Veale v Coleman

Case [2024] FCAFC 83

FEDERAL COURT OF AUSTRALIA

Veale v Coleman [2024] FCAFC 83  

Appeal from: Coleman v Veale [2023] FCA 1023
File number: NSD 1073 of 2023
Judgment of: MARKOVIC, HALLEY AND CHEESEMAN JJ
Date of judgment: 20 June 2024
Catchwords: BANKRUPTCY AND INSOLVENCY – application to set aside bankruptcy notice issued under s 41(1) of the Bankruptcy Act 1966 (Cth) – foreign currency judgment debt – where bankruptcy notice includes incorrect date for conversion of foreign currency judgment debt to Australian dollars – where bankruptcy notice includes Reserve Bank of Australia rate of currency conversion rounded to two decimal places – where rate of currency conversion is rounded down rather than rounded up – whether there is a defect or irregularity in the bankruptcy notice – whether any defect or irregularity is merely formal – where defect was merely formal – appeal allowed
Legislation: 

Acts Interpretation Act 1901 (Cth) s 25

Bankruptcy Act 1966 (Cth) s 306

Federal Court of Australia Act 1976 (Cth) s 27

Bankruptcy Regulations 2021 (Cth) reg 9 and reg 12

Cases cited:

Adams v Lambert (2006) 228 CLR 409

Australian Steel Co (Operations) Pty Ltd v Lewis (2000) 109 FCR 33

Coleman v Gannaway [2023] FCA 224

Farrugia v Farrugia (2009) 99 FCR 6

Fuller v Alford [2017] FCA 782

Kleinwort Benson Australia Ltd v Crowl (1988) 165 CLR 71

Meekin v Commonwealth Bank of Australia (2009) 99 FCR 16

Northern Land Council v Quall (No 3) [2021] FCAFC 2

Parianos v Lymlind Pty Ltd (1999) 93 FCR 191

Division: General Division
Registry: New South Wales
National Practice Area: Commercial and Corporations
Sub-area: General and Personal Insolvency
Number of paragraphs: 151
Date of hearing: 22 February 2024
Counsel for the Appellant: Ms J Mee
Solicitor for the Appellant: Campbell Paton and Taylor Solicitors
Counsel for the Respondent: Mr T Smartt
Solicitor for the Respondent: Shiff & Company Lawyers
Table of Corrections
20 June 2024 Order 3 of the Orders made on 20 June 2024 amended from “The appellant is to pay the respondent’s costs of the appeal.” to “The respondent is to pay the appellant’s costs of the appeal.”

ORDERS

NSD 1073 of 2023
BETWEEN:

ANDREW WILLIAM VEALE

Appellant
AND:

DAVID COLEMAN

Respondent

ORDER MADE BY:

MARKOVIC, HALLEY AND CHEESEMAN JJ

DATE OF ORDER:

20 JUNE 2024

THE COURT ORDERS THAT:

1.The appeal is allowed.

2.Set aside Order 1 of the Orders made by the primary judge on 29 August 2023 and the Order made by the primary judge on 13 October 2023 and in lieu thereof order that:

(a)The originating  application filed by the applicant on 12 April 2023 is dismissed.

(b)The applicant is to pay the respondent’s costs of the originating application. 

3.The respondent is to pay the appellant’s costs of the appeal. 

Note:   Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.


REASONS FOR JUDGMENT

THE COURT:

  1. The appellant, Andrew William Veale, is a creditor of the respondent, David Coleman.  On 23 March 2023, on the application…

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Veale v Coleman [2024] FCAFC 83
Case
[2024] FCAFC 83
Decision Date

CaseChat Overview and Summary

In the matter of Veale v Coleman, the respondent, Mr Veale, sought to set aside a bankruptcy notice issued against the applicant, Mr Coleman, under section 41(1) of the Bankruptcy Act 1966 (Cth). The dispute arose from a foreign currency judgment debt originating from a judgment in Singapore, which was later registered in New South Wales. The primary judge had set aside the bankruptcy notice, finding it invalid due to non-compliance with regulation 12 of the Bankruptcy Regulations 2016 (Cth). Mr Veale appealed this decision, arguing that the primary judge erred in concluding that the notice was invalid due to the inclusion of an incorrect date for the conversion of the foreign currency judgment debt to Australian dollars and the rounding of the exchange rate to two decimal places.

The court had to decide whether the bankruptcy notice was defective and, if so, whether any such defect was merely formal and did not render the notice invalid. The key issue was whether the inclusion of an incorrect date for the exchange rate and the rounding of the rate constituted a significant non-compliance with regulation 12 of the Regulations. The court noted that while the incorrect date was inserted, the actual exchange rate used was correct, and this did not affect the accuracy of the conversion calculation. Furthermore, the rounding of the exchange rate, which was down rather than up, also did not materially impact the result.

The court concluded that the defect in the bankruptcy notice was indeed formal rather than substantive. The court held that the inclusion of an incorrect date for the exchange rate did not breach the requirements of regulation 12, as the rate used was accurate. The rounding of the exchange rate was also deemed to be a minor defect. Given these findings, the court allowed the appeal, set aside the primary judge's orders, dismissed Mr Veale's application, and ordered Mr Veale to pay Mr Coleman's costs of the originating application. Additionally, Mr Coleman was ordered to pay Mr Veale's costs of the appeal.

Orders

Orders of the court

1. The appeal is allowed.

2. Set aside Order 1 of the Orders made by the primary judge on 29 August 2023 and the Order made by the primary judge on 13 October 2023 and in lieu thereof order that:

(a) The originating application filed by the applicant on 12 April 2023 is dismissed.

(b) The applicant is to pay the respondent’s costs of the originating application.

3. The respondent is to pay the appellant’s costs of the appeal.

Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

Background

Background to the litigation

Again, we are not persuaded to admit this evidence. While it could not have been adduced at trial, it bears no direct relevance to the matters in issue on the appeal.BACKGROUND The background to the issue of the Bankruptcy Notice is not controversial. The primary judge succinctly summarised it at PJ [2]-[5] as follows: 2On 28 June 2021 the respondent succeeded in obtaining a judgment against the applicant, in the District Court of the Republic of Singapore, in the amount of USD 150,000 plus interest at 5.33 percent per annum from the date of the writ of summons (which was 25 January 2018) to the date of payment (the Singapore trial judgment). The applicant appealed. The High Court of Singapore dismissed the appeal on 18 January 2022 (the Singapore appeal judgment). In doing so, the appellate court ordered that the costs of the proceedings be fixed at SGD 15,000 and ordered the release to the respondent of an amount of SGD 3,000 which the applicant had been ordered to pay as security for costs.3These two judgments were registered by the Supreme Court of New South Wales on 16 August 2022 (the NSW judgment). The NSW judgment is for the following amounts:(a)USD 186,471.25, being the principal amount of the Singapore trial judgment plus accrued interest;(b)AUD 12,396.64, being the AUD equivalent of the SGD 12,000 remaining to be paid by way of costs under the Singapore appeal judgment; and(c)AUD 7,964.18, being the respondent’s costs of applying for registration.4The respondent obtained the issue of a bankruptcy notice in respect of the NSW judgment on 20 February 2023. That notice was set aside by this Court, by consent, on 21 March 2023. It has no further relevance, except that the respondent was ordered to pay the applicant’s costs fixed in the sum of $3,700 (the costs order).5On 21 March 2023 the respondent’s solicitor made a fresh application to the Official Receiver for the issue of a bankruptcy notice to the applicant. The notice with which the Court is presently concerned was issued, in response to that application, on 23 March 2023. The first page of the Bankruptcy Notice (with addresses redacted) is reproduced below: The “accompanying final judgment/s or final order/s” referred to at item 1 was for USD$186,471.25. For the purposes of this appeal, the salient part of the Bankruptcy Notice is Note A and in particular the information included as to: (1)the “as at” date of “the rate of exchange for the foreign currency published by the Reserve Bank of Australia (RBA)” which is stated to be “19 March 2023”; and(2)the numerical values in the fields for “[RBA exchange rate]” and “AUD$” in the following calculation:Foreign currency amount US Dollar 186,471.25 X [RBA exchange rate] 1.48 = AUD $275,977.45 The selection of these numerical values by Mr Bennett when applying for the issue of the Bankruptcy Notice was informed by what was then the recent decision in Gannaway. That case also concerned a bankruptcy notice addressed to Mr Coleman. Mr Bennett considered the decision in Gannaway at the time he completed the application for the Bankruptcy Notice on behalf of Mr Veale. We return to Gannaway below.

Evidence

Evidence Before The Court

Full text does not contain this section.

Decision

Reasons for decision

The background to the issue of the Bankruptcy Notice is not controversial. The primary judge succinctly summarised it at PJ [2]-[5] as follows: 2On 28 June 2021 the respondent succeeded in obtaining a judgment against the applicant, in the District Court of the Republic of Singapore, in the amount of USD 150,000 plus interest at 5.33 percent per annum from the date of the writ of summons (which was 25 January 2018) to the date of payment (the Singapore trial judgment). The applicant appealed. The High Court of Singapore dismissed the appeal on 18 January 2022 (the Singapore appeal judgment). In doing so, the appellate court ordered that the costs of the proceedings be fixed at SGD 15,000 and ordered the release to the respondent of an amount of SGD 3,000 which the applicant had been ordered to pay as security for costs.3These two judgments were registered by the Supreme Court of New South Wales on 16 August 2022 (the NSW judgment). The NSW judgment is for the following amounts:(a)USD 186,471.25, being the principal amount of the Singapore trial judgment plus accrued interest;(b)AUD 12,396.64, being the AUD equivalent of the SGD 12,000 remaining to be paid by way of costs under the Singapore appeal judgment; and(c)AUD 7,964.18, being the respondent’s costs of applying for registration.4The respondent obtained the issue of a bankruptcy notice in respect of the NSW judgment on 20 February 2023. That notice was set aside by this Court, by consent, on 21 March 2023. It has no further relevance, except that the respondent was ordered to pay the applicant’s costs fixed in the sum of $3,700 (the costs order).5On 21 March 2023 the respondent’s solicitor made a fresh application to the Official Receiver for the issue of a bankruptcy notice to the applicant. The notice with which the Court is presently concerned was issued, in response to that application, on 23 March 2023. The first page of the Bankruptcy Notice (with addresses redacted) is reproduced below: The “accompanying final judgment/s or final order/s” referred to at item 1 was for USD$186,471.25. For the purposes of this appeal, the salient part of the Bankruptcy Notice is Note A and in particular the information included as to: (1)the “as at” date of “the rate of exchange for the foreign currency published by the Reserve Bank of Australia (RBA)” which is stated to be “19 March 2023”; and(2)the numerical values in the fields for “[RBA exchange rate]” and “AUD$” in the following calculation:Foreign currency amount US Dollar 186,471.25 X [RBA exchange rate] 1.48 = AUD $275,977.45 The selection of these numerical values by Mr Bennett when applying for the issue of the Bankruptcy Notice was informed by what was then the recent decision in Gannaway. That case also concerned a bankruptcy notice addressed to Mr Coleman. Mr Bennett considered the decision in Gannaway at the time he completed the application for the Bankruptcy Notice on behalf of Mr Veale. We return to Gannaway below.

Ratio Decidendi

Legal Principle Established

The primary judge concluded (at PJ [60]) that because of the defects in compliance with reg 12(2) of the Regulations the Bankruptcy Notice was invalid.CONSIDERATION As set out above, the notice of appeal raises two principal questions: whether the primary judge erred in finding that the Bankruptcy Notice did not comply with reg 12 of the Regulations; and if the Bankruptcy Notice did not comply with reg 12, whether the primary judge erred in failing to find that the non-compliance was saved by s 306 of the Bankruptcy Act. We address each question below.Did the Bankruptcy Notice fail to comply with reg 12 of the Regulations?The date issue – ground 1 By ground 1 of the notice of appeal Mr Veale contends that the primary judge erred in his construction of reg 12(2)(a)(ii) and reg 12(3) of the Regulations in finding that the Bankruptcy Notice did not comply with the Regulations because the incorrect date was inserted into the application for the Bankruptcy Notice, despite the fact that the exchange rate used was the rate for the correct date and did not affect the correctness of the calculation. Mr Veale submits that the insertion of the wrong date in the Bankruptcy Notice did not amount to a failure to comply with reg 12 of the Regulations because there is no requirement in reg 12 to include the exchange rate date in fact used to undertake the calculation. Regulation 12(2)(a) requires a bankruptcy notice to include a statement to the effect that the debtor must pay the amount of foreign currency or “the equivalent amount of foreign currency” which is defined in reg 12(3) as an amount which is worked out in the way specified in that subsection. Mr Veale contends that, apart from using the prescribed form which includes Note A, all that is required by reg 12(2)(a)(ii) is that the amount in Australian currency be included, and that the amount be correct, as calculated in accordance with reg 12(3). Mr Veale says that in this case: the correct foreign exchange rate was used, i.e. the rate as at Friday, 17 March 2023, which was two business days before the application; and the total amount calculated using that rate was correct. Accordingly, there was no breach of reg 12(2)(a) of the Regulations. Mr Veale also submits that there was no breach of reg 12(2)(b) of the Regulations because the conversion calculation was set out in accordance with the prescribed form and the date did not affect the correctness of the conversion calculation. Regulation 12 of the Regulations (see [25] above) applies where a final judgment or order is expressed in foreign currency. Regulation 12(2)(a) requires a bankruptcy notice to include a statement to the effect that the debtor must pay the amount of foreign currency (subreg (a)(i)) or the equivalent amount of Australian currency (subreg (a)(ii)). Regulation 12(2)(b) requires that a bankruptcy notice must include the conversion calculation for the equivalent amount of Australian currency. Regulation 12(3) of the Regulations provides that for the purposes of reg 12(2)(a)(ii) the “equivalent amount of Australian currency” is “the amount worked out using the rate of exchange for the foreign currency published by the [RBA] in relation to the day that is 2 business days before the day on which the application for the notice is made”. In contrast to the specific reference in reg 12(3) to use of the rate published on “the day” that is two business days before the day the application is made, Note A of the prescribed form provides for insertion of an “as at” date in respect of the rate used. The use in Note A of an “as at” date instead of the date “on” which the rate was in fact published may perhaps introduce an element of ambiguity. There is no such ambiguity in reg 12(3) itself. The requirement is clear that the rate to be used is that published on the day that was two business days before the application is made to AFSA.