ANNEXURE 'INTEREST'
BENDIGO BANK LIMITED
REFERENCE
GARYJOHN WILLIAMS
START END NO. OF INTEREST $ DEBT $ INTEREST $ AMOUNT
DATE DATE DAYS RATE % AMOUNT AMOUNT PER DAY
13/05/98 06/04/99 329 12.3000 4927.88 546.35 1.66
TOTALS 329 546.35"
The learned primary judge said of the schedule:
"It can be seen immediately that the details of the calculation of the amount of interest claimed, and the principal sum on which, the period for which and the interest rate at which, the interest is being claimed are set out in the document attached to the bankruptcy notice. But that document does not set out or state 'the provision under which the interest is being claimed' as is contemplated by sub‑paragraph (a) of Note 2 in the Schedule."
The issues and the legislative framework
3 The ultimate issue in these proceedings is whether the notice served on each judgment debtor was a bankruptcy notice which, if not complied with, resulted in an act of bankruptcy of the type referred to in s 40(1)(g)of the Act. In each of these three appeals, the resolution of that issue turns on one question only. It is whether a notice, which otherwise complies with s 41(2) of the Act, reg 4.02 of the Regulations and Form 1 of Sch 1 to the Regulations, is not a such bankruptcy notice because (and only because) it does not have attached to it a document which states the provision under which the claim for interest is made.
4 If effect is given to the decision of the Full Court in Kirk v Ashdown [1999] FCA 1664 the issue will be resolved in favour of the appellant in each case. For that reason Mr G T Bigmore QC, who appeared with Mr M J Galvin to assist the Court (the respondents being unrepresented) submitted we should decline to follow Kirk v Ashdown, on the basis that a number of relevant authorities apparently had not been cited to the Court in that matter and that, in the light of those authorities, the decision should be regarded as wrong and this Full Court could decline to follow it. To do so would be consistent with the principles most recently stated by the Full Court in Transurban City Link Ltd v Allan [1999] FCA 1723; (1999) 168 ALR 687.
5 A bankruptcy notice is issued by an Official Receiver on application of a judgment creditor: see s 41(1). The contents of the notice are addressed in the remainder of s 41 which relevantly provides:
"41. (2) The notice must be in accordance with the form prescribed by the regulations. …
(5) A bankruptcy notice is not invalidated by reason only that the sum specified in the notice as the amount due to the creditor exceeds the amount in fact due, unless the debtor, within the time allowed for payment, gives notice to the creditor that he or she disputes the validity of the notice on the ground of the misstatement.
(6) Where the amount specified in a bankruptcy notice exceeds the amount in fact due and the debtor does not give notice to the creditor in accordance with subsection (5), he or she shall be deemed to have complied with the notice if, within the time allowed for payment, he or she takes such action as would have constituted compliance with the notice if the amount due had been correctly specified in it."
6 The Regulations prescribe the form referred to in s 41(2). Regulation 4.02 provides:
"4.02 (1) For the purposes of subsection 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 typeface, 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."
7 Form 1 in the Sch 1 to the Regulations is lengthy. It is set out in full later in these reasons. It takes the form of a pro forma document which includes a series of numbered paragraphs. It contains sections that need to be filled out before it is lodged in a draft form for signing by the Official Receiver: see reg 4.01(1)(a). Indeed Form 1 contains what can be described as directions (express or implied) as to how the form should be filled out. It also contains directions requiring that, in certain circumstances, documents must be attached to the notice. One such direction is of central importance in the present proceedings. The first numbered paragraph, when filled out, declares that the judgment creditor claims the addressee (the judgment debtor) owes the judgment creditor a specified amount "as shown in the Schedule". The pro forma schedule in Form 1, in a case such as the present, is in the same terms (not including the amounts specified) as the schedule to the notice sent to Mr Williams in these proceedings which is set out earlier in these reasons. Paragraph (a) of note 2 to the schedule requires that a document accompany the notice which states the provision under which interest is claimed. It is to be recalledthat the notice actually sent did not have attached a document complying with paragraph (a).
8 It is also convenient to set out the terms of s 306:
"306. (1) Proceedings under this Act are not invalidated by a formal defect or an irregularity, unless the court before which the objection on that ground is made is of opinion that substantial injustice has been caused by the defect or irregularity and that the injustice cannot be remedied by an order of that court.
