Dawson v McLernon - [2005] FMCA 721

FEDERAL MAGISTRATES COURT OF AUSTRALIA

DAWSON v McLERNON

[2005] FMCA 721

BANKRUPTCY – Creditors Petition – solvency – going behind judgment – intention to appeal insufficient.

PRACTICE AND PROCEDURE – Whether affidavit filed by solicitors defective – no address for service – reliance on notice of address for service filed by Applicant personally.

Bankruptcy Act 1966, s.52

Re Capel Ex Parte Caram Finance Australia Ltd, [1998] 372 FCA (9 April 1998)
Australia and New Zealand Banking Group v Foyster [2000] FCA 400
Sandal v Porter (1966) 155 CLR 666
Wren v Mahoney (1971-72) 126 CLR 212
Corney v Brien (1951) 84 CLR 343

Applicant:

ROSALIND MARION DAWSON

Respondent:

TERENCE JOHN McLERNON

File No:

PEG 37 of 2005

Delivered on:

20 May 2005

Delivered at:

Perth

Hearing Date:

20 May 2005

Judgment of:

McInnis FM

REPRESENTATION

Counsel for the Applicant:

Mr A P Hershowitz

Solicitors for the Applicant:

Williams & Co

Respondent:

No appearance

Counsel for the Supporting Creditor:

Mr J D Steedman

Solicitors for the Supporting Creditor:

Karp Steedman Ross-Adjie

ORDERS

A sequestration order be made against the estate of Terence John McLernon.
The applicant creditor's and supporting creditor's costs be taxed in accordance with the Federal Court rules and paid from the estate of the respondent debtor in accordance with the Bankruptcy Act 1966.

FEDERAL MAGISTRATES
COURT OF AUSTRALIA AT
PERTH

PEG 37 of 2005

ROSALIND MARION DAWSON

Applicant

and

TERENCE JOHN McLERNON

Respondent

REASONS FOR JUDGMENT

(Revised from transcript)

In this matter the petitioning creditor by a petition filed 15 February 2005 seeks a sequestration order against the respondent debtor Terence John McLernon.
The respondent debtor does not appear this day. It is noted that in the material before the court, the respondent debtor had previously been represented by solicitors and had indeed filed a notice of intention to oppose the petition on 1 April 2005. That notice of intention to oppose the petition is supported by an affidavit sworn by Mr McLernon on 1 April 2005. I note that the affidavit which has been relied upon by the respondent debtor refers to the document being filed by Shann Family Lawyers, solicitors for the respondent. Perhaps somewhat unusually it does not provide an address for the deponent. To that extent it is defective.
The application before the court this day was the subject of a notice to the parties that the matter was scheduled for hearing, and it should be noted that the solicitors previously on record for and on behalf of the respondent debtor had sought to file a notice of ceasing to act as solicitors on 11 April 2005. That notice was filed the day before the matter was listed before a registrar of this court.
Perhaps not surprisingly the registrar of the court then on 12 April 2005 made a number of orders which include the following:
“1. The Respondent file and serve an affidavit of solvency containing details of his assets and liabilities as at the date of the swearing of the affidavit by 26 April 2005.
2. The Applicant file and serve any answering affidavit(s) by 3 May 2005.
3. The parties file and serve written submissions at least 2 days before the hearing date.
4.The matter be listed for hearing for half a day on a date and time to be fixed by a Registrar.
5.The Respondent pay the applicant's costs of today.
6.Shann Family lawyers have leave to cease to be solicitors.
7. The Respondent file and serve a notice setting out his address for service and telephone contact details by 4 pm today.”
I am informed that at that hearing before the registrar, notwithstanding the notice of ceasing to act as solicitors, that Mr Davies of Counsel appeared for and on behalf of the respondent. So much is evident from the report of listing on the court file. It is also consistent with correspondence dated 11 April 2005, addressed to the Registrar from Shann Family lawyers which states in part:
“Recently the solicitors for the judgment creditor have asserted that we are in a position of conflict should we continue to represent the creditor. Whilst this is not admitted, it is a concern to the judgement creditor so it is only proper we cease our representation of the debtor. Accordingly, we have instructed Mr Davies of counsel to appear at court tomorrow and to seek an adjournment in order that the judgment debtor can seek alternative legal representation. (sic)”
I have referred to that letter as it appears but it seems to me there is an obvious error in relation to the reference to that firm continuing to represent what they describe as "the creditor", which I take to mean “the debtor”. In any event, what then occurred on a perusal of the file is that the debtor filed, on 12 April 2005, a document purporting to be a notice of acting person and address for service. That document, dated 12 April 2005, indicated that the respondent's address for service is “26 East Corinthian Road, Beeliar” and also provides a telephone number.
I note for the sake of completeness that, in pencil on that court document, the words have been written "incorrect address." A file note in this matter records that on 13 April 2005, a telephone call was received from Mr McLernon and the note records Mr McLernon filed a Notice of acting person and address for service on 12 April 2005.
“He telephoned today to inform the Court that he had put the wrong address on the form. His correct address is 62 East Churchill Avenue, Beeliar, WA 6164. Mr McLernon stated that he is very sick at the moment. I advised Mr McLernon that

