Re Christianos, Elias & Anor Ex Parte Kennedy, Louis

[1996] FCA 255

CATCHWORDS

BANKRUPTCY - defect in bankruptcy notice under s41 of the Bankruptcy Act 1966 - failure to meet requirement made essential by the Act - failure to state address for service of judgment creditors - bankruptcy notice a nullity

Bankruptcy Act 1966 s.41
Bankruptcy Rules, r.8

Kleinwort Benson Australia Ltd v Crowl (1988) 165 CLR 71 - applied
Re St Leon; Ex parte National Australia Bank Ltd (1994) 54 FCR 371 - approved

RE ELIAS CHRISTIANOS AND MARIA CHRISTIANOS;  EX PARTE LOUIS KENNEDY AND HILDA KENNEDY

No. P 845 of 1995

BEAUMONT J

SYDNEY

10 APRIL 1996

IN THE FEDERAL COURT OF AUSTRALIA  )
  )
BANKRUPTCY DISTRICT OF THE STATE   )    No.  NP 845 of 19954
  )
OF NEW SOUTH WALES               )

Re:ELIAS CHRISTIANOS

Debtors

Ex parte:LOUIS KENNEDY and HILDA KENNEDY

Creditors

CORAM:    Beaumont J.

DATE:     10 April 1996

MINUTES OF ORDER

THE COURT ORDERS:

1. That the petition be dismissed with the costs of today's argument.

1. Reserve all other costs.

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

IN THE FEDERAL COURT OF AUSTRALIA  )
  )
BANKRUPTCY DISTRICT OF THE STATE   )    No.  NP 845 of 19954
  )
OF NEW SOUTH WALES               )

Re:ELIAS CHRISTIANOS

Debtors

Ex parte:LOUIS KENNEDY and HILDA KENNEDY

Creditors

CORAM:    Beaumont J.

DATE:     10 April 1996

REASONS FOR JUDGMENT

Before the Court is a creditors' petition, seeking a sequestration order based upon the failure to comply with the requirements of a bankruptcy notice.  A number of grounds of opposition to the petition have been raised by the debtors but in the present circumstances it is necessary that I deal only with the first ground of opposition, and that is that the notice is allegedly defective, in that it fails to state an address for service of the judgment creditors.

In order to understand the point it will be necessary to refer to the statutory scheme.

By s.41(1)(a) of the Bankruptcy Act 1966. It is provided that the notice:

..... shall be in accordance with the prescribed form.

Section 41(2) provides:

"41.(2)  the prescribed form of bankruptcy notice shall be such that the notice:

(a)requires the debtor named in it, within a specified time (being the time referred to in subparagraph 40 (1)(g)(i) or (ii), whichever is appropriate) 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."

By r.8 of the Bankruptcy Rules, it is provided that for the purposes of s.41(1)(a) of the Act, a bankruptcy notice:

..... shall be in accordance with form 4.

Form 4 is a form of bankruptcy notice which ends with the following statement:

"This notice was issued on the application of (name of the solicitor for the judgment creditor or the name of the judgment creditor, as the case may be ) whose address for service is... ."

In the present case, this statement was not made in the
notice.  However, there was a statement made on the first page of the notice that it was:

"Filed on behalf of :   Judgment Creditors

Prepared by :LANG GELLERT & NOONAN

Solicitors,
  7 Bronte Road,
  BONDI JUNCTION,  NSW,   2022"

On behalf of the debtors, reliance is placed upon the statement made by the majority of the High Court (Mason CJ, Wilson, Brennan and Gaudron JJ) in Kleinwort Benson Australia Limited v Crowl (1988) 165 CLR 71 at 79-80 as follows:

"The authorities show that a bankruptcy notice is a nullity if it fails to meet a requirement made essential by the Act, or if it could reasonably mislead a debtor as to what is necessary to comply with the notice... .  In such cases the notice is a nullity whether or not the debtor in fact is misled ... ."

It is contended on behalf of the debtors that these observations are squarely in point in the present case. 

I agree with their contention. 

It appears that there is no authority strictly on the point.  However, Lindgren J has recently dealt with a situation which I consider to be analogous to the present case in Re St Leon; Ex parte National Australia Bank Limited (1994) 54 FCR 371. There, the question was whether a total failure to state an address for the creditor in a bankruptcy notice
constituted a non-compliance with the Act, by reason of its failure to be in accordance with the prescribed form.  It is true that the defect there considered was in the different context of the requirement to nominate an address for the creditor for the purposes of payment.  However, as has been said, the position should, I think, be considered to be properly analogous for present purposes. 

In the course of his reasons, Lindgren J said (at 378):

"In relation to the submission that the statement of address is not a matter made essential by the Act, there are, in my view, several difficulties.  First, s.41(1)(a) provides that a bankruptcy notice `shall be in accordance with the prescribed form' and it is difficult, in the face of such plain and mandatory terms, 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.  For example, it is difficult to accept that the note at the foot of the prescribed form could be omitted without rendering the notice invalid.

A second difficulty, although it may be but another aspect of the first, is that if the submission is correct there would appear to be no sanction for non-compliance with s.41(1)(a), except perhaps in so far as the prescribed form satisfied s.41(2).  I do not think that Parliament intended the mandatory terms of s.41(1)(a) to have that restricted operation.

Thirdly, I do not think that their Honours in the joint judgment in Kleinwort Benson were contemplating by their reference to `a requirement made essential by the Act' a dissection of the prescribed form of bankruptcy notice into parts specifically referred to in the Act and other parts.  To construe their Honours' words in that way is to approach them as if they were the language of a statute.  I think that it is consistent with the terms of the joint judgment that the statutory requirement that a bankruptcy notice be in
accordance with the prescribed form is itself a requirement made essential by the Act.

The passage quoted from the joint judgment contemplated that a bankruptcy notice might be in accordance with the prescribed form yet still be liable to mislead.  That this is so is indicated by their Honours' reference at 80 of the judgment to the possibility that an understatement of the amount due might be capable, in a particular case, of misleading the judgment debtor as to whether, if an act of bankruptcy was to be avoided, payment was required of the amount in fact due or of the amount specified in the notice.

The two `limbs' in the passage quoted from Kleinwort Benson distinguish between that which the Act requires on the one hand, and the way in which a particular bankruptcy notice is `filled in' on the other hand.  The distinction may not always be clear, but I regard a total failure to state an address for the judgment creditor as a non-compliance with s.41(1)(a), as distinct, for example, from an ambiguous or unclear statement of an address.  The latter would be an instance of a notice in accordance with the prescribed form which could nonetheless reasonably mislead the debtor.

In my opinion, the bankruptcy notices do not comply with the Act for failure to be in accordance with the prescribed form by reason on non-statement of the creditor's address, and this is not a `formal defect or irregularity' within the meaning of s.306 of the Act."

With respect, I agree with what his Honour has said. As I have previously indicated, I regard that reasoning as being analogous and therefore properly to be applied in the present case. 

I have already mentioned that the present bankruptcy notice does contain a statement at the foot of the page which identifies the solicitors for the judgment creditors as the persons who filed and prepared the notice.  This is relied upon by the judgment creditors as either a sufficient statement of an address for service for present purposes, or alternatively, even if it is an ambiguous or unclear statement, it is one which amounts to a defect which is purely formal within the meaning of section 306. 

I cannot agree.  A similar argument was addressed to Lindgren J. in Re St Leon, but his Honour rejected the argument saying (at 376):

"I do not think that the statement of the name and address of NAB's solicitors below the line at the foot of the front page and at the foot of the typewritten material on the second page of the bankruptcy notices in this case purports to be a statement of NAB's address for the purpose of receipt of payment or the acceptance of security or of a composition.  Rather, the statement of the solicitors' name and address at the foot of the first page is no more than an identification of the solicitors who were responsible for preparation and filing of the document, and the words at the end of the typewritten material on its second page constitute an express identification of the particular solicitor on whose application the bankruptcy notice had been issued."

Again, I agree with his Honour's reasoning in this respect, which I also regard as properly analogous in the present case. 
         It must follow, in my opinion, that the bankruptcy notice was a nullity, and that the petition must be dismissed.

I certify that this and the preceding five (5) pages are a true copy of the Reasons for Judgment herein of his Honour Justice Beaumont.

Associate

Dated:  10 April 1996

Counsel and Solicitors      Ms. R.S. McColl S.C. instructed

for Debtors:by Phillips Fox

Counsel and Solicitors      Mr. B. Skinner instructed by

for Creditors:              Lang Gellert & Noonan

Solicitor for supporting     Mr. D.J. Garnsey, Minter Ellison
Creditors:

Date of hearing:            10 April 1996          

Date Judgment delivered:         10 April 1996