislation Amendment Act, 1990 (Cth), s.9(1) and Schedule 3, and came into operation on 1 January 1991. The section provides:
"(1) Where, before the commencement of this Law, a proceeding under a law of this jurisdiction had been commenced by or against the NCSC, the proceeding may be continued by or against the Commission.
(2) Where, but for this Law, a proceeding under a law of this jurisdiction could have been commenced by or against the NCSC, the proceeding may be commenced by or against the Commission."
Section 11(1A) of the ASC Act, also referred to in the bankruptcy notice, was inserted by the Corporations Legislation Amendment Act 1990 (Cth), s.15 and Schedule 7, and came into operation on 1 January 1991. It provides:
"(1A) The Commission also has the functions and powers expressed to be conferred upon the NCSC by or under:
(a) any Act that is a relevant Act for the purposes of the Companies and Securities (Interpretation and Miscellaneous Provisions) Act 1980; or
(b) any law of a State that corresponds to such an Act."
The reference in that provision to "the Commission" is a reference to the ASC. The expression "relevant Act" includes the Companies Act.
In written submissions furnished to the Court after the conclusion of oral argument, the ASC sought support for the validity of the bankruptcy notice in s.45(6) of the NCSC Act (to the language of which reference has already been made) and to s.262(2) of the ASC Act. The latter provision, which was inserted by the CLA Act, s.23 and came into operation on 31 July 1992, provides:
"(2) A right of action in favour of or against the NCSC existing immediately before the commencement (being a right of action arising under a relevant previous law of this jurisdiction) is, after the commencement, taken to be a right of action in favour of or against the Commission."
The argument on behalf of the ASC is that, in instituting the proceeding in the Supreme Court, the CAC purported to exercise the power conferred on the NCSC by s.227A(1) of the Companies Act; that, by virtue of s.45(6) of the NCSC Act, the acts of the CAC in instituting the proceeding in the Supreme Court and obtaining the order for costs are to be taken as having been done by the NCSC; that the order for costs conferred on the NCSC a right of action to enforce that order; that, by virtue of s.262(2) of the ASC Act, that right of action enured in favour of the ASC; and that, by virtue of s.40(3)(b) of the Bankruptcy Act, the ASC is deemed to be the creditor who obtained the final order for costs upon which the bankruptcy notice is founded. It is also argued that a similar result follows if s.11(1A) of the ASC Act is relied upon instead of s.262(2) of that Act. It is said that, as the NCSC was entitled to enforce the order for costs, the ASC was authorised by s.11(1A) to do so in its own name.
In my opinion, none of the statutory provisions upon which the ASC relies, being those referred to in the bankruptcy notice and those referred to in its written submissions, support the validity of the bankruptcy notice on which the petition is founded or a right in the ASC to have that notice issued. There was no relevant proceeding commenced by the NCSC within the meaning of s.1336A of the Corporations Law. The proceeding in the Supreme Court was brought by and in the name of the CAC. The NCSC was not named as a party to the proceeding nor was the party applicant, namely the CAC, referred to in the proceeding as a delegate of the NCSC. It may be accepted that, in instituting the proceeding, the ASC was exercising the power under s.227A of the Companies Act delegated to it by the NCSC. That circumstance, however, does not have the consequence that the order for costs was an order in favour of NCSC upon which it would have been entitled to issue execution. Section 45(6) of the NCSC Act did not, prior to its repeal, have that effect.
The order for costs was an order made in favour of, and enforceable by, the CAC and not by any other person or body. The order has not been amended so as to make the costs payable pursuant to it payable either to the NCSC or the ASC. There was no relevant function or power of the NCSC in relation to which s.11(1A) of the ASC Act could operate. Similarly, there was no relevant right of action in favour of the NCSC which s.262(2) of the ASC Act could convert into a right of action in favour of the ASC.
The bankruptcy notice is, in my opinion, invalid in that it purports to require the debtor to pay the amount claimed otherwise than "in accordance with the judgment or order". In that respect it does not comply with the requirement of s.41(2) of the Bankruptcy Act. Further, the ASC, the body to which the debtor was, by the terms of the bankruptcy notice, required to pay the amount claimed, was not a creditor who had obtained against the debtor a final judgment or order within the meaning of those words in s.40(1)(g) of the Bankruptcy Act. Nor was the ASC a person entitled to enforce the final order for costs obtained by the CAC. In particular, there is no basis upon which it can properly be said that the ASC was, at the date of the issue of the bankruptcy notice, in a position to issue execution against the debtor upon that final order: Abigroup Ltd v Abignano (supra).
The debtor raised other grounds going to the validity of the bankruptcy notice. However, in the light of what has been said it is unnecessary to deal with those grounds.
Before parting with the matter, it should be observed that the petition is itself defective in a number of important respects. There are also defects in the affidavits filed in support. The most significant of the defects in the petition is that par.4 fails to identify the act of bankruptcy on which the debtor relies. That defect is compounded by the failure of the ASC to serve with the petition an affidavit verifying facts sufficient to establish what was the act of bankruptcy upon which the petition was founded. It follows that, even if the bankruptcy notice had been valid, a serious question would have arisen whether a sequestration order should be made against the debtor having regard to those defects.
For the reasons set out above, the petition is dismissed. The ASC must pay the debtor's costs of and incidental to the petition.
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