Owners of Strata Plan No 5459 v Mason [1999] FCA 1137

FEDERAL COURT OF AUSTRALIA

Owners of Strata Plan No 5459 v Mason [1999] FCA 1137 BANKRUPTCY – creditor's petition – where petition based on failure to comply with bankruptcy notice – whether document purporting to be a bankruptcy notice was a "bankruptcy notice under the Bankruptcy Act 1966" - whether bankruptcy notice invalid because attaching two judgment debts – whether reference to "a judgment debt" or "final order" in s40(1)(g) and s41(1) of Bankruptcy Act 1966 should be read as including reference to plural Bankruptcy Act 1966 (Cth), s40(1)(g), s41(1) Acts Interpretation Act 1901 (Cth), s23(b) Illawarra Credit Union Ltd v Olejniczak (unreported, Beaumont J, 26 May 1998), considered GPW Aussie Exports v Latin (unreported, Goldberg J, 7 July 1998), followed

OWNERS OF STRATA PLAN NO 5459 v DESMOND RONALD MASON & ANOR N7588 OF 1999 3 AUGUST 1999

EMMETT J SYDNEY

IN THE FEDERAL COURT OF AUSTRALIA

NEW SOUTH WALES DISTRICT REGISTRY N 7588 OF 1999

IN THE MATTER OF DESMOND RONALD MASON & CAROLYN MASON

BETWEEN: The Owners of Strata Plan Number 5459

Applicant

AND: Desmond Ronald Mason

First Respondent

Carolyn Mason

Second Respondent

JUDGE: EMMETT J

DATE OF ORDER: 3 AUGUST 1999

WHERE MADE: SYDNEY

THE COURT ORDERS THAT:

1. The petition be dismissed.

Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

IN THE FEDERAL COURT OF AUSTRALIA

NEW SOUTH WALES DISTRICT REGISTRY N 7588 OF 1999

IN THE MATTER OF DESMOND RONALD MASON & CAROLYN MASON

BETWEEN: The Owners of Strata Plan Number 5459

Applicant

AND: Desmond Ronald Mason

First Respondent

Carolyn Mason

Second Respondent

JUDGE: EMMETT J

DATE: 3 AUGUST 1999

PLACE: SYDNEY

EX TEMPORE REASONS FOR JUDGMENT 1 I have before me a creditor's petition under the Bankruptcy Act 1966 ("the Act") brought by the Owners of Strata Plan No 5459 ("the Petitioning Creditor"). The respondents are Desmond Ronald Mason and Carolyn Mason. As I understand the position, the petition has been served only on the second respondent, Carolyn Mason ("the Debtor"). The petition alleges an act of bankruptcy comprising failure, on or before 10 May 1999, to comply with the requirements of a bankruptcy notice or to satisfy the court that the Debtor had a relevant counter-claim, set-off or cross demand as referred to in section 40(1)(g) of the Act. 2 A document purporting to be a bankruptcy notice under the Act was served on the Debtor on 18 April 1999. The document is generally in accordance with Form 1 as prescribed by the Regulations. However, where provision is made for particulars of a judgment debt, as is contemplated by section 40(1)(g), there appear on the bankruptcy notice in question references to two judgments: one in the sum of $2241.11 and the other in the sum of $1149.85. When the matter came before the Registrar, she was concerned that the bankruptcy notice was bad and referred the matter to a judge. The matter has now come before me. 3 Section 40(1)(g) relevantly provides that a debtor commits an act of bankruptcy as follows: "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 […] a bankruptcy notice under this Act and the debtor does not: (i) where the notice is served in Australia - within the time specified in the notice; (ii) ………….. comply with the requirements of the notice or satisfy the Court that he or she 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 or she could not have set up in the action or proceeding in which the judgment or order was obtained." 4 The question is whether the bankruptcy notice is a "bankruptcy notice under the Act" within the meaning of section 40(1)(g). Section 41(1) provides as follows: "An Official Receiver may issue a bankruptcy notice on the application of a creditor who has obtained against a debtor a final judgment or final order that: (a) is described in paragraph 40(1)(g), and (b) is for an amount of at least $2,000." Section 41(2) provides that the notice must be in accordance with the form prescribed by the regulations. 5 The solicitor for the petitioning creditor contended that, notwithstanding the language of section 40(1)(g), which refers to "a final judgment or final order", reliance may be placed on section 23 of the Acts Interpretation Act 1901 (Cth) which provides that in any Act, unless the contrary intention appears: "words in the singular number include the plural and words in the plural number include the singular." Thus, it was suggested that it is possible to read section 40(1)(g) by substituting plurals for the expressions "a final judgment" and "final order" and the words "judgment" and "order" where those terms appear in the provision. 6 However, I consider that a contrary intention appears in the Act. Section 41(1) does not easily submit itself to the substitution of plurals pursuant to section 23 of the Acts Interpretation Act. It would be necessary to read section 41 as saying that an Official Receiver may issue a bankruptcy notice on the application of a creditor who has obtained against a debtor, final judgments or final orders that are described in paragraph 40(1)(g) and that are for amounts of at least $2,000. It would then be necessary to include various permutations and combinations of "final order" and "judgment" and "final orders" and "judgments" throughout paragraph (g). I do not consider that that is an appropriate technique of construction. 7 More importantly, I consider that the scheme of section 40 and the idea of a bankruptcy notice is not consistent with the approach contended for. There are numerous paragraphs of section 40(1) specifying the cases in which an act of bankruptcy is committed. For the most part, the acts of bankruptcy relate to conduct initiated by a debtor. Paragraph (g), however, is in a different category. It enables a creditor to initiate a process whereby a debtor may commit an act of bankruptcy. 8 The authorities are clear that a bankruptcy notice must be unequivocal and unambiguous in requiring payment of the amount referred to in it. Prior to the 1996 amendments, payment of a judgment debt had to be made in accordance with the rules of the court in which the judgment was obtained. It would have been confusing and misleading to a debtor to be required to pay more than one judgment debt. It is unlikely that the amendments made in 1996 were intended to effect such a significant change in the notion of a bankruptcy notice. A bankruptcy notice, of its essence, requires the payment of a sum of money and not several sums of money. Once one allows the concept of plurality, there would be no limit on the number of judgment debts that might be the subject of a bankruptcy notice. 9 In Illawarra Credit Union Ltd v Olejniczak, (unreported, 26 May 1998), Beaumont J relied on section 23(b) of the Acts Interpretation Act to make a sequestration order based on a bankruptcy notice that included two judgments. However, his Honour did not have the benefit of any argument. The order was made ex parte. 10 In GPW Aussie Exports v Latin (unreported, 7 July 1998), Goldberg J considered the matter and declined to follow the decision of Beaumont J. His Honour observed that the application before Beaumont J was unopposed and that his Honour's reasons were given ex tempore and without the benefit of reference to authorities. Goldberg J, in his decision, referred to a line of authority commencing with In re Low; Ex parte The Argentine Goldfields Limited [1891] 1 QB 147. In none of the cases to which his Honour referred was section 23(b) of the Acts Interpretation Act, or any equivalent, considered. His Honour was, nevertheless, not persuaded to depart from that line of authority, having heard argument based on section 23(b). 11 I, with respect, agree with the observations made by Goldberg J. I am not satisfied that an act of bankruptcy has been committed, because I do not consider that the purported bankruptcy notice was a "bankruptcy notice" in accordance with the Act, for the reasons which I have briefly indicated. Accordingly, in my opinion the petition should be dismissed. I certify that the preceding eleven (11) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Emmett.