St George Bank Ltd v Klintworth, Maxwell John

[1998] FCA 1066

FEDERAL COURT OF AUSTRALIA

BANKRUPTCY – validity of a bankruptcy notice – referral by Registrar of the Court – where bankruptcy notice had attached to it a computer print-out from the District Court of New South Wales entitled “Notice of Entry of Default Judgment” – whether a document which is not a judgment or order formally entered can found a bankruptcy notice for the purposes of the Bankruptcy Act and Regulations

Bankruptcy Act 1966 (Cth) – s 41
Bankruptcy Regulations – reg 4.01(1)

Hilti (Australia) Pty Ltd v Millard  , unreported, Burchett J, 30 September 1997 – referred to
Kleinwort Benson Australia Limited v Crowl (1988) 165 CLR 71 – referred to
The Distribution Group Ltd v Lydon, unreported, 5 September 1997 – referred to

ST GEORGE BANK LTD v
MAXWELL JOHN KLINTWORTH AND
PATRICIA GWENDOLYNE KLINTWORTH

NG 7675 of 1998

HILL J
SYDNEY
25 AUGUST 1998

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY	NG 7675  of  1998

BETWEEN:	ST GEORGE BANK LTD Applicant
AND:	MAXWELL JOHN KLINTWORTH AND PATRICIA GWENDOLYNE KLINTWORTH Respondents
JUDGE:		HILL J
DATE OF ORDER:		25 AUGUST 1998
WHERE MADE:		SYDNEY

THE COURT DECLARES THAT:

1. The failure to comply with reg 4.01(1) is a formal defect or irregularity not invalidating the proceedings.

THE COURT ORDERS THAT:

1. The declaration be stayed for a period of seven days.

1. The Applicant notify the Respondents of the declaration forthwith and that it has been stayed to enable them to make any submissions they may wish to make on that or any other matter.

1. The matter be listed for that purpose before me on Monday 31 August 1998 at 9.30 am.

Note:Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY	NG 7675 of 1998

BETWEEN:	ST GEORGE BANK LTD Applicant
AND:	MAXWELL JOHN KLINTWORTH AND PATRICIA GWENDOLYNE KLINTWORTH Respondents
JUDGE:		HILL J
DATE OF ORDER:		25 AUGUST 1998
WHERE MADE:		SYDNEY

EX TEMPORE REASONS FOR JUDGMENT

The Applicant, St George Bank Limited, applied to the Court for a sequestration order to be made against the Respondents, Mr and Mrs Klintworth. 

The matter came before a Registrar this morning who referred it to a judge to determine whether the Bankruptcy Notice, the non-compliance of which founded the application, was in the circumstances valid.  The Bankruptcy Notice follows in all ways the prescribed form, Form 1 to the Bankruptcy Regulations, but there is annexed to it a document headed “Notice of Entry of Default Judgment” bearing a stamp from the District Court of New South Wales referring to a judgment in favour of the Applicant totalling $99,751.22 by the Respondents noting the judgment date to be 25 November 1997.

This document also was the document brought before the Official Receiver by the Applicant at the time the application was made for the issue of a Bankruptcy Notice.  Regulation 4.01(1) of the Bankruptcy Regulations ("the Regulations") provides as follows:

“In order to apply for the issue of a bankruptcy notice, a person must lodge with the Official Receiver:

(a)a duly completed draft bankruptcy notice; and

(b)one of the following documents in respect of the final judgment or final order specified by the person on the approved form:

(i)a sealed or certified copy of the judgment or order;

(ii)a certificate of the judgment or order sealed by the court or signed by an officer of the court;

(iii)a copy of the entry of the judgment or order certified as a true copy of that entry and sealed by the court or signed by an officer of the court;

(iv)in the case of an award referred to in paragraph 40(3)(a) of the Act:

(A)a copy of the award certified as a true copy by the arbitrator who made the award or, failing the arbitrator, by an officer of the Court after having compared the copy with the original award; and

(B)a sealed or certified copy of the order giving leave to enforce the award; and

(c)a copy of the draft bankruptcy notice for the Official Receiver’s records and sufficient additional copies of the draft bankruptcy notice for service and for annexure to any required affidavits of service.”

It will be noticed that the regulation contemplates a document of the kind referred to in reg 4.01(1)(b) being lodged and that none of the categories of document referred to in the regulation comprehend the document headed “Notice of Entry of Default Judgment” to which I have referred.  It is of course true that it might be said that the document is a copy of the entry of the judgment or order as referred to in sub-reg (1)(b)(iii) but it is not certified and therefore falls outside that particular category.

The precise status of the document appeared to me to be in issue and accordingly the matter was adjourned until evidence could be obtained from a Registrar of the District Court indicating the procedure that was now adopted by that Court and the place the computer generated “Notice of Entry of Default Judgment” has in that procedure.  That evidence now shows that where a default judgment is sought in proceedings brought in that Court there is filed an affidavit of debt and an affidavit of service.  At some time after those documents are filed they are checked and judgment is then entered on the Court record by the use of a computer system.  Although it has no particular bearing on the present issue, the judgment is actually shown as having been entered as at the date the affidavit of debt and affidavit of service was filed, rather than the date upon which the Court record is noted through the computer system.

Immediately judgment has been entered on the Court record, a notice is generated through the computer system which is the notice to which I have already referred.  A seal is placed upon that notice and the notice is forwarded to the plaintiff.  Its purpose is to confirm the entry of judgment.  The present procedure, as introduced, is said to overcome difficulties arising from administrative delays.  A document given in evidence by an Assistant Registrar of the District Court shows in the present case the entry of judgment in the Court's records having been made in the amounts shown in the notice of entry form, the date of judgment being shown, as I have already indicated, as 25 November 1997, although it is obvious that the processing may not have occurred on that day.  What is clear is that the processing occurred at a time prior to the issue of the notice of entry, that is to say at a time prior also to the Bankruptcy Notice being sought. 

Two questions arise. The first is the effect of non-compliance with reg 4.01(1)(b)(iii). The second is whether there has been compliance with the provisions of reg 4.02 and Form 1, made applicable by the provisions of s 41(2) of the Bankruptcy Act 1966 (“the Act”). I shall deal with the second of those matters first.

Form 1 is made mandatory by force of s 41(2) of the Act and reg 1, unless these provisions are to be read in a non-literal way. Form 1 would lead to non-compliance with the mandatory requirements of s 41(2) of the Act.

There is some difference of authority on this question which I do not propose to resolve in the present case.  Burchett J in a recent decision of Hilti (Australia) Pty Limited v Millard, unreported, 30 September 1997, took the view, based upon Kleinwort Benson Australia Limited v Crowl (1988) 165 CLR 71 at 79, that failure to comply strictly with form 1 led to the result that the Bankruptcy Notice was a nullity.  A contrary view has been taken by Northrop J: see The Distribution Group Ltd v Lydon, unreported, 5 September 1997.

I do not think, however, that the matter arises in the present case because Form 1 requires that the Bankruptcy Notice be accompanied by or have attached to it “a copy of the judgment or order relied upon by the creditor”.  There is no need in my view to give the word “copy” a narrow interpretation. A computer generated document which contains the particulars of the judgment as the present document does amounts in my view, having regard to modern technology, as an appropriate copy of the order or judgment so that Form 1 (and thus s 41(2) of the Act) have been complied with.

That leaves the first matter. Regulation 4.01 has not been complied with. The question which arises is whether the non compliance can be said to be a formal defect or irregularity capable of being cured under s 306 of the Act. Obviously, the case is not one where it may be said that any reasonable debtor in the position of the debtors in the present case might be confused, misled or otherwise led into error. It seems to me that the present is a case where I should form the view that substantial injustice has not been caused by the defect or irregularity but rather that any injustice could be remedied in the event by an order of the Court.

I would propose to declare that the failure to comply with reg 4.01(1), in the circumstances of the present case, is a formal defect or irregularity not invalidating, the proceedings. However, I have reached this conclusion without hearing any argument on the part of the Respondent who did not appear before the Registrar when the matter was called upon this morning. In case the Respondents should desire to make submissions on the application of s 306 or otherwise, I propose to stay the making of a declaration for a period of seven days.

I direct the Applicant to notify the Respondents forthwith that failure to comply with reg 4.01(1) is a formal defect or irregularity and that that order has been stayed to enable the Respondents to make any submissions on that or any other matter they may wish to make.  To enable that to happen, I shall list the matter before myself at 9.30 am on Monday morning.  If no submissions are made, the matter can then be referred back to the Registrar for the making of a sequestration order in the ordinary bankruptcy list on Tuesday.

I certify that this and the preceding three (3) pages are a true copy of the Reasons for Judgment herein of the Honourable Justice Hill

Associate:

Dated:  August 1998

Solicitor for the Applicant:	Ms B Smith of Kemp Strang
Date of Hearing:	25 August 1998
Date of Judgment:	25 August 1998