JD and NK Webster Pty Ltd v FLEMING
[2005] FMCA 566
•3 May 2005
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| JD & NK WEBSTER PTY LTD v FLEMING | [2005] FMCA 566 |
| BANKRUPTCY – Creditors petition – failure of bankruptcy notice to properly identify creditor. |
| Applicant: | JD & NK WEBSTER PTY LTD TRADING AS JOHN D WEBSTER (ABN 55 070 924 417) |
| Respondent: | IAN FLEMING |
| File No: | BRG 571 of 2004 |
| Delivered on: | 3 May 2005 |
| Delivered at: | Brisbane |
| Hearing date: | By written submission |
| Judgment of: | Jarrett FM |
REPRESENTATION
| Solicitors for the Applicant: | Thynne & Macartney |
| No appearance for the Respondent |
ORDERS
The creditor’s petition filed on 5 October, 2004 is dismissed.
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT BRISBANE |
BRG 571 of 2004
| JD & NK WEBSTER PTY LTD TRADING AS JOHN D WEBSTER (ABN 55 070 924 417) |
Applicant
And
| IAN FLEMING |
Respondent
REASONS FOR JUDGMENT
This is a creditors petition referred to me for hearing pursuant to section 104(4) of the Federal Magistrates Act1999.
On 28 April, 2004 the District Court of Queensland at Bundaberg ordered that the respondent pay the amount of $7,742.80 to "John D. Webster ABN 55 070 924 417".
On 19 August, 2004 “JD & NK Webster Pty Ltd trading as John D. Webster (ABN 55 070 924 417)” caused a bankruptcy notice to issue against the respondent. The debt claimed in the notice was the judgment debt obtained in the District Court of Queensland at Bundaberg. Attached to the bankruptcy notice was a copy of the judgment said to constitute the debt. The bankruptcy notice was served upon the respondent on 2 September, 2004.
On 5 October, 2004 “JD & NK Webster Pty Ltd trading as John D. Webster (ABN 55 070 924 417)” presented a creditor’s petition against the respondent. The act of bankruptcy alleged in the petition was the respondent’s failure to comply with the bankruptcy notice served on him on 2 September, 2004.
The creditor’s petition came before a Deputy Registrar of this Court for hearing. The respondent did not appear. In view of the difference in the name of the judgment creditor as it appears in the judgment on the one hand, and the bankruptcy notice and the petition on the other, the Deputy Registrar declined to deal with the matter and referred the creditor’s petition to a Federal Magistrate for determination.
The petitioning creditor has delivered written submissions in support of the petition. No further oral hearing was requested by the petitioning creditor. The respondent has taken no part in the proceedings.
The petitioning creditor’s case
The petitioning creditor contends that the judgment of the District Court of Queensland at Bundaberg does not properly name the petitioning creditor. It concedes that the bankruptcy notice does not follow the judgment upon which it is based. Notwithstanding that the bankruptcy notice does not follow the judgment, the petitioning creditor contends that there is no failure to comply with an essential requirement of the Bankruptcy Act1966 (“the Act”), but rather there is merely a formal defect or irregularity which, by reason of s.306 of the Act, does not invalidate the bankruptcy notice or the petition. That formal defect or irregularity is not capable, it is said, of misleading the respondent in any material way.
The law
Section 41 of the Act governs the issue of bankruptcy notices. Relevantly, it provides:
41 Bankruptcy notices
(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
…
(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;
…
As to defects and irregularities in bankruptcy notices, the relevant law is succinctly summarized by Driver FM in Shephard v Blueberry Farms of Australia (Corindi) Ltd [2001] FMCA 2 as follows:
27. It is accepted that s.41(2) of the Bankruptcy Act provides that a bankruptcy notice must be in accordance with the form prescribed by the Regulations. The relevant Regulation is Regulation 4.02. The relevant form is incorporated by Regulation 4.02 as Form 1. The requirements of a bankruptcy notice are subject to the provisions of s.25C of the Acts Interpretation Act 1901 and s.306 of the Bankruptcy Act. Section 25C of the Acts Interpretation Act applies to the format of the bankruptcy notice: Bankruptcy Regulations 4.02(2) and (3). If that section has any application to the content of a notice, it seems that application is quite limited: Australian Steel Company v Lewis (op cit) at paragraph 43. Section 306 relevantly provides that proceedings under the Bankruptcy Act are not invalidated by "a formal defect or irregularity unless the Court... is of the opinion that substantial injustice has been caused by the defect..." It has long been held that s.306 is applicable to bankruptcy notices: Kleinwort Benson Australia v Crowl (1988) 165 CLR 71 at 77. Accordingly, the respondent has correctly submitted that a bankruptcy notice will not be invalidated by a defect or irregularity if that defect or irregularity is "formal" and it does not cause substantial and irremedial injustice. A defect or irregularity will be characterised as "substantive" rather than formal if it fails to meet a requirement made "essential" by the Act or it is one which "could reasonably mislead a debtor as to what is necessary to comply with the notice": Kleinwort Benson, op cit at 79.
