"7 ) ) ir) No. P.1243 of 1976 ) ) oa ae Pu OF AVSTNAT LA moan om cCT Or ae AND Ti, 3 In the matter of - BANKRUPTCY ACt 1966 And in the mather of - Roerejitor's petitien ro ~ OWEN RICUARO JUNSON Ex pavte: DLePuly COMMISSTOMUAR OF TAXATION — — RUASONS FOR TUOGMENT a Ritey J. cue 23 On the hearing of this creditov's petrtion counsel for the petitioning sredicor, the Deputy Couwmissioner of Taxation, himcelf raiced tho question whecher the bankruptcy notice was valid. The Deputy Commissioner ebtained a judunment against the debtor in the Supreme Court cf New South Wales for $26,349.58 and $14.50 costs, a tctas of $276,364.08. The judgment took effect on 29 December i975 ard interest at 10% per annum was payable from that date an so mach of the money as was from timc to time unpaid: Supreme Couct Act 1970, s. 95; Supreme Court Rules 1970, Part 40, Pule 7 (2) (b; Nothing has ever been psoid, and interest nas accrved at the rate of $7.2? a day. Gn 16 June 1%/e th: Ocputy Commursicnes, addressed to the Registrer in Rankraprey an applroation, dauted thac cay, for the issue of a bankrupuey notieve, With it be leuacd, 33 requared by Ruic 7(7) cof the Barts retew #ulec., o cortifireete: of judgment, ane copies of a formct bankruptey sottee for siqnaturc by the Registrir, Pach of tiese vapies peerueG tac the Sap ata Eas sli Commissioner had claimed "that the sum of $27,548.65 1s due by you to ham under a final judgment obtained by him in the Supreme Court of New South Wales on the twenty-ninth day of December 1975, being the amount of a judgment the execution of which has not been stayed ($26,364.08) together witn interest at the rate of ten dollars per centum per amnuwn from the twenty- ninth day of December 1975 to the date of this notice ($1,184.57)", and required the debtor to pay the sum of $27,548.65 or, in the usual terms, to secure or cemround. The bankruptcy notice was issved by the Registrar on, and was dated, 28 June 1976. Figures supplied by counsel for the petitioning creditor, and not challenged, shor thet at that date interest amounting to $1,307.3€ had accrued on the judgment debt, so that the bankruptcy notice as issucd 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 - 16 June; but he miscalevlated the ameunt of the interest, and the figures supplied show that even had his assumption been correct the amount of accrued intcrest would have been understated by $36.11. It may be as well to point out that the cssumption that a bankruptcy notice will be issued on, and will Lear the same date as, the day on which it is avplied for is not justified by the Act or Rules and cannot properly be made. The bankruptey notice is the Registrar's document; not the applicant's; and it is dated by the Registrar, not by the applicant. It is the Reaistrar who issues it: Bankruptcy Act 1966, s. 43/1) ''b). Tre application for ats issue 15 accompanied by copies of it, as . 1tweee in draft, for his signature: Puie 7(2:(b}; wnere it is -3- to be served in Australia it is he who fixes the time for compliance with it: s. 4C(1})(g}; and he will sign 1t and issue it only when he is satisfied that the application has been "duly" made and that the bankruptcy notice is in ordcr for signature: Rule 7(5). Chviously it is not contemplated that the bankruptcy notice will necessarily he issued immediately the application is filed, er even on the day on which it 1s filed: and an examination of twenty-five current files choren at random shows that in practice 1t was so issued in only twelve of those cases and that in the other thirteen causes the dates of application and of issue differed by from cne to as Many as fourteen days. My attention was drawn to a passage from the judgment of Romer L.J. in In re H. B., (1904) 1 K.B. 94. Tn that case, latigation was settled by an agrzement which provided that the debtor should pay the creditor 5309 on the executisn of the agreement and should consent to Judgment against him for 52,700, payable by instalments - the first ef 5760 and 'the four others of &500 each, payable respectively on the 27th days of April, May, June, July and August 1903. The judgment wa. signed for $2,700 on 20 April. The debtor paid the tnivial #300, and 5350 on account of the first instalment of 5700, but no more. On 13 July 1903 the creditor issued a bankruptcy notice for an amount consisting of the amount rcmaining unpaid of the three instalments then overduc, less an amount which had been garnished. The bankruptcy notice described that total as "the amount dve on the final judgment" of 20 April. The agreement said nothing abont the wrole of the instatuencts being deemed to become due on dcfaul. in payment of ony one of them. 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" (Bankruptcy Act (Eng.) 1883, s. 4(1)(g); cf. Bankruptcy Act 1966, s. 41(2) (a) (1)) but rather in accordance with the judgment as modified by the agreement. At 103 Romer L.J. said: "Now I think 1t is clear thac, when you have a judgment in the form that we have here, a bankruptcy notice under the Act must require payment of 2a 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 remoining unpaid on the judgment debt. Clearly, in a bankruptcy notice the debtor is entitled to see from tne noticr exactly what is claimed to be due on the judgment debt. No doubt a sum might be claimed which is lcss 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 judqment beyond tne amount specified in the notice. But a notice to pay part of a judgment debt, Jeaving any balance that may be due to be subsequently claimed, 1s, to my mind, clearly bad". Romer L.J. was there referring to a bankruptcy notice claiming payment of a judgment debt only: there was no claim for interest. In Re Jack (1458-1959), 19 A.B.C. 266, 269~70, Manning J. thouyht that the second, third and fourth sentences of the remarks of Romer L.J. were applicable tc a bankruptcy notice which required payment of a judgment debt only, though the judgment was for debt and costs and the costs had been taxed. In Nirens v, kowler Asphalt Pty. Limited (1966), 9 F.L.R. 255, 256, Clyne J. applied the last sentence in a case where a bankruptcy notice required payment of only an assisnea portion of a judgment debt. BR bankruptey novice must require the debtor to pay "in accordance with the jyudqment": s. 41(2) fa) (i). In the easc of a Supreme Court fudement interest 1s payable from the date when the judgment takes effect on so much of the money of which the judgment orders payrent as fiom time to time remalss -5- unpaid: Supreme Court Act 1970 s. 95(1); and is a debt necessarily and inevitably attached to the judgment dcbt: Ex parte Lewis (1388), 36 W.R. 653. To pay the judgment @ckt "in accordance with the judgment" 1s to pay the amount for which judgment was recovered with the leaal interest attached to it by statute: Jn re Cooper, (1911) 2 K.B. 55M, 554; aad there is no doubt that a bankruptcy notice may requise the cayment af statutory interest: "The creditor is entitiecd to have the amount of the interest added to the judgment debt 30 that. the debtor may be unformed by the netice that he canuot comply with the notice without paying the interest on the debt": In re Lehmann (1890), 7 Morr. 181, 183 per Cave J. But a bankruptcy notice can "only demand payment of that which the judginent crediter can enforce payment of", and cannot issue fer a sum of money for which execution cannot issue: In re Follows, (1895) 2 Q.B. 521, 525 per Vaughan Williams J.; cf. Re O'Keefe (1963), 19 A.B.C. 101, 103-4. It is te be inferred from cs. 47(5), (6) that a bankruptcy notice must specify a sum as "che anounk duo to the creditor"; and if he demands payment ot interest the creditor must himself calculate, and must specify in the bankruptcy notice, the amount required to be paid: kc Davis (1963), 19 A.B.C. 100; Re O'Keefe (supra). At the date when a bankruptcy notice is issued, the judgment creditor coulé issue execution for the judgment debt and for statutory interest accrued thereon to that date; but he could not issue execution for statutory 1nterest which woula accrue between that date and the date of payment, though the amount levied on exccuticn would include the amount of that interest. From what T have saig about the prohability of a @iffercnee between the dates of application ror and issue ot bankruptcy notice it is apparent that, even 1f the azrplicant has correctly calculated the amount by which statutory interest accrues daily on his judgment debt, it is impossible for him to be certain that a bankruptcy notice, which as submitted by him to the Registrar for signature states the amount of statutory interest dye "at the date of this notice", will not understate that amount when it is actually dated, signed and issued by the Registrar. His problem is difterent from that of the creditor who 1s required merely to state accurately the unpaid amount of his judgment cebt, or of his judement debt together with taxed costs, and by understating tie amount «of statutory interest accrued he is not "leaving any balance that may be due to be subsequently claimed". In my opinion, therefore, the principle enunciated by Romer L.J. is not applicable to his case, and his understatement will not invalidete the bankruptcy notice unless .t is such as to perplex and embarrass the debtor. In the present case I do not think it can reasonably be said that the debtor, whe was accurately told by the bankruptcy notice that his judgment debt amountea 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 interaost on that debt being stated at $122.79 less than it really was. In my opinion this 1s a proper case for the application of s. 306(1), and I do not think that the bankruptcy notice should be held invalid. Counsel] for the peticioning creditors submitted that in any event the debtcr should he taken to have wazrved the irregularity in the bankruptcy notice; end in my opinion he war right. Theo petition first came on for hearing on 30 March 1977, The deptoxr was represented by cemnsel, and counsei fox the petitioning creditor vlearly stated the difficulty the petitioning creditor faced by reason oi the understatement iu whe bankruptcy -7- notice. Counsel for the debtor indicated that he was not instructed on that matter. During discussion about an adjournment, I said that if he wanted to have the bankruptcy notice set aside a notice of opposition should be filed. The hearing was adjourned to 11 May. No notice of oprosition had been filed. I then heard a full argumene by counsel for the peLitioning creditor, after which counsel fer the debtor said that he did not want toe add anything, but wanted the mattcr to take its course as I thought fit. Further, according to a letter From the debtor's solicitors to the petitioning creditor's solicitors which was tendered without objection the debtor had acvepted his solicitor's advice that there was 'no effective purpose in maintaining any vitiating element in the bankruptcy notice served on him", and wished to consent te the making of a sequestrat3.on order. In those circumstances I think, as Manning J. did in Re Jack (supra), 270, that I am justified in treating the defect which may exist in the bankruptcy notice as having been Ps waived. The evidence entitles the petitioning creditor to a sequestration order. I am satisfied that the debtor committed the act of bankruptcy alleged in the petition. Jf am satisfied with the proor of the other matters of which s. 52(1) of the Act requires proof. I make a sequestration order against the estate of the debtor, and I order that costs including reserved custs be taxed and paid in accordance with the 4ct.