KAY v COEN

[2016] FCCA 2118

FEDERAL CIRCUIT COURT OF AUSTRALIA

KAY v COEN [2016] FCCA 2118

Catchwords:
BANKRUPTCY – Application to set aside a bankruptcy notice – whether the bankruptcy notice was properly served – whether an erroneous identification of the interest and repayments gave rise to a material deficiency in the bankruptcy notice – application dismissed.

Legislation:

Bankruptcy Act 1966 (Cth), ss.27, 41, 306.

Civil Procedure Act 2005 (NSW)
Uniform Civil Procedure Rules 2005

Cases cited:
Adams v Lambert (2006) 228 CLR 409
The Australian Steel Company (Operations) Pty Ltd v Lewis [2000] FCA 1915
Kleinwort Benson Australia Ltd v Crowl (1988) 165 CLR 71

Applicant: FIONA KAY

Respondent: JULIE COEN

File Number: SYG 972 of 2016

Judgment of: Judge Street

Hearing date: 16 August 2016

Date of Last Submission: 16 August 2016

Delivered at: Sydney

Delivered on: 16 August 2016

REPRESENTATION

Solicitors for the Applicant: Mr A Kernaghan
Kernaghan & Associates

Counsel for the Respondent: Mr M Kalyk

Solicitors for the Respondent: Paladin Law

ORDERS

1. The application to have the bankruptcy notice set aside is dismissed.

2. The Applicant pay the costs of the Respondent fixed in the amount of $5,000.00.

FEDERAL CIRCUIT COURT
OF AUSTRALIA
AT SYDNEY

SYG 972 of 2016

FIONA KAY

Applicant

And

JULIE COEN

Respondent

REASONS FOR JUDGMENT

1. This is an application within the Court’s jurisdiction under s.27 of the Bankruptcy Act 1966 (Cth) (“the Act”) to set aside a bankruptcy notice dated 3 February 2016, served on the applicant. The basis on which the bankruptcy notice is to be set aside is advanced on the ground that it is misleading as there is a misstatement in relation to the interest in the amounts that have been paid. 

2. On the evidence before the Court, it is apparent that the bankruptcy notice does not articulate the amount of interest accruing on a judgment entered in the Local Court on 6 February 2012 for the sum of $30,233.46. That judgment carried interest in accordance with the Civil Procedure Act 2005 (NSW) and Uniform Civil Procedure Rules 2005. The bankruptcy notice demanded payment of an amount of $15,916.61. 

3. I take into account s.306 of the Act and the principles identified in Kleinwort Benson Australia Ltd v Crowl (1988) 165 CLR 71 at 77; The Australian Steel Company (Operations) Pty Ltd v Lewis [2000] FCA 1915 per Lee J at 66, 68, 70; Adams v Lambert (2006) 228 CLR 409 at [16-21], [31-34].

4. Whilst the calculations in relation to interest and repayments were inaccurate, the correct amount identified as outstanding, taking into account interest, should be $15,960.42. 

5. The bankruptcy notice was in the prescribed form and met the requirements of s.41 of the Act. There was no material error in the amount outstanding in respect of the judgment debt. The absence of the reference to interest did not give rise to circumstances in which the applicant would have been misled that interest was not accruing on the judgment that had been entered in 2012. A reasonable person would know that interest on the judgment debt was payable and the error on the interest entered in the bankruptcy notice could not reasonably mislead the debtor. The correct completion of the form of the bankruptcy notice as to interest was not an essential requirement.

6. I do not accept that the bankruptcy notice was misleading in relation to the amount demanded from the applicant. The error in relation to the amount as a total was, in fact, minor, and in the applicant’s favour and there was no breach of an essential requirement of the Act. The erroneous identification of the interest and repayments in circumstances where the judgment had been entered in 2012 was not such as to give rise to any material deficiency in the bankruptcy notice. I find the amount claimed was owing under the judgment taking into account repayments and interest. The quantum demanded was in substance correct. I find the bankruptcy notice was valid.

7. On the construction of the bankruptcy notice as a whole, no substantial injustice has been caused by the error. The error is in this case an irregularity to which s.306 of the Act applies.

8. The bankruptcy notice was validly served. No contention to the contrary is maintained. A ledger was tendered by the respondent supporting the calculations made in relation to the amount outstanding.  This is not a case where there is any counter-claim, set-off or close demand. For the reasons I have given, there was a valid bankruptcy notice and the application that the bankruptcy notice be set aside is dismissed.

I certify that the preceding eight (8) paragraphs are a true copy of the reasons for judgment of Judge Street

Date: 13 September 2016