Re Greathead, W.M. Ex parte Deputy Commissioner of Taxation

[1993] FCA 925

92s 1 9 3

JUDGMENT No. ........ ........ .. ........ ....

IN THE FEDERAL COURT OF AUSTRALIA	)
GENERAL DIVISION	)
BANKRUPTCY DISTRICT OF THE	) NO. NP2301 of 1993
STATE OF NEW SOUTH WALES	)

RE :  WAYNE MAURICE GREATHEAD

PARTE :

CORAM	:	HILL J
PLACE	:	SYDNEY
DATED	:	9 NOVEMBER 1993

EX TEMPORE REASONS FOR JUDGMENT

Upon the hearing of a petition presented by the Deputy Commissioner of Taxation ("the Commissioner") against Wayne Maurice Greathead ("the debtor"), the debtor opposed the making of a sequestration order upon the basls that the bankruptcy notice which the debtor failed to comply with (which is said to constitute the act of bankruptcy) overstated the amount of the debt due to the petitioning creditor. The debtor seeks to persuade me that I should not make a sequestration order as a matter of discretion because of this overstatement.

the petition warranting the Court making a sequestration order	the debtor has tendered evidence to the Court in support of
but for the question of the supposed overstatement of the bankruptcy notice.
The figure shown as being due in the bankruptcy notice is the amount of $44,972.39. There seems to be no dispute as between the parties but that a judgment of $42,873.53 was obtained by the petitioning creditor in the District Court of New South Wales on 30 October 1992, and that interest thereafter accrued due so that absent any payments made after the date of judgment, there would have been $44,972.39 owing as at the date of the bankruptcy notice and its service upon the debtor.
It appears that some payments were made by the debtor to the petitioning creditor. On a document prepared by the petitioning creditor as at 21 May 1993, payments are shown reducing the debt owing to the petitioning creditor by the debtor to $30,882.52. In another statement of account
prepared as at 12 May 1993, these payments do not appear and the figure shown as being owing by the debtor to the
petitioning creditor is, consistently with the bankruptcy notice, the sum of $44,972.39.
Counsel for the debtor points to what is said to be an admission by the petitioning creditor, in a conversation deposed to by the debtor and said to have taken place on 13 May 1993, where a person whose name was known to him only as "Jenny" is said to have admitted that the figures owing by the debtor appear to be wrong.
"Jenny" was presumably MS Spilitopolous, a clerk in the Australian Taxation Office then having the care and conduct of the matter, but whether or not this is so I could not accept that evidence as an admission binding the petitioning creditor.
There is considerable doubt whether the debtor has shown on the balance of probabilities that, as at the time of lssue of the bankruptcy notice or as at the time of service upon him, the figure shown in that notice was misstated. If this be the case then the argument sought to be raised fails in llmlne.
However, there is another and equally difficult problem which faces the debtor and that is the provisions of
which provide as follows:  sub-secs.41(5) and (6) of the Bankru~tcv Act 1996 ("the Act") (5) A bankruptcy 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 tlme allowed for payment, gives notice to the creditor that he disputes the validity of the notice on the ground of the misstatement.

It is not submitted by the debtor that the amount said to be due by the debtor in the petition itself is overstated, that being an amount considerably less than the amount shown in the bankruptcy notice, and it is conceded that

(6) Where the amount specified in a bankruptcy notice exceeds the amount in fact due and the debtor does not glve notice to the creditor in accordance with subsection (5), he shall be deemed to have complied wlth the notice if, within the time allowed for payment, he takes such action as would have constituted

compliance wlth the notice if the

amount due had been correctly

specified in it.

Absent these sub-sections a bankruptcy notice which overstated the amount owing to a creditor would be defective as likely to confuse or mislead a person in the position of the debtor upon which it was served and such a defect would consist of a defect unable to be cured. Clearly the legislature intended that the ordinary consequence of overstating the amount in the bankruptcy notice (its invalidity) would not follow provided a timely notice was given in accordance with sub-sec.(5).

The giving of a s.41(5) notice serves to alert the

petitioning creditor to the problem. Conversely, failure to

petitioning creditor to proceed with his petition, albeit that

give the notice results in effect to permission to the

it should later be shown that the figure in the bankruptcy notice was wrong. In my view, if the debtor fails to give the notice within the time stipulated by s.41(5), that is to say, within the time allowed for payment under the notice, the bankruptcy notice is not invalidated.

The consequence is then that if there has been a failure to comply with the terms of the notice deemed by s.41(5) not to be invalidated, an act of bankruptcy has occurred. It is therefore crltical to determine whether a notice under s.41(5) has in fact been given.

Counsel for the debtor relied upon evidence of telephone conversations, together with the statement of account to which reference has already been made. I do not need to consider whether the notice to which s.41(5) refers might be oral. That may be left for another day.

The evidence to which counsel refers does not support a submission that any notice at all was given, oral or otherwise. The conversation in questlon consisted of no more than an allegation by the debtor that the figures were wrong and an alleged acceptance of that allegation by Jenny. The document forwarded by the Commissioner as a statement of

Commissioner himself. A submission that I should in some way account could hardly constitute a notlce given to the

construe these conversations, having in mind that the debtor is a lay person, does not seem to me to assist the matter if the terms of the section have not been complied with.

A final submission that until such time as the parties agree, or perhaps as the debtor himself determines what amount is owing, no act of bankruptcy can have taken place also finds no support in the Act. Whether there has been a failure to comply with the terms of the bankruptcy notice is a simple matter of fact once the bankruptcy notice is to be taken as valid - it has either been complied with or it has not. In this case, there is no doubt that no attempt has been made by the debtor to pay the amount demanded in the notice or otherwise to comply with its terms. In these circumstances and being satisfied of the proof of the matters which s.52(1) requires proof, I would make a sequestration order against the estate of the debtor.

I would dismiss an application to stay the operation of that order pending the making of an application to set aslde the judgment upon which the bankruptcy notice is based.

I order that costs including reserved costs, if there be any,

be taxed and paid according to the Act and direct that a draft of this order be delivered to the Registrar within seven days in accordance with r.124.

I certify that this and the

preceding five (5) pages
are a true copy of the Reasons
for Judgment herein of his Honour
Mr Justice Hill.

Counsel and Solicitors	Mr I McGillicuddy instructed by
for the Debtor:	Cassidy Gibson Howlln
Counsel and Solicitors	Mr B Skinner instructed by the
for the Creditor:	Australian Government Solicitor
Dates of Hearing:	9 November 1993