Equuscorp Pty Ltd v Chang [1998] FCA 941

IN THE FEDERAL COURT OF AUSTRALIA

VICTORIA DISTRICT REGISTRY VG 7047 of 1998

BETWEEN: EQUUSCORP PTY LTD

Applicant

AND: MENG CHANG

Respondent

JUDGES: HEEREY J

DATE OF ORDER: 30 JULY 1998

WHERE MADE: MELBOURNE

THE COURT ORDERS THAT: 1. The hearing of the petition be adjourned to 7 December 1998. 2. The respondent's notices of motion dated 22 May 1998 and 6 June 1998 be adjourned to 7 December 1998. Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

IN THE FEDERAL COURT OF AUSTRALIA

VICTORIA DISTRICT REGISTRY VG 7047 of 1998

BETWEEN: EQUUSCORP PTY LTD

Applicant

AND: MENG CHANG

Respondent

JUDGES: HEEREY J

DATE: 30 july 1998

PLACE: MELBOURNE

REASONS FOR JUDGMENT I will make an order adjourning the hearing of the petition until 7 December 1998 and I will adjourn the respondent's notices of motion dated 22 May 1998 and 6 June 1998 to the same date. I shall explain briefly the reasons for those orders. On 14 January 1993 the applicant issued a complaint out of the Magistrates' Court at Melbourne against the respondent, claiming money due under a loan agreement made in 1990. On 15 April 1993 the Magistrates' Court made a default order against the respondent in the sum of $10,633.33. On 29 August 1997 a bankruptcy notice was issued based on the Magistrates' Court order. That was subsequently served and on 8 December 1997 the act of bankruptcy occurred in that the respondent failed to comply with the notice which had been served on 17 November. The applicant issued a creditor's petition on 23 January 1998. The hearing of the petition was adjourned on a number of occasions and on 29 May 1998 on the application of the respondent the Magistrates' Court set aside the order of 15 April 1993 on the ground that the complaint had not been served on the respondent. The respondent was given 21 days to file a defence, which he has now done. The applicant now claims that the respondent is indebted to the applicant in the sum of $25,056.74 pursuant to the loan agreement, including interest. Mr Chang argued that the notice of time for compliance with the bankruptcy notice should be extended until 30 May 1998. He then argued that if that were done there would be no act of bankruptcy because the original order of the Magistrates' Court had been set aside and thus is to be treated as never having existed. It would follow, Mr Chang argued, that the petition ought to be dismissed. However, r 2.01 of the Magistrates' Court Civil Procedure Rules 1989 (Vic) has the effect that a failure to comply with the rules is an irregularity and does not render a proceeding or a step taken or any document ordered therein a nullity. Moreover, s 41(6A) of the Bankruptcy Act 1966 (Cth)has the effect that the time for compliance with the bankruptcy notice can only be extended where proceedings to set aside the order on which the bankruptcy notice was issued were made prior to the time fixed for compliance with the requirements of the notice: see Streimer v Tamas (1981) 37 ALR 211. Spender J held in Re Zagoridis (1990) 27 FCR 108 that even though a judgment of a court, in that case the District Court of Queensland, could be set aside because of failure to serve the defendant, a warrant of issue could have been issued in respect of the judgment and therefore the judgment was within the meaning of s 40(1)(g) of the Bankruptcy Act a final judgment, the execution of which has not been stayed. Thus non-compliance with a bankruptcy notice founded on such a judgment constituted an act of bankruptcy. The practical result is that, as I am informed, the fresh hearing of the applicant's case against Mr Chang will be heard in the Magistrates' Court in November. If the applicant succeeds then it is likely that - without of course me prejudging the matter as I may not be hearing it - it will be able to proceed to obtain a sequestration order. If, however, Mr Chang is successful in the Magistrates' Court rehearing then for practical purposes it seems unlikely that the applicant will be able to establish that there is a debt in existence. Again I do not express any final view on this but those considerations strengthen the conclusion that it is desirable to adjourn the petition until the matter can be determined by the Magistrates' Court. So I will make the orders I have already indicated.