ANZ Banking Group Ltd v Elferkh [1999] FCA 1049 (22 July 1999)

Last Updated: 3 August 1999

FEDERAL COURT OF AUSTRALIA

ANZ Banking Group Ltd v Elferkh [1999] FCA 1049

BANKRUPTCY - creditor's petition - whether sequestration order would be futile - whether unsigned creditor's petition a nullity - whether absence of signature merely a formal defect or irregularity - whether appropriate to permit creditor to sign petition at the hearing

Bankruptcy Act 1966 (Cth), s52(2), s47(1A), s306

Federal Court Rules, Order 77 rule 16(1), Order 77 rule 16(2)

Radich v Bank of New Zealand [1993] FCA 450; (1993) 116 ALR 676, cited

Re Betts; ex parte Betts [1897] 1 QB 50, referred to

Re Taylor; ex parte Ryan (1986) 14 FCR 472, not followed

Deputy Commissioner of Taxation (Vic) v Boxshall (1988) 83 ALR 175, referred to

Re Barry (1862) 1 W&W (IE&M) 174, cited

Russell v ANZ Banking Group Ltd (1987) 14 FCR 72, cited

Re a Debtor (No.3 of 1902); ex parte Petitioning Creditors (1902) 86 LT 688, referred to

ANZ BANKING GROUP LTD v ADEL ELFERKH

NG8444 OF 1998

EMMETT J

22 JULY 1999

SYDNEY

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY	NG 8444 OF 1998

IN THE MATTER OF ADEL ELFERKH
BETWEEN:	AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED (ACN 005 357 522) Applicant
AND:	ADEL ELFERKH (also known as EDDY ELFERKH, EDDIE ELFERKH and EDDYE ELFERKH) Respondent
JUDGE:	EMMETT J
DATE OF ORDER:	22 JULY 1999
WHERE MADE:	SYDNEY

THE COURT ORDERS THAT:

1. Leave be given to the Applicant Creditor's solicitor to sign the petition.

2. A sequestration order be made against the estate of Adel Elferkh.

3. The Applicant Creditor's costs, other than the costs of 22 July 1999, (including reserved costs, if any) be taxed and paid from the estate of the Respondent Debtor in accordance with the Bankruptcy Act 1966.

THE COURT NOTES THAT:

4. The date of the act of bankruptcy is 31 July 1998.

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	NG 8444 OF 1998

IN THE MATTER OF ADEL ELFERKH
BETWEEN:	AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED (ACN 005 357 522) Applicant
AND:	ADEL ELFERKH (also known as EDDY ELFERKH, EDDIE ELFERKH and EDDYE ELFERKH) Respondent

JUDGE:	EMMETT J
DATE:	22 JULY 1999
PLACE:	SYDNEY

EX TEMPORE REASONS FOR JUDGMENT

1 I have before me a creditor's petition under the Bankruptcy Act 1966 ("the Act"), in which Australia & New Zealand Banking Group Limited ("the Bank") is the petitioner. The petition relates to the estate of Mr Adel Elferkh ("the Debtor").

2 The Debtor committed an act of bankruptcy on 31 July 1998 by failing, prior to that day, to comply with the requirements of a bankruptcy notice. I have evidence as to:

(a) the matters stated in the petition,

(b) the service of the petition, and

(c) the fact that the debt on which the Bank relies is still owing,

and I am satisfied as to the proof of those matters.

3 However, the Debtor resists the making of a sequestration order on two grounds, which I shall outline shortly. When the matter first came on for hearing, the Debtor raised a third ground, namely, absence of evidence of authority of the officer of the Bank who verified the statements contained in the petition. However, following further evidence as to that question, that ground of opposition was withdrawn.

4 The first ground that I shall deal with relates to the exercise of the discretion reserved to the Court under section 52(2) of the Act. If the Court is satisfied that, for sufficient cause, a sequestration order ought not to be made, the Court may dismiss a petition. The Debtor contended that I should dismiss the Bank's petition under section 52(2) because a sequestration order would be futile in the present case.

5 The Debtor is 70 years of age, suffers from diabetes and has poor eyesight. He lives with his wife, who supports him financially, and is unable to work on a full time basis. When health enables him to do so, he sometimes works as a shop assistant. The money he earns he pays to his wife. In an affidavit filed in support of the Debtor's opposition to the petition, the Debtor asserted that he owns no assets and that the only liability that he has is the amount owing to the Bank. On that basis, he contended that a sequestration order would be futile because there could be no distribution to the Bank.

6 However, the Debtor also says that he has a contingent claim against Elizabeth Clarey, a former de facto wife, arising from a judgment and verdict obtained in the Supreme Court of New South Wales. In that proceeding, the Supreme Court ordered Ms Clarey to pay the Debtor the sum of $50,000. Ms Clarey subsequently paid the sum of $22,500 to the Bank in part satisfaction of the Bank's judgment debt against the Debtor. The Debtor's entitlement against Ms Clarey was reduced accordingly. The Debtor has commenced bankruptcy proceedings against Ms Clarey but the petition has not yet been served. The Debtor says that when he recovers the amount of the judgment he is prepared to pay it to the Bank.

7 Where the making of a sequestration order would be an exercise in futility, it may be appropriate to dismiss a petition under section 52(2). If the circumstances I have outlined above are complete and accurate, as a matter of fact, there may be little prospect of a bankruptcy achieving anything. However, before a petition is dismissed on the ground that a sequestration order would be futile, a court should be cogently satisfied of the futility. If a court is clearly convinced, from all the circumstances of the case, that there cannot be any assets or any prospect of any coming into existence and that the only effect of a sequestration order would be a mere waste of money in costs, the court may be justified in dismissing a petition - see Radich v Bank of New Zealand [1993] FCA 450; (1993) 116 ALR 676 at 686.

8 However, the evidence to support such a course must be something other than the mere statement of a debtor. Where, for example, a debtor is an undischarged bankrupt and the petitioning creditor is a creditor in that bankruptcy, any assets that the debtor might have would go to the trustee. In such a case, if the petitioning creditor thought that there were any assets, he could put the trustee in funds to obtain the benefit from them. There would be no utility in making another sequestration order - see Re Betts; Ex parte Betts [1897] 1 QB 50.

9 In the present case, there is nothing more than the assertion by the Debtor that a sequestration order would be futile. That assertion is not accepted by the Bank and there is no suggestion of circumstances such as those to which I have just referred. It may only be after sequestration, with a full investigation by a trustee in bankruptcy, including a possible public examination of the bankrupt and other persons, that assets come to light. I am not prepared to dismiss the petition on this ground.

10 The other ground relied on by the Debtor raises a question of some significance. The Bank's petition is not signed. The Debtor contended, therefore, that the petition is a nullity and that, accordingly, I should not make a sequestration order based on it.

11 Section 47(1A) of the Act provides as follows:

"If the rules of court prescribe a form for the purposes of this subsection, the petition must be in the form prescribed."

Order 77 rule 16(1), which appears in Division 4 of Order 77, dealing with "Creditors' Petitions", provides as follows:

"16(1) The petition must be in accordance with Form 150."

Form 150 is a creditors' petition which makes provision, after the date, for signature by the petitioner or the solicitor for the petitioner.

12 The Bank relied on section 306 of the Act as an answer to the Debtor's complaint. The Bank said that the absence of signature is "a formal defect or an irregularity" within the meaning of section 306. If it is, then under section 306 the proceedings are not invalidated unless the Court:

"is of opinion that substantial injustice has been caused by the defect or irregularity and that the injustice cannot be remedied by an order of [the] court."

The Debtor contended, however, that the absence of signature is not a formal defect or an irregularity and that the effect of section 47(1A) is to make it mandatory for any petition to be signed by the petitioner or the petitioner's solicitor.

13 In Re Taylor; Ex parte Ryan (1986) 14 FCR 472, Pincus J considered an unsigned petition in the context of section 47 prior to its amendment in 1996. Prior to amendment, section 47(1) relevantly provided as follows:

"(1) A creditors' petition -

(a) shall be in accordance with the prescribed form

(b) ..."

Under section 5, the term "prescribed" meant prescribed by the Act or by rules under the Act. The relevant prescribed form at that time also included provision for signature.

14 Pincus J characterised the absence of a signature on the creditors' petition before him as "an unusual defect". His Honour considered that the most cogent argument against the validity of the petition was that, in the past, courts had troubled to determine whether or not deficiencies in execution were fatal. His Honour referred to Re Spitzer; ex parte Weltrans Agency Establishment (1979) 25 ALR 447 and concluded that it would not have been necessary to consider questions of deficiency in execution if it was thought that a completely unexecuted petition could be good. His Honour concluded that the failure to sign the petition was neither a formal defect, nor an irregularity and that section 306 did not apply. His Honour, therefore, dismissed the petition.

15 However, because of section 47, a completely unexecuted petition would not be good. It would be necessary to consider whether there was a deficiency in execution as the first step. If the petition were validly executed, that would be an end of the matter. If it were not validly executed, the question of the possible application of section 306 would then arise. I, therefore, am not persuaded by the reasoning of Pincus J.

16 The Debtor could not point to any requirement for signature other than that to be found in Form 150. Section 47(1A) refers to "the form prescribed". Failure to comply with that requirement must be a defect. It is difficult not to characterise such a defect as a defect in form. It is then not a great step to characterise such a defect as a "formal defect" or an "irregularity" for the purposes of section 306. An incorrect attestation clause constitutes a formal defect or irregularity within section 306 - see Deputy Commissioner of Taxation (Vic) v Boxshall (1988) 83 ALR 175 at 181.

17 The question, as I apprehend it, is whether section 47(1A) prescribes a requirement that overrides section 306. In other words, was the legislature so intent on use of a form prescribed by rules of court that no departure from that form could be permitted in any circumstances? I can conceive of no policy for such an intent. The requirement of section 47(1A) is not for a form prescribed by or under the Act. The Rules of the Federal Court are promulgated by the Judges, not by the legislature. It is difficult to see why formal defects arising from failure to comply with provisions of the Act would be seen as less significant than a defect in a form prescribed by rules of court, which may be altered at any time by the Judges.

18 The Act does not, in terms, attach any significance to signature or other execution of a petition. What is critical is that a petition be presented. Significant consequences flow from the date of presentation, by reason of the operation of the Act. For example, the date of presentation of a petition has a bearing on the date of the commencement of the bankruptcy.

19 Pincus J referred to Re Barry (1862) 1 W&W (IE&M) 174, where a rule nisi for compulsory sequestration of an estate was discharged simply because the petition was not signed. However, the decision in that case appears to have turned on the absence of any authentication of the petition in question by the petitioner. While a bill in equity was in the form of a petition unsigned by the petitioner, Chapman J considered that there was "protection" for the Court in such a case because the petition was signed by counsel. In the case before him, however, the petition was apparently without any signature at all.

20 Under Order 77 rule 16(2) of the Rules of the Federal Court, a petition must be accompanied by an affidavit by a person, who knows the relevant facts, verifying the petition. The Rules of the Court, therefore, require a degree of authentication of a petition, quite apart from a signature on the petition itself. If that is a relevant consideration, as it appears to have been for Chapman J in Re Barry, there is adequate provision in that requirement for authentication. That requirement was satisfied in the present case.

21 In Russell v Australia & New Zealand Banking Group Ltd (1987) 14 FCR 72, the Full Court considered whether a petition had been properly signed. The Court concluded that it had been properly signed. However, the Court observed that, whether or not the signature of the Bank in that case had been ratified, the Bank should have been permitted to make any formal amendment under section 306 shown to be required to the manner of its signature of the petition.

22 Further, in Re a Debtor (No 3 of 1902); Ex parte Petitioning Creditors (1902) 86 LT 688, an English appellate court held that a failure to have a signature on a petition attested in accordance with the rules of court did not, under an equivalent of section 306, render the proceedings void. The court held that the proper attestation should have been permitted at the hearing.

23 I am not persuaded that the prescription contained in section 47(1A) is other than a matter of form. I consider that failure to comply with that provision is a formal defect or an irregularity within the meaning of section 306. Accordingly, section 306 is applicable in the present circumstances. No contention was advanced to the effect that any injustice would be caused by the absence of a signature on the petition. I consider, therefore, that, by the operation of section 306, the failure to comply strictly with section 47(1A) does not invalidate the present proceeding.

24 I consider that it would be appropriate to permit the Bank's solicitor to sign the petition at this stage in the proceeding if he wishes to do so. If the petition before me is now signed, I would be prepared to make a sequestration order on the petition.

25 A question arises as to the costs of the proceeding. The matter has had some history of appearances before the Registrar. Nothing has been advanced as to why the costs of the proceedings, up to and including last Tuesday, should not be borne by the Debtor. However, the reason for the further hearing today is the Bank's request, in effect, for an indulgence as a result of its omission.

26 The matter which was the subject of argument, partly on Tuesday and the whole of today, was a matter in respect of which the Debtor had the authority of a judge of this Court in his favour. I have concluded that, while I did not agree with the reasoning of Pincus J in that case, I was not prepared to make a sequestration order on the basis of an unsigned petition. I think, in the circumstances, the appropriate order is that the Debtor pay the applicant's costs other than the costs of today.

I certify that the preceding twenty-six (26) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Emmett.

Associate:

Dated: 22 July 1999

Solicitor for the Applicant:	Patrick Donovan for Kemp Strang
Counsel for the Respondent:	G.P. George
Solicitor for the Respondent:	John McEnroe & Co
Date of Hearing:	20 July 1999; 22 July 1999
Date of Judgment:	22 July 1999