60 The amended Form deleted an improper inclusion therein of provision for a claim for the costs of the issue of a bankruptcy notice. (See: Distribution Group Ltd v Lyndan (1997) 78 FCR 240 per Northrop J at 247.) Furthermore, the Form was revised in significant respects by deleting the "postscript" to the notice headed "Information for debtors", setting out that material as part of the substantive paragraphs of the notice directed to the debtor (pars 6-10).
61 The Form was further amended by inserting several "postscripts" to the notice each headed "For the Information of the Creditor", containing material which had appeared in the previous Form as "Notes to the Schedule" and new material which informed the creditor of impairment of the creditor's privacy rights.
62 With regard to the Regulations, it is to be noted that the former requirement of r 7 of the Rules that the Registrar be satisfied that an application had been duly made and that the documents produced were in order for signature, was not replicated in the obligations imposed on the Official Receiver. In reg 4.01(2) the Official Receiver is instructed that he or she must sign the documents lodged in accordance with reg 4.01(1). In the form of notice prescribed pursuant to reg 4.02(1), the signature of the Official Receiver is endorsed in a box described "For Official Use Only". That suggests that the signature of the Official Receiver is a record made by that officer of the issue of the notice, rather than notification to a debtor that the notice served on the debtor is a direction to the debtor under the hand of the Official Receiver. The Official Receiver is not required to be satisfied that the application for issue of a notice has been duly made notwithstanding the requirement in s 41(3) of the Act that a bankruptcy notice not be issued in relation to a debtor unless circumstances exist as specified in that subsection. Although reg 4.01(2) requires the Official Receiver to sign and return copies of the draft bankruptcy notice lodged in accordance with reg 4.01(1), perhaps it may be argued that there is an implied obligation on the Official Receiver to be satisfied that the draft bankruptcy notice has been duly completed and, therefore, that the contents of the copy document filed pursuant to reg 4.01(1)(b) accord with the minimal details required to be set out in par 1, and in the Schedule, of the draft bankruptcy notice. It is assumed that the words "specified by the person on the approved form" as used in r 4.01(1)(b) refer to the draft bankruptcy notice.
63 Prior to the amending Act, a bankruptcy notice was the Registrar's document issued by the Registrar under statutory authority. (See: Walsh v Deputy Commissioner of Taxation (1984) 156 CLR 337 at 340; Re Munson; Ex parte Deputy Commissioner of Taxation (1977) 29 FLR 479 at 480; Re The Bankruptcy Act 1966; Ex parte Commercial Banking Co of Sydney Ltd (1979) 23 ALR 522.) In that document the Registrar commanded a judgment debtor to take notice that the debtor, within a specified period, was required to pay the sum set out in the notice or secure payment of that sum to the satisfaction of the Court or the judgment creditor, or compound the sum to the satisfaction of the judgment creditor. The debtor was given notice by the Registrar that if the debtor failed to comply with the notice, the debtor would commit an act of bankruptcy.
64 The purpose of a bankruptcy notice has not been altered by the amending Act, namely to give notice to a judgment debtor that the judgment creditor claims a sum to be due under a judgment and that failure to pay that sum within the period specified in the notice will have serious consequences under the Act. Most of the other usual requirements of the notice have been continued, namely that the debtor be informed:
(i) of the creditor's address and of any other address that the creditor nominates for the place of payment of the sum or where the debtor may propose a compromise of the debt;
(ii) that the debtor may apply to the Court to extend the time for compliance with the notice, or to set the notice aside, if specified grounds exist; and
(iii) where the Court is situated.
Several requirements have been deleted. For example, the debtor now is not informed that it is sufficient to comply with the notice by securing the payment of the sum demanded, and the creditor is not restricted to directing the debtor to pay the judgment debt "in accordance with the judgment", the requirement to that effect in s 41(2)(a)(i) of the Act having been repealed. (See: In re HB [1904] 1 KB 94.)
65 The form of bankruptcy notice substituted by the amending Act and Regulations ("the new notice") is not expressed in the peremptory terms of the notice it replaced ("the old notice") and, indeed, it does not inform the debtor that to fail to comply with the notice is to commit an act of bankruptcy. An act of bankruptcy is a matter of significance under the Act in that it attracts the "relation back" doctrine and determines the deemed date of commencement of a bankruptcy, whether or not a petition in bankruptcy is based on that act (s 115). The new notice is not a command to a judgment debtor made by a person authorised to make it by the Act. In neutral and unattributed terms, and in plain language, albeit with complex results (see: Distribution Group per Northrop J at 243), it purports to inform a judgment debtor that the document served upon the debtor is an important document and that bankruptcy proceedings may be commenced if the debtor does not pay, as required by the notice, the sum claimed therein as a judgment debt by the creditor or make an arrangement for settlement of that debt. The notice speaks to the debtor in ten substantive paragraphs and a Schedule. The sum claimed by the judgment creditor in the bankruptcy notice is set out in par 1 of the notice and in the Schedule to the notice. In par 2 of the notice, a debtor is informed that a copy of the judgment or order relied upon by the judgment creditor, is attached to the notice. The debtor is advised that legal advice should be obtained if the debtor is unsure what to do after reading the document. Further, the debtor is told that the information set out in pars 6, 7 and 8 of the notice paraphrases the relevant law and that it "might be unwise to rely solely on this summary".
66 In addition to paragraphs directed to the debtor, the prescribed form of the new notice contains instructions addressed to the person completing a "draft bankruptcy notice" or, perhaps, addressed to the Official Receiver. (See: Trustees of the Franciscan Missionaries of Mary v Weir (2000) 98 FCR 447 at [8].) For example, an introductory Note in the prescribed form instructs that words in italics "are for guidance in completion of this Notice, and are not to be reproduced in the Notice". Although the Note is not in italics, it would seem to follow that it is not intended that the Note be part of the bankruptcy notice served on the debtor. Similarly, a paragraph headed "For the Information of the Creditor Note about use of information" set out in the prescribed form would not appear to be relevant to the obligations of the person upon whom a bankruptcy notice is to be served and it suggests that it is intended that compliance with the requirements of the Act and Regulations would be satisfied if that paragraph were omitted from a "draft bankruptcy notice" presented to the Official Receiver, notwithstanding that neither the heading to, nor the paragraph, appears in italics. (See: Northam v Commonwealth Bank of Australia [2000] FCA 544 at [24]-[27]; Boylan v Farthing [2000] FCA 575 at [15].)
67 After the substantive paragraphs and Schedule directed to the debtor, there is a heading "For the Information of the Creditor - Notes to the Schedule" under which the judgment creditor is instructed to attach a certificate of taxed costs if costs are claimed as part of the judgment debt, and a document setting out the facts relied upon to calculate the amount of interest claimed where interest is included in the amount set out in the Schedule to the notice.
68 Having regard to the foregoing, it would seem that the purpose of the amending Act, effected by the Regulations, was to make a bankruptcy notice easier to comprehend by a person on whom it was served. No material was put before the Court to suggest that Parliament had been made aware of a particular mischief that it sought to rectify by introducing a requirement that there be strict compliance by judgment creditors with a new form of bankruptcy notice. It is obvious that the prescribed form of the new notice is intended to be less intimidating for a judgment debtor. Reducing the formality of a bankruptcy notice to assist a judgment debtor suggests the antithesis of any legislative intent that form, and not substance, govern the rights of a judgment creditor under the same notice.
69 The Act as amended does not specify what a prescribed form of bankruptcy notice must contain and is to be contrasted with the terms of the Act before amendment where s 41(2) set out the matters a bankruptcy notice must include. The essential requirements of a bankruptcy notice could be divined from those stipulations. (See: Kleinwort Benson Australia Limited v Crowl (1988) 165 CLR 71 at 76.) In addition to the matters specified in s 41(2), it was arguable that other matters inextricably linked thereto, and specified in the prescribed form of notice, could become essential requirements of the notice, for example, the address of the creditor, or of the Court, where payment was to be made of the sum claimed by the creditor, or a proposal put by the debtor for securing or compounding the debt. (See: Re St Leon; Ex parte National Australia Bank Ltd (1994) 54 FCR 371; Foote v Mid-West Finance Pty Ltd (in liq) (1997) 78 FCR 306; Hilti Australia Pty Ltd v Millard (1997) 78 FCR 453.) It is not necessary to determine the correctness of that view.
70 Under s 41(2) as it now stands, the Act goes no further than restating that which was formerly provided in s 41(1), namely that a bankruptcy notice be in accordance with the form prescribed. Nothing turns on the fact that the old form was prescribed by rules and the new form prescribed by regulations. On its face, therefore, the amendment has made the Act less prescriptive in operation than it was before the amendment.
71 In the old notice, identification of the judgment relied upon was essential and was provided for in the form. As a matter of practice, costs and interest could be included as part of the sum owing under the judgment provided they were sums for which the creditor could enforce payment by execution, but no further identification of the source of the obligation, other than the judgment, was necessary. (See: Kleinwort Benson at 77; In Re Manion; Ex parte Deputy Commissioner of Taxation (1979) 23 ALR 270 at 273.) Identification of the authority to claim costs or interest flowed from identification of the judgment or order relied upon and provision of information in respect of costs and interest was not essential for the debtor to obtain an understanding the requirements of the bankruptcy notice. It was suggested in CBC Sydney (at 526) that inclusion of particulars of the calculation of interest in the bankruptcy notice was essential to the validity of the notice. It is not clear on the authorities referred to in CBC Sydney that such particulars were ever an essential requirement. It would appear that there was no greater requirement than that the amount claimed for interest be calculated accurately and recited in the notice and not be claimed as an uncalculated amount. (See: Re Davis; Ex parte Deputy Commissioner of Taxation (1963) 19 ABC 100; Re McDonald; Ex parte Elder Smith Goldsbrough Mort Ltd (1978) 18 ALR 505 at 507.)
72 The new notice does not require the judgment or order relied upon to be identified in the body of the notice but par 2 of the substantive part of the notice directed to the debtor states that a copy of the judgment or order relied upon by the creditor is attached. It may be said, therefore, that the attachment referred to now performs the essential requirement of the old notice that there be identification of the judgment or order relied upon. It can be seen that if a notice does not recite in the body thereof, particulars of the judgment or order relied upon, it may be necessary to provide a copy of the relevant judgment or order for the debtor to understand the requirements of the notice. (See: Haros v National Australia Bank Ltd (unreported, Federal Court of Australia, Ryan J, 24 November 1997 - 1391/1997).) However, where a creditor is instructed by a note endorsed on the new notice to attach other documents that relate to matters of costs and interest, it does not follow that such an endorsement expresses the intention of Parliament that provision of that material become an essential requirement of the notice.
73 Furthermore, the only document required to be lodged with the Official Receiver pursuant to reg 4.01, other than the draft bankruptcy notice and additional copies thereof, is the sealed or certified copy of the judgment or order. The Regulations do not require the person applying for the issue of a bankruptcy notice to lodge with the Official Receiver a certificate of the taxed costs or a document showing how interest was calculated if the draft bankruptcy notice includes a claim for costs or interest. As noted earlier, the form of bankruptcy notice in force before the amending Act was enacted did not refer to external documents. As noted above, reg 4.01 does not require more than one sealed or certified copy of the relevant judgment or order be lodged with the Official Receiver and is silent on whether the Official Receiver retains that document or returns it to the party seeking the issue of a bankruptcy notice. Paragraph 2 of the new notice, which seems to place greater reliance on its substance than form, states that a "copy" of the judgment or order relied upon is "attached" and does not state that the "attached" document is a sealed or certified copy of the judgment or order. (See: St George Bank Ltd v Klintworth & Klintworth (1998) 157 ALR 286 at 288.)
74 Under the Act and Regulations as they now stand, the Official Receiver authorises the issue and service of a bankruptcy notice by signing the "additional copies" lodged under reg 4.01(1)(c). It is not a requirement of the legislation that an attached document be affixed to the notice authorised by the Official Receiver for service upon the debtor. Regulation 4.01 does not instruct the Official Receiver to attach any document to the copies of the draft bankruptcy notice that are lodged with the Official Receiver under reg 4.01(1)(c) and signed and returned by the Official Receiver under reg 4.01(2). It should be noted also that reg 4.01 provides no instruction to the Official Receiver on what is to be done with the "duly completed draft bankruptcy notice" lodged with the Official Receiver pursuant to reg 4.01(1)(a). These provisions seem to be concerned more with substance than form.
75 Whether a document referred to in the prescribed form of notice as a document attached to the form, may be said to be part of the prescribed form and whether a failure to attach such a document is a substantive defect or irregularity in the bankruptcy notice issued, notwithstanding that the sum demanded is the sum, in fact, due and payable, is unnecessary to decide. (See: Commonwealth Bank of Australia v Horvath (Junior) (1999) 161 ALR 441; Re Scerri (1998) 82 FCR 146; American Express International Inc v Held (1999) 168 ALR 185.)
76 It is also unnecessary to consider whether a direction to a creditor in the prescribed form of bankruptcy notice, instructing the creditor to attach a document, has the effect of making that document part of the prescribed notice. The substantive content of the notice remained as it was before the amending Act was enacted, except for deletion of the right to comply with the notice by securing payment of the sum demanded in the notice. An obligation to deliver material to the judgment debtor, in addition to the bankruptcy notice, and not referred to in the substantive part of the notice directed to the debtor, may have been a concurrent requirement imposed by the Regulations. It was not contended that in that regard the Regulations exceeded the power delegated by the Act.
77 A certificate of taxed costs pursuant to a judgment is a matter of record. If a copy of the certificate were not provided to a judgment debtor with a bankruptcy notice, the judgment debtor could obtain that information from the relevant record. Similarly, interest accrues on a judgment debt pursuant to statutory provisions of which the creditor and debtor may be presumed to have equal knowledge. At any time a judgment debtor may refer to those provisions to calculate the interest accruing on a judgment debt. If a judgment creditor calculates correctly the amount of interest due according to those statutory provisions but in the bankruptcy notice names incorrectly the statute that provides that interest accrues, that error would not raise a presumption that the judgment debtor would be unable to understand what the debtor had to do to comply with the notice. The assistance to a judgment debtor that the Regulations direct be provided to a debtor by delivering to the debtor material additional to the bankruptcy notice, would not make accuracy of that material in all respects an essential requirement of the bankruptcy notice, particularly where the basic purpose of the notice has been met, namely to advise a judgment debtor of a claim by a judgment creditor for payment of a sum that is due and owing by that judgment debtor. Indeed, the bankruptcy notice itself reminds the judgment debtor that the prescribed words of the bankruptcy notice may be misleading and warns the judgment debtor to obtain legal advice. Such an injunction must be even more relevant in respect of material accompanying the bankruptcy notice that has no prescribed form, to wit, a document prepared by the creditor detailing how the amount of interest due has been calculated.
78 In many cases a debtor would have to make independent enquiry to determine whether the sum claimed by a judgment creditor is in fact the sum due. For example, where a judgment debt has been reduced by payments made from proceeds obtained by execution upon the judgment, it would be difficult for a judgment debtor to check the accuracy of the judgment creditor's claim as to the interest that has accrued and, therefore, the sum owing under the judgment. Neither the Act, nor the Regulations, requires a judgment creditor to provide such information. If the dates and sums on which interest is calculated vary according to the dates on which payments or proceeds of execution are received by, or on behalf of, the judgment creditor, the judgment debtor could not check the accuracy of the creditor's calculations from material attached to a bankruptcy notice to ascertain whether the principal sums, or periods in which interest has been calculated, are correct. In fact, a debtor would have to make further enquiry or search court records. (See: St George Wholesale Finance Pty Ltd v Spalla [2000] FCA 1094.)
79 In the terms of the new notice, the amount claimed by a judgment creditor as the amount a judgment debtor is required to pay, is to be set out in par 1 of, and in the Schedule to, the notice. If the amount claimed is the amount due in fact, the purpose of the notice in that regard will be met. Thus, if a creditor records in the Schedule the sum due under the judgment and the amount of interest that has accrued since the date of the judgment, the purpose of s 41(2) of the Act will be satisfied.
80 Even if it could be said that a document prepared by a judgment creditor and attached to the notice is part of the notice prescribed, such a document must be read with, and not to the exclusion of, the substantive purpose of the notice.
81 The important requirement of a bankruptcy notice is that the amount for which payment is demanded in the notice be the correct sum. A demand that the debtor pay more than the amount due by the debtor to the judgment creditor is a substantive defect or irregularity in the bankruptcy notice. (See: In re a Debtor (No 478 of 1908) [1908] 2 KB 684.) But for ss 41(5) and (6), a notice demanding more than the amount due would be invalid. Understatement of the amount due, however, is no more than a formal defect or irregularity in the notice that attracts the operation of s 306 of the Act unless, objectively, the understatement is capable of misleading the debtor as to what the debtor must do to comply with the notice. (See: Kleinwort Benson at 80.)
82 Until Kleinwort Benson, a line of authority had arisen in this Court that understatement of the judgment debt rendered a bankruptcy notice invalid, but understatement of the interest due on the judgment debt was only a formal defect in the notice, able to be remedied by the operation of s 306 of the Act. Kleinwort Benson made it clear that the essential requirement of the Act was that the amount demanded from the debtor be a sum, including interest, due and payable by the debtor and understatement of that sum would depart from that requirement in form only, unless on an objective view it may be said that the notice was capable of producing uncertainty as to the obligation it imposed on the debtor.
83 That, of course, is consistent with the overall purpose of the notice. A bankruptcy notice is a statutory means for determining whether a person may be declared insolvent under the Act without awaiting the result of execution on the judgment upon which the notice is based. The person ordered by judgment or order of a court to pay a sum will be presumed to be insolvent and to be a person against whom a sequestration order may be made under the Act, if a demand for payment of the monies due under the judgment is made upon the judgment debtor by the judgment creditor by notice issued pursuant to the Act and the debtor fails to comply with the requirements of the notice.
84 Therefore, if the amount demanded in the bankruptcy notice is less than the sum actually due, that in itself will not involve a significant departure from the purpose of the notice. The question will be whether the notice makes clear to the judgment debtor the steps the debtor must take to comply with the notice and informs the debtor of the consequence under the Act of failing to so comply. Understatement by the creditor of the amount due by the debtor under the judgment permits the debtor to comply with the notice by paying only the sum demanded. Compliance with a bankruptcy notice that claims less than the amount due under the judgment or court order will not discharge the judgment debt. Notwithstanding the demand for payment contained in a bankruptcy notice, a judgment debtor must decide, albeit that no instruction to that effect appears in the notice, whether compliance with the notice would have the effect of giving the judgment creditor a preference and be an act of bankruptcy under s 40(1)(b) of the Act.
85 In each of the matters before the Court the amount claimed in the respective bankruptcy notices was the sum due. It is submitted, however, that an error in the information provided in those notices relating to the calculation of the amount of interest due, invalidated each notice notwithstanding that the error did not make the calculation of interest inaccurate. The submissions rely upon a decision of a Full Court of this Court in Bendigo Bank Ltd v Williams (2000) 98 FCR 377.
86 In Bendigo Bank it was held that the amended Act and the Regulations constituted "new and significantly changed legislation" (par 32), the proper construction of which required invalidation of a bankruptcy notice that did not meet the requirements of the "statutory scheme" as reflected in s 41(2) and reg 4.02.
87 The relevant regulations must be construed in conjunction with the Act and, in particular, regard must be given to the purpose of a bankruptcy notice as established by the provisions of the Act. It would require the use of clear terms in the Act before the relevant regulations may be said to make terms of a bankruptcy notice essential requirements thereof if they would not be essential requirements of such a notice according to the proper construction of the Act. In the form of bankruptcy notice prescribed by the Regulations, it may be said that the essential requirements of the notice for the purpose of the Act remain as they have always stood and that it is the manner in which instructions are conveyed to the judgment debtor that has changed.
88 Furthermore, reg 4.02, does not exclude the operation of s 25C of the Acts Interpretation Act 1901 (Cth) ("the AI Act") and, therefore, strict compliance with the form prescribed pursuant to that regulation, is not required. Thus there will be accordance with the form prescribed for the purposes of s 41(2) where there has been substantial compliance with the form. (See: Bank of Melbourne Limited v Hannan (1997) 78 FCR 249; Kirk v Ashdown [1999] FCA 1664 at [16]-[18]; Trustees v Weir at [15]-[16].) The same conclusion may be reached if regard is given to the terms of s 41(2) without resort to s 25C of the AI Act. (See: Farrugia v Farrugia (2000) 99 FCR 16 per Katz J at [61]-[68].)
89 In Bendigo Bank, it is suggested in the reasons of the majority (par 16) that the terms of reg 4.02(2) are to be taken to reflect the intention of the legislature, through its delegate, that s 25C of the AI Act not apply to reg 4.02 other than reg 4.02(2). Therefore, it was said, no question of substantial compliance with the form of notice prescribed could arise. As pointed out in Trustees v Weir (par 16), the relevant intention is constant in respect of the whole of the regulation and it follows that there is no intention to exclude the operation of the AI Act in respect of any part of reg 4.02. Kirk v Ashdown accepted that construction and established that strict compliance with the form prescribed in reg 4.02 is not required and substantial compliance with the form will be sufficient.
90 Therefore, the question in the instant cases is whether the form of the notice in each case has been complied with substantially. The amount demanded from the debtor in the notice is in fact the amount due by the debtor under a judgment entered against the debtor by the creditor, details of which are set out in a copy of the judgment attached to the notice, and the interest on the judgment included in the sum claimed by the creditor is the correct amount. A document attached to the notice set out correctly the rate of interest that applied, the period for which interest was to be calculated, and the sum on which it was so calculated. The document recited the wrong statute that permitted interest to be calculated on and as part of the judgment debt. Instead of citing the Magistrates' Court Act 1989 (Vic) the document referred to the Supreme Court Act 1986 (Vic). As it happens, each statute stated that the rate set by the Penalty Interest Rates Act 1983 (Vic) was the rate at which interest accrued.
91 Even if the narrowest construction were applied to the Act and Regulations, the creditor did not fail to comply with reg 4.02 and the requirements of the prescribed form. The creditor attached to the notice a document that set out the details required by the form under the heading "For the Information of the Creditor - Notes to the Schedule…Note 2" namely, "the provision under which the interest is being claimed". As it happens, the creditor described incorrectly the statute which provided that interest accrued on the judgment debt.
92 If, despite all of the foregoing, it could be said that the creditor did not comply substantially with the requirements of the form, that departure did not cease to be a formal defect or irregularity to which s 306 would apply unless it could be said that the error was capable of misleading a debtor as to the amount due and what the notice required the debtor to do. Bendigo Bank was not a case where the additional material provided by the creditor pursuant to "Note 2" contained an error but a case where the document to which "Note 2" referred was not attached to the bankruptcy notice and for that reason it was held that the notice was invalidated and that s 306 had no operation. Importantly, however, and consistently with the view expressed above, the majority (par 36) acknowledged that where information has been supplied purportedly in compliance with "Note 2", and the information is inaccurate or incomplete, then the question may arise whether the defect is merely formal in which case s 306 may apply and it may be relevant to ask whether a debtor could be misled. I note that their Honours went on to say that the relevant enquiry would not be whether a debtor may be misled as to what must be done to avoid an act of bankruptcy but whether the debtor may be misled as to the information the debtor is intended to derive from the material required to be provided. The latter observation is not consistent with the principle stated in Kleinwort Benson, namely that notwithstanding that there may be a formal defect or irregularity in a notice, the purpose of the notice will be met unless that defect or irregularity could reasonably mislead a judgment debtor as to what the debtor is required to do to comply with the notice.
93 Properly construed, the Act and Regulations do not express an intention to create a new regime of strict compliance imposed on a judgment creditor issuing a bankruptcy notice. The tenor of the Act and Regulations is not consistent with that conclusion. An attempt has been made to recast the process of issue of a bankruptcy notice in terms more understandable to a judgment debtor, but the essential requirements of a bankruptcy notice remain as they have been stated by bankruptcy legislation over many years.
94 Proper construction of the Act and Regulations must take account of the substantial amelioration of the effects of bankruptcy under that legislation that has taken place since the days when bankruptcy was regarded as penal in nature. Where it is contended that legislative provisions provide for consequences of invalidity, construction of those provisions must have regard to the overriding purpose of the legislation as a whole. That principle was stated as follows by McHugh, Gummow, Kirby and Hayne JJ in Project Blue Sky Inc v Australian Broadcasting Authority (1998) 194 CLR 355 at 390-391:
"In our opinion, the Court of Appeal of New South Wales was correct in Tasker v Fullwood in criticising the continued use of the 'elusive distinction between directory and mandatory requirements' and the division of directory acts into those which have substantially complied with a statutory command and those which have not. They are classifications that have outlived their usefulness because they deflect attention from the real issue which is whether an act done in breach of the legislative provision is invalid. The classification of a statutory provision as mandatory or directory records a result which has been reached on other grounds. The classification is the end of the inquiry, not the beginning. That being so, a court, determining the validity of an act done in breach of a statutory provision, may easily focus on the wrong factors if it asks itself whether compliance with the provision is mandatory or directory and, if directory, whether there has been substantial compliance with the provision. A better test for determining the issue of validity is to ask whether it was a purpose of the legislation that an act done in breach of the provision should be invalid. This has been the preferred approach of courts in this country in recent years, particularly in New South Wales. In determining the question of purpose, regard must be had to 'the language of the relevant provision and the scope and object of the whole statute'." [Footnotes omitted]
95 In Deputy Commissioner of Taxation v Woodhams (2000) 169 ALR 503, the High Court (at [33]-[41]) affirmed that it is the statutory purpose to be served by a statutory notice which determines whether a purported notice complies with the requirements of the legislation, or is a nullity:
"[33] It is the legislative purpose to be served by the giving of a s 222AOE notice that determines the nature and extent of the information necessary to satisfy the requirement to set out details of the unpaid amount of the company's liability under a remittance provision in respect of deductions. At this stage of the argument, the concern is with absence of information, rather than erroneous or misleading information. Absence of information will involve a failure to provide necessary details if, without such information, the notice will not fulfil the purpose for which it is required to be given.
[34] The primary source of guidance as to the statutory purpose of the notice before action required by s 222AOE is to be found in s 222ANA. Division 9 seeks to achieve the object that either the deducted amounts are remitted or paid to the Commissioner or the company is promptly taken out of the control of the directors and dealt with under the insolvency laws.
[35] The notice in question is addressed to a director of the company. Such a person will ordinarily have access to information concerning the company's liabilities. The notice does not create a liability to pay a penalty, and if there is to be action to recover the penalty under s 221R it will be taken in the appropriate civil jurisdiction. In that event, the rules of court will require the elements of the cause of action to be pleaded and particularised in the ordinary way. A notice before action is not intended to serve the purpose of a statement of claim.
[36] The first purpose of the notice is to inform the recipient of the unpaid amount of the company's liability under the remittance provisions, and of the recipient's liability to a penalty in the same amount. The second purpose, consistently with s 222ANA, is to inform the recipient of the alternative courses available, as set out in s 222AOE(b), which will result in remission of the penalty, the object being to encourage the recipient to take such steps as are necessary to bring about the result that one or other of those courses is followed.
[37] In a number of respects, the due date for remittance of a deducted amount is relevant to a director's liability to pay a penalty, but that is not the liability to which s 222AOE is referring. The section does not require that the notice state details of the facts relevant to the director's liability. That is a function to be served by the pleadings and particulars, if and when action is taken to recover the penalty. Nor does the section require details of all facts relevant to the company's liability. It requires details of the unpaid amount of the company's liability. Once again, if there is an issue as to that liability, it will be litigated in the recovery action.
[38] The notice in the present case contained all the information that was necessary to fulfil the statutory purpose to be served by the notice. It informed the recipient, in detail, of the unpaid amounts of the company's liability, and of the liability by way of penalty which the revenue authorities were asserting attached to him. It also informed him of the steps available to bring about a remission of that penalty. The statute fixed the due dates in respect of each deduction. Fulfilment of the purpose to be served by the notice before action did not necessitate informing the recipient of the operation of the statute in that respect.
[39] The decision in Gruber, in so far as it held that a notice under s 222AOE is required to set out the due dates of amounts to be remitted, is erroneous and should be overruled.
[40] In Kleinwort Benson Australia Ltd v Crowl [footnote omitted] it was said that a bankruptcy notice is a nullity if it fails to meet a requirement made essential by the legislation, or if it could reasonably mislead a debtor as to what is necessary to comply with the notice. For the reasons given above, the notices in the present case did not fail to meet a requirement made essential by the Act. In this Court it was argued, for the first time, that they were misleading. In that connection reference was also made to a covering letter accompanying the notices.
[41] It was argued that the notices, and the letter, in asserting in a peremptory and summary fashion the recipient's liability to a penalty, incorrectly represented the true position. The existence of liability of the kind asserted depended upon a number of facts and circumstances which, at least in theory, might have been open to question or dispute. (In fact, they were not disputed in the subsequent recovery action.) This argument proceeds upon a false premise as to the purpose of the statutory notices. They were not intended to explain the legal basis of the asserted liability. They were notices before action; not pleadings. They were designed to serve a specific purpose, explained above."
96 In the matters before us, each notice complied with the Act by setting out the amount due, in fact, by the debtor. An attached document which set out details of the calculation of the amount of interest included in that sum recorded the correct calculations. Could it be said that incorrect citation of the statute that prescribed that interest was payable by the debtor on a judgment debt could mislead the debtor as to the steps to be taken by the debtor to comply with the notice? The answer, obviously, is no. Kirk v Ashdown reached that conclusion when the source of the obligation to pay interest had been omitted entirely from the documents supplied by the creditor pursuant to "Note 2". Unless the law declared by a unanimous decision of a Full Court is plainly wrong, it is to be followed in the instant matters in respect of which it is directly in point. (See: Cabvil Pty Ltd v Hoiberg [1999] FCA 1791 per Cooper J at [23].)
97 For the reasons set out above I am of the view the reasoning of the Full Court in Kirk v Ashdown sets out correctly the proper construction of the Act. It cannot be correct that amendments to the Act that left undisturbed ss 41(5) and (6) which state that a notice that demands payment of a sum that is unjustified or excessive is only invalid if a debtor gives notice within a prescribed period, introduced a new regime in respect of bankruptcy notices under which a judgment debtor could have such a notice set aside where the amount claimed is due in fact and there is no prospect that the debtor could be misled as to the steps to be taken to comply with the notice. The amending Act could not have contemplated that a mistaken citation of the source of entitlement to claim interest would be a substantive defect or irregularity in the notice so as to exclude the operation of s 306 of the Act. (See: George v Tricontinental Corporation Ltd (1994) 53 FCR 284; Gardiner v Gardiner (1992) 39 FCR 259 at 267-268; Re Farrugia; Ex parte Deputy Commissioner of Taxation (1988) 19 FCR 1 at 4-5.)
98 With respect, the position is set out correctly in Trustees v Weir at [15]-[16]:
"Whereas s 41(2) was previously expressed in terms of the substance of what the bankruptcy notice must contain, it is now expressed entirely in terms of the prescribed form. In so far as the form prescribed under the new provision embodies matters of substance required to be contained in a bankruptcy notice, the reasoning in James and Kleinwort Benson Australia Limited v Crowl is not at all displaced. It would be surprising if it were, since the amendment of s 41 does not (nor did the Explanatory Memorandum circulated by the Attorney-General when the amendment came before Parliament as the Bankruptcy Legislation Amendment Bill 1996, nor did the second reading speech of the Attorney-General reported in the House of Representatives Hansard of 26 June 1996 at 2825 et seq) demonstrate any intention to introduce an upheaval of principle; the obvious explanation of the amendment relates to the machinery for the implementation of the substitution of one ministerial authority issuing bankruptcy notices for another (that is, of the Official Receiver for the Registrar of the Court). But it would work a far reaching reversal of the operation of the Act if the amendment of s 41(2) were to be regarded as doing away with the emphasis of bankruptcy administration on matters of substance, in favour of the elevation of form as the criterion of validity. That would be the consequence if every part of the prescribed form were treated as something made essential by the Act, and it would use the expression coined by the majority in Kleinwort Benson Australia Limited v Crowl in a sense that would turn their actual decision (which excused, as Deane J emphasized, a quite serious defect) on its head. Such an approach would be completely at odds with the formulation in James confining the consequence of invalidation to important breaches of the relevant provisions of the Act and matters that could mislead, that is to say, to defects of substance.
In our opinion, as a matter of construction, the very fact that the new s 41(2) is expressed in terms of form aligns it directly and naturally with s 306. The new s 41(2) does not amend s 306; it is inserted into an Act that already contains that provision, and it is intended to operate accordingly in the statutory setting into which it is received. The form must be complied with, but in the context of an Act containing s 306, a "formal defect" by the express terms of the statute does not attract the invalidating consequences once associated with a mandatory provision: Project Blue Sky Inc v Australian Broadcasting Authority (1998) 194 CLR 355. It is in fact recognized in regulation 4.02 that the prescription of a form of bankruptcy notice does not involve a requirement of strict compliance, substantial compliance being sufficient. That the draftsman attributed this consequence to the operation of s 25C of the Acts Interpretation Act 1901, rather than to s 306 of the Act, and that express attention was drawn to the matter only because of a drafting problem related to the issue of format, in no way detracts from the conclusion that the regulation was not intended to prescribe a form in precise terms, but one to be complied with in substance. As Katz J pointed out in Farrugia v Farrugia (at para 66), the reference to s 25C in the regulation "discloses an intention in the delegated legislator not to attempt to impose by subreg 4.02(2) a requirement which has to be strictly complied with". And, logically, if it was thought s 25C would apply to subreg (2), it must have been thought it would apply to subreg (1), so that the relevant intention must have been the same."
99 The bankruptcy notices are not invalid and the petitions must be set down for further hearing.
I certify that the preceding fifty-one (51) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Lee.