Pyramid Building Soc (in liq) v Terry, Bruce Mitchell & Anor [1998] FCA 431

IN THE FEDERAL COURT OF AUSTRALIA

VICTORIA DISTRICT REGISTRY VG 7824 of 1997

BETWEEN: PYRAMID BUILDING SOCIETY (IN LIQUIDATION)

Applicant

AND: BRUCE MITCHELL TERRY

First Respondent

JUDITH WENDY TERRY

Second Respondent

JUDGE: RYAN J

DATE: 7 APRIL 1998

PLACE: MELBOURNE

REASONS FOR JUDGMENT By their notice of intention to oppose the making of a sequestration order, as amended by leave on 30 March 1998, the debtors have raised the following as grounds upon which the Court should dismiss the petition of the petitioning creditor, Pyramid Building Society (in liquidation), ("Pyramid"): 1. The Bankruptcy Notice was not issued by an authorised representative of the Applicant. 2. The Bankruptcy Notice has not been signed by the Applicant. 3. The Bankruptcy Notice does not comply with the Bankruptcy Regulations. 4. The Petition has not been verified by the Applicant. 5. The Applicant has brought this Petition for ulterior motives and not for the purpose intended by the Bankruptcy Act and therefore should be dismissed. 6. The Applicant has compromised the whole benefit of judgment debt derived under the final order. It is convenient to consider each of those grounds separately and in the order which it appears in the debtors' notice. I deal first with the ground that the bankruptcy notice was not issued by an authorised representative. The bankruptcy notice conformed with Form 1 contained in Schedule 1 to the Bankruptcy Regulations and concluded with this notation: The person who applied for this Notice to be issued is: Jonathan Kramersh Holding Redlich Lawyers and Consultants 350 William Street MELBOURNE VIC 3000 Then follows a signature and then is given an address for service at the office of Messrs Holding Redlich. In my view, the relevant part of Form 1, as prescribed to come into use in December 1996, allows a bankruptcy notice to be issued on the application of an agent of a creditor. No provision is made for extrinsic proof of the agent's authority as it is contemplated that the agent will confirm his or her authority "by the following signature". In the present case there is no challenge to the authenticity of Mr Kramersh's signature, so he has complied with the requirements of the form by himself confirming by his signature that he is the authorised agent of the creditor: Re Spitzer; Ex parte Weltrans Agency Establishment (1979) 25 ALR 447 on which counsel for the debtor relied in this context exemplifies the general, but not inflexible, rule that the Court requires extrinsic proof of the authority of a person purporting to sign a petition on behalf of a corporation. However, the new form of bankruptcy notice has dispensed with any such requirement in respect of the authority of a signatory to procure the issue of a bankruptcy notice. The second ground relied on was that the bankruptcy notice was not signed by the petitioning creditor. This ground has been rendered unavailable by the conclusion reached in respect of ground 1. Regulation 4.01 of the Bankruptcy Regulations requires only that the draft bankruptcy notice be signed by the person applying for its issue who may be an agent of the creditor. The operative signature is that of the Official Receiver as contemplated by Reg 4.01(2). The third ground relied on was that the bankruptcy notice does not comply with the Bankruptcy Regulations. This ground embodies an attack on the way in which Annexure A to the bankruptcy notice recited the accrual of interest on the foundational judgment debt. Annexure A to the bankruptcy notice recited: Interest claimed pursuant to Section 101 of the Supreme Court Act 1986 - Principal Sum ordered by the $1,313,790.25 Supreme Court of Victoria at Melbourne on 8 September 1994: PLUS - Interest at the rate of 13.2% from $43,236.30 9 September, 1994 to 8 December, 1994 (91 days) LESS - Payment received on 8 December, 1994 $35,000.00 PLUS - Interest at the rate of 13.2% on $144,289.58 $1,278,790.25 from 9 December, 1994 to 16 October, 1995 (312 days) LESS - Payment received on 16 October, 1995 $15,000.00 PLUS - Interest at the rate of 13.2% on $179,160.44 $1,263,790.25 from 17 October, 1995 to 12 November, 1996 (392 days) LESS - Payment received on 12 November, 1996 $15,000.00 PLUS - Interest at the rate of 13.2% on $163,937.08 $1,248,790.25 from 13 November, 1996 to 10 November, 1997 (363 days) - Interest rate: $13.2% Pursuant to Section 2 of the Penalty Interest Rates Act 1983) - Total Amount of Interest Claimed: $530,623.40 That annexure makes it clear that the creditor has applied payments received from time to time in reduction of the principal amount of the judgment debt and then calculated interest pursuant to s 101 of the Supreme Court Act on the new balance which had been arrived at after crediting the payment received. The total amount of interest claimed was calculated by adding the amount of interest referable to each period defined by the payment of $35,000 and two payments of $15,000 each on 8 December 1994, 16 October 1995 and 12 November 1996 respectively. It is trite law that it is open to a creditor to appropriate a payment to any part of the debt owed by a debtor and, in my view, the bankruptcy notice in this respect contains nothing misleading or impermissible. A second basis of this ground of attack is that the address specified in the bankruptcy notice for payment of a debt, although the registered office of Pyramid, was not, in fact, an address at which the debt could have been paid. The relevant paragraphs of the affidavit of the firstnamed debtor, Mr Terry, sworn 6 March 1998, are in these terms: 5.1 Second, I was unable to effect payment to the Applicant at the address set out in the Bankruptcy Notice. Shortly after the receipt of the Bankruptcy Notice I called at Level 26 William Street, Melbourne in order to query someone at that address on how the amount being sought had been calculated having regard to the fact that the Schedule was missing from the Bankruptcy Notice. I also wanted to determine how the interest component was being sought and calculated as I was unable to determine this amount from the content of the Bankruptcy Notice. I further noted that payments had been received by the creditor, these payments I knew had not been made by us. Accordingly I wanted to know what the balance of the debt could have been if these payments continued to be made in the future. There was no information provided on the Bankruptcy Notice to ascertain these matters and no information about these payments had been provided to us prior to the issue of the Bankruptcy Notice. In addition, I wanted to determine as to whether an arrangement could have been made for the settlement of the balance of the debt if any was due and owing to the creditor.