Re Keelan M.D. v Ex parte Bank of South Australia Ltd
[1995] FCA 479
•11 JULY 1995
CATCHWORDS
BANKRUPTCY - opposition to creditor's petition - validity of bankruptcy notice - whether bankruptcy notice issued by creditor who obtained final judgment against debtor- petitioner not the party who obtained the final judgment - relevance of state law as to rights of judgment creditor - whether too late to review decision of Registrar to issue bankruptcy notice - whether bankruptcy notice misleading by failing to identify circumstances of transfer of benefit of judgment debt.
Bankruptcy Act 1966 (Cth) ss 13, 14, 40 and 41
Bankruptcy Rules 1968 (Cth) r 7 and r 8
Acts Interpretation Act 1901 (Cth) s 25C
State Bank of South Australia Act 1983 (S.A.) s 6
State Bank (Corporatisation) Act 1994 (S.A.) ss 3, 7, 11, and 18, Schedule 3
James v Federal Commissioner of Taxation (1955) 93 CLR 631
Re O'Sullivan; Ex parte Bank of New Zealand (1991) 30 FCR 112
Goldsmith v First Pacific Mortgage Limited (1993) 42 FCR 522
Kleinwort Benson Australia Limited v Crowl (1988) 165 CLR 71
Abigroup Limited v Abignano (1992) 39 FCR 74
No. SP 62 of 1995
Re:
MICHAEL DEAN KEELAN Debtor
Ex Parte:
BANK OF SOUTH AUSTRALIA LIMITED Petitioning Creditor
Branson J
Adelaide
11 July 1995
IN THE FEDERAL COURT OF AUSTRALIA )
)
SOUTH AUSTRALIA DISTRICT REGISTRY )
)
GENERAL DIVISION ) No. SP 62 of 1995
)
BANKRUPTCY DISTRICT OF THE )
)
STATE OF SOUTH AUSTRALIA )
Re:
MICHAEL DEAN KEELAN
Debtor
Ex Parte:
BANK OF SOUTH AUSTRALIA LIMITED
Petitioning Creditor
MINUTES OF ORDER
CORAM: Branson J
PLACE: Adelaide
DATE: 11 July 1995
THE COURT ORDERS THAT:
The petition of the creditor be dismissed.
Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules
IN THE FEDERAL COURT OF AUSTRALIA )
)
SOUTH AUSTRALIA DISTRICT REGISTRY )
)
GENERAL DIVISION ) No. SP 62 of 1995
)
BANKRUPTCY DISTRICT OF THE )
)
STATE OF SOUTH AUSTRALIA )
Re:
MICHAEL DEAN KEELAN
Debtor
Ex Parte:
BANK OF SOUTH AUSTRALIA LIMITED
Petitioning Creditor
REASONS FOR JUDGMENT
CORAM: Branson J
PLACE: Adelaide
DATE: 11 July 1995
In this matter the debtor has appeared to oppose the petition of Bank of South Australia Limited for a sequestration order against his estate. The act of bankruptcy upon which the petition is based is that the debtor failed to comply with a bankruptcy notice duly served upon him. The bankruptcy notice requires payment of a sum under a final judgment of the Magistrates Court of South Australia obtained against the debtor by the State Bank of South Australia. All of the grounds upon which the debtor opposes the petition relate in some way to this dichotomy between the identity of the petitioner and the identity of the judgment creditor.
LEGISLATIVE PROVISIONS RE THE TWO BANKS
The State Bank of South Australia ("SBSA") was established by s6 of the State Bank of South Australia Act 1983 (S.A.) ("the SBSA Act"). It conducted the business of banking in South Australia and elsewhere from 1 July 1984 until, effectively, "the appointed day" as defined by s3 of the State Bank (Corporatisation) Act 1994 (S.A.) ("the Corporatisation Act"). The "appointed day" was by proclamation dated 23 June 1994 fixed as 1 July 1994.
Prior to the coming into operation of the Corporatisation Act a public company with the name "Bank of South Australia Limited" was formed under the Corporations Law. The existence of such company, hereinafter referred to as BSAL, is recognised by the Corporatisation Act. By s7 of the Corporatisation Act the Treasurer of the State of South Australia ("the Treasurer") is authorised, by order in writing, to transfer assets or liabilities, or both, of SBSA or an SBSA subsidiary to BSAL. It is admitted in this case that the Treasurer did by an order in writing dated 30 June 1994, which came into effect on 1 July 1994, transfer to BSAL assets which include the benefit of the judgment debt upon which the bankruptcy notice in this case is based.
