Turner v Managed Recoveries Pty Ltd - [2012] FMCA 204

FEDERAL MAGISTRATES COURT OF AUSTRALIA

TURNER v MANAGED RECOVERIES PTY LTD

[2012] FMCA 204

BANKRUPTCY – Application to set aside Bankruptcy Notice – absence any s.40(1)(g) cross-claim – applicant’s criticisms of Notice erroneous – application dismissed.

Bankruptcy Regulations 1996
Bankruptcy Act 1966, s.40(1)(g)

Walsh v Deputy Commissioner of Taxation (1984) 156 CLR 337
Schekeloff v Hopkins Group Pty Ltd (1989) 22 FCR 407

Applicant:

ANDREW DOUGLAS TURNER

Respondent:

MANAGED RECOVERIES PTY LTD

File Number:

MLG 1698 of 2011

Judgment of:

Burchardt FM

Hearing date:

27 February 2012

Date of Last Submission:

2 March 2012

Delivered at:

Melbourne

Delivered on:

6 March 2012

REPRESENTATION

The Applicant:

In person

Counsel for the Respondent:

Ms Rieschieck

Solicitors for the Respondent:

Michael Saunders & Associates

ORDERS

The application be dismissed.
The Applicant shall pay the costs of the Respondent upon the Federal Court Scale to be taxed in default of agreement pursuant to Order 62 of the Federal Court Rules.

FEDERAL MAGISTRATES
COURT OF AUSTRALIA
AT MELBOURNE

MLG 1698 of 2011

ANDREW DOUGLAS TURNER

Applicant

And

MANAGED RECOVERIES PTY LTD

Respondent

REASONS FOR JUDGMENT

(Revised from transcript)

