Fuller v Alford

Case [2017] FCA 782

FEDERAL COURT OF AUSTRALIA

Fuller JR, in the matter of Alford v Alford [2017] FCA 782

File number(s): NSD 1234 of 2016
Judge(s): PERRY J
Date of judgment: 12 July 2017
Catchwords:

BANKRUPTCY – application for sequestration order under s 43, Bankruptcy Act 1966 (Cth) - where debtor outside Australia when act of bankruptcy occurred – whether jurisdiction to make sequestration order– whether debtor ordinarily resident in Australia, had a dwelling house in Australia or carried on a business in Australia

BANKRUPTCY – discussion of principles governing validity of bankruptcy notice –where debtor not present in Australia at time of service – whether service of bankruptcy notice by email to Australian address deemed to have occurred in Australia under reg 16.01, Bankruptcy Regulations 1999 (Cth) – whether service effected within Australia by operation of s 14B, Electronic Transactions Act 1999 (Cth) – whether failure to specify level of building in address for payment and service in bankruptcy notice substantive defect - decision in Celestini v Monte Paschi Australia Limited (1996) 71 FCR 399 not followed – whether reference to Federal Magistrates Court in bankruptcy notice and failure to refer to Federal Circuit Court substantive defect – whether bankruptcy notice could reasonably mislead debtor

Legislation:

Acts Interpretation Act 1901 (Cth), s 25C

Bankruptcy Act 1966 (Cth), ss 40, 41, 43, 156, 306, 309

Electronic Transactions Act 1999 (Cth), s 14B

Bankruptcy Regulations 1999 (Cth), regs 4.02,  16.01

Civil Procedure Act 2005 (NSW), s 101

Uniform Civil Procedure Rules 2005 (NSW), r 36.7
Cases cited:

Adams v Lambert [2006] HCA 10; (2006) 228 CLR 409

American Express Ltd vMichaels [2010] FMCA 103; (2010) 237 FLR 268

Atkinson v Oakleigh Holdings Pty Ltd [2000] FCA 1547; (2000) 105 FCR 15

Australian Steel Company (Operations) Pty Ltd v Lewis [2000] FCA 1915; (2000) 109 FCR 33

Battenberg v Restrom [2006] FCAFC 20; (2006) 149 FCR 128

In Re Brauch (A Debtor); Ex parte Britannic Securities & Investments Ltd [1978] Ch 316

Brennan v McGuire [2015] FCCA 665

Celestini v Monte Paschi Australia Limited (1996) 71 FCR 399

Re Crisafulli; ex parte National Commercial Banking

Commissioner of Taxation v Kelly [2001] FCA 844; (2001) 110 FCR 561

Corporation of Australia Ltd (1985) 11 FCR 272

Croker v Commonwealth [2010] FCA 1031

de Robillard v Carver [2007] FCAFC 73; (2007) 159 FCR 38

Envee Energy Pty Ltd v Stockford [2007] FMCA 1426

Farrugia v Farrugia [2000] FCA 385; (2000) 99 FCR 16

Re Haritos; ex part Hill (1968) 15 FLR 378

Herchenroder v Smith [2002] FMCA 96

James v Federal Commissioner of Taxation (1955) 93 CLR 631

Kleinwort Benson Australia v Crowl (1988) 165 CLR 71

Lee v McNulty [2000] FCA 1519

Mathai v Kwee [2005] FCA 932

Michael Wilson & Partners Ltd v Slater [2013] FCCA 1201

Northam v Commonwealth Bank of Australia [1999] FCA 544

Re Nugent; Ex parte Nugent (1985) 5 FCR 161

Project Blue Sky Inc v Australian Broadcasting Authority [1998] HCA…

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AGLC
Fuller v Alford [2017] FCA 782
Case
[2017] FCA 782
Decision Date

CaseChat Overview and Summary

The case of Fuller v Alford involved a creditor seeking a sequestration order against the debtor, Timothy John Alford, under section 43 of the Bankruptcy Act 1966 (Cth). The central issue was whether the Federal Circuit Court had jurisdiction to make the sequestration order, considering the debtor was outside Australia when the act of bankruptcy occurred. The court also needed to determine if the debtor was ordinarily resident in Australia, had a dwelling house or place of business in Australia, or was carrying on business in Australia.

The legal issues included whether the service of the bankruptcy notice by email to an Australian address was deemed to have occurred in Australia under regulation 16.01 of the Bankruptcy Regulations 1999 (Cth). Another issue was whether the service was effected within Australia by operation of section 14B of the Electronic Transactions Act 1999 (Cth). Furthermore, the court examined whether the failure to specify the level of building in the address for payment and service in the bankruptcy notice constituted a substantive defect. The debtor argued that the decision in Celestini v Monte Paschi Australia Limited (1996) 71 FCR 399 should be followed, but the creditor contended otherwise. Additionally, the court considered whether the reference to the Federal Magistrates Court in the bankruptcy notice and the failure to refer to the Federal Circuit Court constituted substantive defects, and whether the notice could reasonably mislead the debtor.

The court held that the service of the bankruptcy notice by email to the debtor’s Australian address was deemed to have occurred in Australia under regulation 16.01. This was because the facility for receipt of electronically transmitted documents was located in Australia, as inferred from the email address ending in ".com.au". The court also found that service was effected within Australia by operation of section 14B of the Electronic Transactions Act. The court rejected the debtor's argument that the decision in Celestini v Monte Paschi Australia Limited should be followed and concluded that the failure to specify the level of building in the address for payment and service in the bankruptcy notice was not a substantive defect. The reference to the Federal Magistrates Court in the notice and the failure to refer to the Federal Circuit Court were not considered substantive defects as the notice did not reasonably mislead the debtor.

In conclusion, the court granted the creditor's petition and ordered the sequestration of the debtor's estate under the Bankruptcy Act 1966 (Cth). Costs were reserved, and the parties were to liaise to agree on a timetable for the filing of written submissions as to costs if the order as to costs was not agreed.

Orders

Orders of the court

1. The estate of Timothy John Alford be sequestrated under the Bankruptcy Act 1966 (Cth).

2. Costs are reserved.

THE COURT NOTES THAT:

3. The date of the act of the bankruptcy is 27 June 2016.

4. A consent to act as trustee signed by Louisa Sijabat and Nick Jim Combis has been filed under section 156A of the Bankruptcy Act 1966 (Cth).

5. The parties are to liaise to agree a timetable for the filing of written submissions as to costs in the event that the order as to costs is not agreed.

Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

Background

Background to the litigation

Full text does not contain this section.

Evidence

Evidence Before The Court

Finally I note that the parties filed supplementary submissions after the hearing pursuant to leave granted at the hearing to address the question of whether Celestini v Monte Paashi Australia Ltd (1996) 71 FCR 399 should be followed. However, paragraphs 22-29 of the debtor’s supplementary submissions addressed matters outside the scope of that leave and have not therefore been taken into account. As the Full Court held in SZSJA v Minister for Immigration and Border Protection [2013] FCAFC 158; (2013) 308 ALR 266 with respect to supplementary written submissions filed by the respondent in that case after judgment was reserved: 66 …The respondent also filed further written submissions pursuant to that leave but, in our view, went beyond that leave in paragraphs 7-10. As the majority said in NT Power Generation Pty Ltd v Power and Water Authority [2004] HCA 48; (2004) 219 CLR 90 at [192]: “This is unsatisfactory. It is impermissible to file further submissions without leave, and this cannot be evaded by adding on to submissions filed with leave other material for which leave should have been obtained.” … 67. The filing of such submissions is to be deprecated because it runs counter to the principle that the hearing, in open court, is the time and place to present argument; it is at the hearing that a party has the opportunity to put his or her case; and a fair and effective process requires that written submissions beyond the scope of any leave granted should not be filed lest there be a fresh round of answering submissions. So that the other party is not put at a disadvantage, the proper course to take is to ignore the passages in the further written submissions which go beyond the limited grant of leave. This we have done.2. EVIDENCE2.1 Witnesses The creditor relied upon the following affidavits and annexures thereto which were read without objection:(1)two affidavits of Taryn Guyatt, solicitor, affirmed 1 August 2016; (2)a further affidavit of Taryn Guyatt affirmed 20 March 2017; (3)the affidavits of Christopher Allen Stevens, solicitor, sworn 20 September 2016, 11 October 2016, 8 February 2017, 24 February 2017 and 20 March 2017; and(4)the affidavit of Hugh Dean Fuller of 18 March 2017. Mr Stevens was cross-examined on certain aspects of his evidence. In addition, the creditor relied upon incoming and outgoing immigration declarations made by the debtor which were obtained under subpoena issued to the Department of Immigration (exhibit A1). The debtor relied upon his affidavit sworn on 9 February 2017 in support of the submission that the Court did not have jurisdiction under s 43 of the Act, together with the Annexures to that affidavit, which was read save for the second sentence of paragraph 7. The debtor was also cross-examined. 2.2 Findings as to credit While such findings are not made lightly, I formed a poor view of the debtor’s credibility. His evidence was in certain respects at worst misleading or at best incomplete. For example, he gave a street address in his affidavit as his address in Singapore and said that he and his family “live in rental premises in Singapore”. However, until it was put to him in cross-examination he did not disclose that that was the address of the Regis Hotel and that he did not maintain a room there when he was absent from Singapore (see below at [36]). I also formed the strong impression that, consciously or subconsciously, he sought to give evidence on key issues that he considered would best advance his case and to blame others unconvincingly when the contemporaneous evidence did not support his evidence. Examples include blaming his accountant for affixing the debtor’s electronic signature to an application for registration of a company on 3 September 2016 allegedly without his permission, his business associate for speaking allegedly without his permission to Ms Guyatt, a solicitor for the creditor, (see below at [15]-[20]], and a process server for not taking good notes of a conversation (see below at [38]). I also formed the impression that he was evasive such as when confronted with evidence of assurances to process servers about when he would return to Australia from overseas. Overall, I cannot accept his evidence as a reliable in the absence of corroborative evidence. 3. RELEVANT STEPS IN THE PROCEEDING AND RELATED FINDINGS3.1 Service of the bankruptcy notice

Decision

Reasons for decision

The creditor’s petition was lodged on 1 August 2016 and listed for first directions hearing on 7 September 2016. It alleges that the outstanding amount owed by the debtor to the creditor is comprised of the following:(1)the sum of $682,840.09 obtained on 11 December 2015 from the District Court of New South Wales by the Creditor against the Debtor (the judgment debt); and(2)interest accruing on the judgment debt in the sum of $41,404.18 as at 25 July 2016 pursuant to section 101 of the Civil Procedure Act 2005 (NSW) and rule 36.7 of the Uniform Civil Procedure Rules 2005 (NSW). As earlier mentioned, the District Court proceedings involved a debt arising out of the Settlement Deed. On 5 October 2016, the Registrar made orders dispensing with personal service of the creditor’s petition and providing instead that the petition and affidavits verifying the petition and of service of the bankruptcy notice, together with any consent of a registered trustee, be served by scanning them and sending them by email to the debtor at his fernshaw.com.au and mail.com email addresses and the applicant’s authorised representative, Mr Cameron Horne. The Registrar also directed that an amended creditor’s petition be lodged to bear the new hearing date, then 9 November 2016. On 7 October 2016, Mr Stevens sent an email to the debtor using the email addresses referred to and attaching copies of: (1)the orders made by the Registrar dated 5 October 2016;(2)the creditor’s petition filed 1 August 2016;(3)the affidavit of service of the bankruptcy notice affirmed by Ms Guyatt on 1 August 2016;(4)the affidavit of bankruptcy search affirmed by Ms Guyatt at 1 August 2016; and(5)the trustee consent to act declaration dated 3 August 2016. Mr Stevens received a delivery confirmation receipt of the email sent to the fernshaw.com.au address immediately thereafter. He also sent the same documents on 7 October 2016 to Mr Horne at the email address referred to in the Registrar’s orders and immediately thereafter received a delivery confirmation receipt of email from the email address of Mr Horne. 3.3 The debtor’s amended notice of grounds of opposition By a notice of grounds of opposition filed on 29 November 2016 the debtor raised a number of grounds of opposition. On 10 February 2017, the debtor filed an amended notice of grounds of opposition adding two additional grounds including that the Court lacks jurisdiction to make a sequestration order against the debtor’s estate (ground 1); and that the respondent was not served with the Bankruptcy Notice BN 189301 issued on 12 April 2016 (ground 2).4. JURISDICTION TO MAKE A SEQUESTRATION ORDER UNDER s 43 OF THE ACT (GROUND 1, AMENDED GROUNDS OF OPPOSITION)4.1 The issue The Court has jurisdiction to make a sequestration order under s 43(1) of the Act where:(a) a debtor has committed an act of bankruptcy; and(b) at the time when the act of bankruptcy was committed, the debtor:(i) was personally present or ordinarily resident in Australia;(ii) had a dwelling‑house or place of business in Australia;(iii) was carrying on business in Australia, either personally or by means of an agent or manager; or(iv) was a member of a firm or partnership carrying on business in Australia by means of a partner or partners or of an agent or manager;

Ratio Decidendi

Legal Principle Established

That being so, as a matter of ordinary language, reg 16.01(2) deems service to have occurred when the document relevantly is transmitted electronically to a facility maintained by the person for receipt of such documents under reg 16.01(e)(i). Logically, therefore, in my view reg 16.01 also deems service to occur at the place where that facility is located, as Smith FM held in American Express at [33]. As such, the email address to which the bankruptcy notice was transmitted being an Australian one as it ended in “.com.au”, I agree with the creditor that the inference should therefore be drawn that the facility maintained by the debtor for receipt of emails was located in Australia. In this regard, even assuming that reg 16.01(2) creates a rebuttable presumption as to where, as well as when, service was effected, the debtor has not led any evidence to the effect that the facility maintained by him for receipt of electronically transmitted documents was located outside Australia. It follows in my view that the ground of opposition is not made out. There was no requirement for leave to serve out of Australia to be obtained as service of the notice occurred in Australia, and the question of where the debtor was located and when he personally received the bankruptcy notice is not relevant. 5.3.3Was service effected within Australia by operation of s 14B, Electronic Transactions Act 1999 (Cth)? Alternatively, I agree with the creditor that service was effected within Australia by operation of s 14B of the Electronic Transactions Act. In this regard, s 14B provides with respect to the place of despatch and receipt that: (1)For the purposes of a law of the Commonwealth, unless otherwise agreed between the originator and the addressee of an electronic communication:(a)the electronic communication is taken to have been dispatched at the place where the originator has its place of business; and(b)the electronic communication is taken to have been received at the place where the addressee has its place of business.(2)For the purposes of the application of subsection (1) to an electronic communication:(a)a party’s place of business is assumed to be the location indicated by that party, unless another party demonstrates that the party making the indication does not have a place of business at that location; and(b)if a party has not indicated a place of business and has only one place of business, it is to be assumed that that place is the party’s place of business; and(c)if a party has not indicated a place of business and has more than one place of business, the place of business is that which has the closest relationship to the underlying transaction, having regard to the circumstances known to or contemplated by the parties at any time before or at the conclusion of the transaction; and(d)if a party has not indicated a place of business and has more than one place of business, but paragraph (c) does not apply—it is to be assumed that the party’s principal place of business is the party’s only place of business; and(e)if a party is a natural person and does not have a place of business—it is to be assumed that the party’s place of business is the place of the party’s habitual residence.(3)A location is not a place of business merely because that is:(a)where equipment and technology supporting an information system used by a party are located; or(b)where the information system may be accessed by other parties.(4)The sole fact that a party makes use of a domain name or email address connected to a specific country does not create a presumption that its place of business is located in that country.