The notice before Dowsett J did not contain the two notes which are set out in the Schedule to the notice under consideration in this case and, in particular, did not refer to the fact that the document attached to the notice must state the provision under which the interest was being claimed. The notice before Dowsett J had a schedule attached to it (not set out in his Honour's reasons) which stated the principal sum on which interest was claimed and the period for which, and the interest rate at which, the interest was being claimed. Neither the notice nor the schedule to the notice set out or stated the provision under which interest was being claimed.
9 Dowsett J referred to the judgment of the majority of the High Court in Kleinwort Benson Australia Ltd v Crowl (1988) 165 CLR 71 at 77 and 79-80 and reasoned that the defect did not nullify the notice in the following terms at [25] - [30]:
"The failure to refer to s 48 of the Supreme Court Act as the relevant "provision" justifying the claim for interest certainly constitutes non-compliance with the Act. It would be difficult to treat the notice as substantially complying with the relevant requirement so as to invoke the protection of s 25C of the Acts Interpretation Act as there was no attempt to comply with that requirement. Thus it is necessary to consider the approach adopted by the High Court in Kleinwort.
Having accepted that there is a defect or irregularity, I must determine whether the requirement in question is essential pursuant to the Act. That is a matter of construction. Although the relevant provisions are in language which might be thought to be prescriptive, the reference in reg 4.02(3) to s 25C of the Acts Interpretation Act suggests something less than an expectation that there will be strict compliance with its provisions. Similarly, as I have already observed, the express, and relatively liberal treatment in s 41 of an overstatement of the debt suggests that less serious defects should not be fatal to the validity of a bankruptcy notice. If the claim for interest were unjustified or excessive, the matter would have fallen for resolution pursuant to subs 41(5). It seems most unlikely that the Act places the debtor in a better position where the amount claimed is correct, but not justified in detail. I conclude that the defect is not as to an essential requirement of the Act.
It is next necessary to determine whether the defect was objectively capable of misleading the respondents as to what was necessary for compliance with the notice. There is no suggestion that the amount claimed was incorrect. The only conduct necessary in order to comply with the notice was to pay that amount. There was no room for misunderstanding.
As to the possibility of confusion concerning the different interest rates, the bankruptcy notice, with attachments, made it clear that the Supreme Court had awarded interest at twelve per cent until judgment and that the applicants were claiming interest at ten per cent thereafter. The respondents may not have understood why there was a difference in the rates, but that is not a misunderstanding as to what they had to do to comply with the notice. It is the latter kind of misunderstanding which is contemplated in Kleinwort.
In the circumstances, I consider that the defect did not nullify the bankruptcy notice and that it was therefore an irregularity to be dealt with pursuant to s 306(1). I can see no reason to conclude that any substantial injustice has been caused by that irregularity.
Since writing the above, my attention has been drawn to the decision of Finkelstein J in Bendigo Bank Ltd v Scerri [1999] FCA 1215 (3 September 1999). His Honour treated as fatal an omission to identify the provision under which interest is claimed. I have come to the contrary conclusion, although I must say that my initial impression, which I disclosed in the course of argument, was otherwise. Had the view expressed by Finkelstein J been part of the ratio of the decision in question, I would have been inclined to follow it. However his Honour clearly disposed of the case on another basis. I should adhere to the considered view which I have outlined above."
10 In Bendigo Bank Limited v Scerri (supra) Finkelstein J considered a bankruptcy notice in which there was a difference between the amount of the debt alleged to be due to the Petitioner in the body of the notice and the total debt that was due to the Petitioner as set out in the Schedule to the notice. His Honour concluded that the bankruptcy notice was misleading because it failed to clarify the nature of the proceeding that the debtor had to take in order to have the notice set aside. His Honour reached this conclusion because, although the notice notified the debtor that to avoid bankruptcy proceedings he might apply to the Federal Court for an Order to set aside the bankruptcy notice on the ground that he had a counter-claim etc. "equal to or exceeding the sum specified in a bankruptcy notice as owing to the Judgment Creditor", it was not clear to what sum that notification was referring. It was for that reason that his Honour dismissed the Petition. The notice did not state or set out the provision under which interest was claimed in the notice and because his Honour concluded that the bankruptcy notice was misleading he found it unnecessary to determine whether that failure was a failure to meet a mandatory requirement of the Act. Nevertheless, his Honour stated his conclusion on this issue in the following terms at [20] - [21]:
"To my mind, there can be no doubt that when interest forms part of the amount claimed in the bankruptcy notice, the failure to specify the source of the obligation to pay that interest is a failure to meet a mandatory requirement of the Bankruptcy Act. Section 41 (2) requires a bankruptcy notice to be in accordance with the prescribed form and that form requires specification of the provision pursuant to which interest is claimed. This is not an idle piece of information to provide to a debtor. It enables him to decide whether the interest claimed is in fact due. It also permits him to determine whether the amount of interest claimed is the correct amount.
It must be remembered that it has long been a fundament precept of the law of bankruptcy that a bankruptcy notice, which is the foundation of a bankruptcy, is a matter in which great strictness is required: Kleinwort, above at 81 per Deane J (who was in dissent on other matters). Except in the case of a merely formal defect, for which s 306 will provide a remedy, a defective bankruptcy notice is invalid and the failure to comply with it cannot constitute an act of bankruptcy. The failure to specify the source of the obligation to pay interest could hardly be described as a formal defect."
11 The applicant submitted that I should follow Dowsett J and not Finkelstein J whose observations were obiter. The applicant submitted that the reasoning of the majority of the High Court in Kleinwort Benson Australia Limited v Crowl (supra) led to the conclusion that the omission in the bankruptcy notice of the provision under which the interest was being claimed was a formal defect or irregularity. At 77, Mason CJ, Wilson, Brennan & Gaudron JJ said:
"Three questions arise as to the validity of the bankruptcy notices in this case: are they defective or irregular; if so is the defect or irregularity substantive or formal; and if it is formal only, has it occasioned substantial and irremediable injustice?
It may be accepted that a bankruptcy notice which mis-states the amount due to the creditor is defective or irregular.
At 79-81 their Honours said:
"The authorities show that a bankruptcy notice is a nullity if it fails to meet a requirement made essential by the Act, or if it could reasonably mislead a debtor as to what is necessary to comply with the notice: James v Federal Commissioner of Taxation (1955) 93 CLR 631 at 644; Pillai v Comptroller of Income Tax [1970] AC 1124 at 1135. In such cases the notice is a nullity whether or not the debtor in fact is misled: In re A Judgment Debtor, 530 of 1908 [1908] 2 K.B. 474 at 481;
If the amount specified in a bankruptcy notice is in fact due and payment is claimed in accordance with the judgment, the essential requirements of s. 41(2)(a)(i) - the only requirements presently relevant - are met. Understatement of the amount due, whether it be an understatement of the judgment debt or of interest payable thereon, will thus constitute a defect which is substantive rather than formal only if the understatement is objectively capable of misleading the debtor as to what is necessary for compliance with the notice.
It may be that, in a given case, understatement is capable of misleading the judgment debtor particularly if the notice is capable of producing uncertainty as to whether the debtor is required to pay the amount in fact due or the amount specified in the notice. In such a case uncertainty arises, not merely from the understatement, but from the understatement in the context of the particular bankruptcy notice. No such uncertainty arises if it is clear that payment of the amount specified in the notice will constitute compliance with the notice."
Their Honours then analysed the bankruptcy notices under consideration, concluded that there could be no uncertainty as to what would constitute compliance with the notice and continued at 81:
"The notice cannot be regarded as capable of misleading and accordingly cannot be said to be a nullity. The understatement thus constituted a formal defect or irregularity which attracts the operation of s. 306(1) of the Act."
12 The applicant submitted that the respondent could not be misled by the omission in the annexure to the Schedule as it was clear from the notice and the Schedule what the respondent was required to do in order to comply with the bankruptcy notice. It was said there was nothing incorrect about the numbers specified and that there was no ambiguity discrepancy or disconformity within the notice such as was contained in the bankruptcy notice before Finkelstein J. It was submitted that the respondent would not be better informed if the notice had informed him that interest was claimed under the relevant provision of the Supreme Court Act 1986 (Vic) as he still knows how much money he has to pay and how the calculation of interest is arrived at.
13 The form of the bankruptcy notice is derived from s 41(2) of the Act which provides:
"The notice must be in accordance with the form prescribed by the regulations."
Regulation 4.02 provides:
"(1) For the purposes of sub-section 41(2) of the Act the form of Bankruptcy Notice set out in Form 1 is prescribed.
(2) A Bankruptcy Notice must follow Form 1 in respect of its format (for example, bold or italic type face underlining and notes).
(3) Subregulation (2) is not to be taken as expressing an intention contrary to section 25C of the Acts Interpretation Act 1901."
Section 25C of the Acts Interpretation Act 1901 (Cth) provides where an Act prescribes a form, then unless the contrary intention appears strict compliance with the form is not required and substantial compliance is sufficient.
14 Form 1 is contained in Schedule 1 to the Regulations and paragraph 1 of the Form provides for the creditor to claim that the debtor owes the creditor a debt of a specified amount "as shown in the Schedule". The Schedule in Form 1 is in the following form: