Munson, Owen Richard v ex Parte Deputy Commissioner of Taxation

[1977] FCA 34

/

-2-

Commissioner had claimed "that the sun of $27,548.65 1s due by

you t o h l m under a f i n a l judgment obtalned by hlm i n t h e Supreme

Court of New South Wales on the twenty-ninth day of Decaember

1975, being thz amcunt of a judgment the execut ion of whlch

has nc t

been t h e r a t e o f t e n d o l l a r s p e r s tayed ($26 ,364 .08) toge ther w l t n irltcrcst a t

cencum per al,nu~fi frcm t k twenty-

n in th day cf December 1575 t o t h e date of thic, noklce

($1,184.57) ", and r equ l r ed t he deb to r t.o pay t h e s1:m of

$27 ,548 .65 o r , i n t he u sua l terms, t o securc; o r ccnuounil.

The bankruptcy noticc- was i s s u e d by t h e Z?qi,;trar

on, and was d a t e d , 28 J u n e 1 9 7 6 . F igu res supp l i cd by coanse l

for t h e p e t i t i o n i n g c r e d i t o r , a n d n o t c h a l l e n g c d , s h v th;r+-

a t thak da t e i n t e re s t amoun t ing t o $1 ,307 .36 had bccr-ueC: $31;

t h e juticpel;t debt, so t h a t t h e b a n k r u p r c y :lotjce L:s l s s u c d

u n d e r s t a t e d t h e amount payable " to the date of t h i z n ~ i l c e ' ' €c=

judgmefit and i n t e r e s t by $122.75. The Ceputy Csnu1:1r;s2'3r:~r had

ass--irnt? t ha t t he bankrup tcy no t i c? kou ld b? ;?.sued r;n the 3,z.y

on which i t was a p p l i e d f o r - 16 June; but h p r n ~ s c a l c ~ ~ l ~ t c d the:

arr,cu:,t of t h e i n t e r e s t , a n d t h e f i g u r c s sapp!.ied show c h s t e-?en

had h i s a s s u m p t i o n b e e n c o r r e c t t h e amount cf acc ruec l l n t c re s t

wouiE have been u n d e r s t a t e d by $36.11.

It may be as well t o p o i n t = a t t h a t th.2 c s sunp t iun

t h a t a bankruptcv no t ice w i l l be issued on, and wlll Lea? t!>P

same d a t e a s , the day on which it is a q l l r d f o r Is r,>t jvst.!.fi.w2

bv t h c A c t o r Rules and cannot properly be made. Tlre ban!rru:~l.s;j

n o t l c e is t he Xeg i s t r a r ' s docvnen t , no t t he appl:c:,r.k's; an4

it is dated by the Registrar, n o t b) t h c npp1icar. t . 11; .i 5 the

R c u i s t r a r ;?h3 i s s u e s it: Bankruptcy Act l i l C G , S. 4 1 I l . I ' h ) . T P p

appIlcat.;on fa r i t s i s s u e 15 r1ccu.,lp;cr:i4 by cgpScs of i t , as

I t- t iPte i n d r a f t , for h i s s i g n a t u r p : P u l e :!?; ( L ) ; W I - I ~ I E . it i.?

- 3 -

to be served i n A u s t r a l i a ir: is h? who f i x e s the t lmc fur

compl la ixc wi th it: S. 4C(11 (g! ; and h e wlll sign It and lsque

it only when he is s a t i s f i e d t h a t t h e a p y . l i c a t i c u h 3 s b c m

"duly" made and t h a t t h e b a n k r u p t c y n o t i c e i s I n o r d c r f o r

s i g n a t u r e : Rule 7 ( 5 ) . Cbviously it- is n c t c n n t e m p l a t d :hnt

the bankruptcy no t ice wi l l . necessarily he i s s u e d i.rrvecl1 &tclJJ

t h e a p p l i c a t l o p is f i l e d , c r even on t k day on which ! -L 15

f i l e d : dnd a n exammat ion of twenty- i ive cur ren t f l lLr ; s cha:.c:i

a t random shows t h a t i n p r a c t i c e ~t was so : s s ~ ~ e c l i n ormly

twelve uf t h o s c c a s e s a n d t h a t in t h e o t h e r t h i r t c c n CIXS + h ?

d a t e s o f E p p l i c a t i o n a n d o f i s s u e d i f f e r e d by €zori. cn? t o as

many a s four teen days .

