OFlaherty, J. v American Express International Inc

[1985] FCA 673

Re: JOHN O'FLAHERTY
Ex Parte: AMERICAN EXPRESS INTERNATIONAL INC
No. P605 of 1985
Bankruptcy

COURT

IN THE FEDERAL COURT OF AUSTRALIA
GENERAL DIVISION
BANKRUPTCY DISTRICT OF THE STATE OF NEW SOUTH WALES AND THE AUSTRALIAN CAPITAL TERRITORY
Jackson J.

CATCHWORDS

BANKRUPTCY - form of bankruptcy notice - service of bankruptcy notice - misstatement in petition - service of petition - form of affidavit of search.

Bankruptcy Act 1966, ss. 40(1)(g), 306(1)

Bankruptcy Rules 1968, rr. 4(1), 15(b), 138(1)

Re The Bankruptcy Act 1966, Ex parte Commercial Banking Company of Sydney Ltd (1979) 23 A.L.R. 522

Re Munson, Ex parte Deputy Commissioner of Taxation (1977) 29 F.L.R. 479

Re Manion, Ex parte Deputy Commissioner of Taxation (1979) 23 A.L.R. 270

HEARING

SYDNEY
#DATE 11:12:1985

ORDER

There be a sequestration order against the estate of the debtor.

Costs, including the costs reserved on 24th September 1984, be taxed and paid according to the Act.

Note: Settlement and entry of orders is dealt with in Rule 124 of the Bankruptcy Rules.

JUDGE1

On the hearing of a petition for a sequestration order under the Bankruptcy Act 1966, the act of bankruptcy relied on being that referred to in s. 40(1)(g) of the Act, the making of the order was resisted on a number of grounds.

1. First, it was urged that the bankruptcy notice was defective in form because it did not add, in a number of places, the words "and no more" after a reference to the amount of the judgment debt.

2. It is to be noted that the bankruptcy notice in question does contain the words "and no more" in the places discussed in the judgment of Lockhart J in Re The Bankruptcy Act 1966, Ex parte Commercial Banking Company of Sydney Limited (1979) 23 ALR 522.

3. The submission, if accepted, would have the effect that the Bankruptcy Notice would read relevantly as follows:
   
   

AND FURTHER TAKE NOTICE that if, within the period set out above, you fail either to comply with either of the abovementioned requirements of this notice or to satisfy the Federal Court of Australia that you have a counter-claim, set-off or cross demand equal to or exceeding the sum specified in paragraph (A) of this Notice, and no more being a counter-claim, set-off or cross demand that you could not have set up in the action in which the judgment was obtained, you will have committed an act of bankruptcy on which bankruptcy proceedings may be taken against you.

Some other consequential amendments would follow.

1. It seems to me that the addition of those words would be quite inappropriate, because the terms of s. 40(1)(g) themselves recognise that the counter-claim, set-off or cross demand referred to in the section and referred to in the bankruptcy notice may exceed the amount of the judgment debt or amount payable under the final order.

2. The second objection was that the amount stated in the bankruptcy notice was incorrect, in that the amount of interest, calculated at the rate of 14.5 percent per annum from 5 April 1984 to and including 10 May 1984, was $322.74 instead of the $313.60 stated in the bankruptcy notice. Assuming the correctness of the calculation, I do not think the case is one where the understatement of the amount owing should be treated as fatal to the notice.

3. The principle applicable is that discussed in Re Munson, Ex parte Deputy Commissioner of Taxation (1977) 29 FLR 479, and in Re Manion, Ex parte Deputy Commissioner of Taxation (1979) 23 ALR 270 at 277 and, applying that principle, I regard this as a case where it could not be said that the debtor could be "perplexed or embarrassed" by the understatement of interest, if there was such. Accordingly, I consider that the case is one to which s. 306(1) of the Act applies, and that there has been no substantial injustice caused by the misstatement which I have assumed.

4. The third question is whether the Bankruptcy Notice was properly served. An order for substituted service had been made by Wilcox J on 24 September 1984. That order in paragraphs 2 and 3, provided as follows:
   
   

"2. That service of Bankruptcy Notice B2833 of 1984 be effected on the debtor by:

(a) delivering a true copy of Bankruptcy Notice B2833 of 1984 signed and stamped by the Deputy Registrar together with a true and sealed copy of these orders to a person apparently in the employ of Bruce Lane & Co. Solicitors, 151 Macquarie Street, Sydney in the State of New South Wales, and

(b) delivering a true copy of Bankruptcy Notice B2833 of 1984 signed and stamped by the Deputy Registrar together with a true and sealed copy of these orders to Francis Dunlop of 5 Northcliff Street, Milsons Point, in the State of New South Wales or to a person apparently in the employ of the debtor at the office apparently occupied by the debtor at 5 Northcliff Street, Milsons Point in the State of New South Wales.

3. That service of Bankruptcy Notice B2833 of 1984 be deemed to have been effected on the debtor at the later of the dates of service in accordance with order 2 above."

1. The affidavit of service of the notice, an affidavit made by Mr Whiteman, deposes to the following:-
   
   

"2.

"On the 28th September, 1984 I delivered a true copy of Bankruptcy Notice B2833 of 1984 signed and stamped by the Deputy Registrar (a true copy of which notice duly signed and stamped by the Deputy Registrar is annexed hereto and marked with the letter "A") together with a true and sealed copy of orders made in these proceedings and dated the 24th September, 1984 (a true copy of which is annexed hereto and marked with the letter "B") to:

(a) Francis Dunlop at 2nd Floor, 5 Northcliff Street, Milsons Point in the State of New South Wales; and

(b) A female person apparently over the age of sixteen (16) years and apparently in the employ of Bruce Lane & Co. Solicitors, 151 Macquarie Street, Sydney.

