Our Two Cents - Creditor fails to Obtain Bankruptcy Orders for Non-Payment of One Cent

In a Nutshell

His Honour Justice Street in the case of The Owners – Strata Plan No 18027 v Clarke [2015] FCCA 2185 (23 September 2015) has refused to make orders bankrupting an individual, Ms Clarke, for short payment of a bankruptcy notice by one cent.  The creditor’s petition was dismissed with no order as to costs.

In determining this matter the Court applied the legal principle of “

de minimis non curate lex”, or “the law does not concern itself with trifling matters”.

Lessons Learnt

While it is important to be aware that a bankruptcy notice must be strictly complied with, the Court in the Clarke case drew the line at ordering that the short payment of a bankruptcy notice by one cent was an act of bankruptcy.

Creditors should ensure that bankruptcy proceedings are not commenced for any trifling amounts to avoid disappointment and incurring legal fees.

Facts

The Owners – Strata Plan No. 18027 caused a bankruptcy notice to be issued to Ms Clarke for the amount of $8,157.56.

Ms Clarke inadvertently paid the scheme $8,157.55, being one cent less than the bankruptcy notice.

The scheme filed a creditor’s petition in the Federal Circuit Court of Australia for $14,273.46 being for the one cent owing on the bankruptcy notice and $14,273.45 in further unpaid strata levies that were said to have accrued.

The Court accepted that a petitioning creditor can, pursuant to section 44 of the Bankruptcy Act 1966, when presenting a creditor’s petition include any debts in existence at the time of the bankruptcy in addition to any amount outstanding from the bankruptcy notice.

The problem in this case was, however, that only one cent remained outstanding from the bankruptcy notice and the Court held that a failure to pay one cent was not an act of bankruptcy.

While the Court affirmed that there must be strict compliance with a bankruptcy notice, strict compliance doesn’t exclude the principle of “de minimis non curate lex”, or “the law does not concern itself with trifling matters”.

In reaching this decision the Court also noted that:

1.       There had been an accidental failure to pay one cent by Ms Clarke; and

2.       One cent coins are no longer in circulation.

In Conclusion

Creditors should note that the Court will not entertain bankruptcy proceedings where any amount that remains unpaid from a bankruptcy notice is only a trifling amount such as one cent.  For further information or queries in relation to bankruptcy matters please do not hesitate to contact Bannermans Lawyers.

 

***The information contained in this article is general information only and not legal advice. The currency, accuracy and completeness of this article (and its contents) should be checked by obtaining independent legal advice before you take any action or otherwise rely upon its contents in any way.

 

Prepared by Bannermans Lawyers

29 September 2015

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For more information on this topic or any legal enquiries please contact your Strata Team.

 

 

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