Kridan Pty Ltd v Le

[2013] FCCA 1352

FEDERAL CIRCUIT COURT OF AUSTRALIA

KRIDAN PTY LTD v LE [2013] FCCA 1352

Catchwords:

COSTS – Costs in respect of a creditor’s petition – default judgement entered – bankruptcy notice issued – debtor unaware of proceedings – debtor unaware of service of bankruptcy notice – service not initially brought to the attention of the debtor – no order as to costs.

PRACTICE & PROCEDURE – Service – no personal service – documents served at place of residence – documents collected by third party and not brought to attention of the debtor – whether service was properly effected.

Legislation: 

Bankruptcy Regulations 1996 (Cth), reg.16.01(1)(a)
Uniform Civil Procedure Rules 1999 (Qld), r.112

Oshlack v Richmond River Council (1998) 193 CLR 72
McAuliffe Williams & Partners v Pecoult (2003) 179 FLR 412

Applicant:

Supporting Creditor:

KRIDAN PTY LTD TRADING ACN 103 836 380 AS ROYAL WHOLESALE MEATS BN19518699

LION FINANCE PTY LTD ACN 095 926 766

Respondent: ZEDEKIAH XUAN LE

File Number: BRG 281 of 2012

Judgment of: Judge Burnett

Hearing date: 16 May 2013

Date of Last Submission: 16 May 2013

Delivered at: Brisbane

Delivered on: 16 May 2013

REPRESENTATION

Solicitors for the Applicant: MSB Lawyers

Solicitors for the Respondent: T Lawyers Pty Ltd

ORDERS

1. That the interim application filed on 17 April 2013 be dismissed.

2. That there is no order as to costs.

FEDERAL CIRCUIT COURT OF AUSTRALIA

AT BRISBANE

BRG 281 of 2012

KRIDAN PTY LTD TRADING ACN 103 836 380 AS ROYAL WHOLESALE MEATS BN19518699

Applicant

And

LION FINANCE PTY LTD ACN 095 926 766

Supporting Creditor

And

ZEDEKIAH XUAN LE

Respondent

REASONS FOR JUDGMENT

(Revised from Ex Tempore Reasons)

1. In this interim application the creditor seeks orders for costs in respect of a creditor’s petition which was issued on 28 March 2012. The Application had originated in a claim and statement of claim which issued at the Ipswich Magistrates Court on 7 December 2011 claiming a sum of approximately $6000.00. The proceedings were purportedly served on 14 December 2011 in accordance with r.112 of the Uniform Civil Procedure Rules 1999 (Qld).

2. There was no defence entered to those proceedings and the creditor proceeded to enter default judgment on 20 January 2012. Following that default judgment the creditor issued a Bankruptcy Notice on 6 February 2012 and in turn served that notice in accordance with reg.16.01(1)(a) of the Bankruptcy Regulations 1996 (Cth) by post on 8 February 2012. Allowing for the time permitted for service by post, an act of bankruptcy subsequently occurred in early March 2012.

3. Ultimately, the creditor proceeded to issue its creditor’s petition on 28 March 2012 which was subsequently served, and on 28 June 2012 the debtor filed a notice of grounds of opposition. Subsequent to those events, the debtor made application to the Magistrates Court to set aside the original judgment entered on 20 January 2012 and that application was successful. The judgment of the creditor was set aside and the debtor was given leave to defend. Orders to that effect appear to have been made in the Ipswich Magistrates Court on or about 30 July 2012. 

4. The creditor contends that it has acted at all times in good faith, that its prosecution of the matter did not constitute an abuse of process. Nor does it accept that the debtor was not aware at any time that proceedings had been issued against him at first instance, that subsequently a judgment was actioned by the creditor via delivery of a bankruptcy notice and that a creditor’s petition was issued.

5. The debtor contends that he was never aware of the earlier proceedings, the service of the Bankruptcy Notice, nor the purported act of bankruptcy. Accordingly, he says that the first time he became aware of these proceedings was sometime after the issue of the creditor’s petition and its service which occurred on 22 May 2012, when he was personally served by a process server with the creditor’s petition. Following that, he filed his Notice stating grounds of opposition, took advice and subsequently undertook appropriate steps to have the judgment set aside.

6. It is correct that in these proceedings no sequestration order was made and the matters have been resolved between the debtor and the applicant creditor, and also a substituted creditor, Lion Finance Pty Ltd. At the heart of this Application there is no issue, so far as the principles are concerned. The general principle is that costs should normally follow the event, as noted by McHugh J in Oshlack v Richmond River Council.[1] Further, I accept the submission that in the ordinary course, provided proceedings are regular, there is no reason why, even though the matter does not progress to sequestration, a successful creditor ought not be permitted its costs in bringing an application at that point. On this issue I refer to the views of McInnis FM in McAuliffe Williams & Partners v Pecoult.[2]

   [1] (1998) 193 CLR 72.

   [2] (2003) 179 FLR 412.

7. However, notwithstanding those issues, the real problem in this instance is whether or not the debtor did indeed have notice of the earlier proceedings. There is in my view a reasonable basis for doubt that the debtor did have notice of these proceedings because the material, as it is presented to me, does occasion a basis for doubt.

8. The proceedings issued in the Magistrates’ Court were purported to have been served on 14 December 2011. The Affidavit of Service by Mr Joseph White which is sworn on 14 December 2011 is at best confusing. He deposes to having effected both personal service and also service by leaving a copy of the relevant documents at the defendant’s place of residence (22 Swan Street, Brassall).  Although the document could not be said to be internally inconsistent, that is to say, both means of service which are deposed to are proper forms of service that could have been effected, it is in my view quite unusual to see a process server serve a document both personally and then subsequently follow that up by serving at the person’s place of residence.

9. The document itself has all the qualities and character of a pro forma document which has been, perhaps thoughtlessly, completed by the deponent of the affidavit, which of itself in my view gives some rise to some doubt as to the accuracy of the document. This is a matter which ought to have been picked up by the solicitors for the creditor or those acting for the creditor at the time. It is, in my view, a fairly obvious error, but that factor is compounded by the evidence of the person who is the occupant of the premises at 22 Swan Street, Brassall. That is Ms Wennie Phan.

10. Ms Phan deposes that she was not personally served with the documents on that day. Essentially, she says that she was at work and there was no one home. That is not to say that the manner of service proposed would not have been in accordance with the rules, but the fact remains that the deposition by the process server is that he left a copy of the documents with a female occupant (an adult over the age of 18) who undertook to hand the document to the defendant. I note those words, “an adult over the age of 18 years who undertook to hand the Document to the Defendant” as being typewritten words in the affidavit, whereas the words “a female occupant” are manuscript. That is to say, it is apparent again from the face of the Affidavit of Service that this is a pro forma document which in the context of the deposition by Ms Phan gives rise to some doubt.

11. In any event, Ms Phan goes on to specifically depose, in what can only be described as a bespoke affidavit prepared to address the generic pro forma affidavit, that she did not personally receive any papers or documents on behalf of the debtor at any time. She does acknowledge that a document which was intended to be for the debtor was placed in the letterbox and that she was aware of that when she arrived home to open her mailbox on 14 December 2011. However she says that she did not know for certain who it was meant to be for, so she did not contact the debtor concerning this document because he is known to her by a different name.

12. She continued at paragraph 6 of her affidavit to state: “Months later (about 19 May 2012) when he arrived at my residential place, I presented him the [sic] documents which he took back to his home.”  It is somewhat serendipitous that 19 May 2012 is a matter of days before the service of the creditor’s petition, so it would seem, at least on the uncontested facts, that the creditor’s claim would have come to the debtor’s knowledge no later 19 May 2012, when those documents were said to have been handed to him by Ms Phan, and which correlates with service of the creditor’s petition shortly thereafter on 22 May 2012.

13. In any event, it strikes me that there is serious room for doubt as to whether or not the debtor did indeed have notice of the earlier service, and in my view a reasonable solicitor or advisor looking at the papers and experienced in these matters, as I am satisfied the applicant’s lawyers ought to be, would have been alert to the fact that there were possibly some difficulties given the nature of the Affidavit of Service of Mr White.

14. Those difficulties were compounded by Mr Jones’ service of the Bankruptcy Notice. In his Affidavit of Service he notes that on 8 February 2012 he served the debtor with the Bankruptcy Notice by posting it via prepaid post in an envelope addressed to the last known address of the respondent (22 Swan Street, Brassall). 

15. So it follows that the error potentially identified in the affidavit of Mr White was merely compounded by the conduct of Mr Jones deposed to in his affidavit. Accordingly Mr Jones’ affidavit does not assist in satisfying me that it is likely that the debtor came to know of these matters any earlier. Having regard to those issues, it does not surprise me that when the matter came on before the Magistrates Court the judgment was set aside and the debtor was given leave to defend. It also does not surprise me in the context of the dispute on the facts that the order for costs made in the application was not for costs in the cause. That would be entirely consistent with a view being formed by the Court on that occasion, similar to the view formed by me today, that there is serious room for doubt as to the efficacy of the underlining service and, in turn, all that flows from it.

16. In that sense the risks of that error would then flow to be borne by the unsuccessful party in the litigation overall. It follows then, having regard to my view of the facts, that this is not a plain case where it could be said that the conduct of the creditor, even having regard to the fact that the matter did not proceed to a complete hearing, ought to be ignored. There are serious issues as to whether the underlying default judgment was actually entered regularly. They have not been tested, at least on a review of the material. It seems to me that it is highly likely that if it was to be tested there would be a finding that the service was not effected properly and the judgment was irregularly entered.

17. It follows that the approach that is articulated in the decision in McAullife Williams & Partners v Pecoult (supra), while helpful, ought not bind me. In all of the circumstances I have come to the conclusion that the only fair order in this instance is that there be no order as to costs.

18. The debtor seeks costs of the application today. While arguably the debtor has had a success in today’s application, I am of the view that, having regard to the overall circumstances of the case, the only appropriate order is that there be no order as to costs.

I certify that the preceding eighteen (18) paragraphs are a true copy of the reasons for judgment of Judge Burnett

Date: 13 September 2013