Bui v Acimall Australia Pty Ltd [2002] FCA 995

FEDERAL COURT OF AUSTRALIA

Bui v Acimall Australia Pty Ltd [2002] FCA 995

BANKRUPTCY – application to set aside bankruptcy notice – where bankruptcy notice founded upon Local Court default judgment – where application to set aside default judgment dismissed by Registrar of Local Court but no application made for rehearing by a Magistrate

Oliveri v Stafford (1989) 24 FCR 413 referred to Re Longo; Ex parte Longo (1995) 57 FCR 523 referred to Wolfe v Donovan (1991) 29 FCR 480 referred to

CONG BUU BUI v ACIMALL AUSTRALIA PTY LIMITED N 7092 OF 2002 GYLES J SYDNEY 25 JULY 2002

IN THE FEDERAL COURT OF AUSTRALIA

NEW SOUTH WALES DISTRICT REGISTRY N 7092 OF 2002

BETWEEN: CONG BUU BUI

APPLICANT

AND: ACIMALL AUSTRALIA PTY LIMITED

RESPONDENT

JUDGE: GYLES J

DATE OF ORDER: 25 JULY 2002

WHERE MADE: SYDNEY

THE COURT ORDERS THAT: 1. The application to set aside the bankruptcy notice is dismissed. 2. The applicant is to pay the respondent's costs of the application. 3. The time for compliance with the bankruptcy notice is extended up to and including Friday 23 August 2002. Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

IN THE FEDERAL COURT OF AUSTRALIA

NEW SOUTH WALES DISTRICT REGISTRY N 7092 OF 2002

BETWEEN: CONG BUU BUI

APPLICANT

AND: ACIMALL AUSTRALIA PTY LIMITED

RESPONDENT

JUDGE: GYLES J

DATE: 25 JULY 2002

PLACE: SYDNEY

EX TEMPORE REASONS FOR JUDGMENT 1 This is an application to set aside a bankruptcy notice which is founded upon a Local Court default judgment. When the bankruptcy notice was served the applicant debtor made an application to the Local Court to set aside the default judgment. That application was supported by an affidavit which is in evidence before me. The application was unsuccessful. Although I do not have before me the precise terms of the reasons given on behalf of the Local Court, a summary of them is that there had been no sufficient explanation for the delay in the matter on behalf of the defendant. The decision in question was made by a Registrar of the Local Court. Counsel for the applicant debtor submits that a sufficient case has been made for this Court to examine the validity of the underlying debt and, to that extent, go behind the default judgment of the Local Court. It has been agreed between the parties that what has been called in the cases a two-stage process will take place, and I will rule firstly upon that submission. 2 Counsel for the applicant has referred me to some well-known authorities in this field, but in particular to the decision of the Full Court in Oliveri v Stafford (1989) 24 FCR 413 and to passages from the decision of Cooper J in Re Longo; Ex parte Longo (1995) 57 FCR 523. There is no doubt that the authorities establish that a default judgment might more easily be gone behind in an appropriate case where there has been no hearing on the merits. 3 I should recount something of the history of the Local Court proceedings. They were commenced on a date which is not clear to in 1999. The proceedings arose out of the alleged sale of a machine by the respondent to the applicant debtor. Default judgment was entered against the applicant debtor in or about April 2000. A solicitor applied on behalf of the applicant debtor for that judgment to be set aside. That application failed. A further application was then made by counsel on behalf of the applicant debtor. The application was heard in mid July 2000. That application was successful and leave was granted to file a defence within a limited time. It appears from the evidence filed in the recent application to the Local Court that the applicant debtor was under some pressure in relation to filing of the defence and wrote to the Local Court accordingly. In the event a defence was filed which denies the agreement alleged on various bases and in the alternative says that if there was a contract it was the subject of what amounted to a mutual recission prior to breach and further that there was no loss. 4 According to the applicant debtor, he heard nothing further from either the Court or the other side until service of the bankruptcy notice in early March 2002. He says that at about the time of the filing of the notice of grounds of defence he had a conversation with a female, who he understood to be the secretary of a barrister who had prepared the grounds of defence on his behalf, in which reference was made to the possibility of the case being dropped and was therefore not surprised. It appears that the judgment now in question was entered because the applicant debtor had not attended a call-over (whether it was one call-over or a number of call-overs is not clear). In any event, default judgment was obtained. The certificate of Local Court judgment attached to the bankruptcy notice in question shows that judgment was entered against the applicant debtor on 8 November 2000. 5 The basis for the application to the Local Court to set aside the last default judgment, which basis is repeated before me, is that the applicant debtor did not receive any notices from the Local Court or from the plaintiff in the Local Court proceedings after the filing of the defence in that matter. He says that he has changed addresses a number of times over the years. 6 Counsel for the respondent creditor submits that there is no occasion to go behind the judgment in the present case. If the applicant debtor has any genuine concern about the failure of the Registrar to set aside the default judgment then the remedy was to exercise the right given to a party in the Local Court who is affected by an order of a Registrar to seek a fresh hearing by a Magistrate pursuant to Pt 33 r 9 of the Local Court Rules. There can be a re-hearing of the matter by a Magistrate without any particular error of the Registrar having to be established. 7 The position of the respondent, of course, is that in any event the evidence which has been put forward in this Court (which is very similar to that which was put before the Local Court Registrar) is simply not sufficient to justify the setting aside of the judgment in view of the very lengthy delay. The explanation depends upon movements of address by the applicant debtor. However, Pt 7 r 8 of the Local Court Rules obliges changes of address to be notified and this is matched by Form 17 provided for in those Rules, which requires an address for service to be noted on documents which are filed. It is relevant to note that the underlying issue in this matter is a commercial dispute involving a machine of some considerable value. Whilst I have no information about the education or business acumen of the applicant debtor, and although he no doubt is from overseas, it is difficult to accept that, a defence having been filed, such a party would simply move address without notifying anybody about a case for a considerable sum of money brought against him with impunity. 8 Furthermore, the materials which have been placed before this Court are hardly compelling as to any suggestion that there has been a miscarriage of justice in the matter. It is relevant, according to counsel for the respondent, to note that the evidence which has been filed by the applicant debtor in relation to the alleged debt, in fact, concedes the existence of the contract which is denied in the defence in the Local Court. I appreciate that the affidavit which has been sworn in these proceedings would raise the possibility of mutual recission after contract and before breach but it seems to me to be of some relevance to note that the major defence sought to be raised in the Local Court is simply inconsistent with the evidence now filed by the applicant debtor. 9 Counsel for the respondent submits that the alternative case of a consensual recission depends upon evidence given about what was said and done by two then employees of the respondent in a transaction going back to 1997 or early 1998. It is suggested by counsel for the respondent that the delays which have taken place in this matter have prejudiced his client in that they would now have to first of all locate the relevant employees and then have those employees recollect transactions of many years ago. Counsel for the applicant debtor submits that the respondent's endeavours to locate those two persons have been tardy and that the failure to locate Mr Bon in the time available should not be held against them as steps could and should have been taken further than those which have been taken. Furthermore, it is said that Mr Foley was located and the fact that he has not consented to or cooperated with the provision of evidence does not mean he would be unavailable to give evidence if required. 10 Counsel for the respondent has submitted that the passages from the authorities referred to by counsel for the applicant debtor which stress the duty of the Bankruptcy Court to ensure that there is a proper debt and which might be thought to down play the effect of delay, overstate the position and in addition to the passages to which reference has been made by counsel for the applicant, has referred me to passages in the judgments in Wolfe v Donovan (1991) 29 FCR 480 which, he points out, post dates the decision in Oliveri v Stafford. 11 In my opinion, the critical factor is that this is a matter primarily within the jurisdiction of the Local Court. I agree with the submission for the respondent that if there was a concern that the Registrar had not properly applied the principles which ought be applied in setting aside a default judgment then there should have been an application to a Magistrate. No explanation has been given for failure to take that step. Counsel for the applicant debtor submits that having failed before the Registrar it is likely that his client would strike what he described as a "brick wall" in that Court. I am not convinced that there is any basis for that submission. There is no reason why a Magistrate would not look at the matter on the merits. 12 In my opinion the applicant debtor has not established a case for this Court to itself decide the merits of the commercial dispute which underpins the judgment and the bankruptcy notice in the present case. In essence, I accept the arguments advanced by the respondent. There have been means available to the applicant debtor in the Local Court to raise all the issues, including delay and any other aspect of the matter. Those means still remain available, although it will be necessary now to further explain the delay in bringing any further application. That is the fault of the applicant debtor. The judgment has been outstanding for a very long time. There has been ample opportunity to take whatever step is required since service of the bankruptcy notice, which is now some months ago, to protect the position of the applicant debtor. 13 I should say that before an adjournment during the hearing today I expressed to counsel for the parties some concern as to whether the pleading of the matter was appropriate to lead to a default judgment which can only be based upon a liquidated claim or demand. That is not a ground which has been taken on behalf of the applicant debtor in the proceedings and is still not taken. I have done no more than draw that possibility to the attention of the parties. No doubt attention will be given to that possibility, because if there is a real question about the basis for the default judgment, that may provide a reason for setting the default judgment aside. I say that without, of course, intending to indicate any view about that issue. 14 So, under the circumstances, and notwithstanding the arguments which have been adduced by counsel for the applicant, in my opinion, the application must be dismissed as no ground for going behind the judgment has been established. However, I am disposed to grant the application by counsel for the applicant debtor for a further period of extension of the bankruptcy notice in order that a fresh application might be made to the Local Court. In so doing, I do not wish it to be thought that I am encouraging any further application or giving any advice to the applicant or to the Local Court if application is made. I simply think that in view of the argument as it has proceeded, it would be in the interests of justice to adjourn the matter for a period of four weeks to enable steps to be taken if so advised. I do this with some hesitation, because it will mean further delay and may mean further costs to the respondent which may never be recovered, but I think in view of the consequences of an act of bankruptcy, I should give the applicant debtor one last opportunity. It should be clear, however, that this application is at an end. 15 The orders are: 1. I dismiss the application to set aside the bankruptcy notice; 2. I order that the applicant pay the respondent's costs of that application; 3. I extend time for compliance with the bankruptcy notice up to and including Friday 23 August 2002. I certify that the preceding fifteen (15) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Gyles.