FEDERAL COURT OF AUSTRALIA Hubner v Australia & New Zealand Banking Group Ltd [1999] FCA 385 BANKRUPTCY – applications to set aside bankruptcy notices – validity of a bankruptcy notice issued to joint debtors – effect of service of notice on joint debtors on different dates – expiry of time for applications to set aside bankruptcy notices – non-compliance with requirements of O 77 r 13 of the Federal Court Rules – whether Court should exercise discretion under s 51 of the Bankruptcy Act 1966 (Cth) to allow applications – consideration of whether proper basis for setting aside notice WORDS & PHRASES – "joint debtors" Bankruptcy Act 1966 (Cth), ss 30(3), 33(1)(c), 40(1)(g), 41(7), 46(1), 51 Acts Interpretation Act 1901 (Cth) s 23 Federal Court Rules O 77 r 13 Kleinwort Benson Australia Ltd v Crowl (1988) 165 CLR 71, followed Re Myers; Ex parte Mulholland (1932) 5 ABC 128, distinguished Re Ward & Anor; Ex parte R W Brown & Co Pty Ltd (1991) 28 FCR 329, followed Emerson & Anor v Wreckair Pty Ltd (1991) 33 FCR 581, followed McLeod & Anor v The Beneficial Finance Corporation Ltd (Branson J, 5 October 1995, unreported), followed Thompson v Davenport (1829) 9 B & C 78, cited in Bowstead & Reynolds on Agency, 16th ed, 1996 at 8-121, followed COLIN RICHARD HUBNER v THE AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED QG 143 OF 1998 AND YVONNE HUBNER v THE AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED Q 8 OF 1999 COOPER, KIEFEL AND TAMBERLIN JJ BRISBANE 14 APRIL 1999 IN THE FEDERAL COURT OF AUSTRALIA QUEENSLAND DISTRICT REGISTRY QG 143 OF 1998 ON APPEAL FROM A SINGLE JUDGE OF THE FEDERAL COURT OF AUSTRALIA BETWEEN: COLIN RICHARD HUBNER Appellant AND: THE AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED Respondent Q 8 OF 1999 BETWEEN: YVONNE HUBNER Appellant AND: THE AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED Respondent JUDGES: COOPER, KIEFEL AND TAMBERLIN JJ DATE OF ORDER: 14 APRIL 1999 WHERE MADE: BRISBANE THE COURT ORDERS THAT: The appeals in respect of each of the applications made by the appellants are dismissed with costs. Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules. IN THE FEDERAL COURT OF AUSTRALIA QUEENSLAND DISTRICT REGISTRY QG 143 OF 1998 ON APPEAL FROM A SINGLE JUDGE OF THE FEDERAL COURT OF AUSTRALIA BETWEEN: COLIN RICHARD HUBNER Appellant AND: THE AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED Respondent Q 8 OF 1999 BETWEEN: YVONNE HUBNER Appellant AND: THE AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED Respondent JUDGES: COOPER, KIEFEL AND TAMBERLIN JJ DATE: 14 APRIL 1999 PLACE: BRISBANE REASONS FOR JUDGMENT 1 This is an appeal from a judgment of Dowsett J delivered on 7 December 1998. 2 The hearing took place over two days on 9 and 10 November 1998. At the conclusion of the hearing on 10 November his Honour dismissed Mr Hubner's application. On 11 November 1998 a notice of appeal was filed by Mr Hubner against the decision of his Honour. On 7 December 1998 his Honour also dismissed Mrs Hubner's applications and published his reasons with respect to both applications. Mrs Hubner filed a notice of appeal on 14 January 1999. 3 Before his Honour at the November hearing there were six applications to set aside bankruptcy notices. In each of these the applicant had moved for discovery, and in each case the respondent bank gave notice of intention to move to strike out the application on the ground of irregularity in the process adopted by each of the applicants. 4 The relevant debts which are the subject of the bankruptcy notices arose in connection with Supreme Court proceedings in Queensland between Australia and New Zealand Banking Group Ltd ("the Bank") as plaintiff and the appellants as defendants. The writ sought recovery of possession of land in Cairns by the Bank as mortgagee on the basis of alleged default by Mr and Mrs Hubner. The mortgage had been granted by Mr and Mrs Hubner to support guarantees given by them to secure advances made by the Bank to companies controlled by the Hubners or by Mr Hubner. 5 Mr and Mrs Hubner appeared in those proceedings but they did not file a defence within time whereupon the Bank entered judgment by default in the Registry. Mr and Mrs Hubner applied to set aside the judgment by default on the basis they had a meritorious defence. This application was dismissed by Byrne J of the Queensland Supreme Court on 15 September 1997 and they were ordered to pay the costs of the application. These costs are the subject of a bankruptcy notice against Mr and Mrs Hubner which they sought to set aside by two of the six applications. The amount of the debt claimed is $8,907. 6 On 14 October 1998 Mr Hubner commenced proceedings against the Bank in the Federal Court seeking restitution and damages together with loss of profits. On 16 October 1997 Mr and Mrs Hubner applied to the Supreme Court for a stay of execution of the writ of possession pending determination of proceedings in the Federal Court. This was dismissed with costs and a bankruptcy notice concerning this order, taxed in the amount of $7,956.15, is the subject of two more of the applications to set aside. 