Cappello v Homebuilding Pty Ltd

The legislative scheme 5 A debtor commits an act of bankruptcy if a creditor who has obtained a final judgment or order against the debtor, the execution of which has not been stayed, serves the debtor with a bankruptcy notice and the debtor does not: 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[.] See Bankruptcy Act 1966 (Cth), s 40(1)(g). 6 Section 41(1) of the Act confers power on an Official Receiver to issue a bankruptcy notice on the application of a creditor who has obtained a final judgment or final order against a debtor that is of the kind described in s 40(1)(g) and is for an amount of at least $5,000. 7 If the debtor applies to the Court for an order setting aside the bankruptcy notice before the time fixed for compliance on the ground that he or she has a counter-claim, set-off or cross demand of the kind specified in s 40(1)(g), by s 41(7) the time for compliance with the notice is deemed to have been extended to the day the Court decides whether it is satisfied as to the existence of the debtor's claim.

The application 8 The application was made on the grounds that: (1) the Cappellos have on foot a counter-claim, set-off or demand against the respondent being District Court of NSW proceedings 21/115221 being a claim for monies had and received in the amount of $378,198.05 plus interest, fees and costs; (2) the notice was not validly served on the applicants, including because it was not served on them personally; and (3) the creditor's name and address are incorrectly stated in the notice. 9 The application was supported by three affidavits sworn by Rosario Cappello on 3 May 2021, 24 June 2021, and 16 July 2021. Homebuilding relied on two affidavits sworn by Atul Atish Singh, its solicitor, on 12 May 2021 and 5 August 2021. 10 At the hearing all affidavits were read and neither deponent was required for cross-examination. 11 Despite the inference from the application, it was common ground that there was no requirement for personal service. 12 That question aside, the submissions purported to amplify the grounds. The Cappellos argued that the bankruptcy notice should be set aside because it was also "capable of being misleading" as it misstated the applicable regulations and, in addition, the notice was an abuse of process because the Cappellos were solvent. 13 No objection was taken to this course and, with one qualification, an amended originating application was filed by consent the day after the hearing to reflect the expanded scope of the application. The qualification relates to the abuse of process ground. Although the ground was maintained at the hearing, it was abandoned in the amended originating application. The amended originating application also increased the value of the alleged offsetting claim and removed the reference to the District Court proceedings doubtless because there are no proceedings on foot in the District Court. After the present application was filed, the District Court proceedings were dismissed.

The issues 14 The issues that arise, therefore, are: (1) whether the debtors have an offsetting claim; and/or (2) whether the bankruptcy notice was defective for one or all of the stated grounds and, if so, whether it was capable of misleading the debtors.

Do the debtors have an offsetting claim? 15 The contention that the Cappellos have a counter-claim, set-off or cross demand within the meaning of s 40(1)(g) is hopeless. Either they are estopped from bringing that claim under the principles in Port of Melbourne Authority v Anshun Pty Ltd (1981) 147 CLR 589 or, as their counsel ultimately conceded in argument, it was a counter-claim, set-off or cross demand they could have set up in the Supreme Court proceedings and therefore outside the scope of s 40(1)(g). 16 Mr Cappello summarised the nature of the claim he and his wife purport to have in his third affidavit: [M]y claim against the Respondent is that given that the Respondent did not provide supporting invoices from sub-contractors in accordance with the Agreement, it was not entitled to be paid in accordance with the Agreement and the amounts claimed by it are far in excess of a fair and reasonable amount for the work actually done. Accordingly, the Respondent holds money the money paid by me and my wife as "money had and received" or has been unjustly enriched. 17 The relevant parts of the "Agreement" (the building contract) were cll 15.4 and 15.5. 18 Clause 15.4 provided: A progress claim is to include details of the cost of the building works for the building works carried out, the proportion of the builder's fee claimed, any GST payable and of any moneys then due to the builder pursuant to the provisions of the contract. 19 Clause 15.5 provided: A progress claim is to be accompanied by such invoices, receipts, or other documents as may reasonably be expected to support the claim and evidence the cost of the building works being claimed. 20 Mr Cappello annexed a number of invoices to his affidavit which, he complained, did not set out details of the proportion of the builder's fee claimed and were not accompanied by "the required invoices or receipts to support the claim and evidence [of] the cost of building works being claimed". Copies of notices to produce served on Homebuilding in the Supreme Court action were also annexed to this affidavit. Mr Cappello noted that no documents were produced in answer to them. He went on to say: I believe that is because no such documents exist or if they do, the Respondent has refused to produce them because the amounts claimed in the Respondent's invoices were in excess of the amounts claimed in the Respondent's invoices (allowing for its builder's margin). I and my wife did not raise this in the proceedings in the Supreme Court numbered 2019/00008265 because we were not aware that there were no such supporting documents in existence (other than the few that had provided to which I refer in paragraph 9 above) or if there are, the Respondent has withheld them from us. Accordingly, I contend that the claim in the District Court Proceedings is not subject to an Anshun estoppel or that the judgment in the Supreme Court Proceedings is liable to be set aside for having been obtained irregularly, illegally or against good faith. 21 The issues raised by the appeal were: (1) whether the final progress claim made by the builder was invalid because it did not comply with the requirements in cll 15.4 and 15.5 of the contract; (2) who should bear the costs associated with re-pouring an internal slab, which had been done so that the ceiling height would comply with the plans; (3) whether the builder was entitled to amounts paid in respect of hours worked by its employees where the costs incurred by the builder in connection with these employees had not been established and rates charged for three of the builder's employees had not been specified in the contract, and (4) whether the owners were entitled to damages for diminution in value of the property or limited use and loss of amenity associated with the delayed completion of the building works. 22 The Court refused to allow the first issue to be agitated on the appeal since it had not been raised at the trial (at [41] per Leeming JA, with whom Macfarlan and McCallum JJA agreed). But that did not give the Cappellos the right to bring fresh proceedings in which to do so. The principle in Anshun, now commonly referred to as Anshun estoppel, prevents parties or their privies from asserting a claim or raising an issue of fact or law if the claim or issue is so connected to the subject-matter of an earlier proceeding as to have made it unreasonable in the context of that proceeding for the claim not to have been made or the issue not to have been raised in that proceeding: Tomlinson v Ramsey Food Processing Pty Ltd (2015) 256 CLR 507 at 517-18. As Gibbs CJ, Mason and Aickin JJ said in Anshun at 603, "[i]t has generally been accepted that a party will be estopped from bringing an action which, if it succeeds, will result in a judgment which conflicts with an earlier judgment". That will be the case even if, as was the case in Anshun itself, the new judgment would be based on a different cause of action. 23 No application was made by the Cappellos for special leave to appeal from the Court of Appeal's decision. Rather, on 23 April this year, they filed a statement of claim in the District Court seeking damages for non-compliance with the building contract. On 9 July 2021, on the application of Homebuilding, their statement of claim was struck out, the proceedings were dismissed, and the Cappellos were ordered to pay Homebuilding's costs on an indemnity basis. 24 In his affidavit of 16 July 2021 Mr Cappello asserted that the statement of claim was struck out because it was not in a "proper form" and that the judicial registrar, who made the orders, observed that they were at liberty to file a further, properly pleaded, claim. But the transcript of the proceedings before the District Court on 9 July 2021 reveals that this assertion was false. The statement of claim was not struck out because of a deficiency in its form. 25 The judicial registrar explained his reasons for striking out the Cappellos' pleading to Mr Cappello: It's embarrassing for us all if a person can take an issue to the Court, argue it, lose and then run it again and try and get a different result, and that's what I'm understanding Mr O'Connor to be advancing and saying from the very beginning of this directions hearing, and from what I can see, you've only brought this point up this morning, so that statement of claim filed on 23 April is what we would call a liquidated, or money claim, and you have pleaded it in short form, but when I investigate it with Mr O'Connor assistance, it turns out that you've proffered an amended statement of claim, which you don't have leave to file today, and it's based on cll 15.4 and 15.5 of the contract, and that was in your grounds of appeal at paras 10 and 11 before the Court of Appeal. 