BM2008 Pty Ltd (in Liquidation) v Iliopoulos
[2011] FMCA 203
•18 March 2011
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| BM2008 PTY LTD (IN LIQUIDATION) v ILIOPOULOS | [2011] FMCA 203 |
| BANKRUPTCY – Ruling as to service and other matters. |
| Bankruptcy Act 1966, ss.309, 309(2) Federal Magistrates Court Rules 2001, rr.1.05, 1.06, 6.14 Federal Court Rules 2001, O 9, r.6 & 7 Federal Magistrates Act 1999, ss.39, 39(3)(b), 39(3)(c), 42 |
| Ginnane v Diners Club Ltd (1993) 120 ALR 375 Sogelease Australia Ltd v Griffin [2003] FCA 453 Sogelease Australia Ltd v GriffinNo.2 [2003] FCA 454 SZJBD v Minister for Immigration & Citizenship [2009] FCAFC 106 |
| Applicant: | BM2008 PTY LTD (IN LIQUIDATION) |
| Respondent: | STEVE ILIOPOULOS |
| File Number: | MLG 1731 of 2010 |
| Judgment of: | Burchardt FM |
| Hearing dates: | 24 February and 15 March 2011 |
| Date of Last Submission: | 15 March 2011 |
| Delivered at: | Melbourne |
| Delivered on: | 18 March 2011 |
REPRESENTATION
| Counsel for the Applicant: | Mr G. Bigmore Q.C. & Mr Harrison |
| Solicitors for the Applicant: | Cooper Mills Lawyers |
| Counsel for the Respondent: | Mr D. Denton S.C. & Ms Djohan |
| Solicitors for the Respondent: | Belleli King & Associates |
ORDERS
Pursuant to s.309(2) of the Bankruptcy Act 1966 (Cth), personal service of creditor’s petition no. MLG 1731 of 2010 be dispensed with.
In lieu thereof the creditor’s petition be served by delivering a letter enclosing a sealed copy of the creditor’s petition, copies of the affidavits verifying the creditor’s petition (including the affidavit of service of bankruptcy notice) and any trustee’s consent to act together with a sealed copy of this order to Belleli King & Associates, 1st Floor, 9-11 Pultney Street, Dandenong, Victoria 3175.
Service of the creditor’s petition be deemed to be effected on 18 March 2011 upon condition that the event referred to in paragraph 2 occurs by 5.00 pm on 18 March 2011.
The Interim Application of the Respondent filed 3 March 2011 be dismissed.
The costs of this application be reserved.
The further hearing of the petition be adjourned to 25 March 2011 at 1.30 pm.
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT MELBOURNE |
MLG 1731 of 2010
| BM2008 PTY LTD (IN LIQUIDATION) |
Applicant
And
| STEVE ILIOPOULOS |
Respondent
REASONS FOR JUDGMENT
This is the latest in what is clearly hard fought litigation. I observed earlier that there is considerable tactical skirmishing, and indeed the positions of each side can be fluent. That makes controlling the proceedings somewhat difficult from time to time. It is not really possible even to explain the issues before the Court in short form without setting out the relevant history. On 21 May 2010, I dismissed Mr Iliopoulous' application to set aside a bankruptcy notice. He is, of course, the respondent at present. Order 3 that I then made was “this order be stayed for 14 days”.
The respondent appealed and filed a notice of motion seeking that the time for compliance with the bankruptcy notice be extended until the hearing and determination of the appeal. That is Exhibit DAR2 to the affidavit of Mr Rewell. The matter came before Finkelstein J on 4 June 2010, and the transcript of that hearing is DAR4; I will return to it. Finkelstein J made an order, DAR5, which relevantly ordered that my Order 3 be extended until the hearing and the determination of the appeal. The appeal was heard by Finn J on 29 June 2010, and his Honour gave judgment on 27 July 2010. The appeal was dismissed.
A subsequent application for special leave to the High Court was dismissed in December 2010. I think I was told orally that this took place on 10 December 2010. On 13 December 2010, a petition was filed. It had a return date for 24 February 2011 at 9.30 am. Also, on
13 December 2010, the applicant's solicitor, Mr Catalogna, wrote to Belleli King asking if they had instructions to accept service. Mr Catalogna deposed there was no reply to that letter. Mr Catalogna then instructed a process server to effect service.
The process server Warren Mead told Mr Catalogna, on 21 December 2010 that he had effected service on that day. Mr Mead's account of the alleged events is in his affidavit filed on 8 February 2011. I should note that Mr Mead has not been available for cross‑examination, and his evidence has not been tested. Mr Iliopoulous' account of Mr Mead's efforts is described in his affidavit filed on 21 February 2011. His counsel submitted that it was not open to the applicant to rely upon that affidavit, and also the affidavit of Mr Rewell filed on
3 March 2011. I reject that submission. These affidavits have been sworn and filed and constitute evidence before the Court.
Mr Iliopoulous, in his affidavit, described what is clearly the same incident described by Mr Mears. I will read paragraphs 7 to 9 of that affidavit:
“I did not know what was happening and was concerned for my safety since the man could have been running to attack me or to rob the McDonald’s, so I decided to move away by driving off.
I then heard a bang behind me on the driver's side of my vehicle. The car was wet but I saw a glimpse of some paper on the car. As I continued to drive away, the paper must have flown off.
I was not addressed by this person. I understand from my lawyers it is alleged that I was served with all documents in this proceeding. I deny such allegation.”
Obviously something caused Mr Iliopoulous, who deposes he was scared of attack or robbery, to reconsider and consult his lawyers. He does not say what it was. His lawyers were not, however, in any doubt. They realised an attempt at service had been made. A letter from the Belleli King to the applicant's lawyers was sent on 23 December 2010. In it was asserted that it was assumed an attempt at service had been made, and denied service had been effected and said that any attempt to rely upon the attempt would be an abuse of process.
This brings us back to the correspondence in Mr Catalogna's affidavit. The correspondence continued, albeit confused by possible non receipt in some instances, until 9 February 2011. It is sufficient to say this correspondence did not take the matter any further. On 8 February 2011, the applicant filed an interim application. It seeks dispensation of personal service pursuant to s.309(2) of the Bankruptcy Act 1966 (“the Bankruptcy Act”). I note this was not made pursuant to r.6.14 of the Federal Magistrates Court Rules 2001 (“the FMC Rules”). That application was allocated administratively to a Registrar.
On 21 February 2011, Mr Iliopoulous filed the affidavit to which I have already referred. Both the application and the affidavit had the correct intitulation of this case and also the correct number MLG 1731 of 2010. Clearly Belleli King, who prepared and filed them, knew about the petition; both are described as filed on behalf of the respondent. Since Mr Iliopoulous signed the affidavit and swore it, and the application were filed on his instructions, the conclusion that Mr Iliopoulous was aware of this proceeding, at least in general terms, is irresistible.
Also on 21 February 2011, the respondent filed a conditional notice of appearance, albeit that this Court's rules do not provide for conditional appearance. On 24 February 2011, the respondent was represented by senior and junior counsel. Counsel urged the Court to apply r.1.05 of this Court's rules and to apply O 9, rules 6 and 7, of the Federal Court Rules 2001 (“the Federal Court Rules”). This was put, as I recall it, bearing in mind I do not have the transcript, essentially on the points about service, namely its absence and the related abuse of process point.
Mr Denton did foreshadow there might be other matters, and the orders made by me left it open to the respondent to raise them. However, Order 1 of my orders clearly foreshadowed that the hearing on
15 March 2011 would determine the issue of service. All deponents were ordered to be present, although, as best I understand it, in the event none of them were. I also joined by consent the previously filed s.309 application. On 3 March 2011, the respondent filed an interim application, although in part it sought to apply O 9, r 7 of the Federal Court's Rules. It also raised the issue of transfer to the Federal Court.
The application was supported by an affidavit of Mr Rewell, as I have said, filed on 3 March 2011. This affidavit, amongst other things, annexed the transcript before me and Finkelstein J, and inter alia, it also supported a thesis set out at paragraph 7 of Mr Rewell's affidavit that the petition was stale as it was filed outside six months from
21 May 2010, the date asserted by Mr Rewell as the date of bankruptcy.
The next episode was the proceeding on 15 March 2011. Mr Denton raised, as a preliminary issue, the prospect of transfer to the Federal Court. Whether this was correct is open to question, given his client's conditional appearance. Arguably, our first preliminary issue was the matters going to the conditional nature of the appearance, but first no objection was taken to this way of proceeding, and second, this court is, of course, governed by s.42 of the Federal Magistrates Act 1999 (“the Federal Magistrates Act”). That provides:
“In proceedings before it, the Federal Magistrates Court must proceed without undue formality and must endeavour to ensure the proceedings are not protracted.”
I pay due regard to that section.
I heard argument on the issue of transfer, and following a short adjournment, I indicated I would not do so. This is why: the respondent submitted it was appropriate to transfer to the Federal Court pursuant to s.39 of the Federal Magistrates Act. It was submitted that it was inappropriate for this Court to consider the effect of the orders made on 21 May 2010 and/or that this was particularly so in circumstances where Finkelstein J had made observations on 4 June 2010 about the effect of those orders.
Counsel for the applicant in due course took the Court to the decision of Finn J on appeal. It was submitted that the issues raised by the respondent were disposed of by Finn J. Counsel for the respondent said that Finn J’s decision was in error and in conflict with that of Finkelstein J, and was, in any event, obiter dicta because this aspect of the matter was not argued before him. I make the following points: First, although I made some remarks on Tuesday about what I had had in mind in making the orders I made on 21 May 2010, on reflection it is clear that whatever I thought or intended is irrelevant. The fact is I made the orders I made.
Second, those orders were considered by Finkelstein J on 4 June 2010. Finkelstein J observed, by way of example, at page 14, line 8:
“Granting a stay doesn’t help … because granting a stay does not extend time for anything.”
Following submissions, his Honour announced his conclusion at page 32, line 10 in the following way.
“What I am going to do, unless you tell me I shouldn’t, is I’m going to extend the stay order, pending the hearing and determination of the appeal, and it will have whatever effect the magistrate intended it to have, which is best worked out on the appeal proper. In other words, you are not going to be any better off or any worse off, and if the stay order does something to the bankruptcy notice, it doesn’t, and if the stay order doesn’t do anything to the bankruptcy notice then it doesn’t do it. That’s not a bad way of preserving the status quo.”
The matter came before Finn J as judgment was delivered on 27 June 2010 at paragraph [1] his Honour said:
“The original application in this matter was to have set aside a bankruptcy notice served by the respondent company (“BM”) on Steve Iliopoulos on 22 December 2009. The basis of the application was that Mr Iliopoulos had a counter claim, set off or cross demand as referred to in s.40(1)(g) of the Bankruptcy Act 1966 (Cth); see s.41(7) of the Act. That application did not succeed before a Federal Magistrate but his honours orders were “stayed”. Time for compliance with the notice has, on the appellant’s notice of motion, been extended pending the determination of the appeal to this Court so as not to render the appeal nugatory.”
At paragraphs [16] - [17] his Honour continued:
“At the hearing of this appeal, as I have noted, the appellant sought leave to amend its notice of motion to extend time to comply with the bankruptcy notice until the determination of the Perth proceedings. That application is opposed by the respondent.
For my own part I do not consider that the appellant now should be granted any such extension.”
At paragraph [44] his Honour said:
“The extension of time for compliance with the requirement of the bankruptcy notice was until the hearing and determination of this appeal. It will not be further extended.”
It is clear beyond doubt in my view that Finn J decided that the effect of my orders and Finklestein J’s orders was to extend the time for compliance with the bankruptcy notice until determination of the appeal, unless there is some other notice of motion about which nobody has told me anything.
Whether that that matter was argued before him or not (and I see no reason to doubt Mr Denton’s word but I do not have the transcript to show whether one or other party raised the matter in some elliptical way) that is what Finn J decided. The High Court did not intervene.
That decision binds me (see SZJBD v Minister for Immigration & Citizenship [2009] FCAFC 106 where at paragraphs [108] – [110] Perram J said the following:
“At the initial hearing before in the Federal Magistrates Court, the magistrate refused to listen to the tape; SZJBD v Minister for Immigration [2007] FCMA 1829 at [12]. That determination was subject to an appeal to this Court. A judge of this Court determined that the decision not to listen to the tape involved error: SZJBD v Minister for Immigration [2008] FMCA 922 at [25]. That judge set aside the federal magistrate’s determination and remitted it to the federal magistrate for rehearing. In my opinion, there could thereafter be no circumstances which could justify the federal magistrate in refusing to listen to the tape. It is not open to a court lower in the judicial hierarchy to disobey a determination of an appellate court in that manner.
The federal magistrate took this course because he believed that two decisions of Allsop J in NAPS v Minister for Immigration & Multicultural & Indigenous Affairs [2003] FCA 1095 and [2004] FCA 159, required this result. I agree with Buchanan J that that conclusion was incorrect. However, even if it had been correct it would not have possibly have justified the federal magistrate in disobeying the outcome of the appeal from his own decision.
With respect to the federal magistrate, he appears to have confused the result in the appeal from his own decision with a precedent. It was not a precedent – it was a determination of the very issue before him and he was bound to implement it without further consideration.”
Time for compliance was extended by Finn J until 27 June 2010.
There are three other points I would make although they are not perhaps relevant given the conclusions I have just expressed.
First, there is not much point at referring the matter to the Federal Court as it would be referred to a single Judge not a Full Court. Finn J’s judgment was given on appeal.
Second there are no associated proceedings in the Federal Court. That is a matter referred to in s.39(3)(b) of this Court’s Act, and third, the resources of this Court are sufficient to deal with the matter of s.39(3)(c). I think this was conceded by counsel for the respondent. Whether that was so or not, I think would have been a correct concession.
The next issue that arises, and some of these matters are conflated because of the way the parties made their submissions, is the question of the conditional appearance and the interrelated question of the application of the Federal Court Rules.
The discretion to apply the Federal Court’s Rules is plainly discretionary in r.1.05. The discretion only applies in the event that the Rules of this Court are insufficient or inappropriate. That is not the case here. This is because the application was filed under s.309 of the Bankruptcy Act. Section 309(2) of the Act read as follows:
“Where a notice or other document is required by this Act to be served on or given to a person, the Court may, in a particular case, order that it be given or served in a manner specified by the Court whether or not any other manner of giving or serving the notice or other document is prescribed.”
The operation of this section was considered in some detail by the Full Court of the Federal Court in Ginnane v Diners Club Ltd (1993) 120 ALR 375 (“Ginnane”). So far as my research has revealed, that decision has not been the subject of any later disagreement. It was a Full Court, composed of Northrop, Sheppard and Einfeld JJ, and I will read the headnote:
“In March 1992, the respondent presented to the Registrar in Bankruptcy a petition for a sequestration order against the estate of the appellant. A solicitor attended the court on the return date of the petition but did not formally appear. The petition was adjourned whereupon the respondent sought an order for substituted service on the appellant’s solicitor on the basis of discussions between the respective solicitors for each party. The appellant resided overseas. The appellant’s solicitor had told the respondent’s solicitor that he acted for the appellant and was able to have telephone conversations with the appellant. There was no material before the Deputy District Registrar of the court of any unsuccessful attempt to serve the petition or accompanying documents on the appellant. There was also no evidence that the appellant’s solicitor had refused to give the appellant’s address to the solicitor for the respondent.
The Deputy District Registrar of the Court made orders dispensing with personal service and providing for service on the appellant’s solicitor. This decision was reviewed pursuant to section 31(A)(6) and (7) of the Bankruptcy Act 1966 (Cth) by the Federal Court which affirmed the decision and dismissed the application for review. The appellant appealed to the Full Court of the Federal Court.
By s.52(1)(b) of the Bankruptcy Act 1966 (Cth), it is necessary for the court on hearing a creditor’s petition to be satisfied, inter alia, of proof of service of the petition. Rule 20 and Form 8 to sch 1 of the Bankruptcy Rules provide for notices of appearance for a debtor, although this is not always insisted on by r.15(b) the creditor’s petition is to be served personally upon the debtor unless otherwise ordered by the court under s.309(2).”
And then the headnote sets out the provision.
“Held:
(i)The discretion conferred by s.309(2) of the Bankruptcy Act 1966 (Cth) is unfettered but with respect to a creditor's petition is not to be exercised lightly. Normally, before exercising the discretion in relation to a petition, the court must be satisfied that abnormal difficulties exist in effecting personal service of the petition on the debtor and that there is a reasonable probability that the debtor will be informed of the petition as a result of the form of service identified.
(Re Mendonca quoted).
(ii)An order for substituted service should not be made as of course. The circumstances which may requiring the making of such an order are many and varied. It is undesirable to limit the discretions of judges and registrars by prescribing requirements which lack flexibility. The fact that a debtor may be overseas may not be sufficient of itself but it is factor to be taken into account.
(iii)The discretion conferred by s.309(2) is unfettered. The two limbs are not separate and distinct. The evidence must normally show some need for substituted service and the basis by which the substituted form of service will in all probability be effective to bring the petition to the knowledge of the debtor. In any case, it is necessary to waive –
And that is a typographical error, it is plainly “weigh” –
the different considerations, the statutory requirement for personal service of the petition, the facts making personal service unusually difficult and impossible and the likelihood of the form of the substituted service ordered, bringing the petition to the knowledge of the debtor.”
At point (vi) the headnote continues:
“If an appearance is filed it will be a submission to the jurisdiction of the court and admission of service unless the notice says that it intended to impose the petition on the ground that the petition has not been served. Where notice is filed pursuant to r.20, but a debtor appears, there will be a submission to the jurisdiction of the court and admission of service unless the debtor or his legal representative indicates an intention to oppose the petition on the ground it has not been served.”
In the body of the judgment, at p-376, the Court said:
“The essential issue raised by this appeal relates to the manner in which the discretion to make an order for substituted service of a petition under s.309(2) of the Bankruptcy Act 1966 (Cth) should be exercised.
Section 52(1)(b) of the Bankruptcy Act provides that at the hearing of a creditor's petition, the court shall require proof of the service of the petition and, if it is satisfied with the proof of that service, as well as the other matters specified in s.52(1), it may make a sequestration order against the estate of the debtor. Section 52(2) provides, among other things, that if the court is not satisfied with the proof of the service of the petition, it may dismiss the petition. These provisions illustrate a unique prescription relating to a petition for a sequestration order. A sequestration order affects the status of a person. The legislature, in recognition of this feature, has insisted that the petitioner must prove, among other things, service of the petition on the debtor.”
At p-377, at line 25, the Court continued:
“Although r.20 now provides for appearances in cases where a debtor does not intend to oppose the petition, debtors who appear do not usually take that course. Moreover, many judges and registrars do not insist on it being taken. If it is taken and a debtor appears, whether in person or by counsel or solicitor, there will be a submission to the jurisdiction of the court and an admission of service unless the notice says that it is intended to oppose the petition on the ground that the petition has not been served.
In cases where no notice pursuant to r.20 has been filed but a debtor appears, whether in person or by counsel or solicitor, there will again be a submission to the jurisdiction of the court and an admission of service unless the debtor or his or her legal representative indicates an intention to oppose the petition on the ground that it has not been served.”
At line 43, the Court continued:
“Proof of the service of a bankruptcy petition is usually provided by an affidavit of service of it which is read at the hearing. But that is not the only way in which service may be proved. Rules 16 and 122 of the Bankruptcy Rules contain provisions relevant to the form and content of the affidavit of service but that does not mean that proof of service may only be given by affidavit. It may, for instance, be established by oral evidence or by admission and an admission may be express or one which is implied from the overall conduct of a party.”
At p-378, at line 30, the Court continued:
“The discretion conferred by s.309(2) is unfettered but the authorities show that in relation to a creditor's petition, the discretion is not to be exercised lightly. Normally, before exercising the discretion in relation to a petition, the court must be satisfied that abnormal difficulties exist in effecting personal service of the petition on the debtor and that there is a reasonable probability that the debtor will be informed of the petition as a result of the form of service identified. With respect to the second principle, Gibbs J said in Re Mendonca; Ex parte Commissioner of Taxation (citation given):
It is a fundamental rule that a method of substituted service will not be allowed which will not in all reasonable probability be effective to bring knowledge of the proceedings to the debtor [authority quoted].
The facts giving rise to this appeal are unusual, and, to some extent, may be described as artificial and unreal. On 6 March 1992 the respondent, Diners Club Ltd, as petitioning creditor, presented to the Registrar in Bankruptcy a petition for a sequestration order against the estate of the appellant, Anthony Ginnane, the judgment debtor. The petition was to be heard by the Court on 12 May 1992. On that day, there was no appearance by the appellant and the hearing of the petition was adjourned to 22 June 1992.
By application dated 12 June 1992, the respondent sought the following order:
Order for substituted service of the affidavit verifying paras 1, 2 and 3 of the Creditor's Petition and of the affidavit verifying para 4 of the creditor's petition upon the Judgment Debtor's Solicitors, Messrs Kliger Katz of 469 La Trobe Street, Melbourne.
On 19 June 1992, that application came on for hearing before a Deputy District Registrar of the Federal Court in the exercise of powers of the Court conferred by section 31A of the Bankruptcy Act. In support of the application, counsel for the respondent relied upon two affidavits sworn 12 June 1992 and 19 June 1992. Although the application did not seek an order for substituted service of the petition, there was no evidence before the Deputy District Registrar that the petition had been served on the appellant. The affidavits disclosed that on the morning of 12 May 1992, the day on which the petition was due to be heard, a
Mr Rothfield of the firm Messrs Kliger Katz rang Mr Jackson, the solicitor for the respondent. Mr Rothfield told Mr Jackson that he was acting for the appellant who was overseas, that he had spoken to the appellant and made an offer to settle the respondent's debt. Negotiations proceeded and further telephone conversations took place between Mr Rothfield and the appellant. Although Mr Rothfield attended the Court for the hearing of the petition on 12 May 1992, he did not announce an appearance before the Deputy District Registrar. He also did not appear on the application for substituted service on 12 June.
On 12 June 1992, further discussions took place between
Mr Jackson and Mr Rothfield concerning settlement.
Mr Rothfield again told Mr Jackson he was acting for the appellant and that he was able to have telephone conversations with the appellant. Further negotiations continued on 16 June, 18 June and 19 June 1992. There was no material before the Deputy District Registrar of any unsuccessful attempt to serve the petition, or the accompanying documents, on the appellant. There was no evidence that Mr Rothfield had refused to give the address of the appellant to Mr Jackson. There was strong evidence that if the petition was served on Mr Rothfield, the existence of the petition would be brought to the knowledge of the appellant.
On 19 June 1992, on the hearing of the ex parte application, the Deputy District Registrar of the Court made the following orders:
(1)Personal service of the Creditor's Petition be dispensed with.
(2)In lieu thereof the Creditor's Petition be served as follows ‑
And that is set out, serving it on Kliger Katz.
“These documents were served on 25 June 1992 in conformity with the order.
By application dated 27 July 1992, the appellant sought an order:
That the Orders made by Registrar Agnew in this proceeding on 19 June 1992 be set aside and service of the Creditor's petition be deemed ineffective.”
At p-380, the Court continued at line 15:
On 26 August 1992, the application and the petition came on for hearing before the Court constituted by Olney J.
The Court then set out what his Honour had done, and at line 40, the Full Court continued:
“His Honour's approach was thus erroneous. Instead of hearing the matter himself, he regarded his task as one which involved the review by an appellate court of the exercise of a discretion. That being so, it is for this Court to decide whether or not an order for substituted service should be made.
The main thrust of the submissions of counsel for the appellant was that there were two limbs to the exercise of the discretion conferred by s.309(2) of the Bankruptcy Act, the first limb being that there had to be special reasons to dispense with the requirement of personal service of the petition. The second limb was that the debtor would, in all probability, have knowledge of the petition as a result of the substituted service. It was only if the first limb was established, so it was said, that the second limb applied. The appellant's argument is that there was no evidence before the trial Judge to establish either of these limbs, and in particular the first limb.
An order for substituted service should not be made as of course. But the circumstances which may require the making of such an order are many and varied. It is undesirable, therefore, to limit the discretions of judges and registrars by prescribing requirements which lack flexibility. Each case must depend upon its own facts. The fact that a debtor is overseas may not be sufficient, by itself, despite the problems arising in the serving of a document bearing the seal of the Court in an overseas country. Nevertheless it is a factor to be taken into account.
Although as a matter of methodology, it is useful to consider these two limbs separately, it must be remembered that the discretion conferred by s.309(2) of the Bankruptcy Act is unfettered. The two limbs are not separate and distinct compartments. Together, they form a composite basis for the exercise of a discretion. Normally, the evidence must show some need for substituted service and the basis by which the substituted form of service will, in all probability, be effective to bring the petition to the knowledge of the debtor. In some cases, the evidence may establish almost a certainty that the form of substituted service will have the effect of bringing the petition to the knowledge of the debtor. This is such a case. In these circumstances, the evidence justifying the departure from personal service need not be as strong as in other cases. In some cases, the evidence may disclose very strong grounds for substituted service, but that the form of service is less likely to bring the petition to the knowledge of the debtor. In any particular case, it is necessary to weigh the different considerations, the statutory requirement for personal service of the petition, the facts making personal service unusually difficult or impossible and the likelihood of the form of substituted service ordered bringing the petition to the knowledge of the debtor. Having regard to all those factors, it is necessary to exercise the discretion to make or not to make the order for substituted service.
The evidence does not disclose how the appellant's solicitor knew that the petition was due to be heard on 12 May 1992, but it seems that he must have known as he attended the court for the hearing. Moreover, the appellant gave instructions to his solicitor to attempt to settle the claim and to continue negotiations for settlement over several weeks. The appellant was at the time living in California. In all the circumstances, it must be accepted that the appellant knew of the existence of the petition and the fact that it was to be heard on 12 May 1992. There are ample grounds for making an order for substituted service.”
The facts of that case have self evident aspects in common with this one. I take the following propositions from it: first, the discretion is unfettered; second, it does not involve two discrete limbs; and third, each case must be determined on its on facts. It should be noted that the power exercisable under s.309, and indeed, pursuant to r.1.06 of the Federal Magistrates Court Rules, can be exercised even where service is clearly not effected, and a declaration is indeed made pursuant to Order 9, rule 7 of the Federal Court Rules, as the respondent seeks be the case here.
In Sogelease Australia Ltd v Griffin [2003] FCA 453, Emmet J proceeded on exactly this footing, although in the ultimate, he did not have to make the order. What his Honour said at paragraph [1], and following, is as follows:
“I have before me an application under O 9 r 7 of the Federal Court Rules for a declaration that a bankruptcy petition has not been duly served on the respondent debtor to the proceeding. The petition in question was filed by Sogelease Australia Limited and SG Australia Limited (together ‘the Creditor’s). By the Petition, the Creditors apply for a sequestration order under the Bankruptcy Act against the estate of David James Griffin (“the Debtor”). The Debtor has filed a conditional appearance for the purpose of seeking the declaration and has filed notice of grounds of opposition relying solely on the ground that the Petition has not been served on him.
It is common ground that, in so far as it is relevant, the Petition is `originating process' within the meaning of O 7 r 1(1) and that it has not been `served personally on' the Debtor within the meaning of that phrase as used in O 7 r 1(1). The Creditors claim, however, that it is not necessary for a bankruptcy petition to be served personally on a debtor. Alternatively, the Creditors say that, if a petition must be served personally on a debtor, compliance with that requirement should be dispensed with pursuant to O 1 r 8 or, in the circumstances of the case, the Court should make an order under O 7 r 10 that the Petition be taken to have been served on the Debtor.
The Creditors propose to move for orders under O 1 r 8 or O 7, r 10. The Creditors will also apply, in the alternative, if necessary, for an order under s.309 of the Act, which provides, relevantly, that, where a document is required by the Act to be served on a person, the Court may, in a particular case, order that it be served in a manner specified by the Court, whether or not any other manner of serving the document is prescribed. I have deferred consideration of any such application until I have disposed of the Debtor's application under O 9 r 7 for a declaration that the Petition `has not been duly served on' the debtor.”
At paragraph [28], having considered the matter, his Honour continued:
“Mr J F S North is the solicitor for the Debtor. He has been informed by the Debtor that “he personally has not physically received any copy of the petition”. He has also been informed by the Debtor that “at no stage has personal service of the petition been effected upon him by leaving a copy of the document with him”. The Debtor has chosen not to give any evidence in relation to that matter. I am quite satisfied that the Petition, including its return date, has come to the attention of the Debtor and that he has chosen not to oppose the Petition, except conditionally, notwithstanding his awareness of the Petition. I may, therefore, be disposed to make an order under O 1 r 8 dispensing with compliance with the requirement of O 7 r 1 for personal service of the Petition or, possibly, an order under s.309(2) of the Act that the Petition be served otherwise than in accordance with O 7 r 2.”
His Honour went on to say that notwithstanding that, he thought it was appropriate to make the declarations sought. He was also required to consider a construction of r.16.01 of the Rules as they then were. His Honour disposed of that matter antithetically to the creditors. His Honour made the declaration, but on the same day, in a decision with the same parties, but number [2003] FCA 454, his Honour says at paragraph [1]:
“This morning I made a declaration under O 9 r 7 of the Federal Court Rules that the creditor's petition filed in this proceeding has not been duly served upon the respondent debtor. However, in the course of giving my reasons for making that declaration, I indicated that I would be disposed to make an order under O 1 r 8 waiving compliance with the requirement of O 7 r 1 for personal service of the petition on the Debtor or, alternatively, an order under s.309 of the Bankruptcy Act 1966 (Cth) dispensing with personal service.
Following the making of a declaration for the reasons then given, an unconditional appearance was filed in court on behalf of the Debtor.”
In the ultimate, the matter did not proceed in that way, because the debtor submitted to an order under section 50. Of course it needs to be borne in mind that in the Sogelease case, the Federal Court’s rules applied automatically, but that is not the case here. Here, in my view, it is clear that first the respondent’s solicitors knew of the petition as they filed the various documents they filed; second, this was on the respondent’s instructions, so he must have known what the proceeding was; third, counsel has appeared on all hearings to date.
This case has something of the quality described by the Full Court in Ginnane as artificial and unreal. The respondent complains strongly about the absence of service, and its supposed consequences, in circumstances where he clearly must know about the petition even if he has not actually read it. He has clearly, as in Ginnane, known of the various hearings. To quote Ginnane again:
“In some cases, the evidence may establish almost a certainty that the form of substituted service will have the effect of bringing the petition to the knowledge of the debtor.”
This case goes perhaps even further. It is almost a certainty that the respondent already knows about the petition. In the particular circumstances it is, in my view, entirely appropriate to make the orders sought by the applicant under s.309. It is clear that service on Messrs Belleli King will have the effect of bringing the petition to the attention of the creditor. They act for him in this and other proceedings. I will make the orders 1 to 3 sought in the applicant’s application filed on
8 February 2011, subject to alteration of the date in the third order. Consistent with the applicant’s position thus far, unless persuaded to the contrary, the date should be today.
This leaves the interim order 2 sought in the respondent’s application filed on 3 March. In Mr Rewell’s affidavit at paragraphs 6 and 7, it is asserted that the petition being filed on 13 December 2011 was incompetent, as it was outside the six month period from the date of bankruptcy on 21 May 2010. Whether paragraph 2 of the interim orders was intended to raise this issue, as I assume it must have been, or whether paragraph 2 was ancillary to the issues relating to service, with which I have already dealt, is immaterial. The respondent has raised this issue, and I should deal with. I refer again to s.42 of the Federal Magistrates Court Act.
The matter can be dealt with shortly. For the reasons given earlier, Finn J held that time for compliance was extended to trial and determination by him, ie, 27 July 2010. As earlier indicated, I am bound by his Honour’s decision. It follows that the act of bankruptcy was 27 July 2010, and the petition is therefore not out of time. Accordingly, I will not dismiss it or set it aside as the respondent seeks.
As was the case in Sogelease No. 2, that is to say FCA 454, the hearing of the petition should proceed as and when convenient, and in that case Emmet J proceeded at the convenience of the senior counsel for the petitioner. In fact, it proceeded, it would appear, the next day, if one looks at [2003] FCA 455. That is not possible here. I am part heard with a complicated matter at 10 o’clock. The next available date I have is 2.15 pm on Friday, the 25th, next week. The convenience of counsel will have to take secondary place, I am afraid to say.
RECORDED : NOT TRANSCRIBED
I will give my reasons. There are two basic thrusts to the application that the matter be adjourned until after 1 April: the first can, I think, fairly be said to be characterised as the sheer practical difficulties to
Mr Iliopoulos and his advisers of being ready to proceed on that date; the second is that the landscape may very well change following the application for leave to appeal out of time that is due to be heard by the Court of Appeal of the Victorian Supreme Court on that date.
Additionally, it is asserted the matter may not complete on Friday next if it only starts at 2.15 pm. First, the litigation landscape, if I can so describe it in this proceeding, is so multifarious and varied, it is highly probable in my view, that there will always be some court date forthcoming in the relatively near future. If I start putting the matter off on that footing, we may be taking an immensely long period of time. Second, bankruptcy matters are urgent by their nature. If Mr Iliopoulos is successful in resisting the application, then his troubles in this proceeding will dissipate and that is entirely to his advantage.
If a sequestration order were ultimately to be made, he would be in the better position of being able to appeal the whole lot of my reasons in one go. It is really far more uncomplicated to proceed in that way. I appreciate that there are logistical difficulties to Mr Iliopoulous, but quite frankly, it would appear to me that he has remarkable resources and a considerable capacity to litigate, and I do not think that proceeding in a week’s time is unfair. If need be, other counsel can be obtained and they have enough time to prepare themselves for the day. So I will list the matter, but I will list it 1.30 pm on Friday next.
I certify that the preceding fifty-one (51) paragraphs are a true copy of the reasons for judgment of Burchardt FM
Date: 18 March 2011
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