Commonwealth v Gilbert - [2002] FMCA 165

FEDERAL MAGISTRATES COURT OF AUSTRALIA

COMMONWEALTH v GILBERT

[2002] FMCA 165

BANKRUPTCY – Creditor’s petition – alleged defect in bankruptcy notice – provision under which interest is claimed – whether a certificate of judgment from the NSW Local Court can be a provision.

Bankruptcy Act 1966 (Cth), s.52

Bankruptcy Regulations
Local Courts (Civil Claims ) Act 1970 (NSW)
Penalty Interest Rate Act 1983 (Vic)

Supreme Court Act 1970 (NSW), s.95

Australian Steel Company (Operations) Pty Ltd v Lewis [2001] FCA 1915
Boorowa Shire Council v Booth [2001] FMCA 31
Cary and Anor v Owners of Strata Plan No 7241 [2002] FMCA 18
Jiminez v Welcome Homes Real Estate Pty Limited [2001] FMCA 122

Applicant:

COMMONWEALTH OF AUSTRALIA

Respondent:

BEVERLEY ANNE GILBERT

File No:

SZ445 of 2002

Delivered on:

6 August 2002

Delivered at:

Sydney

Hearing Date:

6 August 2002

Judgment of:

Driver FM

REPRESENTATION

Solicitors for the Applicant:

Ms V Theodore
Sparke Helmore

No appearance by the respondent.

ORDERS

(1)The estate of Beverley Anne Gilbert, also known as Beverley Pyne, is to be sequestrated.
(2)The petitioning creditor’s costs, including any reserved costs, are to be taxed and paid in accordance with the Bankruptcy Act 1966 (Cth).

NOTE

(1)The Court notes that the date of the act of bankruptcy is 4 June 2002.

