Coleman v Veale

Case [2023] FCA 1023

FEDERAL COURT OF AUSTRALIA

Coleman v Veale [2023] FCA 1023

File number: NSD 333 of 2023
Judgment of: KENNETT J
Date of judgment: 29 August 2023
Catchwords:

BANKRUPTCY AND INSOLVENCY – application to set aside bankruptcy notice under s 30 of the Bankruptcy Act 1966 (Cth) (the Act) – whether failure to note and make allowance for a costs order adverse to respondent vitiated bankruptcy notice – consideration of whether invalidity flows automatically from misstatement – consideration of meaning of “amount in fact due”

BANKRUPTCY AND INSOLVENCY – where bankruptcy notice includes a final judgment expressed in a foreign currency – error in publication date of exchange rate used – exchange rate expressed to two decimal places and equivalent amount understated due to rounding – whether bankruptcy notice complied with s 12 of the Bankruptcy Regulations 2021 (Cth) – whether non-compliance is merely formal

PRACTICE AND PROCEDURE – where application lodged prior to, but not accepted for filing until after, expiration of the period in s 41(6A) of the Act – consideration of whether Court’s jurisdiction in bankruptcy properly invoked in light of Lamb v Sherman [2023] FCAFC 85

Legislation:

Bankruptcy Act 1966 (Cth) ss 30, 40, 41, 306

Bankruptcy Regulations 2021 (Cth) s 12

Federal Court Rules 2011 (Cth) r 2.25

Cases cited:

Coleman v Gannaway [2023] FCA 224

Croker v Commissioner of Taxation [2005] FCA 127; 145 FCR 150

Duarte v Coshott [2017] FCA 1238

Farah Constructions Pty Ltd v Say-Dee Pty Ltd [2007] HCA 22; 230 CLR 89

Grant v Green & Associates Pty Ltd [2021] FCA 934

Herat v McLean Holdaway Pty Ltd [2014] FCA 816

Kleinwort Benson Australia Ltd v Crowl (1988) 165 CLR 71

Lamb v Sherman [2023] FCAFC 85

N & M Martin Holdings Pty Ltd v Commissioner of Taxation [2020] FCA 1186

Nugawela v Deputy Commissioner of Taxation [2016] FCAFC 164

Parianos v Lymlind Pty Ltd [1999] FCA 684; 93 FCR 191

Re Emerson; Ex parte Wreckair Pty Ltd (1991) 101 ALR 315

Re Greenhill; Ex parte Myer(NSW) Ltd (1984) 5 FCR 84

Re Prossimo; Ex parte De Marco (1952) 16 ABC 86

Re Walsh (1982) 65 FLR 87

Seovic Civil Engineering v Groeneveld [1999] FCA 255; 87 FCR 120

Skououlis v St George Bank [2008] FCA 1765; 173 FCR 236

Walsh v Deputy Commissioner of Taxation (1984) 156 CLR 337
Division: General Division
Registry: New South Wales
National Practice Area: Commercial and Corporations
Sub-area: General and Personal Insolvency
Number of paragraphs: 62
Date of hearing: 27 June 2023
Counsel for the applicant: T Smartt
Solicitor for the applicant: Shiff & Company Lawyers
Counsel for the respondent: J Mee
Solicitor for the respondent: Campbell Paton and Taylor Solicitors

ORDERS

NSD 333 of 2023
BETWEEN:

DAVID COLEMAN

Applicant
AND:

ANDREW WILLIAM VEALE

Respondent

ORDER MADE BY:

KENNETT J

DATE OF ORDER:

29 AUGUST 2023

THE COURT ORDERS THAT:

1.Pursuant to s 30 of the Bankruptcy Act 1966 (Cth), bankruptcy notice BN 259365 issued on 23 March 2023…

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Details
AGLC
Coleman v Veale [2023] FCA 1023
Case
[2023] FCA 1023
Decision Date

CaseChat Overview and Summary

The applicants, Coleman, sought to have a bankruptcy notice issued against them set aside. Veale, the Official Receiver, issued the notice. The notice was issued against the applicants in response to their debt arising from judgments obtained by the respondent in Singapore. The applicants argued that the bankruptcy notice was invalid for two reasons: the notice failed to account for a costs order in favour of the applicants and against the respondent; and the notice contained an error in the exchange rate used to convert the amount from USD to AUD. The applicants lodged their application prior to the expiration of the relevant period but the application was not accepted for filing until after the expiration. The applicants argued that the Court had jurisdiction to hear the application. The court had to decide whether the failure to note and make allowance for a costs order adverse to the respondent vitiated the bankruptcy notice. The court also had to consider whether invalidity flowed automatically from the misstatement, and what was meant by "amount in fact due". The court also had to determine whether the bankruptcy notice complied with s 12 of the Bankruptcy Regulations 2021 (Cth) and whether non-compliance was merely formal. Finally, the court had to consider whether the Court’s jurisdiction in bankruptcy was properly invoked in light of Lamb v Sherman [2023] FCAFC 85.

