Croft, Terry Fortescue v Poli, Armida Croft, Terry Fortescue v Ex Parte Armida Poli
[1997] FCA 326
•28 APRIL 1997
CATCHWORDS
BANKRUPTCY - creditor’s petition - bankruptcy notice - failure to set out credit given to the debtor - failure to set out cost orders made after judgment on enforcement warrants - failure to disclose that statutory interest was claimed on the judgment- failure to set out a calculation of the interest - notice invalid
Bankruptcy Act 1966, s 41(2)
Bankruptcy Legislation Amendment Act 1966, (Act No.44 of 1996)
Bankruptcy Rules, r 7
Bankruptcy Regulations, reg 4.02 and Form 1
Re HB [1904] 1 KB 94
Re Munson; Ex parte Deputy Commissioner of Taxation (1977) 29 FLR 479
Re Manion; Ex parte Deputy Commissioner of Taxation (1979) 23 ALR 270
Matter No. SN 509 of 1996
TERRY FORTESCUE CROFT v ARMIDA POLI
and
Matter No. SG 7058 of 1997
TERRY FORTESCUE CROFT v EX PARTE ARMIDA POLI
von Doussa J
Adelaide
28 April 1997
IN THE FEDERAL COURT
OF AUSTRALIA
SOUTH AUSTRALIA
DISTRICT REGISTRY No. SN 509 of 1996
GENERAL DIVISION
BETWEEN: TERRY FORTESCUE CROFT
Judgment Debtor
AND: ARMIDA POLI
Judgment Creditor
AND IN THE MATTER OF No. SG 7058 of 1997
TERRY FORTESCUE CROFT
Judgment Debtor
AND: Ex Parte ARMIDA POLI
Judgment Creditor
MINUTES OF ORDER
JUDGE MAKING ORDER : VON DOUSSA J
WHERE MADE : ADELAIDE
DATE ORDER MADE : 28 APRIL 1997
THE COURT ORDERS THAT:
The application to review the decision of the Registrar dated 20 January 1997 be allowed, and the decision of the Registrar be set aside.
Declare that the bankruptcy notice in file SN 509 of 1996 dated 20 August 1996 is invalid.
Dismiss the creditor’s petition in action number SG 7058 of 1997.
Judgment creditor to pay the debtor’s costs fixed at $850.00
Note: Settlement and orders are dealt with in Order 36 of the Federal Court Rules.
IN THE FEDERAL COURT
OF AUSTRALIA
SOUTH AUSTRALIA No. SN 509 of 1996
DISTRICT REGISTRY
GENERAL DIVISION
BETWEEN: TERRY FORTESCUE CROFT
Judgment Debtor
AND: ARMIDA POLI
Judgment Creditor
AND IN THE MATTER OF No. SG 7058 of 1997
TERRY FORTESCUE CROFT
Judgment Debtor
AND: Ex Parte ARMIDA POLI
Judgment Creditor
REASONS FOR JUDGMENT
Coram : von Doussa J
Place : Adelaide
Date : 28 April 1997
There are three applications before the Court this morning in connection with steps that have been instituted by the judgment creditor against the debtor seeking a sequestration order. As the debtor resides in Victoria and has come to Adelaide for the purposes of the hearing this morning I propose to deal with the matter forthwith whilst he is here.
The three applications are, first, an application to review a decision of the Registrar of this Court who refused to set aside or declare invalid a bankruptcy notice that had been issued on 20 August 1996 and served on 12 September 1996. Secondly, there is a creditor’s petition that relies upon the failure to comply with the bankruptcy notice which the Registrar did not set aside as the act of bankruptcy. The third is a notice of motion by the debtor seeking a review of a decision of a Registrar to refer the creditor’s petition for hearing this morning before me at the same time as the review of the decision regarding the bankruptcy notice.
I deal with the last application first. The debtor’s primary ground for seeking review is that if I deal with the creditor’s petition this morning he will be denied the opportunity of seeking a review of the Registrar’s decision, which would have been an available option if the Registrar heard the petition and made a sequestration order. In other words, the debtor seeks to reserve the right to have a second bite of the cherry if he is dissatisfied with the Registrar’s decision on the creditor’s petition.
It is customary, at least in this Registry, for creditors’ petitions and other applications being heard by a Registrar to be referred to a judge for decision if the judge is seized of some other aspect of the pending proceedings. The Registrar is exercising delegated authority, since 25 October 1996 pursuant to s.35A(1)(h) of the Federal Court of Australia Act 1976 (Cth). A judge retains jurisdiction to hear a matter notwithstanding the fact that it is before a Registrar. The reasons given by the debtor for challenging the Registrar’s decision indicate a situation where in any event the matter should be referred back to a judge so that the decision which is made on the creditor’s petition is not subject to a review, and an unnecessary proceeding. The application to review the decision of the Registrar to refer the creditor’s petition for hearing this morning is therefore dismissed.
I turn to the other two applications. It is convenient to deal with them together because the creditor’s petition is founded upon the act of bankruptcy constituted by non-compliance with the bankruptcy notice. If the bankruptcy notice is invalid, there is no act of bankruptcy and the creditor’s petition should be dismissed.
The bankruptcy notice purported to follow the form required by the Bankruptcy Rules at the time that it was issued. In particular the opening provisions of the bankruptcy notice specified a sum to be paid in the following terms:
“WHEREAS ARMIDA POLI of 35 Roberts Street, Unley, 5061 in the State of South Australia (hereinafter referred to as ‘the judgment creditor’) has claimed that the sum of $10,821.50 is due by you to her under a final judgment obtained by her against you in the Adelaide Magistrates Court (Civil) on the 24th day of May 1994 being a judgment the execution of which has not been stayed.”
Rule 7 of the Bankruptcy Rules, in force when the bankruptcy notice was issued, required the applicant for the bankruptcy notice to file with the application an office, sealed or certified copy of the judgment or order upon which the bankruptcy notice is founded. In compliance with that rule a document was filed with the Registrar headed “Copy of record of the Adelaide Magistrates’ Court (Civil)” relating to an action between the judgment creditor and the debtor. The document is a long one and at the foot is an endorsement certifying it to be a true and correct “copy of the record of the abovenamed Magistrates’ Court”. The certificate is dated 12 August 1996. The record appears to be issued pursuant to rule 115 of the Magistrates’ Court (Civil) Rules 1992 which reads:
“115.(1)The Registrar may provide a certified copy of any record kept by the Registrar.
(2)The contents of any record in the custody of the Registrar may be proved by a certified copy of it.”
It will be noted that r.115 provides for a certified copy of any record kept by the Registrar. The rule is not confined to the provision of a certified copy of the judgment or order of the Court.
It is necessary to refer at some length to the copy of the record of the Adelaide Magistrates’ Court which has been filed. The relevant parts read:
“COPY OF RECORD OF THE ADELAIDE MAGISTRATES’ COURT (CIVIL)
ACTION NO: ALC-PLNTS-94-006735
BETWEEN:
ARMIDA POLI
PLAINTIFF
AND
TERRY FORTESCUE CROFT
DEFENDANT
29/04/94 ORIGINATING CLAIM - DEBT
AMOUNT CLAIMED 16,788.72 CLAIMED
COURT FEE 86.00 PAID
PRACT FEES 200.00 ALLOWED
-------------------
TOTAL 17,074.72
29/04/94 SERVICE BY POST
24/05/94 SIGN JUDGMENT IN DEFAULT
AMOUNT CLAIMED 16,788.72 CLAIMED
COSTS 286.00 ALLOWED
INTEREST 250.00 ALLOWED
-------------------
TOTAL 17,324.72
24/05/94 APPLICATION - EXPARTE
H/RNG DATE: 31/05/94 AT 9:15 AM
CHARGING ORDER
31/05/94 ORDER TO CHARGE
ORDER:
1. UPON THE APPLICATION of the judgment creditor...IT IS ORDERED:
1That the judgment debtor pay to the judgment creditor the costs of and incidental to this application which are fixed at $80.00.
