Kang v Richmond
[2007] FMCA 946
•22 June 2007
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| KANG & ORS v RICHMOND | [2007] FMCA 946 |
| BANKRUPTCY – Review of Registrar’s decision. PRACTICE & PROCEDURE – Where petition was not served by hand – where service of petition did not comply with rule 6.06 Federal Magistrates Court Rules2001 – whether court should exercise discretion under rule 6.04 Federal Magistrates Court Rules 2001 to find petition has been served. |
| Federal Magistrates Court (Bankruptcy) Rules 2006, rules 2.01, 2.03(1), 4.05 Federal Magistrates Court Rules 2001, rules 1.03, 1.05, 6.04, 6.06 Bankruptcy Regulations 1996, reg.16.01 Bankruptcy Act 1966, s.306 Federal Court of Australia Act 1976, s.51 Federal Court Rules, O 7 rule 1(3) Family Law Rules 1984, O 18 rule 13 |
| Sogelease Australia Limited v Griffin [2003] FCA 453 Carver v de Robillard [2006] FCA 1041 De Robillard v Carver [2007] FCAFC 73 |
| First Applicant: | JUSTIN LIAN SIN KANG |
| Second Applicant: | ELISABETH AMANDA BOYCE |
| Third Applicant: | GEOFFREY BROOKES |
| Fourth Applicant: | GERARD THOMAS BREEN |
| Fifth Applicant: | ANDREW JOHN BUCHANAN |
| Sixth Applicant: | CHARLES WILLIAM BURROUGH |
| Seventh Applicant: | DAVID CHRISTOPHER CARTER |
| Eighth Applicant: | DAVID JAMES FERGUSON |
| Ninth Applicant: | DANIEL JOHN HANNA |
| Tenth Applicant: | LAURA ELIZABETH HARTLEY |
| Eleventh Applicant: | EMMA JANE HODGMAN |
| Twelfth Applicant: | WENDY ELIZABETH JACOBS |
| Thirteenth Applicant: | DALE JAMES KEMP |
| Fourteenth Applicant: | LEONARD PAUL LOZINA |
| Fifteenth Applicant: | PETER DAVID LUKE |
| Sixteenth Applicant: | BETH MCINTYRE |
| Seventeenth Applicant: | DEAN PETER NEWELL |
| Eighteenth Applicant: | RAYMOND AUSTIN NEWTON |
| Nineteenth Applicant: | MICHAEL O’CONNOR |
| Twentieth Applicant: | JULIAN KENT PETERS |
| Twenty-First Applicant: | KEITH REDENBACH |
| Twenty-Second Applicant: | JOHN PATRICK REEN |
| Twenty-Third Applicant: | PETER KEVIN RYAN |
| Twenty-Fourth Applicant: | ROBERT GEORGE SAUER |
| Twenty-Fifth Applicant: | DAVID JAMES SHARPE |
| Twenty-Sixth Applicant: | PHILIP ALLAN STEVENS |
| Twenty-Seventh Applicant: | PETER EDWARD SURGEON |
| Twenty-Eighth Applicant: | DENNIS NEVILLE VUARAN |
| Respondent: | ROSS RICHMOND |
| File number: | SYG2766 of 2006 |
| Judgment of: | Raphael FM |
| Hearing date: | 13 June 2007 |
| Date of last submission: | 13 June 2007 |
| Delivered at: | Sydney |
| Delivered on: | 22 June 2007 |
REPRESENTATION
| Counsel for the Applicant: | Mr E Hyde |
| Solicitors for the Applicant: | Malcolm Johns & Co |
| Counsel for the Respondent: | Mr Tanevski |
| Solicitors for the Respondent: | D Milne & Associates |
ORDERS
Application dismissed.
Applicant to pay respondent’s costs to be taxed if not agreed in accordance with the Federal Magistrates Court (Bankruptcy) Rules 2006.
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT SYDNEY |
SYG2766 of 2006
| JUSTIN KANG & ORS TRADING AS DIBBS BARKER GOSLING |
Applicant
And
| ROSS RICHMOND |
Respondent
REASONS FOR JUDGMENT
In this proceeding the debtor seeks review of an order of Registrar Segal made on 9 February 2007 that he file and serve an affidavit giving full financial details in support of his application for an adjournment by no later than 16 February 2007 and that the proceedings be stood over to 20 February 2007. For more abundant caution the debtor also seeks a review of a decision of Registrar Segal made on 19 January 2007 in his absence that:
“Upon the court being satisfied that service of the petition on the respondent was effected by service of the petition on Ms Catherine Gooley, solicitor in the employ of Deacons, it is ordered
1. proceedings shall be stood over to 9 February 2007
2. Usual order as to notification.”
The application to review the later order was made within time. The application to review the earlier order was made following the first directions hearing before Barnes FM in respect of the application in relation to the later order. The reason for the review has nothing particularly to do with the orders actually made by the Registrar, rather it is to get the court to accept that the bankruptcy petition was not served upon the debtor. Although the creditor has indicated that the debtor has not put forward any significant reasons why he was out of time in relation to filing the application for review against the first order of the Registrar I take the view that the delay has caused no real prejudice and that it is best that the matter be settled once and for all so that the issue of service can be finally determined. I therefore waive the requirement of rule 2.03(1) of the Federal Magistrates Court (Bankruptcy) Rules 2006 that an application for review shall be filed within 21days.
The petition was presented by a firm of solicitors which held a judgment against the debtor in the sum of $28,075.17 plus interest. A payment on account of this sum has been made and the bankruptcy notice issued in the sum of $19,392.40. At the time of “service” of the petition the debtor was represented by Deacons Lawyers. In an affidavit dated 19 January 2007 Richard Alexander Lyne deposes what occurred surrounding “service”.
“12. Following further attempts to serve Mr Richmond by our process server I spoke to Miss Catherine Gooley solicitor in the employ of Deacons on 14 December 2006 and had a conversation in words to the following effect:
I said: The petition has still not been served, do you have instructions to accept service?
She said: Yes we do
13. Following on from that conversation I spoke to Kris Sabatino, our process server and arranged for her to serve the Bankruptcy Petition on Ross Richmond by serving the petition on Catherine Gooley.
14. I note from the affidavit of Kris Sabatino dated 27 December 2006 that the service was effected on Catherine Gooley on 19 December 2006.
15. As I had not been served with a Notice of Appearance on behalf of Ross Richmond I spoke to Catherine Gooley on 15 January 2007 and had a conversation in words to the following effect:
I said: I haven’t received a Notice of Appearance on behalf of Ross yet>
She said: I have been working on something else, I will check what is happening with Mitchell and get back to you.
16. On 16 January 2007 I spoke to Catherine Yap, solicitor in the firm of Deacons and had a conversation in words to the following effect:
She said: You spoke to Catherine Gooley yesterday, I am now dealing with the matter.
I said: OK, I am waiting for a Notice of Appearance to be filed.
She said: We are not instructed to appear.
I said: But you were instructed to accept service?
She said: Yes, but we don’t have instructions to appear.
I said: Ok.
17. On 18 January 2007 I received a telephone call from Malcolm Johns solicitor and had a conversation in words to the following effect:
He said: I act for Ross Richmond in relation to some of his debts and am trying to reach an agreement with his creditors.
I said: I thought Deacons were acting.
He said: They still are for a portion of it.
I said: Ok.
He said: We are close to reaching an agreement with Ross’s other creditors but the Bankrupty hearing is on Friday. Can we stand it over for a couple of weeks to let those negotiations conclude.
I said: Will you be serving a Notice of Appearance?
He said: No, haven’t you served the petition?
I said: It was served on Deacons by agreement, but they don’t have instructions to file a Notice of Appearance.”
Mr Richmond, the debtor’s, gloss on those events is contained in his affidavit of 23 February 2007:
“5. In or about early December 2006, the exact date I can no longer recall, I had a
telephone conversation with Mitchell Mathas, a partner of Deacons.6During telephone conversation referred to in paragraph 4 above, Mr Mathas and I had a conversation to the following effect:
Mr Mathas: “Dibbs [Dibbs Barker Gosling] has written to us wanting to know whether we will accept service of the Creditor’s Petition.”
Myself:“What should I do?”
Mr Mathas:“I do not believe that I can accept service of the Creditor’s Petition due to the fact that it needs to be served on you personally because of the important nature of the document. Even if it [the Creditor’s Petition] is served on Deacons, I don’t believe that it would be correct service.”
Myself:“OK.”
7As a result of the conversation referred to in paragraph 6 above, I understood that unless Dibbs Barker Gosling:
a.personally served the Creditor’s Petition on me; or
b.obtained an order from the Court providing for substituted service on Deacons or another third party,
service of the Creditor’s Petition in these proceedings could not occur.”
When the matter first came before me, Dibbs Barker Gosling were still the petitioning creditors, but prior to the matter being heard the current creditor, who claims to be owed the sum of $155,266.40 under one bankruptcy notice, and $115,152.49 under another bankruptcy notice, was substituted by order of this court on 3 April 2007. The substituted creditor accepted that it was as subject to any defects in relation to service of the original petition as the petitioning creditor would have been.
Discussion
The question before me as posed by counsel for the debtor was:
“Has the requirement for personal service been waived in the circumstances notwithstanding that there has been no compliance with rule 6.06 of the Federal Magistrates Court Rules?”
But there is an additional matter raised by the creditor which is whether the court should exercise its discretion under rule 6.04 of the Federal Magistrates Court Rules 2001 to find that the petition has been served.
It is now accepted that a bankruptcy petition is an initiating process and should, subject to any other provision in the rules, be served personally. It is not a process that falls within the provisions of Regulation 16.01 of the Bankruptcy Regulations 1996: Sogelease Australia Limited v Griffin [2003] FCA 453. Sogelease is also authority for the proposition that want of service in accordance with the Federal Court Rules is not a formal defect or irregularity within the meaning of s.306 of the Bankruptcy Act 1966 (Cth) or s.51 of the Federal Court of Australia Act1976 at [29]. The rules relating to the service of the petition in the Federal Magistrates Court can be found by considering a number of relevant rules. Rule 2.01 of the Federal Magistrates Court (Bankruptcy) Rules requires a person who wishes to make an application permitted by the Bankruptcy Act to be made to the court to file an application in accordance with Form 2 of the bankruptcy forms. Pt 6 rule 6.06 of the Federal Magistrates Court (Bankruptcy) Rules requires service by hand for an application starting a proceeding. Rule 1.03 of the Bankruptcy Rules states:
“1.03 Application of these Rules and other rules of the Court
(1)These Rules apply to a proceeding to which the Bankruptcy Act applies.
(2)The other rules of the Court apply, so far as they are not inconsistent with these Rules, to a proceeding to which the Bankruptcy Act applies.”
Rule 6.06(2) of the Federal Magistrates Court Rules provides an exception to service by hand, relevantly to this case at 6.06(2)(c):
“(2) However service by hand is not required if:
. . .
(c) a lawyer accepts service for a party and subsequently files an address for service;”.
Rule 6.04, which is headed “Court’s discretion in relation to service” states:
“Nothing in this Part affects the power of the Court:
(a)to authorise service of a document in a way that is not provided for in this Part; or
(b)to find that a document has been served; or
(c)to find that a document has been served on a particular day.”
The affidavit of Mr Richmond indicates that at the end of the conversation to which he deposes in paragraph 6, his solicitor would have been left with a clear impression, based upon his own advice, that he could not accept service. The conversation was alleged to have taken place in early December 2006. It was clearly after the letter deposed to by Mr Lyne in paragraph 11 of his affidavit which was dated 4 December 2006. Mr Lyne was not required for cross-examination and therefore I am able to accept the balance of his affidavit including the discussion he had with Catherine Gooley in which she said she was instructed to accept service. This took place on 14 December 2006. There was plenty of time between the date just after 4 December 2006 and 14 December 2006 for Mr Richmond to have changed his instructions. It is interesting to note that he never says in terms that Deacons should not accept service, nor does he say that he was prepared to permit Deacons to accept service because he thought that it would have no effect. I am satisfied that Deacons did accept service on behalf of the debtor. But what that firm did not do was to subsequently file an address of service as required by rule 6.06 of the Federal Magistrates Court Rules. As a result proper service has not been established under that Rule.
The Federal Court Rules and the rules of the Federal Magistrates Court in relation to service
The Federal Court Rules in relation to service provide under O 7 rule 1(3):
“If a respondent to an originating process:
(a) enters an appearance; or
(b) files a defence; or
(c) appears before the Court in response to the process;
the originating process is taken to have been served on the respondent personally when the earliest of those events occurred, unless personal service on an earlier day is established.”
This rule was considered in some length in Carver v de Robillard [2006] FCA 1041 where Lindgren J opined that he did not consider the rule was inconsistent with rule 4.05 of the Bankruptcy Rules:
“because I do not think that rule 4.05 of the Bankruptcy Rules excludes the possibility of waiver”.
That finding was not disturbed when the matter went on appeal to the Full Bench: De Robillard v Carver [2007] FCAFC 73 at [86] per Buchanan J with whom Moore and Conti JJ agreed. Under rule 1.05 of the Federal Magistrates Court Rules the court is permitted to apply the Federal Court Rules in whole or in part and modify or dispense with as necessary if its own rules are insufficient or inappropriate. This will permit the court to apply O 7 r 1(3) if it wished. I would have applied that rule had I been satisfied that this particular debtor had, as Mr de Robillard had, taken part in the proceedings other than to contest service. Whilst I think it is possible that at the second hearing of the matter on 2 February 2007 before Registrar Segal the debtor appearing in person may have done more than dispute service I have not been provided with a transcript or any other evidence of what occurred and would not make such a finding without it.
I am left with the application that I should exercise my discretion to make a finding that service has occurred pursuant to rule 6.04(b) of the Federal Magistrates Court Rules. This rule found its way into the Federal Magistrates Court Rules from O 18 r 13 of the Family Law Rules 1984 which existed prior to their amendment in 2004. The two rules are in identical form. The inclusion of the rule is consistent with the objects of Federal Magistrates Court Rules found at Pt 1 rule 1.03:
“1.03 Objects
(1) The object of these Rules is to assist the just, efficient and economical resolution of proceedings.
(2) In accordance with the objects of the Act, the Rules aim to help the Federal Magistrates Court:
·to operate as informally as possible
·to use streamlined processes
·to encourage the use of appropriate dispute resolution procedures.
(3) The Court will apply the Rules in accordance with their objects.
(4) To assist the Court, the parties must:
·avoid undue delay, expense and technicality
·consider options for primary dispute resolution as early as possible.
(5) If appropriate, the Court will help to implement primary dispute resolution.”
Any exercise of the court’s discretion should take into account these objects. The court appreciates that questions of service are of considerable importance, not just for the efficient and proper running of the court, but to the parties. A party is entitled to the benefit of the rule that requires service of an originating process to be made upon him by hand. If there were no alternatives to service by hand contained in the rules but merely a discretion to find that service by some other method constituted proper service, then the court would be reluctant to exercise that discretion (particularly in bankruptcy cases given their quasi-criminal effect) absent the most pressing submissions. But there are rules relating to service other than by hand and there is now a body of authority indicating that in the Federal Court the pendulum is moving against technical arguments in regard to service. It is quite clear that the existence of the bankruptcy petition was known to the debtor. I accept that he knew that it was going to be served upon his now former solicitors. In arguendo, I posed the question: what would happen if a debtor seeking to evade service gave approval for his solicitors to accept service but then once that service had been effected withdrew those instructions so that the solicitors could not enter an address for service? It would seem to me that this would be abusing the rule and whilst I do not say that this has happened here, the effect has been the same. In determining whether or not to exercise my discretion to hold that service has been effected, I should take into account not only the objects of the rules but also whether or not any prejudice has been caused to the debtor by the petition not being served personally. I cannot see any. The debtor appears to have actually obtained some benefit from making the argument which he has made. The petitioning creditor has already disappeared. If the debtor has some substantive ground for objecting to the grant of the sequestration order then it should be put. I am told it will be. I cannot see any prejudice to the debtor by having those issues ventilated at a hearing. On the other hand, the substituted creditor could be said to be prejudiced by my declining to exercise my discretion. It will then be required to issue its own petition at extra cost relying on the acts of bankruptcy constituted by the failure of the debtor to comply with the bankruptcy notices which it issued. Alternatively it could ask the court to grant substituted service on the current solicitors for the debtor. The debtor argues that this is what should be done. But that is hardly consistent with the object of this court to avoid undue delay, expense and technicality.
I therefore propose to find that the bankruptcy petition presented on 25 September 2006 was served upon the debtor on 19 December 2006. I would dismiss the application for review and I would order that the applicant pay the respondent’s costs to be taxed if not agreed according to the Federal Magistrates Court (Bankruptcy) Rules.
I certify that the preceding eight (8) paragraphs are a true copy of the reasons for judgment of Raphael FM
Associate:
Date:
3
7