I92. _ CATCHWORODS BANKRUPTCY - bankruptcy notice claiming excessive sum - notice disputing validity - whether can extend time. Bankruptcy Act, 1966, ss.33(1)(c), 41(5), 41(6A) Re: Kai Borge Wilhelmsen Ex Parte: Sydney George Gould & Ors. QLD BN61 of 1986 PINCUS J. BRISBANE 16 May 1986 IN THE FEDERAL COURT OF AUSTRALIA ) GENERAL DIVISTON ) QLD BN61 of 1986 BANKRUPTCY DISTRICT OF THE SOUTHERN ) DISTRICT OF THE STATE OF QUEENSLAND ) RE: KAI_ BORGE WILHELMSEN EX PARTE: SYDNEY GEORGE GOULD, JOHN CLARK, PAUL NORMAN FLANAGAN & YVONNE MARIE FLANAGAN, THOMAS ISRAEL COOK & DORIS COOK, ALEXANDER BOWRING AND EVELYN RUTH BOWRING, GLADYS IRENE CLEGG, JOHN ROBINSON & VIOLET ROBINSON, GRAHAM EDWIN NICHOLLS, KERRY BISHOP, RICHARD THOMPSON, MARY THOMPSON, IAN JAMES & CAROL JAMES, BETTY GOODALL, BETTY HERZ, KENNETH GEORGE SFORCINA & META CORAL SFORCINA, KIMLEE PTY. LTD., IAN FLANAGAN & TANYA FLANAGAN, MAXINE KAY TAYLOR, HELEN MARGARET GOULD, BRUCE MACDONALD ROSS & ROMA CONSTANCE ROSS, NORTON PETERS, CRAIG DAVIS, GRAHAM WALTER TICKLE & BARBARA MARY TICKLE MINUTES OF ORDER JUDGE MAKING ORDER: PINCUS J. DATE OF ORDER: 16 May 1986 WHERE MADE: BRISBANE THE COURT ORDERS THAT: 1. The time for giving notice under s.41(5) of the Bankruptcy Act be extended until 22 April 1986. 2. The bankruptcy notice be set aside. NOTE: Settlement and entry of orders 1s dealt with in Order 36 of the Federal Court Rules. IN THE FEDERAL COURT OF AUSTRALIA ) GENERAL DIVISION ) QLD BN61 of 1986 BANKRUPTCY DISTRICT OF THE SOUTHERN ) DISTRICT OF THE STATE OF QUEENSLAND ) RE: KAI_ BORGE WILHELMSEN EX PARTE: PINCUS J. This case concerns SYDNEY GEORGE GOULD, JOHN CLARK, PAUL NORMAN FLANAGAN & YVONNE MARIE FLANAGAN, THOMAS ISRAEL COOK & DORIS COOK, ALEXANDER BOWRING AND EVELYN RUTH BOWRING, GLADYS IRENE CLEGG, JOHN ROBINSON & VIOLET ROBINSON, GRAHAM EDWIN NICHOLLS, KERRY BISHOP, RICHARD THOMPSON, MARY THOMPSON, IAN JAMES & CAROL JAMES, BETTY GOODALL, BETTY HERZ, KENNETH GEORGE SFORCINA & META CORAL SFORCINA, KIMLEE PLY. LTD., IAN FLANAGAN & TANYA FLANAGAN, MAXINE KAY TAYLOR, HELEN MARGARET GOULD, BRUCE MACDONALD ROSS & ROMA CONSTANCE ROSS, NORTON PETERS, CRAIG DAVIS, GRAHAM WALTER TICKLE & BARBARA MARY TICKLE 14 May 1986 REASONS FOR JUDGMENT a bankruptcy notice issued on 16 December 1985, which is challenged by the debtor on the ground, inter alia, that it claims too great a sum. On 22 May 1985, the judgment on which the notice is based was entered against the debtor in the sum of $340,603.24, being money due under securities. The creditors admit that before the notice issued the amount due was substantially reduced, because property the subject of the securities was sold and the proceeds received. There 1s evidence that a bankruptcy notice was issued in June 1985 in respect of the same debt and that is further mentioned below, but the first notice was thought to be deficient in some way not disclosed to me. So the issue of this second notice was procured. Allegedly by a mistake, it required payment of the whole amount due on the judgment, rather than the sum of $181,666 which, so counsel for the creditors informed me, should have been claimed. An order for substituted service was made and complied with. Under the terms of the order, service became effective on 26 February 1986. The last day for compliance with the notice was fourteen days later, 12 March 1986. The debtor, who 1s unrepresented, has placed oral and written evidence before me, principally to the effect that the creditors sold mortaaged property at an undervalue; he also made complaints about the allegedly excessive charges made by the solicitor for the creditors, who had previously acted for the debtor ~ a matter of which he also complained. The first question for determination, however, is whether such a notice was given by the debtor as 1s mentioned in s.41(5) of the Bankruptcy Act, which reads as follows: "A bankruptcy notice 1S not invalidated by reason only that the sum specified in the notice as the amount due to the creditor exceeds the amount in fact due, unless the debtor, within the time allowed for payment, gives notice to the creditor that he disputes the validity of the notice on the ground of the mis-statement." If such a notice was given, then the bankruptcy notice in question must be taken to be invalid: Walsh v. Deputy Comissioner of Taxation (1984) 53 A.L.R. 606 at 607 (High Court). On 25 February 1986, the debtor delivered to the registrar a notice beginning: "I wish to advise that the amount of $340,603.24 is completely untrue." . He went on to make complaints of the same sort as made before me, but did not include an express statement that the sum in question had been reduced since the entry of judgment by the mortgagees' sales. However, reading the notice as a whole, it conveyed the information that the sum of $340,603.24, described as "completely untrue", was so because it was too high, for the reasons set out in 1t. Section 41(5) does not require that any reasons be set out or that, if reasons are given, they be correct. In my view, although by no means clear, the document delivered to the registrar would, 1f delivered to the creditors, have complied with s.41(5). There was a conversation between a member of the registry staff and the debtor at the time the notice was delivered, but I am unable to be satisfied as to what that conversation was, nor does it seem necessary to make a finding on that subject. On 26 February 1986, the registrar prepared a notice, referring to the document of 25 February 1986 which has just been discussed, and setting "the matter" down for hearing by the Court at a specified time. There was some rather confused evidence as to the subsequent history of these two documents - i.e. that filed by the debtor on 25 February and that prepared by the registrar on 26 February. I am satisfied that both came to the knowledge of the Brisbane agents of the solicitors for the creditors on or before 12 March 1986, but there is no evidence from which it could be safely inferred that the Brisbane agents actually had the debtor's notice on or before 12 March; the solicitors for the creditors did not get that document until 14 March - two days too late. In these circumstances, it has become necessary to consider the question whether it is possible to extend time for giving of a s.41(5) notice. Counsel for the creditors argued that I have no power to extend that time because it is the same as the time "allowed for payment" - 1.e. the time for compliance with the bankruptcy notice; by reason of the provisions of s.41(6A), the latter time cannot now be extended. In my opinion, the time for giving of a s.41(5) notice may be extended under s.33(1)(c): "The Court may - {c) extend before its expiration or, if this Act does not expressly provide to the contrary, after its expiration, any time limited by this Act, or any time fixed by the Court or the Registrar under this Act (other than the time fixed for compliance with the requirements of a bankruptcy notice), for doing anact or thing or abridge any such time." Counsel for the creditors relied upon the express exclusion of the time fixed for compliance with the requirements of a bankruptcy notice. That exclusion, however, does not avail the creditors, because the giving of a s.41(5) notice is nota requirement of a bankruptcy notice. What is required by a bankruptcy notice is, of course, primarily payment. To my mind, the question is whether it is implicit in s.41(5), read with s.33(1)(c), that one cannot extend the time for giving a s.41(5) notice other than by extending the time for compliance with the requirements of the bankruptcy notice, under s.41(6A). My conclusion on that point is in favour of the debtor, because, although a s.41(5) notice must prima facie be given within the time allowed for compliance with the requirements of a bankruptcy notice (which time is briefly described there as the "time allowed for payment"), that is to be read subject to s.33(1)(c). I think the time for giving a s.41(5) motice may be extended without affecting the time for compliance with the requirements of the bankruptcy notice. Although counsel argued that, even if there were power to extend the time, that should not be done, it seems clear, for a number of reasons, that this is an appropriate case to exercise the power: (i) The bankruptcy notice grossly overstates the amount due; the discrepancy 1s about $160,000. (ii) The overstatement was deliberate, at least in the sense that it was clear to the creditors that no such sum as claimed was then due. (iii) A previous bankruptcy notice, which was apparently defective in some respect, was given, and the debtor responded by giving a notice similar to that with which he responded to the bankruptcy notice in question. That is, even before the latter was issued, the creditors knew that the amount claimed was challenged. (iv) The debtor acted very promptly, but did not appreciate, it appears, that it was necessary for him to give notice to the creditors as opposed to the registrar. Even so, but for mischance, the creditors would have received the debtor's notice in time rather than two days late. I therefore hold that I both can, and should, extend the time for giving the s.41(5) notice. It is not quite clear whether I should extend that time to 14 March, when the debtor's notice was actually received by the creditors, or to 22 April when the matter came on for hearing before me. The difficulty about the former date 1s that an extension to it raises the question whether a notice given to the registrar, and thence to the creditors, complies with s.41(5). Although a two day extension might, depending on that point, be sufficient, I have decided to extend time to 22 April 1986, on which date notice was undoubtedly given. The result is that the notice is invalid as exceeding the amount in fact due. In Summary: (i) A notice sufficient, as to content, to comply with s.41(5) was given to the registrar by the debtor in time. (ii) (iii) (iv) s.41(5) That notice did not reach the creditor until two days after the time for compliance with the bankruptcy notice. There is power to extend the time for giving a s.41(5) notice. In the special circumstances of this case, it is appropriate to exercise that power in favour of the debtor. The orders will be that the time for giving notice under of the Act be extended until 22 April 1986 and that the bankruptcy notice be set aside. } certify thar this andthe $ preceding pages are a true copy of th reasons for judgrreent herein of His Honour + ¢ 7 Mr. Justice Pincus opr bt Ayferne a Associate Dated #« Mong 1986