Re David Ian Walsh Ex Parte: the Flying Tiger Line Inc [1985] FCA 399; (1985) 7 FCR 579 (29 October 1985)

FEDERAL COURT OF AUSTRALIA

Re: DAVID IAN WALSH
Ex Parte: THE FLYING TIGER LINE INC. (1985) 7 FCR 579
No. P1346 of 1985
Bankruptcy

COURT

IN THE FEDERAL COURT OF AUSTRALIA
GENERAL DIVISION
BANKRUPTCY DISTRICT OF NEW SOUTH WALES AND THE AUSTRALIAN CAPITAL TERRITORY
Beaumont J.(1)

CATCHWORDS

Bankruptcy - bankruptcy notice requiring payment in Australian dollars based on Supreme Court judgment expressed in U.S. dollars - notice bad because conversion to Australian dollars effected as at date of judgment rather than as at date of issue of notice - no notification to debtor of alternative rates of payment.

Bankruptcy - Judgment in foreign currency - Bankruptcy notice required payment of equivalent sum in Australian dollars - Exchange rate on day of judgment used in calculation - Whether appropriate exchange rate - Whether notice defective - Bankruptcy Act 1966 (Cth), s 41. Held: (1) A bankruptcy notice in respect of a judgment in foreign currency which required the debtor to pay an amount in Australian dollars calculated at the rate of exchange on the day of judgment was defective in that it was capable of misleading the debtor as to the manner in which he might pay the debt.

(2) The notice should make it clear to the debtor that he must pay the amount specified in foreign currency or its equivalent in Australian currency at the appropriate rate of exchange on the day of payment.

(3) Where a bankruptcy notice specifies the amount of the equivalent sum in Australian dollars, the appropriate exchange rate should be that of the date of issue of the notice. In addition, however, the notice should inform the debtor that, because of currency fluctuations, the exchange rate may have changed by the time of service; and that, in this event, in order to comply with the notice if payment is to be made in Australian dollars, that payment should be made by reference to the rate of exchange then current.

Re Ikin; Ex parte Same & Lamborghini; Tractors of Australia Pty Ltd (1985) 4 FCR 582; Walsh v. Deputy Commissioner of Taxation (1984) 58 ALJR 368; Downey v. Pryor [1960] HCA 49; (1960) 103 CLR 353; Maschinenfabrik Augsburg-Nurenburg Aktiengesellschaft v. Altikar Pty Ltd (1984) 3 NSWLR 152, referred to.

HEARING

Sydney, 1985, October 28-29. 29:10:1985
PETITION

Petition in bankruptcy.

P Urquhart, for the petitioning creditor.
Cur adv vult

Solicitors for petitioning creditor: Smithers Warren Davenport Mant.
SMW

ORDER

The Petition be dismissed.

Note: Settlement and entry of orders is dealt with by Bankruptcy Rule 124 of the Bankruptcy Act, 1966.

Petition dismissed

DECISION

In this bankruptcy petition, a question has arisen as to the validity of the bankruptcy notice relied on by the petitioning creditor, The Flying Tiger Line Inc. Omitting formal parts, the notice, which was issued on 20 June 1985 and addressed to the debtor, David Ian Walsh, was in the following terms:

"To: David Ian Walsh of 77 New Beach Road,
Darling Point, New South Wales, Company Director

WHEREAS THE FLYING TIGER LINE INC. a Company
duly incorporated according to the laws of the
State of Delaware in the United States of
America and registered as a foreign company in
New South Wales having its registered office
therein at Level 17, Exchange Centre, 20 Bond
Street, Sydney (hereinafter referred to as "the
Judgment Creditor") has claimed:

1. The sum of $US276,150.00 due by you to it
under a final judgment obtained by it
against you in the Supreme Court of New
South Wales at Sydney on 6 December 1984
being the sum of $A324,119.71 which is the
equivalent sum in Australian dollars to the
judgment sum of $US276,150.00 at an
exchange rate of $US0.8520 to $A1.00 as at
6 December 1984 together with interest
(there specified)...AND

2. Interest (further specified)... making a
total of $A560,117.05 the said judgment
being a judgment the execution of which has
not been stayed.

THEREFORE TAKE NOTICE that within fourteen (14)
days after service of this Notice on you,
excluding the day on which this Notice is served
on you, you are required:-

(a) to pay the sum of $A560,117.05 so claimed
by the Judgment Creditor to the Judgment
Creditor; or...."

2. By a judgment to take effect on 6 December 1984, the petitioner recovered judgment in the Supreme Court of New South Wales against the debtor and two other defendants in the sum of $US276,150.00 together with interest and costs.

3. In Re Ikin; Ex parte Lamborghini Tractors of Australia Pty. Ltd. (1985) 58 ALR 759 Pincus, J. set aside a bankruptcy notice which recited a judgment of the Supreme Court of Queensland giving judgment for the petitioning creditor in the sum of $US338,351.79 together with interest in the sum of $US144,276.90. The notice required the debtors "to pay the sum of $US482,628.69 so claimed by the judgment creditor to the judgment creditor." In holding that the notice was bad, Pincus, J. rejected the contention that the notice made it clear that under the notice the debtor might pay in the equivalent amount of Australian currency (at p.761). Pincus, J. further held that the "requirement of payment in American dollars simpliciter (was)...such a significant departure from the statutory form that it does not fulfil the requirement in s.41(1)(a)" (at p.762).

4. The present notice is not vitiated by the flaw perceived by Pincus, J. in Ikin. Yet a separate question arises here as to the date at which the conversion into Australian currency took place: the calculation was made as at 6 December 1984, whereas the notice was not issued until 20 June 1985.

5. In Walsh v. Deputy Commissioner of Taxation (1984) 53 ALR 606, the High Court held that a bankruptcy notice speaks as at the date of its issue so that the amount to be stated in the notice is the amount of the judgment debt owing as at that date. Consistently with that holding, in determining whether there has been compliance with a bankruptcy notice, account must be taken of a payment made before service but after issue of the notice (per Gibbs, C.J. at p.608).

6. It follows that, in the present case, the conversion from the U.S. dollar amount specified in the judgment should have been carried out as at the date of issue of the notice rather than as at the effective date of the judgment. The petitioner accepts that, by reason of currency fluctuations, the exercise of converting the amount of the judgment debt into Australian dollars as at the time of issue of the notice would yield a result different from the conversion stated in the notice.

7. In my opinion, the notice fails to make it clear to the debtor that, in order to comply with the notice he must pay to the petitioner the amounts specified in the Supreme Court judgment in United States currency or its equivalent in Australian currency. The notice should notify the debtor that, because of currency fluctuations, the exchange rate used in calculating the amount owed as at the date of issue of the notice may have changed by the time of service of the notice, and that in this event, in order to comply with the notice by payment of the judgment debt in Australian currency, payment should be made by reference to the rate of exchange then current.

8. Any calculation required for these purposes should be made by reference to the rate current in Australia for the purchase of one U.S. dollar at the close of business on the date next or most nearly preceding the date of issue of the notice or the date of payment of the amount recovered under the judgment as the case may be (see Practice Direction (Judgment: Foreign Currency) (1976) l W.L.R. 83 at p.84). Although no such procedure is prescribed by the Bankruptcy Rules, it is appropriate in the circumstances (see Downey v. Pryor [1960] HCA 49; (1960) 103 CLR 353 at p 362; cf. Maschinenfabrik Augsburg-Nurenburg Aktiengesellschaft v. Altikar Pty. Ltd. (1984) 3 NSWLR 152).

9. Since the present bankruptcy notice failed to notify the debtor of these alternatives, it was bad as capable of misleading him as to the manner in which he might pay the debt (See James v. Federal Commissioner of Taxation [1955] HCA 75; (1955) 93 CLR 631 at pp 643-4).

10. In the result, the petiion must be dismissed.