Re Matthews, W.M. v Ex parte Hazet Tools Australia Unit Trust trading as Hazet Tools Australia

Re: WAYNE MAXWELL MATTHEWS
Ex parte: HAZET TOOLS AUSTRALIA UNIT TRUST trading as HAZET TOOLS AUSTRALIA
No. P2032 of 1986
Bankruptcy

COURT

IN THE FEDERAL COURT OF AUSTRALIA

GENERAL DIVISION
BANKRUPTCY DISTRICT IN THE STATE OF NEW SOUTH WALES AND THE AUSTRALIAN CAPITAL TERRITORY
Einfeld J.(1)

CATCHWORDS

Bankruptcy - Application for sequestration order - challenge to validity of creditor's petition - inaccurate description of creditor in the Bankruptcy Notice and Bankruptcy Petition - overstatement of amount owing due to incorrect calculation of interest - inadequate attestation/authorisation of petition - defects incurable under s. 306 - objective test to be applied in relation to hypothetical debtor - strict compliance with statutory provisions required.

Bankruptcy Act 1966 ss. 41(5), 306(1)

HEARING

SYDNEY

#DATE 1:9:1987

Solicitors for the debtor: Mr Adelstein instructed by Messrs. Lasky & Adelstein

Counsel and solicitors for the petitioning creditor: Mr McGrath instructed by Messrs. McCauley Peter & Cripps

ORDER

Petition is dismissed.

Judgment creditor to pay debtor's costs, including reserved costs.

JUDGE1

This was an application by Hazet Tools Australia Unit Trust trading as Hazet Tools Australia ("Petitioning Creditor") for a sequestration order against Wayne Maxwell Matthews ("Debtor"). The matter commenced with a default judgment obtained in the District Court of New South Wales for $7,650.85 on 9 April 1986. On 3 July 1986, the District Court permitted payment of that judgment debt by instalments of $250 per month, the first such payment to be made on or before 23 July 1986. On 5 September 1986, a Bankruptcy Notice dated 21 August 1986 was issued in the sum of $8,120.07, the original debt having been said by that Notice to have increased to the amount contained in the Bankruptcy Notice because of the addition of interest at the rate of 18.5% per annum from the date of judgment to 8 August 1986. The application for the issue of the Bankruptcy Notice states quite correctly that in the Certificate of Judgment of the District Court filed in the Bankruptcy Registry, the petitioning creditor was shown as "Hazet Tools Aust. Unit Trust". The Bankruptcy Notice was served on 26 September 1986.

On 12 November 1986, a creditor's petition dated 7 November 1986 was presented on behalf of the petitioning creditor, asserting that the debtor had not paid the judgment debt and that such judgment debt had increased to the sum of $8,368.25 by reason of the accumulation of interest at the rate of 18.5% per annum to 10 October 1986. That was the date on which the petition alleges the act of bankruptcy took place. The creditor's petition itself is dated 2 December 1986 and was served on 15 December 1986.
The petition was originally sought to be proved by two affidavits. These affidavits are clearly intended to be in the usual form of supporting or probative affidavits of bankruptcy petitions. They are extraordinarily presented. The first is that of Cheryl Beverley Young whose affidavit, although not in the appropriate form, is dated 7 November 1986. Ms Young says that her affidavit is in the matter of a petition between these parties but the affidavit is unable to identify its date. She says that she is a director, though of what is not stated. Although Ms Young appears to be the same person who signed the creditor's petition as "petitioner", where her signature was witnessed by a solicitor from Mona Vale, she says in the affidavit that she is a "trustee" of the petitioning creditor and that she has been "authorised" by that entity to make the affidavit. She swears to the truth of paragraphs 1, 2 and 3 of the petition and these assertions are not disputed, except in relation to certain parts of paragraph 2 of the petition to which I shall come shortly.
The second affidavit is beguilingly headed "Affidavit of Truth". To my query during the hearing as to the difference between an affidavit of truth and any other type of affidavit, I was informed that this affidavit was intended to be headed "Affidavit of Truth of Statements contained in Paragraph 4 of the Petition". This affidavit was sworn on 12 November 1986 (again not in the correct form) by one Jeni Perriott, a clerk in the office of the petitioning creditor's solicitors. Apart from swearing that the act of bankruptcy, namely the failure to comply with a bankruptcy notice for the requisite period, was still persisting, Ms Perriott's affidavit discloses that the District Court proceedings were in fact between the petitioning creditor and the debtor, with the petitioning creditor being the plaintiff in those proceedings. No dispute arises on the matters contained in Ms Perriott's affidavit.
In a Rule 22 certificate dated 30 January 1987, a Deputy Registrar in Bankruptcy drew attention to a number of possible defects in the bankruptcy notice. The petition was listed for hearing on 2 February 1987 and presumably because of some one or more of the matters identified by the Deputy Registrar in her Rule 22 certificate, the petition was adjourned for two weeks. It was again adjourned when next listed for hearing and on 9 March 1987 Justice Beaumont stood the matter over to 16 March 1987. As had the Deputy Registrar on the previous occasion, his Honour reserved the question of costs. On each of these occasions, the debtor appeared in person and the petitioning creditor was represented by counsel.
When the matter came before me on 16 March 1987, the debtor was represented by a solicitor who advised that he had only received instructions that morning and that the petition was opposed on two grounds, namely that the petitioning creditor was incorrectly designated in the petition and that there had been an incorrect calculation of interest. The solicitor for the debtor indicated that in view of the late receipt of instructions, he had not had the opportunity of filing a notice of intention to oppose the petition but he undertook to do so within 24 hours. Such notice was duly filed on 18 March 1987 and adds a third ground, namely that the petition was not adequately attested or authorised. The petitioning creditor has not sought to address further argument on that question. It was discussed during the proceedings.
At the commencement of the hearing, counsel for the petitioning creditor filed in Court four additional affidavits. The first of the affidavits is by the same Cheryl Beverley Young to whom I have earlier referred, is in the correct form and is dated 13 March 1987. This time Ms Young identifies herself as a director and secretary of a body called Hazet Tools Investments Pty. Limited. Annexure A to the affidavit is an extract from the records of the National Companies and Securities Commission showing the directors of the company as at August 1986 and the certificate of incorporation of the company issued by the Corporate Affairs Commission on 25 August 1978. The significance of these dates is not explained.
Ms Young craves leave to refer to what she describes as "my affidavit dated 6 March 1987 and filed herein". No such affidavit was read. There is none in the Court file. She "confirms" that Hazet Tools Investments Pty. Limited was and is trustee of Hazet Tools Australia (not Aust.) Unit Trust. Of what "the confirmation" purports to be is not stated. There is annexed to the affidavit the deed of trust dated I December 1981. This document says in a prefatory averment that the intention of the deed was to establish a trust to be known as Hazet Tools Aust. (not Australia) Unit Trust and goes on to indicate that the trustee of this trust was to be Hazet Tools Investments Pty. Limited. One page of the photocopy annexed to the affidavit is illegible but clause 36 of the deed says that the trusts (this being on my reading of it the only time that the plural is used) created by the deed are to be known by the name Hazet Tools Australia Unit Trust. The documents contained in the second schedule to the deed are substantially blank and therefore do not provide evidence that the trust was effective to achieve its apparent aim.
Annexure C to Ms Young's affidavit contains what is described as a "true copy obtained from the Corporate Affairs Commission in Sydney (of) details of registration of the business name 'Hazet Tools Australia'". This Annexure consists of three pieces of paper. The third of them is dated 7 August 1978, though it was apparently lodged in the Corporate Affairs Commission on 3 October 1978. It is an application for the registration of the business name Hazet Tools Australia by a company called T.M.E. Sales Pty. Limited of 100 Concord Road, North Strathfield. The second document is annexed only in part. It is not dated but was said to be lodged in the Corporate Affairs Commission on 12 November 1984. The document is quite unsatisfactory in its incomplete form, but it appears to be a document designed to extend the registration of the business name Hazet Tools Australia from October 1984 to October 1987. It is an assertion by the signatories of the form, which apparently include Ms Young signing as director of Hazet Tools Investments Pty. Limited, that that company, not either of the possible Unit Trusts, is the proprietor of that business name and is seeking the renewal of that registration.
The first of the documents in Annexure C is a document of the Corporate Affairs Commission. The document is not dated but it appears to certify that the registration of the business name Hazet Tools Australia has been renewed up to and including 2 October 1987. It does not state who is the proprietor of that business name but the registration number that it bears is the same registration number as appeared on the second document to which I have referred, where the proprietor was said to be Hazet Tools Investments Pty. Limited. Ms Young's affidavit to which those documents were annexed states that the registered owner of the business name is that company.
Ms Young's affidavit goes on to say that at the time of what she describes as the "swearing" of the creditor's petition on 7 November 1986, she was a director of Hazet Tools Investment Pty. Limited and was authorised by the Memorandum and Articles of Association to sign that petition. Presumably, she meant that she was authorised to sign it on behalf of the company named. The only problem with that assertion is that the company named Hazet Tools Investments Pty. Limited was not the petitioning creditor and therefore could not authorise the signature of the petition. Indeed, no explanation is given as to how and by what authority the petitioning creditor was using a business name which was not its to use.
Ms Young's affidavit then seeks leave to refer to what she describes as her "affidavits sworn on 6 March 1987 and 13 February 1987". She goes on to say that at the time of swearing those "previous affidavits", she was a director of and had access to records of Hazet Tools Investment Pty. Limited. Neither of these "affidavits" appears in the file or was presented in evidence. If they existed, then the assertion merely is that on those dates (strangely put in reverse chronological order) she was a director of Hazet Tools Investments Pty. Limited with knowledge of its affairs. From the earlier part of her affidavit and Annexure A, I am able to find that on 28 August 1986, 13 February 1987, 6 March 1987 and 13 March 1987, Ms Young was a director of Hazet Tools Investments Pty. Limited. The only problem with that is that the petition is dated 7 November 1986. There is no evidence that Ms Young was a director of the company on that date, although some favourable presumption may be available.
Paragraph 6 of her affidavit says that she was aware that Hazet Tools Australia Unit Trust presented the petition on 12 November 1986. She goes on in paragraph 7 to say that she has checked the appropriate records of Hazet Tools Investments Pty. Limited and found that no payments have been made since the petition was presented. What is not explained is how the records of Hazet Tools Investments Pty. Limited would be likely to contain evidence of any payment to the petitioning creditor.
Her final, rather bold, assertion is that the debtor is still therefore indebted to the entity she described as Hazet Tools Investments Pty. Limited as Trustee for Hazet Tools Australia Unit Trust trading as Hazet Tools Australia. This is taking quite unacceptable liberty with the Bankruptcy Act and Rules and the District Court Act and Rules. The debtor is not indebted to Hazet Tools Investments Pty. Limited in any form. If indebted at all, he is indebted to the petitioning creditor.
The second affidavit filed in Court at the hearing was sworn by one Jennifer Sue Perriott. I was advised this is the same person as the Jeni Perriott to whom I had earlier made reference, although there is no explanation for the altered nomenclature. Apart from updating the relevant searches to found a sequestration order, Ms Perriott's affidavit discloses for the first time that the relevant District Court records show that the defendant before the District Court was actually the debtor trading as "Wayne's Grand Prix Tools". It is extraordinary, to say the least, that this fact could have been omitted from the deponent's earlier affidavit of 12 November 1986 reporting the same search. At the very least, it demonstrates a continuation of the completely casual way in which this matter has been conducted and the evidence presented on behalf of the judgment creditor.
The third affidavit presented at the hearing was another affidavit by Cheryl Beverley Young. Although dated 13 March 1987, as was the first of her two affidavits presented at the hearing, the form, like her first filed affidavit, is again wrong. Ms Young says in this affidavit that she is a director of Hazet Tools Investments Pty. Limited as trustee for Hazet Tools Australia Unit Trust trading as Hazet Tools Australia. She says that she is at the date of the swearing of the affidavit a person authorised by that entity to make the affidavit. Ms Young asserts again that the statements contained in paragraphs 1, 2 and 3 of the petition are true. Having in mind that this latter testimony has never been disputed, the purpose of this affidavit is quite unclear to me.
The fourth affidavit presented at the hearing was an affidavit of Roger Stewart Cripps of 6 March 1986. This affidavit, again in the wrong form, was not read. I therefore disregard it and have not read it, although I note that Mr Cripps was the person who originally applied for the issue of the bankruptcy notice in this matter.
The first objection to this petition and to the application for a sequestration order was that the creditor has been wrongly described in the documentation. The submission proceeds to embrace the concept that this misdescription is a fatal defect that cannot be cured. It is also submitted that Ms Young did not have or has not been shown to have the authority to sign the petition on behalf of the petitioning creditor.
The history which I have just recounted of the documentation in this matter, particularly as it involves Ms Young, leaves the matter in a wholly unsatisfactory and completely inconsistent way. In chronological terms, Ms Young first shows up on 1 December 1981 as secretary of Hazet Tools Investments Pty. Limited. We learn that she is still the secretary of that company, as well as one of its directors, on 31 December 1985 (the date on which the company returned her directorship to the National Companies and Securities Commission) and was still in that position on 28 August 1986. On 7 November 1986 she described herself in the petition as the petitioner signing a document on behalf of the petitioning creditor. On the same date she swore that she was a director of an unknown company and also a trustee of the petitioning creditor authorised to swear to the truth of part of the petition. On 13 March 1987 she was still a director and secretary of Hazet Tools Investments Pty. Limited, a company of which she says she was a director on 7 November 1986 authorised by its Memorandum and Articles of Association to sign the petition. She said also that on 13 February and 6 March 1987 she was a director of that company. On 13 March she further said that she was a director of that company in its capacity as trustee for the petitioning creditor and was authorised in that capacity to make a further affidavit swearing to the truth of some part of the petition to the truth of which she had earlier sworn.
The evidence, therefore, fails to establish that the debtor was and is indebted to the petitioning creditor. It is clear that Hazet Tools Australia Unit Trust does not and is not authorised to trade as Hazet Tools Australia. Exhibit 1 in the proceedings comprised three statements and two credit notes indicating that the contractual arrangements involved in this matter were between two business names, Hazet Tools Australia and Grand Prix Tools. As there is apparently no dispute that the debtor is in truth and trades as Grand Prix Tools or Wayne's Grand Prix Tools, I need not consider that aspect of the matter further. However, the business name Hazet Tools Australia, to the extent to which any conclusion can be drawn from the evidence at all, appears to be owned by Hazet Tools Investments Pty. Limited. There is certainly no evidence to show that it is owned by Hazet Unit Australia (still less Aust.) Unit Trust. Hence it is clear that the only enforcer of any debt to the entity known as Hazet Tools Australia can be Hazet Tools Investments Pty. Limited and that company is not the judgment creditor. It also is not the petitioner for the sequestration order. The matter is not advanced by Exhibit A to the proceedings which was admitted by consent as a statement of the debtor of 16 February 1987 (written on the letter paper of Ansett Golden Wing) promising to pay to the solicitors for the petitioning creditor said to be acting "on behalf of Hazet Tools Aust.", a sum of money which I am informed includes the judgment debt or part thereof.
The second objection taken by the debtor to the petition relates to the interest rate. The petition claims a sum of money calculated upon an interest rate of 18.5%, whereas in fact it is now admitted that the relevant percentage is 18.25%. The bankruptcy notice had said that the amount of interest was $469.22 when if the interest had been calculated at 18.25%, the amount would have been, as I am informed, $462.22, a difference of $7.00. By the time the petition was presented, the interest difference had increased from the correct amount of $702.88 to $717.40 quoted in the petition, a difference of $14.52. The result is that the petition claims $8,368.25, whereas the correct figure is said to be $8,353.73. These figures are not contested.
The questions that arise in relation to these objections, and in effect the matters on which the petition was litigated, is whether these defects are curable. Despite my pressing the matter, the petitioning creditor's counsel at no time sought to amend the petition or the bankruptcy notice, assuming amendment to be possible. He argued, in the case of the name, that he is entitled to prove a case for Hazet Tools Investments Pty. Limited as judgment creditor without amendment. In relation to the interest calculation, he says that he is entitled to have the matter cured under, what I understand to be, a combination of section 306 of the Bankruptcy Act and Rule 7(1) Part 7 of the District Court Rules. Section 306(1) states:

"Proceedings under this Act are not invalidated by a formal defect or an irregularity, unless the court before which the objection on that ground is made is of opinion that substantial injustice has been caused by the defect or irregularity and that the injustice cannot be remedied by an order of that court."

Rule 7(1) of the District Court Rules provides as follows:

"An action shall not be defeated by reason of the misjoinder of a party or the non-joinder of any person as a party."

Another relevant provision is section 41(5) of the Bankruptcy Act:

"A bankruptcy notice 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 time allowed for payment, gives notice to the creditor that he disputes the validity of the notice on the grounds of mis-statement."

A number of cases were mentioned in argument but many of them were not bankruptcy cases at all. I can see very good reasons of principle which would allow for generous amendment or substitution of names where before or during the trial of an action it appears that the plaintiff was wrongly described, even if this could not be described as an accidental misnomer of the plaintiff. It is also well supported by authority (see inter alia W. Hill & Son v. Tannerhill (1944) KB 472; Whittam v. W.J. Daniel & Co. Ltd. (1962) 1 QB 271; Rainbow Spray Irrigation Pty. Limited v Hoette & Anor. (1963) 80 WN (NSW) 142; Heinrich v. The Attorney General & Anor. (1967) SASR 78; J. Robertson Co. Limited (in liq.) v. Ferguson Transformers Pty. Limited & Ors. (1970) 44 ALJR 441). The question is, in the particular circumstances of bankruptcy proceedings with all their effects including quasi-penal consequences, whether a quite different legal entity than the correct entity can seek a sequestration order, even though the names of the entities are similar and the debtor would not have had any idea of the true legal situation.
Re Wheelahan ex parte Commissioners of the State Bank of Victoria (1981) 58 FLR 91 was referred to in support of the proposition that the test to be applied in considering the validity of the bankruptcy notice is an objective one, it being proper to look at the notice as a whole in considering its effect on a hypothetical debtor (citing in support Roufos v. Andrea (1981) 57 FLR 10 and James v. F.C. of T. (1955) 93 CLR 631).
In this case Justice Sweeney was considering whether a bankruptcy notice with a number of irregularities was invalid or could be saved by s.306(1) and Rules 195(1) and (2) of the Act. None of the defects related to the name of the petitioning creditor or the amount being claimed but Sweeney J favoured strict interepretation of statutory provisions relating to the form of bankruptcy notices due to their penal or quasi penal consequences in the event of non compliance: Re a Debtor ex parte The Debtor v. Hunter (1952) 1 Ch 192; Re Howes ex parte Hughes (1892) 2 QB 628.
In Re Gray ex parte Person to Person Financial Services Pty. Ltd. (1980) 48 FLR 379, the opposition to a creditor's petition was firstly based on the difference in the names appearing in the District Court judgment and creditor's petition. The debtor had a loan agreement with Person to Person Financial Services Pty. Limited but in a District Court judgment of which the debtor was not aware, and in a subsequent bankruptcy notice, the judgment (petitioning) creditor was incorrectly referred to as "Industrial Acceptance Corporation, Person to Person Pty. Limited."
In dismissing the petition, Justice Lockhart considered that the authorities now provided a general principle that bankruptcy notices must conform strictly to statutory requirements (see Re Wimborne ex parte The Debtor (1979) 24 ALR 494; James v. F.C. of T. (supra); Re Howes ex parte Hughes (supra); Re O.C.S. (A Debtor)(1904) 2 KB 161; Re O'Keefe ex parte Australian Factors Ltd. (1963) 19 ABC 101; Re Mellick (1971) 19 FLR 1); and that if a defect or irregularity is such that it could reasonably mislead the debtor, it will be fatal to the notice (Re a Debtor ex parte The Debtor v. Bowmaker Ltd. (1951) Ch 313).
Dismissal of that petition was also sought on the basis that the amount owing was stated to be "the balance sum of $6,677.51 and no more, together with interest or the balance from time to time outstanding at the rate of ten per cent per annum from 15 February 1978". Lockhart J held that the amount as so expressed "is either meaningless or so unclear as to render the notice uncertain, confusing and misleading as a whole."
A 'formal defect or any irregularity' is one that could not reasonably mislead the debtor. If the defect is of such a kind as could reasonably mislead the debtor upon whom it was served, the defect is fatal to the notice: see Re a Debtor ex parte The Debtor v. Bowmaker Ltd. (supra) and Pillai v. Comptroller of Income Tax (1970) AC 1124 at 1135.
The test is not whether the debtor was in fact misled. It is sufficient that he could be misled. In James v. F.C. of T. (supra), Williams, Kitto and Taylor JJ said at 644:

"The court cannot inquire whether the debtor has in fact been misled or not. In this case it is probable that he was not misled. It is sufficient that he could be misled."

In Re A Judgment Debtor (1908) 2 KB 474, Kennedy LJ said at 451:

"In the first place one has not to determine the validity or invalidity of the notice by considering whether the debtor to whom the notice is given has in fact been misled. It is sufficient that there is good ground for saying that the debtor might be misled. That is, I think, settled by authority. Secondly, in judging the probability of the debtor being misled one is bound not to deal too liberally with the requisites of the notice because of the quasi penal consequences which a bankruptcy involves."

As Lockhart J observed, the fact that the petitioning creditor makes an error does not assist in validating the bankruptcy notice. His Honour also said that even if the error did not invalidate the bankruptcy notice, it would provide a ground for dismissing the petition. I agree with respect with these views.
Re Willes Trading Pty. Limited and The Companies Act (1978) 1 NSWLR 463 was raised here by analogy. A winding up petition was resisted in that case based on non-compliance with a notice given pursuant to s.222(2)(a) of the Companies Act 1961. The notice was addressed to Willis Trading Pty. Limited not Willes Trading Pty. Limited.
The effect of a s.222(2) notice was to deem a company unable to pay its debts if a notice demanding payment of a debt exceeding $100 was served on the company and not paid for a period of three weeks.
The Supreme Court of New South Wales (Needham J) considered that s.222(2)(a) creates a "convenient and simple method of proving what is sometimes a very difficult issue to establish, namely that a company is unable to pay its debts." As the presumption arising from a correctly served s. 222 notice is not rebuttable, there is a heavy onus on the creditor to comply with that section. On that basis, non-compliance with s.222(2) requirements was deemed to be a fatal flaw and the petition was dismissed.
In Re Hansen (Beaumont J 4 March 1985, unreported), a bankruptcy notice was issued in the name of Mortgage Guarantee Insurance Corporation of Australia Limited, although before its issue, the creditor had changed its name to M.G.I.C.A. Limited displayed. Not connecting the two, he applied to have the bankruptcy notice set aside.
Beaumont J set aside the bankruptcy notice considering strict compliance with the requisites of a bankruptcy notice to be essential to its validity. His Honour said that if a notice could mislead a debtor in a material respect, "the court will not inquire whether the debtor has in fact been misled." A failure properly to identify the judgment creditor was held to be "a serious breach of the statutory scheme" and incurable by s 306.
Re Crisafulli (Toohey J 8 July 1985 unreported) concerned a District Court judgment obtained by the National Commercial Banking Corporation of Australia Ltd. on 18 January 1984. After judgment but before the bankruptcy notice was issued, the judgment creditor changed its name to National Bank of Australasia Limited. The bankruptcy notice quoted the old name. In considering whether or not the bankruptcy notice was misleading, Justice Toohey following the test laid down in James v. F.C. of T (supra) and by Lockhart J in Wimborne (supra), considered the question to be the capacity of the notice to mislead actual debtor. Toohey J did not set aside the notice, but the case is distinguishable on the facts as it is not one in which the debtor had dealt with a company by a particular name and then received a bankruptcy notice in a different name.
In Re Walsh ex parte Deputy Commissioner of Taxation (NSW) (1982) 47 ALR 751, the amount specified in the bankruptcy notice was correct at the time of issue but incorrect at the time of service because of payments made by the debtor in the meantime. Justice Lockhart repeated the general propositions that

(i) because of the quasi penal nature of bankruptcy proceedings a bankruptcy notice must be construed strictly;

(ii) s.306 cannot validate defects in a bankruptcy notice that could reasonably mislead a debtor.

The test as to whether or not something is misleading is determined by reference to the particular not the hypothetical debtor, as his Honour had held himself in Re Wimborne (supra) (see also Sheppard J in Re Preston ex parte Commercial Bank of Australia Ltd. (1982) 45 ALR 105).
Dealing with the facts of the particular case, Lockhart J held that the debtor had embarked on a mischievous plan of making payments to the creditor in varying, but generally small, amounts all over Australia. Such actions could not be ignored if the debtor was asserting that he could have been misled by some defect in the notice. His Honour rejected the debtor's submission that the overstatement necessarily vitiates the notice, although (provided notice is given pursuant to s.41(5)) he was of opinion that generally such a notice would be bad.
Justice Lockhart's decision was upheld by the Full Federal Court (see Walsh v. DCT (1982) 47 ALR 616), it being considered that where a notice valid upon its issue was partially complied with before service, the partial compliance did not vitiate the notice. The Court held that the Act on its true construction requires only that the notice correctly state the amount actually due by the debtor as at the date of its issue.
In Re Greenhill ex parte Myer (NSW) Ltd. (1984) 58 ALR 185 the judgment on which bankruptcy proceedings were based was wrongly stated in the petition to be for an amount of $200 in excess of the amount due. The applicant disputed the validity of the notice pursuant to s. 41(5) of the Act on the ground that the amount was misstated.
Justice Morling held the bankruptcy notice to be invalid and set it aside. His Honour adopted the comments of Justice Fisher in Re Williams (1982) 43 ALR 552 that bankruptcy notices are to be strictly construed and those of the High Court in James v. F.C. of T. (supra) at 644:

". . . consequences of non-compliance with a bankruptcy notice are serious and there is the highest authority that strict compliance with the requisites of a bankruptcy notice is essential to its validity."

In the course of his judgment, Justice Morling considered a number of authorities where the amount due and owing was misstated. One of them was Re Prossimo ex parte De Marco (1952) 16 ABC 86 at 88, where Justice Clyne held that a bankruptcy notice overstating the due amount was invalid. In considering the effect of s. 53 (ii) (the former equivalent of s. 41(5)), Clyne J had said that although under certain conditions the section can save a notice from invalidity even if it contains an overstatement of the amount actually due,

". . . if there is an overstatement and the debtor gives notice to the creditor, then the notice will be invalid."

In considering the effect of an over-statement of the amount due, Justice Lockhart in Re Walsh (supra) considered the Prossimo line of authority not to be inconsistent with his own view that such a notice would only be invalid if it could reasonably mislead the particular debtor. If they were inconsistent, Lockhart J would not follow them.
This decision was distinguished on the facts and Justice Morling referred in support to the dicta of the High Court in Walsh v. D.C. of T. (1984) 53 ALR 606:

"There is no doubt that a bankruptcy notice will be invalid if the sum specified in the notice as the amount due to the creditor exceeds the amount for which the creditor is entitled to issue execution, provided that the debtor gives timely notice under s 41(5)."

Re Browne ex parte Spirulina Products Company Australia Pty. Limited (1985) 7 FLR 251 was an uncontested petition the only defect being a discrepancy in the bankruptcy notice between the figures and the words of the debt due:

"Ninety one thousand four hundred and seventy five dollars and eighty-nine cents ($91,574.89) . . ."

(the correct debt being shown in the figures not the words).

Justice Pincus had to consider whether such misstatement should be treated as a formal defect or irregularity within the meaning of the Act. His Honour considered the first question to be an objective one - that is, could the notice reasonably mislead a debtor (Roufos v. Andrea (supra))? Although holding that the particular notice could not reasonably mislead a debtor, Pincus J believed that the debtor would be unaware how to satisfy the notice and that a bankruptcy notice should be clear and unambiguous (Re Wong ex parte Kitson (1979) 38 FLR 207). The maxim "de minimis non curat lex" was deemed inapplicable, his Honour being reluctant to create the impression that care is unnecessary in preparation of bankruptcy notices. Pincus J. declined to follow Re Johnson (1883) 25 Ch D 112 in which a bankruptcy notice stated a debt as L24 6s.8d. in one place and L74 6s.8d in another, it having been held that no injustice had been done.
In Re Leppard ex parte Fortune (Aust.) Pty. Ltd. (1974) 25 FLR 158, Justice Dunn also did not apply s. 306 to cure a discrepancy between the words and figures stating the debts, and dismissed the petition, being of the view that the notice should unambiguously tell the debtor what to do to avoid committing an act of bankruptcy.
This review of the authorities demonstrates the result that must follow in this case. The evidence establishes that:

1. the debtor is not indebted to the petitioning creditor;

2. the debtor is not indebted for the amount claimed in the petition (although he failed to give notice within the required time to invalidate the bankruptcy notice);

3. the petition is not signed by a person revealed by the evidence as authorised by the petitioning creditor to do so.

For these reasons, the petitioning creditor has not established an entitlement to a sequestration order. I therefore dismiss the petition and order the judgment creditor to pay the debtor's costs, including reserved costs.

[1987] FCA 507

01 SEPTEMBER 1987