Lion Finance Pty Ltd v Evans

[2016] FCCA 1265

FEDERAL CIRCUIT COURT OF AUSTRALIA

LION FINANCE PTY LTD v EVANS [2016] FCCA 1265

Catchwords:
BANKRUPTCY – Application to review a registrar’s decisions to make sequestration order – application to amend the petition – whether service of bankruptcy notice effected – whether substituted service of creditor’s petition effective – whether reason not to make a sequestration order.

Legislation:

Bankruptcy Act 1966 (Cth)

Bankruptcy Regulations 1994 (Cth)

Fancourt v Mercantile Credits Ltd (1983) 154 CLR 87
Mills ex parte Bondor Pty Ltd (1991) FCA 262
Skalkos v TNS Recoveries Proprietary Limited (2004) FCAFC 321
Watt v Barnett (1878) 3 QBD 183

Applicant: LION FINANCE PTY LTD

Respondent: MOHAMED IGHSAAN EVANS

File Number: BRG 625 of 2014

Judgment of: Judge Jarrett

Hearing date: 20 April 2016

Date of Last Submission: 20 April 2016

Delivered at: Brisbane

Delivered on: 20 April 2016

REPRESENTATION

Counsel for the Applicant: Mr M.R. Bland

Solicitors for the Applicant: Juris Cor Legal

Counsel for the Respondent: Mr M.J. Shaw

Solicitors for the Respondent: Reliance Lawyers

ORDERS

1. Pursuant to r. 1.06 of the Federal Circuit Court Rules 2001, compliance with r. 7.05(5) of the Federal Circuit Court (Bankruptcy) 2016 be dispensed with.

2. Leave to amend the application for review filed on 11 February 2015 is refused.

3. The application for review filed on 11 February 2015 is dismissed.

4. The applicant pay the respondent’s costs of and incidental to the application to be taxed and paid in accordance with the Federal Circuit Court (Bankruptcy) Rules 2016 and the Bankruptcy Act 1966.

FEDERAL CIRCUIT COURT
OF AUSTRALIA
AT BRISBANE

BRG 625 of 2014

LION FINANCE PTY LTD

Applicant

And

MOHAMED IGHSAAN EVANS

Respondent

REASONS FOR JUDGMENT

1. This is an application to amend an application for review of a registrar’s decision to make a sequestration order against the applicant that is listed before me for hearing today.  The creditor’s petition was filed on 14 July, 2014.  There was an order of the registrar making a sequestration order on 21 January, 2015.  The application for review was filed on 11 February, 2015.  The matter came before me on 18 May, 2015 and, for reasons that were discussed on that day, it was suggested that the application was not ready to proceed and would not proceed in the immediate future.

2. I then adjourned the application to a date to be fixed and ordered that it not be re-listed until such time as the solicitors for each of the parties had certified that the matter was ready for trial.  I did that in the vain hope that it might spur people into action.  It did not.  Accordingly, I organised for the matter to be re-listed on 11 April this year.  Nothing had happened, as far is the court is concerned, between the parties about the application.  I listed the matter for final hearing today.  It is an application to review a sequestration order.

3. Although there is no evidence before me about this, it seems to me that there is one of two possibilities: either the bankruptcy is being conducted in accordance with the Bankruptcy Act having regard to the making of the sequestration order or nothing is happening in the administration of the bankrupt’s estate. In either case, the application needs to be dealt with and the position crystallised for the benefit of the bankrupt’s creditors. For that reason, on the last occasion, I set the matter down for hearing.

4. Notwithstanding the long hiatus in the proceedings, today for the first time, the applicant suggests that there should be an amendment to the application for review to seek relief under s.153B of the Bankruptcy Act. That is to say, an annulment.

5. The amendment is opposed on the basis that it may well lead to an adjournment of this application because one of the matters in which the court is interested on an annulment application is the attitude of the trustee to that application and the conduct of the bankrupt through the course of the administration.  The submission is correct.  There might well be an adjournment for that purpose.  Given the history that I have recounted, it seems to me that the application for leave to amend is made too late.  It is therefore refused.

RECORDED  :  NOT TRANSCRIBED

1. This is an application to review a decision of a sequestration order made by a registrar in this court on 21 January, 2015.  The creditor’s petition upon which the petitioning creditor moves alleges that the respondent did not comply with the terms of a bankruptcy notice that was served upon him.  The bankruptcy notice itself was based upon a judgment of the Magistrates Court of Western Australia for an amount in excess of $10,000.

2. In this application the bankrupt says that the sequestration order ought to be set aside because, first, there was no proper service of the bankruptcy notice on him; secondly, because the creditor’s petition was not brought to his attention;  and, thirdly, he is nonetheless solvent and so no occasion arises for the making of a sequestration order.  Originally, there was a fourth ground, namely, that the proceedings which led to the making of the judgment in the Magistrates Court of Western Australia were not properly served on him.  There is, however, no evidence about that and the ground was effectively abandoned.

3. Insofar as service of the bankruptcy notice is concerned, I am satisfied that the bankruptcy notice was served in accordance with the requirements of the Bankruptcy Regulations.  The applicant’s evidence, and that of his wife, Baslana Evans, was that the letter which contained or accompanied the bankruptcy notice was not received by them or seen by them at the applicant’s place of residence.  There is no contest that the address to which the bankruptcy notice and the accompanying letter was sent was his last known place of address.  It is still his place of address, as I understand the material. 

4. But it is said that, for one reason or another, the letter and bankruptcy notice were not seen by him.  There are a number of authorities now that demonstrate that it is not to the point to show non-receipt of a document that is required to be served, delivered or sent under the Bankruptcy Regulations.  Perhaps the authority that most conveniently summarises the position is Skalkos v TNS Recoveries Proprietary Limited (2004) FCAFC 321. See particularly at paragraphs 24, 25 and 26. In that case their Honours of the Full Court applied a line of authority referred to in the High Court in Fancourt v Mercantile Credits Ltd (1983) 154 CLR 87. I was also taken to a case by counsel for the applicant: Mills ex parte Bondor Pty Ltd (1991) FCA 262 which itself applies the line of authority discussed by the High Court in Fancourt and applied by the Full Court in Skalkos.

5. Evidence of non-receipt is only relevant to the extent that an inference might be drawn from it that the relevant documents were not delivered.  Ms Evans’ affidavit was the subject of objection.  I admitted it provisionally subject to rulings on relevance about what was contained in it.  I am satisfied that the evidence contained in her affidavit is relevant because, as counsel for the applicant submitted, an inference might be drawn that the relevant documents were not delivered.  The evidence goes to the drawing of that inference; however, I decline to draw the inference because there is evidence that suggests that the failure by the applicant or his wife to get the documents, receive them or see them, might be explained in a way other than through non-delivery of the documents. 

6. There was evidence, as has been suggested in submissions that at the relevant time there may have been reasons why mail that was delivered to the applicant’s address was not received by him.  Non-receipt is not relevant; non-delivery is.  The evidence does not demonstrate non-delivery; the evidence demonstrates compliance with reg.16.01 of the Bankruptcy Regulations.  

7. As to the question of service of the creditor’s petition, there were orders made for substituted service of the creditor’s petition on the applicant.  Those orders were made by Registrar Baldwin on 3 December, 2014.  She provided three ways in which the documents were to be served upon the applicant.  The three ways are not alternatives; they were cumulative.  As to the first matter - delivery of the creditor’s petition and supporting documents by pre-paid ordinary post addressed to the respondent at his residential address - there is no dispute that that was carried out.  The second method required the fixing of the documents to the front door of the premises at which the bankrupt lived, and the third method required delivery of the documents by ordinary post to his work address.

8. There are difficulties with service of the documents in each of the latter two ways.  The evidence reveals that the process server who attempted to affix the relevant documents to the front door of the premises where the applicant lived, was unable to access the front door of the dwelling on that property and, instead, affixed them to a gate in the front fence of the property on which that dwelling was situated.  There is a non-compliance with order 29(b) of the orders for substituted service, but as counsel for the applicant very properly conceded, it is not substantial non-compliance.  It is non-compliance which is of no consequence.

9. There seems to be some confusion about the address that was placed on the relevant envelope by which the documents were sent to the applicant’s place of employment.  There is evidence from the person who posted the documents that she addressed them to the correct address.  The letter which accompanied the documents appears to be addressed to an incorrect address.

10. Indeed, the applicant himself gives an incorrect address in his own affidavit.  The difference is one letter:  a mix-up between the letter M and the letter N.  But, again, as counsel for the applicant quite properly conceded, it is not substantial non-compliance.  It is a matter of no moment.  The evidence does not suggest that the relevant correspondence was returned unclaimed or undeliverable.  The applicant argues that, notwithstanding the order for substituted service, the relevant documents did not come to his attention.

11. I was taken to the decision of Watt v Barnett (1878) 3 QBD 183 in which the Chief Justice in that case pointed out that one of the fundamental matters with which a court is concerned is whether the relevant proceedings have been brought to the attention of the person taxed with them. If the court concludes that the relevant proceedings were not brought to the attention of the defendant or respondent, then the court might make necessary orders that permit “the defendant to come in and defend the action as he would have been able to do if the substituted service had been effectual.”

12. That principle, and the applicant’s argument about service of the creditor’s petition, is relevant not so much to the requirement that is placed on the petitioning creditor to prove that the applicant was validly served with the creditor’s petition, but rather, I think, more to do with whether the applicant has demonstrated that, for other sufficient cause, a sequestration order ought not to be made.  There could have been valid service according to an order for substituted service and, in this case, I find there has been, but that of itself does not demonstrate proof that the applicant before me received the documents and had notice of the proceedings.

13. I am not suggesting for a minute that there is an onus on the petitioning creditor to do that, but an absence of notice of the relevant proceedings is something which might amount to other sufficient cause for a sequestration order not to be made.  If that is so, the next enquiry must be what would the applicant say in answer to the creditor’s petition apart from the issue about service. 

14. In this case, his argument seems to be that he is solvent.  I am not satisfied that he is.  The evidence upon which he relies is more than a year old.  Moreover, that evidence is insufficient to establish his solvency, in any event.  Whilst he sets out assets that he owns, there is no evidence about the value of the real assets – real property, and in respect of the items of personalty, whilst he has given an estimate of their value as far as he is concerned, I accept the proposition that I should give that little weight.  I should give that little weight for two reasons.  First, the applicant professes no particular skill as a dealer in second-hand goods and so no particular expertise in providing values, and secondly, it is self-serving evidence from the applicant.  There is no evidence to which I am prepared to give any weight about the value of his assets.

15. Assuming that the substituted service was ineffectual, in my view there would be no point, as Coburn CJ says in Watt v Barnett, letting the applicant come in and defend the application as he would have been entitled to if the substituted service has been effectual.

16. There is seemingly no other basis upon which he would resist the making of the sequestration order because he has, on the evidence, committed an act of bankruptcy in respect of a debt which is sufficient for the making of a sequestration order. 

17. I am satisfied that the petition was validly served, that the matters stated in the petition have been verified in the way required by the Bankruptcy Act, and that there is the claimed debt owing by the applicant to the petitioning creditor.

18. In all of those circumstances, in my view, no occasion arises for the setting aside of the sequestration order made by the registrar and the application for review should be dismissed.

RECORDED:  NOT TRANSCRIBED

1. I am asked to deal with a question of costs.

2. When I read the material in this case in preparation for today, and during the course of the argument today, I have been given to think on a couple of different occasions now whether the outcome of this application might have been different if the solicitors had done their job properly.  I immediately say without any reservation that counsel for the applicant has done and said everything that he could possibly do in support of this applicant’s case.  If there is a complaint to be made by the applicant in respect of his representation, then I expect that he would take that up in the appropriate way with the Law Society.

3. Those matters are not relevant to the question of whether costs in this application should be ordered in the usual terms.  There can be no doubt that costs should follow the event in this application, and ordinarily that would be an order that the petitioning creditor have their costs taxed in accordance with the Federal Circuit Court Bankruptcy Rules 2006 and the Bankruptcy Act 1966. The petitioning creditor, however, says that there should be an order for indemnity costs. I am not so sure that it was as obvious as the petitioning creditor would now suggest that this application for review was bound to fail.

4. Apart from anything else and leaving questions of service and other matters aside, it may well have been the case that the applicant could have established solvency, and that might well have been a good argument to make.  That he was not able to do that today does not necessarily mean that he could not have done it at all, and so I could not form the view that this application was hopeless and always bound to fail.  In those circumstances, an order for indemnity costs is not appropriate. 

5. The usual order for costs will be the order for costs that I will make. 

I certify that the preceding twenty-eight (28) paragraphs are a true copy of the reasons for judgment of Judge Jarrett delivered on 20 April 2016

Date: 25 May 2016