dt —! mn) i Db 32 F.L.R.] FEDERAL LAW REPORTS THE FEDERAL LAW REPORTS [FEDERAL COURT OF AUSTRALIA] Re MULLAVEY; Ex parte AUSTRALIA AND NEW ZEALAND BANKING GROUP LTD. Bankruptcy—Creditor's petition—Bankruptcy notice claiming Fev. Cr judgment debt—Notice specifying branch office as address of graven. creditor company rather than registered office—Statutory : interest on judgment debt not claimed in notice— Whether 1977, , MELBOURNE, notice irregular. April 26; Aug. 11; The creditor's petition for a sequestration order was based upon, inter alia, the Sept. 27; debtor's failure to comply with a bankruptcy notice claiming a sum due to the Nov. 8. creditor under a judgment against the debtor in the Supreme Court of Victoria. C. A. Sweeney J. The debtor opposed the petition on the grounds that he did not commit an act of bankruptcy as the notice served on him was irregular in that, inter alia (i) it did not contain any, or alternatively the correct, address of the judgment creditor, and (ii) it was likely to perplex the debtor in that it did not make clear whether interest was claimed on the judgment debt or alternatively whether it was abandoned. It was established by evidence that the address of the creditor in the notice was the address of one of its branches (where the loan the subject of the judgment was negotiated and made) and not its registered office. The branch manager, at all relevant times, was able to give a receipt for the debt. Held: (1) The address of the creditor set out in the bankruptcy notice was sufficient. The loan the subject of the agreement was negotiated and made at the address and the branch manager, during the relevant period, was able to give a receipt for the debt. Re Persse (1911), 55 Sol. Jo. 314, referred to. Semble, any address where the creditor company carried on business in Australia would suffice, and the ability of someone at the address to give a receipt for the debt, without the necessity for authority to agree to a composition or security, would suffice. James v. Federal Commissioner of Taxation (1955), 93 C.L.R. 631, and Re Persse (1911), 55 Sol. Jo. 314, referred to. (2) A bankruptcy notice which simply claims the amount of a judgment, without reference to any claim for statutory interest thereon, is a valid notice, and the creditor is free, either to refrain from claiming, or to make an accurately calculated and specified claim for, interest up to the date of the notice. Fep. Cr oF Aust. Re MULLAVEY; Ex parte AUSTRALIA AND New ZEALAND BANKING Group Lrp. Nov. 8. FEDERAL LAW REPORTS [1977 Reis v. Carling (1908), 5 C.L.R. 673; Re Wilson (1877), 3 V.L.R. 95; Re Lehmann, Ex parte Hasluck (1890), 7 Morr. 181; and Re O'Keefe; Ex parte Australian Factors Ltd. (1963), 19 A.B.C. 101, referred to. Re Jack; Ex parte C. V. Holland (Holdings) Ltd. (1959), 19 A.B.C. 268, and Re Munson; Ex parte Deputy Commissioner of Taxation (1977), 29 F.L.R. 479, distinguished. (3) A sequestration order should be made. CREDITOR'S PETITION. The material facts appear from the judgment. F. G. A. Beaumont, for the petitioner. T. Irlicht, solicitor, for the respondent. Cur. adv. vult. The following judgment was delivered. C. A. Sweeney J. This is a creditor's petition, in which Australia and New Zealand Banking Group Ltd. is the petitioner and Terence Patrick Mullavey is the debtor. On 14th October, 1975, the petitioner obtained judgment against the debtor in the Supreme Court of Victoria in the amount of $19,935.02. On 19th October, 1976, on the application of the petitioner, a bankruptcy notice was issued against the debtor, which recited that the petitioner had claimed that the sum of $19,935.02 was due to it by the debtor under the judgment of the Supreme Court. Under the notice the debtor was required, within fourteen days after service of the notice, excluding the day on which the notice was served: "(a) to pay the sum of $19,935.02 so claimed by the judgment creditor to the judgment creditor; or (b) to secure the payment of the sum referred to in the last preceding paragraph to the satisfaction of the Federal Court of Bankruptcy or the judgment creditor or compound the sum so specified to the satisfaction of the judgment creditor". This notice was served on the debtor on 27th October, 1976, and the debtor did not make or offer to make any payment to the petitioner or seek to secure the payment of it or to compound the sum within the period of fourteen days from that date. On 23rd March, 1977, the petitioner presented a petition against the debtor which was served upon him on 7th April, 1977. In the petition it was alleged that the debtor had committed the following act of bankruptcy, namely, that he failed either to comply on or before 10th November, 1976, with the requirements of the bankruptcy notice or to satisfy the court that he had a counterclaim, set-off or cross-demand equal to or exceeding the sum specified in par. (a) of the bankruptcy notice, which was $19,935.02, the debt relied upon in the petition itself. 32 F.L.R.] FEDERAL LAW REPORTS 3 On the return day of the petition, 26th April, 1977, the petitione: Frp. Cr and the debtor were represented by counsel, and the court was or Aust. informed by counsel for the petitioner that he had been told by counsel for the debtor that his client had certain assets which he Re said "are not readily realizable in the instant future but are in the ores near future", and in these circumstances that a proposal for Ausirauia payment had been made which was acceptable to the petitioner. AND New The parties joined in asking for a direction that the debtor fileand 5 (\04*? serve an affidavit of means by 10th May, 1977. They also sought Group Lrp. an order that the petition be stcod out of the list to a date not later © 4 Sweeney J. than 11th August, 1977, "with a right of reinstatement at any time upon the giving of seven days' notice". The court indicated to counsel for the debtor that there would be no difficulty in making the order sought if it had evidence that the debtor was able to pay his debts. Counsel for the debtor stated that he was in a position to lead that evidence, and called the debtor who stated in evidence-in- chief that he was a company director, that he was indebted to the petitioner in the sum of $19,935.02 and that he had agreed to pay the petitioner instalments of $1,000 on 10th May, 10th June and 10th July and the balance of the debt on or before 10th August, 1977. He set out his assets as follows: one of the two issued shares in Coral Bank Properties Pty. Ltd., the net worth of the assets of which he valued at $58,000; one of the two issued shares of Terence Mullavey Pty. Ltd., the net worth of the assets of which he valued at $112,000; approximately ten per cent of the issued shares of Downtown Car Parks Ltd., which he included amongst his assets, at a value of $250,000, subject to certain contingencies; a sum of $60,000, owed to him by Lensworth Finance Ltd., under an order that it be paid on or about 20th November, 1977, but which might not be paid until eighteen months from April 1977; a sum of $200,000 for the sale of his shares in Locums (Victoria) Pty. Ltd. to three purchasers, payable by a nominal deposit on 1st December, 1976, and, as to the balance, on 1st December, 1977, carrying an interest rate of eleven and a half per cent on the outstanding balance; life assurance and personal superannuation policies of a surrender value of $25,000; a twenty per cent shareholding in Mongalieu Plantations Ltd., a company incorporated in the New Hebrides, in which his shareholding had a net value which he calculated to be $290,400; an art collection, which he valued at some $10,000. The debtor listed his creditors, apart from the petitioner, as follows: National Bank, personally, about $15,000; National Bank; under guarantees, $55,000, both of which he stated were fully secured on properties; A.G.C., approximately $30,000; First Chicago, $9,000; Custom Credit, $3,000. Each of the three last-named creditors had entered judgment against him, which he had agreed to pay by instalments, which he said were currently up-to-date. MULLAVEY; Ex parte AUSTRALIA AND New ZEALAND BANKING Group Lrp. C.A. Sweeney J FEDERAL LAW REPORTS [1977 The debtor stated that his income consisted of approximately $14,000 per annum from his shares in Coral Bank Properties Pty. Ltd. and approximately $1,000 per week from Terence Mullavey Pty. Ltd., which, apart from the assets it held, carried on business as a financial adviser or financial consultant. He said that, apart from living expenses, and a maintenance order in the sum of $90 per week payable to his wife, he had no other expenses, and that his evidence gave a true picture of his financial position. The debtor was not cross-examined. The further hearing of the petition was then adjourned to 11th August, 1977, liberty being reserved to either party to apply to the registrar for relisting of the petition on a date which would permit the giving of fourteen days' notice to the other party. The debtor was directed to file and serve an affidavit of means by 10th May, 1977. Costs were reserved. On 11th August, counsel for the debtor applied for what he described as an adjournment by consent to 20th September. When asked whether his client had filed and served an affidavit of means, he stated that he was not instructed as to that, his only instructions being that the debtor was presently in Nauru. Counsel for the petitioner explained that the debtor had changed solicitors twice since the last hearing and said that the petitioner did not oppose the adjournment. The court directed that the debtor file and serve an affidavit of means by 7th September, adjourned the further hearing of the petition to 20th September, and reserved costs. On 20th September both parties were represented by counsel, and Custom Credit Corporation Ltd. claimed to be a creditor in the amount of $5,400, said to be the balance owing under a Supreme Court judgment for $8,890.18, entered on 28rd April, 1976. Counsel for the petitioner stated that his instructing solicitor had received a copy of an affidavit of means, sworn and filed on 7th September, but served only on 19th September. He pointed out that the debtor had not given notice of intention to oppose the petition and sought to proceed as if it were unopposed. Counsel for the debtor then said: "I do not seek to oppose the petition in that I do not wish to raise any matters relating to the allegations in the petition or the affidavits in support of it. My application is for an adjournment of the further hearing of the petition until 22nd November of this year." The court then noted applications by or on behalf of various companies and persons claiming to be creditors of the debtor and made no order in respect of them. Counsel for the debtor called his client to give evidence in support of his application for a further adjournment. He verified and expanded the statements contained in his affidavit of means, in which he had set out his assets as being: 32 F.L.R.| FEDERAL LAW REPORTS 5 "Property specified in annexure 4 of this statement $780,750 Fep. Ct Amount by which the secured debts due to oF Aust. creditors are less than the value of the securities, — according to annexure 3 of this statement $21,100 M Re Book debts, according to annexure 5 of this Ex parte' statement $450,691." AustRaLia Of the property specified in annexure 4, $766,750 was represented ano New by the value he attributed to shares in three proprietary companies _Banxinc and Downtown Car Parks Ltd. The debtor listed his liabilities to Group Lrp. unsecured creditors as being $72,100, and claimed to have a total €.A.Sweeney J. surplus of $1,180,441. He stated that he had not made the promised payments to the petitioner, as he had been heavily engaged in a series of legal actions, including proceedings between himself and his wife over matrimonial property, and as he had been out of Australia on business between 8th and 18th August. Under cross-examination, he agreed that on 11th August he had made a further agreement with the petitioner as to the discharge of the debt and had not adhered to its terms, as he had not been able to do so. He was finally asked: "Are you able to pay your other creditors apart from Australia and New Zealand Banking Group Ltd. now?" to which he replied: "No". Counsel for the debtor said that the purpose of the adjournment sought was to pay the amount due to the petitioner, and also either to pay or to make arrangements to pay the other persons to whom he acknowledged he was indebted, whom he named as A.G.C. Advances Ltd., originally in the amount of $41,700.67 said to have been reduced to approximately $30,000 and Custom Credit Corporation Ltd., in the amount of $5,400. Counsel for the debtor was asked by the court what was his client's attitude towards the petition itself, and whether he sought to oppose the making of an order of sequestration and, if so, on what grounds. Counsel, who had also appeared for the debtor on the first hearing day, replied that his instructions were limited to seeking an adjournment. He eventually asked that, "the debtor be given at least the opportunity, after consultation with his solicitors, of ascertaining whether he wishes to oppose the making of a sequestration order". Counsel for the petitioner opposed any further adjournment of the hearing, and in the course of his submission, the court observed that its understanding, subject to correction, which was not offered, was that counsel for the debtor had said that his client did not challenge the affidavit evidence on which the petition was based, and that it was a question of seeing whether there were other matters referred to in s. 52 of the Bankruptcy Act 1966 that it was desired to raise on behalf of the debtor. Section 52 (2) provides that, if the court is not satisfied with the proof of the matters set out in sub-s. (1) or is "satisfied by the debtor— (a) that he is able to pay his debts; or Fep. Ct oF AUST. Re MULLAVEY; Ex parte AUSTRALIA AND NEw ZEALAND BANKING Group Ltp. C.A. Sweeney J FEDERAL LAW REPORTS {1977 (6) that for other sufficient cause a sequestration order ought not to be made, it may dismiss the petition." The further hearing of the petition was then adjourned to 27th September, directions being given that the debtor file and serve within three days a notice stating whether it was intended to oppose the making of an order of sequestration and, if so, the grounds of such opposition, and any affidavits in support of it, that the petitioner file and serve any affidavits in reply by 26th September, liberty being reserved to the petitioner to apply in relation to that direction. Costs were reserved. After the hearing on 20th September the debtor retained a new solicitor who gave notice on 23rd September that the debtor intended to oppose the petition on the following grounds: "(1) that the debtor did not commit an act of bankruptcy because the bankruptcy notice served on him was irregular in the following respects: (a) it did not contain any or alternatively the correct address of the judgment creditor; (b) it contained an incorrect address of the judgment debtor and did not contain his occupation; (c) it is likely to perplex the judgment debtor in that it is not made clear whether interest is being claimed on the judgment debt or alternatively whether the interest is in fact abandoned; (d) the said bankruptcy notice had been issued in relation to a judgment which had been modified by an agreement between the judgment creditor and the judgment debtor as to time of payment." It is to be noted that the grounds did not include an allegation by the debtor that he was able to pay his debts. On 27th September, the solicitor for the debtor stated that the petition was opposed. Various companies and persons announced that they claimed to be creditors of the debtor. Counsel for the petitioner was granted leave to intervene on behalf of A.G.C. Advances Pty. Ltd., an undisputed creditor in respect of $29,517.17. During the hearing, the solicitor for the debtor stated that he did not seek to rely on grounds (1) (b) and (d) set out in the notice. Cyril Bernard Schier, manager of the petitioner's Ferntree Gully Road, Notting Hill branch, who had sworn an affidavit verifying the statements contained in pars. (1), (2) and (3) of the petition, and purporting to verify the statements contained in par. (4), was cross-examined by the solicitor for the debtor. He agreed that the address of the petitioner set out in the bankruptcy notice was the address of its branch at Notting Hill and was not its registered office. In the year 1976 he was the manager of that branch and during that year he had referred the debtor's overdue account to his head office, since which time his duties in relation to it had been in endeavouring "to assist the bank to regain its money". At no time did he have authority to accept in full settlement of the debt anything less than the full amount which the bank claimed was owing to it, nor did anyone else at the branch. If any offer of 32 F.L.R.] FEDERAL LAW REPORTS security for the debt had been made by the debtor, no one at the branch was in a position to accept it but it would have been referred to the head office. The same position would have applied had the debtor proposed payment on terms or by instalments. There were people at the head office who had authority to do all or any of these things. The witness also said that at no time since 14th October, 1975, had he made any agreement with the debtor for the deferral of payment by him to the bank of the judgment Fep. Cr oF Aust.Re MULLAVEY; Ex parte AUSTRALIA AND NEW ZEALAND BANKING debt. Had the debtor tendered $19,935.02 or any sum to him, he Group Lip. would have requested advice by the telephone as to whether there © 4 Sweeney J. were also legal costs to collect, before issuing a receipt in full settlement. Had he received advice to accept the tender, he would have been in a position to give a full discharge. Counsel for the petitioner admitted that on his client's instructions its solicitors wrote a letter to the debtor dated 25th May, 1976, in the following terms: "AS you are aware we act for A.N.Z. Banking Group Ltd. A judgment was entered against you on behalf of our client on 14th October, 1975, for $19,825.02 and $110 costs. Interest of course will be payable by you on this amount. "We are at present seeking instructions as to execution and we must advise you that unless this sum of money is paid to our client within the next fourteen days or unless some arrangement is entered into within that time with our client, execution will take place." Due service of the bankruptcy notice and of the petition was proved, as the debtor conceded. The parties agreed that the sum of $1,000 had been paid by the debtor in reduction of the debt and, in an affidavit sworn on 27th September a lending officer of the petitioner deposed that the amount of $18,935.02 was owing to it by the debtor. The debtor called no evidence but submitted, in the first place, that the debtor did not commit an act of bankruptcy because the bankruptcy notice served on him was irregular in that it did not contain any or alternatively the correct address of the petitioner. In