FEDERAL COURT OF AUSTRALIA Circle Credit Co-op Ltd v Lilikakis [2000] FCA 667 BANKRUPTCY – bankruptcy notice – alteration made after issue and before service without authority of Official Receiver – whether altered notice valid Bankruptcy Act 1966 (Cth) (the Act) ss 40(1)(g), 41(1),(2) Hilti (Australia) Pty Ltd v Millard [1997] FCA 1131 mentioned Prudential-Bache Securities (Australia) Limited v Warner [1999] FCA 1143 followed Re Hussey; Ex parte TSAI Pty Ltd (unreported, C A Sweeney J, 15 June 1989) mentioned Kirk v Ashdown [1999] FCA 1664 mentioned Bendigo Bank Ltd v Williams [2000] FCA 482 mentioned Trustees of the Franciscan Missionaries of Mary v Weir [2000] FCA 574 mentioned CIRCLE CREDIT CO-OPERATIVE LIMITED v ANIA LILIKAKIS V 7830 OF 1999 HEEREY J 19 MAY 2000 MELBOURNE IN THE FEDERAL COURT OF AUSTRALIA VICTORIA DISTRICT REGISTRY V 7830 of 1999 BETWEEN: CIRCLE CREDIT CO-OPERATIVE LIMITED Applicant AND: ANIA LILIKAKIS Respondent JUDGE: HEEREY J DATE OF ORDER: 19 MAY 2000 WHERE MADE: MELBOURNE THE COURT ORDERS THAT: 1. The appeal by way of notice of motion filed 7 April 2000 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 V 7830 of 1999 BETWEEN: CIRCLE CREDIT CO-OPERATIVE LIMITED Applicant AND: ANIA LILIKAKIS Respondent JUDGE: HEEREY J DATE: 19 MAY 2000 PLACE: MELBOURNE REASONS FOR JUDGMENT 1 The applicant appeals against a decision of Deputy Registrar Wood made on 23 March 2000 dismissing its creditor's petition. The debtor did not appear and was not represented on the appeal or at the hearing before the Deputy Registrar. The question on which the appeal turns is the effect of an amendment made to the bankruptcy notice after issue and before service. The amendment took the form of crossing out the address of the South Australian District Registry of the Federal Court in par 10 and inserting the address of the Northern Territory District Registry. The amendment was made by the process server on the instruction of the applicant's solicitors but without the authority of an Official Receiver. 2 On 25 May 1999 the applicant obtained a judgment by default in the Magistrates' Court at Melbourne against the debtor for $11,509.43 together with interest $686.50 and costs $643.00. The debtor had been served with the Magistrates' Court summons at 57A George Street, Moonta, South Australia. 3 On 27 May 1999 on the application of the applicant a bankruptcy notice was issued by an Official Receiver in the form prescribed under s 41(2) of the Bankruptcy Act 1966 (Cth) (the Act) by reg 4.02(1) of the Bankruptcy Regulations. In par 10 of the notice as issued the notice stated: "The Federal Court Registry for your State or Territory is located at: Level 8 Grenfell Centre 25 Grenfell Street Adelaide SA 5000 Telephone: (08) 8205 4436" 4 The notice was signed "T. Beirouti" and bore a stamp "Tina Beirouti for Official Receiver, Victoria". 5 The address of the debtor stated in the notice was the Moonta address already mentioned. 6 On 24 June 1999 a process server advised the applicant's solicitors that the debtor had apparently left the Moonta address and could not be located. The bankruptcy notice was returned unserved. The solicitors retained a new process server who in September 1999 located the debtor. She was employed by a hairdresser at an address in Alice Springs, Northern Territory. In instructing the new process server to serve the notice at the debtor's place of employment the solicitors wrote stating inter alia: "We request that you have your agent in the Northern Territory amend the Bankruptcy Notice, page 2, number 10. We request the South Australian Federal Court Registry details be crossed out, and the following be inserted: Federal Court Registry (Northern Territory) Commonwealth Law Court [sic] Cnr Mitchell & Herbert Streets Darwin NT 0800 Tel: (08) 8941 2333" 7 The process server amended par 10 of the bankruptcy notice substantially in accordance with those directions. A line was drawn through the words "for your State or" and above that was written "the Northern". Lines were drawn through the address and telephone number of the South Australian District Registry. The address and telephone number of the Northern Territory Registry were written alongside. 8 On 5 October 1999 the bankruptcy notice in amended form was served upon the debtor at her place of employment in Alice Springs. 9 Counsel for the applicant submitted that the amendment to the bankruptcy notice was incapable of misleading or confusing the debtor as to how to comply with the notice. At the time of service she was resident in the Northern Territory and the notice was amended to inform her formally of the address of the Northern Territory Registry of the Federal Court. The effect of the alteration was to assist the debtor in providing the details of the registry in the State or Territory where she lived. It was said that without such notification the bankruptcy notice would have been fatally defective: Hilti (Australia) Pty Ltd v Millard [1997] FCA 1131. It was further submitted that the decision of Emmett J in Prudential-Bache Securities (Australia) Limited v Warner [1999] FCA 1143 was "strongly persuasive" in favour of the validity of the applicant's bankruptcy notice. 10 I do not accept these arguments. The act of bankruptcy relied on is that prescribed by s 40(1)(g). The applicant has to show that it has obtained against the debtor a final judgment or final order, that there has been served on the debtor "a bankruptcy notice under this Act" and that the debtor has not complied with the requirements of the notice or satisfied the Court as to the existence of a counter-claim, set-off or cross-demand of the kind mentioned in s 40(1)(g). In my opinion the document served on the debtor was not a "bankruptcy notice under the Act". 11 Section 41 relevantly provides: "(1) An Official Receiver may issue a bankruptcy notice on the application of a creditor … (2) The notice must be in accordance with the form prescribed by the regulations." 12 Regulation 4.01 relevantly provides: "(1) In order to apply for the issue of a bankruptcy notice, a person must lodge with the Official Receiver (a) a duly completed draft bankruptcy notice; and (b) one of the following documents in respect of the final judgment or final order specified by the person on the approved form: … (c) a copy of the draft bankruptcy notice for the Official Receiver's records and sufficient additional copies of the draft bankruptcy notice for service and annexure to any required affidavits of service. (2) If documents are lodged with the Official Receiver in accordance with sub-regulation (1), he or she must sign (by hand or by facsimile reproduction) and date the copies of the bankruptcy notice lodged in accordance with paragraph 1(c) and return to the applicant the additional copies referred to in that paragraph." 13 Plainly what was served on the debtor was not the document issued on 27 May 1999 and signed by Ms Beirouti on behalf of the Official Receiver, Victoria. The present case is in truth in marked contrast to Prudential-Bache. In that case an undoubtedly valid notice was issued on 7 January 1999. Subsequently, and before service, the petitioning creditors solicitors wrote to ITSA advising that the amount of the debt had changed because of credits accrued in favour of the debtor and that the debtor had moved to Queensland. The letter enclosed an amended notice which altered the relevant details, including the address of the Federal Court Registry in par 10, and requested ITSA to "kindly issue the amended bankruptcy notices so that we may arrange for service of the same on the debtor in Queensland". That was done and the amended, or rather substituted, document was served. However that document contained no signature or stamp of the Official Receiver or his authorised officer. The issue on which the case turned was whether those omissions were fatal. 14 After hearing evidence as to the practice at the ITSA office Emmett J concluded (par 33): "33. …Accordingly, I am satisfied, in the circumstances I have described, that, for the purpose of s 41 and s 40(1)(g) of the Act, the Official Receiver issued the document served on the debtor on 1 March 1999. 34. To the extent that the regulations and the prescribed form require the signature of the Official Receiver, I am satisfied that the absence of the signature was a formal defect or irregularity within the meaning of s 306. The only explanation for the absence of a signature stamp was that the omission was an administrative oversight. That appears from a letter from ITSA to the solicitors for the petitioning creditor. As I have said, however, there is nothing before me which suggests that substantial injustice has been caused by the defect or irregularity constituted by the omission of the signature." 15 Prudential-Bache is instructive, amongst other things, in providing the practical answer to the problem which arose in the present case. Occasionally circumstances such as the amount of the debt or the address of the debtor or creditor will change after the issue of the bankruptcy notice but before it is served. A bankruptcy notice not containing in par 10 the address of the Registry in the State or Territory in which the debtor is served will be a nullity: Hilti. 16 The solution, as happened in Prudential-Bache,is simply to obtain a fresh notice. (Apparently the practice is not to charge a further fee.) Authority to the same effect is Re Hussey; Ex parte TSAI Pty Ltd (unreported, C A Sweeney J, 15 June 1989). In that case there was some alteration to the date of the bankruptcy notice, the precise nature of which does not appear clearly from the judgment. In any event, C A Sweeney J said (at par 5): "It was submitted that because the alteration of the date was not initialled by the Registrar, it was capable of misleading him [the debtor] into believing that the alteration was made by a third party without the authority of the Registrar and consequently the bankruptcy notice was rendered void. Bearing in mind that the Registry seal was impressed upon the same line as the date in the notice, I am of opinion that it sufficiently authenticated the handwritten date inserted in the notice, and that it was not reasonably capable of misleading the debtor." 17 Both Hussey and Prudential-Bache proceeded on the assumption that a valid bankruptcy notice has to be issued by the Official Receiver (or prior to 1996 by the Court). The only question was whether there was sufficient proof of the fact that the notice had in fact been so "issued", in the sense of being passed from one person to another, sent forth or delivered: Prudential-Bache at par 19, in the form in which it was served. 18 In the present case the undisputed fact is that the document served on the debtor had not been issued by the Official Receiver. What was served was a document which had been issued by the Official Receiver but which was subsequently altered without the Official Receiver's authority. 19 One essential feature of a bankruptcy notice has always been that it is not merely a demand by a creditor, even a judgment creditor, but is a document which comes from an official source – either the Court (before the 1996 amendments) or an Official Receiver. A notice which is altered without the Official Receiver's authority does not answer that description – regardless of whether the notice in its altered form might or might not mislead or confuse the debtor. Reference might be made by way of analogy to the common law rule that a deed or other instrument is voided by alteration in a material respect without the consent of the other party: Halsbury (4th ed) volume 12 pars 1378, 1454. 20 In the present case it is not necessary to embark on the question whether the notice was "in accordance with the form prescribed by the regulations" or whether any deficiencies were merely "a formal defect or an irregularity": see Kirk v Ashdown [1999] FCA 1664, Bendigo Bank Ltd v Williams [2000] FCA 482, Trustees of the Franciscan Missionaries of Mary v Weir [2000] FCA 574. 21 The appeal brought by way of notice of motion filed 7 April 2000 will be dismissed. I certify that the preceding twenty-one (21) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Heerey. Associate: Dated: 19 May 2000 Counsel for the Applicant: J Nolan Solicitor for the Applicant: McMahon Fearnley Counsel for the Respondent: No appearance by or on behalf of the respondent Date of Hearing: 15 May 2000 Date of Judgment: 19 May 2000