Favell v Mbuzi - [2011] FMCA 710

FEDERAL MAGISTRATES COURT OF AUSTRALIA

FAVELL v MBUZI

[2011] FMCA 710

BANKRUPTCY – Creditor’s Petition – service of Bankruptcy Notice – deemed service – delivery in ordinary course of post – no receipt because of no mailbox – cl. 24.1.3 of Australia Post Terms and Conditions – no proved non-delivery.

BANKRUPTCY – Stay of Sequestration Order – refused.

Bankruptcy Act 1966, s.52
Australian Postal Corporation Act 1989, s.32(1)(b)
Bankruptcy Regulations 1996, reg.16.01(a)
Federal Court Rules 2011

Fancourt v Mercantile Credits (1983) 154 CLR 87
Skalkos v T & S Recoveries Proprietary Limited (2004) FCAFC 321

Applicant:

PAUL JOSEPH FAVELL

Respondent:

JOSIYAS MBUZI

File Number:

BRG 493 of 2011

Judgment of:

Jarrett FM

Hearing dates:

18, 26 August 2011 and 5 September 2011

Date of Last Submission:

5 September 2011

Delivered at:

Brisbane

Delivered on:

5 September 2011

REPRESENTATION

Counsel for the Applicant:

Mr P. W. Hackett

Solicitors for the Respondent:

In person

ORDERS

A sequestration order be made against the estate of JOSIYAS MBUZI.
The petitioning creditor’s costs be taxed and paid in accordance with the Federal Court Rules 2011 and the Bankruptcy Act 1966.

THE COURT NOTES:

That the date of the act of bankruptcy is 23 December 2010.

FEDERAL MAGISTRATES
COURT OF AUSTRALIA
AT BRISBANE

BRG 493 of 2011

PAUL JOSEPH FAVELL

Applicant

And

JOSIYAS MBUZI

Respondent

REASONS FOR JUDGMENT

(Revised from the transcript)

This is an application for the making of a sequestration order against the respondent. The proceedings have as their genesis a judgment given by the District Court of Queensland on 18 November, 2005. On that day, the District Court gave judgment in favour of the petitioning creditor against the respondent debtor for the sum of $15,000 plus interest, such interest to be calculated at 10% per annum from 14 February, 2005 to judgment.
On 24 November, 2010 the petitioning creditor applied to the Insolvency and Trustee Service for the issue of a bankruptcy notice against the respondent, and the bankruptcy notice was issued.
There is nothing on the face of the bankruptcy notice, and nothing was put to me in the course of submissions that suggest that the bankruptcy notice is anything other than valid. It was suggested in submissions that the bankruptcy notice overstates the amount claimed by the applicant against the respondent, but in my view, the bankruptcy notice follows the judgment. It sets out quite clearly the judgment upon which it is based, and the way in which the amount claimed under the bankruptcy notice is calculated. True it is that the precise amount claimed in the bankruptcy notice is not set out in the judgment in the same amount, but that is because there is interest included in the amount claimed in the bankruptcy notice. As best as I can tell, there is nothing incorrect about those calculations as set out in the schedule of interest calculations attached to the bankruptcy notice.
The bankruptcy notice was purportedly sent by letter to the respondent’s address. I am satisfied that the bankruptcy notice was dispatched under cover of a letter from the petitioning creditor to the respondent. I am satisfied by the evidence, and Mr Favell was cross-examined about this, that the letter was posted. He did not physically place it in the post box, but he caused it to be posted in the ordinary course of his practice, and he gave evidence of what occurs with mail to be posted in the ordinary course of his practice. He gave evidence about the records that are kept concerning the posting of articles such as this. He also gave evidence that the envelope in which it was posted bore a return address, that is, his own address on it.
The respondent debtor takes issue, and this is largely the issue to be dealt with in this case although not the only one, with the proposition that the bankruptcy notice was served on him. The argument he makes is that there is, first of all, no proof of posting because the person who put the relevant letter in the postal box did not give evidence that he or she did so; but for the reasons that I have already given, I am satisfied that the letter was in fact posted.
Second, the respondent says that the letter was not delivered to him because in the ordinary course of the mail and in the ordinary course of Australia Post’s business, the letter would not have been delivered to him because he does not have a mailbox. I accept his evidence that he does not have a mailbox. He was not challenged on his assertion in that regard.
Regulation 16.01(a) of the Bankruptcy Regulations 1996 permits service of a bankruptcy notice to be done by having it sent by post or by a courier service to the person at his or her last known address, and service is deemed to have occurred unless the person to whom it was sent can prove that it was not delivered. That seems to be the effect of the authorities such as Fancourt v Mercantile Credits (1983) 154 CLR 87 and Skalkos v T & S Recoveries Proprietary Limited (2004) FCAFC 321. The test is not receipt but rather posting and delivery. In that respect the respondent’s point is that because he had no mailbox, Australia Post would not have delivered the mail to him.
Mr Favell was not challenged on his evidence, and I accept his evidence that the letter accompanying the bankruptcy notice was not returned to him undelivered.
Before I commenced these reasons I gave the parties an opportunity to make submissions to me as to whether I should take into account and give judicial notice to the terms and conditions upon which Australia Post operates, as set out in the Australia Post website ( and as authorised by s.32(1)(b) of the Australian Postal Corporation Act 1989. Neither party suggested I should not take those into account.
Clause 24 of the terms and conditions deals with undeliverable articles. It provides:
24 Undeliverable articles
24.1 Unless otherwise agreed between Australia Post and the customer, an article may be deemed undeliverable if:
24.1.1 in the reasonable opinion of Australia Post it does not bear an address sufficient for delivery; and
24.1.2 it is endorsed, or is otherwise known to Australia Post, that the addressee is unknown or does not receive articles at the address on the article; or
24.1.3 there are no receptacles or facilities for receipt of the article or the receptacle or facilities provided are, in the reasonable opinion of Australia Post, inadequate.
There is no evidence before me – and it was not suggested – that there was an agreement between Australia Post and Mr Mbuzi that an article addressed to his street address might be deemed to be undeliverable. There is no evidence and no suggestion before me that the way in which the letter was addressed by Mr Favell to the respondent was insufficient. There is nothing to suggest that the article was endorsed or it was otherwise known to Australia Post that Mr Mbuzi was unknown at the address. Indeed the evidence is, and his own evidence is that it was his address to which the letter was sent. At all relevant times he has lived there. And so it is only cl. 24.1.3 which may have some relevance.
Clause 24.1.3 does not provide that Australia Post does not deliver mail to households that do not have mailboxes. It provides that an article may be deemed undeliverable if there are no receptacles or facilities for the receipt of the article, or what receptacles and facilities there are, are in the reasonable opinion of Australia Post inadequate. Thus cl. 24.1.3 requires Australia Post to perform an evaluative function. Australia Post needs to evaluate whether there are receptacles or facilities available for the receipt for the relevant article, and if not, whether the article should be deemed to be undeliverable.
There is no evidence before me which would suggest that Australia Post made any such determination. The deeming provision set out in cl. 24.1.3 of the terms and conditions is a provision which is permissive rather than mandatory. It permits Australia Post to act in a certain way by deeming an article undeliverable. It does no oblige Australia Post to act in that certain way.
It is a matter for evidence about whether Australia Post deemed this particular letter undeliverable on this particular occasion. When the matter first came before me for argument it was adjourned so that Mr Mbuzi could provide some evidence about Australia Post, its practices, and what might have happened on this occasion. He filed a subsequent affidavit on 25 August, 2011 but it does not address any of those issues.
There is no direct evidence before me about the relevant decision having been made by Australia Post. The question then becomes, should I draw an inference that Australia Post did not deliver the letter to the debtor’s address, given the absence of a mailbox? In favour of drawing the inference is the debtor’s deposition, which is unchallenged, that he did not receive the letter and the enclosed bankruptcy notice. Against drawing the inference is Mr Favell’s evidence that the letter was not returned to him undelivered. The onus of proof is on the debtor to prove that which he alleges, given the way in which the deeming provisions of the Bankruptcy Regulations 1996 operate. Given that the possibilities – delivery or non-delivery – are equally open on the evidence and in my view one just as likely as the other, the onus of proof upon the debtor is not discharged and he has not proved on the balance of probabilities that Australia Post did not deliver the letter.
I am satisfied therefore that service of the bankruptcy notice has occurred in accordance with reg. 16.01 of the Bankruptcy Regulations 1996, and there is no proof of non-delivery.
I am satisfied that the bankruptcy notice has not been complied with – it is not suggested that it has been. An act of bankruptcy has been committed.
I am satisfied of the formal matters of which I need to be satisfied under s.52 of the Act. The debt still exists and that there are no other proceedings against the respondent under the Bankruptcy Act 1966. I am not satisfied that there is any other good cause shown for not making a sequestration order.
There is no evidence before me that the debtor is solvent. There is some evidence which he sought to rely on that suggests that he has two motor vehicles which were purchased for $40,000, but that does not prove solvency, and that is not an answer to the test of solvency.
It is also suggested that the creditor’s petition ought to fail because the debtor is now going to take steps to challenge the judgment upon which the bankruptcy notice is based. He says that he has not taken steps to challenge that judgment before now because, at a time which he could not recall in evidence but which was either before or after the judgment was obtained, the petitioning creditor expressed the opinion that he was not interested in the money but rather the restoration of his reputation. The debtor took that as meaning that the petitioning creditor would not seek to recover any damages that he was successful in securing against him. But now that it has become clear that the petitioning creditor wishes to enforce the judgment, the debtor says that he will approach the relevant courts with an appeal and relief against the judgment. It seems to me, however, that given the delay that has passed since the making of the judgment, his prospects of successfully overturning the judgment are remote. The judgment exists, the execution of it has not been stayed and there is nothing else that stands in the way of the petitioning creditor in executing his judgment.
It was also suggested that the pursuing of these bankruptcy proceedings by the petitioning creditor is an abuse of process. I am not satisfied that it is an abuse of process. It is a course that is open to the petitioning creditor. The debtor says that there is a difference between a debtor who cannot pay and one who will not pay. Indeed, some authorities make that point. The debtor argues that bankruptcy proceedings are not appropriate to be used against a recalcitrant debtor, somebody who simply refuses to pay rather than cannot pay because of insolvency.
But that is not the case here. There is a proved act of bankruptcy, an act of bankruptcy upon which the petitioning creditor is entitled to rely. In those circumstances, I am satisfied that no basis has been shown for opposing the creditor’s petition.
I make an order that a sequestration order issue against the estate of the respondent. I further order that the costs of and incidental to the application be taxed and paid in accordance with the Federal Court Rules 2011 and the Bankruptcy Act 1966.
This is an application for stay of a sequestration order that I have just pronounced. The basis of the stay is that the order I have made will be the subject of an appeal. As I apprehend the authorities dealing with this instanter application, one of the relevant considerations to be taken into account is whether the appeal is bona fide, and in determining whether the appeal is bona fide one needs to have an examination of the proposed grounds of appeal, as best one can. That is always a difficult exercise when the judge or federal magistrate who pronounced the order is also asked to stay that order.
Essentially the debtor argues that there are a number of points that he would make on an appeal. The first is that I was wrong in fact and perhaps in law when I determined that the bankruptcy notice was served. He points to what he describes as a hole in the evidence between the deposition of Mr Favell that he placed the letter containing the bankruptcy notice in a tray in his chambers which meant that the article would have been posted in the ordinary course of business from his chambers, and the lack of an affidavit by the person who actually put it in the post box. There may be some merit in that argument; there may not.
The second point made is that it was suggested that I lost sight of the fact that there was an arrangement between the debtor and Australia Post for any mail to be delivered to a post office box. As I apprehended the evidence, there was an arrangement in place, but that had come to an end. In any event, the point at the end of the day does not matter in this sense: if there was an arrangement in place for the redirection of mail to the PO box, then the letter that was sent, that I found was sent by Mr Favell, would have been redirected to the PO box, thus ensuring delivery.
The next point that was made by the debtor was that I was wrong to take judicial notice of the terms and condition of Australia Post’s letter delivery service set out on the Australia Post website.
The fourth point is allied with the second, in that the debtor says that it is dangerous to speculate about whether the letter was delivered or not, the letter containing the bankruptcy notice. He says that I misapprehended his evidence in that rather than he having an intention to appeal the original District Court judgment, he now has in fact – he says the evidence reveals he has in fact instituted those appeals. What the evidence discloses is an application to extend time within which to appeal – an application which has not yet been decided.
But, whether that is right or not does not ultimately impinge on my decision, it seems to me because the view that I took in my reasons was that any application for leave to appeal out of time was likely to fail, given the length of time that has passed since when the judgment was given and the time taken to bring the appeal. Although the appeal is said to be on a legal point only, and that is the application of the rules about absolute privilege to the circumstances in which the defamatory publications were made, it seems to me that the delay will be a significant factor in any event.
I am not satisfied that the proposed appeal has any particular merit. I am not satisfied that I ought to grant a stay.
The stay application is refused.

I certify that the preceding thirty-one (31) paragraphs are a true copy of the reasons for judgment of Jarrett FM

Date: 12 September 2011