FEDERAL COURT OF AUSTRALIA
Genovese v BGC Constructions Pty Ltd [2005] FCA 215
BANKRUPTCY – bankruptcy notices – abuse of process – whether issue of multiple bankruptcy notices abuse of process – election to proceed on third notice – second notice issued by respondent creditor subject of application by appellant debtor to set aside – judgment on application reserved – respondent creditor informed appellant debtor it was not proceeding with second notice – respondent creditor failed to inform Federal Magistrates Court of election – judgment delivered in respondent creditor’s favour – costs order in favour of respondent creditor – respondent creditor subsequently began enforcing costs order – whether conduct inconsistent with election.
Bankruptcy Act 1966 (Cth)
Abignano & Anor v Wenkart [1998] FCA 1468 followed
Re a Debtor; Ex parte the Debtor v National Westminster Bank Plc [1983] 3 All ER 545 cited
Port of Melbourne Authority v Anshun Pty Ltd (1981) 147 CLR 589 cited
Farrington v Deputy Commissioner of Taxation [2002] FCA 1013 applied
In re Fredericke and Whitworth; Ex parte Hibbard [1927] 1 Ch 253 cited
Re Hansen; Ex parte Hansen (1985) 4 FCR 590 cited
In re a Judgment Debtor [1908] 2 KB 474 cited
HERCOLE PIETRO GENOVESE v BGC CONSTRUCTIONS PTY LTD
WAD 272 of 2004
LANDER J
11 MARCH 2005
PERTH
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IN THE FEDERAL COURT OF AUSTRALIA |
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WESTERN AUSTRALIA DISTRICT REGISTRY |
WAD272 OF 2004 |
ON APPEAL FROM THE FEDERAL MAGISTRATES COURT OF AUSTRALIA
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BETWEEN: |
HERCOLE PIETRO GENOVESE APPELLANT
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AND: |
BGC CONSTRUCTIONS PTY LTD RESPONDENT
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LANDER J |
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DATE OF ORDER: |
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WHERE MADE: |
PERTH |
THE COURT ORDERS THAT:
1. The appeal be allowed.
2. Bankruptcy Notice 247 of 2004 is set aside.
Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
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IN THE FEDERAL COURT OF AUSTRALIA |
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WESTERN AUSTRALIA DISTRICT REGISTRY |
WAD272 OF 2004 |
ON APPEAL FROM THE FEDERAL MAGISTRATES COURT OF AUSTRALIA
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BETWEEN: |
APPELLANT
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AND: |
RESPONDENT
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JUDGE: |
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DATE: |
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PLACE: |
PERTH |
REASONS FOR JUDGMENT
1 This is an appeal from a decision of McInnis FM, dismissing the appellant’s application (the second application) to set aside a bankruptcy notice (number 247 of 2004) (the third notice) issued on 8 September 2004.
history of proceedings between the parties
Proceedings in the Western Australian Magistrates Court
2 The respondent was incorporated as Homestyle Pty Ltd. It changed its name to BGC Constructions Pty Ltd on 9 July 2003.
3 The respondent is a registered builder under the Builders’ Registration Act 1939 (WA). The appellant was a bricklayer who subcontracted to the respondent in respect of a property to be erected at Lot 742 Burnside Terrace, Canning Vale for Mr and Mrs Van den Hoff.
4 The respondent brought proceedings against the appellant in the Local Court of Western Australia and on 17 October 2003, being the second day of the trial, Boothman SM entered judgment for the respondent, with the consent of the respondent, in the sum of $10,000 and costs. The proceedings were brought by the respondent under its former name. Its change of name was not notified to the Local Court before judgment.
5 On 3 November 2003 the respondent issued a warrant of execution to enforce the judgment.
6 On 9 January 2004 the appellant appealed to the District Court of Western Australia against the consent judgment entered in the Local Court.
7 On 16 January 2004, the respondent obtain a Certified Copy of Judgment which provided:
‘In the LOCAL COURT of WESTERN AUSTRALIA…
Held at Perth Local Court
Between
HOMESTYLE PTY LTD Plaintiff
C/- Level 8, 28 The Esplanade
PERTH WA 600
And
GENOVESE Hercole Pietro Defendant
32 Salisbury Street
BAYSWATER WA 6053
JUDGMENT for $10000.00 for debt (or damages), $18422.69 for Costs and $0 for Interest, together amounting to the sum of $28422.69 given for Plaintiff on 17-10-2003.
SUBSEQUENT PROCEEDINGS
(In Chronological Order)
DATE NATURE OF ACTION AMOUNT FOR COSTS RESULTS
3/11/03 Warrant of Execution $14979.33 $227.45 Pending
15/1/04 This Certificate $28687.14 $37.00
SUMMARY
Amount of Judgment or Order and Taxed Costs $28422.69
All Subsequent Costs $264.45
Sub Total $28687.14
Paid into Court $0.00
Remaining due on Judgment or Order $28687.14’
8 On 18 February 2004 a further warrant of execution issued. The costs of that warrant are not included in a second Certified Copy of Judgment which was obtained on 26 February 2004. That document was in the same terms as the Certified Copy of Judgment dated 16 January 2004, except that an additional $37.00 of costs was claimed for the issue of the second certified copy, which brought the total amount outstanding on the second copy to $28,724.14.
9 On 12 March 2004 the respondent filed a bankruptcy notice (63 of 2004) in the Federal Magistrates Court which it served on the appellant on 17 March 2004.
10 On 2 April 2004 the appellant applied to the Federal Magistrates Court seeking to set aside bankruptcy notice 63 of 2004 (WZ40 of 2004).
11 On 6 April 2004 the bankruptcy notice was set aside by consent.
12 On 8 April 2004 the appellant commenced proceedings against the respondent in the District Court of Western Australia claiming damages of $41,200 for breach of contract. Those proceedings have not been heard.
13 On 21 April 2004, the respondent issued bankruptcy notice 91 of 2004 (the second notice) pursuant to s 40(1)(g) of the Bankruptcy Act 1966 (Cth) (the Act). The Certified Copy of Judgment dated 26 February 2004 was attached to that notice.
14 The notice of 21 April 2004 was in the following form:
‘This Bankruptcy Notice is prescribed, under subs. 41(2) of the Bankruptcy Act 1966 (“the Act”), by r 4.02 of the Bankruptcy Regulations.
To: HERCOLE PIETRO GENOVESE
(“the debtor”)
of: 32 Salisbury Street
BAYSWTER WA 6053
This Bankruptcy Notice is an important document. You should get legal advise if you are unsure of what to do after you have read it.
1. HOMESTYLE PTY LTD
(“the creditor”)
of: 4/22 Mount Street
PERTH WA 6000
Claims you owe the creditor a debt of $26,412.29, as shown in the Schedule.
…
Schedule
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Column 1 |
Column 2 |
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1. Amount of judgments or orders |
$28,422.69 |
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Plus 2. Legal costs if ordered to be paid and a specific amount was not included in the judgments or orders (see Note 1, below) |
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Plus 3. If claimed in this Bankruptcy Notice, interest accrued since the date of judgments or orders (see Note 2, below) |
NIL |
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4. Subtotal |
$28,422.69 |
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Less 5. Payments made and/or credits allowed since date of judgment or orders |
$2,010.40 |
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6. Total debt owing |
$26,412.29 |
15 The bankruptcy notice wrongly stated the amount of the judgment was $28,422.69 when, in fact, the amount of judgment was then $28,724.14. It also credited the appellant with payments or credit of $2,010.40. The respondent creditor was described by its former name. As already observed, the respondent company had lawfully changed its name to BGC Constructions Pty Ltd on 9 July 2003. It retained the same ACN number.
16 A change of company name does not create a new legal entity: s 161(1)(a) of the Corporations Act 2001 (Cth). Nor does it render defective any legal proceedings brought by the company: s 161(1)(c). Any legal proceedings brought by the company in its former name may be continued in its new name: s 161(2).
17 On 18 May 2004 the appellant applied in the Federal Magistrates Court to set aside the second notice: WZ57 of 2004.
18 The grounds of the application were:
(1) the appellant had a cross-demand exceeding the amount claimed in the bankruptcy notice;
(2) the respondent was not a legal entity entitled to enter and enforce the judgment;
(3) the name on the bankruptcy notice was not the present name of the respondent.
19 On 23 July 2004 the appellant applied to a Master of the Supreme Court of Western Australia for an order nisi for a writ of certiorari to set aside the order made by consent in the Local Court. I have not seen that application and I have not been made aware of the grounds.
20 I was told by the appellant, who was unrepresented, that at some time he also lodged an appeal from the Magistrate’s order to the District Court of Western Australia. I have not been told the grounds of the appeal. That appeal has not been heard.
Proceedings in the Federal Magistrates Court
21 The application to set aside the second notice was heard on 28 July 2004 in the Federal Magistrates Court by McInnis FM.
22 The Federal Magistrate received written submissions on 6 August 2004 and judgment was reserved.
23 On 17 August 2004 the respondent applied ex parte in the Local Court of Western Australia to amend the respondent’s name on the judgment in the Local Court proceedings from Homestyle Pty Ltd to BGC Constructions Pty Ltd. That order was made on 18 August 2004.
24 On 18 August 2004 the appellant’s application in the Supreme Court of Western Australia for an order nisi for the issue of a writ of certiorari was dismissed with costs.
25 On 25 August 2004, the respondent obtained a third Certified Copy of Judgment. Additional costs were included on that copy for a Chamber Summons and Warrant of Execution (costs). The sum of $2,010.40 was shown as having been paid into Court. The amount remaining due as disclosed in this Certified Copy of Judgment was $26,889.19.
26 On 8 September 2004, the appellant filed a Notice of Appeal in the Full Court of the Supreme Court of Western Australia, seeking to set aside the decision of a Master of the Supreme Court of Western Australia, refusing to grant the appellant an order nisi for a writ of certiorari to quash the order entered by the Magistrate in the Local Court of Western Australia. I have been provided with a copy of that Notice of Appeal. The grounds of appeal assert that the Master erred in not making an order nisi for the issue of a writ of certiorari to quash Boothman SM’s order on the ground of that Magistrate’s bias.
27 On the same day, and before judgment had been delivered on the first application, the respondent issued a third bankruptcy notice (number 247 of 2004) (the third notice) in the following form:
‘This Bankruptcy Notice is prescribed, under subs. 41(2) of the Bankruptcy Act 1966 (“the Act”), by r 4.02 of the Bankruptcy Regulations.
To: HERCOLE PIETRO GENOVESE
(“the debtor”)
of: 32 Salisbury Street
BAYSWTER WA 6053
This Bankruptcy Notice is an important document. You should get legal advise if you are unsure of what to do after you have read it.
1. BGC CONSTRUCTION PTY LTD [sic]
ACN 008 783 248 (formerly known as
HOMESTYLE PTY LTD ACN 008
783 248)
(“the creditor”)
of: Level 6 18 Mount Street
PERTH WA 6000
Claims you owe the creditor a debt of $26,412.29, as shown in the Schedule.
