HOVAN v GOYCOLEA-SILVA - [2003] FMCA 65

FEDERAL MAGISTRATES COURT OF AUSTRALIA

HOVAN v GOYCOLEA-SILVA

[2003] FMCA 65

BANKRUPTCY – Bankruptcy notice – application to set aside – whether use of the name Local Court Act in place of Local Courts (Civil Claims) Act is sufficient to invalidate a notice – whether insertion of lesser sum claimed for costs and appears in the certificate of taxation invalidates the notice.

Local Courts (Civil Claims) Act 1970
Supreme Court Act 1970, s.95(1)
Acts Interpretation Act 1901 (Cth), s.25C
Bankruptcy Act 1966 (Cth), s.41(5)

Australian Steel Company (Operations) Pty Limited v Lewis [2000] 109 FCA
McDowell v Fox [2002] FMCA 254
Bernard v Valassis [2002] FMCA 285-6
General Motors Acceptance Corp Australia v Marshalls [2002] FCA 1006
Wright v Australia and New Zealand Banking Group Limited [2001] FCA 386 St George Bank Limited v Baldwin [2001] FCA 161

Applicant:

GEORGE HOVAN

Respondent:

MARIA SOLEDAD GOYCOLEA-SILVA

File No:

SZ 1281 of 2002

Delivered on:

18 February 2003

Delivered at:

Sydney

Hearing date:

18 February 2003

Judgment of:

Raphael FM

REPRESENTATION

Solicitor for the Applicant:

Foleys Solicitors

Solicitors for the Respondent:

Sally Nash & Co

ORDERS

Application dismissed.
Extend time for compliance of bankruptcy notice until 28 February 2003.
Applicant to pay respondent’s costs pursuant to Federal Court Rules to be taxed if not agreed.

FEDERAL MAGISTRATES
COURT OF AUSTRALIA AT
SYDNEY

SZ 1281 of 2002

GEORGE HOVAN

Applicant

And

MARIA SOLEDAD GOYCOLEA-SILVA

Respondent

REASONS FOR JUDGMENT

The applicant in this matter seeks to set aside a bankruptcy notice issued by the Official Receiver for the Bankruptcy District of New South Wales on 28 August 2002. A schedule of the bankruptcy notice contains details of the amount of the judgment or order, the legal costs and interest to come to a total debt owing of $20,564.16. An interest calculation is annexed to the bankruptcy notice which at (c) says:
“ Interest is claimed pursuant to section 39A of the Local Court Act, the relevant rates of interest pursuant to the Act are as follows:”
then it gives a table setting out the dates for which interest is calculated, the interest rate pursuant to s.39A of the Local Court Act and the interest amount. In accordance with the requirements of the form a certificate of judgment, form 49, is also attached. That indicates that a judgment was registered in the Local Court on 27 July 1999 in the sum of $14,731 which appears to be costs owing by the debtor to the creditor.
It says that interest is payable on the judgment debt at the rate prescribed for the purposes of section 95(1) of the Supreme Court Act 1970. In paragraph 4 of that certificate it says:
“The judgment creditor has incurred costs of attempting to enforce the judgment recoverable against the judgment debtor in the amount of $3286.81 (this amount includes interest).”
The applicant makes two arguments as to why I should set aside his bankruptcy notice, the first is that the notice refers to a non-existent Act of the New South Wales Parliament, the Local Court Act when in fact it should have referred to the Act named in the Certificate of Judgment, the Local Courts (Civil Claims) Act 1970. The applicant argues that this failure is one which would cause confusion to the debtor and constitutes a failure to comply with the prescribed notice under subsection 41(2) of the Bankruptcy Act and Regulation 4.02 of the Bankruptcy regulations.
She argues that this failing is similar to that discussed by a specially constituted full bench of the Federal Court in Australian Steel Company (Operations) Pty Limited v Lewis [2000] 109 FCA 3. The decision in Australian Steel involved the insertion into the bankruptcy notice of a patently wrong provision pursuant to which interest was being claimed.
In this case the drafter of the bankruptcy notice has used the shorthand term "Local Courts Act" for the full name of the relevant piece of legislation. I note with some embarrassment that this is a failing which my brother Driver FM appears to have fallen into in his decision in McDowell v Fox [2002] FMCA 254. It is certainly the case that this is the way in which the Act is referred to generally in New South Wales. I made the same mistake as Driver FM in my judgment in Bernard v Valassis [2002] FMCA 285-6.
In both cases to which I have referred this court followed the decision of Gyles J in General Motors Acceptance Corp Australia v Marshalls [2002] FCA 1006 where his Honour distinguished between a case then before him and Australian Steel. His Honour obtained support for the views which he expressed from the judgments of Beaumont J in Wrightv Australia and New Zealand Banking Group Limited [2001] FCA 386 and of Madgwick J in St George Bank Limited v Baldwin [2001] FCA 161.
I am satisfied that by extension the very minor error of misnaming the Local Court's (Civil Claims) Act would still involve substantial compliance with the form as permitted by section 25C of the Acts Interpretation Act 1901 (Cth) and I am unable to see how there can be any element of substantial injustice so that section 306 of the Bankruptcy Act would apply in relation to such irregularity. I note that no evidence whatsoever has been put on in this case other than an almost illegible affidavit of the applicant which goes to matters other than those discussed in this judgment.
The second complaint made by the applicant is that the claim for costs made in the bankruptcy notice is for a sum of $1,250. The form requires that if legal costs are being claimed a certificate of taxation for assessed costs in the amount claimed must be attached to the bankruptcy notice. The respondent argues that this is complied with by the certificate of judgment which makes reference to the amount of incurred costs in paragraph (4).
That figure is not the same as the $1,250 claimed under column 2 of the schedule. If the amount that had been claimed for costs in the schedule exceeded the amount found in paragraph 4 then the debtor was required to serve notice under section 41(5) of the Bankruptcy Act 1966 (Cth) upon the creditor if he wished to invalidate the bankruptcy notice for that reason.
There is no such requirement where an understatement is made. That is because a bankruptcy notice is a demand for payment coupled with a threat. If the payment is made, the threat cannot be carried out. Therefore, if a sum less than that which the debtor really owes the creditor is paid the creditor can do no more in terms of the insolvency regime without issuing a further notice. I would not set aside a bankruptcy notice on those grounds because to my mind the requirement to make payment is clear – $1,250 and no more is requested. I must dismiss the application.
The applicant requests a further extension of time for compliance with the bankruptcy notice.
Although the applicant has not provided me with any real evidence why I should extend the time for compliance with the bankruptcy notice and although Ms Nash has provided me with a copy of an excerpt from the Law Society Journal of December 2002 indicating that the debtor was refused a practising certificate as a solicitor on 14 November 2002 and a manager has been appointed to his practice and although she has reminded me that it was necessary to obtain substituted service of the bankruptcy notice I am prepared to grant a short extension of time to give the debtor an opportunity to meet his obligations which would appear to be in the best interests of all parties. I therefore extend the time for compliance with the bankruptcy notice until 28 February 2003.
I order that the applicant pay the respondent's costs pursuant to the Federal Court Act and Rules to be taxed if not agreed.

I certify that the preceding thirteen (13) paragraphs are a true copy of the reasons for judgment of Raphael FM

Associate:

Date: