Simple Errors in Bankruptcy Notices Can Lead to Disastrous Consequences
Those familiar with Court proceedings under the Bankruptcy Act 1966 (Cth) (Act) would be aware of the strict requirements for a bankruptcy notice to be true and accurate in all material aspects. One simple error, and the entire notice can be defective.
In the matter of Coleman v Gannaway  FCA 224, the Federal Court of Australia set aside a bankruptcy notice because it contained an arithmetical error in currency conversion.
The underlying debt stemmed back to judgment of the High Court of the Republic of Singapore against Mr Coleman, requiring Mr Coleman to pay Mr Gannaway sums in Singapore Dollars and in US Dollars, plus interest on both accounts.
Mr Gannaway subsequently registered the Singapore Judgment debt in the Supreme Court of New South Wales and then issued a bankruptcy notice against Mr Coleman. The bankruptcy notice was prepared by the solicitor acting for Mr Gannaway on the AFSA portal, which applied the RBA exchange rate and a perilous limitation of two decimal places.
The bankruptcy notice referred to a multiplier of 1.11, rather than the calculation which was actually performed using 1.11495, resulting in a defect in the amount claimed. The Federal Court found in favour of Mr Coleman, and set aside the bankruptcy notice on the basis that the judgment debt applied against the exchange rate listed in the bankruptcy notice did not in fact amount to the AUD equivalent, irrespective of the apparent flaws in the AFSA portal. Mr Gannaway was also ordered to pay for Mr Coleman’s cost in this proceeding.
It is crucial that care be taken when preparing a bankruptcy notice, given the catastrophic consequences of a defect. That being said, a defect or irregularity does not automatically mean that proceedings will be invalidated. Section 306(1) of the Act provides that proceedings are not invalidated by a formal defect or irregularity, unless the Court is of the opinion that substantial injustice has been caused and that the injustice cannot be remedied by an order of that court. In typical lawyer fashion, whether a defect or irregularity is enough to set aside a bankruptcy notice will come down to the circumstances of the matter.
Want to know more?
For a defective bankruptcy notice to be set aside, the defect or irregularity must cause a substantial injustice. If you require assistance with your bankruptcy matter, reach out to one of our expert lawyers in bankruptcy at Taurus Legal Management on (03) 9481 2000 or firstname.lastname@example.org.