DM DEVELOPMENTS v Driscoll
[2011] FMCA 464
•31 May 2011
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| DM DEVELOPMENTS v DRISCOLL & ANOR | [2011] FMCA 464 |
| BANKRUPTCY – Bankruptcy notices – service – last known address – post office box – redirection of mail from nominated address to another address – no evidence to the contrary – service at post office box effective service. |
| Bankruptcy Act 1966 (Cth) |
| Adams v Lambert [2006] HCA 10 Re: Ditfort; Ex parte Deputy Commissioner of Taxation (NSW) (1988) 19 FCR 347 Re: Fairlie; Ex parte Armco Australia Pty Ltd (1969) 14 FLR 65; [1969] ALR 701 Sunrise Auto Ltd v Deputy Commissioner of Taxation & Anor (1994) 124 ALR 425 Sarikaya v Victorian Workcover Authority (1997) 80 FCR 262; [1997] FCA 1372 |
| Applicant: | DM DEVELOPMENTS |
| Respondent: | LEE JOHN DRISCOLL |
| Supporting Creditor: | BMW AUSTRALIA FINANCE PTY LTD |
| File Number: | BRG 65 of 2011 |
| Judgment of: | Burnett FM |
| Hearing date: | 31 May 2011 |
| Date of Last Submission: | 31 May 2011 |
| Delivered at: | Brisbane |
| Delivered on: | 31 May 2011 |
REPRESENTATION
| Counsel for the Applicant: |
| Solicitors for the Applicant: | Robert Bax & Associates |
| Counsel for the Respondent: |
| Solicitors for the Respondent: | Ace Solicitors |
| Counsel for the Supporting Creditor: |
| Solicitors for the Supporting Creditor: | Cooper Grace Ward |
ORDERS
That the Creditor’s Application be adjourned for mention to 26 August 2011 commencing at 10.00am.
That the costs of the Application be costs in the cause.
That each party be at liberty to apply with two (2) days notice.
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT BRISBANE |
BRG 65 of 2011
| DM DEVELOPMENTS |
Applicant
And
| LEE JOHN DRISCOLL |
Respondent
And
| BMW AUSTRALIA FINANCE PTY LTD |
Supporting Creditor
REASONS FOR JUDGMENT
(Revised from transcript)
Introduction
On 3 September 2009, the applicant creditor sought and succeeded in obtaining judgment against the respondent debtor in the Beenleigh Magistrates Court in the sum of $27,200. On 14 December 2010 it caused a bankruptcy notice to issue based upon the judgment.
The creditor then purported to serve the bankruptcy notice upon the debtor by posting it on 20 December 2010 to the debtor at his “last known address”. The last known address of the debtor in this instance was a post office box.
The debtor says he did not receive the letter which had been forwarded to his post office box until approximately five weeks after it had been posted. That is, it was received well outside the compliance period provided for under the notice.
Further, the creditor’s application for sequestration was commenced inside 21 days after the date of actual receipt of the bankruptcy notice by the debtor. In this application, a number of issues arose for determination. They were:
a)Was service of the bankruptcy notice upon the debtor by service at a post office box service at a “last known address” as provided for by bankruptcy regulation 16.01(1)(a)?
b)If so, had there been service in this case based upon the particular facts?
c)If service had been effected, was it deemed to have been received or served upon the debtor in the ordinary course of post by operation of regulation 16.01(2)? That is, had the debtor discharged his onus of establishing “proof to the contrary”?
d)If service was effected on a date deemed to follow in the ordinary course after placing the letter in the post and the debtor had by his failure to comply with the bankruptcy notice committed an act of bankruptcy should he be entitled to an adjournment of the creditor’s petition?
Service at last known address
Was service of the bankruptcy notice upon the debtor effected by service at a post office box being his last known address? In the creditor’s outline of argument he contended that the post office box was the debtor’s last known address. That contention was supported by the authority of Drake t/as T H Drake & Associates v Stanton.[1]
[1] [1999] FCA 1635
There Tamberlin J had to consider the issue of whether or not service had been effected in accordance with regulation 16.01(a) by the notice having been sent to the person at his or her last known address. When considering that term, his Honour made this observation:
“In my view on the language of regulation 16.01(1)(c), the reference to the last known address of the person is to that address which has been made known by the applicant as at the time closest to the date in question.”
Here for the debtor it was contended that a post office box could not be a place of service. In support of that proposition he relied upon the decisions of the courts in Sarikaya v Victorian Workcover Authority (State of New South Wales)[2] and Croker v Sydney Institute of TAFE (New South Wales).[3]
[2] (1997) 80 FCR 262; [1997] FCA 1372
[3] [2003] FCA 942
Those cases are helpful but are distinguishable. In each of those cases the court was examining the relevant rule in the Federal Court Rules governing the requirement for the provision of an address for service by a party. Here, although the bankruptcy notice itself is not a formal part of the creditor’s application or an initiating document, it is generally accepted as a proceeding for these purposes. See generally Adams v Lambert[4] at [415].
[4] [2006] HCA 10; (2006) ALR 396
It is, in effect, an initiating proceeding whereby the creditor puts the debtor on notice and enlivens a requirement upon the debtor to take action within the compliance period to avoid defined consequences.
It has the effect of initiating an application although it is not one in itself.Respectfully, rules that apply to the consequent conduct of proceedings once parties are engaged as, for instance, rules relating to the need to provide an address for service have a different significance.
The purpose of a relevant address for bringing of initiating processes to the attention of an adversary – such as to be satisfied that he or she comes to be aware of the action to be taken against that party – differs from that for an address for the ongoing conduct of litigation. That first stated purpose appears to underlie the decision of Black CJ in Sarikaya (supra) when his Honour was considering Federal Court Rule Order 7, rule 61:
“In the present context, a post office box is not in my view the “address of a place” in which he may be “left” for a person.”
His Honour’s reasoning was adopted by her Honour Bennett J in Croker v Sydney Institute of TAFE (State of New South Wales) (supra) and the numerous authorities referred to by her Honour therein.
That was an instance where a court considering whether service could be affected by delivery to a poste restant service. There the court accepted that even if there was to be evidence of an agreement between the post office and the subject party concerning putting aside of post, the fact remained that such an address was not an address “at which documents could be left”; see paragraph [20].
I do not think those cases are of assistance in the context of bankruptcy regulation 16.01 which provides for service at “the last known address”. The term “address” was considered by the Full Court in Sunrise Auto Ltd v Deputy Commissioner of Taxation & Anor[5] where some helpful observations were made.
[5] (1994) 124 ALR 425
However, the observations of the court in that instance are limited because they were considering the composite phrase “address for service”. Discussion drew upon the meaning of the word “service” in its composite context. There the court accepted the observations of Heerey J in Re: Puglesi; Ex parte The Chase Manhattan Bank of Australia Ltd[6] that, “Address means, among other things, a place where a person lives or may be reached.”
[6] (1993) 44 FCR 536
In that decision the court was considering whether the address of the creditor’s solicitors in the creditor’s petition could be the address for payment of the sum demanded and whether that complied with the requirements of the Act. The court held in that instance it did.
It follows in my view that the authorities demonstrate that prima facie service may be effected at a post office box if the court can be satisfied that in fact the post office box represents the last known address.
Has there been service?
Given that I think service can be effected at a post office box, the question arises whether or not there had been service in this instance.
The importance of the necessity for strictness of proof of the requirements for the service of a bankruptcy notice is well settled.
As was stated by his Honour Gummow J in Re: Ditfort; Ex parte Deputy Commissioner of Taxation (1988) 19 FCR 347 commencing at [358]. There his Honour observed:
“In re Long ex parte Fraser Confirming Proprietary Limited, Walters J reviewed the authorities which indicate the necessity for strictness of proof and observance of the requirements for service of bankruptcy notices and bankruptcy petitions. The applicant properly placed much reliance upon this decision. It was he who drew it to the attention of the court. The dispute before Walters J arose as an application to set aside for want of due service a bankruptcy notice on which a petition had been based. Although an affidavit of service by a process server deposed to personal service of a bankruptcy notice on the debtor, Walters J found after hearing evidence that the notice had not been served personally on the debtor. Rather, the notice had been handed to the wife of the debtor at his house and the notice had not been brought to his attention until some eight or 10 days had elapsed. Walters J held:
(1) that the failure of the petitioner to prove personal service of the bankruptcy notice was not a formal defect or irregularity which might be corrected by bringing it within the umbrella of section 306 of the Bankruptcy Act, and
(2) that the want of personal service of the bankruptcy notice rendered defective the petition founded on it despite the debtor’s subsequently acquired knowledge of the existence of the notice and even though there was no proof of substantial injustice having been done to the debtor by the defective service. In the result, Walters J ordered that the bankruptcy notice be set aside and it followed that a petition was dismissed. While I was not necessarily being of the view that section 306 can never apply in such a case in any circumstances, I respectfully agree with what was said by his Honour as to the importance of proper proof in these cases and to the salutary consequences for creditors of failure to comply with the rules.”
Similar views were expressed by Fisher J in Re: Williams; Ex parte Alberton Electrical Service Proprietary Limited.[7] His Honour’s remarks echo the observations of the English Court of Appeal in Re: A Debtor (1939) 1 Chancery 251 at 257. The reasoning for strictness has been long accepted. It was observed by Hart J in Re: Fairlie; Ex parte Armco Australia[8] at [68] citing with approval in Re: A Debtor:
“Since the commission of an act of bankruptcy was a serious matter and involved consequences of what has been called a penal nature, it was important to see that the necessary preliminaries were complied with.”
[7] (1982) 43 ALR 552
[8] (1969) 14 FLR 65
Here some controversy surrounds the facts. In an affidavit filed on
8 February 2011 and sworn on 4 February, the manager for the creditor who also is a solicitor swore that on 20 December 2010 she served the debtor with a copy of the bankruptcy notice and judgment “by posting them to [the debtor] at his last known address at PO Box 805, Hamilton Central, Queensland 4007.”
The article was posted by registered post. In her affidavit filed
15 March 2011 she attached a copy of both the registered post lodgement receipt and the tracking record for the article. The lodgement receipt noted the address as “PO Box 807”. That receipt was exhibited under cover of a letter dated 20 December 2010 which letter was addressed to the debtor care of “PO Box 805”.Although not expressed in the affidavit, I infer that the exhibit is a file copy of the letter which was forwarded by the creditor to the debtor and that the lodgement receipt was affixed to the letter such that when they were copied they collectively appeared as one document which was then annexed to the affidavit.
There are some matters which require additional observation. First, it ought be observed that the registered post lodgement receipt is post stamped by the post office at Ormeau. I assume that was the place from which the document was posted.
The address on the registered post lodgement receipt is “PO Box 807”, and one would expect that in the ordinary course as a matter of quality assurance the officer at the post office would compare the address on the lodgement receipt with the article to be posted because ultimately as a matter of judicial notice I infer that by forwarding an article by registered post the post office is by that service warranting delivery to the address to which the article is addressed. In the ordinary course the only way this can be achieved is to compare the address of the article with the receipt which was handed to the poster.
It seems plain on that basis that notwithstanding the heading in the letter attaching the bankruptcy notice the envelope contained the wrong address. In addition to the lodgement receipt, however, is the tracking summary. The tracking summary does not identify the post box to which the article was delivered.
However, it can be seen by reference to the tracking ID which is stamped in the left hand corner of the lodgement receipt that the tracking summary relates to the article which was post to PO Box 807. It notes that the article was received and was awaiting collection from the Hamilton Central post office from 22 December 2010 at 0713 hours.
The tracking summary then proceeds to note that the article was subsequently subject to a redirection notice which was received on
22 December at 0910 hours and that in compliance with that direction on 23 December 2010 from 0527 hours it was at the George Street post shop where it was noted as “awaiting collection from post office”.
The next entry in the tracking summary demonstrates that on
28 January 2011 at 1634 hours it was “delivered with signature to
L. Driscoll”. The point at which delivery occurred was the George Street post shop. The basis for the redirection is uncertain.
It could be that the redirection occurred at the instigation of the post office, it having internally identified that the recipient, Mr Driscoll at “PO Box 807” was one and the same as Mr Driscoll who maintained a post box at 805. Alternatively, it could be that the receipt did incorrectly note the address as PO Box 807; the error was not picked up by anyone and Mr Driscoll indeed did receive notice of the article having arrived at PO Box 805 and he did direct its redirection. The matter of redirection does have, in my view, some significance. As I have noted, the article was subsequently collected by Mr Driscoll at George Street.
He says in an affidavit sworn by him that he collected it from the post office at Hamilton, but having regard to the record maintained by Australia Post I consider the record to be more reliable than the memory of the debtor. I find that in fact delivery occurred by
Mr Driscoll attending the George Street post shop where he signed for the collection of the article on 28 January 2011 at about 1634 or 4.34pm in the afternoon.[9]
[9] Neither party required any witness for cross-examination.
As I have earlier indicated, I consider the question of who was responsible for the redirection to be of some significance in this case. If the redirection was at the request of the debtor then service, in my view, will have been effected because I would readily infer that either the address of the envelope was correct and the lodgement receipt was in error.
