James v Australian and New Zealand Banking Group Limited

1. To the extent that paragraph 1 of the Application filed 21 September 2017 seeks to set aside Bankruptcy Notice BN 212173 issued on 23 February 2017 on the grounds set out in paragraphs 2A and 34-40 of the Amended Statement of Grounds in Support of Application (the Amended Statement), those amended grounds be dismissed.
2. The applicant pay the respondent's costs in connection with paragraphs 2A and 34-40 of the Amended Statement as agreed or taxed.
3. Liberty to restore on 3 days' notice. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

JAGOT J: 1 These reasons for judgment concern one aspect of an application for an order to set aside bankruptcy notice BN212173 issued on 23 February 2017 (the Bankruptcy Notice). The aspect of the application which is the subject of these reasons for judgment is set out in paragraphs 2A and 34-40 of the Amended Statement of Grounds in Support of the Application filed on 21 April 2020 (the Amended Statement of Grounds). In summary, the relevant aspect alleges a misstatement of the amount said to be owing in the Bankruptcy Notice. Paragraphs 36-38 of the Amended Statement of Grounds are as follows: 36. Prior to the issuing of the Bankruptcy Notice the creditor received amounts from: a. the sale of a property previously owned by [Print National Nominees Pty Ltd (In Liquidation) (Receivers and Manager Appointed)] at Broadmeadow; b. the sale of a property previously owned by [James Australia Group Pty Ltd (In Liquidation) (Receivers and Manager Appointed)] [JAG] at Rutherford; and c. part-payment of a judgment debt due to JAG. 37. The amount of the receipts paid by the Receivers to the creditor in paragraph 36 above, total approximately $2.4 million. 38. By reason of the receipts in paragraphs 36 and 37 above, the amount of the debt claimed to be owing by the debtor to the creditor in the Bankruptcy Notice is overstated by approximately $2.4 million. 2 In the written submissions for the applicant, the misstatement ground is said to be that the Bankruptcy Notice sets out the amount of the debt as $11,751,606.73 being the amount of the judgment, $13,928,818.66, less payments made and/or credit allowed of $2,177,211.93 which, it is said, does not account for all of the payments the respondent (the Bank) did or should have received from the receivers. In this regard, I refer to my earlier judgment in James v Australian and New Zealand Banking Group Limited (No 1) [2020] FCA 662 (the Earlier Judgment) where I ruled that the applicant should be confined to the case as set out, relevantly, in paragraphs 36-38 of the Amended Statement of Grounds. 3 The relevant principles were not in dispute. 4 As set out in the applicant's written submissions, it is the case that if timely notice is given under s 41(5) of the Bankruptcy Act 1966 (Cth) a bankruptcy notice will be invalid if it claims an amount greater than the creditor is entitled to: Walsh v Deputy Commissioner of Taxation [1984] HCA 33; (1984) 156 CLR 337 at [339]. 5 The relevant date is the date of issue of the bankruptcy notice: Robertson Homes (Qld) Pty Ltd v Twivey [2011] FMCA 69; (2011) 248 FLR 121. 6 An overstatement of an amount owing in a bankruptcy notice is, at least at the bankruptcy stage, fatal. As stated in Herat v McLean Holdaway Pty Ltd [2014] FCA 816 at [19], the relevant position is as follows: The legislative history behind section 41(5) has been previously explored in Seovic Civil Engineering Pty Ltd v Groeneveld [1999] FCA 255 at [41] to [48], (1999) 87 FCR 120 at 130 to 132 per Hill, Sackville and North JJ. Their Honours there referred to the divergence of views between Re Walsh and Re Greenhill and Re Emerson and proceeded to act "on the assumption not challenged by either party, that Re Greenhill and Re Emerson correctly state the law". It was there concluded that "a debtor's notice which wrongly identifies a misstatement in the bankruptcy notice, and does not provide sufficient information to enable the true misstatement (if any) to be identified by the creditor, does not comply with section 41(5) of the Bankruptcy Act": [1999] FCA 255 at [40], (1999) 87 FCR 120 at 130. Subsequently, in Skouloudis v St George Bank Ltd [2008] FCA 1765, (2008) 173 FCR 236 Edmonds J again reviewed the authorities and proceeded on the same assumption "that an overstatement in a bankruptcy notice of the amount in fact due renders the notice invalid, whether or not the overstatement could reasonably mislead the debtor, if a notice complying with the requirements of section 41(5) has been duly given": [2008] FCA 1765 at [23], (2008) 173 FCR 236 at 244. See also: Walsh v Deputy Federal Commissioner of Taxation (1984) 156 CLR 337 at 339 per Gibbs CJ. 7 The applicant made extensive written submissions about the misstatement ground. However, through the course of closing submissions, the applicant effectively conceded that the evidence served by the Bank, being the affidavits of Mr Kerr and Mr Merryweather, answered at least the bulk of those submissions. It seems to me, however, the Bank was correct that effectively there can be no controversy about the correctness of the amount stated in the Bankruptcy Notice, having regard to the confines of the case of the applicant as set out in paragraphs 36-38 of the Amended Statement of Grounds and the information contained in the affidavits of Mr Kerr and Mr Merryweather. 8 As the Bank has submitted in its written submissions, it is not in dispute that the applicant owed the amount ordered in the consent judgment (as defined in the Bank's written submissions) at the time the consent judgment was entered. Rather, the applicant's case appears to involve an assertion that the Bank received amounts after the consent judgment was entered but before the Bankruptcy Notice was issued that had not been taken into account in the Bankruptcy Notice. 9 However, as the Bank also submitted and as I accept, the real complaint of the applicant, from the affidavit evidence and the written submissions, is not that the Bank received amounts not accounted for in the Bankruptcy Notice but rather that the receivers allegedly received payments that they had not accounted for properly and/or that they did not distribute to the companies or to the Bank. As set out in the Earlier Judgment, I have not granted leave to the applicant to advance that proposition. 10 In circumstances where there appears to be no real controversy about the matters set out in the evidence of Mr Merryweather and Mr Kerr, insofar at least, as it is relevant to paragraphs 36-38 of the Amended Statement of Grounds, the Bank's submissions should be accepted. 11 In particular, I accept paragraphs 83-87 of the Bank's submissions in relation to the Broadmeadow property which state: 83. First, in relation to the sale the Broadmeadow Property, Mr James submits that the property was sold by the Receivers for $1.6 million, and that $827,212.93 of those proceeds are "unaccounted for". However, this submission, and the evidence on which Mr James' relies in relation to it, does not establish that ANZ received any funds not accounted for in the Bankruptcy Notice. Rather, Mr James seeks to complain about the Receivers' alleged accounting for the proceeds of the sale. That is not part of his misstatement ground, as set out in his Amended Statements of Ground. Further, this proceeding is not the appropriate forum for Mr James to make allegations in relation to the Receivers' accounts. 84. In any event, Mr James' allegation is without merit. The contemporaneous business records show that: (a) the Broadmeadow Property was sold for $1,448,739.78 plus GST of $144,873.98, for a total purchase price of $1,593,613.76; and (b) the settlement agenda for the purchase contemplated the following cheques be issued by the purchaser: (i) a cheque to PNN for $144,873.98; (ii) a cheque to ANZ for $1,427,211.93; (iii) a cheque to Newcastle City Council for $20,085.77; and (iv) a cheque to Hunter Water Corporation for $1,422.08, that is, cheques totaling [sic] $1,593,613.76 (the total purchase price). 85. No amount of the purchase price for the Broadmeadow Property is unaccounted for. 86. Mr James also alleges that a payment of $1,427,211.93 to TLT was distributed to ANZ but was not accounted for by the Receivers. Again, that allegation has no relevance to whether or not the Bankruptcy Notice is misstated. Mr James accepts that the payment was made to ANZ and accounted for in the Bankruptcy Notice. The distribution of $1,427,211.93 to ANZ was in relation to the sale of the Broadmeadow Property.48 Further, the payment does not appear on the Form 524 in relation to PNN because the funds were paid directly to ANZ by the purchaser, in accordance with an agreed settlement agenda. 87. There is no basis to set aside the Bankruptcy Notice on the grounds of a misstatement arising out of the sale of the Broadmeadow Property. (Original emphasis.) (Citations omitted.) 12 In relation to the Rutherford property, I accept what is set out in the Bank's written submissions between paragraphs 88-90 which states: 88. Second, in relation to the sale of the Rutherford Property, Mr James submits that the property was transferred for $400,000 by the Receivers, that JAG was to be paid $399,030.14 of those proceeds, but that this amount was not accounted for by the Receivers and has not been recognised as a distribution received by ANZ. However, the contemporaneous business records demonstrate that: (a) a bank cheque for $399,030.14 was issued to JAG by the purchaser of the Rutherford property; (b) a distribution of $350,000 was paid to ANZ out of those proceeds; and (c) the distribution was accounted for in the Form 524 relevant to JAG. 89. The distribution of $350,000 to ANZ is recognized in the First Kucharski Affidavit. Further, the balance of the $399,030.14 transfer price was applied by the Receivers to debts with statutory priority. That is, it was not distributed to ANZ. (Original emphasis.) (Citations omitted.) 13 In relation to the part payment of a judgment debt due to James Australia Group Pty Ltd (In Liquidation) (Receivers and Manager Appointed) (JAG), I accept what is set out in paragraph 91 of the Bank's written submissions, which states: 91. Third, in relation to part-payment of a judgment debt due to JAG, Mr James submits the Receivers' accounts acknowledge receipt of some, but not all of the judgment debts said to be owed to JAG. Mr James does not, however, allege that ANZ received any funds in relation to any judgment debt owed to JAG. Accordingly, this argument has no relevance to whether or not the amount of the Bankruptcy Notice is misstated. Again, there is therefore no basis to set aside the Bankruptcy Notice on the grounds of a misstatement arising out of the JAG Judgment Debt. (Original emphasis.) (Citations omitted.) 14 Accordingly, on this basis, it is apparent that I do not accept that there has been any misstatement in the Bankruptcy Notice as alleged in paragraphs 2A or 34-40 of the Amended Statement of Grounds. In this regard, as the Bank has submitted, the applicant has conflated the issue of receipts by the receivers and amounts kept by the receivers with the receipts by the Bank. The evidence for the Bank is clear in relation to the receipts of the Bank. 15 The question for the Court, as has been identified, is whether the sum specified in the Bankruptcy Notice exceeds the amount for which the creditor is entitled: Walsh v Deputy Commissioner of Taxation [1984] HCA 33; (1984) 156 CLR 337 at [339]. That is, the only relevant issue to whether the Bankruptcy Notice involves a misstatement is whether the amount specified to be owed to the Bank exceeds that to which the Bank is entitled. As I have said, there is no effective dispute on the evidence that the consent judgment accurately states the debt owed by the applicant to the Bank and the issue is the quantum of receipts by the Bank, an issue which is wholly answered by the evidence of Mr Kerr and Mr Merryweather. 16 For these reasons, paragraphs 2A and 34-40 of the Amended Statement of Grounds should be dismissed with costs. I certify that the preceding sixteen (16) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Jagot.