FEDERAL COURT OF AUSTRALIA

Lindholdt v Merritt Madden Printing Pty Ltd [2002] FCA 260

BANKRUPTCY – application to set aside Bankruptcy Notice – Federal Magistrate refused to set aside Bankruptcy Notice – whether the Federal Magistrate erred in refusing to set aside the Notice – judgment debt upon which Notice based originally stayed by reason of instalment order – instalment order cancelled by Local Court – failure of respondent to make full and frank disclosure to Local Court prior to cancellation – whether issue of Notice constituted an abuse of process

Bankruptcy Act 1966 (Cth) ss 30(1), 41(1), (2), (3)(b), 41(6) and 306

Evidence Act 1995 (Cth) s 160

Re Moss; Ex Part Tour Finance Limited (1968) 13 FLR 101 referred to

Whiltshire-Smith v Mellor Olsson (1995) 57 FCR 572 at 586 referred to

Re Browbank v Millet; Ex Parte Loniplus Pty Ltd (1985) 12 FCR 254 referred to

Boscolo v Botany Council [1996] FCA 897 referred to

Re Schekeloff; Ex Parte Schekeloff v Hopkins Group Pty Ltd (1989) 22 FCR 407 referred to

Kirk v Ashdown [1999] FCA 1664 referred to

Re Wheeler & Reynolds;  Ex parte Kerr v Crowe (1988) 20 FCR 185 referred to

Kleinwort Benson Australia Ltd v Crowl (1988) 165 CLR 71 referred to

Bryant v Commonwealth Bank of Australia [1994] FCA 1091 referred to

Re Sterling;  Ex parte Esanda Pty Ltd (1980) 30 ALR 77 referred to

Re Lentini; Ex parte Lentini v CSR Ltd (1991) 29 FCR 363 referred to

Brunninghausen v Glavanics [1998] FCA 230 referred to

Walton v Gardiner (1993) 177 CLR 378 referred to

Thomas A Edison Ltd v Bullock (1912) 15 CLR 679 at 681-2 referred to

Garrard v Email Furniture Pty Ltd (1993) 32 NSWLR 662 at 676-8 referred to

Norman v Ricketts (1886) 3 Times LR 182 referred to

Bramston v Robins (1826) 4 Bing 11 referred to

Waller v Andrews (1938) 3 M & W 312 referred to

Thairlwall v The Great Northern Railway Company [1910] 2 KB 509 referred to

Re Amanatidis Holdings Pty Limited (1991) 4 ACSR 253 referred to

PEER LINDHOLDT v MERITT MADDEN PRINTING PTY LTD

N1290 of 2001

WEINBERG J

15 MARCH 2002

SYDNEY (BY VIDEO LINK FROM MELBOURNE)

ON APPEAL FROM A MAGISTRATE OF THE FEDERAL MAGISTRATES SERVICE

THE COURT ORDERS THAT:

1.                  The appeal be allowed.

2.                  The order of the Federal Magistrates Court dismissing the application be set aside and in lieu thereof there be substituted an order that the Bankruptcy Notice issued on 1 June 2001 be set aside.

3.                  The respondent pay the appellant’s costs of and incidental to this appeal, together with the costs of the proceeding before the Federal Magistrates Court.

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

ON APPEAL FROM A MAGISTRATE OF THE FEDERAL MAGISTRATES SERVICE

REASONS FOR JUDGMENT

1                     This is an appeal from a decision of a Federal Magistrate (“the Magistrate”) who on 21 August 2001 dismissed an application by the appellant to set aside a Bankruptcy Notice. The facts which give rise to the appeal are in short compass and were not significantly contentious.

2                     On 31 January 2001 the respondent obtained judgment for the sum of $25,313.14 against the appellant in the Local Court at the Downing Centre in Sydney.  On 15 March 2001 the appellant made application to a Registrar, to be permitted to pay the judgment debt by instalments.  That application was made ex parte, in accordance with the Rules of the Local Court.  The Registrar made orders in the following terms:

“I order that the unpaid amount of the judgment debt be paid by instalments:

                                      of:                  $600

                                    per:            MONTH

                commencing on:        06/04/2001

Payments must be sent to

the Judgment Creditor at:                 C/- DUFFIELD & DUFFIELD

                                                            SUITE 6, LEVEL 3 154 ELIZABETH STREET

                                                           SYDNEY 2000”

3                     The Registrar ordered that if before the expiration of fourteen days after service of the instalment order notice, the judgment creditor filed a notice of objection to the order made on 15 March 2001, the question of payment by instalments would be set down for determination by the Court.  The Registrar further ordered that if the judgment debtor was late in making or failed to make any one payment, the judgment creditor could request the Registrar to cancel the instalment order.

4                     On 3 April 2001 the respondent filed a notice of objection seeking to have the instalment order rescinded.

5                     On 4 April 2001, the appellant forwarded by registered post a cheque drawn in favour of the judgment creditor for the sum of $600.  The cheque was enclosed within an envelope which bore the address of Messrs Duffield & Duffield, the solicitors for the judgment creditor, at Suite 6, Level 3, 154 Elizabeth Street Sydney 2000.  In other words, the cheque was sent to the judgment creditor care of its solicitors at the address specified in the instalment order made by the Registrar.

6                     On the evening of Thursday, 5 April 2001, the envelope containing the cheque (the “registered article”) was received at the GPO Private Box Centre at 310 George Street in Sydney.  GPO records reveal that it was scanned at 11.33 pm that evening.  A GPO employee then caused a card entitled “registered post delivery receipt” to issue.  That card was addressed simply to “1216”, that being the post office box held by the solicitors for the respondent.  It advised that two articles had been received by Australia Post as registered articles, and that they were available for collection.  Why the card was addressed to “1216”, and not to Messrs Duffield & Duffield at their Elizabeth Street address was not the subject of any evidence before the Magistrate.  However, it is clear that the registered post delivery receipt was placed in the box at some time during the day on 6 April 2001.

7                     It appears that the solicitors for the respondent had a practice of emptying the contents of their post office box each weekday morning at between 9.00 and 9.30 am.  There was uncontradicted evidence that that practice had been followed on 6 April 2001 and that the registered post delivery receipt was not yet in the box when it was inspected on that morning. 

8                     It seems that the box was not inspected again until Monday, 9 April 2001.  The employee of the solicitors for the respondent who emptied the box on that morning took the registered post delivery receipt to the counter and signed for, and received, both registered articles.  It follows that the envelope containing the cheque for $600 did not come into the physical possession of the solicitors until 9 April 2001 although it had been available for collection some three days earlier.

9                     On 24 April 2001 the respondent’s solicitors banked the appellant’s cheque.  On the same day they wrote to the Registrar in the following terms:

“Dear Sir,

MERRITT MADDEN PRINTING PTY LIMITED –v- LINDHOLDT

PROCEEDINGS NO.  1270087 OF 2000

We act for the Plaintiff and note that an Instalment Order was made on 15 March 2001.  We also note that a Notice of Objection to payment by instalments was filed on 3 April 2001 within the fourteen (14) day period allowed pursuant to the Registrar’s Notice.

At the time of writing, we have not yet received notification of a hearing date in respect of the Instalment Application but this may now be irrelevant, given the following.

We enclose:-

1.                  Affidavit of Non-Compliance.

2.                  Application for Certificate of Judgment.

You will see from the writer’s Affidavit that the Judgment Debtor has failed to comply with the Instalment Order by making payment of $600.00 on or before 6 April 2001.  In these circumstances, it is our view that the Instalment Order should be rescinded and any proposed hearing date of the Application to pay by instalments should be vacated.

We request that you adopt this course of action and thereafter issue a Certificate of Judgment.

We enclose cheque for $11.00 in payment of an Application fee on the Certificate of Judgment.

Should you wish to discuss any matter please telephone Grant Pritchard of this Office.

Yours faithfully,

DUFFIELD & DUFFIELD 

Encl”

10                  The affidavit of non-compliance to which the solicitors referred in this letter and which was said to have been enclosed within it was actually sworn on 26 April 2001.  It was in the following terms:

“1.       I am the Solicitor for the Plaintiff herein.

2.                  I refer to the Registrar’s Instalment Order made on 15 March 2001 and say that the Judgment Debtor has failed to comply with that Instalment Order in that Judgment Debtor failed to pay the sum of Six hundred dollars ($600.00) on or before 6 April 2001.

3.                  I respectfully request that the Instalment Order be rescinded.”

11                  It is important to note that the solicitors for the respondent made no mention, in either the letter or the enclosed affidavit, of any of the following facts:

·                    on the morning of 9 April 2001 the solicitors had collected from their post office box a registered post delivery receipt showing that on 5 April 2001 two registered articles had been received by Australia Post on their behalf;

·                    immediately after discovering that these registered articles were being held, they were  signed for and collected;

·                    one of those registered articles consisted of an envelope which was correctly addressed to them at their Elizabeth Street office;

·                    that envelope had contained the appellant’s cheque for $600; and

·                    on 24 April 2001 they had banked that cheque.

12                  On 7 May 2001 the Registrar, acting in response to the letter of 24 April 2001 and the affidavit of non-compliance of 26 April 2001, issued a Certificate of Judgment for the judgment debt.  He also cancelled the instalment order which had been made on 15 March 2001.  He did so without having given the appellant any opportunity to be heard, apparently in accordance with the relevant Rules of the Local Court. 

13                  On the same day he wrote to the appellant in the following terms:

“THE PLAINTIFF FILED AFFIDAVIT OF NON-COMPLIANCE AND APPLICATION FOR CERTIFICATE OF JUDGMENT.  OBJECTION HEARING ON 25/5/2001 HAS BEEN CANCELLED.

14                  The reference to an objection hearing seems to have been a reference to a hearing which had been scheduled in response to the respondent’s notice of objection, filed on 3 April 2001, to the instalment order.

15                  Not surprisingly, the Registrar’s action provoked a heated response from the appellant.  On 11 May 2001 he wrote to the Registrar in the following terms:

“Dear Sir,

RE:  Civil Claims File No:  127087/00 Merritt Madden Printing v Peer Lindholdt

The lawyers for the Plaintiff, on 24 April 2001, filed an Affidavit of Non-Compliance with your order of Payment by Instalment.  This claim is blatantly untrue.

The April instalment was sent by registered mail on 4 April (see attached receipt) to Duffield & Duffield and was banked and credited to the account by the Plaintiff on 24 April 2001 (see attached copy of their April Statement).

Your urgent attention to this matter will be greatly appreciated.”

Sincerely yours

PEER LINDHOLDT”

16                  On 16 May 2001 the Registrar replied:

“Dear Sir/Madam,

Civil Claims File No:  127087/00

Plaintiff:         MERRITT MADDEN PRINTING PTY LTD

Ref:

Defendant:      PEER LINDHOLDT

Ref:

**********

Dear Sir,

REGARDING ATTACHED LETTER AND FILE 127087.00

Please note this matter is listed before the Registrar on the 1/6/01 at 10.00 am in Court 5.9. regarding this claim of no default of instalment order.

Yours faithfully,

Registrar”

17                  What subsequently occurred before the Registrar on 1 June 2001 was the subject of an affidavit sworn by the appellant for the purpose of this proceeding.  The contents of that affidavit were not challenged by the respondent.  Paragraph 7 is in the following terms:

“7.      The hearing in the Local Court on 1 June 2001 was conducted before the Deputy Registrar whose name I believe to be Mr Norman and at that hearing I appeared in person and the judgment creditor was represented by Mr Pritchard of its solicitors Mssrs Duffield & Duffield.  Mr Pritchard stated to the Deputy Registrar that his firm had not received until 9 April 2001 the instalment due on 6 April 2001 and that therefore I was in default of the instalment order.  I stated that I had mailed a cheque for $600 on 4 April 2001 and I produced the receipt a copy of which is annexed and marked “G”.  I said words to the effect that it was Mr Pritchard’s word against mine whether or not his office had received the cheque by the due date.  Mr Norman then said words to the effect that he had no reason to doubt Mr Pritchard’s word and that it was his view that the Registrar had been in error in listing the matter for hearing.  He further said words to the effect that upon obtaining the appropriate proof of postage from Australia Post I could apply for a further order to pay the judgment debt by instalments.  Mr Pritchard then applied for costs which Mr Norman awarded to the judgment creditor indicating that the costs should be paid by the Attorney-General in light of his view that the matter should not have been listed for hearing at all.”

18                  It was common ground before me that the Deputy Registrar who dealt with the matter on 1 June 2001 declined to hear it primarily because the appellant had failed to comply with the procedural requirements of the Local Court.  Notwithstanding that the appellant had been specifically invited by the Registrar on 16 May 2001 to attend the Court on 1 June 2001 to present his case, his claim was dismissed without a hearing on the merits, and he was ordered to pay costs.

19                  It should be emphasised that the Deputy Registrar heard no evidence from either side regarding the issue of the supposed default.  He contented himself with the observation that he had no reason to doubt the solicitor’s word, and indicated that in his view, the Registrar had been in error in listing the matter for hearing.

20                  After the appellant had failed in his attempt to have the Deputy Registrar reinstate the instalment order, the solicitors for the respondent moved swiftly.  They sought and obtained from the Official Receiver, on the afternoon of 1 June 2001, a Bankruptcy Notice.  Section 41(1) of the Bankruptcy Act 1966 (Cth) (“the Act”) provides that the Official Receiver may issue a Bankruptcy Notice on the application of a creditor who has obtained a final judgment against a debtor for an amount of at least $2,000.  Section 41(2) provides that the Notice must be in accordance with the form prescribed by the regulations. 

21                  In the Bankruptcy Notice the respondent claimed, as the debt which was then due and payable, the sum of $25,313.14 plus $908.74 interest, less two payments of $600 each, ie a total of $25,021.88.  The respondent further claimed that at the time of applying for the Notice, execution of the judgment or order had not been stayed. 

22                  The appellant now found himself in a difficult situation. Once his attempt to have the original instalment order reinstated had failed, and the Bankruptcy Notice had issued, the only practical course available to him seemed to be to apply to set aside that Notice.  On 19 June 2001, prior to the expiration of the 21 day period provided for within the Notice for payment, he applied to the Federal Magistrates’ Court for that relief.

23                  The Magistrate who heard the application gave detailed reasons for judgment.  He noted that the appellant had relied in support of his application upon s 41(3)(b) of the Act.  That section gave legislative force to the principle established in earlier cases that a Bankruptcy Notice cannot validly be issued in relation to a debtor if, at the time of the application for its issue, execution of the judgment or order to which it relates has been stayed:  Re Moss; Ex Parte Tour Finance Limited (1968) 13 FLR 101.  Where there is a stay on execution of the judgment or order to which the Notice relates, the Notice, if issued, is liable to be set aside. 

24                  The Magistrate observed that the relevant date for considering whether or not the judgment debt upon which the Bankruptcy Notice was founded had been stayed was the date of the issue of the Notice.  In this case that was 1 June 2001.  His Honour accepted that the appellant had not had available to him, at the hearing before the Deputy Registrar on that date, all of the evidence from Australia Post which subsequently came into his possession and confirmed his account of what he had done in purported compliance with the instalment order.

25                  The appellant advanced two arguments before the Magistrate.  First, he submitted that he was entitled to rely upon the presumption of regularity, namely that the registered article would be delivered in accordance with his instructions in the ordinary course of the post, and would not be dealt with in any other way.  More particularly, it would not be dealt with by leaving a card in the post office box of the solicitors for the respondent informing them of the fact that it had been received, rather than delivering that card to them at their Elizabeth Street address.  Secondly, he submitted that whether or not the stay which arose automatically from the instalment order of 15 March 2001 was formally still in force on 1 June 2001, the Court should deem it to have been in force on that day.  He contended that had the Deputy Registrar been apprised, as he ought to have been, of all the circumstances, including in particular the efforts which he had made to comply with the instalment order, that order would have been reinstated.

26                  The respondent’s case, put simply, was that at the time the Bankruptcy Notice was issued, there was no stay of the judgment debt in force.  Accordingly, whatever sympathy there might be for the appellant who, through no real fault of his own was in a dire predicament, his application to set aside the Bankruptcy Notice had to fail.

27                  The Magistrate accepted that for the purposes of s 41(3)(b) of the Act, execution of a judgment debt is deemed to be stayed where a judgment creditor is not in a position to issue immediate execution upon it.  He accepted too that the relevant test was not whether there had been a formal stay of the judgment, but whether the judgment creditor could in practice issue immediate execution as at the date of issue of the Bankruptcy Notice:  Whiltshire-Smith v Mellor Olsson (1995) 57 FCR 572 at 586.  His Honour referred to Re Browbank v Millet; Ex Parte Loniplus Pty Ltd (1985) 12 FCR 254, which established that where there is an irregularity in relation to a judgment debt, execution of the judgment can be treated as having been stayed even if no formal stay had, at the relevant time, been ordered.  The onus of proof of the existence of the circumstances said to constitute the stay rested upon the debtor who was seeking to have the Bankruptcy Notice set aside or declared invalid:  Boscolo v Botany Council [1996] FCA 897.

28                  The Magistrate noted that a Bankruptcy Notice which had otherwise been validly issued and served could not be set aside by reason of the fact that the judgment debt upon which it was founded was subsequently permitted to be paid by instalment:  Re Schekeloff; Ex Parte Schekeloff v Hopkins Group Pty Ltd (1989) 22 FCR 407.  Thus even if the appellant were to make a further application to the Local Court for an instalment order in relation to the judgment debt, and that application were to be granted, it would have no effect upon the validity of the Bankruptcy Notice.

29                  Not surprisingly, his Honour rejected the appellant’s argument based upon the presumption of regularity.  He referred to s 160 of the Evidence Act 1995 (Cth) and observed that it did no more than establish that the cheque had been delivered by no later than the fourth working day after having been posted, which he regarded as having been 10 April 2001.  In fact, the correct date seems to be 11 April 2001. 

30                  His Honour readily concluded that Australia Post had erroneously delivered the registered article to the solicitors’ post office box instead of to their Elizabeth Street address.  He observed:

“I find that, on the balance of probabilities, the respondent’s solicitors were not aware of the arrival of the cheque until 9 April 2001 when they cleared the post office box and found the Australia Post card in it.  I find that the cheque was not delivered in accordance with the terms of the instalment order until it was taken from the GPO to the solicitors’ office on 9 April 2001.  Accordingly, the solicitors were strictly correct in asserting that the instalment payment had been made late.  It was the fault of Australia Post that the payment was delivered late.  It is up to the applicant to decide whether he has a claim against Australia Post, having regard to the terms of s.34(2) of the Australian Postal Corporation Act 1989.  The existence of such a claim may be a relevant consideration on the hearing of the creditor’s petition.  The proceedings before me were conducted on the basis that there was no such claim but that position could change.”

31                  His Honour further observed:

“It follows that the applicant has failed to satisfy me that, at the of the issue of the bankruptcy notice, execution of the judgment debt had stayed.  The result is a hard one for the applicant, who has been brought undone by the actions of Australia Post and by the technical application of the Local Court Rules and the Bankruptcy Act.  The situation would have been different if I could have been satisfied that the solicitors had been put on notice of the delivery of the cheque to their GPO box on 6 April 2001 and that they had failed to collect the item on that day.  That would have indicated that the solicitors had improperly asserted non-compliance with the terms of the instalment order and that the Local Court, if it had been apprised of the facts, would have made order either reinstating the operation of the instalment order or granting a specific stay on execution of the judgment.  There is, however, no evidence that the respondent’s solicitors have acted improperly.  It is clear that the respondent was opposed to the instalment order in the first place and that the solicitors, on instructions, had moved to set it aside.  No doubt they seized the opportunity to escape from the confines of the instalment order when the opportunity presented itself.  A creditor is entitled to take advantage of a window of opportunity if the window, in truth, exists.”

32                  The Magistrate went on to say that upon discovering that the initial instalment order had been cancelled, the applicant could have sought a stay of the judgment debt pending the making of a fresh application for an instalment order.  However, he had not done so.  Instead he chose to dispute the assertion that he had not complied with the original instalment order.  When his claims in that regard were rejected by the Deputy Registrar on procedural grounds, the respondent had caused a Bankruptcy Notice to issue.  In his Honour’s opinion, even if the Deputy Registrar who dealt with the matter on 1 June 2001 had been made aware of the circumstances surrounding the applicant’s attempts to comply with the instalment order, it was unlikely that he would have granted a further stay on the execution of the judgment.

33                  His Honour also observed that the applicant’s only recourse might be to institute proceedings against Australia Post for having failed to deliver the envelope containing the cheque in accordance with the applicant’s instructions.

THE APPEAL TO THIS COURT

34                  The appellant relied upon six grounds in support of his appeal to this Court.  They were as follows:

“GROUNDS

2.         The learned magistrate erred in finding that the appellant had not complied with the instalment order made by the Local Court on 15 March 2001 (“the instalment order”).

3.                  The learned magistrate erred in finding that the cheque for the instalment payable on 6 April 2001 was not delivered in accordance with the instalment order when there was evidence that the cheque was available for collection from the respondent’s solicitors’ post office box on the said due date for payment.

4.                  The learned magistrate erred in law in holding that it was the obligation of the appellant to notify the respondent’s solicitors of delivery of the said cheque to their post office box on the due date for payment.

5.                  The learned magistrate erred in finding that the Local Court if appraised of the facts as to delivery of the said cheque to the post office box of the respondent’s solicitors on or before the due date for payment would not have made order either reinstating the instalment order or granting a specific stay of execution of the judgment.

6.                  The learned magistrate erred in failing to find that rescission of the instalment order had been obtained irregularly and on the basis of an affidavit sworn by the respondent’s solicitors which was inaccurate.

7.                  The learned magistrate erred in law in failing to determine that at the time of the issue of the bankruptcy notice execution of the judgment was to be treated as having been stayed in accordance with the principles discussed and applied in Re Browbank & Miller; ex parte Lonibus [sic] Pty Limited (1985) 12 FCR 254.”

35                  Counsel for the appellant advanced two contentions in support of his client’s case.  First, he submitted that the Magistrate had erred in finding that the appellant had not complied with the instalment order made by the Local Court on 15 March 2001.  That was because the cheque that had been sent by registered post on 4 April 2001 and had been available to be collected on behalf of the respondent on 6 April 2001.  Had the solicitors for the respondent taken the trouble to examine the contents of their post office box at some time after 9.30 am on that day they would have become aware of that fact.  Secondly, he submitted that the Magistrate had erred in concluding that even if all the circumstances surrounding the sending of the cheque been placed before the Deputy Registrar on 1 June 2001, it would have been unlikely that a further stay on the execution of the judgment would have been granted.

36                  Counsel for the respondent submitted that it was plain that the appellant had not complied with the strict terms of the instalment order.  The cheque had not been received by the solicitors for the respondent on 6 April 2001 as required, but on 9 April 2001.  The fact that the solicitors would have been in a position to take delivery of the cheque on 6 April had they inspected their post office box after 9.30 am on that day was of no relevance.  It was the appellant’s responsibility to ensure that the cheque was received by the solicitors in accordance with the terms of the instalment order.  He must accept the consequences of his failure in that regard. 

