Adams v Lambert
[2006] HCATrans 38
[2006] HCATrans 038
IN THE HIGH COURT OF AUSTRALIA
Registry No C11 of 2005
B e t w e e n -
COLIN ADAMS
Appellant
and
MATTHEW LAMBERT
Respondent
GLEESON CJ
GUMMOW J
KIRBY J
HAYNE J
CALLINAN J
HEYDON J
CRENNAN J
TRANSCRIPT OF PROCEEDINGS
AT CANBERRA ON THURSDAY, 9 FEBRUARY 2006, AT 10.06 AM
Copyright in the High Court of Australia
MR D.A. HASSALL: May it please the Court, your Honours, I appear for the appellant. (instructed by Kinneally Miley)
GLEESON CJ: Thank you, Mr Hassall. There are written submissions filed by Marler & Darvall, solicitors for the respondent, and they have indicated that they do not wish to make oral submissions on behalf of the respondent.
MR HASSALL: I had a message to similar effect from Mr John Duncan of that firm, your Honour.
GLEESON CJ: Yes, Mr Hassall.
MR HASSALL: Your Honours, the Appeals Board pursuant to special leave granted by this Court on 17 June 2005, the order granting special leave appears at appeal book page 189. The appellant’s notice of appeal filed on 8 July 2005 is found in the appeal book at page 191.
GLEESON CJ: Mr Hassall, what is the appropriate reprint of the Bankruptcy Act 1966 for us to be looking at? I have in front of me at the moment Reprint No 6.
MR HASSALL: Your Honour, I do have to hand up to your Honours a sequence of the Bankruptcy Act as it has developed from the earlier period through to the time of Kleinwort Benson v Crowl and through to the present.
GLEESON CJ: I understand that entirely, but the bane of our existence is that we regularly deal with legislation and the legislative form that is relevant to our decision is usually some years before the date on which we actually sit. We then have to reproduce, in written reasons for judgment, the relevant forms of the legislation. It therefore becomes very important for us to take considerable care that we have before us, at the time of the argument and at the time of writing our reasons for judgment, the legislation in the form in which it stood at the time of the events relevant to the appeal before us. So my question to you is, what is the reprint of the Bankruptcy Act 1966 at which we should be looking for the purpose of dealing with this appeal.
MR HASSALL: Your Honour, the Act as it stood at the time of the issuing of the bankruptcy notice on 26 March 2004, that ‑ ‑ ‑
KIRBY J: Reprint No 6, which we have, is reprinted as at 7 December 2001.
MR HASSALL: Yes, your Honour.
KIRBY J: Do you know if there was a reprint between 7 December 2001 and the date of the issue of the bankruptcy notice?
MR HASSALL: Not a reprint, your Honour, that I am aware of. There were amendments to section 41 made by an Act in 2002, which I can indicate the number of to your Honours.
KIRBY J: Is that relevant to the matter before us?
MR HASSALL: It is not relevant, in our submission, to the matters in the appeal, your Honour, inasmuch as that amendment in 2002 was simply to pluralise the judgments or orders in order to get around the former rule or to change the former rule, if I may say so.
GLEESON CJ: Yes, but if we have to quote the section in our reasons for judgment we had better get it right.
MR HASSALL: Yes, your Honour.
GLEESON CJ: Now, when we quote, for example, section 41, if we quote it in our reasons for judgment we need to quote it in the form it stood at the relevant time even if, in your submission and your submission may be right, the differences between that form and the form in Reprint No 6 are immaterial.
MR HASSALL: Yes, your Honour.
GLEESON CJ: Therefore, part of the assistance that we require in a case like this is information from counsel as to the most convenient and accurate form of the legislation for us to use for our purposes.
MR HASSALL: Yes, your Honour.
GLEESON CJ: You do not have to answer the question if you do not know the answer to it immediately, but at some stage, whether now or in the next 48 hours, could you please let us know what is the most up‑to‑date reprint of the Bankruptcy Act relevant to the proceedings that are before us?
MR HASSALL: Indeed, your Honour. We will be able to do that, your Honour.
GLEESON CJ: Thank you.
MR HASSALL: Your Honours will most readily see the history of the earlier proceedings and I do not propose to rehearse them, but I just mention that there is a chronology, which is annexure B to the appellant’s submissions that were filed on the 27 January, and there is also a brief chronology up to the Full Federal Court appeal stage at appeal book page 110. As a preliminary, your Honour, I did mention in response to your Honour Chief Justice’s questions I do have some copies of materials which I would seek the leave of the Court to hand up to be of assistance to the Court.
GLEESON CJ: Thank you.
MR HASSALL: Firstly, I have nine copies of the relevant parts of the 5th edition of McDonald, Henry and Meek’s Australian Bankruptcy Law and Practice to which the Court was referred at paragraph 20 of the written submissions. There have been some more recent commentaries, your Honour, and we sought to provide to the Court a working copy, as it were, of those 5th edition extracts. I have hand numbered those pages, your Honour, because the large page numbers in these sorts of documents can be confusing.
GLEESON CJ: Thank you.
MR HASSALL: I seek also, your Honour, to hand up nine copies of two short entries in the Australian Concise Oxford Dictionary and the Shorter Oxford English Dictionary as to the meaning of the word “accordance” appearing in section 41(2), the relevant – the nub of the case.
KIRBY J: I will be looking also at the Macquarie Australian Dictionary later. So if you would care to, you might have a look at that as well.
MR HASSALL: If it please the Court. I also, for the Court’s assistance, your Honour, seek to hand up nine copies of the Bankruptcy Act1966 as it was at the time of Kleinwort Benson v Crowl.
GLEESON CJ: Thank you.
MR HASSALL: That is the Bankruptcy Act as it was at 9 March 1987, and also, your Honours, the Bankruptcy Act as it was 1 August 1989 and, finally, your Honours, as to statutes, a copy of the Bankruptcy Act 1924‑1955 as it was at the time of James v Federal Commissioner of Taxation. I am mindful of observations of the Chief Justice in relation to us making perfectly clear in terms of the reprint in relation to the statute at the relevant time for this case. Those are informative in order to inform the Court in relation to those cases.
Your Honours, the two decisions in Adams v Lambert below have now been reported in the new series of the Australian Bankruptcy Cases. It would appear that the flurry of activity in the jurisdiction has caused a reissue of the old Australian Bankruptcy Cases in the new series.
KIRBY J: Is that the present Adams v Lambert?
MR HASSALL: Yes, your Honour.
KIRBY J: I think we have that, Mr Hassall.
MR HASSALL: Do your Honours have it in 3 ABC [NS]?
KIRBY J: I see, this is the Full Court, yes, thank you.
GLEESON CJ: Mr Hassall, you have an additional burden on you because of the absence of any contradictor orally, so that whilst normally we just sit quietly and listen to counsel we might have to ask you some questions.
MR HASSALL: Well understood, your Honour.
GLEESON CJ: One of them is this. We need to understand the precise role under the legislation in the form with which we are concerned of a bankruptcy notice and of the way such a notice comes to be issued. There is a difference, I understand, between the current procedure and the procedure when I last encountered it which was in Kleinwort Benson and that is that these days bankruptcy notices are not issued by the registrar of the court. They are issued by the official receiver.
MR HASSALL: Indeed, your Honour.
KIRBY J: Is this part of privatisation, is it?
MR HASSALL: It was referred to as streamlining, I think, your Honour, or one‑stop shopping.
KIRBY J: Not that word. That will upset Justice Gummow. We had that in another case.
GLEESON CJ: But is it still the situation that when the solicitor prepares the bankruptcy notice and lodges it with whomever, there is going to be some time delay between that act and the time of the issue of the bankruptcy notice and therefore the amount of the interest is likely to be affected by an administrative delay?
MR HASSALL: Yes, your Honour. In this particular instance the delay was very short. It may have been the official receiver’s office signing these documents was not delayed that day or not burdened with large numbers, but what your Honour says, with respect, is quite correct, that the official receiver issues it and if there is an administrative delay the difficulties about interest and doubts about interest, about the actual amount, so the notice needs in terms of the earlier authorities to be very careful if it is going to nominate interest, to nominate with great specificity the dates with respect to which the interest is claimed and so forth.
GLEESON CJ: So that if the solicitor lodged a bankruptcy notice on Monday and it did not emerge from the official receiver’s office until Thursday, some interest would have accrued in the intervening time.
MR HASSALL: Indeed, your Honour, and the practice has been approved in the cases of the solicitor or the creditor, because it could be a creditor applying for the notice, your Honour, a lay creditor – a matter to which I would refer a later point – the practice is to nominate the date of applying for the notice as the end date of the interest claim. There used to be a further practice of adding some words such as, “and no more”, to make it certain.
GLEESON CJ: Some people used to try and avoid the problem simply by not claiming interest at all.
MR HASSALL: Indeed, your Honour.
GLEESON CJ: As Kleinwort Benson demonstrates, it does not matter if you claim too little in a bankruptcy notice.
MR HASSALL: With respect, yes, your Honour, indeed so. Understatement, which used to be a fatal defect under the old English case of Re HB was the ruling in Kleinwort Benson v Crowl by this Court. They made it perfectly clear that understatement of interest would not necessarily be fatal provided that the two tests in Kleinwort Benson v Crowl, enunciated by this Court, were met.
As to overstatements, of course, section 45(5) of the Bankruptcy Act 1966 provides that the mere fact that a bankruptcy notice overstates the amount in fact due will not of itself invalidate the notice unless the debtor gives a notice disputing the notice on its validity on that ground. No such notice was given in this matter, your Honour.
GLEESON CJ: That was one of the curiosities at the time of Kleinwort Benson that you did not get into trouble by overstating the amount claimed but it was suggested that it could be fatal to understate the amount claimed.
MR HASSALL: Indeed, your Honour.
KIRBY J: Does the fact that there is that specific provision for that particular default bear upon the fact that there is no particular provision for the default that is relevant to this case, that the legislature addressed itself to that particular fault and not this one.
MR HASSALL: In our submission, your Honours, the presence of the addressing of an overstatement in section 41(5) indicates that there is not an intention within section 41 to require an absolute exactitude with respect to bankruptcy notices. It would be part of our submissions, your Honours, that section 41(2) of the Bankruptcy Act 1966, which is now the relevant key provision, in our submission, for this case provides that the notice shall be in accordance with the prescribed form.
I would seek to take your Honours in detail to the language used in that section and also, of course, to the objects and aims of the statute which we will be submitting, your Honours, are multiple objects. They are not just to protect the rights of interests and interests of debtors and of creditors. There is also an overriding public interest and the Act provides a structure. A law governing bankruptcy certainly is a subject matter but also in Part IV, which is where section 41 occurs, in Part IV of the Act it is headed “PROCEEDINGS IN CONNEXION WITH BANKRUPTCY”, so that it would be part of our submissions that one of the objects of the Act is to facilitate a reasonably efficient and effective manner of proceeding with respect both to bankruptcy notices and creditors petitions and all other applications.
KIRBY J: In that article by Mr Cavanagh which you helpfully attach to your written submissions, he talks of the traditional extreme care that is required in bankruptcy notices. What is the origin of that attitude which seems, looking at it from the outside if you are not dealing with bankruptcy all the time, to be a sort of relic of 19th century pleading strictness?
CALLINAN J: Or is it because it involves a matter of status?
MR HASSALL: Your Honours, in respect to both of those observations it was formally said in the case law generally that there was a quasi‑penal consequence of the commission of an act of bankruptcy by, for instance, one of the species, a failure to comply with the notice. But also, of course, as his Honour Justice Callinan has observed, the matter of status, the radical effect on the status of the debtor and also, of course, on the creditors’ rights by the occurring – or the potential of a bankruptcy occurring, creditors’ rights being converted into new rights to proof.
CALLINAN J: And because it is a matter of status may be a reason for the non‑application of the de minimis rule?
MR HASSALL: Indeed, your Honour, but in relation to that aspect of it we would submit that the presence in the Act of section 306 rather points the other way such that section 306 provides that what is merely a formal defect, or an irregularity, be it noted, your Honour, or an irregularity - there appears to be a distinction in section 306 between a mere defect, a formal defect and an irregularity. The word “irregularity” is used at large, in our submission, and there is support for that proposition in the authorities. So that to that extent the bare rule of de minimis, your Honour, is perhaps amplified into a special rule under section 306.
CALLINAN J: You are given some statutory effect by the section.
MR HASSALL: Yes, your Honour, and we would be submitting, your Honours ‑ ‑ ‑
CALLINAN J: Which was necessary in order to meet the matter of status.
MR HASSALL: Yes, in order to meet the point that your Honour raised about status and if the de minimis rule had applied, there might be a question there.
KIRBY J: That status question is relevant because there are many statutes and I think the Constitution itself, which attach undesirable consequences to the status of bankruptcy, that one gets an impression that in society the shame and horror of the status of bankruptcy has changed with the realisation of the other aspect of bankruptcy which is to give debtors a fresh start.
MR HASSALL: Indeed, your Honour. The lifting of that burden and that is one of the multiple objects, as we will be submitting, that the Act is designed to achieve and those multiple objects, in our submission, are apparent upon the face of the Act. Your Honours, there was one last element of handing up. I have also nine copies of the decision of Adams v Lambert at first instance before Justice Gyles as now reported.
KIRBY J: I think we have that, or certainly I have that in my – this is in the bankruptcy cases?
MR HASSALL: This is in the ABC [NS].
GLEESON CJ: Well, we have that, but we will take these too. Thank you.
KIRBY J: A reluctant decision by Justice Gyles, dragooned into obedience by the Full Court.
MR HASSALL: Indeed, your Honour, and we are now in the highest Court seeking an authoritative decision of the point. At the outset, your Honours, in presenting the appellant’s case on appeal we do not propose to take the Court in any tedious detail through all the decisions of the Federal Court of Australia that show a clear divergence of view to be found both before and after the decision in Australia Steel Co (Operations) Pty Ltd v Lewis (2000) 109 FCR 33.
Those are divergences of various single judges and various Full Courts in the Federal Court. The course of those decisions is summarised in the appellant’s submissions at paragraphs 41 to 55.
KIRBY J: Justice Gummow said on the special leave application that there are arguments both ways and they are demonstrated by the differing decisions in the Federal Courts so it would seem to me we just have to go to the issue ourselves.
MR HASSALL: Indeed, your Honour, and for that reason, as I was indicating, I do not propose to take your Honours into a wilderness of instances but to address, if I may, the - and I would seek to indicate in a moment the pattern which may be of assistance in analysing the matter under four headings. I would indicate, your Honours, in the bundle of extracts for McDonald, Henry & Meek there is some material there, a collection of the cases, which I am not going to go through, but which I would like to refer your Honours at the outset.
In the McDonald, Henry & Meek extracts on the hand‑numbered page at the top right‑hand side - on the hand‑numbered page 15, your Honours will see a marked passage where the learned authors of that textbook, which is used widely in the practice, after reviewing the cases, Messrs McQuade and Gronow, who were the editors, make the point about two or three points down the page:
The current situation of inconsistent decisions of the Full Court . . . is unsatisfactory . . . although the weight of Full Court authority supports the stricter, the preferable view is that substantial, rather than strict, compliance with Form 1 is what is required, except in circumstances where the lack of compliance would objectively mislead the debtor -
and then they cite Crowl’s Case, if I may call it that.
GUMMOW J: Mislead the debtor as to what?
MR HASSALL: As to what the debtor must do in order to comply with the notice, in our submission, your Honour.
GLEESON CJ: Yes. I am not suggesting for a moment that you ought to take us in detail to these cases but at the same time it is important to have some kind of general understanding of the variety of mistakes, if I can use a neutral word, to avoid defect or irregularity that can occur and that these judges in the Federal Court bump up against in practice.
MR HASSALL: Indeed, your Honour. They range from misdescription of the rate to misdescription of the period, error about the period and the kind of case that is before your Honours today is, in our submission, a misdescription of the actual provision. In our submission, a mere misdescription of the provision – we would make submissions - would be part of our submissions that this particular subject bankruptcy notice has indeed ‑ in our submission, is in accordance with the Form 1 because it does state a provision under which the interest claimed and set out in the attachment is claimed.
KIRBY J: But we have to come up with a formulation. See, the advantage of the strict rule is that there is less room for doubt and the law at least has the merit of clarity but the problem is that we have to try to find, if we can, a formula that not only solves the problem of a misdescription of the section but also of the rate and of the period.
MR HASSALL: Indeed, your Honour.
GLEESON CJ: Or all of the other manifold errors that can occur in the drafting of a bankruptcy notice.
MR HASSALL: Yes.
KIRBY J: Typographical mistake in the name of a person or ‑ ‑ ‑
MR HASSALL: Or a misnomer of a statute, for instance, your Honour. One of the cases - Wright v Australia & New Zealand Banking Group Ltd, the late Justice Beaumont referred to, I gave as an example. I would be seeking to read a passage from that judgment where his Honour referred to the example of, say, the Bankruptcy Act 1977 were stated in the notice and whether that would be a fatal defect. If the strict view of the words “in accordance” must be in accordance with the form – the prescribed form – the strict view of the majority in Australian Steel is correct.
It is at least arguable, it would appear, that even such a very minor error of the kind which normally would have been curable or amended in general civil law would be fatal to a notice. Even although, as your Honours have said, there is a matter of status and care and so forth, we will be submitting that the presence of section 306 in the Act bespeaks an intention by the legislature to still preserve some margin for small errors or minor errors, misnomers, misdescriptions which is to be contrasted, in our submission, in the theme which is seen in some of the cases – the more recent cases – as to total omission of something.
We will be submitting that the Australian Steel Case was a case of total omission of the provision. In this case before your Honours the relevant statute was referred to. Section 85A was referred to but in truth and in law the relevant section was section 85 of the District Court Act 1973 (NSW). So that this case, in our submission, brings one - it is in a sense a very appropriate vehicle to be here as was submitted on the special leave application because it brings to the Court a case where the relevant error that is alleged is, in our submission, a very fine error.
Of course, the written submissions of the respondent take a different view and say that it was an error that was misleading but we have put in our written submissions reasons why that is not so. The main burden of the respondent’s argument is that because section 83A, if the diligent debtor went to the New South Wales statute and looked up section 83A that person would find that section 83A deals with interest up to judgment which can be awarded by the court at such rate as the court deems appropriate.
GLEESON CJ: There is a little more to it than that, is there not? If you look at page 15 the bankruptcy notice in the present case in one part said that the amount with which we are concerned, which is $66.58, was “interest accrued since the date of judgments”.
MR HASSALL: Indeed, your Honour.
GLEESON CJ: So in that respect there is an inconsistency between what appears at that part of the bankruptcy notice and the description of the statutory provision.
MR HASSALL: Is your Honour referring to the words at item 3 of what I might call the boxed schedule on page 15?
GLEESON CJ: Yes, it has, “plus 3”.
MR HASSALL: As your Honour has indicated the words “interest accrued since the date of judgments or orders” and then there are some words “(see Note 2, below)” which is the relevant note which has led to the issue in Australian Steel. Your Honour is putting to me, if I understand your Honour correctly, to say that there is an inconsistency between that item 3 in the boxed schedule and in the interest calculation on page 19?
GLEESON CJ: Yes. There is an inconsistency between what appears at item 3 on page 15 and what appears in paragraph (a) on page 19?
MR HASSALL: Yes.
GLEESON CJ: In that section 83A refers to pre‑judgment interest and it is section 85 that covers post‑judgment interest.
MR HASSALL: Indeed, your Honour.
GLEESON CJ: So what there is, on one point of view, is an inconsistency between those two parts of the bankruptcy notice, from another point of view perhaps not materially different, a misdescription on page 19 of the statutory basis of the claim described on page 15.
MR HASSALL: Your Honour, if I may make an observation there and a submission, it is our submission that the apparent inconsistency is, with respect, perhaps not an inconsistency inasmuch as the – if one goes back to page 15 and item 3 in the boxed schedule, one sees the words “interest accrued since the date”. Now, those words “since the date of judgments” gives rise to what your Honour identified as an apparent inconsistency with what is said on page 19 under paragraph (a). However, your Honour, on page 19 also you will see in paragraph (c) the words:
Interest is being claimed for the period 22 March 2004 to 26 March 2004 (both dates inclusive).
So that item (c) on page 19, the interest attachment, in our submission, makes it clear, as indeed the words back on page 15 in the schedule, that it was interest accrued since the date of orders, a post‑judgment interest.
GUMMOW J: There is also non‑compliance, is there not, with – going back to page 15, line 23.
MR HASSALL: Yes, your Honour.
GUMMOW J: It tells you you have got to state in the document, is it – that appears at 19, “the provision under which”?
MR HASSALL: Yes, well, your Honour, in that regard we will seek to submit that the interest attachment does – it is our submission that the requirement, if there be one, in relation to note 2 is that the – the requirement in note 2 is that the interest attachment document must state:
the provision under which the interest is being claimed -
and, your Honour, we submit, and this is a point in Kleinwort Benson v Crowl, for instance, under the old form of bankruptcy notice, there was a considerable importance placed on the former appearance of the words “so claimed” in the old formal bankruptcy notice. We note, your Honours, and we seek to invite the Court to notice that the word “claimed” – it says “included” at item in the schedule at item 2. When you go to note 1 it speaks of:
assessed costs in support of the amount claimed must be attached to this Bankruptcy Notice -
at the foot of the page and then in note 2 itself:
If interest is being claimed in this Bankruptcy Notice, details of the calculation of the amount of interest claimed are to be set out . . .
(a) the provision under which the interest is being claimed -
Again, at paragraph (b), the principal sum and rate and so forth, over the page on page 16. The word “claimed” is used with some deliberation, in our submission, and it will be our submission that the word “claimed” is an echo almost of the expression “so claimed” in the former bankruptcy notice and that it would appear that the drafter of the notice may well have had that in mind in order to – those provisions could have said, your Honours, the provision under which the interest is payable.
GLEESON CJ: But it is important to understand what the recipient of this information is supposed to do with it. No doubt all sorts of things are done with bankruptcy notices but, if you look at the form of the bankruptcy notice itself, on page 3, for example, it tells the debtor his options. Mr Lambert was told, in paragraph 7, for example, that he could:
file an application to the Court for an order to set aside this Bankruptcy Notice on the specific grounds -
or, in paragraph 6, he was told that:
The Court may extend the time for compliance -
in certain circumstances. What if Mr Lambert had taken this notice along to his solicitor and the solicitor had read it all and said, “Look, that reference to 83A can’t be right. If they’re claiming, as they obviously are, $66 of post to the judgment interest, that could only be a claim under section 85” – do I have that number right?
MR HASSALL: Section 85, your Honour.
GLEESON CJ: “Section 85 of the District Court Act”. What is to happen then?
MR HASSALL: Your Honour, the answer to that is contained almost within one of the observations your Honour made in asking the question that the solicitor would have indicated that if one looks at the context of the notice, it is clear that it is post‑judgment interest that is being claimed. A doubt is then raised about whether the correct section is being referred to and then it is on that basis, your Honour, that we submit that the misdescription of the section, the statute is referred to. It is clearly stated. A wrong section with respect to one digit, although there is an “A” added on the end, and we submit that that is in a similar case to the kind of misnomer of a statute.
Suppose, for instance, your Honour, that the form on page 1 had referred to the Bankruptcy Act 1977 and suppose that then, in relation to items 6 and 7, the setting aside provisions or setting an extension, that the debtor was somehow misled as to which statute to go and look up if they were acting for themselves, for instance, in relation to making those applications. We submit, your Honour, that when one is considering the extent to which requirements are set out in a special way, the Full Court majority in Australian Steel seems to give special significance to the note 2 in relation to the interest issue.
It is our submission that the general principles as to whether a misdescription is curable under section 306 apply across the notice, as it were, can apply to all items in it. With respect, the majority in Australian Steel says, “No, this is a special rule and must be strictly complied with”.
Our submission, your Honour, is, and I would seek to take your Honours in considerable detail to the actual language of section 41(2) which we say is the nub or pivot on which this case really turns, with respect, that the wording is merely that the notice must be in accordance with.
We will be submitting, your Honour, that there has been a change from the former casting of the section which used to state three characteristics that a prescribed form had to have in the former section 41(2). Those provisions were deleted by the 1996 amendments and we are left with, simply, section 41(1) using the simple words, which were the same formula of words which have always been there and were there indeed at the time of Crowl’s Case, but the characteristics of the form of notice that may be prescribed have been taken away, so that a new form of notice at any particular time - tomorrow - could be prescribed and that might have different characteristics. It might revert to the old form or be something entirely new.
Therefore, your Honours, it is our submission that this case really turns upon a close examination of the language in section 41(2) and considering that language in the context of the Act read as a whole and not just for the purpose of protecting debtors or creditors rights and the due sensitivity to those matters, but having regard to the overriding public interest in the prevention of unremunerative trading and a purpose which is discernable in the Act of providing a reasonably efficient manner of proceeding such that creditors’ proceedings in bankruptcy and bankruptcy notices would not be defeated by relatively minor, or overly technical, or unmeritorious claims about minor errors. We submit that the statutory scheme is such that section 306 needs to be laid beside section 41(2).
GLEESON CJ: What goes on in practice, Mr Hassall? The official receiver is an officer of what?
MR HASSALL: Of the Insolvency and Trustee Service under the Attorney-General’s Department, your Honour.
GLEESON CJ: Now, I understand how the official receiver deals with legally represented creditors, but what happens in relation to a creditor who does not have a lawyer?
MR HASSALL: Indeed, your Honour, and that is a matter that we have addressed in submissions and it is - the Act, rather deliberately as it seems, leaves open the opportunity for a lay unrepresented creditor to issue their own bankruptcy notice having obtained the judgment.
GLEESON CJ: But what goes on?
MR HASSALL: What would happen is that the lay creditor would obtain a form, either in hard copy or off the Internet as it happens these days most often. That is often done in practice, your Honour, from the ITSA site itself in order to - because of these special provisions about format and departing from it, it is often done more exactly that way. Then the lay creditor would fill in the various parts, the amount and so forth and would also have to fill in the boxed schedule and if interest were claimed would have to create an attachment.
Now, it is of note, your Honours, your Honours will see at page 18 of the appeal book where the signature of the official receiver occurs, Ms Inga, issued on 26 March ‑that, your Honours, is where Form 1 ends. It ends with the form of bankruptcy notice with which we are concerned, the prescribed form under regulation 402 of the Bankruptcy Regulations ends at page 8 so the lay creditor would have to fill in the form of notice, Form 1, from pages, what are pages in – I am sorry, your Honours. Pardon me, your Honours, there is a danger here in looking at Mr Reginald Lambert’s papers. It is the same thing. I should have been referring your Honours to page 8. My apologies.
Page 8 is where Mr Matthew Lambert’s notice occurs and the creditor, lay creditor, would then have to have created an interest calculation sheet of a kind like appears on page 9 of the appeal book.
GLEESON CJ: Nine or 19?
MR HASSALL: Sorry, your Honour?
GLEESON CJ: We are concerned with Matthew, is that right?
MR HASSALL: Yes, I am sorry, your Honour, I gave the Court erroneous reference to – we had at once sought to exclude Mr Reginald Lambert’s matters. It was somewhat at the insistence of the other side that both were included.
KIRBY J: Are they the same document on 9 and 19?
MR HASSALL: Not the same document, your Honour. Different notices were issued for each person, but in similar terms.
KIRBY J: But both of them appear to refer to Matthew Lambert.
MR HASSALL: Mr Matthew Lambert’s bankruptcy notice starts at appeal book 1 and goes through to appeal book 10. Appeal book 11 starts Mr Reginald Lambert’s notice.
GLEESON CJ: We are concerned with the document that begins at page 1 of the appeal book and ends at page 9 of the appeal book?
MR HASSALL: Yes, your Honour. Well, it ends at page 8, in our submission.
GLEESON CJ: I know you said that, but if you look at page 5, at the bottom of page 5 it refers to “a document attached to this Bankruptcy Notice”.
MR HASSALL: Yes.
GLEESON CJ: And the document attached is the document that appears on page 9 of the appeal book.
MR HASSALL: Yes, your Honour.
GLEESON CJ: And it is in that document that the error or inconsistency appears.
MR HASSALL: Yes, your Honour.
GLEESON CJ: There is an inconsistency between the reference to section 83A in paragraph (a) and the information given in paragraph (c) and, as is already noted, there is an inconsistency also between the reference to section 83A and what appears on page 5 at line 12.
MR HASSALL: In assenting, your Honour, a moment ago I assented that those things do appear there. We do not, with respect – we submit that there is other information on page 9, the attachment, particularly at the bottom of the page your Honours will see that there is a further small boxed schedule giving dates, 22nd, 26th and so we submit that the information in paragraph (c) on page 9 and the information as the dates in both cases, combined with the references in item 3 on page 5 of the notice, they counter any misleading aspect that the interest was pre‑judgment interest because they are post‑judgment dates.
GLEESON CJ: I understand that. I know that we are in an area of fine technical detail here. I am just having difficulty accepting your proposition ‑ ‑ ‑
MR HASSALL: Understood, your Honour.
GLEESON CJ: ‑ ‑ ‑ that the document on page 9 is not part of the bankruptcy notice and that the bankruptcy notice, in fact, ends on page 8.
MR HASSALL: Well, your Honour, what I am proposing is that the – coming back to section 41(2). It speaks of a bankruptcy notice. It requires that the notice shall be in accordance with – the notice shall be in accordance with, the bankruptcy notice, with the form.
It is curious, your Honour, that the wording in note 2 on page 5 – that is the wording under the schedule – itself draws a distinction between this bankruptcy notice, which is in Form 1, in our submission – and our submission is that Form 1 ends at page 8 – has to have attached to it a document – it says “a document”. It is our submission that that means that the note is speaking about something other than the bankruptcy notice.
GLEESON CJ: Where do we most conveniently find the regulations with the form prescribed relevant to the time with which we are concerned?
MR HASSALL: Most conveniently, your Honour, in the attachment to the appellant’s written submissions there is annexure A, which sets out various portions of the – at the very end, after page 20 of the written submissions, the very end of them, there is an annexure A. The first item is section 41 and 306, and then about four pages beyond that, your Honour, there is regulation 4.02 under the Bankruptcy Regulations 1996.
GLEESON CJ: Thank you.
MR HASSALL: I draw your Honours’ attention to the actual language used in regulation 4.02, especially subsection (1). Before I go there, your Honours will recall that the wording in section 41(2) is simply that:
The notice must be in accordance with the form prescribed by the regulations.
Now, regulation 4.02(1) says:
For the purposes of subsection 41(2) of the Act, the form of bankruptcy notice set out in Form 1 is prescribed.
I pause there to notice, your Honour, that there is no use of a mandatory word other than to the extent that prescribing is read mandatorily, one supposes, but the word “must” or the like is not there. The word “must” which appears in section 41(2) is absent noticeably from subregulation (1). Subregulation (1) is simply prescribing the form which will be in Form 1 and the form that it is prescribing is for the bankruptcy notice, a thing or an instrument called a bankruptcy notice.
GLEESON CJ: Is the note that we have part of the regulations or is it simply some editorial comment?
MR HASSALL: Yes, the note.
GUMMOW J: I think there is something about notes now in the interpretation legislation.
MR HASSALL: Is your Honour referring to the note to the schedule?
GLEESON CJ: Yes.
GUMMOW J: Yes, about section 25C.
MR HASSALL: It is part of the form, your Honour.
GLEESON CJ: No, I am sorry, this document does not have page numbers on it, but in the representation of regulation 4.02 that is in the attachment to your written submissions there are three paragraphs of the regulation and that is followed in a different form of typing by something called a “Note Under section 25C” et cetera.
MR HASSALL: Yes, your Honour, I am sorry, I misunderstood.
GLEESON CJ: My question is is that note part of the regulations or is it some editorial interpolation?
MR HASSALL: Part of the regulation, your Honour.
GLEESON CJ: Thank you.
MR HASSALL: I am sorry, your Honour. I misunderstood what your Honour was referring to as the note.
KIRBY J: You handed up to us Bankruptcy Regulations 1996, or at least they are amongst our papers, and that contains regulation 4.02 with that note in it.
MR HASSALL: Indeed, your Honour.
KIRBY J: Is this the state of the Bankruptcy Regulations at the relevant time?
MR HASSALL: Yes, your Honour.
KIRBY J: This is a compilation prepared on 10 October 2005, so they have not been changed between the time of the issue of the bankruptcy notice and October 2005?
MR HASSALL: No, your Honour. The aspect of this is that it is noticeable that regulation 4.02(2) then says:
A bankruptcy notice must follow ‑
not “must be in accordance with it”, but it “must follow” –
Form 1 in respect of its format –
and this seems to be a rather more special requirement as to “format”. “Format”, in our submission, does not amount to the same thing as saying “the form” or “in accordance with the form” because there is an example given within the subregulation:
bold or Italic typeface, underlining and notes –
including the difficult Note 2 that we have been talking about. It is our submission that “format” ‑ ‑ ‑
KIRBY J: That is a somewhat unusual provision, Mr Hassall, “must follow”. There is “must”, which is a very strong word, but then, for example, “bold or Italic typeface” and so on. It is unusual for the federal regulator to get down into typeface.
MR HASSALL: It seems to be, your Honour, and if I might propose, in response to your Honour’s observation, that this post‑1996 form of bankruptcy notice appears, from what we can tell, to have been somewhat modelled, perhaps, on the new form of statutory demand used in lieu of a bankruptcy notice under the Insolvency Act 1986 (UK). Your Honours, near the very end of the materials with the list of authorities we have included a copy of that United Kingdom form of statutory demand. I do notice there that that form of statutory demand has some bold typefaces here and there and so forth.
GUMMOW J: Where do we find the UK text?
MR HASSALL: In the document being our list of authorities, your Honour. The list of authorities has some annexures and the very last document attached to the list of authorities. We supplied to the Court copies.
GLEESON CJ: As you point out, paragraph (2) of regulation 4.02 is about is “format”.
MR HASSALL: And we say that it seems to be a special thing denoted by “bold or italic typeface, underlining” and so forth. One sees, your Honour, if you go back to the pages where the subject bankruptcy notice occurs, for example, when the debtor is told that they have to do certain things, a bolding is used. It seems to have been an attempt, your Honours, by bringing in the schedule at page 5, to provide a means whereby a lay creditor or a solicitor, by filling in the boxes in the schedule on page 5, would thereby almost be led to comply with the Act to get away from the old idea under the old from of bankruptcy notice that the solicitor or lay creditor was left to adjust the form and fill in some blanks and use wordage to describe the interest and the rate and so forth within the notice itself and often there was very little space to do so, as a matter of practical concern. Nowadays, with computer screens, it is possible to open those spaces up and so forth.
GLEESON CJ: I notice this topic is dealt with in the UK form in the second bullet point of the Notes for Creditor.
MR HASSALL: Yes, your Honour, and it says:
If the amount of debt includes interest not previously notified to the debtor as included in the debtor’s liability, details should be given, including the grounds upon which interest is charged. The amount of interest must be shown separately.
It is interesting that the word “grounds”, a more general word, is used. There is no specificity such as the Australian word “provision” ‑ ‑ ‑
KIRBY J: That is against you because ‑ ‑ ‑
MR HASSALL: It is against us, your Honour, I appreciate that. It is a different statutory regime, your Honour, and we have only attached it for the assistance of the Court as background. It is a statutory demand rather than a bankruptcy notice and the two English cases to which we seek to refer your Honours have taken a more liberal, if I may put it that way, view of defects under the 1986 Act. Even although there are observations in those two English decisions which are on our list – and perhaps I should refer your Honours to them at this point since we are mentioning that matter. We may not be returning to it. They are Re a Debtor (No 1 of 1987, Lancaster) Ex parte the debtor v Royal Bank of Scotland plc [1989] 2 All ER 46. It is item 20 on the list. That is the Court of Appeal. The matter at first instance is reported as Re a Debtor (No 1 of 1987, Lancaster) [1988] 1 All ER 959. Now, in those matters, as I say, your Honours, the statutory demands, the defects, were held to be of a non‑fatal nature.
KIRBY J: Now, I am getting a bit lost, Mr Hassall, because normally we do what you said that you were going to do. That is to say you go to the statute, you go to the statutory language, you then get that very clear in your mind and then you look at the background, the history, other countries and all that other stuff, but you start with ‑ ‑ ‑
MR HASSALL: Yes, your Honour, perhaps it would assist if I turn ‑ ‑ ‑
GUMMOW J: I notice that this 1989 decision has been considered in later cases in England.
MR HASSALL: No, I had not noticed that, your Honour.
GUMMOW J: Well, In re a Debtor [1994] 1 WLR 917.
GLEESON CJ: And In re a Debtor [1992] 1 WLR 507.
GUMMOW J: Yes.
MR HASSALL: I was not aware of those, your Honour. Would it assist your Honours if I return to the matter of – inasmuch as that is a different statutory regime and the expressions used are wider, it may not be of great assistance in resolving the question before the Court under section 41 of the Australian Bankruptcy Act. However, the only point about those cases, your Honour, is that they do seem to indicate that in the United Kingdom the more liberal approach, if one can call it that, under Pillai and of the kind which was applied by this Court in Crowl, appears still ‑ ‑ ‑
KIRBY J: Yes, but the United Kingdom is an enlightened country as far as bankruptcy is concerned. We had a recent case which indicated that despite many suggestions for amendment, the Parliament of the Commonwealth could not find the time – too busy with other things. Therefore, we cannot really be sure that, because the United Kingdom does it, that that is what our statute requires. I mean, the fact is that this is a technical and often neglected area of the law. We just have to look at what the words say and the purpose of the Act.
MR HASSALL: Yes, we put it no higher than that it is for information, your Honour. In what fell from your Honour Justice Kirby a moment ago about returning to the actual examination, I have in response to the Bench’s question sought to answer those, but if I might return to the manner of approach in which I was going to propose, your Honours, I would like to take your Honours first straight to an examination of the statute regulations and the form. We have traversed some of that area already in response to the Bench’s questions.
I would like to tackle the construction or interpretation question to indicate why we submit Australian Steel is in error as to its interpretation of section 41(2). Second, your Honour, we would seek to extract the relevant principles laid down by this Court in Crowl in 1988, in James in 1955, and the Privy Council in Pillai in 1970, and we would seek to submit that they can still save a notice of the type here. Thirdly, your Honour, we would seek to then examine the limited scope, in our submission, of the holding in Australian Steel as being confined to, in our submission, a particular type or form of invalid bankruptcy notice, namely, one which completely or totally omits the relevant provision in answer to Note 2 in Form 1. We seek to show, therefore, how Australian Steel, that case, should not determine the result in a case of this sort because this is not a case of total omission; this is a case of misdescription, in our submission.
HEYDON J: That last argument is really an argument for distinguishing Australian Steel.
MR HASSALL: It is, indeed, your Honour.
HEYDON J: Is there an authority that you say embodies the process of construction that should have been employed by the Federal Court? I mean, is there some decision of Justice Hely or Justice Gyles that you say exhaustively sets out the correct approach to construction?
MR HASSALL: In that regard, your Honour, two cases come to mind; Project Blue Sky v Australian Broadcasting ‑ ‑ ‑
HEYDON J: I was thinking more of a decision of the Federal Court on the regulation upon the form we have to consider, not a general authority on statutory construction.
MR HASSALL: Yes, there is in that regard. Perhaps the most telling discussion of that occurs – it is in Mr Justice Gyles’ dissent, admittedly, in Australian Steel.
HEYDON J: That is all. There is no need to go to it now.
MR HASSALL: Yes.
HEYDON J: But your position is encapsulated in that reasoning of Justice Gyles?
MR HASSALL: Yes, and also I would seek to take your Honours to the case of Formosa, a case decided by this Court.
GUMMOW J: Are you taking us to the case of Weir 98 FCR 447?
MR HASSALL: Weir v Trustees of Franciscan Missionaries, your Honour.
GUMMOW J: Is that the one?
MR HASSALL: Yes.
GUMMOW J: That is the joint judgment of Justices Beaumont, Burchett and Hely?
MR HASSALL: Yes, your Honour. Moving away from the distinction issue, the fourth element of presenting the case, your Honours, is we would seek, perhaps boldly, to submit that this Court might revisit, or elaborate, the principles that it laid down in Crowl and to apply them to the present statutory regime for bankruptcy notices in a much more nuanced way than the approach taken by the Full Courts in Australian Steels and in the subject appeal below. We would seek to propose a way of still stating a workable test based on Crowl’s Case, even under the new statutory regime of Form 1 and regulation 4.02 in the Bankruptcy Regulations.
The workable test that we would propose is one which has been proposed in observations by Mr Ash in an article dealing with the Australian Steels decision of which we have supplied to the Court a copy. That copy appears at the very end of the attachments to our written submissions.
KIRBY J: It is not the very end. The very last one was Mr Cavanagh’s article which was an earlier effort.
MR HASSALL: I am sorry, your Honour, the earlier one. We included that because Mr Cavanagh’s article preceded Crowl. Mr Ash’s article comes after Australian Steel and comments on it. At page 57 of that article, your Honours – the appellant would adopt as a proposed test – and I am perhaps coming to this a little early, your Honour, but since your Honours have inquired about it. Mr Ash there proposes that – three questions are thrown up when you look at section 306. You have to ask whether a notice is defective or irregular. If so, is the irregularity substantive or formal, and then if it is only formal, “has it occasioned substantial and irremediable injustice”.
The proposal for the test is that if the notice does not follow the prescribed form, either on its face, that is, by omitting something, or part of the form that is required to be included, such as the debtor’s name or the creditor’s name, for instance, or an expression Mr Ash uses of “in its face”, by which is meant there is a purported following of the notice which on further inquiry is incorrect. For instance, interest is given, but is wrong, then there is a defect.
Now, so far, your Honour, we would submit that the notice here is defective in that sense. Your Honour the Chief Justice has referred to apparent inconsistencies which we have sought to answer by reference to the actual dates given, but the misnomer or misdescription of section 83A instead of the correct section, section 85, in our submission, is a defect that “there is a purported following of the [form of] notice” – perhaps it would have been better to say, “a following of the form of notice which on further inquiry is incorrect, eg, interest is” – an erroneous section is given. That is the first portion. Then:
If there is a defect or if there are defects, is the notice thereby objectively capable –
picking up the words used in Crowl –
either of misleading or embarrassing the debtor –
How, as his Honour Justice Gummow asked earlier, “in the manner” –
as to the manner in which he or she may comply with its requirements –
that is one level but then one could take it to a deeper level –
or of positively and significantly misleading him or her about the effect of such compliance –
which is a slightly different thing. Of course, your Honour, I am reading from a learned author. It is not a statute. The next:
If the answer is yes, the notice is bad.
Then fourthly:
If the answer is no, the defect is merely formal, and will only be bad if the answer to the question, “has it occasioned substantial and irremediable injustice” –
under section 306, picking up those words would –
be yes.
GLEESON CJ: Can I just go back to the second part of that test?
MR HASSALL: Yes, your Honour.
GLEESON CJ: The majority in the Federal Court in the case that you want to revisit said the purpose of this requirement, the requirement being the requirement in the regulations and the form that if interest is claimed, the document must state the provision under which the interest is claimed, they said the purpose of that is to enable the debtor, or the debtor’s lawyer perhaps, to check the validity, if I can use that expression, of the claim because by hypothesis this is not within the amount of the judgment. You are claiming an amount under a judgment, you have judgment for that amount, and now you want something extra – interest – and you must state the provision under which the interest is claimed. It is said the reason you must do that is so that the debtor can check up on your claim. Suppose the debtor checks up on your claim and finds that it is unwarranted or unjustified, what are the courses then open to the debtor?
MR HASSALL: To set aside the bankruptcy notice, your Honour.
GLEESON CJ: To move to set aside the bankruptcy notice?
MR HASSALL: To move to set it aside. This ties in with what I was submitting earlier, your Honour, that, in our submission, deliberate use of the word “claimed” through the formal notice seems to reflect a desire in the drafter to preserve an element of margin for error, but also the notice could be challenged.
GLEESON CJ: Where do we find the grounds for moving to set aside a bankruptcy notice?
MR HASSALL: The application can be made to the court to declare whether the bankruptcy notice is valid or not within the terms of section 41(2) of the Act.
GLEESON CJ: How can it be a comprehensive statement that it is to be asked whether it is capable of misleading the debtor as to the manner in which he may comply with its requirements or of misleading him about the effect of such compliance if a problem is that you are misleading the debtor about the validity of the claim being made in the notice?
MR HASSALL: Our response to that is, your Honours, if there were no provisions stated – of course, that is not the case your Honour is putting. I rather perceive that your Honour is suggesting a case like this, where there has been a misdescription of the section and that that then leads to a conclusion that the claim is not a claim that can be justified. We would submit, your Honour, that, in fact, in a case like this the fact that it is post‑judgment interest that is sought is sufficiently identified, a provision ‑ ‑ ‑
GLEESON CJ: I was not intending to ask you a question about the particular facts of this case. You were inviting us to make a decision embracing that test in Mr Ash’s article and I am raising what appears to me perhaps possibly a difficulty about the test because I do not at the moment understand how that test would comprehend the problem that is said to exist in the present case, which is not a problem about the debtor knowing what the debtor has to do to comply with the notice or a problem of misleading the debtor about the effect of compliance but, rather, a problem about misinforming the debtor about a matter relevant to the debtor’s assessment of the validity of the claim.
MR HASSALL: Your Honour, our response is, depending upon the nature of the defect, the degree of it, the extent to which it leaves the debtor confused, and we would submit, that in an instance where the bankruptcy from its context, the expressions used in Kleinwort Benson v Crowl, if from its context the notice reasonably makes it clear. Otherwise, even though there is a misnomer on this description, we submit that each case must be examined on its own merits, its own circumstances, and the burden of Crowl’s Case was that that is the test that the courts should be looking at in terms of whether it is going to mislead or confuse. One may observe, your Honour, with respect, it is almost inevitable in this matter that there is a certain crossing over. We have criticised what we called a conflation of the essentiality test and the misleading leg.
GLEESON CJ: Crowl was dealing with a slightly different problem. It was dealing with a situation in which, as a result of a mathematical error, there had been an understatement of the interest that was in fact owing, by an amount of some $20,000-odd. It was a problem of understatement and the court said there was no misleading the debtor as to what the debtor had to do to comply with the notice. All the debtor had to do to comply with the notice was to pay the amount claimed in the notice and then, presumably, if there were a subsequent bankruptcy, the creditor would have to prove in that bankruptcy for the difference. Indeed, in Crowl, as I understand it, they said it is not materially different from a case where a creditor just does not claim interest at all although interest is owing – of course, that is always open to a creditor.
MR HASSALL: Your Honour is asking about how the proposed test would be comprehensive. It is our submission that the test, whatever it is to be, the appropriate test needs to be one which sits with the language of section 41(2), that language considered in the context of the Act as a whole, having regard even to the presence of section 306. The answer to your Honour’s question really, in our submission, comes back to the point that it still begs the question as to whether the provisions of section 41(2) do indeed make it an essential requisite of a bankruptcy notice that the interest provision referred to in the note to Form 1 is indeed an essential requirement. The Full Court majority in Australian Steel concluded that it was.
Now, we would submit that if that is the test, it has the effect that the slightest misnomer or misdescription of a provision where the creditor is addressing the matter but making a slight error, then that would be fatal and that was the result held in Australian Steel.
KIRBY J: Even a typographical?
MR HASSALL: Even, indeed, a typographical error.
GLEESON CJ: You could make an error in stating the name of the creditor, I suppose?
MR HASSALL: Yes, your Honour, and we submit that the difficulty about such a test is that if the test is to remain as laid down by the majority in the Full Court in Australian Steel it has the difficulty that any number of very minor matters in a bankruptcy notice are potentially likely to be held invalid. In the face of a provision such as 306 of the Act, that the Act when read as a whole one must interpret, in our submission, what the words in section 41(2) say ‑ ‑ ‑
KIRBY J: Had you not better start reading it as a whole? What are the other provisions you have to read as a whole?
MR HASSALL: Yes. Your Honour, in particular section 306. Section 306 of the Act, be it noted, deals with proceedings under the Act, so stated in a general way, proceedings under the Act. Some authors, and occasionally judicially there has been a question as to whether indeed a bankruptcy notice, not being a judicial proceeding, is within the scope of section 306.
KIRBY J: Was 306 in this form when Crowl was decided?
MR HASSALL: Yes, your Honour.
KIRBY J: So it has not been changed?
MR HASSALL: No, your Honour, no. Section 306 has a venerable history, going back to section 147 of the English Bankruptcy Act and so forth, and similar provisions in the 1924 Act in Australia. It deals with proceedings, your Honour. Likewise Part 4 of the Act where section 41(2) occurs is to do with proceedings in connection with bankruptcy.
Now, we submit, your Honours, that the Bankruptcy Act has more than one object or purpose that is discernable upon its face. It sets up a substantive code of bankruptcy law but it also provides machinery for bringing about a bankruptcy.
GLEESON CJ: Is the ultimate question that we have to decide whether the misdescription that appears on page 9 in paragraph (a) is a formal defect or irregularity within the meaning of section 306?
MR HASSALL: Yes, your Honours.
KIRBY J: Why do we need Mr Ash’s rather longwinded formula when we can just apply the terms of the Act of a Federal Parliament?
MR HASSALL: Indeed, your Honour, we are only proposing the test that Mr Ash proposes because it breaks down into more elements, as it were, the considerations, but it is based upon, in our submission, a recognition, the burden of that test that Mr Ash proposed. It is based upon a recognition that section 306 in itself – Parliament has chosen to retain section 306 in the Act and that that is a factor, in our submission, which must be very strongly borne in mind ‑ ‑ ‑
KIRBY J: You have made that point. We have to read 41(2) with 306 because they are both in the Act and somehow they have to work together.
MR HASSALL: And that section 306 is expressed to refer to proceedings under the Act in a general way.
KIRBY J: It has not been altered by the privatisation of the bankruptcy notice, has it? It is still part of the proceedings?
MR HASSALL: In our submission, yes, your Honour, because it is a proceeding under the Act in that sense, even although it is not a curial proceeding. We would submit that the registrar who formally ‑ ‑ ‑
GUMMOW J: You rely on the heading to Part IV, do you not?
MR HASSALL: Yes, the “PROCEEDINGS IN CONNEXION WITH BANKRUPTCY”.
GUMMOW J: It describes proceedings in respect of bankruptcy a whole range of things including these steps?
MR HASSALL: Yes, your Honour. In response to the question about whether the effect of the privatisation has had an effect, the registrar, in our submission, who formerly issued the older form of bankruptcy notice was a ministerial officer albeit attached to a court. The Registrar in Bankruptcy, when performing that function, in our submission, is in no different a case than an official receiver who is appointed to issue the notice.
GUMMOW J: The Chief Justice was asking you earlier, what is involved in these administrative steps? When the court used to do it there was an examination before it was issued. Defects sometimes would be pointed out and they would have to go away and do it again. Does that still happen now, with the new system?
MR HASSALL: My understanding is, your Honour, that there is no formal system of requisitions as such, as there used to be in the court, but that informally an official receiver may indicate that this notice is really not in a correct form, but whether that happens in more cases than less I am unable to inform your Honours. It seems to be that the practice is simply that the requisite number of notices is prepared and it is either taken to the official receiver or sent under the cover of a letter requesting the issue of the notice. There is no form of application for a notice as there used to be under the old system. The engrossments of the notice are ready to be signed. The boxes are filled in, the documents are taken with a request to issue a notice.
GLEESON CJ: But is the point of departure between different judges in the Federal Court ultimately all to do with the question whether in a case such as the present the misdescription, misstatement or failure to state the section of the Act under which the interest post-judgment accrues is a formal defect or irregularity of the kind referred to in section 306. Is that the issue?
MR HASSALL: Yes, your Honour. There is also the issue as to whether it is an essential requirement of the Act.
GLEESON CJ: But that is just another way of stating the issue, is it not?
MR HASSALL: Yes, your Honour.
GLEESON CJ: The prevailing view in the Federal Court is it is not, it cannot be a formal defect or irregularity because it is a failure to comply with an essential requirement of the Act.
MR HASSALL: Yes, your Honour. That view is taken on the basis, your Honour, of the Full Federal Court majority’s interpretation of section 41(2) read in the light of the regulations and Form 1.
GLEESON CJ: But whether they are right or wrong, you are saying this is a formal defect or irregularity ‑ ‑ ‑
MR HASSALL: Yes, your Honour, because it is ‑ ‑ ‑
GLEESON CJ: Apply section 306. They are saying this is not a formal defect or irregularity. It is a failure to comply with an essential requirement.
MR HASSALL: Yes, your Honour.
GLEESON CJ: That is the battleground.
MR HASSALL: We rely, really, on both legs, your Honour. We say that it is not on a proper construction of section 41(2). It is not an essential requirement because all that subsection requires is that the notice must be in accordance with and we submit that the ordinary meaning of “be in accordance with” means substantially in accordance with even without resort to section 25C of the Acts Interpretation Act.
We submit that the plain meaning of the words “in accordance with” means substantially in accordance with and if there is a minor departure, a minor defect, formal or otherwise, it can still be said that the notice answers the requirements in section 41(2), because that subsection only requires that the notice must be in accordance with and we submit, your Honours, that “in accordance with” means just that. It does not say “in strict accordance with”.
Admittedly, your Honours, the change, if there is a change between the time of Crowl, the similar statutory provision used exactly the same words but it said “shall”, the notice “shall” be in the prescribed form. Then the sections which were later deleted by the 1996 amendments, they described what kind of prescribed form may be prescribed. Now, we are back to a simple one-liner, your Honour, if I may use that expression, the notice “must” be in accordance with the prescribed form, which is Form 1 at the current time.
HAYNE J: The propositions you make about substantial accordance and the like seem to me, at first blush, to be no more than restating the problem using other words. Is not the relevant point at which to begin to go to the prescribed form to see what it contains or requires and to ask whether that which was produced here sets out those necessary elements?
MR HASSALL: One could do that, your Honour. The difficulty would be, in our submission, that the prescribed form, in terms of section 41(2), could vary from time to time.
HAYNE J: No doubt it could but here you go to the form, you find in the notes to the form that the document must state the provision under which the interest is being claimed. This notice stated a provision but the provision it stated was not the provision under which the interest is being claimed. Words like “substantial accord”, “formal defect”, and the like are words of conclusion characterising a particular result. What is wrong with looking to the form, analysing it in the way I have and concluding that which was produced here did not do what the form said, namely, state the provision under which the interest is being claimed.
MR HASSALL: Firstly, your Honour, the appellant would respond with this that, in a sense, the subject bankruptcy notice did state the provision under which the interest was being claimed in the bankruptcy notice and in the attachment. Erroneously, yes, your Honour, but we submit that the requirement, if one wants to focus upon the requirement of note 2 to Form 1, the requirement, if one reads the language there, is simply that the notice must state the provision under which it is claimed, not the provision under which it is payable.
GLEESON CJ: To observe that there has been a failure to comply with the statutory requirement tells you that there has been a defect or irregularity.
MR HASSALL: Yes, your Honour.
GLEESON CJ: By hypothesis, section 306 is dealing with failure to comply with statutory requirements of which there are a multitude in the Act. Question – now that you know you have a defect or irregularity because there has been a failure to comply with a statutory requirement, is it or is it not one of the kind for which section 306 provides relief?
MR HASSALL: We would submit, your Honour, on the authorities of Crowl and Pillai it is a defect of the kind that section 306 could cure, and I was going to respond to the second part of his Honour Justice Hayne’s question to me that his Honour indicated why would one not look at the form first or the regulation first in order to discern the meaning of section 41(2).
HAYNE J: No, that is not what I was putting, no, not to discern the meaning. Section 41(2) says “must be in accordance”. You would say must be in substantial accordance with the form. The form is set out. What I direct attention to is that the form provides, for example, state the name of the debtor. Let it be assumed that the name of the debtor is mistyped. It does not therefore state the name of the debtor. It is not Michael John Smith, it is Michael Jack Smith or whatever the problem, defect, irregularity. It does not state the name of the debtor. Contrast that with the note to the schedule, “The document must state” something. Now, that is, is there not within the form and its specification an internal specification of that which is essential, not formal defect or irregularity, whereas the misspelled name or the like may be a formal defect or irregularity or most certainly would not.
MR HASSALL: Our submission in that regard, your Honour, is that if one is examining the matter the presence of the word “must” in note 2 to Form 1 and the presence of the word “must” in section 41(2) does not add, in our submission, very much to a landscape in which there have been, even in the earlier forms of the Act, something shall be, the notice shall be in accordance with the form, and we do, with respect, submit that the matter comes back to what section 41(2) requires as to what the notice shall accord to. It shall accord to the prescribed form, and we submit that in judging the question or in determining the question as to the meaning of section 41(2) of the Act one has to have regard to the existence of section 306 and also Parliament’s retention of it, and if one then goes to the note 2 in Form 1 and one examines its actual terms, it only requires that the attachment to the notice which, in our submission, is not the notice itself, must state the provision under which interest is claimed, and we submit that the notice here answers that description.
GLEESON CJ: You are not submitting, are you, that there is no defect or irregularity here?
MR HASSALL: There may be no defect, that may be the conclusion, your Honour. There may be in fact an absolute compliance with the terms of the notice, and if indeed, when one goes back to Crowl’s Case and the former appearance of the words “so claimed” we do submit that there seems to be an element of deliberation if one goes and looks again – if I can take your Honours back to page 5 of the appeal book, and the form of notice itself as filled in in this case, that the expression “amount claimed” and “interest being claimed” and the “amount of interest claimed” and the provision under which it is claimed ‑ ‑ ‑
CALLINAN J: Are you saying that “claimed” has a different meaning from “payable”?
MR HASSALL: Indeed, your Honours, and that it appears to have been in the form and the notes to it appear to have deliberately chosen to use that expression to avoid the words like, as in, for instance, a tax assessment, “due” or “payable”. It says “claimed” and we do submit that that is in a like case to the expression “so claimed”, which was an element in Crowl’s Case.
CALLINAN J: Well, if that is right, you could be claiming it under any Act and you would say it would still be an Act, no matter how remote from the appropriate Act, and you would still have a valid notice.
MR HASSALL: That is so, your Honour, and, indeed, if upon a proper reading of those sections that is the result, it would seem a very strange result. But, then again, your Honours, to many judicial minds the result in Australian Steel seems a very strange result against the background of the Bankruptcy Act.
GLEESON CJ: But we know that the statement is wrong. We know that interest was not claimed pursuant to section 83 A. Interest was claimed pursuant to section 85.
MR HASSALL: Yes, your Honour.
GLEESON CJ: Now, there may be a question “So what?” But we know – to avoid using the words of the statute for a moment – there is something wrong with this bankruptcy notice. How serious the error, what the consequence of the error is, is another question, but there is no avoiding the fact that there is an error, is there?
MR HASSALL: Your Honour, on a plain reading of paragraph (a) to Note 2, the requirement is only that the interest needs to be claimed. We are speaking of the claim for interest. Now, if one bears in mind that it may be a lay creditor who is claiming the interest. Now, the lay creditor, if one can move away from the statutory words for a moment and consider what happens on the ground, if I may use that expression, that a lay creditor, as your Honours posited earlier, has obtained a judgment that contains a form of bankruptcy notice and goes along and fills it in and seeks to have it issued and the question arises as to whether there is an interest claim. Admittedly, it is true that one could decide to simply claim the amount of judgment but the amounts, depending on the amount claimed – in this instance it is a very small amount, but it may be a very large amount and there may have been a gap in time that leads to a large amount of money and ‑ ‑ ‑
KIRBY J: But your point is that the lay creditor imperils the whole process by making some mistake which a lay creditor might be quite innocent of as to the section or the Act or the name of the Act.
MR HASSALL: Indeed, your Honour.
KIRBY J: It seems a very odd result in this day of enlightenment.
MR HASSALL: It is, your Honour.
KIRBY J: Unless there is something in bankruptcy history and purpose, such as status, that demands this exquisite strictness.
MR HASSALL: Your Honour, in that regard it is of some note, in our submission, that the Full Court majority in Australian Steel speaks about purpose but speaks about purpose, with respect, in only a limited way. It seems to speak about a purpose that is immediately discernible from a reading of section 41(2), regulation 4.02 and the notes to the form. It would seem, in our submission, even although the majority refers to the holdings of this Court in Project Blue Sky, the Full Court majority in Australian Steel, in our submission, has placed undue emphasis, with respect, on the presence of the word “must” in section 41, the presence of the word “must” in the note to the form and, indeed, the very presence of Note 2 occurring in any event.
If one looks on page 5, your Honours, and see that the notes are headed “For the Information of the Creditor”, they are notes to the schedule ‑ yes, they are in the form, but they are directed to the creditor, for the creditor, presumably when filling in the form. We would submit that where the draftsperson is setting up a regime that will operate both with the lay creditors and to legally trained representatives of creditors, the broader expression “claimed” is used, in our submission, with some deliberation in order to preserve a measure of a margin for error.
KIRBY J: But your point on the purpose is that the purpose is not only protecting the bankrupt or the debtor but protecting creditors and the community generally.
MR HASSALL: And that the Bankruptcy Act evinces a set of machinery that, including section 306 and including section 41(2), to facilitate in a reasonable balance between exactitude and care and the recognition that human error occurs even with the best intention.
GLEESON CJ: Mr Ash in his article, as appears from page 57 that you have already referred us to, presents the ultimate issue as being one thrown up by section 306 of the Bankruptcy Act, is that correct?
MR HASSALL: Yes, your Honour.
GLEESON CJ: Is that the way what I will call the minority judges in the Federal Court have also identified the issue? I am talking about the ultimate issue, not about the arguments that one considers on the way to the resolution of the issue.
MR HASSALL: My understanding and reading – is your Honour is referring to the minority in Australian Steel.
GLEESON CJ: Those whose view has not prevailed.
MR HASSALL: Yes. It is our submission that those judgments have taken the view that the majority’s identification of the requirement as being an essential one is in error and also, your Honour, that section 306 can apply.
GLEESON CJ: Whether you are right or wrong, you have to apply section 306 to succeed, do you not, unless you adopt your argument that there is nothing wrong with this bankruptcy notice?
MR HASSALL: Inasmuch as, your Honour, there is a misdescription, yes.
KIRBY J: Your first line of defence is it is in accordance in the meaning that you want to give to “in accordance”, but your second line of defence is if it is not in accordance then you call in aid section 306?
MR HASSALL: Indeed, your Honours.
GUMMOW J: Weir’s Case is an illustration, is it not?
MR HASSALL: Yes.
GUMMOW J: If we look at 98 FCR 447, they said that the prescribed form, when correctly understood, does not require the personal signature of the applicant – there was not the personal signature in that case, there was something else – so they said the notice was okay. Then they went on to say, at page 455, how they would apply 306 if they had got to 306, but they did not get to 306 because there was no formal defect or irregularity. What is being put to you is this is not a case like Weir. In other words, you cannot get away just from the first step as they got away in Weir, you have got to get to 306. That is what is being put.
MR HASSALL: Yes, your Honour, inasmuch as it is clear that the letters 3A are in error, we would submit in relation to section 306, your Honours, that it is noticeable that the wording in section 306, in our submission, deals with both formal defects, defects as to matters of form, and also irregularities in the wider sense.
GLEESON CJ: The form says, as Justice Hayne pointed out, that you must state the provision, and what you have done is misstate the provision. Question: where do we go from there?
MR HASSALL: The question, in our submission, comes back to section 41(2), whether the bankruptcy notice itself is in accordance with the form.
HEYDON J: Let me see if I can encapsulate your argument in this way. First of all you say this notice did accord with the form because the error was not in the notice, it was only in an attachment to the notice.
MR HASSALL: Indeed, your Honour, that is one of our submissions.
HEYDON J: The second point is, if it is in the notice, the notice accords with the form because by a process of construction it is plain that it was not referring to section 83A but to section 85 and that process of construction depends on looking at the date of the judgment and the five days for which the $13 per day is claimed.
MR HASSALL: Yes, your Honour.
HEYDON J: Your third point is – and I do not have a very firm grip on this point – is that “accordance” means “in substantial accordance”, and this may be a mistake but in substance most of what was needed was done and, if that fails, you then say this is either a formal defect or an irregularity and it caused no substantial injustice whatever.
MR HASSALL: Indeed, your Honour.
HEYDON J: Is there anything more to it than that?
MR HASSALL: Indeed, your Honour, with respect, the appellant would adopt that formulation of our submissions and the ‑ ‑ ‑
GUMMOW J: Now, where does section 25C of the Interpretation Act fit in that series of steps?
MR HASSALL: We would submit, your Honour, that the ‑ ‑ ‑
GUMMOW J: Which one of the steps that Justice Heydon just took you to involves 25C? That is what I want to know.
MR HASSALL: The aspect about substantial compliance, your Honour. Section 25C is not excluded, in our submission, by any clear and contrary intention in section 41(2). Your Honour, there is this aspect about section 41(2). The former provision said “shall be in the form”, “in accordance with the form”. The present provision says “must be in accordance with the form”. It is our submission that there is little or no difference between “shall”, which would have been mandatory, in our submission, in any event, under the earlier regime ‑ ‑ ‑
GUMMOW J: It is a shift in drafting style, I think.
MR HASSALL: That is our submission, your Honour, that one can have resort to the Acts Interpretation Act. This is an instance of where the legislature, in our submission, has expressed the same idea in different words. Now, moreover, your Honours, we submit that the Full Court majority in Australian Steel has fallen into error in giving too much attention, in our submission, to the expression “must” to that change in section 41(2).
HEYDON J: Which paragraph are you attacking in Australian Steel (2000) 109 FCR 33? They discuss the purpose in paragraph 42 which is on page 45 but you were attacking their reliance on the word “must”. Now, where is that?
MR HASSALL: Yes, in the form ‑ ‑ ‑
GUMMOW J: Paragraph 41, is it not, the last couple of sentences of paragraph 41 on page 45.
MR HASSALL: Yes, I am grateful to your Honour. The majority’s judgment relies upon the words:
The notice “must be in accordance with –
and that sentence comes after – I am not wanting to read their Honours as a statute but that their Honours refer to certain characteristics. The law is not now the notion of certain characteristics but simply that it “must be in accordance with”.
Now, your Honours, we submit in relation to the presence of the word “must” that it is, in our submission, simply a drafting change and that it does not in substance change the meaning from the former regime of “shall”. However, your Honours, to pay too much attention to the presence of the word “must” after 1996 really begs the question. The question must be must do what – must be in accordance with the prescribed form. That is all that is required.
GLEESON CJ: The argument that succeeded in Kleinwort Benson was an argument that section 306 applied and the dissenting view of Justice Gyles in Australian Steel was that the case was governed by Kleinwort Benson, that is to say, that section 306 applied. So going through the various alternative arguments summarised by Justice Heydon the argument that was accepted by the minority in the Federal Court ultimately is an argument about the application of section 306, is it not?
MR HASSALL: Yes, your Honour, because it is referring to a misdescription.
GUMMOW J: Not in all the cases, though?
MR HASSALL: But as your Honour Justice Gummow says, not in all the cases, and of course, your Honour, the first leg, even in Crowl as to essentiality is an aspect as well. My reading and understanding of the dissenting judges, such as Justice Gyles and Justice Lee, dissent on the basis that the alleged purpose on which the Full Court majority in Australian Steel that identifies is a purpose of giving full strict effect to section 41 that purpose being discerned in the regulations and the form and the notes.
GLEESON CJ: On page 75 of 109 FCR 333 in paragraph 124, Justice Gyles said:
I therefore consider the application of s 306. Is the incorrect reference in these notices to the statute by which interest is payable capable of reasonably misleading a debtor as to what is required to comply with the notice? I agree with Lee J that, in the present case, the answer is no, and agree with his reasons for that conclusion.
MR HASSALL: Yes, your Honour.
GUMMOW J: Where does this notion of misleading the debtor come from? It is a gloss on section 147 of the 1914 British Act, is it?
MR HASSALL: Yes, essentially, I would submit, your Honour, it is encapsulated in Pillai.
GUMMOW J: Which is the ancestor of 306.
MR HASSALL: Yes, and the origin of that expression, of that test, appears to have come up in the decisions based on section 147 of the English Act and the decisions under section 306 and the major example would be Pillai’s Case and the thing about Pillai’s Case, your Honour ‑ ‑ ‑
GUMMOW J: That is a Privy Council case from Mauritius or somewhere, is it not?
MR HASSALL: It is from Malaysia, your Honour, and I seek to cite it. It is Pillai v Comptroller of Income Tax [1970] AC 1124 and in that decision, your Honour, if I could take your Honours to that decision, particularly at page 1135 of that decision, the decision was delivered by Lord Diplock.
GLEESON CJ: You start at 1134, do you not, with section 131 of the bankruptcy ordinance?
MR HASSALL: Yes, and the Malaysian statute being the equivalent of the English provision. The interesting and important thing in that case, your Honour, in our submission, is that the requirement that was under consideration was a requirement which was found to be a statutory requisite. There are a number of statutes of Malaysia at the time that are referred to because of changes in legal regime, but in the end of the matter the Privy Council held that it was a statutory requirement that bankruptcy notices be signed and that there be a reference to the Chief Justice or to the Yang di-Pertuan Agong who, our researches have revealed, is the elected king or the paramount sultan, and that this was a requirement and an express requirement, a statutory requirement, an essential requirement in one sense if one were to say that, but the Privy Council held that, no, given the presence of the relieving provision this was not an essential requirement.
GLEESON CJ: But if it had not been a requirement what would have been the defect or irregularity?
MR HASSALL: If it had not been, your Honour?
GLEESON CJ: Yes. By hypothesis a defect or irregularity involves a failure to comply with some requirement.
MR HASSALL: Yes, your Honour.
GLEESON CJ: Otherwise, why would it be a defect or irregularity?
MR HASSALL: Yes, it is a departure, your Honour. Only in this much, your Honour, that it appears in decisions such as the Australian Steel decision there seems to be an attempt to heighten or to elevate certain features of the bankruptcy notice form into a more essential item than others.
GLEESON CJ: And to say therefore it is not merely formal.
MR HASSALL: Yes, your Honour. Then, your Honour, we would submit that in the Australian context the word “irregularity” then comes into play and section 306 speaks to and cures, not only formal defects, but also any irregularity, in our submission.
HAYNE J: “Irregularity” is a word that has a long history everywhere from companies legislation to Rules of Court and is often, I think, used in contradistinction or with the epithet “mere” attached to it in contradistinction to “fundamental defect”.
MR HASSALL: In that regard, your Honour, if I could take your Honours at this point to the text of section 306 and a copy of section 306 most accessible as an annexure to the appellant’s written submissions. The wording of section 306 is:
Proceedings under this Act are not invalidated by a formal defect ‑ ‑ ‑
qualifying “formal defect” ‑ ‑ ‑
or an irregularity -
and it is our submission that the word “formal” does not necessarily qualify “irregularity” so that it is not, in our submission, a case where the section 306 deals with mere irregularities. We are submitting that section 306 can apply to an irregularity in the highest sense.
GLEESON CJ: Do you have any quarrel with what Lord Diplock says at page 1135E:
proceedings in bankruptcy may be so defective as to render them a nullity notwithstanding that no substantial and irremedial injustice has in fact been caused by the defect. The section draws a distinction between such a defect and a “formal defect or irregularity.” It is only the latter which are validated by the section, provided that no substantial and irremedial injustice has been caused.
That is an accurate statement of the ultimate issue, is it not, which involves a question of statutory construction?
MR HASSALL: Yes, your Honour.
GLEESON CJ: On the true construction of the Act and regulations, is the misstatement that occurred here something that made the notice so defective?
MR HASSALL: We would submit not, your Honour, that the misdescription is such in the context of the notice that it could not reasonably objectively have misled and that it is at base a mere misdescription or a misnomer.
KIRBY J: Can you give an example of a defect which would be so substantial that it goes to the heart of the proceedings in bankruptcy and that would not be rescued by any of the three steps that you have propounded?
MR HASSALL: That would not be rescued, your Honour?
CALLINAN J: If the amount of the interest were grossly overstated that would ‑ ‑ ‑
MR HASSALL: If it were grossly overstated, your Honour, then section 41(5) would save it, in our submission. As your Honour asked the question it was going through my mind what kind of examples and I immediately thought difficulties as to amount may not be illustrative.
GLEESON CJ: Let me give you an example. Suppose the bankruptcy notice misstated the address to which the amount involved should be paid so that a person who received the notice might pay the cheque to the wrong address and it would never get to the creditor.
MR HASSALL: As was the defect or vice of the notice in James’ Case, your Honour, additional words, that the notice was cast up in such a way that it did not leave open the statutory means of approaching both creditors.
KIRBY J: But what if it had the wrong floor of 39 London Circuit?
MR HASSALL: Or something like that. That would be a misnomer of address. The difficulty would be there, your Honour, that one would then have to look at the context of the notice. The difficulty there is that if there were no one there authorised to accept payment and to give a receipt – for proper discharge for the moneys, but, of course, the ‑ ‑ ‑
KIRBY J: Assume no one is there on level 2 but if they look up on the noticeboard downstairs they find the accountants are on level 4.
MR HASSALL: Yes, the cases recognise the concept of the reasonably diligent debtor and that is also in a notion of the context of the notice is not limited only to its four corners.
KIRBY J: You have to postulate a case where there is no relief in order for there to be room for the section to give relief. So we have to have in mind something where you do not get relief if you get your notice wrong.
MR HASSALL: Yes.
HAYNE J: In considering the relieving provision it may be important not to conflate the two inquiries which are required under section 306 or the provision considered in Pillai, and at least a possible point of view is that his Lordship does conflate them, as can be seen in what appears between F and G at 1135 where his Lordship says:
If, on the other hand, it –
that is the defect –
could not reasonably mislead the debtor it was a formal defect and validated by the section.
I can understand questions of misleading the debtor being of particular relevance to the question of whether substantial injustice has been caused by the defect or irregularity, but that is an inquiry separate from the inquiry required by the first part of the provision for formal defect or irregularity. It seems to me at least open to the view that his Lordship simply conflates the two and says the only question to be considered is, could it reasonably have misled the debtor? If his answer could not reasonably have misled the debtor, what is left in the second inquiry? Not much.
MR HASSALL: Yes, your Honour, the grosser instances that one could think of in terms of defects – at any rate, your Honour, we would submit that the defect in this case is of a kind which is of a relatively minor nature, albeit ‑ ‑ ‑
KIRBY J: I know you say that and you have some evidentiary material that supports that within the form of the document itself, but you have to get in your mind something which is insusceptible to curative provisions or that is certainly not “in accordance with” the form now.
GLEESON CJ: What about a bankruptcy notice that failed to inform the debtor that he could apply to have the bankruptcy notice set aside, or one that failed to inform the debtor that if he had a counterclaim, set off or cross‑demand he could do certain things, or one that failed to inform the debtor of the time for compliance with the bankruptcy notice, or one that misinformed the debtor as to the time for compliance with the bankruptcy notice?
MR HASSALL: If your Honour would – on page 2, for instance, paragraph 3, if the alternative (a) or (b) were left out, the alternative of making an arrangement with the creditor, for instance, that, in our submission, would be an incurable defect.
KIRBY J: I am feeling more comfortable once we have some things which are so defective that they cannot be cured by – we are not going to give a complete free run for sloppy drafting.
MR HASSALL: Indeed, your Honour.
HEYDON J: Would that be curable in the sense that the injustice could be remedied by an order of the court, namely, an extension of the time within which to comply with the notice?
MR HASSALL: The example just given, your Honour?
HEYDON J: Yes.
MR HASSALL: I would rather think, with respect, your Honour, that if an application were made to set aside the notice, time might be allowed, but the question would be whether the notice would be allowed to be amended. My submission would be that to leave out paragraph (b), for instance, would, in my respectful submission, be a fatal defect.
GLEESON CJ: This really would be a case where time would be of the essence because it is the failure to comply with the bankruptcy notice that is the act of bankruptcy.
MR HASSALL: Yes, indeed, your Honour, and that, in our submission, is why the expression “misleading the debtor” as to what the debtor must do in order to comply with the notice has been the touchstone, if you like, of the test as to whether it misleads or not.
GLEESON CJ: The date of commission of the act of bankruptcy has all sorts of significance in relation to principles of relation back and the rights of creditors and other people.
MR HASSALL: Yes, your Honour, and so that in that sense, indeed, James’ Case ‑ ‑ ‑
GLEESON CJ: What is the reference to James?
MR HASSALL: James v Federal Commissioner of Taxation (1955) 93 CLR 631 and I would just refer your Honours to the ‑ ‑ ‑
GLEESON CJ: That provides an answer to Justice Kirby’s question. It is a decision of this Court that a particular form of defect in a bankruptcy notice was not a formal defect or irregularity.
MR HASSALL: Yes. The problem there was that the notice itself did, indeed, not allow certain statutory options of approaching the creditor and it also limited the place at which payment could be made. It is a case argued by the late Chief Justice Wanstall. The passage at page 644 of the report, your Honours, the Court there said at about point 3 of the page:
But strict compliance with the requisites of a bankruptcy notice is essential to its validity and in these two respects the bankruptcy notice does not comply with these requisites . . . They are breaches of important provisions of s 53.
So there appears in James to be a recognition of a hierarchy of defects. Albeit the observation that fell from his Honour Justice Hayne as to the question of conflation, I sought to submit earlier today that there is perhaps always a difficulty in enunciating these tests of conflating, but that it does appear when one looks at James, for instance, that this Court ‑ ‑ ‑
HAYNE J: It is informed by notions of dividing the litigious world into nullities and irregularities which may be convenient tags to apply after you have followed some chain of reasoning, but they are very difficult terms to take a priori and then argue back from.
MR HASSALL: Understood, your Honour.
CRENNAN J: Mr Hassall, you are essentially saying, are you not, put simply, that the requirement to state the source of the claim of interest is not made essential by the Act?
MR HASSALL: Yes, your Honour.
CRENNAN J: That is your argument in a nutshell, in a sense, is it not, because that is a necessary step before you can characterise the mistake as a formal defect or irregularity.
MR HASSALL: Yes, your Honour. We submit that the majority of the Full Federal Court in Australian Steel has fallen into error in that regard, in our submission.
HAYNE J: Why is not that point answered totally by the terms in which the note is cast? Regardless of whether that is then a sensible decision to make to say you must identify a provision under which.
MR HASSALL: Your Honour, we firstly would submit in response to that that the attachment as to interest is a subsidiary document, in our submission. The former bankruptcy notice post 1966 has no doubt been drafted against the background of the existing Australian law – Crowl’s Case, James’ Case, Pillai and so forth, or at least to the extent that Crowl’s Case refers to Pillai, and that in casting up the notice it is notable that the interest provisions are only referred to at one point and that is in what I called the boxed schedule on page 5 of the bankruptcy notice addressed to Mr Lambert.
If claimed in this Bankruptcy Notice, interest accrued since the date of judgments -
and so forth and then the note follows underneath that. But the thing that identifies the details is a separate document and it is notable that the drafter in preparing the form of Form 1 has not made the requirement as to interest, has given it no greater prominence, in our submission, in the actual body of the notice itself other than by means of this note. It is added on to for the purpose of explaining portion of the form and it is not, in our submission, part of the form itself. It is expressed by those very provisions to be a separate document, admittedly, a document, I think, we would have to concede, part of the context of the bankruptcy notice but, in our respectful submission, not part of the bankruptcy notice itself if one is examining things to that level of precision as the notes state.
GUMMOW J: Section 306 derives, in fact, much earlier than I thought. It derives from section 82 of the English Bankruptcy Act of 1869 which is in the same terms, essentially, except that the phrase was “invalidated by any formal defect or by any irregularity”. So it distinguished.
MR HASSALL: And used the word “any”, if I heard your Honour correctly.
GUMMOW J: Yes, that is right. Then that was carried into section 7(1) of our 1924 Act but then something happened in 1966.
HAYNE J: I think you will find equivalent provisions in Rules of Court of that time which led to this great welling of cases about what are nullities and what are mere irregularities.
KIRBY J: And that bears some analogy with what is mandatory and what was directory in the old way of trying to analyse these problems. But in accordance with what we have said in a lot of other things the real test is to go back to the statute and try, if you can, to discern from the statute how the whole system is supposed to work in this particular case, this case being bankruptcy.
MR HASSALL: Indeed, your Honour. In the decisions in Australian Steel both the majority and the minority referred to the decision of this Court in Project Blue Sky Incorporated v Australian Broadcasting Authority (1998) 194 CLR 355, and in that case, your Honours, the Court did make very clear that in taking a purposive approach rather than – once the Court had jettisoned the elusive distinction between mandatory and directory that in then moving to a purposive approach the Court in Project Blue Sky indicated that one must look at the language of the relevant provision and the whole ‑ ‑ ‑
KIRBY J: Unfortunately that states the problem. It does not solve it for us because on the one hand you can say, well, bankruptcy notices have to be very strict because they affect status and the bankrupt is entitled to know that before any step is taken. As against that, we have the public purposes of bankruptcy and not to be defeated by a technical knockout without any merit that could be just a typographical that is typed up by a secretary. If that is to defeat the whole process, well that is a very odd result in this age.
MR HASSALL: Our submission in that regard is, your Honour, that albeit that the Full Court majority in Australian Steel did refer to Project Blue Sky, we submit that Project Blue Sky, the principles there provide, in our submission, guidance at all times for examining – there are some distinctions. It was the question of the consequences of the breach of the failure to comply with the condition for the exercise of statutory power, whereas the question in this case before the Full Court in the Australian Steel Case in the court below, and now before this Court, is the question of what does section 41(2) actually require in order to comply with it. There is a slight difference. The statutory provisions, in our submission, were somewhat more complex in the Project Blue Sky Case, but our submission at all events is, your Honour, that that case had two prongs, both the language of the section and the scope of the Act as a whole.
Now, we submit that the Full Court majority in Australian Steel has not given adequate regard, in our respectful submission, to the Parliament’s retention of section 306 in the structure of the Bankruptcy Act in a matter relating to proceedings when deciding what section 41(2) actually in truth requires.
GLEESON CJ: You are not suggesting, are you, that section 306 bears upon the construction of section 41(2)?
MR HASSALL: Yes, your Honour.
GLEESON CJ: You only get to section 306 on the assumption that there is a defect or irregularity?
MR HASSALL: Yes, your Honour. However, your Honour, we do submit that because both section 306 and section 41 – section 306 deals with proceedings under the Act, and we would submit that it is a relevant other part of the Act which ought to be taken into account if one is construing the words used in section 41 ‑ ‑ ‑
GLEESON CJ: But you are not setting out to persuade us, are you, that this bankruptcy notice did not have to state the provision under which the interest was claimed?
MR HASSALL: No, your Honour.
GLEESON CJ: And it is the fact, is it not, that this bankruptcy notice misstated the provision under which interest was claimed?
MR HASSALL: Yes, your Honour.
GLEESON CJ: And we are concerned with the consequences of that?
MR HASSALL: Yes, your Honour.
GLEESON CJ: Whether it was formal or not, it was a defect or irregularity, was it not?
MR HASSALL: Insofar as it was a misdescription, your Honour, yes.
KIRBY J: Was this issue looked at by the Law Reform Commission in the Harmer Report or does it ante-date the Harmer Report?
MR HASSALL: It ante-dates that report, your Honour.
KIRBY J: I have noticed various documents coming out of bankruptcy administration in the Attorney-General’s Department dealing with problems. Has there been any document from that department that deals with this problem?
MR HASSALL: Not that I am aware of, your Honour, and in terms of legislative response there does not appear to have been any change made to these provisions.
KIRBY J: That is not unusual. I am not surprised at that at all.
GLEESON CJ: Your complaint, as I understand it, is that the majority in the Australia Steel’s Case did not follow Kleinwort Benson. Do you not need to take us to Kleinwort Benson and do you not then need to take us to what the majority said about Kleinwort Benson to make that proposition good?
MR HASSALL: Yes, your Honours. Can I take your Honours to Kleinwort Benson Australia Limited v Crowl (1988) 165 CLR 71 and, in particular, to the passages at pages 79 to 80:
The authorities show 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: James v Federal Commissioner of Taxation; Pillai. In such cases the notice is a nullity whether or not the debtor in fact is misled: In re A Judgment Debtor, 530 of 1908.
If the amount specified in a bankruptcy notice is in fact due and payment is claimed in accordance with the judgment –
that expression, your Honour, is one of the jettisoned expressions. There was also a requirement that it be claimed in accordance with the judgment. The provision now is simply that the notice be in accordance with the form –
the essential requirements of s 41(2)(a)(i) – the only requirements presently relevant – are met. Understatement of the amount due, whether it be an understatement of the judgment debt or of interest payable thereon, will thus constitute a defect which is substantive rather than formal only if the understatement is objectively capable of misleading the debtor as to what is necessary for compliance with the notice.
It may be that, in a given case, understatement is capable of misleading the judgment debtor particularly if the notice is capable of producing uncertainty as to whether the debtor is required to pay the amount in fact due or the amount specified in the notice. In such a case uncertainty arises, not merely from the understatement, but from the understatement in the context of the particular bankruptcy notice. No such uncertainty arises if it is clear that payment of the amount specified in the notice will constitute compliance with the notice.
It is our submission that it was clear in the subject notice that payment of the amount specified would be compliance with the notice, with its terms, with its requirements in paragraph 3 of the notice and the interest which is ‑ ‑ ‑
KIRBY J: Here you have just got the little mistake in the section – that is the main non‑compliance – but what if a person miscalculated the amount of the interest and claimed the wrong amount? Now, say it was $1 different, they just transposed or they misread their calculator, and then say it is $100 or $1,000. When does it become such that it cannot be relieved?
MR HASSALL: In terms of amount, your Honour, one comes back to the provisions of section 41(5). If it is an overstatement, even a large overstatement, it will not invalidate the notice, in our submission, because of the express terms of section 41(5).
GLEESON CJ: In Kleinwort Benson it was an understatement by more than $20,000.
MR HASSALL: Yes, and Kleinwort Benson v Crowl is authority for the proposition that even an understatement of considerable magnitude will not necessarily invalidate the notice.
KIRBY J: That answers my question. Where is the error of the Full Court in applying those principles?
GUMMOW J: Before you leave Kleinwort, I have always had a difficulty with the majority judgment in that case. It is not clear from their reasoning at what stage section 306 gets into the chain and it is not clear at what stage this notion of reasonably misleading a debtor gets into their chain of reasoning either. I would have thought misleading the debtor only gets in when you are in 306.
MR HASSALL: In the second leg, if one may put it that way.
GUMMOW J: Yes, but that is not the way it is approached, I think.
GLEESON CJ: The conclusion is expressed at the top of 81.
MR HASSALL: Yes.
The notice cannot be regarded as capable of misleading and accordingly cannot be said to be a nullity.
GUMMOW J: Yes, but that does not quite square with the bottom of page 79. This statement “is a nullity” is awkward.
MR HASSALL: Presumably it was intended to mean the notice was invalid.
HAYNE J: It means more than that, I think.
MR HASSALL: I am sorry, I have not responded to a question ‑ ‑ ‑
GUMMOW J: I am not challenging the outcome in Kleinwort, it is just the chain of the reasoning. Justice Deane in his dissenting judgment, clearly, I think, at page 82 and so on, talks about ‑ ‑ ‑
MR HASSALL: Your Honour, if I might respond this way, that the discussion of an essentiality requirement in Kleinwort Benson v Crowl and also in Pillai speaks of what is a requirement made essential by the Act. Of course, one needs to bear in mind that under the pre‑1996 regime, the then section 41’s provision stated and identified the characteristics that any prescribed form, to be valid under the Act, had to have.
GLEESON CJ: It was that sentence, at the bottom of 79, that brought you undone in Australian Steel, was it not? The majority pointed to the word “or” and they said, “Here there is a requirement made essential by the Act, end of story”.
MR HASSALL: Indeed, your Honour. The difficulty is that the basis upon which the conclusion was drawn that the Act made this requirement about interest essential, in our respectful submission, is not justified, with great respect, by the terms of section 41(2) which merely requires that the notice must be in accordance with the form. It is at that point, your Honour, that there is a discontinuity, if one could put it that way, that all the Act requires is that the notice must be in accordance with the form. In that event, your Honour, it is our submission that this case comes back to “What do the words ‘in accordance with’ there require?” We would seek to assist your Honours with this in taking your Honours to that point.
I do not seek to detain your Honours with a whole list of cases drawn from words and phrases. I can identify three that appear, in our submission, to be close. There is a case of Re Bunn; Ex parte Bunn (1989) 20 FCR 393.
GUMMOW J: Is that on our list?
MR HASSALL: It is not on the list, your Honour, and I did not seek to read from it. I simply refer the Court to it. There Justice Neaves was dealing with the words “in accordance with the judgment” as it appeared in the then section 41(2). His Honour held that the bankruptcy notice before him was invalid on that account because it required the debtor to pay to the creditor’s solicitors when the relevant Family Court order on which it was founded did not so require. However, your Honours, Justice Neaves did not elaborate on the meaning of the particular words “in accordance with” so we submit that that case, although it is germane it is not decisive or relevant.
The next case – and there are only three of them, your Honour, that we would refer you to – is a case of Waycott and Another v Koffler 25 NTR 1. It was a workers compensation legislation context and Justice O’Leary held that the phrase “in accordance with the Act” – his Honour held that by that is meant in a way authorised or provided for by the Act or which can reasonably be said to be in conformity with the Act. His Honour made observations to that effect at page 8.
Now, your Honour, the respondent is not here to make oral submissions and has put in written submissions and there is a duty on the Court to indicate authorities that may be against one, and there is the case, your Honour, of Re LA (1993) 41 FCR 151.
HEYDON J: A duty would apply even if he were here.
MR HASSALL: Indeed, your Honour. I was only saying a fortiori, your Honour. I appreciate your Honour’s point very much. Re LA was an industrial relations case on an application for an inquiry into a ballot, and there Justice Gray considered the words:
An application to the Court . . . for an inquiry must be:
(a)in accordance with Form 11;
and Justice Gray held that that words “must be in accordance with” that they meant in conformity with and he therefore held that they must be “in complete agreement with” at 41 FCR page 158. Now, that single judge case is frankly against us but it was in a different context. There was no saving provision comparable to section 306 that was cited and Justice Gray also very significantly noted the absence of any power in the court to reject an application for an inquiry which disclosed no reasonable grounds.
Now, in the bankruptcy notice context, your Honours, we would submit that by way of contrast under the Bankruptcy Act 1966 the debtor has ample opportunities and avenues to seek to set aside the notice against him or her and indeed Form 1 states those opportunities as indeed this particular bankruptcy notice did.
So we would submit, your Honour, particularly that there was an absence of any power in the Court to reject an application provides a basis for distinguishing that particular single judge decision, and it was in a different context, your Honour, albeit that the words are the same words. I would seek to take your Honours to some authorities on the expression “must”.
GUMMOW J: That could be a very long journey.
MR HASSALL: I would seek to make the journey only two cases long.
HAYNE J: With very little fruit to be picked along the way.
MR HASSALL: It will be two cases long, your Honour.
GUMMOW J: There is probably not much refreshment in it.
MR HASSALL: In the case of Kosovich v Mancini (1982) 31 SASR 272. That is not on your Honours’ list. That was a Road Traffic Act truck weight inspection case and Justice Millhouse held that a certain provision that weight “must be determined” in a certain way. His Honour held that was imperative at page 275.
Various texts, such as Dr Stroud’s Judicial Dictionary and other texts like that, do cite dicta of Justice Williams in this Court in a case of Posner v Collector for Interstate Destitute Persons (Vic) (1946) 74 CLR 461 and at page 490 Justice Williams said “‘Must’ is a word of absolute obligation”. That authority has been repeated in the various texts on words and phrases but it turns out, of course, that Justice Williams was there alone and in dissent on that occasion.
The only other authority that we would refer your Honours to, and it is on your Honours’ list, is the case of Vickers v Siddell (1890) 15 App Cas 496. It was a patent case and Lord Chancellor Halsbury held that a provision stating that a patent specification must end with a distinct statement of the invention – the provision is rather like a bankruptcy notice must attach an interest document explaining the interest provisions – was directory only and that it did not void the patent. I do not wish to linger on the distinction of mandatory and directory, given what has fallen from your Honours, but on page 500 of that report it is notable that Lord Halsbury said:
The objection that no distinct claim is made, is one of form only, and I think the legislature did not intend to make the direction, which undoubtedly the Act contains, a condition upon the non‑compliance with which the patent should be void.
We would submit, your Honours, that here the defect is a minor defect in the form and, therefore, a defective form, a misdescription, and no more.
GLEESON CJ: How, if at all, does section 25C of the Interpretation Act relate to this?
MR HASSALL: We submit, your Honour, that section 25C is not – there is, in our submission, no clear contrary intention in the plain words of section 41(2) to provide a contrary intention to displace the provision within section 25C of the Acts Interpretation Act which provide that where you are dealing with a statutory form under Commonwealth legislation that substantial compliance with the form is sufficient. In our submission, that provision in section 25C of the Acts Interpretation Act is not excluded on the true construction of section 41(2).
GLEESON CJ: I suppose any regulation or requirement about a form would always say the form must state, or the form shall state. It would be a little peculiar to say the form may state, otherwise, it would not be a form.
MR HASSALL: Yes, your Honour, and that may be the reason why the earlier regime used the expression “shall” and that there has now been a ‑ ‑ ‑
KIRBY J: We had a case within the last four parts of the ALJR which related to the word “must”. It was a migration case under the Migration Act and the majority said “must” means “must”. So I agree with Justice Gummow. It is really an unprofitable journey because you have to look at the context of each particular – I think that case was SAAP v The Minister.
MR HASSALL: I am grateful to your Honour. Indeed, your Honour, there is still the begging – the question is…..that there is still the question of what the words “in accordance with” mean, in our submission. In that regard, could I at this point take your Honours to Formosa v Secretary, Department of Social Security (1988) 46 FCR 117 at 122. This was a case involving the Social Security Act and the provision in section 159 and there was a requirement that an application be made in writing on a form. The passages at page 122 to 123, your Honours, in our submission, are of some relevance in this context, not so much for the distinction between mandatory and directory, but in terms of what has fallen from your Honours in terms of the practicalities of what the procedure now is. You have a postulated lay creditor taking a form along to the official receiver. Their Honours in that case at page 122 said:
We turn to consider the importance of the terms of s 159(1) in relation to the general objects to be secured by the age pension provisions of the Social Security Act. There are, of course, public interests to be secured both by receipt of age pensions . . .
In the nature of things, the form lodged by an applicant will be the document the applicant has obtained from an officer of the Department, rather than some holograph or informal instrument prepared by the applicant. The applicant, in the ordinary course, will have no knowledge whether or not the particular form that has been obtained from an officer of the Department is, in truth, a form approved . . . Through some default in administrative procedures it may be that the form in use in a particular office of the Department is not the form currently approved by the Secretary. It would be, in such a case, a curious result if the claimant were to suffer, as a result of inadvertence within the Department, for the claimants’ failure to comply with requirements spelled out in s 159(1).
So that their Honours are postulating an instance where a claim had been made in writing that was substantially in accordance with the form. Their Honours then indicate on page 123 at about point 3:
The point is probably put beyond doubt by s 25C of the Acts Interpretation Act 1901 (Cth), which states:
“Where an Act prescribes a form, then, unless the contrary intention appears, strict compliance with the form is not required and substantial compliance is sufficient.”
Their Honours then go on to talk about some other difficulties. What was before their Honours was an oral application and the question being argued was whether the oral application was sufficient to answer the description of a written application. Well, it clearly was not. We mention that case because at page 123 Justice Davies and your Honour Justice Gummow are indicating that in this field, where you are dealing with a requirement of a form, that section 25C would normally have some application and the court could have regard to it, unless there is some contrary intention clearly indicated within the relevant section not to. We submit that that is simply not the case in the case of section 41(2) of the Bankruptcy Act.
Now, while I am on that point, there is in regulation 4.02 – your Honours will recall earlier this morning we were referring to regulation 4.02(2), the one which dealt with format, which made a special provision for format.
KIRBY J: It is being seen to be revisiting your earlier triumphs in your advocacy this morning.
MR HASSALL: Very briefly, your Honour, to make the point that subregulation (3) specifically spells out that there is no contrary intention intended by that format provision. One asks the question, “Why then has there been no similar provision made?” If a strict reading was indicated, why was not any similar provision made in either section 41(2) of the Act or elsewhere in regulation 4.02 when the form was prescribed?
KIRBY J: Is Mr Ash’s article the only one on this? This must be a horrendous trap for even careful practitioners.
MR HASSALL: Your Honour, I understand there have been some papers given at various Law Society conferences. There has been the sort of usual small note in an insolvency journal, a bulletin-type note. I did not seek to trouble the Court with those, I confined myself to what I felt were the two main discussions that were germane to the question of Australian Steel. I do not have any other academic material to assist the Court with.
KIRBY J: It is a pity, in a way, we did not have the Commonwealth Attorney-General’s Department here who administer the Bankruptcy Act to speak for any problems that would arise from any change in the position that the Full Federal Court has adopted.
MR HASSALL: It gave consideration to the question about section 78B but did not seem to arise.
KIRBY J: Yes, it is not a 78B problem. It is just a question of having a contradictor. You always feel more comfortable when you have ‑ ‑ ‑
MR HASSALL: We do submit, your Honour, in that regard that the respondent has appeared to the matter and made written submissions and has simply elected ‑ ‑ ‑
GLEESON CJ: I am not sure, if I may say so, that you have yet come to grips with the reasoning of the majority of the Federal Court in that Australian Steel Case. At some stage before you finish it is going to be necessary for you to explain to us why the reasoning of the majority was not in accordance with (a) the Act and (b) the decision of this Court in Kleinwort Benson. You may have been treating that as the culmination of your argument but that really is the statement of the case against you, is it not?
MR HASSALL: Yes, your Honour. If I could take your Honour to the Australian Steel decision ‑ ‑ ‑
GLEESON CJ: How long do you think you will take to complete your argument?
MR HASSALL: I would have thought only another hour or so, your Honour, but no more.
GLEESON CJ: We will adjourn at a quarter to one and we will resume at 2.00 pm.
MR HASSALL: If it please the Court.
GLEESON CJ: Now, go ahead with this case.
HEYDON J: One criticism you make of Australian Steel, Chief Justice Black, Justices Heerey and Sundberg, be that they do not seem to deal with section 306 at all, unless I am mistaken, except by quotation.
MR HASSALL: No, your Honour. They do briefly deal with section 25C of the ‑ ‑ ‑
GUMMOW J: Is there any reference to 306 by the majority in Australian Steel?
MR HASSALL: Yes, your Honour, at page 44, paragraph 38 at about point 7 of the page in the course of commenting upon the Kleinwort Benson decision.
GUMMOW J: That is it, is it?
MR HASSALL: And then there is a reference to section 306 on the succeeding pages. The next paragraphs 39 through to 43 state the determining whether the requirement is made essential aspect.
GUMMOW J: Did they come back to 306?
MR HASSALL: No, your Honour, not there, not on page 45 that I can see.
GUMMOW J: Well, anywhere. I do not think so.
MR HASSALL: Not elsewhere, your Honour, in the rest of the judgment.
KIRBY J: They simply took the view “must” means must, you have to have the provision I have correctly identified and, therefore, you do not really get any comfort out of 306.
MR HASSALL: That is the view that was taken and we would submit that in not having, in our submission, sufficient regard to section 306 in construing and interpreting – not having sufficient regard to the Parliament’s retention in the Act, in the Act’s structure of section 306 in the process of construing what the words “must be in accordance with the form” in section 41(2), we submit that that amounts to an error.
CRENNAN J: But the nub of the decision is to be found at the bottom of page 45, is it not, where – there is a statement there and I will not read it, but direct your attention to it, commences “Having regard to the purpose behind the requirement” and, in essence, there is very little discussion of section 306 because of the finding that the requirement was made essential by the Act.
MR HASSALL: Yes, your Honour.
HEYDON J: You would say, would you not, maybe it is essential? The fact remains you have to consider whether it is nonetheless formal defect or irregularity.
MR HASSALL: Yes, your Honour.
HEYDON J: If it is not those things, by all means jettison 306, but you have to – I mean, they set it out in paragraph 12 as though it was something raised in argument. But the dissenting judges seem to treat it as a live matter, the majority do not.
MR HASSALL: Yes, they do refer to – they set it out and they set it out in the recitation after the notice and so forth.
HAYNE J: But do not the majority proceed from the premise, which can be seen in paragraph 38, that if the requirement is essential, or failure to comply with that, is not and cannot be a formal defect or irregularity?
MR HASSALL: Indeed, your Honours, at paragraph 38, the majority use the expression “There is another and separate test”.
GUMMOW J: Where is that?
MR HASSALL: This is in paragraph 38, third line:
There is another and separate test, namely whether an essential requirement of the Act has not been met.
GLEESON CJ: But words like “nullity, essential, formal” are words of conclusion, but the concepts of essentiality on the one hand and formality on the other are used in contradistinction, are they not?
MR HASSALL: Yes, your Honour, they are.
GLEESON CJ: You pointed out that “irregularity” may not be qualified by the adjective “formal”, but the point of departure between the majority and the minority in Australian Steel, was, was it not, whether on the true construction of the legislation a misstatement or non‑statement of the provision pursuant to which the interest was claimed, was or was not a defect or irregularity that was capable of being remedied under section 306, or saved under section 306?
MR HASSALL: Yes, your Honour, yes.
GLEESON CJ: Once they concluded that it was an essential requirement and that it had been contravened, that was the end of 306, was it not?
MR HASSALL: Yes, your Honour, and we would submit that in so construing section 41(2), we submit that the plain words of that section do not support the conclusion that the failure to comply with note 2 in Form 1 was an essential requirement, a requirement made essential to a bankruptcy notice under the Act.
HAYNE J: I understand that proposition that you make, but that proceeds, does it – I want to be quite plain about this – from an acceptance by you that essential requirements if not met necessarily fall outside 306, “formal defect or an irregularity”. It may be that that is a point you want cogitate on over lunch but ‑ ‑ ‑
GUMMOW J: This word “essential” is not in the Act?
MR HASSALL: No, your Honour, it is not. It comes from ‑ ‑ ‑
GUMMOW J: What it talks about is formal defects or irregularities?
MR HASSALL: Yes, your Honour, and the Act speaks of formal defects and irregularities at large.
GLEESON CJ: We will adjourn until 2.00 pm and over the adjournment you can think about that question.
AT 12.49 PM LUNCHEON ADJOURNMENT
UPON RESUMING AT 2.02 PM:
GLEESON CJ: Yes, Mr Hassall.
MR HASSALL: Your Honours, during the adjournment for luncheon, I have been able to obtain some - Justice Kirby was referring to the other dictionary definitions and I would seek to hand up nine copies of the Macquarie Australian National Dictionary for your Honours’ assistance, as to the meaning of the word “accordance”.
GLEESON CJ: Thank you.
MR HASSALL: I notice in that regard, your Honour, that dictionary refers to the meaning of “accordance” as being “agreement” or “conformity” and we would submit that that is consistent with what Justice O’Leary indicated in Waycott v Koffler 25 NTR 1, to which I referred the Court earlier.
