Grampians Carpet Cleaning Pty Ltd v McLelland [2010] FMCA 229 (1 April 2010)

Last Updated: 12 April 2010

FEDERAL MAGISTRATES COURT OF AUSTRALIA

GRAMPIANS CARPET CLEANING PTY LTD v MCLELLAND

[2010] FMCA 229

BANKRUPTCY – Amendment to title of proceedings and name of debtor in sequestration order pursuant to the slip rule – whether error in debtor’s name deliberate.

Bankruptcy Act 1966, ss.134(4), 306

Alexander Korda Film Productions Ltd v Columbia Pictures Corporation Limited [1946] 1 Ch 336 Schepis v Esanda Finance Corporation [2006] FMCA 905 Elders Ltd v Lloyd [2005] FMCA 1020 Van Reesema; Ex parte Giameos [1979] FCA 108; (1979) 27 ALR 509 Re McSwiney; Ex parte Davis [1986] FCA 405 Scottish Pacific Business Finance Pty Ltd [2005] FCA 670 Re Keith Laurence Draper; Ex parte Australian Society of Accountants [1989] FCA 10 Pearlman (Veneers) SA (Pty) Ltd v Bartels [1954] 1 WLR 1457; 3 All ER 659 Elyard Corporation Pty Ltd v DDB Needham Sydney Pty Ltd (1995) 61 FCR 385 Construction Pacific Management v Bianco (No 2) [2005] FMCA 460 Lohdia v Trust Company of Australia [2005] FMCA 150 Dimasi v Nangiloc Colignan Farms Pty Ltd 2007 [2007] FCA 308; (2007) 157 FCR 387

Applicant:

GRAMPIANS CARPET CLEANING PTY LTD

Respondent:

RONALD ROYCE MCLELLAND

File Number:

MLG 511 of 2009

Judgment of:

Riley FM

Hearing date:

1 March 2010

Date of Last Submission:

1 March 2010

Delivered at:

Melbourne

Delivered on:

1 April 2010

REPRESENTATION

Counsel for the Applicant:

No appearance

Solicitors for the Applicant:

Mendelsons Lawyers Pty Ltd

Counsel for the Respondent:

Mr Rosenzweig

Solicitors for the Respondent:

Charles Fice Solicitors

Counsel for the Trustees, Mr Clyde Peter White and Mr Stephen John Michell:

Mr Galvin

Solicitors for the Trustees, Mr Clyde Peter White and Mr Stephen John Michell:

Mills Oakley Lawyers

Counsel for Mr Block:

Mr Kohn

ORDERS

(1) The title of this proceeding be amended so that the name of the respondent is amended to read “Ronald Royce McClelland, also known as Ron McClelland”.
(2) Order 1 made on 24 November 2009 is amended by substituting the name “McClelland” for the name “McLelland”.
(3) The interim application filed on 10 February 2010 is dismissed.

FEDERAL MAGISTRATES COURT OF AUSTRALIA AT MELBOURNE

MLG 511 of 2009

GRAMPIANS CARPET CLEANING PTY LTD

Applicant

And

RONALD ROYCE MCLELLAND

Respondent

REASONS FOR JUDGMENT

1. On 1 February 2010, the trustees of the bankrupt estate of Ronald Royce McLelland filed an application seeking:
   1. an order that the name Ronald Royce McClelland be substituted for the name Ronald Royce McLelland in the sequestration order made on 24 November 2009; or, alternatively,
   2. directions pursuant to s.134(4) of the Bankruptcy Act 1966 (“the Act”) that:
      1. Ronald Royce McClelland be made bankrupt; and
      2. the applicants are trustees of the estate.
2. On 10 February 2010, Ronald Royce McClelland filed an application seeking an order that the sequestration order against the estate of Ronald Royce McLelland be set aside. In closing addresses, Ronald Royce McClelland’s counsel explained that in fact the application was only to be activated in the event that the original sequestration order was varied, and what would be sought to be set aside would be the new order.
3. At the hearing, the trustees sought instead:
   1. an order varying the spelling of the bankrupt’s name;
   2. further and alternatively, a declaration that Ronald Royce McLelland and Ronald Royce McClelland are one and the same person;
   100. directions pursuant to s.134(4) of the Act including a direction that the National Personal Insolvency Index be rectified to reflect the correct spelling of the bankrupt’s name.
4. A sequestration order was made on 24 November 2009 against the estate of Ronald Royce McLelland. On 19 January 2010, Ronald Royce McClelland’s solicitors wrote to the applicants saying that their client was not bankrupt and asking the trustees to relinquish control of their client’s estate.
5. The history of the matter is as follows. On 18 July 2007, an action was brought by Grampians Carpet Cleaning Pty Ltd (“Grampians”) against Ronald Royce McLelland, also known as Ron McLelland, of 3 Hammill Street Donald, for $2,442.76 plus costs and interest.
6. Maurice Block, of Mendelsons Lawyers, acting for Grampians, said that the complaint was issued in the name McLelland, rather than McClelland, due to “an oversight and in error”. That is, it was the error of the complainant or its servants and agents, rather than the result of a misrepresentation by Ronald Royce McClelland about his actual name.
7. Mr Block said in cross examination that the complaint was issued by a mercantile agency associated with Mendelsons. He said he did not know exactly who drafted it. He said that he took over the matter after judgment was entered. He said he did not notice the error in the spelling of the debtor’s name until he saw the letter dated 19 January 2010 from the debtor’s solicitors. He conceded that he might have noticed the error if he had read the file from the beginning, but he just obtained a certified copy of the judgment and took the name from there.
8. The Ronald Royce McClelland’s correct address is given in the heading of the court process. The complaint was personally served on 5 February 2007 on Ronald Royce McClelland, after an arrangement was made with him to accept service at a particular time and place.
9. Ronald Royce McClelland handed the complaint to his lawyers, BJT Legal, and gave them instructions to settle the claim. It appears that BJT Legal did nothing in response to those instructions.
10. Mendelsons sent a letter dated 9 February 2007 addressed to Ronald Royce McClelland at 3 Hammill Street Donald noting that he had been served with a complaint and inviting him to pay the amount claimed. There is no evidence of any response to that letter and no suggestion that Ronald Royce McClelland did not receive it.
11. No defence was filed. Judgment was entered in default of defence against Ronald Royce McLelland on 28 February 2007 for $3,046.69. On 10 July 2007, a warrant of seizure and sale was issued in respect of the property of Ronald Royce McLelland. On 20 December 2007, the Sherriff reported that no seizable goods could be located.
12. On 6 March 2007 and 16 October 2008, Mendelsons wrote to Ronald Royce McClelland, spelling his name correctly. On 25 November 2008, Mendelsons wrote to Ronald Royce McClelland at 3 Hammill Street Donald enclosing a draft bankruptcy notice and an article from The Age concerning the effects of bankruptcy. Again, the debtor’s name was spelt correctly.
13. On 13 January 2009, a bankruptcy notice was issued against Ronald Royce McLelland, that is, with the wrong spelling. On 16 March 2009, the bankruptcy notice was personally served on Ronald Royce McClelland at 3 Hammill Street Donald. Ronald Royce McClelland acknowledged at the time of service that he was the Ronald Royce McLelland referred to in the bankruptcy notice.
14. By letter dated 30 April 2009, BJT Legal, solicitors for Ronald Royce McClelland wrote to Mendelsons saying that they had received the bankruptcy notice and made offer of settlement of $1,300. That offer was not accepted and the bankruptcy notice was not complied with.
15. On 5 May 2009, a creditor’s petition was issued against Ronald Royce McLelland and a consent by the applicants to act as trustee was filed.
16. On 2 October 2009, an order was made permitting substituted service of the creditor’s petition by post at 3 Hammill Street Donald, being the address of Ronald Royce McClelland. Service was effected pursuant to that order.
17. On 24 November 2009, a sequestration order was made against the estate of Ronald Royce McLelland.
18. On 26 November 2009, the trustees lodged a caveat in relation to five properties stating that, pursuant to a sequestration order against the estate of Ronald Royce McClelland, the trustees had become trustees of his estate.
19. On 27 November 2009, the trustees wrote to “Mr R R McCelland” at 3 Hammill Street Donald asking him to complete a statement of affairs.
20. On 8 December 2009, Ronald Royce McClelland obtained a $13,000 cash advance from Commonwealth Bank credit card facility without disclosing his bankruptcy. On 9 December 2009, a Mr Newman of the trustees’ office told Ronald Royce McClelland by telephone that his conduct was fraudulent and he had to either pay the money to the trustee or repay it to the credit card facility. On 10 December 2009, Ronald Royce McClelland told the trustee that he had arranged to see an insolvency practitioner.
21. On 18 December 2009, Ronald Royce McClelland completed a statement of affairs with the assistance of his current lawyer, Charles Fice. The statement of affairs gave the correct name of Ronald Royce McClelland. The lawyer lodged the statement of affairs with ITSA on 23 December 2009.
22. Later that day, ITSA wrote to “Mr Mcclelland” saying that the statement of affairs had not been accepted and asking him to complete a debtor’s petition. It seems that ITSA had searched for a bankrupt by the name of Ronald Royce McClelland, had not found one, and assumed that Ronald Royce McClelland wished to file a debtor’s petition.
23. By letter dated 14 January 2010, BJT Legal acknowledged to Mendelsons that Ronald McClelland had been made bankrupt effective from 24 January 2009. (A copy of the letter was meant to be exhibit MSB-9 but it is missing from the court file.)
24. By letter dated 19 January 2010, Charles Fice advised the trustees that his client had not been made bankrupt because their client, Ronald Royce McClelland, was not the Ronald Royce McLelland named in the sequestration order. Charles Fice asked the trustees to relinquish control of the assets of Ronald Royce McClelland and take various consequential steps.
25. Ronald Royce McClelland said to this court that a company of which he was the sole director had engaged Gateway to do some cleaning and Gateway engaged Grampians to do some of it. Ronald Royce McClelland said that he paid Gateway for its work, including the work it had subcontracted to Grampians. However, he said that Gateway did not pay Grampians and Grampians then sought to hold Ronald Royce McClelland liable. He did not run that or any other defence in the Magistrates Court.
26. For present purposes, the essential point is that Ronald Royce McClelland did not dispute that he had dealings with Grampians that led it to claim that he owed them a debt. Ronald Royce McClelland did not suggest that Ronald Royce McLelland was another person who had actually incurred the debt at the basis of this proceeding. That is, there is no suggestion that this case involves a mistaken identity.
27. At the final hearing, Mr Kohn of counsel initially said that he represented both the petitioning creditor and Mr Bloch, even though there had been a suggestion that Mendelsons might need to be separately represented due to a possible conflict of interest. Mr Kohn said that he did not wish to make any submissions but simply supported the submissions of the trustees. Later, however, Mr Kohn said that he was only appearing for Mr Bloch. The petitioning creditor filed affidavits sworn by its solicitor, Maurice Selwyn Bloch, on 29 January 2010 and 10 February 2010. Mr Bloch was cross examined. Afterwards, Mr Kohn sought and was granted leave to withdraw. No submissions were made at the hearing on behalf of the petitioning creditor.
28. The trustees submitted that the misspelling of the bankrupt’s name was a formal defect or irregularity which could be cured under s.306 of the Act. The trustees relied on a number of cases in support of that proposition.
29. Firstly, in Alexander Korda Film Productions Ltd v Columbia Pictures Corporation Limited [1946] 1 Ch 336, the defendant sought to have a writ set aside on the grounds that its name was Columbia Pictures Incorporated rather than Columbia Pictures Corporation Limited. The court refused, noting that there was no suggestion that the defendant had any doubt that it was the person the plaintiff intended to sue.
30. Secondly, in Schepis v Esanda Finance Corporation [2006] FMCA 905, Federal Magistrate Coker considered an application to set aside a bankruptcy notice on the grounds that it was misleading. The defect was said to arise from the fact that the bankruptcy notice used the name Michelle Schepis, when in fact her name was Michele Schepis. His Honour held at [17] that there was no basis on which confusion might arise.
31. Thirdly, in Elders Ltd v Lloyd [2005] FMCA 1020, Federal Magistrate Riethmuller, on the hearing of a creditor’s petition, gave leave to amend to correct the debtor’s middle name, which had been given as Morris instead of Maurice.
32. Fourthly, in Van Reesema; Ex parte Giameos [1979] FCA 108; (1979) 27 ALR 509, Sangster J, on the hearing of a creditor’s petition, allowed an amendment of the debtor’s name to correct a misspelling, namely, van Reesma instead of van Reesema.
33. Fifthly, in Re McSwiney; Ex parte Davis [1986] FCA 405, Beaumont J heard a creditor’s petition in which the debtor was correctly named as Trevor Peter McSwiney. The judgment and bankruptcy notice were in the incorrect name of Trevor John McSwiney. However, before the creditor’s petition was heard, the judgment was amended by the District Court, apparently pursuant to the slip rule, to show the debtor’s correct name. Beaumont J considered that the defect in the bankruptcy notice could be cured under s.306 of the Act and proceeded to make the sequestration order.
34. Sixthly, in Scottish Pacific Business Finance Pty Ltd [2005] FCA 670, Kiefel J, sitting in the Federal Court, rejected an argument that a bankruptcy notice and creditor’s petition were misleading because they identified the debtor as Frederick Matheson rather than his full name of Frederick James Matheson. Her Honour noted at [10] that there was no doubt that Mr Matheson, who appeared before her, was the person named in the District Court and Federal Court proceedings and that he knew that to be the case.
35. Seventhly, in Re Keith Laurence Draper; Ex parte Australian Society of Accountants [1989] FCA 10, Von Doussa J refused to set aside a bankruptcy notice in which the debtor’s middle name was spelt Laurence rather than Lawrence in a case where the spelling of Laurence had been used throughout the proceedings giving rise to the debt, including in documents filed by the debtor himself. His Honour considered that the error was remediable by s.306 of the Act.
36. The trustees also referred to a number of cases concerning the slip rule. There is clear power in the rules of court to amend an order that does not reflect the intention of the court. Whether the title of the proceeding is properly understood as an order of the court is another matter.
37. However, in Pearlman (Veneers) SA (Pty) Ltd v Bartels [1954] 1 WLR 1457; 3 All ER 659, Denning LJ said in the Court of Appeal:
    • When the substantive judgment is not being altered, but only the title of the action, it is to my mind quite plain that this court has ample jurisdiction to correct any misnomer or misdescription at any time whether before or after judgment.
38. In that case, the defendant had been described in the proceedings as Bernhard Bartels. The defendant said his name was actually Josef Bartels and he only traded in the name of Bernhard Bartels. Lord Denning considered that the defendant’s claim that there was no such person as the defendant against whom judgment had been entered “sounds very ill in the mouth of the defendant”. His Honour proceeded to amend the title of the proceeding after judgment.
39. Ronald Royce McClelland argued that the trustees had no standing to bring the application, although the petitioning creditor would have had such standing. Ronald Royce McClelland argued that the trustees could apply to the court for directions in relation to the administration of an estate to which they had been appointed, but in the present case they had been appointed to the estate of a non-existent person.
40. I do not accept that the bankrupt is a non-existent person. This case concerns a spelling mistake in a person’s name. There is no doubt that that person existed, lived at 3 Hammill Street Donald, entered into a commercial arrangement with the petitioning creditor, was sued, was served, offered to settle the proceeding and stood by while judgment in default was entered against him. There is no doubt that he was served with the bankruptcy notice and the creditor’s petition, offered to settle again, and stood by when the sequestration order was made. The person was represented by lawyers throughout the proceedings in the Magistrates’ Court and the Federal Magistrates Court. There is no suggestion that he is unable to read.
41. I do not accept that the trustees do not have standing. Ronald Royce McClelland cited no authority for that proposition, saying it was obvious. However, in my view it is obvious that the trustees do have standing. It is true that they were not parties to the creditor’s petition proceedings. However, the result of the sequestration order, and their consent to act as trustees, is that the trustees now have very significant responsibilities under the Act in relation to the estate. They have embarked on the discharge of those responsibilities. They have sufficient interest to bring the present proceeding.
