Gorczynski v Perera & Anor
[2008] FMCA 55
•23 January 2008
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| GORCZYNSKI v PERERA & ANOR | [2008] FMCA 55 |
| BANKRUPTCY – Service – whether bankruptcy notice served in accordance with reg 16.02 Bankruptcy Regulations 1996. BANKRUPTCY – Bankruptcy notice – validity – whether documents filed for the purposes of obtaining certificate of judgment where no certificate of judgment issues meet requirements of reg 4.01 Bankruptcy Regulations 1996 – whether documents constitute alternative forms of documentation – whether annexed document confusing – whether omission of provision under which interest payable a failure to meet an essential requirement – whether reference to court costs likely to mislead or confuse a debtor. |
| Bankruptcy Act 1966, s.306 Bankruptcy Regulations 1995, reg 4.01, 4.011(b), 16.01(2)(b) Civil Procedure Act 2005 (NSW), ss.101, 133 Legal Profession Act 2004 (NSW), ss.368, 369 Uniform Civil Procedure Rules (NSW), rr.36.10, 36.11, 36.12, Sch 1 Part 4 |
| Dwyer v Canon Australia Pty Ltd [2007] SASC 100 Kleinwort-Benson Australia v Crowl (JA) (1988) 79 ALR 161 Adams v Lambert [2006] HCA 10 Bendigo Bank Ltd v Williams [2000] FCA 482 Kirk v Ashdown [1999] FCA 1664 Australian Steel Company (Operations) Pty Ltd v Lewis [2000] FCA 1915 Croker v Commissioner of Taxation [2005] FCA 127 |
| Applicant: | PETER FRANCIS GORCZYNSKI |
| First Respondent: | RAVINI NELUKA PERERA |
| Second Respondent: | REBECCA PATRICIA DEE-BRADBURY |
| File number: | SYG 2893 of 2007 |
| Judgment of: | Raphael FM |
| Hearing date: | 29 November 2007 |
| Date of last submission: | 29 November 2007 |
| Delivered at: | Sydney |
| Delivered on: | 23 January 2008 |
REPRESENTATION
| Counsel for the Applicant: | Ms N. Obrart |
| Solicitors for the Applicant: | Kent Attorneys |
| Counsel for the Respondents: | Mr W. van Ede |
| Solicitors for the Respondents: | E.H. Tebbutt & Sons Solicitors |
ORDERS
Bankruptcy Notice No NN3391/07 be set aside.
Respondent to pay the applicant’s costs of the application to be taxed if not agreed in accordance with the Federal Magistrates Court (Bankruptcy) Rules 2006.
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT SYDNEY |
SYG 2893 of 2007
| PETER FRANCIS GORCZYNSKI |
Applicant
And
| RAVINI NELUKA PERERA |
First Respondent
REBECCA PATRICIA DEE-BRADBURY
Second Respondent
REASONS FOR JUDGMENT
The applicant debtor seeks by this application to have the court set aside Bankruptcy Notice No. NN3391/07 issued by the Official Receiver on 17 August 2007. The total debt claimed to be owing under the notice was $150,496.08. The money was claimed to be the product of two court orders, the first from the Local Court in the sum of $2,379.00 and the second from the District Court in the sum of $146,116.58. An additional sum of $2,050.00 for interest was also claimed. The debtor propounded a number of grounds upon which he claimed that the bankruptcy notice was invalid and I propose to deal with each of these in turn. There was also an argument about service of the notice. The respondents to the application argued that the bankruptcy notice was served by facsimile transmission in accordance with regulation 16.01(e)(i) of the Bankruptcy Regulations 1996:
“16.01 (1) Unless the contrary intention appears, where a document is required or permitted by the Act or these Regulations to be given or sent to, or served on, a person (other than a person mentioned in regulation 16.02), the document may be:
…
(e) sent by facsimile transmission or another mode of electronic transmission:
(i) to a facility maintained by the person for receipt of electronically transmitted documents; … ”
According to the affidavit of Nyree Deirmendjian sworn on 5 October 2007, a copy of the notice was sent by facsimile transmission on 23 August 2007. A copy of the facsimile transmission report confirming successful transmission is annexed to her affidavit. On 27 August 2007 a letter was sent to the debtor by Express Post. Regulation 16.01(2) deals with the assumptions relating to service:
“16.01 (2) A document given or sent to, or served on, a person in accordance with subregulation (1) is taken, in the absence of proof to the contrary, to have been received by, or served on, the person:
(a) in the case of service in accordance with paragraph (1) (a) or (b) -- when the document would, in the due course of post or business practice, as the case requires, be delivered to the person's address or document exchange facility; and
(b) in the case of service in accordance with paragraph (1) (c), (d) or (e) -- when the document is left, delivered or transmitted, as the case requires.”
The respondent argues that service by either of these means was deemed to have occurred, at the latest, on 28 August 2007. This required the application to set aside the notice to be filed by 18 September 2007, or else an act of bankruptcy would be deemed to have been committed. The date of filing was 19 September 2007. I shall deal first with this question.
The applicant gave evidence. At first he said that the Express Post letter arrived on 28 August 2007, but he quickly changed his mind. He then told how he went to the registry of the Federal Magistrates Court close to 4.00pm on 18 September 2007 and was turned away. He then returned on 19 September 2007 and filed the application. The applicant also told the court that the fax number to which the notice was originally addressed (9571 6284) was a number used by a company with which he was associated, but of which he did not have the day-to-day management or control. The fax machine appears to have been placed in a shared office in premises which the applicant sometimes used as a residence and sometimes did not. It is clear from the affidavit of Ms Deirmendjian sworn on 16 October 2007 that the fax number 9571 6284 was used by the applicant in communication with the respondent creditors or their solicitors. The number was even used in relation to an application for special leave to the High Court. I was not impressed by the evidence given by the debtor. It seemed to me to be tailored to fit the case that he was making that the fax copy of the bankruptcy notice never came to his attention and that the posted copy only came to his attention on 29 August 2007. Mr Gorczynski agreed that he did receive faxes on that number and they were brought to his attention from time to time and I do not accept his suggestion that this particular and important document did not do so. In regard to the posted copy of the bankruptcy notice I believe that Mr Gorczynksi’s story of attending at the Federal Magistrates Court Registry at almost the last moment, on what would have been the last day if the Express Post letter had been received in the ordinary course of business the day after it was posted, is consistent with someone waiting until the last moment to deal with a troublesome problem. I think that Mr Gorczynski was surprised that he was turned away on that day and required to return on the next, which would have been a day too late.
An act of bankruptcy can only be committed by the failure to comply with a valid bankruptcy notice. If a bankruptcy notice is invalid then it matters not when the application to set it aside was filed. Frequently, one hears challenges to a bankruptcy notice upon the hearing of a petition. The importance of the date of service in this case relates to the allegation that the bankruptcy notice contains an overstatement of the amount claimed. Section 41(5) of the Bankruptcy Act 1966 requires notice to be given within the time allowed for payment of an overstatement. If, as I have found, the notice was received on 28 August 2007, the application made on 19 September 2007 is out of time and the indication of an excessive claim was likewise made out of time. To that extent, the application must fail.
The applicant made an interesting submission based upon a decision of Debelle J in the Supreme Court of South Australia in Dwyer v Canon Australia Pty Ltd [2007] SASC 100. At [25] his Honour said:
“The purpose of serving a document is to ensure that its contents come to the notice of the person for whom it is intended: Hastie & Jenkerson v McMahon [1991] 1 All ER 255 at 259; Howship Holdings Pty Ltd v Leslie at 544. That result can be achieved whether the document be served personally, by post or by fax: Hastie & Jenkerson v McMahon at 259. Service by fax is, therefore, good service provided that there is proof that the document in a complete and legible state has ben received by the intended recipient: Hastie & Jenkerson v McMahon at 259 to 260 per Woolf LJ and at 264 to 265 per Glidewell LJ; NM Superannuation Pty Ltd v Hughes at 36; Australian Securities Commission v Bank Leumi Le-Israel; Biotech International Ltd v Peptech Ltd (1999) 156 FLR 295. Service of originating process by fax is also good service where Rules of Court permit it: re WB Sharpe Constructions Pty Ltd (2001) 162 FLR 280.”
The applicant argued that there was no proof that a facsimile copy in a complete and legible state had been received by the intended recipient. He argued that regulation 16.01(2)(b) still required the sender to establish these matters where a recipient had denied receipt. Given my findings in relation to the postal service of this notice it is not necessary for me to opine on this argument. I shall now deal with the other objections to the validity of the notice.
Regulation 4.01 of the Bankruptcy Regulations requires an applicant for a bankruptcy notice to lodge with the Official Receiver one of the following documents in respect of a final judgment or final order specified by the person on the approved form:
i. A sealed or certified copy of the judgment of the order
ii. A certificate of the judgment or order sealed by the court or signed by an officer of the court
iii. A copy of the entry of the judgment or orders certified as a true copy of that entry and sealed by the court or signed by an officer of the court.
The debts incurred by Mr Gorczynski were debts for costs pursuant to certificates of determination of costs assessment under s.369 of the Legal Profession Act 2004 (NSW). What are attached to the bankruptcy notice are a series of documents. The first is a document entitled “Registration of judgment” in Form 1 of the Uniform Civil Procedure Rules forms. It refers to the local court and a judgment of $2310.00. The document is not sealed by the court, nor signed by an officer of the court. It is an application for registration of judgment. Next is a document entitled “Certificate of determination of costs assessment” which refers to a sum of $2310.00 being assessed as the party and party costs in certain proceedings in which Mr Gorczynski is named as the costs respondent. There is a note at the bottom of this document in the following form:
“This certificate is on the filing of the certificate in the office or registry of the court having jurisdiction to order the payment of that amount of money and with no further action taken to be a judgment of that court for amount of unpaid costs (section 369(7) of the Act).” [“the Act” refers to the Legal Profession Act]
The next document is an affidavit of Robert Henry Kirby filed in the Local Court deposing to the fact that he was the solicitor for the plaintiffs, that the outcome of the assessment was a determination in the sum of $2310.00, that no one has applied for a review of the certificate and no payment has been made, and the amount claimed for the issue of the court order is $69.00. These documents deal with the Local Court judgments. There follows the same series of documents dealing with the District Court judgment for $146,047.58 but the affidavit additionally says:
“The amount of interest claimed pursuant to s.101 of the Civil Procedure Act 2005 as at the date of this affidavit is calculated as follows:
Interest on 146.047.58 - $40.01 per day
29 June 2007 – 9 August 2007 42 days at $40.01 per day
$1680.42 to date and continuing.”
The applicant’s argument, ably put by his counsel Ms Obrart, is that these documents do not constitute any of the alternative forms of documentation required by regulation 4.011(b) of the Bankruptcy Regulations. The Uniform Civil Procedure Rules (NSW) deal with entry of judgments and the filing of costs assessor certificates. But the rules themselves are subject to the terms of the Act, the Civil Procedure Act 2005 (NSW), s.133 of which is in the following form
“133 Judgments and orders unenforceable until entered
(1) A judgment or order of the court may not be enforced until it has been entered in accordance with the uniform rules.
(2) This section extends to:
(a) any judgment, order, determination or decree of a court, and
(b) any adjudication or award of a person having authority to make an adjudication or award,
that may be filed or registered in the court, or of which a certificate may be filed or registered in the court, under any other Act or law.
(3) In subsection (2), "law" includes:
(a) a law of the Commonwealth, and
(b) a law of another State or Territory, and
(c) in relation to the Supreme Court, a law of a foreign country.”
The relevant rules relating to entry of judgment are rules 36.10 and 36.11:
“36.10 Filing of cost assessors’ certificates
(1) A cost assessor’s certificate:
(a) may be filed in the proceedings to which it relates, or
(b) may be filed in fresh proceedings, whether in the same court or another court.
(2) If, in relation to proceedings in which a cost assessor’s certificate is filed, there is also filed an affidavit, sworn not earlier than 14 days before it is filed, stating:
(a) if the affidavit is filed with the certificate, how much of the amount of costs included in the certificate has not been paid, and
(b) otherwise, the amount of the costs included in the certificate that, at the time the certificate was filed, had not been paid,
the registrar may enter judgment for the amount of the costs that have not been paid, without a direction of the court or request of a party.
36.11 Entry of judgments and orders
(1) Any judgment or order of the court is to be entered.
(2) Unless the court orders otherwise, a judgment or order is taken to be entered:
(a) in the case of a court that uses a computerised court record system, when it is recorded in that system, or
(b) in any other case, when it is recorded, in accordance with the practice of the court, as having been entered.
(2A) If the court directs that a judgment or order be entered forthwith, the judgment or order is taken to be entered:
(a) when a document embodying the judgment or order is signed and sealed by a registrar, or
(b) when the judgment or order is recorded as referred to in subrule (2),
whichever first occurs.
(3) In this rule, a reference to a judgment or order of the court includes a reference to any judgment, order, determination, decree, adjudication or award that has been filed or registered in the court, or of which a certificate has been filed or registered in the court, as referred to in section 133 (2) of the Civil Procedure Act2005 .
(4) This rule does not limit the operation of rule 36.10.”
There are forms of request for a copy of a judgment or order (Form 34) and an approved form related to the entry of a judgment or order (Form 33). The respondent seeks to argue that by virtue of s.368 of the Legal Profession Act 2004 (NSW) and the fact of filing, there is created a judgment which would satisfy regulation 4.01. I do not agree. It is clear that the Civil Procedure Act requires a judgment to be entered before it can be enforced. It is trite law that a bankruptcy notice can only issue in respect of an enforceable judgment. The requirements to obtain an enforceable judgment in respect of a costs assessor’s certificate is for the certificate to be filed. Only then will the judgment be entered. The act of filing permits the court to enter the judgment without further ado (Rule 36.10) but the actual entry is a further step. As Ms Obrart says, the creation of the judgment is not the issue in this case; there are three steps required before a bankruptcy notice can issue. There is the creation of the judgment, which is done pursuant to s.368 of the Legal Profession Act and the filing of the required documents, then there is the entry of judgment required by s.133 of the Civil Procedure Act and rule 36.10. Finally there is proof of the entry of judgment by the issue of the certificate which is dealt with by rule 36.12 of the Uniform Civil Procedure Rules and it is the proof of entry of a final judgment that is required by regulation 4.01 of the Bankruptcy Regulations. None of the documents annexed to the bankruptcy notice is sealed by the court or signed by an officer of the court. They contain court stamps but only filing stamps. The creditors needed to have annexed to the bankruptcy notice one of the three documents referred to in the regulations. This was not done. The bankruptcy notice does not comply with the regulations. This is not a matter that can be excused pursuant to s.306 Bankruptcy Act; it is an essential requirement. The notice is invalid.
Although it is not strictly necessary for me to deal with it, I should make reference to the second objection to the validity of the notice raised by the applicant. It will be recalled that there is a claim for interest in the sum of $2000.50. The applicant argues that the claim for interest does not comply with the requirements of Note 2 of the bankruptcy notice form which states:
“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 the document attached to this bankruptcy notice. The document must state:
(a) The provision under which the interest is being claimed
(b) The principal sum on which, the period for which, and the interest rate or rates at which the interest is being claimed.”
The document that is annexed claims interest pursuant to Schedule 5 of the Uniform Civil Procedure Rules from 29 June 2007, being the date of default. 29 June 2007 is the day after the date upon which the assessments of party and party costs issued. The applicant claims that from 29 June 2007 to 17 August 2007 is 49 days and not 50 days as claimed. That cannot assist him in regard to a claim for overpayment (because he made the claim too late) but he says that it makes the document confusing in a Kleinwort-Benson Australia v Crowl (JA) (1988) 79 ALR 161 sense. The more substantive argument is that Schedule 5 of the Uniform Civil Procedure Rules is not a provision under which interest is payable. It is a provision under which interest is calculated. The provision of the Civil Procedure Rules under which interest is claimed is s.101 of the Civil Procedure Act 2005. The respondent argues that this is a matter similar in form to that considered by the High Court in Adams v Lambert [2006] HCA 10 and the provisions in s.306 Bankruptcy Act should apply. The court in Adams v Lambert indicated that a bankruptcy notice would not contain a formal defect or irregularity, and would, therefore, not be ‘curable’ by s.306, if a bankruptcy notice failed to meet a requirement made essential by the Act, or if it could reasonably mislead the debtor as to what is required to comply with the notice. In relation to the requirement to state the provision under which interest was claimed the court said at [13]-[14]:
“The evident purpose of the requirement to state the provision under which interest is being claimed is to assign the debtor to check the claim. Nevertheless, as Kiefel J pointed out in her dissenting judgment in Bendigo Bank Ltd v Williams [2000] FCA 482 at [65]-[69], such information is normally incomplete. It would tell a debtor who is represented by a lawyer something the lawyer would, or should, already know. It would set an unrepresented debtor upon a train of inquiry that, in most cases, would require further information in order to find the relevant rate of interest.
The requirement in question is established by three levels of prescription. Subsection 41(2) of that Act states that a bankruptcy notice must be in the form prescribed by the regulations. Regulation 4.02 states that, for the purposes of s.41(2), the form set out in Form 1 is prescribed. Note 2 to the Schedule in Form 1 states that a document attached to the notice must state the provisions under which interest is being claimed. The use of the word ‘must’ is significant, but it should be kept in perspective. A prescription as to a form to be followed will normally be expressed in language of obligation rather than of permission. That is the idea of a form. Such a prescription raises the question to be considered in the present case; it does not answer it.”
