l7oO Bankruptcy - Bankruptcy Act 1966 - application by creditor for sequestration order against estate of debtor - act of bankruptcy under s.40(1)(g) - time limited for compliance with Bankruptcy Notice - petition executed by creditor prior to expiration of Notice - petition executed in anticipation of failure to comply - petition later verified by affidavit - whether irregularity - whether proceedings invalid. Bankruptcy Act 1966 3s.40(1)(g); s.41(7); 3.52(1) Bankruptcy Rules 195(2) Cases Maud: Ex parte Townsend (1891) 8 MOR 144; re Dickson and Mackay (1924) 24 SR NSW 565, re Prow: Ex parte Dalgety Farmers' Ltd (1984) 5 FCR 233 Ex parte Coates in re Skelton (1877) 5 CH D 979 re The Debtor v. Petitioning Creditor and Official Receiver (1933 B at CR 53) Re: SHIRLEY RAE MOORE - Bankrupt Ex Parte: MGICA LID - Creditor No. P49 of 1986 ; oy MUIRHEAD J. PERTH 30 APRIL 1986 IN THE FEDERAL COURT OF AUSTRALIA GENERAL DIVISION BANKRUPTCY DISTRICT OF THE STATE OF WESTERN AUSTRALIA No. P49 of 1986 RE: SHIRLEY RAE MOORE Debtor EX PARTE: MGICA LTD Creditor CORAM: MUIRHEAD J. 30 April 1986 REASONS FOR JUDGMENT This is an application for sequestration of the debtor''s estate made by the petitioning creditor. No notice of opposition to the application was filed and there has been no appearance by the debtor. On 25 October 1985 a final judgment was entered in favour of the creditor in the District Court of Western Australia, judgment not being stayed. Pursuant to that judgment $7,619.79 became due to the creditors. On 12 November 1985 a Bankruptcy Notice was issued under the hand of the Registrar in Bankruptcy. This was duly served on the debtor on 10 January 1986. By its terms it required payment of the sum within 14 days after service, l.e. by 24 January 1986. No affidavit was filed by the debtor pursuant to 3.41(7) of the Act and payment was not effected. Thus as the debtor did not comply with the notice she committed an act of bankruptcy as provided by s.40(1)(g) that act being complete at the last moment of the time limited for compliance with the requirements of such notice (See re Maud: Ex parte Townsend (1891) 8 MOR 144; re Dickson and Mackay (1924) 24 SR NSW 565, re Prow: Ex parte Dalgety Farmers' Ltd (1984) 5 FCR 233.) On 3 February 1986, after the act of bankruptcy had been committed the petition was presented within the meaning of s.43, s.44 and Rule 12, that is to say it was filed with the Registrar who attached and executed the Form 6 Notice containing the hearing date, The problem which I wished to consider was that the petition was executed under the seal of the petitioning creditor, & company with its registered office in New South Wales on 20 January 1986, i.e. before the expiration of the Bankruptcy Notice. Counsel for the petitioning creditor explained that the petition was sent to the creditor in New South Wales before the expiration of the bankruptcy notice and in anticipation that payment would not be made pursuant to such notice. The fact is however that the petition was executed by the creditor before an act of bankruptcy was committed pursuant to s.40(1)(g) which is essentially based upon failure to comply with the notice. The petition was 'verified' by the affidavit of the secretary of the petitioning creditor sworn also on 20 January 1986 who swore inter alia that the debtor had neither "secured payment of the sum referred to in the bankruptcy notice, nor compounded that sum to the satisfaction of the petitioner". This was of course erroneous, the time limited for payment in the bankruptcy notice not having expired. The deponent has subsequently sworn an affidavit stating that the previous affidavit was sworn in error as "I could not know whether the debtor complied with the bankruptcy notice on or before 20 January 1986". He has since sworn that payment was not received on or before 24 January 1986 and I am satisfied both that an act of bankruptcy had been committed by 25 January and that the debt still remains owing. In addition to the affidavit of the company secretary an affidavit was sworn by a clerk on 29 January 1986 supporting as at that date (after the act of bankruptcy was committed) the matters referred to in para 4 of the petition, i.e. the commission of an act of bankruptcy. This affidavit was also filed and served with the petition. The debtor has had notice of the hearing of the Petition and as I have said has not appeared. The question is whether in these circumstances the sequestration order should be granted. Section 306(1) of the Bankruptcy Act 1966 provides as follows: "Proceedings under this Act are not invalidated bya 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". This maintains the wording of s.82 of the old English Bankruptcy Act 1869 and of 3.147 of the English Bankruptcy Act 1914. Rule 195(2) of the Bankruptcy Rules empowers the court to relieve a party from the consequences of non-compliance with the rules upon such terms as the Court thinks fit. In Ex parte Coates in re Skelton (1877) 5 CH D 979 the petition, upon which the debtor had been adjudicated a bankrupt in his absence, was defective by reason of the fact that it merely alleged that the debtor, a trader, had departed from his dwelling house omitting the words "with intent to defeat or delay his creditors". The debtor applied to discharge the order, the creditor applied to amend. Bacon C.J. took a strict view and held that as an order for adjudication had been made on the petition it could not be amended as a proceeding under the equivalent of our 3.306(1). He stated: "The fact of the debtor having departed from his dwelling-house in itself announces nothing. He may have gone to bury his wife or his mother, or to a meet of foxhounds. But that which the law holds, and rightly holds, to be the important fact is, that he has departed "with intent to defeat or delay his creditors." If he does it with that intent it is an act of bankruptcy. That fact the creditor's petition in this case, through some unskilfulness on the part of the person drawing it, has not alleged. The creditor has neglected to conform to the law, and to present a petition in the terms required by the law so as to entitle himself to the relief for which he asks. That is plainly irregular. There is in the bankrupt law a certain savouring of criminality, and as in criminal proceedings no evidence of general moral delinquency on the part of the person charged can be admitted against him, so0 here the bankrupt may possibly be largely indebted, but I cannot go into the merits of the case". The Court of Appeal refused to disturb the decision stating "The Act says that you must tell the debtor what the act of bankruptcy is which you allege against him, so that he may have an opportunity of contesting it in the first instance". The facts in re The Debtor v. Petitioning Creditor and Official Receiver (1933 B at CR 53) were closer. There the petition was signed and sworn the day before the act of Bankruptcy was committed and the Registrar sealed the petition without satisfying himself that the statements in the petitition were duly proved by affidavit. At the time of hearing there was no doubt that the act of bankruptcy had been committed. The Registrar refused to consider an objection on this ground. Clauson and Farwell JJ refused to disturb the order and they relied upon 3.147 of the Bankruptcy Act 1914. They agreed it was but an irregularity and that no substantial injustice had been caused. See also the cases referred to in Australian Bankruptcy Law and Practice (5th Edition) at 1260. I have concluded in the present case that the proceedings are not invalidated. I take into account that the matter was drawn to the attention of the court before any adjudication and I have had of course the opportunity of considering the matter. At the date the petition was gealed and before service the act of bankruptcy had been committed. The affidavit sworn by the company secretary (which was in part defective) was supported by the subsequent affidavit sworn on 29 January 1986 after the commission of the act of bankruptcy. Both were served upon the debtor and it is inconceivable that she has been misled or prejudiced. There is no opposition to the making of a sequestration order and the debt has not been paid. I see no possibility of substantial injustice to the debtor and there is nothing to be served by refusal to make the order sought. The defects were formal and constituted an irregularity which does not impeach the petition at the date it was either presented or served. It was for these reasons that on the 30 April last I ordered as follows: fan "T am satisfied that the debtor has committed the act of bankruptcy alleged in the petition. I am satisfied with proof of the other matters of which s.52(1) of the Act requires proof. I note that Gary Raymond Monck, a registered trustee. has consented to act as the trustee of the estate of the debtor. I make a sequestration order against the estate of the debtor. I order that costs, including reserve costs be taxed and paid according to the Act. I direct that a draft of this Order be delivered to the Registrar within seven days in accordance with r.124". I certify that thas and the five preceding Pages are a true copy of the Reasons for Judgment of his Honour Mr Justice Muirhead. Lugateth Nor dlerner Associate Dated: 30 April 1986