Palasty v Tomko

[2008] FMCA 10

FEDERAL MAGISTRATES COURT OF AUSTRALIA

PALASTY v TOMKO [2008] FMCA 10

BANKRUPTCY – Application to set aside bankruptcy notice – complaint that there is no or no complete copy of any judgment or order attached to notice – whether Court should exercise discretion – complaint that debtor may have been misled or confused by filing of appeal and issuing of bankruptcy notice – the right to appeal a judgment and the right to issue a bankruptcy notice are not inconsistent – application dismissed.

Bankruptcy Act 1966 s.41
Bankruptcy Regulations1996 reg.4.02, 4.01

Kleinwort Benson Australia Ltd v Crowl (1988) 165 CLR 71
Adams v Lambert (2006) 3 ABC (NS) 835 [25]; (2006) 80 ALR 679; [2006] HCA 10
Touma v Gold Holdings Pty Ltd [2002] FMCA 233
Thompson v Metham [1999] FCA 935
InRe Scerri (1998) 82 FCR 146
Commonwealth Bank of Australia v Horvath (Junior) (1999) 161 ALR 441; [1999] FCA 143
American Express International Inc v Held [1999] FCA 321 (unreported 29 March 1999)
St George Bank Ltd v Klintworth and Australia (1998) 157 ALR 286
Clyne v Deputy Commissioner of Taxation (No 4) 66 FLR 301
ReWimborne; Ex parte Debtor (1979) 24 ALR 494
Farrugia v Farrugia [2000] FCA 385

Applicant: JOHN PALASTY

Respondent: JOHN TOMKO

File Number: SYG 866 of 2007

Judgment of: Nicholls FM

Hearing date: 23 May 2007

Date of Last Submission: 23 May 2007

Delivered at: Sydney

Delivered on: 17 January 2008

REPRESENTATION

Counsel for the Applicant: Mr. D. Ash

Solicitors for the Applicant: Ziman and Ziman

Counsel for the Respondent: Mr. R. A. Parsons

Solicitors for the Respondent: Dennis & Co Solicitors

ORDERS

1. The application made on 15 March 2007 is dismissed.

2. The applicant to pay the respondent’s costs.

FEDERAL MAGISTRATES
COURT OF AUSTRALIA AT
SYDNEY

SYG 866 of 2007

JOHN PALASTY

Applicant

And

JOHN TOMKO

Respondent

REASONS FOR JUDGMENT

1. I have before me an application made on 15 March 2007 seeking an order that the Bankruptcy Notice no. NN 5179/06 (“the Bankruptcy Notice”), which was issued on 20 December 2006 and was deemed served on the applicant on 23 February 2007, be set aside.

Background

1. The applicant is Mr Palasty. The respondent is Mr Tomko. The Bankruptcy Notice is attached to the application and reveals Mr Palasty as “the debtor,” and Mr Tomko as “the creditor.”

2. Attached to the Bankruptcy Notice is a document which the creditor/respondent says is a copy of a NSW District Court judgment and on which he relied for the purposes of issuing the Bankruptcy Notice. This shows the applicant before the Court now as the “defendant,” and the respondent as the “plaintiff,” in proceedings before the NSW District Court (District Court of NSW at Sydney Civil Jurisdiction. Sydney No 2398 of 2005. SJ Gibb DCJ Thursday, 15 December 2006).

3. The exact nature of this document is one of the issues of contention before this Court. It appears that a verdict was given in favour of the plaintiff, and judgment was said to be entered for the plaintiff in a set sum inclusive of interest.

Applicant’s Complaints

1. By way of an “Outline of his Application to Set Aside the Notice” filed pursuant to a direction of a Registrar made on 27 March 2007, the applicant makes two complaints about the Bankruptcy Notice, and why it should be set aside. The first complaint is that there is no, or alternatively, no complete copy of any judgment or order attached to the Notice as required by law. The second complaint is that the creditor (the respondent) is seeking (separately) to appeal the judgment of the District Court.

The First Complaint – Attachment of Judgment or Order

1. The applicant asserts that the Bankruptcy Notice does not comply with the relevant legislative provisions. The Bankruptcy Act 1966 (“the Act”) requires that a bankruptcy notice must be in accordance with the form prescribed by the regulations: s.41(2). The relevant form is provided at “Form 1” of the Bankruptcy Regulations1996 (“the Regulations”), which states that “a copy of the judgments or orders relied upon by the creditor is attached.”: reg.4.02(1). The applicant further relies on reg.4.01(1).

2. Attached to the Bankruptcy Notice served in February 2007 was a document comprising twenty-seven pages of a fifty-two page judgment. Excluding page number 1, all odd numbered pages were missing from the document. The applicant’s position is that this document does not constitute a valid judgment or order for the purposes of Form 1, and that consequently the Bankruptcy Notice is a nullity.

The Second Complaint – Creditor seeking to Appeal the Judgment

1. The applicant contends that the Court should use its discretion in setting aside the Bankruptcy Notice because it would be inappropriate for the respondent to rely upon it. The applicant asserts that the Bankruptcy Notice may have misled the applicant as to the respondent’s position with respect to the Bankruptcy Notice, or may have confused the applicant as to whether the applicant should comply with the Bankruptcy Notice, in circumstances where the applicant had been served with a notice of appeal in relation to the proceedings before the District Court.

2. At the hearing before the Court, Mr D Ash of Counsel appeared for the applicant. Mr R A Parsons of Counsel appeared for the respondent. Both parties have filed outlines of written submissions.

Evidence

1. The Applicant relies on:

   (1) The application, the copy of the Bankruptcy Notice and the copy of the twenty-seven page document attached.

   (2) The affidavit of Derek Errol Ziman, sworn on 13 March 2007 with annexures (subject to objections upheld).

2. The respondent relies on the affidavit of Bruce Vernon Dennis, made on 21 March 2007 (paragraph 4 was not read), and the affidavit of the same deponent made on 9 May 2007.

Issues

1. The issues are as follows:

   a)Whether the document attached to the Bankruptcy Notice was a “judgment” for the purposes of the Act, and the Regulations; and

   b)Whether the applicant could have been reasonably misled or confused by the notice of appeal of the NSW District Court matter, and subsequent service of the Bankruptcy Notice.

Legislation

1. Legislation relevant to the issues:

   ·s.41(2) Bankruptcy Act 1966 (Cth)

   ·s.306 Bankruptcy Act 1966 (Cth)

   ·reg.4.02(1) Bankruptcy Regulations 1996 (Cth)

   ·reg.4.01(1) Bankruptcy Regulations 1996 (Cth)

The Applicant’s Submissions

1. The applicant asserts that there was no, or alternatively, no complete copy of any judgment or order attached to the Notice. The applicant submitted that the document which was attached to the Bankruptcy Notice fails to meet an essential requirement of the Act in that there is no, or at best no complete copy, of the judgment attached to it.

2. In short, s.41(2) of the Act requires the bankruptcy notice to be in accordance with the form prescribed by the Regulations. The relevant form is “Form 1.” Paragraph 2 of this form requires a copy of the judgments, or orders, relied upon by the creditor to be attached to the Bankruptcy Notice. The applicant’s argument is that the document attached is deficient and therefore cannot be said to be a copy of a judgment.

3. The applicant’s position is that for the issue of a bankruptcy notice, reg.4.01(1) requires an applicant to lodge a duly completed draft bankruptcy notice, and one of the documents specified in reg.4.01(1)(b). While the document attached to the Bankruptcy Notice (if it were to be complete) could be regarded “as a judicial officer’s pronouncement of a case outcome,” the document attached did not comply with any of the documents described in reg.4.01(1)(b).

4. Mr Ash referred the Court to the relevant New South Wales District Court Rules, and in particular Part 36 of the Uniform Civil Procedure Rules (“UCPR”). A copy of the relevant rules was provided as part of the applicant’s submissions (see pages 10 to 21). The applicant in particular referred the Court to rr.36.11 and 36.12, and asserted that, essentially, the terms and language of the relevant rules of the New South Wales District Court provided for the provision of a copy of the terms of the judgment but not the reasons. The rules separately provide for provision of a written copy including the reasons.

5. Mr Ash submitted that under these rules, therefore, a written copy of the judgment, which included the reasons, was the judgment. Further, that there were two ways a judgment could be put into the hands of a person. The first was that the Registrar of the Court would furnish a sealed copy of the judgment. The second was that the Registrar would deliver a copy of the judgment, which must include the reasons.

6. The applicant’s argument is that the UCPR at 36.2 sets up two pathways in which judgment may be obtained. The “creditor/respondent” proceeded down the path provided for in the UCPR 36.2(2). This provides that a copy of the judgment will “include” the reasons for it. The argument is that this has not occurred in the current case as what purports to be the reasons in the document attached to the Bankruptcy Notice is plainly incomplete.

7. The applicant relied on what was said in Kleinwort Benson Australia Ltd v Crowl (1988) 165 CLR 71 (“Kleinwort v Crowl”) at 79: “The authorities show that a bankruptcy notice is a nullity if it fails to meet a requirement made essential by the Act, or if it could reasonably mislead a debtor as to what is necessary to comply with the notice …”) and in Adams v Lambert (2006) 3 ABC (NS) 835 [25]; (2006) 80 ALR 679; [2006] HCA 10, for the proposition that the Bankruptcy Notice is a nullity and not saved by s.306 of the Act if it fails to meet an essential requirement required by the Act, or could reasonably mislead the debtor as to what is necessary to comply with the bankruptcy notice.

8. Mr Ash submitted that the intention of the Act, in this regard, was that compliance with a bankruptcy notice required attaching a copy of the judgment and that this was an essential requirement. That identification of this judgment was an essential element in establishing the foundation for the notice, and because the Court of Bankruptcy would not usually be the Court where this judgment was obtained, it was important for it to have the judgment of the other Court before it. This led to the position that even if the document that was attached to the Bankruptcy Notice in this case did identify (as it does) the relevant judgment, it fell short in that what is missing is “grossly incomplete.” Further, in an argument put, at least initially, during the hearing before the Court that it was not a notice: “in the approved form.” This was with reference to what is set out in the UCPR.

9. The applicant also relies on Touma v Gold Holdings Pty Ltd [2002] FMCA 233 (“Touma”), a case which was submitted to be similar to the current case before the Court in that there was a document attached to the bankruptcy notice: “…and it most certainly told the debtor the amount of the debt, the person to whom it was owed, the court in which the judgment was entered, the date of the order and the time within which the money was due to be paid.”(Touma at [7]). The submission was that in the current case there was not attached to the Bankruptcy Notice a copy of the judgment in the complete sense in which such a document should be understood.

10. The applicant also emphasised, as being relevant, the remarks by Katz J in Thompson v Metham [1999] FCA 935 (“Thompson”), as noted in Touma at [17] to [18]. In particular, in Thompson at [26] and with reference to cases cited at [23] to [25], namely, InRe Scerri (1998) 82 FCR 146 (“In Re Scerri”), Commonwealth Bank of Australia v Horvath (Junior) (1999) 161 ALR 441, [1999] FCA 143 (“Horvarth”); and American Express International Inc v Held [1999] FCA 321 (unreported 29 March 1999) (“Held”) where, in each case, it was held that a failure to attach to a bankruptcy notice a copy of the judgment or order relied upon by the creditor led to incurable invalidity of the notice. Subsection 306(1) could not save it (Thomson at [25]).

11. Katz J said at [26]:

    “To my mind, the notice in the present case is to be treated in the same way as were the bankruptcy notices in those three cases. The notice in the present case did not literally have attached to it a copy of the judgment upon which the debtor relied, whether certified (as claimed in the first document attached to the notice) or not; the notice did not have attached to it a certificate of judgment of the type provided for in the rules of the court which had given the judgment; further, there was no evidence before me that the document attached to the notice had been produced according to some administrative arrangement for the production of such documents which had been put in place by the court which had given the judgment (as in the St George Case). (I add that there was no need for any such administrative arrangement in the case of documents not generated by computer in any event, since the Forms of the court which had given the judgment already made adequate provision for such documents.) All that the notice had attached to it was a document the creation of which appears to have been unauthorised either legislatively or administratively, which may or may not have been sealed (sealing being required by the rules of the court concerned if the document was to be effective) and which was manifestly erroneous, not only as to the date of the relevant judgment, but also as to its terms. I consider that I should treat the attachment of such a document to the notice as failing to satisfy the requirement that a bankruptcy notice have attached to it a ‘copy of the judgment ... relied upon by the creditor’. Consistently with the three cases to which I have referred above, such notice was therefore invalid and was incapable of being saved by subs 306(1) of the Act.”

12. In all, therefore, the applicant’s position is that the Bankruptcy Notice in the current case fails on the test of essentiality, quite separately on the issue of whether the notice could have reasonably misled the debtor. There is no “judgment” attached to the Bankruptcy Notice and s.306 does not save the situation in light of what is attached to the Bankruptcy Notice.

13. Mr Parsons identified the relevant issue for the Court as being whether there was attached to the Bankruptcy Notice a copy of the judgment relied on by the creditor. The respondent submits that there is a clear distinction to be made between a judgment, and the reasons for that judgment. The respondent’s position is that the document attached to the Bankruptcy Notice, at its first page, is a copy of the judgment and that it satisfies the relevant statutory requirements such that the Bankruptcy Notice is not a nullity.

14. Mr Parsons submitted that the document plainly identified the relevant Court (District Court of New South Wales); the parties to the relevant proceedings before the Court; makes reference to certain proceedings whereby the judgment relied upon by the creditor was obtained in this Court; that the debtor was the defendant in the matter; and that it identifies the judge who gave the judgment. Further, the amount of the judgment (as set out in that document) is exact to the amount set out in the Schedule to the Bankruptcy Notice. Further, the document is sealed with a seal of the District Court of New South Wales, signed with the signature of the relevant judge, and sets out the judgment and related orders. In particular it states:

    “1. I find a verdict in favour of the plaintiff on the plaintiff’s claim and enter judgment for the plaintive as against the defendant in the sum of $480, 852.00 inclusive of interest as at judgment.”

    In all, therefore, this document represents “a copy of the judgment.”

15. The respondent emphasises that there is a distinction between a judgment, and reasons for judgment. The reference at paragraph 6 of the document, “I publish my reasons,” emphasised this. What follows, albeit in incomplete form, is not the judgment, but the reasons for the judgment.

Consideration

1. I agree with the respondent in relation to this complaint by the applicant.

2. The relevant legislative scheme (s.41(2)) requires that the Bankruptcy Notice must be in accordance with the form prescribed by the Regulations. Regulation 4.01(1) requires a duly completed draft bankruptcy notice, and relevantly, a sealed or certified copy of the judgment. The final judgment: “ specified . . . on the approved form.”

3. To the extent that the applicant sought to argue that “on the approved form” was a reference to the approved form of the District Court, rather than what relates to the bankruptcy Court, then I can only agree with Mr Parsons that what is said at reg.4.01(1)-(b), in relation to an “approved form” is a reference to “Form 1” under the Bankruptcy Regulations.

4. While reference to the UCPR may be of some benefit in understanding the background to this case, in the circumstances of this case, in my view, it is limited by the purpose of those parts of the UCPR to which the Court was taken, namely the provision of the relevant judgment and reasons, and the circumstances by which such provision can take place, and how it may be delivered or given to the parties.

5. With reference in particular to UCPR 36.2 this, in my view, is plainly focused on the delivery of the judgment to the parties, and does not, as Mr Parsons correctly submitted, define what a judgment is, or what a copy of a judgment is. It is, adopting his words an: “enabling rule.” I also agree with Mr Parsons that when rr.36.2(1) and (2) are taken as a whole that this reinforces the distinction relied on by the respondent between a judgment, and the reasons for it. Plainly, the language of r.36.2(1) contemplates a judgment given: “orally without stating the reasons,” and 36.2(2) contemplates the delivery of a “written copy of the judgment that has been stated orally, including the Court’s reasons for it.”

6. With reference to the requirements of the Bankruptcy Act, the Regulations, and what relevantly is required in Form 1, is that a certified, sealed, or certified copy of the (final) judgment be attached, being in respect of: “the final judgment specified” “on the approved form” (in context: Form 1).

7. I agree with the respondent that the first page of the document attached to the Bankruptcy Notice in this matter complies with that requirement.

8. The requirement as to the judgment which must be annexed to the Bankruptcy Notice (Form 1) is found in such cases as St George Bank Ltd v Klintworth and Australia (1998) 157 ALR 286 per Hill J at 288:

   “I do not think, however, that the matter arises in the present case because Form 1 requires that the bankruptcy notice be accompanied by all had attached to it ‘a copy of the judgment or order relied upon by the creditor.’”

9. While cases like InRe Scerri, Horvarth and Held were plainly cases where no judgment was attached, and as it was held in those cases, a failure to annex a copy of the judgment on which the bankruptcy notice is founded (as plainly required by paragraph 2 of Form 1) is a fundamental defect which cannot be cured. That is not the situation in the current case.

10. Further, the current circumstances can be distinguished from what was before the Court in Touma. The bankruptcy notice in that matter was found to be a nullity because what was attached to the bankruptcy notice was not: “a copy of the judgment,” as referred to in paragraph 2 of Form 1. Nor did it comply with the provisions of reg.4.01(1)(b) (see Touma at [4]). It was in fact: “a letter from the Local Court of New South Wales” (the relevant Court in that matter). A letter from the “Registrar.” (See Touma at [3].) This document was found not to be a: “copy of record.” It was “a letter” (see Touma at [14]). It was found not to come within the definition of “copy of the judgment or order relied upon by the creditor.”

11. In Thomson, similarly the document that was attached was not: “a copy of the judgment upon which the debtor relied” (Thomson at [26]). It was deficient in a number of significant ways, being: “unauthorised, either legislatively or administratively.” Further: “may or may not have been sealed” – a requirement of the Rules of the Court concerned. It “was manifestly erroneous” in important particulars such as the date of the relevant judgment. But even further “as to its terms” (Thomson at [26]).

1. While some document was attached in both Touma and Thompson, the nullity of the bankruptcy notice was said to derive from the document attached having no statutory status under the relevant rules of the relevant court. But as Mr Parsons correctly submits, in my view in the present case, what is attached to the Bankruptcy Notice is a document which is plainly the relevant judge’s statement of her judgment. The judgment said to be entered for the plaintiff (the creditor) against the defendant (the debtor). The document attached to the Bankruptcy Notice is a copy of a document which further contains the judge’s signature and the seal of the relevant Court.

2. In all, therefore, the Bankruptcy Notice and the copy of the document attached to it, which is a copy of the (final) judgment, a sealed copy, complies with the relevant statutory and regulatory regime (relevant to the Bankruptcy Court). The applicant’s first complaint does not succeed.

3. The applicant’s second complaint is said to arise from the following chronology derived from Mr Ziman's affidavit (of 13 March 2007) (particularly at paragraph 7):

   “1. 15 December 2006: judgment entered for the plaintiff (respondent) as against the defendant (applicant before this Court) in the District Court of New South Wales.

   2. 9 January 2007: the respondent filed a notice of appeal in respect of the District Court judgment.

   3. 19 January 2007: the applicant’s solicitor received a copy of the notice of the appeal.

   4. 20 February 2007: the Bankruptcy Notice is (effectively) served.”

4. The applicant asserts that the Court should exercise its discretion to set aside the Bankruptcy Notice because the respondent should not be able to agitate inconsistent rights. These are said to be the right of appealing the judgment of the District Court and the right to issue the Bankruptcy Notice.

5. Mr Ash submitted that the exercise of the right of appeal (and he emphasised this was by the respondent, who was the creditor and the successful party in the District Court) gives rise to the inference that the judgment was therefore not considered to be a final judgment. Secondly, the right to issue the Bankruptcy Notice is premised on the finality of the judgment as set out in s.40(1)(g) of the Act.

6. The applicant asserts that he was misled in two ways. The first being that he was misled by the confusing document attached to the Bankruptcy Notice (emphasising that the reasons were in effect absent every second page). But also that the applicant was misled by the inconsistency in the respondent’s subsequent actions as they relate to the filing of an appeal, and the subsequent issuing of a Bankruptcy Notice.

7. The applicant relies on Clyne v Deputy Commissioner of Taxation (No 4) 66 FLR 301 (“Clyne”), per Lockhart J, to assert the proposition that for the purposes of determining the validity of a bankruptcy notice, this Court is permitted to take into account events that may be on their face described as extraneous to the bankruptcy notice. That is, that this Court is not confined to: “a mere examination of the notice itself” (see Clyne at 304: “It is well established that to determine whether the debtor could be misled the court is not confined to a mere examination of the notice itself. It may look at facts extraneous to the notice: ReWimborne; Ex parte Debtor (1979) 24 ALR 494 (“Re Wimborne”)).

8. The applicant also relies on the Farrugia v Farrugia [2000] FCA 385 (“Farrugia”), in particular at [44] to [45]:

   “[44] As to the submission that it had not been open in law to the trustee to be satisfied as of 24 July 1996 that all of Alfred’s proved debts had been paid in full, there are, it appears to me, at least two answers.

