Re Svabec, John Ex Parte Deputy Commissioner of Taxation

[1996] FCA 961

CATCHWORDS

BANKRUPTCY - opposition to making of a sequestration order - whether bankruptcy notice valid - whether bankruptcy notice misleading - whether the words “or his agent” should have appeared in the bankruptcy notice - whether there was a restriction on the place for compliance with the notice - whether it is necessary to specify the capacity of the agent appearing in the bankruptcy notice

BANKRUPTCY - whether omission of words from the bankruptcy notice was a defect which could reasonably mislead the debtor - whether notice requiring compliance with notice at any Court -exercising Federal jurisdiction “is deficient or misleading”

Bankruptcy Act 1966 ss 41(1)(a), 41(2), 42, 42(1)(a), 41(2)(a), 41, 27, 40(1)(g), 27, 28(1), 29, 52(1)
Bankruptcy Rules r 8,  Form 4, r 7
Income Tax Assessment Act 1936 ss 208, 209
Bankruptcy Act 1924-1930 s 53(i)

James v Federal Commissioner of Taxation (1955) 93 CLR 631 Refd
In Re a Debtor [1911] 2 KB 718 Refd
Re McCarthy ex parte Deputy Commissioner of Taxation (1979) Qd R 139 Foll
James v DCT (1957) 97 CLR 23 Foll
Re Martin;  ex parte Government Employees Finance and Industrial Loan Corporation (1969) 13 FLR 353 Cons
Pillai v Comptroller of Income Tax (1970) AC 1124 Foll
Re:  Wong ex parte Kitson (1979) 27 ALR 405 Foll
Re Mullavey;  ex parte Australia & New Zealand Banking Group Ltd [1977] 32 FLR 1 Refd
Re St. Leon;  ex parte National Australia Bank Limited (1994) 54 FCR 371 Refd
Re Colwell;  ex parte ARC Engineering Pty Ltd (unreported decision of Spender J of 8 March 1985) Foll

Re John Svabec ex parte Deputy Commissioner of Taxation
Creditor’s Petition QP No 509 of 1996
Kiefel J Brisbane 8 November 1996

IN THE FEDERAL COURT OF AUSTRALIA
GENERAL DIVISION
BANKRUPTCY DISTRICT OF THE
STATE OF QUEENSLAND

Creditor’s Petition QP No 509 of 1996

RE:

JOHN SVABEC

Debtor

EX PARTE:

DEPUTY COMMISSIONER OF TAXATION

Petitioning Creditor

JUDGE MAKING ORDER:          Kiefel J
DATE OF ORDER:  8 November 1996
WHERE MADE:  Brisbane

MINUTES OF ORDERS

THE COURT ORDERS THAT:

1. The estate of John Svabec be sequestrated and that Phillip Kenneth Aggs be appointed trustee.

1. The petitioning creditor’s costs be taxed and paid out of the estate.

Note:Settlement and Entry of Orders is dealt with in Rule 124 of the Bankruptcy Act.

IN THE FEDERAL COURT OF AUSTRALIA
GENERAL DIVISION
BANKRUPTCY DISTRICT OF THE
STATE OF QUEENSLAND

Creditor’s Petition QP No 509 of 1996

RE:

JOHN SVABEC

Debtor

EX PARTE:

DEPUTY COMMISSIONER OF TAXATION

Petitioning Creditor

CORAM:Kiefel J

DATE:8 November 1996

PLACE:Brisbane

REASONS FOR JUDGMENT

The Judgment Debtor has given notice of his opposition to the making of a sequestration order on grounds relating to the contents of the Bankruptcy Notice which previously issued.  It was that notice, and the debtor’s failure to comply with it, which founded the act of bankruptcy referred to in the petition.  On three grounds the debtor submits there was not a notice which satisfied the requirements of the Bankruptcy Act 1966.

On 12 September 1994 judgment was entered against the debtor in the Supreme Court of Queensland for $392,435.82, a sum which included costs.  The bankruptcy notice, issued on 20 July 1995, recited the fact of that judgment and that execution had not been stayed and went on:

“THEREFORE TAKE NOTICE that within 28 days after service of this
notice on you, excluding the day on which this notice is served on you, you are required:

(a)to pay the sum of $392,435.82 so claimed by the judgment creditor to the Deputy Commissioner of Taxation who has an office at 10 Banfield Street, Chermside in the State of Queensland or to the Australian Government Solicitor who has an office at Level 15, 340 Adelaide Street, Brisbane in the State of Queensland or;

(b)to secure the payment of the sum referred to in the last preceding paragraph to the satisfaction of Federal Court of Australia or other court exercising Federal jurisdiction in bankruptcy pursuant to the provisions of Section 27 of the Bankruptcy Act 1966 or the judgment creditor who has an office at 10 Banfield Street, Chermside or the Australian Government Solicitor, who has an office at Level 15, 340 Adelaide Street, Brisbane in the said State or compound the sum so specified to the satisfaction of the judgment creditor or the Australian Government Solicitor:

AND FURTHER TAKE NOTICE that if, within the period set out above, you fail either to comply with either of the abovementioned requirements of this notice or to satisfy the Federal Court of Australia or other Court exercising Federal jurisdiction in bankruptcy pursuant to the provisions of Section 27 of the Bankruptcy Act 1966 that you have a counter-claim, set-off or cross demand equal to or exceeding the sum specified in paragraph (a) of this notice, being a counter-claim, set-off or cross demand that you could not have set up in the action in which the judgment was obtained you will have committed an act of bankruptcy on which bankruptcy proceedings may be taken against you.”

(The highlighting is mine and indicates those parts the subject of following submissions).

In relation to the direction contained in the notice with respect to payment or the taking of other steps in satisfaction of the judgment the debtor submits, firstly, that the reference to a payment which might be made to the Australian Government Solicitor in paragraph (a) does not comply with the requirements of the Act and is apt to mislead. 

Section 41(1)(a) provides that a bankruptcy notice shall be in accordance with the prescribed form. Rule 8 provides that that is Form 4. Sub-section 41(2) provides:

(2)         The prescribed form of bankruptcy notice shall be such that the notice -

(a)         requires the debtor named in it, within a specified time (being the time referred to in sub-paragraph 40(1)(g)(i) or (ii), whichever is appropriate) 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;  and

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

Form 4 in its relevant parts, then provides as follows:

“BANKRUPTCY NOTICE

To:      ¼

¼

THEREFORE TAKE NOTICE that within
days after service of this notice on you, excluding the day on which this notice is served on you, you are required -

(a)       to pay the sum of $  so claimed by the judgment creditor to (here insert “the judgment creditor”, or, if the judgment or order requires payment to be made to a court or a person other than the judgment creditor, the name and address of the court or the other person to whom payment is required to be made);  or

(b)       to secure the payment of the sum referred to in paragraph (a) to the satisfaction of the (name of the Court) or the judgment creditor (or his agent whose name and address are              ) or compound the sum so specified to the satisfaction of the judgment creditor (or his agent):

AND FURTHER TAKE NOTICE that if, within the period set out above, you fail either to comply with either of the abovementioned requirements of this notice or to satisfy the (here insert the name of the Court) that you have a counter-claim, set-off or cross demand equal to or exceeding the sum specified in paragraph (a), being a counter-claim, set-off or cross demand that you could not have set up in the action (or proceeding) in which the judgment (or order) was obtained, you will have committed an act of bankruptcy on which bankruptcy proceedings may be taken against you.

Dated this  day of  ,     19  .

Registrar

NOTE:  If you have a counter-claim, set-off or cross demand equal to or exceeding the sum specified in paragraph (a), being a counter-claim, set-off or cross demand that you could not have set up in the action (or proceeding) in which the judgment (or order) was obtained, you may, under sub-section 41(7) of the Bankruptcy Act 1966, within the period set out above, file an affidavit to that effect giving details of the counter-claim, set-off or cross demand, as the case requires, and the reasons why you were unable to set up the counter-claim, set-off or cross demand, and, if you do so, the time for complying with the requirements of this notice shall be deemed to have been extended until the Court determines whether it is satisfied that you have such a counter-claim, set-off or cross-demand.

This notice was issued on the application of (name of the solicitor for the judgment creditor or the name of the judgment creditor, as the case may be) whose address for service is.”

The option here given for payment to be made to the Australian Government Solicitor was not one provided for in the judgment, which speaks only of the Deputy Commissioner of Taxation recovering the judgment debt.  Counsel for the debtor placed reliance upon the decisions in James v Federal Commissioner of Taxation (1955) 93 CLR 631 and In Re a Debtor [1911] 2 KB 718, 723 which dealt with notices purported to place restrictions upon the place for payment, limitations which were neither to be found in the judgment itself nor in the form of notice authorised under the Bankruptcy legislation. For the Commissioner it was however submitted that the terms of the notice here are permitted by s 42, which was enacted to overcome
the problems created by James v FCT with respect to payment when the debt was due to the Commonwealth:  see Re McCarthy, ex parte Deputy Commissioner of Taxation [1979] Qd R 139. Indeed the provision in the notice in that latter case, which included the option for payment to the Australian Government Solicitor at a specified address, is similar to that here.

Section 42 provides:

42(1)    Where a bankruptcy notice under this Act is served on a debtor by the Commonwealth or a State, it is a sufficient compliance with the notice if, within the time allowed by the notice, the debtor pays the amount required to be paid by the notice to, or secures it or compounds it to the satisfaction of:

(a)the Secretary to the Attorney-General’s Department, or the Crown Solicitor of the State, as the case may be;  or

(b)if an agent of the Commonwealth or of the State, as the case may be is specified in the notice for the purpose, the agent so specified.

(2)         A statement that the debtor may comply with the notice in the manner referred to in subsection (1) may be included in a bankruptcy notice issued on the application of the Commonwealth or a State.”

It seems to me s 42(1) might be availed in the present case. By sections 208 and 209 Income Tax Assessment Act 1936, sums due by way of taxation are debts due to the Commonwealth, payable to the Commissioner and may be sued for and recovered either by the Commissioner or the Deputy Commissioner. Although they sue in their official name, it is in right of the Commonwealth that proceedings are taken. So much is clear from James v DCT (1957) 97 CLR 23, 35. It follows, in my view, that the agent of the Commonwealth referred to in s 42(1)(b) may refer to a person acting for and on behalf of the Deputy Commissioner.

The officers referred to in s 42(1)(a) would not need to be specified in the notice. Payment to them, where the debt is due to the Commonwealth or State, would be sufficient compliance. A statement concerning payment to an agent of the Commonwealth or State is however necessary and it would need at the least, to name the agent. Here the Australian Government Solicitor is named as one to whom compliance, in one of the three respects provided for in the bankruptcy notice, might be addressed. The debtor’s point is that it must be taken as required that it be expressly stated, and thereby made clear to the recipient of a bankruptcy notice, that the Australian Government Solicitor is the Commonwealth’s agent for the purposes of the section.

Section 42(1), like s 41(2)(a) refers to an agent being “specified” in the notice.  That would certainly require identification.  There is a dearth of authority on the question whether it requires more.  Earlier provisions of the bankruptcy legislation, which provided similarly that a notice might “specify an agent to act on behalf of the creditor ¼” were regarded by the commentators as requiring the agent to be named (for example, s 53(i) Bankruptcy Act 1924-1930 referred to in McDonald Henry and Meek, Australian Bankruptcy Law and Practice, LBC, 1928. Whether it also required that the authority of the person be made clear by describing them as the creditor’s “agent” is not so clear. On one view of it a debtor might be said to need to know only the person to whom, and the place at which, the debt might be paid or secured. If the notice specified a person other than the judgment creditor, attempts by the debtor to deal with them in the manner described would suffice. At the least there could be no
act of bankruptcy based upon an alleged failure on the part of the debtor to do what was required of him or her.  But it is difficult to spell out of the section a positive obligation to describe the person as agent.  One may readily infer that the provisions relating to the giving of notice are concerned to make clear to the recipient what they must do to avoid the consequences of the commission of an act of bankruptcy.  But I do not think it could be said to be essential that they know of the appointment, in fact, as agent. Good practice however would suggest it be provided, to overcome concerns which some debtors might have, as to whom the person named was and what connection this stranger had with the matter.  This may affect their perception of this part of the notice as reliable.

The notice set out in Re Martin;  ex parte Government Employees Finance and Industrial Loan Corporation (1969) 13 FLR 353, 354 did contain a description of the person as a “duly authorised agent”. Whether this resulted from a view of the requirements of the then legislation and forms or from a practice which had grown up, was not gone into. I note however that the form to the bankruptcy rules was, with respect to the reference to the creditor’s agent, in the same terms as that now current. Form 4 to the present Act and Rules contains the words in paragraph (b) in parenthesis “(or his agent whose name and address are ¼)”.  Although not free from doubt the better view, it seems to me, is that the words “or his agent” were intended to be set out in the notice where an agent was to be referred to. This is, as I have said, consistent with good practice. And whilst the form was obviously drafted to reflect what was contained in s 41(2)(a) the requirement as to description of agency would likewise apply where s 42(1) was involved.

Given the omission in the bankruptcy notice the question which then arises is whether that defect is of such a kind as could reasonably mislead the debtor, which is the test as to nullity:  Pillai v Comptroller of Income Tax (1970) AC 1124, 1135; Re Wong;  ex parte Kitson (1979) 27 ALR 405, 414.

Even though the Australian Government Solicitor is not described as an agent, one would think it plain enough that a reference to that office is likely to convey that it is the legal representative for the judgment creditor or the Commonwealth itself.  And it also seems to me that the terms of the notice make clear that the relevant dealing with the Australian Government Solicitor will suffice for compliance.  In my view the reference to the Australian Government Solicitor, without more, is not apt to mislead.

It was further submitted for the debtor that the bankruptcy notice here was also defective because it placed a restriction upon the place where the payment or other act of compliance might be effected.  In the case of each of the Deputy Commissioner and the Australian Government Solicitor one office was specified as a place where payment might be effected.  With respect to an agent one would think, and Form 4 confirms, that the name and address would need to be stated, although here the agent has more than one.  The real focus of the submission was, in any event, the Deputy Commissioner.  Counsel for the debtor submitted that the reference to payment to the judgment creditor at a particular office stands as an unnecessary restriction on the right of the debtor to seek out the Commissioner wheresoever the Commissioner be
(see James v FCT, 93 CLR 639). The answer to the objection is, I think, provided by their Honours’ reference, at that part of the judgment, to the notice having the effect of directing payment to be made at one place alone when no such restriction had been provided for by the judgment or order. Their Honours said:

“Section 53 also provides that the notice shall require the debtor to pay the judgment debt or sum ordered to be paid in accordance with the terms of the judgment or order.  We are here concerned with an order that the plaintiff shall pay the costs to the defendants.  It does not provide that the plaintiff must pay the costs to the defendants at any particular place as the bankruptcy notice does.  But the prescribed form simply directs the debtor to pay the debt to the creditor “of”.  Unless the judgment or order does so the notice should not require the debtor to pay the creditor at a particular place.  It is the duty of a debtor to seek out the judgment creditor and pay the judgment debt to the creditor if he is in Australia.  The debtor has the correlative right to pay the creditor wherever he can find him so that a debtor could be seriously prejudiced if he was led to believe that he was bound to pay the creditor at one particular place .  The objection is not a trifling one particularly in a large geographical area like Australia.  It is one of substance.  If a judgment creditor can direct payment at one place exclusively it means that, although he and the debtor reside or carry on business in the same vicinity, the creditor can require the debtor to seek him or his agent out in some remote part of the realm.”

But, it seems to me, the debtor here has not been required to pay or otherwise comply, at one place.  In the body of the notice, where the directions are given, it is simply pointed out that the Deputy Commissioner of Taxation has an office at 10 Banfield Street Chermside.  At the beginning of the notice it is stated “WHEREAS Deputy Commissioner of Taxation, one of whose offices is at 10 Banfield Street, Chermside in the State of Queensland ¼”.  That satisfies the requirement that an address be given, where the creditor may be reached.  In the case of a multiplicity of addresses, one may suffice:  see Re Mullavey;  ex parte Australia & New Zealand Banking Group Ltd (1977) 32 FLR 1 and the other cases discussed in Re St. Leon; 
ex parte National Australia Bank Limited (1994) 54 FCR 371, 377-8. In any event this is not a point taken by the debtor. Relevantly, it is nowhere expressed or implied by the notice that payment elsewhere, to the Deputy Commissioner of Taxation, would not amount to compliance with the notice. And I think it is clear enough from its terms that the address which is referred to in it is only one of many offices.

The remaining ground relied upon by the debtor concerns the references in the notice to compliance by securing payment of the sum demanded to the satisfaction of the Court or satisfying the Court that there is a relevant counter-claim, set-off or cross demand.  The Court referred to in the notice is not however just the Federal Court of Australia but includes “or other Court exercising Federal jurisdiction in bankruptcy pursuant to the provisions of Section 27 of the Bankruptcy Act 1966”. Which is to say that the debtor submits, on this occasion, that the notice is deficient because it provides for too many places at which the debtor might attend to effect compliance.  It was the debtor’s submission that he should only have been directed to the Court out of which the notice issued and that it is to be seen as confusing when a debtor is faced with the possibility of a number of Courts.  There was also raised, during the course of argument, the question whether a Court in a place other than that from which the notice issued, would likely accept what the debtor tendered.  And in that connection it is to be recalled that the debtor is faced with a time limit for compliance with the requirements of the notice. 

That part of s 41 which refers to the debtor securing payment refers to “the Court”. The same words are used in s 40(1)(g) with respect to the counterclaim, set-
off or cross demand which might be set up.  The term “the Court” is defined by s 5 as “a Court having jurisdiction in bankruptcy under this Act”. By s 27 that may be the Federal Court of Australia or a Supreme Court. Each of those Courts has jurisdiction throughout Australia: s 28(1). And the Courts are to act in aid of each other (s 29).

The reference to the Courts in the notice here is that contained in a form commonly used in the Bankruptcy District of Queensland. Insofar as it extends to all courts referred to in s 27, that would seem to be contemplated by s 41(2) and s 40(1)(g), subject to any further consideration as to whether they should be described in any greater detail than “the Federal Court or other Court exercising Federal jurisdiction in Bankruptcy pursuant to the provisions of Section 27 of the Bankruptcy Act 1966¼”.  And when regard is had to the scheme of the Act, further support is obtained for the conclusion that any Court exercising that jurisdiction might be approached by the debtor. 

In Re Colwell;  ex parte ARC Engineering Pty Ltd (unreported decision of Spender J of 8 March 1985) the notice was in similar terms to that here.  It nominated the Supreme Court of Queensland or the Federal Court of Australia or “other court exercising Federal jurisdiction in Bankruptcy, pursuant to the provisions of section 27 of the Bankruptcy Act 1966”.  It was there argued, as it was here, that the debtor might be confused or embarrassed as to which Court to go to.  His Honour however held that, whilst it was possible that some practical difficulties might be encountered, depending upon which Court was approached, nevertheless it was any Court exercising Bankruptcy jurisdiction to which the notice must refer and that any lesser
reference would not suffice as compliance with the sections.  I respectfully concur with his Honour’s view. 

His Honour had earlier noted that a bankruptcy notice could be issued by any Registrar in bankruptcy.  A review of the provisions of the rules confirms that a notice might be issued by any Registrar in Bankruptcy Australia (see Rule 7).  In those circumstances it would seem strange if, nevertheless, the bankruptcy notice could then require a debtor to attend at only one Court and one which might be at a great distance from the debtor, within the period limited by the Registrar for compliance with the notice.  And it is also to be recalled that in any Bankruptcy District there may be two Courts exercising concurrent jurisdiction.  In the passage from James v DCT (93 CLR 639), which I have set out above, the Court pointed out the substantial practical objection to permitting a judgment creditor to limit the mode of payment. And it ought be borne in mind that the Act establishes a system for the administration of bankruptcy for the whole of Australia, with Courts acting in aid of each other.

Form 4, to an extent, does not appear to conform with ss 40 and 41, in that it provides for the insertion of the “name of the Court” and this might be taken to imply one such Court.  It must however be read down in light of the requirements of the sections and the scheme of the Act.  And it is not without importance to recall that a bankruptcy notice is not a Court document.  If it were, there might be a stronger argument that the Court to which the form refers is the issuing Court.  It is however the Bankruptcy Registry which issues the notice.

There seems to me however to be no objection to naming, in the notice, a Court having a connection with the issuing Registry, in the notice, so long as it is made clear that any other Court referred to in s 27 may also be approached by the debtor. The notice here has done this. In my view it complies with the requirements of the Act.

The judgment debtor has not made out a ground for holding the bankruptcy notice to be invalid.  No other point was taken with respect to the requirements of s 52 (1).  I am satisfied as to the matters there referred to and that a sequestration order ought be made.

I certify that this and the preceding twelve pages are a true copy of the reasons for judgment herein of the Honourable Justice Kiefel.

Associate

Date:8 November 1996

Counsel for the debtor:   Mr B DeBuse
Solicitors for the debtor :   Baird & Associates

Counsel for the petitioning creditor:              Mr G Cross
Solicitors for the petitioning creditor:            Australian Government Solicitor

Date of Hearing:  21 October 1996
Place of Hearing:  Brisbane
Place of Judgment:  Brisbane
Date of Judgment:  8 November 1996