Sykes S. v Deputy Commissioner of Taxation

[1992] FCA 734

I JUDGMENT No. ...21kI~ -%

IN THE FEDERAL COURT OF AUSTRALIA )

GENERAL DIVISION	1	LIMITED DISTRIBUTION
BANKRUPTCY DISTRICT OF THE	)	No. P1685 of 1991
STATE OF NEW SOUTH WALES	)

I

l RE : SUZANNE SYKES

Debtor

EX PARTE:  DEPUTY COMMISSIONER OF TAXATION

Creditor

CORAM:	HILL J
PLACE	: SYDNEY
DATED	:  8 SEPTEMBER 1992

MINUTES OF ORDER

I	THE COURT ORDERS THAT:
I

1.    The petition be dismissed.

2.    There be no order as to costs.

i

I

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

IN THE FEDERAL COURT OF AUSTRALIA )

GENERAL DIVISION	)	LIMITED DISTRIBUTION
BANKRUPTCY DISTRICT OF THE	)	No. P1685 of 1991
STATE OF NEW SOUTH WALES	)

RE :  SUZANNE SYKES

Debtor

EX PARTE:  DEPUTY COMMISSIONER OF TAXATION

Creditor

CORAM	: HILL J
PLACE	: SYDNEY
DATED	:  8 SEPTEMBER 1992

EX TEMPORE REASONS FOR JUDGMENT

Before the court is a petition filed by the Commissioner of Taxation agalnst the debtor, Mrs Suzanne Sykes of Budgewoi, New South Wales. The act of bankruptcy relied upon in the petition is the failure to comply with a bankruptcy notice dated 26 February 1992. The petitlon alleges that Mrs Sykes is indebted to the Deputy Commissioner in a sum of $17,535.11, being the balance due under a final judgment recovered in the District Court on 26 October 1990

and costs and $2,534.24 interest thereon to 4 May 1992, for $10,139.18 for income tax, additional tax for late payment	together with a further $4,861.69 being income tax, additional
tax for late payment for the year ended 30 June 1989.
Mrs Sykes admits that judgment was attained against her for $10,679.18, which amount was thereafter reduced by $540 so that a balance of $10,139.18 was due by her. It is also admitted that interest accrued on the judgment debt. There is no dispute that the figure for interest shown in the bankruptcy notice was correct.
Mrs Sykes, in opposition to the petition, raised the question that the Commissioner had assessed the $4,861.69 tax for the year ended 30 June 1989 prior to proceeding to obtain a judgment against her and that the amounts should accordingly have been included in that judgment. However, there is no obligation upon the Commissioner to seek judgment in respect of a particular amount which is owed to him and the statement in the petition, that the additional $4,861.69 is owing, does not in any way invalidate the petition. Nor for that matter is the bankruptcy notice invalidated because it does not refer to that amount.
Mrs Sykes cross-examined a witness called by the Commissioner, a Miss Canley, on various matters contained in Miss Canley's affidavit and herself gave evidence and called
her husband as well to give evidence in respect of
conversations that had taken place in an interview on 11
September 1991.
However, none of the matters raised by Mrs Sykes in any way led to the conclusion that the amount showing in the creditor's petition as being owing by her was not owlng and indeed Mrs Sykes admitted ultimately that she owes the amounts said to be owed by her.

Her d i f f i c u l t y i s i n being able t o pay t h e amounts

owing b y her t o t h e peti t ioning credi tor . She i s presently not employed and would wish t o pay o f f a l l her creditors as and when she was able t o do so, rather than ul t imately be made bankrupt. She has, i n part, had understandable d i f f i c u l t i e s

i n conducting t h e present l i t i g a t i o n because she has not been

able t o a f f o r d legal representation.

Counsel for t h e Commissioner properly drew my

a t ten t ion t o a problem with t h e bankruptcy no t ice . That

notice i s , as relevant for present purposes,	i n t h e following
terms :

"WHEREAS the Deputy Commlssloner o f

Taxation one o f whose addresses i s 266

King	S t ree t ,	Newcastle	(here inaf ter
referred	t o a s	" the judgment	cred i tor")

has claimed -

( 1 ) the balance sum o f $10,139.18 due by

you t o h i m under a f inal judgment obtained by him against you i n the Dis t r ic t Court o f New South Wales a t

Church Street Newcastle, on the

twenty s i x t h day o f October 1991 ,

belng the amount o f $10,679.18 due under the s a i d judgment since reduced by $540

and

( 2 ) i n t e r e s t amounting t o $2,259.72 ...

