Scottish Pacific Business Finance Pty Ltd v DUTT - [2005] FMCA 1424

FEDERAL MAGISTRATES COURT OF AUSTRALIA

SCOTTISH PACIFIC BUSINESS FINANCE PTY LTD v DUTT

[2005] FMCA 1424

BANKRUPTCY – Notice of Objection to a Petition – whether the petition gives adequate details of the judgment debt as required by the prescribed form – where there is an error in interest schedule of the date from which interest is claimable – where the effect is that the applicant has been asked to pay more interest than he is due to pay – whether the applicant is prohibited from raising the matter by virtue of the provision of s.41(5) of the Bankruptcy Act – the interest schedule does not set out the original principal amount upon which the first interest calculation is made – whether that flaw invalidates the Bankruptcy Notice – whether the interest schedule states that interest is claimable under the correct provision of the Bankruptcy Act – Marshall whether inclusion of the correct interest provision is an essential part of the form.

Bankruptcy Act 1966 (Cth), ss.39A, 41(5), 306
Acts Interpretation Act 1901 (Cth), s.25C

Kleinwort Benson Australia Ltd v Crowl 79 ALR 161
Australian Steel Company Pty Ltd v Lewis [2000] FCA 1915
Marshall v General Motors Acceptance Corporation Australia [2003] FCAFC 45
St George Bank Ltd v Baldwin [2001] FCA 161

Applicant:

SCOTTISH PACIFIC BUSINESS FINANCE PTY LIMITED
(ACN 008 636 388)

Respondent:

VIJAND DUTT

File Number:

SYG 1818 of 2005

Judgment of:

Raphael FM

Hearing date:

30 August 2005

Date of Last Submission:

30 August 2005

Delivered at:

Sydney

Delivered on:

30 August 2005

REPRESENTATION

Solicitors for the Applicant:

Piper Alderman

Solicitors for the Respondent:

Douglass Knaggs

ORDERS

Petition dismissed.
Creditor to pay debtor’s costs to be taxed, if not agreed, in accordance with the Federal Court Act and Rules.

FEDERAL MAGISTRATES
COURT OF AUSTRALIA AT
SYDNEY

SYG 1818 of 2005

SCOTTISH PACIFIC BUSINESS FINANCE PTY LIMITED
(ACN 008 636 388)

Applicant

And

VIJAND DUTT

Respondent

REASONS FOR JUDGMENT

In this matter the debtor has filed a notice of objection to a petition filed on 12 June 2005. The notice of objection makes three complaints and I shall deal with each in turn.
The first complaint is that the petition does not give details of the debt underlying the judgment as required by the prescribed form. The words used in the petition are that:
“The respondent debtor owes the applicant creditor the amount of $16,942.98 pursuant to a judgment of the Local Court of New South Wales, Sydney Registry, in proceedings number 3158 of 2002 ...”
Although it seems to me that this, by reference, clearly indicates to the debtor the basis of the creditor's claim against him, I would, subject to what I shall say below concerning the bankruptcy notice, have permitted an amendment to the petition which would have clarified the situation.
The second complaint requires me to look at the bankruptcy notice and the certificate of judgment which is annexed to it. The certificate of judgment indicates, on its face, that the plaintiff (judgment creditor) recovered judgment against the defendant (judgment debtor) on 23 September 2002 in the sum of $17,880.16.
In the interest schedule, which is found after page 8 of the bankruptcy notice and before the judgment, interest is claimed from a date commencing on 19 September 2002. This is an error. The correct date should have been 23 September 2002.
Mr Knaggs, who appears for the debtor, accepts that insofar as the error means that the applicant has been asked for more interest than he is due to pay, his client is prohibited from raising the matter by virtue of the provision of s.41(5) of the Bankruptcy Act 1966 (Cth) (the “Act”) which states:
“41(5) The bankruptcy notice is not invalidated by reason only that the sum specified in the notice is the amount due to the creditor exceeds the amount in fact due, unless the debtor, within the time allowed for payment, gives notice to the creditor that he or she disputes the validity of the notice on the grounds of the mis-statement.”
Mr Knaggs argues that this is not his complaint. His complaint is that by reason of the wrong date the debtor would be confused or perplexed as to the correct amount to pay and that applying the principles set out by the High Court in Kleinwort Benson Australia Ltd v Crowl 79 ALR 161 the bankruptcy notice is invalid. Ms Banton argues that there is no real confusion and that the matter can be solved by the use of s.306 of the Act but I do not think that is the effect of such a mistake. I am satisfied that the use of s.306 in this context would not be appropriate.
The next point raised on the bankruptcy notice is that, although the schedule of interest sets out the principal amount owing after each interest calculation has been made and noting any principal amounts that had been paid by virtue of what appears to have been some form of instalment arrangement, the schedule does not set out the original principal amount upon which the first interest calculation is made. That is also a fatal flaw, to my mind.
It is now clear from the decisions of the Full Bench of the Federal Court in Australian Steel Company Pty Ltd v Lewis [2000] FCA 1915 and Marshall v General Motors Acceptance Corporation Australia [2003] FCAFC 45 that a bankruptcy notice must be completed strictly in accordance with the form set out in the regulations.
In note 2 to the schedule, found on page 5 of the bankruptcy notice, the following appears:
“Note 2 Interest Accrued (Item 3 of the Schedule)
If interest is being claimed in this bankruptcy notice, details of the calculation of the amount of interest claimed are to be set out in a document attached to this bankruptcy notice. The document must state:
(a) the provision under which the interest is being claimed; and
(b) the principal sum on which, the period for which, and the interest rate or rates at which, the interest is being claimed. ...”
Ms Banton says that the amount of the principal sum is clearly set out in the schedule, which is the schedule on page 5, just above the information for the creditor. Indeed it is. However, note 2 appears to me to set out a clear requirement for a separate document and for the principal sum to be set out in it. Although the notice has done that on all the other occasions it did not do it on the first calculation and I am of the view that the notice is invalid for that reason as well.
Finally, Mr Knaggs claims that the notice is invalid by virtue of the fact that in the schedule, which I have just been discussing, it is said that
“Interest is claimed pursuant to Sections 39 and 39A of the Local Courts (Civil Claims) Act 1970 (NSW).”
The interest is not being claimed under s.39A of the Act as that section refers to pre-judgment interest.
I note that in St George Bank Ltd v Baldwin [2001] FCA 161, Madgwick J suggested that a failing such as this could be capable of being cured or, more accurately, that it did not confuse the debtor.

I would respectfully suggest that that decision, given as it was before the Full Bench of the Federal Court handed down its judgment in Marshall, would not have been the same today.
Marshall makes it quite clear that the correct interest provision is an essential part of the form and the inclusion of a section which is not the correct section cannot be saved either by s.25C of the Acts Interpretation Act 1901 (Cth) or s.306 of the Act.
In this case, although one of the two sections referred to is correct, the second is not, and it would seem to me that a Full Bench made up of those Judges who heard the Marshall appeal would have little difficulty in finding that such an inclusion could, at the very least, cause confusion to the notional debtor.
In these circumstances, it seems to me that this bankruptcy notice is invalid and therefore the applicant has not committed an act of bankruptcy by failing to comply with it. No act of bankruptcy having been committed the petition must fail.
I dismiss the petition. I order that the respondents pay the applicant's costs to be taxed, if not agreed in accordance with the Federal Court Act and Rules.

I certify that the preceding eighteen (18) paragraphs are a true copy of the reasons for judgment of Raphael FM

Associate:

Date: