Ke fai td dey CATCHWORDS ~~ bmi Bankruptcy = Bankruptcy Notice -- Order of the High Court of Australia varying an order of the Supreme Court of New South Wales - Description of final order within the Sankruptcy Notice - Whether execution can issue upon such an order of the High Court - Necessity for strict compliance with a Bankruptcy Notice ~ Test to be applied in determining whether the debtor has been misled ~ Court's right to consider facts extraneous to the Bankruptcy Notice - Whether there was a capacity to mislead "the" debtor or some "hypothetical" debtor - s. 306 Bankruptcy Act 1966 Ke Wirndeave , Ex Pere The Dearie 20 PReIL IATA B95) \a74 P RECER 3 | O23UL1993 = AL IN THE FEDERAL COURT OF AUSTRALIA GENERAL DIVISION BANKRUPTCY DISTRICT OF THE STATE No. B 85 of 1979 OF NEW SOUTH WALES AND THE AUSTRALIAN CAPITAL TERRITORY IN THE MATTER OF The Bankruptcy Act 1966 AND IN THE MATTER of an application to set aside hankruptcy notice RE: RAYMOND JOSEPH WIMBORNE EX PARTE: THE DEBTOR JUDGE MAKING ORDER: LOCKHART 3. DATE OF ORDER: 20 APRIL 1979 WHERE MADE: , SYDNEY THE COURT ORDERS THAT: The application be dismissed Applicant to pay the respondent's costs of the application including reserved costs. IN THE FEDERAL COURT OF AUSTRALIA GENERAL DIVISION BANKRUPTCY DISTRICT OF THE STATE OF No. B 85 of 1979 NEW SOUTH WALES AND THE AUSTRALIAN CAPITAL TERRITORY IN THE MATTER OF The Bankruptcy Act 71966 AND IN THE MATTER of an application to set aside bankruptcy notice RE: RAYMOND JOSEPH WIMBORNE EX PARTE: THE DEBTOR 20 Doc! 4979 LOCKHART 3. REASONS FOR JUDGMENT This is an application to set aside a bankruptcy notice issued by a deputy registrar in bankruptcy on 8 January 1979, The applicant is Raymond Joseph Wimborne, one of the two judgment debtors. The respondent is John Edward Walker the judgment creditor. The bankruptcy notice so far as material provides:- "To: (a) RAYMOND JOSEPH WIMBORNE of 92 'New South Head Road, Vaucluse Managing Director and DAVID JOHN WIMBORNE of 92 New South Head Road, Vaucluse, Company Director WHEREAS (b) JOHN EDWARD WALKER of 109 Pitt Street Sydney (hereinafter referred to as "the judgment creditor") has claimed «0/2 ~2— that the sum of $17,960.93 together with interest thereon at the rate of $6 per centum per annum from 21 September 1972 which at 21 December 1978 amounts to $6734.28 making a total of $24,695.21 is due by you to him under a final order obtained by him against you in the High Court of Australia on the 3rd day of March 1976, being an order the execution of which has not been stayed: THEREFORE TAKE NOTICE that...." The attack on the validity of the bankruptcy notice is made on two grounds:= 1. First, that the description of the relevant final order as being obtained against the judgment debtors in the High Court of Australia on 3 March 1976 is incorrect and results in the bankruptcy notice being fundamentally defective as, although the High Court did make certain orders an 3 March 1976, the relevant order of that court was that the order of the Supreme Court of Neu South Wales against whose judgment the appeal to the High Court was brought, be varied by inserting an order that the judgment debtors pay to the respondent the sum of $17,960.93. The applicant contends that the bankruptcy notice should have described the order as being the order of the Supreme Court of New South Wales made on 27 June 1973 as varied by order af the High Court of Australia on 3 March 1976; 2. Secondly, that the claim for interest in 22/3 the bankruptcy notice of $6,734.28 which is said to be due under the order of the High Court made on 3 March 1976, is due 'in fact under an order of the High Court made on 27 October 1977. This circumstance is said to vitiate the bankruptcy notice. The facts are in a narrow compass. On 27 June 1973 the Supreme Court of New South Wales in its Equity Division dismissed a summons filed by the respondent against the applicant and others relating to matters arising out of the winding up of a company Asiatic Electric Co. pty. Limited (In Liquidation) of which the respondent was the liquidator. The liquidator appealed to the High Court from the order of the Supreme Court. On 3 March 1976 the High Court allowed the appeal in part and ordered that the order of the Supreme Court of New South Wales be varied by inserting certain orders including an order that the judgment debtors pay to the respondent;-= "the sum of $17,960.93 which was paid by Asiatic Electric Co. Pty. Limited by way of wages and salaries between 18th March 1967 and 2nd January 1968." The High Court remitted the matter to the Supreme Court of New South Wales for certain purposes immaterial to the questions before me, and otherwise dismissed the appeal. Application was subsequently made to the High Court on 27 October 1977 when an order was made by it that the ..-/4 judgment debtors pay to the respondent interest at the rate of six per centum per annum calculated from 21 September 1972 on the sum of $17,960.93. The date 21September 1972 was the date on which the summons was Filed in the Supreme Court initiating the proceedings. I turn to the first submission by Mr. Chippindall the who appeared for the applicant, namely that/bankruptcy notice is a nullity because it describes the relevant final order as being that of the High Court rather than the order of the Supreme Court of New South Wales as varied by the order of the High Court. Section 41 (2) (a) (i) of the Bankruptcy Act 1966 ("the Act") provides:- "41. (2) the prescribed form of bankruptcy notice shall be such that the notice - (a) requires the debtor named in it, within a specified time (being the time referred to in sub-paragraph (i) or (ii) of paragraph (g) of sub-section (i) of the last preceding section, whichever is appropriate) to = (i) pay the judgment debt or sum . ordered to be paid in accordance with the judgment or order;..." Mr. Chippindall laid considerable emphasis upon the fact that the order of the High Court made on 3 March 1976 in terms varied the order of the Supreme Court of New South Wales by inserting the order that the judgment debtors pay to the respondent the sum of $17,960.93. He submitted that the only relevant final order is the order of the Supreme Court as varied by the order of the High Court from which the liability of the judgment debtors to pay the respondent arises. 22/5 In my opinion the submission fails. The source of the obligation of the judgment debtors to pay the respondent is the order of the High Court. It matters not that the High Court order in terms provided that the order of the Supreme Court be varied by inserting the order for payment of the $17,960.93. The High Court heard an appeal from the order of the Supreme Court, allowed the appeal in part and ordered that the Supreme Court's order be varied in certain respects. It was the order of the Hign Court that caused a liability on the part of the judgment debtors to arise which had not existed before. In my opinion the description of the order of the High Court in the bankruptcy notice satisfies the requirements of s. 41 (2) (a) (i). Mr. Chippindall submitted that whatever be the answer to the submission which I have just mentioned, the order of the High Court is not one on which execution could issue and that it has been established by authority that unless a final judgment or order is one on which execution may issue it cannot be the foundation for the issue of a bankruptcy notice. He referred to s. 40 (1) (gq) which provides so far as relevant, that a debtor commits an act of bankruptcy: "(g) if a creditor who has obtained against the debtor a final judgment or final order, being a judgment or order the execution of which has not been stayed, has served on the debtor in Australia...a bankruptcy notice..." He also referred to s. 41 (3) (b) which provides that a bankruptcy notice shall not be issued in relation to a debtor:~ -.-/6 ~6= "(b) aif, at the time of the application for its issue, execution of the judgment or order to which it relates has been stayed." . I was referred in support of the submission to the decision of Clyne J. in Re O'Keefe; Ex parte Australian Factors Limited 19 A,B.C. 101 expecially at p. 103 and the decision of Riley J. in Re Pannowitz; Ex parte Wilson (1975) 6 A.L.R. 287. Mr. Chippindall submitted that although execution certainly could issue on a final order of the Supreme Court of New South Wales as varied by the order of the High Court, execution could not issue on .the order of the High Court alone and it is that order which is referred to in the bankruptcy notice. Although the' language of the order of the High Court is "that the order of the Suprema Court of New South Wales be varied by inserting...(c) an order that the respondents Raymond Joseph Wimborne and David John Wimborne" (i.e. the judgment debtors) "pay to the appellant" (i.e. the respondent in the application before me) "the sum of $17,960.93 which was paid by Asiatic Electric Co. Pty. Limited by way of wages and salaries between 18th March 1967 and 2nd January 1968", the effect of the order is that the High Court has ordered the judgment debtors to pay to the respondent the sum of $17,960.93. The position would be different if the High Court had remitted to the Supreme Court of New South Wales for assessment the amount of moneys paid by Asiatic Electric Co. Pty. Limited by way of wages and salaries between the two dates stipulated in the order. What the High Court did was to exercise the power conferred upon it by s. 37 of the Judiciary Act by modifying ee ef/7 the order of the Supreme Court. The order of the High Court has effect and may be executed throughout the Commonwealth of its own force: See s. 25 of the Judiciary Act 1903 and also s. 26 of the High Court Procedure Act (1903). If the High Court wished to do so it could have invoked the powers as to execution specifically mentioned in s. 37 of the Judiciary Act. In my opinion the order of the High Court is one upon which execution may issue and may found the issue of a bankruptcy notice. In my opinion the bankruptcy notice is not defective by reason of the description of the final order as being the order of the High' Court. There was consierable argument before me, on the assumption that the description of the relevant final order as being the order of the High Court was mistaken, as to whether the bankruptcy notice was thereby invalidated or saved by the provisions of s. 306 of the Act. Although it is not necessary for me to determine this question, as I have reached the conclusion that the assumption is not well founded, nevertheless [ shall do so as the question was argued fully on behalf of the parties. The courts have said time and time again that bankruptcy notices must conform strictly to the requirements of the bankruptcy legislation and rules of court; see James + F.C. of T. (1955) 93 C.L.R. 631 especially per Williams, Kitto and Taylor JJ. at p. 644; In Re Howes; Ex parte Hughes 1892 2 Q.B. 628; In Re O.C.S. (a debtor); Ex parte The Debto ---/8 -8— 1904 2 K.B. 161; Re O'Keefes Ex parte Australian Factors Limited (supra) and Re Mellick (1971) 19 F.L.R. 1. Section 306 provides so far as relevant:~ "306 (1) Proceedings under this Act are not invalidated by a formal defect or an irregularity, unless the court before which the objection on that' ground is made is of opinion that substantial injustice has been caused by the defect or irregularity and that the injustice cannot be remedied by an order of that court." A "formal defect cr any irregularity" is one that could not reasonably mislead the debtor. If the defect is of such a kind as could reasonably mislead the debtor upon whom it was served the defect is fatal to the notice: see In Re A Debtor (No. 21 of 1950); Ex parte The Debtor v. Boumaker Limited 1951 Ch. 313 and Pillai v. Comptroller of Income Tax 1970 A.C. 1124 at p. 1135. The test is not whether the debtor was in fact misled. It is sufficient that he could be misled. in James v. F.C, of T. (supra) Williams, Kitto and Taylor 32. said at p. 644:- "The Court cannot inquire whether the debtor has in fact been misled or not. In this case it is probable that he was not misled. It is sufficient that he could be misled." In Re A Judgment Debtor 1908 2 K.B. 474 Kennedy L.J. _——— a said at p. 481:- "In the first place one has not to determine the validity or invalidity of the notice by considering whether the debtor to whom the notice is given has in fact been misled. It is sufficient that there is good ground for saying that the debtor might be misled. That is,I think, settled by authority. Secondly, in judging of the probability of the debtor being misled one is bound not to deal too liberally with the requisites of the notice because of the quasi penal consequences which a bankruptcy involves." -.-/9 It is well established that to determine whether the debtor served with the bankruptcy notice could be misled "the court may look at facts extraneous to the notice itself. There are many cases where bankruptcy notices have been held to be invalid as they require payment of part of a judgment debt, leaving any balance that may be due to be subsequently claimed. The very ground of invalidity necessarily pre-~ supposes that the true facts as to the amount of the judgment debt have been considered by the court and measured against the facts stated in the bankruptcy notice. See for instance Re Jack; Ex parte C, V. Holland (Holdings) Limited (1959). 19 A.B.C. 268; Re Munson; Ex parte Deputy Commissioner of Taxation 29 F.L.R. 479; Re Schierholter; Ex parte Geis (1978) 19 A.L.R. 113. Cases where bankruptcy notices have been held to be invalid which required payment only of that part of a judgment debt which had been assigned include Nirens v. Fowler Asphalt Pty. Limited (1966) 9 F.L.R. 255. Sometimes it is not necessary for the court to look at facts extraneous to the notice as the defect may be apparen on the face of the notice. For instance, in Re Manion, a decision of mine delivered on 5 February 1979, the bankruptcy notice there under consideration vas held to be invalid because material words in the document were illegible. Mr. Chippindall submitted that the judgment debtors could be misled, confused or perplexed by the bankruptcy notice because of the description of the final order as being 222/10 that of the High Court and not of the Supreme Court of New South Wales as varied by the order of the High Court. In my opinion that submission fails. The orders of the Supreme Court of New South Wales and of the High Court are in evidence, tendered on behalf of the applicant without objection by the respondent. They establish that the judgment debtors (who included, of course the applicant) resisted the application of the respondent relating to their involvement with Asiatic Electric Co. Pty. Limited (In Liquidation) in the Supreme Court of New South Wales Equity Division. The hearing was lengthy, over some nine days, many documents were tendered in evidence, and 18 witnesses gave oral evidence, including the applicant. All parties were represented by both senior and junior counsel. The Supreme Court order recorded admissions made by the judgment debtors, obviously on their instructions. In the appeal to the High Court the judgment debtors were represented by both senior and junior counsel and the appeal extended over some two days. Judgment was given on 3 March 1976. The respondent applied to the High Court on 27 October 1977 for an order that the judgment debtors pay interest on the sum of $17,960.93, and on the same day the High Court ordered that interest, at the rate of 6% per annum calculated from 21 September 1972, on the said sum be paid by the judgment debtors to the respondent, and that the costs of the judgment debtors of that application be paid by the respondent. The judgment debtors were represented on that application by junior counsel. 2/11 -11- I mention these matters because in my opinion they establish that the judgment debtors could not have been misled by the description of the final order in the bankruptcy notice being that of the High Court. They must have known that the order of the Supreme Court of New South Wales was varied by the High Court in the terms to which I have referred already. ) It is clear from the cases to which I have referred that,.although the courts draw a definite distinction between the possibility of the debtor being misled and the question whether he was misled in fact, the latter being an impermissible field of enquiry, it is the capacity of the bankruptcy notice to'mislead the debtor to whom the notice is directed that matters, not some hypothetical debtor. Hence the relevance of the facts relating to the conduct of the proceedings in the Supreme Court of New South Wales and the High Court as gleaned from the orders of those courts and forming part of the evidence in this application. Mr. Chippindall's final submission was that the bankruptcy notice could mislead the judgment debtors in that it refers to the order of the High Court made on 3 March 1976 as the source of the liability of the judgment debtors to pay $6,734.28 interest rather than the order of the High Court made on 27 October 1977. This constitutes a defect in the bankruptcy. The question is whether the defect is fatal to its validity. The facts as to the proceedings before both the Supreme Court and the High Court, which I have mentioned 222/12 =12— already, clearly establish that the judgment debtors must have known that it was the later order of the High Court that establsihed their liability to pay interest. They could not have been misled by the mistatement in the bankruptcy notice. Accordingly; s. 306 saves the bankruptcy notice from invalidity. In my opinion the application to set aside the bankruptcy natice fails. I order that the application be dismissed and order the applicant to pay the respondent's costs of the application including reserved costs. 2 a trua cory cf the I certify that ta preceding page ent herein cf his Honour