Mudge v Hudson Timber and Hardware Limited - [2004] FCA 722

FEDERAL COURT OF AUSTRALIA
Mudge v Hudson Timber & Hardware Limited [2004] FCA 722
BANKRUPTCY – judgement debt undisputed – whether bankruptcy notice served on debtor personally – whether creditor’s petition served on debtor personally – conflict of evidence – process server cross-examined – affidavit of debtor’s interstate solicitor belatedly filed and sought to be read despite absence of deponent for cross-examination – objection of creditor to that course – application for telephone facility for solicitor’s evidence to be received rejected – sequestration order made – no basis for setting aside sequestration order of Federal Magistrate
Bankruptcy Act 1966 (Cth) ss 306 and 309(2)
Bankruptcy Regulation 16.01(1)
Federal Magistrates Act 1999 (Cth) ss 42 and 64
Federal Court Rules Order 1 rule 8 and Order 7 rules 1 and 2
re Long; ex parte Fraser Confirming Pty Ltd (1975) 6 ALR 338
re Ditfort ex parte Deputy Commissioner of Taxation (NSW) (1988) 83 ALR 265
re Stec; ex parte Scragg (1998) 155 ALR 173
Deputy Commissioner of Taxation v Gadaleta [1999] 42 ATR 414
Dubbo Base Hospital v Jones [1979] 1 NSWLR 225
Re Stec : ex parte Scragg (1998) 155 ALR 173
Soglease Australia Ltd v Griffin [2003] FCA 453
Gauci v Federal Commissioner of Taxation (1975) 135 CLR 81
RONALD ANTHONY MUDGE v HUDSON TIMBER AND HARDWARE LIMITED
N 869 OF 2003
CONTI J
7 JUNE 2004
SYDNEY

IN THE FEDERAL COURT OF AUSTRALIA

NEW SOUTH WALES DISTRICT REGISTRY

N 869 OF 2003

BETWEEN:

RONALD ANTHONY MUDGE
APPELLANT

AND:

HUDSON TIMBER & HARDWARE LIMITED
RESPONDENT

JUDGE:

CONTI J

DATE OF ORDER:

7 JUNE 2004

WHERE MADE:

SYDNEY

THE COURT ORDERS THAT:
1.        Appeal dismissed.
2.        Appellant to pay the respondent’s costs of the appeal.
Note:    Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

IN THE FEDERAL COURT OF AUSTRALIA

NEW SOUTH WALES DISTRICT REGISTRY

N 869 OF 2003

BETWEEN:

RONALD ANTHONY MUDGE
APPELLANT

AND:

HUDSON TIMBER & HARDWARE LIMITED
RESPONDENT

JUDGE:

CONTI J

DATE:

7 JUNE 2004

PLACE:

SYDNEY

REASONS FOR JUDGMENT
Background circumstances to sequestration order of Federal Magistrate

On 17 June 2003, Federal Magistrate Driver made a sequestration order against the estate of the appellant Ronald Anthony Mudge (‘Mr Mudge’), upon the application of the respondent Hudson Timber & Hardware Limited (‘the Company’). That order was based upon an act of bankruptcy committed by Mr Mudge on 24 October 2002, consisting of non-compliance by Mr Mudge with a bankruptcy notice found by his Honour to have been served on Mr Mudge on 3 October 2002. The Company’s creditor’s petition subsequently filed more than five moths later, that is on 6 March 2003, asserted that Mr Mudge owed the Company the sum of $53,451.35, pursuant to a final judgment obtained in the District Court of New South Wales on 30 August 2002, that sum being identical to the amount the subject of the bankruptcy notice. The creditor’s petition was found by his Honour to have been served on 3…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

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Details

Case: [2004] FCA 722
Decision Date: 7 JUNE 2004

CaseChat Overview and Summary

The case of Mudge v Hudson Timber and Hardware Limited involved a dispute over the service of a bankruptcy notice and a creditor's petition, with the Federal Court of Australia ruling on the matter. The petitioner, Hudson Timber and Hardware Limited, sought a sequestration order against Mr Mudge, the debtor, alleging that he had committed an act of bankruptcy. The central issue was whether the bankruptcy notice and creditor’s petition were served on Mr Mudge, which he denied. The petitioner claimed service occurred on 3 October 2002 and 3 April 2003, respectively, through their process server, Mr Donnelly. Mr Mudge and his partner, Ms Courtney, maintained that they were not present and the documents were not served. The court found Mr Donnelly’s evidence more credible, confirming the service of both documents, and thus rejected Mr Mudge and Ms Courtney’s assertions.

The court's reasoning hinged on the credibility of the witnesses and the evidence presented. Driver FM, who delivered the reasons for judgment, noted the discrepancy in the accounts given by Mr Donnelly and Mr Mudge/Ms Courtney. The court observed the demeanor of the witnesses and their consistency with their affidavits. Driver FM accepted Mr Donnelly's evidence due to his familiarity with Mr Mudge and his professional experience as a process server. The court also considered the legal submissions that if Mr Mudge had participated in the proceedings by filing a notice of appearance and a notice of intention to oppose, the issue of service of the creditor’s petition was rendered moot. The court concluded that the petitioner was entitled to the sequestration order as the debtor had committed the act of bankruptcy and the proof requirements under the Bankruptcy Act were satisfied.

The final orders of the court were to dismiss the appeal and for the appellant to pay the respondent’s costs of the appeal. This outcome reinforced the importance of credible evidence in establishing the service of legal documents in bankruptcy proceedings and the impact of a debtor's participation in the proceedings on the service requirements.

Orders

Orders of the court

1. Appeal dismissed.

2. Appellant to pay the respondent’s costs of the appeal.

Background

Background to the litigation

Full text does not contain this section.

Evidence

Evidence Before The Court

Full text does not contain this section.

Decision

Reasons for decision

CONTI J

Mr Donnelly similarly confirmed in his evidence in chief the content of his affidavit of service of the creditor’s petition, such service having been deposed in that affidavit to have occurred on 3 April 2003. Under cross-examination on behalf of Mr Mudge by his then legal representative, he purportedly explained the reason for the delay of six days in making that affidavit of service. He said moreover that it was not his practice to make contemporaneous notes as to the circumstances attending his service of court documents, and that instead he usually relied on his memory for the purpose of compiling his affidavits of service, and upon his six years of experience as a process server. The critical findings of the reasons for judgment below The reasons for judgment of Driver FM, furnished ex tempore for making the sequestration order, were essentially as follows:‘3.The contest between the parties on the issue of service is a simple factual dispute. The petitioning creditor, relying upon two affidavits by Robert Joseph Donnelly, asserts that the debtor was personally served with the bankruptcy notice on 3 October 2002 and with the creditor’s petition on 3 April 2003. Mr Mudge, relying upon his own affidavits and affidavits by his partner, Michelle Terese Courtney, asserts that he was not at home on either of these occasions and that the bankruptcy notice and creditor’s petition only came to his attention subsequently when brought to his attention by Ms Courtney.4.Both Mr Donnelly and Mr Mudge and Ms Courtney were cross examined today on their affidavits. Both held firm to the accounts they gave of the relevant facts. Obviously the evidence of either Mr Donnelly or Mr Mudge and Ms Courtney must be incorrect. Having read the relevant affidavits and having observed the deponents and heard their evidence in cross-examination, I prefer the evidence of Mr Donnelly to that of Mr Mudge and Ms Courtney.5.Mr Donnelly knows Mr Mudge personally, as was confirmed by Mr Mudge, and he has been to Mr Mudge’s home on a number of occasions. He has had dealings with Mr Mudge prior to the present bankruptcy matter. I am satisfied and I accept that Mr Donnelly was well aware of where Mr Mudge could be found, where his home was located and what Mr Mudge looked like. I accept Mr Donnelly’s evidence of personal service of the bankruptcy notice on 3 October 2002 and of the creditor’s petition on 3 April 2003. It follows that I reject the evidence of Mr Mudge and Ms Courtney on that issue.6.During the course of argument, Mr Johnson, for the petitioning creditor, made a number of submissions relating to the issue of service. Mr Johnson submitted, and I accept, that even if there had been no service of the creditor’s petition as alleged, it would not matter because Mr Mudge filed a notice of appearance in the present proceedings on 9 April 2003 and also filed a notice of intention to oppose the creditor’s petition on the same day. 7.Although a creditor’s petition is required to be served personally, and it is an originating process in this Court, where a party files a notice of appearance and participates in the proceedings of the Court, I accept that no issue of personal service of the originating process remains. Mr Johnson also submitted to me that even if there had been no personal service on Mr Mudge of the bankruptcy notice on 3 October 2002, the evidence of Mr Mudge and Ms Courtney would establish that the bankruptcy notice came to Mr Mudge’s attention on 3 October 2002 and the act of bankruptcy would remain upon the expiry of the bankruptcy notice. 8.There is authority in the Federal Court that where a bankruptcy notice is served upon a relative of the debtor and promptly comes to the attention of the debtor that sufficient service has been proved. There is also contrary authority specifically that service on a spouse of the debtor is not sufficient. That authority predates the Bankruptcy Regulations (“the Bankruptcy Regulations”) which provide in regulation 16.1 for alternative methods of service of a bankruptcy notice. Personal service is now one of a range of methods by which service of a bankruptcy notice can be effected.9.In this matter, however, personal service pursuant to regulation 16.01(d) is the form of service relied upon by the petitioning creditor. The affidavit of Mr Donnelly specifically asserts that personal service was effected. While, in my view, there is much to be said for the view that sufficient service of a bankruptcy notice could be provided on the evidence of Mr Mudge and Ms Courtney, in the circumstances of this matter, if I had been persuaded that Mr Donnelly’s affidavit was false, I would not have permitted a sequestration order to be made on the basis of that false evidence.10.However, I have accepted Mr Donnelley’s affidavit. Accordingly, I find that service of the bankruptcy notice was effected in accordance with regulation 16.01(d) of the Bankruptcy Regulations, as asserted by the petitioning creditor. As I have already noted, there is no other opposition to the creditor’s petition. I am satisfied that the petitioning creditor is entitled to a sequestration order. I am satisfied that the debtor committed the act of bankruptcy alleged in the petition and I am satisfied with the proof of the other matters of which s 52(1) of the Bankruptcy Act 1966 (Cth) (“the Bankruptcy Act”) requires proof.’

Ratio Decidendi

Legal Principle Established

Established by: CONTI J

Full text does not contain this section.

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY	N 869 OF 2003

BETWEEN:	RONALD ANTHONY MUDGE APPELLANT
AND:	HUDSON TIMBER & HARDWARE LIMITED RESPONDENT
JUDGE:	CONTI J
DATE OF ORDER:	7 JUNE 2004
WHERE MADE:	SYDNEY

JUDGE:	CONTI J
DATE:	7 JUNE 2004
PLACE:	SYDNEY