DAVIES v Nguyen
[2006] FMCA 363
•16 February 2006
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| DAVIES v NGUYEN | [2006] FMCA 363 |
| BANKRUPTCY – Review of Registrar’s decision to sequestrate – alleged overstatement in Bankruptcy Notice – meaning of words “amount due” for purposes of s.41(5) of Act – no other grounds to set aside established – application dismissed. |
| Bankruptcy Act1966, s.41(5) Acts Interpretation Act1954 (Qld), s.38(1) Supreme Court Act1995 (Qld), s.48 |
| Ex Parte Clubb v Westpac Banking Corporation (1990) 93 ALR 133 Shepherd v Chiquita Brands (South Pacific) Limited [2001] FMCA 78 Re: Wilhelmsen; Ex Parte Gould (1986) 11 FCR 107 Re Dier: Ex Parte Sudak (unreported FCA - Beaumont J - 9 March 1990) Klinewert Benson Pty Ltd and Crowe (1988) 165 CLR 71 Kyiackou v Shield Mercantile Proprietary Limited (2004) FCA 490 |
| Applicant: | TERRENCE EDWARD DAVIES |
| Respondent: | VAN NGUYEN |
| File Number: | BRG 751 OF 2005 |
| Judgment of: | Baumann FM |
| Hearing date: | 14 February 2006 |
| Delivered at: | Brisbane |
| Delivered on: | 16 February 2006 |
REPRESENTATION
| Counsel for the Applicant: | Mr Rostron |
| Solicitors for the Applicant: | Rostron Carlyle |
| Counsel for the Respondent: | Ms Bohan |
| Solicitors for the Respondent: | Patane Lawyers |
ORDERS
The Application for Review filed 3 February 2006 be dismissed.
A stay be granted pursuant to section 52(3) of the Act until 4.00 pm on 22 February 2006 on the operation of the sequestration order made
1 February 2006.
The Respondent’s costs of these proceedings taxed under the Federal Magistrates Court Rules be paid from the Estate in accordance with the Act.
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT BRISBANE |
BRG 751 of 2005
| TERRENCE EDWARD DAVIES |
Applicant
And
| VAN NGUYEN |
Respondent
REASONS FOR JUDGMENT
Introduction
On 1 February 2006, Registrar Baldwin ordered that the estate of
Van Nguyen be sequestrated. She delivered written reasons why she did not agree with the grounds raised by the debtor in opposition to the creditor's petition filed by Terrence Davies. Seemingly, because the Registrar was aware that her decision was to be the subject of an application for review, the learned Registrar ordered a stay of the sequestration order.
On 3 February 2006, an application for review was filed and was heard by me on 14 February 2006. The review of an exercise of power by a Registrar must proceed, by way of hearing de novo (rule 20.03).
It follows that this is not an appeal against the decision of the Registrar, and that the Registrar's reasons for her decision are not to be examined, save to observe that the parties rely upon the same submissions and evidence placed before the Registrar, except that:
a)the applicant's solicitor advocate provided some additional written submissions, and
b)
with my leave, and without objection from the respondent, the applicant relied upon a further affidavit of the applicant sworn
13 February 2006, which deposed as to the reasons for delay in getting legal advice until just prior to the hearing of the creditor's petition.
Application to extend time for compliance with section 41(5) of the Bankruptcy Act
The applicant contends that the bankruptcy notice BRG751/05 issued 15 September 2005 and served on 27 September 2005 overstates "the amount in fact due" to the creditor. The applicant did not give a notice specified under section 41(5) of the Act "within the time allowed for payment." It is common ground that the time for compliance with the bankruptcy notice (and therefore, the time allowed for payment) expired on 18 October 2005.
I am satisfied that the court has jurisdiction to extend the time prescribed for a section 45(1) notice to be given pursuant to section 33(1)(c) of the Act (Ex Parte Clubb v Westpac Banking Corporation (1990) 93 ALR 133; Shepherd v Chiquita Brands (South Pacific) Limited [2001] FMCA 78; Re: Wilhelmsen; Ex Parte Gould (1986)
11 FCR 107). All these cases dealt with extending time before a creditor's petition had been filed.
The learned authors of the Australian Bankruptcy Law and Practice (5th Edition), referring to Re Dier: Ex Parte Sudak (unreported FCA - Beaumont J - 9 March 1990) query "whether or not the power continues after a creditor's petition has been presented."
It is not necessary in this case, for the reasons I soon give, although it may have been an interesting exercise to do so, to decide that issue.
I have come to the conclusion that the amount in fact due was not overstated in the bankruptcy notice. As a result, there is no utility in considering whether to exercise my discretion (if the power, post filing of the creditor's petition, does exist) to extend time to serve a notice under section 41(5).
Ms Boham for the applicant submits that the bankruptcy notice, which states on page 9 that one day's interest is calculated "from the date of payment," is an error. In my view, section 41(5) refers to the "amount due." If the "sum specified in the notice as the amount due to the creditor exceeds the amount in fact due," then the debtor is able to invalidate a bankruptcy notice by giving a notice under section 41(5). On any calculation, in my view, the creditor was entitled to claim one day of interest (totalling $14.54). The judgment was given on
13 September 2005, and the bankruptcy notice issued two days later, 15 September 2005.
On this basis, the amount stated as due is correct. It may even be an understatement. However, a "mis-description" which does not cause an overstatement, of how many days interest is to be calculated, if that is what occurred, is not an error which founds the right to give a notice under s.41(5) in this case.
Invalidity of bankruptcy notice because of non-compliance with form
The applicant submits before me, as he did before the learned Registrar, that the bankruptcy notice is invalid because of some irregular wording in the interest schedule which forms part of the bankruptcy notice. The learned Registrar correctly identified the applicable principles when she said:
“It is established law since Klinewert Benson Pty Ltd and Crowe, (1988) 165 CLR 71, that three questions arise as to the validity of the bankruptcy notice. First of all, consideration must be given to whether there is a defect or irregularity. If so, it needs to be decided whether the defect or irregularity is substantive or formal. If it is substantive, then that is the end of the matter and the bankruptcy notice is invalid. If it is formal only, then consideration needs to be given whether substantial or irremedial injustice has occurred. There will be a defect or irregularity in the bankruptcy notice if the bankruptcy notice itself fails to meet any requirement made essential by the Act.”
The debtor must clearly know what he must do to avoid committing an Act of Bankruptcy. The notice requires him to pay a total sum of $53,083.18, set out in the schedule as follows:-
Column 1
Column 2
1. Amount of judgments or orders
$53,068.64
plus 2. Legal costs if ordered to be paid and a specific amount was not included in the judgments or orders (see Note 1, below)
$Nil
plus 3. If claimed in this Bankruptcy Notice, interest accrued since the date of judgments or orders (see Note 2, below)
$14.54
4. Subtotal
$53,083.18
less 5.Payments made and/or credits allowed since date of judgments or orders
$Nil
6. Total debt owing
$53,083.18
I've already found that the amount required to be paid as a sum is not, in my view, overstated. The issue which is raised by the debtor is that, by using the words "until the date of payment" in the annexure, the debtor could have been misled as to how much he was required to pay. I do not accept this argument. The total debt owing is stated to be $53,083.18. A day of interest was claimable and payable. The correct provision under which interest was claimed (section 48 of the Supreme Court Act 1995 (Qld) as amended) was claimed and prescribed. The correct principal sum ($53,068.64) was identified.
The annexure incorrectly assumed the bankruptcy notice would issue on 14 September 2005, whereas in fact it issued on 15 September 2005. Only one day of interest was claimed. I do not regard s.38(1) of the Acts Interpretation Act1954 (Qld) as of assistance to the debtor. Interest was claimable for 14 September 2005 (at least), being neither the day of the judgment nor the day of the issue of the bankruptcy notice.
I accept the submissions of the petitioning creditor that reference to the words "until the date of payment" merely gives notice to the debtor that interest accrues on judgment by operation of s.48 of the Supreme Court Act 1995 (Qld). The words are superfluous but not capable, in my view, of objectively causing the debtor to be misled as to what he had to do to avoid committing an Act of Bankruptcy. I accept that it is not necessary to show, of course, the debtor was misled.
Further additional grounds asserting invalidity on the basis of non-compliance with an essential requirement of the form prescribed is raised by the applicant before me, but was not, it seems, raised before the Registrar, and, of course, that is quite permissible. The submission made at paragraphs 8 and 9 of the written submissions received by me at the hearing were as follows:
8.The bankruptcy notice does not comply with form 1 of regulation 4.02, Bankruptcy Regulations, because the note stating, "Notes: the address must be within Australia," is absent from page 2 of the notice. Accordingly, the court should the find the notice to be invalid.
9.In Kyiackou v Shield Mercantile Proprietary Limited (2004) FCA 490 at para 43, Weinberg J considered himself bound by Australian Steel to conclude that a bankruptcy notice that did not contain the words "the creditor" in round brackets in the first page of the notes was invalid because it did not comply with the matter made essential by the Act and regulations. His Honour reached that decision even though he considered the debtor would not have been misled as to the identity of the creditor or how to comply with the notice.
In the decision referred to by the applicants in these submissions, although the bankruptcy notice in that case failed to contain the same note (which was also absent from the subject bankruptcy notice in these proceedings), the critical defect in the bankruptcy notice was the failure to identify or define the creditor. Weinberg J said at para 45 that:
“I do not propose to say very much about the applicant's alternative grounds for challenging the bankruptcy notice based upon the omission of the drafting notes in square brackets. In Northam, I held that a challenge to a bankruptcy notice on identical grounds was devoid of any merit. I can see no reasons to part from that view. There is no purpose whatever in requiring a bankruptcy notice is set out verbatim the drafting notes prepared for the assistance of the draftsperson. Bankruptcy lawyers are often highly technical and occasionally far removed from common sense. However, to hold that a bankruptcy notice is invalid merely because it fails to include the drafting notes would, in my view, bring this branch of the law into total disrepute. This is so not withstanding the fact that the first drafting note contained in the form provides that only words in italics are to be reproduced in the notice, and these notes are not in italics.”
I, with respect to his Honour, totally agree with that observation in its content and its tenor.
Conclusion
For the reasons given, I find the bankruptcy notice was not defective. I will dismiss the application to review and discharge the stay order made by Registrar Baldwin. The costs of this application should be costs in the estate of the bankrupt.
I propose to dismiss the application with costs and make the formal orders which appear at the commencement of these reasons.
I certify that the preceding seventeen (17) paragraphs are a true copy of the reasons for judgment of Baumann FM
Associate:
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