Re T.A. Greenland

[1989] FCA 193

I

JUDGMENT No ... I ~3. . .. '/L -gq ··

C A T C H W 0 R D S

BANKRUPTCY - Bankruptcy Notice - validity of - understatement of

amount due to creditor - not defect of substance - not likely

to mislead debtor.

BANKRUPTCY - Bankruptcy Notice - whether creditor appropriated

solicitors sent accounts showing nil balance - effect of sums received so as to extinguish judgment debt - creditor's

communication to debtor of appropriation - appropriation by

bankruptcy notice.

Bankruptcy Act 1966, s.41

Re:  Theodore Anthony Greenland & Anor

Ex parte: National Westminster Finance Australia Limited

Qld BN828 of 1988

PINCUS J. BRISBANE

26 APRIL 1989

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IN THE FEDERAL COURT OF AUSTRALIA

GENERAL DIVISION	QLD BN828 of 1988
BANKRUPTCY DISTRICT OF THE SOUTHERN
DISTRICT OF THE STATE OF QUEENSLAND

RE:	THEODORE ANTHONY GREENLAND and NORMA LORRAINE GREENLAND
EX PARTE:	NATIONAL WESTMINSTER FINANCE AUSTRALIA LIMITED

MINUTES OF ORDER

JUDGE MAKING ORDER:	PINCUS J.
DATE OF ORDER:	26 APRIL 1989
WHERE MADE:	BRISBANE
THE COURT:

1.       declares that bankruptcy notice no. 828 of 1988 is

not bad as being one which c laims a sum less than the amount of the judgment or such as to mislead the debtor;

2.       declares that the sum claimed in the bankruptcy

notice, namely $383,877.24 , has not been

creditor's solicitors of computations showing the extinguished as a debt by the sending by the amount due on the relevant account as being nil;

3.       orders that the question whether there is a claim,

as asserted by the debtor, equal to or exceeding the sum claimed in the bankruptcy notice be set

down for hearing on a date to be fixed by the

registrar;

4.       orders that any further affidavits to be relied on

by the debtor be filed and served on or before 10

May 1989;

5.       orders that any affidavits in reply be filed and

served by 24 May 1989;

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6.       orders that the applicant prepare a numbered book or books containing an index and incorporating all

the material proposed to be used on either side for
use by the Court at the hearing;

7.       orders that any witness whom either side desires to

cross-examine must be notified at least seven days

before the hearing;

8.       orders that the hearing will take place with

limited times for cross-examination and address,

which times will be fixed;

9.       orders that the creditor, on or before 3 May 1989,

supply to the debtor's solicitor full particulars

of the amount claimed by the creditor to be due on

the judgment debt referred to in the bankruptcy

notice;

10.       orders that the costs of today be the creditor's

costs in these proceedings, in any event;

11 .       vacates any mention date which may have been fixed

by the Court in respect of this application;

12.       vacates any orders for discovery or any other orders for particulars than those made in this application to set aside the bankruptcy notice.

NOTE:	Settlement and entry of orders is dealt with in
Rule 124 of the Bankruptcy Rules.

IN THE FEDERAL COURT OF AUSTRALIA

GENERAL DIVISION	QLD BN828 of 1988
BANKRUPTCY DISTRICT OF THE SOUTHERN
DISTRICT OF THE STATE OF QUEENSLAND

RE:	THEODORE ANTHONY GREENLAND and
NORMA LORRAINE GREENLAND
EX PARTE:	NATIONAL WESTMINSTER FINANCE AUSTRALIA LIMITED

PINCUS J. 26 APRIL 1989

EX TEMPORE REASONS FOR JUDGMENT

This is an application to strike out a bankruptcy notice

which was issued on 16 May 1988. The bankruptcy notice claimed

the sum of $383,877.24 as being the balance of a judgment entered

in the Supreme Court. The points taken on behalf of the debtor

were various, but two only, as it seemed to me, require to be dealt with. The others were not able to be formulated in a way

which enabled them to be understood and therefore may be assumed

to have no substance.

Two points were raised by Mr Abaza (who appeared for the

debtor) with which I propose to deal . Firstly, it is said that

the creditor had appropriated sums received by him in such a way

as to extinguish the judgment debt. The argument depended

entirely upon the fact that, after issue of the bankruptcy notice,

the judgment creditor's solicitor had sent a set of accounts

demonstrating the extinction of the judgment debt.

Moneys had been received and the accounts show that in

advance of their being received, or in anticipation of their being

received, the creditor had treated the judgment debt as being

extinguished, in its own books. Mr Abaza argued that, having done

so, the creditor could not change course and appropriate the

moneys received in a different way so as to justify the issue of

the bankruptcy notice .

The answer which was given by senior counsel for the

creditor, Mr Hanson Q.C., is that an appropriation such as to

justify the issue of the bankruptcy notice was made by the bankruptcy notice itself. That is, assuming, in favour of the

debtor, that so far as the internal accounts of the creditor were

concerned, the judgment debt was treated as extinguished by the
payments, still that extinction was not communicated to the debtor

and was ineffective as an appropriation.

However, when the bankruptcy notice was served upon the

debtor, demanding payment in the sum of $383,877.24, it did, as it

seems to me , effectively appropriate so much of the moneys	received by the creditor as to reduce the judgment debt to that
figure.

The only aspect of the matter which has troubled me

somewhat is that it seems odd that the appropriation does not

precede, but succeeds, the issue of the notice, because the

presentation of the notice to the registrar could not be an

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3.

appropriation. Perhaps the correct analysis is that the presentation of the draft notice to the registrar was not an appropriation, but merely a potential appropriation which became

complete when the notice was served.

However that may be, the result is, as it seems to me,

that Mr Hanson's argument is correct, in that the noti ce was an effective appropriation taking place before the correspondence

relied upon by Mr Abaza .

The second point taken by Mr Abaza was taken on what

might be described as an assumption that the amount claimed,

$383,877.24, was understated. The treatment of it as an

assumption seems an odd course, but is justified by the circumstances that other appropriations have been made, the validity of whi c h is in question, as I am told, in proceedings in the Supreme Court. However that may be, I have proceeded on the assumption which Mr Abaza's argument made, namely that the amount

of $383,877.24 is too lo~.

Mr Abaza argued on the basis of the decisions in In Re

H. B. [1904) 1 K. B. 94 andRe Jack (1959) 19 A. B.C . 268, that

unless the excess was waived, the bankruptcy notice was bad.

In my opinion that was once perhaps the law. The

proposition cannot stand with the decision of the High Court in

Kleinwort Benson Australia Ltd v . Crowl (1988) 79 A.L.R. 161.

It is my opinion that the validity of the bankruptcy notice is saved, on the assumption I mentioned, by the principle that understatement of the amount due is not a defect of substance

unless the understatement is objectively capable of misleading the

debtor as to what is necessary for compliance with the notice.

Here, there is no doubt as to what is necessary for compliance

with the notice.

The matters which have been raised by Mr Abaza, and

dealt with in the way which I have just done, do not dispose of the whole of the issues sought to be raised. Mr Abaza wishes, in addition, to contend that there is a claim equal to or exceeding

the sum c laimed by the bankruptcy notice, which could not have

been set up in the proceeding in which judgment was obtained.

Mr Abaza has informed me that proceedings have been

instituted in this Court by application which, if entirely

successful, will result in a judgment of millions of dollars.

There has been a suggestion made by my brother Spender that this

aspect of the bankruptcy notice might await the final determination of the proceedings c laiming the sum to which I have

just alluded. However, Mr Abaza informs me that he desires an

earlier determination, to get rid of the bankruptcy notice, and it

seems to me that I should accede to his wish.

I have already intimated that I propose to make

directions, so as to ensure that the determination of whether or not there is a claim such as Mr Abaza sets up does not turn into a

truncated trial of the suit. I have also indicated that I propose to give directions as to the mode of determination of what is left

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5.

of this attack on the bankruptcy notice .

The orders I propose to make are, firstly, I declare the

bankruptcy notice no. 828 of 1988 is not bad as being one which claims a sum less than the amount of the judgment or such as to

mislead the debtor. I will also declare that the sum claimed in

the bankruptcy notice, namely $383,877.24, has not been extinguished as a debt by the sending of computations showing the amount due on the relevant account as being nil, in correspondence

from Messrs MacGillivray and Co. dated 12 October 1988.

Next, I will order that the question whether there is a claim, as asserted by the debtor, equal to or exceeding the sum claimed in the bankruptcy notice be set down for hearing on a date

to be fixed by the registrar. I will order that any further

affidavits to be relied on by the debtor be filed and served on or

before 10 May 1989 and any affidavits in reply by 24 May 1989.

I will order that the applicant prepare a numbered book

or books containing an index and incorporating all the material

hearing. I order that any witness whom either side desires to proposed to be used on either side for use by the Court at the cross-examine must be notified at least seven days before the
hearing.

I order that the hearing will take place with limited

times for cross-examination and address, which times will be

fixed. Lastly, I order that the creditor, on or before 3 May,

supply to the debtor's solicitor full particulars of the amount

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6.

claimed by the creditor to be due on the judgment debt referred to

in the bankruptcy notice.

The costs of today will be the creditor's costs in these

proceedings, in any event, that is, whoever wins the case the

creditor will have the costs of today . I vacate any mention date

which may have been fixed by the Court in respect of this

application.

I vacate any orders for discovery or any other orders
for particulars than those which I have made in the application to

set aside the bankruptcy notice. If either side wants discovery or particulars then it or they will have to make further

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;. ~ r·•ef1t herein of His Honour

Mr. Justice Pincus £ ~

Dated ;) 6 4)-/; 11~')