2That the property of the judgment debtor being all the estate and interest of the judgment debtor in the land ... and is hereby charged with the payment of the judgment debt herein including interest accrued and accruing under the Magistrates’ Court (Civil) Rules 1992 and costs ...
26/05/95 ORDER - OTHER
LEAVE TO ISSUE WNT SALE OF LAND...
‘Order as Sought and defendant to pay costs of Application fixed at $150’ ...
07/06/95 WARRANT FOR SALE
AMOUNT DUE 17,474.72 ALLOWED
EXECUTION FEE 22.00 PAID
PRACT FEES 30.00 ALLOWED
INTEREST 1,795.50 ALLOWED
-------------------
TOTAL 19,322.22
...
24/07/95 APPLICATION - OTHER
H/RNG DATE: 28/07/95 AT 2:15 PM
28/07/95 APPLICATION DISMISSED
...
Plaintiff to pay defendants costs of attendance and affidavit allowed at $75
...
12/08/96 COPY OF RECORD
LAST PROCESS 19,322.22 ALLOWED
INTEREST 2,327.66 ALLOWED
AMT CREDITED 10,828.38 R
-------------------
TOTAL 10,821.50”
The total figure shown at the foot of the copy of the record is that which has been inserted in the bankruptcy notice. When the bankruptcy notice was served, within the 14 day period provided for compliance the debtor made two applications to the Court. One was to have the bankruptcy notice declared “bad and of no effect”, and the other application was to extend time for compliance with the notice. The debtor also filed an affidavit deposing that pursuant to s.41(5) of the Bankruptcy Act 1966 (Cth) he had given to the judgment creditor a notice disputing the validity of the bankruptcy notice on the grounds of misstatement.
The Registrar dismissed the application to declare the notice invalid on the ground that the copy of the record of the Adelaide Magistrates’ Court constituted a certified copy of a judgment or order made by the Court on 12 August 1996 requiring payment of the amount specified in the bankruptcy notice, namely $10,821.50. As no additional interest was claimed on that sum in the bankruptcy notice the Registrar took the view that the notice was a valid one issued for a sum certain that would have left no room for confusion or misapprehension by the debtor as to what was required by him to comply with the notice.
The debtor argues that the copy of the record is not a judgment or order of the Court, and points out that in any event the entry which the Registrar treated as a judgment or order dated 12 August 1996 is not the date of the judgment referred to in the bankruptcy notice. The bankruptcy notice refers to a judgment entered on 24 May 1994. The debtor points out that the amount apparently sought by the judgment creditor in the bankruptcy notice includes interest and also gives credit for $10,828.38 which was the proceeds of sale pursuant to the warrant for sale of land in the Adelaide Hills. The debtor argues that the notice is bad because it fails to indicate how the sum claimed is made up, in particular it fails to acknowledge that there is a credit against the judgment entered on 24 May 1994 and it fails to specify any calculation of the interest which is included in the sum claimed.
Prior to the amendments effected to the Bankruptcy Act by Act No.44 of 1996 which came into force on 25 October 1996, a bankruptcy notice was required to be in a prescribed form, and by s.41(2) the form required the debtor to pay within a specified time “the judgment debt or sum ordered to be paid in accordance with the judgment or order.”
In Re HB [1904] 1 KB 94 at 103 Romer LJ, speaking of a similar requirement in the United Kingdom legislation, said:
“Now I think it is clear that, when you have a judgment in the form that we have here, a bankruptcy notice under the Act must require payment of a sum alleged to be due according to the terms of the judgment - that is to say, it must state the amount that is claimed as remaining unpaid on the judgment debt. Clearly, in a bankruptcy notice the debtor is entitled to see from the notice exactly what is claimed to be due on the judgment debt.”
It is well recognised that where by statute a judgment carries interest, the judgment creditor may include in the bankruptcy notice a claim for interest. In the present case s.35 of the Magistrates’ Court Act 1991 (SA) provides that a judgment debt bears interest at a rate prescribed by the Rules. In the case of taxed costs interest runs, unless otherwise ordered, from the date the costs are taxed, and in the case of any other monetary sum from the date of the judgment. Rule 124 prescribes the interest rate at 10 per cent or such other rate as is fixed by a practice direction. There is presently no practice direction fixing another rate. So the judgment creditor was entitled to include in the bankruptcy notice a claim for interest on so much of the judgment and costs as was from time to time outstanding. But where interest is included, that fact must be plainly stated, along with an unequivocal calculation of the interest.
In Re Munson; Ex parte Deputy Commissioner of Taxation (1977) 29 FLR 479 at 482 Riley J, speaking of the entitlement to statutory interest on a judgment, said that:
“...(interest) is a debt necessarily and inevitably attached to the judgment debt: Re Clagett; Ex parte Lewis (1887) 36 WR 653. To pay the judgment debt ‘in accordance with the judgment’ is to pay the amount for which judgment was recovered with the legal interest attached to it by statute: Re Cooper [1911] 2 KB 550 at 554; and there is no doubt that a bankruptcy notice may require the payment of statutory interest. ‘The creditor is entitled to have the amount of the interest added to the judgment debt so that the debtor may be informed by the notice that he cannot comply with the notice without paying the interest on the debt’: Re Lehmann; Ex parte Hasluck (1890) 7 Morr 181 at 183, per Cave J. But a bankruptcy notice can ‘only demand payment of that which the judgment creditor can enforce payment of’, and cannot issue for a sum of money for which execution cannot issue: Re Follows; Ex parte Follows [1895] 2 QB 521 at 525, per Vaughan Williams J; cf Re O’Keefe; Ex parte Australian Factors Ltd (1963) 19 ABC 101 at 103-4. It is to be inferred from s.41(5) and (6) that a bankruptcy notice must specify a sum as ‘the amount due to the creditor’; and if he demands payment of interest the creditor must himself calculate, and must specify in the bankruptcy notice, the amount required to be paid: Re Davis; Ex parte Deputy Commissioner of Taxation (1963) 19 ABC 100; [1963] ALR 764; Re O’Keefe,supra.”
The debtor points out that statutory interest has effectively been included in the bankruptcy notice without any mention of that factbeing made. In Re Manion; Ex parte Deputy Commissioner of Taxation, (1979) 23 ALR 270 at 274 Lockhart J said:
“If it is the balance of the judgment that is claimed, that fact should be stated and the amounts paid or credited after judgment was signed should be specified. If interest is claimed, the notice should proceed to provide that interest is claimed at a particular rate from the date of judgment to the date specified in the notice. The total sum claimed to be due by the debtor to the petitioning creditor, inclusive of interest, should then be specified.”
I respectfully agree. Re Manion; Ex parte Deputy Commissioner of Taxation supports the debtor’s submissions.
I return to consider the copy of record of the Adelaide Magistrates’ Court which is relied upon by the judgment creditor. In my view the entry on 12 August 1996 is not a copy of a judgment or order of the Court. It is an administrative entry apparently kept in records of the Adelaide Magistrates’ Court containing a calculation by Registry staff of the amount which the Registry perceives to be the amount due under an earlier judgment after having given credit for the proceeds of the warrant for sale. It is not, nor does it purport to be, a judgment or order of a judicial officer of the Court. The only order for the payment of an amount by way of judgment on the claim is that certified as ordered on 24 May 1994.
There are, however, further orders in respect of costs. They are not part of the judgment entered on 24 May 1994, and insofar as the bankruptcy notice sought to claim those additional amounts it should have referred to them separately indicating their inclusion. It will be noted, however, from the figures contained in the record of the Adelaide Magistrates’ Court that the sum of $80 ordered to be paid by the debtor on 31 May 1994 has not been included in the amount for which the warrant of sale was issued on 7 June 1995.
There is an entry on 28 July 1995 which, according to its terms, awarded the debtor $75 costs against the judgment creditor for which no credit has been carried forward in the calculation shown in the entry of 12 August 1996. However, I was informed from the bar table today that the entry in the record is itself inaccurate as the debtor was not a party present at the hearing of the application on 28 July 1995. The costs were apparently awarded in favour of some other party who must have made an application in relation to the warrant. The particular party has not been identified nor is there any evidence on this Court’s file disclosing the true position.
More significantly, the calculations of interest in the copy of the record raises the likelihood that for the period from 7 June 1995 to 12 August 1996, interest has been allowed upon the interest credited on 7 June 1995. The Magistrates’ Court Act and Rules do not permit the compounding of interest upon interest, and if that interpretation of the record is correct, another reason is disclosed why the calculation of interest within the record is erroneous for the purposes of the Bankruptcy Act.
I have found it impossible to replicate the calculation of interest contained within the record. Neither of the parties have sought to calculate the interest that would be due according to statutory provisions in the Magistrates’ Court Act and Rules on the amounts ordered from time to time to be paid under orders recorded in the copy of the record. My own attempts to do so produce a calculation of interest that is somewhat less than the amounts shown in the copy of the record, which tends to confirm in my mind that interest has been allowed on interest in the record.
Those comments on the copy of the record cause me to find that the sum of $10,821.50 was not the exact amount due in accordance with the judgment together with interest on 12 August 1996. Insofar as that figure was carried forward into the bankruptcy notice, the amount in the bankruptcy notice would itself not be the correct amount. There having been a notice under s.41(5) of the Bankruptcy Act challenging the validity of the notice on the grounds of misstatement that in itself would provide a basis for declaring the bankruptcy notice to be invalid.
It is not, however, necessary to decide the matter on that ground. I have already expressed my view that the copy of the entry in the record of the Adelaide Magistrates’ Court for 12 August 1996 is not a judgment or order requiring payment of $10,821.50. The relevant judgment which would support the bankruptcy notice is that which was entered on 24 May 1994. That is the judgment actually specified in the notice. The notice therefore fails to show the calculation which produces an amount actually due in accordance with that judgment at the date of the bankruptcy notice.
As the amount claimed also fails to show a calculation of the amount due which reflects the orders for costs that were made on subsequent dates and fails to show the calculation of interest on the amounts due from time to time up to the date of the bankruptcy notice, or up to some earlier specified date, in my view the bankruptcy notice was invalid, as it failed to specify in a meaningful way the amount due in accordance with the judgment entered on 24 May 1994.
It is to be noted that in consequence of the amendments effected to the Bankruptcy Act by Act No.44 of 1996, the provisions of s.41(2) have been amended so that a bankruptcy notice must now be in accordance with the form prescribed by the regulations. Regulation 4.02 prescribes the form of a bankruptcy notice in Form 1. Form 1 includes a schedule which sets out not only the amount of the judgment but separately legal costs ordered to be paid, if any, and interest accrued since the date of judgment if interest is claimed. The schedule requires the specification of payments made since the date of the judgment or order, and separately a statement of the costs of the bankruptcy notice. With the provision of information of that kind, hopefully problems of the kind which have been encountered in this case will be less frequent in the future.
For the reasons given, I consider the application for review of the decision of the Registrar, given on 20 January 1997, should be allowed and the decision of the Registrar set aside. There should be a declaration that the bankruptcy notice is invalid, and the creditor’s petition should be dismissed.
I shall hear the parties as to costs.
I certify that this and the preceding pages are a true copy of the Reasons for Judgment of Justice von Doussa
Associate:
Dated:
Mr Croft appeared for himself
Counsel for the judgment creditor : Mr W H Hall
Solicitor for thejudgment creditor : W H Hall
Date of hearing : 28 April 1997
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