As I indicated when we adjourned last time, these Reasons for Judgment are being given orally and will be transcribed from the transcript and forwarded to the parties. The advantage of proceeding in this way is that the matter can be dealt with far more expeditiously than the process of dictating a judgment and having it typed and so on, and in bankruptcy matters, in my view, a timely resolution is of considerable significance. So I will give my Reasons for Judgment now.
This application filed on 1 December 2011 seeks to set aside a Bankruptcy Notice. Inter alia, interim orders are sought to, and I quote, “arrange settlement/repayment of debt”. The applicant’s affidavit also filed on 1 December 2011 asserts, relevantly, first, that he was not served with the Bankruptcy Notice because it was merely left at his address; second, that he was not aware of the judgment in New South Wales Local Court on 7 April 2011, although I note there is an annexure C to his affidavit which is a letter of 8 July 2011 to him referring to that judgment; Next, he asserts that the amount allegedly owing was altered in handwriting and finally, that there was an error in the calculation of the debt.
The affidavit goes on to assert other matters, including an offer of repayment, and at paragraph 6 on page 5 refers to a failed investment scheme involving an entity known as Australian Olives for which there was a Responsible Entity as a manager, first through a body which I will refer to as Huntley Management and secondly, by Australian Olives Limited.
Also annexed to Mr Turner’s affidavit is the Statement of Claim in the New South Wales proceedings. That pleads an agreement on 16 September 1998 between Australian Olives Limited and Mr Turner and that that agreement involved management fees to be paid to Huntley Management. It was an alleged failure to pay about $6,000 of those alleged management fees which gave rise to the original asserted debt.
The pleading also asserts an assignment of that debt to the respondent creditor. I note that because of the assignment, the plaintiff was not Huntley Management but rather, Managed Recoveries Pty Ltd. Clearly, Huntley Management sold the debt to Managed Recoveries Pty Ltd who clearly, as counsel conceded when we were together, is a debt‑collecting body.
On 14 December 2011 a Notice of Opposition was filed. It pointed out that there had been no application to set aside judgment and that service had been effected in comity with the Bankruptcy Regulations 1996, and I would say straightaway that that assertion is clearly correct. Postal service as was effected is plainly permitted by the Rules.
On 14 December 2011, Managed Recoveries Pty Ltd filed an affidavit of Michael Saunders. He provided credible prima facie answers both to the issue of the adjustment to the figure in the Bankruptcy Notice and to the other matters the bankrupt had raised. On 19 December 2011, Registrar Caporale dismissed the application to set aside the Bankruptcy Notice which led to the Application for Review now before me.
On 21 February 2012, Mr Turner provided a modification of his application and sought orders on page 3 of that document. The final orders sought were that the bankruptcy notice be set aside and damages by counterclaim as “per attached affidavit-statement of counterclaim”.
That takes one to the affidavit. The applicant had in the meantime sought orders from the New South Wales Court on 17 February 2012 and on that day, the Court first reduced the sum owing by taking off prejudgment interest and secondly, dismissed the application to set aside.
The grounds of Mr Turner’s application are set out at page 4 of his affidavit. They are summarised and stand as follows:
“1. There is a high probability that having been assigned the debt in relation to the Judgment, the Respondent has been assigned the same responsibilities as the Responsible Entity originating the debt;
2. There is a high probability a contract doesn’t exist with the Respondent or the debt originator, let alone one for management fees in relation to a failed and non-viable project;
3. Or further, if there is a contract, that Breaches of the Corporations Act 2001, s.601(FC) have occurred.”
The defence and counterclaim follow from page 5 of the affidavit onwards. I do not propose to traverse the material in detail, but it does take issue, quite clearly, with the assignment of the debt and pleads a counterclaim against Huntley Management and Australian Olives Limited for various failures to act as Responsible Entities.
On 24 February 2012 Mr Saunders filed another affidavit which was plainly inadmissible hearsay but I note that the applicant, Mr Turner, essentially confirmed its terms. There had been a stay ordered on 16 January 2012 when Mr Turner’s application in New South Wales was filed and that lasted, as I mentioned, until the hearing on 17 February 2012 when it lapsed or was dissolved by the Court. On 2 March 2012 a further amended defence and counterclaim and cross‑claim were filed. In substance, they were the same as the earlier documents filed, but they articulate the issue of a cross-claim more clearly.
Mr Turner has represented himself. Before the Court he asserted, first, that there was no proof that the debt had been assigned. Secondly, he articulated a number of complaints about the conduct of Huntley Management and asserted that the project as a whole had been a debacle, something that is clearly correct. He referred to an existing claim in Queensland, which is apparently a proceeding in the Supreme Court in Queensland as part of a group action against Australian Olives, and in reply he asserted that he could not see why the respondent in this case was not liable for the responsible entity’s misconduct.
The following points should be made. Mr Turner is not a lawyer. Very understandably, he has not addressed the legal issues in an ordered way. The first and obvious matter that arises is the operation of s.40(1)(g) of the Bankruptcy Act 1966 (“the Act”). It is clear from the Bankruptcy Notice, which is annexed to the affidavit of service, that there was a final order for the amount claimed at the time of issue. In Walsh v Deputy Commissioner of Taxation (1984) 156 CLR 337, the High Court confirmed, and I read from the head note, that:
“A bankruptcy notice that requires a judgment debtor to pay a sum which is in fact due at the date of its issue is not rendered invalid by the fact that the amount due under the judgment was reduced by payment made between the dates of issue and service. Such payments must be taken into account in deciding whether there has been compliance with the notice under s.40(1)(g) of the Bankruptcy Act.”
In fact, the original order that grounded the Bankruptcy Notice has since been altered in New South Wales on 17 February 2012 and thus, Mr Turner clearly did not owe the sum claimed in the Bankruptcy Notice, in one sense, at the time the notice issued. Nonetheless, it is clear that the subsequent reduction by the New South Wales Court of the debt does not invalidate the notice which was based on a valid order which had not been stayed at the time it was issued. In that regard, I refer to the longstanding authority of Schekeloff v Hopkins Group Pty Ltd (1989) 22 FCR 407. Accordingly, the notice itself was valid when served.
The next issue to be considered is whether the applicant could have set off a cross-claim or cross-demand in the original proceeding. The answer to that is, unfortunately, clearly “no” as the respondent creditor is not the party who the applicant says wronged him. Those parties are the two responsible entities. Mr Turner could, and perhaps should, have joined them as parties to the New South Wales case, but this would not have been a set-off cross-claim or cross‑demand as referred to in the Act.
Counsel for the respondent also says that there is no evidence that the applicant’s cross-claim exceeds the debt. The evidence is unclear, and certainly Mr Turner does not actually prove that his cross-claim exceeds the debt, although I strongly suspect that it would.
There are no grounds to set aside the Bankruptcy Notice, and accordingly, I will dismiss the application.
I would say, however, that the parties should endeavour to resolve their difficulties. The Bankruptcy Notice was based on an amount that, in part, was never owing, and I refer here to the prejudgment interest claimed. That may be a relevant consideration as and when a Petition is issued and the Court considers its discretion under s.52 of the Act. Accordingly, the application is dismissed with costs.

I certify that the preceding nineteen (19) paragraphs are a true copy of the reasons for judgment of Burchardt FM

Date: 6 March 2012