THEREFORE TAKE NOTICE that within twenty

one days a f t e r service o f t h i s not lce on

you,

excluding the day on which t h i s

not ice i s served on you, you are required

-

(a)	to pay the sum of $12,398.90 so claimed by the judgment credltor to the Registrar District of New South Wales at Church Street Newcastle
(b)	to secure the payment of the sum referred to in the last preceding paragraph to the satisfaction of the Federal Court of Australia or the judgment creditor or compound the sum so specified to the satisfaction of the judgment creditor."

A bankruptcy notice is required by s.41 of the Bankruptcy Act 1966 ("the Act") to be in accordance with the prescribed form and must require the debtor named in it within a specified time to either pay the judgment debt or sum ordered to be paid in accordance with the judgment or order, or secure the payment of the debt to the satisfaction of the court.

Although I do not have the actual judgment before me

in these proceedings, it may be accepted that the judgment

required payment of the debt to the Registrar of the District	Court at his office in Church Street, Newcastle. No doubt, as
a result of a clerlcal error on the part of those who prepared the bankruptcy notice, the bankruptcy notice required payment to be made to "the Registrar Dlstrict of New South Wales at Church Street Newcastle". It is not in dispute that Church Street is a qulte long street in Newcastle. The question that arises for decision, therefore, is whether the notice is such that it does not comply with s.41(2)(a)(i) or with the
prescribed form, or such that the defect in it could reasonably mlslead the debtor and does not constitute a mere formal defect capable of being remedied under the provisions of s.306 of the Act.
Counsel for the petitioning creditor referred me to the declsion of Lockhart J in Re Francis: Ex ~arte Gartrell (1983) 77 FLR 80, where it was held that a bankruptcy notlce which required payment of the judgment debt at the District Court in Orange when the ludgment itself required payment of the judgment debt at the District Court in Dubbo, led to the conclusion that the bankruptcy notice was a nullity, it being of such a kind as could reasonably mislead the debtor. The defect was not a mere formal defect. The general principles to be applied in determining whether or not a bankruptcy notice is void or merely suffers a formal defect are discussed by the High Court in the decision of Kleinwort Benson Australia Ltd v Crow1 (1988) 79 ALR 161 in the joint judgment
of the Chlef Justice and Wilson, Brennan and Gaudron 33 at 164 and following.
Reference may particularly be made to the passages in that judgment at 166. Although the issue in that case was of course different, revolving around the question of whether there was a misstatement in the bankruptcy notice of the amount due, nevertheless, it is clear that the appropriate matter to consider is whether the defect in the bankruptcy notice, in this case the requirement to pay not to the Registrar of the District Court but to someone referred to as the Registrar District, was such as to be objectively capable of misleading the debtor as to what was necessary for compliance with the notice. Counsel for the petitioning creditor submitted that a debtor in the position of Mrs Sykes must be presumed to know the law and that she in any event had made application to the court for payment of the debt by instalments subsequently and therefore would have been perfectly aware that payment was to be made to the Registrar of the District Court at the court office in Church Street, Newcastle, and not to some other place.
I do not think that in bankruptcy matters the principle whether someone is presumed to know the law can be of great assistance. No doubt a person who was presumed to know the law would know that a judgment in the District Court was payable at the office of the court where the judgment was
bankruptcy notice from invalidity in Re Francis. Nor do I in fact pronounced. That, however, did not save the think that such an argument saves the bankruptcy notice here.
The difficulty is that a person in the position of the debtor in this case might well be confused and perplexed and perhaps misled by considering the terms of para. A of the bankruptcy notice. Furthermore, albeit that the problem may have been caused by a clerical error, the bankruptcy notice does not comply with the provisions of s.41, in that it does not require payment to be made at the precise place where the judgment would be payable.
It is clear enough law that a mere clerical error that could not mislead or embarrass the debtor would be a formal defect capable of being cured under s.306. However, I do not think that the present defect is of such a character. In my view, it was one which could have reasonably misled the debtor. In those circumstances, in my view, it constitutes a defect which is substantive rather than formal and could not support an act of bankruptcy. In these circumstances, I would dismiss the petition.
In the circumstances, I would make no order as to I certify that this and the preceding six (6) pages are a true copy of the Reasons for Judqment herein of his Honour costs.
Mr ~ustice
Associate:

Hill.

Date: 8 September 1992

MS Sykes represented herself

Counsel and Solicitors	M.R. Aldridge instructed by
for Respondent:	the Australian Government
Solicitor
Date of Hearing:	8 September 1992
Date Judgment Delivered:	8 September 1992