Mbuzi v Favell (No 2)

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FEDERAL COURT OF AUSTRALIA

Mbuzi v Favell (No 2) [2012] FCA 311

Citation: Mbuzi v Favell (No 2) [2012] FCA 311
Appeal from: Favell v Mbuzi [2011] FMCA 710
Parties: JOSIYAS MBUZI v PAUL JOSEPH FAVELL
File number: QUD 315 of 2011
Judge: COLLIER J
Date of judgment: 28 March 2012
Catchwords:

BANKRUPTCY AND INSOLVENCY – appeal against sequestration order made by Federal Magistrate – service of bankruptcy notice – reg 16.01 Bankruptcy Regulations 1996 (Cth) – bankruptcy notice alleged to have been sent by post – evidence given of standard office practice for sending mail – claimed register of outgoing mail – claim that secretary/receptionist put bankruptcy notice in post – no evidence given by any person who may have put bankruptcy notice in post – system of postage – sequestration order of utmost seriousness – strict proof of service of bankruptcy notice required – onus of establishing proof of service of bankruptcy notice lies with creditor – appeal allowed

COSTS – unrepresented litigant – self-represented litigant – appeal successful but no costs awarded
Legislation: Acts Interpretation Act 1901 (Cth)
Australian Postal Corporation Act 1989 (Cth)
Bankruptcy Act 1966 (Cth) ss 43, 44(1)(c), 52, 309(2)
Bankruptcy Regulations 1996 (Cth) reg 16.01
Federal Court Rules 2011 (Cth) r 36.11
Cases cited: Australian Super Pty Ltd v Woodward (2009) 262 ALR 402 cited
Bennell v American Express International Incorporated [2006] FCAFC 80 cited
Cachia v Hanes (1994) 179 CLR 403 cited
de Robillard v Carver (2007) 159 FCR 38 followed
Drake v Stanton [1999] FCA 1635 cited
Fancourt v Mercantile Credits (1983) 154 CLR 87 cited
Favell v Mbuzi [2011] FMCA 710 cited
Fox v Percy (2003) 214 CLR 118 cited
In re Long; Ex parte Fraser Confirming Pty Ltd (1975) 12 SASR 130 cited
Mbuzi v Favell [2011] FCA 1439 cited
Re Anthony Edward Millar; Ex parte Commonwealth Development Bank of Australia (unreported, Burchett J, 27 April 1993) cited
Re Ferrarese; Ex parte Aloisio (1995) 60 FCR 586 cited
Re Collier; Ex parte Dan Rylands Ltd (1891) 64 LT 742 cited
Re Copley; Ex parte Sundell (1964) 20 ABC 229 cited
Re Ditfort; Ex parte Deputy Commissioner of Taxation (1988) 19 FCR 347 cited
Repatriation Commissioner v Gordon (1990) 26 FCR 569 cited
Skalkos v T & S Recoveries Pty Ltd (2004) 141 FCR 107 cited
T & S Recoveries Pty Ltd v Skalkos [2004] FCA 816 cited
Date of hearing: 6 March 2012
Place: Adelaide via video-link to Brisbane (Heard in Brisbane)
Division: GENERAL DIVISION
Category: Catchwords
Number of paragraphs: 43
Counsel for the Appellant: The Appellant appeared in person
Counsel for the Respondent: Mr CD Coulsen and Mr D Favell
Solicitor for the Trustees of the Estate of Josiyas Mbuzi: Mr SG Muller of Rodgers Barnes & Green

IN THE FEDERAL COURT OF AUSTRALIA

QUEENSLAND DISTRICT REGISTRY

GENERAL DIVISION

QUD 315 of 2011
ON APPEAL FROM THE FEDERAL MAGISTRATES COURT OF AUSTRALIA
BETWEEN:

JOSIYAS MBUZI
Appellant
AND:

PAUL JOSEPH FAVELL
Respondent

JUDGE:

COLLIER J

DATE OF ORDER:

28…

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Details
Case
[2012] FCA 311
Decision Date

CaseChat Overview and Summary

In the matter of Mbuzi v Favell (No 2), the Full Court of the Federal Court of Australia heard an appeal against a sequestration order made by a Federal Magistrate. The dispute centred around the validity of the service of a bankruptcy notice to Mr Mbuzi by Mr Favell, who had obtained a judgment against Mr Mbuzi in the District Court of Queensland. The crux of the issue was whether the creditor, Mr Favell, had provided strict proof of service of the bankruptcy notice, as required by reg 16.01(1)(a) of the Bankruptcy Regulations 1996 (Cth). The Federal Magistrate had ruled in favour of Mr Favell, but the Full Court found that the Magistrate had not properly applied the strict proof requirement for service of the bankruptcy notice.

The Full Court concluded that the evidence provided by Mr Favell did not meet the standard of strict proof needed to establish effective service of the bankruptcy notice. Mr Favell had relied solely on his own testimony regarding the standard office practice for sending mail, including the claim that a secretary or receptionist had put the bankruptcy notice in the post. However, there was no tangible evidence of the actual posting of the notice, such as a register of outgoing mail or testimony from the person who posted the notice. The Court held that the Magistrate should have required stricter proof of the posting of the bankruptcy notice, as established by previous cases such as de Robillard v Australian Financial Services and Leasing Co Pty Ltd and Long v Commonwealth Bank of Australia.

As a result, the Full Court allowed the appeal, set aside the sequestration order against Mr Mbuzi, and also set aside the order for payment of Mr Favell's costs. The Court emphasised the seriousness of sequestration orders and the necessity for creditors to provide strict proof of the service of bankruptcy notices to ensure fairness in the proceedings.

Orders

Orders of the court

1. The appeal be allowed.

2. The sequestration order made against the estate of Josiyas Mbuzi in Favell v Mbuzi [2011] FMCA 710 be set aside.

3. The order for payment of the petitioning creditor’s costs made in Favell v Mbuzi [2011] FMCA 710 be set aside.

Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

Background

Background to the litigation

In my view the appeal ought be allowed, for the reasons I set out below.Background The background facts to these proceedings are set out in the judgment of the Federal Magistrate. Throughout the proceedings Mr Mbuzi has been self-represented, while Mr Favell has been represented by Counsel. In summary, on 18 November 2005 Mr Favell obtained judgment against Mr Mbuzi in the District Court of Queensland in the sum of $15,000 plus interest. On 24 November 2010 Mr Favell applied to the Insolvency and Trustee Service for the issue of a bankruptcy notice against Mr Mbuzi. A bankruptcy notice was duly issued. The method of service of the bankruptcy notice on Mr Mbuzi was explained by Mr Favell during cross-examination at the hearing before his Honour below. In summary Mr Favell claimed that the bankruptcy notice had been sent by post to Mr Mbuzi. The relevant evidence commences at line 38 page 23 and concludes at line 43 page 24 of the transcript:HIS HONOUR: How did you cause it to be sent, Mr Favell? --- Your Honour, I had prepared the letter which is annexed as PJF2, dated 29 November to which was attached the bankruptcy notice that was issued by the Insolvency and Trustee Service Australia on 24 November 2010. I had an envelope addressed to the address which appears in that letter. The contents of that envelope were the letter and the bankruptcy notice. In the normal course of my practice the envelope which contains correspondence has my return address on it and my name. It is then put out to a central area at the reception on the 10th level for it to be later collected in the day and put into the post. There is a register kept of all outgoing mail and each item of outgoing mail is then sourced to the person who is sending it. That information is kept and then that individual is billed for the postage cost through the floor organisation.And is that what happened in this case?--- It did.MR MBUZI: Based on your own explanation would you agree with me that really the basis of your claim that the letter was posted to me depends on what somebody told you?--- No. It depends upon me causing the letter and the notice to be put in an envelope, to be put out, as I said, for collection and then in the normal course of business I get billed for the postage. It gets put in the mail and presumably it’s delivered by the postal service.I repeat my question?--- Well, no I understood your question and I’ve answered it.My question is, do you agree with me that you did not personally post the letter?--- Yes, I didn’t personally put the letter in the letterbox.How do you know that it was put in the letterbox?--- Well, I told you, the normal course of business, the way things are done in my chambers is as I’ve said.Do you know what time it was put in the letterbox?--- No, I don’t. It would have been approximately 5 o’clock or so.Okay. How have you come to that very specific time?--- Because that’s when the receptionist normally leaves the building to do the posting.So the secretary leaves the building at 5 o’clock--- Thereabouts.And then it is your position that when the secretary has left the building at 5 o’clock that’s when she posts – when she leaves your office at 5 o’clock, I’m presuming you leave on 10th floor, so immediately she leaves at 5, your presumption as you have rightly said, is that she put the letter in the box, is that right?--- She goes past the letterbox which is on the corner of George and Turbot Street and puts the post there.Good. Just for purposes of clarification, you agree with me that your claim that the letter was posted is, as you put it, presumption – you presume – that’s what you said. You agree to that?--- I can’t remember if I used the word presume, but if I do, I don’t have any reason to reconcile from it.Good. The document that you presume was posted, do you have evidence that it was received?--- I don’t – no, I don’t have evidence that it was received except that you’ve appeared here, obviously with the affidavit of Mr Grogan with that material attached.

Evidence

Evidence Before The Court

Full text does not contain this section.

Decision

Reasons for decision

Before the Federal Magistrate, Mr Mbuzi also alleged that the pursuit of the bankruptcy proceedings was an abuse of process.Decision of the Federal Magistrate After concluding that the bankruptcy notice was valid, his Honour turned to the issue of service as follows:[4] The bankruptcy notice was purportedly sent by letter to the respondent’s address. I am satisfied that the bankruptcy notice was dispatched under cover of a letter from the petitioning creditor to the respondent. I am satisfied by the evidence, and Mr Favell was cross-examined about this, that the letter was posted. He did not physically place it in the post box, but he caused it to be posted in the ordinary course of his practice, and he gave evidence of what occurs with mail to be posted in the ordinary course of his practice. He gave evidence about the records that are kept concerning the posting of articles such as this. He also gave evidence that the envelope in which it was posted bore a return address, that is, his own address on it.[5] The respondent debtor takes issue, and this is largely the issue to be dealt with in this case although not the only one, with the proposition that the bankruptcy notice was served on him. The argument he makes is that there is, first of all, no proof of posting because the person who put the relevant letter in the postal box did not give evidence that he or she did so; but for the reasons that I have already given, I am satisfied that the letter was in fact posted. Next, his Honour considered whether the bankruptcy notice had been delivered. His Honour observed:[7] Regulation 16.01(a) of the Bankruptcy Regulations 1996 permits service of a bankruptcy notice to be done by having it sent by post or by a courier service to the person at his or her last known address, and service is deemed to have occurred unless the person to whom it was sent can prove that it was not delivered. That seems to be the effect of the authorities such as Fancourt v Mercantile Credits [1983] HCA 25; (1983) 154 CLR 87 and Skalkos v T & S Recoveries Proprietary Limited (2004) FCAFC 321. The test is not receipt but rather posting and delivery. In that respect the respondent’s point is that because he had no mailbox, Australia Post would not have delivered the mail to him. His Honour accepted Mr Favell’s evidence that the letter enclosing the bankruptcy notice had not been returned to him (at [8]). His Honour then dealt in detail with Mr Mbuzi’s claim that the letter containing the bankruptcy notice had not been delivered. His Honour observed that the test is not receipt but rather posting and delivery: Fancourt v Mercantile Credits (1983) 154 CLR 87 and Skalkos v T & S Recoveries Pty Ltd (2004) 141 FCR 107. At [11] his Honour found that there was no evidence:·of an agreement between Australia Post and Mr Mbuzi that an article addressed to his street address might be deemed to be undeliverable;·that the way in which the letter was addressed by Mr Favell to Mr Mbuzi was insufficient;·that the article was endorsed or it was otherwise known to Australia Post that Mr Mbuzi was unknown at the address.

Ratio Decidendi

Legal Principle Established

I respectfully adopt the principles articulated in these cases.Consideration In this case I consider that the Federal Magistrate erred by not having regard to the strictness of proof required for service of a bankruptcy notice in considering whether the evidence before the Court constituted effective service within the meaning of reg 16.01(1)(a) of the Bankruptcy Regulations. The key passages from his Honour’s judgment are [4] and [5], which are helpful to repeat:[4] The bankruptcy notice was purportedly sent by letter to the respondent’s address. I am satisfied that the bankruptcy notice was dispatched under cover of a letter from the petitioning creditor to the respondent. I am satisfied by the evidence, and Mr Favell was cross-examined about this, that the letter was posted. He did not physically place it in the post box, but he caused it to be posted in the ordinary course of his practice, and he gave evidence of what occurs with mail to be posted in the ordinary course of his practice. He gave evidence about the records that are kept concerning the posting of articles such as this. He also gave evidence that the envelope in which it was posted bore a return address, that is, his own address on it.[5] The respondent debtor takes issue, and this is largely the issue to be dealt with in this case although not the only one, with the proposition that the bankruptcy notice was served on him. The argument he makes is that there is, first of all, no proof of posting because the person who put the relevant letter in the postal box did not give evidence that he or she did so; but for the reasons that I have already given, I am satisfied that the letter was in fact posted. However:·It is clear from these passages, and the transcript of the hearing before his Honour, that the only evidence to support Mr Favell’s claim that the bankruptcy notice was actually sent to Mr Mbuzi was oral evidence of Mr Favell as to his recollection of leaving the envelope containing the bankruptcy notice to be put in the mail by an unnamed secretary/receptionist in the ordinary course of business of his practice.·There was no evidence before the Court of any record of the notice being sent by post, as might be expected if there was a system of postage pursuant to which the bankruptcy notice was posted.·Similarly, no evidence was tendered supporting the existence of any register of outgoing mail as claimed orally by Mr Favell.·No evidence, either oral or in affidavit form, was given by any third party who might have physically posted the bankruptcy notice that the notice had been posted. While his Honour accepted the evidence of Mr Favell that the bankruptcy notice had been posted, this evidence was not considered by his Honour in accordance with the principles of strict proof of service confirmed by such authorities as de Robillard and Long. It cannot be said from that evidence before the Court below that Mr Favell has adduced strict proof that the bankruptcy notice was actually sent to Mr Mbuzi by post in accordance with reg 16.01(1)(a), or in fact that there was evidence before the Court from which his Honour could be satisfied that the bankruptcy notice had been effectively served on Mr Mbuzi.