Re Celestini, Antonio Ex Parte Monte Paschi Australia Ltd

[1996] FCA 1107

CATCHWORDS

BANKRUPTCY - Whether failure to state correct address of court at which judgment debt payable is a failure to comply with Bankruptcy Act 1966 (Cth) - whether error a mere formal defect - Bankruptcy Act 1966 (Cth), s 41(2)(a)(i); District Court Rules (NSW), 1973, Pt 31A.

Bankruptcy Act 1966 (Cth), s 41(2)(a)(i)
Bankruptcy Rules (Cth), Rule 8
District Court Rules 1973 (NSW), Pt 31A

In re Beauchamp; Ex parte Beauchamp [1904] 1 KB 572
In re a Debtor [1908] 2 KB 692

Re Francis; Ex parte Gartrell (1983) 77 FLR 80

Re Haritos; Ex parte Hill (1968) 15 FLR 378

Kleinwort Benson Australia Limited v Crowl(1984) 165 CLR 71

Re Smith; Ex parte Closer Settlement Ltd (1917) 34 WN (NSW) 48
Re Soudakoff; Ex parte Crest Air Conditioning Pty Ltd (1991) 28 FCR 53
Re St Leon; Ex parte National Australia Bank Ltd (1994) 54 FCR 371
Re Ma; Ex parte Farrow Mortgage Services Pty Ltd (In liq.) (1995) 58 FCR 444
Re Martin (1971) 18 FLR 373
Re Mellick (1971) 19 FLR 1
Nugent v Brialkim Pty Ltd (1985) 61 ALR 725

ANTONIO CELESTINI v. MONTE PASCHI AUSTRALIA LIMITED

NP1008 of 1996

Sackville J.
Sydney
18 December 1996

IN THE FEDERAL COURT OF BANKRUPTCY  )
BANKRUPTCY DISTRICT                )  No. NP1008 of 1996
OF THE STATE OF NEW SOUTH WALES     )

RE:ANTONIO CELESTINI

Debtor

EX PARTE:MONTE PASCHI AUSTRALIA LIMITED

Creditor

CORAM:    Sackville J.

PLACE:    Sydney

DATE:     18 December 1996

MINUTES OF ORDER

THE COURT ORDERS THAT:

1. The creditor's petition be dismissed.

1. The creditor pay the debtor's costs.

(Note:    Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.)

IN THE FEDERAL COURT OF BANKRUPTCY  )
BANKRUPTCY DISTRICT                )  No. NP1008 of 1996
OF THE STATE OF NEW SOUTH WALES     )

RE:ANTONIO CELESTINI

Debtor

EX PARTE:MONTE PASCHI AUSTRALIA LIMITED

Creditor

CORAM:    Sackville J.

PLACE:    Sydney

DATE:     18 December 1996

REASONS FOR JUDGMENT

Introduction

The petitioning creditor, Monte Paschi Australia Limited ("the creditor"), seeks a sequestration order against the estate of Antonio Celestini ("the debtor").  The creditor's petition relies upon a failure by the debtor to comply with the requirements of a bankruptcy notice, which was issued on 15 January 1996 and served on the debtor on 1 June 1996.  The debtor resists the petition upon the ground, inter alia, that:

"[t]he Debtor did not commit an act of bankruptcy within the meaning of the [Bankruptcy Act 1966 (Cth)] as the Bankruptcy Notice was misleading to the Debtor in that it directed the Debtor to pay the amount claimed to an incorrect address."

The relevant portion of the bankruptcy notice is as follows:

"To: ANTONIO CELESTINI

of41/17 East Crescent Street, McMahons Point, in the State of New South Wales

WHEREASMONTE PASCHI AUSTRALIA LIMITED ACN 003 080 868

of73 York Street, Sydney, in the State of New South Wales

[hereinafter referred to as 'the Judgment Creditor'] has claimed the balance of $41,578.07 calculated as per attached schedule is due by you to it under a final judgment obtained by it against you in the District Court of New South Wales at Sydney on the 15th day of March 1994, being a judgment the execution of which has not been stayed:

THEREFORE TAKE NOTICE that within fourteen (14) days after service of this notice on you, excluding the day on which this notice is served on you, you are required:

[A]to pay the sum of $41,578.07 so claimed by the Judgment Creditor to the Registrar of the District Court of New South Wales, 225 Macquarie Street, Sydney in the said State.

- OR -

[B]....." [emphasis added].

The debtor's contention rests on the undisputed fact that, during the 14 day period commencing on 1 June 1996, the address of the Registrar of the District Court of New South Wales, Sydney, was not 225 Macquarie Street, Sydney, but 86-90 Goulburn Street, Sydney.  Until 1 July 1995, the Registry of the District Court of New South Wales had been located at 225 Macquarie Street, Sydney.  However, on that date, the District Court Registry moved to 86-90 Goulburn Street, Sydney.  It was common ground that at all times from 1 July 1995 there was a notice in the foyer of 225 Macquarie Street, Sydney, as follows:

"DISTRICT COURT OF NSW

DISTRICT COURT JUDGES & DISTRICT COURT REGISTRY &     COURTS RELOCATED TO JOHN MADDISON TOWER, 86-90       GOULBURN ST, SYDNEY."

The Legislation
Section 41 of the Bankruptcy Act 1966 (Cth) ("the Act") provides as follows:

"(1)  A bankruptcy notice:

(a)shall be in accordance with the prescribed form; and

(b)shall be issued by the Registrar.

(2)The prescribed form of bankruptcy notice shall be such that the notice:

(a)requires the debtor named in it, within a specified time... to:

(i)pay the judgment debt or sum ordered to be paid in accordance with the judgment or order; or

(ii)secure the payment of the debt or sum to the satisfaction of the Court or the creditor or his agent, if any, specified in the notice or compound the debt or sum to the satisfaction of the creditor or his agent, if any, specified in the notice; and

(b)states the consequences of non-compliance with the requirements of the notice".  [Emphasis added.]

Rule 8 of the Bankruptcy Rules 1968 (Cth) ("the Rules") provides that, for the purposes of s.41(1)(a) of the Act, the bankruptcy notice shall be in accordance with Form 4. That is a reference to the form so numbered in Schedule 1 to the Rules: r.4(4). Form 4, insofar as relevant, provides for the following form of bankruptcy notice:

"BANKRUPTCY NOTICE

(Title)

To:(name, address and occupation of judgment debtor)

WHEREAS (name and address of judgment creditor)

(hereinafter referred to as 'the judgment creditor') has claimed that the sum of $  is due by you to him under a final judgment (or order) obtained by him against you in the

Court ofon the

day of , 19   , being a judgment (or an order) the execution of which has not been stayed:

THEREFORE TAKE NOTICE that within   days after service of this notice on you, excluding the day on which this notice is served on you, you are required---

(a)to pay the sum of $     so claimed by the judgment creditor to (here insert 'the judgment creditor' or, if the judgment or order requires payment to be made to a court or a person other than the judgment creditor, the name and address of the court or the other person to whom payment is required to be made); or

(b)to secure the payment of the sum referred to in paragraph (a) to the satisfaction of the (name of the court) or the judgment creditor (or his agent whose name and address are            ) or compound the sum so specified to the satisfaction of the judgment creditor (or his agent)...".  [Emphasis added.]

It will be seen that Form 4 requires that, if the judgment or order requires payment to be made to a court, the name and address of the court must be inserted in the bankruptcy notice.

Payment of the Judgment
         The judgment on which the bankruptcy notice was founded was obtained by the creditor against the debtor in the District Court of New South Wales at Sydney, on 15 March 1994.  The certificate of judgment, which was in evidence, does not specify whether the debtor was required by the terms of the judgment itself to pay the debt to the creditor or to the Court.

In the course of argument, both counsel for the debtor and the solicitor for the creditor appeared to assume that the position relating to payment of the judgment debt was governed by s.87(3) of the District Court Act 1973 (NSW). That sub-section, whilst in force, provided that the amount of every judgment debt in the District Court was payable to "the Registrar". The term "Registrar", in relation to any proceedings, was (and is) defined in the District Court Act to mean the Registrar "for the proper place in relation to the proceedings":  s.4(1).  The legislation in this form was considered by Lockhart J in Re Francis; Ex parte Gartrell (1983) 77 FLR 80, where his Honour held that a bankruptcy notice which incorrectly required the debtor to pay the amount of the debt to the Registrar of the District Court at Orange, rather than to the Registrar of the Court at Dubbo (where the proceedings had been conducted), did not comply with s.41(2)(a)(i) of the Act.

Despite the assumption made by the parties, s.87(3) of the District Court Act was in fact repealed by the District Court (Procedure) Amendment Act 1984 (NSW). From 14 June 1985, the payment of judgment debts in the District Court was governed by the District Court Rules, Part 31A. Until its repeal as from 1 August 1996 (Government Gazette No 74, 21 June 1996, 3160), Part 31A, r.1(3) of the District Court Rules provided as follows:

"(3)...the amount of every judgment debt arising from an action shall be payable to the registrar where--

(a)it is payable in one sum...".

The evidence shows that an arrangement had been made between the creditor and the debtor at some time in 1995 for the payment of the judgment debt by instalments. However, no order had been made by the District Court or a Registrar for payment of the judgment debt by instalments (although it should be noted that the Registrar of the District Court made such an order on 28 November 1996, with the first weekly instalment due on 23 December 1996). It would seem, therefore, that at the relevant time, the amount of the judgment was "payable in one sum" for the purposes of Part 31A, r.1(3). It follows that during the period from the issue of the bankruptcy notice until the expiry of the time for compliance with its terms, the District Court Rules required the judgment debt to be paid to the Registrar of the District Court.  In any event, this was the basis on which the parties approached the case.

Reasoning
Section 41(2)(a)(i) of the Act provides that the prescribed form of bankruptcy notice must require the debtor to pay the judgment debt "in accordance with the judgment". The meaning of these words, which have a long legislative history, was considered by Gummow J in Re Soudakoff; Ex parte Crest Air Conditioning Pty Ltd (1991) 28 FCR 53 (FCA/Gummow J). In that case, his Honour held (at 57-59) that:

(i)in the absence of a direction in the judgment itself relating to payment, the judgment should be interpreted as requiring payment in accordance with the relevant rules of court or legislation; and

(ii)the requirement in s.41(2)(a)(i) of the Act is ambulatory in character, so that the bankruptcy notice must require payment in accordance with the law in force during the time specified in the notice for payment of the debt.

It follows from these holdings that the bankruptcy notice in the present case, in order to comply with s.41(2)(a)(i) of the Act, had to require the judgment debt to be paid in accordance with the District Court Rules, as in force during the 14 day period following service of the notice on 1 June 1996.

The District Court Rules, as I have noted, required the judgment debt to be paid to the Registrar of the Court.  The bankruptcy notice correctly stated this requirement.  However, the notice gave an incorrect address for the Court, the registry having changed its address one year earlier.  What is the consequence of the bankruptcy notice failing to state the Court's address correctly?

In Kleinwort Benson Australia Ltd v Crowl (1984) 165 CLR 71, the majority judgment said (at 79) that the effect of the authorities was 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."

The case involved a bankruptcy notice which understated the amount of interest due on a judgment debt.  The majority said this (at 80):

"if the amount specified in a bankruptcy notice is in fact due and payment is claimed in accordance with the judgment, the essential requirements of s.41(2)(a)(i)... are met."

It is clear from these passages that the requirements laid down in s.41(2)(a)(i) are essential to the validity of the notice.

Section 41(2)(a)(i) of the Act does not state in terms that the bankruptcy notice must specify the address of the court to which the judgment debt is to be paid. The requirement that the court's address be stated appears only in Form 4. In Re St. Leon; Ex parte National Australia Bank Ltd (1994) 54 FCR 371 (FCA/Lindgren J), Lindgren J rejected a submission that the inclusion of the creditor's address in a bankruptcy notice was not a requirement made essential by the Act. The submission was based on the proposition that the requirement to specify the address was merely found in Form 4 and was not specifically stated in s.41(2) of the Act.

In rejecting the submission, his Honour pointed out (at 378) that s.41(2)(a) requires the bankruptcy notice to be in accordance with the prescribed form. In the face of such "plain and mandatory terms" it was

"difficult... to assume that anything which is in fact in the prescribed form though not required to be in it by s.41(2), is not made 'essential' by the Act."

His Honour regarded (at 378) a total failure to state an address for the judgment creditor as a non-compliance with s.41(2)(a). He distinguished this from an ambiguous or unclear statement of an address, which would be an example of a notice in accordance with the prescribed form, but which might nevertheless reasonably mislead the debtor. See also Re Ma; Ex parte Farrow Mortgage Services Pty Ltd (In Liq) (1995) 58 FCR 444 (FCA/Whitlam J).

While s.41(2)(a)(i) does not specifically provide that the bankruptcy notice must state the address of the Court to which the judgment debt must be paid, the prescribed form does require the address to be inserted in the bankruptcy notice. It follows from the reasoning adopted by Lindgren J in Re St. Leon that the Act makes it an essential requirement for the bankruptcy notice to specify the address of the court to which payment of the judgment debt must be made in accordance with the judgment. In my opinion, that reasoning should be applied to the present case.

The authorities also strongly suggest that a failure accurately to state the address of the court to which the judgment debt must be paid means that a notice does not comply with the statutory requirement.  This is so notwithstanding that the debtor could readily ascertain the correct address of the court, for example, by following the directions on a sign in the lobby of the premises at the address specified in the bankruptcy notice.

In Re Haritos; Ex parte Hill (1968) 15 FLR 378 (Federal Court of Bankruptcy/Gibbs J), Gibbs J said (at 379) that

"[t]here can be no doubt that as a general rule a bankruptcy notice which omits to show the address of the creditor, or which shows an incorrect address, is bad, being defective in substance and not merely in form"  [Emphasis added].

His Honour expressed this view even though the notice in that case correctly required the debt to be paid to the Registrar of the Court, at the Court's address.  Gibbs J observed that it is necessary to include the correct address of the creditor in order to allow the debtor to find the creditor, should the debtor wish to secure or compound the debt: see In re a Debtor [1908] 2 KB 692 (C.A), at 695.

In Re Haritos, at 380, Gibbs J rejected an argument that the bankruptcy notice was valid because the debtor could have ascertained the creditor's address simply by asking the creditor's solicitor, whose name and address appeared on the notice.  His Honour applied the principle that it is not enough for a creditor to give an address where he or she can be heard of:  In re Beauchamp; Ex parte Beauchamp [1904] 1 KB 572, at 585. To the same effect is Re Smith; Ex parte Closer Settlement Ltd (1917) 34 WN (NSW) 48, where Street J rejected an argument that, because the debtor knew where the creditor's office was located, the failure to specify the creditor's address was a merely formal defect. In Nugent v Brialkim Pty Ltd (1985) 61 ALR 725 (FCA/FC), Lockhart J (with whom Northrop and Beaumont JJ agreed) said (at 727) that the rationale for these decisions

"is that the address of the creditor must be stated in order to comply with the prescribed form of notice and because non-compliance with the requirements of a bankruptcy notice constitutes an act of bankruptcy and may have quasi-penal consequences."

In my opinion, the principles stated in Re Haritos apply to the present case, given that it was an essential requirement of the legislation that the address of the Court be stated in the bankruptcy notice.  The address was wrongly stated.  It is not enough to save the notice that the debtor, had he gone to 225 Macquarie Street, Sydney, might have observed a sign stating that the District Court had relocated to Goulburn Street, Sydney.  Similarly, given the bankruptcy notice failed to comply with an essential statutory requirement, it is not necessary for the debtor to show that he was actually prejudiced.

The authorities also show that the defect in the bankruptcy notice cannot be regarded as merely formal for the purposes of s.306 of the Act: Re Mellick (1971) 19 FLR 1 (Federal Court of Bankruptcy/Sweeney J); Re Martin (1971) 18 FLR 373; Re Francis; Ex parte Gartrell, at 84.

Conclusion
         The bankruptcy notice served on the debtor was invalid.  There was therefore no act of bankruptcy committed by the debtor.  The creditor's petition should be dismissed.  The creditor must pay the debtor's costs.

I certify that this and the preceding 12  pages are a true copy of the Reasons for Judgment of the Honourable Justice Sackville.

Associate:

Dated:18 December 1996

APPEARANCES

Heard:10 December 1996

Place:             Sydney

Decision:18 December 1996

Appearances:       Mr D M Bernie, instructed by Scarfone & Co, appeared for the Debtor.

Mr G Kourt, Solicitor employed by the Creditor, appeared for the Creditor.