26 Earlier, after the judicial registrar had read the proposed amended statement of claim the following exchange took place: JUDICIAL REGISTRAR: Okay. Mr Cappello, that kind of answers my question. I think I understand now that it's - I'll just confirm, the parties - you're going to allege the parties were in a building contract relationship; there was to be invoices on a - usually there's a progress payment schedule, and you've paid them, and you're saying you're not entitled to them, but - can I just - just one thing; why are you entitled to reimbursement? 15.4, you're saying that the claim was to include details of the cost of building works, and so on, and so , and you're saying they were - you're going to say something along the lines that they weren't accompanied with the requirements of the clauses of the contract; is that right, Mr Cappello? PLAINTIFF: Yes, Judicial Registrar. 27 It is true that the judicial registrar did say that "in the current form and the current presentation" there was no utility in allowing the claim to proceed. It is also true that he told Mr Cappello to get some legal advice and that, if he were to reframe the claim that addressed the estoppel point he could "recommence". At the same time, however, he explained to Mr Cappello that ordinarily the statement of claim would be struck out and an opportunity afforded to replead but "in the absence of understanding what other basis [they] could have", he was not prepared to give them that opportunity. 28 The Cappellos' counsel, Mr O'Sullivan, submitted that "no such estoppel arises or that the judgment in proceedings in the Supreme Court … is liable to be set aside pursuant to rule 36.15(1) of the Uniform Civil Procedure Rules 2005 (NSW) [UCPR] because [Homebuilding] purport[ed] to invoiced [sic] it for work done by sub-contractors who did not issue invoices, giving rise to the inference that the sub-contractors didn't do the work or did for less than the amount claimed …". 29 The submission that this claim is not subject to an Anshun estoppel must be rejected. The very matters upon which counsel relied and which were raised by Mr Cappello in his affidavit were the subject of the first and third issues in the appeal (see [20]) above) and dealt with at [13]-[40] and [55]-[66] of the judgment. Mr Cappello's sworn statement that he and his wife did not raise the matter in the Supreme Court proceedings (which I take to be a reference to the trial) because they were unaware that no supporting documents were in existence is difficult to understand when the documents in question were the subject of the notices to produce and, as Leeming JA observed at [56] of his reasons, shortly before the trial, in response to the notices to produce, Homebuilding "confirmed that '[t]here are no documents in possession to produce in relation to wage records'". 30 Annexure A to Mr Cappello's third affidavit is the (draft) statement of claim Mr Cappello said he had prepared and "had intended to file" in the District Court. He deposed that he and his wife intend to instruct solicitors to settle it and to file fresh proceedings. It pleads that invoices rendered between October 2017 and September 2018 did not comply with cll 15.4 and 15.5 of the contract and therefore Homebuilding was not entitled to the monies claimed in them. That was the claim the Court of Appeal refused to allow the Cappellos to run for the first time on the appeal. 31 The draft statement of claim goes beyond the summary given in Mr Cappello's affidavit by pleading in the alternative that the invoices were issued for expenses that Homebuilding had not incurred and that including them was "fraudulent". While it is often said that "fraud unravels everything", that is not universally true: see, for example, SZFDE v Minister for Immigration and Citizenship (2007) 232 CLR 189 at [16], [29]; Nadinic v Drinkwater [2017] NSWCA 114 at [37] ff. Besides, not only is the draft statement of claim in its current form deficient, at least because the claim of fraud is not particularised as required (see UCPR, r 14.14), but the evidence went nowhere near showing that there was a reasonably arguable case of fraud and no submission to that effect was advanced either in writing or orally. 32 Mr O'Sullivan, suggested in argument that there could be "additional causes of action, for example, for …misleading or deceptive conduct under the Australian Consumer Law", a cause of action which was not pleaded in the Supreme Court proceeding. Assuming the Cappellos were consumers for the purpose of the Australian Consumer Law, however, I cannot see why they would not be precluded from bringing such a claim on Anshun principles. 33 In any event, as Mr O'Sullivan fairly conceded in argument, the Cappellos do not have an offsetting claim because they have not shown that the claim they foreshadow "could not have been set up in the action or proceeding in which the judgment or order was obtained" as s 40(1)(g) requires. 34 In short, as Homebuilder's counsel, Mr O'Connor, put it: [T]he proposition that there's an offsetting claim goes nowhere. There's no explanation as to why any of this couldn't have been set up in the first instance in any event. It all seems to revolve around the same contract for residential building work that has been argued uphill and down dale across two courts of superior jurisdiction and a third go at it in the District Court.

