Re Ajaje, Kevin Ex parte Freshmark Ltd [1996] FCA 798

CATCHWORDS BANKRUPTCY - whether bankruptcy notice valid - whether amended bankruptcy notice valid Bankruptcy Act 1966 s 52(2)(b), 41(5) Walsh v Deputy Federal Commissioner of Taxation (1985) 156 CLR 337 Foll Re: Kevin Ajaje ex parte Freshmark Ltd No QP 421 of 1996 Kiefel J Brisbane 5 September 1996

IN THE FEDERAL COURT OF AUSTRALIA GENERAL DIVISION BANKRUPTCY DISTRICT OF THE STATE OF QUEENSLAND No QP 421 of 1996 RE: KEVIN AJAJE Debtor EX PARTE: FRESHMARK LTD Creditor JUDGE MAKING ORDER: Kiefel J DATE OF ORDER: 5 September 1996 WHERE MADE: Brisbane MINUTES OF ORDERS THE COURT ORDERS THAT: 1. The petition be dismissed. Note: Settlement and Entry of Orders is dealt with in Rule 124 of the Bankruptcy Act.

IN THE FEDERAL COURT OF AUSTRALIA GENERAL DIVISION BANKRUPTCY DISTRICT OF THE STATE OF QUEENSLAND No QP 421 of 1996 RE: KEVIN AJAJE Debtor EX PARTE: FRESHMARK LTD Creditor CORAM: Kiefel J DATE: 5 September 1996 PLACE: Brisbane REASONS FOR JUDGMENT On 15 October 1995 a Bankruptcy notice issued upon the application of the petitioning creditor demanding that payment of the sum of $8,952.10, the balance of a judgment entered on 6 October 1994 for $9,252.10, be secured or compounded to the satisfaction of the judgment creditor. That notice was served on 27 October 1995. Within the time specified for compliance with the notice letters were received from the debtor's solicitor on 17 and 21 November 1995 which pointed out that the judgment referred to in the notice had been set aside and that judgment later entered, on 9 May 1995, was in the sum of only $7,201.00. After listing these errors and making the claim that the notice was thereby defective, the solicitors required an assurance that the matter would not be further proceeded with. The petitioning creditor's solicitors advised that they would not be proceeding with it in its present form. They then applied to the Deputy District Registrar for leave to amend the notice and this was granted in December 1995. The petition which was later served was founded on the amended notice. The judgment of May 1995 was later the subject of an order for payment by instalments in the sum of $50 per week. Mr Ajaje's complaint is that the petitioning creditor refused to accept an instalment due in August 1995 and then filed an affidavit of default which had the effect of ending his ability to pay by instalment. As I understand it the Magistrates Court Rules do not prevent the judgment amounting to a debt but prevent execution upon it. On the hearing of the petition then the Court would need to be satisfied that "for other sufficient cause" a sequestration order ought not be made (s 52(2)(b)) because of the conduct alleged on the part of the petitioning creditor, which would amount to impropriety, not only in swearing the affidavit filed in the Magistrates Court but in applying for a bankruptcy notice based upon a situation it had engineered. This would require the resolution of conflicting evidence as between Mr Ajaje's daughter and an employee of the petitioning creditor. The brevity of the material on each side renders that task rather difficult. But for reasons which will follow it has been unnecessary for me to attempt that task or to give directions with respect to a hearing of the matter where the witnesses might be examined. On the view I have taken of the matter I consider that the proceedings are fatally flawed since the original bankruptcy notice, the subject of later amendment, was invalid. When the creditor filed an application on 13 December 1995 seeking leave to amend the bankruptcy notice, the time for compliance with it had passed without any extension having been granted or otherwise effected. One might then think that the notice was spent and that there either was or was not an act of bankruptcy committed. This in turn however would depend upon the bankruptcy notice being valid. Apart from the reference to an incorrect date for the judgment the notice claimed a sum in excess of that which was due and for which the creditor could execute. Section 41(5) provides: "A bankruptcy notice is 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 misstatement." And it has been held that if the sum specified is excessive and notice is given to the creditor, the bankruptcy notice is invalidated: Walsh v Deputy Federal Commissioner of Taxation (1985) 156 CLR 337, 339. By the letter of 21 November 1995 the debtor's solicitors gave such a notice. There was then in my view no valid notice capable of amendment. The petition will be dismissed. I certify that this and the preceding two pages are a true copy of the reasons for judgment herein of the Honourable Justice Kiefel. Associate Date: 5 September 1996 The Debtor: In Person Solicitors for the creditor: Niren Raj Lawyers Date of Hearing: 2 September 1996 Place of Hearing: Brisbane Place of Judgment: Brisbane Date of Judgment: 5 September 1996