Bankruptcy notices can be set aside for something as trivial as a 0.02%-0.03% calculation error in the interest payable on a judgment debt.
A $213 error on a $739,000 bankruptcy notice resulted from overlooking February 29 in a leap year –led to a bankruptcy notice being set aside in 1990.
$213 represented 0.02% of the amount sought on the $739,000 bankruptcy notice.
Bankruptcy notices need to be carefully drafted by experienced insolvency lawyers as they are prone to being set aside.
The rules are strict because of the drastic consequences that flow from failing to satisfy same.
In 1990, Sydney developer Andrew Clubb was able to set aside a notice purely because Westpac incorrectly calculated the interest payable by $213.
The Bank assumed there were 365 days in every year when they calculated the interest payable on $427,938.29.
One of the years however was a leap year, however, so they were out by 1 day in their interest calculations.
The total interest sought was $311,000, however the failure to allow for 1988 being a leap year resulted in an error of $213, so the entire bankruptcy notice (seeking more than $738,000), was set aside.
Indeed, his Honour Justice James Burchett said in his 1990 judgment:
“When Julius Caesar decreed that from the year now known as 45BC onwards there should be adopted the Julian calendar, with its provision for recurring bissextile or leap years, he not only set the scene for a well-known Gilbertian jest; he also set the scene for the problem posed by the present case,” “For the basic question is whether, in calculating a proportionate amount of interest due at a yearly rate, the year in question being a leap year, is it permissible to convert the yearly sum to a daily rate by dividing by 365, or whether it is essential to include the intercalary day, thus making the divisor 366.”
A similar decision in 1991 resulted in a bankruptcy application being judged invalid, as the debt exceeding $100,000 was overstated by $33.19, or 0.03%. That bankruptcy application was against The New York Deli, Double restaurateur Henry Saade.
This is why it is important to engage an experienced insolvency lawyer when serving bankruptcy notices, or when trying to have them set aside.