42. Ronald Royce McClelland also argued that it was not up to him, but up to the petitioning creditor, to have corrected the mistake in his name in the Magistrates Court or during the bankruptcy proceedings. However, in Alexander Korda Film Productions Ltd v Columbia Pictures Corporation Limited [1946] 1 Ch 336, Romer J, in the Chancery Division, said that the defendant should have appeared in his own name and stated in the memorandum that he was sued in the wrong name. That is, it was up to the defendant to draw the error to the plaintiff’s attention.
43. Alexander Korda concerned rules of court that presumably differ considerably from those that apply in the Magistrates’ Court. However, the principle applies. As Lord Denning said in Pearlman (Veneers) SA (Pty) Ltd v Bartels [1954] 1 WLR 1457; 3 All ER 659, the defendant’s claim that there was no such person as the defendant against whom judgment had been entered “sounds very ill in the mouth of the defendant”, or, in this case, in the mouth of Ronald Royce McClelland. Be that as it may. Whoever had responsibility for correcting the error, the matter is now before the court for resolution.
44. Ronald Royce McClelland argued that the slip rule could not be used to correct the error. He relied on Elyard Corporation Pty Ltd v DDB Needham Sydney Pty Ltd (1995) 61 FCR 385, where Lockhart J said that the slip rule applies “where the proposed amendment is one upon which no real difference of opinion can exist” but does not apply “where the amendment is a matter of controversy” or where the mistake is “the consequence of a deliberate decision”.
45. There is a controversy about whether the mistake in the spelling of Ronald Royce McClelland’s name can now be rectified, and, if so, how. However, there is no controversy about who Grampians intended to sue. There is no evidence that Grampians deliberately decided to sue Ronald Royce McLelland of 3 Hammill Street Donald rather than Ronald Royce McClelland of 3 Hammill Street Donald. On the contrary, the evidence is that the name McClelland was misspelt through “an oversight” and “in error”. I accept that evidence. There is absolutely no reason that Grampians would have decided to sue a non-existent person by the name of Ronald Royce McLelland.
46. I consider that, in the present case, there could be no real difference of opinion that the correct spelling of the debtor’s name was Ronald Royce McClelland, and that is the person who Grampians intended to sue and take bankruptcy proceedings against. Accordingly, I consider that the slip rule could apply in the present case.
47. Ronald Royce McClelland sought to distinguish Re McSwiney; Ex parte Davis on the grounds that, in that case, the error was in the debtor’s middle name rather than in his family name. It was submitted that the family name is of the utmost importance. That is so. But here, the correct family name and the incorrect family name are phonetically identical, and the only difference is a “C”. This is not a case where there was a substantial error in the family name.
48. Ronald Royce McClelland relied on Construction Pacific Management v Bianco (No 2) [2005] FMCA 460. In that case, a bankruptcy notice was issued against Serafino (Phil) Bianco, the correct name of the debtor. However, in an array of Local Court documents attached to the bankruptcy notice, apparently in the nature of the judgment relied upon, the debtor was described as Seafinao (Phil) Bianco. There were also various errors in the amount claimed. In the circumstances, while acknowledging the force of Re McSwiney; Ex parte Davis, Raphael FM considered that the bankruptcy notice was too confusing to be salvaged by s.306 of the Act. His Honour dismissed the creditor’s petition, although it was in the correct name.
49. I consider that Bianco was quite different to the present case. It contained a number of errors which in combination led to confusion. Here, there was only one error. The debtor knew exactly what was alleged against him, and knew that he was the person who had engaged in an unhappy commercial transaction with Grampians. If the error in the spelling of the debtor’s name had been brought to the attention of the court before the sequestration order was made, I consider that it is virtually certain that the order would have been made with the correct spelling.
50. Ronald Royce McClelland also relied on Lohdia v Trust Company of Australia [2005] FMCA 150. In that case, Chandrakant Lohdia sought to set aside a bankruptcy notice issued against Chandra Kand Lohdia. The debtor had signed a lease and guarantee in the latter name, pleaded to a writ in that name in the District Court, failed to apply to set aside the judgment of that court on the grounds that the name was wrong, acknowledged at the time of service that he was the person named in the bankruptcy notice and said he was the applicant with that name in an application in the District Court. On those facts, Raphael FM refused to set aside the bankruptcy notice.
51. The debtor in the present case sought to distinguish Lohdia on the basis that Ms Lohdia had actively misled the creditor about her name. However, in my view, Ronald Royce McClelland may not have been as culpable as Ms Lohdia, but he nevertheless had ample opportunity to discern the error in the spelling of his name and correct it. He was served with the complaint and the bankruptcy notice and gave them both to his lawyers. There was no suggestion that the debtor is unable to read.
52. Ronald Royce McClelland in addition relied on Dimasi v Nangiloc Colignan Farms Pty Ltd [2007] FCA 308; (2007) 157 FCR 387. In that case, Ryan J upheld a decision of McInnis FM, who had held that a bankruptcy notice against two joint debtors could be valid against one of the debtors even if it was invalid against the other. The second debtor had been named as Michelina Dimasi when in fact her name was Maria Dimasi. McInnis FM held that the bankruptcy notice was incurably misleading as against her, but not as against her husband, who was correctly named as Frank Dimasi. Ryan J held that it had been open to McInnis FM to find that the defect in Ms Dimasi’s name was capable of misleading her.
53. I consider the error in Ms Dimasi’s name was much greater than the error in Ronald Royce McClelland’s name. Ms Dimasi was given a completely different Christian name, with the exception of the first letter. Ronald Royce McClelland’s name was simply misspelt, by the omission of one letter, but remained phonetically the same. I do not consider that Dimasi assists the debtor in this case.
54. Finally, Ronald Royce McClelland argued that Mendelson’s knew the correct spelling of Ronald Royce McClelland’s name, because they used it in the letter to him dated 9 February 2007, among other things. I accept that Ronald Royce McClelland did not set out to deliberately deceive Grampians.
55. Ronald Royce McClelland, after the hearing, and with the permission of the court, provided a bundle of cases. However, his counsel’s closing submissions only referred to the cases mentioned above.
56. Following the hearing, counsel for Ronald Royce McClelland lodged a written submission in which he said that Perlman was not followed in Sherpa v Anderson Unreported, Supreme Court of New South Wales, Young J, 14 October 1993. That is true. Perlman was distinguished partly on the basis that the slip rule only applies to inadvertent errors and not to mistakes made as the result of deliberate decisions.
57. Ronald Royce McClelland argued, on the basis of Sherpa, that Grampians and its solicitors knew the correct name of Ronald Royce McClelland and deliberately chose to sue in the wrong name. I do not accept that that contention is supported by the evidence. Mr Block’s evidence, which was not effectively challenged, was that the error in the spelling of the debtor’s name was in the nature of a clerical error which was not detected by him until after the error was pointed out on 19 January 2010. I accept that evidence even though it seems that one or more people within the firm or the associated mercantile agency managed to spell the debtor’s name correctly on occasion. It seems to me that the error is a simple one that was made inadvertently and was not detected until after the sequestration order was made.
58. This case seems to be quite unusual. I have not been referred to any authority in which application has been made to vary a sequestration order to correct an error in the spelling of the debtor’s name, where the error was made in the original civil court complaint and perpetuated right through the bankruptcy proceedings.
59. However, I consider that the error in this case was trifling. It could not have misled the debtor. If the issue had been raised in the civil court or in the bankruptcy proceedings, I have no doubt that the error would have been corrected without hesitation. Accordingly, it seems to me to be proper to make the correction now. The orders will amend the title of the proceeding, pursuant to Perlman, and the name of the debtor in the sequestration order itself, pursuant to the various authorities on the slip rule.
60. There remains Ronald Royce McClelland’s application to review the sequestration order as amended. For the reasons already given, I do not consider that the sequestration order as amended should be set aside. However, as the court as presently constituted made the amendments, it does not seem possible for the court as presently constituted to review them. I will leave it for Ronald Royce McClelland and his advisers to take such action on that account as they see fit.

I certify that the preceding sixty (60) paragraphs are a true copy of the reasons for judgment of Riley FM

Associate:

Date: 1 April 2010