In the matter of the Bankruptcy Act 1966 and in the matter of an application by the Commercial Banking Company of Sydney Limited

1341'

JUDGMENT Uo. ....

;

........ ....

J .......

Bankruptcy - Bankruptcy Notice - Judgment Debt - I n t e r e s t

not calculated thereon u n t i l date of

i ssue of bankruptcy

not ice - pet i t ion ing credi tors r i g h t t o l i m i t i n t e r e s t claimed i n bankruptcy not ice by inclusion of the words

rrand no

moret1 i n the bankruptcy

notice.

' .

Q . L

pc* :

4 C.'&

, , t , ~ r J . d

' /

IN THE FEDERAL COURT OF AUSTRALIA

- GENERAL DIVISION

BANKRUPTCY DISTRICT OF THE STATE

OF NEW SOUTH WALES AND THE

AUSTRALIAN CAPITAL TERRITORY

I N THE MATTER of the Bankruptcy Act, 1966

AND I N THE MATTER of an appl icat ion

by THE COiB-1EF.C I AL BANKING COElPAMY

OF SYDNEY LII4ITED t o review a decision

of	the Regis t rar

JUDGE MMING ORDER:

DATE OF ORDER:

5TH MARCH, 1979

as'

w ~ l 3 U 3 MADE:	SYDNEY
THE COURT ORDERS THAT:

The appl icat ion i s dismissed with no order as t o cos ts

Exhibits may be handed out.

IN THE FE~~ERAL

comT oz. AusTmLIA \

GENERAL DIVISION

BANKRUPTCY DISTRICT OF THE STATE

OF NEW SOUTH WALES AND THE

AUSTRALIAN CAPITAL TERRITORY

I N THE MATTER of the Bankruptcy Act,

1966

AND I N THE MATTER of an applj-catior.

by THE C OI414ESC IAL,

EANE(ING C@MFA4bTY

OF ~ Y D ~ % Y

L I i ' l I T z t o review

a decision

of the Registrar

REASONS FOR JUDGMENT

This i s an application by The Commercial

Banking company of Sydney Limited (Itthe bankv1) under S. l 4 (5)

of the Bankruptcy Act 1966 (Itthe Actt1) f o r review of a refusal

by the Registrar i n Bankruptcy fo r the Bankruptcy Dis t r i c t

of The State of New South Wales and the Australian Capital

Territory t o issue bankruptcy notices containing the words

Itand no

more1I. appearing a f t e r the t o t a l amount

claimed. i n two

places i n the notices.

The application ra i ses questions of general

in te res t as t o the law and practice re la t ing t o bankruptcy

notices.

The f ac t s are not i n dispute and may be bri5fl-:T

s & t d

The

bank's

so l i c i t o r s p repzed a l l documents

required t o be

lodged with t he reg i s t ra r under ru le 7

of the Bankruptcy Rules fo r the issue of four bankruptcy

notices.

The documents were rejected by

the reg i s t ra r .

Correspondence between the bank's

so l i c i t o r s and the

r eg i s t r a r ensued

and

concluded with a l e t t e r from the

r eg i s t r a r dated

October

1978 t o the

so l ic i to r s

s ta t ing

the ground on which the reg i s t ra r had rejected the documeds

i n these terms:-

"Neither the Deputy Registrars nor

.	myself consider it desirable t o issue

a Bankruptcy Notice with the words land

no more1 inserted therein unless the

amount of the judgment debt claimed i n

the notice i s l e s s than the original

judgment.

In view of the provisiolls

of ru le 7 (5) of the Bankruptcy Rules vre

are not prepared t o issue a notice i n the

form suggested by you where the f u l l

amount of the judgment

debt i s claimed.I1

A copy of the form of bankruptcy notice i n

contention i s attached t o these reasons for judgment.

r e l a t e s t o the judgment

debtor llLouise Trevillian" but i s

typica l of the forms of bankruptcy notice re la t ing t o

other judgment debtors.	The underlining o f the words ltand
no moret1 i s mine.

The bankruptcy n o e c e included the words llm&

moreu.in an

attempt

t o overcome practi.ca1 d i f f i cu l t i e s

associated with the issue of bankruptcy notices.

In the past fen years there has been a substantial

increase i n the nwi-:b:r

n!crup-Lcy r~ot ices

i s ~ ~ i ~ i

by ':l::

r eg i s t r a r , and there is consequent delay experienced by

judgment 'creditors between the date of lodgment of

applications for the issue of bankruptcy notices and

the date of issue of the notices themselves. The

registrar deposed to a delay of about three days in

November 1978 and about fourteen days in January 1979.

A judgment creditor seeking the issue of a

bankruptcy notice is on the horns of a dilemma. He does

not know when the registrar will issue the notice. As

there.is delay between the date of application for the

issue of a bankruptcy notice and the date on which it in

fact issues, the correct calculation of interest will almost

always be in error as it is the judgment creditor who

calculates the interest claimed and the calculation is

invariably made up to the only date of which the judgnent

creditor can be certain, namely the date of applica-Lion for

the issue of the notice which is usually the dateVof lodgment of the documents including the draft form of bankruptcy notice. In practice, there will be an

understatement of interest for the period between the two

dates.

Mr. Hely, who appeared for the bank, conte~ded

that if the amount claimed in the bankruptcy notice as

being due to the judgment creditor is less than the

amount in fact due to him at the date of issue of the

bankruptcy notice, the bankruptcy notice may be defective

and.	incapable of remedy under S. 306 of the Act. The

bank seeks to insert the words "and no morett

to avoid these

dangerous shoals.

. /4

It is as well to bear in mind that a

bankruptcy notice is not the document of the judgment

creditor but of the registrar. In Re Munson; Ex parte

Deputy Commissioner of Taxation (1977) 29 F.L.R. 479

Riley J.

,id at page 480:

"It may be as well to po:

ItIt

int out

that the assumption

- - -

that -

a bankruptcy

notice will be is ued

--sued on

and will

bear the same dat

e as, t'

r he day on which

it is appliea r v r - is not

- -

d fo

-justified

the Act or Rules

and can--- - -

not properly be

made. The b kruptcy n~tice

~an.Kr-uptcy

ce is the

registrar's document, not the applicant's;

' S

--- -

and it is dated by the registrar, not by

the applicant. It is the registrar who

W ~istrar

issues it:

Bankruptcy A c t . 1966-1973 S. 41

D U ~ ~ L - U ~ ~ ~ T T

(1) (b).

(1) (b) . The application for its issue

auAl--

- -

is accompanied by copies of it, as it were

in draft, for his signature: r. 7 (2) (b) ;

. - - -;

we:

;

where it is to be served in Australia it

0 .,,d ed

is he who fixes the time for compliance

/ A \

m d he will sign

with it: S. 40 ('I)

(g) ; and he will sign

it and issue it only when he is satisfied

- that the application has been "duly" made

and that the bankruptcy notice is in order

for signature:

r. 7 ( 5 ) - Obviously it i s

, -

not contemplated that the bankruptcy notice

will necessarily be issued immediately the

l~~"mediate1y

application is filed, or even on the day on

which it is filed: and an examination of

twenty-five current files chosen at random - ~ ] shows that in practice it was so issued in only twelve of those cases and that in tbe p : other thirteen cases the dates of applicatio

and of issue differed by from one to as many I t

as fourteen days.

Before turning to the cont.entions-of

counsel,

it is convenient if I consider the nature of interest

on a judgment debt.

At common law generally a judgment did not

carry interest: Gaunt v. Taylor 3 Myl. & K. 302; 40 E.R. li

The only way of ' r cover i - l

interest or a judgment d e b W;

by action on the judgment. An exception to this general

rule was where the effect of the judgment had been impeded

by dilatory and vexatious proceedings on the part of

the debtor: Gaun'

v. Taylor (supra).

