Deputy Commissioner Of Taxation; v Healy - [2002] FMCA 282

FEDERAL MAGISTRATES COURT OF AUSTRALIA

DEPUTY COMMISSIONER OF TAXATION
v HEALY

[2002] FMCA 282

BANKRUPTCY – Alleged deficiency in Bankruptcy Notice – no reference to correct Statute as basis for interest – s.306 of Bankruptcy Act does not apply to validate notice.

Bankruptcy Act 1966 s.43
Supreme Court Act 1935 (WA) s.142
District Court of Western Australia Act 1969 s.56

Australian Steel Co (Operations) Pty Ltd v Lewis (2000) 109 FCR 33
General Motors Acceptance Corporation Australia v Gary Brent Marshall (2002) FCA 1006 (13 August 2002).

Applicant:

DEPUTY COMMISSIONER OF TAXATION OF THE COMMONWEALTH OF AUSTRALIA

Respondent:

MAXWELL RAYMOND HEALY

File No:

WZ110 of 2002

Delivered on:

14 November 2002

Delivered at:

Perth

Hearing Date:

26 September 2002

Judgment of:

McInnis FM

REPRESENTATION

Counsel for the Applicant:

Mr De Vaney

Solicitors for the Applicant:

Deputy Commissioner of Taxation

Respondent:

Mr M R Healy in person

ORDERS

The application for review is allowed.
The order made by the Registrar on 23 July 2002 be set aside.

FEDERAL MAGISTRATES
COURT OF AUSTRALIA AT
PERTH

WZ110 of 2002

DEPUTY COMMISSIONER OF TAXATION
OF THE COMMONWEALTH OF AUSTRALIA

Applicant

And

MAXWELL RAYMOND HEALY

Respondent

REASONS FOR JUDGMENT

In these proceedings the DEPUTY COMMISSIONER OF TAXATION OF THE COMMONWEALTH OF AUSTRALIA (the Applicant) commenced proceedings against MAXWELL RAYMOND HEALY (the Respondent) relying upon a Creditor’s Petition dated 4 June 2002 (the petition).
The petition seeks a sequestration order pursuant to s.43 of the Bankruptcy Act against the estate of the Respondent. In particular the petition states the following:
“1.The Respondent Debtor owes the Applicant Creditor the amount of $28,156.15 particulars of which are as follows:
(i) the sum of $28,156.15 being a judgment obtained in the District Court of the State of Western Australia at Perth on 16 February 2001 for an amount of $26,959.59 together with interest on that judgment in the sum of $1,196.56 for the period 16 February 2001 to 13 November 2001”.
The petition refers to a Bankruptcy Notice served by the Applicant on the Respondent on 9 April 2002 which it says was founded on a final judgment obtained in the District Court at the State of Western Australia at Perth in the sum of $26,959.59 on 16 February 2001.
The Bankruptcy notice dated 13 November 2001 provides in the schedule that the amount of the judgment order is $26,959.59 and then states plus $1,196.56 being ‘interest accrued since the date of the judgment or order’. Reference is made then to “Note 2” of the Notes to the schedule which are provided for the information of the creditor. Note 2 provides as follows:
“Note 2: Interest accrued (Item 3 of the schedule)
If interest is being claimed in this bankruptcy notice, details of the calculation of the amount of interest claimed are to be set out in a document attached to this bankruptcy notice. The document must state:
(a)the provision under which the interest is being claimed;
and
(b)the principal sum on which, the period for which, and the interest rate or rates at which, the interest is being claimed.
NB: If different rates are claimed for different periods, full details must be shown.”
It is not disputed that annexed to the Bankruptcy notice is a document entitled “CALCULATIONS OF INTEREST PURSUANT TO: SECTION 142 OF THE SUPREME COURT ACT 1935 (WA)”. In that document the principal is referred to as $26,959.59 and a rate of interest of 6% is claimed for the period 16 February 2001 to

13 November 2001 being interest claimed of $1,196.56.
The usual affidavits were filed in support of the Creditor’s Petition in relation to service of the Bankruptcy Notice, search of the records of the court and the assertion that there is no application to set aside the Bankruptcy Notice on grounds that the Respondent has a Counterclaim, Set-off or Cross- Demand against the Applicant which is equal to or in excess of the amount specified in the Bankruptcy Notice as being owing to the Applicant Creditor or indeed that there are indeed that any other application of the court has been made to set aside the Bankruptcy Notice on any other grounds. An Affidavit of authority has been filed on 5 July 2002 together with Affidavit of Service of the Creditor’s Petition filed the same day. The Applicant further filed on 23 July 2002 an Affidavit of Debt and search of the National Personal Insolvency Index.
When the matter was before the Court on 23 July 2002 Mr John De Vaney appeared on behalf of the Applicant and there was no appearance on behalf of the Respondent. On that day the Court made the following orders:
“1.A sequestration order made against the estate of Maxwell Raymond Healy (the Respondent) of Lot 335, Forest Hills Parade, Bingdon in the State of Western Australia.
2. The Applicant Creditor’s costs be fixed in the sum of $655.20 and paid from the estate of the Respondent in accordance with the Bankruptcy Act 1966.”
The Court noted the date of the act of bankruptcy was 30 April 2002.
On 9 August 2002 the Respondent filed an Application for Review seeking to set aside the sequestration order made by the Registrar on

