Provident Capital Ltd v Mollinger - [2009] FMCA 536

FEDERAL MAGISTRATES COURT OF AUSTRALIA

PROVIDENT CAPITAL LTD v MOLLINGER

[2009] FMCA 536

BANKRUPTCY – Creditor’s Petition – respondent debtor’s opposition to Creditor’s Petition – considerations relevant to review – question in respect of calculation of interest.

Bankruptcy Act 1966 (Cth), ss.33, 34A, 52, 306, 41(5), 43
Bankruptcy Regulations 1996 (Cth), reg.16.01(1)(c)
Evidence Act 1995 (Cth), s.171
Federal Court Rules (Cth), O.13
Federal Magistrates Court Rules 2001 (Cth)
Civil Procedure Act 2005 (NSW), ss.101, 136
Uniform Civil Procedure Rules2005 (NSW), Schedule 5

Adams v Lambert [2006] HCA 10
Joseph Richard Bryant v Commonwealth Bank of Australia [1995] FCA 971
Matthews v Collett [2000] FCA 224
McDonald v Official Trustee in Bankruptcy [2001] FCA 140
Provident Capital Ltd v Mollinger & Anor [2009] FMCA 525
Re Clubb; ex parte Clubb v Westpac Banking Corporation (1990) 93 ALR 123
Re Emerson; Ex parte Wreckair Pty Ltd (1991) 101 ALR 315
Re Greenhill; ex parte Myer (NSW) Ltd (1984) 5 FCR 84
Re Small; ex parte Westminster Bank v Trustees [1934] Ch 541
Re Wilhelmsen; ex parte Gould (1986) 11 FCR 107
Seovic Civil Engineering Pty Ltd v Groeneveld (1999) 161 ALR 543
Thai v Deputy Commissioner of Taxation (1994) 53 FCR 252

Applicant:

PROVIDENT CAPITAL LTD

Respondent:

BEAU JOSHUA MOLLINGER

File Number:

SYG 1492 of 2008

Judgment of:

Lloyd-Jones FM

Hearing date:

3 October 2008

Delivered at:

Sydney

Delivered on:

18 June 2009

REPRESENTATION

Counsel for the Applicant:

Ms B Nolan

Solicitors for the Applicant:

Tiernan & Associates

Solicitors for the Respondent:

The respondent appeared as a self-represented litigant

ORDERS

The parties are to prepare written submissions, supported by authorities, clarifying the calculation of interest claimed on the judgment debt when subsequent repayments are made after the date of judgment or orders.
The parties’ submissions are to address whether these payments or credits should be taken into account in the calculation of interest.

FEDERAL MAGISTRATES
COURT OF AUSTRALIA AT
SYDNEY

SYG 1492 of 2008

PROVIDENT CAPITAL LTD

Applicant

And

BEAU JOSHUA MOLLINGER

Respondent

REASONS FOR JUDGMENT

The proceedings

This application for review was filed by Beau Joshua Mollinger, the respondent debtor, opposing a Creditor’s Petition filed on 11 June 2008. Similar applications were filed by his father, Hans Peter Mollinger, and his mother, Jillian May Mollinger. All three were parties to Supreme Court of New South Wales proceedings 1319 of 2004 which resulted in consent orders being made on 31 January 2005. Separate Bankruptcy Notices were issued against all three individuals. The failure to satisfy those Notices led to the issue of separate Creditors Petitions to each debtor which is the issue in these proceedings. Hearings of the Creditor’s Petitions were heard concurrently and I also delivered/deliver a judgment in relation to Hans Peter and Jillian May Mollinger (Provident Capital Ltd v Mollinger & Anor [2009] FMCA 525) and this separate judgment in respect of Beau Joshua Mollinger.
A Notice Stating Grounds of Opposition to the Petition was filed on 8 July 2008. The hearing of the Creditor’s Petition was initially set down for 11 July 2008, however the petitioning creditor sought three consecutive adjournments on 11 July, 1 August and 26 August 2008 to allow time to prepare and present its evidence. The Duty Registrar transferred the matter to this Court for hearing on 26 August 2008.
During that hearing at which the respondents appeared by telephone, I made the following orders for the further administration of this matter:
1. The applicant file and serve any evidence on which it relies in support of the petition on or before 29 August 2008.
2. The respondent file and serve any evidence in reply upon which he relies on or before 12 September 2008.
3. The parties have liberty to apply on three days’ notice.
4. The matter be listed for hearing on 3 October 2008 at 10.15am in Court 6C, John Maddison Tower, 88 Goulburn Street, Sydney.
The Creditor’s Petition was filed in these proceedings on 11 June 2008. The applicant creditor, Provident Capital Ltd ACN 082 735 573 (“Provident”), applied to the Court for a sequestration order under s.43 of the Bankruptcy Act 1966 (Cth) (“the Act”) against the estate of Beau Joshua Mollinger

Notice Stating Grounds of Opposition

The Notice Stating Grounds of Opposition to the Petition was filed on 8 July 2008 and lists the following grounds:
1. The allegation contained in Part 1, Paragraph 1 of the Creditor’s Petition dated 11 June 2008 (“the Petition”) erroneously alleges that the Respondent owes the Applicant an amount of $2,506,422.23 (‘the Alleged Debt”).
2. The Alleged Debt fails to take into account substantial payments in respect of the judgment debt (in respect of matter 13129 of 2004 in the Supreme Court of New South Wales) (“the Judgment Debt”), accrued from the sales of properties for which the Applicant formerly held security over; those properties being located at:
(a) 16 Henderson Drive, Lennox Head in the State of New South Wales;.
(b) 1/9 Seaview Street, East Ballina in the State of New South Wales; and
(c) 2/9 Seaview Street, East Ballina in the State of New South Wales (‘Unit 2’).
3. Further, the Petition fails to sufficiently verify whether the Alleged Debt has been adequately reduced by revenue generated from the letting of Unit 2 and a further property at 3/9 Seaview Street, East Ballina in the State of New South Wales, over which the Applicant holds security and further, it is not within the means or sources of the Respondent’s knowledge to what extent the Applicant has accounted for this revenue, however sufficient doubt exists as to the accuracy of the amount claimed as the Alleged Debt.
4. The Petition fails to correctly claim interest on the Judgment Debt. The Petition claims, at Part 1 Paragraph 1, an amount of $599,893.48 as Interest (‘the Alleged Interest Sum’). The Alleged Interest Sum has not been calcultated in accordance with Schedule 5 of the Uniform Civil Procedure Rules 2005.
5. The Respondent is not in a position and does not have adequate means or sources of knowledge to forensically determine the exact and correct amount of the Judgment Debt (including interest in accordance with Schedule 5 of the Uniform Civil Procedure Rules 2005), whilst the Applicant is in a position and does have adequate means and sources of knowledge to accurately determine the exact and correct amount of the Judgment Debt (including interest in accordance with Schedule 5 of the Uniform Civil Procedure Rules 2005) and has failed to do so correctly, and has provided an alternative and misleading and grossly inflated allegation of unpaid debt.
6. In the premises, the Applicant has failed to comply with the requirements of section 47 of the Bankruptcy Act 1966 because the Petition is not in the prescribed form as it does not include an accurate figure in respect of the unpaid amount of the Judgment debt as money owing to the Applicant by the Respondent.
7. Further, or in the alternative, the court cannot be satisfied with the proof of the matters stated in the Petition and the alleged debt pursuant to section 52(1) of the Bankruptcy Act 1966 and accordingly the court ought to dismiss the Petition pursuant to section 52(2) of the Bankruptcy Act 1966.
8. Further, or in the alternative, there is sufficient cause to warrant an order that the Petition be dismissed in accordance with section 52(2)(b) of the Bankruptcy Act 1966.

Evidence in respect to Beau Joshua Mollinger

Ms Nolan, counsel for the applicant, moved on the Petition presented on 11 June 2008. The date of the act of bankruptcy was 4 June 2008, being 21 days after the date of service of the Bankruptcy Notice. Ms Nolan submits that a Bankruptcy Notice was issued on 8 April 2008 in the correct form for a debt that was in excess of $2,000. It gave an address for payment in Australia. The Notice was based on a final judgment that was less than six years old, being 31 January 2005. A certified copy of that judgment was attached, with interest calculations referring to Schedule 5 of the Uniform Civil Procedure Rules 2005 (Cth).
An affidavit of a licensed commercial agent, Brian Kenneth Richardson, was sworn on 3 July 2008 in respect of service of the Bankruptcy Notice. The Notice was served on Mr Mollinger on 14 May 2008, being within six months of its issue. Mr Richardson served Mr Mollinger personally with a relevant copy of the Bankruptcy Notice (NN1171/08).
The affidavit of Jessica Lay sworn on 29 August 2008 indicates that the Creditor’s Petition was sent in an express post envelope. It was presented within six months of the date of the act of bankruptcy, being 4 June 2008. It is submitted that the Petition is in the correct form and opposes of the debt over $2,000, is signed by the creditor and correctly indicates the date and time of the hearing as being 11 July 2008. The Creditor’s Petition is verified in respect of paragraphs 1, 2, 3 and 4 in the affidavit of Theresa O’Hare sworn on 6 June 2008.
However on 29 August 2008, Michael O’Sullivan swore an affidavit which seeks to correct the procedural error of the original Petition failing to take into account payments made to reduce the debt. Leave of the Court was sought that the Petition be amended pursuant to the debt outstanding. An affidavit of final debt was sworn by Michael O’Sullivan on 3 September 2008 and an affidavit of current search was sworn by Jessica Lay on 2 October 2008. On 29 August 2008, Jessica Lay swore an affidavit of service deposing to having served the affidavit of service of the Bankruptcy Notice, the affidavit of service of the Creditor’s Petition and the affidavit of final search on Mr Mollinger.
The following material was admitted into evidence:
a)The Creditor’s Petition. Provident applied to the Court for a sequestration order against the estate of Beau Joshua Mollinger.
b)Affidavit of Theresa O’Hare sworn on 6 June 2008. Ms O’Hare, head of credit and lending on behalf of Provident, verified that no application had been made to set aside Bankruptcy Notice NN1171/08 served on Beau Joshua Mollinger.
c)Affidavit of Jessica Lay sworn on 29 August 2008. Ms Lay’s affidavit of service on Beau Joshua Mollinger states:
I, Jessica Lay of 7/64 Croydon Street, Cronulla, NSW, 2230, Paralegal make oath and say:
1. On Friday 29 August I caused to send a letter to Beau Mollinger via express post. Annexed hereto and marked “A” and “B” is a copy of the letter and copy of the express post envelope respectively..
d)Affidavit of Michael O’Sullivan sworn on 29 August 2008.
e)Affidavit of Michael O’Sullivan sworn on 30 September 2008 verifying the final debt.
f)Affidavit of Jessica Lay sworn on 2 October 2008 being an affidavit of final search.
Mr Mollinger tendered the following evidentiary material in support of his application:
a)Affidavit of Beau Joshua Mollinger sworn on 7 July 2008 (first affidavit of Mr Mollinger). Paragraph 9 was excluded and paragraphs 23, 24 and 25 were admitted to the extent that they evidenced Mr Mollinger’s state of mind.
b)Exhibit “R1”, being a copy of an email from the Mollingers to Provident.
c)Affidavit of Beau Joshua Mollinger sworn on 22 August 2008 (second affidavit of Mr Mollinger).
d)Affidavit of Beau Joshua Mollinger sworn on 12 September 2008 (third affidavit of Mr Mollinger). Paragraphs 10 and 12 were treated as submissions. Paragraphs 13, 14 and 17 were admitted to the extent that they evidenced Mr Mollinger’s state of mind.

Submissions by the debtor

I note that Mr Mollinger informed the Court that he is admitted as a legal practitioner to the Supreme Court of Queensland and that he holds a supervised practising certificate. Notwithstanding these current proceedings, he continues to hold that practising certificate with the approval of the Queensland Law Society. I also note that Mr Mollinger does not practice in the area of bankruptcy law and his knowledge is limited to that acquired through his preparation for these proceedings.
Mr Mollinger submits that the Creditor’s Petition was not served in accordance with the Federal Magistrates Court Rules 2001 (Cth) and the Bankruptcy Act 1966 (Cth) (“the Act”). He relies on his first affidavit which states:
9. I was not personally served with the Creditor’s Petition.
10. On the evening of Thursday 3 July 2008 I discovered a sealed Creditor’s Petition that had been slipped under the door of my residential premises (at unit 4, 5 Wickhim St) and consider this the date of receipt of this document.
11. On the evening of Wednesday 2 July I did not return to my residential address, and spent the night at the residence of two friends to watch the State of Origin and therefore I cannot be certain the Creditor’s Petition was not placed at my residential address earlier.
Mr Mollinger also submits that there is no order for substituted service on the Court file. Consequently, the manner of service described in his first affidavit is defective.
Mr Mollinger alternatively submits that the material before the Court demonstrates that the Creditor’s Petition is manifestly defective in substance, particularly in the following aspects:
a)It does not adequately or correctly state the value of the debt owing;
b)It does not correctly demonstrate how the applicant has determined the figure claimed in the Petition;
c)It claims a figure manifestly in excess of the Bankruptcy Notice;
d)It is not accompanied by, nor has the applicant served the respondent with, any independent opinion verifying the accuracy of the amount claimed by the applicant as owing;
e)It is not accompanied by, nor has the applicant served the respondent with, any substantiating documentation verifying the accuracy of the amount claimed as owing as all the affidavits filed in support of the Petition have been sworn by interested parties or contain inadmissible hearsay evidence;
f)It is not accompanied by, and the applicant has not served the respondent with, any documentation or evidence that discharges the burden of proof demonstrate that the debt owed is in excess of the securitised asset with a value of $450,000 (s.34A of the Act); and
g)The apparent basis of the applicant’s calculation of the amount of $2,506,422.23 claimed in the Creditor’s Petition and $837,659.15 in the Bankruptcy Notice is not in accordance with the rules of the Court and Schedule 5 of the Uniform Civil Procedure Rules and s.101 and s.136 of the Uniform Civil Procedure Act 2005 (NSW) and the Federal Magistrates Court Bankruptcy Rules.
Mr Mollinger acknowledges that the Court has jurisdiction to cure defects in form under s.306 of the Act. However, the Creditor’s Petition contains defects that are beyond defects in form, and constitute defects of substance which are of a kind that are:
i)Manifestly and consistently incorrect and not in accordance with the rules of Court; and
ii)Likely to mislead, confuse or deceive the respondent as to the requirements for discharge of the debt.
Mr Mollinger submits that the applicant ought to be estopped from relief under s.306 of the Act and relies on Adams v Lambert [2006] HCA 10 which he says approves of s.306 as being a slip rule to cure defects. Mr Mollinger submits that the applicant has clearly demonstrated that its ability to calculate the correct amount to be claimed in its Creditor’s Petition is beyond a mere “slip”. Mr Mollinger claims that throughout successive adjournments and notwithstanding correspondence from him and evidence he has filed, Provident continued to advance five different figures as the amount of the debt owing. Mr Mollinger submits that as the applicant has not discharged its burden under s.34A and s.52 of the Act to prove that:
a)The debt is in excess of $450,000 (the value of the securitised assets); or
b)The debt as claimed has been calculated in accordance with the rules of Court.
Mr Mollinger also submits that it cannot be established that he will not suffer prejudice as a result of a sequestration order.
Mr Mollinger further submits that the Petition is not in the prescribed form as required by s.52 of the Act. Notwithstanding any application of s.306, the applicant’s conduct and its documents submitted both before and during these proceedings demonstrate that it is unaware of what is required to rectify defects in this documentation.
Mr Mollinger relies on his affidavit sworn on 10 September 2008 and filed on 12 September 2008 which states:
11. It is apparent of the sworn affidavit of Mr Michael O’Sullivan that interest has been calculated at all material times on the original judgment sum, having no regard to reduction in the principle amount by successive payments to the applicant.
12. As at the date of swearing this affidavit I have not received any correspondence or any affidavit from the independent third party verifying the alleged debt claimed by the applicant in its Creditor’s Petition, or as deposed by Mr Michael O’Sullivan in his affidavit sworn 29 August 2008.
15. My affidavit sworn 7 July 2008 [] and filed with the Court in this matter, deposes to prior correspondence (including the applicant’s Bankruptcy Notice and Creditor’s Petition) which on each occasion claims different amounts owed to the applicant, notably:
a) a letter to myself dated 3 July 2007 claiming $1,590,145.00 referred to in paragraph 17 of my affidavit sworn 7 July 2008 and a copy of which is annexed hereto and marked with the letters BJM-01;
b) a letter to Hans Peter Mollinger (and presumably intended for myself also) dated 22 February 2008 claiming $1,309,835.37, referred to at paragraph 16 of my affidavit sworn 7 July 2008 and a copy of which is annexed hereto and marked with the letter BJN-02;
c) the applicant’ Bankruptcy Notice claimed of $837,659.00 referred to at paragraph 12 of my affidavit sworn 7 July 2008; and
d) the applicant Creditors Petition claim of $2,506,422.23 referred to at paragraph 13 of my affidavit sworn 7 July 2008.
Mr Mollinger submits that the Court must be informed and directed by s.34A of the Act which states:
Standard of proof
(1) Where, in proceedings in the Court (other than proceedings for an offence), it is necessary, for a purpose relating to a matter arising under this Act, to establish, or for the Court to be satisfied as to, a particular fact (including a contravention of this Act), it is sufficient if that fact is established, or the Court is satisfied as to that fact, as the case may be, on the balance of probabilities.
(2) Subsection (1) has effect except to the extent that this Act expressly provides otherwise.
It is submitted that this provision is directive and not discretionary. Mr Mollinger further submits that if the applicant fails to discharge this burden of proof then s.34A directs the Court to dismiss the Creditor’s Petition as the applicant’s conduct has been with such disregard to due process, natural justice, civil procedure and the rules of Court that the dismissal ought to be without prejudice. To permit the applicant to refile or amend its Creditor’s Petition is contrary to the legislation.
Mr Mollinger submits in the alternative that the applicant has not presented sufficient evidence to discharge the burden of proof that the debt owed is in excess of the value of the assets over which the applicant holds security. He relies on para.15 of his third affidavit sworn 12 September 2008 (reproduced at [8] above) and correspondence sent by the applicant’s solicitors to him dated 24 September 2008.
Mr Mollinger argues that the applicant’s conduct has at all times been likely to confuse, mislead and deceive the respondent as to what was required to discharge the debt arising from the judgment debt. It is submitted that there have been lengthy delays, attributed solely to the purpose of curing defects in the applicant’s case. As a result of this delay interest on the debt has continued to accrue to the detriment of the respondent debtor.

Mr Mollinger claims that the Bankruptcy Notice contains overstated claims as to the quantum of the debt with the result that he has lost the right to a remedy under s.41(5) of the Act. It is claimed that the Bankruptcy Notice was filed prematurely and consequently Mr Mollinger that he has suffered prejudice in community standing and his credit records. He claims that this has resulted in him having a lower chance of negotiating alternative means of finance to satisfy the debt.
Mr Mollinger further submits that the misleading assertions of Provident as to the correct amount owing resulted in his exploring alternative means of finance in an attempt to discharge the debt. As a consequence of this prejudice the applicant would not be entitled to recover:
a)Any amount above the securitised value of the remaining assets, being the premises located at 3/9 Seaview St, East Ballina, New South Wales; or
b)Any interest accruing from 3 July 2007, being the date of the first known documented misrepresentation on the evidence before the Court (first affidavit of Mr Mollinger, Annexure “BJM-04”; third affidavit of Mr Mollinger).
Mr Mollinger submits that the sale and disposal of funds from the sale of the dwelling located at 16 Henderson Drive, Lennox Head, New South Wales, resulted in adverse and prejudicial treatment of a protected asset under the Act. This is because the asset was jointly owned by the respondent debtors out of the funds acquired as a result of personal injury compensation monies. Mr Mollinger seeks an order that Provident restore to him the relevant value of the revenue for the sale of the protected asset and secure funds against the sequestration.
Mr Mollinger submits in oral submissions that there is a suggestion that the calculation of interest under s.136 of the Civil Procedure Act 2005 (NSW) is not applicable to Bankruptcy Notices. The Bankruptcy Notice purports to rely on a debt that is a consequence of a consent judgment subject to s.136 of the Civil Procedure Act. It is submitted that the Civil Procedure Act clearly stipulates how interest should be calculated and the evidence before the Court demonstrates that the Provident did not calculate interest in accordance with that Act. Consequently the Bankruptcy Notice relies on defective documentation in respect of the purported act of bankruptcy. In addition there is a suggestion that a simple interest calculation rather than compound interest calculation has been used. Mr Mollinger relies on his written submissions in respect of s.136 of the Civil Procedure Act to demonstrate that the applicant has failed to discharge its duties in calculating interest accordingly.

Submissions on behalf of the applicant creditor

Ms Nolan submits that the assertion that the Creditor’s Petition was not served in accordance with the Rules and the Act is addressed in two aspects of the evidence. She submits that there has been no request to cross-examine Mr Richardson and consequently his evidence is uncontested. Mr Mollinger deposes that he was not personally served with the Petition in accordance with the Rules. Ms Nolan refers the Court to para.2 of the first affidavit of Mr Mollinger where he attests to having discovered in his letterbox in early May 2008 a copy of Bankruptcy Notice NN1171/08 (first affidavit of Mr Mollinger, “Annexure BJM-1”). Paragraph 10 of that affidavit states:
On the evening of Thursday 3 July 2008 I discovered a sealed creditor’s petition that has been slipped under the door of my residential premises (at unit 4, 5 Wickham St) and consider this the date of receipt of this document.
This is an admission of receipt which complies with reg.16.01(1)(c) of the Bankruptcy Regulations 1996 (Cth):
Service of documents
(1) Unless the contrary intention appears, where a document is required or permitted by the Act or these Regulations to be given or sent to, or served on, a person (other than a person mentioned in regulation 16.02) , the document may be:
(c) left, in an envelope or similar packaging marked with the person's name, at the last‑known address of the person; or
Ms Nolan submits that on Mr Mollinger’s own evidence, the applicant creditor has discharged its obligation of service with regard to the Bankruptcy Regulations and the Act.
Ms Nolan submits that ground four of the Notice of Objection claims that the Creditor’s Petition is manifestly defective in substance because it does not adequately or correctly first affidavit state the value of the debt. Ms Nolan submits that the Creditor’s Petition as amended does reflect the correct value of the debt. In support of this contention Ms Nolan relies on the affidavit of Mr O’Sullivan sworn on 29 August 2008 and para.5 which attests to the methodology in calculating and the principle sums and interest owing pursuant to the Court’s judgment. This was calculated at the relevant rate of 9% until a change of rate at the end of 2006 to 10%. It is submitted that is in accordance with Schedule 5 of the Uniform Civil Procedure Rules.
Ms Nolan further submits that para.20 of the first affidavit of Mr Mollinger sets out to the best of his knowledge the relative prices received for sale of the properties. Ms Nolan argues that at no stage had Mr Mollinger indicated his conclusive knowledge as to the sale of those properties. Ms Nolan relies on the affidavit of Mr O’Sullivan where the principle repayments are disclosed. Mr Mollinger states at para.20(a) of his first affidavit that to the best of his knowledge and belief the property at 16 Henderson Street, Lennox Head, sold for $444,976.25. It is submitted that if the Court takes into account the principal repayments on 27 and 29 July 2005, they total approximately $444,000. The difference is almost negligible. Paragraph 20(b) of the first affidavit of Mr Mollinger states that the property at 1/9 Seaview St East Ballina sold for $513,919.03. The evidence shows the property sold for $555,000 which reduced the debt by $30,000 more than the figure Mr Mollinger is disputing. Consequently, Ms Nolan submits that there is no real prejudice to Mr Mollinger. The property at 2/9 Seaview St East Ballina was to be sold for $438,140.52, whereas the sale realised $474,000, which again exceeds the figure claimed by Mr Mollinger. Ms Nolan submits that the debt is actually smaller than that claimed by Mr Mollinger.
In reply to Mr Mollinger’s allegation that all affidavits in support of the Petition have been sworn by interested parties or contain heresay evidence, Ms Nolan relies on s.171 of the Evidence Act 1995 (Cth) which empowers a person such as Mr O’Sullivan to swear an affidavit as the duly authorised person of the organisation.
In respect of Mr Mollinger’s submissions (at para.15(f) and (g) above) that there had been gross inaccuracies in the value of the debt recorded in the Creditor’s Petition – specifically the $2,506,420.23 claimed in the Petition and $837,659.15 in the Bankruptcy Notice – were not in accordance with the Rules and Schedule 5 of the Uniform Civil Procedure Rules, Ms Nolan referred to the s.136 of the Civil Procedure Act:
136 Appropriation of payments towards judgment debt
Unless the court otherwise orders, any payment made on account of a judgment debt is to be appropriated:
(a) firstly, towards such part of the judgment debt as comprises interest payable under section 101, and
(b) secondly, towards the balance of the judgment debt.
It is submitted that s.136 is not relevant in this case as the mortgagee (Provident) has made no attempt to accept payment in any way other than by simple principal and interest, in a manner usually applied in non-bankruptcy proceedings. Ms Nolan submits that Mr Mollinger will not suffer prejudice as a result of any sequestration order. Annexure “BJM-9” to the first affidavit of Mr Mollinger is an estimate of debt owing which falls within the confines of lay opinion evidence. This is estimated to be $265,716.00. Ms Nolan also submits that there has been no reference to Mr Mollinger’s solvency in oral or written submissions, or his ability to meet that debt and what assets could be realised. She submits that the assertion is completely unsubstantiated by any evidence and is made purely to cure the defect identified at [29].
Ms Nolan submits that the assertion that Provident did not bring witnesses to Court to give evidence substantiating the debt in these proceedings cannot be sustained. Mr O’Sullivan, whose affidavit was filed and read in these proceedings, has not been called for cross-examination. Neither have Notices to Produce in subpoena been pursued.
With respect to interest, Ms Nolan submits that interest has been calculated on a simple interest basis rather than on a compound basis. In the absence of any rule, the suggestion that the interest has been calculated incorrectly is not sustainable.

Consideration

Application to amend Creditor’s Petition

This Court has the power to allow the amendment of a Creditor’s Petition: s.33(1)(b) of the Act; r.7.01 of the Rules; O.13 of the Federal Court Rules (Cth). However, the Court will only permit an amendment when it is satisfied that no injustice will be done to other parties: Re Small; ex parte Westminster Bank v Trustees [1934] Ch 541.
An application ought to be made by way of a Notice of Motion, but the Court has power to dispense with that requirement: O.19.2(2)(d) of the Federal Court Rules; Matthews v Collett [2000] FCA 224. In McDonald v Official Trustee in Bankruptcy [2001] FCA 140, the Full Court said:
There is extensive authority for the proposition that the power of amendment in s.33(1)(b) extends to authorising the amendment of petitions to cure omissions of allegations made mandatory by various provisions of the Bankruptcy Act and rules, ie, to cure what can be accepted to be more serious deficiencies in petitions than “formal defects or irregularities” within s.306.
A Petition amended under s.33 of the Act is not subject to the requirement of re-verification: Thai v Deputy Commissioner of Taxation (1994) 53 FCR 252; Joseph Richard Bryant v Commonwealth Bank of Australia [1995] FCA 971.
In these proceedings, no Motion seeking an amendment of the Creditor’s Petition has been filed. Ms Nolan seeks to rely on the affidavit of Mr O’Sullivan to correct a procedural error, being the failure to take into account the relevant payments made in reduction of the debt. Mr O’Sullivan’s affidavit seeks to correct that discrepancy. Ms Nolan sought leave for the Petition be amended pursuant to the outstanding debt.
The affidavit of Mr O’Sullivan states:
1. I am the Managing Director of the applicant creditor and as such have access to the books and records of the applicant creditor. I am duly authorised to swear this affidavit on behalf of the applicant.
2. I refer to the affidavit of Theresa O’Hare, former Head of Credit and Lending sworn 6 June 2008 in support of the Creditor’s Petition filed 11 June 2008 and say that the respondent debtor owes the applicant creditor the amount for an unpaid judgment of the Supreme Court of New South Wales entered on 31 January 2005 in relation to the matter 13129 of 2004. The judgment debt is the sum of $1,904,009.75 plus costs in the sum of $2,519.00. The interest on the judgment stands in the sum of $644,807.25, subject to the payments and contributions made since 31 January 2008 as set out at paragraph 5 below.
3. The applicant creditor continues to hold security over the property of the respondent debtor to the value of $450,000.00.
4. The outstanding debt, without accounting for the payments or contributions made since that date, without taking into account the security as set out at paragraph 3 above, is $2,548,817.00.
5. The current amount of the debt outstanding is $600,464.21. This figure has been arrived at using the following methodology. Since the date of judgment in this matter being 31 January 2005:
a. The Respondent Debtor has made principal repayments totalling $1,475,93.45.
b. The Respondent Debtor has made interest repayments totalling $23,159.34.
c. The total amount of payments and/or contributions as referred to in paragraph 5(a) and (b) above is $1,498,352.79, reducing the amount owing under the judgment debt to $1,050,464.21.
d. Taking into account the unrealised security referred to in paragraph 3 above, this leaves a total debt outstanding of $600,464.21.
6. This debt remains owing at the time of swearing this affidavit.
7. Annexed and marked “A” is a copy of a Microsoft Excel spreadsheet used to determine the debt outstanding.
The authorities make it clear that an amendment to a Creditor’s Petition under s.33 of the Act is not subject to verification, see Thai v Deputy Commissioner of Taxation at [104] per Lockhart, Beaumont and Whitlam JJ:
104. Counsel for Mr Thai submits that, if the appeal is allowed, it would be futile to order a retrial of the petition, as amended. This is said to be because, when the amended petition was filed on 28 April 1994, it was not accompanied by an affidavit verifying as required by s. 47(1)(b) of the Act. However, that requirement relates only to the creditor's petition when it is presented, which only occurs once. Rules 12, 13, 15 and 16 of the Bankruptcy Rules proceed on this correct construction of the Act. An amendment allowed under s. 33 of the Act is not subject to verification, which is the procedure laid down for the purposes of instituting a proceeding on a creditor's petition.
The other issue to determine in respect of the application to amend the Creditor’s Petition is whether any injustice will be done to other parties. Mr Mollinger has demonstrated by the filing of his third affidavit and his submissions that he is well aware that Provident was seeking to amend the Creditor’s Petition to the extent stated in Mr O’Sullivan’s affidavit. In the circumstances, I am satisfied that a Notice of Motion seeking to amend the Creditor’s Petition should be permitted.

Grounds of opposition

The grounds of opposition to the Petition as set out in the amended Notice which has been reproduced at [5] above.
The issue of verification has been considered above, leaving the question of whether the Bankruptcy Notice and subsequent Creditor’s Petitions are misleading. The Bankruptcy Notice issued to Mr Mollinger and his parents is based on a consent judgment issued in the Supreme Court of New South Wales, number 13129 of 2004. The judgment was for the amount of $1,904,009.75 and for costs of $2,509.00. Both figures are accurately recorded in the schedule to the Bankruptcy Notice.
The calculation of interest is set out in Annexure B to the Bankruptcy Notice and calculated at 9% for the period of 31 January 2005 to 31 December 2006 (being 700 days) and at 10% for the period 1 January 2007 to 3 April 2008 (being 459 days). Both interest rates are in accordance with Schedule 5 of the Uniform Civil Procedure Rules. The result of that calculation is interest totalling $568,073.05, which again has been accurately recorded in the Schedule to the Bankruptcy Notice.
Item 5 of the Schedule records payments made and/or credits allowed since the date of judgment, totalling $1,636,942.65. It is noted that the Mollingers’ principal private residence at 18 Henderson Drive, Lennox Head, was sold with the sale completed on 26 July 2005. An amount of $444,976.24 was received by Provident (Exhibit “R3”, Annexure 8). Sale of the property known as 1/9 Seaview St, East Ballina was settled on 28 February 2006 and resulted in a payment of $513,933.03 to Provident (Exhibit “R3”, Annexure 9). Similarly, the property known as 2/9 Seaview St, East Ballina, was sold on 12 April 2007 and $438,140.52 being paid to Provident (Exhibit “R3”, Annexure 10).
These capital repayments are not reflected to reduce the interest calculations in the Schedule to the Bankruptcy Notice. No evidence was led, nor submissions made, in respect of a reduction in the principle amount using the interest calculations set out in Annexure B to the Notice. Indeed, those reductions would have resulted in a substantial reduction in the amount of interest claimed.
Unfortunately, the Mollingers, through oversight or ignorance, did not dispute the validity of the Bankruptcy Notice in accordance with s.41(5) of the Act. A review of the authorities supports the view that such a notice in accordance with s.41(5) invalidates a Bankruptcy Notice whether or not the overstatement could reasonably mislead the debtor: Re Greenhill; ex parte Myer (NSW) Ltd (1984) 5 FCR 84; Re Emerson; Ex parte Wreckair Pty Ltd (1991) 101 ALR 315; Seovic Civil Engineering Pty Ltd v Groeneveld (1999) 161 ALR 543.
The time prescribed by s.41(5) of the Act may be extended by the Court under the s.33(1)(c) of the Act: Re Wilhelmsen; ex parte Gould (1986) 11 FCR 107; Re Clubb; ex parte Clubb v Westpac Banking Corporation (1990) 93 ALR 123. Again, no application has been made in respect of this issue. I note that doubt was expressed as to whether such an order could be made after the act of bankruptcy which was 18 May 2008.
The Creditor’s Petition was presented on 11 June 2008 and the Notice stating Grounds of Opposition to the Creditor’s Petition was filed on 8 July 2008. Although Mr Mollinger does not specifically address the calculation of interest in his Grounds of Opposition, he does mention it ground four, albeit without particularisation. In other grounds, Mr Mollinger identifies the sale of properties since the Supreme Court judgment that have had a direct impact on the principal amount owing. Both parties made submissions in respect of the interpretation of the Uniform Civil Procedure legislation but did not specifically address a reduction in the principal amount and any impact that would have on calculation of interest. In a hypothetical situation a very substantial amount could have been paid towards the judgment debt, making a significant difference to the interest calculated. Depending on this difference in interest calculated, the question of Mr Mollinger’s solvency could significantly change. I believe this issue of a discrepancy in interest should be addressed properly prior to the resolution of this matter.
In the circumstances, I believe that the parties should be provided with the opportunity to prepare written submissions, supported by authorities, clarifying the calculation of interest claimed on the judgment debt when subsequent repayments are made after the date of judgment or orders. The parties should address whether these payments or credits should be taken into account in the calculation of interest.

I certify that the preceding fifty-one (51) paragraphs are a true copy of the reasons for judgment of Lloyd-Jones FM.

Associate:

Date: 18 June 2009