Mikkelsen, R.W. v Lynch, A

[1991] FCA 608

CATCHWORDS

Bankruptcy - Application for annulment of bankruptcy - whether sequestration order "ought not to have been made" - whether

service of bankruptcy notice and creditors petition made in

accordance with Act and Rules - whether bankruptcy should be

annulled - Barrkruptcy Act 1966 (Commonwealth) s.l54(l)(a)

Re Williams (1968) 13 PLR 10

RONALD WARREN MIKKELSEN v. ADA LYNCH

NB300 of 1990

14 October 1991

Sweeney J

Sydney

IN THE FEDERAL COTIRT OF AUSTRALIA )

1

GENERAL DIVISION	1
1
BANKRUPTCY DISTRICT OF THE STATE	) No.NB300 of 1990
1
OF NEW SOUTH WALES	1

RE :	RONALD WARREN MIKKBLSEN	Applicant
AND :	ADA LYNCH	Respondent
THE COURT :	Sweeney J
PLACE	Sydney
DATE	14 October 1991

MINUTES OF ORDER

THE COURT ORDERS THAT:

1. Bankruptcy of applicant is annulled.

2.   Respondent to pay the costs of the applicant of and incidental to the application, such costs to be taxed, if not agreed.

Note:	Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
GENERAL DIVISION	i
)
BANKRUPTCY DISTRICT OF THE STATE	)
1
OF NEW SOUTH WALES	1

R O W WARREN MIKKELSEN Applicant

AND :  ADA LYNCH Respondent

THE COURT :	Sweeney J
PLACE	Sydney
DATE
-	14 October 1991

By an application filed on 15 May 1991 Ronald Warren

Mikkelsen ("the applicant") asks that an order of

annulled on the ground that the Bankruptcy Petition was not	sequestration made against him on 13 February 1991 "be	served" on him and that "the Bankruptcy Notice filed herein be set aside on the ground that it was not served" on him.
On 13 October 1991 Registrar Sexton had before her an affidavit in which Lorraine Margaret Dunn, licensed commercial agent deposed that on 12 July at 10.10 a.m. she served the applicant with a copy of the bankruptcy notice "by delivering it to him personally at 'Far East' Fruit Shop, Jonson Street, Byron Bay" and that she identified the person served by reason of the fact that at the time of service she asked him "Are you Ronald Mikkelsen the person referred to in this Bankruptcy Notice?" and he replied "Yes". The bankruptcy notice was based upon a default judgment obtained in the District Court at Sydney on 17 February 1989.
The Registrar also had before her a further affidavit by the licensed commercial agent, in which she deposed that she served the applicant with an official copy of the bankruptcy petition, together with the copies of the affidavits in support and the consent to act of the proposed trustee Richard Campbell Brien, "by delivering the same to him" at the Far East Fruit Shop at about 11.40 a.m. She deposed that she identified the applicant by asking him:

"Are you the Ronald Mikkelsen referred to in the

Petition?" to which he replied "Yes".

The sole act of bankruptcy relied upon in the petition was that the applicant failed on or before 2 August 1990 either to comply with the requirements of the bankruptcy notice or to satisfy the Court that he had a counter-claim set-off or cross demand equal to or exceeding the sum specified in the bankruptcy notice.

An affidavit by the applicant's then solicitor disclosed that on 27 February 1991 he was consulted by the applicant,

who informed him that he had been told by his bank manager that he had been declared bankrupt, a fact which the solicitor confirmed by telephoning "the Bankruptcy Office".

On the same day he wrote to the respondent's solicitors advising them of his instructions and asking for copies of affidavits of service, which were forwarded under cover of their letter dated 28 February.

On 27 February he wrote a letter to the office of the trustee, asking to be provided with a copy of the petition. He does not refer to the receipt of any reply to this letter, but on 5 March he wrote a further letter to the office of the trustee, which read as follows:

"RE: RONALD WARREN MIKKELSEN

We wish to advise that we act for the abovenamed who has instructed us to make various representations on his behalf as a result of the Sequestration Order which was made on the 13th of February last.

