Federal Court: Bankruptcy Notice Valid Despite Use of Pseudonyms

A fundamental factor of bankruptcy is that the public are able to identify a bankrupt and that the relevant parties are able to identify each other. Typically, this would mean that all relevant documentation must clearly identify the relevant parties, however, a recent case in the Federal Court has deemed that the use of pseudonyms in a bankruptcy notice will not necessarily render the notice a nullity.

LFDB v MS S M [2018] FCA 1397 concerned a bankruptcy notice which the applicant alleged was a nullity due to not fulfilling certain essential criteria, specifically that it failed to name the addressee or creditor, that its ‘purported creditor’ was ambiguously described, and that it could not support creditor’s petition or fulfil bankruptcy’s ‘public interest objectives’.

As shown in the image below, the creditor used the pseudonyms L F D B and S M to name the debtor and creditor respectively. These were pseudonyms used by the applicant and respondent in a series of proceedings before the courts in New Zealand, the Federal Circuit Court of Australia and the Federal Court of Australia. The amount claimed in the BN (approx. $6.5 million) was a result of a judgment debts arising from the party’s long litigation history.

An important factor to note is that the parties were subject to suppression orders in both the New Zealand courts and Federal Circuit Court of Australia (or Federal Magistrates Court as it was then). The orders provided, among other things, that no identifying information, or information capable of identifying could be published in relation to the parties or the judgement.

The applicant essentially argued two grounds for having the notice set aside: first, the use of pseudonyms was not in accordance with the Bankruptcy Act and its subordinate legislation as they would not allow the public or other creditors to properly identify the debtor and any related proceeding; and second, that the use of pseudonyms would cause the applicant to be misled as to his creditor’s identity.

Markovich J mostly agreed with the submissions of the applicant, noting that bankruptcy was not simply inter partes litigation and that the public interest aspect had been recently reinforced. Her Honour was however of the opinion that the issues raised were not relevant at the service of a bankruptcy notice. As a bankruptcy notice operates only as between the addressee and the creditor it is not a public document and no other creditor of the same debtor can rely on that bankruptcy notice. On this basis, despite the link between the notice and a creditor’s petition, the use of pseudonyms would not impact other creditors rights.

In regard to the second submission, Markovich J rejected the submission that the use of the “MS S M” pseudonym would have misled the applicant. Her Honour noted the parties had been engaged in litigation for a number of years where the S M pseudonym had been used and that it was difficult to accept that the addition of MS would raise enough ambiguity to mislead the applicant. Further the notice annexed copies of orders made in the various litigations between the parties.

At James Conomos Lawyers we are experienced in Insolvency Law. If you or your business needs assistance navigating a complex legal dispute, please call us on 1800 JCL LAW to speak with one of our friendly staff.