James v. Federal Commissioner of Taxation (1) the High Court was dealing with a bankruptcy notice in which Qantas Empire Airways Ltd. was one of the judgment creditors and the court observed, "Any address anywhere this company carries on business in Australia would suffice." The bankruptcy notice here in question set out the address of the petitioner's branch at which the debtor had his account, and at which the loan, which was the subject of the judgment, was negotiated and made. At this address during the relevant period the branch manager was able to give a receipt for the debt. In Re Persse (2) the Court of Appeal held that, if there is someone at the address who can give a receipt for the debt it is enough, even though he is not authorized to agree to a (1) (1955) 93 C.L.R. 631, at p. 642. (2) (1911) 55 Sol. Jo. 314. Fep. Cr oF Aust. Re MULLAVEY; Ex parte AUSTRALIA AND NEw ZEALAND BANKING Group Ltp. C. A. Sweeney J. FEDERAL LAW REPORTS [1977 composition or security, for the creditor is entitled to payment and cannot be forced to take a composition or security. In the present case I am satisfied that the branch manager, after receiving advice on the telephone, could have promptly dealt with any proposal made by the debtor by way of composition or security. In my opinion, this attack upon the bankruptcy notice fails. The second submission of the debtor was that the debtor did not commit an act of bankruptcy because the bankruptcy notice served on him was irregular, being likely to perplex the debtor, in that "it is not made clear whether interest is being claimed on the judgment debt or alternatively whether the interest is in fact abandoned". As O'Connor J. pointed out in Reis v. Carling (3): "At common law a judgment debt did not carry interest, and the only way of recovering interest on such a debt was by action on the judgment. In England this defect was remedied by 1 & 2 Vict., c. 110, s. 17, which provided that every judgment debt should carry interest at the rate named in the statute from the time of entering up judgment, and that there might be a levy for the recovery of such interest under a writ of execution on the judgment." This statute was adopted in the Australian colonies, the latest such Act being the Queensland Judicature Act of 1876 which gave a statutory right to a successful suitor in respect of interest on a judgment, but only when a writ of execution to recover the moneys due on the judgment was issued (4). In Re Wilson (5) Molesworth J. held that accumulations of interest on a judgment could be relied upon to bring it up to the amount of £50 required by the Victorian Insolvency Statute of 1871 so forming a good petitioning creditor's debt, interest being a mere matter of calculation, differing from a quantum meruit or damages. Re Lehmann; Ex parte Hasluck (6) was an appeal from a decision of the registrar by which he refused to issue a bankruptcy notice against the debtor. An application was made by the appellant to the registrar to issue a bankruptcy notice in respect of a sum of £14,896, claimed as being the amount due in a final judgment. The registrar saw the judgment, which was for £13,796, asum of £1,100 being added for interest, and inserted the judgment debt in the bankruptcy notice, excluding the interest. He said "he had never been asked but once before to include interest and had then refused to do so". A Divisional Court, constituted by Cave and A. L. Smith JJ., held that the appellant was entitled to havea bankruptcy notice issued for the amount due on the judgment, which included the interest due under 1 & 2 Vict., c. 110, s. 17. Cave J. said: "There might be a question whether the two amounts should not appear separately in the notice—namely, first the (3) (1908) 5 C.L.R. 673, at p. 684. (5) (1877) 3 V.L.R. 95. (4) (1908) 5 C.L.R., at p. 685. (6) (1890) 7 Morr. 181. 32, F.L.R.] FEDERAL LAW REPORTS judgment and then the interest—or whether it should be in the form in which it has been put, but that is a matter of detail. The creditor is entitled to have the amount of the interest added to the judgment debt so that the debtor may be informed by the notice that he cannot comply with the notice without paying the interest on the debt" (7). In Re O' Keefe; Ex parte Australian Factors Ltd. (8) Clyne J. had before him a petition based upon a bankruptcy notice which required the debtor, within fourteen days after service of the notice upon him, to pay the petitioning creditor the amount of the judgment debt together with interest thereon at the rate of five per cent per annum from 6th March, 1963 (the date of the judgment) until the date of payment. The learned judge held that the notice was bad, saying: "In my opinion, when a judgment creditor seeks the issue of a bankruptcy notice, he must state specifically therein the amount which the debtor is required to pay to the creditor. If he claims the payment of interest upon his judgment he must specify the amount of such interest. It is not the obligation of the debtor to calculate the interest which the judgment creditor calls upon him to pay: to make specific something unspecified." Counsel for the petitioning creditor then sought leave to amend the notice by striking out the words in the notice which required the payment of interest. Leave was refused, in these words: "The effect of this request would be to turn what is a basically invalid notice into a valid notice. This is a request to which I cannot accede." Clyne J., who at this time had been Federal Judge in Bankruptcy for some twenty-one years, plainly considered that a bankruptcy notice which simply claimed the amount of the judgment, without reference to interest, was not, by reason of the omission of any reference to interest, a bad notice. With this opinion I respectfully agree. This view is not affected by cases such as Re Jack; Ex parte C. V. Holland (Holdings) Ltd. (9), in which the judgment itself referred to the debtor's liability for costs which had been taxed before the issue of a bankruptcy notice making no reference to costs, and Re Munson; Ex parte Deputy Commissioner of Taxation (10), where Riley J. had to consider a bankruptcy notice which included an inaccurately calculated claim for interest upon the judgment. Since Re Lehmann (11) was decided in 1890, a judgment creditor has been free either to refrain from making any reference to interest in a bankruptcy notice or to include in it an accurately calculated claim for interest up to the date of the issue of the notice. In a multitude of cases courts have acted upon bankruptcy notices in which no reference has been made to any claim for interest. The parties in the present case were asked at the hearing whether it (7) (1890) 7 Morr., at p. 183. (10) (1977) 29 F.L.R. 479. (8) (1963) 19 A.B.C. 101. (11) (1890) 7 Morr. 181. (9) (1959) 19 A.B.C. 268. Fep. Cr oF Aust. Re MULLAVEY; Ex parte AUSTRALIA AND New ZEALAND BANKING Group Lrp. C.A. Sweeney J. Fen. Cr OF AUST.Re MULLAVEY; Ex parte AUSTRALIA AND New ZEALAND BANKING Group Lrp, C.A. Sweeney J FEDERAL LAW REPORTS [1977 had ever been decided that a bankruptcy notice, which made no reference to a claim for interest, was bad on that account. They were given a further fourteen days in which to make written submissions. No such case has been cited to me, but, as I have pointed out, Clyne J. clearly held the view that a bankruptcy notice making no claim for interest was a valid notice. In the present case, the reference to interest in the letter of 25th May, 1976, from the petitioner's solicitors to the debtor does not affect the validity of the bankruptcy notice served on 27th October, 1976, which, in my opinion, could not have misled the debtor. I am satisfied that the debtor committed an act of banktuptcy, in that he failed on or before 10th November, 1976, either to comply with the requirements of the bankruptcy notice duly served on him on 27th October, 1976, or to satisfy the court that he had a counterclaim, set-off or cross-demand equal to or exceeding the sum specified in par. (a) of the notice, being a counterclaim, set-off or cross-demand that he could not have set up in the action in which the judgment was obtained. I am also satisfied of the other matters stated in the petition, that the petition was duly served, and that the debt on which the petitioner relies is still owing. I am not satisfied by the debtor that he is able to pay his debts, within the meaning of s. 52 (2) of the Bankruptcy Act 1966, as it has been judicially interpreted, a contention which he first raised and then abandoned, or that for other sufficient cause a sequestration order ought not to be made. On the contrary, I am satisfied that it ought to be made and it is so ordered. The petitioner's costs of and incidental to the petition, including reserved costs, will be in accordance with the statute. In the circumstances, it is not necessary to consider the alternative submission of waiver made on behalf of the petitioner, or the contention by the debtor that there cannot be a waiver of a defect in a bankruptcy notice. In addition to Re Jack (12) and Re Munson (13), these submissions would involve a consideration of the terms of s. 52 of the Act and of such cases as: Re Winby; Ex parte Winby (14), Re A Debtor (No. 27 of 1943) (15) and Re Long; Ex parte Fraser Confirming Pty. Ltd. (16). Order accordingly. Solicitors for the petitioner: Corr and Corr. Solicitors for the respondent: T. Irlicht & Co. {Reported by R. L. Crisp Esq., Barrister-at-Law.] (12) (1959) 19 A.B.C. 268. (15) [1943] Ch. 210. (13) (1977) 29 F.L.R. 479. (16) (1975) 24 F.L.R. 392. (14) (1886) 3 Morr. 108.