Clancy v Robinson

[2002] FMCA 47

FEDERAL MAGISTRATES COURT OF AUSTRALIA

STEPHEN WILLIAM CLANCY v DALE ROBINSON [2002] FMCA 47

BANKRUPTCY – bankruptcy notice – attachment of sealed Certificate of Judgment as opposed to copy of judgment not a failure to comply with Form 1 – certificate of judgment found to be “a copy of a judgment” – use of words “not claimed in this bankruptcy notice” not confusing – application dismissed

Bankruptcy Act 1966
District Court Act 1973 (NSW)

Farrugia; ex-parte Deputy Commissioner of Taxation (NSW) (1988) 80 ALR 651
Kleinwort Benson v Crowl (1988) 79 ALR 161
Australian Steel Co v Lewis (2002) FCA 1915
St George Bank Limited v Klintworth (1998) FCA 1066
Slavko Stankovic v Footers Pty Limited [2001] FMCA 119

Scerri v Karval (1998) 82 FCR 146
Amex v Held (1999) 168 ALR 185
CBA v Horvath (1999) 161 ALR
Thompson v Metham [1999] FCA 935

Applicant: STEPHEN WILLIAM CLANCY

Respondent: DALE ROBINSON

File No: CZ 6 of 2002

Delivered on: 2 April 2002

Delivered at: Sydney

Hearing Date: 13 March 2002

Judgment of: Raphael FM

REPRESENTATION

Counsel for the Applicant: Mr Doug Hassall

Solicitors for the Applicant: Ken Cush & Co

Solicitors for the Respondent: Mr David Farrar of Tress Cocks & Maddox

ORDERS

1. Application dismissed.

2. Applicant to pay respondent’s costs pursuant to the Federal Court Rules.

3. Time for compliance of the bankruptcy notice extended to 5.00p.m. on 3 April 2002

FEDERAL MAGISTRATES
COURT OF AUSTRALIA AT
CANBERRA

CZ 6 of 2002

STEPHEN WILLIAM CLANCY

Applicant

And

DALE ROBINSON

Respondent

REASONS FOR JUDGMENT

1. This matter comes before me by way of review of a decision of District Registrar Mathieson on 24 January 2002 declining to set aside a bankruptcy notice dated 12 December 2001 and served upon the debtor on or about 28 December 2001.

2. The learned Registrar did not provide reasons for his decision but issued a statement of six findings on the matters in contention.  A referral to this court of a Registrar’s decision is not an appeal but a hearing de novo.  Whilst it is some times useful to have detailed reasons for decision which, if appropriate, can be adopted by the Federal Magistrate hearing the application, this is not essential.  The provision of findings in the form set out by the learned District Registrar seem to me to be perfectly sufficient to enable the parties to reargue the case before a Federal Magistrate.

3. The bankruptcy notice under challenge appears to be in the form prescribed under sub-s.41(2) of the Bankruptcy Act 1966 and by Regulation 4.02 of the Bankruptcy Regulations.  It claims a debt due to the creditor of $288,754.65.  This is an amount in respect of which the creditor obtained judgment in the District Court of New South Wales on 8 August 2001.

4. There are two areas in relation to the form which are attacked by the debtor.  The first relates to the schedule.  For ease of explanation a copy of the schedule as completed in the bankruptcy notice appears below:

Column 1	Column 2
1.    Amount of judgment or order	$288,754.65
plus 2.  Legal costs if ordered to be paid and a specific amount was not included in the  judgment or order (see Note 1. Below)	Not being claimed in this  Notice
plus 3.    If claimed in this Bankruptcy Notice, interest accrued since the date of judgment or order (see Note 2. Below)	Not being claimed in this Notice
4.    Subtotal	$288,754.65
less  5.    Payments made and/or credits allowed since date of judgment or order	Nil
6.     Total debt owing	$288,754.65

(NB: Amounts, where applicable, are to be inserted in column 2)

It is also necessary to reproduce the certificate of judgment as that document is referred to in the attached upon the schedule and is impugned in its own right.

IN THE DISTRICT COURT

OF NEW SOUTH WALES

AT SYDNEY    File No:  3019/00

BETWEEN

DALE ROBINSON

Judgment Creditor

AND           L.S.

STEPHEN WILLIAM CLANCY

Judgment Debtor/s

CERTIFICATE OF JUDGMENT

I, J Cowen, Registrar of the District Court

of New South Wales for SYDNEY, being the officer having ordinarily

the custody of the records, documents, proceedings and minutes of

Court at that place,

Do hereby certify that:-

1.    In this action the Plaintiff recovered Judgment

  

against the Defendant on 08/08/2001,

  

in the sum of

  

$287,626.65.        and his costs

  

$1,128.00.

