Stankovic v Footers Pty Ltd - [2001] FMCA 119

FEDERAL MAGISTRATES COURT OF AUSTRALIA

STANKOVIC v FOOTERS PTY LTD [2001] FMCA 119

BANKRUPTCY NOTICE – Application to set aside – review of registrar's decision – attachment of 'Copy of Record' found to comply with requirements of regulations – omission of details of calculation of interest found in Copy of Record invalidates Notice – inclusion of subsequent costs order after original judgment constitutes two judgments and invalidates notice.

Bankruptcy Act 1966 (Cth) s 41

Bankruptcy Regulations Reg 4.01, 4.02 Form 1

St George Bank Ltd v Klintworth (1998) 86 FCR 240
Australian Steel Co (Operations) Pty Limited v Lewis [2000] FCA 1915
Cummings v Raeffaele 175 ALR 107
Terry Fortescue Croft v Armida Poli FCA unreported 28 April 1997

Applicant:

SLAVKO STANKOVIC

Respondent:

FOOTERS PTY LTD

File No:

AZ 241 of 2001

Delivered on:

5 December 2001

Delivered at:

Adelaide

Hearing Date:

4 December 2001

Judgment of:

Raphael FM

REPRESENTATION

Applicant:

Slavko Stankovic

Solicitor for Respondent:

M Hutchins

ORDERS

The Bankruptcy Notice numbered 439 of 2001 be set aside.
Within 2 days of entry, the respondent provide a copy of these Orders to the Official Receiver for the Bankruptcy District of South Australia.

FEDERAL MAGISTRATES COURT OF AUSTRALIA AT ADELAIDE

AZ 241 of 2001

SLAVKO STANKOVIC

Applicant

And

FOOTERS PTY LTD

Respondent

REASONS FOR JUDGMENT

History

On 12 November 2001, Registrar Christie dismissed the application SLAVKO STANKOVIC (“Mr Stankovic”) filed on 30 October 2001 to set aside the Bankruptcy Notice Number 439 of 2001 and to extend time to comply with that Notice. The learned Registrar made her decision in the absence of Mr Stankovic and therefore on the 27^th of November 2001 published detailed reasons for her decision.
Mr Stankovic has sought a review of the learned Registrar’s decision and the matter came before me for hearing on 4 December 2001.
A review is a hearing de novo and the applicant is entitled to put before the Federal Magistrate hearing the application not only the evidence and arguments that were before the Registrar but also any new matters which are relevant to the decision and are capable of being argued.

The applicant’s claim

In the proceedings before me Mr Stankovic raised two matters. He disputed the validity of the Bankruptcy Notice for reasons which will be discussed and he argued that the creditor was being unreasonable in not accepting any proposal for the payment of this small debt ($3,618.71) by instalments. The latter matter was dealt with by the learned Registrar in paragraph 17 of her Reasons for Decision in which she says:
“It is clear that while a creditor is entitled to accept an offer to pay by instalments there is no obligation to do so. (See for example McIntoish v Shashoua (1931) 46 CLR in relation to the entitlement of a petitioning creditor to refuse a tender of payment of a debt and proceed with a creditor’s petition). Whether or not to accept such an offer is a matter for the creditor and failure to enter into an agreement for payment by instalments provides no basis to set aside the Bankruptcy Notice.”
I would not cavil with anything said in that paragraph and if this was the only ground on which review was sought, I would have dismissed the application.
Mr Stankovic then argued that the Bankruptcy Notice was non-compliant in that its Schedule failed to include an amount for interest which was being claimed and did not comply with the provisions of the form in the Notes to the Schedule by providing detail of:
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.
The Bankruptcy Notice is based upon a judgment of the Magistrates Court of South Australia. There is annexed to the Bankruptcy Notice a document entitled “Copy of Record” which sets out in date order an extract from the file of the proceedings from the time the complaint was filed on 17 April, 2000 until 24 September, 2001 which is the date of the Copy of Record. It appears from that document that judgment for the sum of $3,301 was entered on 23 August, 2000.
The Copy of Record also indicates that after the entry of judgment there were a number of applications made by the debtor including an application for what is described as a “minor civil review” which went before Judge Smith on 9 May, 2001. His Honour there found that he had no jurisdiction in the matter. The final entry in the Record is set out below:
24/09/2002 Copy of Record
Last Process $3301.00
Costs$20.00
Interest$297.71
Mr Stankovic argues that the inclusion of $297.71 by way of interest making the total amount owed the sum of $3,618.71 which appears in the Schedule to the Bankruptcy Notice is a failure to comply with Note 2 of the Notes to the Schedule. It was also suggested that the document entitled “Copy of Record” was not one of the documents described in regulation 4.01(1)(b) of the Bankruptcy Regulations which state:
4.01(1)
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 judgment or order certified as a true copy of that entry and sealed by the court or signed by an officer of the court.
The form of Notice prescribed by the regulations requires a copy of the judgment or order relied upon to be attached.
In St George Bank Ltd v Klintworth (1998) 86 FCR 240, Hill J found that a computer generated document which contains the particulars of the judgment and is created by procedure of the relevant court can be an appropriate copy of a judgment or order to attach to the bankruptcy notice and to satisfy regulation 4.02, Form 1 and section 41(2). In that case, His Honour heard evidence of the procedures adopted in the District Court of New South Wales for the production of a “ Notice of Entry of Default Judgment”. I did not have such evidence before me in relation to the “Copy of Record” but that document does appear to be —
“A computer generated document which contains the particulars of the judgment.”
Such a document was considered by Hill J in St George Bank to —
“amount 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.”
Hill J went on to find that Reg 4.01 had not been complied with but that such non-compliance was a formal defect or irregularity capable of being cured under s 306 (1) of the Bankruptcy Act. Is this statement still good law following the decision of the Full Bench in Australian Steel Co (Operations) Pty Limited v Lewis [2000] FCA 1915. In my view this case does not affect the St George decision because Hill J found that the form had been complied with and it was that requirement which formed the ratio of the decision in Australian Steel. I believe I find support for this view in the fact that the decision in St George was specifically referred to with approval in the lengthy dissenting judgment of Lee J at para 73.of Australian Steel and is not commented upon by the majority.
I am, however, not so sanguine about the addition of the sum of $297.71 by way of interest which is referred to in the Copy of Record nor about the addition of a further $20 which appears to be the costs awarded in respect of a failed application by the debtor for the creditor to accept payment by instalments on 1 November 2000. I will deal with the question of interest first.
The schedule to the Bankruptcy Notice is in the form reproduced in the judgment in Australian Steel. In Mr Stankovic’s case paragraph 1 of the schedule is the sum of $3618.71 made up as previously recorded. There is no figure placed next to item 2 nor for item 3. There is no figure for item 5 so that the total debt owing is the sum of $3618.71.
It seems to me that this schedule is incorrect in the following particulars. Firstly the amount of the judgment or order is not $3618.71. The amount of the judgment is $3301.00. That figure includes legal costs and practitioners fee as set out in detail in the first entry in the Copy of Record. There is therefore no need to complete item 2 in the schedule.
I do believe there is a need to complete item 3 in the schedule because the interest which has been added of $297.71 is interest which has accrued since the date of judgment. That being the case, in order that the requirements of the schedule are complied with, there must also be included the information set out in note 2 under subparagraphs (a) and (b). Neither of these sub-paragraphs has been complied with.
I am satisfied that this non-compliance with the requirements of the form falls squarely within the ratio of Australian Steel. At para 42 their Honours in the majority said:
“In our view the purpose of the requirement that the source of the creditor’s entitlement to interest is stated can only be to enable the debtor to verify that the amount claimed is in fact due … The applicable interest rate can often be a matter of dispute … The form prescribed by the regulations provides the answer. Having regard to the purpose behind the requirement that the provision under which interest is being claimed, and correctly claimed, be included in the notice, that requirement is made essential by the Act, and a notice issued in breach of the requirement will be invalid.”
This reasoning must apply with equal force to the requirements of (b) of Note 2 because unless those details are provided the debtor has no way of checking the calculation of interest certified to be due. In the absence of the particulars the debtor is bound by a computer generated document, the input into which he has no way of verifying.
The reasoning of the majority in Australian Steel, particularly in paras 22–26 clearly illustrates why compliance with those provisions of the Act and Regulations that mandate information to be provided to a debtor is so important. Failure of a creditor properly to complete the schedule is, in my view, fatal to the validity of the Notice.
The final matter is the inclusion in the amount claimed by the creditor of the sum of $20 representing a costs order made subsequent to the original judgment. This constitutes a second judgment which is not properly the subject of a bankruptcy notice (see Cummings v Raeffaele 175 ALR 107 and the cases there cited). The inclusion of the second judgment debt invalidates the bankruptcy notice.
Since preparing these reasons I have had an opportunity to consider the judgment of Von Doussa J in Terry Fortescue Croft v Armida Poli FCA unreported 28 April 1997. This judgment dealt with a situation very similar to that before me. However, as was acknowledged by His Honour this was before the most recent changes to the bankruptcy regulations and it was also prior to the decision in St George Bank. The Croft decision supports my view concerning the failure to calculate interest. Whilst His Honour did not consider that the Copy of Record constituted a judgment or order for the amount claimed in the notice, I do not resile from the views which I have earlier expressed about the validity of the document.

Orders

I set aside the Bankruptcy Notice numbered 439 of 2001. As the Applicant is self represented I can make no order for costs in his favour. There were no orders as to costs made by the Registrar.

I certify that the preceding twenty (20) paragraphs are a true copy of the reasons for judgment of Raphael FM

Associate:

Date: