Australian Liquor Marketers (Qld) Pty Ltd v Lawson
[2017] FCCA 2804
•16 November 2017
FEDERAL CIRCUIT COURT OF AUSTRALIA
| AUSTRALIAN LIQUOR MARKETERS (QLD) PTY LTD v LAWSON | [2017] FCCA 2804 |
| Catchwords: BANKRUPTCY – Application for sequestration order – whether judgment against joint or joint and several debtors. |
| Legislation: Bankruptcy Regulations 1996 (Cth), reg.4.01(1)(b) |
| Cases cited: Anne v Ask Funding Ltd (2015) 240 FCR 229 LEP Air Services Ltd v Rollowswin Investment Ltd [1971] 3 All ER 45 Re McLeod; ex parte Beneficial Finance Corporation Limited (unreported, Federal Court of Australia, Branson J, SN267/1995, 5 October 1995) Re Neate; ex parte Pegasus Leasing Ltd (1995) 57 FCR 40 |
| Applicant: | AUSTRALIAN LIQUOR MARKETERS (QLD) PTY LTD |
| Respondent: | PAUL ALEXANDER LAWSON |
| File Number: | BRG 113 of 2017 |
| Judgment of: | Judge Jarrett |
| Hearing date: | 9 November 2017 |
| Date of Last Submission: | 9 November 2017 |
| Delivered at: | Brisbane |
| Delivered on: | 16 November 2017 |
REPRESENTATION
| Counsel for the Applicant: | Mr Eade |
| Solicitors for the Applicant: | Patane Lawyers |
| The Respondent appeared in person |
ORDERS
A sequestration order be made against the estate of Paul Alexander Lawson;
The petitioning creditor’s costs of and incidental to the creditor’s petition be taxed and paid in accordance with the Federal Circuit Court (Bankruptcy) Rules 2006.
| FEDERAL CIRCUIT COURT OF AUSTRALIA AT BRISBANE |
BRG 113 of 2017
| AUSTRALIAN LIQUOR MARKETERS (QLD) PTY LTD |
Applicant
And
| PAUL ALEXANDER LAWSON |
Respondent
REASONS FOR JUDGMENT
The argument on this creditor’s petition presents two issues for resolution. The first is an issue of fact concerning service of the bankruptcy notice upon which the petitioning creditor relies to prove an act of bankruptcy by the respondent. The other issue concerns the form of judgment given in the matter and whether the judgment debt is a joint debt or a debt for which the two defendants in the relevant proceedings are severally liable.
The bankruptcy notice
There is no dispute that on 6 October, 2016 the petitioning creditor caused the Official Receiver to issue a bankruptcy notice directed to the respondent. The bankruptcy notice alleged that the respondent was indebted to the petitioning creditor based upon a judgment given by the District Court of Queensland at Brisbane on 14 December, 2015 for $27,002.54 plus costs. Taking into account post judgment interest less a payment made towards the debt, the bankruptcy notice alleged that the respondent owed the petitioning creditor $9,574.62.
There is also no dispute that on 12 October, 2016 at about 8.15pm, at least the first three pages of the bankruptcy notice were served upon Mr Lawson by a process server, Mr Leon Thach. The first three pages of the bankruptcy notice are the approved form of bankruptcy notice issued by the Official Receiver. The issue is whether the bankruptcy notice had a copy of the judgment relied upon by the petitioning creditor to prove the debt appended to it.
To prove that the copy of the bankruptcy notice served upon Mr Lawson had a copy of the judgment attached to it, the petitioning creditor relied upon affidavit evidence from two witnesses, Alexander Tallon and Leon Thach. Both were cross-examined by Mr Lawson.
Mr Tallon swore an affidavit on 4 October, 2017. He swore that he is a Field Services Manager in the employ of Sharmans, Investigations & Process Serving. On 7 October, 2016 he received instructions from the solicitors for the petitioning creditor to serve the bankruptcy notice upon Mr Lawson. Although Mr Tallon swore that he received instructions to serve the bankruptcy notice and the judgment upon which it was based, the letter of instruction does not refer to the judgment, only the bankruptcy notice. However, the copy of the bankruptcy notice attached to the letter of instruction appears to have a copy of the judgment attached to it.
On 7 October, 2016 Mr Tallon printed out the document which was to be served according to the instructions he received. He swears that the document he printed comprised five pages (the form of bankruptcy notice plus the copy of the judgment which equates to five pages). Mr Tallon swears that he did not print out the email or the letter from the petitioning creditor’s solicitors. He “securely fastened the 5 page bankruptcy notice together by affixing a staple to the top left hand corner”. He swears that he checked that the stapled bankruptcy notice was the same as the electronic copy of the document that he had received from the petitioning creditors solicitors on 7 October, 2016. He swears that he did that to ensure that all pages of the document to be served were accounted for and there were no errors. He then gave instructions via a written memorandum to Mr Leon Thach to serve the bankruptcy notice. He placed the stapled bankruptcy notice together with the instruction sheet to Mr Thach into a “designated out tray for Leon Thach for his collection”. The instructions sheet and the bankruptcy notice were held together by a bull dog clip.
Mr Tallon swears that in accordance with the practice of his employer, he recorded the number of pages that he printed on his employer’s computer system against the file for this particular matter. He did that because according to his employer’s policy, any printing in excess of ten pages is charged to their client. Mr Tallon swears that he recorded on the computer system in respect of this particular matter:
instructed Leon
5 pages printed. No printing charge
Mr Tallon was asked a question in cross examination by Mr Lawson. In answer to that question Mr Tallon said that he did not see Mr Thach remove the documents from the tray in which he had left them for collection by Mr Thach.
The petitioning creditor relied upon two affidavits from Mr Thach. The first was sworn on 20 October, 2016 and filed on 14 February, 2017. In that affidavit Mr Thach swears that he served Mr Lawson with the bankruptcy notice “together with a copy of the judgment dated 14 December 2015, obtained by the applicant against the respondent in the District Court of Queensland Brisbane Registry” by giving them to Mr Lawson personally. Mr Thach annexes to his affidavit a copy of the bankruptcy notice together with a copy of the judgment. The annexure to Mr Thach’s affidavit is five pages long comprising three pages of the printed bankruptcy notice and two pages of a copy of the duplicate judgment given in the District Court of Queensland against the judgment debtor.
In his second affidavit filed on 4 October, 2017 (and sworn the same day) Mr Thach swears that between 7 October, 2016 and 12 October, 2016 he attended at the office of Sharman’s (Mr Tallon’s employer) and collected from his “out tray a stapled document being Bankruptcy Notice 204589 as issued by the Official Receiver on 6 October, 2016 and Judgement of the District Court of Queensland dated 14 December, 2015” together with an instruction sheet. He swears that the instructions and the bankruptcy notice were held together by a bull dog clip. Mr Thach swears:
5. My practice when serving a document for Sharman’s is to:
a. Remove the instructions and bull dog clip immediately prior to service of the documents; and
b. Upon serving the document, to record hand written notes on the instructions.
Mr Thach annexes to his second affidavit the handwritten notes that he made on the instruction sheet that he received from Sharman’s, but those handwritten notes do not advance the question of whether the bankruptcy notice served upon Mr Lawson had a copy of the judgment attached to it.
Mr Thach was cross-examined by Mr Lawson. Mr Lawson challenged the form of words that Mr Thach says he used to identify Mr Lawson at the time he served him with the bankruptcy notice, but nothing turns on the difference between Mr Lawson’s evidence about that and Mr Thach’s evidence about that. There is no dispute that Mr Thach served a document on Mr Lawson on 12 October, 2016 at about 8:15pm.
The only other questions that Mr Lawson asked Mr Thach was:
Mr Lawson:Umm, the judgment he gave me had 3 pages, correct?
Mr Thach:I couldn’t say for certain how many pages it was.
Mr Lawson:Cause I only received 3 pages from yourself, so you don’t know how many pages you gave me yourself, so you don’t know how many pages you gave me?
Mr Thach:No I can’t tell you the exact number of pages I handed over.
Mr Lawson, the judgment debtor, gave evidence in these proceedings. By his affidavit filed on 18 September, 2017 he swears that the documents given to him by Mr Thach on 12 October, 2016 consisted of a total of three pages with the first page bearing the heading “Bankruptcy Notice”. He swears that there were no other pages attached to the three page document handed to him.
Mr Lawson’s wife, Raffaela Lawson, also gave evidence by affidavit filed on 3 November, 2017. She says that after her husband received the documents from Mr Thach he showed her the “paperwork” and that it consisted of three pages with the first page titled “Bankruptcy Notice”. She says that she and Mr Lawson discussed the document and agreed that it should be emailed to their solicitor “for clarification”.
Mr Lawson also relied upon an affidavit by Alistair Tindall, a solicitor in the employ of Robinson Locke Litigation Lawyers, a firm of solicitors that Mr Lawson has retained to act for him in the past. He deposes that on about 13 October, 2016 at about 6:20am his firm received an email from Mr Lawson which attached a document which purported to be a bankruptcy notice. Mr Tindall annexes the email he received from Mr Lawson to his affidavit. The email contains a short letter which says:
Hi Malcolm and Alistair, Just thought I would let you know that last night at 8:30pm the attached was delivered to me.
The document attached to Mr Lawson’s email was the first three pages of the bankruptcy notice. The judgment was not attached to the document that he sent to his lawyers.
Mr Lawson did not apply to have the bankruptcy notice set aside because it was defective because it did not have attached to it a copy of the judgment upon which the debt set out in the bankruptcy notice was based. Before me, Counsel for the petitioning creditor contended that the failure to apply to set aside the bankruptcy notice on that basis was demonstrative of the falsity of the allegation made by Mr Lawson. However, whilst that is one explanation, there are many others. It is just as likely that a decision was made to simply see if the petitioning creditor remedied the situation or sought to proceed upon a creditor’s petition. The alleged defect in the bankruptcy notice could be raised on the hearing of the creditor’s petition. Indeed that seems a likely explanation because on 22 November, 2016 – after time for compliance with the bankruptcy notice had passed – Robinson Locke wrote to the petitioning creditors solicitors and recorded that:
a)the bankruptcy notice was defective because it did not have a copy of the judgment upon which it was based attached to it at the time of service upon Mr Lawson;
b)in the circumstances, should “bankruptcy proceedings founded on service of the defective bankruptcy notice” be commenced, Mr Lawson, would seek to have the proceedings dismissed on that basis; and
c)Mr Lawson intended to apply to the District Court of Queensland to have the judgment “varied” on the basis that one component of the judgment sum – $7,384.29 for administration fees – amounted to a penalty and was not properly recoverable by the petitioning creditor.
Mr Tindall was not cross-examined.
I accept the petitioning creditor’s submission that it is an “inescapable inference” that the Official Receiver received the judgment and that it was an annexure to the bankruptcy notice as issued by the Official Receiver. In order to have the Official Receiver issue the bankruptcy notice, the petitioning creditor was required to lodge a copy of the judgment with its application: reg.4.01(1)(b) of the Bankruptcy Regulations 1996 (Cth). For the bankruptcy notice to be validly issued it needed to have a copy of the judgment attached to it when it was issued by the Official Receiver: Anne v Ask Funding Ltd (2015) 240 FCR 229.
It is of some consequence, I think, that Mr Thach deposed on 20 October, 2016 to serving a copy of the bankruptcy notice and the judgment on Mr Lawson on 12 October, 2016. As the petitioning creditor points out, that affidavit was sworn prior to any contention by Mr Lawson that the judgment was not attached to the bankruptcy notice that he was given.
Further, in Mr Thach’s affidavit filed on 4 October, 2017 he deposed that he collected a stapled document being the bankruptcy notice and the judgment together with an instruction sheet. I think it is of little consequence that Mr Thach could not remember how many pages he gave to Mr Lawson when he served him with the bankruptcy notice.
That Mr Thach gave Mr Lawson a five page document is corroborated by Mr Tallon recording that he had printed five pages in relation to the instructions he had received from the petitioning creditor’s solicitor. I accept the petitioning creditor’s submission that the only probable inference is that those five pages comprised the bankruptcy notice and the judgment.
I think that both Mr and Mrs Lawson are mistaken when they say that the judgment was not attached to the bankruptcy notice. In order to email a copy of the bankruptcy notice to Robinson Locke, Mr Lawson said that he removed the staple from the document and scanned the bankruptcy notice. I accept that the absence of the judgment from the attachment to Mr Lawson’s email to Robinson Locke is not determinative evidence that the judgment was not served with the bankruptcy notice.
The petitioning creditor argues that prior to service of the bankruptcy notice, Mr Lawson was aware of the judgment. He had been present in Court when judgment was given against him and his house had been sold to partially satisfy that judgment. He also acknowledged the judgment in subsequent correspondence with the petitioning creditor. Robinson Locke had acted for Mr Lawson. The judgment was something with which both Mr Lawson and his lawyers were familiar.
Although Mr Lawson denied the proposition when it was put to him, I consider it likely that for the purposes of informing his then solicitors of the service of the bankruptcy notice he only scanned the bankruptcy notice itself, not the attachment to it.
It is also of consequence in reaching that conclusion, I think, that despite his lawyers writing to the petitioning creditor’s solicitors on 22 November, 2016 to the effect that they would resist any creditor’s petition on the basis that the bankruptcy notice was defective (a matter then raised for the first time), by letter from Mr Lawson (personally) to the petitioning creditor dated 4 April, 2017 Mr Lawson did not raise the defective bankruptcy notice or seek to impugn the judgment in any way. Instead, he acknowledged the debt and the judgment with which, he alleged, he was never served.
I am satisfied, and I find, that the respondent debtor was served with a copy of the bankruptcy notice in this matter and at the time of service a copy of the judgment of the District Court of Queensland upon which it was based was attached to the bankruptcy notice.
Liability under the judgment – joint or several?
It is uncontroversial that the petitioning creditor, Tiagai Holdings Pty Ltd and Mr Lawson entered into a credit application and guarantee and indemnity on 24 October, 2014. Mr Lawson has put the credit agreement into evidence.
The petitioning creditor commenced proceedings in the District Court of Queensland on 25 June, 2015 against both Tiagai Holdings and Mr Lawson seeking the recovery of an amount of money for goods sold and delivered pursuant to the credit agreement.
Neither Tiagai Holdings nor Mr Lawson filed a notice of intention to defend or defence. The petitioning creditor obtained judgment against each of Tiagai Holdings and Mr Lawson on 14 December, 2015 after a hearing. Mr Lawson attended the hearing. Order 1 of the judgment is in the following terms:
1. The First Defendant and Second Defendant not having filed a notice of Intention to defend, pursuant to Rule 288 of the Uniform Civil Procedure Rules 1999 (Qld) the judgment of the court is that each of the First Defendant and Second Defendant pays to the Plaintiff the sum of $17,984.21 for claim plus $1,634.04 for Interest and $7,384.29 for administration fees plus the plaintiffs costs of and incidental to this proceeding, including this application, on an indemnity basis to be assessed if not agreed.
In my view, that form of judgment imposes several liability. The phrase “each of” demonstrates that the Court ordered both Tiagai Holdings and Mr Lawson, to each pay the amounts stated. That is to say, the judgment imposed several liability. I accept that although order 1 could also have been expressed as two separate orders, had the Court intended Mr Lawson to have been jointly liable with Tiagai Holdings, the District Court would most likely have phrased its order thus: “the First Defendant and Second Defendant pay to the Plaintiff…” or “the Defendants pay to the Plaintiff…”. To construe the order otherwise fails to give the words “each of” any work to do in the order.
In any event, to the extent that Mr Lawson’s case is that I should go behind the judgment and conclude that the underlying liability is properly seen to be a joint liability rather than a joint and several or several liability, the terms of the credit contract and the law generally, are against him.
Generally speaking, a primary debtor (here Tiagai Holdings) and a guarantor (Mr Lawson) are severally liable. That is always subject to the terms of any contract to which they might be parties: Re Neate; ex parte Pegasus Leasing Ltd (1995) 57 FCR 40 at 42; LEP Air Services Ltd v Rollowswin Investment Ltd [1971] 3 All ER 45 at 58, applied in Re McLeod; ex parte Beneficial Finance Corporation Limited (unreported, Federal Court of Australia, Branson J, SN267/1995, 5 October 1995).
Here, the terms of the credit contract make it clear that Mr Lawson was severally liable with Tiagai Holdings to the petitioning creditor: cll.15.1, 15.2, 15.11 of the contract which is annexure “B” to the affidavit of Paul Alexander Lawson filed on 18 September 2017.
Conclusion
I am satisfied that Mr Lawson committed an act of bankruptcy on 2 November, 2016 by failing to comply with a bankruptcy notice served on 12 October, 2016 or by otherwise satisfying the Court that he had a counter-claim, set-off or cross-demand equal to or more than the amount of the debt ($9,574.62).
I am satisfied that Mr Lawson remains indebted to the petitioning creditor in the amount of $9,574.62.
All other formal requirements have been met, including the service of a valid bankruptcy notice on the respondent, the service of a creditor’s petition and the verification of that petition as required.
Mr Lawson has failed to prove any other sufficient cause warranting the dismissal of this petition.
I am satisfied that it is an appropriate case in which to make a sequestration order against Mr Lawson’s estate together with the usual order as to costs.
I certify that the preceding forty (40) paragraphs are a true copy of the reasons for judgment of Judge Jarrett delivered on 16 November, 2017.
Associate: C Allen
Date: 16 November 2017
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