The Owners - Strata Plan No 18027 v CLARK
[2015] FCCA 2185
•23 September 2015
FEDERAL CIRCUIT COURT OF AUSTRALIA
| THE OWNERS – STRATA PLAN NO 18027 v CLARK | [2015] FCCA 2185 |
| Catchwords: BANKRUPTCY – Creditor’s petition – failure to comply with bankruptcy notice – whether s.40(1)(g) is a rule of strict compliance – whether failure to pay $0.01 constituted non-compliance with the bankruptcy notice – application of de minimis non curat lex – creditor’s petition dismissed. |
| Legislation: Acts Interpretation Act 1901 (Cth) s.25C Bankruptcy Act 1966, ss.27, 40(1)(g), 42, 43, 44, 52(2), 306 Currency Act 1965 (Cth) ss.8, 11 and 16 |
| Emerson v Wreckair Pty Ltd (1991) 33 FCR 581 Owners of Strata Plan 50164 v O'Connor [2010] FMCA 833 Pinho, Manuel Simoes & Pinho, Izilda v Andre, Francisco De Silva & Andre, Project Blue Sky v ABA (1998) 194 CLR 355 Matilde Do Paco [1994] VicSC 817 (20 December 1994) Re Charles Alroy Goldberg Ex Parte: the Law Society of New South Wales [1988] FCA 181 Rollings & Rollings [2009] FamCAFC 87 |
| Applicant: | THE OWNERS – STRATA PLAN NO 18027 |
| Respondent: | MARGARET CLARK |
| File Number: | SYG 682 of 2015 |
| Judgment of: | Judge Street |
| Hearing date: | 13 August 2015 |
| Date of Last Submission: | 13 August 2015 |
| Delivered at: | Sydney |
| Delivered on: | 23 September 2015 |
REPRESENTATION
| Counsel for the Applicant: | Mr Borse |
| Solicitors for the Applicant: | David Le Page Solicitor Pty Limited |
| Counsel for the Respondent: | Mr Parish |
| Solicitors for the Respondent: | Fidelity Legal |
ORDERS
The creditor’s petition date 27 May 2015 is dismissed.
No order as to costs.
| FEDERAL CIRCUIT COURT OF AUSTRALIA AT SYDNEY |
SYG 682 of 2015
| THE OWNERS - STRATA PLAN NO 18027 |
Applicant
And
| MARGARET CLARK |
Respondent
REASONS FOR JUDGMENT
This is an application within the Court’s jurisdiction under s.27 of the Bankruptcy Act 1966 (Cth) in respect of an application by the petitioning creditor for a sequestration order against the respondent. Although there were broader issues initially raised in the notice of opposition, the two critical questions for the Court in this case are:
a)Whether the respondent by a payment for the full sum specified in the bankruptcy notice of $8157.55 made within the specified period after service complied with the requirements of the notice in circumstances where it was one cent less than the amount specified in the notice of $8157.56.
b)Whether in the circumstance of the case other sufficient cause has been established by the respondent whereby the Court is satisfied for that reason it should dismiss the petition under s.52(2).
For the reasons that follow, those two questions should be answered “yes” and “yes”.
Affidavit evidence was read by the petitioning creditor that established service of the bankruptcy notice, service of the petition, verification of the petition, search and relevantly the currency of alleged indebtedness identified in the petition. In this case, the petition specified the full judgment sum that was paid but for one cent and specified further strata levies accruing pursuing to s.80(1) of the Strata Schemes Management Act 1996 (NSW) by reason of which the amount outstanding in the petition was said to be $14,273.46.
In relation to the first issue, significant consequences flow from non-compliance with a bankruptcy notice. Under the scheme of the Act the change of status that may flow as a result of failure to comply with a bankruptcy notice is one in respect of which there is a minimum indebtedness required by Parliament before that significant consequence follows. The first issue involves the construction of s.40(1)(g):
Section 40 Acts of bankruptcy
(1) A debtor commits an act of bankruptcy in each of the following cases:
(g) if a creditor who has obtained against the debtor a final judgment or final order, being a judgment or order the execution of which has not been stayed, has served on the debtor in Australia or, by leave of the Court, elsewhere, a bankruptcy notice under this Act and the debtor does not:
(i) where the notice was served in Australia--within the time specified in the notice; or
(ii) where the notice was served elsewhere--within the time fixed for the purpose by the order giving leave to effect the service;
comply with the requirements of the notice or satisfy the Court that he or she has a counter-claim, set-off or cross demand equal to or exceeding the amount of the judgment debt or sum payable under the final order, as the case may be, being a counter-claim, set-off or cross demand that he or she could not have set up in the action or proceeding in which the judgment or order was obtained; (emphasis added)
It is necessary to take into account s.42 as follows:
(1) Where a bankruptcy notice under this Act is served on a debtor by the Commonwealth or a State, it is a sufficient compliance with the notice if, within the time allowed by the notice, the debtor pays the amount required to be paid by the notice to, or secures it or compounds it to the satisfaction of:
(a) the Secretary of the Attorney-General's Department, or the Crown Solicitor of the State, as the case may be; or
(b) if an agent of the Commonwealth, or of the State, as the case may be, is specified in the notice for the purpose, the agent so specified.
(2) A statement that the debtor may comply with the notice in the manner referred to in subsection (1) may be included in a bankruptcy notice issued on the application of the Commonwealth or a State.
Section 43(1) provides:
(1) Subject to this Act, where:
(a) a debtor has committed an act of bankruptcy; and
(b) at the time when the act of bankruptcy was committed, the debtor:
(i) was personally present or ordinarily resident in Australia;
(ii) had a dwelling-house or place of business in Australia;
(iii) was carrying on business in Australia, either personally or by means of an agent or manager; or
(iv) was a member of a firm or partnership carrying on business in Australia by means of a partner or partners or of an agent or manager;
the Court may, on a petition presented by a creditor, make a sequestration order against the estate of the debtor.
Section 44(1) provides:
(1) A creditor's petition shall not be presented against a debtor unless:
(a) there is owing by the debtor to the petitioning creditor a debt that amounts to $5,000 or 2 or more debts that amount in the aggregate to $5,000, or, where 2 or more creditors join in the petition, there is owing by the debtor to the several petitioning creditors debts that amount in the aggregate to $5,000;
(b) that debt, or each of those debts, as the case may be:
(i) is a liquidated sum due at law or in equity or partly at law and partly in equity; and
(ii) is payable either immediately or at a certain future time; and
(c) the act of bankruptcy on which the petition is founded was committed within 6 months before the presentation of the petition.
There is no role in this case for s.25C of the Acts Interpretation Act 1901 (Cth) and the express words of s.42 expands on the method of compliance.
Counsel for the petitioning creditor maintained that strict compliance was required, and that albeit one cent short of the amount specified in the bankruptcy notice, this nonetheless meant that the debtor did not comply with the exact requirements of the notice. Counsel for the petitioning creditor maintained that strict compliance means the failure to pay $0.01 was not compliance with the bankruptcy notice and that by reason of the non-compliance in this case the additional strata levies that became due and payable at law pursuant to s.80 of the Strata Schemes Management Act 1996 were properly able to be taken into account in the petition and that the amount now outstanding in respect of strata levies of $14,273.46 were included in the petition. Counsel for the petitioning creditor put that this was a substantial amount and well above the required amount for presentation of a petition. It was put that there was a non-compliance within s.40 albeit the smallest monetary unit that could be identified, consistent with the Currency Act 1965 (Cth), see ss.8, 11 and 16. It was further put that as a result of the alleged non-compliance the petitioning creditor, pursuant to s.44, is entitled to present a petition including the further debts that have accrued under the Strata Schemes Management Act 1996.
I accept the petitioning creditor’s submission that the petition can, consistent with requirements of s.44, have added to the amount outstanding identified in the bankruptcy notice, if not complied with, other debts in existence at the time of the act of bankruptcy that meet the requirements of s.44(1). There must however be an act of bankruptcy, see s.43(1)(b). I accept the petitioning creditor’s submission that it is not necessary for there to be a judgment in respect of the additional debts that comply with the requirements of s.44(1) and enliven the power to make a sequestration order under s.43, again provided there is an act of bankruptcy.
In this regard the petitioning creditor relied upon what was said in Owners of Strata Plan 50164 v O'Connor [2010] FMCA 833 and in particular what was said in relation to s.44(1)(a) in Emerson v Wreckair Pty Ltd (1991) 33 FCR 581 at [588] and in relation to s.44(1)(b) what was said Re Charles Alroy Goldberg Ex Parte: the Law Society of New South Wales [1988] FCA 181 at [14]-[16]. No submission was advanced that the one cent could constitute a defect or irregularity within s.306. This issue of strict compliance is one of construction as to whether substantial compliance or strict compliance is required, consistent with the principles in Project Blue Sky v ABA (1998) 194 CLR 355 at [93]. The language of s.40 supports a requirement for strict compliance and the purpose and object of the statute as a whole supports an act of bankruptcy requiring strict compliance. I accept that s.40(1)(g) requires strict compliance with the bankruptcy notice. Whether there was an act of bankruptcy is a finding of jurisdictional fact for the purpose of s.43. Strict compliance does not mean that payment of all bar $0.01 may not be found to be compliance with s.40(1)(g). Compliance as an issue of fact does not mean that absolute precision is required and in circumstances where the intention was clearly to comply but for the smallest monetary error possible there was in this case compliance with the bankruptcy notice within the specified period. The missing $0.01 was in this case accidental. Strict compliance does exclude the principle of de minimis non curat lex.
