Slan v Mitry

[2003] FMCA 237

FEDERAL MAGISTRATES COURT OF AUSTRALIA

SLAN v MITRY [2003] FMCA 237

BANKRUPTCY – Application to set aside creditor’s petition on the grounds that the bankruptcy notice is a nullity – where the notice does not contain the words “the debtor” and “the creditor” as required by the regulations – whether this defect can be cured – whether the defect is misleading or confusing – whether the judgment itself is incorrect – whether the judgment will stand as available to the issuer of a bankruptcy notice until set aside.

Bankruptcy Act 1966 (Cth) ss.41(2), 306
Bankruptcy Rules Reg 4.02

Kleinwort Benson v Crowl (1988) 165 CLR 71

Australian Steel Co (Operations) Pty Limited v Lewis (2000) 109 FCR 33 Marshall v General Motors Acceptance Corporation Australia [2003] FCAFC 45
McWilliam v Jackson & Ors [2000] FCA 175
Re Vella; Ex parte Seymour (1983) 67 FLR 287

Applicant: MILAD SLAN

Respondent: RICHARD MITRY

Supporting Creditor: COMMISSIONER OF TAXATION

File No: SZ 423 of 2003

Delivered on: 6 June 2003

Delivered at: Sydney

Hearing date: 6 June 2003

Judgment of: Raphael FM

REPRESENTATION

Counsel for the Applicant: Mr J Azzi

Solicitors for the Applicant: Webster O’Halloran & Associates

Counsel for the Respondent: Mr A Rogers

Solicitors for the Respondent: Sandroussi & Associates

ORDERS

1. THE COURT DECLARES:

   (a)the Bankruptcy notice issued on 11 September 2002 to be a nullity.

2. THE COURT ORDERS:

   (a)Bankruptcy petition dated 24 March 2003 dismissed.

   (b)Applicant to petition to pay the respondent’s costs to be taxed if not agreed in accordance with the Federal Court Act and Rules.

FEDERAL MAGISTRATES
COURT OF AUSTRALIA AT
SYDNEY

SZ 423 of 2003

MILAD SLAN

Applicant

And

RICHARD MITRY

Respondent

REASONS FOR JUDGMENT

1. In this matter the respondent to a bankruptcy petition filed on 24 March 2003 seeks by way of an amended Notice of Intention to Oppose dated 15 June 2003 to set aside the creditor's petition on the grounds that the bankruptcy notice upon which it is founded was itself a nullity.

2. The respondent makes other claims which appeared to require the court to go behind a judgment debt but although affidavits relating thereto have been read they have not been dealt with substantively and those issues have not been ventilated.

3. The grounds upon which the respondent to the petition seeks to impugn the bankruptcy notice are these. The bankruptcy notice appears to follow the form prescribed under s.41(2) of the Bankruptcy Act 1966 (Cth) (“the bankruptcy Act”) and by regulation 4.02 of the Bankruptcy Regulations.  The draft form which is contained in those regulations provides that the form be addressed to the debtor and that the word ("the debtor") be appended under the name.  The form also provides that the name and address of the creditor be inserted and that there appear under the name of the creditor the words ("the creditor").

4. The bankruptcy notice which is before me attached to the affidavit verifying the petition dated 21 March 2003 does not contain either the words ("the debtor") or ("the creditor"). 

5. Mr Rogers who appears on behalf of the respondent argues that the failure to identify the creditor constitutes a fatal defect. The applicant says that whilst this is a defect it is one which can be cured by utilising the provision of s.306 of the Bankruptcy Act. The applicant argues that there is nothing misleading or confusing in the omission of the words "the creditor" because it is plain from a reading of the document who the creditor is. In support of that proposition Mr Azzi points to paragraph 2 of the bankruptcy notice which states:

   "The creditor claims that the debt is due and payable by you.  A copy of a judgment or order relied upon by the creditor is attached.  At the time of applying for this notice, execution of the judgment or order has not been stayed."

