Irani v Hollyburton UK Ltd

[2007] FCA 1447

FEDERAL COURT OF AUSTRALIA

Irani v Hollyburton UK Limited [2007] FCA 1447

BANKRUPTCY – bankruptcy notices – circumstances where notice substantially complies with requirements of relevant legislation – whether requirement made essential by the Act – principles to be applied – application of principles set out by the High Court in Adams v Lambert – Bankruptcy Act 1966 (Cth), ss 41(2) and 306(1) – Bankruptcy Regulations 1996 (Cth), reg 4.02 – Acts Interpretation Act 1901 (Cth), s 25C

Acts Interpretation Act 1901 (Cth), s 25C
Bankruptcy Act 1966 (Cth), ss 40(1), 41, 306(1)
Bankruptcy Regulations 1996 (Cth), reg 4.02

Adams v Lambert (2006) 225 ALR 396 followed
American Express International Inc v Held (1999) 87 FCR 583 cited
Bendigo Bank Ltd v Gard (1999) 92 FCR 560 not followed
Kleinwort Benson Australia Ltd v Crowl (1988) 165 CLR 71 discussed
Re Bankruptcy Act 1966; Ex parte Commercial Banking Co of Sydney Ltd (1979) 23 ALR 522 cited
Re Spurr; Ex parte Werner (1991) 31 FCR 236 approved
Snelgrove v Roskell (2007) 157 FCR 313 discussed
The Australian Steel Company (Operations) Pty Ltd v Lewis (2000) 109 FCR 33 discussed

BOMAN IRANI v HOLLYBURTON UK LIMITED
VID115 OF 2007

MIDDLETON J
14 SEPTEMBER 2007
MELBOURNE

IN THE FEDERAL COURT OF AUSTRALIA
VICTORIA DISTRICT REGISTRY	VID115 OF 2007

ON APPEAL FROM THE FEDERAL MAGISTRATES COURT OF AUSTRALIA

BETWEEN:	BOMAN IRANI Appellant
AND:	HOLLYBURTON UK LIMITED Respondent

JUDGE:	MIDDLETON J
DATE OF ORDER:	14 SEPTEMBER 2007
WHERE MADE:	MELBOURNE

THE COURT ORDERS THAT:

1.The appeal be dismissed with costs.

Note:    Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

IN THE FEDERAL COURT OF AUSTRALIA
VICTORIA DISTRICT REGISTRY	VID115 OF 2007

ON APPEAL FROM THE FEDERAL MAGISTRATES COURT OF AUSTRALIA

BETWEEN:	BOMAN IRANI Appellant
AND:	HOLLYBURTON UK LIMITED Respondent

JUDGE:	MIDDLETON J
DATE:	14 SEPTEMBER 2007
PLACE:	MELBOURNE

REASONS FOR JUDGMENT

1. The appellant appeals the whole of the orders made by the Federal Magistrates Court on 8 February 2007.  The federal magistrate had dismissed the appellant's application to set aside a bankruptcy notice dated 3 November 2006 (‘the Notice’) in respect of a debt (inclusive of interest) of $619,757.22.

2. The issue in this appeal concerns the manner in which the Notice was completed in respect of the calculation of interest.  The appellant argued that the respondent failed to comply with the requirements of the prescribed form because the Notice contained no statement of the principal sum, the period, or the interest rate or rates at which the interest had been claimed by the respondent.

3. The background to the incurring of the judgment debt and the claim for interest is as follows.  On 12 June 2003, Master Wheeler of the Supreme Court of Victoria entered judgment against the appellant in favour of the respondent in the sum of $569,589.65 in proceeding number 6302 of 2000 (‘the 2003 Orders’).

4. In proceeding number 5407 of 2005, Whelan J of the Supreme Court of Victoria made orders on 31 October 2006 (‘the 2006 Orders’) in the following terms:

   (1) The Court declares that the judgment obtained by the plaintiff in proceeding number 6302 of 2000 remains enforceable and that the sum of $619,757.22 remains outstanding as at 11 October 2006 pursuant to the said judgment.

   (2) There is no order as to costs in relation to all aspects of the proceeding not already the subject of a costs order, including the costs of the amendments made during the trial which but for this order would be dealt with by Rule 63.17. 

5. On 3 November 2006, the Notice was issued and on 16 November 2006, it was served on the appellant.  On 5 December 2006, the appellant applied to the Federal Magistrates Court to set aside the Notice.

6. It is convenient to set out the relevant part of the Notice:

Schedule
Column 1	Column 2
1.	Amount of judgments or orders Judgment 12 June 2003 in Supreme Court proceeding number 6302 of 2003	$569,589.65
plus      2.	Legal costs if ordered to be paid and a specific amount was not included in the judgments or orders (See Note 1, below)	NIL
plus      3.	If claimed in this Bankruptcy Notice, interest accrued since the date of judgments or orders (See Note 2, below)	$190,167.57
4.	Subtotal	$759,757.22
less      5.	Payments made and/or credits allowed since date of judgments or orders	$140,000.00
6.	Total debt and interest owing pursuant to declaration made by Justice Whelan in proceeding 5047 of 2005	$619,757.22

(NB: Amounts, where applicable, are to be inserted in column 2)

FOR INFORMATION OF THE CREDITOR - Notes to the Schedule

Note 1: Legal costs (item 2 of the Schedule)
If legal costs are being claimed in this Bankruptcy Notice, a certificate of taxed or assessed costs in support of the amount claimed must be attached to this Bankruptcy Notice.

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)

1. The calculation of the interest claimed in item 3 of the schedule was set out by the respondent in a document attached to the Notice in the following terms:

   CALCULATION OF INTEREST CLAIMED IN ITEM 3 OF THE SCHEDULE

   Interest is claimed pursuant to Section 101(1) of the Supreme Court Act 1986 which provides:

   "Every judgment debt carries interest at the rate for the time being fixed under Section 2 of the Penalty Interest Rates Act 1983 from the time the judgement was given.”

   By an order made by the Honourable Justice Whelan in the Supreme Court of Victoria, in proceeding number 5407 of 2005 the court declared that the judgement in proceeding 6302 of 2000 remains enforceable and that the sum of $619,757.22 remains outstanding.
   The sum of $619,757.22 includes interest in the sum of $190,167.57 pursuant to the Penalty Interest Rates Act 1983.

2. Annexed to the Notice were the 2003 Orders and 2006 Orders.  As indicated above, the 2006 Orders included a declaration of the debt owing by the appellant to the respondent as at 11 October 2006 inclusive of interest, being the sum of $619,757.22.  It was not disputed that the declaration of Whelan J was binding on the parties.  It would appear that the amount of interest was in fact agreed between the parties in the proceeding before Whelan J, as was noted by the federal magistrate (at [8]):

   In this case the respondent has not produced a schedule explaining how the figure set out in the declaration by Whelan J was calculated.  Indeed, it appears that Whelan J reached that figure as a result of admissions made in the pleadings (the respondent alleged that the judgment debt together with interest as at 12 October 2006 was the sum of $619,757.22, and this allegation was admitted by the applicant in the defence).  There is now some dispute as to whether or not this figure is calculated precisely in accord with the relevant statutory provisions that apply to judgments of this type in Victoria.  However, it is conceded that the declaration of Whelan J is binding.  There has been no appeal, nor is it sought to look behind that judgment.

   Neither party contended before me that these observations of his Honour were inaccurate.

   LEGISLATION

3. It is convenient to set out the relevant statutory context. Section 40(1) of the Bankruptcy Act 1966 (Cth) (‘the Act’) so far as is relevant, provides:

   A debtor commits an act of bankruptcy in each of the following cases:
   …

   (g)if a creditor who has obtained against the debtor a final judgment or final order, being a judgment or order the execution of which has not been stayed, has served on the debtor in Australia or, by leave of the Court, elsewhere, a bankruptcy notice under this Act and the debtor does not:

   (i)where the notice was served in Australia - within the time specified in the notice; or

   (ii)where the notice was served elsewhere - within the time fixed for the purpose by the order giving leave to effect the service;

   comply with the requirements of the notice or satisfy the Court that he or she has a counter-claim, set-off or cross demand equal to or exceeding the amount of the judgment debt or sum payable under the final order, as the case may be, being a counter-claim, set-off or cross demand that he or she could not have set up in the action or proceeding in which the judgment or order was obtained;

4. Section 41 of the Act, so far as is relevant, provides:

   (1)      An Official Receiver may issue a bankruptcy notice on the application       of a creditor who has obtained against a debtor:

   (a)       a final judgment or final order that:

   (i)is of the kind described in paragraph 40(1)(g); and

   (ii)is for an amount of at least $2,000; or

   (b)       2 or more final judgments or final orders that:

   (i)        are of the kind described in paragraph 40(1)(g); and

   (ii)       taken together are for an amount of at least $2,000.

   (2)The notice must be in accordance with the form prescribed by the regulations.

   (3)      A bankruptcy notice shall not be issued in relation to a debtor:

   (a)except on the application of a creditor who has obtained against the debtor a final judgment or final order within the meaning of paragraph 40(1)(g) or a person who, by virtue of paragraph 40(3)(d), is to be deemed to be such a creditor;

   …

5. Regulation 4.02 of the Bankruptcy Regulations 1996 (Cth) (‘the Regulations’) provides:

   (1)For the purposes of subsection 41(2) of the Act, the form of bankruptcy notice set out in Form 1 is prescribed.

   (2)A bankruptcy notice must follow Form 1 in respect of its format (for example, bold or italic typeface, underlining and notes).

   (3)Subregulation (2) is not to be taken as expressing an intention contrary to s 25C of the Acts Interpretation Act 1901.

6. Section 25C of the Acts Interpretation Act 1901 (Cth) (‘the Acts Interpretation Act’) provides:

   Where an Act prescribes a form, then, unless the contrary intention appears, strict compliance with the form is not required and substantial compliance is sufficient.

7. Section 306(1) of the Act provides:

   Proceedings under this Act are not invalidated by a formal defect or an irregularity, unless the court before which the objection on that ground is made is of opinion that substantial injustice has been caused by the defect or irregularity and that the injustice cannot be remedied by an order of that court.

   CONSIDERATION

8. In order to determine the issues in this appeal, it is useful to refer to the recent decision of Snelgrove v Roskell (2007) 157 FCR 313. In that case, Jacobson J considered whether an incorrect reference to the legislation, which was the statutory source of post-judgment interest claimed in the bankruptcy notice, resulted in the bankruptcy notice being invalid. In determining the correct principles to apply, his Honour held (at [29]-[31]):

   The High Court said in Adams [v Lambert (2006)] 225 ALR 396 at [18] that if there is a failure to comply with a provision of the Act or the Bankruptcy Regulations 1996 Cth (the Regulations), the first question which must be asked is whether the defect or irregularity is a formal one within the purview of s 306. If it is, it is then necessary to ask whether substantial injustice has been caused by the defect or irregularity and whether the injustice cannot be remedied by an order of the Court. It must be borne in mind that these are separate and distinct questions.

   The first question, that is, whether the defect or irregularity is formal, involves two levels of enquiry.  These were stated by an earlier decision of the High Court in Kleinwort Benson Australia Ltd v Crowl (1988) 165 CLR 71, and applied in Adams 225 ALR 396 at [25] ff.

   The relevant enquiry is: does the bankruptcy notice fail to meet a requirement made essential by the Act or the Regulations; or could it reasonably mislead a debtor as to what is necessary to comply with the notice; see Kleinwort Benson 165 CLR at 79; Adams 225 ALR 396 at [25].

9. Apart from the reference to the Regulations in the last paragraph (to which see Gyles J at [113] in The Australian Steel Company (Operations) Pty Ltd v Lewis (2000) 109 FCR 33 referred to later which correctly indicates that the task is to focus on the Act not the Regulations), in my view Jacobson J correctly states the matters relevant to the inquiry whether the defect or irregularity in the Notice is a formal defect or an irregularity.

10. However, a preliminary matter to consider is whether the Notice was defective or irregular in any event by reason of a failure to include an interest calculation in accordance with note 2, having regard to the circumstances of this case and to the operation of s 25C of the Acts Interpretation Act. This preliminary matter was raised by the respondent, the federal magistrate having found, in favour of the appellant, that there was a relevant defect or irregularity in the Notice.

11. If there was such a defect or irregularity, then the only remaining issue that I have been asked to determine is whether the Notice failed to meet a requirement made essential by the Act. The appellant did not contend that the failure to include an interest calculation could reasonably mislead a debtor as to what was necessary to comply with the Notice, but said that this was not relevant to determining whether there was a failure to comply with a requirement made essential by the Act. I agree. The relevant inquiry as described by Jacobson J consists of two aspects, which need to be addressed separately, and to the extent the federal magistrate treated both aspects together, in my respectful view he fell into error.

12. However, I turn first to the preliminary matter as to whether the Notice substantially complied with the requirements of the form prescribed by the Regulations. In my view, the Notice does provide an equivalent to the required details of the calculation of the interest claimed as is necessary and prescribed, in the unusual circumstances surrounding the Notice.

13. The following information is contained in or can be derived from the Notice:

    ·The 2003 Orders were made on 12 June 2003 in the amount of $569,589.65 which was the principal sum of the final judgment debt.

    ·Interest which accrued since the date of the 2003 Orders was claimed pursuant to s 101(1) of the Supreme Court Act 1986 (Vic) (‘the Supreme Court Act’).

    ·Interest was determined by the Supreme Court of Victoria on the basis of the rate set by the Penalty Interest Rates Act 1983 (Vic) (‘the PIR Act’) from the date of the 2003 Orders to 11 October 2006.

    ·The 2006 Orders were made on 31 October 2006 and the sum of $619,757.22 remained payable by the appellant to the respondent as at 11 October 2006.

    ·The sum of $619,757.22 included the interest claimed in the sum of $190,167.57 pursuant to the PIR Act and according to the calculation made by the binding determination of the Supreme Court of Victoria.

    ·No further interest was claimed.

14. It is true that in the document attached to the Notice the principal sum on which the interest is claimed is not separately identified (although it can be easily derived from the information available), and no actual rate of interest is identified other than by reference to the Supreme Court Act and the PIR Act.  However, the form prescribed by the Regulations is to adapt to the actual interest claim being made in each bankruptcy notice. It is not necessary in all situations to do an arithmetic calculation or to compute mathematically, and the reference to “details of calculation”, whilst normally envisaging such a calculation or computation, do not necessarily exclude the details being provided in the way provided in this case, having regard to the interest that was claimed and the way in which it was derived. In this case, the respondent adapted the form to the unusual circumstances and in my view there has been substantial compliance with the prescribed form, which is sufficient (see s 25C of the Acts Interpretation Act).

15. Substantial compliance is a matter of degree.  The court is concerned to look to the practical effect of what has been provided by way of information and the practical effect of what the form sought to achieve.  The binding declaratory order has in effect provided the determination or calculation of the interest claimed and in this way details equivalent to the calculation of the amount of interest claimed have been provided.  In the usual case one would expect to see a setting out of the principal sum and the exact rate applied over the period of time in which interest is claimed.  However, if the interest has already been determined and calculated (in this case by a court), then it seems to me that for the purposes of note 2, by referring to the declaratory orders and providing the information set out above, the equivalent to the details of the calculation are provided to the debtor.  In fact, there was probably no better or appropriate way to detail the interest claim, as both parties were bound by the 2006 Orders so far as the calculation of interest was concerned.  I do not consider it was incumbent upon the respondent to set out an explanation as to how the figure in the declaratory order of the 2006 Orders was arrived at – the declaratory order itself was a sufficient statement of the interest and how it was derived. 

16. Therefore, I consider the federal magistrate was not correct to conclude that there was a failure to comply with the prescribed form.  In my view, there was substantial compliance with the form and on this preliminary basis the appeal should be dismissed. 

17. As detailed argument has been presented to me on the remaining issue, whilst it is unnecessary for me to do so, it is convenient to nevertheless consider and determine that issue.  I observe that this question must be considered on the assumption that substantial compliance has not been achieved, for if it had, then there would be no relevant defect or irregularity.

18. If then the requirement as alleged by the appellant was made essential by the Act, there being no substantial compliance, failure to comply will result in the invalidity of the Notice.

19. In determining what is an essential requirement one is guided by the High Court in Adams v Lambert (2006) 225 ALR 396 at [25]-[26]:

    In some cases the answer to that question may be easy.  In others, a difficult question of judgment may be involved.  The matter for judgment was identified by this court in Kleinwort Benson [165 CLR 71] at 79-81.  In that case, the majority contrasted the concept of a formal defect or irregularity with a defect or irregularity that renders a bankruptcy notice a nullity that cannot be saved by s 306.  To describe a defect as merely formal, or to describe a notice as a nullity, is, of course, to state a conclusion, rather than the reason for reaching that conclusion.  Even so, it is necessary to identify the question that arises for judgment.  The majority, referring to James [v FCT (1955) 93 CLR 631] at 644, and Pillai v Comptroller of Income Tax [1970] AC 1124 at 1135, summarised the exclusionary aspect of the meaning of “a formal defect or an irregularity” by saying [at 79]:

    The authorities show that a bankruptcy notice is a nullity if it fails to meet a requirement made essential by the Act, or if it could reasonably mislead a debtor as to what is necessary to comply with the notice.

    The question of construction raised by the words “a formal defect or an irregularity” is one to be decided by reading s 306 in the context of the whole Act, informed by the general purpose of the legislation, and the particular purpose of the provisions relating to bankruptcy notices. It is similar to the question that, in former times, would be explained by asking whether a statutory requirement was mandatory or directory.  In Project Blue Sky Inc v Australian Broadcasting Authority [(1998) 194 CLR 355 at 390-391] it was said: 

    A better test ... is to ask whether it was a purpose of the legislation that an act done in breach of [a] provision should be invalid ... In determining the question of purpose, regard must be had to “the language of the relevant provision and the scope and object of the whole statute.”

1. The High Court then considered whether the defect constituted a breach of an essential requirement of the Act (at [28]-[30]) (footnotes omitted):

   The other exclusionary aspect of the expression “a formal defect or an irregularity” in s 306 was said to consist in a failure to meet a requirement made essential by the Act. Here again, the word “essential”, in its application in a particular case, involves a conclusion. If a requirement is made essential by the Act, then a failure to meet that requirement is not a formal defect or an irregularity within the meaning of s 306. Whether a requirement is made essential is to be decided by a process of statutory construction undertaken in the manner described above. The majority in Lewis [109 FCR 33] regarded the error in that case as involving a failure to meet a requirement made essential by the Act.

   To describe an error or a deficiency in a bankruptcy notice as involving a failure to meet a requirement made essential by the Act is to state a conclusion reached after a consideration of the legislative purpose and an evaluation of the significance or importance of the error or deficiency in the circumstances of the case. That question is not answered by observing that there has been a failure to meet a requirement. In this respect, the majority in Lewis placed undue emphasis on the imperative terms of the Act and Regulations. If there were no failure to meet a requirement, there would be no defect or irregularity. Furthermore, as noted earlier, the fact that the requirement is expressed by the use of the term “must” is not conclusive. How otherwise might a requirement as to form be expressed?

   The misdescription of the relevant section of the District Court Act was not capable of misleading the respondent as to what he had to do to comply with the notice. This is not a matter of dispute. The question is whether the misdescription involved a failure to meet a requirement made essential by the Act. On the true construction of the Act, is it essential that there be no misdescription of the relevant section? Is it the purpose of the legislation that any slip, such as giving a reference to the statutory provision governing pre-judgment interest when what is intended is a reference to the provision governing post-judgment interest, should invalidate the notice? Is this so no matter how clear it might be from other parts of the notice that the claim is for post-judgment interest?

2. The High Court then decided that the defect fell within the scope of s 306 of the Act (at [31]):

   Section 306, in its application to bankruptcy notices, makes it plain that some instances of non-compliance with the requirements as to the form of a notice will not invalidate the notice. The practical significance of an error or deficiency could vary according to the circumstances of each particular case. Errors or deficiencies in compliance with requirements as to form may involve questions of degree as well as of kind. At the same time, the decision in Kleinwort Benson shows that an error may be covered by s 306 even though it involves a substantial misstatement of an amount of money. It was essential that the bankruptcy notice state the amount claimed. Was it essential that the amount be correct? Section 41(5) made it clear that an overstatement, even a large overstatement, would not necessarily invalidate the notice. This court concluded that it was not the legislative purpose that a substantial understatement should necessarily invalidate the notice. That is to say, accurately stating the amount of interest owing was not a matter of such importance that error necessarily resulted in invalidity. In the present case, overstatement or understatement of the amount of post-judgment interest owing would not necessarily have invalidated the notice. That is part of the context in which legislative purpose is to be considered in deciding whether the reference to s 83A rather than s 85 was fatal.

3. The High Court found that the mistake in the bankruptcy notice was not a breach of an essential requirement of the Act and that s 306 applied to remedy the default (at [32]-[34]):

   In Lewis [at [95]], Gyles J accurately identified the question as whether correct completion of the form prescribed by the regulations in every respect is a requirement made essential by the Act. Bearing in mind that, in the present case, the error could not have misled the respondent as to what it was necessary to do in order to comply with the requirements of the notice, it is difficult to understand how, consistently with Kleinwort Benson, the respondent could succeed without an affirmative answer to that question.  In their dissenting reasons in Lewis, Lee J and Gyles J both gave a detailed account of the 1996 amendments to the Act and Regulations. It is unnecessary to repeat what they said in that respect. Lee J concluded [at [93]]:

   Properly construed, the Act and Regulations do not express an intention to create a new regime of strict compliance imposed on a judgment creditor issuing a bankruptcy notice. The tenor of the Act and Regulations is not consistent with that conclusion. An attempt has been made to recast the process of issue of a bankruptcy notice in terms more understandable to a judgment debtor, but the essential requirements of a bankruptcy notice remain as they have been stated by bankruptcy legislation over many years.

   Lee J also said [at [97]]:

   It cannot be correct that amendments to the Act that left undisturbed s 41(5) and (6) which state that a notice that demands payment of a sum that is unjustified or excessive is only invalid if a debtor gives notice within a prescribed period, introduced a new regime in respect of bankruptcy notices under which a judgment debtor could have such a notice set aside where the amount claimed is due in fact and there is no prospect that the debtor could be misled as to the steps to be taken to comply with the notice. The amending Act could not have contemplated that a mistaken citation of the source of entitlement to claim interest would be a substantive defect or irregularity in the notice so as to exclude the operation of s 306 of the Act.

   That view of the legislative purpose is persuasive.  The effect of the majority view in Lewis is to attribute to the legislature an overwhelming preference for form over substance. That should not be done. Given that s 306 relieves against the invalidating consequences of some mistakes in the preparation of bankruptcy notices, the mistake that was made in this case falls within its terms.

4. Before me, the appellant contended that the calculation of interest requirement is made essential by the Act because:

   ·the purpose of the requirement is to enable the debtor to verify that the amount claimed is in fact due;

   ·the information required to be provided (namely an interest calculation) is of far greater importance than the requirement under consideration in Adams 225 ALR 396 (to give a precise identification of the provision under which interest is claimed);

   ·in the usual case, the omission has the potential to “reasonably mislead a debtor as to what is necessary to comply with the notice” – in the event of an overstatement, the debtor is entitled to pay the actual amount of the debt and not the overstated amount;

   ·in the usual case the omission has the potential to prejudice the debtor’s ability to exercise rights under s 41(5) – in the event of an overstatement, a notice of overstatement must give sufficient information for the creditor to identify what is said to be alleged misstatement.

5. Each of the above submissions is presented in the abstract and without consideration of the basis of the claim for interest in the Notice. I do not consider it helpful to compare and contrast different types of information that may be included in a notice, and attribute to them lessor or greater importance. The task I have is to consider the legislative purpose of the Act and make “an evaluation of the significance or importance of the error or deficiency in the circumstances of the case”. Assuming that the Notice does not comply (substantially or otherwise) with the requirement to give details of the calculation of the amount of interest, or fails to specify the actual interest rates over the relevant period, in my view it is not an essential requirement of the Act that such details be provided having regard to the following particular circumstances of this case:

   ·there is and can be no dispute about the amount of interest claimed,

   ·an order of the Supreme Court of Victoria binding on the debtor has determined (and calculated) the amount of interest claimed,

   ·the Notice accurately sets out the basis of the claim for interest, namely pursuant to the Supreme Court Act, and has been determined (and calculated) by the Supreme Court of Victoria in the 2006 Orders, and

   ·there is (and can be) no suggestion that any interest is claimed in the Notice itself otherwise than as set out therein. 

6. I cannot envisage that the legislative purpose of the Act would be served by concluding that the failure to adhere to the form in the way alleged by the appellant would lead to the Notice being a nullity. It would be a classic situation of preferring form over substance to conclude that the Notice was a nullity. The whole purpose of the essential requirements of the Act is to inform the debtor clearly and simply of the basis of the debt said to be owed, and this has been achieved.

7. In any event, in my view, the calculation of interest in itself is not necessarily an essential requirement of the Act, irrespective of the circumstances of this case.

8. In Lewis 109 FCR 33, Lee J considered the amendments to the Act, which were enacted in 1996, reviewed the legislation and considered whether the calculation of interest was a necessary requirement of a bankruptcy notice. His Honour held at [70]-[73]:

   Under s 41(2) as it now stands, the Act goes no further than restating that which was formerly provided in s 41(1), namely that a bankruptcy notice be in accordance with the form prescribed. Nothing turns on the fact that the old form was prescribed by rules and the new form prescribed by regulations. On its face, therefore, the amendment has made the Act less prescriptive in operation than it was before the amendment.

   In the old notice, identification of the judgment relied upon was essential and was provided for in the form.  As a matter of practice, costs and interest could be included as part of the sum owing under the judgment provided they were sums for which the creditor could enforce payment by execution, but no further identification of the source of the obligation, other than the judgment, was necessary. (See Kleinwort Benson at 77; Re Manion; Ex parte Deputy Commissioner of Taxation (1979) 23 ALR 270 at 273.) Identification of the authority to claim costs or interest flowed from identification of the judgment or order relied upon and provision of information in respect of costs and interest was not essential for the debtor to obtain an understanding the requirements of the bankruptcy notice. It was suggested in CBC Sydney at 526 that inclusion of particulars of the calculation of interest in the bankruptcy notice was essential to the validity of the notice. It is not clear on the authorities referred to in CBC Sydney that such particulars were ever an essential requirement. It would appear that there was no greater requirement than that the amount claimed for interest be calculated accurately and recited in the notice and not be claimed as an uncalculated amount. (See Re Davis; Ex parte Deputy Commissioner of Taxation (1963) 19 ABC 100; Re McDonald; Ex parte Elder Smith Goldsbrough Mort Ltd (1978) 18 ALR 505 at 507.)

   The new notice does not require the judgment or order relied upon to be identified in the body of the notice but par 2 of the substantive part of the notice directed to the debtor states that a copy of the judgment or order relied upon by the creditor is attached. It may be said, therefore, that the attachment referred to now performs the essential requirement of the old notice that there be identification of the judgment or order relied upon. It can be seen that if a notice does not recite in the body thereof, particulars of the judgment or order relied upon, it may be necessary to provide a copy of the relevant judgment or order for the debtor to understand the requirements of the notice.  (See Haros v National Australia Bank Ltd (unreported, Federal Court, Ryan J, No 1391 of 1997, 24 November 1997).)  However, where a creditor is instructed by a note endorsed on the new notice to attach other documents that relate to matters of costs and interest, it does not follow that such an endorsement expresses the intention of Parliament that provision of that material become an essential requirement of the notice.

   Furthermore, the only document required to be lodged with the Official Receiver pursuant to reg 4.01, other than the draft bankruptcy notice and additional copies thereof, is the sealed or certified copy of the judgment or order. The Regulations do not require the person applying for the issue of a bankruptcy notice to lodge with the Official Receiver a certificate of the taxed costs or a document showing how interest was calculated if the draft bankruptcy notice includes a claim for costs or interest. As noted earlier, the form of bankruptcy notice in force before the amending Act was enacted did not refer to external documents. As noted above, reg 4.01 does not require more than one sealed or certified copy of the relevant judgment or order be lodged with the Official Receiver and is silent on whether the Official Receiver retains that document or returns it to the party seeking the issue of a bankruptcy notice. Paragraph 2 of the new notice, which seems to place greater reliance on its substance than form, states that a “copy” of the judgment or order relied upon is “attached” and does not state that the “attached” document is a sealed or certified copy of the judgment or order. (See St George Bank Ltd v Klintworth (1998) 86 FCR 240 at 242).

   (Emphasis added)

9. Justice Gyles agreed with the views of Lee J, and made additional comments at [113]:

   It is suggested that the 1996 amendments can be construed by reference to the new regulations. I do not agree. The regulations do not control the construction of the Act in any way. The 1996 amendments to the Act itself have nothing new (or relevant) to say concerning the required content of bankruptcy notices. As I have said, the only material change to the Act was to make the position less, rather than more, prescriptive than previously. The circumstance that the form now provides for much more information and is more complicated than hitherto would tend against a conclusion that the correctness and completeness of all information is a statutory requisite in the Kleinwort Benson sense. The varying nature and importance of the contents of the form which appears from the analysis by Lee J supports this conclusion. Delegated legislation is, of course, binding. That proposition is of no assistance in deciding whether strict compliance with a form prescribed by delegated legislation is made essential by the Act within the meaning of the majority judgment in Kleinwort Benson. Consideration of what was said by the majority at 76 of Kleinwort Benson shows that the phrase “made essential by the Act” in this context means what it says, and does not encompass the effect of a form prescribed by the executive government.

10. The High Court of Australia in Adams 225 ALR 396 considered all judgments of the court in Lewis 109 FCR 33. After considering the minority decisions of Gyles and Lee JJ, the court approved their approach and applied the legislative purpose test applied by Gyles and Lee JJ (at [33] to [34]). I do not conclude, however, that the High Court necessarily approved the comments of Lee J concerning Re Bankruptcy Act 1966; Ex parte Commercial Banking Co of Sydney Ltd (1979) 23 ALR 522. Further, his comments in this regard were made concerning the old notice prescribed pursuant to s 41(2) of the Act as it was prior to the amendments made in 1996 where there was no requirement in the same terms as note 2 of the new form of the bankruptcy notice, although reflections were made by his Honour on the new notice which impacts upon his views as to what would be expected by the new notice.

