Commonwealth Bank of Australia v Jorgensen
[2011] FMCA 767
•11 July 2011
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| COMMONWEALTH BANK OF AUSTRALIA v JORGENSEN | [2011] FMCA 767 |
| BANKRUPTCY – application to adjourn hearing of creditor’s petition – application refused. BANKRUPTCY – application to set aside bankruptcy notice – allegation of ineffective service – bankruptcy notice properly served. BANKRUPTCY – creditor’s petition – sequestration order made. |
| Bankruptcy Act 1966, ss.40(1)(g), 52(1) Federal Magistrates Court Rules 2001, r.13.03B(1)(a) Uniform Civil Procedure Rules (Qld) 1999 |
| Brookfield v Yevad [2002] FMCA 82 Jensonv Queensland Law Society [2004] FCA 1630 Re Duckworth; Ex parte Lockett (unrep. Fed Ct of Aust, French J. 12 February 1987 |
| Applicant: | COMMONWEALTH BANK OF AUSTRALIA |
| Respondent: | ALAN BRADLEY JORGENSEN |
| File Number: | BRG 82 of 2011 |
| Judgment of: | Jarrett FM |
| Hearing date: | 11 July 2011 |
| Date of Last Submission: | 11 July 2011 |
| Delivered at: | Brisbane |
| Delivered on: | 11 July 2011 |
REPRESENTATION
| Counsel for the Applicant: | Mr P.D. Hay |
| Counsel for the Respondent: | Mr A.J. Taylor |
ORDERS
A sequestration order be made against the estate of ALAN BRADLEY JORGENSEN.
The Petitioning Creditor’s costs (including reserved costs, if any) be taxed and paid from the estate of the Respondent Debtor in accordance with the Bankruptcy Act 1966.
IT IS NOTED THAT
The date of the act of bankruptcy is 3 December 2010.
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT BRISBANE |
BRG 82 of 2011
| COMMONWEALTH BANK OF AUSTRALIA |
Applicant
And
| ALAN BRADLEY JORGENSEN |
Respondent
REASONS FOR JUDGMENT
(ex tempore)
This matter came before me the week before last on two occasions.
On the first, the respondent was represented by counsel who applied for an adjournment of the proceedings. At that stage, the basis of the adjournment was that counsel had only recently been instructed. Solicitors, who were based in Victoria, were to be instructed or had recently been instructed but needed more time to get around the issues that were involved in this case. I left the bench to consider the material upon which both parties relied. At the time I inquired as to whether either party had an objection to me reading all of the material that had been filed in the two applications that were before me and neither party did. So I did.
After reading that material I returned to court. I delivered reasons at the time and refused the adjournment. I was then informed from the bar table that the respondent had removed himself from the court precincts and gone to hospital. It was suggested that he had problems with chest pains, vomiting and nausea. The matter was stood down for some time so that more precision that could be put to the position of the respondent. Ultimately the matter was stood over to the next day.
At that time there was a solicitor from Victoria who appeared or purported to appear for the respondent by telephone. He informed the court, and there was some evidence before the court to suggest, that the respondent had admitted himself to hospital – a different hospital than that which he attended the previous day. It was said that he was undergoing some tests to investigate the symptoms of which he had complained on the previous day. The suggestion was that it was something to do with his heart.
In light of that evidence the applications before me were adjourned to today. Today the respondent appears by a solicitor recently instructed and seeks a further adjournment. The affidavit of his solicitor, Andrew John Taylor, sets out that the respondent is now in China. There is nothing in the affidavit material that deals with his state of health but presumably the fact that he is in China indicates that there is no reason, from the point of view of his health, that he could not travel such a great distance. He also says that his client has “irretrievably misplaced his passport” and is urgently obtaining a replacement in China.
It is said now that the matter should be adjourned because the respondent is able to enter into a personal insolvency agreement which, if approved by the creditors and if put into place, might return something to the creditors which is more commercially viable than what would be returned to them in a bankruptcy. There is not one skerrick of evidence, however, that suggests that is so. Against the background of what has occurred until now, I have a great deal of scepticism about the respondent’s assertion that there is any commercial reality to be gained from a personal insolvency agreement.
Mr Taylor does not depose to anything that would support the proposition that the return to creditors by reason of a proposed personal insolvency agreement would be greater than the return to them in a bankruptcy. The submissions made this morning tend to suggest that the respondent is in fact insolvent. And so, in those circumstances there seems to be little point in adjourning the application further. The application for the adjournment is refused.
RECORDED : NOT TRANSCRIBED
The first application I need to deal with this morning is an application by the respondent debtor to have a bankruptcy notice that was served upon him set aside. He filed his application to set aside the bankruptcy notice on 10 June, 2011. The application is clearly out of time. There is a dispute between the applicant and the respondent as to when the respondent was validly served with the bankruptcy notice. I accept the submission that even on the respondent debtor’s own version of events, the application to set aside the bankruptcy notice is out of time.
I accept the submission, having regard to the authorities that I referred to last week of Re Duckworth; Ex parte Lockett (unrep. Fed Ct of Aust, French J. 12 February 1987) and the subsequent decisions, including the decision of Raphael FM in Brookfield v Yevad [2002] FMCA 82 at [7] – [13] that in the absence of an application to extend, or an order which extends, the time within which to comply with the terms of the bankruptcy notice the court cannot set aside the bankruptcy notice and on that basis alone it seems to me that the application should fail. The application to set aside the bankruptcy notice has been made after the time permitted for compliance with its terms has passed. There is no order extending time to comply with the notice, and no application for such an order.
The application to set aside the bankruptcy notice should also fail because the respondent debtor, who is the applicant in that application, is not here and does not prosecute the application. Pursuant to rule 13.03B(1)(a) I have power to dismiss the application on that ground alone.
I dismiss the application to set aside the bankruptcy notice on the ground that there is no extension of time to comply with its terms sought and the application is made after the expiry of the time limited for compliance with its terms. I cannot make the orders sought by the respondent debtor. If I am wrong about that, nonetheless it seems to me that it ought to be dismissed on its merits in any event.
Filed on 10 June, 2011 with the application to set aside the bankruptcy notice was an affidavit sworn by the respondent debtor. At paragraph 6 of that affidavit he sets out the grounds upon which he says the bankruptcy notice ought to be set aside. The first is that he says that it was not validly served. However, the material relied upon by the creditor reveals that it was validly served. The petitioning creditor was entitled to serve the bankruptcy notice by sending it by way of email to the respondent debtor’s email address. Even if it was the case, which I very much doubt, that it did not come to the notice of the respondent debtor, that of itself is no answer to the claim that the bankruptcy notice has been validly served.
On that point, the respondent debtor says that he did not have notice of the application until May of this year when he received the documents relating to the creditor’s petition. But as counsel for the petitioning creditor has amply demonstrated, there is a significant inconsistency in the respondent debtor’s material.
On the one hand he swears in these proceedings that he did not have notice of the bankruptcy notice until he received the documents relating to the creditor’s petition yet, in earlier proceedings in the District Court of Queensland, to which I have already referred in my reasons last week, he deposes that a bankruptcy notice was issued. That was clearly a reference to the bankruptcy notice in this case – there has only been one – and it must be the case that the respondent debtor knew about it if he could depose to it.
There is also, as counsel has pointed out, the change in language between the draft affidavit sent by respondent debtor to the petitioning creditor’s lawyer (exhibit AGJ 5 to the affidavit of Amy Joy Griffin filed 3 May, 2011) and the actual sworn version of the same affidavit. There is a significant difference in the wording of the relevant passage which again underscores my conclusion that the respondent debtor well and truly knew of and had received the bankruptcy notice in this case when it was served on him as the petitioning creditor alleges.
The second ground of opposition to the bankruptcy notice was “The Applicant here, was never aware of it” that is the bankruptcy notice “until 13 May, 2011 but deemed by the court to be on 20 May 2011.”
I have already dealt with that in dealing with the notion that the bankruptcy notice was not validly served. I say nothing more about it.
The third ground is that the respondent debtor says he has a valid counter-claim against the applicant for the sum of $170,000 for damages stemming from the respondent’s breach of agreement. It is not enough, however, to demonstrate that he has a counter-claim, cross-demand or a setoff in respect of the amount sought to be claimed in the bankruptcy notice. To have the bankruptcy notice set aside one must demonstrate that that setoff, counter-claim or cross-demand, could not be set up in the proceedings that led to the judgment upon which the bankruptcy notice is based. In Jensonv Queensland Law Society [2004] FCA 1630 Kiefel J made it clear that the authorities established that what s.40(1)(g) of the Bankruptcy Act1966 required was not a factual inability to set up the relevant setoff, counter-claim or cross-demand but rather a legal disability from doing so. In this case there was no such legal inability and, indeed, in his first application to set aside the judgment by default dealt with by Jones DCJ in the District court of Queensland, the respondent debtor had indeed attempted to set up that cross-claim or counter-claim or setoff. As his Honour remarked in his reasons for judgment in that case, the respondent debtor simply had no evidence to support his claims.
The fourth ground relied upon by the respondent debtor to set aside the bankruptcy notice is “that the applicant long before the respondent issued its creditor’s petition filed an application in the District Court of Queensland to set aside the default judgment of 3 September 2010 for about $85,000 which gave rise to this bankruptcy debt.”
There have been two applications to set aside the judgment by default. One last year and one this year. The application last year has been disposed of. Jones DCJ in the District Court, as I have already remarked, determined that application in November last year. The application was dismissed for reasons that were delivered by his Honour then and which have subsequently been published.
Earlier this year, again the date escapes me but the precise date is not particularly relevant, but in March of this year the applicant re-applied to have the judgment by default set aside. On the last occasion the matter was before me, I was informed that application was listed for hearing on 14 July, 2011. It has not yet been determined. It has been on the “backburner” for some time, the respondent says, because the petitioning creditor’s solicitors led him to believe that it may not be necessary to press it. But whatever the case might be, the fact is it has been made but it remains undetermined.
This court has the power to go behind the judgment upon which the bankruptcy notice is founded and determine whether there truly is a debt that is owed by the respondent debtor to the petitioning creditor. Even if the application to set aside the judgment by default in the District Court, which is still outstanding, was unsuccessful it is for this court to exercise its own mind about the judgment debt to determine if there is in truth a debt owed by the respondent debtor. However, there is no probative material before me which would establish that there is in fact no debt owed by the respondent debtor to the petitioning creditor. The conclusion I have come to is that there is no evidence that would establish that there is a setoff, counter-claim or cross-demand, or other answer to the petitioning creditor’s claim in the District Court.
The other point to be made is that made by counsel in the course of submissions and that is that irrespective of whether the judgment by default has been set aside, the bankruptcy notice has not been complied with. An act of bankruptcy has been committed and so to draw upon that decision, Brookfield v Yevad [2002] FMCA 82, the purpose in setting aside the bankruptcy notice is defeated. The act of bankruptcy has occurred. There has been no application to extend time to comply with the notice and no automatic extension of time within which to comply with the requirements of the notice. So even if the application to set aside the judgment by default is successful, it does not change the fact that an act of bankruptcy has been committed.
For all of those reasons, in my view, the application to set aside the bankruptcy notice ought to be dismissed.
RECORDED : NOT TRANSCRIBED
This is the hearing of a creditor’s petition by the Commonwealth Bank of Australia seeking a sequestration order against the estate of Alan Bradley Jorgensen. I am satisfied that an act of bankruptcy has been committed. I have previously given two sets of reasons now that deal with the service of a bankruptcy notice on Mr Jorgensen and the disputes that there were between him and the petitioning creditor about the service of that notice. I am satisfied, however, that a bankruptcy notice was properly issued and has been served upon him. I am satisfied that he failed to comply with the bankruptcy notice and that he committed an act of bankruptcy on 3 December 2010.
A creditor’s petition in this case was issued and it has been served in accordance with a substituted service order made by Registrar Baldwin. There are two affidavits of service, both filed on 26 May 2011 deposing to service of the creditor’s petition. I am satisfied that the matters set out in the creditor’s petition have been verified and that what is stated in the creditor’s petition is true and correct. The respondent has filed a notice of opposition to the petition. The notice of opposition was filed on 23 June 2011. There are a number of grounds.
The first is that the respondent, on 20 June 2011, filed and served an application to set aside the CBA’s bankruptcy notice. I have dealt with that application to set aside the bankruptcy notice.
The second is that the respondent, on 17 November 2010 appealed the decision of the District Court of Queensland to the Court of Appeal. Having read all of the material on the file last week, for the purposes of an adjournment application, it is difficult to understand exactly to what it is that the appeal relates but it seems to be that it is an appeal against a decision of a deputy registrar to administratively enter a judgment by default against the respondent, pursuant to the Uniform Civil Procedure Rules1999 (Qld).
According to the debtor’s own evidence when it was pointed out to him that the proper application was one to set aside the judgment by default, he made an application to a District Court judge for that order. But that application, as I have already remarked several times now, was unsuccessful. There is nothing in the second ground of opposition to the creditor’s petition.
The third ground is that the respondent has an application afoot in the District Court to rehear the previous application to set aside the District Court judgment. It is said to be “based on significant new evidence” which, had it been known to the District Court judge who heard the first setting aside application, would have likely brought about a different decision. There does not seem to be any dispute between the parties that there is a second application to set aside the judgment by default on foot in the District Court of Queensland but there is absolutely no evidence before me that there is “a significant amount of new evidence” which is being put before the court on that second application. There is simply no evidence before me about that.
I have already referred, in my earlier reasons on the application to set aside the bankruptcy notice, as to the adequacy of the evidence before me about the respondent debtor’s setoff counter-claim or cross-demand that he wishes to agitate. There is nothing in the third ground of opposition to the making of the sequestration order.
As to the fourth ground, he says:
The most fundamental aspect of a fair judicial system is to allow both sides to be heard. In this case the CBA have gone to great lengths to prevent the respondent from being heard at every step of the way. The CBA have, at every stage, tried to obtain default judgments by relying on the “system” to grant them unopposed default judgments against an unrepresented respondent. This applies from gaining possession of the family home, the substituted service for serving their statement of claim, their application for default judgment and that misconceived claim, the emailed service of their bankruptcy notice and their unaware creditor’s petition where they are angling to deny the respondent the opportunity to rebut their claim for committing an act of bankruptcy. Such an outrageous continual abuse of process cannot be allowed to continue by the court where members of the ignorant public have no knowledge of dealing with.
Errors are those in the original, not mine. Ground 4 of the notice of opposition to the petition does not articulate an appropriate ground to the opposition of making a sequestration order but it seems to be that the debtor says he has been denied the opportunity of being heard. That does not, in my view, carry any weight. Each time the matter has come before this court, whether it be before a registrar, deputy registrar or a federal magistrate, the respondent has asked for an adjournment. It has been before the court on a number of occasions now and there has been a considerable period of time between when the creditor’s petition was first before the court and now. The respondent has had ample opportunity to put his case together and put his case before the court. For reasons that are entirely unclear, he has chosen not to do so. The last week provides the best example of that. The matter was adjourned from Friday before last to today. True it was that the respondent was undergoing some medical tests Friday before last but the inference that is clearly open, is that there was nothing that came out of those tests that was of any significant import because he now, via his solicitor, says that he is in China.
Why things were not done, why the case was not prepared between Friday last and now, is completely unaddressed in the material that the respondent relied upon for the purposes of the adjournment. It is just not right to say that the respondent debtor has not been given any opportunity to properly be heard.
Ground 5 of the notice of opposition to the making of the sequestration order is connected with the fourth ground, and is as follows:
To this end if the rules of natural justice are to be observed the respondent must be allowed to have its defence and counter-claim heard by the court. In the many exhibits to the respondent’s various affidavits the respondent has cried “foul play” from the beginning whereby the CBA Bank, where during the global financial crisis the CBA’s senior bank manager, Russell Burns, made an agreement for the respondent to ignore the CBA’s letter of demand for the loan to be repaid in full, if it is just paid up the $10,000 of arrears. That $10,000 and more, was paid but then the CBA’s most senior manager, changed his mind and still wanted the full $620,000 to be paid. That unconscionable conduct surely is entitled to go before the court for deciding instead of allowing the CBA to circumvent the system by bankrupting the respondent and thereby putting an end to having to go before the court.
Again, the errors are in the original. The purport of what it is that Mr Jorgensen says in that paragraph of the notice of opposition seems to be that his counter-claim needs to be heard but then he has not had the opportunity of agitating it. Assuming that is correct, he is not held out of agitating his counter-claim against the bank. It might be that if there is a sequestration order made, he will need to interest his trustee in bankruptcy in prosecuting those proceedings but that, seems to me, is probably a good thing because it will bring to the potential claim an independent eye, an eye with a view to a number of matters which will mean that if proceedings are commenced by the trustee in bankruptcy they ought to be taken very seriously by the bank. That is something that will work in Mr Jorgensen’s favour, or at least his creditors.
To put it shortly, he has had the opportunity to agitate his cross-claim, his counter-claim or his setoff and he has failed to take the opportunities presented to him. He still has the opportunity in an around about sort of way and so as a matter of discretion it is not something that would mean a sequestration order in this case should not be made.
The last ground of notice of opposition to the petition deals with a request for an adjournment and it is no longer of any relevance.
In those circumstances I am satisfied, having regard to the affidavits filed by leave today, that the matters that I need to be satisfied of in s. 52(1) of the Bankruptcy Act have been satisfied and in my view it is appropriate to make a sequestration order with the usual order as to costs.
I certify that the preceding thirty-seven (37) paragraphs are a true copy of the reasons for judgment of Jarrett FM
Associate:
Date: 5 October 2011
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