GUMMOW J: I put this to you, Mr Hassall, before you go on. In 306, on the one hand you have the notion of a formal defect or irregularity and bearing in mind proceedings under this Act cover all sorts of things, meetings for compositions and so on, notices for meetings, minutes and so on, on the one hand you have formal defect or an irregularity, on the other hand you have substantial injustice, so one view is that the juxtaposition is of formality and substance.
MR HASSALL: Yes, your Honour. That takes one back to the provisions of section ‑ ‑ ‑
GUMMOW J: At least it does not involve using the word “essential”.
MR HASSALL: Yes, indeed, your Honour, and it takes one back to section 25C of the Acts Interpretation Act and it would be our submission in response to the questions which the Bench have put, and particularly the Chief Justice’s question as to enunciating what kind of test might the Court lay down and also, we will submit, in the respects in which the decision of the majority in Australian Steel is in error in terms of its construction of section 41(2) of the Bankruptcy Act.
If I could start in relation to that matter, could I take the Court in the Australian Steel Case to 109 FCR at page 45 of that decision, the judgment of the majority, Chief Justice Black, Justices Heerey and Sundberg, near the very end of the judgment, being paragraph 43 at the foot of page 45 and I would seek to read that passage:
Our conclusion is unaffected by reg 4.02(3). If that provision is to be taken as a statement that s 25C of the Acts Interpretation Act applies to the content of the form as well as its format (see Franciscan ‑ ‑ ‑
that is Weir’s Case, and I will take your Honours to Weir’s Case in a moment at page 457 -
the failure to comply with a requirement in such a way that the purpose behind the requirement is thereby thwarted, cannot be excused under s 25C on the ground that there has been substantial compliance.
GUMMOW J: That is finding a contrary intention, is it not?
MR HASSALL: Yes, your Honour, indeed, and we would submit that there is no contrary intention to be seen in section 41(2). Going on:
Essentiality for the purpose of the Kleinwort Benson principle being determined by purpose, a provision as to substantial compliance –
such as interpolate section 25C -
assuming it applies at all, cannot make unessential that which purpose reveals as essential. It can hardly be said that there has been substantial compliance with a prescribed form where the form fails to include information made essential by an enactment.
Now, your Honours, that very significant passage near the end of that part of the judgment ‑ if I might correct myself ‑ we submit, points to the degree to which the Full Court majority and the way in which the Full Court majority, in our respectful submission, erred, in that it still, with respect, begs the question as to what section 41(2) actually requires.
Notably, also, your Honours, the formulation of the words in the last part of that paragraph, that there can be no:
substantial compliance with a prescribed form where the form fails to include information -
well, of course, your Honours, in the appeal book at page 199 ‑ we have not been to this spot before, your Honours, but I would like to take you to the – it is a copy attached to the submissions below of the actual form of bankruptcy notice considered by the Full Court in Australian Steel Case and obtained from the Victorian Registry of the Federal Court of Australia, and your Honours will notice that the relevant interest attachment is much shorter at page 119 of the appeal book:
Interest is being claimed pursuant to Section 101 of the Supreme Court Act 1986 (Vic) -
and then over the page, your Honours, your Honours will see on page 120 there is mention of the “Magistrates’ Court at MELBOURNE” but no mention within the judgment, nor by any stamps or even by a heading, as has occurred in other cases where there has been some incidental reference to the relevant statute under which the interest ran in the judgment itself which has enabled judges in certain instances to find that there was a sufficient disclosure of the relevant provision.
That is not there, your Honour, it is not there on page 120. The statute is not there on page 119. So as the text of the decision in Australian Steel shows, in fact, the relevant statute was not stated. The relevant statute was some other legislation other than the Supreme Court Act 1986. So that not only was the section number wrong there but the wrong Act was nominated and indeed in that sense there has been absolutely a total failure to state the provision under which the interest is claimed.
Therefore, your Honours, we submit that the Australian Steel Case is a holding, a special five judge bench assembled to consider a point that had arisen in a number of bankruptcy notices, and that it is a holding only with respect to a specific type or kind of bankruptcy notice, that is to say a bankruptcy notice that ‑ ‑ ‑
GUMMOW J: We are not bound by it so ‑ ‑ ‑
MR HASSALL: No, your Honour.
GUMMOW J: We take it for what its reasoning is worth as a matter of cogency.
MR HASSALL: Yes, your Honour. Your Honours, I only mention it in relation to the appeal on the basis that it is part of our case that the court below ought to have distinguished our bankruptcy notice case from the facts in that case, in our submission.
Now, returning then to the decision in Australian Steel itself, the paragraph that I had indicated to your Honours at pages 45 to 46 in the majority decision, we submit that it is a limited holding in that way to which I have just referred but also, your Honours, we submit that the analysis there – and it does not appear to have been covered anywhere else in the judgment – a little before the luncheon adjournment your Honours were referring to the references to section 306 in this judgment of the majority, but there is nothing else that I can see dealing with section 25C other than this paragraph 43.
Now, at paragraph 43 the majority deals with the question that had been put and raised, an argument based on regulation 4.02(3) about format, and their Honours have indicated that to then suppose that:
that provision is to be taken as a statement that s 25C . . . applies to the content of the form as well as its format –
as was done in Franciscan, their Honours say and hold that that is not justified. In that regard, your Honours, it is the submission of the appellant in this case that the manner in which that matter is to be approached is one which requires a consideration of the words back to section 41(2).
We submit that the majority in Australian Steel is wrong, with respect, as to what section 41(2) requires on the following points, for the following reasons. Section 41 only requires the notice to be “in accordance with the form”. We submit that there is no contrary intention within section 41(2) to exclude section 25C of the Acts Interpretation Act which would permit substantial compliance. Secondly, there is not only no contrary intention expressed to exclude section 25C but also section 41 does not amend in any way or purport to amend section 306 of the Act, for instance.
Thirdly, we submit, your Honours, that on ordinary principles of construction section 41, since it only requires that the notice “be in accordance with” the Act and given the absence of contrary intention, that section 25C of the Acts Interpretation Act can be had resort to and does apply and is not excluded by section 41(2) and that, therefore, your Honours, we submit that substantial compliance with the notice is indeed permitted against or in contradistinction to what their Honours the majority, Chief Justice Black and Justices Heerey and Sundberg, said at paragraph 43 of the judgment in Australian Steel.
We submit, with great respect to their Honours, that the difficulty that arises perhaps arises from the attempt to meld, as it were, the concept of essentiality derived from Crowl’s Case with a notion of the purposive construction of the Act. We submit that in adverting to the purposive construction their Honours have still yet not had sufficient regard to the plain terms and language of section 41(2). It merely requires “in accordance with”, in our submission.
GLEESON CJ: Mr Hassall, could I just ask you for some background information relating to this concept of claiming things in a bankruptcy notice. If you go to the prescribed form of bankruptcy notice – it is in this book that you have – you have referred us to Note 2, but by hypothesis, an hypothesis which comes from section 40(1)(g) of the Act, a bankruptcy notice is something that follows a judgment. Is that right?
MR HASSALL: Yes, your Honour.
GLEESON CJ: Now, this form or the regulations about the form deal with legal costs and with interest. The note to the form says “If legal costs are being claimed in this Bankruptcy Notice” you have to do something, and Note 2 says “If interest is being claimed” you have to do something. You could, having obtained a judgment, issue a bankruptcy notice without claiming either costs or interest in the notice. Is that right?
MR HASSALL: True, your Honour.
GLEESON CJ: That does not abandon your entitlement to costs or interest?
MR HASSALL: No, indeed, your Honour.
GLEESON CJ: It simply produces the consequence that the debtor will not have committed an act of bankruptcy by not paying the interest or the costs.
MR HASSALL: And if I am correct, your Honour, I think that where that question has been raised about it does not arise in estoppel or give away the right to pursue the interest or costs, it has been observed that it may waive it for bankruptcy purposes and for the purpose that your Honour is indicating but not generally. It is still enforceable, in our submission ‑ ‑ ‑
GLEESON CJ: I am not sure what you mean by “waive” in that context.
MR HASSALL: ‑ ‑ ‑ and that the interest or the costs may still be enforceable in other ways.
GLEESON CJ: But in Australian Steel the amount of interest was $50‑odd and in this case the amount of interest was $60‑odd.
MR HASSALL: Yes, your Honour.
GLEESON CJ: Why, in practice, bearing in mind how easy it is to come adrift, would anyone claim interest in a bankruptcy notice, or at least interest of such a trivial amount?
CALLINAN J: Is it not a fact that a lot of solicitors, because of this concern, do not in fact claim the interest, that there is almost a practice in not claiming it?
MR HASSALL: Yes, your Honour, in the last five years my perception is that that has been the case in the period from which Australian Steel has dated and that whereas prior to Australian Steel and the sequence of cases leading up to it there had been rather, if one may say so, a fashion to claim the interest and then one sees a progression through the cases that once upon a time ‑ ‑ ‑
CALLINAN J: Of not taking the risk.
MR HASSALL: Well, yes, your Honour, and once upon a time interest was hardly ever claimed and I think, going right back, could not be claimed.
GLEESON CJ: It was very hard to get it right under the previous regime because you would take your bankruptcy notice along to the registrar and it might lie in the registry for a time before it issued.
MR HASSALL: Indeed, your Honour.
GLEESON CJ: But coming back to this concept of claiming legal costs in Note 1. Suppose you just did not attach the certificate of taxation to the bankruptcy notice, what would be the consequence of that?
MR HASSALL: If you fail to attach it, your Honour, one would say it would be argued that the document required to be attached has not been attached and that to that extent it has offended Note 1. It would be a similar argument, your Honour.
HAYNE J: On one view there may or may not be a question about compliance with paragraph 2 of the notice which says:
A copy of the judgments –
plural –
or orders –
plural –
relied upon by the creditor is attached.
MR HASSALL: Yes, and those things, those certificates or judgments or interest attachments, are separate documents but they are required to be attached – again, in support of the amount claimed must be attached.
GLEESON CJ: What happened in this case? Was there any claim for costs in the bankruptcy notice?
MR HASSALL: No. In the bankruptcy notice there was a – it is rather complicated, your Honour. I am instructed that the background to the matter was it was a $50,000 principal sum on a loan and that there had been some terms of settlement and that the judgment was entered pursuant to the terms of settlement and that certain amounts were paid off – a couple of amounts were paid off well before the judgment and then the arrangement fell down and then there was a computing done which resulted in – with interest under the terms of the loan. The pleadings apparently indicated that what was sought was the principal sum, plus interest under the terms of the loan or, in the alternative, such sum and rate of interest as the court may determine for prejudgment interest.
GLEESON CJ: Are you telling us that the amount of the judgment was wrong?
MR HASSALL: No, your Honour.
GLEESON CJ: Have a look at page 5. Are you telling us that the amount of the judgment was greater than $54,000 and some amount had been paid off?
MR HASSALL: No, your Honour, that prior to the judgment being entered the parties had – there had been negotiations and there had been some terms of settlement such that the judgment that was entered – there had been some moneys paid but the judgment entered was full and regular, in our submission.
GLEESON CJ: A compromise?
MR HASSALL: Yes, I am sorry, your Honour.
HAYNE J: The terms of the compromise being, “If you default in instalments, we can enter judgment for an amount identified under the terms”, which you say is $54,000.
MR HASSALL: Yes, your Honour. So there was no question, in our submission, of any payment off after the judgment.
KIRBY J: At least one possible interpretation of Note 2 requiring that:
The document must state:
(a) the provision under which the interest is being claimed –
is that that specification or statement was sufficiently made here in any case by – if the “provision” is a word wide enough to just include reference to the District Court Act as distinct from the particular section, subsection, paragraph and so on of the District Court Act. There must be some obligation on the debtor to say, “I’m confused or uncertain”, when the answer to that is, “Well, why didn’t you just go to the District Court Act and have a look at it? It would have been clear to you”.
MR HASSALL: Your Honour, there is that point, the concept of the diligent debtor, the reasonably diligent debtor. Also it is a matter that we submit that words there of “the provision”, the broad expression “provision” which is, in our submission, a broad expression ‑ ‑ ‑
KIRBY J: It does not say “the section or subsection of the section of an Act” or something like that; it just says “provision”.
MR HASSALL: Quite so, your Honour. In this case the bankruptcy notice named the statute and named the correct statute and the distinction is that in the Australian Steel Case the bankruptcy notice did not name even the correct statute. Not only do we submit this is not a case of total omission but this is a case where that matter has been addressed, a provision has been nominated, the numbers which nominate the provision are slightly misdescribed.
KIRBY J: Does that give you a fourth argument as distinct from the three that Justice Heydon nominated?
MR HASSALL: It does, your Honour, and it is for that reason that we have indicated it is the appellant’s contention that, as I was saying before in relation to the argument about “claimed”, we submit that the provision under which the interest is being claimed is indeed stated in the Act, albeit incorrectly. One readily can see that the contrary argument would be that ‑ ‑ ‑
KIRBY J: That would be effectively the second argument, that it did accord because – it is in the attachment. The second one would be that the provision is in accordance with Note 2 stated under which the interest is made.
MR HASSALL: “Under which the interest is claimed”, your Honour.
KIRBY J: Sufficiently stated.
MR HASSALL: Your Honours, the question that the Chief Justice posed to me before the luncheon adjournment as to why we say Australian Steel is in error, referring to the paragraph to which I took your Honours, paragraph 43 of the judgment, we submit that in the latter part of that paragraph there is in the joinder of the concepts of essentiality and purpose almost an element of what other judges have referred to, with respect, as a mere verbal kind of distinction. We submit that that is also a basis upon which the majority has fallen into error inasmuch as the majority is attempting to meld the concepts of essentiality with – to set it against “purpose” in the Act.
Now, your Honours, what I am coming to, if I can be short about it, is that our case is and our submission is that, having regard to cases such as Trustees of Franciscan Missionaries v Weir and the indications in the case of Formosa, which I cited to your Honours this morning, we submit that there being, in our submission, nothing in section 41(2) to make a contrary intention against the application of section 25C of the Acts Interpretation Act, we submit that section 25C of the Acts Interpretation Act can apply and does apply in relation to bankruptcy notices in regard to what it is that is required under section 41(2) of the Bankruptcy Act, that is to say, that substantial compliance is all that is required. If one were looking to compose a test, our submission would be that perhaps no safer test could be enunciated, or more general test, than that substantial compliance is what is required.
GLEESON CJ: What does section 25C add to section 306 in a case like this?
MR HASSALL: That section 25C is not limited by any words such as “formal defect” or “irregularity” or “substantial injustice”. It does touch upon the word “substantial” admittedly, your Honour, but our submission would be that it would be appropriate, bearing in mind that section 25C is a provision of general application unless there is a contrary intention clearly shown or an express exclusion of it, that it is an appropriate test. Now, we submit that there is nothing in section 25C, it is a provision of general application to forms, and it permits of substantial compliance.
GLEESON CJ: You mean there would be no defect or irregularity if via section 25C you concluded that in this case there was substantial compliance with the form?
MR HASSALL: Indeed, your Honour, and that then section 306 would have work to do in relation to formal defects, irregularities or ones where there was substantial injustice. Now, that, your Honours, seems to be adumbrated, that approach seems to be adumbrated in the dicta in Formosa, because Formosa was decided on the absence of a written form. There was indication by their Honours there that section 25C would put it beyond doubt, that if there was some sort of defective form, that there may be well an argument as to whether there was substantial compliance.
Now, your Honours, therefore it would be our submission that if one were seeking to formulate a test or a new test, it may well be that the difficulty that has arisen is this attempt to meld essentiality and purpose and to reconcile the two and that it may indeed be, with respect to the decision in Crowl’s Case, that the Court ought re-examine the question as to whether essentiality, the notion of essentiality, is a helpful concept or a less helpful concept than perhaps the notion of substantial compliance in terms of section 25C of the Acts Interpretation Act. If Parliament wishes to alter that position, it could specifically exclude section 25C of the Acts Interpretation Act.
Now, of course, there would still have to be a second leg, as it were, as indicated in what fell from the Chief Justice, what about section 306? Well, section 306, the second part of the test would be that if the substantial compliance part were not required, if there was some formal defect or irregularity that would fall within section 306, then you would look at the question of whether it was objectively misleading, whether the bankruptcy notice in its context was objectively misleading, and thereby discard the essentiality test and replace it with the substantial compliance test, which we submit would be a workable test on known concepts and familiar things across the board of statutory forms in the federal field.
Your Honours, in order to bolster that critique of the Australian Steel decision, we would seek to take your Honours to a particular passage in Franciscan Missionaries v Weir (2000) 98 FCR 447. I am wanting to take your Honours to a passage in the judgment of the court, Justices Beaumont, Burchett and Hely, starting at page 456.
GUMMOW J: Judgment was delivered 10 days after Bendigo Bank.
MR HASSALL: Yes, your Honour, and Bendigo Bank is indeed referred to and critiqued by their Honours. This is a decision of course preceding Australian Steel and referred to in Australian Steel. To the extent that the reasoning of the majority in Australian Steel reflects the approach of the Full Court in Bendigo Bank and indeed approved Bendigo Bank, this passage at pages 456 to 457 we would adopt these observations made their Honours and apply it to the manner in which the Full Court in Australian Steel has approached the question. At the bottom of page 456 their Honours said:
But it would work a far reaching reversal of the operation of the Act if the amendment of s 41(2) were to be regarded as doing away with the emphasis of bankruptcy administration of matters of substance, in favour of the elevation of form as the criterion of validity. That would be the consequence if every part of the prescribed form were treated as something made essential by the Act, and it would use the expression coined by the majority in Kleinwort Benson Australia Ltd v Crowl in a sense that would turn their actual decision (which excused, as Deane J emphasised, a quite serious defect) on its head. Such an approach would be completely at odds with the formulation in James confining the consequence of invalidation to important breaches of the relevant provisions of the Act and matters that could mislead, that is to say, to defects of substance.
