ROBERT HUDSON JUNIOR v THOMAS JAMES DONALD and STEPHEN WILLIAM MICHAEL WHALAN

Time: 10.45 Date 26/5/97" [Second page] ... "Registrar making Order: Quinn Date of Order: 26 May 97 Where made: Sydney THE COURT ORDERS THAT: 3.(c) The Respondents undertake not to give any creditors petition within 28 days from today (26.5.97) (d) In the event the costs order for $5,817.54 is rescinded or set aside by a Court on or before 30.9.97 the Respondents agree to repay the sum of $5,817.54. R J Hudson (signed) R E Quickenden (signed) ............................................ ......................................... for Applicant [sic] for Respondents. M. Quinn (signed) ................................... REGISTRAR Time: 10.45 Date 26/5/97" On 19 June, Mr Hudson filed summons No 11829 of 1997 in the Common Law Division of the Supreme Court of New South Wales, seeking leave to appeal out of time against Magistrate Cocks' order for costs made on 24 October 1996. On the same day, he filed his second application in the present proceeding for an order setting aside the bankruptcy notice. On 4 August, Barr J dismissed Mr Hudson's summons in the Supreme Court. There is not before me a copy of his Honour's reasons but, according to affidavit evidence, his Honour said: "[T]here is no right of appeal from the Local Court to the Supreme Court regarding this matter and further, in any event, the Magistrate appears to have made the costs order correctly." Two days later, on 6 August, Mr Hudson filed in the Supreme Court a notice of appeal against Barr J's order. In relation to the events before Registrar Quinn on 26 May, Mr Hudson says that he felt pressured, over-awed and did not understand fully what was happening. He submits that in consequence he is not bound by his signed undertaking contained in par 3 of the short minutes of that date. I need not set out Mr Hudson's more detailed account of what he says occurred on 26 May because I do not find it necessary, in disposing of the present application, to rely on Mr Hudson's undertaking. REASONING In support of his application to set aside, Mr Hudson (who has appeared in person before me) relies on two defects in the bankruptcy notice and also asks the Court to "go behind" the judgment or order. The bankruptcy notice refers to a claim by the Creditors that Mr Hudson owes them $5867.54 as shown in a Schedule. According to the Schedule, the sum of $5867.54 comprises $5542.00 [sic] as the amount of the judgment or order, legal costs of $68.00 and interest of $257.54. The bankruptcy notice states that a copy of the judgment or order relied on by the Creditors is annexed to it. It is common ground that there was annexed to the bankruptcy notice served on Mr Hudson a copy of a certified copy of Magistrate Cocks' order relating to Mr Donald alone, and no copy of an order relating to Mr Whalan (a certified copy of that order was subsequently, on 11 June 1997, supplied to Mr Hudson by the solicitors for the Creditors). The certified copy of the order annexed to the bankruptcy notice referred only to the sum of $2,770.00 and referred to it as being an amount which Mr Hudson was ordered to pay to Mr Donald for costs. I will deal with the two defects in the bankruptcy notice first, and the invitation to go behind the judgment or order later. First defect in bankruptcy notice: overstatement by $2.00 The first defect relied on by Mr Hudson is an overstatement by $2.00 in two figures. The amount stated in the notice as the "Amount of judgment or order" was $5542.00 but the correct amount was, as noted earlier, $5540.00. The hearing proceeded on the footing that the effect of this overstatement was that the amount of the "Total debt owing" was also overstated by $2.00: that it was wrongly stated to be $5867.54 rather than $5865.54. While I have said that Mr Hudson "relies" on the overstatement by $2.00 in the "Amount of judgment or order" and in the amount of the "Total debt owing", this statement calls for explanation and qualification. It was counsel for the Creditors who drew attention to the matter in closing submissions. Mr Hudson did not refer to the particular defect at all, but I have chosen to treat him as having relied on it. Counsel for the Creditors also raised the possibility that the amount of interest also may have been overstated by a few cents. There is, however, no evidence of an overstatement of interest. I proceed simply on the assumption in favour of Mr Hudson that he relies on the conceded overstatement by $2.00 in the two amounts mentioned. There is ample evidence that there has never been a misunderstanding on the part of Mr Hudson as to the correct amount. He was, of course, a party to the order made by Magistrate Cocks, which made it clear that the total amount of the order was $5540.00 and that this comprised two sums of $2770.00, one payable to each of the Creditors. According to an affidavit sworn by Mr Hudson on 6 May 1997, he "was present in the Local Court throughout the entirety of the proceedings which gave rise to the order for costs the subject of the Bankruptcy Notice." There was annexed to that affidavit a copy of the last page of Magistrate Cocks' "Reserved Order as to Costs". That page included the following "formal cost order": "The Applicant to pay the costs of the 4th and 5th respondent [sic] in the sum of $5540.00, including their own witness expenses, to be divided equally between those respondents. NO ORDER AS TO COSTS OF 1ST, 2ND AND 3RD RESPONDENTS." As noted earlier, the certificate relating to Mr Donald annexed to the bankruptcy notice referred to the amount of $2770.00. Subsections 41(5) and (6) of the Bankruptcy Act 1966 (Cth) ("the Act") provide: "(5) A bankruptcy notice is not invalidated by reason only that the sum specified in the notice as the amount due to the creditor exceeds the amount in fact due, unless the debtor, within the time allowed for payment, gives notice to the creditor that he or she disputes the validity of the notice on the ground of the mis-statement. (6) Where the amount specified in a bankruptcy notice exceeds the amount in fact due and the debtor does not give notice to the creditor in accordance with subsection (5), he or she shall be deemed to have complied with the notice if, within the time allowed for payment, he or she takes such action as would have constituted compliance with the notice if the amount due had been correctly specified in it." The bankruptcy notice allowed twenty-one days after service, that is to say, until 11 May, for compliance. Did Mr Hudson, by 11 May, give notice to the Creditors that he disputed the validity of the notice on the ground of the overstatement of either amount by $2.00? It is necessary to consider what Mr Hudson did by 11 May. On 5 May he filed the application by which the present proceeding was commenced. On 7 May, he filed his affidavit sworn 6 May to which I referred earlier. In that affidavit, Mr Hudson complained that as to $600.00, the Magistrate's order was "unenforceable at law" because, according to the affidavit, he (Mr Hudson) did not see the two Creditors attend to give evidence and they were not called to give evidence. This was not a complaint as to the overstatement by $2.00, or even by $600.00, but rather an invitation to go behind Magistrate Cocks' judgment or order to the extent that it included the sum of $600.00. Paragraph 12 of Mr Hudson's affidavit sworn 6 May is as follows: "12. The claim in the Bankruptcy Notice is in the sum of $5,867.54 claiming an amount of judgment or order in the sum of $5,542.00 but I have been served with an affidavit of Paul Tonkin sworn on 20th February 1997 being 'Annexure A' to the Bankruptcy Notice declaring that costs awarded but remaining unsatisfied are to the extent of $2,770.00." Again, the complaint made is not as to an overstatement by $2.00, but as to the absence of any annexed document relating to one of the Creditors. In my opinion, Mr Hudson did not, by 11 May, give notice to the Creditors that he disputed the validity of the bankruptcy notice on the ground of the overstatement by $2.00, either in the amount of the judgment or order or in the amount of the total debt said to be owing. How does subs 41(5) apply to the particular bankruptcy notice? Subsection 41(5) refers to an overstatement of "the amount in fact due". Prior to recent amendments, Bankruptcy Rule 8 required that for the purposes of par 41(1)(a) of the Act, a bankruptcy notice be in accordance with the prescribed form, and the prescribed form of bankruptcy notice, Form 4, provided for a statement only of the amount which the judgment creditor claimed to be the sum "due by [the debtor] to him under a final judgment (or order) obtained by him against [the debtor]". Since 16 December 1996, however, subs 41(2) of the Act has provided that a bankruptcy notice must be in accordance with the form prescribed in the Regulations, and Bankruptcy Regulation 4.02 has provided that the form of bankruptcy notice set out in Form 1 in Schedule 1 is prescribed. Form 1 provides for a bankruptcy notice to state the amount which the creditor claims the debtor owes "as shown in the Schedule". The Schedule is as follows: Column 1 Column 2

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