Sarina v O'Shannassy (No 2)
[2021] FCCA 338
•26 February 2021
FEDERAL CIRCUIT COURT OF AUSTRALIA
Sarina v O’Shannassy (No 2) [2021] FCCA 338
File number(s): SYG 1345 of 2020 Judgment of: JUDGE MANOUSARIDIS Date of judgment: 26 February 2021 Catchwords: BANKRUPTCY – application under s 306(1) or s 33(1)(b) of the Bankruptcy Act 1966 (Cth) (Act) for an order to vary bankruptcy notice by removing the post office box address of the creditor and substituting a street address – whether it is an essential requirement to the issue of a bankruptcy notice that it not specify a post office box as the creditor’s address – such requirement is essential and its non-fulfilment, although a defect or irregularity, is not a formal defect or irregularity amendable to being cured under s 306(1) or s 33(1)(b) of the Act – interim application dismissed and bankruptcy notice set aside. Legislation: Bankruptcy Act 1966 (Cth), ss 33(1)(b), 40(1)(g), 41, 306(1)
Bankruptcy Regulations 1996 (Cth) reg 4.02
Cases cited: ABB Australia Pty Limited v Commissioner of Taxation [2007] FCA 1063
Adams v Lambert (2006) 228 CLR 409; [2006] HCA 10
Ex parte John Danks In the Matter of John Farley, [1852] EngR 1038; (1852) 2 De G M & G 936; 42 E.R. 1138 (22 November 1852)
Cardinal Insurance Company v Maple Underwriters Ltd (1983) 46 BCLR 137
James v Federal Commissioner of Taxation [1995] HCA 75; (1955) 93 CLR 631
Metledge v Hopkins [2020] FCA 561
Nugent v Brialkim Pty Ltd (1985) 61 ALR 725
Proctor v Jetway Aviation Pty Ltd [1984] 1 NSWLR 166
Re Pugliese; Ex parte The Chase Manhattan Bank of Australia Ltd [1993] FCA 454
Skouloudis v St George Bank Ltd [2008] FCA 1765
Steel Company (Operations) Pty Ltd v Lewis [2000] FCA 1915
Sunrise Auto Limited v Deputy Commissioner of Taxation [1995] FCA 1693
Number of paragraphs: 34 Date of hearing: 18 February 2021 Place: Sydney Counsel for the Applicant: Mr C Bolger, by telephone Solicitor for the Applicant: Kalantzis Lawyers The Respondent: Appeared in person, by telephone ORDERS
SYG 1345 of 2020 BETWEEN: CLINTON SARINA
ApplicantAND: JOHN O'SHANNASSY
Respondent
ORDER MADE BY:
JUDGE MANOUSARIDIS
DATE OF ORDER:
26 FEBRUARY 2021
THE COURT ORDERS THAT:
1.The interim application filed by the respondent on 21 January 2021 for an order that bankruptcy notice BN249223 issued on 6 March 2020 be amended is dismissed.
2.Bankruptcy notice BN249223 issued on 6 March 2020 is set aside.
3.Subject to order 4, the respondent pay the applicant’s costs of the proceeding, including the costs of the interim application referred to in order 1.
4.The parties have liberty to apply by email communication to the chambers of Judge Manousaridis by no later than 12 March 2021 for an order to vary or discharge order 3, such communication to be supported by short written submissions stating the orders that are sought, the grounds on which the orders are sought, and whether the party making the application requires a hearing or instead consents to Judge Manousaridis determining on the papers the application for the variation or discharge of order 3.
REASONS FOR JUDGMENT
INTRODUCTION
In this proceeding Mr Sarina applies for an order that the bankruptcy notice the respondent, Mr O’Shannassy, caused to be issued and served on Mr Sarina be set aside. One of the grounds on which Mr Sarina relies is the bankruptcy notice is invalid because it specifies a post office box rather than a street address as the creditor’s address.
Mr O’Shannassy accepts that the inclusion of a post office box address renders that bankruptcy notice defective or irregular. He submits, however, and by an interim application he filed on 21 January 2021 Mr O’Shannassy claims, that this defect or irregularity can be remedied by the Court making an order to amend the bankruptcy notice to include a street address. Mr O’Shannassy submits the Court has power to amend the bankruptcy notice under s 306(1) of the Bankruptcy Act 1966 (Cth) (Act), or under s 33(1)(b) of the Act. Mr Sarina, on the other hand, submits the defect is beyond the power of s 306 or s 33(1)(b) of the Act to cure or, if it is within power, the Court should not cure the defect.
In these reasons for judgment, therefore, I consider Mr O’Shannassy’s application for an order that the bankruptcy notice be varied. Before I consider the parties’ competing contentions, it will be necessary to say something about the statutory scheme that regulates bankruptcy notices, and refer to the principal authority on which Mr Sarina relies.
STATUTORY SCHEME AND PRINCIPLES
I begin with s 40(1)(g) of the Act, which provides that an act of bankruptcy occurs in the following circumstances:[1]
if a creditor who has obtained against the debtor a final judgment or final order, being a judgment or order the execution of which has not been stayed, has served on the debtor in Australia or, by leave of the Court, elsewhere, a bankruptcy notice under this Act and the debtor does not:
(i) where the notice was served in Australia--within the time fixed for compliance with the notice; or
(ii) where the notice was served elsewhere--within the time specified by the order giving leave to effect the service;
comply with the requirements of the notice or satisfy the Court that he or she has a counter-claim, set-off or cross demand equal to or exceeding the amount of the judgment debt or sum payable under the final order, as the case may be, being a counter-claim, set-off or cross demand that he or she could not have set up in the action or proceeding in which the judgment or order was obtained . . . .
[1] In this and the following two paragraphs repeat what I said in Sommer v C Pty Ltd (No.2) [2020] FCCA 1898, at [11]-[13]
The act of bankruptcy provided for by s 40(1)(g) of the Act is defined by reference to “a bankruptcy notice under the Act”; and the act of bankruptcy consists of a failure to “comply with the requirements of the” bankruptcy notice within “the time fixed for compliance with the notice”. That directs attention to “a bankruptcy notice under the Act”; and this is provided for by s 41 of the Act. Sub-section 41(1) provides that “an Official Receiver may issue a bankruptcy notice on the application of a creditor who has obtained against a debtor”, among other things, “a final judgment or final order that (i) is of a kind described in paragraph 40(1)(g); and (ii) is for an amount of at least the statutory minimum”, that being $10,000.
Section 41 of the Act does not specify the contents and, therefore, the requirements of a bankruptcy notice. The contents of a bankruptcy notice are left to be prescribed by regulation. That is made clear by s 41(2) of the Act, which provides that the “notice must be in accordance with the form prescribed by the regulations”. A form has been prescribed by reg 4.02 of the Bankruptcy Regulations 1996 (Cth) (Regulations), which provides that for “the purposes of subsection 41(2) of the Act, the form of bankruptcy notice set out in Form 1 is prescribed” (prescribed form of bankruptcy notice). Form 1 is contained in Schedule 1 to the Regulations.
The prescribed form of bankruptcy notice contains two principal parts. The first may be described as a notification part; it requires the creditor to record his or her or its name, and the creditor’s address; and a statement that the person identified as the creditor claims the person to whom the bankruptcy notice is addressed owes to the creditor the “[a]mount as per the attached final judgment/s or order/s” (plus interest on that amount since judgment, less any payments made or credits allowed since judgment). The second principal part of the prescribed form of bankruptcy notice is that which specifies the requirements of the bankruptcy notice. The principal requirement is that specified in paragraph 1, namely:
You are required, within [ ] days after service on you of the Bankruptcy Notice, to either:
(a) pay to the creditor the amount of the debt claimed; or
(b) make arrangements to the creditor’s satisfaction for settlement of the debt.
Particularly relevant to these reasons is paragraph 2, which provides:
2. Payment of the debt can be made to (name and address, including telephone, fax and email address if appropriate):
There are a number of observations that may be made about paragraph 2 of the prescribed form of bankruptcy notice. First, it is concerned with “payment of the debt” the creditor claims the debtor owes the creditor. “Payment” ordinarily denotes a particular method for discharging a liquidated money obligation, this being the method Lindgren J described in ABB Australia Pty Limited v Commissioner of Taxation:[2]
It is said that in order for payment to occur, there must be a monetary obligation, the offer of an act by the debtor in discharge of it, and an acceptance of that offer by the creditor; see Proctor C, Mann on the Legal Aspect of Money (6th ed, Oxford University Press, 2005) at [7.04]; Brindle M and Cox R (eds), The Law of Bank Payments (3rd ed, Sweet & Maxwell, 2004) at [1-002] ff, and cases referred to in those works, including Libyan Arab Foreign Bank v Bankers Trust Co [1989] QB 728 at 764 per Staughton J; Goode RM, Payment Obligations in Commercial and Financial Transactions (London, Sweet & Maxwell, 1983) at 11 ff; and Derham SR, The Law of Set-Off (3rd ed, Oxford University Press, 2003) at [16.01] and fn 2.
[2] ABB Australia Pty Limited v Commissioner of Taxation [2007] FCA 1063, at [166]
Second, and following from the first observation, “payment”, being a bilateral consensual act consisting of the debtor’s tendering to the creditor money or the equivalent of money, and the creditor’s accepting that tender in discharge of the debt, can be effected by any method the parties to the payment may agree.[3] Such agreement may be made either at the time payment is required to be made or in advance of the time by which payment is required to be made. In the latter circumstance, the agreement may consist of the creditor informing the debtor of the manner in which the creditor is prepared to accept payment, and the debtor making the payment in the manner notified by the creditor. It would therefore be open, for example, for a creditor to inform the debtor that the creditor will accept payment by the debtor delivering cash or a cheque at a specified post office box by a particular time.
[3] Proctor C, Mann on the Legal Aspect of Money (7th ed, Oxford University Press, 2012) at [7.10]: “In English law, therefore, the question of law is not how payment is to be made, for it may be made by any means agreed between the parties or which the creditor may otherwise choose to accept. Anything so agreed and accepted constitutes a payment provided that the creditor is put in a position freely to dispose of the money transferred to him, to the extent required by the terms of the contract.”
Third, although paragraph 2 of the prescribed form of bankruptcy notice refers to “payment”, which would ordinarily denote a bilateral consensual act, the bankruptcy notice is directed to the debtor doing that which it is within the debtor’s legal power to do to pay the debt, namely, to tender payment to the creditor. The debtor’s making a proper tender of payment of the debt demanded in a bankruptcy notice constitutes sufficient compliance with its requirements, even if the debt has not been paid because the creditor did not accept the tender.[4]
[4] Ex parte John Danks In the Matter of John Farley, [1852] EngR 1038; (1852) 2 De G M & G 936; 42 E.R. 1138 (22 November 1852)
Fourth, the prescribed form of bankruptcy notice refers to “address”. One of the definitions of “address” given by the Oxford English Dictionary is the “particulars of the place where a person lives or an organization is situated, typically consisting of a number, street name, the name of a town or district, and often a postal code; these particulars considered as a location where a person or organization can be contacted by post”.[5] In Re Pugliese; Ex parte The Chase Manhattan Bank of Australia Ltd, Heerey J said “‘address’ means, amongst other things, ‘a place where a person lives or may be reached’ (Macquarie Dictionary)”.[6] Further, in Sunrise Auto Limited v Deputy Commissioner of Taxation,[7] the Full Federal Court referred to the Canadian case of Cardinal Insurance Company v Maple Underwriters Ltd,[8] where Hinds J said that “Black’s Law Dictionary, revised 4th ed., defines ‘address’ as: ‘Place where mail or other communications will reach person ... Generally a place of business or residence.’” Thus, the ordinary meaning of “address” is not restricted to a place of residence or business. It is the place at which a person may be reached. That “address”, as it appears in the prescribed form of bankruptcy notice, is intended to bear its ordinary meaning is confirmed by what follows after the “address”, namely, “including telephone, fax and email address if appropriate”. The word “including” suggests that each of a person’s telephone, fax and email address, if the person has a telephone, fax, or email address, is an address. In these circumstances, there is no reason why “address” should not include a post office box address.
[5] Oxford English Dictionary (Web Page, 24 February 2021) < Re Pugliese; Ex parte The Chase Manhattan Bank of Australia Ltd [1993] FCA 454, at [6]
[7] Sunrise Auto Limited v Deputy Commissioner of Taxation [1995] FCA 1693, at [38]
[8] Cardinal Insurance Company v Maple Underwriters Ltd (1983) 46 BCLR 137, at page 142
It follows from the fourth observation that paragraph 2 of the prescribed form of bankruptcy notice is directed to the specification of the identity of the creditor to whom the debtor can tender payment, and to the specification of the means by which the debtor can seek out the creditor and pay the debt; it is not directed to specifying the place at which payment can be made. That is clear on the face of paragraph 2: “Payment of the debt can be made to”, not “at” or “to . . . at”. That makes sense, given that payment of a debt consists of a bilateral consensual act – the debtor’s tendering to the creditor money or the equivalent of money, and the creditor’s accepting that tender in discharge of the debt. It also makes sense given the means by which payments are, and for some time have been, ordinarily made, namely, through electronic means such as computers or portable devices. What is important, and this, in my opinion, is the true purpose of paragraph 2 of the prescribed form of bankruptcy notice, is that the debtor be informed of the identity of the creditor to whom the debtor can tender payment, and where or how the debtor can seek out the creditor to tender payment.
These observations are supported by the ruling and reasoning of the High Court in James v Federal Commissioner of Taxation.[9] In that case the bankruptcy notice required the debtor pay the debt at the nominated office of the creditor’s agent. The High Court held this rendered the bankruptcy notice defective; and that is because it had the potential for misleading the debtor into believing that that was the only place at which the debtor could pay the debt, contrary to the right any debtor has to seek out and pay the creditor wherever the debtor may find the creditor:[10]
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 defect in the present bankruptcy notice is that it directs the debtor that he must pay the creditors at a certain address. Such a direction could only be in accordance with a judgment or order if the judgment or order directed payment at that particular address. The creditors, in order to comply with the form in the schedule, varied so as to apply to joint creditors, would have to give an address or addresses where they or one of them, or some agent authorized on their behalf, could be found during the seven days, where the creditor could be paid or where by agreement the debt could be secured or compounded, and this is so whether the address is the residence or the place of business of the creditor . . . . The proviso authorizes a creditor to specify in the notice an agent to receive payment on his behalf and an address at which the agent could be found at reasonable hours during the seven days would have to be given. The prescribed form is carefully drawn by describing the creditor as “of” so that the notice will require the debtor to pay the creditor in accordance with the terms of a judgment or order which simply directs the debtor to pay the creditor and will not require the debtor to pay the creditor at a particular address. The notice merely gives an address at which the debtor may, at his option, seek out the creditor and pay him.
[9] James v Federal Commissioner of Taxation [1995] HCA 75; (1955) 93 CLR 631
[10] James v Federal Commissioner of Taxation [1995] HCA 75; (1955) 93 CLR 631, at pages 639-640
It is true the High Court assumed the bankruptcy notice would at least include an address in Australia at which the debtor could pay the creditor. But the High Court did not regard this as an essential condition of the validity of the bankruptcy notice. The High Court was of the view that the issuing of a bankruptcy notice did not alter the “duty of the debtor to seek out the judgment creditor and pay the judgment debt to the creditor if he is in Australia” and the “correlative right to pay the creditor wherever he can find him”. What the High Court found objectionable about the bankruptcy notice is that it had the potential to mislead the debtor about his or her “correlative right to pay the creditor wherever he can find him”. At most, the form of bankruptcy notice in that case was designed to give the debtor the option of a place at which the debtor could seek out and pay the creditor.
A fifth observation relates to the methods by which payment may be effected or, more precisely, the methods by which a debtor can tender payment of a debt. It may still be the strict position of the common law that, unless the parties have agreed otherwise, tender requires the proffering of actual cash, that is legal tender;[11] but it cannot be supposed the Act contemplates that a debt demanded by a bankruptcy notice would ordinarily be paid by the debtor attending the creditor at the street address specified in the bankruptcy notice and there tender cash to the creditor. The Act contemplates that if the debtor is willing and able to pay the debt, he or she will contact the creditor to arrange payment of the debt. Provided the bankruptcy notice gives sufficiently precise information about the identity of the creditor, and the means by which the debtor can seek out and pay the creditor, the bankruptcy notice will have given the debtor sufficient information to enable him or her do that which the bankruptcy notice requires the debtor to do, namely, tender payment of the debt to the creditor.
[11] See, for example, Libyan Arab Foreign bank v bankers Trust Co [1989] Q.B. 728, at page 764 (Staughton J): “[e]very obligation in money terms, is to be fulfilled, either by the delivery of cash or by some other operation which the creditor demands and which the debtor is either obliged, or is content to perform . . . .”
Metledge v Hopkins
Mr Sarina relies on the judgment of Lee J in Metledge v Hopkins.[12] In that case a bankruptcy notice was issued where paragraph 2 of the requirements part of the bankruptcy notice provided that “Payment of the debt can be made to: Ms Mary Metledge P. O. Box 226, Strathfield, Sydney (sic), NSW 2135”. The bankruptcy notice also provided the creditor’s mobile telephone number and email address. Lee J held there is “no question that the necessity to identify an address at which payment of the debt could be made (or an offer can be made to secure or compound the debt) is an essential matter”, but a post office box could not constitute such address and, for that reason, the bankruptcy notice was “invalid”. In that regard, Lee J said:[13]
It is worth initially focussing on what a PO Box actually constitutes. In the context of considering whether a PO Box constituted an address for service for service of court process, Black CJ in Sarikaya v Victorian WorkCover Authority (1997) 80 FCR 262 explained at 263 that the “ordinary notion of a ‘post office box’ is of a container at a post office into which mail that has been duly posted is placed by the postal authorities for retrieval by or on behalf of the holder of the box”.
This conceptualisation of what a PO Box constitutes seems to me to be correct, and when this is appreciated, whatever the perceived demands of common sense, it is difficult to see how it could be said that such a container amounts to a place where the debtor could make payment or offer to secure or compound the debt. Make the payment or offer to whom? The postmaster? A postal clerk? The present circumstance is quite different from the not uncommon situation where an address is given for payment at the address of a creditor’s solicitor.
[12] Metledge v Hopkins [2020] FCA 561
[13] Metledge v Hopkins [2020] FCA 561, at [12], [13]
Lee J particularly relied on the judgment of Lockhart J in Nugent v Brialkim Pty Ltd, which included the following passage:[14]
In my opinion, the address stated must be one at which the debtor may, during the currency of the notice, make payment of the amount claimed in the notice, or one where he may make arrangements to secure or compound the debt. . . . I respectfully agree with the primary judge that the basic principle is that the address given should be one which during the relevant period it is reasonably practicable for the debtor to make payment or to offer to secure or compound.
[14] Nugent v Brialkim Pty Ltd (1985) 61 ALR 725, at page 727
There are a number matters to note about the judgment in Metledge.
(a)The principle stated in the passage from Nugent on which Lee J relied, namely, “that the address given should be one which during the relevant period it is reasonably practicable for the debtor to make payment or to offer to secure or compound”, does not appear to be based on the construction of any legislative text, or of any text of the prescribed form of bankruptcy notice that was in effect at the time Nugent was decided. Neither s 40(1)(g) of the Act, as it currently stands, nor the (current) prescribed form of bankruptcy notice, contain text that could reasonably yield a meaning to the effect that the creditor must specify an address at which it is reasonably practicable for the debtor to make payment or to offer to secure or compound the debt. Further, the requirement that the bankruptcy notice must include an address at which it is “reasonably practicable” for the debtor to make a payment does not sit comfortably with the High Court’s judgment in James. As I have set out, in James the High Court said that the form of bankruptcy notice “merely gives an address at which the debtor may, at his option, seek out the creditor and pay him”. The High Court did not say that the address must be one at which it is reasonably practicable for the debtor to pay his or her debt.
(b)Although Lee J referred to paragraph 2 of the bankruptcy notice that had been issued,[15] his Honour did not set out the words “name and address, including telephone, fax and email address if appropriate” that appear in paragraph 2 of the prescribed form of bankruptcy notice after the words “Payment of the debt can be made to”. It appears that the words “name and address, including telephone, fax and email address if appropriate” that appear on the prescribed form of bankruptcy notice do not remain on the form after it is completed. That is apparent from the bankruptcy notice Mr O’Shannassy caused to be issued and served on Mr Sarina. The bankruptcy notice contains the words “Payment of the debt can be made to” after which appear the name of Mr O’Shannassy, his post office box address, telephone number, and email address. From this I infer the parties did not bring to the attention of Lee J the prescribed form of bankruptcy notice as it appears in Form 1 of Schedule 1 to the Regulations, and in particular, the parties did not bring to his Honour’s attention that the prescribed form of bankruptcy notice contained the words “name and address, including telephone, fax and email address if appropriate”. That, in turn, means that no submission was made to his Honour about the significance, if any, that could be attached to the prescribed form requiring, if appropriate, that there be included the creditor’s “telephone, fax and email address”. It also means that no submission was made to Lee J that the prescribed form of bankruptcy notice that was considered in Nugent in all probability required nothing more than the provision of an address, without requiring the provision of a telephone number, a fax number, and (obviously) an email address.[16]
(c)The difficulties Lee J identified with a bankruptcy notice specifying a post office box as the creditor’s address are to a large extent present where a street number is specified as an address. Lockhart J identified these in Nugent, the principal difficulty being that the creditor need not be present at the address the bankruptcy notice specifies as the place where the debt may be paid. His Honour suggested that difficulty could be overcome by the debtor “speaking to persons who are themselves not physically at that address, but are, for example, available on the telephone”.[17] That option is available to a debtor where a post office box address is provided and where, as in the bankruptcy notice Mr O’Shannassy arranged to be issued, provides both a telephone number and an email address where Mr Sarina can seek out Mr O’Shannassy to pay the debt demanded in the bankruptcy notice.
(d)At least in relation to the requirement for paying the debt, the difficulties in specifying a post office box as the place for making a payment are less pronounced than specifying a street address, particularly where the street address is that of the registered office of a company which will often be the business address of an accountant or the address of premises dedicated to acting as the registered office of many companies. A bankruptcy notice specifying a post office box as the address at which the debt can be paid would constitute a representation to the debtor that the creditor will accept payment of the debt by the debtor posting or delivering to the post office box cash or a cheque (assuming it is reasonable to interpret the demand for payment as payment by means other than cash) without any further need for the debtor to contact the creditor.
[15] Metledge v Hopkins [2020] FCA 561, at [2], where his Honour said: ‘The bankruptcy notice referred to the applicant’s address twice: first, on page one, where the address of the applicant was notified as being “P.O. Box 226, Strathfield, Sydney (sic), NSW, Australia”; and secondly, on page 2 (being that part of the approved form of notice dealing with how payment is to be made), the bankruptcy notice provided: Payment of the debt can be made to: Ms Mary METLEDGE P.O. Box 226, Strathfield, Sydney (sic), NSW 2135”.
[16] I say in “all probability” because the prescribed form of bankruptcy notice that was in force at the time Nugent was decided is not reproduced in the judgment of the Full Federal Court. The prescribed form of bankruptcy notice, as it existed in 2000, however, is reproduced in the judgment of Gyles J in Steel Company (Operations) Pty Ltd v Lewis [2000] FCA 1915, at [11]. The equivalent part of that prescribed form provided: “Payment of the debt can be made to: (name) . . . of (address*) . . . *the address must be in Australia”.
[17] Nugent v Brialkim Pty Ltd (1985) 61 ALR 725, at page 727
DOES THE DECISION IN METLEDGE BIND THIS COURT?
Decisions of the Federal Court, being a court to which appeals may be brought from this Court, are binding on this Court. This is an aspect of the doctrine of precedent. Under that doctrine it is not open to this Court, as a Court from which appeals lie to the Federal Court, to decide not to follow a decision of the Federal Court only because this Court may be of the view that the decision was made “per incuriam”, that is, without a relevant matter having been brought to the attention of the Federal Court.[18] It follows, therefore, that this Court is bound by the judgment of Lee J in Metledge v Hopkins.
[18] Proctor v Jetway Aviation Pty Ltd [1984] 1 NSWLR 166
The question, then, is whether the decision and reasoning in Metledge compels me to conclude that the bankruptcy notice caused to be issued and served on Mr Sarina is invalid and, for that reason, must be set aside.
IS FAILURE TO SPECIFY STREET NUMBER AS ADDRESS A FORMAL DEFECT?
In Metledge Lee J held that the bankruptcy notice in that case was “invalid” because it gave a post office box, rather than a street number, as the creditor’s address. His Honour, however, did not in terms consider whether that which led his Honour to conclude the bankruptcy notice was “invalid”, namely, the recording of a post office box as the creditor’s address, could be characterised as a “formal defect or an irregularity” within the meaning of s 306 of the Act. That means it is open to me to consider whether, at least in the circumstances of the case before me, Mr O’Shannassy’s not including a street address as his address, but instead including a post office box, is a “formal defect or an irregularity” such that any injustice that may arise from it can be remedied by an order of this Court. Nor did Lee J consider whether the defect or irregularity could be cured by an order under s 33(1)(b) of the Act.
Section 306 of the Act
Sub-section 306(1) of the Act provides:
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.
The expression “proceedings under this Act” has been construed to extend beyond matters that occur in a proceeding before a court to include administrative acts. Thus, it has been held that the issuing of a bankruptcy notice under s 41 of the Act is a “proceeding under” the Act, and that s 306(1), therefore, is capable of applying to a bankruptcy notice.[19]
[19] Adams v Lambert (2006) 228 CLR 409; [2006] HCA 10, at [17]
The High Court in Adams v Lambert considered the scope of s 306(1) of the Act; and the following principles may be deduced from the judgment of the High Court:
(a)In its application to a bankruptcy notice s 306 of the Act assumes the possibility of some failure to comply with statutory requirements; “that is, some defect or irregularity”.[20] Thus a “defect or irregularity” in the context of a bankruptcy notice is the bankruptcy notice not complying with a statutory requirement.
(b)In relation to any defect or irregularity, up to three separate questions may need to be asked: is the defect or irregularity a “formal” defect or irregularity? If so, has a substantial injustice been caused by the defect or irregularity? If so, can the injustice be remedied by an order of the court?[21]
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.
(c)Whether a defect or irregularity is to be characterised as formal is to be determined by asking whether, having regard to the legislative purpose of the provision with which the bankruptcy notice does not comply, and the significance or importance of the defect or irregularity, compliance with the requirement from which the bankruptcy notice has departed is a requirement the Act makes essential.[22]
(d)The correct question in assessing whether a bankruptcy notice’s failure to comply with a requirement is a formal defect or irregularity is whether the “correct completion of the form prescribed by the regulations in every respect is a requirement made essential by the Act”; and it is difficult to answer that question in the affirmative where the irregularity “could not have misled the [debtor] as to what it was necessary to do in order to comply with the requirements of the notice”.[23]
[20] Adams v Lambert (2006) 228 CLR 409; [2006] HCA 10, at [18]
[21] Adams v Lambert (2006) 228 CLR 409; [2006] HCA 10, at [18]
[22] Adams v Lambert (2006) 228 CLR 409; [2006] HCA 10, at [29]
[23] Adams v Lambert (2006) 228 CLR 409; [2006] HCA 10, at [32]
Determination
Mr O’Shannassy submits his including a post office box as his address, rather than a street number, is incapable of misleading Mr Sarina of what he must do to comply with the requirements of the bankruptcy notice; and to the extent the bankruptcy notice is capable of misleading Mr Sarina, Mr Sarina will not be misled because the time for complying with those requirements have been regularly extended and, by ordering the amendment of the bankruptcy notice to include Mr O’Shannassy’s street address, Mr Sarina can be under no misapprehension of where he can pay the debt demanded by the bankruptcy notice.
There is force in Mr O’Shannassy’s submissions; but, as was said in Adams, that a defect or irregularity is incapable of producing injustice does not necessarily mean that the defect or irregularity is no more than a “formal” defect or irregularity. The question is whether, having regard to the legislative purpose of the provision with which the bankruptcy notice has not complied, and the significance or importance of the defect or irregularity, compliance with the requirement from which the bankruptcy notice has departed is a requirement which the Act makes essential. And the difficulty Mr O’Shannassy faces is that in Metledge Lee J held that the Act requires that the bankruptcy notice specify as the creditor’s address an address that is not a post office box, and the Act renders the satisfaction of that requirement an essential condition to the validity of a bankruptcy notice. Unless the facts and reasoning in Metledge can materially be distinguished from the facts of the case before me, the defect or irregularity in the bankruptcy notice Mr O’Shannassy caused to be issued and served on Mr Sarina is not one to which s 306(1) of the Act can apply.
Mr O’Shannassy relies on the time for Mr Sarina complying with the requirements of the bankruptcy notice not having yet expired. The difficulty with this submission is that in Metledge Lee J held that the Act requires a bankruptcy notice to specify as the creditor’s address an address that is not a post office box; and the fulfilment of this requirement is essential to a bankruptcy notice being valid. As the High Court held in Adams, a bankruptcy notice’s not complying with a requirement that is essential to its validity cannot be characterised as a “formal defect or an irregularity”.
Given this Court is bound by the decision in Metledge, and I am not satisfied this case is distinguishable from the facts in Metledge, it follows that the bankruptcy notice’s specifying Mr O’Shannassy’s post office box address, rather than a street number, as his address is a defect or an irregularity that cannot be cured under s 306 of the Act. For that reason, the bankruptcy notice Mr O’Shannassy caused to be issued and served on Mr Sarina is invalid.
CAN BANKRUPTCY NOTICE BE AMENDED UNDER ACT?
Next, I consider whether s 33(1)(b) of the Act is available to permit me to amend the bankruptcy notice. That paragraph provides that the Court may “at any time allow the amendment of any written process, proceeding or notice under this Act”.
Paragraph (b) of s 33(1) of the Act is broad enough to authorise this Court to order that a bankruptcy notice be amended. It has been held, however, that the power is only available to authorise the amendment of a bankruptcy notice if the notice can properly be characterised as a notice under the Act. A bankruptcy notice that is a nullity cannot be so characterised.[24]
[24] Skouloudis v St George Bank Ltd [2008] FCA 1765, at 35 (Edmonds J)
I have already concluded that the decision and judgment in Metledge compels me to conclude that the Act requires a bankruptcy notice specify as the creditor’s address an address that is not a post office box, and the Act renders the satisfaction of that requirement an essential condition to the validity of a bankruptcy notice. It follows that by specifying an address that is a post office box, the bankruptcy notice Mr O’Shannassy caused to be issued and served on Mr Sarina is invalid and, for that reason, is not a notice under the Act. Paragraph (b) of s 31(1) of the Act is therefore not available to permit me to amend the bankruptcy notice to substitute an address for the creditor that is not a post office box.
CONCLUSION AND DISPOSITION
In specifying as the creditor’s address a post office box the bankruptcy notice Mr O’Shannassy caused to be issued and served on Mr Sarina contains a defect or an irregularity. Not specifying a post office box as the creditor’s address is an essential requirement to the validity of a bankruptcy notice. The defect or irregularity constituted by the bankruptcy notice specifying a post office box address, therefore, is not a formal defect or a formal irregularity. That means that the bankruptcy notice is invalid, and not a notice under the Act which, in turn, means that neither s 306 nor s 33(1)(b) of the Act is available to cure the defect or irregularity.
I propose, therefore, to order that Mr O’Shannassy’s interim application be dismissed, and that the bankruptcy notice be set aside. I also propose to order that Mr O’Shannassy pay Mr Sarina’s costs, but I will grant the parties liberty to apply within 14 days to vary or discharge the order for costs I propose to make.
I certify that the preceding thirty-four (34) numbered paragraphs are a true copy of the Reasons for Judgment of Judge Manousaridis. Associate:
Dated: 26 February 2021
5
11
0