(2) A defect or irregularity in the appointment of any person exercising, or purporting to exercise, a power or function under this Act or under a deed entered into under this Act does not invalidate an act done by him in good faith."
We now turn to the issue raised in the appeal.
Consideration of the issue in the appeal
9 A failure to comply with a bankruptcy notice can constitute an act of bankruptcy: s 40(1)(g). Ascertaining what, for that purpose, is a bankruptcy notice (or a valid bankruptcy notice as it has conventionally been described) is a matter of construction of the Act: see Project Blue Sky Inc v Australian Broadcasting Authority (1998) 194 CLR 355 at 388-390 and Deputy Commissioner of Taxation v Woodhams [2000] HCA 10; (2000) 169 ALR 503.
10 The characterisation of elements in a bankruptcy notice as elements evidencing a "requirement made essential by the Act" in Kleinwort Benson Australia Ltd v Crowl (1988) 165 CLR 71 ("Kleinwort Benson") was in a statutory context in which s 41 identified matters that had to be dealt with in a specified way in the form prescribed by the Regulations. Significantly those matters included the requirement to make payment, doing so within a specified time and in accordance with the judgment debt or order and the consequences of non-compliance with the notice. Section 41 qualified the power conferred by s 315(1)(a) to prescribe a form by directing that the prescribed form address those matters. Having regard to the function a bankruptcy notice serves it can be readily understood why these matters were both identified by the legislature in s 41 as matters a notice must address and characterised as essential (with certain consequences) by the High Court in Kleinwort Benson.
11 Section 41 now contains no explicit directions concerning the contents of a notice but deals with the contents of the notice in two more limited ways. The section contemplates the prescription of a form and directs that the notice be in accordance with that form: s 41(1). Evident in s 41 are two assumptions about the contents of any notice conforming with the prescribed form. The first is that the notice will specify an amount due to the creditor: s 41(5) and (6), and the second is that it will, if served in Australia, specify a time within which the payment will be made: s 41(6A) (and also in s 40(1)(g)). However it is scarcely likely that the legislature was, in framing s 41 in the way it did in the 1996 amendments, intending to abandon the notion that a notice must have certain characteristics for it to be a bankruptcy notice for the purposes of s 40(1)(g). The question that then arises is by what means has the legislature identified those characteristics and what are they.
12 The starting point in this inquiry is that a notice must conform with the prescribed form as directed by s 41(1). What must be done to satisfy the direction in s 41(1) is to be found in the Regulations. The regulation prescribing the form, reg 4.02, together with the form completes the legislative scheme arising from the amendments made to s 41 in 1996. The amendments to s 41 commenced on 16 December 1996 which was the time the Regulations were made which included reg 4.02. Generally it is not permissible to interpret a statute by reference to regulations made under it: see e.g. Hunter Resources Ltd v Melville (1988) 164 CLR 234 at 244. Nonetheless the role of reg 4.02 in ascertaining the legislative scheme embodied in the Act, and s 41 in particular, is relevant and is similar to the role of the sales tax regulations discussed by Beaumont J in Thorn EMI Pty Ltd v Commissioner of Taxation (1987) 13 FCR 491 at 498:
"It may be accepted, as a general proposition, that 'the intention of Parliament in enacting an Act is not to be ascertained by reference to the terms in which a delegated power to legislate has been exercised' (per Brennan J in Webster v McIntosh (1980) 49 FLR 317 at 321.) On the other hand, as Mason J observed in the course of argument in Brayson Motors Pty Ltd (In Liq) v Federal Commissioner of Taxation (1985) 156 CLR 651 at 652:
'One looks at regulations, not to construe an overall scheme or to throw light on ambiguity in a statutory provision, but to ascertain what the scheme is.'
In the present context, it has been settled since the decision in Deputy Federal Commissioner of Taxation (SA) v Ellis & Clark Ltd (1934) 52 CLR 85, that the Sales Tax Regulations are an essential part of the legislative scheme (see, especially, per Dixon J at 89). This approach was affirmed recently in Brayson Motors (supra, at 657) and it is unnecessary to pursue the questions which could arise in other contexts (cf Neill v Glacier Metal Co Ltd [1965] 1 QB 16 at 27; Jackson v Hall [1980] AC 854 at 884, 889; Bennion, op cit, at p 146).
In my opinion, reference to the Sales Tax Regulations, including reg 14A(2), is not merely permissible; it is essential to an understanding of the legislative plan."
13 This use of reg 4.02 and the form as a means of ascertaining the legislative scheme accords with the fourth of the six propositions developed by Lord Lowry in Hanlon v The Law Society [1981] AC 124 at 193-194 concerning the use that may be made of regulations in construing an Act. They are:
"(1) Subordinate legislation may be used in order to construe the parent Act, but only where power is given to amend the Act by regulations or where the meaning of the Act is ambiguous.
(2) Regulations made under the Act provide a Parliamentary or administrative contemporanea expositio of the Act but do not decide or control its meaning: to allow this would be to substitute the rule-making authority for the judges as interpreter and would disregard the possibility that the regulation relied on was misconceived or ultra vires.
(3) Regulations which are consistent with a certain interpretation of the Act tend to confirm that interpretation.
(4) Where the Act provides a framework built on by contemporaneously prepared regulations, the latter may be a reliable guide to the meaning of the former.
(5) The regulations are a clear guide, and may be decisive, when they are made in pursuance of a power to modify the Act, particularly if they come into operation on the same day as the Act which they modify.
(6) Clear guidance may also be obtained from regulations which are to have effect as if enacted in the parent Act."
14 The fourth proposition has been cited with approval by an Australian Court: see Elazac Pty Ltd v Commissioner of Patents (1994) 53 FCR 86 at 90; 125 ALR 663 at 667 per Heerey J and contemporaneous regulations have been called in aid in construing an Act in two comparatively recent decision of the House of Lords: see Government of Canada v Aronson [1990] 1 AC 579 at 590 and 610 (per Lord Bridge of Harwich and Lord Lowry respectively, two of the majority of their Lordships) and British Amusement Catering Trades Association v Westminster City Council [1989] 1 AC 147 at 158.
15 The meaning and effect of s 41 can be ascertained by reviewing the scheme rendered complete by the regulations. In our view, the scheme appears to be this. The characteristics of a valid bankruptcy notice (subject to s 41(5) and (6)) are those identified in Form 1. Those characteristics include information that the form expressly or impliedly directs be included. The form must be followed to create a valid bankruptcy notice (the notice must be "in accordance with" the form). This is subject to two qualifications. The first is that a notice which fails in some respect to comply with Form 1 may nonetheless be valid because of the operation of s 306. The second is that s 25C of the Acts Interpretation Act 1901 (Cth) may operate to avoid invalidity though its operation is limited by reg 4.02.
16 Section 25C 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."
Section 41 does not prescribe a form. That is done by reg 4.02. Thus for the purposes of s 25C, the regulation itself is to be treated as "the Act prescrib(ing) the form ...". That arises because by operation of s 46(1)(a) of the Acts Interpretation Act 1901 (Cth) a regulation is to be treated for this purpose as if it were an Act. It is clear that reg 4.02 was drafted to ensure that the provisions of s 25C have full effect in relation to the format of a notice if it is in the form prescribed by reg 4.02(1). That is, substantial compliance with Form 1 is sufficient in relation to the format of the notice. What elements in Form 1 or aspects of it are comprehended by the word "format" is not entirely clear but the concluding words in parentheses suggest it is probably a reference to the visual representation of the text constituting Form 1 as well as the notes in it. However it appears that reg 4.02 was also drafted to ensure that strict compliance is necessary with Form 1 other than as to format. Reg 4.02(3) refers only to reg 4.02(2) and not reg 4.02(1). It is comparatively clear, in our opinion, that the regulation was drafted this way so as to signify that whileit was intended s 25C would operate in relation to the format of the notice, it would not operate in relation to any other aspect of a notice and, relevantly, not operate in relation to its contents. That is, a notice that did not contain what Form 1 required was not, by operation of s 25C, a valid notice even if, as to contents, it substantially complied with Form 1.
17 However, it can be assumed that both s 41(1) and reg 4.02 were drafted with s 306 in mind. Thus, the omission from a notice of some text or information required by Form 1 which constituted a formal defect or irregularity would not invalidate the notice if no substantial injustice was caused by the defect or irregularity.
