Prasad v Lila Wati [1997] FJHC 55; HBF0009j.1996s (6 May 1997)

Fiji Islands - Amrit Prasad v Lila Wati - Pacific Law Materials

IN THE HIGH COURT OF FIJI

AT LABASA

CIVIL JURISDICTION

CIVIL APPEAL NO. 9 OF 1996

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AMRIT PRASAD

s/o Shiu Prasad

Appellant/Debtor

AND:

LILA WATI

d/o Ram Charan

Respondent/Creditor

Mr. V. P. Ram for the Appellant

Mr. A. Sen for the Respondent

JUDGMENTp class=MsoNormal style="margin-top: 1; margin-bottom: 1"> 1"> This is an a by the Debtor against the Ruling of the Learned Magistrate, Labasa given on 4 June 1996 up96 upon the ground that the "Learned Magistrate has erred in law in holding that the Bankruptcy Notice upon which the petition was founded could be amended at the hearing of the Bankruptcy Petition and that the Petition ought properly to have been dismissed."

Background

The facts are set out in the Ruling but in so far as it is relevant to this Appeal, they are briefly as follows:

(a)Respondent (the judgment "creditor") on 26 May 1993 obtained judgment agai against the appellant (the "debtor") in the sum of $3500.00 and $50.00 costs.

(b) Bankruptcy Notice was issued June 1995 in the sum of $4984.11.

(c) The Petition was presented on 4 October 1995.

(d) On 14 November 1995 the debtor filed an affidavit deposing that the Petition was an abuse of the process of the Court and ought to be dismissed since the Petition is for an excessive amount it is null and void and therefore does not form the basis on which a Receiving Order can be made.

(e) The Creditor realithe error filed an affidavit praying for an amendment to thto the Petition by reducing the amount to $4175.31 i.e. a reduction of $808.80 from the previous claim.

For the reasons given in the Ruling the Learned Magistrate allowed the amendment by ordering that tnkruptcy Notice and Petitiotition be amended by deleting the said figure $4984.11 and by substituting therefor the figure $3916.96 (yet another, a third figure). He further ordered that the Notice and Petition shall be filed in Court and served on the judgment debtor within 7 days of the date of his Order.

It is from this order that the debtor has appealed.

Appellant's submission

Mr. Ram for the Debtor argues that item 3 of the Petition (p.31 of Record) has the incorrect amof $4984.11 and therefore iore item 5 cannot be correct when it states that the debtor "...failed on or before the 29th day of June, 1995 to comply with the requisition of a bankruptcy Notice duly served on him on the 18th day of July, 1995 ...". He says that the Affidavit Verifying Petition sworn 26 July 1995 (p.35 of Record) has been sworn to "an incorrect Petition".

Respondent's submission

Mr. Sen for the Creditor submits that had the Learned Magistrate struck off the ion, the creditor would havd have issued fresh Petition or may not have proceeded. He said that there was power in the Court under s101(3) of the Bankruptcy Act to allow the amendment sought.

The issue

The issue before me is very simple, namely, whether verstatement in respect of the amount claimed under the bane bankruptcy notice (the 'notice') invalidates the notice in the circumstances of this case.

Consideration of the issue

(a) Legislative provisions: sections 4 and s101 of the BankruAct

Under section 4 of the Bankruptcy Act Cap 48 it is provided that a bankruptcy notice:

"shall be in rescribed form, and shall require the debtor to pay the jude judgment debt or sum ordered to be paid in accordance with the terms of the judgment or order,................

Provided that a bankruptcy notice -

(a) .........

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(b) shall not be validated by reason only that the sum specified in the notice as the amount due exceeds the amount actually due, unless the debtor within the time allowed for payment gives notice to the creditor that he disputes the validity of the notice on the ground of such misstatement; but, if the debtor does not give such notice, he shall be deemed to have complied with the bankruptcy notice if within the time allowed he takes such steps as would have constituted a compliance with the notice had the actual amount due been correctly specified there."

In this case the r disputed the amount on the hearing of the Petition. As stated earlier the amount initialltially claimed as due was $808.80 in excess of the judgment. I am not sure whether even the amended claim of $3916.96 is correct or not. The Formal Decree dated 26 June 1995 at page 13 of Record shows the amounts of "debt $3500.00" and "costs $50.00" making a total of $3550.00. Then at page 53 in Affidavit Verifying it states that there was 'typing error' in the previous notice and "the amended petition should read" $4175.31. This figure included judgment debt $3500.00, deposit of $110.00 paid to Official Receiver, filing of bankruptcy action $34.10 and interest from 26.5.93 to 10.4.96 i.e. $431.21.

It is abundantly from the above affidavit evidence that the whole claim is in a complete mess. It cannot beot be said with certainty as to what is the actual amount due.

This shows that the Petitioner has not complied with the provisions of section 4 in this regard which requires the debtor to pay the 'judgment or order'.

The Petitioner was of the view that he can apply to amend the petition and he appto Court to invoke the prov provisions of s101 (3) of the Act which provides:

"(3) The court may at ane amend any written process or proceeding under this Act upct upon such terms, if any, as it may think fit to impose."

The amendment was allowed by the learned Magistrate.

I find this to be a case in which the bankruptcy notice was a nullity because it fato meet a requirement made made essential by the Act (Section 4) and it could reasonably mislead the debtor as to what is necessary to comply with the notice. In such cases the notice is a nullity whether or not the debtor is in fact misled. It was so held in KLEINWORT BENSON AUSTRALIA LIMITED and JAMES ALBERT CROWL [1988] HCA 34; (165 CLR 71 at 72, H.C. of Australia). It was further held that "if the amount specified in a bankruptcy notice is in fact due and payment is claimed in accordance with the judgment, the essential requirements of s.41(2)(a)(i) are met". This requirement is similar to our s.4 of the Act. Here the amount alleged to be due was in excess of over eight hundred dollars. This cannot be in accordance with the judgment. The Petitioner therefore swore a false affidavit and tried to shelter behind the excuse that the amount stated was a typographical error. This is hard to believe; this reason was put forward at the eleventh hour, namely, at the time of the hearing of the Petition. Had the debtor not disputed it the Petitioner will have got away with it.

The overstatement in this case was not a formal defect irregularity to enable the Court to amend under s101(3). T3). There is no doubt that this was a "proceeding" under the Act. Even with the inclusion of interest in the amended petition, the difference in the amount due was substantial. "Interest due in a judgment debt may, but need not, be included in a bankruptcy notice" (KLEINWORT at 77) (supra). However, here the Formal Decree makes no mention of interest. does does the interest come from and at what rate is it claimed? This has not been revealed. It is said in KLEINWORT, supra at 78 that: "if interest is included in a bancy notice it must be calculalculated: Re O' KEEFE (1962) 19 A.B.C. at p.103."

In KLEINWORT, DEANE J gavissenting judgment. I agree with him when he said at p.81 t.81 that:

"It has long been a fundamental pt of the law of bankruptcy that "a bankruptcy notice, ice, which is the foundation of a bankruptcy, attended as a bankruptcy is with penal consequences, is a matter in which great strictness is required":

per Cozens-Hardy M.R., In re A Judgmebtor, 530 of [1908] UKLawRpKQB 101; 1908 2 KB 474 at 476 - 477; see also J James v. Federal Commissioner of Taxation [1955] HCA 75; (1955) 93 CLR 631 at 644. A defect in a bankruptcy notice will invalidate it "except in the case of a merely formal defect": per Vaughan Williams L.J., In re O.C.S. (A Debtor); Ex parte The Debtor [1904] UKLawRpKQB 112; (1904) 2 KB 161 at p163, see also In Re a Debtor, No 21 of 1950; Ex parte The Debtor v. Bowmaker Ltd. (1951) Ch. 313 at 317. If a defect in a bankruptcy notice is other than a formal one, the notice itself is defective and failure to comply with it does not constitute an act of bankruptcy.

To show how important it is to comply with the provisions of the Act I refer to the following statement of DEANE J when he said in KLEINWORT at 802 that:

"As Riley J, a noted Australian authority on bankruptcy lametimes pointed out to thos those appearing before him, the least that the courts can do is to insist that a person who seeks to subject another to the law of bankruptcy himself strictly observes the requirements of that law."

DEANE J in KLEINWORT at 82, further ther pointed out that subject to two qualifications, that:

To comply with the above rules, a bankruptcy notice must correctly state the amount of the debt upon which it is based. If interest is included in the claim under the bankruptcy notice, it must be accurately calculated and stated. Otherwise, the bankruptcy notice is invalid:" Re McDONALD; Ex parte ELDER SMITH GOLSBROUGH MORT LTD [1978] FCA 4; (1978) 32 F.L.R. 11 at p.13)

The first qualification is that ifmisstatement is "a mere clerical error - which could not mislead or embarrass thss the debtor, because he could see on the face of the document ... what the amount which was really claimed from him" (per KENNEDY L.J. In re A Debtor [1908] UKLawRpKQB 116; (1908) 2 KB 684 at 691 ... the defect will be merely a formal one which may be cured pursuant to s.306 ..." (as in our s.101). The second qualification is similar to our s4 which contain express provisions which may operate to avoid the invalidating consequences of an overstatement of the judgment debt. I have already dealt with 'overstatement' hereabove.

Application o1(3)

ass=MsoN=MsoNormal style="margin-top: 1; margin-bottom: 1"> The learned Magistrate, even after stating "how the figure $4984 was ad at remains a mystery"", goes on to say in his Ruling that the "defect is formal and curable and not likely to cause any injustice" and then he refers to proviso (b) to s.4.

With respect I differ with the learned Magistrate's grounr allowing the amendment to the Petition and uphold Mr. Ram. Ram's submissions.

The Creditor admitted that the notice was defective bumits in effect that the alleged defects were procedural irrl irregularities which had not caused nor would cause any substantial injustice. This meant that in his opinion and also in the opinion of the learned Magistrate, the alleged defects were protected by s101(3) and the proviso to s.4.

It is my view that on the facts of this case particularly when there is so much uncertainty surrou the amount actually due unue under the judgment, that justice of the case demands that because of the severe consequences of such a notice, its accuracy in detail is demanded as a matter of justice for that was the basis on which the Notice is founded and on which the Petition is based.

Therefore, on the facts I find that this was not a case of procedural irregularity to enable either the creditor to shelter behind s101(3) and s4 or for the learned Magistrate to make the order which he did make.

Conclusion

As was said by DERRINGTON J in RE MACRO CONSTRUCTIONS PTY LTD (1992) 10 ACLC 1.7222 (which was a winding up case but the same principles apply), that there is abundant authority that the courts will require strict compliance by an alleged creditor with the technical formal requirements of a notice subject to section 4 the reason being the draconian consequences to the debtor because default of compliance with the notice will render him vulnerable to a receiving order. However, the quality of strictness of compliance will depend on the facts of each case for not every error will attract invalidity, for example, the court will look to see whether on a fair construction of the notice, there is need to invoke the provisions of the proviso to s4 or s101(3).

p class=MsoNormal stal style="margin-top: 1; margin-bottom: 1"> For the above reasons, with respect, I consider that the learned Magistrate fell into error in interpreting as he did the proviso to s4 and s101(3) to the facts of this case. The Petition ought to have been dismissed by him.

The appeal is ad. The said Ruling of 4 June 1996 is set aside and the Petition is dismissed with costs agas against the creditor to be taxed if not agreed.

D. Pathik

Judge

At Suva

6 May 1997

Hbf0009j.96s