FEDERAL COURT OF AUSTRALIA

Bonds Industries Ltd v Sing [1999] FCA 1055

BANKRUPTCY – creditor’s petition – whether sequestration order should not be made because bankruptcy notice on which creditor’s petition is founded is defective – address of Federal Court registry shown on bankruptcy notice incorrect as at date of service – whether defect in address a formal defect or an irregularity – purpose of showing address of Federal Court on bankruptcy notice compared with purpose of showing address where payments may be made – whether defect could have reasonably misled debtor as to what was necessary to comply with bankruptcy notice

Bankruptcy Act 1966 (Cth), s41(1), s41(2), s306

Bankruptcy Regulations, reg 4.02(1)

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

Nugent v Brialkim Pty Ltd (1985) 61 ALR 725, cited

Re Celestini; ex parte Monte Paschi Australia Ltd (1996) 71 FCR 399, distinguished

BONDS INDUSTRIES LTD v ROBERT SING

N7554 OF 1999

EMMETT J

23 JULY 1999

SYDNEY

THE COURT DECLARES THAT:

1.         The proceedings on the petition are not invalidated by reason only of the fact that paragraph 10 of the Bankruptcy Notice on which the petition is based states that the Federal Court registry is located at “Federal Court of Victoria, 450 Little Burke [sic] St, Melbourne, Vic 3000, Telephone:  (03) 9289 9333”.

THE COURT ORDERS THAT:

2.         The proceedings be remitted to the Registrar for the hearing of the petition on Monday 2 August 1999.

Note:    Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

EX TEMPORE REASONS FOR JUDGMENT

1                     I have before me a petition under the Bankruptcy Act 1966 (“the Act”) by Bonds Industries Ltd (“the Creditor”), seeking the sequestration of the estate of Robert Sing (“the Debtor”).  The petition is based on an act of bankruptcy consisting of failure by the Debtor, on or before 15 April 1999, to comply with the requirements of a bankruptcy notice served on 25 March 1999.

2                     Pursuant to sub-regulation 4.02A(2)(b), the Official Receiver extended the period for service of the bankruptcy notice, which was originally issued on 6 May 1998, until 6 May 1999.  The bankruptcy notice bears the date 6 May 1998.  When the matter came before the Registrar, the Registrar was concerned that the bankruptcy notice does not comply with Form 1 prescribed under the regulations.  The petition was therefore referred to a judge and the matter came before me.

3                     Section 40(1)(g) of the Act provides that a debtor commits an act of bankruptcy if a creditor, who has obtained a judgment against the debtor, has served on the debtor a bankruptcy notice under the Act and the debtor does not, within the time specified in the notice, comply with the requirements of the notice or satisfy the Court that he has a counter-claim, set-off or cross-demand equal to or exceeding the amount of the judgment debt.

4                     Section 41(1) provides that the Official Receiver may issue a bankruptcy notice on the application of a creditor who has obtained against a debtor a final judgment or final order such as is referred to in section 40(1)(g), and is for an amount of at least $2,000.

5                     The Creditor has obtained a judgment against the Debtor in the sum of $6,000, of which $500 has been paid.  The judgment therefore satisfies the requirements of section 41(1).  Section 41(2) provides that the notice must be in accordance with the form prescribed by the Regulations.  Regulation 4.02(1) provides that, for the purposes of section 41(2) of the Act, the form of bankruptcy notice set out in Form 1 is prescribed.  Under regulation 1.03(2) a reference in the Regulations to a form of a specified number is a reference to the form of that number in Schedule 1.  Form 1 is a form in Schedule 1 to the Regulations.

6                     The bankruptcy notice in question is in accordance with all of the requirements of Form 1, except one.  The form sets out 10 paragraphs, some of which require blank spaces to be completed.  The prescribed form relevantly provides as follows:

“6.       The Federal Court of Australia may extend the time for compliance with this Bankruptcy Notice if, within the time stated in paragraph 3 above, you apply to that Court on one or more of the following grounds:…

………………………………

7.         In addition, within the time specified in paragraph 3 above, you may file an application to the Federal Court of Australia for an order to set aside this Bankruptcy Notice on the specific grounds that:

(a)        you have a counter-claim, set-off or cross demand […] and

 (b)       in the action or proceeding in which the judgment or order mentioned in paragraph 2 of this Bankruptcy Notice was obtained, you could not have set up that counter-claim, set-off or cross-demand.

………………………………

8          You should note the following points carefully:

(a)        if you file, at the Federal Court Registry, an application mentioned in paragraph 6(a) or 6(b), you must still comply with this Bankruptcy Notice within the time stated in paragraph 3 above, unless the Court extends the time for you to comply;

(b)        if you file, at the Federal Court Registry, an application mentioned in 7(a) you need not comply with this Bankruptcy Notice until the Court decides whether you have grounds for a counter-claim, set-off or cross-demand…

………………………………

10.       The Federal Court Registry for your state or territory is located at:

(Set out the address and telephone number of the relevant registry).”

7                     The bankruptcy notice in question complied with all of the requirements of the form except paragraph 10.  Paragraph 10 was completed as follows:

“The Federal Court Registry for your state or territory is located at:

Federal Court of Victoria

450 Little Burke Street [sic]

Melbourne VIC 3000

Telephone 03-92899333”

8                     There is no such thing of course as the Federal Court of Victoria.  What was intended to be referred to was the Victoria Registry of the Federal Court of Australia.  That, however, was not the critical error.  At the time when the bankruptcy notice was issued and at the time when the Official Receiver authorised the extension of the period for service, the address of the Victoria Registry of the Federal Court of Australia was 450 Little Bourke Street, Melbourne, Victoria, 3000. 

9                     However, on 22 March 1999 the Victoria Registry moved to a new address, following the opening of the Commonwealth Law Courts Building on the corner of William and Latrobe Streets in Melbourne.  The new address was Level 7 of that building.  In addition, the telephone number changed.  Thus, at the time when the bankruptcy notice was served on 25 March 1999, the bankruptcy notice did not state correctly the address of the Federal Court Registry for the State in which the Debtor resided.

10                  The question before me is whether that defect is fatal or whether it can be ignored by reason of the operation of section 306 of the Act.  Section 306(1) relevantly provides as follows:

“Proceedings under this Act are not invalidated by a formal defect or an irregularity, unless the court before which the objection on that ground is made is of opinion that substantial injustice has been caused by the defect or irregularity and that the injustice cannot be remedied by an order of that court.”

11                  The Debtor did not appear before the Registrar and, although the Debtor was notified that the proceeding had been referred to me for hearing today, there has been no appearance for the Debtor today.  There is no material before me to suggest that any substantial injustice has been caused by the defect to which I have referred.  The question, however, is whether the statement of an address at the Registry of the Court which is wrong at the time of service of the notice, is a formal defect or an irregularity, so as to attract the operation of section 306.  The Registrar’s concern in the light of decisions of this Court, was that it may not be properly characterised as a “formal defect” or “an irregularity”.

12                  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 - see Kleinwort Benson Australia Limited v Crowl (1988) 165 CLR 71 at 79.  There is no requirement of the Act which states that the address of the Federal Court must be stated in a bankruptcy notice.

13                  The position may be different in relation to the address at which a debtor may make the payment demanded under the bankruptcy notice.  A judgment creditor in a bankruptcy notice must give an address or addresses where he may be found.  The address stated must be one at which the debtor may, during the currency of the notice, make payment of the amount claimed in the notice or, one where he may make arrangements to secure or compound the debt.  The test for adequacy of such an address must satisfy the demands of common sense in the highly ordered and busy world in which we live, tempered by a consideration of the implications of a bankruptcy notice and the serious consequences that can flow from non-compliance with its requirements.  The address given should be one at which, during the relevant period, it is reasonably practicable for the debtor to make payment or to offer to secure or compound - per Lockhart J in Nugent v Brialkim Pty Limited (1985) 61 ALR 725 at 726 and 727. 

14                  Prior to the 1996 amendments to the Act, section 41(2) relevantly provided as follows:

“The prescribed form of bankruptcy notice shall be such that the notice

(a)       requires the debtor named in it, within a specified time ... to

(i)        pay the judgment debt or sum ordered to be paid in accordance with the judgment or order.”   [emphasis added]

The provision no longer appears in section 41.  Nor indeed, does it appear in the prescribed form. 

15                  In Re Celestini; ex parte Monte Paschi Australia Ltd (1996)71 FCR 399, Sackville J considered the application of the principles to which I have referred in circumstances where a bankruptcy notice required payment in accordance with the District Court Rules.  Those Rules refer to payment at the Registry.  The address shown in the bankruptcy notice in question stated the wrong address for the District Court Registry because the Registry had moved from Macquarie Street to another part of Sydney.  In a sense, therefore, the circumstances of that case, were similar to this.  The difference however, is that there was the requirement of section 41(2)(a)(i) which required that the bankruptcy notice must require the Debtor to pay the judgment debt “in accordance with the judgment or order”.  Secondly, the defect in the notice was concerned with payment of the debt which is, of course, the basic requirement of a notice.

16                  The defect, in the present case, is not a defect in a matter which is made essential by the Act, because it is simply not referred to in the Act.  It is a matter referred to in the prescribed form, although of course section 41(2) requires that a bankruptcy notice must be in the prescribed form.

17                  The question therefore resolves itself into this: could the bankruptcy notice in question reasonably mislead a debtor as to what is necessary to comply with it?  The requirement of the notice is to make a payment.   The requirement in the prescribed form is in the following terms:

“3.       You are required within (‘insert number in accordance with the note to this paragraph’) days after service on you of this bankruptcy notice;

(a)        to pay to the creditor the amount of the debt;

(b)        to make an arrangement to the creditor’s satisfaction for settlement of the debt.”

That is the requirement of the bankruptcy notice.  Compliance with the notice involves the making of a payment. Compliance with the notice has nothing to do with making an application to the Federal Court.  By making such an application, it may be that compliance will not be necessary.   The question however, in the light of the principle derived from Kleinwort Benson Australia Limited v Crowl, is whether the bankruptcy notice before me could reasonably mislead the Debtor as to what is necessary to comply with the notice.

18                  The notice makes quite clear in paragraphs 5 and 6, that the requirement of paragraph 3 may not be necessary if an application is made to the Federal Court.   Such an application could be made at any registry of the Court.  The application does not have to be made to the registry in the State of residence of the Debtor.  I do not consider that the statement, in paragraph 10 of the bankruptcy notice in question, of an address which had become incorrect could reasonably mislead the Debtor as to what was necessary in order to comply with the notice. 

19                  In any event, and I am not sure that this is necessarily relevant, there is evidence before me that, at all times during the period during which payment was required, it would have been apparent to anybody who attended at 450 Little Bourke Street, Melbourne, that the registry’s address had changed between 25 March 1999, and 16 April 1999, when that period expired.  Three laminated signs were located around the main doorway entrance to the building at 450 Little Bourke Street, directing attention to the new location of the Federal Court registry.  One of the signs was attached to a wooden stand in the front of the door during that time. The other two signs were located in the front windows adjacent on either side of the doorway entrance looking in a northerly direction from Little Bourke Street.  Little Bourke streets runs generally east to west.

20                  In any event, I am not convinced that that is a significant or relevant factor.  I consider that the significant factor is that the bankruptcy notice makes clear that compliance requires either payment or an application to the Federal Court.  It is a matter for any citizen to find out how to make an application to the Federal Court.  That is a matter of public record.  In the circumstances, I do not consider that the defect is one which could reasonably have misled the Debtor as to what was necessary to comply with the notice in question.  Accordingly, I am satisfied that section 306 has the effect that the proceeding on the petition is not invalidated only by that defect.

21                  I propose to make a declaration that the proceeding on the petition is not invalidated by reason only of the fact that in paragraph 10 of the bankruptcy notice on which the petition is based states that the Federal Court Registry is located at Federal Court of Victoria, 450 Little Bourke Street, Melbourne, Victoria 3000, telephone (03) 9289 9333.  I will remit the hearing of the petition to the hearing before the Registrar on Monday, 2 August.

Associate:

Dated:              23 July 1999