Gambotto, L.C. & Anor v Napoli Constructions Pty Ltd [1995] FCA 593

CATCHWORDS Bankruptcy - failure by debtor to comply with bankruptcy notice - whether notice was defective - omission of the word "or" between paragraphs "(a)" and "(b)" of bankruptcy notice - distinction between formal defects and defect which could reasonably mislead the debtor - s.306(1) Bankruptcy Act 1966 (Cth) Bankruptcy Act 1966 (Cth) - ss.40(1)(g) and 306(1) LEANDRO CAMILLO GAMBOTTO and RUTH GAMBOTTO v NAPOLI CONSTRUCTIONS PTY LTD NP 902 of 1995 Davies J 18 July 1995 Sydney

IN THE FEDERAL COURT OF AUSTRALIA ) ) GENERAL DIVISION ) NP902 OF 1995 ) BANKRUPTCY DISTRICT OF THE ) ) STATE OF NEW SOUTH WALES ) RE: LEANDRO CAMILLO GAMBOTTO AND RUTH GAMBOTTO EX PARTE: NAPOLI CONSTRUCTIONS PTY LTD 2 Coram: Davies J Date: 18 July 1995 Place: Sydney REASON FOR JUDGMENT This is the return of a petition for sequestration based on the failure of the debtor to comply with the requirements of a bankruptcy notice (see s.40(1)(g) Bankruptcy Act 1966 (Cth)). The bankruptcy notice contained one defect. The word "or" was omitted from between the two paragraphs "(a)" and "(b)" of the bankruptcy notice, which are the alternatives which the debtor was required to comply with if he wished to avoid the commission of an act of bankruptcy.

In Re Wong ex parte Kitson, (1979) 38 FLR 207, Lockhart J held that the omission of the word "or" in a bankruptcy notice could reasonably mislead a debtor and that in that circumstance the notice was invalid and a nullity. Mr Skinner, counsel for the petitioning creditor, submitted that the law as laid down in Re Wong has been altered by the High Court in Kleinwort Benson Australian Ltd v Crowl (1988) 165 CLR 71. At page 81, Mason CJ, Wilson, Brennan and Gaudron JJ pointed out that, if a defect in proceedings constituted a formal defect or irregularity, then by the operation of section 306(1) Bankruptcy Act, if no evidence was presented of and no claim was made of actual injustice, the defect would be ignored. This is because s.306(1) provides that proceedings under the Act are not invalidated by a formal defect or irregularity unless the Court is of the opinion that substantial injustice has been caused by the defect or irregularity and that the injustice cannot be remedied by an order of the Court. The effect of the judgment of Lockhart J in Re Wong, however, was that the defect was not a formal defect or irregularity, but a defect which could reasonably mislead the debtor and which thereby invalidated the notice. This distinction was recognised by their Honours in Kleinwort Benson, where at page 81 they said: "The notice cannot be regarded as capable of misleading and accordingly cannot be said to be a nullity. The understatement thus constituted a formal defect or irregularity which attracts the operation of s. 306(1) of the Act."