Kyriackou v Shield Mercantile; Pty Ltd
[2003] FMCA 421
•24 September 2003
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| KYRIACKOU v SHIELD MERCANTILE PTY LTD | [2003] FMCA 421 |
| BANKRUPTCY – Bankruptcy Notice – whether defect - whether omission of notes and the words “the creditor” from notice renders it invalid – whether strict compliance with form required – whether words omitted are essential requirements under the Bankruptcy Act 1966 – whether s.25C of the Acts Interpretation Act applies – substantial compliance – application of s.306 of Bankruptcy Act 1966. |
Bankruptcy Act 1966, s.41(2), 306(1)
Bankruptcy Regulations, Reg 4.02
Acts Interpretation Act 1901, s.25C
Kleinwort Benson Australia Ltd v Crowl (1988) 165 CLR 71
The Australian Steel Company (Operations) P/L v Lewis (2000) 109 FCR 33
Conway v Jackson (2001) 107 FCR 201 (FC)
Slan v Mitry [2003] FMCA 237 (6 June 2003)
McWilliam v Jackson (2000) FCA 175
Northam v Commonwealth Bank of Australia (1999) FCA 544 (5 May 1999)
Marshall v General Motors Acceptance Corp Australia (2003) FCAFC 45
| Applicant: | MICHAEL KYRIACKOU |
| Respondent: | SHIELD MERCANTILE PTY LTD (ABN 48 082 737 442) |
| File No: | MZ 393 of 2003 |
| Delivered on: | 24 September 2003 |
| Delivered at: | Melbourne |
| Hearing Date: | 8 September 2003 |
| Judgment of: | McInnis FM |
REPRESENTATION
| Counsel for the Applicant: | Mr T Ellis |
| Solicitors for the Applicant: | Comlaw |
| Counsel for the Respondent: | Mr J Arthur |
| Solicitors for the Respondent: | John Finlayson Lawyers |
| Solicitor for the Trustee: | Mr E Fice |
| Solicitors for the Trustee: | Charles Fice |
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT MELBOURNE |
MZ 393 of 2003
| MICHAEL KYRIACKOU |
Applicant
And
| SHIELD MERCANTILE PTY LTD (ABN 48 082 737 442) |
Respondent
REASONS FOR JUDGMENT
This is an application for review of a sequestration order made by
a Registrar on 26 June 2003.
A preliminary issue has been raised by the debtor who is the Applicant in the application for review concerning the validity of the Bankruptcy Notice relied upon by the creditor in the petition.
It was submitted that the Bankruptcy Notice is invalid if it fails to comply with a requirement made essential by the Bankruptcy Act 1966 (the Act) or if it may mislead a debtor as to what is necessary to comply with the notice (See Kleinwort Benson Australia Ltd v Crowl (1988) 165 CLR 71 at 80).
It was submitted that in either case it would be sufficient to render the Bankruptcy Notice invalid. I was referred to The Australian Steel Company (Operations) Pty Ltd v Lewis (2000) 109 FCR 33 at 43-4 (Australian Steel). Reliance was placed upon s.41(2) of the Act which provides that –
“The notice must be in accordance with the form prescribed by the regulations.”
The prescribed form of bankruptcy notice for the purpose of s.41(2) is found in Form 1 of the Regulations (see Regulation 4.02 Bankruptcy Regulations). It was submitted that the Court requires strict compliance with the legislative requirements for a Bankruptcy Notice. The reason for strict compliance is that the failure to comply with a Bankruptcy Notice is an act of bankruptcy which has a profound effect on the debtor and affects the rights and obligations of others (see Australian Steel at p.41 and see Conway v Jackson (2001) 107 FCR 201 (FC) at 207).
The complaint in relation to the Bankruptcy Notice in the present application is that it differs in form from the prescribed form as a result of the absence of the note which appears before the name of the debtor, the omission of the notes which appear on the prescribed form after paragraphs 3 and 4 and the words of definition “the creditor” which should appear after the Applicant’s name in paragraph 1. It was submitted that each of the requirements and in particular the name in paragraph 1 to include the definition “the creditor” are requirements made essential by the Act. The absence of these requirements invalidates the Bankruptcy Notice. As a consequence if the Bankruptcy Notice is invalid there is no act of bankruptcy upon which the creditor may rely with the result that the sequestration order should be set aside and the petition dismissed.
It was further submitted relying upon the authority of Australian Steel that the omission of the notes at the end of paragraphs 3 and 4 of the prescribed form and the words “the creditor” mean that the Bankruptcy Notice is not in accordance with the prescribed form and accordingly is invalid. The notes referred to are as follows:-
“[NOTE: Words appearing below in italics are for guidance in the completion of this Notice, and are not to be reproduced in the Notice.]
[NOTE: The number of days to be inserted is 21 or, if an order has been made under subparagraph 40(1)(g)(ii) of the Act, the number of days constituting the time fixed by the order.]
[NOTE: The address must be within Australia.]”
In referring to the decision of Australian Steel reference was made to the majority decision and in particular the discussion under the heading “Determining whether a requirement is made essential” and paragraphs 39 to 43 (inclusive) which appear under that heading. Reliance was placed on a decision of the Federal Magistrates Court in Slan v Mitry [2003] FMCA 237 (6 June 2003) where at paragraph 10 the Court states,
“The effect of Marshall is to restore the very strict interpretation of the use of the form, of the requirements of the Act and of the High Court's decision in Kleinwort Benson which had been laid down in Australian Steel.”
The Court in Slan’s case had quoted the decision of North J in Marshall v General Motors Acceptance Corporation Australia (2003) FCAFC 45. In particular reference was made to paragraph 79 of the judgment of North J where His Honour recites what he describes as the essence of the reasoning of the majority in Australian Steel. North J in reciting the relevant paragraphs from Australian Steel added emphasis to the following passage from paragraph 42 of that judgment where the Court in Australian Steel had stated:-
“Having regard to the purpose behind the requirement that the provision under which interest is being claimed, and correctly claimed, be included in the notice, that requirement is made essential by the Act, and a notice issued in breach of the requirement will be invalid.”
In the present case it is claimed that the Court should follow the decision of the Federal Magistrates Court in the Slan case which in turn it is submitted correctly interpreted the decision of Australian Steel referred to by North J in the Marshall decision.
During the course of written submissions reference was made to specific passages from Australian Steel dealing with the issue of whether a requirement is made essential and counsel relied upon paragraph 39 which provides as follows:-
“Kleinwort Benson decides that a bankruptcy notice that does not contain a requirement made essential by the Act is not a valid notice. In Project Blue Sky Inc v Australian Broadcasting Authority (1998) 194 CLR 355 at 390-391 McHugh, Gummow, Kirby and Hayne JJ, after discarding the elusive distinction between director and mandatory requirements as a test of validity, said:
‘A better test for determining the issue of validity is to ask whether it was a purpose of the legislation that an act done in breach of the 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 purpose of the whole statute’.’
In the light of this passage, it can be seen that a requirement is ‘made essential’ within the Kleinwort Benson principle when the inquiry as to purpose discloses the intention that an act done in breach should be invalid.’
It was submitted that in reliance upon the authority of Australian Steel the omission of the notes at the end of paragraphs 3 and 4 of the prescribed form and the words ‘the creditor” mean that the bankruptcy notice is not in accordance with the prescribed form and is accordingly invalid. The purpose it was submitted behind the requirement that the applicant creditor be defined is so the notice would make sense. Without the definition “the creditor” it was submitted that the notice simply does not make sense. The absence of the words “the creditor” after the name of the applicant could reasonably mislead a debtor as to what he or she must do to comply with the notice. The reference to “creditor” thereafter in the notice is not clear and is misleading. It was submitted that Regulation 4.02(3) and s.25C of the Acts Interpretation Act 1901 would not save the notice. These conclusions were supported not only by the recent decision of the Federal Magistrates Court in Slan v Mitry but also by Wilcox J in McWilliam v Jackson (2000) FCA 175 where it was held that the identity of the creditor is a particularly important matter.
In reply counsel for the creditor submitted that in the present case the omissions which had been highlighted by the debtor do not constitute a defect. The identity of the creditor is made clear by the bankruptcy notice when read in conjunction with the attached certified extract of the relevant judgment and that this case can be distinguished from the case of Slan as at least one party has been identified leaving it open to conclude the name of the other party. That is, “the debtor” has been identified as “Michael Kyriackou” who it is noted is referred to as the defendant in the certified extract of judgment entered in the Magistrates Court at Melbourne on 16 January 2003 and who is identified as being the person who is to pay the creditor the claim under the default order.
Reference was further made to the past history between the parties and it was submitted that it would be clear to the debtor receiving the bankruptcy notice as to the identity of the creditor. Reference was made in particular to an affidavit by the debtor sworn 11 July 2003 where he refers to an application to set aside a default order which was successful on 19 September 2002 resulting in an order being made on 14 June 2002 being set aside. Otherwise reference is made to the chronology of events leading to the default order on 16 January 2003.
Reasoning
I accept in the present case that when considering issues of this kind it is relevant to note as a starting point that the prescribed form of the bankruptcy notice for the purpose of s.41(2) is found in Form 1 prescribed by Regulation 4.02 of the Bankruptcy Regulations.
I otherwise accept that the failure to comply with the requirement made essential by the Act will invalidate the bankruptcy notice and cannot be cured under s.306(1) whether it is regarded as misleading or not (see Kleinwort Benson Australia Ltd v Crowl (1988) 165 CLR 71 at 79 and Australian Steel).
In the present case however I do not accept that it is a correct interpretation to find that the decision of North J in Marshall necessarily leads to the conclusion that there must be strict interpretation of the use of the form. In any event whilst I accept that s.41(2) provides that the notice must be in accordance with the form prescribed by the Regulations it does not follow that information on the form which is excluded will necessarily defeat that notice.