It is appropriate to set out the relevant subsections of s7 of the Corporatisation Act.
"s7(1)The Treasurer may, by order in writing, transfer assets or liabilities (or both) of
SBSA or an SBSA subsidiary to BSAL.
An order under this section must be made before, or within the period of six months beginning on the appointed day ....
If an order is made under this section on or before the appointed day, it takes effect (subject to any contrary provision in the order) on the appointed day.
. . . . . . . . . .
A transfer of an asset or liability under this section operates by force of this Act and despite the provisions of any other law or instrument."
Section 11 of the Corporatisation Act contains transitional provisions which apply in relation to transferred assets and liabilities. Such provisions include the following:-
"(a)if an instrument or other document, or oral agreement, understanding or undertaking, is applicable to a transferred asset or liability, then for the purpose of construing the instrument or other document or oral agreement, understanding or undertaking (so far as it applies to the transferred asset or liability) -
(i)a reference to SBSA or an SBSA subsidiary is to be construed as a reference to BSAL; and
(ii)a reference to a branch, office, or agency of SBSA or an SBSA subsidiary is to be construed as a reference to the corresponding branch, office, or agency of BSAL, or a branch, office or agency designated by the CEO of BSAL as the corresponding branch, office or agency; and
(iii)a reference to an officer of SBSA or an SBSA subsidiary is to be construed as a reference to the corresponding officer of BSAL or an officer designated by the CEO of BSAL as the corresponding officer; and
. . . . . . . . . .
(k)legal proceedings in respect of a transferred asset or liability commenced by or against SBSA or an SBSA subsidiary must (subject to discontinuance) be continued and completed by or against BSAL; and
(l)in legal proceedings relevant to a transferred asset or liability -
(i)BSAL will have the same rights and privileges as SBSA or the SBSA subsidiary would have had if there had been no transfer; and
(ii)a document that could have been given in evidence by or against SBSA or an SBSA subsidiary if there had been no transfer may be given in evidence by or against BSAL; and
(m)BSAL may execute an instrument discharging, surrendering, transferring or otherwise dealing with a transferred asset or liability either in its own name or in the name of the body corporate from which the asset or liability was transferred to BSAL."
Section 18 of the Corporatisation Act is in the following terms:-
"18.(1)A certificate issued by the Treasurer certifying that an asset or liability is or is not a transferred asset or liability is to be accepted in any legal proceedings as conclusive evidence of the matter so certified.
(2)An apparently genuine document purporting to be a certificate of the Treasurer under subsection (1) is to be accepted in any legal proceedings
as such a certificate in the absence of proof to the contrary."
The Corporatisation Act by Schedule 3 thereof makes certain consequential amendments to the SBSA Act. Amongst these amendments are:-
(a)the replacement of the original long title with a new long title in the following terms:-
"An Act to continue the State Bank of South Australia in existence as the South Australian Asset Management Corporation with the function of managing certain assets; and for other purposes."
(b)the replacement of the original definition of "the Bank" by the following definition:-
'"The Bank" means the State Bank of South Australia, or, according to the context, that body as continued in existence under the name the "South Australian Asset Management Corporation"'.
(c)the inclusion of the following section:-
'6A(1) The Bank continues in existence as a body corporate under the name the "South Australian Asset Management Corporation".
(2)Despite the change of name, the Bank may, with the approval of the Treasurer, carry on business under the name "State Bank of South Australia" on such terms and conditions as the Treasurer specifies.'
(d)the redefinition of the general functions of the Bank as follows:-
"19(1)The Bank's functions are to manage, realise and otherwise deal with its remaining assets and liabilities and,
with the approval of the Treasurer, other assets and liabilities of the Crown or an instrumentality of the Crown, to the best advantage of the State."
RELEVANT PROVISIONS OF THE BANKRUPTCY ACT 1966
Section 40 of the Bankruptcy Act provides for acts of bankruptcy. So far as is here relevant it is in the following terms:-
A debtor commits an act of bankruptcy in each of the following cases:-
. . . . . . . . . .
