Cardrona Pty Ltd v Norris and Cardrona Pty Ltd v Norris

[2017] FCCA 317

FEDERAL CIRCUIT COURT OF AUSTRALIA

CARDRONA PTY LTD v NORRIS and CARDRONA PTY LTD v NORRIS [2017] FCCA 317

Catchwords:

BANKRUPTCY – Bankruptcy notice – review of decision – whether service properly effected – application dismissed.

Legislation:

Bankruptcy Act 1966 (Cth) s.306
Bankruptcy Regulations 1996 (Cth)r.16.02

Cases cited:

Haig-Young v Brennan [2004] FMCA 253
Re STEC, Ex parte SCRAGG (1997) 155 ALR 173

Applicant: CARDRONA PTY LTD AS TRUSTEE FOR THE CARDRONA PROPERTY TRUST ACN 128 170 490

Respondent: LEANNE MAREE NORRIS

File Number: BRG 793 of 2016

Applicant: CARDRONA PTY LTD AS TRUSTEE FOR THE CARDRONA PROPERTY TRUST ACN 128 170 490

Respondent: MICHAEL JOHN NORRIS

File Number: BRG 794 of 2016

Judgment of: Judge Vasta

Hearing date: 13 February 2017

Date of Last Submission: 13 February 2017

Delivered at: Brisbane

Delivered on: 13 February 2017

REPRESENTATION

Counsel for the Applicants: Mr K. Wylie

Solicitors for the Applicants: R.B. FLINDERS

Counsel for the Respondents: Mr C. Tam

Solicitors for the Respondents: AEJIS LEGAL

ORDERS

1. The Application for review filed on 22 November 2016 be dismissed.

FEDERAL CIRCUIT COURT
OF AUSTRALIA
AT BRISBANE

BRG 793 of 2016

CARDRONA PTY LTD AS TRUSTEE FOR THE CARDRONA PROPERTY TRUST ACN 128 170 490

Applicant

And

LEANNE MAREE NORRIS

Respondent

BRG794 of 2016

CARDRONA PTY LTD AS TRUSTEE FOR THE CARDRONA PROPERTY TRUST ACN 128 170 490

Applicant

And

MICHAEL JOHN NORRIS

Respondent

REASONS FOR JUDGMENT

(Ex tempore)

1. This is an application for review of a Registrar’s decision to make sequestration orders against the two Applicants, Leanne Marie Norris and Michael John Norris.  The matter came before me today on a very busy Family duty day, but because both counsel were here ready to argue the matter, both counsel quite properly agreed to limit their submissions to one aspect only, because it is that one aspect by itself really is a matter that would determine the future of the case.

2. That question revolves around a construction of r.16.01 of the Bankruptcy Regulations 1996 (Cth). That regulation, dealing with service of documents, reads, relevantly:

   “(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…”

3. The contradicted evidence is that a process server was allowed access to the floor where the unit that Mr and Mrs Norris lived in (or was their last known address) was situated.  He attended there.  There was no one who answered the door of this address. 

4. The process server then took a photograph of the contents of the envelope, which was a bankruptcy notice addressed to Mr Norris and a separate bankruptcy notice addressed to Mrs Norris.  Both notices were put into the one envelope.  The envelope was marked “Leanne Norris, Michael Norris”.  The envelope was then slipped under the door of the residence.

5. In terms of r.16.01, the notice was in an envelope. It was left at the last known address of the person.

6. The question here is whether, because there was one envelope that was addressed to two separate persons, there has been effective service.  The Applicants, in very helpful submissions, have referred to this aspect as the “joint envelope” argument.

7. The Applicants rely upon a decision of Judge Raphael, who was a Federal Magistrate at the time, of Haig-Young v Brennan [2004] FMCA 253. In that case, what had occurred was that there was a joint bankruptcy notice issued against John Brennan and Jane Brennan.

8. There was only one notice, and it was put in an envelope and it was left at the address in accordance with the requirements of r.16.01. The fact is, though, that it was only one notice, even though the one notice was for the two people.

9. At paragraph 9, His Honour remarked:

   “…I believe myself that the rules relating to service still require an individual to be individually served.  At the very least what should have occurred was that the bankruptcy notice should have been contained in two separate envelopes and served in accordance with the regulation, those envelopes being addressed to the individual debtors and not to them both…”

10. His Honour seemed to quote, with some approval, an argument before him that a situation could occur where one of the joint debtors would pick up the bankruptcy notice and keep it hidden from the other joint debtor, possibly to make his own arrangements with the creditor without the knowledge of the other joint debtor, and cause the other joint debtor to have failed to comply with the notice without even knowing that it had been served upon him or her. 

11. However, as will be seen later in these reasons, I am of the view that such a hypothetical situation was simply an illustration as to why the regulation required a bankruptcy notice to be served individually upon a debtor. I am of the view that this hypothetical situation does not form part of the ratio decidendi of His Honour’s decision.

12. His Honour went on at paragraph 11:

    “I would mention here that in the application before me Mr Baker indicated that the petition was only directed at the debtor, John Brennan and not the debtor, Jane Brennan.  He indicated that he was not claiming that the debtor Jane Brennan had been served with a bankruptcy notice or that she had been served with a petition.  This statement seems to contradict the affidavit of service which refers to both debtors and the method of service which was the placing of one bankruptcy notice in one envelope addressed to them both.  It seems to me that if this method of service was to be used, it could not be said that only one of the debtors was served, at least without some more evidence of an acknowledgement of service by the debtor.”

13. It seems, then, from what His Honour was saying, that there would need to be more than one copy of the bankruptcy notice to have been served upon each of the parties; each individual debtor would have to be served their individual notice. 

14. There is evidence in this matter that there were two notices in the one envelope that was addressed to both parties.

15. The argument that the Applicants also raise relies upon a decision of Re STEC, Ex parte SCRAGG (1997) 155 ALR 173 by Von Doussa J, where a bankruptcy notice was served on the wife of the judgment debtor, and His Honour reasoned that the delivery of a bankruptcy notice on a person other than the judgment debtor does not constitute service; and that the formality of the act of service is important, as the date when service occurs is critical in determining if and when an act of bankruptcy has occurred.

16. However, it does seem to me that that decision of His Honour’s pre-dated the enacting of the r.16.01, because if one were to look at His Honour’s judgment, it would seem to be inconsistent with service being able to be effected by simply being left in an envelope marked with the person’s name at the last known address of the person.

17. But still, the question really for me is whether or not the placing of two notices in one envelope, albeit addressed to the two persons, is sufficient to fulfil the regulation that it be left in an envelope or similar packaging marked with the person’s name at the last known address of the person. 

18. In looking at this matter, I have also had the assistance of submissions from the Respondent.  The Respondent contends that the Haig-Young v Brennan (supra) decision can be distinguished simply because there were two notices that were put into the one envelope. 

19. To my mind, the ratio decidendi of the Haig-Young v Brennan (supra) decision was that there must be proof that a judgement debtor was served with a notice. In that case, it could not be established as to which judgement debtor was served. The affidavit of service contended that both debtors had been served, however there was only one notice left at the address.

20. The facts in this case illustrate a totally different situation.  The fact is that the envelope, albeit marked to two people, was an envelope that contained a bankruptcy notice; a separate bankruptcy notice for one person who was the addressee of the envelope, and a separate bankruptcy notice to another person who was the addressee on the envelope.

21. The hypothetical situation posited by the Applicants that “one person could have picked up the envelope and taken their particular notice out and not let the other person see it,” is a hypothetical that has no relevance to the current situation.

22. One could envisage a situation where a bankruptcy notice was put in an envelope marked with the debtor’s name and left at the last time address. Someone other than the debtor could conceivably come along and take the envelope and discard it without the debtor ever knowing.

23. Notwithstanding that possibility, the regulation would still deem that the debtor had been served.

24. The Applicant argues that in this case there should have been two envelopes marked with the individual debtor’s name for effective service to have been made so as to avoid this hypothetical situation.

25. But the hypothetical situation that the Applicants have posited could still occur even if two envelopes are left because the one person may pick up both envelopes and not tell the other debtor of the existence of their individual envelope. Yet they would still have both been served under the regulation.

26. The mischief that would be “cured”, by the regulation being interpreted as Applicants contend, would not be cured at all by such interpretation. The “fear” that one addressee would not inform the other addressee if two notices were in one envelope marked with both names is misplaced because the same “fear” would still exist if there were two envelopes left at the same time. 

27. The fact is that the addressee on the envelope had their individual bankruptcy notice inside the envelope and the other addressee on the envelope had their individual bankruptcy notice inside the envelope. 

28. To my mind, r.16.01 has been complied with. So as far as that aspect of this matter is concerned, I would dismiss the application.

29. The Respondent contended, in the alternative, that if this Court found that separate envelopes enclosing the bankruptcy notices should have been left at the address, another section of the Bankruptcy Act 1966 (Cth) (“the Act”) should then be applied.

30. Section 306 of the Act reads as follows:

    “306  Formal defect not to invalidate proceedings

    (1) Proceedings under this Act are not invalidated by a formal defect or an irregularity, unless the court before which the objection on that ground is made is of opinion that substantial injustice has been caused by the defect or irregularity and that the injustice cannot be remedied by an order of that court.

    (2) A defect or irregularity in the appointment of any person exercising, or purporting to exercise, a power or function under this Act or under a personal insolvency agreement entered into under this Act does not invalidate an act done by him or her in good faith.”

31. The Respondents submitted that it was a “formal defect or irregularity” if the notices needed to be in separate envelopes and were not in separate envelopes. The Respondents made very helpful submissions as to the ambit of what s.306 would then allow the Court to do.

32. However, I am of the view that the question before the Court is one of whether the Applicants were served. They were either served or they were not served. If they were not served in accordance with r.16.01, such could not be deemed as a “formal defect or irregularity”.

33. Service of notices is an integral part of any application for a sequestration order. The observations of Von Doussa J are still apposite; the formality of the act of service is critical.

34. Therefore, if I had ruled in favour of the Applicants, I would have ruled that the Respondents would find no comfort in s.306.

35. The Applicants had two other arguments regarding email service. The Applicants properly conceded that all three arguments before me would have had to succeed in order for their application to succeed. As I explained at the beginning of these reasons, I only had time to evaluate and rule upon one of those arguments.

36. I am fully cognisant that the Applicants may seek to appeal the ruling that I have just made. The apprehension of the Applicants is that if they are successful in such an appeal, the matter would then have to be remitted back to this Court for a determination on the other two points and further costs will be incurred.

37. The Respondents have submitted that if the Applicants were to be successful in an appeal against the ruling I have just made, they would simply issue fresh bankruptcy notices.

38. This means that the application before me to review the decision of the Registrar can now be considered at an end.

39. I dismiss the application.

I certify that the preceding thirty-nine (39) paragraphs are a true copy of the reasons for judgment of Judge Vasta.

Date: 23 February 2017