The defect was remedied in England by Act

1 and 2 Vict. c. 110, S. 17, which provided that every

judgment debt should carry interest at the rate named

in the Act from the time of entering judgment, and that

there might be a levy for the recovery of such interest

under a writ of execution on the judgment.

Since then, many statutes have been passed

giving a statutory right to a successful suitor to

interest on a judgment.

See for example the Supreme Court

~ d t ,

1970 (N.S.W.)

S. 95 and the Dist,rict Court Act, 1973

(N.S.W.)

S .

85.

It is well established that it is permissible

though not obligatory, to include in a bankruptcy notice,

a'claim for interest on a judgment debt which bears interest.

In re Lehmann, Ex parte Hasluck (1890) 7 Mor. 181 ;

Re C o o ~ e ~

(1911) 2 K.B.

550;

Re OIKeeffe (1963) 19 A . B . C .

101 - a

decision of Clyne J; Re T. P. Mullavey, Ex parte A. E. 2.

Banking Group Limited - a decision of C. A. Sweeney J.

(1978) 20 A.L.R.

276; Re Munson (supra); and Re K. R. Manion

Ex parte Deputy Commissioner of Taxation - a decision of

myseir' delivered 5 February 1979.

If a judgment creditor chooses to claim interes-

on a judgment debt, it is necessary for the calculation

of the claim to be accurate, and for the period during which

the claim is made to be specified:

Re Mullavey ( supre ) :

Re Thornas E. Davis, Ex parte Deputy Ccrnrnissioner of Taxation	-
(1963) 19 A.B.C. 100; and Re McDonald 18 A.L.R. 505.

Understatement of the amount of statutory interest accrued from the date of judgment to the date of issue of a bankruptcy notice or other date specified

in the notice does not necessarily vitiate the bankruptcy

notice.

Section 306 of the Act may be capable of operating

to validate a bankruptcy notice that otherwise would be

invalid. See the decision of Riley J. in Re Munson (sugra)

and my own decision in Re Manion (supra).

Mr. Hely submitted that a judgment creditor

is entitled to limit the duration of time for which he

claims interest in his bankruptcy notice. He relied in

particular upon the decision of the Court of Appeal in

Re H.B. - (1904) 1 K.B. 94 especially at p. 103 per Romer

L. J. where his Lordship said:-

"No doubt a s m

might be claimed which

is less than the real amount due, and

that would not of course be fatal to the

notice so long as the notice made it

clear that nothing more was claimed to be due

on the judgment beyond the amount specified

in the notice."

The Full Bench of this court said much the

same -in

Re Schierholter, Ex ~arte

Geis (1978) 19 A,L.R. 113,

None of the authorities to which I was referred

by counsel said anything to the contrary.

I see no reason in principle why a bankruptcy

notice, claiming the amount of a judgment debt and

statutory interest thereon, cannot in terms limit the

date to which interest is calculated a ~ d

claimed provided

i t i s made clear tlia-t no-t;hing more is claimed.

The

judgment debtor knows where he stands. He may comply with

the notice and pay the total amount claimed or secure payment

thereof and, if he does not.

do so, he will have comi-l-ted

* . /7

. .

-7-

ac t of

b d r c 2 t c y .

Bell ,

who

.appeared

f o r the reg i s t ra r ,

contended tha t , a t l e a s t i n the case of

a judgment

signed

i n the D i s t r i c t Court of

New

South Wales,

the inclusion

a claim f o r in te res t on a judgment

debt i n the bankruptcy

notice was unnecessary.

He pointed t o the words i n form 4 ,

which i s the prescribed form:-

ttWHEREAS (name and address of judgment

credi tor) (hereinafter referred t o as

Itthe judgment

credi tor t t ) has

claimed

t h a t the sum of

i s due by

you t o him under a f i n a l judgment (or order) obtained by him against you i n

the

Court of

on the

day of

, being a judgment

(or an order) the execution of which

has not been stayed:. .

.lt

and t o S.	85 of the Dis t r i c t Court Act which so f a r
relevant

"85. (1) Unless the Court orders i n any part icular case t h a t in te res t be

not payable,

in te res t sha l l , subject

t o subsection ( 3 ) , be payable on SO

much of the amount of a judgment debt

as i s from time t o time unpaid.

(2)	In te res t payable under subsection (1 )

i n respect of

a judgment debt sha l l -

$(a)

be calculated as from the

subject t o subsection (3) ,

date when the judgment debt

.me

in to being o r from such

l a t e r date as the Court i n any.

p a r t i c u l a r

case

f ixes ;

(b)

be calculated a t the r a t e prescribed fo r the purposes of

section 95 (1) of the Supreme

Court Act, 1970; and

(c)

form pa r t of the judgment debt, but not s o as t o require the payment of in te res t upon interes-

contended tha t S . 85 of

the Dis t r i c t Cour-L \ I

unlike s. 95 of the Supreme Court Act, 1970 makes interest as much part of the judgment debt as the amount for which judgment itself is signed. Hence

it is only necessary to include in the bankruptcy notice

the judgment debt, it being a composite figure comprising

debt, costs and interest, and to insert this after the

first dollar sign in the bankruptcy notice as it all

answers the description of a sum due by the judgmnt

debto~~

to the judgment creditor under the final judgment

obtained in the District Court.

Whether this be so or not, in my opinion a

bankruptcy notice may specify separately the amount

claimed as being due under the final judgment, whether

in the District Court or some other court, and the amount

claimed as interest thereon.

I said so in Re Manion (supra)

and nothing has been said in the course of argument in

this case to change my view.

I would be loathe to reach a conclusion which

required bankruptcy notices to state the amounts outstanding

on a judgment debt and interest in different forms

depending upon the accident of the particular court in whicL

judgment happened to be signed unless such a conclusion was

the necessary result of particular statutory requirements.

Nothing was said in argument to lead to this conclusion

in the present case and I see nothing in the terms of S. 85

of the District Court Act of New South Wales to require it.

Also, any other view would compound the registrar's problems

in the day to day practic.- 3f issuing bankruptcy n ~ ~ ~ i e ~ s .

Mr. Bell next submitted that it would be

. .

/ .

-9-

impermissible for the registrar to issue bankruptcy

notices with the words Itand no more" appearing as

sought by the bank, as the form of bankruptcy notice

would then be other than as prescribed. He referred

me to rules 6 and 8 of the Bankruptcy Rules and submitted

that they were inconsistent with each other and that, in

the result, unless a bankruptcy notice was issued strictly

in accordance with the prescribed form, it would not Le

authorised by the Rules.

- Rules 6 and 8 of the Bankruptcy Rules provide,

so far as relevant:-

- -

"6. - (1) Strict compliance with the

forms in the First Schedule is not	- .
necessary and substantial compliance, or such compliance as the special circumstances of a particular case allow, is sufficient...
8. For the purposes of paragraph (a) of sub-section (1.) of section 41 of the Act, a bankruptcy notice shall be
in accordance with Form 4."

section 41 (1) (a) of the Act provides

that a bankruptcy notice shall be in accordance with

the prescribed form.

In my opinion rules 6 and 8 are not mutually

inconsistent. They mean simply that certain documents

shall be in accordance with the prescribed forms; but it

is sufficient that they substantially comply with those

forms or comply to a lesser degree if the special

circumstances of a particular case allow. Form 4, which

is the form pre~cribi-3

by 1 Le €3.

is but one such fo1~12.

In my opinion rules 6 and 8 do not have the

construction and operation contended for by Mr. Bell.

I turn t o consider whether the words

chosen by the bank .Itand no moret1 are apposite t o make c lear

that nothing more i s claimed by the bank t o be due on the

judgment

debt together with i n t e r e s t than the sum s ta ted

i n the bankruptcy notice as being the t o t a l sum

claimed.

The t rue meaning of the words,

sa id M r . Hely,

is that all t h a t i s claimed t o be due by the judgment

c r e d i t ~ r

from the judgment debtor i s the sum claimed i n

the bankruptcy notice and tha t i f anything more is i n f a c t

due by the judgment debtor it i s waived o r abandoned.

M r .

Bell contended t h a t the words were

equivocal as they could bear e i the r the meaning assigned

t o them by M r .

Hely o r perhaps r e l a t e t o the mathematical

accuracy of the t o t a l f igure claimed of $1,680.19.

said

t h a t the words were equivalent t o "preciselyu or ttexact.lyn,

s o - t h a t a judgment

debtor reading the notice could

reasonably conclude tha t the judgment credi tor was clairting

a t o t a l of $1,680.19 precisely.

In my opinion a judgment

debtor reading the notice would conclude tha t , whether

he owed the judgment credi tor more than the t o t a l sum

mentioned i n the bankruptcy notice o r not,

a l l t h a t was

being claimed from him was the t o t a l sum specified and tha t ,

i f there were any fur ther sums due, they were being claimed

no longer.

I asked M r . Hely why the bank had not sought

t o include the words "and no moreu i n paragraph (b) o f the

.	not ice a f t e r .the worcls 'Ithe l a s t preceding: paragraph" so .

t h a t (b) would read:-

' l l to secure the payment of the swn referred t o i n the l a s t preceding paragraph and no more to- the

sa t i s fac t ionN etc .

Again,

the underlining i s mine.

H i s response was t h a t paragraphs (a) and (b)

were al ternat ives and tha t the additional words were not

necessary i n paragraph (b) .

I do not accept t ha t

t h i s i s so.

There ought t o be consistency between

g,.

paragraphs (a) and (b) and the introductory paragraph

of the bankruptcy notice.

I f the words It and no moreu

are t o appear a t a l l , they ought t o appear i n the same

sense throughout the document i n a l l relevant places.

The only matter I wish t o add is tha t the

problem confronting the bank and other judgment credi tors

. is a real one.

The bank i s en t i t l ed t o the issue of a

bankruptcy notice which includes a claim f o r in te res t .

The

bank runs the r i s k t ha t i f there i s an understatement

i n

the bankruptcy notice o f the sum

claimed as in te res t , the

notice may

v i t i a t ed o r ,

best,

en t i t l ed t o the benef i t

of the ameliorating ef fec t of S. 306.

The bank should not

placed

i n t h i s position.

Nor

should the reg i s t ra r ,

especially as the bankruptcy notice is h i s document.

For these reasons, i n my

opinion the bank i s

en t i t l ed t o the

issue by

the r eg i s t r a r of

bankruptcy no t ices

containing the words "and no moren i n the two places sought

by the bank and in paragranh (b) where I have indicated. The

bankruptcy notices ought no-'; t o . be issued by the registrar*

in the form sought by the b&

without the addition of

the appropriate words to paragraph (b).

Hence I am

not prepared to set aside the decision of the registrar

as sought by the bank as that would be tantamount to

approving the issue of bankruptcy notices in an incomplete,

and perhaps misleading, form.

It must be remembered that

the decision of the registrar under review is his refusa; to

issue bankruptcy notices in the form of the particular

documents submitted by the bads and not otherwise.

-	The registrar will, of course, be mindful

of what I have said and will not refuse to issue bankruptcy

notices, including those uctlder review, if they are in

accordance with the document annexed to these reasons for

judgment with the addition of the words "and no moret1

paragraph	(b)	.
As to costs, in my opinion, it is appropriate

that each party pay his or its own costs. The questions

'raised are of general importance in the administration of bankruptcy. Both the bank and the registrar wish to know where they stand on a question not decided before and not without'complexity. The case has not been argued as

adversary litigation. Both the registrar and the bank have

sought to resolve a question of mutual interest and

importance to them.

The application is dismissed with no order as

to costs. Exhibits may be handed-out.

Dated:

--v--

- --

---

Fornr

- ,

BANKRUPTCY

Rnnknrntc I* ~ c t

1966

NOrFPC@

-0

or rs 78

BANKRUPTCY DISTRICT OF TEIE STATE OF ]

;	(a) Here insert	To: (a b..	M U I S E ~ v I L L ~ ~ . . . Q ~ ,	'~?.6,,.l58..	Sh?c kels...EstatCo	........ ........ ...
;	name, address and
:	occupation of

judgment debtor.

Woronora.River.

N.S .W.

. . . . . . . . . . .

2234

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(occupat ion

unknown)

. . .

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

I	WHEREAS b ) THE COIQERCIAL BANKING *COp?'P_M* OF SYDN.ZY LIMITED

*	(b) Ilere insert	. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
'	name and address

of judgment

of 343 (George Street. Sydney

cred~tor.

(hereinafter referred to as "the judgment creditor") has claimed that the sum of 3.

5 4 . 7 0 ~ ~ .

$10.00

together with interest thereon at the rate of

per centum per annum from

. . . . . . .

15th sept ember, 1978

7th..

19?(xere icsert date of judgment) which at ..

Y b d y m J m w t c m ~ ~

"3 V-?

ountr to $ 1 3 2 - 3 1.

. . . . . . . . .

making a total of $ 1 s 680

0 19.

1s d u n 9 YOU to

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

under a final

judgment

obtained by=

against you in the

~ H k r x

. . . . . . . . . . . . . . . .

. . . . . . . . .

. . . . . . . . . . . . . . . . . . .

........ ........ .. .Di . s t r ic t . .

Court of

:...New

South. .

l?a J-es

........ ........ ....

.No~e.mke.r~..

. . .

l 7

, being

on the..

........ ........ . .%h..

........ ....... .day of

a jUdgyent

the execution of which has not been stayed:

........ ........ ........ ...

THEREFORE TAKE NOTICE that within

. . . .

f0ur . teen . .

(.14).

days

after service of this notice on you, excluding the day on which this notice is served on you, you

are required-

n ,q

. !

(a) to pay the sum of S 1,680.19

\.and.,no &more

. . . . . . . . . . . . . . . . .

so claimed by the

(C) Hcre insert	judgment creditor to (C)	. . . .	.Regis t rar	,,., ,Di	s t r i c t	...C our.t...of	........ ........ ........ ..
cred!tor" or, i f	"the, judgment
. the	~udgment or order resuircs payment to be made to a court
or a person other

than the judgment

(b) to secure the payment of the sum referred to in the last preceding paragraph to the

creditor. the name

i t s

apd address of the

. satisfaction of the Federal Court of

Australia or the judgment creditor (or Xi%

agent

a r t or the other

-:on to whom

* mcnt is

whose name and address are P e t e r Robert Evere t t ,

16 Barrack

roiuired t, tr

made.

........ ........ ... ) r compound

its

the sum so specified to the saiisfaiilclr, of ihc judgimalt creditor (urX&, ageil:;:

AND FURTHER TAKE NOTICE that if, within the period set out above, you fail either tc :

coniply with either of the above-mentioned requirements of this notice or to satisfy the Fetierdi

Court of

Australia

that you have a counter-claim, set-off or cross demand equal to o i e x c ~ ~ , ? i n g

the sum specified in paragraph (a) of this notice, being a counter-claim, set-off or cross deil~and

that you could not have set up in the

action

P~aturrx

in which the j U 2 g t was obtained, you ;viil

have committed an act of bankruptcy on which bankruptcy proceetlings may be taken agaimt vciil.

DATED this

day of

, 1978

[1979] FCA 179

5 Mar 1979