FEDERAL COURT OF AUSTRALIA

Dekkan v Macquarie Leasing Pty Ltd [2008] FCA 1235

Bankruptcy Act 1966 (Cth) s 41(6A)

Federal Court of Australia Act 1976 (Cth) ss 35A(5), 35A(6)

Federal Court (Bankruptcy) Rules 2005 rr 1.03(2), 3.03

Federal Court Rules O 35A r 2(b)

Autodesk Inc v Dyason (No 2) (1993) 176 CLR 300 referred to

Harris v Caladine (1990) 172 CLR 84 followed

Martin v Commonwealth Bank of Australia (2001) 217 ALR 634 cited

Mazukov v University of Tasmania [2004] FCAFC 159 cited

Jageev Pty Ltd v Deane (1997) 72 FCR 398 followed

Pittalis v Sherefettin [1986] QB 868 referred to

BASSAM DEKKAN and JEANETTE DEKKAN v MACQUARIE LEASING PTY LTD

NSD 832 of 2008

PERRAM J

19 AUGUST 2008

SYDNEY

THE COURT ORDERS THAT:

1.                  The orders made by the Court on 13 August 2008 be vacated.

2.                  The orders made by Registrar Hedge on 9 July 2008 be set aside.

3.                  There be no order as to costs in relation to the applicants’ application for review.

4.                  Pursuant to s 41(6A) of the Bankruptcy Act 1966 (Cth) and rule 3.03 of the Federal Court (Bankruptcy) Rules 2005,the time for compliance by the applicants with the requirements of the bankruptcy notice be extended up to and including 17 September 2008.

5.                  The applicants file and serve an amended application and affidavits to be relied upon by them on or before 9 September 2008.

6.                  The respondent file and serve any affidavits in reply on or before 16 September 2008.

7.                  The matter be stood over before the Registrar at 9.30 am on 17 September 2008.

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

REASONS FOR JUDGMENT

1                     By an application dated 30 July 2008, the applicants apply pursuant to s 35A(6) of the Federal Court of Australia Act 1976 (Cth) (“the Act”) for a review of a decision made by Registrar Hedge on 9 July 2008.  The proceedings before the Court are proceedings by Mr Dekkan and his wife to set aside a bankruptcy notice issued to them by Macquarie Leasing Pty Ltd.  The matter was first returnable before the Court on 18 June 2008.  On that occasion, the Registrar extended the time for compliance with the bankruptcy notice to 9 July 2008 and directed the applicant to file and serve an amended application and affidavits in support by 4 July 2008.  This she did because the application appeared to disclose no proper grounds for setting aside a bankruptcy notice.

2                     When the matter came before the Court on 9 July 2008 there was no appearance by the applicants.  Registrar Hedge dismissed the application, presumably pursuant to Order 35A rule 2(b) of the Federal Court Rules and rule 1.03(2) of the Federal Court (Bankruptcy) Rules 2005.

3                     On 30 July 2008 the applicants applied for a review of the order made by Registrar Hedge.  That application came before me on 13 August 2008 in the duty list and I made orders dismissing the application for review.  Section 35A(6) of the Act provides:

The Court may, on application under subsection (5) or of its own motion, review an exercise of power by a Registrar pursuant to this section and may make such order or orders as it thinks fit with respect to the matter with respect to which the power was exercised.

4                     In Jageev Pty Ltd v Deane (1997) 72 FCR 398 at 399, Davies J considered the nature of the power to review conferred by s 35A(6):

Although many matters are sent for hearing in the first instance before a registrar, it is beyond the jurisdiction of this Court to arrange affairs so that the decision of the registrar is equivalent to a decision of a judge.  That is a constitutional problem which of course does not face State courts.  The result is that … the Court must provide a rehearing on the merits of any matter which comes before a registrar and with which one of the parties to the proceedings before the registrar is dissatisfied.

5                     The correctness of that statement, albeit in a slightly different context, has been accepted by a Full Court of this Court on at least two occasions:  see Martin v Commonwealth Bank of Australia (2005) 217 ALR 634 at 635-636 [6]-[7] per North, Mansfield and Katz JJ, and Mazukov v University of Tasmania [2004] FCAFC 159 at [22]-[24] per Kiefel, Weinberg and Stone JJ.  It seems to me that that reading is also consistent with the reasoning in Harris v Caladine (1990) 172 CLR 84 at 95 per Mason CJ and Deane J, 124-125 per Dawson J, 151 per Gaudron J and 164 per McHugh J.  The consequence is that whilst s 35A(6) appears to confer a discretionary power on the Court to order a review by use of the words “may”, in fact, the applicants are entitled, by right, to a review.    Thus, “may” in s 35A(6) means “must”.

6                     When the matter came before me on 13 August 2008 I approached the matter on the basis that the power was discretionary.  In exercising that discretionary power, I took into account the likelihood of success of the applicants’ application to set aside the bankruptcy notice.  The debt upon which the Respondent relied for the issue of the notice was a judgment debt issuing out of the Local Court.  Despite the matter having been before this Court for a number of months, the applicants had not yet taken any step to set aside that judgment debt or to propound an offsetting claim.  In that circumstance, and still without any real explanation as to how that judgment debt might be impugned, it was apparent that the applicants’ proceedings to set aside the bankruptcy notice were attended by considerable difficulty.  I declined to exercise the power to order a review. 

7                     It will be apparent that in so approaching the matter, the wrong question was asked.  The correct question was not whether the applicants should, as a matter of discretion, have a review of Registrar Hedge’s order – the correct question was what the outcome of that review should be.  The orders made by me on 13 August 2008 have not been entered.  It follows that there exists a power to recall those orders and reconsider the matter.  This is because it is apparent that in dealing with the application I “erred in a material matter in [my] approach to the case”:  see Pittalis v Sherefettin [1986] QB 868 at 880 per Fox LJ; Autodesk Inc v Dyason (No 2) (1993) 176 CLR 300 at 302 per Mason CJ.

8                     Once that is appreciated, it becomes necessary to consider what order should now be made in light of all the circumstances as they are known.  Those circumstances undoubtedly include the fact that the applicants did not appear on 9 July 2008.  However, they also include the fact that on the hearing of the review, Mr Dekkan did appear and did proffer an explanation as to his absence on the prior occasion.  It is not necessary for me to determine whether I accept that explanation because it is sufficient to note that he has now appeared.  The consequence of him being present before the Court is that the power to dismiss the proceedings under Order 35 rule 2(b) of the Federal Court Rules has not been enlivened.  It is appropriate, therefore, that the orders made by Registrar Hedge on 9 July 2008 be set aside.  It follows that my orders to the contrary should also be vacated.

9                     Although the applicants have succeeded on their review application, that application was made necessary by their failure to appear on 9 August 2008.  In those circumstances, there will be no order as to costs.

10                  That then leaves the issue of what directions are now appropriate.  Despite the fact that the applicants have now have had some months to pursue an application to set aside the judgment of the Local Court without taking any steps to do so, I nevertheless propose to grant a further indulgence to them in that regard.  However, the time is rapidly being approached where any further non-compliance may have serious consequences.

11                  The Court orders that:

1.                  The orders made by the Court on 13 August 2008 be vacated.

2.                  The orders made by Registrar Hedge on 9 July 2008 be set aside.

3.                  There be no order as to costs in relation to the applicants’ application for review.

4.                  Pursuant to s 41(6A) of the Bankruptcy Act 1966 (Cth) and rule 3.03 of the Federal Court (Bankruptcy) Rules 2005,the time for compliance by the applicants with the requirements of the bankruptcy notice be extended up to and including 17 September 2008.

5.                  The applicants file and serve an amended application and affidavits to be relied upon by them on or before 9 September 2008.

6.                  The respondent file and serve any affidavits in reply on or before 16 September 2008.

7.                  The matter be stood over before the Registrar at 9.30 am on 17 September 2008.

Associate:

Dated:         22 August 2008