George v Tricontinental Corporation Ltd

[1994] FCA 955

RE: SIR ARTHUR GEORGE
EX PARTE: TRICONTINENTAL CORPORATION LIMITED
No. NG 630 of 1994
FED No. 955/94
Number of pages - 3
Bankrutcy
(1994) 53 FCR 284

(1994) 126 ALR 541

COURT

IN THE FEDERAL COURT OF AUSTRALIA
BANKRUPTCY DISTRICT OF THE STATE OF NEW SOUTH WALES
GENERAL DIVISION
DAVIES(1), BURCHETT(2) AND EINFELD(3) JJ

CATCHWORDS

Bankruptcy - bankruptcy notice - appeal from decision that bankruptcy not invalid - whether a clerical error in statement of interest rate was an irregularity that affected the validity of the notice.

Bankruptcy Act 1966 (Cth) - s.41(1), s.306

Kleinwort Benson Australia Ltd v Crowl (1988) 165 CLR 7
Ex parte Johnson. In re Johnson (1993) 25 Ch D 112

HEARING

SYDNEY
#DATE 16:9:1994
#ADD 12:5:1995

Counsel for the debtor: D R Pritchard

Solicitors for the debtor: Corrs Chambers Westgarth

Counsel for the creditor: M R Aldridge

Solicitors for the creditor: Phillips Fox

ORDER

The appeal be dismissed with costs.
NOTE: Settlement and entry of orders is dealt with in Rule 124 of the

Bankruptcy Rules.

JUDGE1

DAVIES J In this appeal, it is alleged that the bankruptcy notice served on the debtor was invalid. The requirements of a bankruptcy notice are set out in s 41(1) of the Bankruptcy Act 1966 (Cth), which provides, inter alia, that a bankruptcy notice shall be in the prescribed form and that the prescribed form shall require the debtor to "pay the judgment debt or sum ordered to be paid in accordance with the judgment or order."

1. In the present case, the bankruptcy notice was in accordance with the prescribed form and, if one adverts to the sums set out in the bankruptcy notice, the principal of $400,000, the interest of $6,904.11 and the total claim of $406,904.11, then the bankruptcy notice required the debtor to pay the judgment debt in accordance with the judgment.

2. However, counsel for the debtor has pointed to the reference, in the bankruptcy notice, to the erroneous statement of the rate of interest as 10.05% p.a. The rate for the relevant period, payable in accordance with s.95 of the Supreme Court Act 1970 (NSW) and the Rules of the Supreme Court of New South Wales, was in fact 10.5% p.a.

3. The principle to be applied in assessing the validity of a bankruptcy notice in the light of such an error was that stated by Deane J in Kleinwort Benson Australia Limited v Crowl ("Kleinwort Benson") (1988) 165 CLR 7 at 82, where his Honour said:-
   

"To comply with the above rules, a bankruptcy notice must correctly state the amount of the debt upon which it is based. If interest is included in the claim under the bankruptcy notice, it must be accurately calculated and stated. Otherwise, the bankruptcy notice is invalid: Re McDonald; Ex parte Elder Smith Goldsbrough Mort Ltd (1978) 32 FLR 11, at p 13; 18 ALR 505 at p 507. There are two qualifications which need to be made to that general proposition. The first is that, if the misstatement is 'a mere clerical error ... which could not mislead or embarrass the debtor, because he could see on the face of the document ... what was the amount which was really claimed from him' (per Kennedy LJ, In re a Debtor, 478 of 1908, (1908) 2 KB 684, at p 691 explaining Ex parte Johnson. In re Johnson (1883) 25 ChD 112), the defect will be merely a formal one which may be cured pursuant to s.306 of the Bankruptcy Act 1966 (Cth) which deals with formal defects and mere irregularities. The requirement is not that the mistake did not actually mislead the debtor. It is that it could not have reasonably so misled him: Bowmaker (1951) Ch, at pp 391-320, Pillai v. Comptroller of Income Tax

(1970) AC 1124, at p 1135, James (1955) 93 CLR, at p 644. The second qualification is that the Bankruptcy Act, in s.41(5) and (6), contains express provisions which may operate to avoid the invalidating consequence of an overstatement of the judgment debt. There is, however, no such statutory provision excusing the consequences of understatement of the judgment debt."

1. Although his Honour dissented in the particular case, there was no difference between his Honour and the other members of the High Court as to this principle.

2. In my opinion, the bankruptcy notice in the present case made it plain that the sum of $406,904.11 was the sum which had to be paid by the debtor to comply with the notice. This sum was correct. If the debtor had made the calculation of interest and had ascertained that interest at 10.05% amounted to only $6,608.22, the debtor would nevertheless not have been confused as to the sum which was demanded and required to be paid to satisfy the notice. That sum was quantified and stated without qualification as $406,904.11.

3. In the circumstances, the error in the statement of the interest rate was a mere clerical error and, as there was no prejudice to the debtor arising therefrom, it was an irregularity which, under s 306 of the Bankruptcy Act 1966 (Cth), did not affect the validity of the Bankruptcy Notice. See Ex parte Johnson In re Johnson (1883) 25 Ch D 112.

4. The irregularity in this case is, indeed, of less significance than that considered in Kleinwort Benson, in which the High Court held that the error was one to which s 306 of the Bankruptcy Act applied.

5. I agree with the reasons for judgment given by the judge at first instance, Mr Justice Sheppard. I would dismiss the appeal with costs.

JUDGE2

BURCHETT J I do not think that to find this bankruptcy notice misleading or perplexing would be consistent with what was held by the High Court by majority in Kleinwort Benson. Furthermore, the dissenting judge in that case, Deane J, specifically noted at 82 that what was plainly a mere clerical error would not invalidate a bankruptcy notice. He referred to In Re A Debtor (1908) 2 KB 684 at 691. In my opinion the error here is of that kind. No one reading this bankruptcy notice and doing the calculations on which the appellant relies, which would reveal that the interest claimed was, in fact, 10.50% and not 10.05%, could possibly doubt that what was involved was a mere clerical error. For these reasons I agree with the orders proposed by the presiding judge.

JUDGE3

EINFELD J I agree with the other members of the Court and with Mr Justice Sheppard that the appeal should be dismissed.