Brown v Penrith Waste Services Pty Ltd [2005] FCAFC 152 (4 August 2005)

BANKRUPTCY – Bankruptcy notice – Paragraph 1 of the notice failed to state the amount of the debt but referred the reader to the Schedule where this amount was correctly and unambiguously stated – Whether notice was a nullity – Whether there was a substantive ‘defect or irregularity’ in connection with the notice or merely a formal defect.

Bankruptcy Act 1966 (Cth) s 306

DAVID ALISTAIR BROWN v PENRITH WASTE SERVICES PTY LIMITED
NSD 1034 of 2005

WILCOX, TAMBERLIN and EDMONDS JJ
SYDNEY
4 AUGUST 2005

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY	NSD 1034 of 2005

BETWEEN:	DAVID ALISTAIR BROWN APPELLANT
AND:	PENRITH WASTE SERVICES PTY LIMITED RESPONDENT
JUDGES:	WILCOX, TAMBERLIN and EDMONDS JJ
DATE OF ORDER:	4 AUGUST 2005
WHERE MADE:	SYDNEY

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

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY	NSD 1034 of 2005

BETWEEN:	DAVID ALISTAIR BROWN APPELLANT
AND:	PENRITH WASTE SERVICES PTY LIMITED RESPONDENT

JUDGES:	WILCOX, TAMBERLIN and EDMONDS JJ
DATE:	4 AUGUST 2005
PLACE:	SYDNEY

1 This is an appeal against a decision of a judge of the Court, Emmett J, given on 31 May 2005. His Honour made a sequestration order against the estate of the appellant, David Alistair Brown.

2 The only point of opposition to the making of the sequestration order was an argument advanced, on behalf of Mr Brown, that the bankruptcy notice served upon him was a nullity. The argument was that nullity arose out of the omission of a figure in para 1 of the bankruptcy notice.

3 The creditor, Penrith Waste Services Pty Limited, obtained judgment against the debtor in the Supreme Court of New South Wales. Judgment was entered on 6 December 2004, in the sum of $300,000.

4 The bankruptcy notice was dated 17 February 2005 and served on 24 February 2005. The failure to comply with the bankruptcy notice was alleged to be an act of bankruptcy.

5 Paragraph 1 of the notice identified the creditor as Penrith Waste Services Pty Limited, and set out its Australian Company Number and address. The paragraph went on to say the said company:

6 The Schedule followed para 9 of the bankruptcy notice. It contained two columns. The first item in column 1 was identified as ‘Amount of judgments or orders’. In column 2, the figure ‘$300,000’ appeared. Items 2, 3, 4 and 5 in column 1 were left blank. Item 6 in column 1 read:

7 In this case, no complexity was added to the Schedule by a claim for legal costs or interest, or any allowance for payments made. The claim set out in the Schedule was simply that there was a judgment or order for payment of $300,000 and this was the total debt owing. The Schedule is clear and unambiguous.

8 The point put to Emmett J, and repeated to us today by Mr G B Carolan, counsel for Mr Brown, is that the prescribed form contemplates that the amount of the total debt, in this case $300,000, will be inserted in the blank space in para 1 of the form. Undoubtedly, this was the intention. The question is, what is the effect of omission of that figure?

9 The principles relevant to determination of this matter were stated in a decision of the Full Court of this Court, Australian Steel Co (Operations) Pty Ltd v Lewis [2000] FCA 1915, 199 ALR 68. In their judgment at [32], Black CJ, Heerey and Sundberg JJ noted the effect of a failure to comply with an essential requirement of the prescribed form of notice: the bankruptcy notice would be a nullity, even if the failure did not mislead, and could not reasonably have misled, the debtor as to what was necessary for compliance. Their Honours also held that, if there was no failure to comply with an essential requirement, then the question would arise as to whether there was an irregularity or defect, in which case the Court would have to consider the application of s 306 of the Bankruptcy Act 1966 (Cth) (‘the Act’).

10 As Mr Carolan observes, it is an essential requirement of the bankruptcy legislation that a bankruptcy notice unambiguously inform the debtor as to the amount that the creditor requires the debtor to pay, in order to avoid commission of an act of bankruptcy. This amount need not necessarily be the total amount that the debtor owes to the creditor. See Kleinwort Benson Australia Ltd v Crowl [1988] HCA 34; (1998) 165 CLR 71.

11 If the bankruptcy notice fails to inform the debtor as to the total debt that is required to be paid, or provides that information in a misleading or confusing way, there is a failure to comply with an essential requirement of the bankruptcy legislation. Therefore, the first question in the present case is whether the omission of the figure from para 1 of the bankruptcy notice meant the bankruptcy notice failed to inform the debtor as to the amount claimed by the creditor or provided that information in a confusing or misleading way. In my opinion, both these questions have to be answered in the negative.

