Re Keith Laurence Draper Ex Parte: Australian Society of Accountants [1989] FCA 10 (3 February 1989)

FEDERAL COURT OF AUSTRALIA

Re: KEITH LAURENCE DRAPER
Ex Parte: AUSTRALIAN SOCIETY OF ACCOUNTANTS
Nos. 1086-87 of 1988
Bankruptcy Notice

COURT

IN THE FEDERAL COURT OF AUSTRALIA
SOUTH AUSTRALIA DISTRICT REGISTRY
GENERAL DIVISION
BANKRUPTCY DISTRICT OF THE STATE OF SOUTH AUSTRALIA
Von Doussa J.(1)

CATCHWORDS

Bankruptcy Notice - application to set aside - notices based on orders for costs entered under FCR O.62, r.45(3) - whether final orders - whether notices invalidated by the inclusion of statutory interest - order for substituted service by post - whether mode of description of debtor on envelope an irregularity - whether misspelling of second christian name an irregularity - whether irregularity validated by Bankruptcy Act 1966, s.306(1)1 - whether judgment obtained by fraud - whether time for compliance should be extended pending hearing of application for special leave to appeal to High Court - whether final order must exceed $1500.00.

Bankruptcy Act 1966

HEARING

ADELAIDE
3:2:1989

Counsel for debtor: Mr J. Pertl

Solicitor for debtor: Mr J. Pertl

Counsel for creditor: Mr N.W. Morcombe

Solicitor for creditor: minlaysons

ORDER

Applications to set aside Bankruptcy Notices be dismissed.

Debtor to pay the costs of the judgment creditor.

Time for compliance with Bankruptcy Notice extended until 5.00 p.m. on Monday 6 February 1989.

Note: Settlement and entry of order is dealt with in Bankruptcy Rule 124.

DECISION

This is an application to set aside two bankruptcy notices issued by the deputy registrar on 31 August 1988. The judgment creditor in each case is the Australian Society of Accountants. In bankruptcy proceedings 1086 of 1988 the notice requires payment of $31,367.33. The preamble to the notice recites that:
"WHEREAS The Australian Society of Accountants of

170 Queen Street Melbourne in the State of
Victoria (hereinafter referred to as 'the
creditor') has claimed that the sum of $30,405.20
together with interest on the sum of $30,405.20
from the date of the order being the 14th day of
June 1988 until the 31st day of August 1988,
calculated at the rate of 15% per annum and being
$962.13 amounting to $31,367.33 and no more is due
by you to it under a final order obtained by it
against you in the Federal Court of Australia,
Victoria District Registry, General Division on
the 14th day of June 1988 being a (sic) order the
execution of which has not been stayed:- ..."

The other bankruptcy notice in proceedings number 1087 of 1988 requires payment of $1477.31. The preamble is in similar form reciting that the creditor has claimed $1432 together with interest from 14 June 1988 to 31 August 1988 amounting in all to $1477.31 -

"... due by you to it under a final order obtained
by it against you in the Federal Court of
Australia, Victoria District Registry, General
Division on the 14th day of June 1988 being an
order the execution of which has not been stayed."

2. By way of background, the final orders referred to are orders for costs which arose out of proceedings in the Victorian District Registry of the Federal Court brought by the creditor against the debtor, the Federation of Australian Accountants Incorporated and John Fairfax and Sons Limited. The debtor at all material times was the president of the Federation of Australian Accountants Inc. In those proceedings the Australian Society of Accountants sought an injunction to restrain the respondents from publishing a particular advertisement which it was said represented that the Federation of Australia Accountants Inc. was entitled to confer CPA (Certified Practising Accountant) status on members of the Federation of Australian Accountants Inc.

3. The Australian Society of Accountants obtained the injunctive relief which it sought from Woodward J. on 12 June 1987. That judgment was upheld on appeal by the Full Court of the Federal Court on 2 March 1988. Belatedly, the debtor has sought leave to appeal from the High Court of Australia and his application is listed for hearing in March 1989. Whilst the two bankruptcy notices were issued on 31 August 1988, part of the subsequent delay has been due to difficulties encountered by the creditor in serving the notices. It seems that the debtor went to lengths to avoid service and an order for substituted service of each notice by post was made on 17 October 1988. The notices were "served" (whether validly served is an issue to be decided in these applications) late in October 1988. The notices were apparently received because on 10 November 1988 these applications were taken out to set aside the notices. Against that background I turn to the attack on the bankruptcy notices which goes both to their validity and to the validity of the service.

4. I take the grounds in the order in which they appear in the debtor's affidavit of 10 November 1988. The first ground reads :

"(a) That the amount claimed by the creditor is for
taxed costs and is not costs given by a
judge in final judgment."

5. In proceedings 1086 of 1988 the complaint is that the order for costs to which the notice relates was made by Woodward J. on 12 June 1987 when he delivered his reasons for judgment. The minutes of order record, "The first and second respondents pay the applicant's taxed costs of the application." In proceedings 1087 of 1988 the order for costs was made initially in similar terms on 26 November 1987 on the dismissal of a notice of motion by the debtor to change the venue of the hearing of the appeal to the Full Court.

6. An additional argument is added here that the order for change of venue was only an interlocutory order and it is said no order for costs made in relation to a discrete interlocutory order can ever be a final order. It is said that each of these orders for costs is not a final order because it did not specify a precise monetary sum. Rather, the orders were in terms which contemplated that there would be a taxation and other orders to follow. For this reason it is argued that the liability for costs arises under an interlocutory judgment.

7. The fallacy of the debtor's contentions is that neither bankruptcy notice is based on the judgment or order seized upon by the argument. Each bankruptcy notice is based on an order of the Federal Court made on 14 June 1988. Those orders were made after taxation of the costs and were entered pursuant to O.62, r.45(3) of the Federal Court Rules. Each order is a final order within the meaning of s.40(1)(g) of the Bankruptcy Act 1966. If there could be any doubt about that, the doubt is, in my view, removed by the provisions of s.40(3)(b) as the orders are ones which can be enforced as final judgments.

8. Ground (b) complains :

"(b) That the interest claimed is not a judgment
debt and therefore does not comply with
s.40(3)(d)."

The section reference is mystifying. It must be a mistake. No reference was made to any section by counsel for the debtor in his submissions. The complaint is that by including interest the amount stated as the debt in each notice exceeds the amount of the final order (assuming for the moment that the order is a final one). The short answer is that O.62, r.45(4) of the Federal Court Rules provides for the payment of interest as does the Federal Court of Australia Act itself in s.52. The entitlement to interest is a statutory entitlement which forms part of the money due under the judgment. That a bankruptcy notice may validly include statutory interest is well established; see Re Mullavey, ex parte Australia and New Zealand Banking Group Limited [1977] FCA 17; (1977) 32 FLR 1.

9. Ground (c) of the affidavit reads :

"(c) That the notice has been served incorrectly;
that substituted service has not been complied
with. The service should have been by post
to Keith Laurence Draper, but was addressed to
K.L. Draper."

Paragraph (d) of the affidavit is in substance the same and I will not read it. The terms of the order of substituted service required that :

"A true copy of the Bankruptcy Notice signed and
stamped by the Deputy Registrar in Bankruptcy
together with a sealed copy of this order be
served on or before 24 October 1988 by prepaid
post addressed to the debtor at two addresses,
namely ..."

and the two addresses are specified.
The judgment creditor concedes that the bankruptcy notices were posted in an envelope to those addresses addressed to "Mr K.L. Draper". It would have been better had the envelope been addressed to Keith Laurence Draper, but I do not think the mode of description of the debtor adopted on the envelope failed to comply with the order. In any event, if there was an irregularity in the mode of description, it was, in my view, of a formal nature and not one that was likely to cause any injustice whatsoever. In fact, it did not do so as it is not suggested that the debtor failed to receive either of the notices at either address. The irregularity, if there was one, is validated by s.306(1) of the Bankruptcy Act; see Re McCormack, ex parte Taylor (1985) 10 FCR 162.

10. Ground (e) of the affidavit reads :

"(e) The applicant does not admit that he is the
Keith Laurence Draper. He admits he is Keith
Lawrence Draper. The second christian name
is spelt with a "u" and not a "w". The
applicant therefore states that he is not the
debtor named in the judgment."

The misspelling of the debtor's second christian name has been common throughout the proceedings in the Victorian Registry of the Federal Court. The proceedings as commenced named the relevant respondent as Keith Laurence Draper. The appearance, both in the heading and in the body of the appearance itself, adopts this spelling, and the debtor concedes that the appearance was entered by his solicitor on his instructions.

11. In the course of the proceedings, affidavits were filed by him. The headings to those affidavits adopted the spelling "Laurence" and in the affidavits the debtor describes himself as the respondent in the proceedings. In his appeal to the Full Court, he also adopted in the heading the spelling "Laurence". There is no doubt that the applicant now before this Court - that is the man who has given evidence before me - is the man who was the respondent in the proceedings in the Federal Court brought by the Australian Society of Accountants, and the man against whom orders for costs were made in those proceedings.

12. The judgment creditor submits that both spellings have been adopted by the debtor and no irregularity arises in the use of either spelling; however, I think the use of the name Laurence is a misspelling of the debtor's correct name which constitutes a formal defect or irregularity. However, it is one to which s.306(1) applies so as to validate the notice. A "formal defect or any irregularity" within the meaning of that section is one that could not reasonably mislead the debtor; see Re Wimborne, ex parte the debtor (1979) 24 ALR, 494. In my view, the present bankruptcy notices had no capacity to mislead the debtor.

13. The next two grounds of complaint in the affidavit read :

"(f) An appeal will be lodged to dispute this and
to have the matter retrialed.
(g) An application for an appeal in the High Court
of Australia has been lodged and it is
requested that the notice should be set aside
until this is heard on 9 December 1988."

The date of the proposed hearing of the application for special leave to appeal has been deferred and is now listed sometime in March 1989. The debtor has already made two applications to have execution stayed on the judgment in the Federal Court. The first was made to the Federal Court and was heard by Jenkinson J. on 15 December 1987. He refused to grant a stay. The debtor then applied to the High Court of Australia and, on 20 December 1988, Dawson J. refused to grant a stay. In my opinion, it is not appropriate on these applications for this Court now to grant what would amount to the stay which has already been twice refused. I decline the request that the consideration of these applications be deferred or that the time for compliance with the bankruptcy notice be extended to a date after the determination of the application for special leave to appeal. However, what Jenkinson J. said when refusing to grant a stay on 15 December 1988 should be remembered. His Honour said :

"It is perhaps unnecessary to say this, but of
course the failure of these applications and any
reasons given for the refusal of the applications
would in no way inhibit or embarrass the exercise
of any power which may become available to a court
exercising bankruptcy jurisdiction if a petition
for sequestration, founded upon these bankruptcy
notices which have been issued and are pending,
were to come to hearing."

The present applications do not concern bankruptcy petitions. His Honour's remarks may still hold good, depending on events which are yet to occur.

14. The next two grounds of complaint in the affidavit are :

"(h) The applicant alleges that perjury was
committed in obtaining this judgment in the
Federal Court in Victoria and is reporting
this fact to the Attorney-General in Canberra.
The applicant will rely on a statement made in
an affidavit by Emile Michel Badawy ..., the
Executive Director of the Australian Society
of Accountants.
(i) The applicant wishes the court to consider
going behind the judgment because of (h)
above."

These grounds for complaint arise out of the words I emphasise in the following paragraph of an affidavit filed by Mr Badawy in the Victorian proceedings :

"26. I consider that if the advertisement is
published again it will continue to cause loss
and damage to the Society and its membership.
This damage will inevitably result from the
fact that the public will be confused and
misled as to the origin and status of CPA.
The general public, and in particular, users
of accounting services, associate CPA with a
high level of competence and with the Society
as a professional body of accountants. The
advertisement misleads students intending to
take up the profession of accountancy into
believing that the CPA status, which carries
with it the implication of competence and
up-to-date technical knowledge as well as an
obligation to continuing professional
development, is available from the Federation
..."

The debtor argues that the words emphasised mean that Mr Badawy claimed that the Australian Society of Accountants were asserting originality for the acronym CPA and that such a claim to originality was not only false, but knowingly so. The evidence adduced in support of this complaint and a perusal of the full text of the affidavit of Mr Badawy show the allegation to be a wild one that is totally unjustified. I do not think that para.26 of Mr Badawy's affidavit should be construed as a claim to originality by the Society of the acronym and, in any event, no evidence has been adduced before me to lend any support to the suggestion of fraud or perjury by the deponent of the affidavit.

15. The issue in the case was not as to the original authorship of the acronym, nor was that claimed by the Society. The debtor himself produced a volume of material, which is exhibited to affidavits he filed in the proceedings, to show the acronym "CPA" had been in use in various contexts in various countries of the world for a long time and had, in some circumstances, been used by accountants overseas. But the issue in the proceedings was a different one. The issue concerned the perceptions of a qualification known as certified practising accountant within Australia by that section of the public which is concerned with accounting qualifications. It is sufficient to read two paragraphs from the judgment of Woodward J. given on 12 June 1987. At pages 4 and 5 he said :

"Having studied the affidavits, and considered
counsel's arguments, I am left in no doubt that,
over the last three years, the applicant has gone
to great trouble and expense - to the tune of over
$3m - to establish the status of its qualification
of Certified Practising Accountant or CPA. I am
satisfied that, even in that comparatively short
space of time, it has built up a substantial
reputation in the accountancy profession and in
the general community for that qualification.
The expression Certified Practising Accountant was
apparently unknown in Australia before the
applicant began its campaign, and there is no
evidence to suggest that it is used in any other
English-speaking country. It seems that the
expression Certified Public Accountant has
currency in the United States, but there is no
evidence before me to indicate how widespread its
usage is or just what status it conveys."

Later in page 10 of his judgment he says :

"However, I am satisfied that these three words
(that is, 'certified' 'practising' and
'accountant'), used in combination, have acquired
a secondary meaning and become distinctive. In
the same way the letters CPA have acquired a
special meaning in relation to accountants in
Australia."

The case was concerned with a secondary meaning and it was to that secondary meaning that Mr Badawy was referring. Further, the evidence adduced by the debtor on these applications in support of these grounds of complaint fails to establish that the acronym CPA was in use within the Australian accounting profession prior to the period to which Mr Badawy was referring in his affidavit, that is, about 1982. The evidence which the debtor has adduced is to be found in three books. The first two are respectively the 6th and 7th editions of the Principles and Practice of Auditing, a practical textbook for students and practitioners, Australian and New Zealand edition. Edition 6 was published in 1937 and edition 7 in 1940. Page 5 in each volume gives part of the history of the subject. There is reference to early accounting bodies formed in Australia. The history is given to show how those earlier bodies have merged into the Institute of Chartered Accountants in Australia. In the course of the history there appears the sentence :

"The Federal Institute of Accountants and the
Australian Corporation of Public Accountants were
formed in 1894 and 1807 respectively ..."

The debtor seizes on the name Australian Corporation of Public Accountants and argues that the acronym CPA must have been in use in Australia in relation to that body. There is nothing in the text to warrant that interference. There is no reference to the acronym "CPA". If any acronym was adopted in relation to the name of the body referred to I think it would have been ACPA and not CPA.

16. The evidence adduced from those two textbooks is therefore of no value whatsoever to the debtor. The other book referred to is one to which the courts would be unlikely in the ordinary course to refer as an authoratative text. It is a paperback book entitled "Up The Organization" written by an American author, Robert Townsend. The particular book tendered is an English edition for distribution in the United Kingdom, Australia, New Zealand and South Africa. The work was first published in America in about 1970. On p 145 there appears the following passage :

"Ad agencies love to spend your money on market
research and lawyers on legal research. CPA
firms all have systems departments and it doesn't
take much to start them doing systems work. With
all three groups it is as well to set up some kind
of general alarm that goes off before you
accidently discover they've spent a lot of your
money in doing work you don't want done."

It is suggested that the reference to CPA in that passage shows that the acronym was in common use in Australia prior to 1982. This overlooks that the book is an American one describing the American scene. Whilst I think it is possible to infer from surrounding paragraphs in the text that CPA does refer to accountants there is nothing in the text to show that the acronym refers to certified practising accountants. Indeed, the other information that was supplied by the debtor himself in the Victorian proceedings suggests that the acronym is probably one for certified public accountants, a style which Woodward J. acknowledged had some currency in America at some stage.

17. As I have said, the allegation of fraud and perjury is without any evidentiary support. I am not even satisfied that there is any falsity in the statement upon which the argument is based in para.26 of Mr Badawy's affidavit. In any event, the evidence said to be false would have had no material bearing on the outcome of the Victorian proceedings. Even if it were proper for this Court to go behind the judgment as requested by the debtor there would be no basis upon which the bankruptcy notices should be set aside.

18. The next ground of complaint reads :

"(j) That the bankruptcy notice has been issued on
a debt that is insufficient to comply with the
amount under the Bankruptcy Act."

This complaint as I understand it relates only to proceedings numbered 1087 of 1988. The contention of the debtor is that a bankruptcy notice cannot be issued in respect of a judgment debt for less than the sum of $1500. This argument is based on s.44(1)(a) of the Bankruptcy Act which reads :

"(1) A creditor's petition shall not be presented
against a debtor unless -
(a) there is owing by the debtor to the
petitioning creditor a debt that amounts
to $1,500 or 2 or more debts that amount
in the aggregate to $1,500, or, where 2
or more creditors join in the petition,
there is owing by the debtor to the
several petitioning creditors debts that
amount in the aggregate to $1,500;
..."

It is submitted that if the debt necessary to support a creditor's petition must be $1500 so must a judgment debt be at least that sum to support a bankruptcy notice. This submission is without substance. Section 44 relates to a bankruptcy petition. The provisions which deal with bankruptcy notices are ss.40(1)(g) and 41. Those sections, in contrast with s.44, impose no limitation as to monetary amount in the case of bankruptcy notices. A bankruptcy notice may be issued in respect of a final judgment or order no matter what the amount. If the amount of the judgment debt on which the bankruptcy notice is based is less than $1500 then on non-compliance with the notice the judgment creditor would have to aggregate the judgment debt with one or more other debts so that the amount in total exceeded $1500 to present a petition under s.44.

19. For these reasons I consider the debtor has not made out any of the grounds of complaint upon which he challenges each of the bankruptcy notices. I therefore dismiss each of the applications to set aside the notices. There will be an order in each matter that the debtor pay the costs of the judgment creditor. In each matter I will extend the time for compliance with the bankruptcy notice until 5.00 p.m. on Monday, 6 February 1989.