Adams v Lambert was a case in which there was a misdescription of the statutory provision under which interest was claimed. In Bendigo Bank Ltd v Williams [2000] FCA 482 the bankruptcy notice failed entirely to state the provision under which interest was claimed. A majority of the Full Court (Moore and Lehane JJ, Kiefel J dissenting) concluded that this constituted a failure to comply with an essential requirement of the Act and declined to follow a previous case before the Full Court, Kirk v Ashdown [1999] FCA 1664, on this issue. In Kirk v Ashdown, there was a similar failure to identify the statutory provision under which interest was claimed, and the court in that instance determined that such failure did not render the notice a nullity. A majority of the Full Court in Australian Steel Company (Operations) Pty Ltd v Lewis [2000] FCA 1915 concluded that Kirk v Ashdown was wrongly decided and Bendigo Bank Ltd v Williams was correctly decided. Following this, the High Court in Adams v Lambert determined that Australian Steel Company (Operations) Pty Ltd v Lewis was incorrectly decided and that the dissenting judgments in that case of Lee and Gyles JJ were to be preferred. In addition, the court referred to the remarks of Kiefel J in Bendigo Bank Ltd v Williams, as outlined above, with apparent approval. Her Honour concluded at [66]-[69] that a failure to include the provision under which interest was claimed was not a failure to meet an essential requirement of the Act:
“The question in these cases concerned what a bankruptcy notice needed to contain and could not, in my respectful view, be answered by having regard to the language and requirements of the regulation and Form 1 alone. The requirements of the notice were to be gleaned principally from the scheme of the Act and s 40(1)(g).
It has been said that bankruptcy notices are viewed strictly so far as compliance is concerned. Certainly the Courts are conscious of the consequences which follow for a debtor who has not complied; which explains the clarity required of a notice. The consequences for a debtor who is not told about the legal basis for an interest claim are not of that kind. A person with legal representatives would not need it; an unrepresented person, at best, would only be put on a train of inquiry by a reference to the statute, which would not usually disclose the ultimate source of the relevant rate of interest. A claim for interest in the notice by reference to a statute might, however, be taken by a debtor as authoritative and therefore likely to be accurate.
Dowsett J in Ashdown v Kirk observed that s 41(5) permitted that an error of magnitude will not automatically lead to invalidity. Indeed, the subsection recognises that an overstatement may be viewed as a defect beyond that to which s 306 might apply: Kleinwort, 78. His Honour then doubted that it was intended that less serious defects should be fatal to the validity of a bankruptcy notice. Further, his Honour considered that a strict view of all that the Form required to be inserted would mean that a creditor making an excessive claim would be, by reason of s 41(5), in a better position than one claiming the correct amount, but omitting a matter of detail. I would respectfully agree.
In my view, there is no reason to doubt the decision of the Full Court in Kirk v Ashdown. The identification of the provision under which interest has accrued since judgment is not an essential requirement of bankruptcy notices under the Act.”
Similarly, in Australian Steel Company (Operations) Pty Ltd v Lewis, Lee J stated at [96] in relation to the misdescription of a statutory provision in the interest annexure:
“Could it be said that incorrect citation of the statute that prescribed that interest was payable by the debtor on a judgment debt could mislead the debtor as to the steps to be taken by the debtor to comply with the notice? The answer, obviously, is no. Kirk v Ashdown reached that conclusion when the source of the obligation to pay interest had been omitted entirely from the documents supplied by the creditor pursuant to ‘Note 2’.”
Given that the failure to include the provision does not amount to a failure to meet an essential requirement of the Act, and it is not capable of reasonably misleading the debtor as to what is necessary to comply with the Act, the error is a formal defect and s.306 of the Act applies. It is not the case that substantial injustice would ensue from this error.
Finally, the applicant argues that the reference to court costs of $69.00 is a matter which is likely to mislead or confuse a debtor. I think the reference to court costs supports the view I have taken of the invalidity of the notice for failing to comply with regulation 4.01. It is only when a certificate of judgment issues that the amount of court costs can be determined. The fee of $69.00 is found in Schedule 1 Part 4 of the Uniform Civil Procedure (NSW) Regulations under the heading “Miscellaneous court fees”. It is a fee for filing or registering a copy or certificate of a judgment. But the right to recover that fee would arise at the time the certificate of judgment issues when it forms part of the certified judgment amount.The debtor in this case is not provided with any information as to how the fee is calculated or the provision of the act, rules or regulations under which it is charged. To my mind this also constitutes a matter that would be considered confusing in the Kleinwort-Benson sense. The imposition of the fee had the certificate of judgment issued would have constituted an overpayment: Croker v Commissioner of Taxation [2005] FCA 127, but in this case no notice under s.41(5) was validly given.
For the reasons given above I believe that Bankruptcy Notice No. NN3391/07 should be set aside. The respondent should pay the applicant’s costs of the application to be taxed if not agreed in accordance with the Federal Magistrates Court (Bankruptcy) Rules 2006.
I certify that the preceding eight (8) paragraphs are a true copy of the reasons for judgment of Raphael FM
Associate:
Date: 23 January 2008
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