23 July 2002. In an Affidavit sworn by the Respondent on 9 August 2002 he states the following:
“1.In support of my review application pursuant to Part 20 of the Federal Magistrates Court Rules 2001 to set aside the sequestration order dated 23 July 2002 on the ground that the original bankruptcy notice dated 13 November 2001 was defective as judgment was obtained in the District Court and the calculation of interest was under s 142 of the Supreme Court Act 1935 (WA).
2.The Respondents were notified by myself some months ago and indicated they would re-issue an amended or new Bankruptcy notice.
3. The Respondents knowingly have proceeded with the defective Bankruptcy Notice”.
When the matter was before me Mr De Vaney appeared for the Applicant Creditor and Mr Healy appeared on his own behalf.
The Applicant Creditor referred the Court to relevant legislation. Section 142 of the Supreme Court Act 1935 (WA) provides as follows:
“142. Interest on judgment debts
(1) Every judgment debt shall carry interest at such rate for every $100 by the year as the Treasurer from time to time by notice published in the Government Gazette determines from the date of the judgment until the judgment is satisfied, and the interest may be levied under a writ or warrant of execution on the judgment.
(2)This section applies to a judgment in a Local Court, except where the amount of the debt, claim or demand allowed by the judgment does not exceed $750.”
I was further referred to s.56 of the District Court of Western Australia Act 1969 which provides as follows:
“56. Enforcement of judgments, interest.
(1)A judgment may be enforced in the same manner and to the same extent as though it were a judgment of the Supreme Court.
(2)A judgment debt shall carry interest at such rate for every $100 by the year as the Treasurer from time to time by notice published in the Government Gazette determines commencing on and from the date of entering up the judgment until the date the judgment is satisfied, and the amount of the interest may be levied under a writ of fieri facias on the judgment.”
It was noted that both sections provide for a judgment debt to carry interest at such rate for every hundred dollars by the year as the treasurer from time to time by notice published in the Government Gazette determines. It is clear that there is a slight variation in the provisions with the District Court Act providing for interest to commence on and from the date of entering “up” the judgment whereas the Supreme Court Act refers to determining interest “of” the judgment and other variations in relation to recovery which are clear from the provisions to which I have referred.
Further reference was made to the Government Gazette dated 12 September 1997 where at page 5159 the Treasurer has determined pursuant to s.142 of the Supreme Court Act 1935 that interest shall be at the rate of $6.00 for every $100 by the year as from the date of publication of the notice. The same rate of interest is provided in the Gazette pursuant to s.56(2) of the District Court of Western Australia Act 1969.
It was submitted therefore by the Applicant Creditor that although it is acknowledged that the Bankruptcy Notice relying as it does upon a judgment in the District Court of Western Australia incorrectly refers to s.142 of the Supreme Court Act that the outcome is the same. It was submitted that in the circumstances the defect in the present case is not a defect which would mislead the debtor and it could be regarded as a formal defect or irregularity which does not lead to any substantial injustice. Reliance is then placed upon s 306 of the Bankruptcy Act to support the contention that the Bankruptcy Notice is not invalidated by reason of this defect. It was submitted that the failure to specifically refer to the correct legislation as the basis for the calculation of interest is not a failure to comply with the requirement made essential by the Act.
In considering this issue it is appropriate to have regard to the authority of Australian Steel Co (Operations) Pty Ltd v Lewis (2000) 109 FCR 33. In that case an issue arose concerning the post judgment interest in a Victorian judgment and it is appropriate to set out the following passages from the majority of judgment in Australian Steel Co as follows:
“3.In the present case the notices all had the same defect. Each notice was founded on an order made in the Magistrates’ Court of Victoria and claimed interest from the date of the order to the date of issue of the notice. In a schedule attached to each notice the calculation of interest was set out and also, as is now required, a statement as to ‘the provision under which the interest is being claimed’. The notices stated that interest was claimed ‘pursuant to section 101 of the Supreme Court Act 1986 (Vic)’. However that provision did not apply to the orders founding the notices. Interest on Magistrates’ Court orders is governed by s 100(7) of the Magistrates’ Court Act 1989 (Vic). That section provides:
‘Every judgment debt carried interest at the rate for the time being fixed under s 2 of the Penalty Interest Rates Act 1983 from the time the order is made.’
4.Section 101 of the Supreme Court Act is as follows:
‘Every judgment debt carried interest at the rate for the time being fixed under s 2 of the Penalty Interest Rates Act 1983 from the time the judgment is given, or in the case of costs which are taxable by the taxing master, from the date of the order from the taxing master stating the result of the taxation or such other date as the Court orders.’
5.Generally speaking, costs in the Supreme Court are ordered to be taxed, whereas costs in the Magistrates Court are fixed at the time of the making of the order.
6.The Penalty Interest Rates Act 1983 (Vic) s 2 provides for the proclamation of interest rates from time to time. The applicable rate in the present cases was published in the Victorian Government Gazette No 7 of 19 February 1998 at 395. Thus in dollar terms the amount of interest payable on a judgment debt of a given amount over a given period will be the same whether the judgment is in the Supreme Court or the Magistrates Court. …”
The extract from the majority in Australian Steel to which I have referred was referred to in the judgment of Gyles J in the unreported decision of General Motors Acceptance Corporation Australia v Gary Brent Marshall (2002) FCA 1006 (13 August 2002). In that case His Honour interpreted the majority of Australian Steel in a manner which would not prevent him from finding that an error in the application before him was of a kind that would preclude the operation of s 306 of the Act. The facts in the case before Gyles J however were different to the present case in the sense that before Gyles there was a reference to provisions of the Supreme Court Act 1970 (NSW) which fixed the rate expressly incorporated by reference to the relevant local council rule. The notice and the certificate of judgment according to His Honour made it plain that the judgment is governed by the Local Courts (Civil Claims) Act 1970 (NSW). His Honour states:
“The only provision of that Act which deals with the post judgment interest is s 39 which leads inexorably to Pt 13 r 3 of the Rules, which unequivocally identifies the provision referred to in the Notice. Put another way, the debtor could actually verify the interest entitlement by reference to s 95(1) of the Supreme Court Act 1970 (NSW) which was the identified provision by contrast with the position in Australian Steel Co. The debtor would not be misled.”
In the present case however there can be no such capacity on the part of the debtor to be led inextricably to an identification of the correct provision as there is no reference at all nor indeed any means by which reference could be made to the correct legislation namely the District Court of Western Australia Act 1969. The reference which is conceded to be incorrect to the ‘Supreme Court Act 1935’ is clearly an error and an error of a kind which even if one were to accept the interpretation of Australian Steel and consider the particular facts which were then confronting Gyles J in GMAC would not in my view permit this Court to apply s 306 of the Bankruptcy Act and nor could it be said that incorrectly citing the Supreme Court Act in the present case is a failure of a kind that should not be regarded as a failure to comply with an essential statutory requirement. Accordingly in my view it cannot be validated by the operation of s.306 of the Bankruptcy Act.
Whilst it is true that reference to the correct section in the District Court of Western Australia Act combined with reference to the Government Gazette which provides a separate determination for that Act would result in the same monetary outcome, it is not in my view appropriate for the Court to retrospectively impose or impute that knowledge on the debtor receiving the Bankruptcy Notice where there is clearly no indication on that face of the notice that the debtor would be inextricably led to the same conclusion as to the quantum of the interest and/or indeed the rate of interest.
It should be further added that in the present case that the uncontradicted affidavit evidence of the debtor is that he was advised by the Taxation Office that a new and/or amended notice would be forwarded to him and there appeared to be some recognition of the error. Whilst from the Bar Table the creditor’s representative suggested that there had been no evidence found to corroborate the debtor’s assertion regarding that conversation it is my view that in the absence of any contrary affidavit evidence I should accept the affidavit of the debtor which would provide a reasonable explanation as to why despite service he did not attend on the date when the sequestration order was made namely 23 July 2002. He had believed reasonably at that time that a new bankruptcy notice would be issued.
It follows therefore that the orders of the court will be:
(1)The application for review is allowed.
(2)The order made by the Registrar on 23 July 2002 be set aside.

I certify that the preceding twenty-one (21) paragraphs are a true copy of the reasons for judgment of McInnis FM

Associate:

Date: 14 November 2002