…
29. Even if the identified defects in the bankruptcy notice are not matters made "essential" by the Act, they would still invalidate the bankruptcy notice if they are matters which "could reasonably mislead a debtor". In that regard, it is irrelevant whether the debtor is in fact misled. The Court must apply an objective test but the Court is entitled to take into account the surrounding circumstances and should consider the position of the actual debtor: Re Crisafulli; ex parte National Commercial Banking Corporation of Australia Ltd (1985) 11 FCR 272. The essential point is that a debtor needs to understand by reading the bankruptcy notice what he or she must do to comply with its requirements and thus avoid the consequences of an act of bankruptcy.
Discussion
The basis of the petitioning creditor's case is that the creditor named in the judgment of the District Court is the same as the entity that issued the bankruptcy notice upon which the petition is founded. The petitioning creditor referred me to a number of cases in which such an issue has been considered: Re Howes; ex parte Hughes (1892) 2 QB 628, Re Crisafulli; ex parte National Commercial Banking Corporation of Australia Limited (1985) 11 FCR 272, McWilliam v Jackson (2000) 96 FCR 561 and Shephard v Blueberry Farms of Australia (Corindi) Ltd [2001] FMCA 2.
It is important to scrutinize the core of the petitioning creditor’s case, namely that:
a)the petitioning creditor is simply misdescribed in the proceedings and judgment of the District Court; and
b)the judgment creditor named in the judgment is the same entity as the creditor that issued the bankruptcy notice.
The judgment upon which the bankruptcy notice is founded arose in proceedings commenced by the respondent in the District Court against a number of defendants. “John D. Webster (ABN 55 070 924 417)” was named as the seventh defendant in those proceedings. The relevant allegations against that defendant, as appears from the statement of claim filed in the District Court by the respondent, are:
7. At all material times to this action, the seventh defendant John Webster was:
(a) engaged in the business of conducting marine vessel survey reports for the fourth defendant;
(b) was a duly authorised servant or agent of the fourth defendant.
…
28. On 23.10.00 the seventh defendant acting in capacity as agent for the fourth defendant contacted the plaintiff and has to date conducted a number of inspections of the vessel during the period from November 2000 until June 2002.
29. These inspections related to a claim by the plaintiff lodged with fourth defendant for latent hull defects and one claim for severe hull damages following collision with rocks by the vessel.
…
43. The seventh defendant's conduct as referred to in paragraph 28 & 29 hereof was:
(a) in trade or commerce within the meaning of s 52 and s 53 of the Trade Practices Act 1974 (Cth);
(b) in connection with the promotion by any means of the use of goods and did falsely represent the particular standard, quality, value or grade of said goods by virtue of s 53 of the said Act;
(c) misleading and/or false by virtue of s 52 and/or s 53 of the said Act;
(d) in contravention of s 52 and/or s 53 and set Act;
44. That the seventh defendant knew, came to know, or should reasonably have been expected to know of the vessel defects and/or limitations for use as referred to in paragraph 17 hereof.
45. By reason of the defendant’s misleading and/or false representations or conduct in contravention of s 52 and/or s 53 (a) of the said Act, the plaintiff has suffered loss or damage.
The allegations against the seventh respondent are not clear. It is plainly alleged that he was acting for the fourth defendant (an insurer) and carried out certain surveys of the vessel which was the subject of the proceedings. There is no allegation that the survey reports (if there were any) carried any particular representation about the vessel. The allegations of misrepresentation and misleading or deceptive conduct are entirely unparticularised.
The petitioning creditor submits that the respondent, in truth, meant to sue to “JD & NK Webster Pty Ltd trading as John D. Webster (ABN 55 070 924 417)” in the District Court proceedings. The name used, “John D. Webster (ABN 55 070 924 417)”, is simply a misnomer.
I am asked to come to that conclusion because:
c)the relief sought against the seventh defendant in the proceedings is based upon ss.52 and 53 of the Trade Practices Act 1974 and therefore the plaintiff must have known that he needed to, and thought he was, suing a company;
d)it is alleged that the respondent had been told by the fourth defendant (in the District Court proceedings) and Mr John Webster, from time to time, that the work was being performed by JD & NK Webster Pty Ltd;
e)correspondence was sent to the respondent identifying JD & NK Webster Pty Ltd as the entity to perform the relevant work.
I am not satisfied, however, that I can properly infer from the above matters that the respondent intended to sue JD & NK Webster Pty Ltd and not “John D. Webster (ABN 55 070 924 417)” as he did. The petitioning creditor’s material reveals that both the relevant insurer and Mr. John Webster both referred to John D Webster as performing the relevant work from time to time: (see para 2(e) and exhibit “MAM1” to the affidavit of Mark Maskell filed on 24 November, 2004).
As named, the seventh defendant is a natural person and indeed, such an individual exists. He is a director of the petitioning creditor and the person who performs the relevant work on the part of the petitioning creditor. The addition of an ABN takes the matter nowhere because an individual can hold an Australian Business Number.
There is no evidence that any defence was ever filed by the seventh defendant in the District Court proceedings. Rather, the seventh defendant applied to the District Court for summary dismissal of the proceedings against him. The application was supported by an affidavit sworn by John Douglas Webster. In that affidavit, Mr Webster pointed out that the relevant work was carried out by JD & NK Webster Pty Ltd. The basis upon which the District Court gave judgment in favour of John D. Webster (ABN 55 070 924 417) is not revealed. There could have been many bases upon which the summary dismissal of the proceedings was founded, not least of which was that the plaintiff had sued the wrong defendant. I do not have the reasons the judgment nor am I given a summary of those reasons by the petitioning creditor's solicitors.
I am not satisfied that an Official Receiver was entitled to issue a bankruptcy notice on the application of the petitioning creditor. In my view, the petitioning creditor was not a “creditor” for the purposes of s.41(1) of the Act. The creditor entitled to apply for the issue of the bankruptcy notice was John D. Webster. He was the person sued and who obtained judgment against the respondent. There is no evidence that there was any application to substitute the seventh defendant at any stage, or any application to join the petitioning creditor to the District Court proceedings.
If that view is wrong, nonetheless I am not satisfied that the irregularity in the bankruptcy notice is a formal defect or irregularity not affecting the validity of the bankruptcy notice. The defect concerns a matter that is essential to the notice, namely the identity of the creditor.
This is not case like Re Crisafulli, Shephard or Re Hansen; ex parte Hansen (1985) 4 FCR 590. In those cases the petitioning creditor had changed its name at various stages of the proceedings. At all times, however, there was only one legal entity that could possibly have been the judgment creditor, although known by different names from time to time. In the present case, however, there are two legal entities that might possibly be the judgment creditor. There is John D. Webster the individual and there is the company. One has a judgment in his favour, the other does not but has issued a bankruptcy notice based upon the judgment. Those circumstances are entirely capable of misleading the respondent in this case, notwithstanding the matters claimed by the petitioning creditor to clarify the situation for the respondent. It is entirely conceivable that a respondent might take the view that no response to the bankruptcy notice or petition is necessary because, as the judgment plainly shows, what he owes, he owes to John D. Webster.
The creditor’s petition filed on 5 October 2004 is dismissed.
I certify that the preceding twenty-one (21) paragraphs are a true copy of the reasons for judgment of Jarrett FM
Associate: S Haysom
Date: 3 May 2005
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