FEDERAL COURT OF AUSTRALIA

BANKRUPTCY – Bankruptcy notice – non-compliance – validity of notice – two addresses given for creditor, one being solicitor’s address – both addresses reasonably practicable for payment of debt – application to deregister respondent company made but never pursued – requirements for counter-claim – no counter-claim made

Bankruptcy Act 1966 (Cth) – s 41

James v Federal Commissioner of Taxation (1955)93 CLR 631 - cited

Re Nugent (1985) 5 FCR 161 - applied

Re Pugliese (1993) 44 FCR 536 - cited

Re Brink (1980) 30 ALR 433 - cited

MALCOLM McFARLANE v EASTERN PASTORAL PTY LTD T/AS AGRICULTURAL ASSESSMENTS

VG 7473 of 1998

BEFORE:         RYAN JR

PLACE:           MELBOURNE

DATE:             30 SEPTEMBER 1998

THE COURT ORDERS THAT:

1.      The application to set aside Bankruptcy Notice VN 738 of 1998 issued 14 May 1998 be dismissed.

2.      The applicant pay the respondent’s costs of and incidental to the application, as agreed or taxed.

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

REASONS FOR JUDGMENT

(DELIVERED EX-TEMPORE)

On 30 June 1998 the applicant filed an application to set aside a bankruptcy notice issued on 14 May.

The applicant has filed an affidavit in support of his application that the bankruptcy notice be set aside.  In the affidavit numerous assertions are made as to:

·        the history of the matter

·        the judgment debt

·        an instalment order

·        payments under the instalment order

·        a dispute between the applicant and an employee of the respondent’s solicitors

·        direct negotiations between the applicant and directors of the respondent company

·        a statement by the applicant that he cannot make any instalment payments until matters raised (in correspondence with the respondent’s solicitors) are satisfied

·        certain defects allegedly existing in the present bankruptcy notice

·        an application for deregistration of the respondent company as a defunct company filed 28 August 1997

·        the failure of the respondent to refer to any indebtedness by the applicant in the balance sheet as at May 1997 annexed to the respondent’s Notice of Intention to Deregister the respondent company and signed by a director of the respondent company on 11 August 1997

·        the failure of the respondent to list the judgment debt as an asset of the company in the above balance sheet

·        certain allegations against the respondent’s solicitors including an expression of belief by the applicant that the bankruptcy notice is an abuse of process.

I have summarised the applicant’s assertions irrespective of the relevance or irrelevance of some of them because the applicant is unrepresented, appears for himself without the assistance of counsel and I wish to record the case he puts in support of setting aside the bankruptcy notice. However, it must also be recorded that the application to set aside the bankruptcy notice is based on three grounds:

(a)    the bankruptcy notice is defective in relation to the creditor’s address

(b)   the bankruptcy notice is defective in relation to clause 2 of the notice

(c)    the applicant has a counter-claim or set-off against the respondent.

FIRST GROUND – THE ADDRESS OF CREDITOR

In James v Federal Commissioner of Taxation (1955)93 CLR 631 at 642 the High Court had before it a bankruptcy notice in which Qantas was one of the judgment creditors and observed that “any address anywhere this company carries on business in Australia would suffice”.  In Re Nugent (1985) 5 FCR 161 Pincus J applied the test that an applicant debtor must prove to the satisfaction of the Court that the address of the creditor given in the notice was one at which it was not reasonably practicable to make payment or secure or compound the debt. The applicant cannot satisfy this test. He has not put any evidence of an attempt at the stated address, Level 16 of 60 Collins Street Melbourne, or elsewhere, to make payment of the debt or secure or compound it.

In any event, the bankruptcy notice specifies the address of the respondent’s solicitors. In Re Pugliese (1993) 44 FCR 536 at 538 Heery J held that “the requirement of providing the address of the creditor was satisfied … by giving the address of the creditor’s solicitors …”.

SECOND GROUND – ALLEGED DEFECT IN CLAUSE 2 OF THE BANKRUPTCY NOTICE

Clause 2 reads as follows:

“The creditor claims that the debt is due and payable by you. A copy of the judgment or order relied upon by the creditor is attached. At the time of applying for this notice, execution of the judgment or order has not been stayed.”

The applicant seems to contest in paragraph 30 of his first affidavit of 30 June that the debt is due and payable by him and appears to base this assertion on an application to deregister the respondent company and on the failure of the respondent to refer to any indebtedness to the applicant in the balance sheet as at May 1997 annexed to the respondent’s Notice of Intention to Deregister and on the failure of the respondent to list the judgment debt as an asset of the company in the above balance sheet.

While I find it curious that the respondent has given only the most oblique of reasons for the change of heart and corporate mind which led to a reversal of an earlier decision to deregister and to assess the debt as commercially unrealisable, I refer here to paragraphs 14 and 16 of Mr Elgin’s affidavit of 5 August, the motivation of the respondent is of no relevance in a case in which the application to deregister was never pursued.  It is clear from exhibit ME1 that as at 4 August 1998 the respondent company was a registered proprietary company limited by shares.  There is no evidence which suggests that the respondent remains other than a current registered company.

The applicant appears to labour under the misapprehension that an offer to settle the matter, rejected by him, and steps taken, but not pursued, to deregister the company, and a commercial decision, at one stage, that the debt was unrealisable, amounted to the respondent “writing off” the judgment debt.

A decision, at one stage held, that a debt is not commercially realisable, indeed, even an assessment that a debt remains unrealisable, does not amount to a decision to write off the debt and, in any event, in the absence of specific agreement between creditor and debtor, such a decision cannot release the debtor from liability.

COUNTER-CLAIM OR SET-OFF

In questions from the Court today the respondent has conceded that he has made no counter- claim.  Indeed, he concedes that he is at present unable to make a counter-claim. In such circumstances, it is clearly impossible for the applicant to satisfy the Court of any chance of success of a counter-claim which he concedes he has not made and cannot make:  In Re Brink (1980) 30 ALR 433.

Counsel for the respondent has also submitted that even if the applicant had a sufficient counter-claim or set-off it was one which was open to him to raise in the proceeding in which judgment was obtained against him. Accordingly, it is not a counter-claim or set-off for the purposes of s 41(7) of the Bankruptcy Act 1966. 

FINDINGS

The applicant has failed to substantiate any ground for setting aside the bankruptcy notice. The judgment debt which grounds the notice is not in dispute and the judgment has not been stayed. The applicant has not established any abuse of process. The application to set aside the bankruptcy notice must be dismissed.

ORDERS

 I order that:

1.      The application to set aside Bankruptcy Notice VN 738 of 1998 issued 14 May 1998 be dismissed.

2.      The applicant pay the respondent’s costs of and incidental to the application, as agreed or taxed.

Associate:

Dated:              30 SEPTEMBER 1998