G.P.W. Aussie Exports v Latin [1998] FCA 786

FEDERAL COURT OF AUSTRALIA BANKRUPTCY – creditor's petition - bankruptcy notice referred to three debts not one - whether bankruptcy notice invalid or merely voidable. Acts Interpretation Act 1901 (Cth): s 23(b), s 25C Bankruptcy Act 1966 (Cth): s 40(1)(g) In Re Low; Ex parte The Argentine Gold Fields Limited [1891] 1 QB 147 - followed Re Bond; Ex parte Hongkongbank of Australia Limited (1991) 33 FCR 426 - followed Catalano v Commonwealth Bank of Australia (Sundberg J, 3 July 1997, unreported) - followed The Illawarra Credit Union Limited v Olejniczak (Beaumont J, 26 May 1998, unreported) – not followed Yu v Farrow Mortgage Services Pty Ltd (In Liq) (1995) 60 FCR 300 - followed

G. P. W. AUSSIE EXPORTS v MAURICE LATIN & ANOR VG 7140 of 1998 MELBOURNE GOLDBERG J 7 JULY 1998

IN THE FEDERAL COURT OF AUSTRALIA

VICTORIA DISTRICT REGISTRY VG 7140 of 1998

in the matter of maurice latin and fabrizio latin

BETWEEN: G. P. W. AUSSIE EXPORTS

(ACN 006 679 287)

Applicant

AND: MAURICE LATIN

First Respondent

FABRIZIO LATIN

Second Respondent

JUDGE: GOLDBERG J

DATE OF ORDER: 7 JULY 1998

WHERE MADE: MELBOURNE

THE COURT ORDERS THAT: 1. The creditor's petition presented on 4 March 1998 is dismissed. Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules

IN THE FEDERAL COURT OF AUSTRALIA

VICTORIA DISTRICT REGISTRY VG 7140 of 1998

in the matter of maurice latin and fabrizio latin

BETWEEN: G. P. W. AUSSIE EXPORTS

(ACN 006 679 287)

Applicant

AND: MAURICE LATIN

First Respondent

FABRIZIO LATIN

Second Respondent

JUDGE: GOLDBERG J

DATE: 7 JULY 1998

PLACE: MELBOURNE

REASONS FOR JUDGMENT On 4 March 1998 the petitioning creditor presented and filed a petition in the Court petitioning the Court for a sequestration order against the estates of the debtors. The act of bankruptcy relied upon was the failure of the debtors to comply with the requirements of a bankruptcy notice served on each of them on 15 September 1997. The bankruptcy notice claimed that the debtors owed the creditor $149,034.75 as shown in the schedule to the notice. The creditor claimed that that amount was due in respect of three judgments obtained against the debtors together with interest of $54,386.82 which had accrued on the judgment debts. The first judgment was obtained on 8 May 1995 in the County Court for $5,500.00, the second judgment was obtained in respect of the same action in the County Court on 11 July 1995 for $71,528.33 and the third judgment was obtained in respect of a different action in the County Court on 14 August 1996 for $17,569.60. Save for the issue which has arisen in relation to the judgment debts on which the bankruptcy notice is based, all other formalities required in order for a sequestration order to be made have been complied with and the petition is not opposed. The creditor relies for the act of bankruptcy of the debtors on s 40(1)(g) of the Bankruptcy Act 1966 (Cth) which provides that a debtor commits an act of bankruptcy: "if a creditor who has obtained against the debtor a final judgment or final order, being a judgment or order the execution of which has not been stayed, has served on the debtor in Australia or, by leave of the Court, elsewhere, a bankruptcy notice under this Act and the debtor does not: (i) where the notice was served in Australia: within the time fixed by the Registrar by whom the notice was issued; or (ii) where the notice was served elsewhere: within the time fixed for the purpose by the order giving leave to effect the service; comply with the requirements of the notice or satisfy the Court that he has a counter‑claim, set‑off or cross demand equal to or exceeding the amount of the judgment debt or sum payable under the final order, as the case may be, being a counter‑claim, set‑off or cross demand that he could not have set up in the action or proceeding in which the judgment or order was obtained …" Counsel for the petitioning creditor recognising a line of authority which has held that a bankruptcy notice is invalid if founded on more than one judgment or order, submitted that in such circumstances the bankruptcy notice was not void or invalid but was rather, voidable. He submitted that if the point was not taken by the debtors, the bankruptcy notice remained in force for the purposes of providing an act of bankruptcy upon which a sequestration order could be made. He submitted that the issue was not one of illegality or jurisdiction but one rather of form. In the alternative, he submitted that s 23(b) and s 25C of the Acts Interpretation Act 1901 (Cth) could be used so as to construe s 40(1)(g) of the Bankruptcy Act 1966 (Cth) as referring to or covering a bankruptcy notice relying on more than one final judgment or final order. The line of authority which holds that a bankruptcy notice is a nullity if founded on more than one judgment or order is long‑standing. It appears to have its genesis in the Court of Appeal in England in In Re Low; Ex parte The Argentine Gold Fields Limited [1891] 1 QB 147. That decision and a number of decisions which have followed it were the subject of consideration by Foster J in Re Bond; Ex parte Hongkongbank of Australia Limited (1991) 33 FCR 426 at 434 – 436 (see Re OCS (A Debtor); Ex parte Debtor [1904] 2 KB 161; Re A Bankruptcy Notice (1906) 96 LT 133; Re Application for Issue of a Bankruptcy Notice; Ex parte Tinson (1946) 14 ABC 41, 43; Re Stephenson; Ex parte Cintee Nominees Pty Ltd (1988) 18 FCR 375). These decisions were followed more recently by Sundberg J in Catalano v Commonwealth Bank of Australia (3 July 1997, unreported). However, his Honour upheld the validity of the bankruptcy notice in that case on the basis that two costs orders in one action had been channelled into one order by a certificate of taxation. In this respect his Honour adopted and followed the approach taken in Re Wheeler [1982] 1 WLR 175. My attention has been drawn to a recent decision of Beaumont J in The Illawarra Credit Union Limited v Olejniczak (26 May 1998, unreported) in which his Honour held that it was open to a creditor to rely upon more than one judgment in a bankruptcy notice for the purpose of founding an act of bankruptcy by way of failure to comply with the bankruptcy notice. His Honour held that the provisions of s 23(b) of the Acts Interpretation Act were applicable on the basis that there was nothing in the context of s 41 which indicated a contrary intention to construing the reference in s 40(1)(g) to a final judgment, final order and judgment debt in the plural. His Honour accordingly held the bankruptcy notice valid and made a sequestration order. The proceeding before his Honour was unopposed, there being no appearance for the debtor, his Honour's reasons were given ex tempore and his Honour was not given the benefit of reference to or citation of any of the authorities in this area, particularly the decisions to which I have referred above. I would therefore, with respect, differ from his Honour in concluding that resort can be had to s 23(b) of the Acts Interpretation Act so as to validate a bankruptcy notice predicated on more than one final judgment or final order. The line of authority to which I have referred is too well established to enable me as a single judge to reconsider the matter. In any event, it would only be appropriate for me to do so if I was of the opinion that the decisions in those cases were clearly wrong. I am not of that opinion. Although it does not appear that s 23(b) of the Acts Interpretation Act was considered in any of the Australian authorities to which I have referred I consider that the reasoning in those cases is inconsistent with the proposition that s 40(1)(g) does not exhibit a contrary intention to the expressions "final judgment" and "final order" being read in the plural. In my opinion the structure of s 40(1)(g) and in particular the reference to satisfying the court of a counterclaim, set‑off or cross demand that could not have been set up in the action in which the judgment or order was obtained does exhibit a contrary intention. I consider that the effect of the decisions to which I have referred is that the bankruptcy notice which relies on more than one final judgment or final order is a nullity not just a procedural irregularity. Put shortly, in the terms submitted to me, such a bankruptcy notice is void and invalid rather than simply voidable. It is not simply a failure to comply with form. Accordingly, s 25C of the Acts Interpretation Act is of no assistance to the petitioning creditor. In my opinion, it falls within the former of the categories referred to by Lehane J in Yu v Farrow Mortgage Services Pty Ltd (In Liq) (1995) 60 FCR 300 where he considered the effect of s 25C of the Acts Interpretation Act and said: "If a document claimed to be a bankruptcy notice fails to meet a requirement made essential by the Act or is apt to mislead a debtor, then it will not have been drawn substantially in compliance with the form. If the notice, though otherwise in order, contains a formal defect or irregularity, then though the requirements of the prescribed form may not be strictly met in every detail, nevertheless the form will have been substantially complied with." The application for a sequestration order against the estates of the debtors will be dismissed. I certify that this and the preceding three (3) pages are a true copy of the Reasons for Judgment herein of the Honourable Justice Goldberg