Adams v Lambert & Anor

[2005] HCATrans 436

[2005] HCATrans 436

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry  No C18 of 2004

B e t w e e n -

COLIN ADAMS

Applicant

and

REGINALD LAMBERT

Respondent

Office of the Registry  No C19 of 2004

B e t w e e n -

COLIN ADAMS

Applicant

and

MATTHEW LAMBERT

Respondent

Applications for special leave to appeal

GUMMOW J
CALLINAN J

TRANSCRIPT OF PROCEEDINGS

AT CANBERRA ON FRIDAY, 17 JUNE 2005, AT 2.14 PM

Copyright in the High Court of Australia

__________________

MR D.A. HASSALL:   May it please the Court, I appear for the applicant.  (instructed by Kinneally Miley)

GUMMOW J:   Yes, Mr Hassall.

MR HASSALL:   The applicant will be submitting in this case that it is a particularly good vehicle for the Court to resolve the important difficult issue of validity of ‑ ‑ ‑

GUMMOW J:   What was the amount of the judgment debt?

MR HASSALL:   $54,000, your Honour.

GUMMOW J:   And what was the occasion for it?  What was the litigation about?

MR HASSALL:   The litigation was an action in the District Court, your Honour, in a commercial matter.  Judgment was given in the District Court of New South Wales and I can inform your Honour of some further detail of the background of the judgment, if your Honour wishes.

GUMMOW J:   Anyhow, there was some commercial dispute, was there?  What was the nature of the commercial dispute, in very broad terms?

MR HASSALL:   In a recovery of a short-term loan, your Honour.

GUMMOW J:   I see.  Thank you.

MR HASSALL:   Your Honour, we would submit that this is a case where there was a misdescription of the interest provision in an attachment.  Indeed, if I could take your Honours to the application book at page 38 at about point 5 of that page, your Honours will see that the Full Federal Court below noted in its judgment that it was bound by the Australian Steel’s Case and that any reconsideration of that case ought to occur before this Court.

Your Honours, the two tests laid down by this Court in Crowl’s Case are that a bankruptcy notice is a nullity, firstly, if it fails to meet a requirement made essential by the Bankruptcy Act 1966 or, secondly, if it could reasonably mislead a debtor as to what the debtor must do in order to comply with its requirements. Incidentally, Crowl also held, your Honours, that the context of the notice itself is relevant in relation to the latter.  Now, your Honours, if I could take ‑ ‑ ‑

GUMMOW J:   Now, your client was the judgment creditor.

MR HASSALL:   Yes, your Honour.

GUMMOW J:   What was to stop them getting the bankruptcy notice right?  Is there some significance for preference times, or some other significance that does not immediately appear?

MR HASSALL:   Your Honour, the bankruptcy notice was issued in order to set in motion bankruptcy proceedings.  The creditor was not in any particular position to be aware of the details of assets or dispositions or other things that the debtor may have entered into, or the debtors may have entered into, there being two matters.

In the materials book, if I could take your Honours firstly to section 41(2), which appears ‑ ‑ ‑

GUMMOW J:   I think you can take it, Mr Hassall, that we are familiar with the difference of opinion in the Federal Court, which seems to have been resolved in the year 2000 in the Australian Steel Case.

MR HASSALL:   Indeed, your Honour.

GUMMOW J:   Has that been followed by any legislative response?

MR HASSALL:   Not that we are aware of, your Honour.  Indeed, there has been a suggestion in the judgments in relation to the legislation dealing with the matter.  The relevant provisions, your Honour, in relation to the bankruptcy notices that are subject to this matter are section 41(2) and also regulation 4.03.  Section 41(2) appears at pages 314 and 315 of the materials book and that requirement there is that:

The notice must be in accordance with the form prescribed by the regulations.

The relevant regulation is regulation 4.02, your Honour, and I would like to take your Honours immediately to regulation 4.02 at page 319 of the materials book in volume 2.  That regulation, your Honour, in the first subsection of it, says:

the form of bankruptcy notice set out in Form 1 is prescribed.

Then, the important provision, your Honour, the second clause:

(2)      A bankruptcy notice must follow Form 1 in respect of its format (for example, bold or italic typeface, underlining and notes).

However, your Honour, the third subparagraph of regulation 4.02 states that:

(3) Sub-regulation (2) is not to be taken as expressing an intention contrary to section 25C of the Acts Interpretation Act 1901.

Indeed, your Honours, there is also a note ‑ ‑ ‑

GUMMOW J:   But the problem is this, Mr Hassall.  A number of judges have applied themselves to this question and they have split.  One cannot, I think, say that either side lacks cogency to some degree.  A resolution has been reached five years ago; other views are still open probably.  Why should the status quo be disturbed?

MR HASSALL:   I hear what your Honour says and I would ‑ ‑ ‑

GUMMOW J:   And it was with that status quo in existence that this bankruptcy notice went forward.

MR HASSALL:   Our submission, your Honour, is that that status quo, that the basis of it is, in our respectful submission, flawed in that an examination of regulation 4.02, its effect, and the actual form in Form 1 that follows it, and also the wording of section 41(2), properly construed, in our submission, does not amount to the imposition of a new strict regime for creditors to comply with in relation to bankruptcy notices.

Now, my reasons for saying that, your Honour, could I take your Honours to that. In the draft notice of appeal, your Honours, you will see that we have relied upon section 306 of the Act and also the effect of section 25C of the Acts Interpretation Act.  We note that in Australian Steel’s Case, in the very last paragraph of his Honour Chief Justice Black’s decision, which appears in the materials book at pages 124 to 125, in the short paragraph there his Honour mentions the effect of regulation 4.02(3) and also section 25C of the Acts Interpretation Act but, in our submission, his Honour does not fully deal with the effect of those provisions in this context.

Your Honours, section 306 of the Act, we submit, is an important and enduring part of the statutory scheme, purposed to guard against reliance upon unmeritorious technicality.  Our submission, your Honours, is that the fact that Parliament has retained section 306 in its full effect and has altered, by the 1996 amendments, section 41(2) and has then inserted the words that your Honours see in regulation 4.02 at page 319 of the materials book, are such that the construction that the Full Courts in both Australian Steel’s Case v Lewis and in the subject case below, in our submission, that that construction, we submit, is not, with great respect, in accordance with what the law indicates.  Albeit that there has been a 3:2 majority decision in the Australian Steel’s Case and there has been in the instant case below a unanimous Full Court decision in relation to this issue, we submit, your Honours, that on proper examination, particularly the effect of regulation 4.02 because the workings of that regulation and section 41(2) of the Act, in our submission, when one lays them beside the actual form of bankruptcy notice – and in the judgments in Australian Steel, your Honours, great reliance was placed, with respect, by the majority in Australian Steel on the actual format of the notice.

Now, if I could indicate to your Honours that regulation 4.02 speaks with respect to the bankruptcy notice, saying the bankruptcy notice itself must follow the form.  I would invite your Honours to – in the application book I would like to take your Honours to page 5.  That serves a double purpose.  It is the Form 1, the relevant part of Form 1, with the judgment details and the relevant notes upon which – notes to the form, particularly Note 2, your Honours.  At page 5 I would indicate to your Honours this, that if your Honours go to what I call the boxed schedule your Honours will see that it says:

If claimed in this Bankruptcy Notice, interest . . . (see Note 2, below)

Note 2 is under a heading “For the Information of the Creditor – Notes to the Schedule”.  Then Note 2 itself says, your Honours:

Interest accrued (item 3 of the Schedule)
If interest is being claimed in this Bankruptcy Notice, details of the calculation of the amount of interest claimed are to be set out in a document attached to this Bankruptcy Notice.  The document must state:

(a)      the provision under which the interest is being claimed –

We submit, your Honours, that when one lays section 41(2) alongside regulation 4.02 and the nature of the form itself, Form 1, particularly the note, one sees that section 41(2) says:

The notice –

that is to say the bankruptcy notice itself –

must be in accordance with the form prescribed by the regulation.

The regulation says that same thing, that:

A bankruptcy notice must follow Form 1 –

et cetera, and then the very note upon which, it would appear, the Australian Steel majority’s reasoning was based, the appearance of Note 2 in the form.  Note 2 itself, in our submission, has an express contradistinction between the bankruptcy notice as such and the attachment to it.  That is borne out by examination when one looks at the rest of the form at pages 6, 7 and 8.  One notices that the bankruptcy notice itself effectively ends at page 8 when the official receiver, the now official, signs it off.

On page 9 is the page which was the “Interest Calculation”, the attached document.  Our submission is, your Honours, there is a distinction there which is not, in our respectful submission, adequately explored in the Australian Steel decision, nor in the decisions of the Full Court in Marshall, nor in the decision of the Full Court with respect below in the instant matter.

Another factor, your Honours, is that when one looks at the clear line of indication in the authorities, from James’ Case through to Pillai’s Case, which are on the list, through to Crowl’s Case, your Honour, there is a principle there that – the leading cases, that technical though bankruptcy is, undue and unmeritorious technicality ought not spell invalidity and ‑ ‑ ‑

GUMMOW J:   What was the difference in the money sum in reliance upon the correct section rather than the incorrect section for interest?

MR HASSALL:   Your Honours, the money sum claimed was – is your Honour referring to the present case?

GUMMOW J:   Yes.

MR HASSALL:   Yes.  The money sum claimed is $66.58, and I have to indicate, your Honours, here the duty to assist the Court to avoid error requires my noting that there is a mistake in paragraph 5 of the applicant’s summary.  Your Honours will see from section 83A of the District Court Act, which appears in the materials book at page 327, that the interest rate for pre‑judgment interest under section 83A is such as the trial court may fix.  Hence, your Honours, the words in paragraph 5 “under both sections was identical” is in fact an error.  We apologise for those mistaken words, but we do submit that it does not ultimately affect the wider grounds upon which the applicant relies, inasmuch as the applicant’s case is based upon what we submit is a mere misdescription.

We submit that, albeit in the context of interest calculations, it is a mere misdescription in a subsidiary attached document, and it is as much ‑ ‑ ‑

GUMMOW J:   But is the sum of $66.58 correct?

MR HASSALL:   And the rate, your Honour – the rate is 9 per cent and the calculations are correct, in our submission.  The other aspect of this is that we submit that the error, this misdescription, is as much of a misdescription, although in a different context, as the use in a notice of Bankruptcy Act 1946 as opposed to Bankruptcy Act 1966, the kind of thing which has always been regarded as a formal error, unless there were other complicating factors, in our submission.

Now, admittedly, your Honours, it is in the context of interest.  If I could sum up this, your Honours.  We say that Australian Steel is inconsistent with Kleinwort Benson v Crowl because section 41 only commands as to the bankruptcy notice itself, Note 2 clearly distinguishes the attachment from the notice and section 41(2) only requires the notice to be in accordance with the form. In accordance with the form, in our submission, both on the older authorities in the list and by virtue of regulation 4.02(3) and section 25 of the Acts Interpretation Act means substantial compliance.  In any event, the notice itself, in our submission, is fully in accordance with Form 1.  The majority’s purposive construction, in our submission, is flawed because an examination ‑ ‑ ‑

GUMMOW J:   Justice Gyles says that Australian Steel is clearly inconsistent with Kleinwort ‑ ‑ ‑

MR HASSALL:    And other judges as well, your Honour Justice Callinan.  There is that difficulty.  I do not know whether your Honours would at this stage wish to hear me in relation to the aspect of reasonably mislead.  We would submit that this is not such as would reasonably mislead because, to adopt the words used in Crowl itself, where the notice is sufficiently clear as to what is required to comply with it, then the misdescription of the section – and it is only a one digit misdescription.  A one digit misdescription, your Honours, is what this case is about.  We submit that there to use the context of the particular notice which was a relevant matter in Crowl, the second leg of Crowl, in our submission, would not apply, would not be such as reasonably mislead.

Your Honours, I perhaps should conclude on this basis, that we do submit that it is a difficult important question of law.  The listed cases, particularly the recent ones from the 3:2 majority in Australian Steel to the contrast between the sharply different holdings of the majorities in Kirk v Ashdown and Bendigo Bank, not to mention the dissents, notably Justice Gyles in Australian Steel, Justice Lee, Justice Kiefel in Kirk v Ashdown, and Justice Spender in Marshall v GMAC, disclose a division of judicial opinion.

The case squarely raises the issue as to whether a misdescription of the interest section will invalidate a notice.  Nowadays interest is claimed in notices more often than not.  In the nature of things, in an imperfect world, similar problems will recur, and the approach laid down in Australian Steel binds judges to invalidity even in the face of Parliaments having still retained section 306 and regulation 4.02 in the Act.  The approach in Australian Steel, your Honours, imposes a burden of absolute exactitude on all creditors which is simply not justified, in our submission, by Note 2, nor by the Act, nor by the well‑settled principles in James, Pillai and Crowl.

That statutory regimes around Australia exhibit a wide variety of details tells for, not against, the applicant’s contention that a margin for clerical error curable by section 306 for misdescriptions was intended by Parliament to remain.  Your Honours, we submit that the interests of justice both generally and in this case require consideration by this Court of the Full Federal Court judgment below and that this is an appropriate case for the granting of special leave.

GUMMOW J:   Thank you.

MR HASSALL:    If there was any other matter your Honours want to be ‑ ‑ ‑

GUMMOW J:   Yes, we have had written submissions, but of course no oral argument on behalf of the respondent.

MR HASSALL:   If it please the Court.

GUMMOW J:   Yes, there will be a grant of special leave in this matter.

AT 2.34 PM THE MATTERS WERE CONCLUDED