FEDERAL COURT OF AUSTRALIA

Autron Pty Ltd v Benk [2011] FCAFC 93

THE COURT ORDERS THAT:

1.    The appeal be dismissed.

Note:    Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules. The text of entered orders can be located using Federal Law Search on the Court’s website.

REASONS FOR JUDGMENT

THE COURT

1    This is an appeal from a judgment of the Federal Magistrates Court of Australia (the Federal Magistrates Court) which dismissed an application for review of a decision of a Registrar of that court, who in turn had dismissed the appellant’s petition for the making of a sequestration order against the respondent under the provisions of the Bankruptcy Act 1966 (Cth) (the Bankruptcy Act).

2    The review was a hearing de novo of the appellant’s petition for the sequestration order. The presiding Federal Magistrate was satisfied of the existence of the matters prescribed by s 52(1) of the Bankruptcy Act and of the respondent’s insolvency. However, his Honour shared the view of the Registrar that no act of bankruptcy had been established because the bankruptcy notice served on the respondent did not comply with s 41(1)(b)(ii) of the Bankruptcy Act and could not found an act of bankruptcy in reliance on s 40(1)(g) of the Act.

3    The sole question that arises on this appeal is whether the bankruptcy notice complied with the requirements of s 41(1)(b)(ii) of the Bankruptcy Act.

4    The respondent did not appear on the appeal. However, the Court was assisted by amicus curiae.

Legislative Framework

5    Section 43(1) of the Bankruptcy Act provides that, where a debtor has committed an act of bankruptcy and certain connecting factors exist, “the Court” (which includes the Federal Magistrates Court) may, on a petition presented by a creditor, make a sequestration order against the estate of the debtor.

6    A debtor’s failure to comply with the requirements of the bankruptcy notice may constitute an act of bankruptcy. Section 40(1)(g) of the Bankruptcy Act provides:

A debtor commits an act of bankruptcy…

(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.

7    This provision must be interpreted in the light of s 40(3), which provides:

For the purposes of paragraph (1)(g):

(a)    where leave is given by a court to enforce an award made on a submission to arbitration, being an award under which money is payable by a debtor to another person:

(i)    the award shall be deemed to be a final order obtained by that person against the debtor; and

(ii)    the arbitration proceedings shall be deemed to be the proceeding in which that final order was obtained;

(b)    a judgment or order that is enforceable as, or in the same manner as, a final judgment obtained in an action shall be deemed to be a final judgment so obtained and the proceedings in which, or in consequence of which, the judgment or order was obtained shall be deemed to be the action in which it was obtained;

(d)    a person who is for the time being entitled to enforce a final judgment or final order for the payment of money shall be deemed to be a creditor who has obtained a final judgment or final order;

(e)    a judgment or order for the payment of money made by the Court in the exercise of jurisdiction conferred on it by this Act shall be deemed to be a judgment or order the execution of which has not been stayed notwithstanding that it may not be enforceable at law by execution; and

(f)    an order made after the commencement of this paragraph under the Family Law Act 1975 for the payment by a person of arrears of maintenance for another person shall be deemed to be a final order against the first-mentioned person obtained by the other person.

8    The requirements for the issue of a bankruptcy notice are set out in s 41(1) of the Bankruptcy Act. At the relevant time, s 41(1) provided:

An Official Receiver may issue a bankruptcy notice on the application of a creditor who has obtained against a debtor:

(a)    a final judgment or final order that:

(i)    is of the kind described in paragraph 40(1)(g); and

(ii)    is for an amount of at least $2,000; or

(b)    2 or more final judgments or final orders that:

(i)     are of the kind described in paragraph 40(1)(g); and

(ii)     taken together are for an amount of at least $2,000.

9    The form of a bankruptcy notice is prescribed by the Bankruptcy Regulations 1996 (Cth) (the Regulations): see reg 4.02(1) and Schedule 1 Form 1; see also s 41(2) of the Bankruptcy Act.

10     Section 41(3) of the Bankruptcy Act provides:

A bankruptcy notice shall not be issued in relation to a debtor:

(a)    except on the application of a creditor who has obtained against the debtor a final judgment or final order within the meaning of paragraph 40(1)(g) or a person who, by virtue of paragraph 40(3)(d), is to be deemed to be such a creditor;

(b)    if, at the time of the application for the issue of the bankruptcy notice, execution of a judgment or order to which it relates has been stayed; or

(c)    in respect of a judgment or order for the payment of money if:

(i)    a period of more than 6 years has elapsed since the judgment was given or the order was made; or

(ii)    the operation of the judgment or order is suspended under section 37.

11    The conditions for presenting a creditor’s petition are set down by s 44(1) of the Bankruptcy Act. At the relevant time, s 44(1) provided:

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 $2,000 or 2 or more debts that amount in the aggregate to $2,000, 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 $2,000;

(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.

the bankruptcy notice

12    On 4 March 2009 the appellant obtained an order against the respondent in the Magistrates’ Court of Victoria for the sum of $1,598.44. A certificate given by a Deputy Registrar of that court on 17 November 2009 showed that the sum comprised amounts for the principal claim, pre-judgment interest and costs. On 12 October 2009 the appellant obtained a costs order against the respondent in the Magistrates’ Court for the sum of $381.00.

13    The bankruptcy notice issued on 18 November 2009. It specified the respondent’s indebtedness to the appellant to be $2,090.24, as shown in the Schedule to the notice.

The Schedule was in the following form:

14    The claim for interest in the bankruptcy notice related to post-judgment interest based on s 100(7) of the Magistrates’ Court Act 1989 (Vic) (the Magistrates’ Court Act). Section 100(7) provides:

Every judgment debt carries interest at the rate for the time being fixed under section 2 of the Penalty Interest Rates Act 1983 from the time the order was made.

15    This interest was calculated on the sum of $1,598.44 at the rate prescribed by s 2 of the Penalty Interest Rates Act 1983 (Vic). The calculation for interest was set out in an annexure to the bankruptcy notice. No issue arises as to the appellant’s entitlement to claim interest in the bankruptcy notice or as to the amount that was in fact claimed. The only issue that arises is whether the appellant was entitled to rely on that amount as a component of the statutory minimum amount prescribed by s 41(1)(b)(ii) of the Bankruptcy Act for the issue of a bankruptcy notice.

16    The Registrar who heard the appellant’s petition reasoned that, while post-judgment interest can be relied on to ground a debt or debts for the statutory minimum amount on which a creditor’s petition can be presented under s 44(1) of the Bankruptcy Act, such interest cannot be relied on to reach or exceed the statutory minimum amount prescribed by s 41(1)(b)(ii) of the Bankruptcy Act. In the present case, absent the inclusion in the bankruptcy notice of the sum of $110.80 for post-judgment interest, the total debt claimed in the bankruptcy notice would have been less than $2,000.00 ($1,979.44). The Registrar concluded, therefore, that the bankruptcy notice was a nullity. On review, the presiding Federal Magistrate came to the same view.

17    The appellant accepts that, if the amount claimed for post-judgment interest in the bankruptcy notice cannot be a component part of the minimum amount specified in s 41(1)(b)(ii) of the Bankruptcy Act then the bankruptcy notice is a nullity and the appeal cannot succeed.

The appellant’s submissions

18    The appellant’s contention that accrued post-judgment interest can be included as a component of the minimum amount specified in s 41(1)(b)(ii) of the Bankruptcy Act was developed by an argument which had the following elements:

    The prescribed form of bankruptcy notice provides for the inclusion of interest that has accrued on the amount of the judgment debt or final order in calculating the amount of the total debt claimed in the bankruptcy notice.

    Neither the Bankruptcy Act nor the prescribed form of bankruptcy notice states that accrued interest cannot be added to the amount of the judgment debts or final orders to achieve the statutory minimum amount prescribed by s 41(1)(b)(ii) of the Bankruptcy Act.

    A direct consequence of legislation that provides for interest on judgment debts or final orders for monetary amounts is that interest so accrued “constitutes part of every final judgment or order”. This position is supported by the definition of “judgment debt” as used in the Judgment Debt Recovery Act 1984 (Vic), which is wide enough to include accrued post-judgment interest: see s 3.

    The use, in the concluding paragraph of s 40(1)(g) of the Bankruptcy Act, of the words “… the amount of the judgment debt or sum payable under the final order, as the case may be …” “shows that a final judgment or order includes a judgment debt or sum payable under that final judgment or order” (emphasis added).

    The construction of s 41(1)(b)(ii) of the Bankruptcy Act for which the appellant contends is supported by the observations of Riley J in Re Munson; Ex parte Deputy Commissioner of Taxation (1977) 29 FLR 479 at 482 and of Lockhart J in Re Manion; Ex parte Deputy Commissioner of Taxation (1979) 23 ALR 270 at 273.

    This construction is also supported by the cases that hold that accrued interest on a judgment debt can be used to support the statutory minimum amount of the debt for which a petition can be presented, as prescribed by s 44(1) of the Bankruptcy Act.

consideration

19    The issue on appeal is resolved by determining the proper construction of s 41(1) of the Bankruptcy Act and, specifically, s 41(1)(b)(ii), given that two final judgments or final orders were relied upon for the issue of the bankruptcy notice in the present case.

20    In this connection the relevant provision posits three requirements:

    the judgments or orders must be final judgments or final orders;

    those final judgments or final orders must be of the kind described in s 40(1)(g); and

    taken together those final judgments or final orders must be “for an amount of at least $2,000”.

21    The Bankruptcy Act does not define the expressions “final judgment” and “final order” as used in s 40(1)(g) and s 41(1). Historically, in bankruptcy law, a rigid distinction has been drawn between a “final judgment” and a “final order”. In context, a “final judgment” is strictly construed to mean a final judgment “obtained in an action”. Thus, in Clyne v Deputy Commissioner of Taxation (NSW) (1983) 48 ALR 545 at 547-548 Gibbs CJ (with whom the other members of the High Court agreed) said:

A final judgment within the meaning of the provisions of the Bankruptcy Act has been held to mean a judgment obtained in an action by which the question whether there was a pre-existing right of the plaintiff against the defendant is ascertained or established: Opie v Opie (1951) 84 CLR 362 at 372. In other words it is a judgment which finally disposes of the rights of the parties: see Licul v Corney (1976) 8 ALR 437 ; 50 ALJR 439 at 444. The fact that a judgment is subject to appeal or that it may later be set aside or become inoperative does not mean that it is not final: Re Hanby; Ex parte Flemington Central Spares Pty Ltd (1967) 10 FLR 378.

22    In a technical sense, an “action” is the invocation of a court’s jurisdiction by writ and a “proceeding” is an invocation of a court’s jurisdiction by other process: Herbert Berry Associates Ltd v Inland Revenue Commissioners [1977] 1 WLR 1437 at 1446. Accordingly, in Re A Bankruptcy Notice; Ex parte The Official Receiver [1895] 1 QB 609 a bankruptcy registrar refused to issue a bankruptcy notice for a debt, represented by unpaid costs ordered to be paid in proceedings successfully taken by the Official Receiver, as trustee in bankruptcy, to set aside an assignment of property. The registrar refused to issue the bankruptcy notice on the ground that an order upon motion in bankruptcy was not a final judgment in an action for the purpose of s 4(1)(g) of the Bankruptcy Act 1883 (Eng) (the 1883 Act) (which provided for the issue of bankruptcy notices). The Court of Appeal dismissed an appeal from that refusal. Lord Justice Rigby said (at 611):

No doubt this order is a final one, and it is very like a judgment. But it is certainly not a judgment in an action, and, according to the former decisions of this Court, the “final judgment” spoken of by sub-s. 1(g) must be a judgment in an action.

23    This case was one in a series of cases, of which In re Chinery; Ex parte Chinery (1884) 12 QBD 342 is usually taken as the starting point, in which this distinction was strictly observed. These cases, and the history of the distinction, are discussed in detail in Abigroup Limited v Abignano (1992) 39 FCR 74 at 80-81; see also the analysis Re Pannowitz; Ex parte Wilson (1975) 6 ALR 287 at 289-291 and Re Smith; Ex parte Chesson (1992) 106 ALR 359 at 362-364. In Pannowitz Riley J (at 290) described these cases as having been “laid to rest” by the enactment of the Bankruptcy and Deeds of Arrangement Act 1913 (Eng) which, by s 16, effectively abolished the distinction between a “final judgment” and a “final order” for bankruptcy purposes by providing that s 4(1)(g) of the 1883 Act should have effect as if:

… references to final orders and to sums ordered to be paid were included in the references to final judgments and judgment debts respectively wherever the same occur, and a reference to the proceedings in which the order was obtained was included in the reference to the action in which the judgment was obtained.

24    So far as Australian federal bankruptcy legislation is concerned, the rigid distinction between a “final judgment” and a “final order” is really one of historical interest only. The first federal enactment was the Bankruptcy Act 1924 (Cth). In that legislation the cause for debate about the distinction between a “final judgment” and a “final order” was eliminated at the outset because provision was made for the issue of bankruptcy notices based on a “final judgment” or “final order”. Section 52(j) of the 1924 Act (the precursor to s 40(1)(g) of the Bankruptcy Act) provided:

A debtor commits an act of bankruptcy in each of the following cases:

…

(j)    If a creditor has obtained a final judgment or final order against him for any amount, and execution thereon not having been stayed, has served on him in Australia or, by leave of the Court, elsewhere, a bankruptcy notice under this Act, and the debtor does not, within seven days or such time as is prescribed after service of the notice in Australia, or within the time limited in that behalf by the order giving leave to effect the service elsewhere, either comply with the requirements of the notice, or satisfy the Court that he has a counter-claim, set-off, or cross demand which equals or exceeds the amount of the judgment debt, and which he could not set up in the action or proceeding in which the judgment or order was obtained:

Any person who is for the time being entitled to enforce a final judgment or final order for the payment of money shall be deemed a creditor who has obtained a final judgment within the meaning of this paragraph ; and a final judgment or order against a married woman shall be deemed to be a final judgment or order within the meaning of this paragraph, notwithstanding the fact that no execution can issue at law on the judgment or order ;

25    In Re Black; Ex parte Jeffery (1932) 4 ABC 157 (a case concerning a bankruptcy notice issued on an unsatisfied order for costs made in a motion for a new trial in divorce proceedings) Lukin J, after referring to the historical position under English bankruptcy legislation, said (at 160):

It will be noted that s. 52(j) … contemplates a final order not only in an action but also in a proceeding. A proceeding may mean something as distinct from an action or any step thereunder in which final orders are made for the payment of money. It may also mean a step in an action, in which proceeding a final order is made for the payment of money. Sec. 52(j) does not of itself impose any restricted meaning on the word “proceedings” in the amendment, and there appears to be no reason for doing so.

In there referring to “the amendment” his Honour can be taken to have been referring to the amendment to the 1883 Act which incorporated the references to “final orders” and to “sums ordered to be paid” in s 4(1)(g) of that Act.

26    In the Australian context the focus of case law, for the purposes of s 40(1)(g) and s 41(1) of the Bankruptcy Act, has been the requirement for there to be “judgments” and “orders” that are “final” rather than the distinction between “judgments” and “orders” themselves. The provisions of s 40(3) of the Bankruptcy Act give, in a number of respects, an extended interpretation to “final judgment” and “final order” as used in s 40(1)(g) (and hence to the corresponding expressions used in s 41(1)) by deeming certain awards, judgments and orders to be a “final judgment” or a “final order”. This has eliminated a number of the controversies that might otherwise have arisen in the absence of those provisions: see, in particular, ss 40(3)(a), (b) and (f). Importantly, in the present appeal, the issue of “finality” itself does not arise.

27    As noted, the appellant placed reliance on the following passage in the judgment of Riley J in Re Munson (at 482) as supporting its primary contention:

A bankruptcy notice must require the debtor to pay “in accordance with the judgment”: s. 41 (2) (a) (i). In the case of a Supreme Court judgment interest is payable from the date when the judgment takes effect on so much of the money of which the judgment orders payment as from time to time remains unpaid: Supreme Court Act, 1970, s. 95 (1); and is a debt necessarily and inevitably attached to the judgment debt: Re Clagett; Ex parte Lewis (1887) 36 WR 653. To pay the judgment debt “in accordance with the judgment” is to pay the amount for which judgment was recovered with the legal interest attached to it by statute: Re Cooper [1911] 2 KB 550 at 554; and there is no doubt that a bankruptcy notice may require the payment of statutory interest. “The creditor is entitled to have the amount of the interest added to the judgment debt so that the debtor may be informed by the notice that he cannot comply with the notice without paying the interest on the debt”: Re Lehmann; Ex parte Hasluck (1890) 7 Morr 181 at 183 per Cave J. But a bankruptcy notice can “only demand payment of that which the judgment creditor can enforce payment of”, and cannot issue for a sum of money for which execution cannot issue: Re Follows; Ex parte Follows [1895] 2 QB 521 at 525 per Vaughan Williams J.; cf. Re O’Keefe; Ex parte Australian Factors Ltd. (1963) 19 ABC 101 at 103-104. It is to be inferred from s. 41 (5) and (6) that a bankruptcy notice must specify a sum as “the amount due to the creditor”; and if he demands payment of interest the creditor must himself calculate, and must specify in the bankruptcy notice, the amount required to be paid: Re Davis; Ex parte Deputy Commission of Taxation (1963) 19 ABC 100; Re O’Keefe (1963) 19 ABC 101.

28    In Re Munson a question had arisen as to the validity of a bankruptcy notice where the amount of post-judgment interest under s 95 of the Supreme Court Act 1970 (NSW), which had accrued at the date of issue of the bankruptcy notice, was understated in the notice itself. It was held (at 483) that this understatement of accrued interest would not invalidate the bankruptcy notice. In the course of his reasons, Riley J addressed the requirements of s 41 of the Bankruptcy Act in its form before the amendments introduced by the Bankruptcy Legislation Amendment Act 1996 (Cth) (on which the present s 41 is based). In that form, s 41(2)(a) provided that the prescribed form of bankruptcy notice should require the debtor to pay the judgment debt or sum ordered to be paid “in accordance with the judgment or order”. That provision no longer exists. Section 41(2) now provides that the bankruptcy notice must be in accordance with the form prescribed by the Regulations. In referring to the requirements of s 41(2)(a) in its former guise, Riley J reasoned that, by use of the words “in accordance with the judgment or order”, a bankruptcy notice may include, and require the payment of, statutory interest as part of the debt due under the bankruptcy notice. However, the case itself was not dealing with the meaning of “final judgment” or “final order” as used in s 40(1)(g), and as currently used in s 41(1), of the Bankruptcy Act.

29    In Re Manion, after referring to the passage in Re Munson quoted above, Lockhart J (at 273) said:

Although interest is necessarily and inextricably attached to the judgment debt, in my opinion it does not itself answer the description of the sum due by the debtor to the petitioning creditor under the final judgment.

30    It is clear from that case, as indeed it is clear from Re Munson itself, that there is a distinction between the amount of the “final judgment” or “final order” or the balance due thereunder, on which the bankruptcy notice is based, and post-judgment interest that may be included in the bankruptcy notice as part of the debt identified therein as being due to the creditor who has sought the issue of that notice: Re Manion at 274; Re Munson at 483. These cases do not assimilate the imposition of post-judgment interest into the “final judgment” or “final order” referred to in s 40(1)(g) and s 41(1). Indeed, in principle, it could not be the case that a liability for interest, imposed separately by statute post-judgment (such as s 100(7) of the Magistrates’ Court Act) could assume the character of a “final judgment” or “final order” obtained from a court, in accordance with the construction placed on those expressions judicially. The discussion of the meaning of “final judgment” and “final order” in the cases serves to underline the distinction between (a) a final judgment (or final order) as an operative judicial act in an action (or proceeding) where a pre-existing right is ascertained or established, and (b) post-judgment interest, as an entitlement which only arises by imposition of statute once the final judgment is given or a final order is made by a court.

31    The wording of s 40(1)(g), as extended by s 40(3), does not otherwise throw light on the meaning of the expressions “final judgment” and “final order” as used in s 41(1) of the Bankruptcy Act. In particular, the reference in the final paragraph of s 40(1)(g) to the debtor satisfying the Court that he or she has a counter-claim etc “equal to or exceeding the amount of the judgment debt or sum payable under the final order, as the case may be …” does not signify that the expressions “final judgment” and “final order”, respectively, have an extended meaning beyond their judicially determined meaning so as to include, in each case, post-judgment interest.

32    The appellant’s position in this regard is not advanced by recourse to the prescribed form of bankruptcy notice. As a matter of general principle, the form of the bankruptcy notice, as prescribed by the Regulations, could not determine the meaning of the expressions “final judgment” and “final order” as used in s 40(1)(g) and s 41(1) of the Bankruptcy Act: Master Education Services Pty Limited v Ketchell (2008) 236 CLR 101 at [39]; Webster v McIntosh (1980) 32 ALR 603 at 606; The Great Fingall Consolidated Limited v Sheehan (1905) 3 CLR 176 at 184. In any event, there is no reason to doubt that the expressions “final judgment” and “final order” as used in reg 4.01 (which deals with applications for bankruptcy notices) take their meaning from s 40(1)(g) and s 41(1) of the Bankruptcy Act: s 13 Legislative Instruments Act 2003 (Cth). Moreover, the prescribed form of bankruptcy notice plainly draws a distinction on its face between the amount of the “judgments or orders” and, if claimed, the “interest accrued since the date of judgments or orders”.

33    Similarly, the appellant’s position is not advanced by recourse to the definition of “judgment debt” in s 3 of the Judgment Debt Recovery Act 1984 (Vic). That Act is concerned with the payment of judgment debts by instalments. Section 3 of the Act defines a “judgment debt” as “the amount of money recoverable or payable under and in respect of a judgment”. The appellant submits that the definition is wide enough to include post-judgment interest. That submission can be accepted: see Cahill v Howe [1986] VR 630. However, the only relevance of that definition is in relation to the recovery of judgment debts as provided for by that particular piece of State legislation. The definition of “judgment debt” in that Act could not possibly be used to construe the expressions “final judgment” or “final order” as used in the Bankruptcy Act, or otherwise illuminate their meaning. In any event, as the decision in Cahill makes clear, post-judgment interest is captured in the definition of “judgment debt” for the purposes of that Act because of the words “in respect of a judgment”: see the discussion at 633-634. If anything, those words stand as an acknowledgement of a distinction between a judgment given or order made by a court, and the separate statutory imposition of interest “in respect of” such a judgment or order.

34    Finally, the appellant’s position is not advanced by reliance on cases that hold that account can be taken of accrued post-judgment interest to support the presentation of a petition under s 44(1) of the Bankruptcy Act: see In re Henry Wilson (1877) 3 VLR 95 at 96; Re Merrington; Ex parte Monds & Affleck Limited (1929) 2 ABC 154. The requirements of s 44(1) of the Bankruptcy Act are clearly distinct from the requirements of s 41(1) in that the statutory minimum amount for the purposes of s 44(1) is in respect of the “debt” owing by the debtor to the petitioning creditor, not the “final judgment” or “final order” on which a bankruptcy notice is required to be based. It is trite that the “debt” relied on to support a creditor’s petition need not be one arising from a judgment or order; nor is there any requirement that a creditor, who petitions for a sequestration order based upon an act of bankruptcy for which s 40(1)(g) provides, rely upon the debt claimed in the bankruptcy notice giving rise to the act of bankruptcy: Emerson v Wreckair Pty Limited (1992) 33 FCR 581 at 588. Indeed, the relevant act of bankruptcy can arise from any of the circumstances set out in s 40(1). Thus the operation of s 41(1) is independent of the operation of s 44(1) of the Bankruptcy Act. Each section should be seen as imposing statutory minimum amounts in respect of two conceptually different conditions, one for the issue of a bankruptcy notice and the other for the presentation of a creditor’s petition.

CONCLUSION

35    There is no reason to doubt that the expressions “final judgment” and “final order” as used in s 40(1)(g) and s 41(1) of the Bankruptcy Act were intended by the legislature to have their generally understood meanings as judicially interpreted in Australian bankruptcy law, extended only by recourse to s 40(3), which operates on those generally understood meanings.

36    There is no reason why s 41(1) should not then have the plain meaning that its words bear: subject to the further limitations imposed by s 41(3), a bankruptcy notice should only issue where the creditor seeking its issue has obtained a “final judgment” or “final order” for, at least, the statutory minimum amount, or two or more such judgments or orders that, taken together, are for, at least, that amount. The use of the word “for” in this context does not really admit debate. It means the amount, in monetary terms, of the “final judgment” or “final order”, or of the two or more such judgments or orders taken together, obtained by the creditor.

37    In the course of submissions counsel appearing as amicus curiae sought to argue that s 41(1) should not be construed literally, but given a meaning or operation that would accommodate payments made by the debtor or credits allowed by the creditor. Counsel submitted that “it is unlikely that Parliament intended that a creditor may issue a bankruptcy notice in respect of a judgment debt of $2,000 in circumstances where it had been paid $1,999”. However, to so construe s 41(1) would be to radically alter the words chosen by the legislature. Expressed in its simplest terms, the legislature has chosen to condition the issue of a bankruptcy notice on the amount of the “final judgment” or “final order”, not on the amount of the total debt (after allowing for payments and credits) for which the creditor seeks to have the notice issued. No doubt, as a matter of policy, the legislature could have chosen to adopt the latter course. The plain words of s 41(1) show that that was not its intention.

38    In the present case, the bankruptcy notice did not satisfy the requirements of s 41(1)(b)(ii) of the Bankruptcy Act. It was not, therefore, a “bankruptcy notice under this Act” for the purposes of s 40(1)(g). A bankruptcy notice is a nullity if it fails to meet a requirement made essential by the Bankruptcy Act: Kleinwort Benson Australia Limited v Crowl (1988) 165 CLR 71 at 79. There can be no doubt that the attainment of the minimum amount prescribed by s 41(1) of the Bankruptcy Act is an essential requirement for the issue of a bankruptcy notice under that section. Accordingly, the failure of the respondent to comply with the bankruptcy notice issued in the present case could not constitute an act of bankruptcy under s 40(1)(g). It follows that, absent the act of bankruptcy on which the appellant relied, the conditions required by s 44 of the Bankruptcy Act, on which its petition was to be presented, could not be met.

39     The presiding Federal Magistrate did not err in dismissing the appellant’s application for review of the Registrar’s decision.

disposition

40    The appeal should be dismissed.

Associate:

Dated:    28 July 2011