Sgro v Liberty Funding Pty Ltd

[2004] FMCA 320

FEDERAL MAGISTRATES COURT OF AUSTRALIA

SGRO v LIBERTY FUNDING PTY LTD [2004] FMCA 320

BANKRUPTCY – Application to set aside Bankruptcy Notice – overstatement of amount owed – no reference to sum received before notice issued.

Bankruptcy Act 1966, ss.30(1), 41. 41(6A), 41(7), 306(1)

Metalflex Pty Ltd v Tovey [2004] FMCA 77 (20 February 2004)
Kyriackou v Shield Mercantile Pty Ltd (2004) FCA 490 (29 April 2004 with the corrigendum dated 29 April 2004)
Blackshaw Services Pty Ltd v Cureton [2003] FMCA 591
Re Keith John McAlpine Ex parte AMEV Finance Ltd (Unreported
14 December 1987)
Northam v Commonwealth Bank of Australia (1999) FCA 544 (5 May 1999)

Applicant Debtor: CARMELO ANTONIO SGRO

Respondent Creditor: LIBERTY FUNDING PTY LTD
(ACN 081 981 872)

File No: MZ 1239 of 2003

Delivered on: 21 May 2004

Delivered at: Melbourne

Hearing Date: 10 May 2004

Judgment of: McInnis FM

REPRESENTATION

Counsel for the Applicant Debtor: Mr G.J. Parncutt

Solicitors for the Applicant Debtor: Acquaro & Co

Counsel for the Respondent Creditor: Mr A.T. Schlicht

Solicitors for the Respondent Creditor: Middletons

ORDERS

1. The Bankruptcy Notice No VN1143 of 2003 be set aside.

2. The Respondent shall pay the Applicant’s costs of and incidental to the application including reserved costs if any but not including the costs incurred on 20 May 2004 to be taxed in default of agreement pursuant to Order 62 of the Federal Court Rules.

FEDERAL MAGISTRATES
COURT OF AUSTRALIA AT
MELBOURNE

MZ 1239 of 2003

CARMELO ANTONIO SGRO

Applicant Debtor

and

LIBERTY FUNDING PTY LTD (ACN 081 981 872)

Respondent Creditor

REASONS FOR JUDGMENT

1. By an application filed 10 November 2003 Carmelo Antonio Sgro (the applicant debtor) seeks orders pursuant to ss. 30(1), 41. 41(6A), 41(7), of the Bankruptcy Act 1966 to extend time to comply with a bankruptcy notice and set aside a bankruptcy notice issued 25 July 2003 served by the respondent upon the applicant on 23 October 2003.  The bankruptcy notice which is the subject of this application relies upon a debt entered on 19 May 2003 in Supreme Court of Victoria proceedings wherein Liberty Funding Pty Ltd (the respondent creditor) was the plaintiff and the applicant was the second defendant.  In those proceedings the first defendant was Properties Australia Pty Ltd (the company).  There is no dispute that at all material times the applicant debtor was a director of that company.

2. At the commencement of this hearing a preliminary issue arose in relation to the bankruptcy notice.  The preliminary issue concerned the question of whether or not the amount of the judgment referred to in that bankruptcy notice should properly be regarded as the amount owed by the debtor to the creditor.  In the bankruptcy notice it is claimed that the creditor owes a debt of $2,443,190.84 as shown in the schedule.  In the schedule the total debt owing is that amount comprising the amount of judgment or orders of $2,395,719.50 together with interest accrued since the date of the judgment or orders of $47,471.34.  It is noted that in the schedule annexed to the bankruptcy notice under item 5, that is, "Payments made and/or credits allowed since date of judgments or orders," there is written the word "nil".

3. The applicant has relied upon affidavits sworn by him on 10 November 2003, 7 May 2003 and 16 January 2004.  The respondent has relied upon an affidavit sworn by Jerome Shaw on 12 March 2004, and an affidavit of Benedict Redmond Callinan sworn 7 May 2004. 

4. For the purpose of determining the preliminary issue, it is appropriate to refer to the first of the applicant's affidavits.  In that affidavit the applicant confirms that he is a director of the company.  He further deposes that on or about 14 December 2001 using mortgage finance the company purchased land and erected a building of 20 storeys of 109 units including three shops and a carpark at 318-320 Little Lonsdale Street, Melbourne.  He deposes that following default under the mortgage, that on 7 April 2003 he received a copy of a writ and statement of claim in the Supreme Court proceedings to which reference has already been made.  He recites the issuing of the bankruptcy notice and the service of that notice and confirms that it is based on the judgment entered on 19 May 2003 for the sum of $2,395,719.50.

5. The applicant in his affidavit asserts that he did not defend the Supreme Court proceedings based on what he alleges was an understanding that the mortgage property would be sold first before he would be called upon to pay any shortfall.  He further deposes that that view was reinforced by the wording of the guarantee and the view of the former solicitors as to the order of liability; that is, that the company property would be sold first and the applicant would pay for any shortfall.  He claims in his affidavit that after judgment was entered on 19 May 2003 he heard nothing further until the bankruptcy notice was served on 23 October 2003.  He deposes that on 10 November 2003 his solicitors filed the application to set aside the judgment in the Supreme Court proceedings.

6. It is common ground that the application to set aside the judgment in the Supreme Court was initially refused by a Master of the Supreme Court and then on appeal that decision upheld by Hansen J of the Supreme Court when the matter was heard.  There is no dispute that the applicant creditor has now apparently exhausted whatever rights may have then been available to him personally in relation to those Supreme Court proceedings.  What is now sought to be argued in relation to this application is that the applicant, as a result of guarantee for and on behalf of the company, seeks to pursue rights of the company to take proceedings against the creditor.  The company is in liquidation.  The right therefore, assuming the applicant has standing, to take proceedings against the creditor on behalf of the company will of course be subject to various requirements of a company in liquidation.  It is not necessary for me in dealing with the preliminary issue to further consider that matter.

7. The preliminary issue arises in that having recited the amount of the judgment of $2,395,719.50, the applicant debtor then deposes that on

   
   

   2 June 2003 one of the units of the development the subject of orders made in the Supreme Court for possession was allegedly sold.  It is claimed that the proceeds of $457,178 were paid to the respondent creditor. 

8. In the affidavit of Jerome Shaw relied upon by the respondent it is noted that the sale of unit 1804 is confirmed.  However, it is important to note the chronology of events set out in that affidavit which are not disputed in these proceedings for the purposes of a ruling in relation to the preliminary issue.  Mr Shaw deposes that on 28 February 2003 the respondent had received a facsimile from the company signed by the applicant.  That facsimile referred to the mortgage for which unit 1804 was provided as security and advised the property was in the process of being sold and that necessary documents were being prepared.  In fact the letter provides the following:-

   “We refer to our Mortgage with the above as security and wish to advise that the property is in the process of being sold and necessary documents are being prepared.  We shall forward to you shortly a copy of the Contract of Sale as proof of Purchase and will advise you then of settlement date so all amounts outstanding to your organisation can be finalised.

   I hope this satisfies your requirement but in the meantime we should be grateful for your continued leniency and understanding.”

9. Mr Shaw deposes further that the respondent creditor was not involved in the sale of unit 1804.  The sale was conducted by the applicant creditor and the company.  On 1 April 2003 the respondent creditor received a fax from the company claimed to be handwritten by the applicant which states:-

   “FURTHER TO OUR FAX OF 13-03-03, WE WISH TO LET YOU KNOW THAT THE PURCHASER IS JUST AWAITING ON SETTLEMENT DATE.  THE PROPERTY WAS SOLD FOR $600,000.  WE WILL ADVISE YOU OF DEVELOPMENT ASAP.”

10. Mr Shaw deposes that on 15 April 2003 the respondent creditor received a fax from Premium Financial Services Group purportedly acting for the purchaser of unit 1804 and advising that a contract of sale had been executed and that application for funding "is pending approval".  On 12 May 2003 the respondent creditor claims to have received a facsimile from solicitors acting for the company and advising that unit 1804 had been sold.  A request was made for the preparation of discharge of mortgage and provision of a payout figure as at "21 May 2003".  Settlement did not take place on 20 May 2003.  It is noteworthy that the default judgment which was the subject of the bankruptcy notice was entered on 19 May 2003.  The respondent through the affidavit of Mr Shaw claims that as it had not been advised of the settlement date for the sale of unit 1804, the default judgment "included orders for possession of unit 1804 and the amount of the judgment debt included an amount for the amount outstanding on the loan for which unit 1804 was offered as security".

11. There is no dispute that ultimately settlement of unit 1804 was scheduled for 2 June 2003 and that a cheque payable to the respondent creditor in the sum of $457,178.36 was ultimately received by the respondent.  It should be noted that although the settlement was scheduled for 2 June 2003, the settlement did not actually proceed until 5 June 2003 when the cheque for $457,920.58 was received by the respondent creditor.  It is clear therefore that at least as at 5 June 2003 the respondent was in possession of a cheque for the sum of $457,178.36 and it would have been at least known to the respondent creditor as at that date that there had been that amount received, which I am satisfied in the circumstances could have been included in the schedule under item 5 to which I referred earlier.

12. The preliminary issue which arises out of the chronology is that the bankruptcy notice should be set aside on the ground that it failed to refer to the payment of the sum of $457,178.36.  It is submitted on behalf of the applicant debtor that the failure to insert reference to payment of that amount is a fatal defect which of itself would justify the setting aside of the bankruptcy notice.  It was submitted on behalf of the applicant that the applicant himself should not be prejudiced merely as a result of ultimately deposing to the fact of the payment in his affidavit sworn 10 November 2003 in support of the application filed that day. 

13. The respondent creditor submitted that in the circumstances there can be no confusion in the mind of the applicant as to the balance of the judgment debt due and payable on the date of issue of the bankruptcy notice and/or the date of its service.

14. The respondent relied upon a decision of this Court in the matter of Metalflex Pty Ltd v Tovey [2004] FMCA 77 (20 February 2004). In considering a creditors petition, the Court in that case had to consider the issue of the amount claimed in the bankruptcy notice being different to the sum referred to in the petition. The amount referred to in the bankruptcy notice had been the amount of a judgment or order which had been made in the Melbourne Magistrates Court in that case and whilst there was a reference in the bankruptcy notice to interest, it was noted in that case that in addition a deduction had been made of a further $1000 which had been paid by the respondent debtor to the applicant creditor. It was noted in that case that that amount of $1000 was paid prior to the issue of the bankruptcy notice but had been unidentified as coming from the respondent debtor until after the bankruptcy notice had been issued. By making due allowance for that sum, the applicant creditor then claimed the debt owed by the respondent debtor excluding interest from the relevant date was a sum less than the amount referred to in the bankruptcy notice.

15. In that case the Court referred to relevant authorities and then concluded that in the circumstances, although the bankruptcy notice had claimed a higher amount than the amount actually owing, there could not be by reason thereof any confusion in the mind of the recipient of the bankruptcy notice in circumstances where he was aware of the payments made from his own sources and on his own affidavit material was able to trace payments accurately.  It is appropriate to set out the relevant paragraphs from the reasoning as follows:-

    “I am satisfied that although the bankruptcy notice claims a higher amount than the amount actually owing there could not by reason thereof be any confusion in the mind of the recipient of the bankruptcy notice in circumstances where he was aware of the payments made from his own sources and on his own affidavit material was able to trace the payments accurately.  The fact that a payment is made in what may be described as an anonymous fashion making it difficult to track for the applicant creditor is relevant, in my view, in determining whether the consequent omission in the bankruptcy notice should be an error which could then be relied upon by the respondent debtor in order to prevent the applicant creditor from relying upon the bankruptcy notice. 

    I am satisfied in the circumstances that a combination of ss.306(1) and 41(5) of the Act are sufficient in the circumstances to enable the application to proceed.  Although the respondent debtor through his solicitors on record had filed a notice of objection, which in general terms may be said to raise an objection of a kind contemplated by s.41(5), it is clear that the raising of that objection in that manner has not been made within the time allowed for payment of the sum due in the bankruptcy notice and indeed has been made somewhat belatedly through the course of proceedings where I conclude there has been considerable delay primarily as a result of the conduct of the respondent debtor.”

16. It was submitted on behalf of the respondent relying upon the passages to which I have referred in this Court's decision in Metalflex the same principles apply in the present case.  It is submitted that the applicant debtor by reason of the control exercised by him and/or the company over the sale of unit 1804 was at all material times aware that as part of that ordinary sale of property a discharge of mortgage had to be effected in order for settlement to take place.  The amount payable to the mortgagee at settlement was an amount known to the applicant and accordingly it was submitted that when the applicant was served on 23 October 2003 with the bankruptcy notice, he would then have been aware that the amount claimed as owing in that bankruptcy notice, based as it was upon the judgment in the Supreme Court, was higher than the amount then actually owing as a deduction had to be made of the amount then known to the applicant of $457,178.36.

17. In the circumstances it was submitted by the respondent that as in the Metalflex case, the applicant debtor in the present application would not have been in any way confused as to the amount actually owing under the bankruptcy notice.  There being no confusion, then as

    
    

    I understand it, it was submitted that s.306(1) of the Bankruptcy Act would be sufficient to persuade this Court that the objection to the bankruptcy notice by way of preliminary issue could not be sustained and at least on this issue the attempt to set aside the bankruptcy notice should fail.

18. During the course of the hearing I referred the parties to a recent decision of the Federal Court in the matter of Kyriackou v Shield Mercantile Pty Ltd (2004) FCA 490 (29 April 2004 with the corrigendum dated 29 April 2004). Both parties were given the opportunity, if necessary, to make further submissions in relation to the Court's decision in that matter. Counsel for the Applicant provided an outline of further submissions addressing not only the issues raised in the Kyriackou decision but also raising other issues.

19. In the Outline of Further Submissions of the Applicant it was submitted that in applying the decision of Weinberg J in Kyriackou the following paragraph is relevant:-

    “39.In the present case, I am quite satisfied that the appellant was at all material times well aware of who the creditor was, and the basis upon which the debt was said to be owing.  However, Australian Steel makes it clear that whether or not the debtor is actually aware of these matters is not the test.  The bankruptcy notice must spell them out.  The debtor is not required to put two and two together, and come to the obvious conclusion.  It is not sufficient to say that the debtor must have known who the creditor was, and why the money was owing.  The surrounding circumstances cannot substitute for what the bankruptcy notice must itself contain.” (emphasis added)

20. It is also useful to note that in the Kyriackou decision one of the matters raised was whether or not the appellant could have worked out for himself that the First Respondent was “the creditor” in circumstances where the words “the creditor” in the prescribed form were not included in the bankruptcy notice considered by the Court.  Weinberg J states the following:-

    “42.It is trite to observe that the appellant could easily have worked out for himself that the first respondent was "the creditor" to which reference was made in par 1 of the bankruptcy notice. However, that is not what the notice actually said. Rather, it named the first respondent as having claimed that the appellant owed "the creditor" (whoever that might be) a debt of $23,276.62. Had the definition "the creditor" below the first respondent’s name, as the form requires, there would have been no doubt whatever about the identity of that party. Alternatively, it would have been sufficient to insert after the words "claims you owe" the word "it", rather than "the creditor", in order to avoid any possibility of uncertainty. The failure to identify or define the creditor cannot be regarded as a formal defect or irregularity. It is a matter of substance.

    43 It gives me no satisfaction to arrive at this conclusion. Were it not for Australian Steel, I would have said that a bankruptcy notice, like other important documents, should be read sensibly, and not perversely. The notion that there is an area of the law where form takes precedence over substance is not intuitively attractive. Nonetheless, I consider that I am bound by Australian Steel to conclude that this bankruptcy notice failed adequately to identify or define the creditor, a matter made essential by the Act and Regulations. I note that the binding quality of the majority judgment has been described as conjectural: General Motors Acceptance Corporation Australia v Marshall (2002) 124 FCR 210 per Gyles J and, on appeal, Marshall v General Motors Acceptance Corporation Australia (2003) 127 FCR 453 per Spender J at 457. However, the decision of Gyles J was reversed on appeal, and Spender J was in dissent. Both Cooper and North JJ followed Australian Steel, and I consider that I too should do so.

    44 A bankruptcy notice that fails correctly to identify the statute under which interest is claimed cannot sensibly be regarded as invalid, while one that fails adequately to identify the creditor is upheld. The defect or irregularity in the present case was, on any view, of greater significance that that which was held to invalidate the bankruptcy notice in Australian Steel. The bankruptcy notice in the present case was therefore invalid.”

21. It was submitted on behalf of the Applicant that in the present case there has been the overstatement of the debt and that the overstatement is sufficient to render the bankruptcy notice invalid.  Reliance was placed upon page 3 of the bankruptcy notice and in particular paragraph 5 of the schedule to which reference has already been made.  In the supplementary submissions the Court was referred to a decision of Justice Heerey in St George Wholesale Finance Pty Ltd v Spalla (2000) 181 ALR 682 at 690 (2000) FCA 1094 where the Court states at paragraph 28 the following:-

    “28.It could not be disputed that the notice of 28 July 1999 was defective in that it stated that no payments had been made and/or credits allowed since the date of the judgment or order whereas in fact credits or payments amounting at least to $1,439,180 had been received. Therefore the notice was not in accordance with the form prescribed because it did not provide information required by the schedule. In my opinion this particular defect is not within s 41(5) because the defect is not ‘only that the sum specified in the notice as the amount due to the creditor exceeds the amount in fact due’ (emphasis added). It is true that the amount specified in the notice as due ($2,781,173.50) exceeded the amount in fact due. However there was another and separate, albeit related, defect in the non-recording of payments or credits received. Since s 41(5) does not apply, no question of extending the time for giving of a notice arises.”

1. It was submitted that in the present case the notice should be set aside having regard to the principles set out in Kyriackou and by Heerey J in St George Wholesale Finance Ltd.

2. A further separate issue was raised in the Outline of Further submissions of the Applicant where reference was made to the bankruptcy notice which states in paragraph 4 thereof that payments of the debt can be made to “MIDDLETONS” of Level 29, 200 Queen Street Melbourne Victoria 3000.  On page 4 of the bankruptcy notice it is stated that:-

   “The person who applied for this notice to be issued is:

   ANDREW JOHN CHAMBERS

   who confirms by the following signature that he is the creditors authorised agent.”

3. It was submitted that the notice is invalid by reason of the failure of Andrew John Chambers to state what connection he has with Middletons.  Reliance was placed upon a decision of Raphael FM in Blackshaw Services Pty Ltd v Cureton [2003] FMCA 591. In that case the Court referred to an authority relied upon by the debtor of Spender J in a matter of Re Keith John McAlpine Ex parte AMEV Finance Ltd (Unreported 14 December 1987) where the Court states the following at paragraph 9:

   “9.The relevant inquiry as to whether a bankruptcy notice is valid is whether the notice is capable of misleading the debtor as to the manner in which he may comply with its requirements. The High Court said in James v Federal Commissioner of Taxation (1955) 93 CLR 631 at p 644:-

   ‘The Court cannot inquire whether the debtor has in fact been misled or not.  In this case it is probable that he was not misled.  It is sufficient that he could be misled.  But strict compliance with the requisites of a bankruptcy notice is essential to its validity and in these two respects the bankruptcy notice does not comply with these requisites.  The defects cannot be regarded as formal defects or irregularities.  They are breaches of important provisions of s.53: …’”

4. The Applicant in the written submissions relied upon the following extract from the decision of Raphael FM in Blackshaw:-

   “There are a number of cases about signatories to bankruptcy notices. DCT v Boxshall (1988) 83 ALR 175 related to the signatory of a delegatee of the Deputy Commissioner for Taxation. Meekin v Commonwealth Bank of Australia [1999] FCA 682 related to an employed solicitor signing on behalf of his principal as was the case in Trustees of the Franciscan Missionaries of Mary v Weir (2000) 176 ALR 501. Those cases establish that a form signed by a person who is not the person who claims to be signing the form is at worst a formal defect capable of being cured by s.306 of the Bankruptcy Act. The creditor submitted that this was all that had occurred in this case i.e. the solicitor had signed on behalf of the creditor and particularly referred me to the joint judgment of Lockhart, Burchett and Gummow JJ in Boxshall where at [178] Their Honours held that:

   ‘At common law, where a person authorises another to sign for him, the signature of the person so signing is the signature of the person authorising it.’

   I think that looking at the matter in this way detracts from the fundamental principle made clear in James that a bankruptcy notice must not be capable of misleading a debtor.  The creditor filed a detailed affidavit setting out the long history of this matter between the parties.  He argued that it was quite clear that the debtor knew perfectly well who Mr Cahill was and his relationship with the creditor.  That is as may be.  James makes it clear that this is not an appropriate consideration.  I would also add that to my mind the existence of this knowledge might make matters even more likely to be confused.  The debtor might think that Mr Cahill had bought the debt from his client or had come to some arrangement with him to take the debt (perhaps in lieu of fees).  The debtor could not be sure exactly why Mr Cahill was describing himself as the creditor.  The debtor is not expected or required to work these things out for himself.  But if he had even looked at the standard form of bankruptcy notice he would have noticed the difference between it and the document that was before him.  In his document there was the omission to the reference to the agent of the creditor and that might set him thinking as to exactly who the creditor was.  I think that the completion of the form in this way was sufficiently misleading to render the notice invalid.”

5. After referring to those cases it was submitted by the Applicant that as I understand it confusion might arise in the mind of the Applicant as to exactly who Chambers was and whether he was a solicitor or some other person acting on behalf of a creditor.  Accordingly on that basis as an alternative the bankruptcy notice should be set aside.

6. During the course of further oral submissions the Court was referred to the decision of Weinberg J in Northam v Commonwealth Bank of Australia (1999) FCA 544 (5 May 1999) where the Court states the following: -

   “Bankruptcy Notices – the general principles and s 306 of the Act 1908

   9.The form of bankruptcy notice set out in Form 1 is prescribed. A bankruptcy notice must follow Form 1 "in respect of its format" (for example, bold or italic typeface, underlining and notes). Plainly there must be the closest attention to detail in the preparation of a bankruptcy notice if it is to be relied upon as the basis for establishing the commission of an act of bankruptcy pursuant to s 40(1) of the Act. A bankruptcy notice will be a nullity, or liable to be set aside due to a defect or failure to comply with the prescribed form, if the defect or irregularity is substantive or, if formal only, it occasions substantial and irremediable justice.

   10 In Kleinwort Benson Australia Ltd v Crowl (1988 165 CLR 71 at 77 it was stated by Mason CJ and Wilson, Brennan and Gaudron JJ that:

   ‘It may be accepted that a bankruptcy notice which mis-states the amount due to the creditor is defective or irregular.’

   11 Their Honours continued at 79-80:

   ‘The authorities show that a bankruptcy notice is a nullity if it fails to meet a requirement made essential by the Act, or if it could reasonably mislead a debtor as to what is necessary to comply with the notice: James v Federal Commissioner of Taxation [(1955) 93 CLR 631 at 644]... In such cases the notice is a nullity whether or not the debtor is in fact misled: In re A Judgment Debtor, 530 of [[1908] 2 KB 474 at 481].’”

7. As I understood the Applicant Debtor’s submissions the overstatement of the amount owing in the bankruptcy notice is a substantive matter and it was not conceded that this could be described as a formal defect or irregularity of the kind which would attract the attention of s.306 of the Bankruptcy Act.

8. The Respondent Creditor claimed that the overstatement is merely a formal defect which can be cured by s.306 and invited the Court to consider the issue of whether there is indeed as a consequence any suggestion that the Applicant Debtor would have been misled or otherwise prejudiced. Hence in relation to what had previously been described as a preliminary issue upon further submissions and in particular reference to the Kyriackou and St George decisions, Counsel for the Respondent Creditor reiterated that the amount actually owed could be easily determined by the Applicant Debtor who had been directly involved in the arrangements for settlement referred to earlier in paragraph 16 of this judgment.

9. In relation to the issue raised concerning the failure of Mr Chambers to identify his relationship with Middletons it was submitted that this is not in breach of any requirement and accordingly does not constitute any defect or irregularity. The alternative as I understand it if it was a defect or irregularity it was a formal defect which could be cured by the application of s.306.

Reasoning

1. I am satisfied in the present case that the understatement of the amount owing was clearly incorrect.  I am satisfied that on 25 July 2003 that is the date the bankruptcy notice was issued unit 1804 had been sold and the settlement and payment of the sum of $457,920.58 had been made to the Respondent Creditor by 5 June 2003.  It is clear to me therefore that the Respondent Creditor was properly seized of the facts which would lead to the conclusion that rather than inserting the word “nil” in Item 5 in the schedule the Respondent Creditor should have referred to the sum of $457,178.36 being paid leaving the appropriate balance then owing.  It is clear to me therefore that by omitting entirely the amount which the Respondent Creditor knew to have been paid prior to the issue of the bankruptcy notice there has been a failure to meet a requirement made essential by the Act and I do not accept that this could be regarded as a failure not in respect of a substantive matter.

2. The present application is different to the facts in the Metalflex decision where the debtor had made an anonymous payment making it virtually impossible and/or difficult for the creditor at the time of issuing the bankruptcy notice to identify the payment and in particular be satisfied that the source of payment was the debtor.

3. I have no doubt that the debtor in the present case was well aware of the amount paid as a consequence of the sale of unit 1804 and by simple arithmetic could easily ascertain the amount owing.  The fact remains however that Item 5 in the schedule has not been completed. 

   
   

   I am further satisfied that the omission of the amount which should have been included goes beyond what might otherwise be described solely as providing in a notice an amount due to a creditor exceeding the amount in fact due but rather involved non compliance with a requirement made essential by the Act namely that in Item 5 of the schedule reference must be made to the amounts then known by the creditor to have been paid by the debtor in reduction of the amount owing arising as in the present case from a judgment debt.

4. Whilst I accept that there is some degree of artificiality in this process

   
   

   I am bound to follow the decisions to which reference has been made namely the decision of the Court in Kyriackou and the St George case.  On balance however this is not a case where one would necessarily have the same reservations as those expressed by Weinberg J in Kyriackou.  After all the creditor at all material times was seized with the relevant knowledge and despite the fact that the debtor had absolute control over the sale of the unit and knew the precise amount obtained as a result of that sale and that the amount was paid to the creditor, this does not of itself relieve the creditor of the duty to comply with the bankruptcy notice and properly complete the details of amounts received in part payment of the judgment debt which would then in turn reduce the amount owed.  That amount could then have been clearly stated in the bankruptcy notice and there would be no risk of that notice being set aside.

5. Accordingly I conclude that it is appropriate that the bankruptcy notice be set aside with consequential orders.

6. To the extent that I am required to do so I add that the challenge to the bankruptcy notice based upon the failure of Mr Chambers to identify his relationship with Middletons in my view has no merit. There is no requirement that I can discern in the Bankruptcy Act which would make it essential or necessary for Mr Chambers to identify his relationship with Middletons. In any event Mr Chambers name is clearly indicated on the bankruptcy notice together with an address which of course is identical to the address of Middletons and in my view this is not a matter on its own which would justify setting aside the bankruptcy notice. It should be noted that there were different facts and circumstances in the Blackshaw case which may in any event give rise to a different outcome.  In the present case there is simply the name of a person as the ‘creditors authorised agent’ and the name of a solicitor’s firm both with the address and the authorised person clearly identified.  As I understand the facts before the Court in Blackshaw there was a difficulty in terms of an omission of a reference of the person as agent of the creditor.  There is no similar omission in the present case.

7. It follows however that the appropriate order should be that the Bankruptcy Notice  No VN1143 of 2003 should be set aside.

I certify that the preceding thirty-seven (37) paragraphs are a true copy of the reasons for judgment of McInnis FM

Associate: 

Date:  21 May 2004