2.    I am informed by the Judgment Creditor that the

  

amount of

  

$0.00

  

has been paid in respect of the Judgment.

3.    Interest is payable per annum on so much of the

  

judgment debt (including costs) as is from time to

  

time unpaid – see attached schedule.

4.    The Judgment Creditor has incurred costs of

  

attempting to enforce the judgment, recoverable

  

against the judgment debtor,

  

in the amount of $0.00.

  

Signed J Cowen

Dated:  23/10/2001  Registrar

District Court, SYDNEY located at 86 Goulburn St,

Sydney. DX 11518  Sydney D’town. Ph: 9377 5611, open 8.30a.m.– 5.00p.m.

1. The debtor argues that paragraph 1 of the bankruptcy notice claims, without further explanation, a debt of $288,754.65. “as shown in the schedule.” Box 1of the schedule refers to $288,754.65. as the “amount of judgment or order” but the certificate of judgment attached nowhere states that amount.  The schedule does not further explain that amount. The words in column 2 of boxes 2 and 3 imply, and indeed suggest, that the respondent creditor makes a further claim for legal costs and also for interest by way of some additional, but yet undefined process.  The crucial test here is the impression upon an ordinary lay debtor, not how a trained lawyer, experienced in insolvency matters might read it.

2. The debtor also suggests that the manner in which the notice is set out contains an understatement of the true amount due and contains words likely to lead the ordinary debtor to believe that a demand for payment of some amount for legal costs or for post judgment interest may also be claimed against and made upon the debtor in bankruptcy proceedings to be issued by the respondent, or that he ought to pay further amounts due under the judgment in order to ensure that he does not commit an act of bankruptcy.  In regard to the certificate of judgment, so far as it relates to the schedule, he says that the full stop after “65¢” creates a discrepancy in the amount claimed which is left totally unexplained. 

3. I do not accept these arguments.  Firstly I believe that paragraph 1 of the certificate of judgment is absolutely clear.  The addition of a full stop after the 65¢ would not to my mind confuse any lay reader of the document and I cannot see how it leads to any discrepancy.  We are surely not at the stage where a debtor is relieved of the simple act of adding two figures together to make a total.  In any event, a reading of the schedule makes it quite clear that no other legal costs are being claimed in the notice which were not included in the judgment or order and the amount is quite clearly spelt out in paragraph 1 of the certificate of judgment.

4. In putting forward an argument that the use of the words in column 2 of the schedule “not being claimed in this notice” would confuse the debtor as to what is required to avoid “bankruptcy proceedings” seems to me to be misunderstanding the purpose of a bankruptcy notice.  In re Farrugia; ex-parte Deputy Commissioner of Taxation (NSW) (1988) 80 ALR 651 the Full Bench made a clear distinction between what is required to comply with a bankruptcy notice (and therefore avoid the commission of an act of bankruptcy) and what may be claimed in bankruptcy proceedings consequent upon an act of bankruptcy taking place. At 655 their Honours said:

   “If the debtor fails to comply with the requirements of bankruptcy notice and thereby commits an act of bankruptcy, the creditor may include in his petition the full amount of the judgment debt and interest accrued thereon to the date of presentation of the petition.   Also, the creditor may prove in the bankruptcy for the full amount due to him for the judgment debt and interest accrued to the date of bankruptcy.  There is no rule of bankruptcy law that requires the creditor to abandon or waive, in the bankruptcy notice, his entitlement to interest on the judgment debt accruing after the date to which the claim is made in the notice.”

5. The judgment creditor in this case has said in column 2 of the schedule that he is not making any claim in this notice for costs.  It may well be that he is not entitled to any costs apart from those which are included in the judgment but if he is, he is not confusing the creditor.  He is telling the creditor that if the creditor pays the amount claimed in this notice he will not have committed an act of bankruptcy on this occasion.  The same is being said in box 3 relating to interest.  Interest would almost certainly be due under this particular judgment.  It is notorious that the calculation of interest has caused numerous problems in bankruptcy notices.  That is why a number of creditors do not bother with it.  They are entitled to omit it from a bankruptcy notice and to claim it in the petition or in their proof of debt.

6. Re Farrugia was decided after KleinwortBenson v Crowl (1988) 79 ALR 161, and to the extent that in this case there is an understatement of the amount owed,the finding in Crowl that the amount specified in the bankruptcy notice must be due and payment must be claimed in accordance with the judgment are essential requirements of s.41(2)(a)(i) of the Bankruptcy Act, are met. Therefore any understatement must be objectively capable of misleading a debtor. Australian Steel Co v Lewis (2002) FCA 1915 at paragraph 33. It seems to me that in this notice before me, the schedule makes it quite clear that compliance can be effected by the payment of $288,754.65. and that nothing else is claimed.

7. The debtor also alleged that in claiming the sum of $288,754.65.as a judgment debt the creditor was overstating the amount due. The appropriate notices under s.41(5) of the Bankruptcy Act have been served. I do not agree with this submission either. Section 148D of the District Court Act 1973 (NSW) provides:

   “Any costs payable by a judgment debtor under this Act shall form part of the judgment debt.”

8. The amount claimed in box 1 of the schedule as the amount of the judgment or order is the amount of the judgment as certified in the certificate of judgment together with the costs certified and is therefore “the amount of the judgment or order”.

9. The next point made by the debtor is that the use of a Certificate of Judgment attached to the bankruptcy notice is a non-compliance with Regulation 4.02 and Form 1 and therefore a breach of s.41(2) of the Bankruptcy Act.  Such a breach is substantive and renders the bankruptcy notice invalid.  It seems to me that this point is made at its highest in the following manner.

10. Regulation 4.01 of the Bankruptcy Regulations states:

    “4.01. (1)  In order to apply for the issue of  a bankruptcy notice, a person must lodge with the Official Receiver:

    (a)a duly completed draft bankruptcy notice; and

    (b)(ii)  a certificate of the judgment or order sealed by the court or signed by an officer of the court.”

    The certificate of judgment which is annexed to the current bankruptcy notice appears to me (and I do not believe this is disputed by the debtor) to comply with that requirement.

11. Regulation 4.02 of the Bankruptcy Regulations provides as follows:

    “4.02 (1) For the purposes of sub-s.41(2) of the Act, the form of bankruptcy notice set out in Form 1 is prescribed.”

12. The form of the bankruptcy notice contains in paragraph 2 the following statement:

    “2  The creditor claims that the debt is due and payable by you.  A copy of the judgment or order relied on by the creditor is attached…”

13. The debtor says that the District Court Rules makes special provision to the issue of documents evidencing judgment.  District Court Rule 31.15 is in the following terms:

    “31.15 Form of Judgment or Order

    (1)   A  form of judgment, and a form of order for signature by the Registrar, shall when filed be sealed with the Seal of the court.

    (2)  Except where otherwise provided by the Rules or required by the court, it shall not be necessary to file the form of judgment or order unless application is made for a certified copy thereof.  c f DCR R 26

    31.16Copies and Certificates

    (1)Subject to sub-rule (3), the Registrar shall, on the filing of a request therefore, furnish to any party to any proceedings the certificate of any judgment, or a certified copy of any judgment or order, a form of which is filed in the proceedings.

    (2)…

    (3)…

    (3A)The Registrar may issue a certified copy of a default judgment to a party in the proceedings at any time after the judgment is entered even if the party has not filed the request for a certified copy under this rule. 

14. The effect of these rules, it is said, is that the District Court allows a party to obtain two documents if it wishes.  The first is a certificate of judgment and the second is the certified copy of a default judgment.  In order to comply with the Bankruptcy Act and Regulations and still only have one document annexed to the bankruptcy notice it will be necessary for the creditor to obtain a certified copy of the judgment pursuant to Rule 31.16(3A).  However, there is no requirement for only one document.  The requirement in the bankruptcy form for “a copy of the judgment or order relied upon by the creditor” is not a requirement for a certified copy.  It would be perfectly open to the creditor to make the equivalent of what used to be known as “a registration copy” of the document and attach that to the bankruptcy notice. The purpose of Regulation 4.01 is that the Official Receiver, before placing his seal and imprimatur upon the bankruptcy notice, should be satisfied by the production of one of the documents set out in Reg 4.01(1)(b) that the bankruptcy notice was correct, at least insofar as the copy judgment annexed to it was concerned.  The Official Receiver could compare the copy judgment with the certified copy and be satisfied. 

15. Looked at in this way there is no discrepancy between the wording on the bankruptcy notice and the wording in the regulation and no need to expand the definition of “copy of a judgment” as Hill J did in St George Bank Limited v Klintworth (1998) FCA 1066. The words in the form should be given their true and proper meaning and I should follow the statement of the Full Court in Australian Steel:

    “42 In our view the purpose of the requirement that the source of the creditor’s entitlement to interest be stated could only be to enable the debtor to verify that the amount claimed is in fact due.  The same purpose lies behind the requirement that a copy of the judgment relied on be attached to the notice… That requirement is made essential by the Act and a notice issued in breach of the requirement will be invalid.”

16. In St George Bank his Honour found that a document entitled “Notice of Entry of Default Judgment” (a computer generated document which contained the particulars of the judgment) amounted to a copy of the order or judgment so that form 1 had been complied with. In that case there was another defect, namely that the notice of default judgment was for some reason not sealed. His Honour held that that was a formal defect which could be cured under s.306(1) of the Bankruptcy Act.  That is not a problem in the case presently before me as the certified copy of the judgment is sealed.

17. I considered the effect of Australian Steel upon the decision in St George Bank in Slavko Stankovic v Footers Pty Limited [2001] FMCA 119 where at paragraph 11 I said:

    “In my view this case does not affect the St George decision because Hill J found that the form had been complied with and it was that requirement which formed the ratio of the decision in Australian Steel.”

18. If I maintain that view, the certified copy of the judgment annexed to the bankruptcy notice will constitute a “copy of the judgment” for the purposes of Form 1 and the debtor’s argument will fail.  If I take the view urged upon me by the debtor, that St George Bank is distinguishable upon its particular facts and that Australian Steel Company’s reasoning applies to require a copy of the judgment, the debtor will succeed.

19. In support of his submission the debtor cites re ScerrivKarvall (1998) 82 FCR 146, Amex v Held (1999) 168 ALR 185 and CBA v Horvath (1999) 161 ALR at 441. Re Scerri was a case in which no copy of the judgment was attached to the bankruptcy notice.  I would agree that omission of the document is more than a mere formal defect curable under s.306.  CBA v Horvath was a case in which copies of costs orders said to found the bankruptcy notice were not attached.  At paragraph 4 his Honour said:

    “The bankruptcy notice specified as the debt due to the bank the  sum of $55,864.10.  In the schedule this debt was described as “legal costs.  Attached to the notice was a copy of the order of the taxing master.  The order reads “The costs of the plaintiff (the bank) are taxed and allowed in the sum of $55,864.10.”  The order records that it was made on a summons for taxation and notes that the “taxation” (was) pursuant to the orders of the Honourable Mr Justice Beach made 23 May 1995, the Honourable Mr Justice O’Brien made 2 April 1996, and the Honourable Mr Justice Beach made 10 May 1996.”  Copies of those orders were not attached to the notice.  The taxing master’s order does not record the fact that the costs order had been made against the debtor.”

    At paragraph 7 his Honour said:

    “… Where as here, a taxing master undertakes a taxation in consequence of an order made by a Judge of the court, the taxing master’s order is not capable of enforcement.  It is not, therefore, a final judgment or order of the Supreme Court and cannot be relied upon to found a petition.  Accordingly, the bankruptcy notice is defective in that there were not attached to it copies of the final orders which were the foundation for the debt described in the notice.”

20. In Amex v Held Keddy J followed both Finkelstein J in CBA v Horvath and Beaumont J in Scerri v Karval and held that the absence of a copy of the judgment was a fatal defect.  I do not cavil with any of these authorities as they do not address the question before me.  They do not distinguish between a certificate of judgment and “a copy of a judgment”.

21. Although I understand the applicant’s argument, I do not propose to recant my previously held views.  St George Bank was not only discussed in detail and with approval by Lee J in Australian Steel but also approved by Katz J in Thompson v Metham [1999] FCA 935. At paragraph 21 his Honour quoted the important dicta of Hill J in St George Bank:

    “There is no need in my view to give the word “copy” a narrow interpretation.”

22. The debtor has before him a sealed certificate of judgment signed by the Registrar of the District Court, which clearly sets out the amount owed by him to the creditor.  That document is not confusing on its face; the addition of a ready reckoner form of calculation for interest is not likely to confuse where no interest is claimed.  I reject the debtor’s submission that the certificate of judgment as attached to the bankruptcy notice is liable to confuse or mislead the debtor.  I would find that it is a “copy of the judgment” for the purposes of Form 1.  I note that in my reading of the various cases to which I have referred there is always a full stop after the cents figure wherever money is described numerically.  This fortifies me in my view that the addition of a full stop could not lead to any confusion in the mind of a debtor.

23. For the reasons set out above I dismiss the debtor’s application with costs.   I extend the time for compliance with the bankruptcy notice until 5.00p.m. on 3 April 2002.

I certify that the preceding twenty-seven (27) paragraphs are a true copy of the reasons for judgment of Raphael FM

Associate: 

Date: