Vaughan v Beretov - [2006] FMCA 1294

FEDERAL MAGISTRATES COURT OF AUSTRALIA

VAUGHAN v BERETOV

[2006] FMCA 1294

BANKRUPTCY – Creditor’s petition – alteration to bankruptcy notice made after issue and before service without authority of Official Receiver – whether altered notice valid.

Bankruptcy Act 1966 (Cth), s.40(1)(g)
Federal Magistrates Court (Bankruptcy) Rules 2006

Blackshaw Services Pty Limited v Cureton [2003] FMCA 591
Chandramouli v Wallader [2001] FCA 808
Circle Credit Co-op Limited v Lilikakis [2000] FCA 667
Hussey v TSAI Pty Limited (unreported) Federal Court of Australia 15 June 1989, No. P607 of 1988
McDowell v Fox [2002] FMCA 254
Prudential-Bache Securities (Australia) Limited v Warner [1999] FCA 1143
Re McAlpine; Ex parte Amef Finance Limited, Federal Court of Australia (unreported) 14 December 1987 QLD PET 1517 of 1987
Re O’Sullivan; Ex parte Bank of New Zealand (1991) 102 ALR 206
Re Pender; Ex parte Sullivan, Federal Court of Australia (unreported) 22 April 1988 (No. P939 of 1987)

Applicant:

MICHAEL JOHN VAUGHAN T/AS JOHNSTON VAUGHAN SOLICITORS

Respondent:

MARY BERETOV

File Number:

SYG483 of 2006

Judgment of:

Barnes FM

Hearing date:

14 July 2006

Date of Last Submission:

4 August 2006

Delivered at:

Sydney

Delivered on:

7 September 2006

REPRESENTATION

Solicitors for the Applicant:

Johnston Vaughan Solicitors

Respondent:

In person

ORDERS

That the petition is dismissed.
A copy of this order be provided to the Official Receiver in Sydney within two (2) days.

FEDERAL MAGISTRATES
COURT OF AUSTRALIA AT
SYDNEY

SYG483 of 2006

MICHAEL JOHN VAUGHAN T/AS JOHNSTON VAUGHAN SOLICITORS

Applicant

And

MARY BERETOV

Respondent

REASONS FOR JUDGMENT

On 14 February 2006 Michael John Vaughan trading as Johnston Vaughan Solicitors (the applicant) presented a creditor’s petition seeking that a sequestration order be made against the estate of the respondent, Mary Beretov. The petition is founded on the failure of the respondent debtor to comply with a bankruptcy notice issued on

15 August 2005 which the applicant contends was served on the respondent on 9 September 2005.
The bankruptcy notice required the respondent to pay to Mr Vaughan within 21 days after service the sum of $50,246.91 due to Johnson (sic) Vaughan Solicitors pursuant to a costs assessment order made by a costs assessment registrar of the Family Court of Australia on 13 April 2005.
The applicant relies on the creditor’s petition and a number of affidavits, in particular an affidavit as to service of the bankruptcy notice sworn by Desiree McRae on 9 September 2005 and filed on

14 February 2006, an affidavit verifying paragraphs 1, 2 and 3 of the creditor’s petition sworn by Michael John Vaughan on 14 July 2006 filed on 14 July 2006, an affidavit verifying paragraph 4 of the petition sworn by Amil Dlakic on 9 January 2006 and filed on 14 February 2006, an affidavit of Michael John Vaughan sworn on 24 April 2006 and filed on 27 April 2006 in relation to the composition of the debt and the fact that it was still outstanding and two affidavits sworn on

14 July 2006 by Amil Dlakic and filed on that date, being an affidavit of final debt and what is described as an affidavit verifying paragraph 4 of the petition.
Contrary to the contention for the applicant there is no record that any affidavit of service of the creditor’s petition and other affidavits has been filed in this Court as required under the Federal Magistrates Court (Bankruptcy) Rules 2006. The applicant was given the opportunity to provide the court with a sealed copy of such an affidavit after the hearing. No sealed copy was filed. However annexed to the applicant’s post-hearing written submissions was a photocopy of an unsealed affidavit of service sworn on 7 March 2006 by Desiree McRae as to service of such documents on that date which was, in turn, annexed to an affidavit of Amil Dlakic filed in proceedings in the Family Court of Australia on 23 June 2006.
The respondent relies on her affidavits sworn on 23 March 2006 and

8 May 2006, a notice of intention to oppose the petition and post-hearing written submissions.
A number of issues arose on the material before the Court in these proceedings, including whether the creditor identified on the bankruptcy notice and creditor’s petition was the same as the creditor on the costs assessment order; whether a costs assessment order of the Family Court of Australia is a final judgment or a final order; whether the respondent was served with notice of the proceedings that led to the making of the costs assessment order; whether the Court should go behind the order; whether the bankruptcy notice was served at the last known address of the respondent and whether the requirements of the Federal Magistrates Court (Bankruptcy) Rules 2006 as to the filing of affidavits were met. However it is not necessary to resolve these issues because the bankruptcy notice relied upon was amended and, as discussed below, consistent with the authorities of Circle Credit Co-op Limited v Bilirakis [2000] FCA 667 and Chandramouli v Wallader [2001] FCA 808 it was therefore not a bankruptcy notice issued by the Official Receiver within the meaning of the Bankruptcy Act 1966 (Cth) (the Act).
It is not disputed that in the form in which the bankruptcy notice was issued by the Official Receiver on 15 August 2005 it was addressed to the debtor at “14 Farr Street” in a suburb in Sydney. However the copy of the bankruptcy notice annexed to the affidavit of service of Desiree McRae sworn on 9 September 2005 has been altered. The typed street number “14” has been crossed out and replaced with a handwritten number “118”. It has not been suggested that the amendment was made prior to the bankruptcy notice being issued (cf Blackshaw Services Pty Limited v Cureton [2003] FMCA 591 at [3] per Raphael FM). Nor is it suggested that the amended notice was re-issued by the Official Receiver or amended with the Official Receiver’s authority (cf Prudential-Bache Securities (Australia) Limited v Warner [1999] FCA 1143 and Chandramouli at [3]). There is no suggestion that the amendment was otherwise authorised (cf Re Pender; Ex parte Sullivan, Federal Court of Australia (unreported) 22 April 1988, (Number P939 of 1987), Re McAlpine; Ex parte Amef Finance Limited, Federal Court of Australia (unreported) 14 December 1987 (QLD PET 1517 of 1987) and also see Hussey v TSAI Pty Limited (unreported) Federal Court of Australia 15 June 1989, No. P607 of 1988) or that the notice was amended pursuant to any order of this Court (cf McDowell v Fox [2002] FMCA 254 at [6] to [8] per Driver FM).
The act of bankruptcy relied on in these proceedings is that provided for in s.40(1)(g) of the Act which relevantly is as follows:
If a creditor who has obtained against the debtor a final judgment or final order … … has served on the debtor … … a bankruptcy notice under this Act and the debtor does not … 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 …
That section requires the applicant to establish, inter alia, that there has been served on the debtor “a bankruptcy notice under this Act” (see Circle Credit Co-op Limited at [10] per Heerey J.
Section 41(1) of the Act provides that “an Official Receiver may issue a bankruptcy notice on the application of a creditor who has obtained against a debtor” a final judgment or final order. Section 41(2) provides:
“The notice must be in accordance with the form prescribed by the Regulations.”
Regulation 4.01 (see s.315 of the Act) specifies that in order to apply for the issue of a bankruptcy notice a person must lodge a number of documents with the Official Receiver including “a duly completed draft bankruptcy notice” and sufficient “copies” of the draft bankruptcy notice (for the Official Receiver’s records, for service and for annexure to any required affidavits of service). If the requisite documents are lodged, the Official Receiver must (see Regulation 4.01(2)) sign and date the copies of the bankruptcy notice and return the additional copies to the applicant.
The difficulty for the applicant is that the document served on the respondent in this instance was not the document that was issued on

15 August 2005 by the Official Receiver. As in Circle Credit: “what was served was a document which had been issued by the Official Receiver but which was subsequently altered without the Official Receiver’s authority.” (at [18] per Heerey J).
Hence, for the reasons given in Circle Credit at [10] – [19], the document served was not a “bankruptcy notice under the Act” as required by ss.40(1)(g), 41(1) and Regulation 4.01 (also see Chandramouli at [4]).
The solicitor for the applicant sought to rely on s.306 of the Act. However, a bankruptcy notice is not merely a demand by a creditor:
“but is a document which comes from an official source … an Official Receiver. A notice which is altered without the Official Receiver’s authority does not answer that description – regardless of whether the notice in its altered form might or might not mislead or confuse the debtor” (Circle Credit at [19] per Heerey J and see Re O’Sullivan; Ex parte Bank of New Zealand (1991) 102 ALR 206 at [10]).
It is not necessary to consider the application of s.306. (See Circle Credit at [20]). The document served on the debtor was not a bankruptcy notice issued by the Official Receiver and hence not a bankruptcy notice under the Act. Accordingly the issues of whether the bankruptcy notice was in accordance with the prescribed form, whether any deficiency was merely a “formal defect or an irregularity” under s.306 of the Bankruptcy Act, whether any substantial injustice has been caused by the alteration or whether the notice was misleading or the debtor was misled do not arise. I note that an alteration to the address of the debtor shown on the bankruptcy notice is of potential practical significance. According to the affidavit of service of the bankruptcy notice it was served on the respondent by being “delivered in a sealed envelope marked Private and Confidential, Mary Beretov with the address of 118 Farr Street …” The respondent raised issues as to whether documents (including the bankruptcy notice) were served on her or served in accordance with the Act. However in light of my findings in relation to the validity of the bankruptcy notice it is not necessary to deal with this or the other issues raised by the respondent or on the material before the Court.
Accordingly the petition should be dismissed.

I certify that the preceding sixteen (16) paragraphs are a true copy of the reasons for judgment of Barnes FM

Associate:

Date: 7 September 2006