Caddies and Ors TAS Rankin Nathan Solicitors v Coughlin
[2009] FMCA 588
•16 June 2009
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| CADDIES & ORS T/AS RANKIN NATHAN SOLICITORS v COUGHLIN | [2009] FMCA 588 |
| BANKRUPTCY – Review of Registrar’s sequestration order – disputed personal service of bankruptcy notice – debtor’s denial of service disbelieved – sequestration order affirmed – application for review refused. |
| Bankruptcy Act 1966, s.52 Federal Magistrates Act 1999 (Cth), ss.103, 104 |
| De Robillard v Carver (2007) 159 FCR 38 Pattison v Hadjimouratis (2006) 155 FCR 226 Totev v Sfar (2008) 167 FCR 193 |
| Applicants: | ROBERT CADDIES & ORS T/AS RANKIN NATHAN SOLICITORS |
| Respondent: | STEVEN COUGHLIN |
| Supporting Creditor: | OFFICIAL RECEIVER |
| File Number: | SYG 1621 of 2008 |
| Judgment of: | Smith FM |
| Hearing date: | 16 June 2009 |
| Delivered at: | Sydney |
| Delivered on: | 16 June 2009 |
REPRESENTATION
| Counsel for the Applicant: | Mr J Mitchell |
| Solicitors for the Applicant: | Rankin Nathan Solicitors |
| Counsel for the Respondent: | Mr M Foley |
| Solicitors for the Respondent: | Foley Solicitors |
| Counsel for the Supporting Creditor: | Mr J Piper |
| Solicitors for the Supporting Creditor: | Foley Solicitors |
ORDERS
The application for review is refused.
The sequestration order made on 6 March 2009 is affirmed.
The applicant creditor’s costs, including all reserved costs, be taxed and paid from the estate of the respondent bankrupt in the priority fixed by s.109(1)(a) of the Bankruptcy Act 1966 (Cth).
The applicant creditor shall serve a copy of this order on the trustee and the Official Receiver in Sydney within 2 days.
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT SYDNEY |
SYG 1621 of 2008
| ROBERT CADDIES & ORS T/AS RANKIN NATHAN SOLICITORS |
Applicant
And
| STEVEN COUGHLIN |
Respondent
REASONS FOR JUDGMENT
(revised from transcript)
Mr Coughlin applied on 23 March 2009 for review under s.104(2) of the Federal Magistrates Act 1999 (Cth) of a decision of a Registrar to make a sequestration order against Mr Coughlin. The sequestration order was made by Registrar Tesoriero on 6 March 2009.
The application for review was brought reasonably promptly. There is evidence of its service on the trustee who has submitted to the Court's orders save as to costs. There is no evidence of creditors being served with notice of the application as required by r.7.06(3), but two of them have appeared. In the circumstances, and particularly since I am refusing the application, I do not consider any departure from the rules in that respect is significant.
The petitioning creditors, who appear as ‘the applicants’ in the proceedings, are the partners of a firm of solicitors who practice as Rankin Nathan Solicitors in Newcastle. I will refer to them as “the solicitors”. They have instructed counsel to oppose the application for review of the sequestration order.
As ultimately presented to the Court, the application for review relied only upon one ground of opposition to the making of a sequestration order, being the absence of an act of bankruptcy as alleged in the petition, based on a challenge to the affidavits of service of the bankruptcy notice.
However, I have reviewed all the evidence which was before the Registrar in support of the petition when the sequestration order was made, and done so in the light of the additional evidence now before me. I have also received up-to-date r.4.06 affidavits. This is necessary because the Court on a review acts de novo in considering the matter which was before the Registrar, although under s.104(3) it has an amplitude of powers (see Pattison v Hadjimouratis (2006) 155 FCR 226, and Totev v Sfar (2008) 167 FCR 193). At times it may become more appropriate to annul a sequestration order rather than set it aside, and in some circumstances the making of a fresh sequestration order might be appropriate, where the Court on review decides that a sequestration order should be made but not necessarily by affirming the earlier sequestration order.
However, as I shall explain, I am satisfied in the present case that there was no defect in the making of the sequestration order by the Registrar, and I am satisfied that the appropriate order today would be to affirm the making of that order so as to allow the administration to proceed without interruption.
The petition was filed on 24 June 2008, and alleged a debt of $16,052.95, being the balance owing under a default Local Court judgment plus interest, made on 22 November 2006. The same Local Court judgment was relied upon in relation to the bankruptcy notice, which the solicitors allege was served personally on Mr Coughlin on 10 May 2008.
There is no dispute that the debt relied upon in the petition was owing at the date of the making of the sequestration order and remains owing today. There is no issue taken with the formal sufficiency of the bankruptcy notice which was issued on 2 April 2008, nor is any issue taken with the existence of the debt relied upon in the bankruptcy notice. This was the balance then owing under the Local Court judgment. A certificate of the Local Court dated 27 March 2008 was attached to the bankruptcy notice, and quantified the amount then owing as $14,811.29. The bankruptcy notice added some additional interest, so as to demand the payment of the amount of $15,740.49 at the date of its issue.
As I have indicated, no dispute is made as to the existence of that debt as quantified at the various times, and the Court is not invited to look behind the certificate of judgment. There are suggestions in the evidence that Mr Coughlin disputed the debt and represented himself in proceedings in the local Court in November 2007, when he applied unsuccessfully to set aside the judgment. The arguments he presented to the Local Court are obscure and he has not attempted to assert them again to this Court.
I am satisfied that, if the affidavit of service of the bankruptcy notice is accepted, then the act of bankruptcy alleged in the petition occurred on 2 June 2008.
The file contains a number of affidavits from a process server and from one of the partners of the solicitors, Mr Thomas, which were presented in support of an interim application for an order allowing substituted service of the petition. This evidence disclosed very numerous attempts by a process server to serve Mr Coughlin with the petition. He attended upon what appears to be a rural property, on which Mr Coughlin has his family home. On most of his visits he found the front gate to be locked, but on two occasions a male person who identified himself as ‘Nathan’ claimed that Mr Coughlin was absent, and refused to provide further cooperation in relation to service of documents on him. On one occasion the front door was open, and for five minutes nobody answered the process server's calls. The process server left copies of the documents at the premises on at least one of these occasions.
The other evidence before the Registrar on the substituted service application, included two affidavits by Mr Thomas deposing to conversations with Mr Coughlin by telephone, in which Mr Thomas claims to have made reference to attempts to serve him with documents and to the existence of pending proceedings in the Court concerning the unpaid debt.
Based on this evidence, Registrar Hannigan made a substituted service order on 19 December 2008. It required either hand delivery to a male person at Mr Coughlin’s home, or service by placement in its letter box plus posting to that address. I am satisfied, on an affidavit, that the second mode of service was adopted and performed. Registrar Hannigan also required the sending of a text message to Mr Coughlin's mobile telephone number, stating that the applicants had filed a creditor's petition which was sent to or left at his home. I am satisfied that such a text was sent. Mr Coughlin denies reading a text message, but he claims to have a general practice of not reading text messages on his mobile phone. I am not satisfied by his denial that a text message was not sent in accordance with Registrar Hannigan's order.
The hearing of the petition did not proceed on 27 February 2009, the date appointed by the substituted service order, and there was no appearance by or on behalf of Mr Coughlin. The hearing of the petition proceeded in his absence on 6 March 2009, and I am satisfied that a sufficient letter notifying Mr Coughlin of that adjournment was sent. On the evidence now before me, I consider that it was open and proper for the Registrar on 6 March 2009 to be satisfied as to service of the petition in accordance with the substituted service order. The file contains the other evidence required before the making of a sequestration order on that day, and I am not satisfied that the order ought not have been made on that day. This conclusion is subject to my resolving the disputed service of the bankruptcy notice.
Mr Coughlin asserts in an affidavit in support of his application for review, that he has never been served with a bankruptcy notice. He denies that this happened on 10 May 2008 by personal delivery to him by Mr Thomas at a meeting in a coffee shop at Maitland, as is deposed to in affidavits of service sworn by Mr Thomas. He denies ever receiving the creditor's petition in the mail box or by post at any time, and denies receiving a text message. He claims that:
The existence of these proceedings was only brought to my attention late in the evening on 18th March 2009 when my current solicitor, Michael Foley, brought these matters to my attention and advised me that a Sequestration Order had been made against me.
Mr Coughlin was cross-examined on his affidavit, and he vehemently maintained the truth of these statements. However, I do not accept his evidence.
On Mr Coughlin's own evidence, he has an extremely poor memory of events which have occurred in the course of his dispute over the solicitors' account, including the Local Court proceedings concerning the default judgment and the bankruptcy proceedings. In particular, he has an extremely poor memory of his attendance at the Local Court in November 2007 to set aside the judgment. His disclaimers of knowledge of the court proceedings and documents were so extensive, that if I accepted his evidence I would doubt whether he was capable of understanding any of the documents which must have been in front of him on that occasion, or on other occasions. The very unreliability of his memory as now presented by him, causes me to doubt that he could have such a perfect memory of not receiving a document from Mr Thomas at the coffee shop meeting, which he admits occurred.
The surrounding circumstances of the meeting on 10 May 2008 all point to the probability, rather than otherwise, of Mr Thomas hand delivering him a copy of the bankruptcy notice on that occasion. The bankruptcy notice had been issued on 2 April 2008, and this followed other actions suggesting that the solicitors were keen to take steps to recover their unpaid fees, including by seeking to persuade Mr Coughlin to make a reasonable offer. I find it almost inconceivable that in the course of those efforts the solicitors, having obtained a bankruptcy notice, would not attempt to serve it on Mr Coughlin. In particular, I consider it most improbable that Mr Thomas would not at the coffee shop meeting have drawn its existence to the attention of Mr Coughlin, and would not have taken the opportunity to serve him with it.
Moreover, I accept Mr Thomas's evidence under oath that this was one of his intentions in arranging for the meeting, and that this intention arose after the solicitors encountered difficulties in obtaining service of the bankruptcy notice on Mr Coughlin through a process server. That there probably had been such attempts and difficulties is overwhelmingly suggested by the subsequent evidence of difficulty serving Mr Coughlin with the petition documents.
In my opinion, Mr Thomas's evidence under oath in cross-examination had the ring of truth about it. Moreover, it is not unaccompanied by evidence which is roughly contemporaneous. This is a file note, which Mr Thomas says he made on the Monday after the Saturday coffee shop meeting. There are other file notes from the files of Mr Thomas, which show that he is a meticulous file note maker. It was not suggested to him in cross-examination nor in submissions to me that these were not a solicitor’s contemporaneous file notes from the relevant file. I find that they were. In my opinion, they confirm Mr Thomas' current memory, which was unshaken, that he did serve Mr Coughlin with the bankruptcy notice on 10 May 2008, as was originally deposed in his first affidavit which was before the Registrar.
I also find Mr Thomas’ evidence much more believable than Mr Coughlin’s, concerning the telephone conversations which he had with Mr Coughlin subsequent to the coffee shop meeting. I consider it probable that he would have referred to the existence of bankruptcy proceedings in some fashion, when talking to Mr Coughlin on those occasions. I do not accept Mr Coughlin's suggestions that the phone calls were only on the topic of negotiating payment of the debt, without any reference to the contemporaneous existence of bankruptcy proceedings.
In his submissions to me, Mr Coughlin's current solicitor, Mr Foley, submitted that all of Mr Thomas' actions in relation to the bankruptcy proceedings which are deposed to by him in his affidavit and are noted in his sundry file notes, were concocted to suggest falsely that the existence of the proceedings was attempted to be brought to Mr Coughlin's attention, and that Mr Thomas had the intention of keeping the existence of the proceedings secret until after the making of a sequestration order.
I do not consider there is any evidence giving support to that serious allegation against a solicitor. I accept Mr Thomas' evidence to the contrary. The documented and extensive efforts of the solicitors to serve the petition on Mr Coughlin personally through the use of a process server make it clear, in my opinion, that every effort was made by the solicitors properly to serve the bankruptcy proceedings on Mr Coughlin, so as to give him the opportunity to take legal advice and, if he thought fit, appear and defend the proceedings. For whatever reasons, these efforts did not receive Mr Coughlin's appropriate attention, and it is unnecessary for me to decide how that actually came about.
I do not accept the suggestion that there was some impropriety by the solicitors for failing to tell the Court in the course of the application for substituted service that Mr Coughlin, in one conversation, suggested to Mr Thomas that he speak to Mr Foley. I accept that Mr Thomas did make attempts to speak to Mr Foley but was unable to do so. In circumstances where there is no evidence that Mr Foley had ever communicated to Mr Thomas that he had received instructions to act for Mr Coughlin in relation to the bankruptcy proceedings, and where he had not acted for him in the Local Court in November 2007, I can see no reason why it would have been necessary for Mr Thomas to assume that Mr Foley might have, or might receive, instructions to accept service for Mr Coughlin, and to have drawn this to the attention of the Registrar. The order for substituted service which was sought, and obtained, was plainly appropriate in the circumstances deposed to in the affidavits which were presented to the Court at that time.
Mr Coughlin attempted to reinforce the credibility of his denial of having been served with the bankruptcy notice with an affidavit from his accountant. This gave the accountant's opinions that Mr Coughlin brings to him “any Court processes or similar documents that he may receive shortly after he has received them”, that this did not happen in relation to the bankruptcy notice, and that therefore there was no bankruptcy notice served on Mr Coughlin. The accountant also states that Mr Coughlin did not refer to the bankruptcy notice when speaking to the accountant, and it is submitted that this fact also supports Mr Coughlin's credibility.
However, I am not persuaded by that evidence, nor that the memories of the accountant provide reason for me to prefer Mr Coughlin’s evidence over that of Mr Thomas in relation to service of the bankruptcy notice. It is clear from Mr Coughlin’s own evidence that he has not always employed an accountant and solicitor in his legal affairs, including in relation to this debt owed to the solicitors, but that he has attempted at times to deal with it himself “before getting legal people involved”. In my opinion, it is quite likely that in relation to this bankruptcy notice, Mr Coughlin attempted to deal with the solicitors’ debt by ignoring the receipt of the document or by failing to read it and appreciate its significance.
On all the evidence before me I am satisfied that the bankruptcy notice was duly served on 10 May 2008, and that it gave rise to the act of bankruptcy relied upon in the petition.
Mr Coughlin’s notice of opposition also disputed service of the petition. However, as I have already found, it was duly served in accordance with the substituted service order. It was therefore open to the Registrar, as it is to me, to find in terms of s.52(1)(b) of the Bankruptcy Act that there was due service of the petition, even if in fact I accept Mr Coughlin's evidence that it never actually came to his attention. However, my disbelief of Mr Coughlin's evidence that he was not served with the bankruptcy notice, and his generally unsatisfactory presentation as a witness, cause me not to be satisfied that he did not actually receive at least one of the copies of the petition documents which were left at his home or in his letter box during the extensive efforts of the process servers.
Moreover, it is now academic whether service of the petition documents was duly effected on Mr Coughlin before the making of the sequestration order by the Registrar. This is because he has filed an unconditional notice of appearance by Mr Foley, who has brought and presented his present application to the Court. The making of the appearance allows the Court to be satisfied that Mr Coughlin was properly served with the creditor's petition, insofar as my hearing today constitutes a de novo hearing of the petition (see De Robillard v Carver (2007) 159 FCR 38 at 86).
The four other grounds in the notice of opposition put in issue the validity of the bankruptcy notice and the petition, without giving particulars of an argument. However, they were not relied upon today. Nor was an obscure ground in paragraph six, which appears to assert that there are “other sufficient causes” within s.52(2)(b) of the Bankruptcy Act for not making a sequestration order. There is no claim that Mr Coughlin is solvent and able to pay his debts.
For the above reasons, I am satisfied on all the evidence presented to me today in support of the petition that the sequestration order was properly made by the Registrar on 6 March 2009. I am also satisfied at today’s date as to all the requirements of s.52 and the other provisions of the Bankruptcy Act and Rules required to be satisfied before the making of a sequestration order. Mr Coughlin has not made any submissions inviting the Court to exercise its discretion under s.52(2) to dismiss the petition, and I am satisfied that it is appropriate today to affirm the making of the previous sequestration order.
I note that the trustee has filed a submitting appearance, and did not seek any order in relation to his costs arising from the administration under the Registrar’s order, in the event that I affirmed that order.
I consider that it is appropriate to order that the petitioners’ costs of resisting the application for review should be paid from Mr Coughlin’s estate in bankruptcy with the same priority as their costs of the petition.
I certify that the preceding thirty-three (33) paragraphs are a true copy of the reasons for judgment of Smith FM
Associate: Michael Abood
Date: 29 June 2009
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