The respondent relied upon the decision of Smith J in Pinho, Manuel Simoes & Pinho, Izilda v Andre, Francisco De Silva & Andre, Matilde Do Paco [1994] VicSC 817 (20 December 1994) and, in particular (at [22]):
It is essential to the working of a legal system that it should adopt the principle of the maxim de minimis non curat lex (the law does not concern itself with trifling matters). {Cro Eliz 353; Hob 88.} There are a number of reasons for this. Litigious persons and unnecessary litigation must be discouraged: bond judicis est lites dirimere (the good judge prevents litigation). {4 Co Inst 15.} Time must not be wasted. Costs must be kept down. The dignity of the law must be preserved.
Parliament is presumed to have regard to all these matters, and by implication to intend that its enactments shall not apply in a de minimis case."
In that case whilst the requirements of the statutory provisions were not the subject of close analysis, there was nonetheless a finding that there had been substantial compliance in circumstances where the short payment was one of $7.63, applying the principle de minimis non curat lex.
In this case, the short payment in respect of the issue of compliance with the Bankruptcy Notice that arises under s.40(1)(g) is the smallest unit of legal tender in existence and it is a matter of judicial notice that one cent coins are no longer in circulation.
I have also taken into account that the correct amount was, in fact, identified in the email correspondence between the parties. I find that the respondent genuinely believed that the full amount was in fact being paid. The short payment under the bankruptcy notice was an accidental failure to pay $0.01 by the respondent. I find that the shortfall of one cent was a genuine error and that the intention of the respondent by the payment made was to pay the full sum specified in the notice. I find that the bankruptcy notice was complied with and that there was no act of bankruptcy.
In my opinion, this is a case in which the principle identified by Smith J in Pinho, v Andre, has application. Parliament should be presumed to have regard to that principle in the maxim de minimis non curat lex and that, as a matter of statutory interpretation, the words “the debtor does not comply with the requirement of the notice” requires a non-compliance as a matter of fact finding that involves something more than an accidental one cent omission.
To hold otherwise would give rise in this case to the significant consequences of the exposure of the applicant to a sequestration order and the change in status that arises from a sequestration order in circumstances where but for the payment of one cent that change of status could not be the subject of the exercise of jurisdiction by this Court.
It would not be consistent with maintaining public confidence in this Court and the exercise of the judicial power of the Commonwealth in respect of the jurisdiction reposed in it under the Bankruptcy Act 1966 to permit a finding of non-compliance with a bankruptcy notice where the amount involved was merely one cent. Even if the Court be wrong with respect to the construction identified under ss.40(1)(g) and 43(1), I am of the view that, in the circumstances of this case, other sufficient cause has been established by the debtor for the petition to be dismissed.
In relation to this consideration, I have taken into account the applicant’s submission identifying the parlous financial position of the applicant and the amount of the further strata levies due and payable. I have taken into account the costs incurred by the creditor and further costs that may be incurred. Nonetheless, it would not be appropriate for the reasons I have identified to exercise this Court’s bankruptcy jurisdiction to make a sequestration order in circumstances where, in essence, it arises from the failure to pay one cent. That, in my opinion, is other sufficient cause not to make a sequestration order.
I note that the respondent requested the matter be adjourned for three weeks so as to permit an opportunity to the respondent to see if payment could be made. It was in these circumstances the matter was stood over until 21 September 2015 with the Court reserving its decision but providing the parties with an opportunity to put on any further written submissions and/or to notify the Court if payment was, in fact, made. The Court had heard argument in relation to the consequences that would flow if payment was or was not made. No further submissions were filed.
This Court has power under s.75 of the Federal Circuit Court of Australia Act 1999 to make orders and to reserve reasons to be published on a later date, see Rollings & Rollings [2009] FamCAFC 87 at [13]. Orders were made on 21 September 2015 whereby the petition was dismissed with no order as to costs and although substantially completed the reasons were reserved to be published on a later date pursuant to s.75. These are the published reasons for the orders made 21 September 2015.
I certify that the preceding twenty-one (21) paragraphs are a true copy of the reasons for judgment of Judge Street
Associate:
Date: 23 September 2015
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