…
Schedule
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Column 1 |
Column 2 |
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1. Amount of judgments or orders |
$28,422.69 |
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Plus 2. Legal costs if ordered to be paid and a specific amount was not included in the judgments or orders (see Note 1, below) |
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Plus 3. If claimed in this Bankruptcy Notice, interest accrued since the date of judgments or orders (see Note 2, below) |
NIL |
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4. Subtotal |
$28,422.69 |
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Less 5. Payments made and/or credits allowed since date of judgment or orders |
$2,010.40 |
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6. Total debt owing |
$26,412.29 |
28 The notice specified the same debt as owing on the second notice. There are two differences between the two notices. First, the creditor’s address in the second notice was given as Level 6, 18 Mount Street, Perth WA 6000, whereas the creditor’s address in the first notice was given as 4/22 Mount Street, Perth WA 6000. More significantly, the creditor is identified in the second notice as BGC Construction Pty Ltd ACN 008 783 248 (formerly known as Homestyle Pty Ltd ACN 008 783 248), whereas the creditor in the second notice was given simply as Homestyle Pty Ltd.
29 It is not, in my opinion, without significance that the creditor is misdescribed in that third notice as ‘BGC Construction Pty Ltd’, rather than ‘BGC Constructions Pty Ltd’ which is its correct name.
30 On 10 September 2004, the respondent’s solicitors wrote to the appellant enclosing the third notice:
‘Enclosed is a bankruptcy notice, 247 of 2004, in respect of judgment and costs obtained in Local Court Plaint 18423 of 2001. Our client BGC Construction Pty Ltd (formerly known as Homestyle Pty Ltd) does not intend to proceed with bankruptcy notice 91 of 2004, the validity of which is currently being considered by the Federal Magistrates Court. Our client elects to proceed with the enclosed bankruptcy 247 of 2004.’
31 The appellant wrote to the respondent’s solicitors on 10 September 2004, attaching a copy of his Notice of Appeal to the Full Court. It would seem then that at the time the respondent issued the third notice, it had not been informed of the appellant’s intention to appeal.
32 The appellant was served with the third notice on 13 September 2004.
33 On 15 September 2004, the appellant wrote to the respondent’s solicitors asserting that, because judgment was still pending on the second notice, the issue of a third notice was oppressive and an abuse of process. The appellant claimed that the respondent ought to have obtained leave of the Court before issuing a further bankruptcy notice. He wrote:
‘Dear Sir
BANKRUPTCY NOTICE 247 OF 2004
I refer to your recent letter and enclosed bankruptcy notice. It is an abuse of process and oppressive for you to have taken the course of action you did. I find it is delivered in bad faith and embarrassing. The timing of your decision to elect not to proceed with bankruptcy notice 91 appears frustrated and belated for the following reasons;
1. I made application to appeal against bankruptcy notice 91 within 21 days of service on various grounds.
2. the Registrar extended time for compliance due to my application.
3. you gave notice that you objected and sought orders for and granted adjournment to cross appeal [respond].
4. orders were made for submissions to be filed by both parties.
5. you filed 2 extra submissions to support your case than were called for.
6. directions were made by registrar Stanley the matter go to a final hearing before Federal Magistrate McInnis on the 28 July 2004.
7. the hearing concluded and orders made for each party to file a further 2 page submission each on the question of issue of the ACN number.
8. Both parties subsequently filed the final submissions.
9. the matter has now concluded and awaits the reserved decision of the Court yet to be handed down.
Quite clearly it is an abuse of process for your client to elect to not proceed with a bankruptcy notice after it has been concluded by announcing that you have issued another no. 247 of 2004 without fir obtaining leave of the Court.
In any event you cannot issue a new bankruptcy notice unless the former notice 91 had not been proceeded with.
The assertion that you claim your client changed its name from Homestyle pty ltd to BGC Constructions pty ltd is not new one and has been pleaded by you in your previous submission in WZ 57 and his Worship is aware of it.’
34 On 22 September 2004, the respondent’s solicitors wrote to the appellant in response to that letter:
‘We confirm that on 13 September 2004 bankruptcy notice 247 of 2004 was served on you along with our covering letter of 10 September 2004 which clearly stated that BGC Construction Pty Ltd did not intend to proceed with bankruptcy notice 91 of 2004 rather, our client elected to proceed with bankruptcy notice 247 of 2004. The fact that the validity of bankruptcy notice 91 of 2004 is being considered by the Court does not affect our client’s ability to elect to proceed with a further notice.
A second bankruptcy notice may be issued in respect of a judgment debt, where a prior notice in respect of the same debt has been issued and not proceeded with. See: Abignano v Wenkart (unreported) Federal Court, Ryan, Heerey, Tamberlin JJ, 13 November 1998.’
35 Notwithstanding that the respondent advised the appellant that it did not intend to proceed with bankruptcy notice 91 of 2004 it did not advise the Court. Mr Buchan, who appeared for the respondent on this appeal, said that his client had no obligation to advise the Court that it was not proceeding with the second notice. That is plainly wrong. The Court should have been advised, even if only as a matter of courtesy, that the bankruptcy notice was not being pursued. The Court would then not have given judgment and would not have ordered the appellant to pay the respondent’s costs.
36 But, more than that, the respondent had an obligation to allow the second bankruptcy notice to be set aside so that the appellant could know that the bankruptcy notice, which he was obliged to satisfy, was the third notice.
37 On 27 September 2004, the appellant wrote to the Registrar of the Federal Magistrates Court:
‘I write to inform you that as you know the above matter was heard 2 months ago with the decision to be reserved. [copy letter dated 30 June 2004 enclosed] The Bankruptcy notice in this matter was No. 91
On the 13 September 2004 I was served a new bankruptcy Notice No. 247 in the same matter, accompanied by letter dated 10 September 2004 from the creditors solicitor. [copy letter enclosed]
On the 15 September 2004 I wrote to Hotchkin Hanly to the effect that it is an abuse of process to issue another notice on the same issues when the former has been concluded and fully ventilated. [copy letter dated 15 September enclosed]
Mr Buchan contends that his client now elects not to proceed with bankruptcy notice 91 of 2004 but with notice 247 of 2004.
Bankruptcy notice 91 was issued on 21 April 2004.
“ditto” 8 Sept. 2004.
Nearly 5 months have elapsed between the issues of notice 91 and 247 and I contend that it is an abuse of process to assert that notice 91 has not been proceeded with at such a late stage when in reality it has run its course.
I would be pleased if you could give directions on procedure with respect to the issue of whether or not I need to comply with notice 247 given the information supplied hereto. My understanding is also that time to comply was extended to me and is still current because of my submission in WZ 57 on the ground of cross demand Section 41(7)
I have made enquiries to ITSA in respect to whether I need to comply with notice 247 and they have referred my enquiry to their legal department in the Eastern States for a ruling because they do not know at this stage.’
38 Because of later events, I assume this letter did not come to the attention of the Federal Magistrate.
39 On the same day the Registrar of the Federal Magistrates Court replied advising the appellant to obtain independent legal advice having regard to the time constraints in the bankruptcy notice.
40 On 30 September 2004, the appellant wrote again to the respondent’s solicitors, advising them that he intended to dispute the validity of the third notice. He wrote:
‘BANKRUPTCY NOTICE 247 OF 2004
I write to inform you that in accordance with the Bankruptcy Act 1966 Section 41 sub-section (5) I dispute the validity of the notice on the ground of the misstatement.
The amount claimed exceeds that allegedly due. There is inter alia an amount claimed that did not form part of and is outside the terms of the consent judgment. The computer generated CCJ dated 25 August 2004 is not accurate nor does it reflect the terms of the judgment or accord with the CCJ dated 26 February 2004. There was a praecipe for warrant of execution lodged by you on 12 March 2004 is for a greater amount.’
Second Proceedings in the Federal Magistrates Court – Bankruptcy Notice 247 of 2004
41 On 1 October 2004 the parties were advised by McInnis FM’s associate that judgment would be handed down on 5 October 2004.
42 On that day, the respondent’s solicitor arranged for a colleague within the firm to attend for the handing down of judgment. The respondent’s solicitor was unavailable.
43 On the same day, the appellant brought proceedings to set aside the third bankruptcy notice.
44 The application sought the setting aside of the bankruptcy notice on the following grounds:
‘1. The bankruptcy notice 247/04 is an abuse of process and be struck out.
2. The bankruptcy notice does not follow the terms of the judgment and be struck out.
3. The bankruptcy notice is invalid Section 41 sub-law (5) and be set aside.’
45 The grounds take up the matters raised by the appellant in his letters of 15 September and 30 September 2004 to the respondent.
46 The respondent had informed the appellant, prior to 1 October 2004, that it did not intend to proceed on the second bankruptcy notice and that it elected to proceed on the third notice. It was aware that the appellant had brought proceedings to set aside that third bankruptcy notice and that one of the grounds of the appellant’s challenge was that the third bankruptcy notice was an abuse of process.
47 Nothing could be plainer, in my opinion, than that the respondent was under an obligation to bring to the attention of the Court, prior to the Court delivering judgment on the appellant’s challenge to the second bankruptcy notice, that the respondent did not intend to proceed upon that notice; that a further notice had issued; and that that third notice was subject to challenge on the grounds stated in the proceedings issued on 1 October 2004.
48 If the respondent had brought those matters to the attention of the Court, the Court, in my opinion, would not have ruled upon the appellant’s challenge to the second notice but would have set aside the second notice on the ground that the respondent did not intend to proceed with it and had elected to proceed on the third notice.
49 In those circumstances, the respondent, in my opinion, would not have been entitled to costs against the appellant in relation to the appellant’s application to set aside the second bankruptcy notice because the notice was to be set aside on the motion of the respondent.
50 Indeed, the respondent may have had to meet whatever expenses the appellant had been put to in relation to the proceedings to set aside the second notice.
51 The respondent, however, took no steps whatsoever to notify the Court of those matters.
52 Judgment on the first application (WZ57 of 2004) was not handed down until 5 October 2004, which was also the date upon which the second application was listed for hearing before McInnis FM.
53 The Magistrate made the following orders in that first application:
1. The application to set aside the bankruptcy notice be dismissed.
2. The applicant shall pay the respondent’s costs to be taxed in default of agreement pursuant to O 62 of the Federal Court Rules.
54 The appellant contends that during the hearing he advised the Federal Magistrate and the solicitor attending at the hearing that the respondent had withdrawn the notice the subject of decision which was about to be given and issued a new bankruptcy notice.
55 He said that the Federal Magistrate inquired of the solicitor present and she told him that she knew nothing about it.
56 In an affidavit sworn by that solicitor, she said that at the time she attended the hearing she had a very limited knowledge of the file and the matter. She said that the appellant did raise the matter of another application after the Federal Magistrate had given his decision. She agrees that she told the Federal Magistrate that she knew nothing about any further application and that, to her knowledge, the respondent had not been served with any application.
57 McInnis FM adjourned the hearing of the second application to 9 November 2004.
58 The appellant was given leave to file and serve an amended application, which he did on 12 October 2004. The amended application sought the following further relief in respect of the third bankruptcy notice:
‘AND the applicant claims by way of interlocutory relief:
1. That the orders made 5 October 2004 in the matter of WZ 57 by FM McInnis be amended.
2. That orders be made the respondent bears all the costs for electing to discontinue bankruptcy notice 91 and application WZ 57 [F.M.C.R] Rule 13.02(1)’
59 The appellant’s amended application claiming interlocutory relief is misconceived.
60 In my opinion, the appellant should have appealed from the decision of McInnis FM in which he dismissed the appellant’s application to set aside the second notice and ordered the appellant to pay the respondent’s costs.
61 In any event, the amended application was supported by two affidavits sworn by the appellant.
62 In his affidavit of 1 October 2004, which, of course, was sworn before McInnis FM made his orders in relation to the second notice, the appellant deposed:
‘2. This bankruptcy notice was served on me on the 13 September 2004.
