Westwood v Nelson
[2004] FMCA 474
•6 August 2004
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| WESTWOOD v NELSON | [2004] FMCA 474 |
| BANKRUPTCY – Where respondent debtor opposing creditor’s petition – where bankruptcy notice prepared in accordance with old Form 1 and did not pluralise the words “judgment” and “order” as now required – where this error was pointed out by clerk of the Official Receiver – where handwritten amendments to the bankruptcy notice was made – where the result of these amendments was that not all copies of the bankruptcy notice were the identical – whether these amendments were authorised by the Official Receiver – whether the amendment rendered the notices confusing or misleading – whether the bankruptcy notice is invalid because the notice served was not a “copy” of the one filed with the Official Receiver – whether every copy of a bankruptcy notice is required to be identical. |
Bankruptcy Act 1966 (Cth), ss.41(1), 50(1)
Bankruptcy Legislation Amendment Act 2002(Cth), Schedule 1
Bankruptcy Regulations 1966 (Cth), reg 4.01(1)
James v Federal Commissioner of Taxation (1955) 93 CLR 631
Blackshaw Services Pty Ltd v Cureton [2003] FMCA 591
Vincent v State Bank of NSW (1995) 60 FCR 290
Re DeIeso (1978) 24 ALR 701
Re Low; Ex parte Argentine Gold Fields Ltd (1891) 1 QB 147
Australian Steel v Lewis (2000) 199 ALR 68
Farrugia v Farrugia (2000) 169 ALR 503
| First Applicant: | AVRIEL ELWINA WESTWOOD |
| Second Applicant: | GEORGE DESMOND WESTWOOD |
| Respondent: | LORI ANN NELSON |
| File No: | SZ 517 of 2004 |
| Delivered on: | 6 August 2004 |
| Delivered at: | Sydney |
| Hearing date: | 22 July 2004 |
| Judgment of: | Raphael FM |
REPRESENTATION
| Counsel for the Applicant: | Mr R J Carruthers |
| Counsel for the Applicant: | Blake Dawson Waldron |
| Counsel for the Applicant: | Bowles Lawyers |
ORDERS
Bankruptcy notice set aside.
Petition dismissed.
Creditors to pay the debtor’s costs to be taxed if not agreed according to the Federal Court Act and Rules.
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT SYDNEY |
SZ 517 of 2004
| AVRIEL ELWINA WESTWOOD |
Applicant
And
| LORI ANN NELSON |
Respondent
REASONS FOR JUDGMENT
These proceedings are the hearing of a creditor’s petition originally filed on 1 March 2004. The creditors claimed that the debtor owed them the amount of $323,079.89 pursuant to a judgment of the Supreme Court of New South Wales on 28 August 2003. In addition there were supporting creditors. On 1 April 2004 I made orders pursuant to s.50(1)(a) Bankruptcy Act 1966 that pending the determination of the petition Scott Darren Pascoe take control of the debtor’s property comprised of folio identifier 1/402835 and known as 155 River Rd Northwood. On 6 April 2004 the debtor filed Notice of Application to Oppose the Petition. The grounds of the Notice of Opposition which are relevant to these proceedings are as follows:
1. The Bankruptcy Notice NN 2618/03 (“the Bankruptcy Notice”) which was served on the debtor on 27 November 2003 contains handwritten amendments at paragraphs 2,6(a), 7(b) and at Lines 1, 3 & 5 of the Schedule. Such amendments were not authorised by the Official Receiver or the creditor’s agent and as a result the Bankruptcy Notice fails to comply with essential requirements of the Bankruptcy Act 1966 and Regulations.
2. The Bankruptcy Notice served on the debtor on 27 November 2003 is not identical to the Bankruptcy Notice issued by the Official Receiver on 21 October 2003 and as a result the Bankruptcy Notice fails to comply with essential requirements of the Bankruptcy Act 1966 (Cth) and Regulations.
3. The handwritten alterations to the Bankruptcy Notice have made material parts of the Bankruptcy Notice illegible and as a result the Bankruptcy Notice is capable of confusing and/or misleading a debtor.
4. By failing to ensure handwritten alterations in the Bankruptcy Notice were properly authorised by the Official Receiver and the creditor’s agent a debtor could believe that the handwritten alterations were made by a third party and without the authority of the Official Receiver and is not a document that comes from an official source.
A substantial number of affidavits were filed in these proceedings, evidence was given and a witness for the creditors was cross-examined. I do not believe there is any substantial dispute between the parties in relation to the essential background facts concerning the bankruptcy notice. These I find to be as follows.
On or about 20 or 21 October 2003 a bankruptcy notice was prepared in the offices of Messrs Blake Dawson Waldron. The document which was prepared was based upon the old form 1 prior to the Bankruptcy Legislation Amendment Act 2002 which altered the Bankruptcy Act to allow a bankruptcy notice to issue on the basis of more than one judgment or order of a court. The new s.41(1)(b) Bankruptcy Act came into effect on 5 May 2003. The new form which should have been used places into the plural the words “judgment” and “order” wherever found in the form. For the sake of clarity I will note that these words are found in paragraphs 6(a), paragraph 7(b), and in the schedule column 1 part 1, column 1 part 2, column 1 part 3 and column 1 part 5.
Four copies of the Bankruptcy Notice were given to Deborah Howitt the registration clerk employed by that firm of solicitors. Each of those copies of the form was identical and Mr Voss the solicitor for the judgment creditor signed one copy which was left with the Official Receiver. When Ms Howitt attended at the office of the Official Receiver who was to issue the bankruptcy notice the clerk behind the counter pointed out to her that the notice did not comply with the current form. He said to her words to the effect that it was necessary to put the words “judgment and order into plurals”. He then said to her:
“It will be quicker if you do some and I do some.”
This is what happened. All four forms were altered in handwriting by the addition of an ‘s’. But not all of the forms were altered in the same way.
There was exhibited in the proceedings the bankruptcy notice filed with the Official Receiver no. NN2618/03. In this document the words “judgment” and “order” has been altered in both places required in paragraph 2 of the form. They have been altered where required in paragraph 6(a). In paragraph 7(b) the word “judgment” has been altered but the word “order” has not. In the schedule column 1 part 1 has been altered, column 1 part 2 has been altered, as has column 1 part 3 and column 1 Part 5.
Ms Nelson, the debtor, filed an affidavit sworn on 27 April 2004 which had exhibited to it a bankruptcy notice. Ms Nelson deposed to the fact that the actual document exhibited to the court copy of her affidavit was the bankruptcy notice served upon her. I accept this evidence. In this document the words had been altered in paragraph 2, paragraph 6(a), paragraph 7(b), column 1 part 1, column 1 part 3 but not column 1 part 5. This document is therefore not identical with the document filed at the Official Receiver’s. It is also fair to say that where the document has been altered the addition of the handwritten ‘s’ runs the enlarged word into the word immediately next to it.
In another affidavit by Ms Nelson sworn on 6 April she exhibits a photocopy of the bankruptcy notice which was originally exhibited to an affidavit of D M Persson sworn on 28 November 2003. The original affidavit filed in Court contains what I am prepared to accept as an original stamped bankruptcy notice. On this notice the words have been changed in paragraph 2, paragraph 6(a), paragraph 7(b), and in the schedule column 1 part 1, but not column 1 part 2, column 1 part 3 and column 1 part 5. In other words, the bankruptcy notice attached to the affidavit of service is not a true copy of the notice which was served because in the one attached to the affidavit of service in schedule column one part 5 the ‘s’ has been added but it has not in the notice which was actually served upon Ms Nelson. Furthermore, both the notice served upon Ms Nelson and the copy for service indicate an error in that the ‘s’ was not added in the schedule column 1 part 2. Both of those documents are different from the document filed with the official receiver in that they both add an ‘s’ to the word “order” in paragraph 7(b) but the document filed with the Official Receiver does not.
The petitioning creditor resists an argument being put by the debtor that the bankruptcy notices did not comply with form 1 prescribed by the regulations and says that paragraph 2 of the notice of opposition assumes the very opposite. It seems to me that the fact of non-compliance with form 1 was very much in issue in the proceedings and if it is required to be dealt with should be.
I am satisfied that the amendments that were made to the bankruptcy notices given to the Official Receiver were amendments that were authorised by the Official Receiver. This is clear from the evidence of Ms Howitt. I would also state immediately that I am not satisfied that the handwritten alterations made material parts of the notices illegible and thus that the notices were capable of confusing or misleading a debtor. I do not believe that a reasonable person looking at the notices would not clearly understand that the amendments intended to make plural what was originally singular would otherwise not alter the form.
Ground four of the notice of opposition relates to the way in which the alterations were made. They were not initialled and they did not have a stamp which would indicate that they are in some way official. It is suggested that because of this the document could be confused as one not coming from an official source. I am disinclined to accept this submission. The service copy of the bankruptcy notice contains stamps from the Official Receiver which would tend to indicate to a reasonable person the document is official. The holograph amendments are so minor and really relate to nothing of importance to this particular debtor (because there is only one judgment). I cannot believe that it could be considered objectively as to be likely to mislead a debtor as to the manner in which she may comply with its requirements: James v Federal Commissioner of Taxation (1955) 93 CLR 631 at 644. I dealt with this matter in a similar way in Blackshaw Services Pty Ltd v Cureton [2003] FMCA 591. I think there is a case for suggesting to the Official Receiver that holograph amendments made to documents filed with him should be noted with a little seal to prevent there being any possible confusion. See Vincent v State Bank of NSW (1995) 60 FCR 290 for the practice when notices were issued by the Court.
I will deal first with the question as to whether or not the notice is invalid because the one which is served is not a copy of the one filed with the Official Receiver. If I make that finding then it will not be necessary to make any finding as to whether the addition in some places but not in others of the letter ‘s’ constitutes a breach of an essential requirement of the act.
The manner in which an application for a bankruptcy notice should be made is dealt with in reg 4.01 of the Bankruptcy Regulations. This is in the following form:
Application for bankruptcy notice
(1) In order to apply for the issue of a bankruptcy notice, a person must lodge with the Official Receiver:
(a) a duly completed draft bankruptcy notice; and
(b) one of the following documents in respect of the final judgment or final order specified by the person on the approved form:
(i) a sealed or certified copy of the judgment or order;
(ii) a certificate of the judgment or order sealed by the court or signed by an officer of the court;
(iii) a copy of the entry of the judgment or order certified as a true copy of that entry and sealed by the court or signed by an officer of the court;
(iv) in the case of an award referred to in paragraph 40 (3) (a) of the Act:
(A) a copy of the award certified as a true copy by the arbitrator who made the award or, failing the arbitrator, by an officer of the Court after having compared the copy with the original award; and
(B) a sealed or certified copy of the order giving leave to enforce the award; and
(c) a copy of the draft bankruptcy notice for the Official Receiver's records and sufficient additional copies of the draft bankruptcy notice for service and for annexure to any required affidavits of service.
Note For bankruptcy notices, see r. 4.02 and Form 1.
(2) If documents are lodged with the Official Receiver in accordance with subregulation (1), he or she must sign (by hand or by facsimile reproduction) and date the copies of the bankruptcy notice lodged in accordance with paragraph (1) (c), and return to the applicant the additional copies referred to in that paragraph.
But what is meant by a “copy” in these circumstances? Can it be said that three documents all of which are subtly different one from the other can be copies? The first response that one might make to this question is a speedy “No”. But that response may have been made without the benefit of considering the decision in Re DeIeso (1978) 24 ALR 701. That case involved the interpretation of rule 7(2) of the Rules under the Bankruptcy Act 1966. The rule required that an applicant for a bankruptcy notice was
To furnish to the registrar, for signature by the registrar, so many copies of a form of bankruptcy notice as are required for service and for annexure to any affidavits of service, and one additional copy of that form for filing.
Rule 7(5) provided that:
The Registrar shall sign each of those copies and return them to the applicant.
Re DeIeso was a case about photocopies. His Honour came to the view that photocopies were not copies for the purposes of the rules and that each copy of the bankruptcy notice had to be individually signed by the Registrar. His Honour said at 703:
“It seems clear that the word “copy” is used in the rules in the sense of an individual example of a document (in the way in which we infer to a “copy” of a book), and not in the sense of a reproduction of an original document. There is no one original bankruptcy notice contemplated, of which other “notices” are copies.”
Of course the rules are no longer the guiding hand in these matters. But the regulations are fairly similar and are certainly intended for the same purpose; namely that the issuer of the bankruptcy notice shall retain in the files one example of the document and other examples of the document shall be used for the purposes of service. They are all originals to the extent that they are all effective in a way in which a “copy” would not be. Thus following DeIeso the document which was served would have to have an original stamp from the Official Receiver even though the rest of the document might have been a photocopy of the one filed with the Official Receiver. It is the stamp that gives it its status.
But is there some requirement that every “copy” of a valid bankruptcy notice be identical? It is almost certain that they will not be. It would be very difficult to expect the Official Receiver to place the stamp, including the signature stamp now utilised, in exactly the same place in each document. What would happen if the Official Receiver lost the date stamp that he normally used and wrote in the date so that on one copy he wrote “21 October 2003” and on another “October 21 2003” - would that render the notice invalid or “not a copy”? Common sense says no. But only because the documents are reproductions of each other in so far as their content is concerned. The date upon which the document is issued is the same whether the month is put before the day or vice versa. The same cannot be said for differences in other words of the document where those differences can change the sense of the words. The difference between “judgment” and “judgments” does not appear great but it does in fact bear considerable historical significance. A bankruptcy notice which relied on more than one judgment has been held to have been invalid since the late 1800’s: Re Low; Ex parte Argentine Gold Fields Ltd (1891) 1 QB 147. If it is accepted that the pluralisation of the words “judgment” and “order” is an important matter then it must be of some concern that not one of the three “original copies” is the same in this particular. Rogerson J said in Re DeIeso at 704:
“Where there is some mistake in the context of the bankruptcy notice the question as to whether the debtor could have been mislead by it is clearly material (Re Hamor; Ex Parte Deamer (1968) 11 FLR 261, where the Debtor, if he had complied with the incorrect notice, would have discharged his liability by so doing; and the defect was therefore treated as being purely formal).”
I do not think his Honour here is referring to mistakes between the various copies of the bankruptcy notice used for filing and serving but more as to whether the copy produced by the debtor in respect of which he claims a mistake has been made was an “original copy”. I believe the question as to whether three “original copies” all of which are different can still constitute three valid bankruptcy notice has not yet been answered.
In my view the phrase “copies for service” found in the regulations incorporates elements of both duplication and individuality as described by Rogerson J. It is my view that the task delineated to the Official Receiver is to take in the original bankruptcy notice, to check it against the “copies for service” for the purpose of ensuring that they are all reproductions of each other in the sense that a reasonable person looking at each of them would not say that in any even small way the sense of them was any different. That could not be said in this case.
The findings which I have made mean that the applicant creditor has failed to comply with an essential requirement of the Act. This is because the Official Receiver was not supplied with “a copy of the draft bankruptcy notice and sufficient additional copies for service and annexure to any required affidavits of service” when the Official Receiver was supplied with documents that did not constitute copies of the draft bankruptcy notice. It is clear that compliance with the regulations is considered to be an essential requirement of the Act: Australian Steel v Lewis (2000) 199 ALR 68 at [40]-[43].
This finding means that it is not necessary for me to decide whether or not the failure to pluralise the words “judgment” and “order” itself constitutes a failure to comply with an essential requirement of the Act. I would suggest that in this case, where there is only one judgment in any event and the required or omitted pluralisations are in parts of the Schedule which are otherwise left blank, it is difficult to see how it could be considered to be an essential requirement. I note that in Australian Steel the majority specifically disapproved of the decision in Farrugia v Farrugia (2000) 169 ALR 503 where a failure to bold parts of the form as required in the regulations was held to have been an essential requirement. If that is no longer the case I would have difficulty in finding that the failure to pluralise was either.
To some extent this tentative finding might appear to be incongruous with my previous conclusions. As Mr Carruthers so aptly put it in his submissions the regulations can not take a formal defect and elevate it to an essential requirement. But I do not believe that this is what has occurred. It is not the defect in the notice that has caused me to find it to be invalid. It is the failure of the creditor, when seeking the issue of the notice, to comply with the requirements concerning the submission of a draft and copies.
In all the circumstances the bankruptcy notice must be set aside and the petition must be dismissed. The creditors must pay the debtor’s costs to be taxed if not agreed pursuant to the Federal Court Act and Rules.
This leaves the s.50(1)(a) order made by me on 1 April 2004 appointing Scott Darren Pascoe as controller of the property known as 155 River Road Northwood. The substratum of this order, a valid bankruptcy notice with which the debtor has not complied, no longer exists. And the order, so far as the applicant in these proceedings is concerned, must be discharged. However, I am mindful of the existence of supporting creditors, one of whom claims to have issued a valid bankruptcy notice with which the debtor has not complied. I will therefore hear the parties in relation to this order and the remuneration of the trustee for the work done.
I certify that the preceding twenty-one (21) paragraphs are a true copy of the reasons for judgment of Raphael FM
Associate:
Date: 6 August 2004
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