American Express International Inc v Bennell
[2008] FMCA 1415
•17 October 2008
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| AMERICAN EXPRESS INTERNATIONAL INC v BENNELL | [2008] FMCA 1415 |
| BANKRUPTCY – Creditor’s Petition – respondent debtor’s opposition to Creditor’s Petition – considerations relevant to review – grounds of opposition dismissed. |
| Bankruptcy Act 1966 (Cth), ss.5(1), 33(1)(b), 43, 44, 47(1A) Bankruptcy Regulations 1996 (Cth), reg.16.01(c) |
| American Express International Inc v Ian Bennell & Anor [2003] NSWSC 976 Green v Solomon [2001] FCA 698 McDonald v Official Trustee in Bankruptcy [2001] FCA 140 Re Finn; ex parte Finn v Amoco Australia Ltd (1982) 58 FLR 54 Re Wiggins; ex parte Credit Assistance Pty Ltd (1979) 30 ALR 443 Skalkos v T & S Recoveries Pty Ltd [2004] FCAFC 321 Wright Designed Pty Ltd v McClymont [2006] FCA 999 |
| Applicant: | AMERICAN EXPRESS INTERNATIONAL INC |
| Respondent: | SUSAN JANE BENNELL |
| File number: | SYG 2884 of 2007 |
| Judgment of: | Lloyd-Jones FM |
| Hearing dates: | 30 January 2008 & 4 March 2008 |
| Delivered at: | Sydney |
| Delivered on: | 17 October 2008 |
REPRESENTATION
| Counsel for the Applicant: | Mr S. Docker |
| Solicitors for the Applicant: | Kemp Strang Lawyers |
| Counsel for the Respondent: | Mr P. Braham |
| Solicitors for the Respondent: | Purcell Insolvency Lawyers |
ORDERS
The Amended Notice Stating Grounds of Opposition to the Creditor’s Petition filed on 11 January 2008 is dismissed.
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT SYDNEY |
SYG2884 of 2007
| AMERICAN EXPRESS INTERNATIONAL INC |
Applicant
And
| SUSAN JANE BENNELL |
Respondent
REASONS FOR JUDGMENT
The proceedings
This is an application for review by Susan Jane Bennell, the respondent debtor, opposing the applicant’s Creditor’s Petition filed on 19 September 2007. A Notice Stating Grounds of Opposition to Petition was filed on 18 October 2007. Listing of the Creditor’s Petition was stood over to 6 November 2007. On that date, Mrs Bennell applied for a further adjournment in order to obtain legal advice and file a statement of assets and liabilities to prove her solvency. Mrs Bennell was ordered to file and serve any affidavit evidence and an Amended Notice of Opposition by 20 November 2007. On 27 November 2007, this matter was listed for directions and Mrs Bennell was represented by counsel but had not filed an Amended Notice of Opposition. The matter was fixed for hearing on 30 January 2008 and further directions were made.
Mrs Bennell filed an Amended Notice of Opposition on 11 January 2008 containing the following grounds:
1. The Bankruptcy Notice was not served on the respondent debtor.
2. The Creditor’s Petition is incorrect and irregular in that it states the applicant creditor “does not hold any security over the property of the respondent debtor” when the applicant creditor has jewellery belonging the respondent debtor worth more than judgment debt.
3. [not pressed]
The Creditor’s Petition was filed in these proceedings on 19 September 2007. American Express International Inc. (“American Express”), the applicant creditor, applied to the Court for a sequestration order under s.43 of the Bankruptcy Act 1966 (Cth) (“the Act”) against the estate of Susan Jane Bennell:
1. The respondent debtor owes the applicant creditor the amount of $57,712.40 for a judgment debt obtained in the Local Court of New South Wales at Sydney proceedings no. 7124 of 2007 in the amount of $57,712.40 dated 1 August 2007.
2. The applicant creditor does not hold any security over the property of the respondent debtor.
3. At the time when the act of bankruptcy was committed, the respondent debtor:
a) was ordinarily resident in Australia;
4. The following act of bankruptcy was committed by the respondent debtor within 6 months before presentation of this petition:
The respondent debtor failed to comply on or before 31 August 2007 with the requirements of a Bankruptcy Notice served on her on 10 August 2007 or to satisfy the Court that she had a conter-claim, set-off or cross demand equal to or more than the sum claimed in the Bankruptcy Notice, being a counter-claim, set-off or cross demand that she could not have set up in the action in which the judgment referred to in the Bankruptcy Notice was obtained.
5. The applicant creditor provides the following information, to the extent it is known to the applicant creditor, for use by the Insolvency and Trustee Service Australia:
(a) any alias used by the respondent debtor;
(b) the date of birth of the respondent debtor;
(c) the business name of the respondent debtor;
(d) the business address of the respondent debtor.
The Creditor’s Petition was verified by an affidavit of Cynthia Chan sworn on 18 September 2007, legal counsel employed by American Express. On 19 September 2007, Liesa Zuscak swore an affidavit verifying that no application had been made to set aside the Bankruptcy Notice NN3246/2007. On 26 September 2007, Ms Zuscak swore an affidavit stating that she served Mrs Bennell with the Creditor’s Petition (including Ms Chan’s verifying affidavit), Ms Zusack’s affidavit of 19 September 2007, a Consent to Act and Trustee Declaration and an Affidavit of Service of Jon Still sworn on 13 August 2007.
The Bankruptcy Notice was issued on 9 August 2007. Mr Still’s Affidavit of Service states:
1. On 10 August 2007, I attended 13 Bradleys Head Road, Mosman, NSW. At those premises I served Susan Jane Bennell with a Bankruptcy Notice.
2. At the time I attended the premises, I knocked on the front gate…There was no response. I placed the Bankruptcy Notice in a sealed envelope…I placed the sealed envelope in the mailbox of the premises.
3. True copies of the Bankruptcy Notice is annexed and marked with the letter “A”.
4. I have attained the age of sixteen years.
The hearing of 30 January 2008 commenced with Mr Braham, for Mrs Bennell, advising the Court that the ground of solvency (Ground 3 of the Amended Notice of Opposition – see [2] above) was not pressed. Evidence was taken from:
a)Jon Still;
b)Bill Sechos;
c)Cynthia Chan
The hearing was adjourned part heard to 4 March 2008.
On 27 August 2008, Tesoriero R extended the period of the Petition to 24 months pursuant to s.52(5) of the Act, up to and including 19 September 2009.
