Chrichton, John v Shaw, George Thomas

[1997] FCA 1231

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY	NG 7560 of 1997

BETWEEN:	JOHN CRICHTON & ANOTHER APPLICANTS (PETITIONING CREDITORS)
AND:	GEORGE THOMAS SHAW & ANOTHER RESPONDENTS (DEBTORS)

JUDGE(S):	BRANSON J
DATE:	23 OCTOBER 1997
PLACE:	SYDNEY

REASONS FOR JUDGMENT (EX TEMPORE)

BRANSON J

John Crichton and Neil Crichton, (“the creditors”), have petitioned the Court for a sequestration order against the estates of George Thomas Shaw and Leila Shaw (“Mr and Mrs Shaw”).  On the hearing of the petition today the creditors are represented by Mr Condon of counsel.  With the leave of the Court, Mr and Mrs Shaw’s son, Mr Thomas Shaw, has made submissions to the Court on his parents’ behalf.  Mrs Shaw is in court although Mr Shaw is not.  I am advised that he is in hospital having undergone an operation.

Subsections 52(1) and (2) of the Bankruptcy Act 1966 (Cth) (“the Act”) provide as follows:

“(1)     At the hearing of a creditor’s petition, the Court shall require proof of:

(a)the matters stated in the petition (for which purpose the Court may accept the affidavit verifying the petition as sufficient);

(b)service of the petition;  and

(c)the fact that the debt or debts on which the petitioning creditor relies is or are still owing;

and, if it is satisfied with the proof of those matters may make a sequestration order against the estate of the debtor.

...

(2)      If the Court is not satisfied with the proof of any of those matters, or is

satisfied by the debtor:

(a)that he is able to pay his debts;  or

(b)that for other sufficient cause a sequestration order ought not to be made;

it may dismiss the petition.”

Mr and Mrs Shaw, on 1 July 1997, filed a notice of intention to appear at the hearing of the petition.  Such notice indicated that the petition would be opposed on the ground that neither the bankruptcy notice upon which the creditors’ petition is based, nor the creditors’ petition itself, were validly served on Mrs Shaw.  On 7 August 1997, Registrar Quinn conducted a hearing at which witnesses, including Mr and Mrs Shaw, gave evidence concerning the validity of the service upon them of the bankruptcy notice and the petition.

On 26 September 1997, the Registrar delivered reasons for decision. She concluded that the bankruptcy notice was validly served for the purposes of the Act on both Mr and Mrs Shaw. She further concluded that, although the service of the petition may have been defective in that it was placed under the windscreen wiper of the car rather than handed to Mr and Mrs Shaw, such defective service was curable as no prejudice or injustice had been suffered by Mr and Mrs Shaw. The Registrar further concluded that the creditors’ petition was not itself defective. Indeed, Mr and Mrs Shaw had not suggested, as I understand it, that it was. The Registrar dismissed the opposition to the creditors’ petition insofar as such opposition related to the service of the bankruptcy notice and the service and defects in the creditors’ petition. Mr and Mrs Shaw did not seek review of the Registrar’s decision of 26 September 1997 and accept that it is binding on them.

The procedure adopted by the Registrar in conducting, in effect, a hearing into a preliminary matter relevant to the hearing of a creditors’ petition was apparently undertaken with the consent of Mr and Mrs Shaw and the creditors. The procedure has not been criticised before me, and it was presumably a convenient one to be adopted. Ordinarily, however, it will, in my view, be a preferable course for matters of the kind dealt with by the Registrar to be heard and determined in the context of an application to the Court, such as the hearing of a creditors’ petition or an application to set aside a bankruptcy notice. In particular it may be noted that section 52(1) of the Act requires the Court “at the hearing of a creditor’s petition” to require proof of service of the petition.

On 13 October 1997, Mr and Mrs Shaw filed a document outlining additional grounds of opposition to the creditors’ petition.  Such grounds may be regarded as grounds upon which Mr and Mrs Shaw contend that there is sufficient cause for a sequestration order not to be made in this case.

On 21 October 1997, I declined to hear argument as to the validity of such grounds of opposition as the creditors’ petition was not then before me for hearing.  With the consent of the parties, I listed the petition for hearing before me today.  Mr and Mrs Shaw have expressed their additional grounds of opposition as follows:

“1.      The debt in question, $10,046.73, issuing 16 July 1996, represents court costs awarded against the then applicants G T Shaw and L Shaw, when application for special leave to appeal to the High Court was denied in a probate case by Justices Dawson, Toohey and Gummow.

2.        This was the last link in a chain of litigation which G T & L Shaw were “forced” to initiate, first as plaintiffs in the Supreme Court, then as appellants in the Court of appeal and finally as applicants in the High Court.  What “forced” them to be initiators in this protracted litigation (and thereby attract adverse cost judgements) is a law that states that the ONUS OF PROOF (of testamentary capacity) lies with the party propounding the will.  Since the will made out by the late Ramza Crichton in favour of George and Lily Shaw was blocked with a caveat by their opponents, the Shaws, in order to defend the wishes of the testatrix and their own right, were saddled with this onus of proof and placed in a position of having to justify why their will was valid!

3.        The debt in question is repudiated because the “onus of proof” rule which occasioned it flies in the face of natural justice.  We stress: this objection has nothing to do with “re-running a case”.  The problem is deeper than that and has to do with an in-built systemic bias irrespective of how any  individual case is administered.

4.        It would seem that our legal system affords more protection to suspected murderers and rapists - who are at least held to be innocent until proven guilty - than it does to a testator and his beneficiaries, since the nature of their relationship, the propriety  of their conduct and the soundness of their judgement can all be called into question on the flimsiest pretext motivated by deep-seated malice, envy or mischief, especially when these tap popular prejudices embodied in the judiciary.  This is what happened in the case of Shaw Vs Crichton.

5.        Unless it is the party attempting to BLOCK a will that bears the onus of proving a LACK of testamentary capacity, testamentary freedom and other individual rights will be denied.  This is a outrage to the principle of natural justice.”

There is no contest between the creditors and Mr and Mrs Shaw as to the matters stated in the petition, and I accept the affidavit evidence placed before me as sufficient proof of such matters.

Although the question of the service of the petition has been dealt with by the Registrar, as I have already mentioned, section 52(1) requires that the Court require proof of the service of the petition at the hearing of the creditors’ petition. I therefore consider it appropriate myself to consider the evidence concerning the service of the petition. Victor Keller, licensed commercial sub-agent, has filed two affidavits sworn 3 June 1997, dealing with the service of the creditors’ petition on each of Mr and Mrs Shaw. His evidence is that he attached the petition, and the other requisite documents, under the windscreen wiper of a car in which Mr and Mrs Shaw were sitting, and advised them of the nature of the documents and the return date. I note that, before the Registrar, Mr and Mrs Shaw accepted that Mr Keller did place the creditors’ petition and other documents under the windscreen wiper of their car whilst they were in it, but they denied that he advised them of the nature of the documents or of the return date. Before me, Mr and Mrs Shaw have accepted the validity of the Registrar’s ruling on the issues of services.

Rule 15 of the Bankruptcy Rules, as in operation at the time of the alleged service of the creditors’ petition, provided for personal service of a creditor’s petition.  In Re Silvas  (Tamberlin J, 4 April 1997, unreported), Tamberlin J expressed a tentative view that regulation 16.01 of the Bankruptcy Regulations may have had the effect of abolishing the requirement for personal service of a creditor’s petition.  I hold some doubts in this regard. However, I do not regard it as necessary for me here to address this issue.