While our client denies that any Bankruptcy Notice or

that he only has one unsecured creditor namely the	Bankruptcy Petition was served upon him he instructs us
petitioning creditor. He has had an ongoing arrangement with Westpac Banking Corporation which he would like to continue however that organisation is not prepared to accept any further payments on the mortgage by reason of the Sequestration Order. In the meantime Mr Mikkelsen continues to earn approximately two thousand dollars per week from his business as a horticulturist and subject to payment of the amount owing to the petitioning creditor he would like to enter into an arrangement with Westpac Banking Corporation for the payment of mortgage monies and have the bankruptcy annulled.
We enclose herewith duly completed Statement of Affairs for your consideration and we would ask that you contact us in order to canvass the possibility for Mr Mikkelsen entering an arrangement as we have envisaged. We look

forward to hearing from you."

The solicitor's affidavit referred to "further telephone discussions and correspondence with the trustee with a view (sic) Mr Mikkelsen entering into an arrangement with his creditors". The affidavit concluded by noting that on 9 April 1991 he ceased to act in relation to this application, which the applicant subsequently instructed his present solicitors to make.

There was filed in support of the application. an affidavit by the applicant's mother which is set out below:

"1. I am the Mother of Ronald Warren Mikkelsen referred to as Ronald Mikkelsen the Bankrupt in these proceedings. I am aged 70 years.

2.    I remember a day in mid 1990 when a woman of medium

build came into the shop business I conduct at Corner of Jonson Street and Carlyle Street, Byron Bay, called 'Marqueza's Continental Grocery'.

3.   My recollection of our conversation is that the woman said to me 'Is Ron Mikkelsen here?' I answered 'No, he's not here. I am his Mother can I

help you?'.

4.  The woman said 'These papers are for Mr Ronald Mikkelsen. I am leaving them with your. I said 'I won't accept them. My son's problems aren't mine'. She said 'Well I am leaving them here' and threw them on the counter. Then she left.

5.    I was very upset with her aggressive manner and put the papers on a shop shelf. I then took them home that night and put them with my shop papers. I said nothing about it to my son and put the episode out of my mind until the next lot of papers were served on me.

6.   Late in January 1991 the same woman came to the shop with more papers. My son was not in the shop.

7.   At first I didn't recognize the woman. She said 'Is Ronald Mikkelsen here?' I answered 'No' She said 'I am leaving these papers for him'.

8.  I said 'Look this is my shop and I am not

responsible for my son's problems. You deliver the papers to him'. I had become very agitated at this stage. The woman replied 'I will still leave them herer. She then threw the papers onto the counter and they fell onto the floor. She then left the shop.

9.  I did not look at the papers apart from seeing on one document a name which I think said 'Far East Fruit and VegetablesJ. I had never heard of that name before. I took the papers home and forgot about them for a few days.

10.  Approximately two weeks later I posted both sets of documents to the Bankruptcy Court 16th Floor, Law Courts Building, Queens Square Sydney with a covering letter saying that it was not my affair and not to deliver any more papers to my shop. I did not keep a copy of that letter.

11.  I did not tell my son about the papers until March 1991 when he questioned me about them. He was very angry and told me that his Bank Manager had informed him that he had been declared Bankrupt. He asked me if any papers had been served at the shop. It was then that I informed him of the delivery of two sets of papers and the circumstances as set out above.

12.  Ron was very upset. He said 'You have wrecked me, I have been Bankrupted without a chance to do anything about it. Now the bank won't accept my repayments and I will probably lose the farm. What made you do

it? '

13.  I replied 'I was upset with the woman. I told her it was nothing to do with me. I took the papers home and forgot about them until the second lot came. Then I posted them back to the Bankruptcy

Court' . "

The applicant's affidavit in support read as follows:

"1. I am the Bankrupt referred to in these proceedings.

2.    My Mother, Joan Mavis Mikkelsen, is the proprietor of 'Marquezas Continental Grocery' at the corner of Carlyle and Jonson Street, Byron Bay.

I first heard of my Bankruptcy in late February 1991

from Mr Ken Davenport Manager of the Westpac Bank, Byron Bay. I later received a letter dated 21st February, 1991 from R.C. Brien the Trustee appointed in my Bankruptcy.

I was stunned to hear this news because I had never

been served with any papers.

I consulted a Byron Bay Solicitor, Mr Wroth Wall of OrMoore Hertzberg Solicitors Byron Bay. M r Wall made inquiries of the Bankruptcy Office on my behalf and informed me that I was declared bankrupt on the petition of 'Joan Lynch Racing Colours1.

I informed M r Wall that I had never been served with any documentation relating to Bankruptcy. About one week into March 1991, Mr Wall informed me that the Bankruptcy Notices were served on me personally at the 'Far East Fruit Shop' Jonson Street, Byron Bay according to the Affidavits of Service.

I questioned my Mother about Bankruptcy papers being served at her shop.

I said to my Mother 'Mum I'm in heaps of trouble because someone says they served papers on me in the shop, do you know anything about it?'

My Mother is an elderly lady and I could see she was upset. She replied 'Someone asked for you to serve papers on you quite some time ago, they left the papers in the shop and I told the woman that I would not accept them. I took them home to Lismore and later I posted them back to the court'.

I said 'Why didn't you tell me?'. She replied 'I

papers down. After I took them home, I forgot about	was nothing to do with me but she just threw the was upset with the woman's manner. I told her it	them until she came with the second lot. Then I just posted them right back to the Bankruptcy
Court ' .
I have never been served with a Bankruptcy Notice or a Bankruptcy Petition. My Mother had not previously told me anything of the delivery of these documents.
Annexed hereto and marked with the letter 'A' is a photocopy of the Affidavit of Service of Lorraine Margaret Dunn deposing that she served a Bankruptcy Notice on me on 12th July, 1990. I say that the contents of that Affidavit are false.
Annexed hereto and marked with the letter 'B' is a photocopy of the Affidavit of Service of Lorraine

Margaret Dunn deposing that she served a Bankruptcy petition on me on 23rd January, 1991. I say that the contents of that Affidavit are false.

14.  Mr Wall advised me to seek a composition with

Creditors through the Trustee which meant accepting the validity of the Bankruptcy proceedings. I was unwilling to accept this advice.

15.  Two to three weeks later I consulted my present Solicitors on 15th April, 1991. They advised me to make the present Application.

16. I do not dispute the Petitioning Creditor's debt and I recognise that I am in financial difficulties. It is my intention if this Court makes the orders sought by me to seek a composition of creditors under Part X of the Bankruptcy Act, whereby my Creditors will be repaid 100 cents in the dollar.

17.  I have been advised that if I accept this Bankruptcy notwithstanding its invalidity by reason of the circumstances described above I may be entitled to a discharge from it in three (3) years time upon payment of an amount likely in my circumstances to be considerably less than 100 cents in the dollar, but I choose not to accept this course."

In opposition to the applicant there was filed an affidavit by MS Dunn, sworn on 2 October 1991, which read as follows:

"1. I crave leave to refer to previous affidavits sworn

by me in these proceedings on 12 July, 1990 and 24
January, 1991.

2.   I have read an affidavit of Ronald Warren Mikkelsen

sworn on 13 May, 1991. I have also read an affidavit sworn by Joan Mavis Mikkelsen on 13 May, 1991.

3.  On 5 July, 1990 documents and instructions were received in respect of the service of a Bankruptcy Notice on Ronald Mikkelsen of Pacific Highway, Tyagarah, via Byron Bay.

4.  On 6th July, 1990 I travelled to Tyagarah. No person was in attendance at the address given to me. On 9 July, 1990 I again travelled to Tyagarah and on that occasion had a conversation with a person who

I '

, I

provided me with certain informacion. As a result	I :
of the information provided to me I travelled to a fruit shop located in Jonson Street, Byron Bay on the opposite side of the road to Woolworths.	t l

5.	I located the fruit shop in Jonson Street and had a	l
conversation in the shop with an elderly lady of
asian appearance.	1 I
I. .
6.	On 12 July 1990 I again attended Tyagarah where I
had a conversation with two young children aged	l
1 .
I , .
approximately 11 years and 8 years. The children
I
were of asian appearance. I obsemed that the front	>
fence at the premises had a sign bearing the	I
, .
inscription 'Far East Produce'.
7.	I left the premises at Tyagarah and again attended the fruit shop on the corner of Jonson and Carlyle Streets, Byron Bay. I recall the front of the shop is situated in Jonson Street and has no name on it apart from a sign with the words 'Fruit Shop'. At about 10.lOam I entered the shop and spoke to a young lady of asian appearance. I then observed a man stacking shelves in an aisle behind the counter. As I was in the act of leaving the shop a young child ran to the man I observed stacking the shelves and called him 'Dad'. I then walked to the man who had his back to me and said: 'Good morning, are you Ronald Mikkelsen?' The man turned around quickly and said: 'Yes, what do you want?' I then said: 'I am Lorraine Dunn' and handed to him a true copy of the Bankruptcy Notice signed and stamped by the Deputy Registrar in Bankruptcy which is annexed to the affidavit sworn by me on 12 July 1990 and is marked with the letter 'A'. I then left the shop.
8.	I recall that the person served by me on 12 July 1990 was of fair complexion, tall, solid with blonde
hair and very untidy in appearance. The person
appeared to me to be aged in his mid-40s.
9.	On 21 January 1991 I received instructions to again serve Ronald Mikkelsen with a Creditor's Petition.
10.	on 23 January 1991 at 11.15am I attended the address at Tyagarah and found no person in attendance. I then travelled to the- fruit shop in Jonson Street, Byron Bay which I had visited previously. On entering the shop a lady of asian appearance was behind the counter. I had a conversation with the female person and on leaving the shop I saw the person previously served by me and known to me as Ronald Mikkelsen. I said: 'Hello Mr Mikkelsen.'
The male person replied: 'Oh you again. ' I then handed an official copy of the Bankruptcy Petition which is annexed to my affidavit sworn on 24 January 1991 and is marked with the letter A . I said to Mr Mikkelsen: 'Are yoq the Ronald Mikkelsen referred to in the petition?' The male person replied: 'Yes.' I then left the premises.
11.	I recall observing a signwriter at the fruit shop in
Jonson Street, Byron Bay some time after 23 January
1991. I observed that the sign on the shop is now 'Marquezas Continental Grocery'."

The applicant and his mother were cross examined on their affidavits, as was MS Dunn and I have had the assistance of detailed submissions by counsel in reference to the critical question in the case, which clearly comes down to one of credibility. The rival accounts of what took place in relation to service of the bankruptcy notice and the petition cannot be reconciled. This is one of those cases in which it is necessary to decide where the truth lies.

In her affidavit Mrs Mikkelsen said (in paragraph 10) that approximately two weeks after the petition was left in her shop, which I am satisfied was on 23 January 1991, she posted "both sets of documents to the Bankruptcy Court 16th

Floor Law Courts Building Queens Square Sydney with a covering	letter saying that it was not my affair and not to deliver any
more papers to my shop. I did not keep a copy of that letter".
When that affidavit was sworn there was no trace in the records of the Court's registry of any such letter. During the course of the hearing, a call was made by counsel for the respondent for the production from the Court file of any such letter. It then transpired that the original letter had been received by the registry and forwarded to the solicitor for the respondent. It became Exhibit 3, and read as follows:

Joan Mavis Mikkelsen
365 Keen St
Lismore 2480

2-2-91

Dear Sir,

Twice now some barbarious (sic) person has insisted that the defendant Ron Mikkelsen lives at my shop Marqueza's Continental corner Carlyle and Johnson Streets Byron Bay.

I will have you know that I am the owner of this shop and nobody lives here including me.

Please inform your future messengers to refrain from leaving this defendant's papers on the floor of my property.

I am returning these papers to Sydney in a hope to suggest you may have the ability to serve them on the Correct identity.

Joan M Mikkelsen"

Counsel agreed that the date stamps on the letter showed that it had been received in the registry on 14 February 1991

and in the office of the solicitor for the respondent on 18
February 1991.

It was submitted on behalf of the respondent that MKS Mikkelsen and the applicant had embarked on a deliberate course of prevarication and evasion, in which this letter was a step. ~t was sought to compare it with a letter which the lady had earlier written to the Sheriff's Department at Murwillumbah Court but I do not regard the comparison as valid. That earlier letter was prompted by a visit from a bailiff and set out her claim to be the sole owner of property at Brunswick Heads.

I am satisfied that the letter of 2 February was an honest expression by Mrs Mikkelsen of her resentment of the events of 12 July 1990 and 23 January 1991 and that those events took place in the manner in which she described them. Having seen her in the witness box, I do not believe that she was capable of the cunning and deceit which would have been involved in writing a letter of simulated indignation about events which had not taken place.

I accept the applicant's evidence that neither the bankruptcy notice nor the creditor's petition was served upon him as required by the Act and Rules and I reject the evidence of Ms Dunn to the contrary. It is not possible to be confident of her motive, but it may be that she lost

patience after seeking in vain to locate the applicant and

thought that she would take the risk of swearing the

affidavits of service, thinking perhaps that no injustice would follow as the documents would be llkely to come to his attention. I have not found it necessary to deal with the submissions of both counsel on many of the details of the evidence led, because I have come to a clear conclusion that the applicant and his mother were witnesses of truth, and incapable of planning and executing the elaborate conspiracy which would on the respondent's submissions, have been involved in the presentation of the applicant's case.

Section 154 of the Bankruptcy Act 1966 ("the Act") reads:

"154. (1) Where the Court is satisfied-

(a)	that a sequestration order ought not to have been made or, in the case of a debtor's petition, that the petition ought not to have been presented or ought not to have been accepted by the Registrar; or
(b)	that the unsecured debts of the bankrupt, being debts that have been proved in the bankruptcy, have been paid in full or the bankrupt has obtained a legal acquittance of them,

the Court may make an order annulling the

bankruptcy. "

The effect of s.l54(l)(a) was stated by Gibbs J in Le

Williams (1968) 13 FLR 10. His Honour said (at p.23):

satisfied (inter alia) that a sequestration order ought

"Section 154(1) provides that where the court is

not to have been made the court may make an order annulling the bankruptcy. Under this section there are two matters which the court has to consider, first, whether a sequestration order ought not to have been made, and then, if the court is satisfied of that, whether in the exercise of the court's discretion the order should be discharged (see Delph Sing v . Wood (1918) 25 CLR 497 at 498, per Street J, whose decision was affirmed by the High Court). In determining the question whether the sequestration order ought not to have been made, the court is entitled to consider not only the case as disclosed at the time the order was made, but as it would have been disclosed had all the true facts been before the court on the making of the order (Re Cook (1946) 13 ABC 245 at 259). If the court is satisfied that the order ought not to have been made, it is not

bound a s a mat ter of course t o annul t h e order , but must

consider i n t h e l i g h t of a l l t h e circumstances of t h e case whether t h e order ought t o be annulled (Delph Sing v. Wood a t 498-499; R e Lawson (1939) 11 ABC 137 a t 139)."

I n t h e present case, counsel agreed t h a t i f I w e r e t o

f i nd t h a t t h e bankruptcy no t ice and t h e c r e d i t o r ' s p e t i t i o n had not been duly served on t h e appl icant , it would be appropr ia te t o order t h a t t h e bankruptcy be annulled, and it

i s so ordered.

The respondent is ordered t o pay t h e cos t s of t h e

appl icant of and i nc iden t a l t o t h e appl ica t ion , such c o s t s t o

be taxed, i f not agreed.

I c e r t i f y t h a t t h i s and t h e preceding twelve ( 12 ) pages a r e a true copy of t h e

Reasons f o r judgment here in

of h i s Honour Mr J u s t i c e

Sweeney

Dated:  1 4 O c t b e r 1 9 1

Associate

Counsel for the applicant:	MR Aldridge
Solicitors for the applicant:	Brown & Partners
Counsel for the respondent:	B Skinner
Solicitors for the respondent:	Roxburgh & Co.

Dates of hearing: 10, 11 October 1991