Re George, A v Ex parte Tricontinental Corporation Ltd

[1994] FCA 662

6 6 2      97

JUDGMENT No. ...,, J ,..,,,-

IN THE FEDERAL COURT OF AUSTRALIA	)
1
EANKRUPTCY DISTRICT of the	1 No. NP1098 of 1994
1
STATE OF NEW SOUTH WALES	1

RE:	SIR ARTHUR GEORGE Debtor
Ex parte:	T R I C O N T I N E N T A L CORPORATION LIMITED ACN 008 416 297 Creditor

CORM:	SHEPPARD J.
DATE :	16 SEPTEMBER 1994

REASONS FOR JUDGMENT

HIS HONOUR: On 6 September a question concerning the validity of the bankruptcy notice in this matter was argued. I reached the conclusion that the bankruptcy notice was valid and said that I would publish reasons for that conclusion in due course. What follows are those reasons.

The relevant portion of the bankruptcy notice which needs to be considered is the opening paragraph of it. That paragraph is as follows:

been stayed."

"WHEREAS Tricontinental Corporation Limited ACN 008

416 297 of 2nd Floor, 555 Lonsdale Street, Melbourne

in the State of Vlctoria (hereinafter referred to as "the judgment creditor") has claimed the sum of

$400,000.00 together with interest thereon at the

rate of 10.05 per centum per annum from 17 December,

1993 which at 15 February, 1994 amounts to $6,904.11

making a total of $406,904.11 due by you to it under a final judgment obtained by it against you in the Supreme Court of New South Wales on 17 December,

1993 being a judgment the execution of which has not

The problem arises because the rate of 10.05 per cent is incorrect. It should have been 10.5 per cent. The interest in question is payable pursuant to S. 95 of the Su~reme Court Act 1970 (NSW). Relevantly that section provides that, where judgment is given for the payment of money, interest shall, unless the Court otherwise orders, be payable at the prescribed rate from the date when the judgment or order takes effect on so much of the money as is from time to time unpaid. Part 40, r. 7 of the Rules of the Supreme Court of New South Wales provides that the prescribed rate of interest for the purposes of S. 95 of the Act is the rate provided for in Schedule J to the Rules. Schedule J relevantly provides that the rate of interest payable in respect of judgments entered after 31 August 1993 is 10.5 per cent.

Evidence given in the proceedings establishes that the
amount of $6,904.11 claimed for interest for the period 17

December 1993 to 15 February 1994 would be correct if the

would not be correct if interest were calculated at the stated	interest were calculated at the rate of 10.5 per cent. It
rate of 10.05 per cent. In that event the amount of interest for the period in question would be $6,608.22 rather than $6,904.11.
As I understood the submissions of counsel for the debtor, his contention was that the bankruptcy notice was capable of misleading or confusing the debtor because, if an attempt were made to calculate the amount of interest, one would find that the interest payable was not $6,904.11 but a lesser sum.
In my opinion, there are a number of ways this matter can be looked at. For me the preferable way is simply to treat the misstatement of the rate of interest as a typographical error. There is no issue that the judgment was entered nor that the amount of the judgment has not been paid. The rate of interest is prescribed by law. The amount of interest which is claimed in the bankruptcy notice is the correct amount if one calculates interest according to the correct rate of 10.5 per cent. In those circumstances I think it appropriate to treat the defect which there is as a formal one. The consequence is that the proceedings are not invalidated; see S. 306 of the Bankruotcv Act 1966.
In the course of his submissions, counsel for the debtor emphasised the provisions of sub-para. 41(2)(a)(i) of the
Bankru~tcv Act which provides that the prescribed form of bankruptcy notice shall be such that the notice requires the
debtor named in it, within a specified time, to pay the judgment debt or sum ordered to be paid in accordance with the judgment or order. He submitted that this notice dld not comply with that provision because it misstated the rate of interest which was payable under the judgment. But the fact is that it did correctly state the amount of interest which was payable. The mistake in the notice was a mistake as to the rate, not the amount, of interest. Counsel relied upon the decision of Riley J. in Re McDonald: Ex uarte Elder Smith Goldsbrouah Mort Limited (1978) 18 ALR 505. That was a case where both the rate of interest and the amount of interest due were wrongly calculated. The notice was held to be bad. Whether that would be the position now in the light of the decision of the High Court in Kleinwort Benson Australia Ltd v. Crow1 (1988) 165 CLR 71 I do not need to decide. McDonald's case is distinguishable from the present because, not only was the rate of interest wrongly stated; the amount of interest claimed to be due was also wrongly stated. McDonald's case was referred to with approval in the judgment of the Full Court of this Court in Re Farruaia: Ex uarte Deuutv Commissioner of Taxation (NSW) (1988) 80 ALR 651. In the course of their judgment the members of the Full Court said (at 653) that, if a judgment creditor chooses to claim interest on a judgment debt it is necessary for the calculation of the claim to be accurately stated in the notice and for the period during which the claim is made to be
other authorities. In the present case the amount of the specified. McDonald's case is then cited along with some
claim for interest is accurately stated as is the perlod for which the claim is made. It follows that I do not regard either McDonald's case or Farruaia's case as warranting a conclusion different from the one which I have reached.
There are, of course, very many authorities in this area. It is not appropriate to review the entirety of them. Very often problems in this area concern either overstatements or understatements of the amount due by a debtor to a creditor. The legislature itself made specific provisions in subsecs.
41(5) and (6) concerning overstatements of amounts due. The
decision in Kleinwort Benson appears to have overcome a number of problems which existed in relation to understatements. In the present case there is no overstatement or understatement unless one takes the view that one should engage in the artificial exercise of calculating the interest on the basis of a rate of 10.05 per cent. If that were done, subsec. 41(5) would not assist the petitioning creditor in the present case because the subsection speaks of the notice specifying a sum as the amount due which exceeds the amount "in fact due". The amount in fact due is the amount which the bankruptcy notice claims. It is perhaps not inappropriate to observe, however, that it would be a curious outcome if the overstatement of the amount of interest would not invalidate the notice, but the correct statement of the amount would do so.
The whole of this area of the law is, of course, artificial. One does not take into account the question whether or not the debtor was in fact misled. The question is whether, objectively speaking, the bankruptcy notice was capable of misleading the debtor. The artificiality is, however, underlined by the fact that the debtor in the present case is an experienced solicitor of the Supreme Court of New South Wales. In other areas of the law such a person would have imputed to him knowledge of the provisions of the rules
of the court in which he is admitted to practise. That is not a matter, however, which I have taken into account in resolving the question to be decided.

In the result, I concluded that the bankruptcy notice was

not invalid.