Lee v McNulty [2000] FCA 1519

FEDERAL COURT OF AUSTRALIA

Lee v McNulty [2000] FCA 1519

BANKRUPTCY – bankruptcy notice – retrospective amendments to prescribed form

Bankruptcy Act 1966 (Cth) s 52 Federal Magistrates Act 1999 (Cth) Federal Magistrates (Consequential Amendments) Act 1999 (Cth) Bankruptcy Amendment Regulations 2000 (No. 2) (Cth) reg 2 Acts Interpretation Act 1901 (Cth) s 48(2) Trustees of the Franciscan Missionaries of Mary v Weir [2000] FCA 574 referred to Toowoomba Foundry Pty Ltd v Commonwealth (1945) 71 CLR 545 referred to Tefonu Pty Ltd v Insurance & Superannuation Commissioner (1993) 44 FCR 361 referred to MICHAEL BRYAN JOSHUA LEE & ORS (PRACTISING AS CORRS CHAMBERS WESTGARTH) v LIANE MCNULTY (IN THE MATTER OF LIANE MCNULTY) N 7802 OF 2000 MOORE J 30 OCTOBER 2000 SYDNEY

IN THE FEDERAL COURT OF AUSTRALIA

NEW SOUTH WALES DISTRICT REGISTRY N 7802 OF 2000

IN THE MATTER OF LIANE McNULTY

BETWEEN: MICHAEL BRYAN JOSHUA LEE & ORS

PRACTISING AS CORRS CHAMBERS WESTGARTH

APPLICANT

AND: LIANE McNULTY

RESPONDENT

JUDGE: MOORE J

DATE OF ORDER: 30 OCTOBER 2000

WHERE MADE: SYDNEY

THE COURT ORDERS AND DECLARES THAT: 1. The failure to make reference to the Federal Magistrates Court and to the other matters prescribed by the Bankruptcy Amendment Regulations 2000 (No. 2) did not invalidate the bankruptcy notice. 2. The creditor's petition be listed before a Registrar at 9.15am on Tuesday, 31 October 2000 for hearing then or at such later time as the Registrar determines. 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 7802 OF 2000

IN THE MATTER OF LIANE McNULTY

BETWEEN: MICHAEL BRYAN JOSHUA LEE & ORS

PRACTISING AS CORRS CHAMBERS WESTGARTH

APPLICANT

AND: LIANE McNULTY

RESPONDENT

JUDGE: MOORE J

DATE: 30 OCTOBER 2000

PLACE: SYDNEY

REASONS FOR JUDGMENT 1 This judgment concerns an issue that has arisen in proceedings brought under s 52 of the Bankruptcy Act 1966 (Cth) ("the Act"). The creditor's petition is based on an alleged act of bankruptcy flowing from the failure of the judgment debtor to comply with a bankruptcy notice. The notice in question issued on 20 July 2000. It was generally in the form prescribed, at the time it was issued, by the regulations made under the Act. That form made repeated reference to the Federal Court of Australia. 2 However, generally, the jurisdiction exercised by the Federal Court under the Act can also be exercised by the Federal Magistrates Court. That latter Court was established by the Federal Magistrates Act 1999 (Cth) which commenced on the date of its assent, namely 23 December 1999. However s 2 of the Federal Magistrates Act 1999 (Cth) provided that proceedings were not to be instituted in that Court before the earliest of two days specified in that subsection. As it transpired, the relevant date was 23 June 2000. Jurisdiction in bankruptcy matters was conferred on the Federal Magistrates Court by amendments to the Act made by the Federal Magistrates (Consequential Amendment) Act 1999 (Cth) (see Schedule 7). 3 Because jurisdiction in bankruptcy matters was conferred on the Federal Magistrates Court, it was necessary to amend the prescribed form to refer to that Court in addition to the Federal Court. To that end, regulations were made on 10 August 2000 amending the prescribed form: see Bankruptcy Amendment Regulations 2000 (No. 2) ("the amending regulations"). The amending regulations were notified by publication in the Australian Government Gazette on 17 August 2000. However of some significance to the present proceedings is reg 2 which declared when the amending regulations were to commence. Regulation 2 provided: 2 Commencement These Regulations are taken to have commenced on 1 July 2000. 4 The Acts Interpretation Act 1901 (Cth) deals with when regulations take effect. Section 48 provides: (1) Where an Act confers power to make regulations, then, unless the contrary intention appears, all regulations made accordingly: (a) shall be notified in the Gazette: (b) shall, subject to this section, take effect from: (i) a specified date; (ii) a specified time on a specified date; (iii) the date, or date and time, of commencement of a specified Act or a specified provision of an Act; or (iv) in any other case – the date of notification; and (c) shall be laid before each House of the Parliament within 15 sitting days of that House after the making of the regulations. (2) A regulation, or a provision of regulations, has no effect if, apart from this subsection, it would take effect before the date of notification and as a result: (a) the rights of a person (other than the Commonwealth or an authority of the Commonwealth) as at the date of notification would be affected so as to disadvantage that person; or (b) liabilities would be imposed on a person (other than the Commonwealth or an authority of the Commonwealth) in respect of any thing done or omitted to be done before the date of notification. 5 In the present matter the amending regulations, which are expressed to commence on 1 July 2000, may arguably affect the rights of the judgment creditors who have procured the issue of, and acted on, a bankruptcy notice which is not in the form prescribed by the amending regulations. The disadvantage the judgment creditors might suffer is that the notice in question may not be a valid notice and non-compliance with it might not have constituted an act of bankruptcy. The judgment creditors would have acted, to their detriment, on the basis that the notice was regular and valid. If this was so then an issue would immediately arise concerning the operation of s 48(2) and whether the amending regulations (or a provision in them) have any effect. 6 However the answer to the difficulty created by the retrospective promulgation of a form in common use and having considerable commercial significance (both to creditors and debtors) lies in s 306 of the Act. It was submitted on behalf of the judgment creditors that the failure to comply with the form prescribed by the amending regulations does not constitute a failure to address a relevant requirement of the form. Accordingly, and consistent with the decision of the Full Court in Trustees of the Franciscan Missionaries of Mary v Weir [2000] FCA 574, the defect can be treated as a formal defect or an irregularity that does not invalidate the proceedings. I agree. In my opinion, no substantial injustice would have been caused by the defect or irregularity. That is because the judgment debtor has not sought to avail herself of the rights she had which would have involved recourse to the Federal Court or its Registry. It can be inferred she would not have similarly done so had she been informed that the Federal Magistrates Court (or its Registry) was another forum in which those rights could be pursued. Moreover both Courts share, relevantly, in the state of New South Wales a common registry. 7 If the view I have taken about the scope of s 306 and its relationship to the prescribed form (which is, more generally, an issue which is not yet settled in this Court and is the subject of a reserved judgment (reserved on 28 June 2000) of a five member Full Court in Metropolitan Fire & Emergency Services Board v Zemlic (V 7860 of 1999) and two other matters) and the import of the judgment of the Full Court in Trustees of the Franciscan Missionaries of Mary v Weir [2000] FCA 574 is not correct, then one would turn to s 48 (2) of the Acts Interpretation Act 1901 (Cth). If rights were affected in the way just discussed then that subsection would operate to invalidate the retrospective operation of the amending regulations and would not make them void absolutely: see Toowoomba Foundry Pty Ltd v Commonwealth (1945) 71 CLR 545 at 568-9, 575 and 587-8 and also Tefonu Pty Ltd v Insurance & Superannuation Commissioner (1993) 44 FCR 361 at 368. On this approach the amending regulations (when read with the relevant provisions of the Act and the Bankruptcy Regulations) would have required compliance with the new form from the date of their notification only. 8 It was unfortunate that the amendments to the prescribed form were not made at the time the Federal Magistrates Court was first able to exercise jurisdiction under the Act, and recourse was had to the fiction of prescribing, retrospectively, variations to the contents of a form. However, this sequence of events has had, at least in the present case, no material legal consequence. 9 I propose to refer this matter to a Registrar to hear and determine the creditor's petition. I certify that the preceding nine (9) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Moore.

Associate: Dated: 30 October 2000

Solicitor for the applicant: Ms T Iskra, Corrs Chambers Westgarth

The respondent did not appear.

Date of Hearing: 24 October 2000

Date of Judgment: 30 October 2000