11. Nevertheless, the observations of Lee J concerning the requirement for a calculation of interest seem to be borne out by my review of the authorities to which he referred in his judgment.  Even CBC Sydney 23 ALR 522 does not necessarily suggest that the inclusion of particulars of the calculation of interest was essential. In my view, the authorities referred to, including CBC Sydney 23 ALR 522, do not enable one to conclude that it was ever an essential requirement to include particulars of the calculation of interest in a bankruptcy notice. Undoubtedly the authorities indicate that the calculation must be made accurately, and that the period in which interest is claimed and the amount of interest must be specified in the notice, but they go no further.

12. In light then of the approach to the legislative purpose adopted by Lee and Gyles JJ, as approved by the High Court, in my view nothing in the Act indicates that now the calculation itself must be included in the Notice. In fact, if it were not a requirement prior to the 1996 amendment, the tendency would be towards the view that providing such information is not now a statutory requirement in the Kleinwort Benson 165 CLR 71 or Adams 225 ALR 396 sense, if one adopts the approach of Gyles J as referred to above.

13. In addition to the above authorities, two other cases need to be mentioned.

14. In Re Spurr; Ex parte Werner (1991) 31 FCR 236, Heerey J considered the validity of a bankruptcy notice which stated the amount of interest due but not the rate of interest applied. The notice also contained inconsistencies as to whether payment was to be made by the debtor in 14 or 21 days. His Honour dismissed the creditors’ petition and held that the notice was invalid by reason of the inconsistencies in the notice. As to the calculation of interest, his Honour held at 237:

    It seems to me that as long as the bankruptcy notice correctly states the amount of interest which is in fact due, the notice is valid and the debtor fails to pay that amount at his peril.  No authority was cited which suggests there is any requirement to include in the notice all the information which would be necessary for the debtor to be able to recalculate the amount of interest to his own satisfaction.

15. The decision of Heerey J is consistent with the position observed by Lee J and the view I have arrived at after a review of the authorities.  The position adopted by his Honour is, in my view, currently the correct one.

16. In Bendigo Bank Ltd v Gard (1999) 92 FCR 560, North J in an ex tempore decision considered an appeal from a decision of the registrar regarding the failure to make a sequestration order for non-compliance with a bankruptcy notice, by reason that the notice was defective in that it did not include an interest calculation. His Honour considered the decision of Kenny J in American Express International Inc v Held (1999) 87 FCR 583 where her Honour found that failure to attach a copy of the judgment to the bankruptcy notice was a breach of an essential requirement of the Act. At [11], North J held that even though there was no precise analogy between the purpose for which the copy judgment is required by the form, and the purpose for which the interest calculation is required, the interest calculation was nevertheless an essential requirement of the Act. His Honour found that the bankruptcy notice contained a substantive defect by reason of failing to contain an interest calculation.

1. Justice North did not have the advantage of the reasoning in the subsequent cases referred to in this judgment, particularly Adams 225 ALR 396; Lewis 109 FCR 33 and Snelgrove 157 FCR 313. With the benefit of the reasoning in these decisions, North J would have needed to have undertaken an analysis of the failure to comply with note 2 of the Schedule to the form in the context of the Act to determine whether it was an essential requirement. Merely equating such a failure to a failure to attach a copy of the judgment to the bankruptcy notice without the further analysis now required, would not be sufficient. In the circumstances, I do not regard the decision of North J as one I should follow. In any event, the circumstances of the case before me are quite different from those confronting his Honour, for he did not have a binding determination of the Supreme Court of Victoria declaring the amount of interest payable which was the basis of the interest claimed in the bankruptcy notice.

2. In view of the above reasons I would conclude that even if the Notice did not substantially comply with the form, then in the circumstances of this case, such compliance was not an essential requirement of the Act. No other issue arises in this proceeding as to the operation of s 306(1) of the Act.

3. In view of the above, the appeal is dismissed with costs.

I certify that the preceding forty-four (44) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Middleton.

Associate:

Dated:        14 September 2007

Counsel for the Appellant:	P Fary
Solicitor for the Appellant:	Comlaw
Counsel for the Respondent:	M Biviano
Solicitor for the Respondent:	Erica Strugnell & Associates
Date of Hearing:	30 May 2007
Date of Judgment:	14 September 2007