In the present case I am satisfied that the exclusion of the notes would not invalidate the bankruptcy notice. In passing I observed that one of the notes in the bankruptcy notice provides that,"Words appearing below in italics are for guidance in the completion of this notice and are not to be reproduced in the notice”. That particular note has been, in my view, properly omitted from the bankruptcy notice under review even though it does not appear in italics. Likewise the other notes which are the subject of the current complaint are not in italics and have not been included. To include those notes would add nothing to the bankruptcy notice and in my view it could not be regarded as a matter of law that inclusion of these notes constitutes strict compliance with the bankruptcy notice or is required. What is required is that the form be in the form set out in Form 1 of the Regulations but it is still for the Court to determine what might be regarded as the requirements made essential by the Act. It is inconceivable to me that the notes which are provided in the form for guidance should somehow be rendered as a requirement made essential by the Act when they do nothing more than provide guidance to the person completing the prescribed form. I note that similar considerations were before Weinberg J in the matter of Northam v Commonwealth Bank of Australia (1999) FCA 544 (5 May 1999) where His Honour in dealing with failure to comply with the form found no merit in the submissions whatsoever. Whilst it is true that that decision pre-dated the Australian Steel decision, the comments in my view remain apposite to the present case.
The omission of the words “the creditor” may in certain circumstances be of more substance particularly if there is a similarity in names and a degree of confusion. However, to describe the parties by their commonly known titles of creditor and debtor simply aids in the description of the parties and in my view the assistance provided by that reference is not a matter which I would regard as a requirement made essential by the Act. In the present case the name of the debtor is clear, the name of the creditor is likewise clear and both are identical to the respective plaintiff and defendant in the certified extract properly attached to the bankruptcy notice. In the present case unlike Slan there is no confusion about the description and significantly unlike the case of Slan it is not suggested the certificate of judgment is incorrect. In my view there is no defect of a kind which would warrant or justify the application of s.306. If the defect could be characterised as a defect of the nature that would otherwise attract the attention of s.306 then
I would not hesitate to find that it is only a formal defect or an irregularity and I cannot see any basis upon which this Court would find that substantial injustice has been caused by the defect or irregularity.
I have noted the decision of Wilcox J in McWilliam v Jackson. In my view that case is distinguishable from the present case. In McWIlliam it was clear that there was a significant difficulty in identifying the name and address of the creditor. Whilst I accept that identification of the relevant creditor as stated by Wilcox J is “of central importance to a proper understanding of a bankruptcy notice and obligations of the addressee in respect of the notice” (see paragraph 19), I do not accept that in the present case any confusion could arise where there is only one creditor accurately identified in the certificate of judgment and having regard to the history of the matter well known to the debtor. In the case of McWilliam there were other defendants in the Supreme Court action and there was indeed a real risk that the debtor may have been misled into thinking that those other persons were amongst the other referred to in the Bankruptcy Notice. The identification of the creditor in that case was left, as Wilcox J described it, as “a matter of doubt” (see paragraph 24). That is not the case in the facts surrounding the present application and accordingly the decision of Wilcox J in McWilliam v Jackson may be distinguished from the present case. Unlike the decision in the McWilliam case I am further satisfied to the extent that it is required that there has been substantial compliance in the present case of a kind which would attract the benefit of s.25C of the Acts Interpretation Act.
As indicated however substantial compliance with the form, that is the bankruptcy notice, is required for good reason. The significant debate in the past has often arisen in relation to claims for interest and the form in current use seeks to avoid any difficulties which may otherwise arise when dealing with that important issue.
In the present case the absence of the notes and the absence of the words “the creditor” in my view are no more than minor omissions and cannot be regarded as requirements made essential under the Act. They are merely aids for the assistance of persons completing the prescribed form and to the extent that my conclusion differs from the conclusion of the Court in the matter of Slan v Mitry then with due respect I decline to follow that decision. I am not satisfied that the decision of North J in Marshall necessarily leads to a conclusion that a very strict interpretation of the use of the form is required. In my view whilst the use of the form is required the contents of that form are still a matter for the Court to consider and to consider in the light of whether or not the contents of that form are matters which could properly be said as being requirements made essential by the Act.
I accept for the present purposes that certain information on the form used by a creditor may well be significant. It is not the use of the form itself per se which is made essential by the Act, but rather the important information contained in the prescribed form. In the present case all the important and critical information has been set out in the form with the only omission of any significance perhaps being the use of the words “the creditor”.
In circumstances where the “debtor” is identified and the parties are accurately noted both in the bankruptcy notice and the certified extract of judgment, it is my view that the bankruptcy notice is valid and the omissions referred to are not of a kind which would otherwise invalidate the notice.
It was agreed that I should further consider the petition after dealing with this preliminary issue.
I certify that the preceding twenty-four (24) paragraphs are a true copy of the reasons for judgment of McInnis FM
Associate:
Date: 24 September 2003
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