Adams v Lambert

REASONS FOR JUDGMENT 1 These bankruptcy petitions are founded, in each case, upon an act of bankruptcy constituted by failure to comply with a bankruptcy notice served on 1 April 2004. I am hearing the two cases together by consent. The respondents take the point that the interest calculation which is attached to each notice states the source of the claim for interest as s 83A of the District Court Act 1973 (NSW). 2 It is submitted (correctly) that the proper source of the claim in question was s 85 of the District Court Act 1973 (NSW). It is apparent from the face of the document that the interest that is claimed is post-judgment interest. Section 83A does not relate to that topic. The amount of interest is small. It is $66.58 on a judgment debt of $54,000. It is submitted that the decision of the Full Court of this Court in Australian Steel Co (Operations) Pty Ltd v Lewis (2000) 109 FCR 33 requires a conclusion that the bankruptcy notices were invalid. 3 I have received written submission from both parties on that point, which is fundamental to the establishment of the petition in each case. I should make it clear that there are other aspects of the matter that would need to be considered if the attack upon the validity of the notices did not succeed. Counsel for the creditor has supplemented the written submissions by a very interesting analysis of the cases in an endeavour to persuade me that the notices are valid. It is no disrespect to the substance of the arguments, either written or oral, that I am unable to dispose of the matter this morning. 4 The impact of the decision of the Full Court in Australian Steel Co (Operations) Pty Ltd v Lewis upon the administration of bankruptcy in Australia can only be described as dramatic. It has, in my respectful opinion, led to the triumph of form over substance in case after case. However, my distaste for the effect of the decision of the majority in that case cannot influence my approach to the authorities. There are three authorities that directly relate to the issue before me, and all of them post-date the decision of the Full Court in Australian Steel Co (Operations) Pty Ltd v Lewis. 5 The first is the decision of Madgwick J in St George Bank Ltd v Baldwin [2001] FCA 161. In that case the same error was made in attributing post-judgment interest to s 83A of the District Court Act. However, in that case, apparently, the certificate of judgment that was attached had a heading "Section 85 interest schedule", and that then set out the interest schedule in question. Relying upon that, his Honour distinguished Australian Steel Co (Operations) Pty Ltd v Lewis. 6 The next direct authority is a decision of Hely J in Cosco v Tsatsoulis [2002] FCA 358; (2002) 189 ALR 559, in which his Honour was faced with a form of bankruptcy notice that is indistinguishable in substance from those before me in the sense that the interest calculation refers, in paragraph (a), to s 83A of the District Court Act. In that case, so far as I can see from the judgment, there was no reference to s 85 in the schedule, and there is no reference to any certificate of judgment. His Honour considered (at [23]-[27]) the decision of Australian Steel Co (Operations) Pty Ltd v Lewis and an argument which was advanced that his Honour should follow Kleinwort Benson Australia Limited v Crowl (1988) 165 CLR 71, rather than the majority in Australian Steel Co (Operations) Pty Ltd v Lewis. Not surprisingly, put in that bald way, his Honour did not accept the submission. His Honour concluded (at [26]): 'In the present case, it did not matter that the rate of interest payable under the applicable Act was correctly stated. Nor did it matter whether or not the debtor might be misled as to the amount that he or she needed to pay. The erroneous statement of the provision under which interest is being claimed is sufficient of itself to invalidate the bankruptcy notice, as the requirement that the source of the interest entitlement be correctly stated is made essential by the Act.' 7 The third decision that is directly in point is that of Moore J in Commonwealth Bank of Australia v Booth [2002] FCA 430. That again is a case in which the error made is attributing the interest to s 83A of the District Court Act, rather than s 85. However, in that case, as in St George Bank Limited v Baldwin, the certificate of judgment included a schedule of interest headed "Section 85 Interest Schedule". His Honour, after referring to Cosco and St George Bank, followed St George Bank because of the consistency of the facts as his Honour saw them between that case and the case before his Honour. 8 It is of some significance that all of those decisions were given prior to the decision of the Full Court in Marshall v General Motors Acceptance Corporation Australia (2003) 127 FCR 453. In that case the counsel for the present creditor had persuaded me that Australian Steel Co (Operations) Pty Ltd v Lewis was distinguishable in relation to the validity of a bankruptcy notice that had identified s 91 of the Supreme Court Act 1970 as the source provision for the payment of interest, rather than s 39(1) of the Local Courts (Civil Claims) Act 1970 (NSW) on the basis that the notice otherwise contained a correct statement of the quantum, calculations, rates, relevant periods and so on (General Motors Acceptance Corporation Australia v Marshall (2002) 124 FCR 210). In coming to that view, I had had regard both to the notice and to the certificate of judgment. The majority of the Full Court, Cooper and North JJ, disagreed with that reasoning and the appeal was allowed. Spender J was of a different view, which he expressed in firm fashion. The precise facts in Marshall v General Motors Acceptance Corporation Australia are, as counsel for the creditor here submits, not precisely on all fours with the present case. He suggests that the present case can be seen as a mere misdescription rather than a failure to state a source provision. 9 It seems to me that the essence of the majority decision in Marshall v General Motors Acceptance Corporation Australia very much underlines the strictness with which bankruptcy notices are to be construed and leaves little, if any, room for a more benign interpretation of the effect of the decision of the majority in Australian Steel Co (Operations) Pty Ltd v Lewis. I had been prepared to apply that decision in a more expansive fashion than found favour with the majority of the Full Court in Marshall. 10 I therefore think that I have little alternative but to follow the decision of Hely J in Cosco. The facts are quite indistinguishable between that case and this, whereas Madgwick J in St George Bank Limited v Baldwin and Moore J in Commonwealth Bank of Australia v Booth were able to point to a reference to s 85 in the relevant interest schedule. I am not able to do that in the present case. 11 Thus, bearing in mind the similarity of the facts and the strong indication from the Full Court in Marshall v General Motors Acceptance Corporation Australia as to the correct approach to matters such as this, with considerable regret I find myself bound to find that in each of these cases the bankruptcy notice is invalid. That leaves me no alternative but to dismiss each petition with costs. I echo the comments of Weinberg J in Kyriackou v Shield Mercantile Pty Limited [2004] FCA 490 at 43 where his Honour said that he got no satisfaction from arriving at a conclusion of invalidity in that case. I certify that the preceding eleven (11) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Gyles.