Coburn v RAMS Mortgage Corporation Ltd

REASONS FOR JUDGMENT 1 The applicant has commenced proceedings by filing an application in Court today to set aside a bankruptcy notice. The applicant seeks by way of interlocutory relief an order under s 41(6A) of the Bankruptcy Act 1966 ("the Act") extending the time for compliance with the bankruptcy notice. The affidavit filed in support of the application is that of the applicant himself, and he deposes to service of the bankruptcy notice upon him on 22 November 2000. The bankruptcy notice, which is in the usual form, requires payment or an arrangement for settlement of the debt within 21 days of service of the notice upon the debtor. 2 Counsel for the applicant presses the application to set aside the bankruptcy notice on two grounds: first, that the bankruptcy notice is defective in form; and secondly, that proceedings are on foot to set aside the judgment in respect of which the bankruptcy notice was issued. 3 As to the first of those grounds the prescribed form of bankruptcy notice set out in schedule 1 of the Bankruptcy Regulations 1996 requires the name and address of the person to whom payment can be made to be stated in paragraph 4. Importantly, the form prescribes in a note to that paragraph that the address must be within Australia. That is no mere formality because, of course, a creditor may be someone who has no place of business in Australia. Therefore, the requirement that there be an address stated in Australia may be one that cannot be accommodated by having the name of the creditor inserted in that place. The bankruptcy notice in question here specifies the name of an individual, Mr Gavin Wood, as the name of the person to whom payment can be made and specifies his as the office address of the creditor corporation. 4 Extensions of time for compliance with bankruptcy notices were once frequently dealt with administratively in the registry on an ex parte basis. However, following the decision of Dowsett J in Sockhill v Deputy Commissioner of Taxation [2000] FCA 1208, a view has been taken that except exceptional cases such matters ought not proceed ex parte but on a basis where the respondent has an opportunity to be heard. That is this case, and the respondent has been heard today in opposition to the relief sought. 5 The extension of the time for compliance, of course, may have the effect of postponing an act of bankruptcy which is available not simply to this creditor but to any other creditor. Counsel for the applicant accepts that the extension will involve an interference with the rights of creditors on a temporary basis. The test to be applied is the usual test in relation to such interlocutory relief, namely, whether there is a serious question to be tried, and whether the balance of convenience favours the granting of relief. 6 In respect of the first ground it seems there really is nothing to be said in the creditor's favour on the balance of convenience, except that the legal effect of any extension of time will be to delay the occurrence of an act of bankruptcy. Therefore the question is whether there really is a serious question to be tried. I am conscious of the fact that this has been brought on very quickly. However, my view is that there is no serious question to be tried as to whether the bankruptcy notice complies with the prescribed form or, as counsel for the applicant correctly puts it, whether it has the capacity to mislead the debtor to whom it is directed. That is, of course, an objective test and one which is not necessarily answered by reference to whether it actually misled the applicant. 7 The second ground on which the application to set aside the bankruptcy notice is pressed is, in my opinion, even more difficult to sustain from the point of view of the applicant. That is that proceedings have been instituted to set aside the judgment in respect of which the bankruptcy notice was issued. 8 The bankruptcy notice annexes a certified copy of the judgment. In form it appears to be a default judgment. The applicant says that he was not notified of those proceedings, which were brought against him and another defendant one Heather Frances Coburn. However, judgment is expressed to be simply against him as the first defendant. Evidently, there have been proceedings in the Family Court between the applicant and the second named defendant in the Supreme Court action involving a dispute about property given as security in respect of a debt now merged in the judgment debt. In any event, counsel for the applicant tells me, and I accept, that a notice of motion was filed in the Supreme Court today seeking orders that the judgment be stayed and that the order for costs in that proceeding be set aside. 9 The judgment rendered in those proceedings provided for judgment in the sum of $170,668.31 and costs in the sum of $3,645.70. The bankruptcy notice issued in respect of the combined total of those sums. Quite properly, no objection is taken to that as to the form of the bankruptcy notice. However, counsel for the applicant submits that, where in substance only part of the debt is sought to be set aside, that still meets the prescription in subsection 41(6A) and subsection 41(6C). 10 There was for many years a semantic argument about whether proceedings that would have the effect of setting aside a judgment obtained at first instance involve the setting aside of the judgment. It was ultimately resolved by reference to the examination of the orders generally made in a successful appeal where the judgment at first instance is expressed, in terms, to be set aside. So far as this case is concerned the form of the relief sought in the notice of motion does not approach the problem in that way and would still leave undisturbed a judgment debt in excess of $170, 000. 11 Counsel for the applicant says this shows the bona fides of his client and that the applicant is only dealing with that part of the judgment debt that he thinks he can in terms of the rights of the creditor. Nevertheless, it seems to me that proceedings which do not seek to set aside the whole of the judgement sum in respect of which the bankruptcy notice was issued do not meet the requirements of s 41(6C) of the Act. 12 The power of the Court to extend the time for compliance with the bankruptcy notice here is subject to s 41(6C). I am satisfied that the proceedings that are on foot have been instituted bona fide and are being prosecuted with due diligence, but I cannot be satisfied that they are proceedings to set aside the judgment in respect of which the bankruptcy notice was issued. 13 Accordingly I do not think that a case has been made out for the interlocutory relief sought. The application for interlocutory relief is refused. I certify that the preceding thirteen (13) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Whitlam.