Re Manion; Ex Parte Deputy Commissioner of Taxation [1979] FCA 1; (1979) 37 FLR 78 (5 February 1979)

FEDERAL COURT OF AUSTRALIA

Re MANION; Ex parte DEPUTY COMMISSIONER OF TAXATION (1979) 37 FLR 78
Bankruptcy

COURT

FEDERAL COURT OF AUSTRALIA
GENERAL DIVISION
Lockhart J.(1)

CATCHWORDS

Bankruptcy - Creditor's petition - Bankruptcy notice claiming unpaid balance of judgment debt and statutory interest thereon - Defects in form of notice - Amount of interest understated - Whether notice a nullity or defects curable - Bankruptcy Act 1966 (Cth.), ss. 40, 41, 306. The act of bankruptcy on which the petition for a sequestration order was based was a failure to comply with the requirements of a bankruptcy notice, the first paragraph of which was as follows: "WHEREAS the Deputy Commissioner of Taxation, one of whose addresses is first floor, 126 Church Street, Parramatta, (hereinafter referred to as "the judgment creditor") has claimed that the sum of $24,011.24 is due by you to him in the Supreme Court of New South Wales Common Law Division on 24th November, 1977, being the balance of a judgment the execution of which has not been stayed ($22,824.31 together with interest at the rate of $10 per cent per annum from 24th November, 1977, to the date of this notice ($1,186.93)."

The amount of the final judgment had been $24,658.99 with $26 costs; credits were allowed the debtor after judgment had been signed in the sum of $1,860.68, and the figure of $22,824.31 in the bankruptcy notice represented the balance due under the judgment, including costs, but not interest on the judgment.

It was argued for the debtor that the notice was a nullity on the grounds that: (a) the notice was not in the prescribed form and ambiguous and calculated to perplex the debtor by leaving him uncertain as to the sum alleged in the bankruptcy notice to be due under the final judgment; (b) the amount of statutory interest due on the judgment was understated in the notice; and (c) the copy bankruptcy notice served on the debtor, apparently the last of a number of carbon copies had typing insertions misplaced, resulting in the typing out of a material word or words in both par. (b) and the following paragraph of the notice, so that the debtor would not know what the notice required him to do or what were the consequences of noncompliance with its requirements.

The amount of interest claimed in the notice was understated because it was not known at the time of calculation when the registrar would sign the notice.

Held: (1) Where by statute a judgment debt carries interest, the judgment creditor may include in his bankruptcy notice a claim for interest.

Re Lehmann; Ex parte Hasluck (1890), 7 Morr 181; Re O'Keefe; Ex parte Australian Factors Ltd. (1963), 19 ABC 101; Re McDonald; Ex parte Elder Smith Goldsbrough Mort Ltd. (1978), 32 FLR 11, referred to.

(2) Although statutory interest is necessarily and inextricably attached to the judgment debt, it does not itself answer the description of the sum due by the debtor to the petitioning creditor under the final judgment. Re Munson; Ex parte Deputy Commissioner of Taxation (1977), 29 FLR 479, referred to.

(3) On the facts, although the opening paragraph of the bankruptcy notice left much to be desired, the defects in the notice could not be regarded as of a kind which could reasonably mislead the debtor, and did not render the notice a nullity.

Pillai v. Comptroller of Income Tax, (1970) AC 1124, referred to.

(4) If a balance of a judgment debt is claimed in a bankruptcy notice, that fact should be stated and the amounts paid or credited after judgment was signed should be specified. If interest is claimed, the notice should proceed to provide that interest is claimed at a particular rate from the date of judgment to the date specified in the notice. The total sum claimed to be due by the debtor to the petitioning creditor, inclusive of interest, should then be specified.

(5) The understatement of interest in the bankruptcy notice should not vitiate the notice in the circumstances, and the defect was curable under s. 306 of the Act.

Re Munson; Ex parte Deputy Commissioner of Taxation (1977), 29 FLR 479, followed.

Re H.B., (1904) 1 KB 94, referred to.

Re McDonald; Ex parte Elder Smith Goldsbrough Mort Ltd. (1978), 32 FLR 11; Re Schierholter; Ex parte Geis (1978), 32 FLR 22, distinguished.

(6) The typing over of material words in the notice in par. (b) and the following paragraph made them unclear in material respects, rendering the notice as a whole confusing and perplexing. The defects were fatal to the notice and incurable under s. 306 of the Act.

Re Barwick; Ex parte Leggett unreported, referred to.

James v. Federal Commissioner of Taxation [1955] HCA 75; (1955), 93 CLR 631; Re Boddie; Ex parte Amburys Ltd., (1933) NZLR 1012, distinguished.

(7) The petition should be dismissed.

HEARING

Sydney, 1978, November 28; 1979, February 5. 5:2:1979
PETITION.

The material facts are set out above.

P. Moggach, for the petitioning creditor.

P.M. Donohue, for the debtor.

Cur. adv. vult.

Solicitor for the petitioning creditor: Alan R. Neaves (Commonwealth Crown

Solicitor).

Solicitors for the debtor: Matthews, Dooley & Associates.
R.L. CRISP

DECISION

February 5.

The following judgment was delivered.
LOCKHART J. This is a petition for a sequestration order against the estate

of Kevin Robert John Warren Manion. (at p80)

2. The petitioner is the Deputy Commissioner of Taxation. The act of bankruptcy on which the petition is based is the failure by the debtor to comply with the requirements of a bankruptcy notice. (at p80)

3. The debtor filed an amended notice of intention to oppose the petition stating the grounds on which he intended to rely in opposition to the petition. The only ground relied on before me was ground (d) namely, a denial by the debtor that he committed the act of bankruptcy. The submissions of counsel for the debtor in support of this ground all related to alleged defects in the bankruptcy notice which were said to invalidate it. (at p80)

4. To understand the submissions it is necessary to examine the precise form of the bankruptcy notice which, the parties agreed, was served on the debtor. A copy of this bankruptcy notice is provided opposite. (at p80)

5. The first submission made on behalf of the debtor is that the bankruptcy notice is ambiguous and calculated to perplex the debtor by leaving him uncertain as to the sum alleged in the bankruptcy notice to be due by the debtor to the petitioning creditor under the final judgment. (at p80)

6. Counsel for the debtor relied on the opening paragraph of the bankruptcy notice in support of his submission namely: "WHEREAS the Deputy Commissioner of Taxation, one of whose addresses is first floor, 126 Church Street, Parramatta, (hereinafter referred to as "the judgment creditor") has claimed that the sum of $24,011.24 is due by you to him under a final judgment obtained by him in the Supreme Court of New South Wales Common Law Division on 24th November, 1977, being the balance of a judgment the execution of which has not been stayed ($22,824.31 together with interest at the rate of $10 per cent per annum from 24th November, 1977, to the date of this notice ($1,186.93)." (at p80)

7. It is common ground that the amount of the final judgment signed by the petitioning creditor against the debtor in the Supreme Court of New South Wales on 24th November, 1977, was

(Refer 37 F.L.R., 1979, at p. 81 for document.)

$24,658.99 together with $26 for costs. Mr. Moggach, who appeared for the petitioning creditor, told me that credits were allowed the debtor by the petitioning creditor after judgment had been signed against the debtor in the sum of $1,860.68, and that the figure $22,824.31 appearing in the bankruptcy notice represents the balance of the moneys due under the judgment including the $26 costs but excluding interest on the judgment. Mr. Donohue of counsel for the debtor did not concede that the amount of credits allowed by the petitioning creditor was $1,860.68; but no evidence was led by either party on that matter. (at p81)

8. Section 40(1) of the Bankruptcy Act 1966 ("the Act") provides, so far as relevant for present purposes: "A debtor commits an act of bankruptcy . . .

(g) If a creditor who has obtained against a 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 . . . a bankruptcy notice under the Act and the debtor does not (within the time allowed) 'comply with the requirements of the notice or satisfy the Court that he has a counter-claim, setoff or cross-demand' of the specified kind." (at p82)

9. Section 41 of the Act provides that a bankruptcy notice shall be in the prescribed form and that the prescribed form shall be such that the notice requires the debtor named in it, within the appropriate time, to pay "the judgment debt or sum ordered to be paid in accordance with the judgment or order", or to secure or compound the payment of such debt or sum. (at p82)

10. Form 4 is the prescribed form and provides, so far as relevant for present purposes: "WHEREAS (name and address of judgment creditor) (hereinafter referred to as "the judgment creditor") has claimed that the sum of $ is due by you to him under a final judgment (or order) obtained by him against you in the court of on the day of 19 , being a judgment (or any order) the execution of which has not been stayed: . . ." (at p82)

11. Counsel for the debtor submitted that the bankruptcy notice in the present case does not follow the prescribed form as it fails to set out in the space following the first dollar sign the sum which is claimed by the petitioning creditor to be due under the final judgment. (at p82)

12. The problem in the present case arises principally because the petitioning creditor has claimed interest on the amount due under the judgment. The figure $24,011.24 is the sum of what is claimed to be the balance of the amount due under the judgment namely $22,824.31 together with interest from the date of the judgment to the date of the bankruptcy notice, stated as being $1,186.93. (at p82)

13. Counsel for the debtor submitted that although the petitioning creditor was entitled to include in the bankruptcy notice a claim for interest on the amount of the judgment, this should appear after the statement of the amount due under the judgment. (at p82)

14. Where by a statute a judgment debt carries interest, the judgment creditor may include in his bankruptcy notice a claim for interest. See Re Lehmann; Ex parte Hasluck per Cave J. (1890) 7 Morr 181, at p 183 ; Re O'Keefe; Ex parte Australian Factors Ltd. per Clyne J. (1963) 19 ABC 101, at p 104 ; and Re McDonald; Ex parte Elder Smith Goldsbrough Mort Ltd. per Riley J. (1978) 32 FLR 11, at p 12 . (at p82)

15. Interest on a judgment of the Supreme Court of New South Wales was described by Riley J. in Re Munson; Ex parte Deputy Commissioner of Taxation (1977) 29 FLR 479 in these terms: "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 p 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, at p 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 p 525 per Vaughan Williams J.; cf. Re O'Keefe; Ex parte Australian Factors Ltd. (1963) 19 ABC, at pp 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 Commissioner of Taxation (1963) 19 ABC 100 ; Re O'Keefe; Ex parte Australian Factors Ltd. (1963) 19 ABC 101 " (1977) 29 FLR, at p 482 . (at p83)

16. 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. (at p83)

17. It was submitted on behalf of the debtor that the form of the bankruptcy notice leaves one uncertain whether the sum of $22,824.31 is the balance of the judgment. Counsel for the debtor submitted that the proper construction of the bankruptcy notice leaves one to conclude that the sum of $22,824.31 is claimed by the petitioning creditor as being the amount of the judgment rather than the balance due thereunder. He submitted that the confusion is increased because it appears from an examination of the bankruptcy notice served on the debtor that it is a second, third or later carbon copy of the original and the typed part thereof has, as he put it, "run up the page", with the result that it is difficult to read and is confusing. (at p84)

18. In my opinion the opening paragraph of the bankruptcy notice leaves much to be desired. It would be clearer if it stated in the space following the first dollar sign either the amount of the final judgment or the balance thereof due at the date on which the bankruptcy notice is issued. If it is the balance of the judgment that it claimed, that fact should be stated and the amounts paid or credited after judgment was signed should be specified. If interest is claimed, the notice should proceed to provide that interest is claimed at a particular rate from the date of judgment to the date specified in the notice. The total sum claimed to be due by the debtor to the petitioning creditor, inclusive of interest, should then be specified. (at p84)

19. Notwithstanding that the bankruptcy notice is not in this form I do not regard it as perplexing a debtor to the point where he could not readily understand it. He can by reading the first paragraph see that $24,011.24 is the sum of $22,824.31 and $1,186.93. The typing in the first paragraph is not as clear as it should be, but it is going too far to say that a debtor would be perplexed or confused by it. (at p84)

20. The test to be applied in determining whether a defect in a bankruptcy notice is a formal defect or irregularity within the meaning of s. 306 or a defect that renders the bankruptcy notice a nullity has been stated in many authorities. In Pillai v. Comptroller of Income Tax (1970) AC 1124 , a decision of the Privy Council on appeal from the Federal Court of Malaysia, Lord Diplock, who delivered the opinion of the board, said: "But there is relevant authority upon the construction of the identical words in section 147(1) of the English Bankruptcy Act, 1914. It is implicit in the section that proceedings in bankruptcy may be so defective as to render them a nullity notwithstanding that no substantial and irremedial injustice has in fact been caused by the defect. The section draws a distinction between such a defect and a 'formal defect or irregularity'. It is only the latter which are validated by the section, provided that no substantial and irremedial injustice has been caused. (at p84)

21. "What, then, is a 'formal defect or irregularity' within the meaning of the section? This was discussed in relation to a bankruptcy notice in In re A Debtor (No. 21 of 1950); Ex parte the Debtor v. Bowmaker Ltd. (1951) Ch 313 , in which the earlier authorities were considered. The test there laid down was whether the defect in the notice was of such a kind as could reasonably mislead a debtor upon whom it was served. If it was, the notice was not validated by the section notwithstanding that the particular debtor upon whom it was served was not in fact misled. If, on the other hand, it could not reasonably mislead the debtor it was a formal defect and validated by the section. Their Lordships are here only concerned with the application of the section to a bankruptcy notice. They are not concerned with whether the same test is appropriate to determine the validity of subsequent steps in bankruptcy proceedings. In their view any failure to comply with the statutory provisions as to the form of a bankruptcy notice of a kind which could not reasonably mislead a debtor upon whom it is served is a 'formal defect' and validated by the section" (1970) AC, at p 1135 . (at p85)

22. Section 147(1) of the English Bankruptcy Act, 1914, is equivalent to s. 306 of the Act. (at p85)

23. In my opinion the defects relied on by the debtor in this case are not of such a kind as could reasonably mislead a debtor upon whom it was served. (at p85)

24. The second submission by counsel for the debtor is that the amount of interest ($1,186.93) claimed in the bankruptcy notice to be due from the date of judgment, namely 24th November, 1977, to the date of the bankruptcy notice, namely 22nd June, 1978, is incorrectly stated. It should be a lesser figure. The parties have not agreed as to what that figure should be. The debtor's calculation of the understated interest is $126.24; and the petitioning creditor's calculation is $193.84. The difference appears to arise from the adoption of different methods of calculation. (at p85)

25. I was informed by Mr. Moggach that the understatement of interest arose because officers of the deputy commissioner at his Parramatta office calculated the amount of interest up to 22nd May, 1978, as they did not know on what date the registrar would sign the bankruptcy notice. (at p85)

26. The practise is for a petitioning creditor, seeking to have the registrar issue a bankruptcy notice, to lodge an application for the issue of the bankruptcy notice under r. 7(2) together with a certificate of judgment and copies of the form of bankruptcy notice for signature by the registrar. It does not follow that the bankruptcy notice will be issued on the same day as the day on which it is applied for. (at p85)

27. I notice that the application for the issue of a bankruptcy notice in the present case is dated 22nd June, 1978, and that the bankruptcy notice bears the same date. (at p85)

28. In Re Munson; Ex parte Deputy Commissioner of Taxation Riley J. said: "It may be as well to point out that the assumption that a bankruptcy notice will be issued on, and will bear the same date as, the day on which it is applied for is not justified by the Act or Rules and cannot properly be made. The bankruptcy notice is the registrar's document, not the applicant's; and it is dated by the registrar, not by the applicant. It is the registrar who issues it: Bankruptcy Act 1966-1973, s. 41(1)(b). The application for its issue is accompanied by copies of it, as it were in draft, for his signature: r. 7(2)(b); where it is to be served in Australia it is he who fixes the time for compliance with it: s. 40(1)(g); and he will sign it and issue it only when he is satisfied that the application has been 'duly' made and that the bankruptcy notice is in order for signature: r. 7(5). Obviously it is not contemplated that the bankruptcy notice will necessarily be issued immediately the application is filed, or even on the day on which it is filed: and an examination of twenty-five current files chosen at random shows that in practice it was so issued in only twelve of those cases and that in the other thirteen cases the dates of application and of issue differed by from one to as many as fourteen days" (1977) 29 FLR, at pp 480-481 . (at p86)

29. Whatever the reason, the fact is that the sum of $1,186.93 appearing on the bankruptcy notice understates by $126.24 or $193.84 the amount of interest due on the judgment or balance thereof to the date of the notice namely 22nd June, 1978. Hence not only is that figure erroneous so is the total of $24,011.24, as it represents the sum of the balance due on the judgment and $1,186.93. (at p86)

30. Do these defects vitiate the bankruptcy notice or are they curable under s. 306? (at p86)

31. The same question arose for determination by Riley J. in Munson's case. The petitioning creditor, the Deputy Commissioner of Taxation, obtained a judgment against the debtor in the Supreme Court of New South Wales for $26,349.58 and $14.50 costs, a total of $26,364.08. The judgment took effect on 29th December, 1975, and interest at ten per cent per annum was payable from that date on so much of the money as was from time to time unpaid by virtue of the Supreme Court Act and the Supreme Court Rules. Nothing had been paid and interest had accrued at the rate of $7.22 a day. (at p86)

32. On 16th June, 1976, the deputy commissioner addressed to the registrar in bankruptcy an application dated that day for the issue of a bankruptcy notice. With it he lodged a certificate of judgment and copies of a form of bankruptcy notice for signature by the registrar. Each of those copies recited that the deputy commissioner had claimed "that the sum of $27,548.65 is due by you to him under a final judgment obtained by him in the Supreme Court of New South Wales on 29th December, 1975, being the amount of a judgment the execution of which has not been stayed ($26,364.08) together with interest at the rate of $10 per centum per annum from 29th December, 1975, to the date of this notice ($1,184.57)" (1977) 29 FLR, at p 480 , and required the debtor to pay the sum of $27,584.65, or, in the usual terms, to secure or compound. (at p86)

33. The bankruptcy notice was issued by the registrar on and was dated 28th June, 1976. In fact at that date interest amounting to $1,307.36 had accrued on the judgment debt, so that the bankruptcy notice as issued understated the amount payable "to the date of this notice" for judgment and interest by $122.79. The deputy commissioner had assumed that the bankruptcy notice would be issued on the day on which it was applied for; but he miscalculated the amount of the interest, and the figure supplied to his Honour showed that even had his assumption been correct, the amount of accrued interest would have been understated by $36.11. (at p87)

34. His Honour referred to the judgment of Romer L.J. in Re H.B. (1904) 1 KB 94 . In that case the creditor and debtor agreed in writing that the debt should stand at a certain sum and that the debtor should consent to a judgment against him for that sum, but that the amount should be payable by instalments. Judgment was signed for the whole sum but without any reference to payment by instalments. The debtor failed to pay some of the instalments as they fell due and the creditor served him with a bankruptcy notice requiring payment, not of the whole judgment debt, the final instalment of which had not become due, but of the total amount of the instalments then in arrears and expressed as being "the amount due on the judgment". The agreement was silent as to the whole of the instalments being deemed to become due on default in payment of any one of them. (at p87)

35. The Court of Appeal held that the bankruptcy notice required the debtor to pay the judgment not "in accordance with the terms of the judgment" but in accordance with the judgment as modified by the agreement. Riley J. (1977) 29 FLR, at p 481 referred to the following passage in which Romer L.J. said: "Now I think it is clear that, when you have a judgment in the form that we have here, a bankruptcy notice under the Act must require payment of a sum alleged to be due according to the terms of the judgment - that is to say, it must state the amount that is claimed as remaining unpaid on the judgment debt. Clearly, in a bankruptcy notice the debtor is entitled to see from the notice exactly what is claimed to be due on the judgment debt. No doubt a sum might be claimed which is less than the real amount due, and that would not of course be fatal to the notice so long as the notice made it clear that nothing more was claimed to be due on the judgment beyond the amount specified in the notice. But a notice to pay part of a judgment debt, leaving any balance that may be due to be subsequently claimed is, to my mind, clearly bad" (1904) 1 KB, at p 103 . (at p87)

36. Riley J. held the principles expressed by Romer L.J. were not applicable to the case where any deficiency in the bankruptcy notice is merely one of understatement of the amount of the statutory interest accrued on the amount of the judgment, unless in a particular case the understatement is such as to perplex and embarrass the debtor. His Honour said: "In the present case I do not think it can reasonably be said that the debtor, who was accurately told by the bankruptcy notice that his judgment debt amounted to $26,364.08, and that the rate of interest on it was $10 per cent per annum, could be perplexed or embarrassed by the interest on that debt being stated at $122.79 less than it really was. In my opinion this is a proper case for the application of s. 306(1) and I do not think that the bankruptcy notice should be held invalid" (1977) 29 FLR, at p 483 . (at p88)

37. In my opinion, these statements by Riley J. apply to the facts of the present case so far as concerns the understatement of interest. (at p88)

38. In Re McDonald; Ex parte Elder Smith Goldsbrough Mort Ltd. (1978) 32 FLR 11 the petitioning creditor obtained a judgment against the debtor in the Supreme Court of New South Wales for $10,648.75 plus $98 costs, a total of $10,746.75. Interest was payable on so much of that sum as was from time to time unpaid at the rate of ten per cent per annum by reason of s. 95(1) of the Supreme Court Act, 1970 (N.S.W.), and the Supreme Court Rules. The bankruptcy notice claimed the sum of $8,213.50 together with interest thereon at the rate of five per cent per annum from 17th February, 1965, amounting to $1,016.24 at the date of the notice, namely 3rd May, 1977. That made a total of $9,229.74. (at p88)

39. In fact, on 12th January, 1976, the debtor had paid $2,435.25 so that the unpaid balance as at 3rd May, 1977, was $8,311 not $8,213.50. Interest ran at the rate of ten per cent per annum not five per cent per annum on $10,746.75 from 17th February, 1975, to 12th January, 1976, and on $8,311.50 thereafter until 3rd May, 1977, amounting to $2,449.44 and not $1,016.24. The total of unpaid debt plus interest at 3rd May, 1977, was $10,360.94 not $9,229.74. (at p88)

40. Riley J. held that the bankruptcy notice was invalid. His Honour said that the bankruptcy notice must be looked at as a whole; that it suffered from a number of deficiencies; it claimed, as being due under the judgment, an amount less than the balance which remained due and unpaid after part payment of the sum due under the judgment; and was silent as to the difference between that amount and that balance. His Honour held that that description precisely fitted the case of Re H.B. (1904) 1 KB 94 in which the bankruptcy notice was held to be invalid. His Honour cited with approval the passage from the judgment of Romer L.J. which I have already set out. (at p88)

41. His Honour held that the rate of interest was wrongly stated and the amount of interest due was wrongly calculated with the result that both it and the total of the claims for unpaid debt and for interest were understated by amounts "amply sufficient to prevent any application of s. 306(1)". (at p88)

42. His Honour did not refer to his earlier decision in Munson's case (1977) 29 FLR 479 doubtless because it dealt with a different question. (at p88)

43. In my opinion McDonald's case has nothing to say about the question which arises in the case before me. (at p89)

44. In Re Schierholter; Ex parte Geis (1978) 32 FLR 22 the bankruptcy notice alleged a debt of "the sum of $2,735.95 . . . due . . . under a final judgment" and it went on to require payment of this sum or, that payment be secured or compounded. The judgment was in respect of the sum of $3,631.55 plus costs. The costs payable under the judgment were a total of $198.90 consisting of $104.40 being general costs on the relevant court scale which were taxed by the registrar and $94.50 being the costs of the application for final judgment. (at p89)

45. An amount of $1,000 had been paid before the issue of the bankruptcy notice. The amount outstanding under the judgment in respect of judgment debt and costs was therefore $2,830.45. If costs were ignored, the amount outstanding was $2,631.55. The amount claimed in the bankruptcy notice, namely $2,735.95, represented the amount of the judgment debt and part only of the costs which had been ordered to be paid under the judgment. (at p89)

46. It was held by the Full Bench of this Court, Nimmo, Franki and Deane JJ. that a bankruptcy notice does not comply with the requirement of s. 41 of the Act where it specifies a lesser sum than the judgment debt, unless the notice makes it clear that nothing more is claimed to be due under the judgment debt. (at p89)

47. Their Honours applied the principles enunciated in Re H.B. (1904) 1 KB 94 ; by Clyne J. in Nirens v. Fowler Asphalt Pty. Ltd. (1966) 9 FLR 255, at p 256 ; and by Manning J. in Re Jack; Ex parte C.V. Holland (Holdings) Ltd. (1959) 19 ABC 268 . Their Honours referred to the decision of Riley J. in Munson's case without disapproval. (at p89)

48. Schierholter's case is distinguishable from the present case. It did not involve the question of understatement of the amount of interest due from the date of judgment to the date of the bankruptcy notice. It was a case that turned very much upon its own rather unusual facts. Also the petitioning creditor and the debtor both joined in seeking that the sequestration order be set aside. It appears from the reasons of Franki J. that the authorities which were referred to relating to the validity of the bankruptcy notice were not challenged before their Honours by either party. (at p89)

49. In my opinion the understatement of the amount of statutory interest accrued from the date of judgment to the date of the issue of the bankruptcy notice does not vitiate the bankruptcy notice. The debtor was told by the notice that the balance due under the judgment was $22,824.31. There was no evidence to suggest that this was an inaccurate figure. The debtor was also told that the petitioning creditor claimed interest at the rate of $10 per cent per annum. (at p89)

