Aluma-Lite Products Pty Ltd v Simpson [1999] 1105

FEDERAL COURT OF AUSTRALIA

Aluma-Lite Products Pty Ltd v Simpson [1999] FCA 1105 BANKRUPTCY - where petition opposed - review of Registrar's decision to substitute petitioning creditor - whether bankruptcy notice defective - identification of debtor - calculation of debt - failure to pursue trust estate before trustee - proper classification of trust creditors Bankruptcy Act 1966 s 5, 44, 52(2)(b) Kleinwort Benson Australia Ltd v Crowl (1988) 165 CLR 71 Refd to Re Sly; Ex parte Broadlands International Finance Ltd (1988) 79 ALR 681 Dist Octavo Investments Pty Ltd v Knight (1979) 144 CLR 360 Cited

ALUMA-LITE PRODUCTS PTY Ltd v KENNETH NORMAN JAMES SIMPSON

Q 7040 of 1999 KIEFEL J 12 AUGUST 1999 BRISBANE

IN THE FEDERAL COURT OF AUSTRALIA

QUEENSLAND DISTRICT REGISTRY Q 7040 OF 1999

BETWEEN: ALUMA-LITE PRODUCTS PTY LTD

Applicant

AND: KENNETH NORMAN JAMES SIMPSON

Respondent

JUDGE: KIEFEL J

DATE OF ORDER: 12 AUGUST 1999

WHERE MADE: BRISBANE

THE COURT ORDERS THAT: 1. The application for review be dismissed with costs. 2. The estate of Kenneth Norman James Simpson be sequestrated. 3. David Clout be appointed trustee. 4. The substituted petitioning creditor's costs of the proceedings be paid out of that estate. Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

IN THE FEDERAL COURT OF AUSTRALIA

QUEENSLAND DISTRICT REGISTRY Q 7040 OF 1999

BETWEEN: ALUMA-LITE PRODUCTS PTY LTD

Applicant

AND: KENNETH NORMAN JAMES SIMPSON

Respondent

JUDGE: KIEFEL J

DATE: 12 AUGUST 1999

PLACE: BRISBANE

REASONS FOR JUDGMENT Ex tempore 1 On 23 June 1999, the District Registrar ordered that Aluma-Lite Products Pty Ltd be substituted as petitioning creditor. The debtor seeks a review of that decision. The basis given for it in the affidavit in support was denial of procedural fairness. It is not necessary for me to determine that question on the view I have taken of the substantive argument. As to what could have been put forward, the debtor refers to the grounds given for opposition to the petition to which I shall now turn. 2 In the first place, it is said that the bankruptcy notice fails to reflect the description of the debtor in the judgment on which it is based. There he was referred to as Kenneth Norman James Simpson as trustee for the Michael James Trust. The notice simply refers to him by name and omits mention of his capacity. I would not think that it would be appropriate in bankruptcy proceedings to make mention of that capacity. In any event, the test of inaccuracy is whether the omission tends to mislead. This is not a case of ambiguity. It is clear that it is Mr Simpson who is said to be liable on the judgment and who must comply with the notice. A reference to his capacity in the notice might have tended to confuse. 3 The second ground is that the bankruptcy notice claimed interest at 9 per cent and not 10 per cent, which was the prevailing rate under the Rules of the Supreme Court of Queensland and that is a deliberate and wilful error. The substantial point made is whether it can therefore be seen to be claiming part only of the interest, leaving another part to be claimed subsequently. That does not, however, seem to me to address the relevant question. With respect to an understatement of the amount due, whether debt or interest, the question is, again, whether the defect is substantive, which is to say it is objectively capable of misleading the debtor as to what is necessary for compliance. No uncertainty arises if it is clear that the payment of the amount specified would constitute compliance - see Kleinwort Benson Australia Ltd v Crowl (1988) 165 CLR 71 at 80. That would seem to me to conclude the matter. Here the sum of $466.24 is claimed for interest in the bankruptcy notice. It is just that that is calculated on a lesser rate of percentage. The bankruptcy notice in Re Sly; Ex parte Broadlands International Finance Ltd (1988) 79 ALR 681 was misleading because it was not clear there what sum was to be paid and up to what date the calculation of interest was to be taken. The notice here makes clear what is required. If the total debt owing had been tendered, which would have included the amount owing for interest, there would have been compliance and no act of bankruptcy committed. It may be a different question where there is no payment and the petitioning creditor then proves in the estate for sums due, since waiver may not arise. That the original petition then asserted a debt calculated at a different rate would not, in my view, have prevented the making of a sequestration order but, in any event, it is here overtaken by the event of substitution. 4 The debtor then says that "other sufficient cause" is shown so that the petition should be dismissed under s 52(2)(b) of the Bankruptcy Act 1966. It is said that the creditor was obliged to exhaust its remedies against the trust before presenting a petition against Mr Simpson as trustee. It would seem to me, however, that so long as a person is themselves liable, that is an end to the matter. The court will not determine what course a creditor should take, and would intervene only if proceedings were brought against the trustee for some ulterior purpose, and that is not here suggested. A trustee is liable for business debts, but may be entitled to reimbursement. Assuming that to be open to the trustee here, and that appears to be the basis of Mr Allen's other submissions, the money has not been produced. There may be good reason why administration of the trust was not sought by the substituted petitioning creditor, or the original petitioning creditor but, as I have said, that is a matter for a creditor. 5 Lastly, it is submitted that the original petitioning creditor should be seen as a secured creditor, and has not taken steps under s 44 prior to presentation of the petition. The submission points to the fact that in the event of a trustee's bankruptcy, creditors are subrogated to the trustee's right to indemnity from the trust estate: Octavo Investments Pty Ltd v Knight (1979) 144 CLR 360. That does not, in my view, equate a creditor of a trust to a secured creditor within the meaning of s 5 of the Bankruptcy Act. All creditors may have resort to the assets of the trust, though they may not know what they are, and what the other creditors of the trust are, at the time the trustee is sued. That is not, however, a mortgage, charge or lien securing their individual debts, which security would have enabled them to take steps against the property offered as security without the benefit or requirement of a judgment. 6 It is not otherwise contended that there is a defect in the process. The grounds of the petition are made out, and I am satisfied that a sequestration order ought to be made. The orders will therefore be that the application for review be dismissed with costs; the estate of Kenneth Norman James Simpson be sequestrated; David Clout be appointed trustee, and the substituted petitioning creditor's costs of the proceedings be paid out of that estate. I certify that the preceding six (6) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Kiefel J.