My a t t e n t i o n was d r a m t o a p x s a q e f~:vro the

judgment @f Romer L . J . i n __ I n re Fi. B . , (1904) 1 K.B. 9 4 . T:I

t h a t case, litigation was r ,c t r . led by an agrzsrent w!Ii.ch prn\-j.?cci

t h a t t h e debtcl: should pay the c r e d i t o r k309 on the exec -u t lm

of the f o r g 2 , 7 0 0 , agreement and should consent t o Judgment agzinst h m

poyable by i n s t a l m e n t s - t h e f i r s t CE E7CO and :he

f o u r o t h e r s of g500 cach ,payab le r e spec t ive ly OII the 27th dJys

of A p r i l , May, June, July and Augast 1 9 0 3 . !Ck j udgwr , t -,.-S.,

s ignec! for g2,700 on 2 0 A p r i l . The d e b t o r pald t h e !n1.-~1zl

6300, and g350 on account of t h e f i r s t i n s t a l r e n t of k'IO0. b u t

no more. On 1 3 J u l y 1 9 0 3 Chr c r e d i t o r issucd a banlriuptcy

n o t i c e f o r a n amount cor . s i s t lng o f the amount rcmainlng unp7id

o f t he t h ree i n s t a lmen t s t l i co ove rduc , l e s s m Z ~ O ~ I - vhirh

had been as " t h e amount 2ve on garnished. The backrup'xy ~ o t l c c ? d e s r r l b d that t o t n i

the f inz i -juc?qr,x<nt'' of 2 0 A p r i l . T?w

agreement said nothing about the vt-c.lc bf the io1stzl!x.ncs

be ing

deemed

tc.

become

d.Je

on

dcPa;;d

8-

1 r!

~ & , W ~ : I I + -

3:

- n y c m z :

cf

then .

-4-

The Cour t o f Appeal he ld tha t the bankruptcy

n o t i c e r e q u i r e d t h e d e b t o r t o p a y t h e ~ u d g m e n t n o t “ i n a c c o r d a n c e

w i t h t h e terms of the judgment” (Bankruptcy A c t (Eng.) 18S3,

S. 4 (1) ( g ) ; cf . Bankruptcy A c t 1966, S. 4 1 ( 2 ) (a) (1)) b u t r a t h e r

i n acco rdance w i th t he j udgmen t a s nod i f i ed by the agreemcnt .

A t 103 Romer L.J. s a i d :

“Now I t h i n k It i s c l e a r t h a c , wher. yau ham a ju6gn::nt

i n t h e f3rm t h a t w e have here , a bankrup t ry no t l ce Ghder

t h e A c t must r e q u i r e payment of 5 sum a l lcc jcd to be due

accord ing t o t h e t e r - m s of t h e jlldqm;.;!t - that 1 s t.r,

say , it must s i a t e t h e dmouni t!nt 1 s clcimad a s rm:inir:g

unpald on th? jhdgment deb t . C l e e r l y , m 5 bankr1ipi-*-,\-

n o t i c e t h e d p b t o r i s e n i i t l e d t o sse from t n e n 3 t l c -

exac t ly what i s c l a i x e d t o be due on t h e ]uJgment dcbt.

No doubt a sun n i g h t bp claimed Irhlch 1s l c s s t h a n

t h e r s a l amount due, and t h a t would not of course be

f a t a l t o t h e n o t l c e s o l o n g a s t h e n o t i c e made it c l c a r

t h a t n o t h l n g more vas clalmed t o be due on t h e j u d q r e n t

, beyond tne amount s p e c i f i e d i n t h e n o t l c e . E a t a noClce

t o pay p a r t of a j -dr lq~wnt debt , leaving any balance

t h a t may be due t o be subnrquont ly c la imed, 1 5 , t o ~y

mind , c l ea r ly bad“ .

!

Romer L . J . was t h e r e r e f e r r i n g t o a bankruptcy

not ice claiming payment of a ~ u d g n e n t d e b t o n l y : t h e r e wa5 no

claim for i n t e r e s t . i n Se Jack (lU58-1959), 19 A . B . C . 76E,

269-70, Mznning J. t h o u y h t t h a t t h e s e c o n d , t h i r d a d f o u r t h

sen tences o f the remarks of RoKer L . J . were a p p l i c a b l e ?c a

bankruptcy no t ice which requi led p lyxent o f a judgment debt

only, thouqh had been taxed. In the judgment was for deb t and cos t s and t h e cost:;

- XireEs v. low!.er - Asphal t - Pty. - L l m l t e d (.L966!

9 ?.L.R. 255, 256 , Clyne J. z p p l i e d t h e l as t s e n t e n c e i n a c a s e

where a b?nkruptcy po t ice r -qd1red pdy,c.-nt of on1.y an assl3r.m

p o r t i o n o f a jcdgment debt .

? P. bankruptdy r loLic? m x t r e q u i r e t h e d e b t o r t o

pay ” in accordance w i C h the ]ud:m.:nt”: S. 41(2) (a ) ( i ) . Ir. t h e

g-asc of a Supreme Court jddvmcnt ictcJrsst 1s payable from tkc.

d a t e when t h e j u d g m m t t a k e s e f f e c t on sc much of t h e money 0:

w h A the judgment ax601s r,ayrr?nt €]on time t o tim remclll!c

-5-

unpaid: Suprene Court A c t 1 9 7 0 S. 95 (l) ; a x l 1s a debt

n e c e s s a r l l y a n d l c e v i t a b l y a t t a c h x i t o the judgment clcbt:

Ex p a r t e L c w i s (1388), 36 W . R . G53. To pzy thc judqmslit rlcl;t

" in accordance with the judgment" 1s t o pay the anlcunt for trhich

judgment was recovered with the lepal interest a t t a c h c d t o it

by s t a t u t e : - In re Cooper, (1911) 2 K.B. 550, 554; a i ~ d t h e r e 1s

no doub t t ha t a b snkrup tcy no t l ce nay require rhe FayIwr,t of

s t a t u t o r y I n t e r e s t : "The c r e d l c o r is erltlti.ccl to Fa\+? t k ~ : I I C V I I ?

of t h e i n t e r e s t a d d e d t o t h e judgm2nt debt >o thai. Eh? d c h t o r

may he lnformrd by t h e n c t i c e tha-c he c a n m t con:ply wit!: t h ?

n o t l c e w i t h o u t p a y i n g t h e i n t e r e s t on t h e d e b t " : ___ Jn re L c h r d i n -

(18901, 7 Korr. 181 , 183 pe r Cave J. But a bankruptcy nc t icc

can "only demand payment of t h a t which the -~udg,cent crcdl tcr

can enforce f o r whlch payment of" , and cannot ISSU? f c r a sua nf n x e v

execut ion cannot i s sue : I n re Fo!lcws, (19Y:) 2 ? .B.

521 , 525 pe r Vaughan Williams J. ; c f . __ R c O'tcr-efe ____ !:.363! c

19 A.B.C. l G l , 103-4. I t i s t u bc i n f e r r e d frcm 2. f!: ( 5 ) , ( 2 )

t h a t a bankruptcy no t ice mus t spec i fy z sum 2 s ";he I?GLIL~. 12nc

t3 t h e c r e d l t o r " ; a n d i f he demands paynept o t i n t e r e s t t h e

z r e d i t o r n l u s t h i m s e l f c a l c u l a t e , a n d m u s t s p e c i f y 11; thn

bankruptcy Rot ice , the amount reqcircc! to Se pzid: Sc 13av.L~ -

(1953) , 1 9 A.B.C. 100; Re O'Kccfe __ ( s u p r h ) . A t t h e d a t c whzn 3

hankruptcy no t ice i s i s sucd , t he j ud fpen t c r ed i t c r L O L I ~ ~ i:,sllu

execu t ion fo r t he j udgmen t deb t and fo r s t a tu to ry intf . res t

a c c l d e d t h c r e o n t o t h a t d a t e ; b u t he ccL1ld n o t i<s..lS? ex:c~~l-iorl

f i , r s t a t u t o x y I n t e r e s t w h i c h woulu accrue h c w e e n t h a t k t e acd

thF. da te o f payment , though the mount lev1 cd VI> ~ X T I C U ~ L C I ? xould

i n c l u d e t h c amount of t h a t i c t c r c s h .

Prom what T have sat,? about t!~e 7rohzhi:Lty o l

d l f f c I c n s c b e t f w e n t h e dates o i , ~ p p l , Pat . ;wt icr c,?ci issuc 0: 3

banXrLptcy ly.otice it is a p p a r e n t t h a t , e v m ~f th? a:.?) j c . 3 h t

-G-

h a s c o r r e c t l y c a l c u l a t e d t h e amount by which s t a t u t o r y i n t e r e s t

a c c r u e s d a i l y on h i s judgment d e b t , it i s i m p o s s i b l e f o r him

t o b e c e r t a i n t h a t a bankruptcy no t ice , which as submit ted

by him s t a t u t o r y l n t e r e s t d u e t o t h e i e g i s t r a r f a r s i g n a t u r e s t a t e s t h e amount o f

“ a t t h c date o f t h l s n o t l c e “ , will n o t

u n d e r s t a t e t h a t amol;nt whe.r? it is ‘ > c t u a l l y d a t e d , sicpe.3 and

i s sued by t h e R e g i s t r a r . H i s problcrn i s d i f r - e r c n t €?:on: t h a t

of t h e c red i tor who 1 s r c q c i r e d m e r e l y t o z t a t c a c c u r a t e l y

t h e unparc! amount of hi< judqnent Ceb t , o r of h l s judqident

debt togc-rher with taxed costs , and by u n J c r s t a t i n g rile amomt :,f

s t a t u t o r y i n t e r e s t a c c r u e d h e i s n o t “ l e a v l r ? any balance

t h a t may be due t o be subsequent ly c la imed“. I n my op in lon ,

t h e r e f o r e , t h e p r i n c i p l e e n u n c i a t e d by Koncr L.J. is n o t

a p F l l C a b h t o h i s c a s e , m d h i s u n 3 e r s t a t e m e n t w i l l no? i n v a i l d z t e

the bankrup tcy no t l ce un le s s Lt is such as t o pclrple;: and

embarrass the deb to r . In t he F rosen t case I do n o t t h m k i c c a n

r easonab ly be s a id t hd t t he debtor, whc w a s a:-curatc-:y to13

by t he bankrup tcy Ro t i ce t hz t h i s Jud r Jnen t dcbt amoaIltei tc

$ 2 6 , 3 6 4 . 0 8 , and t h a t t h e r a t e of i n t e r e s t o n it w a 5 $l@ p e r

c e n t p e r annum, could be perplexed or embarrassed by ths interest

on t h a t d e b t b e i n g s t a t e d a t $122.79 less than it zc211y WBS.

I n my o p i n i o n t h i s 1s a p roppr ca se for t h e application oL’

S . 306 (l), and I do no t thi:lk t h a t t h e b a n k r u p t c y n o t i c e shguld

be he ld i nva l id .

Counsel for i h-. p e t i i i o n l n g c r s d l t o c s u i m i t t e c ;

t h a t i n any e w n t t h e dcxbtcr s h o , ~ l d be t.al:en t o l lcvr w d l v e d the

i r r e g u l d r i t y jn t h e bankruptry not1;e; a n t in 1,:y 0pr.i .x. h.? wz?

r i g h t . Thz p t i k i c x llrnt ”=m? GP. fc,r h c e r m q o n 30 March i9.77.

The :!ebtor. w b s rc;~rcsci~tcd by ?cslnc-L-l, and counsel fox t h e

p e t i t l o n i n g crcciitonr \:ie.arJy staked ?-he di f f lcu l izy thc pe t : l:ionL!q

c r e d i t o r faced by zeasv? r J i :!I= dn.ler::t.jtemcnt ill :-+p& b a l ] : r ~ , i , t ~ ~

- 7-

I,ot.ice. Counse l for thc debcor ind lcaCed tha t he was n o t

insLructed on t h a t matter. D u r u q d i s c u s s i o n a b o u t a n

adjomnment , I said t h z t i f h c w a n t e d t o h a v e t h e b a n k r u p t c y

n o t l c e set a s l d e a no t i ce o f oppos l t i on shou ld t c f i l e d . The

n e a r i n g was hdjournsd t o 11 May. No not lce o f o p c o s l t i o n > d

been f i l e d . I then hesr i l a f L 1 argunlcn; by counscl. f a r t h e

pcLition.i.ng creditor, a f t e r w t l c h c o u n s e l f c r t h e d e b t o r s c l ~ r l

th?t he d i d n o t r n n t t c add znykhi f iq , bu t wanted the mat tc r

t o t a k e i t s course as I t h o u a h t f i t . F u r t h e r , a c c o r d i n g t o

a l e t t e r from Chc r i c h t a r ' s s o l i c i ' o r s t o t h e p e t l t l o n l n g

c r o d i t o r ' s s o l l c i t o r s w h i c h was t ende red w i thou t ob jec t joa t h;?

d&tor had accepted h i s solicitor's a d v l c c t h a t there was

'no e f fecCivc purpose in m: t in ta in ing any v i t la t ing e lement i n

thz bankruptcy not ice scrved on him", and wished t o consen t

tc t h e making of a s e q u e s t r a t x m order.

In t hose c i r cums tacces I t h i n k , ds Mannlng J. d i l

iv RC _ _ J a c k ( s u p r a ) , 2 7 0 , Lhat I am j u s t i f i e d i n t x e a t i y q th-1

fictect whicil m3ly exis t L11 t h e SankruFtcy no t ice as having b ~ c ,

wa %-b~~3d .

The ev idence elltitles t h e p e t i t i o n m g credS t o r

t o a s e q u e s t r a t i o n o r d e r . I an s a t i s f i e d t h a t t h e d e b t o r

cormutted t h c ac t of bankruptcy a l leged 3.n t h e petition. 1: am

s a t i s f i e d w i t h the proof fill t h e o t h c r m a t t e r s of which

S. 57 (I) of o r d e r a g a i n s t t h e t k A c t r c q u i r e s p r o o f . I make a s e q u e s t r a t i o n

estate of the deb to r , and I o r d c r t h a t c o s t : ;

i ~ c l b Z ~ ~ ~ g r e se rved cus::s be taxed end p a i d in accordance with

Cne i z t .