Hill v Lyons

[2013] FCCA 1760

FEDERAL CIRCUIT COURT OF AUSTRALIA

HILL v LYONS [2013] FCCA 1760

Catchwords:

BANKRUPTCY – Bankruptcy notice – service – postal service – electronic service – whether the notice was properly served – whether the respondent had knowledge of the proceedings – deliberate evasion of service – service effected – application allowed – sequestration order issued.

Legislation:  

Bankruptcy Act 1966 (Cth), ss.52(1), 52(2)
Bankruptcy Regulations 1996 (Cth), Reg.16.01

Sandell v Porter (1966) 115 CLR 666

Applicant: CLIFFORD ERIC HILL

Respondent: DIANNE BARBARA LYONS

File Number: BRG 597 of 2013

Judgment of: Judge Burnett

Hearing date: 25 September 2013

Date of Last Submission: 25 September 2013

Delivered at: Brisbane

Delivered on: 25 September 2013

REPRESENTATION

Counsel for the Applicant: Mr D. de Jersey

Solicitors for the Applicant: Gadens Lawyers

The respondent appeared on her own behalf.

ORDERS

1. A sequestration order be made against the estate of DIANNE BARBARA LYONS.

2. The applicant creditor's costs, including reserved costs, if any, be taxed and paid, as a first charge, from the estate of the respondent debtor in accordance with the Bankruptcy Act 1966 (Cth).

The Court notes that the date of the act of bankruptcy is 24 JUNE 2013.

FEDERAL CIRCUIT COURT OF AUSTRALIA

AT BRISBANE

BRG 597 of 2013

CLIFFORD ERIC HILL

Applicant

And

DIANNE BARBARA LYONS

Respondent

REASONS FOR JUDGMENT

(Ex Tempore)

1. The applicant creditor obtained judgment in the District Court of Queensland against the respondent debtor by default on 31 May 2013 in the sum of $202,031.21 in respect of claim, interest and costs. He subsequently sought the issue of a bankruptcy notice on 20 June 2013 which issued on that date.  The notice was purportedly served by prepaid post and email on 21 June 2013.  I will come back to those matters in a short time, but in any event, arguably by reference to the Bankruptcy Regulations 1996 (Cth), service of the notice would have been effected no later than 24 June 2013. That was the date upon which the material sent by prepaid post would have been received in the ordinary course by the respondent at her last known address.

2. There is no issue that her last known address for the purpose of service of the bankruptcy notice itself is indeed the address where she was resident at the time of service and remains so to this date. There was non-compliance with the notice. Accordingly an act of bankruptcy occurred on 16 July 2013. The applicant commenced its application for sequestration by filing its creditor’s petition on 28 August 2013 and the matter now comes before me today. In all respects, save for the issue in respect of service of the bankruptcy notice, the applicant has demonstrated the matters which must be established pursuant to s.52(1) of the Bankruptcy Act 1966 (Cth) (the Act) and would be entitled to a sequestration order.

3. For her part, the respondent contends that she was not served with the bankruptcy notice.  If she is correct in that assertion, then there is no issue that the creditor’s petition must fail. Whether the bankruptcy notice was in fact served ultimately must be determined by reference to the evidence in respect of service and that advanced by the respondent.

4. Regulation 16.01 of the Bankruptcy Regulations 1996 (Cth) provides that service may be effected by forwarding a bankruptcy notice by post to a person at his or her last known address or by being sent by facsimile transmission, or another mode of electronic transmission, to a facility maintained by the person for the receipt of electronically transmitted documents. A bankruptcy notice may also be forwarded in such a manner, for example by electronic mail, that the documents should in the ordinary course of events be received by the person.

5. As earlier noted, the applicant contends that the bankruptcy notice was purported to be served by both ordinary prepaid post as well as by electronic transmission.  The respondent’s grounds of contention are as follows:

   a)That she never received the bankruptcy notice, by either electronic transmission or post;

   b)That she is not the person who owes the money;

   c)That she is able to pay her debts – by that I understand her to mean she is able to pay her debts as and when they fall due in the ordinary course of business;

   d)That she did not commit the act of bankruptcy set out in the creditor’s petition, a matter that is not particularised; and

   e)That the applicant has refused the respondent’s capacity to draw down from funds that the applicant has control over to at least permit her to make some effort to repay the debt. She contends that the applicant also has the ability to draw down a significant amount of money from a company in respect of which the respondent has control, Leisure Freight & Import Pty Ltd, but that the applicant has failed or refused to permit this to happen.

6. I will deal now with the grounds that are raised. In relation to service, the applicant bears the onus of proof. Service by post gives rise to a presumption that unless the contrary intention can be demonstrated, service was effected. In this instance it requires the respondent to prove that she was not served.  She does so in this case by swearing to the fact that the documents were not received by her and by inviting the Court to find as a matter of fact, by reason of her evidence, that she was not served. Ultimately, these matters are to be determined by reference to individual credit in a contest such as this. 

7. The applicant contends that I ought reject the respondent’s evidence and her denials because her evidence is broadly unsatisfactory in the face of both the evidence of service which the applicant has put before the Court and also in respect of her general credibility.

8. The applicant has placed evidence before the Court in the form of the evidence of Ms Daisy Jamie-Tenelle Brown, a legal clerk at the office of the applicant’s solicitors, who has annexed to her affidavit copies of emails that she says she forwarded to the respondent at an address which is acknowledged by the respondent as her email address. This evidence is relied upon to prove service by electronic means.

9. The respondent simply says that she did not receive them.  She put before the Court a screenshot from her computer which allegedly states that the email was not received. However the screenshot itself does not show which email box it belongs to and really nothing more about whether or not the inbox from which the screenshot is taken has been modified in order to produce the document which is placed before the court.

10. Arguably, the evidence itself is dependent upon the general credibility of the respondent for that matter to be resolved. For reasons I will state shortly, I do not accept the respondent as a credible witness and accordingly I am not prepared to accept her statements that the screenshots that she has placed in evidence before me are, in fact, true screenshots of the email account to which the email was sent.

11. In any event, and perhaps more significantly, more compelling evidence of service can be found in the evidence of Ms Brown concerning the forwarding of the documents by prepaid post. She says that they were forwarded by her in an express post envelope and the item itself was subject to the customary tracking available by Australia Post.

12. In her material she has attached a printout dated 24 June 2013 from the Australia Post “Track your item” webpage. She entered into the webpage the relevant Tracking ID, which is the ID for the envelope which forms part of the exhibit. It can be seen by reference to the envelope marking and barcode that this was the correct identification number. The tracking record shows that the item was received at the Cleveland Post Office and logged on 24 June 2013 at 8:04am as being “On board with driver for delivery today.”  A subsequent entry on 24 June 2013 at 12:15pm lists the item as “Delivered.”

13. The only documentary evidence put against that evidence by the respondent is a copy of a document which she has also obtained from the Australia Post website which identifies the status of the parcel as, “No events currently found.” It is worthy of note that this search inquiry was made on 28 August 2013 at 4:32am.  In an affidavit filed in response to that material, Ms Brown gave evidence that she contacted the Australia Post customer service centre via telephone about the express post tracking system. She says that she was informed that the envelope the subject of this particular delivery was indeed delivered on 24 June 2013 and that the explanation for the entry on 28 August is that one month after the delivery has been effected, the system itself clears all status entries. No objection was taken to that affidavit.

14. In any event, I am satisfied that the postal envelope was served in the manner which is deposed to by Ms Brown and I am satisfied that the respondent has been served.  Perhaps she did not choose to open the envelope for reasons which would be entirely consistent with other matters which I will address in a moment. In that regard, I note the affidavit of Mr Michael John Doxey, a process server, whose affidavit was filed on 8 August 2013. 

15. That affidavit records the difficulty that he experienced in serving other documents on the respondent.  In that respect he particularly identifies difficulty associated with the service of the District Court proceedings, which I understand to be the same proceedings which are the subject of the judgment which gave rise to the issue of the bankruptcy notice and, consequently, this application.

16. In particular it is worthwhile noting the events of 24 July 2012 when he visited the respondent’s address to serve the material. He started by introducing himself and saying, “Can I please speak with Dianne Barbara Lyons. I have documents to give her.” Another woman who had answered the door said, “Dianne is home but is on a phone call. I will let her know that you are here. I am family, can I accept them?” Wise to those words, Mr Doxey did not accept the invitation and said he would wait. He waited a little time before the woman returned to the door and advised him, “She could be another 2 to 3 hours. She knows you are here.”