Is the bankruptcy notice defective and, if so, capable of misleading the debtors?

The relevant principles 35 It is trite that strict compliance with the requirements of a bankruptcy notice is essential to its validity: James v Federal Commissioner of Taxation (1955) 93 CLR 631 at 644 (Williams, Kitto and Taylor JJ). 36 It does not matter whether the debtors were in fact misled: James at 644. The question is to be determined objectively. Nor does it matter whether "some hypothetical debtor" could be misled. It is clear from the case law that what matters is "the capacity of the bankruptcy notice to mislead the debtor to whom the notice is directed": Re Wimborne; Ex parte The Debtor (1979) 24 ALR 494 at 500 (Lockhart J); Re Crisafulli; Ex parte National Commercial Banking Corporation of Australia Ltd (1985) 11 FCR 272 at 274 (Toohey J). It is also clear that the Court is entitled to look at facts extraneous to the notice to determine whether the debtor could be misled: Re Wimborne at 499; Re Florance; Ex parte Turimetta Properties Pty Ltd (1979) 28 ALR 403 at 409 (Lockhart J). 37 But proceedings under the Bankruptcy Act are not invalidated by "a formal defect or an irregularity", unless the court before which the objection is taken is of the opinion that substantial injustice has been caused by the defect or irregularity and that the injustice cannot be remedied by a court order: Bankruptcy Act, s 306(1). A "formal defect or an irregularity" is one that could not reasonably mislead the debtor: Re Wimborne at 498.

Was the bankruptcy notice capable of misleading the debtors because of the name and address of the creditor recorded in the notice?

The name of the creditor 38 The evidence is that H & S changed its named to Homebuilding on 3 September 2020, well before the Court of Appeal made the orders which underpin the bankruptcy notice. Those orders and the bankruptcy notice itself incorrectly refer to Homebuilding by its former name. The ACN did not change. 39 The Cappellos submitted that an error of this kind is "capable of being misleading", citing Re Hansen; Ex parte Hansen (1995) 4 FCR 590. That case concerned a bankruptcy notice which incorrectly described the judgment creditor as "Mortgage Guaranty Insurance Corporation of Australia Limited" when, by the time the bankruptcy notice had issued, its name had been changed to "MGICA Limited". Beaumont J held that the bankruptcy notice was invalid although the judgment creditor had obtained judgment against the debtor under the former name of the company. At 593-4 his Honour said: In my opinion, the correct manner of description of the judgment creditor for the purposes of the bankruptcy notice is "MGICA Limited (formally known as Mortgage Guaranty Insurance Corporation of Australia Limited)" or words to that effect… Unless some such description of the judgment creditor were made in the bankruptcy notice, the judgment debtor could, in my view, be misled as to the identity of the judgment creditor for the purposes of complying with the requirements of the notice. It should be noted that there is no room for any suggestion that the judgment debtor was aware of the change of name from extraneous sources (cf Re Wimborne; Ex parte The Debtor (1979) 24 ALR 494 per Lockhart J (at 500)). … In my opinion, it is essential to the validity of a bankruptcy notice that the judgment debtor be in no reasonable doubt as to the identity of the judgment creditor. In the present case, the judgment creditor was identified by a name which it had abandoned some considerable time previously. That name was quite different from the name of the judgment creditor at the time of issue of the bankruptcy notice and the judgment debtor could hardly be expected to connect the two corporate names. The judgment debtor could thus have been misled as to the identity of the party with whom he had to deal in order to comply with the requirements of the bankruptcy notice. The notice was accordingly defective (cf Re Gray; Ex parte Person to Person Financial Services Pty Limited (1980) 48 FLR 379 per Lockhart J (at 382)). 40 His Honour went on to reject the argument advanced by the judgment creditor that any defect fell within the scope of s 306 as a merely formal defect, describing the misdescription of the judgment creditor as "a serious breach of the statutory scheme", relying on James at 644. 41 At first blush, this case is remarkably similar. In this case, as in Re Hansen, the name of the judgment creditor had been changed seven months before the bankruptcy notice was issued. In this case, as in Re Hansen, the name of the company in the bankruptcy notice was the same name in which it had recovered the judgment underpinning the notice. But on closer scrutiny the facts of Re Hansen are very different from the facts of this case. 42 In Re Hansen there was evidence which indicated to Beaumont J the possibility that the name change could have misled the judgment debtor. In that case, the new name of the company was fixed outside its principal office and displayed on the tenants' directory of the building it occupied. After the bankruptcy notice had been issued, an employee of the solicitor for the judgment debtor attempted to seek out the judgment creditor at the address shown on the bankruptcy notice but was unsuccessful because only the new name of the company appeared at the building and the employee did not connect the two names. 43 Here, however, there was no such evidence. In all their dealings with the Cappellos the company had invariably used the H & S name. 44 Further, in Re Hansen Beaumont J noted that there was "no room for any suggestion that the judgment debtor was aware of the change of name from extraneous sources" as there was in Re Wimborne. In Re Wimborne the debtor argued that the bankruptcy notice was defective in that it incorrectly referred to the order of the High Court as the source of the liability of the judgment debt, rather than the earlier order of the Supreme Court of NSW, which was later varied by the High Court. Lockhart J held at 500 that the defect was not fatal because, the judgment debtors must have known that it was the later order of the High Court that established their liability to pay the judgment debt. 45 Here, however, the position is very different. In this respect the Cappellos' position is substantively identical to the position of the judgment debtors in Re Wimborne. The fact is that the Cappellos knew that H & S had changed its name to Homebuilding before they were served with the bankruptcy notice. Mr Cappello's first affidavit annexes an ASIC search conducted on 21 April 2021, two days before the bankruptcy notice was issued, which discloses the change of name and on 23 April 2021 the Cappellos filed their action in the District Court referring to H & S by its new name. 46 In these circumstances, I cannot accept that the misdescription of the creditor's name in the bankruptcy notice was capable of misleading them. 47 In Re Crisafulli Toohey J held that the bankruptcy notice was not capable of misleading the debtor, distinguishing Re Hansen. In that case, as in this, there had also been a change in the name of the judgment creditor after the judgment had been obtained but before the issue of bankruptcy notice, yet the name of the judgment creditor had remained constant in the material before the court. . His Honour noted (at 274) that at all material times the judgment creditor (the National Australia Bank Ltd, formerly the National Commercial Banking Corporation of Australia Ltd) occupied the same address and during the relevant period it had undergone one change of name. There was also evidence before the court of widespread media coverage of the change of name. His Honour emphasised that this was not a case in which the debtor had dealt with a company by a particular name and then received a bankruptcy notice in a different name (cf. Re Howes; Ex parte Hughes [1892] 2 QB 628) or one in which the notice was defective in its contents (as in Re James). His Honour observed that the distinction between a notice being misleading because of its contents and a notice being misleading because of events that have occurred had not always been maintained. Speaking of the case before him, his Honour went on to say (at 274-5): [T]he possibility of the debtor being misled could arise only if and when he attempted to take some action pursuant to the bankruptcy notice. In my opinion, given the continued occupancy of the judgment creditor at the same address, the similarity in its name before and after the change in the publicity surrounding the change of names, this is not a case in which the debtor was likely to be misled. In my view, had the question arisen, it is not likely that the debtor would have been in any doubt as to the identity of the company with which he was to deal. If, on receipt of the bankruptcy notice, he had sought to deal with the judgment creditor by letter, telephone or personal approach, there is no reason to think that his use of the company's former name would have presented an obstacle or lead to any confusion on his part. In other words, I do not think that the bankruptcy notice was capable of misleading this debtor in the particular circumstances of this case. 48 In the present case, there is no evidence of any publicity surrounding the change in the name of the judgment creditor and the names are not similar. Nevertheless, as I have already noted, the Cappellos were aware of the change of name. The ASIC search annexed to Mr Cappello's first affidavit discloses that the registered address of the company had changed twice since the Cappellos had been dealing with them. Still, there is no reason to think that if, on receipt of the bankruptcy notice, the Cappellos had sought to deal with the judgment creditor, by letter, email, telephone or personally, the use of the H & S name would or, indeed, could have presented an obstacle or led to any confusion. It was not in dispute that in all its dealings with the Cappellos, the company had invariably used the H & S name. 49 The failure to refer to the creditor in the bankruptcy notice by its correct name was a formal defect or irregularity which was not reasonably capable of misleading the Cappellos.

The address of the creditor 50 The address of the creditor given in the bankruptcy notice is the address of their solicitors, Adams & Partners. Mr O'Sullivan conceded that it is permissible to give the address of solicitors as the place where the debt can be paid. He did not concede, however, that it was permissible to give the address of solicitors as the address of the creditor. He argued that it was potentially misleading to do so because it might suggest that the debt had been assigned to the lawyers and the potential to mislead was "particularly compounded" because the company address had changed more than once during the relevant period. 51 I reject this argument, too. As Mr O'Connor submitted, the possibility that the debt had been assigned to the respondent's solicitors was not a realistic one in this case. The email Mr Singh sent to the Cappellos' solicitor, Mr Parsons, on 15 April 2021 requesting immediate payment of the judgment debt directed that the Cappellos' transfer the money into the firm's trust account. That direction is inconsistent with the notion that the debt had been assigned to the lawyers. 52 In Re Pugliese; Ex parte The Chase Manhattan Bank of Australia Ltd (1993) 44 FCR 536 Heerey J held that a bankruptcy notice which gives the address of the creditor as that of the creditor's solicitors is not invalid on that account. His Honour explained at 538: In my opinion, the bankruptcy notice did comply with the Act. The term "address" means, amongst other things, "a place where a person lives or may be reached" (Macquarie Dictionary). The purpose of a bankruptcy notice is to convey to the debtor the amount which the judgment creditor claims and to give the debtor the opportunity of paying or securing that amount. For that purpose the judgment debtor must be told what the amount is and where the creditor can be reached to accept payment or security. The requirement of providing the address of the creditor was satisfied in this case by giving the address of the creditor's solicitors, since that was a place where payment of the debt would be accepted, even though it was not a place where the creditor carried on business. It is not suggested in the present case that Swersky McPhee and Velos were not in fact the solicitors for the petitioning creditor or that they did not carry on practice at the address given or that they did not have authority to accept payment of the judgment debt on behalf of the petitioning creditor. Therefore in my opinion the provisions of the Act were complied with. (Emphasis added.) 53 It was not suggested that his Honour was wrong and the facts of the present case are relevantly indistinguishable. 54 For these reasons I do not consider that the address of the creditor recorded in the notice was erroneous. If I am wrong in this respect, I would hold that the error was a formal defect because there is no realistic possibility that the Cappellos would have been misled by the inclusion of the solicitors' address.

Was the bankruptcy notice capable of misleading the debtors because they were only served with one notice? 55 Regulation 10 of the Bankruptcy Regulations 2021 (Cth) relevantly provides: (1) A bankruptcy notice in relation to a debtor must be served on the debtor within: (a) the 6 month period beginning on the day that the Official Receiver issues the notice; or (b) any additional period that the Official Receiver determines in writing for the purposes of this paragraph. … (2) A bankruptcy notice in relation to a debtor that is served on the debtor outside of a period mentioned in subsection (1) is not valid. 56 The Cappellos submitted that, because reg 10 "is couched in the singular" (it refers to "a debtor"), the service of only one notice on them is "capable of being misleading" in that it could create the impression that only one of them was liable to pay the debt when they were jointly and severally liable. 57 This submission must also be rejected. 58 First, s 23(b) of the Acts Interpretation Act 1901 (Cth) provides that "[i]n any Act … words in the singular number include the plural". Thus, where two debtors who reside at the same premises are named as debtors in a bankruptcy notice, service of the notice is effective if they are served with one copy of the notice. 59 Second and in any event, the Cappellos were in fact served with two copies of the bankruptcy notice. Ultimately, they did not argue otherwise. 60 In his first affidavit Mr Cappello purported to annex an undated letter from Adams & Partners addressed to him and his wife which he stated was left at their home when they were not there. In fact the letter is not undated. It bears the date 27 April 2021. It also carries the notation "by Registered Post". In his first affidavit Mr Singh deposed that on 27 April 2021 the bankruptcy notice was sent by registered post to the Cappellos at the Haberfield address and that it was delivered to the Haberfield property on 30 April 2021. Documents obtained from Australia Post confirming as much were annexed to the affidavit. 61 In his first affidavit Mr Singh also deposed that he made arrangements for the Cappellos to be served personally as well and annexed to the affidavit a letter dated 29 April 2021 addressed to a firm of process servers conveying instructions to that effect. While the letter enclosing the bankruptcy notice and the judgment/order was addressed to both the Cappellos, the covering letter attached the following documents "for service": 1. Letter to Maria Cappello enclosing Bankruptcy Notice and Judgement Order; and 2. Letter to Rosario Cappello enclosing Bankruptcy Notice and Judgement Order. 62 In neither of the two affidavits Mr Cappello swore after receiving the first Singh affidavit does he say that he and his wife were not served with these documents and no submission to that effect was made by his counsel. Indeed, at the hearing Mr O'Sullivan informed the Court that "a few days", after the notice was served by registered post on the two of them, "two notices were served naming each individual". 63 It follows that the proposition that the Cappellos were only served with one copy of the bankruptcy notice cannot be sustained and the foundation for the allegation that the bankruptcy notice is capable of misleading them falls away.

Was the bankruptcy notice capable of misleading the debtors because it referred to the old Regulations? 64 Section 41(2) of the Bankruptcy Act provides that a bankruptcy notice must be in the form prescribed by the regulations. BN 252616 states in the top left corner "Bankruptcy Regulations 1996 Regulation 4.02" although it was issued on 22 April 2021, 21 days after these regulations had ceased to have effect and when the Bankruptcy Regulations 2021 (Cth) came into operation. 65 Regulation 9 of the 2021 Regulations provides: (1) For the purposes of subsection 41(2) of the Act, the form of bankruptcy notice set out in Schedule 1 is prescribed. (2) A bankruptcy notice must follow that form in respect of its format (for example, bold or italic typeface, underlining and notes). (3) Subsection (2) does not limit section 25C of the Acts Interpretation Act 1901. Note: Section 25C of the Acts Interpretation Act 1901 provides that strict compliance with a form is not required and substantial compliance is sufficient. 66 The Cappellos submitted that the reference to the 1996 Regulations, which were no longer in force, was fatal because it was a defect capable of misleading the debtors as to what was necessary to comply with the bankruptcy notice and could lull them into a false sense of security. The problem with this submission is that ignores the fact, a fact that their counsel accepted, that there was no substantive difference between the old regulations and the new in any relevant respect. The regulations relating to bankruptcy notices have not materially changed. 67 In oral argument Mr O'Sullivan said that the bankruptcy notice was issued at a time when the insolvency regime was in a state of flux. He pointed to the Coronavirus Economic Response Package Omnibus Act 2020 (Cth) which amended the Bankruptcy Regulations 1996 (Cth) to temporarily increase the statutory minimum of bankruptcy notices from $5,000 to $20,000 and the statutory period for payment from 21 days to 6 months. He contended that the widely publicised changes to the insolvency regime effected by the legislation were capable of misleading a debtor who thought the 1996 Regulations applied into thinking they had an extended period of time to pay their debts. 68 I cannot accept this argument. There were a number of problems with it. First, the insolvency regime was not in a state of flux at the time the bankruptcy notice was issued. The amendments were only in force until 31 December 2020: Corporations and Bankruptcy Legislation Amended (Extending Temporary Relief for Financially Distressed Businesses and Individuals) Regulations 2020 (Cth), Sch 1; cll 1 and 2. Second, there was no evidence about the extent of the publicity. I, myself, had seen none of it. And third, there was no evidence to suggest that the short-lived amendments ever came, or would have come, to the attention of the Cappellos. 69 I find that the reference in the bankruptcy notice to the 1996 Regulations was a formal defect or irregularity which does not invalidate the issue of the bankruptcy notice.

Conclusion 70 None of the grounds pleaded in the amended originating application is made out. The Cappellos have been unable to show that they have a counter-claim, set-off or cross demand that could not have been made in the Supreme Court proceedings. Nor have they been able to establish that the bankruptcy notice is invalid. 71 Section 41(6A) of the Bankruptcy Act gives the Court power to extend the time for compliance with the bankruptcy notice. Neither party made submissions on the question. I propose to extend the time for a period of seven days. Otherwise, the application must be dismissed. The Cappellos should pay Homebuilding's costs. There will be orders accordingly. I certify that the preceding seventy-one (71) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Katzmann.