McKean Park (A Firm), In the matter of Lawrence v Lawrence

REASONS FOR JUDGMENT 1 The question before the Court is whether a bankruptcy notice is invalidated by the failure to include in the interest calculation reference to the provision under which interest is being claimed. 2 On 4 March 2009, the creditor, McKean Park, obtained judgment in the sum of $10,793 in the Magistrates' Court in Victoria against the debtor, Tess Lawrence. 3 On 6 November 2010, the creditor left the bankruptcy notice in a sealed envelope at the debtor's address and, pursuant to an order for substituted service made by Registrar Hetyey, service was deemed to have been effected on 23 November 2010. 4 The bankruptcy notice claimed that the debtor owed $11,962.67 comprising the judgment debt of $10,793, and interest of $1,369.67. 5 The debtor failed to comply with the bankruptcy notice and the creditor filed a creditor's petition alleging that the failure to comply was an act of bankruptcy. The creditor sought a sequestration order against the estate of the debtor. 6 Section 41(2) of the Bankruptcy Act 1966 (Cth) provides in respect of a bankruptcy notice that: The notice must be in accordance with the form prescribed by the regulations. 7 Regulation 4.02(1) of the Bankruptcy Regulations 1996 (Cth) provides: For the purposes of subsection 41(2) of the Act, the form of bankruptcy notice set out in Form 1 is prescribed. 8 The prescribed form on the date the bankruptcy notice was issued, namely, 18 June 2010, stated in [1] that the creditor owes the debtor a debt of a specified amount "as shown in the Schedule". 9 The schedule comprised a table and some notes for the information of the creditor. The table had two columns. Column one listed the items constituting the debt owing, and column two provided blank spaces for the amount of each item to be inserted. Item three, in column one stated: If claimed in this Bankruptcy Notice, interest accrued since the date of judgments or orders (see Note 2, below) 10 Note 2 to the schedule referred to item three as follows: 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, [emphasis added]: and (b) the principal sum on which, the period for which, and the interest rate or rates at which, the interest is being claimed. (NB: If different rates are claimed for different periods, full details must be shown) 11 The provision relating to post judgment interest on judgments of the Magistrates' Court in Victoria is set out in the Magistrates' Court Act 1989 (Vic) as follows: s 100(7) Every judgment debt carries interest at the rate for the time being fixed under section 2 of the Penalty Interest Rates Act 1983 from the time the order was made. 12 Section 2(1) of the Penalty Interest Rates Act 1983 (Vic) provides: The penalty interest rate is the interest rate expressed as a percentage fixed by the Attorney-General from time to time by notice published in the Government Gazette. 13 The bankruptcy notice in this case included the schedule with item three, column one in the terms of the prescribed form. The amount of interest claimed, namely, $1,369.67, was inserted in column two of item three of the schedule. The notes to the schedule included the terms of Note 2 exactly in the form found in the prescribed form. Then, at the end of the schedule, there was a section headed "Interest Calculation" which was in the following form: INTEREST CALCULATION (See Note 2: Interest accrued (Item 3 of the Schedule)) Details of calculation of interest claimed: (a) Interest is claimed pursuant to section 2(1) of the Penalty Interests Act 1983. [emphasis added] The current rate of interest as at the date of preparation of this notice is 10.50% p.a. (b) Judgment was entered against TESS LAWRENCE in the Magistrates Court of Victoria on 4 March 2009 for the sum of $10,793.00. A Certificate of Judgment issued by the Magistrates Court of Victoria is attached. (c) Interest is being claimed for the period from 5 March 2009 to 11 June 2010. Summary of Interest Calculation Start Date End Date No of Days Interest rate Amount Paid Balance of Debt Interest Amount Daily Interest 05/03/2009 25/03/2009 21 10.00% $0.00 $10,793.00 $62.10 $2,9570 26/03/2009 11/05/2009 47 10.00% $50.00 $10,743.00 $138.33 $2.9433 12/05/2009 15/06/2009 35 10.00% $50.00 $10,693.00 $102.54 $2.9296 16/06/2009 31/01/2010 230 10.00% $100.00 $10,593.00 $667.50 $2.9022 01/02/2010 11/06/2010 131 10.50% $0.00 $10,593.00 $399.20 $3.0473