12 In the present case, unlike perhaps the majority of cases, the only monetary figure stated anywhere in the notice, including the Schedule and the annexed Supreme Court judgment, was $300,000.

13 The drafter of the prescribed form of notice clearly intended that the relevant figure, here $300,000, would be included in para 1. However, at least in this case, nothing was lost by its omission. The situation is the same as if the prescribed form of notice used the words, ‘claims you owe the debtor a debt as shown in the Schedule’. Those words would immediately take the reader to the Schedule and, in this case, to the figure of $300,000. The remaining provisions of the notice informed the debtor what must be done if he was to avoid committing an act of bankruptcy.

14 In the present case, the circumstances are extremely clear. There is no doubt that this notice fulfilled the essential function of informing the debtor that an identified creditor claimed he owed to that creditor the sum of $300,000.

15 The omission of the figure in para 1 constituted a formal defect or an irregularity. That being so, s 306 of the Act comes into play. That section provides that proceedings under the Act are not invalidated by a formal defect or irregularity:

16 In this case, there is no evidence that any injustice has been caused by the omission of the figure of $300,000 in para 1. It is difficult to conceive that this omission could have caused any problem to the debtor. Emmett J held that s 306 applied to this case. I agree with that view.

17 Emmett J’s reasons adequately cover all the issues in this case. I am of the opinion that his Honour was entirely correct. In my view, the appeal should be dismissed with costs.

18 Reference was made at the beginning of the hearing to the fact that costs had been incurred by the Official Trustee as a result of attendances before Stone J, in connection with two notices of motion heard on 5 July 2005. Her Honour reserved, for determination by this Court, the Official Trustee's costs of that appearance. Having regard to the result, in my opinion, there ought to be an order that the appellant pay the costs incurred by the Official Trustee in relation to the notices of motion that were heard by her Honour on 5 July 2005.

I certify that the preceding eighteen (18) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Wilcox.

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY	NSD 1034 of 2005

BETWEEN:	DAVID ALISTAIR BROWN APPELLANT
AND:	PENRITH WASTE SERVICES PTY LIMITED RESPONDENT
JUDGE:	WILCOX, TAMBERLIN and EDMONDS JJ
DATE OF ORDER:	4 AUGUST 2005
WHERE MADE:	SYDNEY

19 I agree with the reasons and with the orders proposed by his Honour the presiding Judge. I would simply add that it seems to me that on a reasonable reading of the bankruptcy notice as a whole, it is in the plainest and clearest terms, and that when considering the amount of the debt, it is obvious that the figure is that shown in the schedule. There is simply one figure shown in the schedule opposite the reference to total debt owing, and that is $300,000.

20 In addition, it is relevant to take into account the fact that in clause 2 of the bankruptcy notice, there is a requirement that a copy of the judgment or order relied on by the creditor is attached, and in this case, the order has been attached, and it is an order of the Equity Division of the Supreme Court, which orders that judgment is entered in favour of the plaintiff against the second defendant, in the sum of $300,000, and there is also a requirement as to costs - an award of costs, which are not specified. They are to be as agreed or assessed.

21 This reinforces the unambiguous and plain statement in the schedule to the amount of $300,000 is the total debt owing and, in the circumstances, it is difficult to imagine a plainer case of specification of the amount of the debt.

I certify that the preceding four (4) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Tamberlin.

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY	NSD 1034 of 2005

BETWEEN:	DAVID ALISTAIR BROWN APPELLANT
AND:	PENRITH WASTE SERVICES PTY LIMITED RESPONDENT
JUDGES:	WILCOX, TAMBERLIN and EDMONDS JJ
DATE OF ORDER:	4 AUGUST 2005
WHERE MADE:	SYDNEY

23 I also agree with the reasons and orders proposed by his Honour the presiding Judge and of the further reasons of Tamberlin J.

I certify that the preceding one (1) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Edmonds.

Counsel for the Appellant:	Mr G Carolan

Solicitor for the Appellant:	Farry & Co

Counsel for the Respondent:	Mr G E Underwood

Solicitor for the Respondent:	Bradfield & Scott

Counsel for the Official Trustee:	Mr J T Johnson

Date of Hearing:	4 August 2005

Date of Judgment:	4 August 2005

Federal Court of Australia - Full Court Decisions

Brown v Penrith Waste Services Pty Ltd [2005] FCAFC 152 (4 August 2005)