Ruckman v Suncorp Metway Insurance Limited

[2013] FCCA 840

FEDERAL CIRCUIT COURT OF AUSTRALIA

RUCKMAN v SUNCORP METWAY INSURANCE LIMITED [2013] FCCA 840

Catchwords:
BANKRUPTCY – Bankruptcy notice – Bankruptcy Act provides that “notice must be in accordance with the prescribed form” – notice based on judgment in Supreme Court of Queensland including the amount of the judgment sum plus interest at 10% from date of proceedings to date of order – inclusion of interest claimed pursuant to Supreme Court order and interest subsequent to Supreme Court order as one amount – whether such approach constituted a failure to meet a requirement made essential by the Bankruptcy Act – consideration of whether any error is substantive or formal.

Legislation:
Bankruptcy Act 1966, ss.30, 41(2), 41(5), 303, 306(1)
Bankruptcy Regulations, r.4.01
Supreme Court Act 1995 (Qld), s.47
Civil Proceedings Act 2011 (Qld), s.211

Cases cited:
Kleinwort Benson Australia Ltd v Crowl (JA) (1998) 79 ALR 161
Adams v Lambert (2005) 228 CLR 409

Applicant: JONATHAN OWEN RUCKMAN

Respondent: SUNCORP METWAY INSURANCE LIMITED ABN 83 075 695 966

File Number: BRG 874 of 2012

Judgment of: Judge Coker

Hearing date: 31 January 2013

Date of Last Submission: 31 January 2013

Delivered at: Townsville

Delivered on: 28 June 2013

REPRESENTATION

Counsel for the Applicant: Mr Coulsen

Solicitors for the Applicant: Sajen Legal

Counsel for the Respondent: Mr T Matthews

Solicitors for the Respondent: Quinlan Miller & Treston Lawyers

ORDERS

1. That the Application filed on 2 October 2012 is dismissed.

FEDERAL CIRCUIT COURT OF AUSTRALIA

AT TOWNSVILLE

BRG 874 of 2012

JONATHAN OWEN RUCKMAN

Applicant

And

SUNCORP METWAY INSURANCE LIMITED
ABN 83 075 695 966

Respondent

REASONS FOR JUDGMENT

1. The Court having made Orders on 28 June 2013 and indicating that Reasons for Judgement would be subsequently provided, now provides those Reasons.

INTRODUCTION

1. On 2 October 2012 Jonathan Owen Ruckman, whom I shall refer to as the applicant, filed an application in this court seeking orders in the following terms:

   1. Pursuant to sections 30 and or 303 of the Bankruptcy Act 1966 (Cth):

   (a)A declaration of the Bankruptcy Notice dated 29 June 2012, issued by the Official Receiver to the Applicant on the application of the Respondent and served on the Applicant on or about 13 September 2012 (‘the Bankruptcy Notice’) is invalid by reason that it fails to meet the essential requirements of the Bankruptcy Act 1966; and

   (b)That the Bankruptcy Notice be set aside.

   2.  The Respondent pay the Applicant’s costs of and incidental to this application on an indemnity basis, and

   3.  Such further or other order as to the Court seems appropriate.

2. The respondent to the application is Suncorp Metway Insurance Limited, ABN 83 075 695 966, whom I shall refer to as the Respondent.  A response was not filed in relation to the application, but a notice of appearance was filed on 24 October 2012, and at that time an affidavit responding to various issues contained within the application and the accompanying affidavit of the applicant was filed.  The affidavit of 24 October 2012 was under the hand of Nicole Clair Henkey, an employee of the firm Quinlan Miller & Treston, the solicitors for the respondent. 

3. The issue in relation to this matter turned specifically on the point of whether the bankruptcy notice, which is dated 29 June 2012, was valid or invalid.  The reason suggested for the invalidity was as detailed in the application:

   By reason that it failed to meet the essential requirements of the Bankruptcy Act 1966.

4. The bankruptcy notice that was filed in relation to the matter is annexed to an affidavit of Alan Edward Reeves, a licensed commercial sub-agent who deposes to the fact that on 13 September 2012 at 5.20 pm he served the applicant with the bankruptcy notice, along with a true copy of the judgment of the Supreme Court of Queensland, by delivering it personally to him at 106 The Esplanade, Toolakea in the State of Queensland. 

5. There appears to be no contest as to service having been properly effected but rather the issue relates to the bankruptcy notice itself, and whether the particulars included therein provide information sufficient to meet the requirements of the Act. 

THE EVIDENCE

1. Prior to addressing such issues, it is, of course, necessary to note the evidence called in relation to the matter and, in particular, the evidence of the applicant, Mr Ruckman.  Along with his application, he filed an affidavit in which he notes the service of the Bankruptcy Notice upon him and says at paragraph 4:

   On my receipt of the Notice, I examined same.  As a result of my examination of the Notice and the Judgment, a copy of which was attached thereto, I became confused as to the basis upon which interest was claimed in the Notice.  I am unable to properly determine from the Notice how interest of $149,678.10 could possibly have accrued since judgment on 19 April 2012. 

2. The applicant then goes on to indicate that as a result of that confusion, he is unable to properly ascertain the amount actually due and owing to the respondent.  Interestingly, the applicant notes at paragraph 7 that despite having read the bankruptcy notice and the claims contained therein, as well as having read the reasons for judgment that were annexed, he believed that Martin J had made no award for interest in favour of the respondent in the Supreme Court proceedings. 

3. That is a little confusing, however, when it is clear that the judgment that was issued by the Deputy Registrar, following the decision of Martin J, is in these terms:

   JUDGMENT for the Plaintiff in the sum of $764,106.82 together with Interest at the rate of 10% per annum from 29 June 2010 until today.  Order that the Defendant pay the Plaintiff’s costs of and incidental to the proceeding, including reserved costs, if any, to be assessed on the standard basis.

   It is, therefore, difficult to accept that the applicant, as suggested, was of the belief that there had been no award made for interest in favour of the respondent. 

4. However, the applicant gave oral evidence in relation to the proceedings which perhaps more fully explained his position in relation to the matter.  The applicant, in cross-examination, confirmed that he had been served with the bankruptcy notice, a schedule of interest and a copy of the final judgment of Martin J, at the time that service was effected.  He acknowledged, therefore, that he had been served with all of such documents, including the schedule of interest, which is not referred to in his affidavit material.

5. Interestingly, when asked whether he had looked at the documents, which constituted four sheets, he indicated that he did not recall whether he had done so, but went on to acknowledge that he did know that he was ordered to pay the amount of $764,106.82, together with interest at 10 per cent.  He acknowledged that the sum owed would be greater, therefore, than the judgment amount of $764,106.82 and confirmed that he did recognise that there was an interest component that had to be paid. 

6. More confusing from my own perspective, however, was his statement thereafter that, when asked if it was plain and clear as to what was required, he responded, “I really don’t know.”  Quite simply, there appears to be a degree of confusion on the part of the applicant in relation to what is required in relation to the matter in that he acknowledges that the order does provide for a payment of interest on top of the amount noted in relation to the judgment and, though he does not appear to have done any calculations in that respect, still seems to suggest that there is confusion, attributable to the respondent’s calculations.

7. That confusion is highlighted, not by the notice that was given in relation to the matter, but rather by the statements of the applicant in that he was specifically asked as to the basis upon which he suggested, as he did in paragraph 7 of his affidavit, that Martin J had not made an award for interest and he was unable to clarify that.  When asked again to consider the order of the court, he simply responded that he couldn’t explain what was in the affidavit and that he, “just found the whole thing very confusing.”

8. The confusion of the applicant is difficult to understand, in light of the fact that the schedule, which is acknowledged by the applicant to have been received by him, included, as best it could using the forms that are prescribed, a figure for interest of $149,678.10 which is the amount claimed in the actual bankruptcy notice.  I struggle, therefore, with any suggestion that there was confusion as to what was required to be paid in relation to the matter but to a significant degree the application is based, I would think, far more on the legal argument than any real confusion on the part of the applicant. 

9. The fact is that the applicant knew that there was a judgment against him.  He knew that there was an interest component to be paid and he knew, when served with the bankruptcy application, that the amount of interest that was sought in relation to the debt was an amount that had been calculated.  There is, with respect, no confusion in that regard, but rather there needs to be consideration of whether there is a defect in the bankruptcy notice which is substantive rather than formal.

10. In that respect, it is argued on the part of the applicant that the figure contained in item 1 of the bankruptcy notice, $764,106.82, is inaccurate and should, in fact, include interest at 10 per cent per annum, from 29 June 2010 until 19 April 2012, which would provide for a total judgment debt of $902,483.42.  It is then contended that rather than inclusion of a sum of $149,678.10 in item 3, there should only be included interest, from 20 April 2012 until it is said 29 June 2012, which totals $17,802.41. 

11. However, the interest that is calculated pursuant to the schedule annexed to the bankruptcy notice only claims interest to 13 June 2012. The amount that is contended by the applicant therefore that should be contained within the bankruptcy notice is $920,285.83. The amount actually claimed in the bankruptcy notice is $913,784.92, which is, in fact, some six and a half thousand dollars or so less than the amount that the applicant’s own calculations would indicate, is required to be paid.

12. That confusion may arise in relation to the matter is clear, but it is also clear in this instant that the amount claimed in order to satisfy the debt in its entirety is an understatement of the amount that the applicant himself acknowledges, as being required to be paid.  The argument therefore relates to the essential requirements in relation to such proceedings, as are necessary to bring a debtor before the court in relation to bankruptcy. 

13. It is noted that section 41(2) of the Bankruptcy Act prescribes that the bankruptcy notice must be in accordance with the form prescribed by the regulations. That form is prescribed in regulation 4.02 of the Bankruptcy Regulations and is in the exact terms of the bankruptcy notice, which was served upon the applicant in these proceedings. The claim is to be detailed at the conclusion of the first part of the bankruptcy notice and has six parts. The first of those items is headed “Amount as per the attached final judgment/s or final order/s”.

14. Accordingly, the judgment of 19 April 2012 gives rise to a difficulty in light of the fact that it fixes the amount of the debt together with interest to be calculated from 29 June 2010 until the date of the order, 19 April 2012. The inclusion therefore, of the amount as per the final judgment in the sum of $764,106.82 is reflective of the only formal amount mentioned in the order, though not of interest that was to be included from that date in June 2010 until the judgment in April of 2012.

15. Item 3 then relates to the addition of interest accrued “since date of judgment/s or order/s”. The amount included there is $149,678.10, which, it is contended on the part of the applicant is, “wildly exaggerating the post-judgment interest.” If that were the only evidence in relation to the matter, such a submission would carry significant weight, but it cannot stand, in my assessment, beside the fact that the applicant specifically acknowledges that the amount due and owing, pursuant to the orders of the Supreme Court made in April of 2012, was $764,106.82, plus interest at 10 per cent from 29 June 2010. As I noted earlier, his own calculations include an amount in the vicinity of $140,000 as interest, which is a component of the judgment debt.

16. From the respondent’s perspective, a more realistic approach is taken in relation to the figures included in the bankruptcy notice. In her affidavit filed in this matter, Ms Henkey deposes to the fact that the judgment debt only specified the amount of the statutory debt and did not particularise the amount payable in pre-judgment interest, so that when completing the bankruptcy notice, she was of the belief that she should only specify the amount as per the judgment in the sum of $764,106.82, and as there was no place in the bankruptcy notice to include an amount for interest in that debt, which had been awarded in addition to the dated judgment, she added the sum calculated as the interest awarded by the court in the only section of the bankruptcy notice that appeared applicable, which was that relating to post-judgment interest.

17. More particularly, Ms Henkey acknowledges that after the judgment was handed down on 19 April 2012, she forwarded to the legal representatives for the applicant, correspondence in which it was noted that an order had been prepared claiming the amount of $902,271.22, which included the interest component calculated in accordance with the orders of Martin J, totalling $138,164.40. 

DISCUSSION

1. The position in relation to the matter therefore arises not so much from any confusion as to the amount of the debt or amount of interest that was claimed, but arises directly from the limited parameters available in relation to inclusion of information within the bankruptcy notice itself.  As was submitted on the part of the respondent, therefore, it is disingenuous in the extreme for the applicant to say that he is confused as to the amount which he owes pursuant to the judgment, the interest awarded on the principal sum and the interest which has accrued on both the principal sum and interest, since the date of judgment, given that he did not pay the judgment sum and interest within 21 days after judgment and was given clear notice as to the amount that was claimed in that regard. 

2. The issue therefore is simply one of determining whether the contents of the bankruptcy notice and the calculations included therein give rise to a defect which is substantive rather than formal. 

3. In that regard, the argument of the respondent is, in my view, highly persuasive. To suggest that because of the absence of inclusion of interest awarded by the Supreme Court on the principal judgment sum, there is a substantive defect, that cannot be cured by the application of section 306(1) of the Bankruptcy Act, would be a triumph of form over substance.

4. The High Court has been called upon to comment in relation to such matters on numerous occasions and I was of course referred to the decision of the High Court in Kleinwort Benson Australia v Crowl (JA) (1988) 79 ALR 161, where at pages 166 and 167, the majority said the following:

   If the amount specified in a bankruptcy notice is in fact due and payment is claimed in accordance with the judgment, the essential requirements of s 41(2)(a)(i) – the only requirements presently relevant – are met.  Understatement of the amount due, whether it be an understatement of the judgment debt or of interest payable thereon, will thus constitute a defect which is substantive rather than formal only if the understatement is objectively capable of misleading the debtor as to what is necessary for compliance with the notice. 

   It may be that, in a given case, understatement is capable of misleading the judgment debtor particularly if the notice is capable of producing uncertainty as to whether the debtor is required to pay the amount in fact due or the amount specified in the notice.  In such a case uncertainty arises, not merely from the understatement, but from the understatement in the context of the particular bankruptcy notice.  No such uncertainty arises if it is clear that payment of the amount specified in the notice will constitute compliance with the notice. 

5. Such a position arises in relation to this matter.  The bankruptcy notice specifically detailed a final figure that it is claimed is owed, inclusive of the judgment debt and any or all interest.  That sum is $913,784.92.  The bankruptcy notice goes on to specifically recognise that the applicant was required to pay the amount claimed within 21 days, and that if there was not compliance with the bankruptcy notice, then that bankruptcy proceedings may be taken. 

6. There is no uncertainty as to what is required in relation to such proceedings.  In fact, the High Court was called upon again to consider the circumstances relating to whether a defect would be substantive rather than formal, in Adams v Lambert (2005) 228 CLR 409. The Full Court noted the following at paragraph 18 onwards:

   In its application to a bankruptcy notice, s 306 assumes the possibility of some failure to comply with a statutory requirement; that is, some defect or irregularity. In the present case, if there had been no failure to comply with the requirement of the Act and Regulations, there would be no issue as to the effect of s 306. In the event of such a failure, it must be asked whether the defect or irregularity is a formal defect or irregularity within the purview of s 306. If it is, then it becomes necessary to consider whether substantial injustice has been caused by the defect or irregularity, and whether the injustice cannot be remedied by an order of the court. The questions whether the defect or irregularity is a formal defect or irregularity, and whether substantial injustice has been caused and cannot be remedied, are separate and distinct, the latter question arising only if the former is answered in the affirmative. It may be accepted that, if a defect could cause substantial injustice, it may not easily be classified as a formal defect or irregularity. But the absence of claimed injustice does not conclude the separate question that arises under s 306 about whether the defect or irregularity is a formal defect or irregularity. Neither in Lewis (where the provision under which interest was being claimed was stated to be s 101 of the Supreme Court Act 1986 (Vic) whereas it should have been s 100(7) of the Magistrates’ Court Act 1989 (Vic)) nor in the present case was it suggested that substantial injustice had been caused by the defect or irregularity.

7. Such a statement is relevant in relation to this matter because of the inclusion within the bankruptcy notice and the schedule thereto of reference to the Supreme Court Act 1995 (Qld) section 47 when in fact section 211 of the Civil Proceedings Act 2011 repealed the Supreme Court Act 1995 after the date of the issue of the bankruptcy notice, but before its service. The fact is, of course, that no substantial injustice was caused by such a change, and it constitutes no more than an irregularity. That is recognised in section 306 of the Bankruptcy Act which, insofar as is relevant is in these terms:

   1.  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. 

8. Consideration of whether the defect is therefore substantive or formal is a matter for determination by the court before which such an argument is conducted.  It is noteworthy that in Adams v Lambert, the Full Court specifically considered such issues, noting at paragraphs 23 and 24 the following:

   The appellant’s principal argument turns upon s 306 of the Act.  Accepting that the misdescription of the provision under which post judgment interest was claimed, by referring to s 83A of the District Court Act rather than s 85 was a defect or irregularity and noting that it caused no substantial injustice, is it a formal defect or irregularity within the meaning of s 306? 

   The composite expression “a formal defect or an irregularity”, in its application to a bankruptcy notice, conveys a meaning with elements of both inclusion and exclusion.  A failure to comply with a requirement, to be found in the Act, imposed by reference to the regulations as to information to be furnished by the notice, is a defect or irregularity.  So, in Kleinwort Benson Australia Ltd v Crowl, an erroneous statement of the amount of interest owing on a judgment debt was a defect or an irregularity.  What is excluded from the section is a defect or irregularity of such a nature tha,t reading s 306 in the context of the whole Act, it is not “a formal defect or an irregularity.”  What kind, or degree, of defect is to be regarded as having such a nature? 

1. The court goes on to note that in some cases, the answer to that question may be easy and in others difficult, depending upon the circumstances of the particular case.  However, some guidance was provided in that respect when one considers the comments contained in paragraphs 30 and 31 of the decision.  There it is said, 30:

   The misdescription of the relevant section of the District Court Act was not capable of misleading the respondent as to what he had to do to comply with the notice.  This is not a matter of dispute.  The question is whether the misdescription involved a failure to meet a requirement made essential by the Act.  On the true construction of the Act, is it essential that there be no misdescription of the relevant section?  Is it the purpose of the legislation that any slip, such as giving a reference to the statutory provision governing pre-judgment interest when what is intended is reference to the provision governing post-judgment interest, should invalidate the notice?  Is this so no matter how clear it might be from other parts of the notice that the claim is for post judgment interest?

2. And 31:

   Section 306, in its application to bankruptcy notices, makes it plain that some instances of non-compliance with the requirements as to the form of a notice will not invalidate the notice.  The practical significance of an error or deficiency could vary according to the circumstances of each particular case.  Errors or deficiencies in compliance with requirements as to form may involve questions of a degree as well as of kind.  At the same time, the decision in Kleinwort Benson Australia Limited v Crowl shows that an error may be covered by s 306 even though it involves a substantial misstatement of an amount of money.  It was essential that the bankruptcy notice state the amount claimed.  Was it essential that the amount be correct?  Section 41(5) made it clear that an overstatement, even a large overstatement, would not necessarily invalidate the notice.  This Court concluded that it was not the legislative purpose that a substantial understatement should necessarily invalidate the notice.  That is to say, accurately stating the amount of interest owing was not a matter of such importance that error necessarily resulted in invalidity.  In the present case, overstatement or understatement of the amount of post-judgment interest owing would not necessarily have invalidated the notice.  That is part of the context in which legislative purpose is to be considered in deciding whether the reference to s 83A rather than s 85 was fatal.

3. In Adams v Lambert (supra), a clear indication is available as to the intent of the legislature. It was to require that there be consideration of whether or not the debtor was misled as to what was required to comply with the notice. As submitted on the part of the respondent in this case:

   The simple fact of the matter is there is no specific provision in the prescribed form for a separate delineation of what has sometimes been called ‘prejudgment’ interest, albeit that the schedule strictly is to include the ‘post-judgment’ interest calculation.  It is submitted that the manner in which this particular notice has been completed constitutes a formal defect or irregularity, and thus, by the non-inclusion of prejudgment interest in the amount of the judgment, or by way of the necessary corollary, the inclusion of the same in the calculation in the schedule does not invalidate the notice.

4. I could not agree more.  There is a defect certainly, but at least in part, it arises, not as a result of a failure on the part of the respondent to these proceedings, but rather as a result of a difficulty inherent in the prescribed form required to be used.  The information contained, however, within the bankruptcy notice, and additionally within the schedule of post-judgment interest calculation, which notes a starting date in June 2010 until April 2012 clarifies beyond any doubt the basis upon which the interest has been claimed in relation to the proceedings. 

5. There is not, in my view, a defect which is substantive, but rather one which is only formal or irregular in relation to the notice, and the application should be dismissed.  I intend to so order.

I certify that the preceding thirty-six (36) paragraphs are a true copy of the reasons for judgment of Judge Coker

Associate: 

Date:  17 July 2013