Thompson v STX Pan Ocean and Co Ltd
[2011] FMCA 575
•20 July 2011
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| THOMPSON v STX PAN OCEAN & CO LTD | [2011] FMCA 575 |
| BANKRUPTCY – Claim that bankruptcy notice invalid – claim of abuse of process – requirement of strict compliance with prescribed form – omission from notice of particular words – omission of “a statement that the conversion of the amount of foreign currency into Australian currency has been made in accordance with the Regulations” – omission of “applicable rate of exchange” – whether errors, and if so, whether errors could be regarded as substantive or formal – notice invalid. |
| Bankruptcy Act 1966 (Cth), s.41(6A) Federal Court of Australia Act 1976 (Cth), s..20(1A) Bankruptcy Regulations (Cth), reg 4.02, reg 4.04 (2) and (3), reg 4.04 |
| Australian Steel Company (Operations) Pty Ltd v Lewis [2000] FCA 1915 (22 December 2000) Kleinwort Benson Australia Ltd v Crowl [1988] HCA 34; (1988) 165 CLR 71 Kyriackou v Shield Mercantile Pty Ltd [2004] FCA 490 Parianos v Lymlind Pty Ltd [1999] FCA 684 |
| Applicant: | DAVID JOHN THOMPSON |
| Respondent: | STX PAN OCEAN & CO LTD |
| File Number: | BRG 541 of 2011 |
| Judgment of: | Burnett FM |
| Hearing date: | 20 July 2011 |
| Date of Last Submission: | 20 July 2011 |
| Delivered at: | Brisbane |
| Delivered on: | 20 July 2011 |
REPRESENTATION
| Counsel for the Applicant: | Mr A.J.H. Morris QC and Mr L.A. Jurth |
| Solicitors for the Applicant: | Worcester & Co |
| Counsel for the Respondent: | Mr D. Williams |
| Solicitors for the Respondent: | McCullough Robertson |
ORDERS
That Bankruptcy Notice No. NN 916 of 2011 issued on 11 February 2011 and addressed to the Applicant be set aside.
That the parties file and serve written submissions on the question of costs within seven (7) days of the written reasons for judgment being published and any order as to costs be determined on the basis of such submissions.
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT BRISBANE |
BRG 541 of 2011
| DAVID JOHN THOMPSON |
Applicant
And
| STX PAN OCEAN & CO LTD |
Respondent
REASONS FOR JUDGMENT
(Revised from transcript)
On 26 November 2010, Rares J gave judgment to the respondent creditor against the applicant debtor in the sum of US$509,771.10. His Honour also made a costs order which is not relevant for the present application. The creditor caused a bankruptcy notice to issue on 11 February 2011. It claimed the debtor owed the creditor A$510,993.82 at the date of its issue. The debtor seeks an order setting aside the notice as:
a)it is invalid for failure to comply with the requirements of Regulations 4.04(2) and (3) of the Bankruptcy Regulations; or alternatively
b)that it constitutes an abuse of process.
The application itself did not seek orders for an extension of time to comply with the notice presumably under s.41(6A).
However the matter proceeded on the respondent’s understanding that this too was an issue to be resolved and that such relief was sought and was open to be inferred from the orders sought in the application. For reasons which follow, I have concluded it is unnecessary to consider that part of the application.
The applicant makes two complaints about the bankruptcy notice. It was submitted for him that if either complaint is sustained, then on either basis, the bankruptcy notice is defective and he is entitled to the relief claimed and to have the notice set aside. On his case, the notice is a nullity and that is the end of the matter.
The two defects complained of are:
a)the notice does not contain:
“…a statement that the conversion of the amount of foreign currency into Australian currency has been made in accordance with the Regulation – ”
as required by Bankruptcy Regulation 4.04(2)(b)(iii); and
b)it is not apparent that the notice sets out:
“…the applicable rate of exchange, being the rate worked out in accordance with the sub‑Regulation (3) – ”
as required by Regulation 4.04(2)(b)(i).
Regulation 4.04 relevantly provides:
“Judgment or order in foreign currency
(1) This regulation applies to a bankruptcy notice if the judgment or order lodged under subregulation 4.01 (1) in relation to the notice is expressed in an amount of foreign currency (whether or not the judgment or order is also expressed in an amount of Australian currency).
(2) A bankruptcy notice to which this regulation applies must:
(a) contain a statement to the effect that payment of the amount of foreign currency expressed in the judgment or order may be paid in that foreign currency or by means of a specified amount of Australian currency that is stated to be equivalent to the amount of foreign currency; and
(b) set out:
(i) the applicable rate of exchange, being the rate worked out in accordance with subregulation (3); and
(ii) the conversion calculation; and
(iii) a statement that the conversion of the amount of foreign currency into Australian currency has been made in accordance with this regulation.
(3) For paragraph (2) (b), the conversion of an amount of foreign currency into an equivalent amount of Australian currency must be done in accordance with the telegraphic rate of exchange prevailing on the second day before the day when the application to which the conversion applies is lodged under subregulation 4.01 (1).”
It applies in this instance for, as I have earlier observed, the judgment in respect of which the notice issued was expressed in U.S. dollars. Given the significance of the notice to this application, it is appropriate to set out its relevant terms in full. However, before doing so, it must be noted that the bankruptcy notice itself is in the form provided for by Schedule 1 to the Bankruptcy Regulations, and more particularly, was in the form issued by the Insolvency Trustee Service Australia (ITSA), in accordance with its Form 1 of administrative forms. This application deals with the Regulation form.
It is also relevant to note that at this time no complaint is made about the information contained within the form. It is materially correct insofar as it has been inserted. The relevant part of the notice is as follows:
“Bankruptcy Notice
Bankruptcy Act 1966 Subsection 41(2)
Bankruptcy Regulations 1996 Regulation 4.02To : Mr David John Thomson
Of : 35 Killara Street, Elanora Queensland 4221
You are notified that:
STX Pan Ocean Co Ltd
100-803
STX Namsan Tower, 631 Namdaemunno 5-GA, Jung-Gu, Seoul, Korea
Claim/s that you owe the following debt:
1. Amount as per the attached final judgment/s or final order/s (note A) $499,799.59
2. Add legal costs (note B) $0.00
3. Add interest accrued since date of judgment/s or order/s (note C)
$11,214.23
4. Sub total (1+2+3) $510,993.825. Less payments made and/or credit allowed since judgment/s or order/s $0.00
6. TOTAL DEBT AMOUNT (4-5) $510,993.82
Notes
A. If an attached final judgment or final order is expressed in an amount of foreign currency, you may pay the amount in that foreign currency or pay an equivalent amount in Australian dollars that has been calculated using the opening telegraphic transfer rate of [name of institution] Commonwealth Bank of Australia as at [date] 9 February 2011.
Foreign currency amount USD509,771.10 x [telegraphic transfer rate] 0.9804 = AUD 499,7779.59
B. Where legal costs are being claimed (and a specific amount was not included in the judgment/s or order/s), a certificate of taxed or assessed costs in support of the amount claimed is attached.
C. Where interest is being claimed, the provisions under which it is claimed and the basis of its calculation are shown in the attached interest schedule. If no interest is claimed the creditor need not attach the schedule to this notice.”
The matters raised by the applicant, however do identify apparent failures by the form to interface precisely with the Regulations concerning their use in reliance upon the foreign judgments and the tension this causes, given the requirement of Regulation 4.02(1) that prescribes the form and Regulation 4.02(2) that provides a bankruptcy notice must follow Form 1 in respect of its format.
The form in question was the November 2002 application for issue of a bankruptcy V1.1 and is available from the ITSA website:
Page 3 of the application includes the bankruptcy notice. In particular, from halfway down page 3, two distinct boxes appear. The first box sets out:
“Claim/s that you owe the following debt”.
The second box details notes A, B and C. It is immediately apparent from a review of that part of the form and close examination of other parts of the form that the form does not include a statement compliant with the Regulation 4.04(2)(b)(iii):
“…that the conversion of the amount of foreign currency into Australian currency has been made in accordance with this Regulation”.
Furthermore, the applicable rate of exchange worked out in accordance with the sub‑regulation (iii) does not appear to be set out in that form and it does not identify a:
“…telegraphic rate of exchange…”
as called for by Regulation 4.04(3), although in note A, it identifies a:
“…telegraphic transfer rate”.
In his submissions for the applicant, senior counsel relied extensively upon the observations of Sackville J in Parianos v Lymlind Pty Ltd[1] in contending strict compliance with Regulation 4.04 is required and that any omission to do so would be fatal to the validity of the notice. In particular, he referred to his Honour’s remarks commencing at paragraph [13] which I will specifically address shortly. Although his Honour’s remarks are helpful, the context in which those remarks were made are readily distinguishable from this case. In Parianos (supra), the rate of exchange used was not the applicable rate prevailing on the second day before the day when the application to which the conversion applied was lodged. Although the difference between the required rates and the rate used were minor, the requirement concerning the prevailing rate to be employed was a requirement made essential by the Bankruptcy Act 1966 (Cth) (see paragraph [18]). Accordingly, the notice was a nullity. It did not matter that the notice may not reasonably have misled the debtor (see paragraph [13]). In reaching his conclusion, his Honour made particular remarks about Regulation 4.04 which are relevant in this case. Commencing at paragraph [16], his Honour stated:
“[16] The language of reg 4.04 strongly suggests that it is intended to create requirements essential to the validity of a bankruptcy notice. It applies to the specific case of a bankruptcy notice issued in relation to a judgment expressed in an amount of foreign currency (reg4.04(1)). The regulation is expressed in emphatic language. The notice must contain a statement to the effect that the amount of foreign currency expressed in the judgment or order may be paid in that foreign currency or by means of a specified amount of Australian currency that is stated to be the equivalent to the amount of foreign currency (reg4.04(2)(a)). The notice also must set out the applicable rate of exchange worked out in accordance with reg 4.04(3), the conversion calculation and a statement that the conversion of the foreign currency amount into Australian currency has been made in accordance with the regulation (reg4.04(2)(b)).
[17] Reg 4.04(3) itself specifies the manner in which the conversion must be done. In particular, it requires the conversion to be done in accordance with the opening telegraphic transfer rate of the CBA on the second working day before the day on which the application for a bankruptcy notice is lodged under reg 4.01. Thus reg 4.04(3) identifies a particular exchange rate prevailing at a particular time in a particular institution.
[18] Reg 4.04 is clearly intended to establish a specific scheme for bankruptcy notices issued in relation to foreign currency judgments. The scheme has two principal objects. The first is to inform the judgment debtor that, in order to comply with the bankruptcy notice, he or she has an option. The debtor may pay the judgment debt in the foreign currency in which the judgment is expressed. Alternatively, he or she may choose to pay "by means of a specified amount of Australian currency that is stated to be the equivalent to the amount of foreign currency". The second and related object is to identify the precise means by which the "specified amount of Australian currency" must be calculated and therefore to notify the debtor of the precise amount of Australian currency that must be paid, if he or she exercises the option to pay in local currency. The means chosen to identify the exchange rate recognises the obvious fact that exchange rates may vary, not merely from day to day, but from hour to hour or even by the minute or second. For this reason, a clearly identified and readily ascertainable rate of exchange is nominated for the purpose of undertaking the calculation required by reg 4.04.”
Likewise, his Honour made further relevant remarks at paragraph [22]:
“[22] Confirmation that reg 4.04 is to be interpreted as creating an essential requirement for a bankruptcy notice is provided by the wording of reg 4.02. Mr Aldridge submitted that minor departures from the prescribed form of a bankruptcy notice could hardly be intended to lead to the invalidity of the notice. This is plainly correct. However, the conclusion follows from the express language of reg 4.02, which prescribes the required form. Reg 4.02(3) states that the requirement that a bankruptcy notice must follow the prescribed form is not to be taken as expressing an intention contrary to s25C of the Acts Interpretation Act 1901 (Cth). Since s25C provides that, in the absence of a contrary intention, strict compliance with a prescribed form is not necessary, reg 4.02(3) makes it abundantly clear that substantial compliance with the prescribed form is sufficient. Had the drafter of Pt4 intended that, in the case of a bankruptcy notice founded on a foreign currency judgment, substantial compliance with reg 4.04 should be enough, it would have been very easy to adopt a formula similar to that employed in reg 4.02(3). The absence of any such formula in reg 4.04 strongly suggests that strict compliance was required, at least in relation to the date by which the conversion calculation is to be made.”
[1] [1999] FCA 684
Having made those observations about Regulation 4.04, his Honour proceeded to resolve the question before him. Respectfully, however, his Honour’s remarks provide no assistance in this case beyond the general remarks that I have just noted concerning the general approach to Regulation 4.04. The difficulty here is that in respect of both matters identified by the applicant, the relevant bankruptcy notice appears to be deficient in its failure to provide within its form a Regulation 4.04(2)(b)(iii) statement and to set out a “telegraphic rate of exchange”.
