Re Maher, Denis Ex Parte Official Trustee in Bankruptcy

[1995] FCA 972

IN THE FEDERAL COURT OF AUSTRALIA   )
  )
VICTORIA DISTRICT REGISTRY         )     VN 347 of 1995
  )
BANKRUPTCY DIVISION                )

RE:DENIS MAHER

Judgment Debtor

EX PARTE:OFFICIAL TRUSTEE IN BANKRUPTCY

Judgment Creditor

CORAM:RYAN J

PLACE:MELBOURNE

DATE:03 MAY 1995

MINUTE OF ORDERS

THE COURT ORDERS:

1. That the bankruptcy notice be set aside.

1. That the respondent pay the applicant's costs of and incidental to the motion on notice dated 19 April 1995, such costs be taxed in default of agreement.

NOTE:Settlement and entry of orders is dealt with in O 36 of the Federal Court Rules.

IN THE FEDERAL COURT OF AUSTRALIA   )
  )
VICTORIA DISTRICT REGISTRY         )     VN 347 of 1995
  )
BANKRUPTCY DIVISION                )

RE:DENIS MAHER

Judgment Debtor

EX PARTE:OFFICIAL TRUSTEE IN BANKRUPTCY

Judgment Creditor

CORAM:RYAN J

PLACE:MELBOURNE

DATE:03 MAY 1995

REASONS FOR JUDGMENT

RYAN J:  This is an application to set aside a bankruptcy notice issued on behalf of the official trustee on 22 February 1995.  The recital to the bankruptcy notice is in these terms:

"WHEREAS the Official Trustee in Bankruptcy of Level 9, 360 Elizabeth Street, Melbourne, Victoria 3000 (hereinafter referred to as "the Judgment Creditor") has claimed that the sum of $16,479.76 is due by you to it under a final order obtained by it against you in the Federal Court of Australia at Melbourne on 21 February 1995,  being an order the execution of which has not been stayed." 

The order obtained on 21 February 1995 was made by Young R and is in these terms:

"WHEREAS:

A.On 3 November 1993 the Court ordered that the respondent pay 85% of the applicant's costs of the proceedings; 

B.The applicant's bill of costs was taxed and a sealed Certificate of Taxation was issued on 5 December 1994 allowing the above costs at $16,479.76 (being 85% of $19,387.96); 

C.Service of the Certificate of Taxation was effected by the applicant in accordance with the Rules of the Court and after 14 days from the date of service the applicant's taxed costs remained unpaid.

THE COURT:  pursuant to O 62 r 45(3) of the Federal Court Rules, as read with r 114B of the Bankruptcy Rules, HEREBY ORDERS THAT the respondent pay to the applicant the sum of $16,479.76."

On behalf of the applicant debtor, it has been contended that the bankruptcy notice is defective either as not being based on or as not referring to a final order in the sense in which that expression is used in s 40(1)(g) of the Bankruptcy Act.  That section provides:

.."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;"... 

That stipulates one of the conditions upon the happening of which a debtor commits an act of bankruptcy. 

For the debtor, it was contended that the order which is the source of the liability to pay the costs referred to in the certificate of taxation and in the order of 21 February 1995 of Young R was an order made by Olney J on 3 November 1993, in relation to costs or proceedings which, as I understand it, were indisputedly interlocutory in nature.  Accordingly, so it was argued, Olney J's order was not a final judgment or order in the sense used in s 40(1)(g).  I entertain some doubt about the correctness of that submission, because it appears that many of the authorities which suggest that an order for costs (for example, on the grant of a new trial) is not final, considered sections which referred specifically to "final judgments".  As noted by McDonald, Henry & Meek on Australian Bankruptcy Law and Practice 5th Edition p 1045, the sections in issue in those cases did not include the words "or final order".

However, it is unnecessary for me to resolve this difficulty because I consider that the debtor is entitled to succeed on the argument that the bankruptcy notice does not refer to what in truth was the final order in this matter, namely the order of Olney J of 3 November 1993.  That failure was held by Neaves J in Gardiner v Gardiner (1992) 39 FCR 259 to be a defect incapable of being cured. His Honour said at page 274:

"The notice now under challenge identifies the judgment or order under which the amount of $7574.10 is claimed to be due as being the final judgment or final order obtained by the judgment creditors against you in the Supreme Court of New South Wales, Sydney Registry, Equity Division made on 22 May 1989 and entered on 31 October 1990. 

In my opinion this description does not correctly identify the judgment or order under which the amount is claimed.  The respondent's liability to pay the amount claimed has its source in the judgment of Needham J given on 4 June 1986 and that judgment is not referred to in the notice.  The amount claimed was for interest on the costs ordered by Needham J to be paid by the respondents. 

Interest was payable on the amount of those costs when ascertained pursuant to the provisions of s 91 of the Supreme Court Act.  Interest commenced to run from the date of the certificate of taxation 19 November 1988.  The effect of the order made by the Deputy Registrar on 22 May 1989 was simply to preserve that situation in respect of what we referred to in the order as all disputed items eventually found in favour of the appellants. 

Whilst it may have been necessary to include in the bankruptcy notice a reference to the order made on 22 May 1989, and perhaps to the Certificate of Taxation dated 29 November 1988, the omission of any
reference to the source of the respondents' liability, namely the judgment of 4 June 1986, is in my opinion fatal to the validity of the notice.  The defect is not a formal defect to which s 306 of the Bankruptcy Act could apply."

In my view, by parity of reasoning, the order of Young R of 21 February 1995, although it may have been a necessary precursor to execution of the order of Olney J, did not excuse or relieve the creditor of the need to specify in the bankruptcy notice, Olney J's order.  In the words of Neaves J, that order was the source of the respondent's liability.

Accordingly I propose to order that the bankruptcy notice be set aside.

I certify that this and the preceding three (3) pages are a true copy of the reasons for judgment of his Honour Justice Ryan

Associate:

Date:

Counsel for the judgment debtor:     Mr A W Sandbach

Solicitors for the judgment debtor:   Mr R P D Wright

Counsel for the judgment creditor:        Mr A Murray

Solicitors for judgment creditor:     Australian Government Solicitor

Hearing date:  3 May 1995