37                  Counsel for the respondent further submitted that there was nothing to suggest that the Bankruptcy Notice had not been validly issued.  It was based upon a Certificate of Judgment issued by the Registrar of the Local Court on 7 May 2001.  That Certificate of Judgment had been the subject of attack by the appellant on the morning of 1 June 2001.  That attack had been unsuccessful.  There was nothing to prevent the Bankruptcy Notice from issuing after that time. 

38                  It is necessary to make several preliminary observations.  The issue of a Bankruptcy Notice on the application of a judgment creditor is a matter of the utmost gravity.  In order to apply for the issue of such a Notice there are a number of requirements which must be met.  The judgment creditor must lodge with the Official Receiver not merely a draft Bankruptcy Notice but also a series of specified documents including a sealed or certified copy of the judgment or order upon which the creditor relies. 

39                  Prior to 16 December 1996, Bankruptcy Notices were issued by the Registrar in Bankruptcy.  However, that position no longer exists.  Bankruptcy Notices are now issued by the Official Receiver and represent the first step towards invoking the insolvency jurisdiction of this Court.  Any defects in a Bankruptcy Notice may result in it being set aside since its primary function is to make clear to the debtor what he must do in order to comply with its requirements and thus avoid the consequences of committing an act of bankruptcy:  Kirk v Ashdown [1999] FCA 1664.

40                  A Bankruptcy Notice is regarded as a “proceeding” under the Act:  Re Wheeler & Reynolds;  Ex parte Kerr v Crowe (1988) 20 FCR 185 and may be remedied under s 306.  Its importance in the overall scheme of bankruptcy is emphasised in Kleinwort Benson Australia Ltd v Crowl (1988) 165 CLR 71.

41                  There is no express power in the Act to set aside a Bankruptcy Notice.  However, such a power arises by necessary implication, and is within the general powers of the Court conferred by s 30(1) of the Act:  Bryant v Commonwealth Bank of Australia [1994] FCA 1091.

42                  It has been held that this Court can set aside a Bankruptcy Notice as an abuse of process in the exercise of its inherent jurisdiction:  Re Sterling;  Ex parte Esanda Pty Ltd (1980) 30 ALR 77 and Re Lentini; Ex parte Lentini v CSR Ltd (1991) 29 FCR 363.  For example, if it is apparent that the purpose of a Bankruptcy Notice is to put pressure on a debtor to pay a debt rather than to invoke the Court’s insolvency jurisdiction, then the filing of the Bankruptcy Notice is itself an abuse of process:  Brunninghausen v Glavanics [1998] FCA 230.

43                  It may be more apt to describe the power of the Court to set aside a Bankruptcy Notice as an abuse of process as an exercise of the Court’s implied jurisdiction rather than an exercise of its inherent jurisdiction.  That is because serious doubts exists as to whether the Court has any inherent jurisdiction.  In any case, there is no doubt that the Court has the power to ensure that its processes are not abused by the improper invocation of its jurisdiction.  This is simply an application of the general principles articulated in Walton v Gardiner (1993) 177 CLR 378.

44                  In my opinion the Bankruptcy Notice issued in this case should be set aside.  The solicitors for the respondent who caused that Notice to be issued did so in circumstances which amounted to an abuse of process.  The Notice relied upon a judgment debt which had been stayed on 15 March 2001 by reason of the instalment order made that day.  That instalment order was cancelled on 7 May 2001 in response to what was, in substance, an application made ex parte by those solicitors on behalf of the respondent.  That application was supported by the letter of 24 April 2001 and the affidavit of 26 April 2001.  Neither of those crucial documents disclosed matters which, on any view, ought properly to have been disclosed to the Registrar. 

45                  A party who applies ex parte for an order in the exercise of a judicial, or quasi judicial, power is required to meet a high standard of candour and responsibility in bringing to the attention of the decision-maker all facts material to the determination of the application.  This obligation extends to facts which the absent party (if present) would presumably rely upon in defence to the application.  The existence of such a duty of candour is not limited to applications to the Court for injunctive or other equitable relief.  An order obtained in breach of an ex parte applicant’s duty of candour will almost invariably be set aside even if, on a fresh application following full disclosure, the applicant would be entitled to an order in similar terms. 

