Hinchliffe v Meiko Australia Pacific Pty Ltd (No.2) - [2009] FMCA 926

FEDERAL MAGISTRATES COURT OF AUSTRALIA

HINCHLIFFE v MEIKO AUSTRALIA PACIFIC PTY LTD (No.2)

[2009] FMCA 926

BANKRUPTCY – Application to set aside bankruptcy notice – application dismissed.

Bankruptcy Regulations 1996, reg.16.01

Bhagat v Global Custodians Ltd [2002] FCA 223
Lazar v Seccombe (2005) 3ABC(MS) 727; [2005] FCA 1652
Sunderland v G & J Drivas Pty Ltd [2000] FCA 1029

Applicant:

ADAM SAMUEL HINCHLIFFE

Respondent:

MEIKO AUSTRALIA PACIFIC PTY LIMITED

File Number:

SYG 1972 of 2009

Judgment of:

Barnes FM

Hearing date:

11 September 2009

Delivered at:

Sydney

Delivered on:

11 September 2009

REPRESENTATION

Counsel for the Applicant:

Mr Timmins

Solicitors for the Respondent:

Barringtons Lawyers

AMENDED ORDERS

The application to set aside bankruptcy notice NN 3281 of 2009 filed on 17 August 2009 be dismissed.
In the event of a sequestration order being made on the application of the respondent to the present proceedings as petitioning creditor then the applicant is to pay the respondent’s costs of this application with the respondent being accorded the priority ascribed under the Bankruptcy Act 1966 (Cth) and Rules.
In the event that no sequestration order is made by 11 March 2010 the applicant is to pay the respondent’s costs of this application as agreed and in the absence of agreement taxed in accordance with the Federal Court Rules.

FEDERAL MAGISTRATES
COURT OF AUSTRALIA AT
SYDNEY

SYG 1972 of 2009

ADAM SAMUEL HINCHLIFFE

Applicant

And

MEIKO AUSTRALIA PACIFIC PTY LIMITED

Respondent

REASONS FOR JUDGMENT

(Revised from transcript)

This is an application to set aside bankruptcy notice NN 3281/09 issued on 24 July 2009 in which the respondent claimed that the applicant in these proceedings, Mr Hinchliffe, owed it the sum of $1,595,305.60 consisting of the total of a judgment of the Supreme Court of New South Wales made on 5 December 2008 and entered on 17 February 2009 and orders made and entered on 19 May 2009 in the same matter.
The applicant filed an application to set aside the bankruptcy notice on 17 August 2009. The matter came before the court on 1 September 2009. He sought and was granted an adjournment in order to file further evidence. He did not do so. The matter is back before the court today. The applicant sought a further adjournment, which I refused. The matter then proceeded to hearing.
No submissions, beyond what was said in relation to the adjournment application, were made on behalf of the applicant through Mr Timmins, the barrister who was given leave to appear on his behalf today having only been approached yesterday evening. In effect, it was acknowledged that on the evidence before the court there was no basis to set aside the bankruptcy notice in the manner that had been contended for by the applicant.
For the sake of completeness however, the solicitor for the respondent briefly addressed the grounds relied on by the applicant in his application to set aside the bankruptcy notice. I consider in the circumstances of this case that it is appropriate for me to consider the grounds relied on, bearing in mind that the question of whether a bankruptcy notice should be set aside is one that is within the power of the court to decide but that the court has a discretion as to do so.
The application to set aside the bankruptcy notice contends that the bankruptcy notice was not “suitably served” on the applicant. In the absence of any evidence to support that contention, and in the face of the affidavit of Mr Barry as to service filed on 1 September 2009, I cannot be satisfied on the evidence that the bankruptcy notice was not served in accordance with the regulations, particularly reg.16.01 of the Bankruptcy Regulations 1996 (Cth). I bear in mind that as Jacobson J observed in Lazar v Seccombe (2005) 3ABC(MS) 727; [2005] FCA 1652 the Court should not necessarily exercise its discretion in favour of the debtor in such a case, unless plainly satisfied on the evidence that the bankruptcy notice was not served in accordance with the Regulations. In this case, whatever the manner of service of the bankruptcy notice, it is clear that it came to the attention of the debtor at least no later than the date on which he filed the application to set it aside that is, 17 August 2009. The matter has been before the court on two occasions since that time. This notice not only came to the attention of the debtor, but he also had the opportunity to bring proceedings to set aside the bankruptcy notice. In all the circumstances, I consider that it would not be appropriate to set aside the bankruptcy notice on the basis of some unexplained possibility of a failure to meet the specific requirements of reg.16.01. I am satisfied on the evidence before me that I ought not to exercise my discretion to set aside the bankruptcy notice based on any argument in relation to service of the bankruptcy notice.
I note that on hearing any creditor’s petition it would be open to the debtor to raise issues in relation to service of the bankruptcy notice. However there is no basis on the evidence presently before me on which the applicant can succeed in his application to set aside the bankruptcy notice based on the method of service (also see Sunderland v G & J Drivas Pty Ltd [2000] FCA 1029, in which Hely J stated at [3], after declining to exercise his discretion in similar circumstances, that such an issue could be raised on the hearing of a petition).
The applicant does not take issue with the existence of a judgment debt as such or the form or content of the bankruptcy notice. It was clarified in submissions for the applicant that there was no contention that there was any abuse of process. Thus there is no suggestion that the bankruptcy notice was issued for a collateral purpose of putting pressure on the debtor to pay the debt rather than to invoke the court’s jurisdiction in bankruptcy. In that respect I note that there is evidence before the court from the respondent’s solicitor as to the respondent’s lack of knowledge as to the whereabouts of money said to be owed to the creditor pursuant to the Supreme Court judgments (based on proceedings in relation to misappropriation of $1,595,305.60 by the applicant while in the employment of the respondent). The respondent is of the view that the applicant has failed to disclose all his assets and ultimately seeks the appointment of a trustee to investigate that issue.
Insofar as there was some suggestion in connection with the adjournment application that the debtor might be in a position to pay the debt, there is no evidence before the court to support any such contention. The evidence that is before the court, particularly a financial statement lodged in connection with the applicant’s application to pay the judgment debt by instalments, is to the contrary.
It was also contended that an appeal would be filed against the judgment of the Supreme Court and that it should be heard before “any act of bankruptcy be entered”. It has, however, been some considerable time since the judgment of the Supreme Court. There is no evidence before the court of any appeal or lodgement of application for leave to appeal. It would seem that any appeal would be out of time in the absence of leave of the court.
Nor is there any evidence, or indeed, any submissions as to any basis for an appeal or grounds on which an appeal could be lodged. Insofar as the possibility of an appeal might be sought to be relied on as a basis for a further adjournment of these proceedings, the fact that there might be an application for leave to appeal does not warrant an adjournment, let alone constitute grounds to set aside the bankruptcy notice, on the evidence before the court.
The application to set aside the bankruptcy notice also sought interim orders that the time for compliance with the bankruptcy notice be extended up to and including 21 November 2009. The time for compliance with the bankruptcy notice was extended up to and including today. There is nothing in the material before the court to warrant a further extension of time.
The applicant sought mediation. I was not persuaded that it was appropriate to order mediation in the circumstances, having regard to the material before the court in relation to the applicant’s situation and past attempts to resolve this issue. It is open to the applicant to endeavour to come to an agreement at any time with the respondent whatever the result of these proceedings.
It is not appropriate in these proceedings to entertain an interim application that unidentified writs on property be withdrawn to allow a “suitable working out of agreed judgment” as the applicant sought.
The affidavit relied on by the applicant in support of his application of 17 August 2009 contains statements which, as I indicated when these were objected to, I take as being in the nature of submissions. I deal with them on that basis. The first is that service (of the bankruptcy notice) does not comply with Bankruptcy Regulations reg.16.01(1)(a), (b), (c), (d), or (e). As indicated, there is no evidence to support such a contention. I note the existence of reg.16.01(2). I do not consider it appropriate to exercise my discretion where there is no evidence establishing any defect in service of the bankruptcy notice.
The final contention in that affidavit is that “the true nature of the bankruptcy notice is knowingly unable to fulfil the judgment. No attempt has been made to find suitable methods of payment”. It is not clear how this could be a basis on which the bankruptcy notice could be set aside. I also note that there is evidence before the court from the solicitor for the respondent of attempts to resolve these proceedings. There was also an unsuccessful attempt by the applicant to obtain an order from the Supreme Court to pay by instalments. This contention does not establish a basis on which the bankruptcy notice should be set aside.
For the sake of completeness, I note finally that, as indicated in relation to the adjournment application, the generally expressed contention that there might be a possible issue arising from the fact that there were two judgments or two sets of orders in the one Supreme Court matter is not such as to establish that there is a defect in form or substance in the bankruptcy notice, or otherwise such as to establish any ground on which the bankruptcy notice should be set aside.
Accordingly, on the evidence before the court, it is appropriate to order that the application to set aside Bankruptcy Notice NN 3281 of 2009 filed on 17 August 2009 be dismissed.

RECORDED : NOT TRANSCRIBED

The respondent seeks costs. The applicant has been unsuccessful and there is nothing in the material before the court to warrant a departure from the normal rule that the unsuccessful applicant should meet the costs of the respondent. The fact that the applicant was self-represented when he commenced these proceedings is not such as to warrant a departure from the normal rule.
The respondent seeks indemnity costs. The court has a wide discretion in relation to costs to be exercised judicially. Whether it is appropriate to make an order for indemnity costs or an ordinary costs order depends on the circumstances of the case. The normal practice to provide for costs to be on a party/party basis is not to be lightly departed from, although special or unusual circumstances may warrant an indemnity costs order.
One relevant factor is whether a party should have known that there was no prospect of success in the case. In this instance, while Mr Hinchliffe has obtained last-minute representation, he was a self-represented litigant until last night, including at the time that he commenced these proceedings and when the matter was last before the court. While it is open to the court to make an order for indemnity costs against a self-represented litigant (see Bhagat v Global Custodians Ltd [2002] FCA 223). I bear in mind the caution to be exercised and the need to make allowances for the position of such a litigant appearing in person. It has not been established that the conduct of the applicant in these proceedings was so inappropriate or unsatisfactory that an indemnity costs order was appropriate. The issue of whether the action was commenced or continued in circumstances where the applicant, properly advised, should have known that he had no chance of success is difficult to assess. It was open to the applicant to seek to assert that he or she had not been properly served with the bankruptcy notice, or to raise other issues in relation to the form or content of the bankruptcy notice, notwithstanding that he has not taken the opportunity to file the foreshadowed evidence.
I have had regard to the fact that after the adjournment application was refused, when given the opportunity to make submissions in relation to the application to set aside the bankruptcy notice, there was no additional time taken by Mr Timmins in pursuing matters that he properly conceded were not open to be pursued on the evidence before the court. The applicant failed to file evidence in accordance with the order of the court and consequently was unable to establish his case.
Hence while I have some concern about the fact that the applicant proceeded by making allegations rather than putting proper evidence on, I bear in mind that he was, until today, effectively self-represented and that at least one of the grounds that he raised was a ground that could properly be raised in the context of an application to set aside a bankruptcy notice. The fact that the applicant sought and obtained an adjournment on the last occasion is not such as to warrant the award of indemnity costs, in light of the basis of the adjournment being the condition of his wife.
I note that there is no suggestion that this is other than his first application in relation to the bankruptcy notice. On balance, while I am satisfied that the applicant should meet the costs of the respondent, I am not satisfied that it has been established that there are special or unusual circumstances in this case warranting an indemnity costs order.

I certify that the preceding twenty-three (23) paragraphs are a true copy of the reasons for judgment of Barnes FM

Associate:

Date: 8 October 2009