The court held that the failure to note and make allowance for a costs order adverse to the respondent did not vitiate the bankruptcy notice. The court found that invalidity did not flow automatically from the misstatement and that "amount in fact due" referred to the amount that the debtor actually owed. The court held that the bankruptcy notice did not comply with s 12 of the Bankruptcy Regulations 2021 (Cth) because of the error in the exchange rate used to convert the amount from USD to AUD. However, the non-compliance was merely formal. The court held that its jurisdiction in bankruptcy was properly invoked in light of Lamb v Sherman [2023] FCAFC 85.

The court set aside the bankruptcy notice issued on 23 March 2023. The court made no order as to costs.

Orders

Orders of the court

1. Pursuant to s 30 of the Bankruptcy Act 1966 (Cth), bankruptcy notice BN 259365 issued on 23 March 2023 be set aside.

Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

Background

Background to the litigation

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Evidence

Evidence Before The Court

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Decision

Reasons for decision

These two judgments were registered by the Supreme Court of New South Wales on 16 August 2022 (the NSW judgment). The NSW judgment is for the following amounts:(a)USD 186,471.25, being the principal amount of the Singapore trial judgment plus accrued interest;(b)AUD 12,396.64, being the AUD equivalent of the SGD 12,000 remaining to be paid by way of costs under the Singapore appeal judgment; and(c)AUD 7,964.18, being the respondent’s costs of applying for registration. The respondent obtained the issue of a bankruptcy notice in respect of the NSW judgment on 20 February 2023. That notice was set aside by this Court, by consent, on 21 March 2023. It has no further relevance, except that the respondent was ordered to pay the applicant’s costs fixed in the sum of $3,700 (the costs order). On 21 March 2023 the respondent’s solicitor made a fresh application to the Official Receiver for the issue of a bankruptcy notice to the applicant. The notice with which the Court is presently concerned was issued, in response to that application, on 23 March 2023. The notice asserts a total debt amount of $309,923.56, which it explains as follows: Complaint is made about two aspects of the notice:(a)the absence of allowance for the $3,700 payable by the respondent to the applicant pursuant to the cost order (ground 1 in the application); and(b)an alleged error in note A of the notice, where it is said that the principal amount has been converted from USD to AUD using the rate of exchange published by the Reserve Bank of Australia (the RBA) “as at 19 March 2023” which was said to be 1.48 (ground 2 in the application).RELEVANT PROVISIONS The substantive issues involve s 41 of the Act which, relevantly, provides as follows:(1) An Official Receiver may issue a bankruptcy notice on the application of a creditor who has obtained against a debtor:(a) a final judgment or final order that:(i) is of the kind described in paragraph 40(1)(g); and(ii) is for an amount of at least the statutory minimum; or(b) 2 or more final judgments or final orders that:(i) are of the kind described in paragraph 40(1)(g); and(ii) taken together are for an amount of at least the statutory minimum.(2) The notice must be in accordance with the form prescribed by the regulations.(2A) The notice must specify a period for compliance with the notice. That period must be:(a) if the notice is to be served in Australia—the statutory period after the debtor is served with the notice; or(b) ...(3) A bankruptcy notice shall not be issued in relation to a debtor:(a) except on the application of a creditor who has obtained against the debtor a final judgment or final order within the meaning of paragraph 40(1)(g) or a person who, by virtue of paragraph 40(3)(d), is to be deemed to be such a creditor;(b) if, at the time of the application for the issue of the bankruptcy notice, execution of a judgment or order to which it relates has been stayed; or(c) in respect of a judgment or order for the payment of money if:(i) a period of more than 6 years has elapsed since the judgment was given or the order was made; or(ii) the operation of the judgment or order is suspended under section 37.(5) A bankruptcy notice is not invalidated by reason only that the sum specified in the notice as the amount due to the creditor exceeds the amount in fact due, unless the debtor, within the time fixed for compliance with the notice, gives notice to the creditor that he or she disputes the validity of the notice on the ground of the misstatement.(6) Where the amount specified in a bankruptcy notice exceeds the amount in fact due and the debtor does not give notice to the creditor in accordance with subsection (5), he or she shall be deemed to have complied with the notice if, within the time fixed for compliance with the notice, he or she takes such action as would have constituted compliance with the notice if the amount due had been correctly specified in it.(6A) Where, before the expiration of the time fixed for compliance with a bankruptcy notice:(a) proceedings to set aside a judgment or order in respect of which the bankruptcy notice was issued have been instituted by the debtor; or(b) an application has been made to the Court to set aside the bankruptcy notice;the Court may, subject to subsection (6C), extend the time for compliance with the bankruptcy notice.(6C) …(7) Where, before the expiration of the time fixed for compliance with a bankruptcy notice, the debtor has applied to the Court for an order setting aside the bankruptcy notice on the ground that the debtor has such a counter-claim, set-off or cross demand as is referred to in paragraph 40(1)(g), and the Court has not, before the expiration of that time, determined whether it is satisfied that the debtor has such a counter-claim, set-off or cross demand, that time shall be deemed to have been extended, immediately before its expiration, until and including the day on which the Court determines whether it is so satisfied.

Ratio Decidendi

Legal Principle Established

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