Miller v Niven

[2001] FMCA 32

FEDERAL MAGISTRATES COURT OF AUSTRALIA

Name: TRAVIS ANTHONY MILLER v SEAN NIVEN

File No:  BZ 75/01

Citation No:  FMCA 32

CatchwordsBANKRUPTCY – creditors petition – incorrect statement of interest applied – whether Bankruptcy Notice invalid – Bankruptcy Notice set aside – Australian Steel Company Operations Pty Ltd v Lewis (2000) FCA 1915 and Shephard v Blueberry Farms of Australia (2001) FMC 2 applied.

ApplicantTRAVIS ANTHONY MILLER

Respondent:  SEAN NIVEN

File No:BZ 75/01

Delivered on:  31 May 2001

Delivered at:  Brisbane

Hearing Date:  23 May 2001

Judgment of:  Baumann FM

REPRESENTATION:

Counsel for the Applicant:  Mr Coulsen

Solicitors for the Applicant:  Rapp Yarwood, Lawyers

of Bundall

Counsel for the Respondent:  Mr McQuade

Solicitors for the Respondent:  James Conomos, Lawyers

of Brisbane
ORDERS:

(1)Bankruptcy Notice QN112 of 2001 is set aside.

(2)The creditors petition is dismissed.

(3)      There is no order as to costs.

IN THE FEDERAL MAGISTRATES COURT OF AUSTRALIA

BRISBANE REGISTRY

No BZ 75 of 2001

TRAVIS ANTHONY MILLER

Applicant

And

SEAN NIVEN

Respondent

REASONS FOR DECISION

INTRODUCTION

1.SEAN NIVEN (“the Debtor”) seeks an order that the creditors petition filed by TRAVIS ANTHONY MILLER ("the Creditor”) be dismissed on the grounds that the BANKRUPTCY NOTICE which is relied upon to found the petition, is invalid.

ISSUE

2.Although other grounds were raised by the Debtor to oppose the petition, the only ground argued on 23 May 2001, as a preliminary ground, was the alleged invalidity of the Bankruptcy Notice QN112/2001 filed 29 January 2001 (“the Bankruptcy Notice”).

BACKGROUND

3.A dispute arose between the parties, whereupon the Creditor commenced proceedings No 973/2000 in the Southport District Court against the Debtor. As a result of a summary judgment application filed 19 December 2000, Hall DCJ gave a final judgment to the Creditor for “the amount of $100,000 and $2736.98 interest”. The Creditor also received the benefit of a Costs order.

4.Relying upon the judgment the Creditor issued the Bankruptcy Notice which was served upon the Debtor on 29 January 2001. The Creditor’s Petition, filed 21 February 2001 and served upon the Debtor, is founded upon the Debtor’s failure to comply with the Bankruptcy Notice by 19 February 2001.

5.Relevant to these proceedings at this time, is the claim for interest in the Schedule to the Bankruptcy Notice. An amount of $221.92 was claimed in the following manner:

“Calculation of interest.

The interest is calculated under s47 Supreme Court Act 1995

Principal Sum:         $100,000.00
Rate:  9%
Period:  20/01/01 – 28/01/01
Number of days:      9

Calculation:              $100,000.00 x 9/365 x 9/100 = $221.92”

6.It is common ground that the claim for interest under s 47 of the Supreme Court Act 1995 (Qld) was wrong, this section referring to interest up to the date of judgment. s 48 of the Supreme Court Act 1995 is the basis of any claim for interest after the date of judgment.

SUBMISSIONS BY DEBTOR

7.Mr McQuade for the Debtor says that the Full Court of the Federal Court in the case of AUSTRALIAN STEEL COMPANY (OPERATIONS) PTY LTD V LEWIS (2000) FCA 1915 considered which of the different approaches of the Court (see BENDIGO BANK LTD v WILLIAMS (2000) 173 ALR 175 and KIRK v ASHDOWN (1999) FCA 1664) should be followed. He submits the majority in Australian Steel found that: -

(a)it is an essential requirement of the Bankruptcy Act 1966 that the provision under which interest is being claimed, must be correctly claimed and be included in the notice.

(b)it does not matter where an essential requirement is breached, that the Debtor might not be misled as to the amount he or she needed to pay.

8.He said, in reply to the valiant submissions of Mr Coulson for the Creditor, that this Court is bound by the decision in Australian Steel and that, as a result, the Bankruptcy Notice is invalid.

SUBMISSIONS BY THE CREDITOR

9.The essence of Mr Coulson’s submissions is that the High Court decision in KLEINWORT BENSON AUSTRALIA v CROWL (1988) 165 CLR 71 still represents good law, notwithstanding the amendments to the Act and in particular s 41(2). He submits that the defect in claiming interest under s 47 (wrongly) in the Bankruptcy Notice is not breach of an essential requirement and that the error is not such as is capable of objectively misleading the Debtor as to what is necessary for compliance with the Notice.

10.He further submits that: -

(a)the Full Court in KIRK v ASHDOWN was properly decided and applied KLEINWORT BENSON.

(b)it was not open to the Full Court in BENDIGO BANK v WILLIAMS to depart from KIRK v ASHDOWN.

(c)The majority in Australian Steel Company (Operations) Pty Ltd v Lewis ought to have followed KIRK v ASHDOWN and I should follow and prefer the view and approach expressed by GYLES J in Australian Steel.

(d)The decision of DRIVER FM in SHEPHARD v BLUEBERRY FARMS OF AUSTRALIA (2001) FMC 2 was in error due to its heavy reliance on Australian Steel and because DRIVER FM felt himself bound by that decision.

CONCLUSION

11.Since the decision in Australian Steel, the dilemma which the Creditor in this case seeks to identify as a continuing uncertainty has been considered in other decisions including: -

(a)On 1 February 2001 in SHEPHARD v BLUEBERRY FARMS OF AUSTRALIA (op cit) where DRIVER FM found a Bankruptcy Notice invalid where it incorrectly referred to s 94 of the Supreme Court Act 1970 (NSW), which, as in this case, referred to a statutory enactment for pre-judgment interest rather than post judgment interest.

(b)On 20 February 2001 in ST GEORGE BANK LTD v BALDWIN (2001) FCA 161 where MADGWICK J found that a Bankruptcy Notice which cited an incorrect section of the District Court Act 1973 (NSW) in one part of the Bankruptcy Notice and the correct (s 85 provision) section in another part was not capable of misleading a diligent Debtor and declared the Notice as valid. Because MADGWICK J found there had been compliance with the legal requirements of the Act the question of whether non-compliance should be regarded as a failure to comply with an “essential” requirement of the legislation did not require his determination.

(c)On 28 February 2001 in CUTTING EDGE POST PTY LTD v NIELSON (NO BZ 33 of 2001) where a Deputy Registrar of this Court, confronted with a Bankruptcy Notice which referred to the provision under which interest is being claimed as merely “Supreme Court Act 1995 (Qld)” and thus omitted to cite s 48(1), ordered that the Notice was invalid. The experienced Deputy Registrar queried “whether every defect in a matter made essential by the Act results in invalidity” and said, in his view, that it was sufficient to determine the matter before him “on the basis that every substantial defect in an essential requirement results in invalidity.”

(d)On 5 April 2001 in WRIGHT v ANZ BANKING GROUP LTD (2001) FCA 386 where BEAUMONT J was confronted with an argument that a Bankruptcy Notice which specified two sources of entitlement of interest (s 39 Local Courts (Civil Claims) Act 1970 - which was accepted by the parties as an error; and

s 95(1) of the Supreme Court Act 1970 (NSW) which was accepted as correct) was invalid. BEAUMONT J gave a further view on the reasoning and basis of the majority view in Australian Steel when he said (at paragraph 20) that: -

“It appears that the argument for the judgment creditors in Australian Steel was prepared to accept that any error, however obvious, could amount to a “defect” or irregularity” in a bankruptcy notice. In my opinion, such a concession ought not to have been made. If it were right, it would mean, for example, that a notice would be “defective” or “irregular” because, instead of referring (correctly) to the “Bankruptcy Act 1966”, it referred (incorrectly) to the “Bankruptcy Act 1977” (sic); or if, instead of mentioning the “Supreme Court Act”, the notice referred to the Supreme Act (sic). Such obvious errors should, and would, be corrected by the natural and common sense approach mentioned. Any other approach would lead to an absurd, unacceptable result.”

In WRIGHT v ANZ BANKING GROUP LTD the learned Judge was urged (as I was) that he should not follow Australian Steel because it was “clearly wrong”, however he found there was no need to address the submission as: -

“the wording there was materially different from the present case”.

12.MCHUGH J recently stressed the advantages of certainty in the law (see PERRE v APAND PTY LTD 73 ALJR 1190 at page 1205) and he particularly observed that: -

“When legal practitioners are unable to predict the outcome of cases with a high degree of probability, the choice for litigants is to abandon or compromise their claims or defences or to expose themselves to the great expense and unpredictable risks of litigation”.

The existence of a level of uncertainty in this area is being evidenced, it would seem on a regular basis, and is not desireable.

13.I agree with and adopt the remarks of DRIVER FM in SHEPHARD v BLUEBERRY FARMS when he says at paragraph 40, in response to an invitation by Counsel for the Creditor to prefer the minority view in Australian Steel that: -

“I accept that this Court is bound to follow the precedent established by the High Court in KLEINWORT BENSON. But it is clear from the majority decision in Australian Steel Company v Lewis that their Honours regarded their own decision as consistent with the decision of the High Court. Indeed they applied it. The fact that the minority in Australian Steel Company v Lewis took a different view, in common with the Full Court in Kirk v Ashdown and Kiefel J in Bendigo Bank indicates that the attempted resolution of the issue by the Federal Court may now need to become a resolution of the issue by the High Court. Until such time as that occurs, however, this Court should follow the most recent pronouncement on the issue by the Full Federal Court.”

14.As a result of my views so expressed which also promotes proper consistency in this Court in this seemingly vexed area, I conclude that the incorrect statement of the source for the provision of interest in the Bankruptcy Notice breached a requirement made essential by the Act and is therefore invalid. It necessarily follows that there has been no Act of Bankruptcy founded on non-compliance with the Notice and the creditors petition should be dismissed.

15.In the circumstance of this matter I propose to make no order as to costs.