IG4+ SZ IN THE FEDERAL COURT OF AUSTRALIA GENERAL DIVISION BANKRUPTCY DISTRICT OF THE STATE OF No. P2181 of 1987 NEW SOUTH WALES AND THE AUSTRALIAN CAPITAL TERRITORY ee a ae ee ee at ee ee RE: HANS PETER MOELLER Debtor EX PARTE: DAIRY FARMERS EMPLOYEES' CREDIT UNION LIMITED Petitioning Creditor CORAM: Davies J. DATE: 15 April 1988 PLACE: Sydney REASONS FOR JUDGMENT EX TEMPORE In this matter there has been set aside for separate determination the question whether the bankruptcy notice No. Vv3443 of 1987, dated 2 July 1987, was a valid notice. The issues raised are similar to those which were considered by me in Re Edward Lyall Sly; ex parte Broadlands International Finance Limited, delivered on 21 March 1988. In that case I enunciated the following principles:- "4 1. -2- As provided in s.41(2) of the Bankruptcy Act 1966 (Cth)("the Act"), the bankruptcy notice must require the debtor to pay within the specified time "the judgment debt or sum ordered to be paid in accordance with the judgment or order". A bankruptcy notice which understates the amount of the judgment debt is invalid unless the notice makes it clear that nothing more than the specified amount is claimed to be due. As Romer L.J. said in Re H.B. (1904) 1 K.B. 94 at p.103, "Clearly, in a bankruptcy notice the debtor is entitled to see from the notice exactly what is claimed to be due on the judgment debt. No doubt a sum might be claimed which is less 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 judgment beyond the amount specified in the notice. But a notice to pay part of a judgment debt, leaving any balance that may be due to be subsequently claimed, is, to my mind, clearly bad." A purely formal defect or irregularity in the bankruptcy notice may be excused under s.306(1) of the Act but no understatement of the sum due will be excused if it was significant enough to be capable of misleading, perplexing or embarrassing the debtor. See e.g. Crowl and Others v. Kleinwort Benson Australia Limited (1987) 74 A.L.R. 148 at 151-3. -3- If interest runs upon the judgment debt, a judgment creditor may choose to refrain from including in the bankruptcy notice any reference to that interest or he may include in the notice "an accurately calculated claim for interest up to the date of the issue of the notice." See Re Mullavey; ex parte Australia and New Zealand Banking Group Ltd (1977) 20 A.L.R. 276 at p.284. In the application of s.306(1) to a miscalculation of interest, some latitude is permitted both because the amount of interest is not fixed by the judgment debt but runs from the date of the judgment to the date of payment. (Per Lockhart J., Re Manion; ex parte Deputy Commissioner of Taxation (1979) 23 A.L.R. 270 at 273) and because it may be impossible to be certain that the bankruptcy notice will be issued on the precise day up to which the interest has been calculated. (Per Riley J. in Re Munson; ex parte Deputy Commissioner of Taxation (1977) 29 F.L.R. 479 at pp.482-3 and per Lockhart J. in Re Manion, cited above, at p.275) If interest is claimed, it is not sufficient to state the rate of interest claimed but, as a bankruptcy notice must specify a sum as to the amount due to the creditor, the bankruptcy notice must specify the amount of the interest required to be paid. See Re Munson, cited above, at p.482. le an -4- In the present case, the bankruptcy notice recited that the creditor, Dairy Farmers Employees' Credit Union Limited, claimed that the sum of $18,072.91, together with interest thereon at the rate of 19.5 per centum per annum from 13 May 1987 to 1 June 1987, $293.68, making a total of $18,366.59 in all, was due by the debtor to it under a final judgment obtained against the debtor in the District Court of New South Wales at Sydney on 13 May 1987. The notice went on to state that the debtor was required, within 14 days of the service upon him of the notice, to pay the sum of $18,366.59 so claimed by the judgment creditor or to secure the same. The notice was dated, as I have said, 2 July 1987, application for it having been filed on 1 July 1987. In my opinion, that notice had a defect of the same nature as that in the bankruptcy notice considered in Re Edward Lyall Sly, namely, that on its terms the bankruptcy notice did not claim the whole of the judgment debt but only part thereof, namely the principal sum and interest from 13 May 1987 to 1 June 1987. It is not permissible for a judgment creditor so to claim part only of the debt, leaving another part of the debt subsequently to be claimed. The judgment creditor may, ina bankruptcy notice, claim part only of the debt; but only if the judgment creditor abandons the claim for the remainder. In this case, as in the Sly case, there was no abandonment of the additional interest. Rather one would infer from the notice that the creditor contended that interest on the judgment debt at the rate of 19.5 per centum per annum continued. -5- In my opinion, 8.306 of the Bankruptcy Act 1966 (Cth) does apply to a bankruptcy notice and entitles any error to be excused but only if there is not a substantial defect. In this present case, as in the Sly case, the bankruptcy notice claimed part only of the judgment debt and did not abandon the remainder of the debt due. Such an error cannot be excused. I do not go on to consider what would be the case if this were an irregularity with which s.306 dealt. The sum specified for the interest from 13 May to 1 June was in fact wrong as is shown from the affidavit of Jill Annette Martin, for the sum of $293.68 was in fact one month's interest and not interest only from 13 May 1987 to 1 June 1987. The result was that the interest for the the period specified was overstated but interest for the whole period to 2 July 1987 was nevertheless a little understated. If I had to consider whether the error ought to be excused, I would take into account there was no evidence that the debtor had been misled and that the sums involved were not very great. However, for the reasons I have mentioned, which follow those given in Sly's case, I am of the view that the bankruptcy notice was invalid. For those reasons, then, the Court will declare that the bankruptcy notice dated 2 July 1987 was invalid. I certify that this and the 4 preceding pages are a true copy of the Reasons for Judgment herein of the Honourable Mr 7 Davies. Associate: ye Ouse Date: cede (AE ~