Meekin v Commonwealth Bank of Australia

Federal Court of Australia|1999-05-26|Before: Moore J

REASONS FOR JUDGMENT 1 This is an application to set aside a bankruptcy notice served on Mr John Meekin ("the applicant") on 1 September 1998 by the Commonwealth Bank of Australia ("the Bank") or for an order extending the time to comply with that notice. The amount claimed in the notice is $702,106.86. The debt arises from a judgment of Acting Judge Bowden of the District Court of New South Wales delivered on 9 April 1998. His Honour found that the applicant was liable to the Bank under a guarantee. 2 Those proceedings arose against the following background which reflects findings made by the trial judge. The applicant was the guarantor of a loan taken out by Mr Stanley Gilmore and Mr Terence Dumbrell for a hotel venture which ultimately failed. The Bank sued Gilmore and Dumbrell for the sum lent and sued the applicant under the guarantee. 3 The applicant cross-claimed against the Bank contending it was not entitled, in equity, to the relief it sought. The applicant alleged that in January 1990, when Gilmore and Dumbrell were contemplating the purchase of the hotel business, the Bank had represented to him that it look liked a good deal and that there was no risk in the applicant executing a guarantee as the business was more than sufficient to meet any obligations of the borrowers to the Bank. The applicant claimed that the Bank owed him a duty of care when making these representations and it had been negligent and/or misleading and deceptive in doing so. The central issue in the cross-claim was whether the Bank, through its senior loans officer Mr Brkic, in fact made those representations and whether they were, in the circumstances, misleading. Brkic was an acquaintance of the applicant, Gilmore and Dumbrell. 4 The applicant's evidence was that Gilmore phoned him in January 1990 and told him about the proposed hotel venture. There was no mention in that conversation about a guarantee. The applicant says that he then received a phone call from Brkic in which it is alleged that Brkic said the only way that Gilmore and Dumbrell could secure a loan for the hotel venture would be for the applicant to provide a personal guarantee. The applicant says that it was on Brkic's assurance that he agreed to give the guarantee. Brkic denied that this conversation ever took place. In the result, the trial judge preferred the evidence of Brkic. His Honour did not accept the evidence of the applicant. The trial judge held that despite the likely truth of the applicant's statement that he would not have become involved in the transaction if he thought he would be called upon to pay money, his position was a result of his own assessment and not anything said or done by the Bank. The applicant had entered into the guarantee of his own accord and with full knowledge of the risks and responsibilities. 5 The applicant has appealed to the Court of Appeal. The appeal is pending. No application has been made for expedition nor has application been made to stay the District Court judgment. 6 The first issue raised by the applicant in these proceedings concerns the form of the bankruptcy notice. Section 41(2) of the Bankruptcy Act 1966 provides: (2) The notice must be in accordance with the form prescribed by the regulations. 7 Division 1 of Part IV of the Bankruptcy Regulations deals with, amongst other things, the form and contents of bankruptcy notices. Regulation 4.01 deals with the manner in which a bankruptcy notice issues and provides that a person seeking the issue of a bankruptcy notice by the Official Receiver must lodge with the Official Receiver both a draft bankruptcy notice and a document evidencing the final judgment or final order upon which the notice is founded. Regulation 4.02 deals with the form of bankruptcy notices and provides: 4.02 (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. 8 It is unnecessary to set out Form 1 though the form contains various words, expressions, or sentences which are either in bold or underlined. 9 The attack made by counsel for the applicant on the form of the bankruptcy notice was that first the notice did not conform with the form in so far as words that should have been in plain type were in bold type and words that should have been underlined were in bold. Second, the prescribed form required that there be reference to the relevant regulations as part of the heading and these were not included in the heading. Third, the judgment of the District Court annexed to the bankruptcy notice was defective in material respects which impacted on the contents of the notice itself. Fourth, the bankruptcy notice was not issued by an Official Receiver in the manner contemplated by the Act. Fifth, the bankruptcy notice did not demand payment of the judgment debt in a way conformable with the judgment. Last, the bankruptcy notice did not identify whether it had been issued on the application of the creditor or the creditor's authorized agent and, if the latter, the agent had not, himself, signed the notice. In any event, the person signing on his behalf did not purport to make his signature or mark but rather her own. Counsel for the applicant candidly but correctly conceded that at least some of these criticisms were highly technical and not particularly meritorious. 10 It is convenient to set out parts of the notice and the annexure. It read: Bankruptcy Act 1966 NN1379/98 BANKRUPTCY NOTICE This Bankruptcy Notice is prescribed, under subs. 41(2) of the Bankruptcy Act 1966 ("the Act"), by r.4.02 of the Bankruptcy Regulations. To: JOHN RAYMOND MEEKIN ("the debtor") of: Brinawa Lodge DOON DOON, via UKI NSW 2484 This Bankruptcy Notice is an important document. You should get legal advice if you are unsure of what to do after you have read it. 1. COMMONWEALTH BANK OF AUSTRALIA (ACN 123 123 124) ("the creditor") of: 48 MARTIN PLACE SYDNEY NSW 2000 Claims you owe the creditor a debt of $702,106.86, as shown in the Schedule. 2. The creditor claims that the debt is due and payable by you. A copy of the judgment or order relied upon by the creditor is attached. At the time of applying for this Notice, execution of the judgment or order had not been stayed. 3. … 4. Payment of the debt can be made to: (POINT 1) the creditor's solicitors Abbott Tout Solicitors of: Level 42, MLC Centre 19-29 Martin Place SYDNEY NSW 2000 REF: SDJ:JHB:427900 … 10. … Schedule Column 1 Column 2

… The person who applied for this notice to be issued is: (POINT 2) JOHN HENRY BARTROP who confirms by the following signature that he or she is the creditor/the creditor's authorised agent: (signature of Ms Sancia de Jersey and handwriting "by his employed solicitor) Creditor's solicitor … FOR OFFICIAL USE ONLY Dated this day of 19 16 JUL 1998 This notice was issued by the Official Receiver (or delegate or an officer authorised by the Official Receiver) for the Bankruptcy District of: NEW SOUTH WALES (POINT 3) address of Official Receiver: (or an officer authorised by the Official Receiver) LEVEL 10, 255 ELIZABETH STREET SYDNEY NSW 2000 [SIGNED] G L Coddy (POINT 4) OFFICIAL RECEIVER (signature or stamp of Official Receiver or delegate or authorised officer)

11 Annexed to the notice was the following document issued by the District Court of New South Wales. JUDGMENT IN THE DISTRICT COURT ) OF NEW SOUTH WALES ) AT SYDNEY ) No. 6810 of 1997 BETWEEN: COMMONWEALTH BANK OF AUSTRALIA (ACN 123 123 124) Plaintiff AND: STANLEY ROBERT GEORGE First Defendant AND: TERRENCE RONALD DUMBRELL Second Defendant AND: JOHN RAYMOND MEEKIN Third Defendant April 1998 It is this day adjudged that: 1. the plaintiff recover against the defendant $683,931.16 on its claim and its costs of the action to be assessed. 2. the plaintiff recover judgment against the defendant on the cross-claim and that costs include the costs of the cross-claim. 3. The defendant pay $683,931.16 to the plaintiff forthwith. 4. The defendant pay the costs to the plaintiff forthwith after the assessment thereof. By the Court Assistant Registrar 12 For ease of reference I have noted, as points 1- 4, four points of the notice referred to by counsel for the applicant in the critique of the notice.

Did the notice conform to the form? 13 There is an unambiguous requirement created by s 41(2) that a bankruptcy notice must be in accordance with the form prescribed by the regulations. However the precise nature of the obligation imposed by that provision has to be determined by reference to the terms in which the form itself is prescribed. Regulation 4.02 prescribes the form. It may be accepted that sub regulation (1) directs attention to Form 1 which is in Schedule 1 to the regulations. However sub regulation (1) has to be viewed in the statutory context in which it appears which plainly includes sub regulations (2) and (3). A distinction is drawn in regulation 4.02 between "the form" of the notice which is the expression used in sub regulation (1) and "the format" of the notice which is the expression used in sub regulation (2). In so far as sub regulation (2) requires adoption of the format, that requirement is itself subject to sub regulation (3). In my opinion, the expression "form" is, in context, a reference to the letters, numbers and symbols used in the form the way they are used to form words, sentences, paragraphs and the like. The word "format" on the other hand is intended to be an aspect of the form concerning the visual representation of the text found in Form 1. It is visual representation of the type referred to in the parenthesis at the end of sub rule (2) but also includes notes which is text itself. It is clear from regulation 4.02 viewed in its entirety, that the prescription of the form requires that the notice used be in the format identified in Form 1 in Schedule 1 to the regulations but with the qualification that s 25C of the Acts Interpretation Act 1901 might operate in circumstances where there had not been strict compliance with the form. Section 25C provides: Where an Act prescribes a form, then, unless the contrary intention appears, strict compliance with the form is not required and substantial compliance is sufficient. 14 While, as noted earlier, s 41(2) is in unambiguous terms, the actual prescription in reg 4.02 is in terms that contemplates the operation of s 25C in relation to the format. In my opinion, if there is a minor variation between the format of the bankruptcy notice actually used and the format of the bankruptcy notice in Form 1 then that disconformity does not necessarily result in non-compliance with the strictures of s 41(2). In the present case the typing of a limited number of words in bold type where there should have been plain type and the typing of other words in bold which should have been in plain type and underlined is an immaterial disconformity with the format of the prescribed form. It is not a disconformity that leads to the conclusion that s 41(2) was not complied with. It was.

Was the heading defective? 15 The second criticism of the bankruptcy notice concerns its heading. There is no reference in the heading to "sub regulation 1.03(2)" and "Regulation 4.20". It was submitted they should be included in the heading. The prescribed form in Schedule 1 to the Bankruptcy Regulations contains a heading in the following form: SCHEDULE 1 Subregulation 1.03(2) FORMS FORM 1 Regulation 4.02 Bankruptcy Act 1966 BANKRUPTCY NOTICE 16 The submission on behalf of Mr Meekin proceeds on an assumption which is plainly incorrect. The expression "SCHEDULE 1" and the expression "FORM 1" are simply headings in the schedule but not the form. The adjacent reference to the subregulation and regulation form part of the heading in the schedule. They identify where the schedule and where the form are, respectively, referred to in the regulations themselves. The prescribed form is that which appears below the heading "FORM 1".

The terms of the judgment 17 The challenge to the bankruptcy notice as it relates to the judgment debt is of greater substance. It can be seen from the judgment annexed to the bankruptcy notice that three defendants are identified. The applicant in these proceedings is the third defendant. One of the others is misdescribed but nothing turns on that. The order requiring the payment of the judgment sum is said to be "against the defendant". That is, the order itself does not identify which defendant is required to pay that amount. 18 It was common ground in these proceedings that the matter should be approached on the footing identified in the following passage from James v Federal Commissioner of Taxation (1955) 93 CLR 631 at 644 as to whether the debtor was misled: The Court cannot inquire whether the debtor has in fact been misled or not. In this case it is probable that he was not misled. It is sufficient that he could be misled. 19 It should be noted that some aspects of the judgment of the High Court in James's case have to be approached with caution given recent changes to legislative regime concerning bankruptcy notices: see e.g. Stec v Orfanos & Ors [1998] FCA 1281. 20 The relevant inquiry becomes whether the applicant might have been misled by the bankruptcy notice and the annexure to it. The notice itself was in unequivocal terms in demanding payment of the judgment sum and interest. The only possible source of confusion which might have led to the applicant being misled was the reference to "the defendant" in the order requiring payment. There was an issue in these proceedings as to the extent to which the Court can look at surrounding circumstances in ascertaining whether the bankruptcy notice might have misled the judgment debtor. The relevant principles were discussed by Carr J as a member of a Full Court in Thorpe v Bristile Ltd [1997] FCA 1369 (Burchett J agreeing). His Honour said in relation to an argument concerning the form of the bankruptcy notice that: … then the question is whether it is a defect which causes the notice to be a nullity. As mentioned above, the test is whether the debtor could be misled, not whether in fact he was misled. I accept the respondent's submission that, in deciding this issue, the Court may look at facts extraneous to the notice itself: Re Wimborne (1979) 24 ALR 494 at p 499, a decision of Lockhart J. 21 In the present case it is clear from the reasons for judgment of Acting Judge Bowden that the judgment given on 9 April 1998 related to a cause of action concerning the applicant only. It is to be recalled that the applicant had guaranteed a loan from the bank to Gilmore and Dumbrell. As a matter of fact judgment had been entered against them on 29 June 1995 and 2 July 1996 respectively. The reasons of Acting Judge Bowden of 9 April 1998 commenced with the following: The first and second defendants borrowed money from the plaintiff for a hotel venture. The third defendant guaranteed the debt. The venture failed. The plaintiff sues the third defendant for moneys owing under the guarantee. 22 Everything that follows makes it plain that his Honourwas dealing only with the claim of the Bank based on the guarantee and the cross claim of the applicant against the Bank. It is improbable that the applicant could have been misled by the bankruptcy notice and the attached judgment debt as to the amount he owed and the foundation of the claim.

The issuing of the bankruptcy notice by an Official Trustee 23 Section 41(1) of the Act provides that an Official Receiver may issue a bankruptcy notice. Section 15(1) provides that for each District there shall be an Official Receiver and s 5 defines "District" as being a part of Australia declared to be a Bankruptcy District. That declaration is effected by the process identified in s 13, namely the publication of a notice in the Australian Government Gazette declaring parts of Australia to be a District. Relevantly the name of the Bankruptcy District broadly coinciding with the State of New South Wales has been identified in the Gazette as "The State of New South Wales". The area of that District is described in the Gazette as "The State of New South Wales and the Jervis Bay Territory". Thus the Bankruptcy District of the State of New South Wales includes not only the geographical area which is that State but also Jervis Bay. The Jervis Bay Territory is the territory surrendered by New South Wales to the Commonwealth and dealt with by the Jervis Bay Territory Acceptance Act 1915: see also s 18 of the Acts Interpretation Act 1901. In the present case the bankruptcy notice declares that it was issued by the Official Receiver for the Bankruptcy District of "NEW SOUTH WALES". Thus, it was submitted, the notice fails to identify, on its face, the person authorized to issue it namely the Official Receiver for the Bankruptcy District of The State of New South Wales. The bankruptcy notice contains, at point 4, a stamp which is a composite of a signature of "G L Coddy" and the identification (in the stamp) of that person underneath as "OFFICIAL RECEIVER". In my opinion nothing flows from the misdescription of the Bankruptcy District. Section 41(1) requires that an Official Receiver issue a bankruptcy notice. On its face it was issued by an Official Receiver. Regulation 4.01(2) provides that an Official Receiver must sign (by hand or facsimile reproduction) the notice. As shortly discussed it was signed by means of a facsimile reproduction. It thus purports to have been signed by an office holder acting in that capacity and s 150 of the Evidence Act 1995 (Cth) raises a presumption that it has been signed by that office holder. That presumption is not displaced by what is plainly an inadvertent misdescription or incomplete description of the Bankruptcy District.

Status of person issuing notice 24 It was also submitted that the mode of authorization evident in the stamping of the form is deficient in several additional respects. The first is that the stamp does not conform with regulation 4.01(2) which requires the Official Receiver to sign the notice by hand or by facsimile reproduction. The suggestion that the stamp is not a facsimile reproduction is, in my opinion, untenable. It plainly is: see Goodman v J Eban Ltd [1954] 1 QB 550. However a related point is of greater substance. It can be seen that underneath the stamp there is a printed reference to the "signature or stamp of Official Receiver or delegate or authorised officer". The Official Receiver has power to delegate his powers: see s 15(4). Thus the delegate of an Official Receiver may issue a bankruptcy notice under s 41(1). However there is no provision to which I was referred or of which I am aware for that to be done by "an authorised officer". To the extent that the authorized officer may have been authorized by a delegate that is impermissible: see s 34AB of the Acts Interpretation Act 1901. However the notice in the present case does not purport to be signed by an authorized officer (even though reference is made to an authorized officer in the printed form) and accordingly no question arises about it having been issued by a person lacking the statutory authority to issue it.

Manner of payment identified in bankruptcy notice 25 It was submitted by counsel for the applicant that there was a disconformity between the judgment and the bankruptcy notice concerning the manner of payment of the judgment debt. The notice informed the applicant at Point 1 that he could make payment to the creditor's solicitors who were identified as "Abbott Tout" and their address in Martin Place, Sydney was set out. It was submitted that the judgment required payment to the plaintiff. However there is no reason apparent to me why, in conformity with Form 1, the bankruptcy notice cannot require payment to the creditor by making payment to the creditor's agent including their solicitors. So much is contemplated by Form 1 itself and s 41(2), unlike s 41(2) prior to the Bankruptcy Legislation Amendment Act 1996 (Cth), does not dictate that the notice states the judgment debt has to be paid in accordance with the judgment.

Application for bankruptcy notice 26 Section 41(3) provides that a bankruptcy notice shall issue on the application of a creditor. Regulation 4.01(1) contemplates that such an application is to include a duly completed draft bankruptcy notice. There is no express requirement that the application take a particular form though the final bankruptcy notice is required by regulation 4.02 to be in conformity with Form 1 which in turn contains a provision identifying who the person was who applied for the notice and their signature. In the present case the applicant was a solicitor, Mr John Henry Bartrop, though it can be inferred from the notice in evidence that, in fact, the application was made on Mr Bartrop's behalf by Ms Sancia de Jersey who signed the draft bankruptcy notice with her own signature and identified herself as a solicitor in the employ of Mr Bartrop. This evidences, it was submitted on behalf of the applicant, a failure to comply with an essential requirement of the form. That is, Mr Bartrop did not sign the form and, to the extent that it was signed on his behalf, it did not purport to be his signature made by another authorized by him: see London County Council v Agricultural Food Products Ltd [1955] 2 QB 218. 27 However the relevant legal inquiry is whether this feature of the notice bears upon its validity. In London County Council (supra) the tenancy agreement in question required the notice of termination to be signed by an identified officer of the Council while a signature of the officer could be affixed by a proxy. The members of the Court of Appeal variously indicated that could be done by the proxy writing a signature of the principal and signifying that the writing was made by an agent. However at general law an agent, in this case, Bartrop, can delegate ministerial acts including the signing of documents: see Bowstead on Agency, 16th ed 161. An effective signature made by A on behalf of B need not necessarily take the form of writing purporting to be the signature of B but signifying that it was writing made by A. A can affix his or her own mark and indicate that is being done on behalf of B and such a mark can be treated as the signature of B: see McRae v Coulton (1986) 7 NSWLR 644 at 651, 663 and Muirhead v Commonwealth Bank of Australia (1996) 139 ALR 561. In the present case it is plain that de Jersey was signing on behalf of Bartrop. It is equally clear that the application was being made by Bartrop as the Bank's solicitor and agent. The signature of de Jersey was, in my opinion, a sufficient signature of the agent for the purpose of both securing the issue of the notice and identifying the applicant who had sought its issue and the capacity in which it was sought.

The existence of the debt 28 Counsel for the applicant submitted that there was sufficient uncertainty attending the judgment of Acting Judge Bowden to justify an order extending the time for compliance with the bankruptcy notice to permit the hearing and determination of the appeal against it by the Court of Appeal. The principal ground upon which this submission was made concerned the applicant's cross claim in which it was alleged that an officer of the Bank, Mr Brkic, made certain representations which were false to the applicant to induce him to sign the guarantee. It was submitted that the trial judge erred by failing to find that the representations by Mr Brkic were in fact made. The cross-claim pleaded: 9. In or about January 1990 the first and Second Defendants were contemplating the acquisition of the licence and goodwill of the Cityview Hotel, Ipswich. At about this time the Plaintiff by its servants or agents represented to the Cross Claimant that:- (a) The first and Second Defendants had got themselves into a very good deal in respect of the Cityview Hotel and that it was such a good deal that no security or collateral was required by the Plaintiff. 29 It was submitted by counsel for the applicant that the evidence of both the applicant and Mr Brkic as to the contents of a conversation they had on or about 14 February 1990 was sufficiently similar to support a finding of fact that certain things were said which, in turn, made out the conversation as pleaded in the cross-claim. In substance the trial judge rejected the evidence of the applicant and generally accepted the evidence of Brkic. I was taken at length to the evidence of both concerning the conversation on 14 February 1990. I do not accept that the account of Brkic is, in any material respect, supportive of the conversation as pleaded in the cross-claim. At best the evidence of Brkic was to the effect that he told the applicant that he, the applicant, would not have to provide security beyond providing the guarantee. It is not apparent to me that the evidence of Brkic went any further and in particular that it would have supported a finding that Brkic told the applicant that the Cityview Hotel constituted a good deal for Gilmore and Dumbrell and that the Bank would require no collateral to support the loan to them. 30 A subsidiary submission was made that the trial judge was not entitled to reject the evidence of Gilmore that Brkic had told him certain things about the duration of his relationship with Gilmore's partner and that he had talked the applicant into signing the guarantee. However these matters were raised with Gilmore in cross-examination and the manner in which the trial judge approached Gilmore's evidence was, in my opinion, was unexceptionable.

The proof of the debt at trial 31 A further basis on which the applicant sought to impugn the judgment of the trial judge is that the Bank failed to prove the amount of the debt. In the proceedings in the District Court the Bank sought to prove the debt by a certificate prepared by Mr Anthony Higgs, an officer of the Bank, ostensibly in conformity with clause 17 of the deed of guarantee. Clause 17 provided that a statement in writing made up from books of the Bank and signed by an authorized officer of the Bank of "the amount due or owing of the moneys hereby secured" would be prima facie evidence that such amount was due or owing. The recitals to the deed of guarantee identified that the "moneys hereby secured" could be constituted by various amounts which included monies owing by Gilmore and Dumbrell. It is clear that the certificate prepared by Higgs was based on information gleaned from the records of the Bank concerning two accounts maintained by Gilmore and Dumbrell. The amounts outstanding in the two accounts included both principal and interest. The submission made on behalf of the applicant was that it was necessary for evidence to be provided about the manner in which the interest was calculated. In particular it was necessary for the Bank to establish the means by which the rate of interest was determined and what investigations the Bank undertook to establish the appropriate rate. Reference was made to the judgment of Master Adams of the Supreme Court of Western Australia in Australia and New Zealand Banking Group v Dzienciol, 5 November 1993, and Commonwealth Bank of Australia v Prentice, Supreme Court of New South Wales, Barr AJ, 14 December 1995 and National Australia Bank Ltd v Sampson (No 2), Supreme Court of New South Wales, Young J, 9 September 1991 and Shomat Pty Ltd v Rubinstein (1995) 124 FLR 284. However the submission of counsel for the applicant proceeded on a premise I do not accept. The various components of what might constitute "moneys hereby secured" identified in the deed of guarantee included moneys payable by Gilmore and Dumbrell (para (a)) and, as I construe the deed, interest on any such amount from the time payment of the amount was due and payment not made (para (h)). The submission that evidence was necessary assumed that part of the "moneys hereby secured" included interest of the type referred to in para (h). However I do not understand the certificate as relating to any such amount. Rather it concerned moneys payable by Gilmore and Dumbrell including interest that had already accrued. Those amounts were ascertained by Higgs by reference to the records of the Bank relating to the accounts of Gilmore and Dumbrell. The Bank was, in my opinion, entitled to prove the guaranteed amount in the way it did. 32 I dismiss the application with costs. I certify that the preceding thirty-two (32) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Moore.

Counsel for the Applicant: D B McGovern with L J Aitken

Solicitor for the Applicant: Hamilton Quinlan Fenwick

Date of Hearing: 4 February, 19 April 1999

Bankruptcy Legislation Amendment Act 1996(Cth)

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