The Bankruptcy Notice is an Abuse of process
3. On the 13 September 2004 I was served with a bankruptcy notice and a cover letter from the respondent informing me that his client had ceased to proceed with b/n 91 of 2004 but elects to proceed with b/n 247 of 2004…
4. On the 15 September I wrote to the respondents solicitor objecting, and informing him that it was oppressive and in bad faith to issue a new notice without lodging a notice of discontinuance or obtaining leave from the Court to do so…
5. I made enquiries to the Court as to whether a notice of discontinuance had been filed by the respondent. I was informed by the Registry that it wasn’t. I was later informed that the file was no longer in Perth, that it was with Magistrate McInnis in Melbourne.
6. I thereafter wrote a letter to the Court asking for directions in respect to compliance with this notice given the uncertainty as described in the preceding paragraph. The respondent may have indeed filed a notice of discontinuance, unknown to me because the file was in Melbourne…
The Bankruptcy Notice does not follow the terms of the judgment
7. The bankruptcy notice must follow the terms of the judgment. The applicant contends that the copy of the judgment, orders, and other proceedings attached to this notice is not a copy of a final judgment or order within the meaning of section 40 (1) (g) of the Bankruptcy Act 1966…
8. The applicant affirms that in the Local Court action he represented himself and Mr Buchan represented his client who claimed at all material times that he was known as Homestyle pty ltd. I was there on the 17 October 2003 when the consent judgment was entered. BGC Constructions pty ltd was not a party to the judgment that was merged. I contend that the copy of the CCJ submitted by the respondent in this application is not a true copy of the relevant judgment, but a document purporting to contain particulars of the judgment which are not clear.
9. The applicant has instituted proceedings for an appeal to set aside and quash the judgment in respect of which the bankruptcy notice was issued.
…
10. Bankruptcy notice invalid Section 41 sub law (5)
The bankruptcy notice does not accord with the terms of the judgment and the amounts claimed are erroneous. There is an interlocutory order that is not a final order that did not form part of the compromise of the consent judgment…
11. Cross demand
The applicant has full details of the cross demand which have been submitted in application WZ 57 and refers to his interlocutory order in this application for that file to be transferred onto the record of this application. The application WZ 57 is still under consideration by Federal Magistrate McInnis.
63 The last paragraphs of the appellant’s affidavit must be a reference to the proceedings before McInnis FM which were decided on 5 October 2004.
64 In that affidavit the appellant appears to have taken three issues with the validity of the third notice.
65 First, he claimed that it was an abuse of the Court’s processes because it issued while the first notice was still on foot and under consideration by McInnis FM. No election was made by the respondent until 13 September 2004 and no discontinuance was ever entered.
66 Secondly, the appellant claimed that the second notice was not fairly based on the Certified Copy of Judgment of the Local Court and that the Certified Copy of Judgment was not, in any event, an accurate record of the judgment entered on 17 October 2003.
67 Thirdly, the appellant argued that the creditor issuing the bankruptcy notice was not the entity in whose favour the judgment in the Local Court was awarded.
68 His second affidavit was sworn on 11 October 2004. In that affidavit the appellant has descended into argument. He has reiterated his claim that the second notice was an abuse of process. He argued that the decision of the Full Court of the Federal Court in Abignano v Wenkart supported this proposition. He further argued that the decision of the English Court of Appeal in Re a Debtor; Ex parte the Debtor v National Westminster Bank Plc [1983] 3 All ER 545 was authority for the proposition that it was improper to issue two bankruptcy notices with respect to the same debt without first electing not to prosecute the first issued notice.
69 He reasserted his argument that the second notice did not follow the terms of the judgment and ‘…relies on the merger of the first judgment first recovered of the right to the remedy thereby given’, citing Port of Melbourne Authority v Anshun Pty Ltd (1981) 147 CLR 589. This argument seemed to be a subset of his third argument identified above.
70 On 19 October 2004 the respondent’s solicitors wrote to the appellant in the following terms:
‘We refer to your application to set aside the bankruptcy notice which was heard by McInnis FM on 28 July 2004.
Federal Magistrate McInnis delivered his judgment and published his reasons on 5 October 2004. We confirm that your application was dismissed and you were ordered to pay the respondent’s costs of the application.
Our client has incurred costs of $6,160.00 in relation [sic] this application, however it is prepared to accept $5,500.00 to avoid the need to submit the questions of costs to taxation.
Please make payment of the sum of $5,500.00 in settlement of our client’s costs within 7 days. If we do not hear from you within 7 days of the date of this letter we will assume that you are not prepared to agree costs and will file our client’s Bill of Costs with the Federal Magistrates Court for taxation. The taxation will incur our client additional costs which it will seek to cover [sic] from you in the event that costs cannot be agreed.’
71 The appellant’s evidence was that he responded to that letter on 20 October 2004 in the following terms:
‘I refer to your letter dated 10 October 2004 asking for your clients costs.
I am not prepared to pay anything because you told me your client abandoned the above matter and did not wish to proceed with it.
On the 5 October 2004 I told FM McInnis you withdrew in the above matter and issued me a new bankruptcy notice. He said he didn’t know anything about it at all. He asked your Ms Gogoulis for an explanation and she told him she new [sic] nothing either. It would appear you were the only person who knew, and you weren’t telling anybody else.
I advise that by letter dated 10 September 2004 prior to judgment, you wrote to me and asserted that your client did not wish to proceed in the above matter, had changed its name and elected to proceed in a new matter under that name.
By further letter to me dated 22 October 2004 you reiterated that your client clearly did not wish to proceed in the above matter but wished to proceed in its new name BGC Constructions pty ltd under a new bankruptcy notice which was served on me 13 September 2004.
Your client has exercised his choice of not proceeding in the former matter B/N 91 WZ 57 prior to its determination, and proceeded with a new matter B/N 247 of 2004. He is bound by election estoppel and thus barred from any of the fruits of the judgment of that action.’
72 The letter serves to confirm that McInnis FM was unaware of the contents of the previous letter written by the appellant.
73 If what the letter says is right, it would seem that the respondent’s solicitor was unaware of the election which had been made.
74 The appellant’s reference to the letter of 22 October 2004 is a mistake. Clearly enough, he was referring there to the respondent’s solicitor’s letter of 22 September 2004.
75 At some stage, on 5 October 2004, McInnis FM was aware that the further bankruptcy notice had issued but he would not have been aware, unless he had received the appellant’s letter of 27 September, that the respondent had elected to proceed on the third notice and not to proceed on the second.
76 On 26 October 2004 the respondent filed its Bill of Costs in the matter WZ57 of 2004 in relation to the second notice for taxation.
77 The second application was heard by McInnis FM on 9 November 2004 and was dismissed. The Federal Magistrate delivered ex tempore reasons.
78 McInnis FM identified the claims made by the appellant and addressed his argument that the issue of the second notice was an abuse of process. He said:
‘6. In one sense the arguments raised in the amended application to set aside filed 12 October 2004 have a superficial attractiveness in the sense that what the applicant claims is that the second notice is an abuse of process. He otherwise argues that it doesn’t follow the terms of the judgment and should be struck out. It is clear to me that on a proper analysis of the two bankruptcy notices that they are in fact almost identical, save and except that what appears to have occurred is that the certified judgment now relied upon has been corrected or regularised so that the name of the plaintiff relied upon in the certified copy of the judgment in support of the second bankruptcy notice is now the changed name, that is, “BGC Constructions Pty Ltd”.
7. Likewise the second notice itself reflects that change of name and refers to the creditor as “BGC Constructions Pty Ltd” ACN 008 783 248, formerly known as “Homestyle Pty Ltd” ACN 008 783 248. What is perfectly clear to me on a proper reading of the documentation is that there has simply been a change of name. It is important to understand a change of name of creditor is not the same as an entirely different entity with an entirely different ACN number.’
79 Although McInnis FM was somewhat critical of the respondent’s conduct in issuing the third notice without informing the Court of its election not to proceed with the second notice, he was satisfied that the procedure was adopted to address the appellant’s argument that the second notice was bad because the creditor was described by its former name of Homestyle Pty Ltd. He said:
’12. In this case I accept that the second notice has been issued in an attempt to regularise the issues which were then of concern to the creditor notwithstanding that this court had reserved its judgment. It is not a practice to be encouraged and whilst I am not prepared to find it is an abuse of process it seems to me that where a court has reserved its decision in a pending application seeking to set aside one bankruptcy notice it is not desirable for a creditor to then issue, without advice to the court, a second bankruptcy notice and by correspondence indicate that it elects to rely upon the second bankruptcy notice and to no longer rely upon the first bankruptcy notice.
13. Whilst that may not be an abuse of process in one sense, given that the application which was the subject of a reserved decision was an application by the debtor to set aside the first bankruptcy notice it nevertheless in my view is desirable that creditors who make an election of that kind permissible by law should at the very least advise the court accordingly and perhaps the matter could then have been resolved without the need for a formal decision being delivered.
14. Nevertheless, the chronology of events that has occurred does not of itself preclude the creditor from issuing the second bankruptcy notice issued out of an abundance of caution and perhaps what might be described as a ‘fallback position’ should the first decision of the court be in favour of the applicant debtor to set aside the first notice.
15. However, the correspondence indicating that an election has been made goes beyond creating a fallback position but rather indicates that a second bankruptcy notice having been issued the creditor then elected to rely upon that notice and not the first notice which was the subject of the reserved decision. As I have made clear I am not prepared to find that that is an abuse of process or that other steps necessarily as a matter of law should have been taken by the creditor in relation to that first notice and the proceedings then the subject of a reserved decision.
16. Nevertheless it is my view undesirable for the creditor to conduct itself in that manner. This is a particularly difficult process for unrepresented parties and whilst I have made a decision unfavourable to the applicant debtor it is clear to me that there is at least a potential for a degree of confusion in his mind as to what may or may not be permissible by a creditor under the Bankruptcy Act in relation to issuing more than one bankruptcy notice.
17. I should add that in fairness to the respondent creditor once having issued a second notice it would not be proper for it to then leave in abeyance the issue of which of those bankruptcy notices it elected to proceed with in order to ultimately take further action by way of a creditor’s petition if that was thought appropriate and if necessary, having regard to the period of time allowed for in the second notice. It would in fact be an abuse of process to have two bankruptcy notices current and not elect to pursue one or other of those bankruptcy notices.
18. Hence as I have indicated I am not prepared to find that the process is an abuse of process and indeed the opposite would be true had an election not been made. My only concern is that where there is a pending application subject to a reserved decision it would be desirable for creditors to advise the court accordingly. In any event that did not occur. The current amended application in my view does not therefore have any basis on which this court can act in terms of setting aside the second notice as I have found there is no abuse of process.’
80 There is no doubt that the respondent informed the appellant that it did not intend to proceed on the second notice and that it elected to proceed on the third notice.
81 The real question in this case is whether its subsequent conduct in failing to advise the Court and obtaining an order for costs in relation to that second notice was consistent with the election which it said it had made.
82 The respondent also sought the costs of the appellant’s application to set aside the third notice.
83 The Federal Magistrate said:
’21. …It is not appropriate that I should revoke an earlier order for costs in my view. However, the existence of those proceedings and the fact that they were pending at the time when the second notice was issued and an election made in relation to that second notice in my view is a relevant matter to take into account.
22. In my view there is some force in the submission made by the applicant debtor as to the undesirability of two sets of costs in all the circumstances. The issue of costs is a matter of discretion. I am mindful of the fact that they normally follow the event. In an application to set aside the second notice which has been unsuccessful it would normally be the case that those costs would follow the event with the applicant being required to pay the respondent’s costs of and incidental to the application to set aside.
23. However, having regard to the undesirability of the lack of notice to the court of the issuing of a second notice and an election to rely upon that notice it seems to me that as a matter of fairness between the parties the court should make no order as to costs…’
84 The Federal Magistrate’s reasons, in my opinion, highlight the difficulty which the respondent’s conduct caused by purporting to elect to proceed on the third notice but, at the same time, seeking orders in respect of the second notice.
85 The respondent did not file any affidavits in the proceedings before the Federal Magistrate. In those circumstances, the respondent did not further explain the reasons why the third bankruptcy notice was issued.
86 Initially, when this appeal was called on, the only information before me was contained in the two affidavits relied upon by the appellant in the Federal Magistrates Court.
87 During the hearing of this appeal I raised with Mr Buchan the status of the order for costs made in relation to the appellant’s proceedings to set aside the second notice.
88 I was advised not only that the order for costs made in relation to those proceedings not been discharged but that in fact the respondent had taxed its costs and had taken steps to recover those costs from the appellant.
89 I adjourned the hearing of the appeal so that the appellant could establish the facts necessary to prove what steps the respondent had taken subsequent to the order of McInnis FM on 5 October 2004.
90 The respondent did not object to the Court receiving a further affidavit of the appellant in which he exhibited a number of documents to which I have referred in these reasons, which establish some of the events on 5 October 2004 and the events subsequent to that date.
91 In fact, the respondent also filed and read two affidavits, one of Mr Buchan and the other of the solicitor who attended the hearing on 5 October when McInnis FM made the orders to which I have already referred.
92 Mr Buchan says in his affidavit:
‘8. The Respondent’s decision to pursue its costs on application WZ 57/2004 was based solely on the fact that a costs order had been made in the Respondent’s favour and the Respondent considered it was entitled to recover those costs. I did not consider that pursuing the costs order made in respect of WZ 57/2004, after the Respondent had elected to proceed with Bankruptcy Notice 247 of 2004 by its letter of 10 September 2004 (annexed to the affidavit of the Appellant sworn 1 October 2004 and marked HPG1) in any way affected its election to proceed with Bankruptcy Notice 247 of 2004.’
93 Mr Buchan does not depose to why his client did not advise or cause the Federal Magistrate to be advised that the respondent was not proceeding with the second notice and had elected to proceed on the third notice.
94 The appellant, of course, requested me to have regard to the further matters contained in his third affidavit filed on this appeal. He did not object to me having regard to the matters contained in the respondent’s affidavits.
95 The respondent conceded that I should have regard to the facts contained in the appellant’s affidavit leading up to the Federal Magistrate’s decision on 9 November 2004.
96 This appeal is an appeal by way of rehearing and the Court can receive further evidence: Farrington v Deputy Commissioner of Taxation [2002] FCA 1013.
97 I do not intend to accept evidence of events which occurred after the Federal Magistrate’s decision because those facts could not have impacted upon that decision.
THE APPEAL TO THIS COURT
98 On 1 December 2004, the appellant filed a notice of appeal in this Court. On 13 December 2004, an amended notice of appeal was filed. In summary, the appellant claims that McInnis FM erred in that:
· The Certified Copy of Judgment of 25 August 2004 does not accurately reflect the original judgment and therefore, the third notice does not follow the terms of the judgment.
· The issue of a third notice whilst determination of the validity of the second notice was reserved amounted to an abuse of process.
· The respondent ought not have been entitled to prosecute proceedings under whatever name it saw fit, having changed its name in July 2003.
· The costs order made in respect of the application to set aside the second notice should have been set aside because it was those proceedings that the respondent chose not to pursue.
99 A creditor is entitled to issue a second bankruptcy notice to cure a defect in a previous bankruptcy notice: Abignano & Anor v Wenkart [1998] FCA 1468; In re Fredericke and Whitworth; Ex parte Hibbard [1927] 1 Ch 253. The authority to which the appellant referred Re a Debtor; Ex parte the Debtor v National Westminster Bank Plc is not to the contrary.
100 If a creditor adopts such a course the creditor must elect as to which bankruptcy notice the creditor intends to proceed so that the debtor knows with which bankruptcy notice he or she must comply: Abignano v Wenkart.
101 In that case, the Full Court of this Court (Ryan, Heerey and Tamberlin JJ) said at 4:
‘We also consider that, where the same creditor issues two bankruptcy notices, one after the other, the creditor is required to make an election as to which bankruptcy notice it is with which the debtor is required to comply.’
102 The respondent says that it did what it was obliged to do when it advised the appellant on 10 September and 22 September that it was electing to proceed on the third bankruptcy notice.
103 I think the notice given to the appellant was unequivocal in that the respondent intended to rely upon the third bankruptcy notice and no longer proceed with the second bankruptcy notice.
104 However, the respondent’s subsequent actions were inconsistent with the claimed election. First, it did not notify the Court that it no longer wished to proceed upon the second bankruptcy notice. Secondly, it allowed the Court to make orders dismissing the appellant’s proceedings to set aside the second bankruptcy notice and ordering the appellant to pay the respondent’s costs. If the respondent had notified the Court that it no longer wished to proceed with the bankruptcy notice then, clearly, the Court would not have made orders dismissing the appellant’s proceedings to set aside the second notice, nor would the Court have awarded the respondent its costs. Thirdly, the respondent has tried to recover those costs. It seems to me that the respondent’s conduct is inconsistent with its claimed election.
105 The purpose of a bankruptcy notice is to put the debtor clearly on notice of the identity of the judgment creditor and the amount of the judgment so that the debtor can meet that judgment and avoid committing an act of bankruptcy. In other words, its purpose is to inform the debtor who and what he/she must pay to avoid an act of bankruptcy.
106 In those circumstances, the judgment creditor must avoid creating confusion in the debtor’s mind which might lead the debtor to either pay an incorrect amount or a correct amount to an incorrect party.
107 It is for that reason that the Full Court of this Court concluded that the judgment creditor must elect as to which bankruptcy notice it requires the debtor to comply.
108 In my opinion, the respondent’s conduct in this case was to create the confusion which an unequivocal election would have avoided. On the one hand, it told the appellant that it was relying upon the third notice but, on the other hand, proceeded in the Court to obtain orders in respect of the second notice including orders for costs. The order it obtained dismissing the appellant’s application to set side the second notice meant that the second notice was held to be valid at the same time as the respondent disavowed any reliance upon it.
109 The respondent argued that the abuse of process would only be complete when the order for costs was enforced.
110 I do not agree with that argument. The abuse of process was complete when the respondent allowed the Federal Magistrate to give his decision on 5 October 2004. The respondent did not intend to rely upon that notice and it was an abuse of process to allow the Court to think it was still relying on the notice and obtaining the Court’s opinion on the validity of that notice. More particularly, from the appellant’s point of view, the further abuse was obtaining an order for costs in circumstances where the appellant had been told that the respondent had no intention of relying upon the second notice.
111 During the hearing of the appeal, Mr Buchan advised me that the respondent would not seek to enforce the order for costs made by the Federal Magistrate.
112 For the reasons already given, I think that is appropriate. Indeed, I think the respondent should apply to the Federal Magistrate to have the order revoked.
113 However, I do not think that the respondent’s acknowledgement that it would not enforce the order for costs is a factor which ought to be taken into account in favour of the respondent on this appeal.
114 For the reasons already given, I think the abuse of process was complete on 5 October 2004 when the respondent acted inconsistently with its claimed election.
115 The respondent also argued that its conduct in failing to advise the Federal Magistrate that it did not intend to rely upon the second notice and obtaining the order for costs was not inconsistent with its election because it was not thereby, in obtaining those orders, pursuing or proceeding upon the second notice insofar as it was not relying upon the second notice as an act of bankruptcy.
116 In my opinion, that is not a matter upon which the respondent can rely in defence of the appellant’s claim that the respondent has abused the Court processes.
117 Indeed, when analysed, that argument only supports the appellant’s contention. If the respondent was not relying upon the second notice, as indeed it was not, why did it allow the Magistrate to pronounce upon the validity of the notice and order the appellant to pay the respondent’s costs?
118 In my opinion, that argument rather highlights the inappropriateness of the respondent’s conduct.
119 In my opinion, the respondent’s conduct does amount to an abuse of process and the appellant should be entitled to succeed on that ground.
120 The appellant also argued that the third notice is invalid because the original judgment in the Local Court was entered in favour of the respondent under its previous name. The appellant argues that he never had any dealings with the appellant under the name of BGC Constructions Pty Ltd.
121 The respondent is the same entity which obtained a judgment against the appellant, albeit under a different name. Its change of name did not in any way affect the validity of the judgment it obtained under its previous name. That argument is misconceived.
122 The appellant admitted during argument that he was aware that Homestyle Pty Ltd had changed its name to BGC Constructions Pty Ltd on 9 July 2003. Indeed, that was one of the grounds of challenge to the second notice.
123 It follows, of course, that he was aware of the change of name of the respondent prior to receiving the third notice.
124 If he had not been aware of that matter he might have been entitled to say that the notice was invalid because the judgment creditor was styled under a different name to the judgment creditor which obtained judgment on 17 October 2003. In Re Hansen; Ex parte Hansen (1985) 4 FCR 590, a bankruptcy notice incorrectly described the judgment creditor by its former name when by the date of the notice its name had been changed.
125 In that case, Beaumont J concluded that the notice was bad because it did not bring to the debtor’s attention that the judgment creditor, described in the notice, was the same judgment creditor who had obtained judgment against the judgment debtor.
126 In this case, the notice does properly describe the judgment creditor’s previous name, Homestyle Pty Ltd.
127 Again, that argument highlights the inappropriateness of the respondent’s conduct.
128 However, as I have already said, the debtor in this case was not misled by the description of the respondent in the notice because he was well aware that the respondent had changed its name on 9 July 2003 prior to receipt of the third notice.
129 As I have already observed, the respondent is incorrectly described in the third notice as ‘BGC Construction Pty Ltd’ rather than ‘BGC Constructions Pty Ltd’.
130 The appellant did not rely upon that misdescription, I think only because he did not notice it. Bankruptcy notices are to be construed strictly because of the consequences that flow from debtors’ failure to comply with a notice: In re a Judgment Debtor [1908] 2 KB 474.
131 However, if the misdescription of the respondent’s name by the use of the word ‘Construction’ rather than ‘Constructions’ had been the only matter relied upon, I would not have allowed the appeal.
132 The appellant also argued that the bankruptcy notice is for a greater amount than judgment was given. The bankruptcy notice reflects the amount shown in the certified copy of the judgment. There is nothing in that point.
133 In my opinion, the Federal Magistrate should have found that, notwithstanding the respondent’s claimed election to rely on the third notice, in fact, the respondent had, by its conduct, purported to rely on both the second and third notices and in those circumstances the issue of the third notice was an abuse of process.
134 The third notice should be set aside.
135 In my opinion, the appeal should be allowed and there be an order that the third notice is set aside.
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I certify that the preceding one hundred and thirty five (135) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Lander. |
Associate:
Dated: 11 March 2005
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Counsel for the Appellant: |
The Appellant appeared in person |
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Counsel for the Respondent: |
Mr A Buchan |
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Solicitor for the Respondent: |
Hotchkin Hanly |
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Date of Hearing: |
28 February 2005; 4 March 2005 |
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Date of Judgment: |
11 March 2005 |
