Merfield, Kathleen Anne Stead v Comalco Aluminium Ltd

[1984] FCA 42

Re: KATHLEEN ANNE STEAD MERFIELD
Ex Parte: COMALCO ALUMINIUM LIMITED
No. P1615 of 1983
Bankruptcy
1 FCR 107

COURT

IN THE FEDERAL COURT OF AUSTRALIA

BANKRUPTCY DISTRICT OF THE STATE OF NEW SOUTH WALES AND THE AUSTRALIAN CAPITAL TERRITORY
Beaumont J.(1)

CATCHWORDS

Bankruptcy - Validity of bankruptcy notice - Word omitted.

Bankruptcy Act, 1966, SS.41(2)( )(II),306

James v F.C.T. (1955) 93 C.L.R. 631-CON.

Bankruptcy - Bankruptcy notice - Form and contents - Requirement to compound sum to satisfaction of judgment creditor - Omission of word "creditor" - Whether debtor could reasonably be misled - Validity of notice - Bankruptcy Act 1966 (Cth), ss 41 (2)(a)(ii) - Bankruptcy - Bankruptcy notice - Formal defects - Requirement to compound sum to satisfaction of judgment creditor - Omission of word "creditor" - Whether debtor could reasonably be misled - Validity of notice - Bankruptcy Act 1966 (Cth), s. 306.

HEARING

A bankruptcy notice required the debtor, inter alia, "to . . . compound the sum so specified to the satisfaction of the judgment" and omitted the word "creditor" after "judgment".

Held: (1) The debtor could not reasonably be misled in any substantive sense: he was informed of the requirement to compound the debt and the satisfaction of the judgment creditor was implicit in any such requirement.

James v. Federal Commissioner of Taxation (1955) 93 CLR 631, distinguished;

Re A Debtor; Ex parte The Debtor v. The Trustee of the Property of Waite (1956) 1 WLR 480 at 483;

Re Preston; Ex parte Commercial Bank of Australia Ltd (1982) 45 ALR 105 at 107-108 applied.

(2) Alternatively the omission of the word "creditor" was merely a formal defect within the Bankruptcy Act 1966 (Cth) s. 306.

Pillai v. Comptroller of Income Tax (1970) AC 1124 at 1135; and

Re Wimborne; Ex parte The Debtor (1979) 24 ALR 494 at 499, followed

HEARING

Sydney, 1984, March 6, 7. #DATE 7:3:1984

PETITION FOR A SEQUESTRATION ORDER.

R. Neville, for the debtor.

P. M. Clark, for the petitioning creditor.

D. G. Pullinger, for the supporting creditor.

Cur. adv. vult.

Solicitors for the debtor: C. R. Potts, Latimer & Co.

Solicitors for the petitioning creditor: Clayton Utz.

Solicitors for the supporting creditor: Willott & Klimt.

B. A. GRAY.

ORDER

1. Make a sequestration order against the estate of the debtor.

2. Make no order for costs of the argument on 6 March 1984; otherwise order that costs (including reserved costs) be taxed and paid according to the Act.

3. Direct that a draft of this order be delivered to the Registrar within seven days in accordance with R.124(2).

Orders accordingly.

JUDGE1

In this petition, the debtor seeks to oppose the making of a sequestration order upon the ground that the bankruptcy notice relied on by the petitioner was invalid. The notice, so far as material, was in these terms:

"THEREFORE TAKE NOTICE that within 14 days after service of this notice on you, excluding the day on which this notice is served on you, you are required:

(a) to pay the sum of $24,825.41 so claimed by the judgment creditor to The Registrar of the District Court at Mena House, 225 Macquarie Street, Sydney in the State of New South Wales; or

(b) to secure the payment of the sum referred to in paragraph (a) to the satisfaction of the Federal Court of Australia or the judgement creditor or compound the sum so specified to the satisfaction of the judgment:"

The notice is in the prescribed form save that, presumably by typographical error, the "creditor" was omitted after "judgment" at the end of paragraph (b): see s.41(2)(a)(ii), rule 8 and form 4.

In support of its opposition, the debtor relies upon the decision and the reasoning of the High Court of Australia (Williams, Kitto and Taylor, J J.) in James v Federal Commissioner of Taxation 93 C.L.R. 631. It was there held that a bankruptcy notice by which a debtor was notified alternatively that he must compound for the debt to the satisfaction of a person nominated by one of three creditors, "the agent for the abovenamed creditors, or the satisfaction of the Bankruptcy Court" did not follow the prescribed form varied to meet the circumstances and was bad in that it failed to notify the debtor that he might compound the debt to the satisfaction of the creditors themselves. The Court said (at pp.643-4):

". . . . . (the bankruptcy notice) should notify the debtor that he may secure or compound the debt to (the defendants') satisfaction. . . . and. . . it is (thus) capable of misleading the debtor as to the manner in which he may secure or compound for the debt. The court cannot inquire whether the debtor has in fact been misled or not. In this case it is probable that he was not misled. It is sufficient that he could be misled. But strict compliance with the requisites of a bankruptcy notice is essential to its validity and in these two respects the bankruptcy notice does not comply with these requisites. The defects cannot be regarded as formal defects or irregularities. They are breaches of important provisions of s.53:"

In the present case, the notice requires the debtor (inter alia) "to. . . compound the sum so specified to the satisfaction of the judgment." The ordinary meaning of the verb "compound" in a civil context is "to settle or adjust by agreement, especially for a reduced amount, as a debt" (Macquarie Dictionary). It is thus implicit in the requirement made by the notice (that the debtor (inter alia) compound the debt) that any such compound take place with the concurrence of the judgment creditor: obviously, a bilateral agreement is required and any merely unilateral action on the part of the debtor would be ineffective. It follows, in my view, that the notice, properly construed, requires (inter alia) that the debt be compounded with the concurrence of the judgment creditor. (See Re A Debtor; Ex p. The Debtor v The Trustee of the Property of Waite (1956) 1 W.L.R. 480 at p.483; Re Preston; Ex p. Commercial Bank of Australia Ltd. (1982) 45 A.L.R. 105 AT pp.107-8). On that construction, the provisions of s.41(2)(a)(ii) are complied with.

Alternatively, in my opinion, the omission of the word "creditor" at the end of paragraph (b) is merely a formal defect within the meaning of s.306 and does not invalidate the notice. In my view, given the reference to the compound of the debt, the failure to refer, in the notice, to the satisfaction of the judgment creditor could not reasonably mislead a debtor upon whom it is served: as has been said, the satisfaction of the judgment creditor is implicit in the requirement that the debt be compounded (see Pilla v Comptroller of Income Tax (1970) A.C. 1124 at p.1135; Re Wimborne; Ex p. The Debtor (1979) 24 A.L.R. 494 at p.499).

James Case should, I think, be distinguished for present purposes. There, the notice explicitly departed from one of the important, substantive requirements of the Act, namely that the debtor be informed (inter alia) that a compound could be agreed with the judgment creditors themselves as distinct from their agent; so that the debtor was not to be confined to dealing with the agent only. Here, the debtor could not reasonably be misled in any substantive sense: he is informed of the requirement to compound the debt and the satisfaction of the judgment creditor is implicit in any such requirement.

In my opinion, the opposition fails. I propose to make a sequestration order but to deprive the petitioning creditor of its costs of the argument of this point.