Re Grujin, Michelle Ex Parte Tesselaar Nominees Pty Ltd

[1997] FCA 461

CATCHWORDS

BANKRUPTCY - bankruptcy notice - whether form of bankruptcy notice as prescribed by the Bankruptcy Regulations could validly include an item for costs of the notice

Federal Court of Australia Act 1976 s 35A(7)

Bankruptcy Act 1966 s 41
Bankruptcy Legislation Amendment Act 1996 s 41
Bankruptcy Regulations  reg 4.02

Roy Butcher & Anor; ex parte Hughes Petroleum Pty Ltd, unreported, Neaves J, Federal Court of Australia, 29 May 1984
Kleinwort Benson Australia Limited v James Alan Crowl and Ors (1988) 165 CLR 70

RE:  MICHELLE GRUJIN
EX PARTE:  TESSELAAR NOMINEES PTY LTD (ACN 005 031 943)
VG 7183 of 1997

Before:  MARSHALL J
Place:  MELBOURNE
Date of hearing:       28 MAY 1997
Date of judgment:    28 MAY 1997

IN THE FEDERAL COURT OF AUSTRALIA           
VICTORIA DISTRICT REGISTRY
GENERAL DIVISION
  No. VG 7183 of 1997

RE::  
  Michelle GRUJIN

A Debtor

EX PARTE:  
  TESSELAAR NOMINEES PTY LTD
Petitioning Creditor

BEFORE:     MARSHALL J
PLACE:       MELBOURNE
DATE:          28 MAY 1997

REASONS FOR JUDGMENT

Delivered ex tempore - revised from the transcript

On 4 February 1997 a bankruptcy notice was issued by the Official Receiver in respect of the debtor Michelle Grujin. The notice was served on the debtor who failed to comply with it or take any action at all in respect of it. On 20 March 1997 a creditor’s petition pleading the debtor's failure to comply with the notice was presented to the Court. On 20 May 1997 Registrar Efthim, in the absence of an appearance by the debtor, referred the petition for hearing by a judge of the Court pursuant to s. 35A(7) of the Federal Court of Australia Act 1976.

The learned Registrar referred the petition to a judge for a ruling on a question that has arisen regarding the form of the bankruptcy notice.  That question was apparently causing some apprehension amongst practitioners in the bankruptcy jurisdiction.  The issue was whether a bankruptcy notice could validly include a claim for the costs of the notice.  The Bankruptcy Regulations as amended provided at all material times at item 7 in the table contained in Form 1, being the Form prescribed by regulation 4.02 of the Bankruptcy Regulations, for an item entitled “Costs of This Bankruptcy Notice”.  The validity of the bankruptcy notice in this matter is in issue because it claims at item 7 an amount of $300 for the costs of the notice.

Under the pre-existing bankruptcy legislation, that is, the law as it applied prior to 16 December 1996 when the Bankruptcy Legislation Amendment Act 1996 (the Amendment Act) became operative it was not permissible to include in a bankruptcy notice an item relating to the costs of the bankruptcy notice itself. Mr Ellis of counsel who appeared for the petitioning creditor and who ably assisted the Court in the resolution of this issue referred to the decision of Neaves J in Roy Butcher & Anor; ex parte Hughes Petroleum Pty Ltd, unreported, Federal Court of Australia, 29 May 1984.  In that judgment his Honour said at page 10 of the unreported judgment in respect of the particular bankruptcy notice with which he was concerned:

The vice which is reflected in the bankruptcy notice issued in this case is that the judgment creditor or those acting on its behalf, by inadvertence or otherwise, miscalculated the amount due under the final judgment on which the notice was based and in consequence overstated the amount so due.  The vice is that the notice was drafted on the basis that it was proper to include in the amount claimed to be due to the judgment creditor a debt which was quite separate from and was not part of the judgment providing the foundation for the notice.  Further, the notice included without so far as it appears any authority for doing so interest on that additional debt.

Neaves J's decision was in the context of legislation that applied well before the amendments contained in the Amendment Act. Prior to the Amendment Act s. 41(1) and 41(2) of the Bankruptcy Act 1966 provided as follows:

41(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;

(b) states the consequences of non-compliance with the requirements of the notice.

The relevant form which applied prior to 16 December 1996 makes no mention of any amount in respect of the costs of the bankruptcy notice. The Amendment Act had the effect of introducing a wholly new s 41 which provides at subsec (1) as follows:

An Official Receiver may issue a bankruptcy notice on the application of a creditor who has obtained against a debtor a final judgment or final order that:

(a) that is described in paragraph 40(1)(g); and

(b) is for an amount of at least $2,000.

Importantly, subsec 2 of s 41 provides:

The notice must be in accordance with the form prescribed by the regulations. (emphasis supplied).

It is in pursuance of s 41(2) that reg 4.02 was made. This regulation provides as follows:

4.02(1) For the purposes of subsection 41(2) of the Act, the form of bankruptcy notices set out in Form 1 is prescribed.

4.02(2) A bankruptcy notice must follow Form 1 in respect of its format (for example, bold or italic typeface, underlining and notes).

Mr Ellis submitted that as the Amendment Act had inserted a completely new s 41(1) and (2) and had replaced the previous provisions, the law as referred to in the Hughes Petroleum case by Neaves J, and also by the High Court in Kleinwort Benson Australia Limited v James Alan Crowl and Ors (1988) 165 CLR 70 is no longer applicable. He submitted that it is clear that a bankruptcy notice which claims the amount of the judgment and interest since the judgment, plus the cost of the bankruptcy notice, is in accordance with s 41(2) of the Amendment Act, the regulations and the new form of bankruptcy notice as prescribed. He submitted that the bankruptcy notices drawn in terms of those provisions is a valid notice.

I agree with the submissions put by Mr Ellis on those issues and am of the view that from 16 December 1996 until 14 April 1997 when the Bankruptcy Regulations were amended by Statutory Rule number 76 of 1997 deleting item 7 of the relevant table to Form 1, it was appropriate for bankruptcy notices to include a claim for the costs of the notice.  In my view the bankruptcy notice in this proceeding is a valid bankruptcy notice. 

There has been no other issue identified by the Registrar which would inhibit the Court from making a sequestration order in the circumstances of this case and I will now hear any submission as to whether or not the court should now make such an order and if so the form of the order.

I certify that this and the preceding four (4) pages are a true copy of the Reasons for Judgment of his Honour Justice Marshall as recorded in the transcript and revised by his Honour.

Associate:  
Date:  

APPEARANCES

Counsel for the Petitioning Creditor:  Mr A Ellis
Solicitors for the Petitioning Creditor:  Lakes Solicitors

Date of hearing:  28 May 1997
Date of judgment:  28 May 1997