   If the recipient of the notice then turns to the rear portion thereof he will find annexed a certificate of judgment from the District Court of New South Wales.  This is headed in certain proceedings file number 827/01 and has Milad Slan as judgment creditor and Richard Mitry as judgment debtor.

6. Paragraph 3 of the bankruptcy notice is advice to the debtor about payment and says:

   "Payment of the debt can be made to Milad Slan of:

   C/- Ian B. Mitchell, Solicitors

   Suite 1401B, Level 14

   33 Bligh Street, Sydney."

1. The applicant argues that a proper reading of Kleinwort Benson v Crowl (1988) 165 CLR 71 indicates that unless the defect is one of failing to comply with the regulation itself, then the notice should only be struck out if it would tend to confuse or mislead a debtor.

2. The extent to which observance of the form found in regulation 4.02 must be adhered to has been the subject of two important cases heard before the Full Bench of the Federal Court.  The first is Australian Steel Co (Operations) Pty Limited v Lewis (2000) 109 FCR 33 and the second Marshall v General Motors Acceptance Corporation Australia [2003] FCAFC 45.

3. In that latter case North J set out at [79] what he considered to be the essence of the reasoning of the majority in Australian Steel.  He referred particularly to [40] of that judgment where the majority stated:

   "In 1996 parliament chose to make a form to be prescribed by regulation, the sole criterion of whether a bankruptcy notice complied with the Act, with the consequence that an act of bankruptcy would be committed in the case of non compliance with such a notice.  This being the will of parliament, it is not for a court to treat the terms of the prescribed form as inherently less important than a requirement specified in the Act itself, so as to attract a more lenient view in the case of non compliance."

4. The effect of Marshall is to restore the very strict interpretation of the use of the form,  of the requirements of the Act and of the High Court's decision in Kleinwort Benson which had been laid down in Australian Steel.

5. It seems to me that the identity of the creditor is a particularly important matter.  That much was affirmed by Wilcox J in McWilliam v Jackson & Ors [2000] FCA 175, although the facts of that case were somewhat different to those before me.

6. Whilst I do have some considerable sympathy with Mr Azzi's argument that the name of a creditor may be clear on the attached certificate of judgment, there are two counter-arguments raised by Mr Rogers which I think carry the day.  The first is that it might have been possible for this judgment to have been assigned and therefore the name of the judgment creditor on the certificate of judgment might not have been the person who was claiming under the bankruptcy notice.  In those circumstances it would not be possible to identify the creditor from the document.

7. The second point is that the certificate of judgment is itself incorrect.  At paragraph 1 of the certificate of judgment the following is stated:

   "1. In this action the plaintiff recovered judgment against the defendant on 05/07/2002 in the sum of $130,000."

8. There has been produced in evidence in this case as exhibits A and B an affidavit supporting the entry of judgment and a judgment form, both of which are dated 14 August 2002.  No judgment was entered against the debtor on 5 July 2002 and having had regard to the terms of settlement of the proceedings it could not have been.  Reliance upon this document would have been confusing and misleading to the debtor because if he had sought to find such a judgment he would not have done so.

9. I should make it clear that it is not the judgment which is impugned.  Re Vella; Ex parte Seymour (1983) 67 FLR 287 makes it clear that a judgment of the District Court will stand as available to the issuer of a bankruptcy notice until it is set aside. It is the fact that this particular judgment upon which reliance is placed for the purposes of my exercising my discretion under s.306 is confusing because the judgment itself did not actually exist upon the date given in the certificate.

10. In those circumstances I would find that the bankruptcy notice is a nullity and I must therefore dismiss the petition. I am mindful that there is a supporting creditor but this will not avail the applicant as there is no act of bankruptcy upon which the supporting creditor can rely in order to obtain a substitution.

11. I order that the applicant to the petition pay the costs of the respondent to be taxed if not agreed pursuant to the Federal Court Act and Rules.

I certify that the preceding seventeen (17) paragraphs are a true copy of the reasons for judgment of Raphael FM

Associate: 

Date: