Bankruptcy Notice set aside due to administrative errors
The recent case of Grant v Green & Associates Pty Ltd [2021] FCA 934, shows the importance of checking bankruptcy notices for errors, particularly ones that could invalidate the notice.
Factual Background
A Bankruptcy Notice was served by Green & Associates (Green) on Ms Nerez Grant (Ms Grant) on 13 May 2021 for $27,802.87 for which she had to pay or make arrangements to pay within 21 days. The Bankruptcy Notice contained three errors.
The first error in the Bankruptcy Notice was that it specified that the address to make payment to was Ms Grant’s personal address, rather than the creditor’s address. The second error was that same address issue was repeated in the Bankruptcy Notice for the address where service of documents was to be sent to. The final error was that the wrong debt amount was specified. The Creditor also did not take into account a garnishee order which had been made by the Local Court for $1,113.29 which should have been deducted from the amount in the Bankruptcy Notice.
As a result, Ms Grant filed an application within the 21-day deadline, seeking an order that the Bankruptcy Notice be set aside. Green did not dispute that the errors were present in the Bankruptcy Notice, but contended that there errors were not substantial enough to justify that the Bankruptcy Notice be aside.
Should the errors cause the notice to be set aside?
Relevantly, two provision of the Bankruptcy Act 1966 (Cth) were applicable. The first was s 41(5) which states that a bankruptcy notice is not invalidated by an incorrect sum that exceeds the amount unless the debtor within time fixed for compliance notifies the creditor. The other provision was s 306, which states that a formal defect will not invalidate a bankruptcy notice unless the Court is of the opinion that substantial injustice has been caused by the defect. The address and the incorrect amount were dealt with separately.
When it came to the incorrect amount on the notice, Green relied on s 41(5). The creditor submitted that Ms Grant did not submit the relevant notice disputing the amount within the “time fixed” as required by the Bankruptcy Act, as she did not serve the affidavit to them within the initial 21 days of the bankruptcy notice. It was submitted that the “time fixed” definition does not encompass any court ordered extensions, like the one that Ms Grant received.
Ms Grant contended that the application was sent to Green within the extended timeframe and also Green acknowledged that the debt on the bankruptcy notice was incorrect.
Wigney J agreed with Ms Grant, stating that time fixed would encompass any extensions given by the Court. He concluded that by the operation of s 41(5), the notice was automatically invalid.
It was therefore not necessary to make a conclusion on the address error. However Widney J did state that the error would be unlikely to cause substantial injustice under s 306. Ms Grant would have noticed that the address to pay on the notice was her personal address and would have been able to easily rectify this error.
However, due to the overstatement of the debt, the notice was set aside. This case highlights the importance of taking into account any other amounts paid including garnishee orders when sending a bankruptcy notice and checking for any administrative errors.
