Milton v HP Mercantile Pty Ltd
[2002] FMCA 150
•23 July 2002
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| MILTON v HP MERCANTILE PTY LTD | [2002] FMCA 150 |
| BANKRUPTCY – Defective bankruptcy notice – more than 21 days specified for compliance. Bankruptcy Act 1966 (Cth), ss.30, 41(6A), 41(7) Re Manny; ex parte Deputy Commissioner of Taxation (1979) 23 ALR 270 |
| Applicant: | COLIN DERMOT MILTON |
| Respondent: | HP MERCANTILE PTY LTD |
| File No: | SZ426 of 2002 |
| Delivered on: | 23 July 2002 |
| Delivered at: | Sydney |
| Hearing Date: | 23 July 2002 |
| Judgment of: | Driver FM |
REPRESENTATION
| Counsel for the Applicant: | Mr W Vahl |
| Solicitors for the Applicant: | Ramensky Lawyers |
| Counsel for the Respondent: | Mr P Ton |
| Solicitors for the Respondent: | Versace & Co |
ORDERS
Bankruptcy notice N953/02 is set aside.
The respondent is to pay the applicant’s costs and disbursements of and incidental to the application, which are fixed at $2,000.
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT SYDNEY |
SZ426 of 2002
| COLIN DERMOT MILTON |
Applicant
And
| HP MERCANTILE PTY LTD |
Respondent
REASONS FOR JUDGMENT
I have before me for ex tempore judgment an application under ss.30, 41(6A) and 41(7) of the Bankruptcy Act 1966 (Cth) (“the Bankruptcy Act”) seeking to set aside a bankruptcy notice served on the applicant. The only ground advanced by the applicant in support of the application in these proceedings before me is that the bankruptcy notice contains a fundamental defect or irregularity, in that in paragraph 3 the time specified for compliance with the notice is 28 days rather than what is said to be the prescribed period of 21 days.
Alternatively, the applicant submits that the bankruptcy notice is apt to mislead or confuse a debtor in that the note contained in the prescribed form, included in paragraph 3 of this bankruptcy notice, specifies a compliance period of 21 days. As against that, Mr Ton, for the respondent, has submitted to me that the Bankruptcy Act envisages that a creditor is to specify the period for compliance with a bankruptcy notice and that while there is authority, in particular the decision of the Federal Court in Scerri v Cahill [1998] FCA 403; 82 FCR 146; 168 ALR 185, to the effect that a creditor cannot reduce the period of notice below 21 days, there is no authority that the creditor cannot extend the period for compliance beyond 21 days. I am not aware of any authority directly on point.
Plainly, the inclusion of the number of days for compliance with a bankruptcy notice is a requirement made essential by the Act and Re Scerri, is authority at least for the proposition that a period of less than 21 days cannot be specified in a bankruptcy notice. There is also authority that the complete omission of a time for compliance is a breach of a requirement made essential by the Act: Re Manny; ex parte Deputy Commissioner of Taxation (1979) 23 ALR 270. Likewise, a bankruptcy notice will be set aside as being misleading if more than one time for compliance is given: Re Spurr; ex parte Werner (1991) 31 FCR 236.
In my view, a bankruptcy notice which purports to specify a time for compliance of anything but 21 days, where the notice is served in Australia, is invalid. My reasons are first, that the period of 21 days is specified in the note at paragraph 3 of the prescribed form. Section 41(2) of the Bankruptcy Act provides that a bankruptcy notice must be in accordance with the form prescribed by the Regulations.
The form currently prescribed by reg. 4.02 of the Bankruptcy Regulations specifies in the note at paragraph 3 that:
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.
Such an order relates to service of a bankruptcy notice outside Australia.
It is apparent to me, from the terms of the Bankruptcy Act and the prescribed form, that the time to be entered for compliance with a bankruptcy notice served within Australia is prescribed to be 21 days. In those circumstances that time cannot be altered at the election of the creditor.
In my view that is the substance of what his Honour Beaumont J decided in Re Scerri. Accordingly, the inclusion of a period other than 21 days in a bankruptcy notice served within Australia will be a breach of a requirement made essential by the Act.
The reason for that is plain when one reads s.40. Paragraph 40(1)(g) specifies the act of bankruptcy most commonly relied upon by a creditor. That act of bankruptcy is the failure to comply with a bankruptcy notice, served upon the debtor, within the time specified in the notice. It is, therefore, obvious that the time specified for compliance with a bankruptcy notice determines the fundamental issue of when an act of bankruptcy is committed. That is not a matter that has been left to the discretion of a creditor. It is a matter which requires clarity and which has been specified in the prescribed form of notice, at least where a notice is served in Australia.
The time for compliance with a bankruptcy notice can be extended by order of the Court pursuant to s. 41(6A) of the Bankruptcy Act or by operation of s. 41(7). The time for compliance cannot be extended at the election of a creditor.
I find that the bankruptcy notice in these proceedings breaches an essential requirement of the Bankruptcy Act and therefore suffers from an irremedial defect or irregularity. If I am wrong in that I also find that the bankruptcy notice is invalid because it is apt to mislead or confuse a debtor in the position of the applicant. The bankruptcy notice, at paragraph 3, purports to specify a time for compliance within 28 days and goes on to include the note, in the prescribed form, which states that:
The number of days within which compliance must be made is 21 days unless an order has been made under subparagraph 40(1)(g)(ii) of the Act.
It is apparent from a reading of s.40(1)(g)(ii) that such an order is only made where service is to be effected outside Australia and a debtor, on reading the notice and checking the legislation, would be left perplexed and confused as to whether he or she could safely comply with the notice within 28 days or whether in fact compliance was required within 21 days. For this reason as well I find that the irregularity in this notice invalidates the notice. This is not a defect or irregularity that can be cured by resort to s. 306.
Therefore, the order that I will make is that Bankruptcy Notice number N953 of 2002 be set aside.
I am empowered to fix costs and disbursements in a specific amount under rule 21.02(2)(a) of the Federal Magistrates Court Rules 2001 (Cth). I will order that the respondent pay the applicant's costs and disbursements of and incidental to this application, which I fix in the amount of $2,000.
I certify that the preceding thirteen (13) paragraphs are a true copy of the reasons for judgment of Driver FM
Associate:
Date:
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