I would put his address on the file but he is still required to file a formal change of address.”
On 14 April 2005, a notice of address for service was filed by the respondent. That notice of address for service provides as the address for service, “62 East Churchill Avenue, Beeliar, 6164”. The court file reveals that a letter dated 13 April 2005 was forwarded by the District Registrar to the respondent at the address provided on the notice of address for service. That letter appears to have been returned to the sender. I note that the envelope has the suburb, Beeliar WA 6164, crossed out and in red ink, the number “6147” has been written on the envelope. I have not determined whether that is the correct postcode. Nevertheless, from that correspondence and chronology of events, including reliance upon the notice of address for service provided by the respondent, I am satisfied that in all the circumstances, the matter should proceed in the absence of the respondent.
Where a respondent provides a notice of address for service and that address for service is relied upon, then in my view the respondent should not then be permitted to simply not attend court or to claim not to be aware of the proceedings. I am further satisfied that in the normal course of publication of the list of cases to be heard and determined this day, that appropriate notice in any event has been given to the respondent.
It is my view therefore that in those circumstances, it is appropriate that I consider the petition and deal with the material currently before the court. That material includes the notice of intention to oppose the petition and the affidavit of the respondent debtor referred to earlier.
I have considered all the material in support of the creditor's petition. In particular, I note that in compliance with the registrar's orders, the applicant creditor has provided an outline of submissions. I note further that a supporting creditor appears before the court and does so, having filed a notice of intention to appear and be heard. That notice is filed for and on behalf of Service Finance Corporation Limited. The supporting creditor has also sought to rely upon and has filed an affidavit of Graham John Ambridge, sworn 7 April 2005.
By way of background, it is noted that in this case, the bankruptcy notice relied upon in the petition was served on the respondent debtor on 30 December 2004. The respondent debtor failed, on or before 20 January 2005 to comply with the requirements of that notice. Accordingly, I am satisfied that the act of bankruptcy for the purpose of these proceedings occurred on 21 January 2005. I am otherwise satisfied, on the material before me, that the requirements of s.52 of the Bankruptcy Act 1966 (the Act) have been complied with for and on behalf of the petitioning creditor. I have noted in the affidavit material relied upon by the debtor assertions that other proceedings might be taken in relation to the judgment debt which is the subject of the bankruptcy notice.
That expression of an ‘intent’, in my view, is insufficient to persuade this court to exercise any discretion it may have in favour of the debtor and against the petitioning creditor to refuse to make a sequestration order. In my view, the submissions made for and on behalf of the petitioning creditor in relation to this petition are correct. There is an onus on the debtor to prove that he is solvent and has assets sufficient to pay his debts (Re Capel Ex Parte Caram Finance Australia Ltd, [1998] 372 FCA (9 April 1998).
I further accept that in this case the affidavit of the debtor and his notice, whilst asserting solvency and referring to what might be described as means by which the amount of $127,908 claimed in the bankruptcy notice could be paid, is insufficient for the present purposes to establish solvency and to otherwise provide a basis upon which this court should refuse to make a sequestration order. As submitted by the petitioning creditor, it is not sufficient for the respondent debtor to establish merely that he has assets exceeding in value the amount of his liabilities but not presently available or realisable (Australia and New Zealand Banking Group v Foyster [2000] FCA 400 at 17). It must be established that the assets are available to be realised and they are capable of ready realisation.
I accept that on the affidavit material before this court that there is no evidence from the respondent debtor as to whether the alleged assets are readily realisable assets. Further, it is noteworthy in this case that the respondent debtor has not provided details as ordered by the registrar in the orders made, referred to earlier in this decision, and to that extent I accept has not taken according to his confidence and provided details of assets and liabilities in order for the court to determine as a question of fact whether he is solvent (Sandal v Porter (1966) 155 CLR 666 at 670-672).
In all the circumstances, the conclusion I reach is that there is insufficient evidence in this matter to satisfy me that the respondent debtor has discharged the onus of proving that he is solvent. I am likewise satisfied that this is not a case where there is material before me to persuade the court that it should go behind the judgment, or that indeed there is any other sufficient cause which would provide a basis upon which the court should not proceed to make a sequestration order. In this case, I am satisfied that there is no evidence or substantial reason which would justify this court, questioning the judgment relied upon by the petitioning creditor.
I accept that in most cases there must be substantial reasons which warrant the judgment being questioned before the court will make an inquiry, that is, before it will go behind the judgment (Wren v Mahoney (1971-72) 126 CLR 212). I further accept as a matter of law that the court will not generally go behind the judgment unless there can be shown there is a prima facie case of fraud, collusion, or miscarriage of justice (Corney v Brien (1951) 84 CLR 343).
In this case, the affidavit material in any event from the respondent debtor merely indicates an intention to take further proceedings to challenge the relevant judgment. That of itself, in my view, is insufficient and does not provide, as I indicated earlier, a proper basis upon which this court should seek to impeach the judgment relied upon by the petitioning creditor. Merely indicating an intention to seek leave to appeal out of time is insufficient. I am satisfied that there is no basis upon which this court should refuse to grant the orders sought by the petitioning creditor.
It follows, for the reasons given, that I should make the appropriate order in relation to this petition. I note and take into account the supporting creditor's affidavit in consideration of the issue of solvency. For those reasons, it follows that the following orders should be made:
(1)A sequestration order be made against the estate of Terence John McLernon.
(2)The applicant creditor's and supporting creditor's costs be taxed in accordance with the Federal Court rules and paid from the estate of the respondent debtor in accordance with the Bankruptcy Act 1966.

I certify that the preceding eighteen (18) paragraphs are a true copy of the reasons for judgment of McInnis FM

Associate:

Date: 20 May 2005