Consideration
134 In addressing this ground it is convenient first to set out the relevant facts:
(1) on 25 and 28 August 2017 respectively Daniel's Bankruptcy Notice and Michael's Bankruptcy Notice were issued. Those notices were subsequently served on each of Daniel and Michael. There is no issue about their service;
(2) at the time of the issue of the Bankruptcy Notices, Mr Arnautovic was the liquidator of St Gregory's. The Bankruptcy Notices each provided that payment of the debt could be made to Mr Arnautovic in his capacity as liquidator of St Gregory's at his business address (see [15] above);
(3) on 24 September 2017 Daniel and Michael each commenced a proceeding in this Court seeking orders to set aside, in the case of Daniel, Daniel's Bankruptcy Notice and, in the case of Michael, Michael's Bankruptcy Notice (Bankruptcy Notice Proceedings);
(4) on 11 January 2019 the Liquidators replaced Mr Arnautovic as liquidators of St Gregory's. In Ghougassian (No 1) at [113] Farrell J notes that "given the nature of some of the claims and issues identified by the Court" her Honour sought submissions in relation to, among other things, events since the hearing and whether the Liquidators wished to be joined as parties, noting that they did not;
(5) on 23 September 2019 an order was made pursuant to s 41(6A) of the Act that the time for compliance, in the case of Daniel, with the requirements of Daniel's Bankruptcy Notice and, in the case of Michael, with the requirements of Michael's Bankruptcy Notice be extended up to and including 30 September 2019;
(6) Peter Justin Hegarty of Hegarty Legal, the solicitors for the Liquidators, gave evidence that:
(a) he previously acted for the former liquidators of St Gregory's, Mr Sutherland and then Mr Arnautovic;
(b) he acted for Mr Arnautovic in the Bankruptcy Notice Proceedings;
(c) following the replacement of Mr Arnautovic as liquidator and the appointment of the Liquidators as liquidators of St Gregory's he continued to act in the Bankruptcy Notice Proceedings; and
(d) although at that time he received instructions from the Liquidators, he continued to act for Mr Arnautovic with the authority of the Liquidators and Mr Arnautovic remained the respondent in the Bankruptcy Notice Proceedings and the subject of a potential adverse costs order in the event that Daniel and Michael were successful;
(7) on 28 February 2019 Hegarty Legal sent a letter to Robert Balzola & Associates, the solicitors for Daniel and Michael, relevantly informing them that:
As you are aware, Mr John Mcinerney and Mr Philip Campbell-Wilson of Grant Thornton were appointed as the replacement liquidators of the School by order of the Supreme Court of NSW on 14 January 2019. We confirm that we continue to act for the replacement liquidators in respect of the liquidation.
Notwithstanding that the appointment of our clients is a matter of public record, we enclose a copy of the relevant orders for your clients' information and records.
(8) between early February 2019 and 1 May 2019 Mr Balzola and Hegarty Legal exchanged without prejudice correspondence in an attempt to resolve all outstanding matters; and
(9) on 27 September 2019 Mr Hegarty sent an email to Mr Balzola attaching a copy of the 2019 Judgment. Mr Hegarty informed Mr Balzola that payment of the 2019 Judgment could be made into the account specified in his email, referred to the Bankruptcy Notice Proceedings and relevantly said:
As a separate made [sic] we note the extension of the Bankruptcy Notices as ordered by Farrell J of the Federal Court on Monday, 23 September 2019 expire this coming 30 September 2019.
We are instructed that the amounts referrable to the Bankruptcy Notices issued to your clients may also be made to the above mentioned bank account.
135 Mr Arnautovic also gave evidence. He said that at all times since the date of issue of the Bankruptcy Notices his work address has remained the same and it is the address included in the Bankruptcy Notices for payment of the debt claimed. Mr Arnautovic said that during the currency of the Bankruptcy Notices he did not receive any payment of the debts claimed in them nor was he otherwise contacted directly by Daniel or Michael at his work address concerning payment of those amounts or in relation to Bankruptcy Notices.
136 If Mr Arnautovic had received payment of the debts claimed in the Bankruptcy Notices, he would have forwarded those funds to the Liquidators pursuant to his ongoing obligation to account for the money he receives in his capacity as the former liquidator of St Gregory's and pursuant to the undertaking he gave to the Supreme Court. In relation to the latter, Mr Arnautovic notes that he undertook that he would "provide whatever assistance is necessary for [the Liquidators] including with respect to the transfer of files at no addition [sic] cost to the liquidation", an undertaking which was acknowledged in In the matter of St Gregory's Armenian School Inc (in liquidation) (Supreme Court of New South Wales, 2019/12805, 12 February 2019) at [20]-[21] where Robb J relevantly said:
20 Although the voluntary replacement of Mr Arnautovic by liquidators who are external to the Firm could potentially increase the costs of the liquidation, Mr Arnautovic has explained that the remaining work is relatively straightforward. It involves having a costs order in favour of the liquidator assessed, seeking to recover costs, and seeking to distribute surplus proceeds in the liquidation. The incoming liquidators' use of Mr Arnautovic's existing solicitor will be cost-effective and ensure continuity of knowledge concerning the steps to be undertaken. Mr McInerney has confirmed that the new liquidator will continue to instruct that solicitor.
21 Further, Mr Arnautovic has agreed to provide whatever assistance is necessary to the replacement liquidators at no additional cost to the liquidation.
137 Mr Arnautovic's evidence is that, consistent with his ongoing obligations as the former liquidator of St Gregory's, on 18 January 2019 he transferred all monies in the liquidation account to the Liquidators and that, similarly, were he to receive a cheque in his favour as judgment creditor and former liquidator he would have forwarded those funds to the Liquidators.
138 Next, it is convenient to turn to the authorities.
139 In Nugent the relevant bankruptcy notice provided that the respondents had "their registered office at c/o Messrs. Lyons, Dunlop and Pratt, 8th level, MLC Centre, Cnr. George & Adelaide Streets, Brisbane in the state of Queensland". The issue before a Full Court of this Court (Northrop, Lockhart and Beaumont JJ) was whether the bankruptcy notice failed to give an address at which there was a person or persons present with the authority of the respondents to receive payment or to secure or compound the debt. Commencing at 726 Lockhart J (with whom Northrop and Beaumont JJ agreed) said in relation to that issue:
Neither the Bankruptcy Act 1966 itself nor the Bankruptcy Rules contain any provision requiring the address of the creditor to be stated in the bankruptcy notice. That requirement is contained in Form No 4 in Sch 1 to the Bankruptcy Rules, and is not in terms a requirement that it state the judgment creditor's address at which payment may be made by the debtor or where he may secure or compound. It simply provides, in what is for convenience sometimes called the recital to the bankruptcy notice, for the insertion of the name and address of the judgment creditor. However, the prescribed form does make provision in the operative part of the notice for the debtor to pay the amount claimed by the judgment creditor to the judgment creditor, or, if the judgment or order requires payment to be made to a court or a person other than the judgment creditor, the name and address of the court or the other person to whom payment is required to be made.
Judgments of long standing have held in relation to comparable provisions in the bankruptcy legislation of England and the Australian Bankruptcy Act 1924 that a judgment creditor must give an address or addresses where he, or, if more than one, they, or one of them, or some agent authorized on his or their behalf, may be found: see Re Beauchamp; Ex parte Beauchamp [1904] 1 KB 572 and James v FC of T (1955) 93 CLR 631 at 639. The question before this court must be considered in the light of the following passage from James' case (at p 639): "It is the duty of a debtor to seek out the judgment creditor and pay the judgment debt to the creditor if he is in Australia The debtor has the correlative right to pay the creditor wherever he can find him so that a debtor could be seriously prejudiced if he was led to believe that he was bound to pay the creditor at one particular place."
As I perceive it, the rationale of these and other decisions is that the address of the creditor must be stated in order to comply with the prescribed form of notice and because non-compliance with the requirements of a bankruptcy notice constitutes an act of bankruptcy and may have quasi-penal consequences.
It is not sufficient that a creditor merely give an address where he is known. It must be an address at which he can be paid or where an agreement may be made with him or on his behalf to secure or compound it. If the creditor gives his home as his address he is not bound to remain there all day and night during the currency of the notice. Obviously that would be absurd. Similarly, if he gives his business address he is not bound to remain there always, or even throughout the whole of normal business hours (whatever that expression may mean these days) during the currency of the notice.
However, I agree with the primary judge that, where the creditor is a company, it is desirable that there be someone present at the address given in the notice during ordinary business hours with authority to receive payment immediately and without having to get in touch with the Board or any other person capable of conferring authority. I would add that it is desirable, though not essential, that such a person also have authority to secure or compound the debt if that is the wish of the creditor and he does not merely insist, as he may if he wishes, upon payment of the debt in full.
In my opinion, the address stated must be one at which the debtor may, during the currency of the notice, make payment of the amount claimed in the notice, or one where he may make arrangements to secure or compound the debt. It may be that in certain circumstances, although he may make arrangements to secure or compound by calling at the address stated in the notice, he will do so by speaking to persons who are themselves not physically at that address, but are, for example, available on the telephone. The examples of the possibilities are manifold and need no elaboration.
The test must satisfy the demands of common sense in the highly ordered and busy world in which we live, tempered by a consideration of the implications of a bankruptcy notice and the serious consequences that can flow from non-compliance with its requirements. I respectfully agree with the primary judge that the basic principle is that the address given should be one at which during the relevant period it is reasonably practicable for the debtor to make payment or to offer to secure or compound.
140 In Bonds Industries Ltd v Sing [1999] FCA 1055 (Bonds Industries) Emmett J considered whether the inclusion of an incorrect address of the Registry of this Court in the relevant bankruptcy notice was a defect that was fatal or whether it could be ignored because of the operation of s 306 of the Act. Justice Emmett articulated the question for the Court to be "whether the statement of an address [of] the Registry of the Court which is wrong at the time of service of the notice, is a formal defect or an irregularity, so as to attract the operation of section 306". Relevantly at [12]-[13] his Honour said:
12 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 - see Kleinwort Benson Australia Limited v Crowl (1988) 165 CLR 71 at 79. There is no requirement of the Act which states that the address of the Federal Court must be stated in a bankruptcy notice.
13 The position may be different in relation to the address at which a debtor may make the payment demanded under the bankruptcy notice. A judgment creditor in a bankruptcy notice must give an address or addresses where he may be found. The address stated must be one at which the debtor may, during the currency of the notice, make payment of the amount claimed in the notice or, one where he may make arrangements to secure or compound the debt. The test for adequacy of such an address must satisfy the demands of common sense in the highly ordered and busy world in which we live, tempered by a consideration of the implications of a bankruptcy notice and the serious consequences that can flow from non-compliance with its requirements. The address given should be one at which, during the relevant period, it is reasonably practicable for the debtor to make payment or to offer to secure or compound - per Lockhart J in Nugent v Brialkim Pty Limited (1985) 61 ALR 725 at 726 and 727.
141 Daniel and Michael rely on the decision in Metledge v Hopkins [2020] FCA 561 (Metledge) in which Lee J found that the relevant bankruptcy notice, the non-compliance with which was relied upon as an act of bankruptcy for the purposes of a creditor's petition subsequently served on the debtor, was invalid. Accordingly, the creditor's petition was dismissed. The bankruptcy notice in question recorded the creditor's address, including in that part of the notice dealing with how payment is to be made, as "P.O. Box 226, Strathfield, Sydney (sic), NSW 2135".
142 At [7]-[8] Lee J said:
7 An essential aspect of a bankruptcy notice is to make it clear what a debtor must do in order to comply, and to explain what is necessary to be done to ensure an act of bankruptcy is not committed by reason of non-compliance (including where payment can be made). In Re St Leon; Ex parte National Australia Bank Limited (1994) 54 FCR 371, Lindgren J held that the statement of address in a bankruptcy notice is a matter that is made essential under the Bankruptcy Act 1966 (Cth) (Act) and noted at 378:
… Kleinwort Benson distinguish[es] between that which the Act requires on the one hand, and the way in which a particular bankruptcy notice is "filled in" on the other hand. The distinction may not always be clear, but I regard a total failure to state an address for the judgment creditor as a non-compliance with s 41(1)(a), as distinct, for example, from an ambiguous or unclear statement of an address. The latter would be an instance of a notice in accordance with the prescribed form which could nonetheless reasonably mislead the debtor.
(emphasis added).
8 The reference of Lindgren J to an instance which could "reasonably mislead the debtor", was a reference to the judgment of Lockhart J in Re Wimborne; Ex parte The Debtor (1979) 24 ALR 494 at 498-9, where it was explained that a "formal defect or any irregularity" is one that could not "reasonably mislead the debtor". And it was further explained by Lockhart J that "if the defect is of such a kind as could reasonably mislead the debtor upon whom it was served" then the defect "is fatal to the notice". Accordingly, the test to be applied in the present circumstances is not whether or not the respondent was subjectively misled; it is sufficient to establish invalidity that the defect could mislead the recipient of the notice.
(Original emphasis.)
143 After referring to the decisions in Nugent and Bonds Industries his Honour identified the issue before him to be whether the address identified in the bankruptcy notice was one at which, during the relevant period, it was reasonably practicable for the debtor to make payment or to offer to secure or compound the debt. His Honour then considered what a PO Box actually constitutes and, relying on the decision in Sarikaya v Victorian WorkCover Authority (1997) 80 FCR 262, found that it is "a container at a post office into which mail that has been duly posted is placed by the postal authorities for retrieval by or on behalf of the holder of the box" and that it was difficult to see how such a container could be a place where the debtor could make payment or offer to secure or compound the debt: at [12]-[13]. His Honour concluded that a PO Box was not an address at which during the relevant period it was reasonably practicable for a debtor to make payment or to offer to secure or compound a debt: at [14].
144 The issue raised by Daniel and Michael is whether the address identified in the Bankruptcy Notices, being Mr Arnautovic's place of business, was one at which during the relevant period, being the period from 23 to 30 September 2019, it was reasonably practicable for each of them to make payment or to offer to secure or compound the debt the subject of the Bankruptcy Notices. More particularly, in oral submissions Daniel and Michael refined their position. It seems that they accept that payment could be made at Mr Arnautovic's business address but contend that they were not able to secure or compound the debt by attending at the address specified in the Bankruptcy Notices. They said, had they done so, Mr Arnautovic would have not had the requisite authority to deal with them because he was no longer the liquidator of St Gregory's.
145 A bankruptcy notice must be in accordance with the form prescribed by the Bankruptcy Regulations 1996 (Cth): see s 41(2) of the Act. The relevant form is Form 1 which requires the inclusion of the creditor's name and address and at item 2 on page 2 the "name and address, including telephone number, fax and email address if appropriate" where "[p]ayment of the debt can be made to". The Bankruptcy Notices include the information set out at [15] above and, in particular, at item 2 on page 2 set out Mr Arnautovic's business address, telephone number and email address. The evidence establishes that the address included in the Bankruptcy Notices was Mr Arnautovic's business address at the time of the issue of the Bankruptcy Notices and continues to be his business address.
146 Although the Liquidators are the petitioning creditors, the relevant creditor for the purposes of the Bankruptcy Notices was Mr Arnautovic. True it is that by the time an order was made extending the time for compliance with the Bankruptcy Notices Mr Arnautovic was no longer the liquidator of St Gregory's, but it does not follow that his address was no longer valid or that the Bankruptcy Notices were invalid by reason of that change. That that is so is apparent from the following matters.
147 First, throughout the currency of the Bankruptcy Notices the judgment creditor named in the 2017 Judgment, which was found to be the relevant judgment for the purposes of compliance with the Bankruptcy Notices, was Mr Arnautovic. The address of the judgment creditor, being Mr Arnautovic's business address, was correctly stated in the Bankruptcy Notices.
148 Secondly, payment to Mr Arnautovic of the amount claimed in the Bankruptcy Notices would have been a good discharge of the debt.
149 I accept the Liquidators' submission that an analogy can be drawn between this case and Francis v Eggleston. As set out at [76] above, there the appellant was indebted to a law firm, constituted by a partnership, for assessed legal costs. The assessment had been registered as a judgment in favour of the firm. The partnership was subsequently dissolved and a company incorporated. The members of the firm assigned all the business, work in progress, book debts and liabilities of their former partnership to the new company. A little time later the appellant was served with a bankruptcy notice which named the creditor as "Eggleston Mitchell Lawyers". The appellant did not comply with the bankruptcy notice and the company, Eggleston Mitchell Lawyers Pty Ltd, filed a creditor's petition which named the petitioning creditor as "Eggleston Mitchell Lawyers (ACN 131 952 942)".
150 On appeal it was contended that the primary judge erred in finding that the company was a "creditor" of the appellant as at the date of the sequestration order. The issue before the Full Court was whether the company was the appellant's creditor in respect of the debt the subject of the judgment at the times the bankruptcy notice operated and the sequestration order was made. The Full Court held (at [20]) that, in circumstances where no notice of the assignment to the company of the judgment had been given to the appellant, if the appellant had complied with the bankruptcy notice by paying the firm in whose name it was issued that would have been a good discharge of the debt. At [21] the Full Court held that the company was beneficially entitled to the firm's book debts, including the choses in action represented by any right of the firm to enforce or bring proceedings in respect of the money due to it under the relevant judgment. By analogy, if Daniel and/or Michael had paid the amounts claimed in the Bankruptcy Notices to Mr Arnautovic that would have been a good discharge of the debt despite the fact that the Liquidators in their capacity as liquidators of St Gregory's were beneficially entitled to those debts by reason of their appointment as liquidators of St Gregory's.
151 Further, Mr Arnautovic as the former liquidator and an officer of the Court had an obligation to account for any monies he received in satisfaction of the 2017 Judgment to the Liquidators. That obligation, which arises from the office Mr Arnautovic held, is recognised and reinforced by the arrangements between Mr Arnautovic and the Liquidators which are the subject of Mr Arnautovic's evidence.
152 Thirdly, insofar as compromising the debt was concerned, Mr Arnautovic as the named judgment creditor for the purpose of the 2017 Judgment had the authority to compromise the debt, albeit that in doing so he may have breached other obligations to the Liquidators.
153 Fourthly, this case is unlike Metledge where the address provided was a PO Box, a receptacle for the receipt of mail where no person could be found, let alone a person with authority to compromise the debt. Here the address provided was that of the judgment creditor and former liquidator of St Gregory's. Had Daniel and/or Michael wished to make arrangements for settlement of the debt or to secure or compound it, they could have done so by attending at the address specified in the Bankruptcy Notices.
154 The evidence establishes that Mr Arnautovic was under an obligation to assist the Liquidators. I infer that had Mr Arnautovic been approached by either Daniel or Michael with a view to compromising the debts claimed, Mr Arnautovic would have, in turn, approached the Liquidators. As Lockhart J said in Nugent "it may be that in certain circumstances although [the debtor] may make arrangements to secure or compound by calling at the address stated in the notice he will do so by speaking to persons who are themselves not physically at that address, but are, for example, available on the telephone. Examples of the possibilities are manifold and need no elaboration".
155 It follows that I am satisfied that the address included in the Bankruptcy Notices was one at which during the currency of the notices the debtors, Daniel and/or Michael, could not only make payment of the amounts claimed in those notices but one where they could also make arrangements to secure or compound those debts.
156 If I am wrong in that conclusion such that there is a defect in the Bankruptcy Notices by reason of the inclusion of Mr Arnautovic's address in them, I am satisfied that any such a defect is formal in nature and could not reasonably have misled Daniel and Michael. That is because the fact of Mr Arnautovic's retirement and replacement as a liquidator of St Gregory's was known to Daniel and Michael; the issue was raised and addressed in Ghougassian (No 1) (at [3] and [113]) and a copy of the orders made appointing the Liquidators in place of Mr Arnautovic was provided to their lawyer together with details of a bank account into which payment of the amount claimed in the Bankruptcy Notices could be made. That being so, as the Liquidators submit, s 306 of the Act has the effect that the proceeding on the petition is not invalidated only by that defect: see Bonds Industries at [20].