   [45] First, subs 30(1) of the Act is the source of this Court’s power to set aside a bankruptcy notice: see Bryant v Commonwealth Bank of Australia (unreported, Federal Court, full court, No 1091 of 1994, 11 November 1994) at p 4. That provision confers powers the exercise of which is discretionary: see, for example, Re Ellis; Ex parte Jefferson (unreported, Federal Court, Drummond J, No 81 of 1995, 17 February 1995) at p 4. It would not, in my view, be a sound exercise of discretion in the present case to set aside the bankruptcy notice, based on acceptance of an argument that it had not been open in law to the trustee to be satisfied as of 24 July 1996 that all of Alfred's proved debts had been paid in full, when it had been Alfred himself who had sought to persuade the trustee to achieve that state of satisfaction and who had then reaped the benefit of the trustee's achieving that state of satisfaction by subs 153A(1)'s apparently operating to annul his bankruptcy: compare the often-quoted statement of Scrutton LJ in Verschures Creameries v Hull and Netherlands Steamship Co, Limited [1921] 2 KB 608 at 612:

   ‘A person cannot say at one time that a transaction is valid and thereby obtain some advantage, to which he could only be entitled on the footing that it is valid, and then turn round and say it is void for the purpose of securing some other advantage. That is to approbate and reprobate the transaction.’”

9. Mr Ash submitted that the applicant could be reasonably misled when the Court has regard to the chain of events leading up to the Bankruptcy Notice being issued. That is, that a judgment was obtained against the applicant, which on its face (and even with reference to page 1 of the District Court document subsequently attached to the Bankruptcy Notice) there is nothing to suggest anything adverse to the respondent. The applicant is then served with a notice of appeal in relation to this matter. Then, in the circumstances, “inexplicably” and “perplexing,” is served with a Bankruptcy Notice which purports to rely on the very judgment which earlier was said to be the subject of an appeal. The applicant’s confusion could only have been “manifestly increased.” He could have been further confused by the document that was actually attached to the notice, given that there were missing copies of the relevant pages.

10. The respondent’s position is that the only relevant question that arises from this complaint is whether the District Court judgment is a final judgment, or not. If it is a final judgment, then the Bankruptcy Notice is not susceptible to being set aside. Mr Parsons’ submission was that the starting point must be in relation to whether a debtor could be said to be reasonably misled and this is with reference to the Bankruptcy Notice (see Klienwort v Crowl at p.79-80: “The authorities show that a bankruptcy notice is a nullity if it fails to meet a requirement made essential by the Act, or if it could reasonably mislead a debtor as to what is necessary to comply with the notice . . . In such cases the notice is a nullity whether or not the debtor in fact is misled. . .”).

11. Mr Parsons submitted that the misleading, or in Mr Ash’s words “perplexing,” element has to arise from the Notice itself as a starting point at least. His submission was that on its face, there is nothing in the Bankruptcy Notice which could be said to create a “perplexity,” or to say that the debtor would reasonably be misled. Mr Parsons distinguished the circumstances in Clyne’s case in that what accompanied the bankruptcy notice there was a letter. This was considered by the Court in circumstances to ascertain whether this letter (the extraneous matter) led to a conclusion that a bankruptcy notice, which might on its face be misleading to the debtor, was rendered “good” by the extraneous, but relevant material.

12. He emphasised that the issue in Clyne was not a consideration by the Court as to whether extraneous material might render “misleading” a bankruptcy notice which was not in itself ambiguous or misleading (see in particular at p.304):

    “Bankruptcy notices must conform strictly to the requirements of the Act and the Bankruptcy Rules. If a notice is defective a question arises whether the defect renders the notice a nullity. If the defect is such as could reasonably mislead the debtor then the notice is a nullity: Pillai v Comptroller of Income Tax [1970] AC 1124.

    The test is not whether the debtor was in fact misled but whether he could be misled: James v FCT (1955) 93 CLR 631 at 644; Re Wong; Ex parte Kitson (1979) (27 ALR 405) ; 38 FLR 207. I said in Wong’s case at 217:

    ‘A debtor is not required to engage in the task of construing a bankruptcy notice and resolving questions of doubt or ambiguity. A bankruptcy notice ought to be clear and unambiguous. Noncompliance with its requirements constitutes an act of bankruptcy with quasi penal consequences. If it is equivocal, generally the equivocation must be resolved in favour of the debtor.’