Accordingly, the question for resolution is whether any of the matters are requirements made essential by the Bankruptcy Act.
The matter of essentiality was considered in part in Australian Steel Company (Operations) Pty Ltd v Lewis [2000] FCA 1915 (22 December 2000), a decision of a Full Bench of the Full Federal Court. In that case, the court was considering a notice alleged to be defective because of a statement as to interest. At paragraph [3], the majority, Black CJ, Heerey and Sundberg JJ, expressed the issue in these terms:
“…In a schedule attached to each notice the calculation of interest was set out and also, as is now required, a statement as to "the provision under which the interest is being claimed". The notices stated that interest was claimed "pursuant to s101 of the Supreme Court Act 1986 (Vic)". However that provision did not apply to the orders founding the notices. Interest on Magistrates' Court orders is governed by s100(7) of the Magistrates' Court Act 1989 (Vic)….”
It is noteworthy that in Australian Steel (supra), the court was reviewing the matter concerning the validity of the bankruptcy notice pursuant to s.20(1A) of the Federal Court of Australia Act 1976 (Cth), pursuant to a s.20(1A) Federal Court of Australia Act direction. Such a direction did not call for the court to consider the question of the correct application of the doctrine of precedent or whether or not an earlier approach was justifiable of another, but rather:
“…because there are conflicting Federal Court decisions affecting the day to day operations of the bankruptcy law, an authoritative decision was needed (see paragraph 21).”
From paragraph [22], the majority made the following general observations:
“[22] Non-compliance with a bankruptcy notice is, by far, the act of bankruptcy most commonly relied on by creditors. Non-compliance does not merely provide means of proof of insolvency (cf the statutory demand in company winding-up proceedings). It is an act of bankruptcy in itself. Non-compliance with a bankruptcy notice not only has profound consequences for the debtor but also affects the rights and obligations of others. These are but some of the reasons why courts have required strict compliance with the legislative requirements for a bankruptcy notice.
[23] In Re Wimborne (1979) 24 ALR 494 at 498 Lockhart J said:
‘The courts have said time and time again that bankruptcy notices must conform strictly to the requirements of the bankruptcy legislation and rules of court; see James v FC of T (1955) 93 CLR 631, especially per Williams, Kitto and Taylor JJ at 644; Re Howes; Ex parte Hughes [1892] 2 QB 628; Re OCS (a debtor); Ex parte The Debtor [1904] 2 KB 161; Re O'Keefe; Ex parte Australian Factors Ltd (1963) 19 ABC 101, and Re Mellick (1971) 19 FLR 1.’
[24] In Kleinwort Benson Australia Ltd v Crowl (1998) 165 CLR 71 at 81 Deane J said: "It has long been a fundamental precept of the law of bankruptcy that 'a bankruptcy notice, which is the foundation of a bankruptcy, attended as a bankruptcy is with penal consequences, is a matter in which great strictness is required': per Cozens-Hardy MR, In re A Judgment Debtor, 530 of 1908 [1908] 3 KB 474, at p476-p477; see also James v Federal Commissioner of Taxation (1955) 93 CLR 631, at p 644. A defect in a bankruptcy notice will invalidate it 'except in the case of a merely formal defect': per Vaughan Williams LJ, In re OCS (A Debtor); Ex parte The Debtor [1904] 2 KB 161, at p163, see also In Re a Debtor, No 21 of 1950; Ex parte the Debtor v Bowmaker Ltd [1951] Ch 313, at p317. If a defect in a bankruptcy notice is other than a formal one, the notice itself is defective and failure to comply with it does not constitute an act of bankruptcy.
It is true that the strictness of the above rules leaves open the possibility of abuse by unscrupulous debtors. That is, however, an unavoidable concomitant of the protection of ordinary people faced with the threat of being made bankrupt. Many, and possibly most, of the petitions in the bankruptcy lists of this country seek the bankruptcy of honest, albeit unbusinesslike or naive, people whose indebtedness springs from causes which evoke sympathy rather than indignation. For such people, bankruptcy does not represent a game to be played to the frustration of their creditors. It represents a pronouncement of failure and humiliation attended by the fear of unknown consequences and the susceptibility to criminal punishment for what would otherwise be innocent conduct: see, eg, per Griffith CJ, Hamilton v Warne (1907) 4 CLR 1293, at p1297. As Riley J, a noted Australian authority on bankruptcy law, sometimes pointed out to those appearing before him, the least that the courts can do is to insist that a person who seeks to subject another to the law of bankruptcy himself strictly observes the requirements of that law."
[25] His Honour was in the minority as to the result of that case but nothing in the judgment of the majority (Mason CJ, Wilson, Brennan and Gaudron JJ) is inconsistent with his Honour's general statement. Not infrequently in the daily business of this Court sequestration orders are sought against debtors who are plainly insolvent and who have probably not been misled by defects in the bankruptcy notice served on them, yet the petition is dismissed. While it may be true in general terms to say that bankruptcy administration emphasises substance over form (Franciscans at para15), such a statement needs to be substantially qualified when applied to bankruptcy notices.”
Their Honours observed that the question of validity of bankruptcy notices had been examined by the High Court in Kleinwort Benson Australia Ltd v Crowl[2] which in considering the matter of the notice before it formulated the issues in these terms:
“Three questions arise as to the validity of the bankruptcy notices in this case: are they defective or irregular; if so, is the defect or irregularity substantive or formal; and if it is formal only, has it occasioned substantial and irremediable injustice?”
[2] [1988] HCA 34; (1988) 165 CLR 71.
As with Kleinwort Benson (supra), there are defects as complained of by the applicant. The real question in this case was whether they could be regarded as substantive or formal. In reviewing the High Court’s approach to the second issue, the majority continued at paragraph [31]:
“[31] The authorities show that a bankruptcy notice is a nullity if it fails to meet a requirement made essential by the Act, or if it could reasonably mislead a debtor as to what is necessary to comply with the notice: James v Federal Commissioner of Taxation [1955] HCA 75; (1955) 93 C.L.R. 631, at p.644, Pillai v Comptroller of Income Tax [1970] A.C. p.1124 at 1135. In such cases the notice is a nullity whether or not the debtor in fact is misled: In re a Judgment Debtor, 530 of 1908 [1908] 2 K.B. 474, at p.481." (Emphasis added)”
The question of whether a requirement is made essential was more particularly discussed and considered by the majority commencing at paragraph [39]. Their Honours continued:
“[39] Kleinwort Benson decides that a bankruptcy notice that does not contain a requirement made essential by the Act is not a valid notice. In Project Blue Sky Inc v Australian Broadcasting Authority [1998] HCA 28; (1998) 194 CLR 355 at 390-391 McHugh, Gummow, Kirby and Hayne JJ, after discarding the elusive distinction between directory and mandatory requirements as a test of validity, said:
"A better test for determining the issue of validity is to ask whether it was a purpose of the legislation that an act done in breach of the provision should be invalid. ... In determining the question of purpose, regard must be had to `the language of the relevant provision and the scope and purpose of the whole statute'."
In the light of this passage, it can be seen that a requirement is "made essential" within the Kleinwort Benson principle when the enquiry as to purpose discloses the intention that an act done in breach should be invalid. See also Deputy Commissioner of Taxation v Woodhams [2000] HCA 10; (2000) 169 ALR 503 at 512-513.
[40] In 1996 Parliament chose to make a form to be prescribed by regulation the sole criterion of whether a bankruptcy notice complied with the Act, with the consequence that an act of bankruptcy would be committed in the case of non-compliance with such a notice. This being the will of Parliament, it is not for a court to treat the terms of the prescribed form as inherently less important than a requirement specified in the Act itself, so as to attract a more lenient view in the case of non-compliance. Valid delegated legislation (and there is no suggestion that the present regulations are otherwise) is binding law because that is what Parliament has willed. As Lindgren J said in Re St Leon; Ex parte National Australia Bank Ltd (1994) 54 FCR 371 at 378 (obviously in relation to a pre-1996 notice)
"... the statutory requirement that a bankruptcy notice be in accordance with the prescribed form is itself a requirement made essential by the Act."
[41] This proposition is a fortiori since the 1996 amendments as the majority in Bendigo Bank, correctly in our view, pointed out (at par 19). Moreover, this is a case where the 1996 amendments resulted in "a framework built on by contemporaneously prepared regulations", in which case the latter may be a reliable guide to the meaning of the former: Hanlon v The Law Society [1981] AC 124 at 194. The law now is that a bankruptcy notice has to contain substantially more information than it did prior to the 1996 amendments. The law now is not just that a notice shall have certain characteristics stipulated in the Act. The notice "must be in accordance with the form prescribed by the regulations".
Following those remarks, their Honours went on to consider the question of essentiality in the case before it. They concluded at [42] that:
“[42]… 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.”
Significantly for this case however, the majority continued at paragraph [43] to observe:
“[43] Our conclusion is unaffected by reg 4.02(3). If that provision is to be taken as a statement that s 25C of the Acts Interpretation Act 1901 applies to the content of the form as well as its format (see Trustees of the Franciscan Missionaries of Mary v Weir, par 16), the failure to comply with a requirement in such a way that the purpose behind the requirement is thereby thwarted, cannot be excused under s 25C on the ground that there has been substantial compliance. Essentiality for the purpose of the Kleinwort Benson principle being determined by purpose, a provision as to substantial compliance, assuming it applies at all, cannot make unessential that which purpose reveals as essential. It can hardly be said that there has been substantial compliance with a prescribed form where the form fails to include information made essential by an enactment.”
As if to emphasise the second sentence of paragraph [43], the majority continued at [45]:
“We should add that we do not see any rational basis for distinguishing between, on the one hand, the form itself and, on the other hand, information inserted in the form by the creditor. Material in the latter category, such as the amount of the judgment, interest and costs and the address of the creditor, is unique to the debtor and, if anything, of more importance to the debtor than the text of the form as appearing in the regulations….”
On the issue of essentiality it was submitted by the respondent creditor that consistent with the judgment of Sackville J in Parianos, I should adopt a purposeful approach to the construction of Regulation 4.04. His Honour’s views were summarised in the headnote as:
“The scheme has two principal objects. The first is to inform the debtor that, in order to comply with the bankruptcy notice, the debtor may pay the debt in a foreign currency or alternatively in an equivalent amount of Australian currency. The second is to identify the precise means by which the specified amount of Australian currency must be calculated and therefore notify the debtor of the precise amount of Australian currency that must be paid.”
Two observations arise from the headnote summary of his Honour’s views. The first point to make in addressing the respondent’s submission is that Parianos was decided before Australian Steel and so has limited application, particularly given that the Australian Steel decision was one determined pursuant to s.20(1A) of the Federal Court Act; and secondly, Parianos was not considered by the Full Court in Australian Steel.
However notwithstanding these matters, his Honour Sackiville J’s views as summarised in the headnote are not inconsistent with the principle articulated in Australian Steel that a purposeful approach be adopted. However his Honour’s application differs from the approach of the Full Court. His Honour Sackville J looked to the scheme to inform the answer as to “purpose” whereas the Full Court looked to the compliance with the form for the “purpose” in the case before it. In that regard, it appears to me having regard to the differing approaches to be considered Parianos is at least distinguishable on its approach which should not be preferred to the approach of the Full Court. That matter does not bear on the outcome for reasons which are otherwise advanced before.
Considering then the majority’s approach to the matters before this court; could either or both be seen to be essential requirements? First the requirement under Regulation 4.04(2)(b)(i) and Regulation 4.04(2)(b)(iii). Plainly the purpose of this requirement can only be to enable the debtor to verify that the amount claimed is in fact due. To that end, its essentiality is not materially different to the essentiality of the source of a creditor’s entitlement to interest for a like purpose. See para [42] of Australian Steel.
For similar reasons a statement in conformity with Regulation 4.04(2)(b)(iii) is in my view also essential. For the respondent it was contended that the notice conforms precisely with the prescribed form. That matter is unquestionably correct. However the requirement of Regulation 4.02 is directed to “format”, not content. In this instance, content requires a consideration of the expression of the demand in the context of a judgment entered and expressed in a foreign currency. This is a feature of this case in much the same way as an entitlement to interest and the basis for it may be, and frequently is, a feature in other cases. Regulation 4.04 requires, in cases involving judgments expressed in foreign currency, additional information. For reasons I have earlier concluded, that information is essential pursuant to the Act. There is nothing in the expression of the Regulation that brings the provision of this additional information into conflict with the requirement to comply with the form.
As was stated by the majority in Australian Steel at [43], it can hardly be said that there has been substantial compliance with a prescribed form where the form fails to include information made essential by an enactment. Plainly the court saw the matter of content as entirely distinct from format. As the Full Court observed at [45]:
“[45] We should add that we do not see any rational basis for distinguishing between, on the one hand, the form itself and, on the other hand, information inserted in the form by the creditor. Material in the latter category, such as the amount of the judgment, interest and costs and the address of the creditor, is unique to the debtor and, if anything, of more importance to the debtor than the text of the form as appearing in the regulations. This conclusion seems obvious enough when one considers the nature and function of a bankruptcy notice and the consequences of non-compliance. And there are numerous cases where bankruptcy notices have been held invalid because of incorrect information contained therein.”
Having determined the two matters as essential under the Act, the question is whether they were addressed in the notice. Despite submissions by the respondent that the matters are self‑evident and compliance is substantial and apparently constitutes no irredeemable injustice, these factors are not relevant given my finding that such a defect, if it exists, is in respect of an essential matter. If the defects exist, that is the end of the matter. If not, there is nothing more for the respondent to address on the issue. Here the notice plainly omits a statement, as required by Regulation 4.04(2)(b)(iii), that the conversion of the amount of the foreign currency into Australian currency has been made in compliance with the Regulations. The notice is invalid on that basis alone. This is a matter that could have been addressed by relevant information included in the schedule attached to the notice.
The second matter concerning the expression of the exchange rate is not so clear. Regulation 4.04(2)(b)(i) requires that the notice must set out the applicable rate of exchange being the rate recorded in accordance with subregulation (3). Subregulation (3) requires that the conversion of an amount of foreign currency into an equivalent amount of Australian currency must be done in accordance with “the telegraphic rate of exchange” prevailing on the second day before the day when the application to which the conversion applies is lodged. The notice itself speaks of a “telegraphic transfer rate”. It also attached a copy of the CBA foreign exchange rates quoted as at 7.33 am on 9 February 2011, that is the second day before the day when the application to which the conversion applied was lodged. It is simply not plain from the face of that material that the CBA foreign exchange rates constitute the appropriate “telegraphic rate of exchange”.
First there is the difficulty of the nomenclature. The form 1 refers to “telegraphic transfer rate”. The Regulation refers to “the applicable rate of exchange” which by operation of subregulation (3) is the specified “telegraphic rate of exchange”. Finally the Commonwealth Bank foreign exchange rates material makes no reference to either a “telegraphic transfer rate” or a “telegraphic rate of exchange”. Moreover the disclaimer notes in the Commonwealth Bank material indicate the rates quoted only apply to transactions up to A$50,000, a sum well below the judgment sum in question here.
Finally the Commonwealth Bank foreign exchange rates quoted include three buy and two sell columns. In this case, the relevant conversion rate is a sell rate however the two sell rates expressed in the sell columns differ. Nothing in the material assists in identifying if either or which is the “telegraphic rate of exchange”. In my view the notice does not set out the “telegraphic rate of exchange” and so is rendered invalid by the omission.
Both these omissions could have been addressed by the inclusion of additional information: for instance, by annexure of that information to the form of bankruptcy notice in addition to the annexed judgment and the foreign exchange material. The inclusion of such material would have addressed those essential requirements now absent and would have rendered the notice valid.
I make that observation despite not formally ruling on the question of whether the notice was misleading because of the manner in which the interest is expressed. That issue will now not need to formally be decided given my earlier ruling.
In concluding, I respectfully adopt the observations of Weinberg J in Kyriackou v Shield Mercantile Pty Ltd (2004) FCA 490, a case also considering an application to set aside a bankruptcy notice where in deciding a notice had to be set aside, for what were highly technical defects in the notice, his Honour said at paragraph [43]:
“[43] It gives me no satisfaction to arrive at this conclusion. Were it not for Australian Steel, I would have said that a bankruptcy notice, like other important documents, should be read sensibly, and not perversely. The notion that there is an area of the law where form takes precedence over substance is not intuitively attractive. Nonetheless, I consider that I am bound by Australian Steel to conclude that this bankruptcy notice failed adequately to identify … a matter made essential by the Act and Regulations. …”
These observations apply here with equal force. For the reasons above, I do not consider necessary to consider other matters that were raised in argument before me in the application.
I certify that the preceding thirty-eight (38) paragraphs are a true copy of the reasons for judgment of Burnett FM
Date: 25 August 2011
2
11
3