Evidentiary material
The following affidavits have been filed in these proceedings:
a)Affidavit of service sworn by Jon Still on 13 August 2007 (affidavit of service). Mr Still was cross-examined in Court.
b)Final affidavit of debt sworn by Cynthia Chan on 4 March 2008 (final affidavit of debt). Ms Chan was cross-examined in Court.
c)Affidavits of Susan Jane Bennell sworn on:
i)18 October 2007 (first affidavit of Mrs Bennell);
ii)20 November 2007 (second affidavit of Mrs Bennell);
iii)23 November 2007 (third affidavit of Mrs Bennell);
iv)11 January 2008 (fourth affidavit of Mrs Bennell).
d)Affidavit of Bill Sechos, gemmologist and valuer, sworn on 26 November 2007 (affidavit of Mr Sechos).
e)Affidavit of Sandra Spencer sworn on 12 February 2008
f)Affidavit of Daniel Casamento sworn on 12 February 2008
The applicant tendered the following exhibits:
i)“A1” – Certificate as to Determination of Costs (assessment of party /party bill of costs)
ii)“A2” – Certificate of Determination of Costs of Costs Assessment
iii)“A3” – Certificate of Taxation
iv)“A5” – letter from Jim Graham, Partner of Kemp Strang, to Messrs John de Mestre & Co dated 16 October 2002
v)“A6” – email from Mrs Bennell to Sean Docker dated 29 August 2003
vi)“A7” – email from Mrs Bennell To Sean Docker dated 2 September 2003
vii)“A8” – Order of Hedge R made on 12 November 2004
viii)“A9” – Notice of Appeal
ix)“A10” – Application for special leave to appeal
x)“A11” – Summons to attend examination
xi)“A12” –Federal Magistrates Court order made by Tesoriero R on 28 June 2007 in the matter of Ian Robert Bennell v Scott Darren Pascoe as Trustee of the Bankrupt Estate of Ian Robert Bennell (SYG1259 of 2007)
xii)“A13” – Affidavit of Susan Jane Bennell sworn on 25 July 2007
xiii)“A14” – photographs 1,2,3,6 and 7
xiv)“A15” - two photographs of the gate at 13 Bradleys Head Road, Mosman NSW
xv)“A16” – letter from Mrs Bennell to R. Mitchell of Eggleston Mitchell Lawyers dated 29 June 2005
The respondent tendered the following exhibit:
xvi)“R1” – Tax Invoice, Mosman Locksmith & Manly Warringah Locksmith
g)Affidavit of Jane Foley sworn 6 November 2007 (first affidavit of Ms Foley);
h)Affidavit of Jane Foley sworn 8 November2007 (second affidavit of Jane Foley).
Applicant’s submissions in respect of ground one
Mr Docker, for the applicant, submits that it is permissible to serve a Bankruptcy Notice by putting it in the letterbox at the recipient’s last known address. The evidence of Mr Still is that he placed the Bankruptcy Notice in an envelope with Mrs Bennell’s name written on it and placed it in the letterbox at 13 Bradleys Head Road, Mosman NSW, on 10 August 2007 (affidavit of service; Transcript, p6.36). Mr Docker submits that the requirements of service were satisfied and delivery was achieved by putting the envelope in the letterbox. He further submits that this is a permissible mode of service of a Bankruptcy Notice pursuant to reg.16.01(c) of the Bankruptcy Regulations 1996 (Cth): Skalkos v T & S Recoveries Pty Ltd [2004] FCAFC 321 at [28]-[31] per Sundberg, Finkelstein and Heerey JJ. In that case, alternative forms of service, other than personal service, were considered and held to be effective even if the person was not personally served.
Mr Docker contends that the standard of proof is on the usual balance of probabilities and there is nothing in the legislation to suggest that a higher standard of proof should apply. Mr Docker contends that the consequence of committing an act of bankruptcy is not that the debtor becomes bankrupt immediately, as he/she can pay the debt within the time limit specified in the Bankruptcy Notice. Mr Docker submits that on the balance of probabilities no catastrophic consequence automatically follow from the service of the Bankruptcy Notice.
Mr Docker contends that service of the Bankruptcy Notice depends only on whether Mr Still placed it in the letterbox of the correct house. Mr Docker submits that the unchallenged evidence shows the following:
a)Mr Still had a copy of the Bankruptcy Notice on 13 August 2007 in an envelope addressed to Mrs Bennell.
b)The envelope was addressed to Mrs Bennell’s last known address at 13 Bradleys Head Road.
c)Mr Still’s evidence was that he placed the envelope in the letterbox at that address.
d)He had been to that address on other occasions to serve documents on the Bennells and that he remembered the property.
e)Exhibit “A14” (Photograph 3) shows that the house number is clearly visible above the letterbox.
Mr Docker acknowledged that Mr Still gave evidence that:
a)The gate to the house appeared to be locked.
b)He did not see the bell next to the gate.
c)He did not see the intercom system next to the gate.
Mr Docker submits that Mr Still was cross-examined on his recollection of whether the gate was locked and if there was a bell/intercom next to it. However, the relevance of the evidence only goes to the allegation that he went to the wrong house (Transcript, p.11.40). Mr Still said that he was sure that he had gone to the right house because he had been there on other occasions.
Sandra Spence, the agent managing the property, gave evidence that the gate was damaged prior to being repair:
That’s what the gate looked like when it was out of whack.
Mr Docker submits that from the photographs the gate looked as though it was locked (Exhibit “A14”, photographs 6 and 7). Similarly in respect of the bell/intercom which Mr Still could not remember (Exhibit “A14”, photograph 2), it can be seen from the photograph that it could have been overlooked as it is located on the door frame of the garage.
Paragraph 4 of the first affidavit of Mrs Bennell asserts that the Notice was not served on her because she did not receive it. Mr Docker contends that this evidence does not establish non-delivery as opposed to non-receipt and referred to Skalkos v T & S Recoveries Pty Ltd at [25]-[26]:
25 It is not necessary in the present case, any more than it was in Fancourt, to decide whether the Rossi line of cases should be followed. If, on the proper construction of reg 16.01(2), the words "proof to the contrary" permit proof that the document was not delivered, there is no such proof in the present case. It is clear from Fancourt that proof of non-receipt as opposed to non-delivery is not permitted. If on the other hand those words only permit proof that the document was delivered on a date other than that on which it would have been delivered in the due course of post, there is no such proof.
26 Thus on either view of reg 16.01(2), the primary judge correctly said there was no point in the appellant filing an affidavit of non-receipt.
Mr Docker argues that Mrs Bennell’s evidence should not displace Mr Still’s evidence of delivery of the Bankruptcy Notice to the Bradleys Head Road address (see [10] above). I note that Mrs Bennell conceded that even if the envelope containing the Notice had been put in the letterbox, it could have fallen out or another person could have collected it. Mrs Bennell did not put on evidence from any other person living at the address to say that they collected the mail on or about that day. Mr Docker argues that Mrs Bennell had the opportunity to put on further evidence about the issue of service but did not.
Submissions for Mrs Bennell in respect of ground one
Mr Braham submits that a debtor who argues that she was never served with a Bankruptcy Notice is making a point of substance in that she has not committed an act of bankruptcy. Legal practitioners are properly expected to comply with the law and this applicant has filed a defective Creditor’s Petition. Mr Braham contends that Mr Still did not properly serve the Bankruptcy Notice in accordance with the Act.
Mr Braham further submits that while it has been a practice that Bankruptcy Notices are personally served and that the Regulations provide for other means of service, it is usual practice to seek an Order for substituted service. Mr Braham contends that there service in this matter was unusual as the process server presumably set out to personally serve Mrs Bennell but ended up leaving it in her letterbox. In cross-examination, Mr Still, a professional process server, relied on some notes. When pressed on whether he actually had a recollection or if he was reconstructing one, he insisted that he had an actual recollection.
In respect of this issue, Mr Braham referred to the Transcript, p.7.40:
Still: Yes, I would remember because otherwise I would have gone to the front door and placed the notice at the front door.
Braham: Let’s be clear about this – do you have a recollection of those notes or not?
Still: Yes I do.
Braham: Do they record if they are unable to get in the front gate or do they not record that fact?
Still: Well they would have recorded that fact.
The exchange continued:
Braham: Do you have an actual recollection about what the note said in that respect?
Still: Yes I have because I am quite confident to make out that affidavit. I would have taken it from the notes, so yes I would have. (Transcript, p.8)
Then at Transcript, p.9:
Braham: What do your notes say on that topic?
Still: The notes I’ve put down said I couldn’t get through the front gate, it was locked. I shouted out and then I put it in a sealed envelope and put the document in a letterbox.
Braham: Now Mr Still, what was it that prevented you from passing through the gate?
Still: There was a lock on it.
Braham: Are you quite sure about that?
Still: Yes sir.
Braham: No doubt in your mind on that question?
Still: No.
Braham: So the premise is you attended on 10 August 2007 and it had a locked front gate?
Still: Correct.
Braham: Any room for doubt in your mind on that question?
Still: No because again I would have gone to the front door if the gate had been accessible to go through.
Braham: Leaving aside your reasoning process, do you have an actual recollection of the gate being locked?
Still: Yes.
Braham: What was the mechanism of lock?
Still: I can’t remember, it may have been a padlock but I’m speculating on that. I believe that that’s what it was because on another premises I’ve been to where the Bennells had a padlock.
Braham: You gave it a good try to try and get through did you?
Still: Yes.
Braham: You didn’t just push?
Still: No I would have.
Braham: It couldn’t have been a rusty hinge?
Still: No sir.
Braham: Or piece of vegetation or something of that nature?
Still: I don’t believe so, no.
Braham: You are quite sure you gave it a good try?
Still: I am quite sure, yes sir.
Braham: And it was locked?
Still: Yes.
Mr Braham submits that there is simply no room in light of that evidence to suggest that the gate was stuck or rusty. Mr Still’s evidence was that the gate was locked.
The evidence of Mrs Spencer was the gate had no lock and that it opened when it was pushed. The evidence of Mrs Bennell was to the same effect. Although Exhibit “A14”, photograph 7, shows a locking mechanism on the steel gate, this was not put to Mrs Spencer.
Mr Braham raised how Mr Still’s explanation that the gate was locked can be reconciled with the evidence of other witnesses and posits a number of possibilities:
a)That Mr Still went to the wrong house with a locked gate and was mistaken about which gate he was attempting to open.
b)That his recollection was faulty because he had great difficulty identifying whether the source of his recollection was his notes or his actual memory. The evidence of Mr Still which he was confident of – the lock on the gate – was the one point which Mr Braham claims can be demonstrated to be wrong.
Mr Braham submits that service has to be strictly proved as there is a significant matter which hangs on the question of whether the Notice was served. Mrs Bennell gave evidence that she never saw the Notice. Mr Braham argues that there are significant consequences for Mrs Bennell if she is made bankrupt on this Petition; therefore the question of proper service in accordance with the rules needs to be supported by corroborated evidence. Mr Braham contends that the sworn evidence of Mr Still is unsatisfactory on a number of aspects and that the question of service cannot be proved on the balance of probabilities.
Consideration in respect of ground one
Mrs Bennell asserts in her first affidavit that the Bankruptcy Notice “was never served on me, or received by me”. The significant issue in these circumstances is non delivery as opposed to non receipt: Skalkos v T & S Recoveries Pty Ltd at [25]-[26].
Regulation 16.01(c) states:
Service of documents
(1) Unless the contrary intention appears, where a document is required or permitted by the Act or these Regulations to be given or sent to, or served on, a person (other than a person mentioned in regulation 16.02) , the document may be:
(c) left, in an envelope or similar packaging marked with the person's name, at the last‑known address of the person; or
See Skalkos v T & S Recoveries Pty Ltd at [28]-[31].
Mr Still’s affidavit of service states that he served Mrs Bennell on 10 August 2007 by leaving the Bankruptcy Notice in a sealed envelope in the mailbox of her residential address, 13 Bradley Head Road, Mosman, which was the last known address to the applicant and contained on the Bankruptcy Notice itself. There is no dispute between the parties in respect of Mrs Bennell’s last known address.
The Court heard considerable evidence in respect of the front gate at 13 Bradleys Head Road. The evidence of Mr Still was that the gate was locked. He stated it was his intention to enter the property to serve the Notice on Mrs Bennell but, in circumstances where there was no response from the occupants, it was then his intention to leave the Notice at the front door. Mr Still also gave evidence that the gate was not jammed or difficult to open because of rusty hinges, it was simply locked. The evidence of Ms Spencer was that at the time, the gate had no lock and that it could be opened when pushed. Mrs Bennell gave evidence to the same effect.
A photograph tendered in evidence (Exhibit “A15”) shows that the gate is fitted with a locking mechanism. However, I cannot be satisfied that on the date Mr Still attended the property, this locking mechanism was operational and prevented the gate from opening. Evidence given by Ms Spencer is that there have been recent repairs to the gate and the locking mechanism. A tax invoice from Mosman Locksmiths (Exhibit “R1”) indicates that the lock was serviced on 18 December 2007. This included re-keying the lock, service and adjustment to the striker area. A number of possible explanations as to the operation of the gate have been given but, ultimately, the evidence of Mr Still is that he did not enter the property and took the alternative mode of service by placing the document in the letterbox. The evidence about the gate is not directly to the point and should be put aside.
Mr Still states that the Bankruptcy Notice was contained in an envelope clearly marked to the attention of Mrs Bennell. This evidence remains unchallenged. The issue of effective service is whether the notice was placed in the letterbox at 13 Bradleys Head Road and this must be strictly proved.
The question of whether reg.16.01(c) was complied with and whether the document was in fact placed in the letterbox at the premises depends on the evidence of Mr Still as to his actions on 10 August 2007.
Mr Braham made submissions in respect of Mrs Bennell’s affidavit evidence of her attitude to other Bankruptcy Notices she has received in the past. He submits that on previous occasions, she had immediately brought applications to set aside the Notices and contest Petitions. Her evidence is that she would have pursued this course if this Notice had come to her attention. Regardless of her evidence, this matter is not resolved by proof of non-receipt but must be based on whether or not there was delivery of the Notice. Consequently, it can only be resolved by the testimony of Mr Still.
The affidavit of service of Mr Still states:
i) On 10 August 2007 I attended 13 Bradley Heads Road Mosman, NSW. At these premises I served Susan Jane Bennell with the Bankruptcy Notice.
ii) At the time I attended the premises I knocked at the front gate and called out for occupants. There was no response. I placed the Bankruptcy Notice in a sealed envelope addressed to Susan Jane Bennell and placed the envelope in the mailbox of the premises.
In cross-examination Mr Still asserted reliance on his recollection of some notes. Mr Braham asked Mr Still whether the notes contained details of how he entered the property to which he responded:
They would have done because I would have needed them to make the affidavit.
Mr Braham asked whether he did recollect or if he was just constructing a recollection but Mr Still insisted that he had an actual recollection. The following exchange took place:
Still: Yes I would have remembered otherwise I would have gone to the front door and placed a notice at the front door.
Braham: Let’s be clear about this – do you have a recollection of those notes or not?
Still: Yes I do.
Braham: Do you recall you were unable to get through to the front gate or do you not recall that fact?
Still: Well they would be recorded that fact. (Transcript, p.7)
Mr Braham then continued:
Braham: Do you have an actual recollection about what the note said in that respect?
Still: Yes I have because I am quite confident to make out that affidavit I would have taken from the notes, so yes I would have.
Braham: What do your notes say on that topic?
Still: The notes that I put down said that I couldn’t get through the front gate, it was locked. I shouted out and then I put it in a sealed envelope and put the document in the letterbox. (Transcript, pp.8-9)
After giving evidence about the locked gate and the location of the intercom, Mr Braham asked Mr Still about the size of the letterbox:
Still: A normal size letterbox, you fold it once put it in the normal size letterbox.
Braham: Was this a normal size letterbox or do you not recall?
Still: I believe it was a normal size letterbox from my memory.
Braham: Mr Still, do you recall or not?
Still: No.
The Court has before it two photographs of the letterbox (Exhibit “A15”, photographs 4 and 5). Photograph 4 is a frontal close up view of the letterbox through the entry shoot into the interior with a view of the garden bed behind. No scale was provided. However there is a certain uniqueness to the style. Photograph 5 is of the rear of the letterbox which again is not scaled. It shows its proximity to two posts which are part of a steel fence on the top of the stone wall running between the corner and front gate post. Exhibit “A14”, photograph 2, is a landscape photograph of the front fence and the letterbox opening can be seen in the corner post. From that photograph, the letterbox opening is approximately half way up the post, in line with the concrete joint between the third and fourth stone of the six stone column. The photograph has been taken from the street facing the house and shows the letterbox opening as clearly visible.
An examination of the photographs tendered into evidence indicates that the letterbox has been carved out of one of the stone blocks which then form a column in the fence at the corner of the property. The letterbox opening which faces the street appears to the size of an average domestic letterbox. All internal surfaces are carved but not polished and typical of normal weathered sandstone masonry finish. The rear of the letterbox opens to the garden and access appears to be both from the garden and the side wall which tapers back to the gate near the garage. There is no door or other physical barrier closing off the rear of the letterbox. I have been asked to find that the envelope addressed to Mrs Bennell has not remained in the letterbox because it may have fallen out. Mrs Bennell gave evidence that documents fell out of the letterbox all the time. However, Mr Still cannot be made responsible for the state of the letterbox at 13 Bradleys Head Road, nor can evidence that documents fall or are blown away from the letterbox establish non-delivery.
I am satisfied that the letterbox is a substantial and sturdy structure easily accessed for the depositing of mail from the street at the front of the property at 13 Bradleys Head Road. It is clearly visible and obviously intended for the receipt of postal items. The apparent inadequacy of the closing device at the rear of the letterbox for the protection and retention of mail is a problem known to the residents and an issue for their resolution. It is not for Mr Still, as process server, to take any special measures to ensure that mail delivered into the letterbox remain inside it. I am satisfied that the letterbox located in the stone column of the fence is clearly intended for the receipt of postal and similar items for that residence. The serving of debtors in bankruptcy proceedings is a common area of contest. However, I am satisfied that the depositing of a correctly addressed envelope to Mrs Bennell in the letterbox detailed above satisfies the requirements of service contained in reg.16.01(c). I am satisfied that ground one of the amended Notice of Opposition dated 11 January 2008 cannot be sustained.
Applicant’s submissions on whether American Express was a secured creditor
Mr Docker contends that if American Express was to be a secured creditor, it would need to hold Mrs Bennell’s jewellery by way of a mortgage, lien or charge as security for a debt. Mr Docker argues that the circumstances in which the jewellery was handed over did not create any recognised mortgage, charge or lien over them as the jewellery was put forward as a gesture of good faith in an attempt to have American Express negotiate with Mrs Bennell and her husband. The original Notice Stating Grounds of Opposition to the Petition made no reference to the jewellery being held as a security. However, the Notice Stating Grounds of Opposition to Petition filed on 11 January 2008 states:
(2) The Creditor’s Petition is incorrect and irregular in that it states the Applicant Creditor “does not hold any security over the property of the Respondent Debtor” when the Applicant Creditor had jewellery belonging to the Respondent Debtor worth more than the judgment debt.
Mr Docker submits that the statement in the Creditor’s Petition is correct as American Express did not hold security over the property of Mrs Bennell and the statement must be construed in the context of the relevant statutory framework. He submits that American Express was not a secured creditor of Mrs Bennell within the meaning of the Act.
The relevant statutory regime is as follows:
·Section 44(1)(a) of the Act states:
Conditions on which creditor may petition
(1)A creditor's petition shall not be presented against a debtor unless:
(a) there is owing by the debtor to the petitioning creditor a debt that amounts to $2,000 or 2 or more debts that amount in the aggregate to $2,000, or, where 2 or more creditors join in the petition, there is owing by the debtor to the several petitioning creditors debts that amount in the aggregate to $2,000;
·Section 44(2)- (4) of the Act states:
(2) Subject to subsection (3), a secured creditor shall, for the purposes of paragraph (1)(a), be deemed to be a creditor only to the extent, if any, by which the amount of the debt owing to him or her exceeds the value of his or her security.
(3) A secured creditor may present, or join in presenting, a creditor's petition as if he or she were an unsecured creditor if he or she includes in the petition a statement that he or she is willing to surrender his or her security for the benefit of creditors generally in the event of a sequestration order being made against the debtor.
(4) Where a petitioning creditor is a secured creditor, he or she shall set out in the petition particulars of his or her security.
·Section 5(1) of the Act states:
"secured creditor”, in relation to a debtor, means a person holding a mortgage, charge or lien on property of the debtor as a security for a debt due to him or her from the debtor.
·Section 47(1A) of the Act states:
1(A) If the rules of court prescribe a form for the purposes of this subsection, the petition must be in the form prescribed.
·Rule 4.02(1) of the Federal Magistrates Court (Bankruptcy Rules) 2006:
A creditor’s petition must be in accordance with Form 6.
·Schedule 1, Form 6, Part 1 Petition of the Federal Magistrates Court (Bankruptcy) Rules 2006 (Cth) states:
2. The applicant creditor does not hold security over the property of the respondent debtor.
OR
The applicant creditor holds security over the property of the respondent debtor to the value of [$ amount] and consists of [statement of particulars of security] and;
(a) is willing to surrender the security for the benefit of the creditors generally if the sequestration order is made against the respondent debtor;
OR
(b) the value of the property is [$ amount], which leaves an unsecured debt of [$ amount].
Mr Docker submits that while American Express held three pieces of Mrs Bennell’s jewellery at the time it presented the Creditor’s Petition, it was not a “secured creditor” because it did not hold a mortgage, charge or lien on the jewellery for any debt due to American Express by Mrs Bennell. He gives two reasons in support of this contention:
a)The circumstances in which Mrs Bennell handed over the jewellery to American Express were:
i)Paragraph 10 of the second affidavit of Mrs Bennell states that she handed over some jewellery on 19 July 2002 as surety.
ii)The receipt given by American Express for the jewellery does not refer to it being handed over for any particular purpose (second affidavit of Mrs Bennell, Annexure “B”).
iii)In 2003 Mrs Bennell alleged that American Express had no right to retain possession of the jewellery (first affidavit of Mrs Bennell, Annexure “C” – judgment of Cripps AJ). Mr Docker submits that such an assertion is inconsistent with American Express holding the jewellery as security of any kind.
iv)Mrs Bennell’s solicitors, Purcell Insolvency Lawyers, wrote a letter to Kemp Strang for American Express 27 on November 2006 asserting that the jewellery was handed over as security for mediation (second affidavit of Mrs Bennell, Annexure “A”).
v)Mrs Bennell asserted that American Express’ possession of the jewellery was unlawful (second affidavit of Mrs Bennell, paragraph 11).
b)Mr Docker submits that even if the jewellery was held by American Express as security for a debt, it was not for a debt owed by Mrs Bennell at the time the Creditor’s Petition was presented. This distinction was drawn in Re Wiggins; ex parte Credit Assistance Pty Ltd (1979) 30 ALR 443 at 446-447 by Lockhart J, where a mortgage securing a debt which was claimed in the Creditor’s Petition was considered irrelevant for the purposes of whether the applicant creditor was required to estimate its value or offer to surrender it:
i)In July 2002 American Express claimed Mrs Bennell, her husband Ian Bennell, Total Entity Pty Ltd and Janile Pty Ltd owed them outstanding amounts. American Express’ claim against Mr and Mrs Bennell was litigated in the Supreme Court of New South Wales (S12169/2002). In American Express International Inc v Ian Bennell & Anor [2003] NSWSC 976, Cripps AJ gave judgment in favour of American Express against Mr Bennell in the amount of $1,979,754, and against Mrs Bennell in the amount of $8,239 (first affidavit of Mrs Bennell, Annexure “C”).
ii)The letter of 27 November 2006 from Personal Insolvency Lawyers letter to Kemp Strang records that Mrs Bennell extinguished her debt to American Express on 15 November 2006 (second affidavit of Mrs Bennell, Annexure “A”).
iii)The only debts owed by Mrs Bennell to American Express when the Creditor’s Petition was presented on 19 September 2007 arose from the assessment of taxation of costs orders made against Mrs Bennell (Exhibits “A1”-“A3”) which are unsecured debts.
Respondent’s submissions on whether American Express was a secured creditor
Mr Braham referred to the following evidence in support of his contention that American Express held Mrs Bennell’s jewellery as security:
a)The handwritten receipt for the jewellery signed by Mrs Bennell and by and on behalf of American Express (first affidavit of Mrs Bennell, Anneuxre “A”). Mr Braham submits that the receipt is prima facie evidence that the jewellery was received by American Express from Mrs Bennell in July 20002.
b)The letter from Jim Graham, partner of Kemp Strang Lawyers, dated 16 October 2002 to Messrs John D Mestre & Co, solicitors (Exhibit “A5”), which is a letter written on behalf of American Express to the solicitors then acting for Mr and Mrs Bennell. The letter states:
As your clients are aware, Mr Linn is happy to meet and discuss this matter with your clients, however as our clients are aware, they must first pay our client the sum of $871,055.66 in cleared funds. We note your clients have indicated they will pay this amount by Friday 18 October 2002. Our client does not consider the jewellery left by your client as security for payment of the outstanding debts as part payment of the above amount. (emphasis added)
Mr Braham submits that the letter proceeded on the basis that both parties understood that the jewellery was security for payment of the Mrs Bennell’s debt. Mr Braham contends that this letter was written on 16 October 2002, shortly after the jewellery was provided to American Express and when all the relevant facts would have been clear in minds of solicitors and the parties. At that point in time the jewellery was described by American Express as “surety for payment of Mrs Bennell’s debt”.
c)The first affidavit of Mrs Bennell states:
6. Attached to this affidavit and marked “A” is an affidavit of mine dated 21 January 2005 detailing jewellery that is still in the possession of American Express International Inc. This affidavit also detailed that I have a claim against American Express International for a minimum of “AUD 151,000” which exceeds the amount of the judgment order under which Bankruptcy Notice NN3246/07 and Creditor’s Petition SYG2884 of 2007 were issued.
The second affidavit of Mrs Bennell describes her understanding of the basis upon which the jewellery was held by American Express.
9. I have assets worth in excess of forwarded judgment debt of $57,712.40. The two main sources of my assets are:
a) jewellery worth in excess of $130,000; and
b) a share of antique furniture worth in excess of $400,000.
10. On 19 July 2002, I left my jewellery in the possession of the applicant creditor as surety for a mediation in relation to the disputed debt owed to the applicant creditor. The applicant creditor held on to the jewellery despite a request for its return on 27 November 2006. In this regard I refer to the letter from Purcell Insolvency Lawyers to Kemp Strang annexed to this affidavit and marked “A”.
The above paragraphs from Mrs Bennell’s affidavits are consistent with American Express’s letter dated 16 October 2002 (Exhibit “A5”).
Mr Braham submits that American Express appears to be relying upon emails sent by Mrs Bennell claiming that the jewellery did not belong to her but to Janile Pty Ltd. Although he acknowledges that the emails give that impression, he submits that there can be no question now as to who owned the jewellery. The first affidavit of Ms Foley, Annexures “A”-“F”, are copies of letters sent by American Express to all possible interested parties asking if they had a claim on the jewellery. Each of the recipients replied that the jewellery did not belong to them. At the completion of that process the jewellery was returned to Mrs Bennell and Mr Braham submits that it is clear that at the date of the Petition the jewellery belonged to Mrs Bennell.
Mr Braham then referred to the cross-examination of Cynthia Chan who swore the affidavit verifying the Creditor’s Petition. She gave evidence that at the time she verified the Petition, both her and American Express suspected that the jewellery belonged to Mrs Bennell. Ms Chan was asked whether she actually recollected the conversation with her supervisor about the providence and ownership of the jewellery. Ms Chan could not recall the exact date, the terms of the conversation, or whether the jewellery was handed over by Mrs Bennell or her solicitors.
The following exchange took place in respect of whether Ms Chan gave any thought to the ownership of the jewellery when verifying the Petition:
Chan: I did give the jewellery consideration, I just didn’t see it was the jewellery or the property of the debtor.
Braham: You didn’t know whose property it was, is that right?
Chan: No I didn’t know.
Braham: You knew it was connected with the Bennells in some way, with Mr Bennell?
Chan: Correct.
Braham: Didn’t it occur to you that a diamond necklace connected with Mr Bennell might belong to his wife
Chan: I haven’t seen the jewellery so I don’t exactly know what they are.
Braham: Did you know what they were?
Chan: No I didn’t.
Braham: Did it occur to you that jewellery associated with Mr Bennell might belong to his wife?
Chan: Not necessarily, no. (Transcript of 30 January 2008, p.23)
In further cross-examination the following exchange occurred:
Braham: Do you accept now that had you been aware in September of last year that the jewellery belonged to Mrs Bennell that would have been an appropriate thing for you to have recorded in the affidavit verifying paragraph 2 of the petition.
Chan: If that was my belief at the time I couldn’t say whether I would have said we held it as security.
Braham: No, but certainly you would have made some enquiries, wouldn’t you, to ascertain whether you held it as security?
Chan: Possibly.
Braham: Were you required to verify the creditor held no security?
Chan: Correct. (Transcript of 30 January 2008)
Mr Braham sought access to files retained by American Express which contained notes of the meeting that occurred on the same day the Creditor’s Petition was verified. Certain privileged material was masked in these documents. The following exchange occurred in cross-examination:
Braham: No-one was ever able to tell you to your satisfaction that it was not Mrs Bennell’s jewellery.
Chan: I am informed that Mrs Bennell said it belonged to Janile. That was my belief.
Braham: In the meeting you described it – was raised “why don’t we ask Mrs Bennell who it belongs to”. Do you remember that occurring?
Chan: Yes
Braham: Someone said “if it’s hers we’ll give it back to her. If it’s the company’s we’ll give it to the liquidator of the company?”
Chan: Yes
Braham: Do you remember that occurring?
Chan: Yes.
Braham: What was the date of that meeting?
Chan? The 18th.
Braham: Of September?
Chan: Yes
Braham: The same day that you verified the petition?
Chan: Yes, correct.
Braham: Do you remember if the meeting occurred before or after you verified the petition?
Chan: Before.
Braham: In between the meeting and verifying the petition did you ask Mrs Bennell if she owned the jewellery?
Chan: I did not. (Transcript of 30 January 2008, p.45)
Mr Braham further argues that the above evidence is important because Ms Chan referred to a meeting at which all relevant American Express staff and its solicitors asked but did not know who owned the jewellery. At the meeting it was decided that Mrs Bennell would be asked if the jewellery did belong to her. Yet between that meeting and Ms Chan verifying the Petition that American Express held no security over Mrs Bennell’s property, no such enquiries were made.
Near the conclusion of the cross-examination, Ms Chan was asked about the contexts in which certain notes were prepared at American Express:
Chan: If Mrs Bennell object to the creditor’s petition by using jewellery then we wanted to get rid of it.
Braham: You thought the possibility was being raised that Mrs Bennell might rely on the jewellery to assert her solvency?
Chan: Possibly.
Braham: Which she could only do if it was her jewellery?
Chan: Possibly.
In respect of a further note prepared by American Express, Ms Chan was asked the following questions:
Braham: (reading from the note) Put the onus on everyone else to assert a claim on the jewellery and, if not, then Susie has it.
Braham: Do you see that?
Chan: Yes
Braham: That is, in fact, what occurred isn’t it. Everyone else was written to and asked if they wanted the jewellery and when no-one except Mrs Bennell accepted a claim for it, it was given to her, correct?
Chan: Eventually yes that occurred.
Braham: So that was the position you understood when it came to verifying the petition?
Chan: Yes
Braham: I want to suggest to you that what was disclosed to you was that the question of ownership of the jewellery was entirely unclear to American Express at the time you signed the petition.
Chan: It was unclear to me. (Transcript of 30 January 2008, p.49)
Mr Braham submits that Ms Chan’s evidence establishes that when she verified the petition she claimed she was aware of the jewellery. Ms Chan knew inquiries were going to be made of Mrs Bennell as to the ownership of the jewellery, yet she signed the Petition verifying that American Express held no security over the jewellery.
Consideration in respect of ground two
The Court has been referred to Wright Designed Pty Ltd v McClymont [2006] FCA 999 per Rares J. In that matter, Mr & Mrs McClymont engaged the Wright Designed under two contracts to do work in their home unit. Mr & Mrs McClymont charged their property in favour of Wright Designed as equitable mortgagee to secure payment of all amounts to be paid by them under the contract. The Consumer Trader and Tenancy Tribunal of New South Wales made a money order against the McClymonts which was subsequently registered by the Local Court of New South Wales as a judgment in favour of Wright Designed. The Supreme Court of New South Wales registered two judgments for costs, one in favour of Wright Designed and the other in favour of a director of Wright Designed. However no amount was paid in respect of either judgment. Wright Designed issued a Bankruptcy Notice seeking payment of the outstanding Local Court judgment debt and an act of bankruptcy was subsequently committed by Mr and Mrs McClymont. A Creditor’s Petition which relied on that act of bankruptcy was served. Mr and Mrs McClymont opposed the making of the sequestration order on grounds including that the Petition incorrectly alleged that Wright Designed did not hold security over their property.
Significantly in that decision, Rares J found at [26] that:
[26] Wright Designed was a secured creditor. It incorrectly caused the petition to be verified without complying with s 44(3). It was well aware of the provisions of the contract entitling it to security, for it lodged a caveat making a claim that it had an interest in Mr and Mrs McClymont’s home unit at Killara. The caveat lapsed after they caused a lapsing notice to be issued under the provisions of the Real Property Act 1900 (NSW).
Whether Mrs Bennell’s jewellery was held as a security for the debt claimed in the Petition is a question of fact. The question to resolve is whether American Express was a secured creditor at the time the Creditor’s Petition was issued and if the evidence establishes this. The ownership of the jewellery while it was in the possession of American Express is in question. However, all possible interested parties, such as the trustee in bankruptcy and the administrators or liquidators of various Bennell companies, sent letters denying ownership of the jewellery (affidavit of Ms Foley, Annexures “A”-“F”). Ultimately, the jewellery was returned to Mrs Bennell and there is no question that at the date the Petition was presented, the jewellery belonged to her. Another question to be resolved is why Mrs Bennell provided her jewellery to American Express.
Considerable emphasis was placed on the cross-examination of Ms Chan and her subjective belief or knowledge at the time she swore the affidavit verifying the Petition. The Court was referred to McDonald v Official Trustee in Bankruptcy [2001] FCA 140 where Drummond, Whitlam and R.D. Nicholson JJ found that a Creditor’s Petition is not rendered null because it has been verified by the affidavit of a person who might not have full knowledge of the facts. Their Honours said at [31]:
[31] Next, it was said that the sequestration order should not have been made because, contrary to s47(1)(b), the petition had not been verified by the affidavit of a person with knowledge of the facts. The point made here is that the affidavit of Mr Osborne filed with the petition in terms verified only the allegedly incomplete statement of the act of bankruptcy: it was said that it was incapable of establishing that, in addition to failing to pay the amount demanded by the bankruptcy notice, the appellant also failed to satisfy the Court of the existence of a relevant cross-demand. But, as has already been pointed out, the Full Court in Bryant held that failure of a petitioning creditor to comply with the requirements of s47(1)(b) and r12(3)(b) of the Bankruptcy Rules then in force, which required the affidavit verifying the petition to be filed with the petition, did not render presentation of the petition a nullity. See also Re Chu; Ex parte RSL Permanent Building Society Ltd (1976) 15 ALR 173. A sequestration order can still be made, at the discretion of the Court, if the necessary evidence is before the Court at that stage even though no affidavit verifying the petition was filed with it.
I accept that the evidence of Ms Chan that the steps taken by her in preparation of her affidavit and the corporate knowledge relied upon to prepare that document was flawed. However, I am not satisfied that this evidence establishes the true status of Mrs Bennell’s jewellery held by American Express.
The letter from Mr Graham of Kemp Strang to John D.E. Mestre & Co (Exhibit “A5”) reads:
As your clients are aware, Mr Linn is happy to meet and discuss this matter with your clients, however as your clients are aware, they must first pay our client the sum of $871,055.66 in cleared funds. We note your clients have indicated that they will pay this amount by Friday 18 October 2002. Our client does not consider the jewellery left by your clients as surety for payment of the outstanding debts or as a part payment of the above amount. (emphasis added)
Mr Docker put to Mrs Bennell in cross-examination that the above sentence meant that American Express did not consider the jewellery to be either surety for payment of debts or a part payment of the debts. Mr Braham argues that the syntax of the sentence is not capable of sustaining Mr Docker’s construction. Further, that the letter then proceeds on the basis that both parties understood that the jewellery was for surety for payment of Mrs Bennell’s debt. I disagree with this interpretation and believe that the sentence emphasised above merely states that the jewellery was not held as surety for part payment of the $871,055.66 debt.
The Court was then referred to paragraph 6 of the first affidavit of Mrs Bennell which refers to details of the jewellery in Annexure “A”. I believe that that affidavit does nothing more than establish the identity of the pieces of jewellery described in Annexure “A” as follows:
5. Annexed and marked “B” are two copies of the insurance Cover and Valuation of in particular the 288 diamond bracelet and the 26.33 Sapphire pendant and necklace left by me as security with American Express International Inc on 19 July 2002.
6. I value the jewellery to be worth approximately $AUD435,000. as I know that my husband had purchased the hand made pieces for me at wholesale price.
Paragraph 10 of the second affidavit of Mrs Bennell states:
On 19 July 2002 I left my jewellery in the possession of Applicant Creditor as security for a mediation in relation to the disputed debt owed to the Applicant Creditor. The Applicant Creditor held onto the jewellery despite a request for the return on 27 November 2006. In this regard, I refer to a letter from Purcell Insolvency Lawyers to Kemp Strang annexing to this affidavit and marked “A”.
In the letter from Purcell Insolvency Lawyers to Kemp Strang the following paragraph appears:
I am instructed that the jewellery was held by American Express International Inc (American Express) as surety for a mediation in relation to the disputed debt owed by Mr and Mrs Bennell to American Express. I note that Ian Bennell was made bankrupt on 25 October 2006. The abovementioned payment has extinguished my client’s debt to your client, in the circumstances, please advise as a matter of urgency a suitable time for collection of the above mentioned jewellery.
I agree with Mr Braham’s submission that the contents of the first and second affidavit of Mrs Bennell are consistent with the Kemp Strang letter of 16 October 2002 (Exhibit “A5”). However, the sequence of documents supports the view that the reason for the deposit of the jewellery was to facilitate mediation between American Express and the Bennells.
I note that Mrs Bennell has repeatedly asserted that she wants her jewellery returned and these requests were recorded as follows:
a)During the Supreme Court proceedings in 2003 (American Express International Inc v Ian Bennell & Anor) where Mrs Bennell said in cross-examination that she was claiming the jewellery back as a reason to set aside the first Bankruptcy Notice issued to her in 2004. At that time, Mrs Bennell accepted that the she owed the debts as at July 2002, yet she still asked for the return of the jewellery. This is completely inconsistent with the jewellery being held as security for those debts.
b)In the letter from Purcell Insolvency Lawyers letter to Kemp Strang (second affidavit of Mrs Bennell). The letter states that all debts had been paid. At the time of that letter all the debts to American Express at the time the jewellery was handed over had been settled as at 15 November 2006. Therefore any claim for return of the jewellery before that date is inconsistent with the suggestion that the jewellery was held as security as there were still debts owing before that date. The letter states:
The money is now paid back.
I am instructed that the jewellery was held by American Express International Inc as a surety for a mediation in relation to the disputed debt owed by Mr and Mrs Bennell to American Express.
I am satisfied that the words as used by Mrs Bennell and her solicitors demand a return of the jewellery. The jewellery was eventually returned once American Express had satisfied itself that all other parties who might have had a claim to the jewellery confirmed that they were making no claim.
The debt which is the basis of the Bankruptcy Notice (NN 3246/07) and the subsequent Creditor’s Petition presented on 19 September 2007 is in respect of a Local Court judgment made and entered on 1 August 2007 in the amount of $57,712.40. This amount is independent of the debt to American Express outstanding in July 2002.
In relation to the letter from Mr Graham to John D Mestre & Co (Exhibit “A5”), the paragraph in question reads:
As your clients are aware, Mr Linn is happy to meet and discuss this matter with your clients, however as your clients are aware, they must first pay our client the sum of $871,055 in cleared funds. We note your clients have indicated that they will pay this amount by Friday 18 October 2002. Our client does not consider the jewellery left by your clients as surety for payment of their outstanding debts as a part payment of the above amount. (emphasis added)
Mr Docker put to Mrs Bennell in cross-examination that the above sentence meant that American Express did not consider the jewellery as either surety for payment of debts or a part payment of the debts. Mr Braham argues that the syntax of the sentence is not capable of sustaining that construction. Further that the letter then proceeds on the basis that both parties understood that the jewellery was left as surety for payment of Mrs Bennell’s debt. I disagree with this interpretation and believe that the sentence emphasised above merely states that the jewellery is not held as a surety for part payment of the debt of $871,055.66. The Court was referred to paragraph 6 of the first affidavit of Mrs Bennell which refers to details the jewellery in Annexure “A”. I believe that affidavit does nothing more than establish the identity of the pieces of jewellery described in Annexure “A”:
Annexed and market “B” are two copies of the Insurance Cover and valuation of in particular the 288 carat diamond bracelet and the 26.33 carat sapphire pendant and necklace left by me as security with American Express International Inc on 19 July 2002.
I value the jewellery to be worth approximately AUD$435,000. I also know that my husband had purchased the hand made pieces for me at wholesale price.
Paragraph 10 of the second affidavit of Mrs Bennell states:
On 19 July 2002 I left my jewellery in the position of applicant creditor as security for a mediation in relation to the disputed debt owed to the applicant creditor.
American Express held on to the jewellery despite a request for the return on 27 November 2006. In this regard, I refer to a letter from Purcell Insolvency Lawyers to Kemp Strang where the following paragraph appears:
I am instructed that the jewellery was held by American Express International Inc (American Express) as surety for a mediation in relation to the disputed debt owed by Mr and Mrs Bennell to American Express. I note that Ian Bennell was made bankrupt on 25 October 2006. The above mentioned payment has extinguished my client’s debt to your client, in the circumstances, please advise as a matter of urgency, a suitable time for collection of the abovementioned jewellery.
I agree with the submission made by Mr Braham that the contents of the first and second affidavits of Mrs Bennell are consistent with the Kemp Strang letter of 16 October 2002 (Exhibit “A5”). However, the sequence of documents supports the view that the reason for the deposit of the jewellery was to facilitate mediation between American Express and the Bennells.
Although Mrs Bennell has given affidavit evidence that the jewellery was provided to American Express in an attempt to facilitate a mediation between the parties concerning her and her husband’s earlier debt, the jewellery still remained in the possession on American Express on 19 December 2007 when this Creditor’s Petition was presented. Even if American Express held the jewellery as security when the Petition was presented, it no longer holds the jewellery now as it was returned to Mrs Bennell on 6 November 2007. Consequently, if this interpretation is applied then the Creditor’s Petition was incorrect between the period of 19 September 2007 and 6 November 2007. If the jewellery was held as security, the failure of American Express to disclose this does not necessarily mean that an application for an annulment of the Creditor’s Petition will succeed upon the basis that the order ought not to be made. A petitioning creditor may be given leave to amend the Petition to allege matters required by the Act notwithstanding that the relevant allegation was not made at the time the Petition was presented: Re Finn; ex parte Finn v Amoco Australia Ltd (1982) 58 FLR 54.
A defect in the Creditor’s Petition could have been corrected by an amendment pursuant to s.33(1)(b) of the Act:
(1) The Court may:
(a)…
(b) at any time allow the amendment of any written process, proceeding or notice under this Act; or
(c)…
An amendment of this nature is usually not permitted unless the Court is satisfied that no injustice will be done to the other party. In Green v Solomon [2001] FCA 698 at [7] Wilcox J stated:
…The question, in dealing with prejudice, is whether Mr Solomon is now any worse off than if the [material] correct date had been inserted in the petition in the first place. I cannot see any basis for concluding he is in any way disadvantaged by the error. Accordingly, this seems to me a proper case in which to grant leave to amend the petition…
The important issues in determining whether Mrs Bennell would suffer any prejudice are:
a)American Express no longer holds the jewellery as it was returned to Mrs Bennell on 6 November 2007.
b)Mrs Bennell gave sworn evidence that her jewellery was only given to American Express to facilitate the mediation.
c)Mrs Bennell had demanded return of the jewellery on a number of occasions as she believed the reason for the deposit of the jewellery had passed.
d)This ground of opposition was not raised until after the jewellery was returned to Mrs Bennell.
The Creditor’s Petition would now require a theoretical further amendment as the Petition in its original form now reflects the true position. These two theoretical amendments would be permitted by the Act and would do no more than overcome a technical argument.
In the circumstances I am not satisfied that ground two can be sustained. As I have dismissed both grounds, the Amended Notice Stating Grounds of Opposition to Petition is dismissed.
I certify that the preceding seventy-four (74) paragraphs are a true copy of the reasons for judgment of Lloyd-Jones FM.
Associate:
Date: 17 October 2008
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