7 On 27 November 1997, a further application was made by Mr and Mrs Hubner to restrain the Bank from dealing with the land pending the hearing of a proposed application to the High Court. On 10 December 1997, this application was also dismissed with costs and bankruptcy notices concerning those costs taxed at $5,123.76 is the subject of two further applications to set aside. Mr and Mrs Hubner also filed a further application in the Supreme Court to set aside the default judgment on the basis that it had been entered irregularly, but that was dismissed with costs and they have appealed. That appeal had not been determined at the time of the hearing before Dowsett J. 8 Joint bankruptcy notices were issued against both Mr and Mrs Hubner on 4 June 1998 in connection with each of the three costs orders against which there has been no appeal. They were served on Mr Hubner on 5 June 1998 and on Mrs Hubner on 11 June 1998. The applications to set them aside were filed on 30 June 1998. It is contended by Mr and Mrs Hubner that the notices are vexatious, malicious and an abuse of process. On 15 July 1998, the Bank gave notice of intention to oppose the Hubners' applications. Mr and Mrs Hubner sought discovery in connection with each of the applications. All these matters were listed before Dowsett J for hearing in November 1998. 9 In relation to the applications to set aside the bankruptcy notices, his Honour considered that there would be no point in setting aside the notices after expiry of the time for compliance, in the absence of a power to extend time. He pointed out that once time has expired, the bankruptcy notice is spent because the act of bankruptcy has been committed and is available for use by all creditors for the purpose of presenting a petition. His Honour held Mr Hubner's applications to be incompetent because they were made outside the prescribed time. His Honour noted that no attempt had been made to set aside the relevant costs orders made which provided the basis for the bankruptcy notices, although Mr and Mrs Hubner had, at the time of the hearing before his Honour, appealed against the refusal to set aside the substantive judgment on the ground of irregularity. In accordance with Full Court authority, his Honour pointed out in his reasons that the orders for costs are orders of a superior court of record and as such they operate unless there is an appeal. Because there had been no appeal against the costs orders, his Honour found that they could not be set aside. 10 His Honour also held that the proceedings were defective in that the applications to set aside the bankruptcy notice were not accompanied by appropriate affidavits as required by O 77 r 13 of the Federal Court Rules ("FCR"). He considered that although the Court had a discretion to entertain the applications, notwithstanding the failure to file the appropriate accompanying affidavit, it would be futile to do so because in the case of Mrs Hubner the applicant had no proper basis for setting aside the notice and therefore the affidavit could serve no useful purpose. His Honour noted that there was no such discretion to be exercised concerning Mr Hubner's applications because they must fail for the reasons given above. 11 His Honour also gave consideration to the submission of Mrs Hubner that she did not understand the papers which the Bank asked her to sign and that no explanation had been offered. His Honour concluded, however, that even if she were to be relieved of liability under the guarantee leading to the setting aside of the substantive judgment in the Supreme Court action, her liability under the orders as to costs which are the subject matter of the bankruptcy notices would not be affected. These orders are independent of the litigation on the substantive claim. In these circumstances, his Honour did not accept that Mrs Hubner had any valid basis for attacking the bankruptcy notices. 12 We are not satisfied that any error has been shown in the reasons of his Honour. We consider that the reasoning was correct in relation to the above matters and we deal with more specific issues later in this judgment. Bankruptcy Notice - Joint debtors 13 After the hearing was completed on 10 November a further matter was raised in supplementary written submissions on behalf of Mr and Mrs Hubner. This was that the Bankruptcy Act 1966 (Cth) ("the Act") did not authorise the issue of a bankruptcy notice addressed to joint debtors. In the present case the bankruptcy notices were addressed to the joint debtors. Mr Hubner has argued on behalf of himself and his wife that the bankruptcy notices are ineffective because they nominate joint debtors, and submits that there should have been two separate bankruptcy notices. He says that because of the drastic consequences which flow from non-compliance with a bankruptcy notice it is essential that there should be strict compliance with the requirements of s 40(1)(g) and with the prescribed regulations and forms. In support of this submission he refers to the High Court decision in Kleinwort Benson Australia Ltd v Crowl (1988) 165 CLR 71 where Deane J said (at 81): "It has long been a fundamental precept of the law of bankruptcy that 'a bankruptcy notice, which is the foundation of a bankruptcy, attended as a bankruptcy is with penal consequences, is a matter in which great strictness is required': per Cozens-Hardy M.R., In re A Judgment Debtor [[1908] 2 KB 474 at 476-477] … A defect in a bankruptcy notice will invalidate it 'except in the case of a merely formal defect': … If a defect in a bankruptcy notice is other than a formal one, the notice itself is defective and failure to comply with it does not constitute an act of bankruptcy." 14 The other members of the Court in that case pointed out (at 79) that a bankruptcy notice is a nullity if it fails to meet a requirement made essential by the Act, or if it could reasonably mislead a debtor as to what is necessary to comply with the notice. In such a case the notice is a nullity whether the debtor is in fact misled. 15 Mr Hubner also relies on the wording of ss 40 and 41 of the Act insofar as it refers to "a debtor" and to "the debtor". He says this language refers to the singular person. The language of the section in other words, so it is said, contemplates a single individual committing an act of bankruptcy as the result of a single notice and that the final judgment is against a single debtor. There is also a reference in par (g) to "he" or "she" which Mr Hubner submits points to an individual rather than a joint debt. 16 In further support of his submission Mr Hubner refers to the decision in Re Myers; Ex parte Mulholland (1932) 5 ABC 128 where Macrossan SPJ said in a succinct judgment (at 129): "I am satisfied that one of several executors may present a petition in bankruptcy, but I am not satisfied that two or more joint debtors may be included in the one petition … there appears to be no authority which permits the petitioning creditor to include joint debtors in the one petition." (Emphasis added) 17 However, as Mr Hubner points out, that was a case in which the bankruptcy notice was issued in the name of the two debtors jointly. It was assumed in that decision that a bankruptcy notice could be issued against joint debtors. 18 As Dowsett J points out, specific authority on this question is somewhat sparse. He refers to three cases. In the first, Re Ward & Anor; Ex parte R W Brown & Co Pty Ltd (1991) 28 FCR 329, one of two joint debtors made an application to set aside a bankruptcy notice addressed to both of them. Hill J, on an appeal from the Registrar, did not express any doubt about the validity of the bankruptcy notice addressed to joint debtors in that case. In Emerson & Anor v Wreckair Pty Ltd (1991) 33 FCR 581, the Full Court heard an appeal in relation to a bankruptcy notice addressed to joint debtors. None of the three judges on appeal nor the primary judge raised any doubt as to the validity of the notice to joint debtors. In a more recent decision, McLeod & Anor v The Beneficial Finance Corporation Ltd (Branson J, 5 October 1995, unreported), her Honour considered whether a bankruptcy notice could be issued to several debtors. Her Honour observed (at 13) that the right to issue a bankruptcy notice cannot be wider than the right to present a creditor's petition, and because s 46(1) of the Act expressly authorised the presentation of a creditors petition against joint debtors, her Honour concluded that a bankruptcy notice could be addressed to joint debtors but not to several debtors. 19 Dowsett J saw no reason to doubt the correctness of the practice, indicated by these cases, of addressing a bankruptcy notice to joint debtors, because each debtor was obliged to pay the full debt and therefore was able to comply with such a notice. 20 In our view, the decision of his Honour was correct. 21 The essential requirement of the bankruptcy notice is that payment is claimed in accordance with the judgment: see Kleinwort at 80. In addition, there is nothing in the context of the Act which prevents the application to it of s 23 of the Acts Interpretation Act 1901 (Cth) which deems references to the singular to include the plural. 22 It was noted at the hearing that anomalies can arise if a bankruptcy notice is issued in the names of both of the joint debtors and service is effected on different dates, so that the act of bankruptcy in the case of each joint debtor is different. It was also suggested that a single bankruptcy notice addressed to two joint debtors could be misleading in the sense referred to in Kleinwort because of the different times for compliance. We do not agree. In the present case there is no suggestion that any one was misled, in fact, by the notices, and in our view the notices made it clear that payment was required in relation to each debtor within a specific time. Time to apply to set aside bankruptcy notices 23 The last day for compliance with the bankruptcy notices in the case of Mr and Mrs Hubner was 26 June 1998. It was not until 2 July 1998 that Mr Hubner filed his application to set aside the notices. By that time the act of bankruptcy had occurred. Section 41(7) of the Act requires that the notice must be filed before the time for compliance. Even assuming that the Court has power to extend time under s 33(1)(c) of the Act, in the present case there would be no purpose in so doing. This is because by 2 July the act of bankruptcy on the part of Mr Hubner had been committed. 24 In the case of both applicants there was also a failure to comply with O 77 r 13 of the FCR, which requires that an application to set aside a bankruptcy notice must be accompanied by an appropriate affidavit. Under s 51 of the Act, the Court has a wide discretion to ensure that proceedings shall not be invalidated for breach of formal requirements, provided that the Court considers that substantial injustice will not be caused by such relief. Although his Honour considered that he had power to extend time in an appropriate case, he was not persuaded that the applicants had any proper basis for setting aside the notice because there had been no appeal against the costs orders which were the basis for the issue of the bankruptcy notices. His Honour therefore concluded that an order under s 51 should not be made as it would serve no useful purpose. The three costs orders which were made in the period September to December 1997 in relation to the unsuccessful applications made by Mr and Mrs Hubner were independent of any determinations in the substantive proceedings in the Supreme Court which are under appeal. These unchallenged orders have remained in force at all times and were available as lawful grounds on which to base the bankruptcy notices. Accordingly, it was not an answer to the respondent's claim that Mr Hubner might eventually be successful in his appeal against the Bank in the substantive action with respect to the guarantee. We are not satisfied that any error of law has been shown in the approach taken and the decision made by his Honour in this respect. 25 In view of the approach taken by His Honour as to the consequences which flowed from the failure to challenge the costs orders, it was not necessary for his Honour to consider or discuss the contents of the affidavits of Mr and Mrs Hubner. We also consider that his Honour was correct in dismissing the application for discovery made by the applicants which was in aid of the applications to set aside the bankruptcy notices. Double claim 26 Mr Hubner made a further submission that there was an inconsistency in the Bank's claim and it was in effect "double dipping" because records sighted by Mr Hubner indicated that costs awarded in the Bank's favour were debited to an entity known as the Cairns Glass Company Pty Limited which is in liquidation. In our view, this is of no relevance on the appeal before this Court because it is clear that the Bank is pressing the applicants for the debt by pursuing the bankruptcy notice and it cannot be suggested in any realistic sense that the Bank has made any election by the book entry to only pursue the company for costs. It has been held that merely debiting a person in books of account does not amount to an election: Thompson v Davenport (1829) 9 B & C 78, cited in Bowstead & Reynolds on Agency, 16th ed, 1996 at 8-121. Jury 27 Mr and Mrs Hubner also say that the bankruptcy proceedings should be heard with a jury pursuant to s 30(3) of the Act. That provision reads: "(3) If in a proceeding before the Court under this Act a question of fact arises that a party desires to have trial before a jury, the Court may, if it thinks fit, direct the trial to that question to be had before a jury, and the trial may be had accordingly in the same manner as if it were the trail of an issue of fact in an action." 28 The appellants say that it is a civil right of all Queenslanders to have a trial by jury under s 30(3). 29 In view of the approach taken by his Honour, which we consider to be correct, the question of a jury trial does not arise; so we do not accept the applicants' submissions in relation to this matter. Moreover, there was no relevant question of fact raised for a jury to determine. The Court under s 30(3) has a wide discretion and there is no entitlement to a jury trial given by the section. We are not persuaded, given the necessity for a clear case of error to be shown on a matter of principle that there is any justification for ordering a jury trial in the present case. We see no error on the part of his Honour. Other claims 30 Broad allegations of fraud were raised by Mr and Mrs Hubner in their written submissions but it is not necessary for us to deal with these submissions on this appeal. Conclusion 31 We are of the opinion that the appeals in respect of each of the applications made by the appellants should be dismissed with costs. I certify that the preceding thirty-one (31) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Court. Associate: Dated: 14 April 1999 For Mr Hubner: Litigant in person For Mrs Hubner:: Mr Hubner Counsel for the Respondent: Mr P E Hack Solicitor for the Respondent: Minter Ellison Date of Hearing: 18 February 1999 Date of Judgment: 14 April 1999