However, if the redirection occurred for other reasons such as the post office box having internally identified the error and perhaps acting upon a standing direction or instruction to redirect post, I would not initially be so satisfied. I would then have to proceed to consider whether the error was a formal defect which ought to be subject to remedy pursuant to section 306(1) of the Act.
In this case the evidence doesn’t assist me. Accordingly, consistent with the principle requiring that the matter ought be strictly proved, I proceed upon the premise that the error in the address existed and was identified by someone other than the debtor and that that person caused the letter to be forwarded to the George Street post shop from where it was collected. Section 306 of the Act provides:
“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.”
It is accepted by authority that an error of the kind that is evident in this instance can be corrected. See the observations in Re: Ditfort (supra). In Adams v Lambert (supra), the question posited for answer was expressed by the High Court in these terms:
“If there had been no failure to comply with a requirement of the Act and regulations, there would be no issue as to the effect of section 306. In the event of such a failure it must be asked whether the defect or irregularity is a formal defect or irregularity within the purview of section 306. If it is then it becomes necessary to consider whether substantial injustice has been caused by the defect or irregularity and whether the injustice cannot be remedied by an order of the court. The question as to whether the defect or irregularity is a formal defect or irregularity and whether substantial injustice has been caused and cannot be remedied are separate and distinct, the latter question only arising if the former is answered in the affirmative.”
Having proceeded to examine the issue from the perspective of the best possible case for the debtor, it does appear that there is the prospect of a formal defect or irregularity. The question then becomes whether any substantial injustice has been caused and cannot be remedied by intervention of the court.
The tracking history would suggest that the delay occasioned by the defect – that is, by the misdescription of the address – was at most one day. That is, that was the time that could arguably have been lost between the arrival of the registered post at the Hamilton central post office and its subsequent redirection to the George Street post shop where, plainly, Mr Driscoll was expecting to receive postal articles.
In my view, the defect can be corrected by its waiver without the need for any intervention by the court. In the circumstances there would not appear to me to be any injustice to have been occasioned to the debtor by reason of the defect in the address because of the redirection of the post, particularly in the circumstances of this case given that the redirection occurred promptly and secondly the delay in collection was by a factor well in excess of one day.
My views may have been different had the postal item been collected more promptly leading for the day to have some materiality. In my view, this is a case where the creditor is entitled to the benefit of s.306 and it follows from my finding that there has been service of the bankruptcy notice upon the debtor.
Was service within the ordinary course of post?
Accepting then that there has been service of the bankruptcy notice upon the debtor, the question arises as to whether or not the debtor has satisfied the onus which then is cast upon him by regulation 16.01(2). That regulation is in these terms:
“A document given or sent to or served on a person in accordance with subregulation (1) is taken in the absence of proof to the contrary to have been received by or served on the person in the case of service in accordance with paragraph 1A when the document would in the due course of post be delivered to the person’s address.”
In his affidavit the debtor says that he didn’t know about the bankruptcy notice until he received it in his post office box in late January. While I am inclined to a sympathetic view of the debtor’s position because of the time of the year, bearing in mind that it was Christmas/New Year and the dislocation that occurred in Brisbane particularly because of the flooding that occurred in January 2011, it ought to have been plain to the debtor since at least 15 March – that is, when the creditor filed her affidavit attaching the tracking summary – that the postal history of the registered post article was very much a live issue.
Given the article was being posted to the debtor, it was within his power to contact the post office and ascertain what happened between 22 December and 23 December when the article was redirected.
Although, as I have found, I accept service occurred and adopting a presumption that service occurred within two business days of posting, the presumption could have been rebutted by evidence concerning the time of the year and the events in Brisbane provided there was no other evidence of intervening conduct.
In this instance there was evidence demonstrating that there had been some intervening conduct. That is the redirection of the postal article which occurred on 22 December. Irrespective of whether the debtor knew the article awaiting collection was a bankruptcy notice or otherwise, the fact remains that once he became aware that an article was awaiting his collection he would, in my view, ordinarily have been subject to the presumption that arises under regulation 16.01(2)(a).
It then would have been incumbent upon him to adduce evidence addressing the reason why the fact of service ought not be accepted. Here the debtor’s absence of any evidence on the point particularly in relation to the matter of redirection is, in my view, telling and gives rise to an adverse inference of the kind permitted by the rule in Jones v Dunkel.[10]
[10] (1959) 101 CLR 298; [1959] ALR 367
I am satisfied that the debtor has not addressed the matter, particularly the matter of the redirection, because this matter would lead to evidence which would be adverse to him. He bears the onus of proving the matter to the contrary and in the circumstances he has in this instance failed.
I find there was service of a bankruptcy notice upon him on or about
22 December 2010 and that because of his failure to comply with this bankruptcy notice by 12 January 2011 he thereby committed an act of bankruptcy. The creditor’s petition was filed on 8 February 2011, that is after the commission of an act of bankruptcy and on that basis it is a valid proceeding.
Should the creditor’s application be adjourned?
The debtor seeks that the petition be adjourned. The principal grounds advanced for the adjournment of the petition are these. First, there is a challenge to the judgment which supports the bankruptcy notice and in turn the petition; and second, the debtor contends there is an offsetting claim in excess of the amount claimed by the creditor and, I should add, when considered collectively with the supporting creditor is still well in excess of the sums claimed cumulatively by the creditors and supporting creditors.
So far as the first ground is concerned, the principal ground advanced is that there is presently an application seeking to appeal against the decision giving rise to the judgment entered against the debtor. I note that the debtor and the other personal representatives of the creditor appear to have a somewhat long and extensive history. They have been involved in other litigation beyond this court and beyond the dispute giving rise to the judgment. In part, a claim appears to arise on the part of the debtor against the creditor and an individual associated with the creditor, a Mr Malarkey.
The debtor says that he was engaged to provide professional services to Mr Malarkey in respect of criminal proceedings that Mr Malarkey was facing concerning serious charges relating to various drug offences for which he was subsequently convicted. He is presently serving a sentence of about 13 years. Without descending into detail, the debtor contends he is owed a sum of about $130,000 on account of services provided to the creditor at the request of Mr Malarkey.
There is a considerable amount of intrigue surrounding these events, perhaps not made any easier because of Ms Thorpe, who swears the affidavits as manager for the creditor and who is a solicitor employed by Queensland Law Group Pty Ltd. She is also apparently romantically involved with Mr Malarkey and may be involved in his business affairs. In summary, there are many issues between these parties which are beyond this dispute.
The judgment which was obtained in the Magistrates Court for approximately $27,000 relates to a claim for rental owing in respect of a property which was owned by the creditor and in respect of which
Mr Malarkey and Ms Thorpe, it is said, had an arrangement with
Mr Driscoll. The judgment was entered by default following an application by the creditor for failure by the debtor to comply with various procedural directions.
Again, without descending into detail on those matters, there is clear material before the court indicating that there are serious issues to be agitated on appeal from the decision of the magistrate who seems to have allowed judgment in circumstances where there is a contest about whether or not there had been compliance with court orders. Indeed the evidence, at least, demonstrates clear performance subject to the question as to whether or not a party was entitled to redact from disclosed material that information which he contends was irrelevant to the proceeding concerning which he was subject to a disclosure order.
Without seeking to second guess what a court will do on appeal there are, in my view, serious issues to be agitated in respect of the appeal which would militate against permitting the application for sequestration to proceed at this point. But that is not the end of it.
The debtor sought to maintain a defence and counterclaim in the proceeding which was the subject of the order for judgment. The cross-claim sought a sum of approximately $132,000. That was the claim in respect of the provision of services. Irrespective of what happens to the creditor’s appeal, the debtor has an entitlement to proceed in the action to recover his $132,000.
The matter has not been the subject of judicial determination and no
res judicata or issue estoppel arises. It is a significant claim and from the material filed in the court, it appears to me that there are serious issues to be tried.
If the debtor succeeds in his proceeding he will obviously obtain more than sufficient to discharge the indebtedness to the creditor irrespective of the outcome of the creditor’s appeal and also the sums due to the supporting creditor.
It was advanced on behalf of the creditor that there is no material before the court by the debtor concerning his general solvency. In the ordinary course that sort of material would be expected, but having regard to the nature of the judgment which is relied upon, the prospect of a successful appeal and the evidence of a live and genuine dispute about a sum which was to be the subject of a counterclaim I am presently satisfied that there is more than ample to answer any questions of solvency and on that basis I likewise come to the view that it is appropriate that the application be adjourned.
I will adjourn the matter to 26 August.
I certify that the preceding fifty-eight (58) paragraphs are a true copy of the reasons for judgment of Burnett FM
Date: 24 June 2011
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