FEDERAL COURT OF AUSTRALIA

Deputy Commissioner of Taxation, in the matter of Kelly v Kelly 

[2001] FCA 844

IN THE MATTER OF MICHAEL J KELLY

DEPUTY COMMISSIONER OF TAXATION OF THE COMMONWEALTH OF AUSTRALIA v MICHAEL J KELLY

N 7153 of 2001

KATZ J

SYDNEY

3 JULY 2001

IN THE MATTER OF MICHAEL J KELLY

THE COURT ORDERS THAT:

1.      The applicant’s petition be dismissed.

2.      The applicant pay the respondent’s costs of the proceeding.

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

IN THE MATTER OF MICHAEL J KELLY

REASONS FOR JUDGMENT

1                     There is before the Court a creditor’s petition, the creditor being the Deputy Commissioner of Taxation of the Commonwealth of Australia (“the creditor”) and the debtor being Mr Michael J Kelly (“the debtor”).

2                     A question has been raised in the course of the proceeding as to the validity of a bankruptcy notice which was earlier issued and served on the debtor.  That notice was issued by the Official Receiver for the New South Wales Bankruptcy District on 21 August 2000 and served on the debtor by the creditor on 4 September 2000.

3                     The bankruptcy notice was in a form which had, at an earlier date, been the appropriate form of bankruptcy notice.  However, by the time of the issue of the notice, regulations made under the Bankruptcy Act 1966 (Cth) (“the Act”) had amended the form of the bankruptcy notice which was to be used.  Those regulations had been made on 10 August 2000.  Notification of their making had been gazetted on 17 August 2000.  As it happens, those regulations had purported to operate retrospectively to 1 July 2000, but that is not a matter of any moment in the present case, given the date of issue of the bankruptcy notice, to which date I have already referred.

4                     The notice as issued contained, in pars 6, 7, 8 and 10, references to the Federal Court of Australia.

5                     Paragraph 6 referred to the ability of the Federal Court to extend the time for compliance with the notice.  Paragraph 7 referred to the power of the Federal Court to set aside the notice.  Paragraph 8 referred to the consequences of applying either for an extension of time for compliance with the notice or to have the notice set aside.  Finally, par 10 referred to the address of the Federal Court Registry for New South Wales.

6                     The form of bankruptcy notice which was appropriate at the date of the issue of the bankruptcy notice differed from that used by reason (relevantly) of the conferral of bankruptcy jurisdiction on the Federal Magistrates Court. 

7                     The  new form of bankruptcy notice contained, in par 5(b), a reference to  “the Court (that is, the Federal Court of Australia or the Federal Magistrates Court)”. Paragraphs 6, 7 and 8 of the new form of notice then simply referred to “the Court”.  There was no longer in the notice a paragraph 10, giving the address of any relevant Court Registry.

8                     The debtor filed a notice of intention to oppose the creditor’s petition.  The grounds of opposition to the creditor’s petition all related to the validity of the bankruptcy notice itself.  I have not given any independent consideration to the question whether, for any reason, the debtor should not be allowed to oppose the creditor’s petition on the basis that the bankruptcy notice was invalid, but, in any event, the parties have been content that I should deal with the validity of the notice and I do so accordingly.

9                     Four grounds of opposition to the creditor’s petition were relied on by the debtor.

10                  The first of them related to the omission from the notice as issued of any reference to the Federal Magistrates Court.  That ground read,

“The bankruptcy notice issued on 21 August 2000 fails to make reference to the jurisdiction of the Federal Magistrates Court in bankruptcy matters.  By omitting such references the notice fails to comply with the Bankruptcy Act 1966 and with the form of the notice as prescribed by the Bankruptcy Amendment Regulations 2000 (No2) made on 10 August 2000 and notified in the Australian Government Gazette on 17 August 2000.”

11                  The question of the validity of bankruptcy notices issued after the making and notification of the amending regulations, but containing no reference to the jurisdiction in bankruptcy of the Federal Magistrates Court, has been considered before by Judges of this Court.

12                  I refer first to a decision of Moore J, Lee v McNulty [2000] FCA 1519 (30 October 2000, unreported), and, in particular, to par [6] of his Honour’s reasons for judgment, at which he said, after referring to s 306 of the Act,

“It was submitted on behalf of the judgment creditors that the failure to comply with the form prescribed by the amending regulations does not constitute a failure to address a relevant requirement of the form.  Accordingly, and consistent with the decision of the Full Court in Trustees of the Franciscan Missionaries of Mary v Weir [2000] FCA 574, the defect can be treated as a formal defect or an irregularity that does not invalidate the proceedings.  I agree. In my opinion, no substantial injustice would have been caused by the defect or irregularity.  That is because the judgment debtor has not sought to avail herself of the rights she had which would have involved recourse to the Federal Court or its Registry.  It can be inferred she would not have similarly done so had she been informed that the Federal Magistrates Court (or its Registry) was another forum in which those rights could be pursued.  Moreover both Courts share, relevantly, in the State of New South Wales a common registry.”

13                  Moore J considered as well a further question which had arisen in the proceeding before him.  He said (at [7]),

“If the view I have taken about the scope of s 306 and its relationship to the prescribed form (which is, more generally, an issue which is not settled in this Court and is the subject of reserved judgment (reserved on 28 June 2000) of a five member Full Court in Metropolitan Fire & Emergency Services v Zemlic (V 7860 of 1999) and two other matters) and the import of the judgment of the Full Court in Trustees of the Franciscan Missionaries of Mary v Weir [2000] FCA 574 is not correct, then one would turn to s 48(2) of the Acts Interpretation Act 1901 (Cth).”

14                  His Honour did then turn to that subsection and held that the notice was valid by reference to that subsection as well.

15                  I have already said that there are two decisions of Judges of this Court which bear on the question of the validity of bankruptcy notices issued after the making and notification of the amending regulations, but containing no reference to the jurisdiction in bankruptcy of the Federal Magistrates Court.

16                  The second of those two decisions is the decision of Heerey J in Atkinson v Oakleigh Holdings Pty Ltd (2000) 105 FCR 15.  In his reasons for judgment in that case, Heerey J referred to Moore J’s decision in Lee.

17                  Heerey J first referred (at 18, [14]) to the fact that, in Lee, Moore J had held the notice to be valid on two bases:

“First, the failure to refer to the Federal Magistrates Court was a formal defect or irregularity which by virtue of s 306 did not invalidate the proceeding: Trustees of Franciscan Missionaries of Mary v Weir (2000) 98 FCR 447.  Secondly, s 48(2) of the Acts Interpretation Act 1901 (Cth) applied because retrospective operation of the regulation would affect the rights of a person so as to disadvantage that person.”

18                  Next, Heerey J referred (at 19, [15]) to the fact that, in Lee, Moore J had noted that conflicting Full Court authorities in relation to the new bankruptcy notice scheme were subject to a reserved decision of a five member Full Court.

19                  Then, Heerey J said (at 19, [16]),

“I have come to the same conclusion as Moore J but prefer to do so on the basis of s 48(2).  As to the first basis, since the sole criterion of a bankruptcy notice now is that it, ‘must be in accordance with the form prescribed by the regulations’ (s 41(2)), and the sole raison d’être of the amending regulations was to require a notice to refer to the Federal Magistrates Court as well as the Federal Court, it is not easy to see why this is not a requirement ‘made essential by the Act’: Kleinwort Benson Australia Ltd v Crowl (1988) 165 CLR 71 at 79.  A court is not at liberty to hold that some matters expressly required to be stated are essential but others, also the subject of express requirement, are not: Bendigo Bank Ltd v Williams (2000) 98 FCR 377 at 389.”

20                  It appears to me that I am then confronted with conflicting decisions, in the relevant sense at least, of individual Judges of this Court.  In Lee, Moore J gave as an independent, and, indeed, the primary, basis for his decision holding valid the relevant bankruptcy notice that s 306 of the Act cured any defect in the notice.  On the other hand, in Atkinson, Heerey J took the view that s 306 of the Act was not available in the circumstances of the case.

21                  When one turns to Kleinwort Benson at 79, one finds Mason CJ and Wilson, Brennan and Gaudron JJ saying,

“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….  In such cases the notice is a nullity whether or not the debtor in fact is misled….”

22                  It appears that in considering the availability of s 306 of the Act in Lee, Moore J focused on the second of the two circumstances referred to by the High Court in Kleinwort Benson as ones in which a bankruptcy notice is a nullity, that is, that the notice might reasonably mislead a debtor as to what is necessary to comply with a notice.  Moore J did not focus on the first of the two circumstances referred to by the High Court in Kleinwort Benson as ones in which a bankruptcy notice is a nullity (in other words, the first of the two circumstances in which s 306 of the Act cannot save the notice), that is, that the notice has failed to meet a requirement made essential by the Act.

23                  In view of what Heerey J had to say in Atkinson, it appears to me that I should proceed on the basis that the bankruptcy notice served on the debtor in the present matter was invalid by reason of its failure to refer to the Federal Magistrates Court.  What is more important, s 306 of the Act cannot save the notice for the reason given by Heerey J, namely, that the requirement to refer to the Federal Magistrates Court is “a requirement made essential by the Act” in the sense used in Kleinwort Benson.

24                  Given the view which I have just expressed, I consider it unnecessary for me to deal with any of the other grounds contained in the debtor’s notice of intention to oppose the creditor’s petition.

25                  The order which I will make, then, consistent with the view that I have taken about the validity of the bankruptcy notice, is to dismiss the creditor’s petition.  There will be, as well, an order that the creditor pay the debtor’s costs of the proceeding.

Associate:

Dated:              11 July 2001