4 It was not disputed on the hearing of the petition that the judgment debt had not been paid. Before the hearing of the petition, an application had been made to another Judge of the Court, Kiefel J, for the bankruptcy notice on which the petition was founded to be set aside. That application had been refused. However, on the hearing before Dowsett J, Counsel for the petitioning creditor did not contend that the debtors were precluded by application of the principle in Port of Melbourne Authority v Anshun Pty Ltd (1981) 147 CLR 589 especially at 598, from contesting the validity of the bankruptcy notice.
5 Counsel for the petitioning creditor took that course apparently in the belief that reliance on the Anshun principle had been foreclosed by the judgment of a Full Court of this Court in Makhoul v Barnes (1995) 60 FCR 572. However, on the hearing of the present appeal, Mr Hack of Counsel for the respondent, who also appeared below, sought to invoke the Anshun principle as precluding the appellants from contesting the validity of the bankruptcy notice.
6 On the hearing of the appeal, Counsel for the appellants contended, first, that the bankruptcy notice was a nullity because it had failed to comply with s 41(2) of the Bankruptcy Act 1966 and with Form 1 and Reg 4.01 of the Regulations in that the reference to interest in the schedule did not identify the statutory prescription under which the entitlement to interest claimed was said to have arisen.
7 Section 41(2) of the Act provides.
"The [bankruptcy] notice must be in the form prescribed by the regulations."
8 Regulation 4.02 of the Regulations stipulates:
"(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."
9 By Note 2 to Schedule 1 of the Regulations it is provided:
"Interest accrued (item 3 of the Schedule).
If interest is being claimed in this Bankruptcy Notice details of the calculation of the amount of interest claimed are to be set out in a document attached to this Bankruptcy Notice. The document must state:
(a) the provision under which the interest is being claimed; and
(b) the principal sum on which, the period for which, and the interest rate or rates at which, the interest is being claimed.
(N.B. If different rates are claimed for different periods, full details must be shown.)"
10 On behalf of the appellants, it was submitted that the failure to specify in the bankruptcy notice the provision under which the interest was being claimed rendered the bankruptcy notice a nullity because it was not a mere understatement of the amount due but a non-compliance with an express requirement of the Regulations.
11 A further, and alternative, submission on behalf of the appellants was that, as the schedule to the bankruptcy notice stipulated a rate of interest of 10% per annum prescribed pursuant to the regulations contemplated by s 48(1) of the Supreme Court Act 1995 (Qld) which was different from the rate of 12% per annum awarded by Byrne J pursuant to s 47 of the same Act, the bankruptcy notice was capable of misleading the debtors as to the amount which they had to pay in order to comply with it.
12 The only way in which it was contended that the bankruptcy notice was capable of misleading the debtors was that, by failing to specify that the interest was on the amount of the judgment debt (including interest) fixed by Byrne J in the Supreme Court of Queensland, it may have confused the debtors into believing that the lesser rate of 10% per annum was unauthorised and selected on a whim or caprice by the judgment creditors.
13 It was accepted on behalf of the appellants that the bankruptcy notice did not require payment of an amount more than that properly due from the debtors. The absence of any such overstatement led the learned primary Judge to conclude:
"To claim more than is due would create a serious dilemma for the judgment debtor - whether to pay the amount claimed in order to avoid bankruptcy or to dispute the amount, probably aggravating an already perilous financial situation. The inclusion of subs 41(5) makes it clear that even an error of that magnitude will not automatically lend to invalidity. It seems unlikely that less serious defects should do so."
14 In Kleinwort Benson Australia Ltd v Crowl (1988) 165 CLR 71 it was observed, at 77, in the joint judgment of the majority in respect of a bankruptcy notice which, due to an error in the calculation of interest, claimed less than the amount due:
"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?"
15 At pp 79-80 the joint judgment continued:
"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 p644; Pillai v Comptroller of Income Tax [1970] A.C. 1124 at p1135. 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 KB 474 at p 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."
16 It was held in Kleinwort that the essential requirements of what was then s 41(2)(a)(i) of the Bankruptcy Act were met if the amount specified in a bankruptcy notice was in fact due and payment had been claimed in accordance with the judgment. Their Honours continued, at 80:
"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."
17 The learned primary Judge in the present case, after referring to the passages from Kleinwort which we have just summarised, continued, at paras 25 and 26 of his reasons:
"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."
18 We agree that, as a matter of construction, the requirement of Note 1 to Schedule 1 to the Regulations is not mandatory in the sense that failure to comply with it will render a bankruptcy notice a nullity. It therefore remains for us to consider whether the omission of the reference to the prescription of a rate of interest pursuant to a regulation contemplated by s 48(1) of the Supreme Court Act 1995 (Qld) was objectively capable of misleading the debtors as to the amount which had to be paid in order to comply with the notices.
19 In Foote v Mid-West Finance Ltd (1997) 78 FCR 306 Foster J said at 307:
"Clearly, the underlying rationale of these cases is that the bankruptcy notice must make clear to the debtor what he or she must do to comply with its requirements and thus avoid the consequences of committing an act of bankruptcy. If he or she is left uncertain in this regard then the notice is rendered invalid and non-compliance with it does not have that serious result.
The earlier forms of notice with which these cases were concerned did not contain the "Information to Debtors" section or make provision for the inclusion of the address of the nearest Registry of the Court. I am satisfied that the legislature required the inclusion of this material in order to inform the debtor fully of the other avenues available to him or her to avoid committing an act of bankruptcy through non-compliance, namely the taking of steps to obtain an extension of the time for compliance with or for the setting aside of the bankruptcy notice. Consequently, I am of the view that if a bankruptcy notice is reasonably capable of misleading the debtor as to the manner in which he or she could take those important steps in the time frame of the notice then it must be regarded as a nullity, even if the debtor is not in fact misled. I have, accordingly, come to the view that the bankruptcy notice in this case must be regarded as a nullity and, therefore, not capable of grounding the act of bankruptcy relied upon in this petition. The result, of course, is that the petition must be dismissed."
20 In our view, given the concession that the omission to refer to the statutory source of the right of the judgment creditors to claim interest at the rate of 10% per annum on the judgment debt could not have misled the appellants as to the amount which had to be paid to comply with the bankruptcy notices, the bankruptcy notices were not misleading in the sense indicated in Kleinwort. Putting the appellants' case at its highest, they could only have been perplexed as to the source of the claimed rate of interest post-judgment of 10% per annum and as to why interest did not continue to accrue at the rate of 12% per annum which Byrne J had adopted, pursuant to s 47 of the Supreme Court Act 1995 (Qld), in quantifying the amount of the judgment debt when judgment was entered on 3 April 1997. That state of mind, assuming it to be one that can objectively be imputed to the appellants, could not have resulted in any injustice to them when they were deciding whether or not to comply with the bankruptcy notice.
21 In Distribution Group Ltd v Lyndan (1997) 78 FCR 241 Northrop J noted, at 243, the "apparent conflict between reg.4.02(2) and (3)" and in Bank of Melbourne Ltd v Hannan (1997) 78 FCR 249 the same Judge adopted his own reasoning in Lyndan but went on to deal with an issue not raised by that case which was whether non-compliance with Form 1 constituted by the omission of the address of the creditor had the result that the bankruptcy notice was a nullity. His Honour said, at 253:
"In the present case, the only relevant non-compliance is that the address of the Creditor is not set out in par 1. In my opinion, in all the circumstances of this case, there has been substantial compliance with the requirements of Bankruptcy Regulations 4.02 and 4.03.
Section 306(1) of the Bankruptcy Act provides:
"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 the 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."
As said earlier there is a formal defect or irregularity in the bankruptcy notice. The bankruptcy notice cannot be regarded as capable of misleading and accordingly cannot be said to be a nullity."
22 In Bendigo Bank Ltd v Scerri [1999] FCA 1215 (unreported, 3 September 1999) Finkelstein J, in a passage which he acknowledged to be obiter said, at paras 19-21:
"It is also unnecessary to determine whether the failure to state the provision under which interest is claimed, is a failure to meet a mandatory requirement of the Bankruptcy Act. However, it is as well that I should state my conclusion on this issue. I can do so quite shortly.
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 fundamental 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."
23 It does not appear that his Honour had occasion to consider Bank of Melbourne v Hannan or the other cases in which Judges of this Court have held that the omission of a matter required by Reg 4.01 does not nullify a bankruptcy notice but is curable by resort to s 306. We consider that the omission to specify the source of the obligation to pay interest should also be regarded as a formal defect or irregularity, and that no substantial injustice has been caused by that omission.
24 An interesting question has been raised by the respondents' notice of contention. That is, whether the debtors are estopped from relying on the omission from the Form 1 Schedule, of reference to the source of the creditor's entitlement to interest at 10% per annum, because they did not raise that defect when they applied, unsuccessfully, to Kiefel J to set aside the bankruptcy notice.
25 In support of that contention, Mr Hack of Counsel for the respondents relied on the "extended principle" which Gibbs CJ, Mason and Aickin JJ in Port of Melbourne Authority v Anshun Pty Ltd derived from the judgment of Sir James Wigram V-C in Henderson v Henderson (1843) 3 Hare 100 [67 ER 313] at 115. In answer to this contention, Mr Coulson of Counsel for the appellants pointed to, amongst other things, the disavowal by counsel for the petitioning creditor at first instance of reliance on Anshun estoppel. However, our rejection, for the reasons indicated above, of the substantive submission that the bankruptcy notice is a nullity, makes it unnecessary for us to consider these questions. Accordingly, each appeal will be dismissed. There will be an order in each matter that the respondents' costs of the appeals be taxed and paid as part of the petitioning creditor's costs out of the estate of the bankrupt.