It is our submission firstly that on a true construction of section 41, section 25C is still available. Furthermore, that being the case, it is our submission that in the relevant state of the Bankruptcy Act, section 25C not having been excluded, it would be appropriate to enunciate a test based on substantial compliance.
GLEESON CJ: You will note the word “and” in the sentence that you have just read, which ties in with paragraphs 13 and 14, the two immediately preceding paragraphs, and it ties back in with Kleinwort Benson. In paragraph 13 they said:
a document sought to be relied upon as a bankruptcy notice does not fulfil the statutory definition of such a notice at all, because of a failure to comply with defining, or “important” or “essential”, provisions of the Act, its defectiveness cannot be described as a mere matter of form, or as a mere irregularity.
That is case one. Then they say:
But in cases where a notice does not fail so completely, the test has long been accepted . . . as being whether the bankruptcy notice “could reasonably mislead a debtor –
et cetera. Then when they do come to the last sentence in paragraph 15, they say:
confining the consequence of invalidation to important breaches of the relevant provisions . . . and matters that could mislead –
and they use a summary expression to describe both of those attributes as “defects of substance”.
MR HASSALL: Yes.
GLEESON CJ: So they would describe as a defect of substance not merely of form one that involves non-compliance with “important” or “essential” provision of the Act or one that could relevantly mislead the debtor. If it is either of those, it is not a formal defect or irregularity.
MR HASSALL: Yes, your Honour. It is interesting, in light of that, to see what is then put in the next paragraph by their Honours that:
as a matter of construction, the very fact that the new s 41(2) is expressed in terms of form aligns it directly and naturally with s 306. The new s 41(2) does not amend s 306; it is inserted into an Act that already contains that provision, and it is intended to operate accordingly in the statutory setting into which it is received. The form must be complied with, but in the context of an Act containing s 306, a “formal defect” by the express terms of the statute does not attract the invalidating consequences once associated with a mandatory provision . . . It is in fact recognised in reg 4.02 that the prescription of a form of bankruptcy notice does not involve a requirement of strict compliance, substantial compliance being sufficient. That the draftsman attributed this consequence to the operation of s 25C of the Acts Interpretation Act, rather than to s 306 of the Act, and that express attention was drawn to the matter only because of a drafting problem related to the issue of format, in no way detracts from the conclusion that the regulation was not intended to prescribe a form in precise terms, but one to be complied with in substance. As Katz J pointed out in Farrugia v Farrugia at [66] the reference to s 25C in the regulation “discloses an intention in the delegated legislator not to attempt to impose by subreg 4.02(2) a requirement which has to be strictly complied with”. And, logically, if it was thought s 25C would apply to subreg (2), it must have been thought it would apply to subreg (1), so that the relevant intention must have been the same. The contrary suggestion made in Bendigo Bank Ltd v Williams 98 FCR 377 at 383, with respect, simply overlooks the manner in which the regulation has been drafted.
It is our submission, adopting that critique, as it were, in those terms that the majority judgment in Australian Steel did a similar thing. It mentions the regulation but it overlooks the closer inspection that was warranted as to the terms of the regulation, regulation 4.02 and the actual language of section 41(2), your Honours. Their Honours also note that:
In Farrugia v Farrugia at [61-64], Katz J refers to Ex parte Stanford. Re Barber (1886) 17 QBD 259 -
and that case, Ex parte Stanford. Re Barber, the appellant referred your Honours to that in the written submissions -
where a strong Court of Appeal held that a provision indistinguishable in terms from s 41(2) exacted only substantial compliance; however, in the context of the Act, the appropriate brake on the apparently mandatory word “must” in s 41(2) is that provided by s 306. It is more in accord with modern principles of statutory interpretation to give weight to the statutory context, and the consistency of the section with the statutory scheme as a whole, than to place significant reliance on the kind of verbal distinction which grounds this Court of Appeal decision -
Your Honours, we submit that it is precisely the absence of any words of exclusion of section 25C within section 41(2) - there is an absence of any words of exclusion there of section 25C nor are there any words of exclusion of section 306 so that, your Honours, we submit that in some, the Full Court majority in Australian Steel has erred in that it has not given any effect to section 25C in relation to section 41(2).
The point mentioned of section 25C in paragraph 43 of the judgment in Australian Steel to which I referred your Honours is, in our respectful submission, an inadequate consideration of the role of section 25C in relation to the interpretation of section 41(2) of the Bankruptcy Act.
GLEESON CJ: How can you substantially comply with the requirement to state a provision by misstating it?
MR HASSALL: Perhaps at best one could give a concrete example, your Honour. In this case, we would submit that, firstly, the bankruptcy notice is in the form. It follows the form, leaving aside the statutory question of being “in accordance” for the moment. What are the factors? It is in the form. It is not in some other form or an attempt to justify an oral demand of some kind as a bankruptcy notice. It is in the form. It uses the form. Secondly, it does not fail to address all necessary matters.
Now, as to this provision stating the provision under which interest is claimed, the creditor has attempted to address that, has attempted to that, and we would submit has done that in a sense, stated a provision under which the creditor claims in the notice that interest is being claimed. Next, we would submit that that is a mere misdescription and that there being only a mere misdescription that would be a case of substantial compliance inasmuch as there is a very minor error – it might be of a typographical kind or so forth, but that substantially the steps have been taken to comply with the form and that there has been a substantial compliance and that section 306 would still have some work to do in relation to other matters.
So we submit, your Honours, that a proposed test would be that a bankruptcy notice must substantially comply with the prescribed form, that the words “in accordance with” mean no more than that in the absence of any contrary intention, in our submission, and in the absence of any specific exclusion of section 25C of the Acts Interpretation Act.
KIRBY J: That would still leave room for argument and differences of view as, for example, in the case of getting the floor of the address wrong. Is that a substantial – is that likely to cause confusion and uncertainty or to lead to the bankruptcy notice to miscarry, or not? I mean, views might differ on that. You could never get a formula that is going to be perfect.
MR HASSALL: Your Honours, in response to what has fallen from Justice Kirby, there is the point that the apparent attempt by the draftsperson to invent this new form of notice appears to have been to prepare some sort of failsafe‑type mechanism that most creditors would get right, but in fact it carries the difficulty that if a strict interpretation such as Australian Steel ‑ ‑ ‑
GUMMOW J: It has more and more norms in it because it is longer. It creates more scope for error, really.
MR HASSALL: Yes, in many respects it could be said – and I have heard it said, your Honour, amongst practitioners – that the old form was preferable but ‑ ‑ ‑
KIRBY J: Well, the present law really is a trap and a frustration and makes the law look a bit of a laughing stock, in my respectful opinion.
MR HASSALL: Your Honours, there is the difficulty as well that this is a document which can be addressed to a lay creditor. They are not necessarily legally represented. There is some comment by the majority in Australian Steel about the duties of solicitors but we submit that that is not the appropriate test. It is the test of the ordinary citizen who may be a creditor and may wish to avail themselves of the procedure that the Act leaves open to draw up their own bankruptcy notice using the form.
GLEESON CJ: I presume these forms are published by law publishing companies?
MR HASSALL: They are mainly found on the website of the ‑ ‑ ‑
GLEESON CJ: The form of bankruptcy notice with which I was familiar had W.C. Penfold & Co Pty Limited on the end of it.
KIRBY J: Taken around by a horse.
HAYNE J: The argument seems to depend as to the judgments in James, Kleinwort Benson and Weir upon the proposition that there are some requirements of the form or of the Act that are to be classified as essential, requisite, important or some other term. There is a view that by their specification by the legislature, actually or by delegation, those judgments have been made elsewhere.
MR HASSALL: That is the view that is articulated, your Honour, in Australia Steel, certainly. We would submit with respect to that view that the actual terms of section 41(2), properly construed in the context of the Act, lead to a different conclusion.
HAYNE J: You have told us that.
MR HASSALL: Your Honours, there is one remaining matter and, again, pursuant to the duty of assisting the Court, even when cases are against us, we did attach in our written submissions, your Honour – the appellant’s written submissions have a number of attachments including, as required by the practice direction, certain unreported judgments. I will be quite brief about this, your Honour, but it is important that I bring it to your attention.
Your Honours, near the end of the folder which is the appellant’s submissions and just before the academic articles there is a case of Kalfus v Cassis reproduced. Admittedly, it is a single Federal Magistrate decision given last year, but it raises a point which needs to be dealt with, either out of an abundance of caution or for the avoidance of doubt. I will summarise that decision and your Honours will readily see why I bring it to attention. Federal Magistrate Driver set aside a bankruptcy notice which claimed interest and the relevant parts of it are at page 9 of 10 and page 10 of 10 in the electronic numbering that is there of the judgment ‑ setting aside a bankruptcy notice which claimed interest in a case where the learned magistrate held that the effect of section 95(2) of the Supreme Court Act 1970 (NSW) was that the creditor had no entitlement to be paid interest until 21 days had elapsed from the date of the judgment.
KIRBY J: How did the Supreme Court Act get picked up?
MR HASSALL: This was a judgment in the Supreme Court, your Honour.
KIRBY J: No, this is the Federal Magistrate.
MR HASSALL: There is also a point about whether an equitable damages ‑ ‑ ‑
KIRBY J: I see, the judgment debt upon which the bankruptcy notice was founded was in the Supreme Court of New South Wales?
MR HASSALL: Yes, your Honour. Now, your Honours, the view taken by Federal Magistrate Driver was that as the bankruptcy notice in that case was issued before 21 days had elapsed there was no interest entitlement during what the Federal Magistrate called a period of grace. The period of grace is derived from – on page 9 of 10 your Honours will see section 95 of the Supreme Court Act (NSW) extracted and you will see that subsection (1) provides that:
Where judgment is given . . . for payment of money, interest shall . . . be payable at the prescribed rate –
on so much of the money “as is from time to time unpaid”. Then subsection (2):
Notwithstanding subsection (1), where, in proceedings . . . the damages are paid within 21 days after the date when the judgment takes effect, interest on the judgment debt is not to be payable under subsection (1) unless the Court otherwise orders.
I mention this, your Honour, because in this bankruptcy notice that is before the Court this was a bankruptcy notice relying, in truth, upon section 85 of the District Court Act.
Section 85 of the District Court Act is in not quite the same but similar terms to section 95 of the Supreme Court Act (NSW). Since the date of judgment here – your Honours will have noticed from the bankruptcy notice before you, the date of the actual judgment, as appears in the chronology, is 11 March 2004. Your Honours will recall that the interest claim made in this bankruptcy notice were for the date five days from the date 22 March to 26 March, to the date of issue. That means that the interest would appear to have been understated at the very least. We would submit that on ordinary Crowl principles an understatement of the interest is not misleading because the relevant dates have been quite precisely stated. Now, your Honours will see that at appeal book page 10 that 11 March was less than 21 days earlier than the day on which the bankruptcy notice was issued, 26 March.
Now, I have taken your Honours to section 95, the wording of that. As to section 85, which is the relevant statute in the matter before your Honours, the appellant’s submissions, again in the annexures immediately after the submissions that have been made, contains a copy of section 85, your Honours, and section 85 of the District Court Act (NSW) at the relevant time – there have been some amendments since because of the coming into effect of the Uniform Civil Procedure Rules, but at the relevant time there was a similar provision. Section 85(1):
Unless the Court orders in any particular case that interest ‑ ‑ ‑
GUMMOW J: What page is this?
MR HASSALL: I am sorry, your Honour. I apologise that it does not have an easily locatable page.
HEYDON J: It is about 30 pages in, in your written submissions.
MR HASSALL: It is the attachment to the submissions, your Honour, and it is after the blank form of bankruptcy notice.
GUMMOW J: Yes, I have that.
MR HASSALL: Section 85(1) provides:
Unless the Court orders in any particular case that interest be not payable, interest shall, subject to subsection (3), be payable on so much of the amount of a judgment debt as is from time to time unpaid.
It shall be payable subject to subsection (3). Subsection (3) says:
Despite subsection (1) or (2), where:
(a)the amount of a judgment debt (excluding the amount of costs to be assessed) is paid in full within 21 days after the judgment debt becomes payable, or
(b)the amount of costs assessed is paid in full within 21 days after that amount is assessed,
interest is not payable on the amount so paid, unless the Court otherwise orders.
Now, at first face, your Honours, that would appear to support an interpretation, along the lines of Magistrate Driver’s decision, that there was a period of grace. However, your Honours, we submit that when one sits back and looks at it, it is not, in our submission, really so, inasmuch as section 85(1) provides that:
interest shall, subject to subsection (3), be payable –
and subsection (3) operates only if the interest is payable in full.
GLEESON CJ: It produces the result, does it not, that if you pay within 21 days you do not have to pay interest but if you do not pay within 21 days you have to pay interest dating from the date of the judgment?
MR HASSALL: Indeed, your Honour. In other words, we submit that there are no suspensory words. There are no words to suspend.
GLEESON CJ: I had thought the combined effect of section 41(5) and the decision in Kleinwort Benson is that either overstating or understating the interest now does not matter unless the debtor is misled.
MR HASSALL: With respect, your Honour, we would submit that that is the case and, in this event, if there was an understatement of interest it is saved by ordinary application of Crowl and in relation to this aspect of period of grace we submit that Federal Magistrate Driver’s decision is, with respect, incorrect. It is notable, your Honours, that it does not appear that section 41(5) was cited to the Federal Magistrate.
GLEESON CJ: But whatever is the ultimate outcome of this appeal, one of the things that is causing unease is that if this bankruptcy notice had overstated or understated the amount of the interest there would have been no problem, but because it misstated the statutory provision under which the interest was payable there was a problem.
MR HASSALL: That is so, your Honour.
KIRBY J: Depending on the meaning of “provision”.
MR HASSALL: Yes, and we would submit that “provision” is a term of wide import, your Honours. Unless there was any other aspect I could assist your Honours with.
GLEESON CJ: Thank you, Mr Hassall.
MR HASSALL: I would only add this, your Honour. Out of an abundance of caution, we sought declaration relating to the life of the petition and we would submit that Clyne’s Case answers that.
GUMMOW J: Yes, what relief do you seek? This could be important actually.
MR HASSALL: We included that prayer for that relief out of an abundance of caution, but it is in appeal book page 193, paragraph (e) and we were concerned in terms of section 52 of the Bankruptcy Act, your Honours. But we do submit that Deputy Commissioner of Taxation v Clyne [1984] 4 FCR 156, which is on your Honours’ list, and it is in the other large book – at page 158 of that decision, your Honours, the Full Court made it clear that the effect of section 52, particularly the words in section 52(4) of the Bankruptcy Act, are that an event had occurred, which was dismissal.
In this instance dismissal had occurred. In that other instance sequestration had occurred. We submit, your Honours, that section 52 clearly provides as a proviso to lapsing – normally of course the petition will lapse after 12 months after its presentation unless extended by the court for a further period of up to 24 months.
GUMMOW J: Within that period.
MR HASSALL: Within that period. But when one examines section 52(4), we submit that there is a proviso to that lapsing effect. Section 52(4) provides that where there is a sequestration order or the petition is dismissed or the petition is withdrawn – that is what the subsection says – then the lapsing will not happen. There has been a sequestration order or there has been a dismissal of the petition or there has been a withdrawal of it. In this instance the petition has been dismissed by the primary judge.
KIRBY J: But are we not setting that aside by order (b)?
MR HASSALL: There is that aspect of it, your Honour.
KIRBY J: So that does not solve a problem, I do not think. Why would we not do anything else than set aside the order that was made at first instance by Justice Gyles and send it back to him to be dealt with to sort out the machinery provisions in accordance with the decision of the Court? That is to say, if you succeed in the appeal.
MR HASSALL: Yes, your Honour. We would submit that Clyne’s Case indicates that section 52(4) makes provision for this eventuality inasmuch as that the life of the petition is preserved by the happening of those events. Clyne’s Case was a case involving a sequestration order. The subsequent annulment position – so that the question arose as to whether the ‑ ‑ ‑
GLEESON CJ: You may be right about all this but this is not a matter on which we have the benefit of any reasoning either at first instance or in the Full Court of the Federal Court.
KIRBY J: Nor the submissions of the debtor who might want to be heard specifically on this matter in consequence of the sorting out of the general matters of principle.
MR HASSALL: It was raised in the notice of appeal, your Honour.
KIRBY J: It is raised at the end of the hunt.
GLEESON CJ: If we were otherwise in your favour, and we otherwise made orders as in paragraphs (a), (b), (c) and (d), would you be disadvantaged in any way by our not dealing with (e)? It would be a matter for the trial judge to deal with, would it not?
MR HASSALL: I think so, your Honour.
GUMMOW J: If we remitted it you would not be shut out.
MR HASSALL: May it please the Court, I would adopt, with respect, that view. We would submit that is the effect of Clyne.
GLEESON CJ: Thank you. We will reserve our decision in this matter and we will adjourn until 9.30 tomorrow morning in Canberra and 9.30 tomorrow morning in Sydney.
AT 3.00 PM THE MATTER WAS ADJOURNED
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