    It is well established that to determine whether the debtor could be misled the court is not confined to a mere examination of the notice itself. It may look at facts extraneous to the notice: Re Wimborne; Ex parte The Debtor (1979) 24 ALR 494.”

13. Relying on what was said in Clyne (and in Re Wimborne (1979) 24 ALR 494, where the Court considered the effect of extraneous material in saving from invalidity a bankruptcy notice which was arguably invalid in that in itself it could have misled the debtor), Mr Parsons submitted that in the current case the Bankruptcy Notice is: “clear and unambiguous.” That the respondent debtor should not be required to construe it and resolve any questions of doubt or ambiguity with reference to extraneous material.

14. Mr Parsons also sought to distinguish Farrugia on its facts, submitting that it was not applicable to the circumstances currently before the Court. Farrugia applied the well established principle that the person who treats a particular transaction, either as valid or invalid, but essentially treats it in a particular way, and obtains an advantage from it being so treated, may not depart from that initial treatment for the purpose of securing some other advantage.

15. Relevantly, the respondent submits that there is no basis in the current case to say that the respondent creditor was seeking by the notice of appeal to remove or negate the judgment of the District Court in so far as it was beneficial to him to seek some other advantage (which were the circumstances in Farrugia). The respondent’s submission is that there is no basis for saying that the respondent seeks to gain an advantage on the basis of a treatment of a particular transaction, but then is seeking to assert the opposite to obtain a different advantage.

16. Ultimately, the resolution of this issue must start with the relevant legislation. Section 40(1)(g) of the Act relevantly requires the creditor to have obtained against the debtor a “final judgment or final order.” When taken with s.41(1)(a), the Bankruptcy Notice must be based on a final judgment or order. There is no disputing that the judgment of the District Court was a final judgment. The pre-existing right asserted by the “plaintiff” against the “defendant” was finally determined in favour of the plaintiff creditor. There is clearly nothing to show that this judgment was interlocutory. Indeed, what is provided to this Court now at page 1 of what is attached to the Bankruptcy Notice reveals a final judgment. (Understood in the context of what is set out above regarding the issue of what constitutes “judgment,” as opposed to “judgment and reasons.”)

17. On its face, I agree with Mr Parsons, that the Bankruptcy Notice is clear and unambiguous. Nor does the applicant assert to the contrary. The applicant relies on what is said to be attached beyond page 1 of the attached document (the judgment of the District Court) to the Bankruptcy Notice itself. This is not a case where the circumstances as found in Farrugia can be said to apply. Nor do I see that because one of the parties sought to appeal the judgment that this detracts from the finality of the judgment. I agree with Mr Parsons that the lodging of the appeal itself does not alter the status of the relevant judgment obtained in the District Court. It remains a final judgment.

18. The evidence for the applicant in this matter put before the Court comes from his solicitor. The evidence, which is not disputed, is that the sequence of relevant events (that is, the giving of the judgment, then the notification of the appeal, and then the issuing and serving of the Bankruptcy Notice depending on that judgment) could be said to mislead the applicant as to what the applicant was required to do. The short answer, in agreeing with Mr Parsons’ submission for the respondent, is that the Bankruptcy Notice (which after all, was received on the applicant’s behalf by his solicitor – a Federal Court order for substituted service of the Bankruptcy Notice was made according to Mr Ziman’s evidence and with reference to what is annexed to his affidavit) was clear in itself and in its terms absent any defect, or misleading aspect, as to what the applicant was required to do. That is (as set out at para.3 of p.2 of the Bankruptcy Notice), 21 days after 23 February 2007, to pay the creditor the amount of the debt or to make an arrangement to the creditor’s satisfaction. That the respondent had earlier instituted an appeal in relation to the judgment from which the debt is said to be founded does not, in my view, alter the fact that the judgment was final and the terms of the Bankruptcy Notice itself were clear in themselves and not misleading as to what was required of the applicant. This right to appeal is not inconsistent with the respondent’s right to seek to obtain payment of the amount in the judgment and the right to issue a Bankruptcy Notice.

19. In all, the applicant’s two complaints about the Bankruptcy Notice are not made out. The application made to this Court on 15 March 2007 is therefore dismissed.

I certify that the preceding fifty-eight (58) paragraphs are a true copy of the reasons for judgment of Nicholls FM FM

Associate: C Darcy

Date: 17 January 2008