3. I identified the person served with documents at 5 Northcliff Street, Milsons Point in the State of New South Wales as aforesaid as Francis Dunlop by reason that I had established her identity on a previous visit to the office at which she was served. At the time of service of the documents as aforesaid upon Francis Dunlop I had the

following conversation with her:

Whiteman: "Hello Francis."

Dunlop: "Hello David. He (I took her to refer to John O'Flaherty) is not here."

Whiteman: "My instructions are to leave this with you."

Dunlop: "This has nothing to do with me."

The documents served upon her were left on her desk and in her presence."

1. It seems to me that the service effected upon Messrs Bruce Lane and Company was sufficient and I am also satisfied that service on Francis Dunlop was effected.

2. The next objection which was made is that paragraph 4 of the petition is in the following terms:
   
   

"4. The debtor, John O'Flaherty within six (6) months before the date of presentation of this Petition committed the following Act of Bankruptcy namely that he failed either to comply on or before the 16th November, 1984 with the requirements of a Bankruptcy Notice duly served on him on the 28th September, 1984 the time for compliance with which was extended by order of the Registrar to the 16th November, 1984 or to satisfy the court that he had a counter-claim, set-off or cross demand equal to or exceeding the sum specified in paragraph A of the said Bankruptcy Notice."

and the date 16 November 1984 twice appearing is misstated and should be 26 November 1984.

1. It is agreed that the date is misstated and Mr Graham for the petitioning creditor seeks leave to amend the petition by substituting the correct date.

2. The material before me establishes that there has been no payment of any of the amount of the judgment debt, and there is no suggestion that the debtor has a counter-claim, set-off or cross demand equal to or exceeding the sum specified in the Bankruptcy Notice. There is no evidence that the debtor has been in any way misled by the error in the petition, nor has there been any suggestion in argument of any way in which the debtor may have been misled. In the circumstances I consider that the misstatement of the dates in paragraph 4 is a formal defect or an irregularity in terms of s. 306(1). I am not of the opinion that substantial injustice has been caused by it, and I give leave to amend paragraph 4 of the petition by substituting the date "26 November 1984" for "16 November 1984" where it there appears.

3. In view of the matters to which I have earlier referred, and in view of the fact that the debtor is represented before me, I shall dispense with the need to re-serve the amended petition on the debtor personally.

4. A further question was raised concerning service of the petition. r. 15(b) of the Bankruptcy Rules provides that:
   
   

"Unless otherwise ordered by the Court under sub-section 309(2) of the Act -

(b) service of a creditor's petition shall be effected on a debtor by delivering -

(i) an official copy of the petition;

(ii) a copy of the affidavit or of each affidavit verifying the petition; and

(iii) a copy of the consent referred to in paragraph 12(3)(ba) or of the affidavit referred to in paragraph 12(3)(bb), as the case requires,

to the debtor personally -

(iv) if service is effected in Australia - not less than 8 days before the hearing date for the petition;

1. The documents which were served on the debtor were put in evidence before me at the hearing and include a document which satisfies the description "an official copy of the petition". The term "official copy of the petition" is defined by r. 4(1). The copy petition, however, shows an annexure marking which indicates that it was Annexure A to the affidavit of Mr Sharp which was also served at the same time.

2. To comply with the rule a further copy of the petition should also have been served. It is not suggested that the copy actually served was in any way defective or that the debtor was in any way misled or suffered or might have suffered a prejudice as a result of the fact he was not served with a further copy of the petition.

3. Whilst I do not doubt the general proposition that the debtor is entitled to be served with a copy of the petition, the debtor in this case in my view was in fact so served and in these circumstances I am prepared to treat the failure to serve a second copy as an irregularity under s. 306(1) and not as something as invalidating the service.

4. The last matter to which I wish to refer is in relation to the affidavit of Penny Limonis. The handwritten parts of, and alterations to, that affidavit have not been separately sworn to in the manner required by r. 133. It is apparent, however, when one looks at the affidavit that the omission is of a minor kind which I regard as an irregularity in the affidavit. I shall direct in accordance with r. 138(1) that a memorandum be written on the affidavit authorizing its use notwithstanding that irregularity.

5. In the light of the reasons which I have just given it will be apparent that I propose to make a sequestration order in respect of the debtor and propose to do so now. I am satisfied that the debtor has committed the act ob bankruptcy alleged in the petition as amended. When I say, "the petition as amended" I mean, of course, the petition to be amended. I should say in passing, that the sequestration order will not become effective until the amendment has been made. I am satisfied with the proof of the other matters of which s. 52(1) of the Act requires proof.

6. I note that David Lewis Clout, a registered trustee, has consented to act for the trustee of the debtor. I make, subject to an observation as to its coming into operation which I shall make in a moment, a sequestration order against the estate of the debtor. The order that I shall make is an order that costs including the costs reserved on 24 September 1984 be taxed and paid according to the Act. I make no order as to the costs on the adjournment of the proceedings on 18 November 1985. I direct that a draft of this order be delivered to the Registrar within 7 days in accordance with r. 124. I direct that this order shall not take effect until the filing of the amendment to paragraph 4 of the petition which I have permitted by my ruling today.

7. I have now been informed that paragraph 4 of the petition has been amended and the observations which I made concerning the time at which the order will take effect no longer apply. I directed that a draft of the order be delivered to the Registrar within 7 days in accordance with r. 124.

8. The document which is Exhibit A in the proceedings is released to Mr Chippendale on his undertaking to have a photocopy of the document provided to the Court for the purposes of the file today.