FEDERAL MAGISTRATES
COURT OF AUSTRALIA AT
SYDNEY

SZ445 of 2002

COMMONWEALTH OF AUSTRALIA

Applicant

And

BEVERLEY ANNE GILBERT

Respondent

REASONS FOR JUDGMENT

I have before me for ex tempore judgment a creditor's petition, filed on 26 June 2002 by the Commonwealth of Australia, against Beverley Anne Gilbert, also known as Beverley Anne Pyne. I have had presented to me in support of the petition affidavits of search and debt and an affidavit verifying paragraph 4 of the creditor's petition. Subject to one matter I am satisfied as to all of the matters for which satisfaction is required pursuant to s.52 of the Bankruptcy Act 1966 (Cth) (“the Bankruptcy Act”) preparatory to the making of a sequestration order. The one matter which necessitates the giving of reasons is whether the bankruptcy notice supporting the creditor's petition is valid.
The issue is whether the bankruptcy notice is invalid by reason of a failure to state the provision under which interest is claimed. It is accepted that the prescribed form of bankruptcy notice, prescribed by regulation 4.02 of the Bankruptcy Regulations at note 2 to the interest schedule, requires that if interest is claimed under the bankruptcy notice, details of the calculation of the amount of interest claimed are to be set out in a document attached to the bankruptcy notice. The document must state the provision under which interest is being claimed and the principal sum on which, the period for which, and the interest rate or rates at which, interest is being claimed.
The present bankruptcy notices attaches a schedule which satisfies some but not all of those requirements. It sets out the principal sum on which, the period for which, and the interest rate or rate at which interest is being claimed. However, it does not set out the provision under which interest is being claimed. Nevertheless, there is also attached to the bankruptcy notice a certificate from the Local Court which states at point 3 that interest is payable on the judgment debt at the rate prescribed for the purposes of s. 95(1) of the Supreme Court Act 1970 (NSW) (“the Supreme Court Act”). That is the provision under which interest is calculated for the purposes of proceedings in the Local Court.
In a number of cases, some published, and some not, this Court has set aside bankruptcy notices which have failed to set out or set out correctly the legislative provision under which interest is claimed in respect of a judgment debt arising out of proceedings in the Local Court of New South Wales. The most recent of those cases was Cary and Anor v Owners of Strata Plan No 7241 [2002] FMCA 18. That was a decision of mine. Commencing at paragraph 8 of that judgment I dealt with the question of the interest annexure and I said that in that case the bankruptcy notice was based upon a judgment of the Local Court in Burwood in its civil claims jurisdiction. Attached to the bankruptcy notice was a certificate of judgment in relation to the Local Courts (Civil Claims) Act 1970 (NSW) (“the Local Courts Act”) which similarly specified at point 3 that interest is payable on the judgment debt at the rate prescribed for the purposes of s.95(1) of the Supreme Court Act.
There was also attached to that notice a schedule which on its face contained a statement that interest was payable at the rates prescribed for the purposes of s. 95(1) of the Supreme Court Act. In that case I referred to earlier decisions in Boorowa Shire Council v Booth [2001] FMCA 31 and also Jiminez v Welcome Homes Real Estate Pty Limited [2001] FMCA 122 as authorities supporting the proposition that s.95(1) of the Supreme Court Act is not the provision under which interest is payable in civil proceedings in the Local Court, but rather is the provision under which interest is calculated. In Cary, as in the case of Jiminez, I found that the relevant bankruptcy notice was invalid by making an incorrect reference in the interest schedule to the provision under which interest was payable.
In this matter Ms Theodore, for the petitioning creditor, has produced a novel argument. She submits that the word “provision” in the note to the prescribed form of bankruptcy notice is not necessarily a reference to the statutory provision either prescribing the rate of interest or providing the legal authority for a claim of interest. She has referred me to the definition of the word “provision” in the Macquarie Dictionary which is that provision means, first, a clause in a legal instrument, a law et cetera providing for a particular matter; a stipulation or a proviso.
In Butterworths Bankruptcy Law and Practice at page 10,151 the learned authors deal with the question of the provision under which interest is claimed. The learned authors say that the requirement that the document set out the provision under which interest is claimed gives rise to a number of issues. The first issue is what is the source of the entitlement to interest? In most cases the source of the entitlement would at least need to include a reference to the relevant Court Act. This should be distinguished from the Act, rule or regulation prescribing the rate of interest, for example, the Penalty Interest Rate Act 1983 (Vic). The next issue is what is meant by the requirement to state the "provision". Where the entitlement arises pursuant to a statute it is arguable that “provision” means both the relevant Act and the section. The learned authors have then set out a list of the provisions of statutes supporting a claim of interest. In the case of the Local Court of New South Wales the relevant provision is s.39(1) of the Local Courts Act.
The argument Ms Theodore advances is that “provision” can include a certificate of judgment where that is itself the source of the entitlement to interest, so that where a court has relevantly ordered or at least identified that interest is to be payable the requirement to state the provision would be met by including in the document annexed to the bankruptcy notice a reference to the judgment or the certificate of judgment. This was not a matter that was dealt with specifically in Australian Steel Company (Operations) Pty Ltd v Lewis [2001] FCA 1915.
There has been an assumption that the reference to provision means a reference to a legislative provision. That is ordinarily the case, but the framers of the prescribed form of bankruptcy notice evidently envisaged that it would not necessarily be the case. If they had thought that it would necessarily be the case one would have expected that the prescribed form would have required that the legislative provision or the enactment or the provision of the statute be referred to.
Australian Steel Company (Operations) Pt Ltd v Lewis requires the Court construing a bankruptcy notice to take a purposive approach. The purpose of the requirement to state the provision under which interest is claimed is to ensure that the debtor understands where the liability to pay interest comes from. There is much force in the proposition that if the liability to pay interest stems from an order of a court or if the court at least identifies the interest obligation, then the obligation to state the provision under which interest is claimed is satisfied by putting in the reference to the court judgment or the certificate of judgment.
Where the schedule of interest claimed contains an incorrect reference to the legislative provision supporting the claim of interest, consistently with the view that I took in Cary v Owners of Strata Plan No.7241 and consistently with the judgment of the Full Federal Court in Australian Steel v Lewis, the proper conclusion is that the bankruptcy notice is invalid. However, where the interest schedule says nothing about the legislative provision under which interest is claimed and where the bankruptcy notice attaches a certificate of judgment, that clearly contains a reference to the interest component of the judgment, it seems to me that it is open to the Court to amend the bankruptcy notice to cure a formal defect pursuant to s. 306 of the Bankruptcy Act. This is on the basis that the provision in this case is the certificate of judgment annexed to the bankruptcy notice and the defect is purely one of form not of substance. I am, therefore, persuaded that in the somewhat novel circumstances of this bankruptcy notice it is open to me to correct this formal defect.
There is no confusion that would have been created in the mind of the debtor because nothing was included in the interest schedule that would conflict with what was contained in the certificate of judgment. The debtor on reading the certificate of judgment would have been put on notice as to the legal source of the claim of interest. Accordingly, no injustice is done by permitting the bankruptcy notice to be amended to correct the formal defect arising from the failure to include a reference to the certificate of judgment in the interest schedule.
Accordingly, I find that the requirement in the prescribed form of notice for the provision under which interest is claimed to be included in the interest schedule can be satisfied by including a reference to a certificate of judgment from the Local Court which deals with the obligation to pay interest. A failure to include in the interest schedule a reference to that certificate of judgment can be cured pursuant to s. 306 of the Bankruptcy Act where the certificate of judgment is itself annexed to the bankruptcy notice, provided that nothing else has been included in the interest schedule or elsewhere in that bankruptcy notice that would give rise to confusion in the mind of the debtor.
There is nothing confusing in this bankruptcy notice, therefore, the bankruptcy notice can be amended and is valid. In the circumstances I will, therefore, order that the estate of Beverley Anne Gilbert also known as Beverley Anne Pyne, be sequestrated. I will further order that the petitioning creditor's costs, including any reserved costs, be taxed and paid in accordance with the Bankruptcy Act. The Court notes that the date of this act of bankruptcy is 4 June 2000.

I certify that the preceding fourteen (14) paragraphs are a true copy of the reasons for judgment of Driver FM

Associate:

Date: 16 August 2002