FEDERAL COURT OF AUSTRALIA

National Australia Bank Ltd v Westbrook, in the matter of Westbrook [2000] FCA 246

BANKRUPTCY - bankruptcy notice - validity - whether substantial compliance with form in regulations - firm name of creditor's solicitors inserted as "person" who applied for notice to be issued - notice signed on behalf of creditor's solicitors by employee solicitor - employee solicitor's name stated elsewhere in notice.

ESTOPPEL – Anshun estoppel – earlier attempt to set aside bankruptcy notice on other grounds – whether recipients of notice estopped from arguing that notice invalid – whether notice a nullity.

Bankruptcy Act 1966 (Cth) ss 40(1)(g), 41(2)

Acts Interpretation Act 1901 (Cth) s 25C

Bankruptcy Regulations reg 4.02, Form 1 Sch 1

McWilliam v Jackson [2000] FCA 175 followed

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

Port of Melbourne Authority v Anshun Pty Ltd (1981) 147 CLR 589 referred to

IN THE MATTER OF DAVID EDMUND HUGH WESTBROOK AND MARIA CARMEN REYES WESTBROOK

NATIONAL AUSTRALIA BANK LIMITED (ACN 004 044 937) v DAVID EDMUND HUGH WESTBROOK AND MARIA CARMEN REYES WESTBROOK

V 7544 OF 1999

GRAY J

6 MARCH 2000

MELBOURNE

THE COURT ORDERS THAT:

1.                  The application is dismissed.

2.         The subpoena dated 1 March 2000 is set aside.

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

IN THE MATTER OF DAVID EDMUND HUGH WESTBROOK AND MARIA CARMEN REYES WESTBROOK

REASONS FOR JUDGMENT

1                     Before the Court are two documents creating disputes.  The first is in effect a creditor's petition dated 20 August 1999, in which the National Australia Bank Ltd is the applicant and David Edmund Hugh Westbrook and Maria Carmen Reyes Westbrook are the respondents.  The second is a notice of motion filed on 2 March 2000, by which the applicant seeks to set aside a subpoena dated 1 March 2000.  The subpoena was issued at the request of the respondents and directed to the applicant, requiring it to produce certain documents. 

2                     Both of these controversies were referred to a judge by a deputy registrar of the Court.  The issue about which these reasons for judgment are delivered was argued as a preliminary point.  The petition is based on an allegation of an act of bankruptcy, being that specified in s 40(1)(g) of the Bankruptcy Act 1966 (Cth), namely that the applicant has obtained against the respondents in the Supreme Court of Victoria a final judgment in the sum of $200,642.51 with interest in the sum of $7,031.44 and costs fixed at $1,780.00 and has served on the respondents a bankruptcy notice, and the respondents have not within the time specified in the notice complied with the requirements of the notice.

3                     It should be noted that the respondents have previously sought to persuade the Court that they have a counterclaim, set-off or cross-demand against the applicant, which they could not have set up in the proceeding in the Supreme Court of Victoria in which the judgment was obtained.  They failed to have the bankruptcy notice set aside on this ground.

4                     Section 41(2) of the Bankruptcy Act 1966 (Cth) requires that a bankruptcy notice must be in accordance with the form prescribed by the regulations.  Regulation 4.02(1) of the Bankruptcy Regulations prescribes the form of bankruptcy notice as being Form 1 in Sch 1 to the regulations.  Regulation 4.02(2) provides:

A bankruptcy notice must follow Form 1 in respect of its format (for example, bold or italic typeface, underlining and notes).

Regulation 4.02(3) provides:

Subregulation (2) is not to be taken as expressing an intention contrary to section 25C of the Acts Interpretation Act 1901.

5                     Form 1 in Sch 1 to the Bankruptcy Regulations contains provisions for signature in the following manner. 

The person who applied for this notice to be issued is:

                                                                           ___________________________ 

(name)

who confirms by the following signature that he or she is the creditor/the creditor's authorised agent *:

(* delete as appropriate)

                                                                        ___________________________

(signature)

and whose address for service is:

___________________________                                                                              ___________________________

___________________________

(address)

6                     The notice served on the respondents is relevantly as follows:

The person who applied for this notice to be issued is:

                                                                           Russell Kennedy, Solicitors

(name)

who confirms by the following signature that they are the creditor's

authorised agent:

                                                                            [Indecipherable signature]

    (signature)

and whose address for service is:

                                                                                                                                    Levels 10 & 11

                                                                                        469 LaTrobe Street

                                                                                        Melbourne 3000

                                                                                        (Ref: Mr D Manly)

       (address)

The Court has been informed from the bar table that the signature is that of Declan Patrick Manly.  Mr Manly is now a partner of the firm of Russell Kennedy, Solicitors.  At the time when he signed the notice he was not a partner but was a solicitor employed by that firm. 

7                     Because of the form of the notice served on the respondents, the deputy registrar drew the attention of counsel for the parties to a recent judgment of Wilcox J in McWilliam v Jackson [2000] FCA 175 (“McWilliam”).  Counsel for the respondents relied on this judgment to contend that the bankruptcy notice is a nullity.  The relevant facts of McWilliam are found at [14]: 

The bankruptcy notice issued in the present case identified the person who applied for the notice as “Sally Susan Nash”, a solicitor.  However, the person who signed the confirmation note prescribed by the form was not Ms Nash.  The signature on the bankruptcy notice is indecipherable, but I was told from the bar table that it is of a solicitor employed by her firm, Sally Nash & Co.  That fact would not be apparent to a recipient of the notice.

At [26] – [30], Wilcox J said:

Ms Oakley put two submissions in relation to the failure of Ms Nash to sign the bankruptcy notice by way of confirmation of her authorisation.  First, she pointed out that the Federal Court Rules now apply to proceedings under the Bankruptcy Act (see Order 77 Rule 4(2)) and referred to Order 45 Rule 9.  That rule provides that “(w)here any signature by a solicitor is required or permitted for the purpose of any proceeding”; the signature for the solicitor by (amongst others) a solicitor employed by that solicitor shall be sufficient.  However, a bankruptcy notice is not a “proceeding”, within the meaning of that rule.  A “proceeding” is an action commenced by filing process in the Court (see Order 77 Rule 6), not an extra‑curial notice; even an extra‑curial notice that might later give rise to a proceeding in the Court.  Furthermore, Order 45 Rule 9 is concerned with a signature required or permitted by a solicitor, acting as such.  Form 1 does not envisage that the authorised person will necessarily be a solicitor.  The authorized person often will not be a solicitor; typically, perhaps, the person will be a company officer who signs on behalf of a creditor company.  Order 45 Rule 9 has no application to this case.

Ms Oakley's other contention is that the case is covered by s25C of the Acts Interpretation Act.  That section reads:

"Where an Act prescribes a form, then, unless the contrary intention appears, strict compliance with the form is not required and substantial compliance is sufficient."

I do not think it can properly be said that certification other than by the authorized person constitutes a substantial compliance with the requirement of Form 1 for execution of the notice by the creditor or a person who, by his or her signature, “confirms … that he or she is the creditor's authorized agent”.  Nor do I think the omission of proper certification is a “formal defect” or “irregularity” within the meaning of s306 of the Act.  The receipt by a debtor of a bankruptcy notice is a serious matter; non-compliance with the requirements of the notice constitutes an act of bankruptcy and exposes the person to the possibility of being made a bankrupt.  Certification is required in order to give an assurance to the addressee of the notice that it comes with the authority of the creditor and its demand is the demand of the creditor himself or herself.  For that reason, the notice is required to be signed personally by either the creditor or the person who is disclosed as the creditor's agent.  To use the words of the Crowl majority, this is a "requirement made essential by the Act".

In this case, it may be surmised that the person who signed the notice did so with the knowledge and approval of Ms Nash.  But surmise is not sufficient; the addressee of the notice is entitled to be assured of the position.  Execution of the notice by someone other than the authorized agent is not a substantial compliance with the requirements of the form. 

I think the bankruptcy notice should be regarded as a nullity on this ground, also.

8                     The reference that Wilcox J made to Crowl is a reference to Kleinwort Benson Australia Ltd v Crowl (1988) 165 CLR 71, at 79, where Mason CJ and Wilson, Brennan and Gaudron JJ in a joint judgment said:

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 ….

9                     The facts of McWilliam are remarkably similar to those of the present case.  The signature in the present case is not that of the person whose name is given as the person who applied for the notice to be issued.

10                  The facts of this case may be even worse for a petitioning creditor than were the facts of McWilliam.  In that case, the name given as the name of the person who applied for the notice to be issued was the name of a natural person.  In the present case, the name of the person who applied for the notice to be issued is given as the name of a firm.  The use of the word "person" in the prescribed form raises issues of construction.

11                  Section 22(1)(a) of the Acts Interpretation Act 1901 (Cth) provides that, unless the contrary intention appears, expressions used to denote persons generally, such as the word "person", include a body politic or corporate as well as a natural person.  Section 23(b) of the Acts Interpretation Act 1901 (Cth) provides that, unless the contrary intention appears, words in the singular number include the plural.  There are powerful arguments for concluding that the prescribed form of a bankruptcy notice displays a contrary intention for the purposes of both these provisions.  The use of the words "he or she is" in the prescribed form suggests that the applicant for the issue of a bankruptcy notice must be one person and that person must be a natural person.  If the purpose of the signature of a bankruptcy notice is that characterised by Wilcox J in McWilliam, there is every reason why the recipient of the notice should not be left wondering which of a number of partners of a firm is the applicant for the notice or which officer or employee of a corporation had the authority of the creditor.  These issues were not argued fully and I express no concluded view of them.

12                  Counsel for the applicant sought to distinguish McWilliam.  He argued that the respondents would have been able to be reassured that the notice came with the authority of the creditor and its demand was the demand of the creditor itself for two reasons.  One is that, following the address for service of the applicant in the notice appear the words in brackets “(Ref: Mr D Manly)”.  The other is similar.  Attached to the notice is a sealed copy of the judgment entered in the Supreme Court of Victoria.  In the solicitors’ code in that judgment appear the words “Reference: Mr Manly – 742180”.

13                  This submission confuses two things.  As the High Court said in Crowl, a bankruptcy notice is a nullity either 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.  In McWilliam, Wilcox J concluded that execution of the notice by someone other than the authorised agent is not a substantial compliance with the requirements of the form.  Prior to reaching that conclusion, his Honour set out the reasons for it.  They included the proposition that the addressee of the notice is entitled to be assured that the signatory of the notice was the authorised agent of the creditor.  The mere fact that the respondents might have been able to obtain a greater level of assurance from another part of the notice and an attachment to it in the present case does not warrant a different conclusion.    If the statutory requirement is that the person applying for the issue of the notice must sign, and a notice signed by some other person is not a substantial compliance, then there is a failure to comply substantially, even if the notice otherwise supplements the information available to the recipient. 

14                  In any event, I am of the view that the references to Mr Manly do not overcome the defect in the notice.  The recipient of a bankruptcy notice should not have to decipher it.  The recipient should not have to search the document and its attachments, decide whether particular information disclosed is relevant to an issue and then apply a particular chain of reasoning to reach a conclusion about the issue.  Only by taking all of these steps would the respondents have been able to achieve some level of reassurance about Mr Manly's position.  Even that level of assurance would not have put them in the same position as if the signature had been that of the person applying for the notice.  In my view, this case is not relevantly distinguishable from McWilliam.

15                  Counsel for the applicant attempted faintly to suggest that the respondents were estopped from arguing that the notice is a nullity because they have already applied unsuccessfully to set aside the notice.  He referred to Port of Melbourne Authority v Anshun Pty Ltd (1981) 147 CLR 589.  The submission was not developed fully.  The short answer to it is that it is the applicant which relies on the bankruptcy notice to found its petition.  If the bankruptcy notice is a nullity, the Court's jurisdiction to make the orders sought by the applicant has not been invoked validly.  Once the Court acquires knowledge that the jurisdictional facts for which s 40(1)(g) of the Bankruptcy Act 1966 (Cth) provides cannot be established, because the bankruptcy notice is a nullity, it is impossible for the Court to proceed to make a sequestration order.

16                  I take the view that I should follow McWilliam.  Even if I were not convinced of its correctness, the need for certainty in the administration of the Bankruptcy Act 1966 (Cth) would dictate that I should follow it, unless persuaded that it is fundamentally wrong.  I am far from being persuaded that it is wrong at all.

17                  For the foregoing reasons, I am of the view that the bankruptcy notice served on the respondents is a nullity.

18                  It follows that the application, which is in effect a creditor’s petition, must be dismissed.  I also set aside the subpoena, solely on the ground that the proceeding which supported it is no longer viable.  The orders of the Court then will be as follows:

1.         The application is dismissed.

2.         The subpoena dated 1 March 2000 is set aside.

19                  I note that there is to be no consequence in costs following from those orders.

Associate:

Dated: