Macquarie Leasing Pty Ltd v Phrakhoungheaung - [2009] FMCA 167

FEDERAL MAGISTRATES COURT OF AUSTRALIA

MACQUARIE LEASING PTY LTD v PHRAKHOUNGHEAUNG

[2009] FMCA 167

BANKRUPTCY – Creditor’s petition – service of bankruptcy notice.

Bankruptcy Act 1966 (Cth), ss.40, 43, 52, 306

Adams v Lambert (2006) 228 CLR 409
Deputy Commissioner of Taxation v Gadaleta [1999] FCA 923
Drake v Stanton [1999] FCA 1635
Magafas v Carantinos (2008) 222 FLR 185
Marshall and Another v Clarkeand Others (2003) 180 FLR 297
Re McCormac; Ex parte Taylor (1985) 10 FCR 162
Troy & Company v Cameron [2002] FMCA 42

Applicant:

MACQUARIE LEASING PTY LIMITED (ACN 002 674 982)

Respondent:

RON PHRAKHOUNGHEAUNG AKA RUNGROJ PHRAKHOUNGHEAUNG

File Number:

SYG1989 of 2008

Judgment of:

Barnes FM

Hearing date:

18 February 2009

Delivered at:

Sydney

Delivered on:

18 February 2009

REPRESENTATION

Counsel for the Applicant:

Ms Glover

Solicitors for the Applicant:

Douros Lawyers

Solicitors for the Respondent:

de Mestre and Company

ORDERS

That a sequestration order be made against the estate of Ron Phrakhoungheaung, also known as Rungroj Phrakhoungheaung.
That the applicant creditor's costs (including reserved costs, if any) be taxed and paid from the estate of the respondent debtor in accordance with the Bankruptcy Act 1966.
That under the Bankruptcy Regulations a copy of this sequestration order be given to the Official Receiver within 2 days.

The Court notes that the date of the act of bankruptcy is 28 May 2008.

A consent to act as trustee has been signed by Nicholas Crouch.

FEDERAL MAGISTRATES
COURT OF AUSTRALIA AT
SYDNEY

SYD1989 of 2008

MACQUARIE LEASING PTY LTD (ACN 002 674 982)

Applicant

And

RON PHRAKHOUNGHEAUNG AKA RUNGROJ PHRAKHOUNGHEAUNG

Respondent

REASONS FOR JUDGMENT

(Revised from transcript)

On 1 August 2008 the applicant creditor filed and presented a creditor's petition seeking that a sequestration order be made against the estate of the respondent debtor. It relied on an act of bankruptcy said to consist of non-compliance with a bankruptcy notice.
The issue of substance that needs to be addressed by the Court is whether the bankruptcy notice was “served” on the debtor. It is convenient to address that issue before considering the other formal matters in these proceedings.
Under s.40(1)(g) of the Bankruptcy Act 1966 (Cth) a debtor commits an act of bankruptcy where a creditor who has obtained against the debtor a final judgment or final order (which is not disputed in the case) “has served on the debtor” in Australia or, by leave of the Court, elsewhere, a bankruptcy notice under the Act and the debtor does not within the time specified comply with the requirements of the notice or satisfy the Court that he has a counter-claim, set-off or cross demand as detailed in that sub-section. Under s.43(1) where a debtor has committed an act of bankruptcy (and certain other requirements not disputed in this case are met) the Court may, on a petition presented by a creditor, make a sequestration order against the estate of the debtor.
The debtor in this case is legally represented. The matter has been before a Registrar of this Court on a number of occasions. On 10 February 2009 the debtor was given leave to file a notice of opposition, notwithstanding that it was not accompanied by an affidavit. The ground of opposition is that the bankruptcy notice was not “properly served” on the debtor. The Court ordered that the debtor file and serve any affidavit evidence by 13 February 2009. No affidavit evidence was filed by the debtor. I am told by the solicitor for the debtor that he has been unable to obtain instructions from his client since 10 February 2009. Nonetheless he maintains the opposition to the creditor’s petition.
The hearing proceeded on the basis that I dispensed with the requirement of an affidavit in support of the notice of opposition. However the effect of this is that the debtor has put no evidence before the Court in support of his contention that the bankruptcy notice was not properly served.
That leaves the evidence relied on by the creditor. I have considered whether I am satisfied with proof of matters referred to in s.52 and the existence of an act of bankruptcy to found the petition. The creditor relies on the creditor's petition and the usual affidavits and, in relation to the issue of service of the bankruptcy notice, an affidavit of service of the bankruptcy notice sworn on 17 May 2008 by Craig Sheen and filed on 1 August 2008 and an affidavit of Gavin Richard Francis, solicitor, affirmed and filed on 10 February 2009. Neither deponent was required for cross-examination.
The affidavit of service of the bankruptcy notice attested to the fact that on 7 May 2008 Mr Sheen “served the … debtor” with the bankruptcy notice in issue by delivering it to Michelle Symington of Lyons & Lyons Solicitors, at a specified address in Campbelltown. Mr Sheen’s evidence is that he established that the person served was the said named debtor by reason of statements made at or at the time of service. The evidence is that Mr Sheen asked, "Are you authorised to accept these documents on behalf of Ron Phrakhoungheaung aka Rungroj Phrakhoungheaung," and the person served replied, "Yes I am, my name is Michelle Symington." The affidavit of service attaches a copy of the bankruptcy notice.
Mr Francis attested to the fact that another solicitor employed by the creditor’s solicitors received an email report from Access Mercantile (the process servers) in relation to service of the bankruptcy notice in this case. No objection was taken by the solicitor for the debtor to any part of this affidavit or its attachments.
The report relates unsuccessful attempts to serve the debtor at a residential address. The person who identified herself as the debtor's mother indicated that he did not live there anymore and she did not know where he lived, but she would pass on a calling card. An attempt was made to serve the debtor at another address. The report records that a person indicated that she knew the debtor but that he did not live there and she did not know where he lived.
The report also records a telephone conversation between the agent and the debtor, who then rang the agent back and informed the agent that he had given authority to his solicitor to accept documents on his behalf. The report recorded that Ms Symington confirmed in a telephone conversation that she had instructions to accept documents on the debtor's behalf.
Also annexed to this affidavit is a file note of a telephone conversation between a solicitor in the employ of the solicitors for the creditor and Michelle Fontanilla of Lyons & Lyons in which Ms Fontanilla is recorded as having advised that she had instructions to accept service of the bankruptcy notice and that she acted for the debtor. She was asked to put this in writing. There is no evidence before the Court of any such confirmation in writing.
On this evidence I am asked to determine whether the bankruptcy notice has been served on the debtor. There was no order for substituted service in this case. Provisions in relation to service of documents such as bankruptcy notices are contained in reg.16.01 of the Bankruptcy Regulations. It is not disputed that personal service is not required. Relevantly, reg.16.01(1) provides inter alia for a document to be sent by post or by a courier service to a person at his or her last-known address or (in para (c)), “left in an envelope or similar packaging marked with the person's name, at the last-known address of the person.”
It is well established (see Drake v Stanton [1999] FCA 1635 per Tamberlin J) that the expression "the last- known address of the person” is not confined to a residential address (Drake at [8]) and that "on the language of reg 16.01(1)(c), the reference to “last-known address of the person” is to that address which has been made known by the [debtor] as at the time closest to the date in question” (Drake at [8]). In Drake reference was made to the fact that the debtor had not been called to give any evidence to the contrary. His Honour concluded that “the weight of the sworn evidence” before him favoured the conclusion that the bankruptcy notice had been left at the address last made known by the debtor (and hence his last-known address), when left tucked under the front door of particular premises referred to in statements and documents signed by the debtor, even though the debtor’s solicitor said that this was not the debtor’s residential address or where he sent correspondence for the debtor.
The solicitor for the creditor referred to a decision of Chief Federal Magistrate Bryant (as she then was) in Troy & Company v Cameron [2002] FMCA 42. In that case an issue arose on the hearing of a creditor's petition as to whether the bankruptcy notice was properly served. The notice had, as in this case, been served on the solicitors for the debtor. The evidence relied on included a copy of a letter to the creditor’s solicitors from the debtor's solicitors referring to then current legal proceedings between the parties and indicating that the solicitors were instructed to accept service “of” other foreshadowed proceedings or “proceedings of any nature to be instituted by your client against” the debtor. On the basis of that letter a process server had served the bankruptcy notice by delivering it to an employee at the office of the debtor's solicitors.
Her Honour was satisfied, having regard to the letter from the debtor's solicitors, that the solicitor had instructions to accept service of any process, and that that included a bankruptcy notice. Bryant CFM referred to Drake v Stanton (also see Deputy Commissioner of Taxation v Gadaleta [1999] FCA 923) in finding (at [48]) that it was not necessary that a person live at an address for it to be possible to effect delivery of documents to that address and that as the debtor's solicitors had stated that they acted on instructions from the debtor and that they would accept service, their address constituted the last-known address of the debtor for the purposes of reg.16.01(1)(c).
In this case it is not disputed that the bankruptcy notice was left at the address of the solicitor Lyons & Lyons by being delivered to Michelle Symington. While there is no evidence of a letter from the debtor's solicitors before the Court as in Troy v Cameron, there is evidence that the solicitor served stated to the process server that she had such authority.
It was nonetheless submitted by the solicitor for the debtor that the Court should not reach a conclusion that the solicitor had such authority in the absence of a copy of a letter from the former solicitor for the debtor confirming these matters. However the absence of a letter from the former solicitors, while distinguishing this case from the circumstances in Troy v Cameron, is not such as to persuade me that the requirements of reg.16.01(1) in relation to the last-known address of the person have not been satisfied.
This is not a case in which there is no evidence that advice was given by the solicitor that he would accept service for and on behalf of the debtor (cf Marshall and Another v Clarke and Others (2003) 180 FLR 297). Nor is it a case in which there is dispute as to which of a number of addresses was the last-known address of a debtor that a creditor might reasonably discover. There is no evidence from the debtor contrary to the claim that he advised the creditor’s agent that his solicitor had authority to accept service of the bankruptcy notice as his solicitor asserted (cf Magafas v Carantinos (2008) 222 FLR 185).
In the absence of any evidence to the contrary from the debtor, in circumstances where he was given time to file affidavit evidence in support of his notice of opposition, I am satisfied that the weight of sworn evidence favours the conclusion that the debtor had (as Ms Fontanilla told Mr Sheen) given his then solicitors Lyons & Lyons, authority to accept documents on his behalf, which extended to authority to accept a bankruptcy notice on his behalf. Ms Fontanilla confirmed this in a conversation in that context and not in the context, for example, of some other proceedings. I am satisfied that the address of those solicitors constituted the last-known address of the respondent for the purposes of reg.16.01(1)(c), as the address made known by the debtor as at the time closest to the date of service as considered in Drake v Stanton. I am satisfied that the bankruptcy notice was left at the last-known address of the debtor.
The other issue in relation to reg.16.01 is that under reg.16.01(1)(c) the document must be left “in an envelope or similar packaging marked with the person's name.” There is no evidence before the Court that the bankruptcy notice was left in that form.
The creditor submitted that reg.16.01(1)(a) might apply on the basis that the document was sent by a courier service to the debtor at his or her last-known address. However the evidence of the process server is, at the least, more consistent with service being by personal delivery to a person in the course of a conversation rather than by being “sent” by courier service. In those circumstances the relevant provision is reg.16.01(1)(c). The fact that the bankruptcy notice was not in an envelope marked with the debtor’s name, is, however, a defect that may be cured under s.306 of the Bankruptcy Act. This issue also arose in Troy v Cameron in which Bryant CFM referred (at [50]) to Re McCormac; Ex parte Taylor (1985) 10 FCR 162, in relation to whether a defect or irregularity in the context of service of the bankruptcy notice might reasonably mislead the debtor as to what he or she must do to comply with the notice or might reasonably have adversely affected the debtor in some other way (now see Adams v Lambert (2006) 228 CLR 409). Her Honour found (at [50]) that such defect could not have misled the debtor or adversely affected him in any other way and that the bankruptcy notice had been delivered in such a way that it was immediately brought to the attention of the solicitors.
As the High Court stated in Adams v Lambert at [18]: “In its application to a bankruptcy notice, s 306 assumes the possibility of some failure to comply with a statutory requirement; that is, some defect or irregularity.” In this case the bankruptcy notice was not contained in an envelope marked with the debtor's name as required by reg. 16.01(1)(c), but was delivered to a solicitor who accepted service on the debtor’s behalf. This was delivery in such a way that the bankruptcy notice was immediately brought to the attention of the solicitors. There is nothing to indicate that the absence of a marked envelope could have misled a debtor as to what he was required to do to comply with the notice or that it could have adversely affected him in any other way. There is no evidence of injustice or unfair prejudice to the debtor. I am satisfied that the defect is not such that substantial injustice has been caused and is a defect of form, not of substance, that could not so mislead or embarrass the debtor and can be “cured” under s.306 of the Act.
Accordingly I am satisfied that the requirement of service of the bankruptcy notice is met. No issue was taken by the debtor in any other respect with whether or not an act of bankruptcy has been established. I am satisfied that there was an act of bankruptcy consisting of a failure to comply with the bankruptcy notice issued on 1 April 2008. No issue was taken with the form of the bankruptcy notice or with any other matter in the bankruptcy notice. The date of the act of bankruptcy as recorded in the creditor's petition (and no issue was taken with the accuracy of that) is 28 May 2008. It consisted of a failure by the respondent debtor to comply on or before that date with the requirements of the bankruptcy notice served on him on 7 May 2008 or to satisfy the Court that he had a counter-claim, set-off cross demand etc within s.40(1)(g) of the Bankruptcy Act.
On the affidavit evidence for the creditor relied on in these proceedings I am satisfied with proof of the requirements of s.52(1) of the Bankruptcy Act.
Apart from the issue of service of the bankruptcy notice, no other issue was raised by the debtor such as to give rise to a need for consideration of s.52(2) of the Act. In particular, there is no evidence before the Court that the debtor was able to pay his or her debts or that for other sufficient cause a sequestration order ought not to be made.
Accordingly, I am satisfied that the debtor committed the act of bankruptcy alleged in the petition. I am satisfied with proof of the other matters required by s.52 of the Bankruptcy Act 1966. I make a sequestration order against the estate of Ron Phrakhoungheaung, also known as Rungroj Phrakhoungheaung.

I certify that the preceding twenty-six (26) paragraphs are a true copy of the reasons for judgment of Barnes FM

Associate:

Date: 5 March 2009