FEDERAL COURT OF AUSTRALIA

Pioneer Permanent Building Society Limited v Parrott [2003] FCA 517

BANKRUPTCY – unopposed petition for sequestration – no notice of opposition filed – no challenge to bankruptcy notice, in particular to effect of failure to refer to Federal Magistrates Court – matters necessary to be proved under s 52 of Bankruptcy Act 1966 (Cth) on hearing of petition – function of court hearing petition

Federal Court of Australia Act 1976 (Cth) s 35A

Acts Interpretation Act 1901 (Cth) Section 25C

Bankruptcy Act 1966 (Cth) ss 41, 52, 306

Boorowra Shire Council v Booth [2001] FMCA 31 cited

Lee v McNulty [2000] FCA 1519 cited

Blanco v Employers’ Mutual Indemnity Ltd & Anor [2002] FMCA 38 cited

Atkinson v Oakleigh Holdings Pty Ltd (2000) 105 FCR 15 approved

Australian Steel Company (Operations) Pty Ltd v Lewis (2000) 109 FCR 33 cited

Deputy Commissioner of Taxation v Kelly (2001) 110 FCR 561 referred to

PIONEER PERMANENT BUILDING SOCIETY LIMITED v ERIC MERVYN PARROTT and SALLY ANN PARROTT

No Q 7023 of 2002

SPENDER J

BRISBANE

28 MAY 2003

THE COURT ORDERS THAT:

1.             A sequestration order be made against the estate of Eric Mervyn Parrott and the estate of Sally Ann Parrott. 

2.             The costs of and incidental to the petition be paid in accordance with the Act.

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

REASONS FOR JUDGMENT

1                     This is an unopposed creditor’s petition which came before Deputy District Registrar Heather Baldwin for hearing on 4 February 2003.  There was no notice of intention to oppose the making of a sequestration order when the matter was before the Deputy District Registrar, but having regard to the form of the Bankruptcy Notice on which the petition was founded, the Deputy District Registrar referred the matter to the Federal Court pursuant to s 35A(7) of the Federal Court of Australia Act 1976 (Cth).  Deputy District Registrar Baldwin gave directions for the filing of written submissions.

2                     The Bankruptcy Notice No QLD 877/2002 was served on the respondent debtors on 1 October 2002.  The respondent debtors failed to comply with the Bankruptcy Notice by 22 October 2002.  There was no application made to set aside the Bankruptcy Notice.  The Bankruptcy Notice was founded on a judgment obtained by the applicant creditor against the respondent debtors for an amount $50,202.95 in the Magistrates Court at Mackay on 11 September 2001.  The Bankruptcy Notice was issued on 10 September 2002 by the Official Receiver.  The Bankruptcy Notice was in accordance with the form as prescribed by the Regulations as they existed prior to 1 July 2000.  Amending Regulations requiring the notice to refer to the Federal Magistrates Court were gazetted on 17 August 2000 and stated that they were effective as at 1 July 2000. 

3                     It was submitted by the petitioning creditor that the fact that the notice does not refer to the Federal Magistrates Court as a forum for determining the matter would have no effect on the current proceedings, nor could the omission reasonably mislead the debtors.  Section 25C of the Acts Interpretation Act 1901 (Cth) provides that substantial compliance with a form is sufficient.  The petitioner refers to the judgment of Raphael FM in Boorowra Shire Council v Booth [2001] FMCA 31, where a bankruptcy notice was issued and served after 1 July 2000 but which did not include a reference to the Federal Magistrates Court, concluding:

‘I find that the failure to include reference to the Federal Magistrates Court does not invalidate the bankruptcy notice, nor was it misleading or confusing.’

4                     In Lee v McNulty [2000] FCA 1519, Moore J said:

‘… the defect can be treated as a formal defect or an irregularity that does not invalidate the proceedings. … In my opinion, no substantial injustice would have been caused by the defect or irregularity.  That is because the judgment has not sought to avail herself of the rights she had which would have involved recourse to the Federal Court or its Registry.  It can be inferred she would not have similarly done so had she been informed that the Federal Magistrates Court (or its Registry) was another forum in which those rights could be pursued.

5                     On the other hand, in Blanco v Employers’ Mutual Indemnity Ltd & Anor [2002] FMCA 38, Driver FM on the application of a debtor that a sequestration order made against her on 7 February 2002 be set aside, relied on a defect in the bankruptcy notice which omitted any reference to the Federal Court of Australia but did refer to the Federal Magistrates Court.  In that case also, issue was joined as to the validity of the bankruptcy notice, and Federal Magistrate Driver followed the judgment of Heerey J in Atkinson v Oakleigh Holdings Pty Ltd (2000) 105 FCR 15 (“Atkinson”).  There, Heerey J expressed the view:

‘…since the sole criterion of a bankruptcy notice now is that it “must be in accordance with the form prescribed by the regulations” (s 41(2)), and the sole raison d’etre of the amending regulations was to require a notice to refer to the Federal Magistrates Court as well as the Federal Court, it is not easy to see why this is not a requirement “made essential by the Act”:Kleinwort Benson Australia Ltd v Crowl (1988) 165 CLR 71 at  79.  A court is not at liberty to hold that some matters expressly required to be stated are essential but others, also the subject of express requirement, are not: Bendigo Bank v Williams (2000) 98 FCR 377 at 389.’

6                     Heerey J was a member of the majority in Australian Steel Company (Operations) Pty Ltd v Lewis (2000) 109 FCR 33 (“Australian Steel”). 

7                     On one view of the majority in Australian Steel every element in the prescribed form is essential, and there is no room for the operation of s 306 of the Bankruptcy Act 1966 (Cth) (“the Bankruptcy Act”) where something has been omitted from the form or something inserted in the form is incorrect, or even that something included in the form is incorrect.  This view of the majority decision seems to me to be inconsistent with the judgment of the majority in Australian Steel, in that the bankruptcy notice in Australian Steel itself omitted any reference to the information about Federal Court Registries, which the form in operation at the relevant time in Australian Steel required to be included in the bankruptcy notice.  It was not suggested that that omission (which in my view is of the same order as the omission in the present case) was fatal to the validity of the bankruptcy notice. 

8                     Reference should also be made to the judgment of Katz J in Deputy Commissioner of Taxation v Kelly (2001) 110 FCR 561 (“Kelly”) where Katz J followed the view of Heerey J in Atkinson.  Kelly, however, was a case like Atkinson where issue was joined as to the validity of the bankruptcy notice.  Had the validity of the bankruptcy notice been in issue in the present case, there are thus conflicting judicial opinions on that issue. 

9                     Section 41(6A) of the Bankruptcy Act contemplates that a debtor on whom a bankruptcy notice has been served may apply to the Court to have the bankruptcy notice set aside.  Section 52(1) is important in the present proceedings.  It relevantly provides:

‘At the hearing of a creditor’s petition the Court shall require proof of

(a)     the matters stated in the petition (for which purpose the Court may accept the affidavit verifying the petition as sufficient);

(b)     service of the petition; and

(c)     the fact that the debt or debts on which the petitioning creditor relies is or are still owing;

and, if it is satisfied with the proof of those matters, may make a sequestration order against the estate of the debtor.’

10                  It has to be remembered that a debtor who wishes to oppose a creditor’s petition must, at least three days before the date fixed for the hearing of the creditor’s petition, or, with the Court’s consent, at the date of the hearing:

(a)      enter an appearance in accordance with O 9; and

(b)     file a notice in accordance with form 149, stating the grounds of opposition to the creditor’s petition; and

(c)      file an affidavit in support of the grounds of opposition; and

(d)     serve the notice and supporting affidavit on the petitioning creditor or the nominated address for service: O 77, r 11 of the Federal Court Rules; r 29.07 of the Federal Magistrates Court Rules.

The form of the notice of opposition should specify with particularity the grounds of opposition. 

Here, there was no notice of intention to oppose the making of a sequestration order, nor any grounds in support of that opposition.

11                  While bankruptcy is, of course, a serious matter in which there is a public interest which extends beyond the interests of the respective parties, it is not the function of a court to be the advocate for any particular party, particularly in respect of matters which that party does not himself or herself wish to prosecute.  The judge in bankruptcy proceedings is an umpire, not a longstop for one of the parties.

12                  In this case I am satisfied of the matters of which the Act requires proof.  I make a sequestration order against the estate of Eric Mervyn Parrott and the estate of Sally Ann Parrott.  I further order that the costs of and incidental to the petition should be paid in accordance with the Act.

Associate:

Dated:              28 May 2003