The requirement of r 15 of the Bankruptcy Rules was for an official copy of the creditors petition, and other relevant documents, to be delivered to the debtor personally.  In Re Ditfort;Ex parte Deputy Commissioner of Taxation (1988) 19 FCR 347, Gummow J said at 360:

“I accept the submission by the respondent to the present application that there may be delivery personally to the debtor of process within the meaning of r 15 of the Bankruptcy Rules, even though the process has not been left in what Patteson J described as the “actual corporal possession of the defendant”.  If a debtor were refusing to take such actual corporal possession of the process, but the process server informed the debtor of the nature of the process and left it before or near the debtor so that the debtor had unimpeded and immediate access to the documents, that, in my view, should, in general, be sufficient to comply with r 15.”

I agree with his Honour’s views which suggest that personal service of the creditors’ petition may well have been effected in this case.  I note that r 122 of the Bankruptcy Rules, as in force at the relevant time, provided for proof of personal service of a document by affidavit.  The affidavits sworn by Mr Keller in this matter comply with that rule.

If, on the evidence before the court, the creditors’ petition was not properly served on each of Mr and Mrs Shaw, I nonetheless regard the default in the service as a formal defect, or an irregularity, within the meaning of s 306(1) of the Act, which has not caused substantial injustice to any person: see Re Florance (1979) 28 ALR 403 and Re Ram and Singh (Einfeld J, 23 September 1988, unreported).

I am also satisfied on the affidavit evidence before me that the creditors have proved that the debt on which they rely is still owing.  Mr and Mrs Shaw have not suggested otherwise. 

The Court is thus empowered by s 52 of the Act to make a sequestration order as sought by the petitioning creditors, as I am satisfied of all matters of which s 52 requires that the Court be satisfied. I am further satisfied that the relevant Rules have been complied with in this case.

Such an order (ie. a sequestration order) ought therefore to be made, unless Mr and Mrs Shaw can show some cause overriding the interest of the public in persons who cannot pay their debts not  continuing  to trade, and the interests of the creditors in receiving payment of their debt.  (Cain v White (1933) 48 CLR 639.)

Mr and Mrs Shaw have not sought to demonstrate that they can pay their respective debts.  The cause for a sequestration order not to be made which Mr and Mrs Shaw rely upon is based upon a view held by them as to the injustice of the probate laws of this  country.  As I mentioned in argument to Mr Thomas Shaw, as a judge of this Court, I am bound to “do right to all manner of people according to law”.  I say nothing on the question of whether Mr and Mrs Shaw  have any reasonable basis for their view that the operation of the law concerning probate has, in their particular case, resulted in their being treated harshly.  I am bound to uphold and respect the law, which includes the law concerning probate.

The debt upon which the creditors’ petition in this case is based arises from an order of the High Court of Australia whereby the High Court ordered that an application by Mr and Mrs Shaw for special leave to appeal to that Court from a judgment of the Court of Appeal of the New South Wales Supreme Court be refused with costs.  The creditors have obtained a certificate from the Chief Executive and Principal Registrar of the High Court certifying that, pursuant to the order of the High Court, the respondents’ (i.e. the creditors’) costs of the application for special leave to appeal have been taxed in the amount of $10,046.73.  This amount has not been paid.

In the circumstances I am not satisfied that there is any sufficient cause for a sequestration order in this case not to be made.

The Court orders as follows:

1. A sequestration order be made against the estate of each of the debtors.

1. The petitioning creditors’ costs of and incidental to the petition, including reserved costs, be taxed and paid in accordance with the statute.

I certify that this and the preceding six (6) pages are a true copy of the Reasons for Judgment herein of the Honourable Justice Branson.

Associate:

Dated:            

Counsel for the Petitioning Creditors:	Mr M. Condon
Solicitor for the Petitioning Creditors:	Philip Bushby International Lawyers
Mr Thomas Shaw, son of the debtors, made submissions on his parents’ behalf.
Date of Hearing:	23 October 1997
Date of Judgment:	23 october 1997