18 In reaching a final view about the proper construction of the Act and Regulations and the scope of the operation of s 306 attention must be given to authorities concerning the contents of a bankruptcy notice. It will be necessary to discuss the three leading authorities, James v Federal Commissioner of Taxation (1955) 93 CLR 631 ("James"), Pillai v Comptroller of Income Tax [1970] AC 1124 ("Pillai") and, particularly, Kleinwort Benson. However, it is instructive first to consider the course of authority, following Kleinwort Benson, at first instance in this Court.
19 We do not know of any case, and counsel were unable to refer us to any, in which it has been held that a complete failure to incorporate any information of a kind required by either the Act or the Regulations (including the form), or their predecessors, has been held not to amount, in the terminology of Kleinwort Benson, to a failure to meet a requirement made essential by the Act. That, perhaps, is not surprising. Firstly, though we would not exclude the possibility of exceptional cases it might perhaps be thought strange, where the legislature and the executive have required a notice to take a particular form and to include a number of specified items of information, for the Court to take the view in the absence of a clear legislative licence to do so, that some of those items are essential but others are not. Secondly, counsel for the appellant conceded, rightly in our view, that he could not suggest that, in circumstances where an item was wholly omitted, there was substantial compliance with the form within the meaning of s 25C of the Acts Interpretation Act 1901 (Cth) (on the assumption, contrary to our view, that the section has an operation in relation to the contents of the form as opposed to its format) or r 6 of the earlierBankruptcy Rules.
20 Re St Leon; Ex parte National Australia Bank Ltd (1994) 54 FCR 371 ("St Leon") contains what is, with respect, a clear statement of the difficulties to which we have referred and of the distinction, in principle, between a complete failure to provide a category of information required by the form and the provision of information which is inaccurate or incomplete. Lindgren J said at 378:
"In relation to the submission that the statement of address is not a matter made essential by the Act, there are, in my view, several difficulties. First, s 41(1)(a) provides that a bankruptcy notice 'shall be in accordance with the prescribed form' and it is difficult, in the face of such plain and mandatory terms, to assume that anything which is in fact in the prescribed form though not required to be in it by s 41(2), is not made 'essential' by the Act. For example, it is difficult to accept that the note at the foot of the prescribed form could be omitted without rendering the notice invalid.
A second difficulty, although it may be but another aspect of the first, is that if the submission is correct there would appear to be no sanction for non‑compliance with s 41(1)(a), except perhaps in so far as the prescribed form satisfied s 41(2). I do not think that Parliament intended the mandatory terms of s 41(1)(a) to have that restricted operation.
Thirdly, I do not think that their Honours in the joint judgment in Kleinwort Benson were contemplating by their reference to 'a requirement made essential by the Act' a dissection of the prescribed form of bankruptcy notice into parts specifically referred to in the Act and other parts. To construe their Honours' words in that way is to approach them as if they were the language of a statute. I think that it is consistent with the terms of the joint judgment that the statutory requirement that a bankruptcy notice be in accordance with the prescribed form is itself a requirement made essential by the Act.
The passage quoted from the joint judgment contemplated that a bankruptcy notice might be in accordance with the prescribed form yet still be liable to mislead. That this is so is indicated by their Honours' reference at 80 of the judgment to the possibility that an understatement of the amount due might be capable, in a particular case, of misleading the judgment debtor as to whether, if an act of bankruptcy was to be avoided, payment was required of the amount in fact due or of the amount specified in the notice."
21 There is, perhaps, scope for debate about whether the majority in Kleinwort Benson can be taken to have intended that the requirement in s 41(1)(a) (that the notice be in accordance with the prescribed form) was one of the matters to be treated as a matter made essential by the Act. It may be that their Honours' observations were directed only to s 41(2), the provision under which the requirement then under consideration arose. However that is not to gainsay Lindgren J's observations about the inappropriateness of dissecting a notice in the way discussed. A similar approach was taken by Burchett J in Hilti (Australia) Pty Ltd v Millard (1997) 78 FCR 453 (though that was a case of the provision of incorrect information rather than an omission to provide any information). St Leon is a case in which an entire failure to state a matter required to be included in a bankruptcy notice (the creditor's address) was held to invalidate the notice; Whitlam J decided similarly, again in relation to the omission of the creditor's address, in Re Ma;Ex parte Farrow Mortgage Services Pty Ltd (in liq) (1995) 58 FCR 444; Finkelstein J held that failure to attach to the form a copy of the judgment giving rise to the debt relied on invalidated a bankruptcy notice (Commonwealth Bank of Australia v Horvath [1999] FCA 143; (1999) 161 ALR 441); so did Beaumont J in Re Scerri (1998) 82 FCR 146, Katz J in Thompson v Metham [1999] FCA 935 and Kenny J in American Express International Inc v Held [1999] FCA 321; (1999) 168 ALR 185; and in Parianos v Lymlind Pty Ltd [1999] FCA 684; (1999) 164 ALR 229(see especially at par 16) Sackville J took the same view about the requirements of reg 4.03 (that was a case where information was provided, but not the information which the regulation required).
22 There are cases in which it has been held that it is unnecessary to state the address of the creditor precisely where, in the notice, the prescribed form requires it to be stated (Yu v Farrow Mortgage Services Pty Ltd (in liq) (1995) 60 FCR 300 ("Yu"), a case in which the principles stated by Lindgren J in St Leon were adopted and applied) and that the current form of notice is not invalidated if the creditor's address is not stated as such, but an address is stated at which the debtor may pay the judgment debt (Bank of Melbourne v Hannan (1997) 78 FCR 249 - we leave open the question whether the creditor's address might be necessary in order to identify where the debtor is able to make arrangements to the creditor's satisfaction for the settlement of the debt). That the creditor's address might not be necessary is readily explained by reference to the nature and purpose of the particular information required to be provided. The creditor's address is required for two reasons. The first is part of the description of the creditor, to assist identification. The second is to inform the debtor of where payment may be made or arrangements made to compound the sum or otherwise settle the debt to the creditor's satisfaction. If the latter requirement is met and there is no difficulty about identification, then there is no question of failure to provide the informationrequired to be given. The same point may be illustrated by reference to the decision in Yu. In that case the prescribed form required, as part of the description of the creditor, that the creditor's occupation be stated. The creditor was a corporation and no occupation was stated. That was held not to amount to a failure to comply with an essential requirement because the requirement to state the creditor's occupation was part of the more general requirement to identify the creditor. Stating the creditor's occupation could have no other purpose.
23 That course of authority supports the proposition that, subject perhaps to exceptional cases, the entire failure to address or deal with, in a bankruptcy notice, a matter which the legislative scheme requires be addressed or dealt with is not a formal defect or irregularity cured by s 306. However, it is necessary to consider whether such a general proposition is justified by reference to the decisions of the High Court and the Privy Council in James, Pillai and Kleinwort Benson.
24 The legislation considered in James was the Bankruptcy Act 1924‑1954 (Cth) ("the 1924 Act") and the Bankruptcy Rules made under that Act. The provisions, including the prescribed form, are set out in the joint judgment of the Court at 637‑639. The prescribed form was a great deal less elaborate than the form now prescribed. In particular, there was no requirement to attach a copy of the judgment or order relied on, a certificate of taxed or assessed costs (if legal costs were claimed) or (if interest was claimed) a document of the kind required by Note 2 to the present form. Section 53 of the 1924 Act provided that a notice was to "require the debtor to pay the judgment debt … in accordance with the terms of the judgment …" and the prescribed form directed the debtor "to pay the debt to [the creditor] of [an address]". The notice in question purported to require (as the judgment on which it was based did not) that the debtor pay the creditor at a particular place. There was a second defect in the notice. The prescribed form, following the terms of s 53, required the debtor either to pay the amount due or to "secure or compound for the said sum to [the creditor's] satisfaction or the satisfaction of the Court." The notice served on the debtor instructed him that either he must pay "or you must secure or compound for the said sum to the satisfaction of the said Deputy Crown Solicitor, the agent for the abovenamed creditors, or the satisfaction of the Bankruptcy Court" (that is, it did not make it clear that the debtor could compound to the satisfaction of the creditors themselves). The court held that those two defects in the notice resulted in its invalidity. That was so, their Honours said at 643-644:
"… because it wrongly seeks to restrict the debtor to paying the debt to the creditors at one particular place and because it does not notify him that he may in the alternative secure or compound the debt to [the creditors'] satisfaction. In the first respect it is not in accordance with the terms of the order and in the second it is capable of misleading the debtor as to the manner in which he may secure or compound for the debt. The court cannot inquire whether the debtor has in fact been misled or not. In this case it is probable that he was not misled. It is sufficient that he could be misled. But strict compliance with the requisites of a bankruptcy notice is essential to its validity and in these two respects the bankruptcy notice does not comply with these requisites. The defects cannot be regarded as formal defects or irregularities. They are breaches of important provisions of s. 53 … ."
25 The legislation with which Pillai was concerned required a bankruptcy notice to be in a prescribed form. The prescribed form required the notice to bear the title of the court by which it was issued and was expressed to be issued "by the Court". The notice served on the debtor took the prescribed form and was signed by a registrar of the court by which it was issued and sealed with the seal of that court. Section 7 of the Courts of Judicature Act 1964 (Malaysia) provided, however, as follows:
"7. (1) All summonses, warrants, orders, rules, notices and mandatory processes whatsoever, whether civil or criminal, shall be issued and shall be expressed to be issued by the Chief Justice of the High Court issuing the same in the name of Yang di‑Pertuan Agong and shall be signed by a registrar of such Court; and every such summons, warrant, order, rule, notice and mandatory process shall be sealed with the seal of the court issuing or making the same.
(2) All summonses, warrants, orders, rules, notices and other processes whatsoever, whether civil or criminal, issued or made by or with the authority of any court respecting any cause or matter within its jurisdiction shall have full force and effect and may be served or executed anywhere within Malaysia."
26 The Privy Council held that a bankruptcy notice was a "notice" within that section. The notice served on the debtor was not issued in the manner required by s 7(1). Their Lordships held, however, that the omission was a "formal defect or irregularity" within the meaning of a provision corresponding to s 306 of the Bankruptcy Act 1966 (Cth). Their Lordships said, at 1135:
"What, then, is a 'formal defect or irregularity' within the meaning of the section? This was discussed in relation to a bankruptcy notice In re A Debtor (No. 21 of 1950), Ex parte the Debtor v. Bowmaker Ltd. [1951] Ch. 313, in which the earlier authorities were considered. The test there laid down was whether the defect in the notice was of such a kind as could reasonably mislead a debtor upon whom it was served. If it was, the notice was not validated by the section notwithstanding that the particular debtor upon whom it was served was not in fact misled. If, on the other hand, it could not reasonably mislead the debtor it was a formal defect and validated by the section. Their Lordships are here only concerned with the application of the section to a bankruptcy notice. They are not concerned with whether the same test is appropriate to determine the validity of subsequent steps in bankruptcy proceedings. In their view any failure to comply with the statutory provisions as to the form of a bankruptcy notice of a kind which could not reasonably mislead a debtor upon whom it is served is a 'formal defect' and validated by the section."
27 There is no suggestion in Pillai that there is a separate category of requirements, in relation to a bankruptcy notice, made essential by the legislation. What their Lordships appear to say (the authorities which they cited were, of course, subsequently considered in some detail in Kleinwort Benson) is that in every case where a bankruptcy notice fails to comply with the prescribed form the deficiency will be a formal defect or irregularity if, and only if, it is one which is not capable of misleading the debtor. What, precisely, was intended by the phrase "mislead a debtor" was not explored. Given the form of the bankruptcy notice in question, exploration was hardly necessary.
28 Nor is there in James a clear anticipation of the distinction later made in the majority judgment in Kleinwort Benson. Certainly it was said that the requirement that the debtor make payment at a particular place was "not in accordance with the terms of the order" whereas the failure to indicate that the debtor might compound to the satisfaction of the creditors themselves was merely "capable of misleading the debtor". But in discussing the former deficiency the court observed at 639 that:
"The objection is not a trifling one particularly in a large geographical area like Australia. It is one of substance. If a judgment creditor can direct payment at one place exclusively it means that, although he and the debtor reside or carry on business in the same vicinity, the creditor can require the debtor to seek him or his agent out in some remote part of the realm."