50. The bankruptcy notice must be read as a whole. I have said earlier that the composition of the first paragraph of the bankruptcy notice commencing with the words "WHEREAS the Deputy Commissioner of Taxation . . . " leaves much to be desired; but even when coupled with the understatement of the amount of interest the debtor could not be said to have been perplexed and embarrassed by it. (at p90)

51. I turn to the final attack made by the debtor on the bankruptcy notice. Counsel for the debtor submitted that the copy of the bankruptcy notice served on the debtor, and apparently the last in the chain of a number of copies which had been typed, was typed "up the page" and had resulted in the typing out of a word or words both in par. (b) and the following paragraph commencing with the words "and further take notice that . . ." so that the debtor would not know what the bankruptcy notice required him to do or what the consequences were if he did not comply with those requirements, whatever they may be. (at p90)

52. The form of bankruptcy notice used by the petitioning creditor is an old form referring to the Federal Court of Bankruptcy rather than to the Federal Court of Australia. Hence the need for the deletion of the word "Bankruptcy" and the substitution of the word "Australia" in par. (b) and in the following paragraph. Had this been done without obscuring any of the remaining printed words, this argument would not have been available to the debtor. (at p90)

53. Mr. Moggach contended that it was possible to read the word "Australia" where it had been typed in and that one should reasonably construe the bankruptcy notice, so that it would be assumed by any person that it was intended by the draughtsman to delete the word "Bankruptcy" and type over it the word "Australia". This assumes, amongst other things, that the word "Australia" in type is clear. In my opinion the typed words cannot be read clearly or at all. Indeed, for my part, I cannot make out the word "Australia" where it is typed in par. (b), although I can vaguely discern it in the following paragraph. But whether one can read the word "Australia" or not, the fact is that it is typed over printed words which cannot be read except that by a very careful study of the words in the paragraph commencing "And further take notice" one can possibly make out the words "to comply" appearing in print underneath the typed word which may be "Australia". Why should a debtor be put to the trouble of producing a magnifying glass, if he has one, to try and make sense of the words of a document, noncompliance with which constitutes an act of bankruptcy with quasi-penal consequences? (at p90)

54. What is the effect of those two paragraphs having no sufficiently clear meaning, or, indeed any meaning at all? (at p90)

55. Counsel for the debtor referred me to the decisions of James v. Federal Commissioner of Taxation [1955] HCA 75; (1955) 93 CLR 631 ; Re Boddie; Ex parte Amburys Ltd. (1933) NZLR 1012 , and a decision of Wanstall S.P.J. in Re Barwick; Ex parte Leggett unreported but noted in the Australian Bankruptcy Bulletin, vol. 41, April 1975, at p. 3578. (at p91)

56. James v. Federal Commissioner of Taxation is a decision of the High Court and authority for the proposition that a bankruptcy notice is defective if it does not notify the debtor that he may in the alternative secure the debt to the satisfaction of the court or the judgment creditor or compound it to the satisfaction of the judgment creditor; and that such a defect is fatal to the bankruptcy notice. Re Boddie; Ex parte Amburys Ltd. (1933) NZLR 1012 says much the same. (at p91)

57. In Barwick's case the bankruptcy notice required the debtor: "(a) to pay the sum of $563.50 so claimed by the judgment creditor to the judgment creditor; or (b) to secure the payment of the sum referred to in the last preceding paragraph to the satisfaction of the Supreme Court of Queensland exercising federal jurisdiction in bankruptcy on the judgment creditor or compound the sum so specified to the satisfaction of the judgment creditor." Wanstall S.P.J. said: "It is regrettable that it is my opinion . . . that the defect is incurable and that I should follow the decision of the High Court in James' case. It seems to me to be indistinguishable from this situation. And that, of course, is regrettable because it is a typographical error and due entirely to inadvertence. Of course, that was the position in Boddie's case a New Zealand case referred to by the registrar." His Honour dismissed the petition. (at p91)

58. The defects in the two paragraphs of the bankruptcy notice in the present case are more serious than those in Barwick's case the typing over of words in par. (b) and the following paragraph render them unclear in material respects, thus making the bankruptcy notice as a whole confusing and perplexing. In my opinion the defects are fatal to the bankruptcy notice and they prevent the application of s. 306(1). (at p91)

59. I dismiss the petition and order the petitioning creditor to pay the debtor's costs. (at p91)

ORDER

Petition dismissed with costs.