(g)if a creditor who has obtained against the debtor a final judgment or final order, being a judgment or order the execution of which has not been stayed, has served on the debtor in Australia or, by leave of the Court, elsewhere, a bankruptcy notice under this Act and the debtor does not -
(i)where the notice was served in Australia - within the time fixed by the Registrar by whom the notice was issued; or
(ii). . . . . . . . . .
comply with the requirements of the notice ....
. . . . . . . . . .
For the purposes of paragraph 1(g) -
. . . . . . . . . .
(d)a person who is for the time being entitled to enforce a final judgment or final order for the payment of money shall be deemed to be a creditor who has obtained a final judgment or order;
. . . . . . . . . ."
Section 41 of the Bankruptcy Act is concerned with bankruptcy notices. So far as is here relevant it provides:-
A bankruptcy notice -
(a)shall be in accordance with the prescribed form; and
(b)shall be issued by the Registrar.
. . . . . . . . . .
A bankruptcy notice shall not be issued in relation to a debtor -
(a)except on the application of a creditor who has obtained against the debtor a final judgment or final order within the meaning of paragraph 40(1)(g) or a person who, by virtue of paragraph 40(3)(d), is to be deemed to be such a creditor;
. . . . . . . . . ."
Rules 7 and 8 of the Bankruptcy Rules govern the making of applications for the issue of bankruptcy notices and prescribe the form of such notices. So far as is here relevant they provide:-
Application may be made to the Registrar for the issue of a bankruptcy notice by filing an application, in accordance with Form 3, with the Registrar.
At the time when the application is filed, the applicant shall -
(a)file one of the following documents in respect of the final judgment or final order in relation to which the bankruptcy notice is to be issued:-
(i)an office, sealed or certified copy of the judgment or order;
. . . . . . . . . .
(b)furnish to the Registrar, for signature and stamping by the Registrar, so many copies of a form of bankruptcy notice as are required for service and for annexure to any affidavits of service, and one additional copy of that form for filing.
. . . . . . . . . .
Where the Registrar is satisfied that the application has been duly made to him for the issue of a bankruptcy notice and that the copies of the form of bankruptcy notice furnished to him in accordance with paragraph 2(b) are in order for signature, the Registrar shall sign and stamp each of those copies and return them to the applicant.
. . . . . . . . . .
8.For the purposes of paragraph 41(1)(a) of the Act, a bankruptcy notice shall be in accordance with Form 4."
SUBMISSIONS OF THE DEBTOR
Mr Stevens, who appeared on behalf of the debtor, submitted that no act of bankruptcy had been committed in this case as the bankruptcy notice served upon the debtor was invalid on the following grounds:-
(1)that it was not issued by "a creditor who has obtained against the debtor a final judgment" within the meaning of ss40(1)(g) and 41(3)(a);
(2)that there was no proof before the Registrar at the time when he issued the bankruptcy notice that the benefit of the judgment debt referred to in the notice had been transferred by the Treasurer to BSAL pursuant to the Corporatisation Act;
and
(3)that the bankruptcy notice failed to identify the circumstances of the transfer of the benefit of the judgment debt so as to enable the debtor to be clear to whom he was obliged to make payment and why.
VALIDITY OF THE BANKRUPTCY NOTICE
The authorities are clear that failure to comply with an invalid bankruptcy notice does not constitute an act of bankruptcy. (James v Federal Commissioner of Taxation (1955) 93 CLR 631; Re O'Sullivan; Ex parte Bank of New Zealand (1991) 30 FCR 112; Goldsmith v First Pacific Mortgage Limited (1993) 42 FCR 522; Kleinwort Benson Australia Limited v Crowl (1988) 165 CLR 71 per Deane J at 81).
A bankruptcy notice may only be issued by "a creditor who has obtained against the debtor a final judgment" within the meaning of ss40(1)(g) and 41(3)(a) of the Bankruptcy Act. However, s40(3) of the Bankruptcy Act deems a person who is entitled for the time being to enforce a final judgment to be a creditor who has obtained such final judgment for the purposes of paragraph 1(g) of that section. The legislative history of this subsection and its meaning is discussed by the Full Court of this Court in Abigroup Limited v Abignano (1992) 39 FCR 74.
Is BSAL a person entitled for the time being to enforce the final judgment obtained by SBSA against the debtor? It is acknowledged by the debtor that SBSA did obtain against him a final judgment in the sum referred to in the bankruptcy notice. He further acknowledges that the benefit of the final judgment has been transferred from SBSA to BSAL pursuant to s7 of the Corporatisation Act. The benefit of the final judgment obtained by SBSA against the debtor is thus acknowledged by the debtor to be a "transferred asset" within the meaning of the Corporatisation Act (see the definition of "transferred asset" in s3 of the Corporatisation Act).
Section 7(5) of the Corporatisation Act provides that a transfer of an asset under the section operates by force of the Act and despite the provisions of any other law or instrument. Section 11(a) of the Corporatisation Act provides as to a transferred asset that, for the purpose of construing any instrument applicable to such asset, a reference to SBSA is to be construed as a reference to BSAL. Section 3 of the Corporatisation Act defines the term "instrument" to include a judgment of a court. The Corporatisation Act discloses a clear intention in the Parliament of South Australia that a judgment obtained by SBSA, the benefit of which has been transferred to BSAL under the Corporatisation Act, is to be treated as though it had been obtained by BSAL itself.
In my view, the Parliament of South Australia has power to legislate concerning the way in which judgments of South Australian courts are to be construed and as to their effect and general enforceability. Such power is, of course, subject to the limitation imposed by s109 of the Constitution. However, I do not consider that any issue of inconsistency between laws of the respective Parliaments of the Commonwealth and the State arises here. In my view the Bankruptcy Act discloses an intention in the Commonwealth Parliament to leave undisturbed the laws of the States as to the creation of the relationship of debtor and creditor and as to the general rights of the parties to such a relationship.
I conclude that BSAL is a person entitled for the time being directly to enforce the judgment of the South Australian Magistrates Court obtained by SBSA against the debtor within the meaning of s40(3) of the Bankruptcy Act. BSAL is consequently to be deemed for the purposes of s40(1)(g) of the Bankruptcy Act to be a creditor who has obtained a final judgment against the debtor. In my view, BSAL is a person authorised to issue a bankruptcy notice to the debtor in the circumstances of this case (Bankruptcy Act s41(3)(a)).
The second argument advanced on behalf of the debtor was that there was no proof before the Registrar at the time that he issued the bankruptcy notice in this case that the benefit of the judgment debt referred to in the notice had been transferred by the Treasurer to BSAL pursuant to the Corporatisation Act. This argument was not based upon any alleged non-compliance with the requirements of r7 of the Bankruptcy Rules. As I understand the argument, it was contended that the Registrar ought not in the circumstances of this case to have been satisfied that the application for the bankruptcy notice had been duly made (see r7(5)). For the purpose of dealing with this argument I accept the accuracy of the assertion of fact implicit in the argument - i.e. that no evidence was placed before the Registrar to establish that the Treasurer had, by order in writing, transferred the benefit of the judgment debt from SBSA to BSAL.
Section 14(1) of the Bankruptcy Act provides that for each Bankruptcy District created pursuant to s13 of the Act there shall be a Registrar in Bankruptcy and such numbers of Deputy Registrars as is determined by the Minister, by notice published in the Gazette. Section 14(2) confers on each Registrar and Deputy Registrar such powers and functions as are conferred or imposed on a Registrar by the Act. One such power is the power to issue bankruptcy notices (s41(1)(b)). Section 14(5) of the Bankruptcy Act provides as follows:-
"An order or direction made or given, or an act done, by a Registrar or a Deputy Registrar under this Act is subject to review on summary application to the Court."
Sections 41(6A), (6B) and (6C) of the Bankruptcy Act each recognises the right of a debtor to apply to set aside a bankruptcy notice before the time fixed by the Registrar for compliance with the requirements of the notice. The time for compliance with the notice in this case has long passed. No application has been made at any time to review the decision of the Registrar to issue the bankruptcy notice or to set aside the bankruptcy notice. In my view it is not open to the debtor to challenge on this hearing the adequacy of the material upon which the Registrar was satisfied that the application for the issue of the bankruptcy notice had been duly made to him (Bankruptcy Rule 7(5)).
Although I have not been prepared in this case to consider the adequacy of the material upon which the Registrar was satisfied that the application for the issue of the bankruptcy notice had been duly made to him, I consider it appropriate to express the following view. On any application for the issue of a bankruptcy notice where reliance is placed upon the provisions of the Corporatisation Act dealing with the transfer of assets from SBSA to BSAL, evidence of such transfer should, in my view, be placed before the Registrar. I consider that a Registrar would be entitled on such an application to rely on a certificate issued by the Treasurer pursuant to s18 of the Corporatisation Act. It is not necessary for me to determine in this case whether it is within the power of the Parliament of South Australia to make a certificate of the Treasurer "conclusive evidence" of any fact in issue before this Court.
The third argument advanced on behalf of the debtor contended that the bankruptcy notice served on him was invalid by reason of its terms.
A bankruptcy notice is invalid and a nullity if it fails to meet a requirement made essential by the Bankruptcy Act, or if it could reasonably mislead a debtor as to what is necessary to comply with the notice (Kleinwort Benson Australia Limited v Crowl (supra)). In such a case the notice is a nullity whether or not the debtor in fact is misled (James v Federal Commissioner of Taxation (supra)). In my view, a bankruptcy notice ought also to make clear to the debtor the basis upon which his or her asserted liability to make payment to the creditor arises. Unless sufficiently informed of such asserted basis the debtor may be unclear as to his or her obligation to comply with the notice and as to the consequences of compliance. In an ordinary case the asserted basis of liability will be made perfectly clear by adherence to the prescribed form for a bankruptcy notice. However, in a special case such as the present, where facts to which the debtor is not privy are relied upon, something additional will be required.
The relevant part of the bankruptcy notice in this case is worded as follows:-
"WHEREAS BANK OF SOUTH AUSTRALIA LIMITED of 97 King William Street, Adelaide in the State of South Australia (hereinafter referred to as "the Judgment Creditor") has claimed that the sum of $9,820-99 is due by you to the Judgment Creditor being th sum of $7,118-07 under a final judgment obtained by the State Bank of South Australia against you in the Adelaide Magistrates' Court on the 10th day of May 1991 being a judgment the execution of which has not been stayed and the benefit of which has been assigned to the Judgment Creditor ....".
Apart from the last few words set out above, the bankruptcy notice in this case follows closely, although not precisely, the wording of Form 4 of the Bankruptcy Forms. Substantial compliance with the form is sufficient to satisfy the requirement of r8 of the Bankruptcy Rules (Acts Interpretation Act 1901 (Cth) s25C). However, such substantial compliance must result in a notice which could not reasonably mislead a debtor as to his or her obligations under the notice.
The bankruptcy notice in this case makes no reference to the Corporatisation Act or to the Treasurer by order in writing having transferred the benefit of the judgment debt to BSAL. It makes no reference to the judgment being an instrument in which, by reason of s11 of the Corporatisation Law, references to SBSA are to be construed as references to BSAL. The bankruptcy notice does refer to the benefit of the judgment debt having been "assigned" to the judgment creditor (i.e. in the context of the bankruptcy notice - BSAL). It may be noted that the power given to the Treasurer by s7 of the Corporatisation Act is the power to "transfer" assets or liabilities: the expression "assign" is not used in the section. Without further explanation contained in the bankruptcy notice the debtor might well have questioned the validity of an assignment of which he had not received notice as required by s15 of the Law of Property Act 1936 (S.A.).
This is not a case in which a creditor has simply undergone a change of name: the effect of the Corporatisation Act is that both SBSA and BSAL are continuing corporations capable of holding the benefit of the judgment debt. In my view, in all of the circumstances, the bankruptcy notice in this case might reasonably have created doubt in the mind of the debtor as to the identity of the creditor to whom he was obliged to make payment and as to the basis of his obligation to make such payment. The Court will not inquire as to whether he was in fact misled. (James v Federal Commissioner of Taxation (supra)).
In view of my above findings the deficiencies in the bankruptcy notice in this case cannot be characterised as "a formal defect or an irregularity" within the meaning of s306 of the Bankruptcy Act.
I conclude that the bankruptcy notice in this case was a nullity. Accordingly I hold that the non-compliance with a bankruptcy notice complained of in the creditor's petition has not been established. The creditor's petition is dismissed.
I will hear counsel as to costs.
I certify that this and the preceding pages are a true copy of the Reasons for Judgment of Justice Branson.
Associate:
Dated:
Counsel for the Debtor : Mr G Stevens
Solicitors for the Debtor : Armour & Co.
Counsel for the : Mr G Coppola
Petitioning Creditor
Solicitors for the : Kelly & Co.
Petitioning Creditor
Hearing Date : 30 June 1995
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