46                  These principles are well established:  Thomas A Edison Ltd v Bullock (1912) 15 CLR 679 at 681-2 per Isaacs J and Garrard v Email Furniture Pty Ltd (1993) 32 NSWLR 662 at 676-8 per Mahoney AP and Clarke JA.

47                  I have no doubt that both the letter of 24 April 2001, and the accompanying affidavit ought to have disclosed to the Registrar all of the circumstances relating to the supposed failure of the appellant to comply with the instalment order.  It was highly misleading to omit from those documents the information that notification of the existence of a registered article had been provided to the solicitors on 6 April 2001, regardless of the fact that they did not retrieve that notification until the following Monday morning.  It was also incumbent upon the solicitors, in my view, to ensure that the Registrar was informed that the appellant’s cheque had been received on 9 April 2001 and indeed banked on the same day that the letter was prepared. 

48                  When the matter came before the Deputy Registrar on 1 June 2001 he declined, for procedural reasons, to hear it on its merits.  That was most unfortunate.  Had he been prepared to entertain the matter, and had he been made fully aware of all that had transpired, I believe he would certainly have reinstated the instalment order.  It was, after all, the non-disclosure of highly relevant material that had led to the cancellation of the instalment order in the first place. 

49                  In my opinion, the Certificate of Judgement which was granted on 7 May 2001 was procured in a manner that was wholly unsatisfactory.  For the solicitors of the respondent to have invoked the insolvency jurisdiction of this Court on 1 June 2001 by issuing a Bankruptcy Notice based upon such a judgment was, in the circumstances, an abuse of process.  The Court should not condone that abuse, and should take whatever steps are appropriate to protect its processes from being tainted by it.  In this case the most appropriate method by which that can be done is to order that the Bankruptcy Notice be set aside. 

50                  I should add for the sake of completeness that I am by no means certain that the Magistrate was correct in concluding that the appellant did fail to comply with the terms of the instalment order.  That order required him to pay the sum of $600 on or before 6 April 2001 to the solicitors for the respondent at their Elizabeth Street address. 

51                  The appellant plainly took reasonable steps to ensure that he complied precisely with the terms of that order.  There is authority for the proposition that a payment may be made by sending a cheque by post in compliance with a request for a cheque.  In Norman v Ricketts (1886) 3 Times LR 182, Lord Esher MR, with whom Lindley and Lopes LJJ agreed, observed that if a debtor had to pay his creditor money, as a general rule the debtor must come and pay his creditor.  But if the creditor asked him to pay in a particular way, the debtor might do so.  If asked to pay through the post, the putting of the letter in the post with the money was sufficient.  That case was followed in Thairlwall v The Great Northern Railway Company [1910] 2 KB 509.  Moreover payment may sometimes be made through the agency of a third party: Bramston v Robins (1826) 4 Bing 11; and Waller v Andrews (1938) 3 M & W 312; cf.  Re Amanatidis Holdings Pty Limited (1991) 4 ACSR 253 where Senior Master Mahony of the Supreme Court of Victoria held that service by “security post” whereby a card left by an employee of Australia Post at a company address informing the company of a demand under s 364(2)(a) of the Companies (Vic) Code was not effective service under s 528(4) of the Code.

52                  In the present case, the cheque was sent by registered post and was received by Australia Post on 5 April 2001.  Notification of its receipt was given to the solicitors for the respondent the following day.  The fact that they did not check their post office box after 9.30 am on that day was, in a sense, their choice.  They were not entitled to deprive the appellant of his right to pay the first instalment at any time, at least during normal business hours, on that day.  This point was not fully argued before me and it is therefore inappropriate to come to a final conclusion regarding it.

53                  In my opinion the appeal should be allowed.  The orders by the Magistrate should be set aside, and in lieu thereof there should be substituted as order that the Bankruptcy Notice be set aside.  The respondent should pay the appellant’s costs of the appeal and the costs below.

Associate:

Dated:              15 March 2002