17. In response, Mr Doxey asked, “Could Dianne come to the door for just a moment to accept service?” He was told, “No. It is a landline call from America.”  Mr Doxey waited for over two hours while the respondent refused to come to the door to accept service of the documents. That is perhaps the most egregious of the circumstances recounted by Mr Doxey, but in my view it lends more than ample support to his conclusion that the respondent was “deliberately evading service and [his] telephone calls.”

18. As I have earlier noted, I accept that the Australia Post parcel was delivered, and perhaps the respondent is correct in saying that she did not see what was in the document. Nevertheless, I am more than satisfied that she knew exactly what was coming and that there was no surprise to be had in that regard. She was, in my view, served as required under the Bankruptcy Regulations 1996 (Cth).

19. Other matters lead me to draw a very unfavourable view of the overall credibility of the respondent.  She was cross-examined at some length concerning the debt which gave rise to the actual indebtedness. I have now formed a view that the transactions which give rise to the debt are of a type which could only be described as being cloaked in a series of ‘smoke and mirror’ reverse transactions or ‘round robin’ entries. Her evidence left me with the same impression. She was a witness who prevaricated and obfuscated, who sought to make speeches and who certainly sought to avoid identifying and addressing the real issues in response to the question put to her.

20. The underlying issue in this case, and perhaps the most telling point of the evidence against her as illustrated in cross-examination, was not only the circular nature of the transactions identified in the affidavit of Mr Mark Peacock, particularly in the email exhibited at MBP-11, and the documents which were referred to (which added to the statements made in the email) but, perhaps most significantly, what can only be described as the recent invention that arose when the respondent was taken to the disappearance of a sum approaching $200,000.00. That was evident when she sought to explain a transaction of 27 December 2012 which resulted in a transaction on the following day which sent moneys off to a third account which had previously not been disclosed.

21. That matter arose against the background of these other matters which had been the subject of an ongoing dispute between the applicant and the respondent and which had been the subject of extensive litigation. It is therefore surprising that she would raise this matter for the first time today, it not being evident in any other material.

22. It is for those reasons that I have formed the view that the respondent is entirely incredible and I do not accept anything she says.  I am satisfied that she was served, both by email and by post. Having made that finding I am satisfied that, prima facie, the applicant is entitled to the relief. 

23. The respondent does however identify other grounds that ought to be considered pursuant to s.52(2) of the Act which might give rise to a conclusion that a sequestration order ought not be made.

24. First she says she was solvent.  For reasons which are self-evident, that cannot be correct. There is no evidence to support any solvency on her part at all. The obligation is upon her to produce evidence of solvency.  She has done nothing and it follows that I am not persuaded to accept she is solvent in the sense that it provided for by the High Court in Sandell v Porter (1966) 115 CLR 666.

25. Some reference was made to a sum of about $110,000.00 which the respondent says she has been denied access to.  However, that sum, if it is the respondent’s (and there is some doubt about that), is held by a company, Leisure Freight & Import Pty Ltd. It must be noted that that company is presently subject to an application for its liquidation which is set down to be heard and determined. I was told by the respondent that that application should come on next week; it is at this stage part heard. In any event, there is a real issue about whether those funds are hers or not. I am inclined to think that, as the money sits in the company’s accounts, those are the company’s funds and not hers.

26. Finally, if it is true that the money was hers and not the company’s, the fact remains that what she has is only about $110,000.00, which is well short of the sum in respect of which she is clearly indebted. It follows I am satisfied that she is not able to pay her debts in the ordinary course as and when they fall due.

27. I shall also mention some other sundry matters. The respondent made a request in respect of other orders. Those matters are not matters for this Court. They do not concern the exercise of this Court’s jurisdiction and so I reject any request for orders of the kind sought.

28. She also made submissions in respect of perjury. Again, they are matters that she can pursue elsewhere. They are not matters for resolution in the context of this application.

29. It follows that, in my view, the application ought be allowed. I will direct that a sequestration order issue in the usual terms.

30. The respondent can advance no reason as to why the usual order as to costs ought not follow. I will direct that the respondent pay the applicant creditor's costs, including reserved costs, if any, to be taxed and paid, as a first charge, from the estate of the respondent debtor in accordance with the Act.

I certify that the preceding thirty (30) paragraphs are a true copy of the reasons for judgment of Judge Burnett

Date:  4 November 2013