SUSSMAN v Johncorp Industries Pty Ltd

[2002] FMCA 58

FEDERAL MAGISTRATES COURT OF AUSTRALIA

SUSSMAN v JOHNCORP INDUSTRIES PTY LTD          [2002] FMCA 58

BANKRUPTCY – Application to set aside Bankruptcy Notice – overstatement in amount of debt owed.

Bankruptcy Act 1966, ss 33, 306

Australian Steel v Lewis (2000) FCA 1915
Kleinwort Benson Australia Ltd v Crowl (1998) 165 CLR 71

Applicant: ALEXANDER SUSSMAN

Respondent: JOHNCORP INDUSTRIES PTY LTD

File No: SZ163 of 2002

Delivered on: 26 March 2002

Delivered at: Sydney

Hearing Date: 26 March 2002

Judgment of: Raphael FM

REPRESENTATION

Counsel for the Applicant: Mr J Johnson

Solicitors for the Applicant: Gordon & Johnstone

Counsel for the Respondent: Mr R J Bromwich

Solicitors for the Respondent: Alan Parszos & Associates

ORDERS

1. Bankruptcy notice set aside. 

2. Respondent pay the Applicant’s costs as agreed or taxed. 

FEDERAL MAGISTRATES
COURT OF AUSTRALIA AT
SYDNEY

SZ163 of 2002

ALEXANDER SUSSMAN

Applicant

And

JOHNCORP INDUSTRIES PTY LTD

Respondent

REASONS FOR JUDGMENT

1. In this matter the applicant seeks to set aside a bankruptcy notice issued by JOHNCORP INDUSTRIES PTY LTD against the debtor, ALEXANDER SUSSMAN.  The bankruptcy notice was required to be served by way of an order for substituted service made on 30 January 2002 by District Registrar Segal.  The bankruptcy notice follows a consent judgment in the Supreme Court of New South Wales in the sum of $1,914,248.18.  There is also a claim for interest made.  The claim for interest commences on 29 June 2001.

2. A copy of the judgment which is required to be annexed to the Bankruptcy Notice clearly states that the judgment was ordered and entered on 18 July 2001, even though the document is actually dated 28 June 2001. It is because of this, Mr Johnson argues that there is an obvious overstatement in the amount of the debt owed because of the excess of interest that was payable. The applicant issued the notice required under section 41(5) of the Bankruptcy Act, advising the respondent of the overstatement and suggesting that the respondent issue a new notice and consented to the dismissal of the current one. This the respondent declined to do.

3. Hence, we are here today.  Mr Bromwich who appears on behalf of the respondent, has admitted that there is a formal defect.  That there is an overstatement of interest.  He may not go as far as Mr Johnson by suggesting that interest only commences on 18 July 2001.  It is suggested in an affidavit in support of the respondent that the document was filed with the court on 2 July 2001 but whatever the situation is, there was some overstatement.  That overstatement has been drawn to the attention of the respondent, then it would appear to me that the bankruptcy notice is invalid.

4. Mr Bromwich suggests that I may make one of three possible orders. I may utilise section 306(1) to cure a formal defect or irregularity and substitute the correct figures. I think it is fairly clear from the authorities such as Australian Steel v Lewis (2000) FCA 1915 and even authorities before that, including Kleinwort Benson Australia Ltd v Crowl (1998) 165 CLR 71 that an overstatement in a Bankruptcy Notice is not a matter which can be cured under section 306.

5. The second submission Mr Bromwich makes is that I can allow an amendment under section 33(1)(b) of the Bankruptcy Act. Mr Johnson argues against this and against the third suggestion which is also based on section 33(1)(b) that if the Bankruptcy Notice is invalid, it cannot be amended to validate it. I have been provided with no authority about amendments to Bankruptcy Notices under this section. Mr Johnson rightly points out of course that a Bankruptcy Notice is not the creditor's document. It is the document of the Official Receiver. He issued it.

6. I do not think I can accept an application for an amendment under section 33 from a judgment creditor at this stage in the proceedings when the amendment goes to the amount of the claim. Even if I could I would be disinclined to do it. This judgment creditor had an opportunity to consent to the application that the Bankruptcy Notice be set aside, and declined to accept it. That was the appropriate thing to have done and to reissue a new notice. The judgment creditor suggests as the third possibility that the notice is amended, and in addition I make new orders as to substituted service and provide the debtor an opportunity within 21 days to make payment under the notice.

7. I can understand the frustration of a judgment creditor in these situations, but the fact is that if the notice is invalid, it's invalid, and he must start again.  No doubt the court will take into account, and sympathetically consider, what may well be an earlier application for substituted service than the one previously made, if the judgment debtor is not found at his premises or his place of business.  But that is something for the Registrars of this court to decide. 

8. In all the circumstances, I think I have really no alternative but to find that this Bankruptcy Notice is invalid and that it should be set aside and that the respondent should pay the applicant's costs to be taxed if not agreed in accordance with the Federal Court Rules.

I certify that the preceding eight (8) paragraphs are a true copy of the reasons for judgment of Raphael FM

Associate: 

Date: