FEDERAL COURT OF AUSTRALIA

John Fairfax Publications Pty Ltd v Naranjo [2003] FCA 775

JOHN FAIRFAX PUBLICATIONS PTY LTD v NARANJO & ANOR

N 7158 OF 2003

STONE J

22 JULY 2003

SYDNEY

THE COURT DECLARES THAT:

1.         The bankruptcy notice issued on 9 April 2003 is invalid. 

THE COURT ORDERS THAT:

2.         The application to amend the bankruptcy notice be dismissed. 

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

REASONS FOR JUDGMENT

1                     The applicant in this matter appears pursuant to a referral from Deputy District Registrar Hedge.  Although there is no formal notice of motion I am prepared to treat the applicant’s oral application as such.  That application is for the Court, by exercise of its powers under s 306(1) of the Bankruptcy Act 1966 (Cth) (‘Bankruptcy Act’), to cure a formal defect in a bankruptcy notice issued on 9 April 2003 and served on the first and second respondents, on 23 April 2003 and 25 April 2003 respectively.

2                     The formal requirements for a bankruptcy notice are set out in regulation 4.02 of the Bankruptcy Regulations 1996 (Cth):

‘(1)      For the purposes of subsection 41(2) of the Act, the form of bankruptcy notice set out in Form 1 is prescribed. 

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

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

3                     Form 1 relevantly includes:

‘Note 2:  Interest accrued (item 3 of the Schedule)

If interest is being claimed in this Bankruptcy Notice, details of the calculation of the amount of interest claimed are to be set out in a document attached to this Bankruptcy Notice.  The document must state:

(a)               the provision under which the interest is being claimed; and

(b)       the principal sum on which, the period for which, and the interest rate or rates at which, the interest is being claimed.’  (emphasis added)

4                     The defect in the bankruptcy notice presently before me is a failure to comply with the requirement to specify the provision under which the interest is claimed.  The bankruptcy notice refers to s 95(1) of the Supreme Court Act 1970 (NSW) (‘Supreme Court Act’) as the provision on which the interest calculation on the debt is based whereas, the applicant concedes, that the correct provision is s 39(1) of the Local Courts (Civil Claims) Act 1970 (NSW) (‘Local Court Act’). 

5                     The applicant asks the Court to ‘amend’ the bankruptcy notice to cure the defect exercising its power under s 306(1) of the Bankruptcy Act which provides:

‘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.’

6                     If the power in s 306 were to be exercised, it would not, in my view, take the form of an amendment to the bankruptcy notice but rather a decision of the Court that the defect had not caused an injustice that could not be remedied by some order of the Court.  There is however, a major obstacle to the exercise of that power, namely the decision of the Full Court in Marshall v General Motors Acceptance Corporation Australia [2003] FCAFC 45 (‘Marshall’).  In that case, the majority of the Full Court, Cooper and North JJ held that the same defect in the bankruptcy notice as is before me today, namely the basing of the claim for interest on s 95(1) of the Supreme Court Act when it was properly s 39(1) of the Local Court Act was fatal to the validity of the notice.  In doing so theyfollowed, over a vigorous dissent by Spender J, the earlier Full Court decision in Australian Steel Company (Operations) Pty Ltd v Lewis (2000) 109 FCR 33. 

7                     The applicant concedes that I am bound by the decision in Marshall and, unless the circumstance of this case can be distinguished, it must follow that the applicant’s bankruptcy notice is invalid and that I dismiss the application to make an order under s 306. 

8                     The applicant made a valiant attempt to distinguish Marshall on the basis that it had sent a letter to the respondents notifying them of the defect in the bankruptcy notice and of the provision on which the interest calculation was properly based.  That letter was dated 1 July 2003.  The creditor’s petition in this matter reveals that the purported acts of bankruptcy by the first and second respondents occurred on 14 May 2003 and 16 May 2003 respectively.  Had the applicant notified the respondents of the true position prior to these dates I would have had to consider if such clarification could prospectively cure an otherwise defective bankruptcy notice.  In the circumstances I do not have to decide this point.  I am, however, satisfied that it cannot validate an invalid notice with the effect of retrospectively converting a failure to comply with the then invalid notice into an act of bankruptcy. 

9                     The bankruptcy notice issued by the applicant on 9 April 2003 is invalid and the application is dismissed.

Associate:

Dated:              24 July 2003