Re Batiste, D.M.
[1991] FCA 379
•28 May 1991
IN THE FEDERAL COURT OF AUSTRALIA 1 GENERAL DIVISION 1 BANKRUPTCY DISTRICT OF THE
1 No. B3068 of 1990 1
RE : DONNA MARIA BATISTE
Applicant/DebtorEX PARTE: TRIDELTIC PTY LTD
Respondent/Creditor
EX TEMPORE REASONS FOR JUDGMENT
This is an application by Donna Maria Batiste, the applicant, to set aside a bankruptcy notice dated 26 September 1990 and served upon her. The application seeks, as well, a declaration that no act of bankruptcy has been committed by the applicant in respect of failure to comply with the notice. However, that declaration is no longer sought. The application was not opposed.
with the applicant to pay the respondent's costs.
The bankruptcy notice was based upon a judgment obtained by the respondent against the applicant. It seems that proceedings were commenced by the respondent in the commercial list of the Supreme Court of New South Wales in 1986 and judgment was thereafter entered against the applicant without a hearing. Damages were ultimately assessed in the sum of $776,822.27 and verdict was entered accordingly for the respondent against the applicant in the sum of $983,723.01
The amount ordered to be paid arose out of a guarantee said to have been given by the applicant to the respondent. Evidence has been adduced before me that makes it clear that the applicant, although she had signed the form of guarantee under seal, delivered it in escrow subject to various conditions that were never fulfilled. Although her evidence was not particularly positive on all the circumstances surrounding the execution of the document, it is supported by her solicitor, who also gave evidence, and for the purposes of these proceedings only, the respondent concedes that the amount in respect of which verdict was entered was not a true debt.
I was advised from the bar table that an application has been made to set aside the Supreme Court judgment, but those proceedings have not yet been disposed of within the time prescribed by s.41(5) of the Bankru~tcv Act 1966 (Cth) ("the Act"), that is to say, within the time allowed for
payment by the bankruptcy notice.
A notice under s.41(5) was given by the applicant to the respondent notifying it that she disputed the validity of the bankruptcy notice on the ground that the sum specified in it as the amount due to the respondent exceeded the amount in fact due. Matters referred to in the notice under s.41(5) concerned items not now argued before me. Nevertheless, a notice was given in terms of s.41(5) and the grounds of objection are not required to be stated by that sub-section and do not form part of the notice itself. I see no reason why the reference to reasons contained in a notice under s .41(5) should be regarded as binding upon a debtor who gives such a notice should it turn out that there are other reasons which require the conclusion that the sum stated in the bankruptcy notice was overstated. A similar view was taken by Pincus J in Re Wilhemsen: Ex Darte Gould (1986) 66 ALR 189.
There is little doubt that the court has power to set aside a bankruptcy notice. At least a source of that power is to be found in s.30 of the Act, see Re Sterlina: Ex parte Esanda Limited (1980) 44 FLR 125. The problem that arises in the present case is that the application to set aside the bankruptcy notice was made after the time limited by that notice, for compliance, had expired, and in circumstances where no application had been made in time under the provisions of ss.41(6A) or (6B) to extend the time for
compliance with the requirements of the bankruptcy notice.
The issue for decision, therefore, is whether the court should
set aside the bankruptcy notice when, prima facie being valid, an act of bankruptcy would have occurred, so that it may be said to be misleading to other creditors so to do. I do no more than note at this stage that this way of stating the issue assumes that an act of bankruptcy has, in the present circumstances, been committed.
Counsel for the applicant submitted that the bankruptcy notice was defective and for that reason should be set aside. He submitted in the alternative, and perhaps also cumulatively, that no act of bankruptcy had in the circumstances been committed.
The first matter upon which counsel for the applicant placed reliance was the fact that underlying the judgment in favour of the respondent was no true debt. This fact alone, the applicant submitted, was sufficient to make the bankruptcy notice invalid. I was referred to the decision of Lockhart J in Re Francis: Ex Darte Gartrell (1983) 77 FLR
80. In that case, the bankruptcy notice required the debtor to pay the sum claimed to the Registrar of the District Court at Orange. Under the terms of the judgment, however, it was not payable at Orange but elsewhere. In that case, like the present, the time for compliance with the bankruptcy notice had expired before the proceedings in this court to set aside
these circumstances that an order would be made setting aside the bankruptcy notice were commenced. Lockhart J held in the bankruptcy notice notwithstanding that the time for compliance with it had expired. In so doing his Honour distinguished cases such as Re Hanbv: Ex Darte Fleminaton Central Spares Ptv Ltd (1967) 10 FLR 378 and Re Vella: Ex parte Sevmour (1983) 67 FLR 287. The first of those two cases, a judgment of Gibbs J, was not an application to set aside a bankruptcy notice. In that case, at the hearing of the petition it was contended that where the judgment underlining the bankruptcy notice had been set aside, it could no longer be treated as a final judgment. What had happened in that case was that the judgment had been set aside and the debtor let in to defend. Subsequently, the proceedings in the District Court were settled upon terms that the verdict be for a sum smaller than the amount for which the original default judgment had been entered.
Gibbs J, in a passage cited in full by Lockhart J in Re Francis (supra at 85), pointed out that the critical time for determining whether an act of bankruptcy had been committed was the date on which the period limited by the bankruptcy notice expired. As at that time, the judgment was on foot and his Honour said (at 381):
"It is not possible to say that by reason of subsequent circumstances an act of
bankruptcy once committed ceases to have
been committed or must be treated as though it had never been committed. "
Lockhart J also makes reference to the decision of Morling J in Re Vella: Ex Darte Sevmour (supra). It is said by his Honour that the facts are similar to those in W ,
this is only partly so. In Re Vella the applicant made application to this court, after the time limited for compliance with the bankruptcy notice had expired, to set aside a bankruptcy notice. The bankruptcy notice was based upon a default judgment which had been set aside, it would seem, totally. Morling J was of the view that the subsequent setting aside of the judgment did not alter the fact that the act of bankruptcy had already been committed. His Honour pointed out that at the time a petition was heard, a court would not make a sequestration order unless it was shown at that time that the judgment debtor was in fact indebted to the judgment creditor. Nevertheless, in his Honour's view, the act of bankruptcy was complete. In this respect, his Honour referred to the judgment of Gibbs J in Re Hanby. His Honour (at 292) declined to exercise the power under S. 30(1) of the Act to set aside the bankruptcy notice once the act of bankruptcy had taken place because, if the notice were to be set aside at that point of time, in his Honour's view, the impression would be created that no act of bankruptcy had been committed. That impression would be a misleading one.
The general position must therefore be seen to be, that in a case where a judgment has been set aside and not
substituted by some other judgment, the court would not
intervene to set aside the bankruptcy notice after the time for compliance had expired, yet such is a case where clearly there was no true debt underlying the bankruptcy notice. On the other hand, in a case such as Re Francis where the notice itself was defective as, for example, not complying with the provisions of ~.41(2)(a)(i) of the Act, and in circumstances where the defect could not be regarded as a merely formal one, the court would act to set aside the bankruptcy notice, taking the view that the bankruptcy notice was at all times invalid. The present is not, but for the argument under S. 41 (5) of the Act, a case where, in the sense used by Lockhart J in
Francis, the bankruptcy notice was invalid. In anticipation that I might be constrained to take this view, counsel for the applicant relied, as I have indicated, also on the provisions
of s.41(5). That sub-section provides as follows:
"A bankruptcy n o t i c e i s not i n v a l i d a t e d by
reason o n l y t h a t t h e sum s p e c i f i e d i n t h e
n o t i c e a s t h e amount due to t h e c r e d i t o r
exceeds t h e amount i n f a c t due, un le s s t h e
d e b t o r , w i th in the t i m e a l lowed f o r payment, g i ve s n o t i c e to t h e c r e d i t o r t h a t
he d i s p u t e s the v a l i d i t y o f t h e n o t i c e on
t h e ground o f t h e mis - s ta tement . "
The first question that arises under s.41(5) is the
meaning of the words " t h e amount i n f a c t due" which appear in
it. On a narrow view of the sub-section, those words refer to
operation for s.41(5) would be where the amount owing under the amount due under a judgment. On this basis the only the judgment was in fact overstated. The alternative view of the words is that the reference to " t h e amount i n f a c t due" is a reference to the amount which the court determines is due where the court goes behind the judgment itself. The second of those views was adopted by Clyne J in Re Prossimo: Ex uarte De Marco (1952) 16 ABC 86 under the corresponding provisions
of the then Bankruutcv Act. His Honour said (at 89-90):
" I th ink c l . ( i i ) i n s . 5 3 can i n c e r t a i n
circumstances c r e a t e an excep t ion to t h a t
part o f t h e first paragraph o f s . 5 3 which
enac t s t h a t t h e n o t i c e should r e q u i r e the
d e b t o r to pay the judgment deb t according to the terms o f t h e judgment."
It would be, I think, a forced construction of the words " t h e amount a c t u a l l y due" if they were construed as meaning the amount actually due under the judgment, and not the amount due in fact. The words " a c t u a l l y due" must, I think, refer to what is due in reality.
Some doubt may perhaps in the meantime have been cast upon what was said by Clyne J by the judgment of Gummow J in the full court of this court in Olivieri v Stafford (1989) 24 FCR 413. In that case a bankruptcy notice had been issued which the debtor claimed was for an amount in excess of the amount in fact due by him. The judgment debt had been obtained in the District Court in circumstances where the
debtor, having failed to obtain an adjournment, withdrew from the proceedings. In due course an appeal to the Court of Appeal was dismissed, as also was an application to set aside the judgment in the District Court.
The amount of the mis-statement was said to arise out of a mistake in invoices and was of a relatively minor sum. The size of the discrepancy, however, is of no great materiality when one is concerned with s.41(5). By majority, the full court dismissed an appeal by the debtor against the decision of the trial judge refusing to set aside the bankruptcy notice.
The reasons for judgment are not consistent. Beaumont J was of the view that the case was not one where the Court of Bankruptcy should go behind the judgment to determine the real debt because the circumstances were such that there had been a process of adjudication, including proceedings to set aside the debt, which had been unsuccessful. In the result it was not possible to speculate about the antecedent transactions which underlay the judgment and the notice was to be taken as accurately stating the amount due by the debtor to the creditor.
Gummow J, though agreeing that the appeal should be
dismissed, did so, as his Honour observes (at 427), for
reasons different from those of Beaumont J. Some of the
comments made by his Honour suggest that the decision of Clyne J in Re Prossimo should be read having regard to the change in the current legislation and particularly having regard to the insertion of ss.41(6A), (6B) and (6C) into the Act by s.24 of the Bankruptcv Amendment Act 1980 (Cth). His Honour suggests that the significance of those changes was not drawn to the attention of the court in later cases which have followed & Prossimo. His Honour, however, fell short of deciding that & Prossimo should no longer be followed.
Gummow J points out that Olivieri v Stafford is a case where, if the court went behind the debt the subject of the judgment, there still remained an indebtedness in the sum greater than that needed to found bankruptcy proceedings, but his Honour found it unnecessary to express a concluded view as to whether it was appropriate for extensions of time to be granted under s.46 of the Act in such cases. The present, which of course does not concern extensions of time and is a case where, if one goes behind the debt, there is just no debt at all upon which a petition could be founded, is clearly different. In any event, his Honour was of the view, on the facts of that case, that the court should not go behind the judgment debt in the circumstances where on the debtor's case to do so would still leave a substantial sum due and owing but unpaid.
The third member of the court, Sweeney ACJ, was of
the view that the language of s.41(5) was wide enough to cover
proceedings to the trial judge to determine the question of the case before the court and would have remitted the whether a true debt really did lie behind the judgment. Sweeney ACJ accepted the authority of the decision in Re Prossirno. The difference between the members of the court perhaps lay more in matters of discretion than on matters of principle.
It follows, in my view, that one can still regard Re Prossimo as of authority and as indicating that, provided notice has been given under S .41(5) of the Act, a debtor will be able to show there has been a mis-statement in a bankruptcy notice where the amount claimed in the bankruptcy notice exceeds the amount in fact due.
It has been accepted that where the bankruptcy notice contains a mis-statement of the kind referred to in s.41(5), the bankruptcy notice is invalid. The cases do not suggest that one asks the question in such circumstances whether the mis-statement is such as to mislead or perplex a debtor in the circumstances of the debtor to whom the bankruptcy notice is addressed. This is so, notwithstanding that s.41(5) does not itself state specifically that a bankruptcy notice over-stating a debt is invalid in all circumstances, cf Re Greenhill: Ex Darte Mver (NSW) Limited (1984) 5 FCR 84, a case referred to by Beaumont J in Olivieri v Stafford (at 4 2 6 ) , without apparent disapproval, though
referred to by Gummow J (at 429) in the context of cases which
had not understood the significance of the changes in the
Bankru~tcv Act. It follows accordingly that the debtor has shown that the bankruptcy notice is defective and invalid in the same sense that Lockhart J referred to in his Honour's decision in Re Francis.
I was referred to an unreported judgment of French J in Re Duckworth: Ex Darte Lockett ( 12 February 1987) which was referred to in McDonald Henry and Meek Australian Bankru~tcv
Law and Practice as perhaps authority to the contrary of Francis. I have perused that decision. Its facts were more similar to Re Vella than they were to Re Francis and his Honour expressed the view consistent with Re Hanby and Vella, neither of which were referred to in the judgment, that the scheme of the Act was inconsistent with the existence of a power to set aside a bankruptcy notice after the time for compliance with it has expired and no extension has been granted.
While with respect I have much sympathy for the view expressed by French J as being a general proposition, it is inconsistent with the view taken by Lockhart J, and in circumstances where the facts of the two cases are totally distinguishable, I would follow the decision of Lockhart J on
of the view that it was clearly wrong. Nothing that was said the confined basis which I have indicated, unless I were to be by French J leads me to that conclusion, and as a matter of comity, therefore, I would adopt the view taken by Lockhart J.
In these circumstances it is not necessary to consider a third argument based upon comments made by Beaumont J in Re Browbank and Miller: Ex parte Loniplus Ptv Ltd (1985)
12 FCR 254. I would accordingly set aside the bankruptcy notice dated 26 September 1990. There remains the question of costs. Counsel for the applicant relies heavily upon two documents, a notice to admit facts and a notice to produce documents, as signifying the clear intention on the part of his client to argue in this court that the judgment debt was based upon an ineffective guarantee, the escrow conditions not having been satisfied. Those documents were given in November 1990. Despite the giving of those documents, the respondent continued to oppose the present proceedings and, in due course, affidavits were ordered to be prepared and filed and considerable costs were incurred. Accordingly, the order which counsel for the applicant suggests is appropriate is that the respondent pay the applicant's costs until today or until such time at least as the respondent indicated that it would not oppose the applicant's application.
The respondent, on the other hand, pointed to the fact that the applicant had not sought to set aside the judgment in the Supreme Court notwithstanding that the applicant was aware at least of the grounds so to do and counsel had been instructed on her behalf to set aside the judgment in the Supreme Court, but those proceedings had not been proceeded with. Counsel for the respondent also pointed to the fact that although the applicant had, in correspondence, detailed various grounds upon which it was said that the bankruptcy notice should be set aside, none of those were the grounds actually argued before me and that the giving of a notice to produce and notice to admit would not ordinarily be thought as the appropriate way of notifying what amounted to a total change of case.
I was directed to a decision of Pincus J in which, upon the facts of a particular case, his Honour had ordered that each party pay its own costs. However, where matters of discretion are involved one gets very little assistance from reading reports of decided cases on totally different factual situations. On the whole it seems to me that the appropriate order, at least up to the time in which the respondent conceded the applicant's case, namely 28 May 1991, is that each party pay its own costs. It was then said by counsel for the respondent, however, that from and after that date the costs should be borne by the applicant. I do not know whether there was, in truth, any expense incurred between 28 May 1991
and the time of the present hearing, although I have some doubt whether there would have been. The substantial costs, of course, are the costs of the present proceedings before me. Those are proceedings in which the applicant was not opposed. They were proceedings which concerned a difficult question of law and proceedings which had to be litigated irrespective of the consent, or otherwise, of the respondent. Although it is a very minor matter in the overall exercise of the judicial discretion to award costs, I am not unmindful of the fact that the presence of the respondent today, represented in court by counsel, has been, in fact, of considerable assistance to the applicant, particularly as regards concessions that were made at the time of the hearing. In these circumstances it seems to me that the appropriate order, so far as the costs of today are concerned, is that the applicant bear the respondent's costs.
Accordingly, the cost order I make is as follows: that each party bear its own costs of the proceedings up to today and that the respondent's costs be borne by the applicant for the proceedings today.
I certify that this and the
preceding fourteen (14) pages
are a true copy of the Reasons
for Judcrment herein of his Honour
Mr ~ustice Hill. Associate:
Date: 2 8 M
Counsel and Solicitors P.L.G. Brereton instructed for Applicant/Debtor: by Blessington Judd Counsel and Solicitors G. Blake instructed by for Respondent/Creditor: Greaves Wannan & Williams Date of Hearing: 28 May 1991 Date Judgment Delivered: 28 May 1991
IN THE FEDERAL COURT OF AUSTRALIA ) GENERAL DIVISION )
BANKRUPTCY DISTRICT OF THE ) No. B3068 of 1990
)
RE : DONNA MARIA BATISTE
~pplicant/DebtorEX PARTE: TRIDELTIC PTY LTD
~espondent/Creditor
PLACE: SYDNEY
DATED: 28 MAY 1991
EX TEMPORE REASONS FOR JUDGMENT
This is an application by Donna Maria Batiste, the applicant, to set aside a bankruptcy notice dated 26 September 1990 and served upon her. The application seeks, as well, a declaration that no act of bankruptcy has been committed by the applicant in respect of failure to comply with the notice. However, that declaration is no longer sought. The application was not opposed.
The bankruptcy notice was based upon a judgment obtained by the respondent against the applicant. It seems that proceedings were commenced by the respondent in the commercial list of the Supreme Court of New South Wales in 1986 and judgment was thereafter entered against the applicant without a hearing. Damages were ultimately assessed in the sum of $776,822.27 and verdict was entered accordingly for the respondent against the applicant in the sum of $983,723.01 with the applicant to pay the respondent's costs.
The amount ordered to be paid arose out of a guarantee said to have been given by the applicant to the respondent. Evidence has been adduced before me that makes it clear that the applicant, although she had signed the form of guarantee under seal, delivered it in escrow subject to various conditions that were never fulfilled. Although her evidence was not particularly positive on all the circumstances surrounding the execution of the document, it is supported by her solicitor, who also gave evidence, and for the purposes of these proceedings only, the respondent concedes that the amount in respect of which verdict was entered was not a true debt.
I was advised from the bar table that an application has been made to set aside the Supreme Court judgment, but those proceedings have not yet been disposed of within the time prescribed by s.41(5) of the BankruDtcv 1966 (Cth) ("the Act"), that is to say, within the time allowed for
payment by the bankruptcy notice.
A notice under s.41(5) was given by the applicant to the respondent notifying it that she disputed the validity of the bankruptcy notice on the ground that the sum specified in it as the amount due to the respondent exceeded the amount in fact due. Matters referred to in the notice under s.41(5) concerned items not now argued before me. Nevertheless, a notice was given in terms of s.41(5) and the grounds of
objection are not required to be stated by that sub-section and do not form part of the notice itself. 1 see no reason why the reference to reasons contained in a notice under s .41(5) should be regarded as binding upon a debtor who gives such a notice should it turn out that there are other reasons which require the conclusion that the sum stated in the bankruptcy notice was overstated. A similar view was taken by Pincus J in Re Wilhemsen: Ex Darte Gould (1986) 66 ALR 189.
There is little doubt that the court has power to set aside a bankruptcy notice. At least a source of that power is to be found in s.30 of the Act, see Re Sterlinu: Ex parte Esanda Limited (1980) 44 FLR 125. The problem that arises in the present case is that the application to set aside the bankruptcy notice was made after the time limited by that notice, for compliance, had expired, and in circumstances where no application had been made in time under the provisions of ss.41(6A) or (6B) to extend the time for
The issue for decision, therefore, is whether the court should compliance with the requirements of the bankruptcy notice. set aside the bankruptcy notice when, prima facie being valid, an act of bankruptcy would have occurred, so that it may be said to be misleading to other creditors so to do. I do no more than note at this stage that this way of stating the issue assumes that an act of bankruptcy has, in the present circumstances, been committed.
Counsel for the applicant submitted that the bankruptcy notice was defective and for that reason should be set aside. He submitted in the alternative, and perhaps also cumulatively, that no act of bankruptcy had in the circumstances been committed.
The first matter upon which counsel for the applicant placed reliance was the fact that underlying the judgment in favour of the respondent was no true -debt. This fact alone, the applicant submitted, was sufficient to make the bankruptcy notice invalid. I was referred to the decision of Lockhart J in Re Francis: Ex Darte Gartrell (1983) 77 FLR
80. In that case, the bankruptcy notice required the debtor to pay the sum claimed to the Registrar of the District Court at Orange. Under the terms of the judgment, however, it was not payable at Orange but elsewhere. In that case, like the present, the time for compliance with the bankruptcy notice had expired before the proceedings in this court to set aside
these circumstances that an order would be made setting aside the bankruptcy notice here commenced. Lockhart J held in the bankruptcy notice notwithstanding that the time for compliance with it had expired. In so doing his Honour distinguished cases such as Re Hanbv: Ex ~arte Fleminaton Central SDares Ptv Ltd (1967) 10 FLR 378 and Re Vella: Ex parte Sevmour (1983) 67 FLR 287. The first of those two cases, a judgment of Gibbs J, was not an application to set aside a bankruptcy notice. In that case, at the hearing of the petition it was contended that where the judgment underlining the bankruptcy notice had been set aside, it could no longer be treated as a final judgment. What had happened in that case was that the judgment had been set aside and the debtor let in to defend. Subsequently, the proceedings in the District Court were settled upon terms that the verdict be for a sum smaller than the amount for which the original default judgment had been entered.
-
Gibbs J, in a passage cited in full by Lockhart J in Re Francis (supra at 85), pointed out that the critical time for determining whether an act of bankruptcy had been committed was the date on which the period limited by the bankruptcy notice expired. As at that time, the judgment was on foot and his Honour said (at 381):
"It is not possible to say that by reason of subsequent circumstances an act of
been committed or must be treated as bankruptcy once committed ceases to have
though it had never been committed. "
Lockhart J also makes reference to the decision of Morling J in Re
(supra). It is said
by his Honour that the facts are similar to those in -,
this is only partly so. In Re Vella the applicant made
application to this court, after the time limited for
compliance with the bankruptcy notice had expired, to set
aside a bankruptcy notice. The bankruptcy notice was based
upon a default judgment which had been set aside, it would seem, totally. Morling J was of the view that the subsequent setting aside of the judgment did not alter the fact that the act of bankruptcy had already been committed. His Honour pointed out that at the time a petition was heard, a court would not make a sequestration order unless it was shown at that time that the judgment debtor was in fact indebted to the judgment creditor. Nevertheless, in his Honour's view, the act of bankruptcy was complete. In this respect, his Honour referred to the judgment of Gibbs J in Re Hanbv. His Honour (at 292) declined to exercise the power under s.30(1) of the Act to set aside the bankruptcy notice once the act of bankruptcy had taken place because, if the notice were to be set aside at that point of time, in his Honour's view, the impression would be created that no act of bankruptcy had been committed. That impression would be a misleading one.
The general position must therefore be seen to be, that in a case where a' judgment has been set aside and not
substituted by some other judgment, the court would not
intervene to set aside the bankruptcy notice after the time for compliance had expired, yet such is a case where clearly there was no true debt underlying the bankruptcy notice. On the other hand, in a case such as Re Francis where the notice itself was defective as, for example, not complying with the provisions of s.41(2)(a)(i) of the Act, and in circumstances where the defect could not be regarded as a merely formal one,
the court would act to set aside the bankruptcy notice, taking the view that the bankruptcy notice was at all times invalid. The present is not, but for the argument under S. 41(5) of the Act, a case where, in the sense used by Lockhart J in & Francis, the bankruptcy notice was invalid. In anticipation that I might be constrained to take this view, counsel for the applicant relied, as I have indicated, also on the provisions
of s.41(5). That sub-section provides as follows:
-
"A bankruptcy notice is not invalidated by reason only that the sum specified in the notice as the amount due to the creditor exceeds the amount in fact due, unless the debtor, within the time allowed for payment, gives notice to the creditor that he disputes the validity of the notice on
the ground of the mis-statement. "
The first question that arises under s.41(5) is the
meaning of the words "the amount in fact due" which appear in
it. On a narrow view of the sub-section, those words refer to
operation for s.41(5) would be where the amount owing under the amount due under 3 judgment. On this basis the only the judgment was in fact overstated. The alternative view of the words is that the reference to "the amount in fact due" is a reference to the amount which the court determines is due where the court goes behind the judgment itself. The second of those views was adopted by Clyne J in Re Prossimo: Ex Darte
(1952) 16 ABC 86 under the corresponding provisions
of the then Bankru~tcv Act. His Honour said (at 89-90):
"I think cl.(ii) in s.53 can in certain circumstances create an exception to that part of the first paragraph of s.53 which enacts that the notice should require the debtor to pay the judgment debt according to the terms of the judgment."
It would be, I think, a forced construction of the words "the amount actually due" if they were construed as meaning the amount actually due under the judgment, and not the amount due in fact. The words "actually due" - must, I think, refer to what is due in reality.
Some doubt may perhaps in the meantime have been cast upon what was said by Clyne J by the judgment of Gummow J in the full court of this court in Olivieri v Stafford (1989) 24 FCR 413. In that case a bankruptcy notice had been issued which the debtor claimed was for an amount in excess of the amount in fact due by him. The judgment debt had been obtained in the District Court in circumstances where the
the proceedings. In due course an appeal to the Court of debtor, having failed tq obtain an adjournment, withdrew from Appeal was dismissed, as also was an application to set aside the judgment in the District Court.
The amount of the mis-statement was said to arise out of a mistake in invoices and was of a relatively minor sum. The size of the discrepancy, however, is of no great materiality when one is concerned with s.41(5). By majority,
the full court dismissed an appeal by the debtor against the decision of the trial judge refusing to set aside the bankruptcy notice.
The reasons for judgment are not consistent. Beaumont J was of the view that the case was not one where the Court of Bankruptcy should go behind the judgment to determine the real debt because the circumstances were such that there had been a process of adjudication, including proceedings to set aside the debt, which had been unsuccessful. In the result it was not possible to speculate about the antecedent transactions which underlay the judgment and the notice was to be taken as accurately stating the amount due by the debtor to the creditor.
Gummow J, though agreeing that the appeal should be
dismissed, did so, as his Honour observes (at 427), for
reasons different from those of Beaumont J. Some of thecomments made by his Honour suggest that the decision of Clyne J in Re Prossimo should be read having regard to the change in the current legislation and particularly having regard to the insertion of ss.41(6A), (6B) and (6C) into the Act by s.24 of the Bankru~tcv Amendment Act 1980 (Cth). His Honour Suggests that the significance of those changes was not drawn to the attention of the court in later cases which have followed
Prossimo. His Honour, however, fell short of deciding that
Prossimo should no longer be followed.
Gummow J points out that Olivieri v Stafford is a case where, if the court went behind the debt the subject of the judgment, there still remained an indebtedness in the sum greater than that needed to found bankruptcy proceedings, but his Honour found it unnecessary to express a concluded view as to whether it was appropriate for extensions of time to be granted under s.46 of the Act in such cases. The present, which of course does not concern extensions of time and is a case where, if one goes behind the debt, there is just no debt at all upon which a petition could be founded, is clearly different. In any event, his Honour was of the view, on the facts of that case, that the court should not go behind the judgment debt in the circumstances where on the debtor's case to do so would still leave a substantial sum due and owing but unpaid.
The third member of the court, Sweeney ACJ, was of
the view that the language of s.41(5) was wide enough to cover
proceedings to the trial judge to determine the question of the case before the court and would have remitted the whether a true debt really did lie behind the judgment. Prossimo. The difference between the members of the court perhaps lay more in matters of discretion than on matters of principle.
It follows, in my view, that one can still regard & Prossimo as of authority and as indicating that, provided notice has been given under s.41(5) of the Act, a debtor will be able to show there has been a mis-statement in a bankruptcy notice where the amount claimed in the bankruptcy notice exceeds the amount in fact due.
It has been accepted that where the bankruptcy notice contains a mis-statement of the kind referred to in s.41(5), the bankruptcy notice is invalid. The cases do not suggest that one asks the question in such circumstances whether the mis-statement is such as to mislead or perplex a debtor in the circumstances of the debtor to whom the bankruptcy notice is addressed. This is so, notwithstanding that s.41(5) does not itself state specifically that a bankruptcy notice over-stating a debt is invalid in all circumstances, cf Re Greenhill: Ex ~arte Mver (NSW) Limited (1984) 5 FCR 84, a case referred to by Beaumont J in Olivieri v Stafford (at 426), without apparent disapproval, though
referred to by Gummow J '(at 429) in the context of cases which
had not understood the significance of the changes in the
Bankruutcv Act. It follows accordingly that the debtor has shown that the bankruptcy notice is defective and invalid in the same sense that Lockhart J referred to in his Honour's decision in Re Francis.
I was referred to an unreported judgment of French J in Re Duckworth: Ex Darte Lockett (12 February 1987) which was referred to in McDonald Henry and Meek Australian Bankru~tcv
Law and Practice as perhaps authority to the contrary of Francis. I have perused that decision. Its facts were more similar to Re Vella than they were to Re Francis and his Honour expressed the view consistent with Re Hanby and Vella, neither of which were referred to in the judgment, that the scheme of the Act was inconsistent with the existence of a power to set aside a bankruptcy notice after the time for compliance with it has expired and no extension has been granted.
While with respect I have much sympathy for the view expressed by French J as being a general proposition, it is inconsistent with the view taken by Lockhart J, and in circumstances where the facts of the two cases are totally distinguishable, I would follow the decision of Lockhart J on
of the view that it was clearly wrong. Nothing that was said the confined basis which I have indicated, unless I were to be by French J leads me to that conclusion, and as a matter of
comity, therefore, I would adopt the view taken by Lockhart J.In these circumstances it is not necessary to consider a third argument based upon comments made by Beaumont J in Re Browbank and Miller: Ex Darte Loni~lus Ptv Ltd (1985)
12 FCR 254. I would accordingly set aside the bankruptcy notice dated 26 September 1990. There remains the question of costs. Counsel for the applicant relies heavily upon two documents, a notice to admit facts and a notice to produce documents, as signifying the clear intention on the part of his client to argue in this court that the judgment debt was based upon an ineffective guarantee, the escrow conditions not having been satisfied. Those documents were given in November 1990. -~espite the giving of those documents, the respondent continued to oppose the present proceedings and, in due course, affidavits were ordered to be prepared and filed and considerable costs were incurred. Accordingly, the order which counsel for the applicant suggests is appropriate is that the respondent pay the applicant's costs until today or until such time at least as the respondent indicated that it would not oppose the applicant's application.
The respondent, on the other hand, pointed to the fact that the applicant had not sought to set aside the judgment in the Supreme Court notwithstanding that the applicant was aware at least of the grounds so to do and counsel had been instructed on her behalf to set aside the judgment in the Supreme Court, but those proceedings had not been proceeded with. Counsel for the respondent also pointed to the fact that although the applicant had, in correspondence, detailed various grounds upon which it was said that the bankruptcy notice should be set aside, none of those were the grounds actually argued before me and that the giving of a notice to produce and notice to admit would not ordinarily be thought as the appropriate way of notifying what amounted to a total change of case.
I was directed to a decision of Pincus J in which, upon the facts of a particular case, his Honour had ordered that each party pay its own costs. However, where matters of discretion are involved one gets very little assistance from reading reports of decided cases on totally different factual situations. On the whole it seems to me that the appropriate order, at least up to the time in which the respondent conceded the applicant's case, namely 28 May 1991, is that each party pay its own costs. It was then said by counsel for the respondent, however, that from and after that date the costs should be borne by the applicant. I do not know whether there was, in truth, any expense incurred between 28 May 1991
and the time of the present hearing, although I have some doubt whether there would have been. The substantial costs, of course, are the costs of the present proceedings before me. Those are proceedings in which the applicant was not opposed. They were proceedings which concerned a difficult question of law and proceedings which had to be litigated irrespective of the consent, or otherwise, of the respondent. Although it is a very minor matter in the overall exercise of the judicial discretion to award costs, I am not unmindful of the fact that the presence of the respondent today, represented in court by counsel, has been, in fact, of considerable assistance to the applicant, particularly as regards concessions that were made at the time of the hearing. In these circumstances it seems to me that the appropriate order, so far as the costs of today are concerned, is that the applicant bear the respondent's costs.
Accordingly, the cost order I make is as follows: that each party bear its own costs of the proceedings up to today and that the respondent's costs be borne by the applicant for the proceedings today.
I certify that this and the
preceding fourteen (14) pages
are a true copy of the Reasons
for Judgment herein of his HonourM r Justice Hill.
/? / / l r
Associate:
,,- ,,
Date: 28 M* 1991 /
Counsel and Solicitors P.L.G. Brereton instructed for Applicant/Debtor: by Blessington Judd Counsel and Solicitors G. Blake instructed by for Respondent/Creditor: Greaves Wannan & Williams Date of Hearing: 28 May 1991 Date Judgment Delivered: 28 May 1991
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