Beware the Perils of Bankruptcy Notice
The recent Federal Court case of Coleman v Gannaway [2023] FCA 224 demonstrates the difficulties creditors and their lawyers face when preparing bankruptcy notices and the special care required to ensure they are not defective.
In the case, Gannaway issued a bankruptcy notice against Coleman which was based on a Singapore judgment. Gannaway registered it in the Supreme Court of NSW.
The bankruptcy notice required the conversion of a foreign currency judgment amount, which involved interest, from Singapore dollars to Australian dollars, thereby providing the amount payable by the debtor to satisfy the bankruptcy notice.
AFSA provides a mechanism for generating bankruptcy notices. Creditors (or their lawyers) are required to input details into the AFSA website to enable the bankruptcy notice to be produced electronically. This is the only way in which a bankruptcy notice can be issued.
In calculating the amount due, the creditor’s lawyer correctly inputted the RBA exchange rate into the AFSA website to 5 decimal places. However, due to limitations in the AFSA website, the output of the bankruptcy notice did not reflect what had been entered, because the conversion rate on the bankruptcy notice was only to 2 decimal places.
The result was that the amount owing in Australian dollars on the bankruptcy notice was not correct if the figures appearing on the face of the bankruptcy notice (particularly, the conversion rate to only 2 decimal places) were used in the calculation.
Despite the diligence of the creditor’s lawyer, the court decided that there was non-compliance with the relevant legislation which rendered the bankruptcy notice a nullity. The bankruptcy notice was set aside and a costs order followed.
The case reinforces that particular care must be taken in preparing bankruptcy notices, especially those involving foreign judgments and interest calculations. The consequences of errors, even those resulting from deficiencies in the AFSA website processes, can be disastrous.
Please feel free to contact Tony Scoglio or David Tooth on (07) 3833 2100 or info@scogliolaw.com.au if you have any questions.