Murphy v Sharples
[2008] FMCA 1118
•5 August 2008
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| MURPHY v SHARPLES | [2008] FMCA 1118 |
| BANKRUPTCY – Review of sequestration order made by a registrar – order procedurally unfair and set aside – de novo hearing of the petition – whether bankruptcy notice invalid by reason of service in the precincts of a court considered – no invalidity in the circumstances of service – fresh sequestration order made. |
| Bankruptcy Act 1966 (Cth), s.52 |
| Mitzev v Foxman (No 2) [2008] FMCA 405 Re O’Sullivan; Ex parte O’Sullivan v Commonwealth Bank of Australia (1995) 57 FCR 145 |
| Applicant: | DAMIEN MURPHY |
| Respondent: | TERRY PATRICK SHARPLES |
| File Number: | SYG 1090 of 2008 |
| Judgment of: | Driver FM |
| Hearing date: | 5 August 2008 |
| Delivered at: | Sydney |
| Delivered on: | 5 August 2008 |
REPRESENTATION
| Counsel for the Applicant: | Mr S Golledge |
| Solicitors for the Applicant: | Freehills |
The Respondent appeared in person
CORRECTED ORDERS
Orders 1 and 2 made by Registrar Hannigan on 3 July 2008 are set aside.
A sequestration order be made against the estate of Terry Patrick Sharples.
The applicant creditor’s costs, including reserved costs if any, be taxed and paid in accordance with the Bankruptcy Act 1966 (Cth), subject to the stipulation that those costs are not to include the costs of the hearing before the Registrar on 3 July 2008.
The Court notes that the date of the act of bankruptcy is 21 November 2007.
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT SYDNEY |
SYG 1090 of 2008
| DAMIEN MURPHY |
Applicant
And
| TERRY PATRICK SHARPLES |
Respondent
REASONS FOR JUDGMENT
(revised from transcript)
I have before me an application filed on 24 July 2008 seeking review of a sequestration and a costs order made by a Registrar at this Court on 3 July 2008. The review application is supported by an affidavit by the applicant debtor, Mr Sharples, filed on 4 August 2008. There is also a notice stating grounds of opposition filed on 29 July 2008.
The creditor relies upon the petition filed on 30 April 2008 and the affidavits verifying that petition. In addition, the creditor relies upon an affidavit of Naomi Ruth Sayer made on 27 November 2007, affidavits of Paul William Sheehy made on 11 December 2007, 23 May 2008 and 3 June 2008, an affidavit of Alexander Bruce Bensemann made on 24 May 2008, an affidavit of William Robert Potter made on 30 June 2008, an affidavit of debt made on 4 August 2008 and an affidavit of search made on 5 August 2008.
I also have before me as exhibits an application filed on 26 November 2007 and supporting affidavit seeking to set aside a bankruptcy notice purportedly served on Mr Sharples and a file note by a Freehills solicitor, Mr Sheehy, dated 2 November 2007.
There are a number of issues raised on the review application. One of those is whether the proceeding before the Registrar was fair in the light of a substituted service order earlier made by the Court and the time available for Mr Sharples to deal with the creditor's petition after it came to his attention. I am satisfied that the substituted service order was properly made. Attempted personal service had not been effective and the creditor was seeking to effect personal service at an address identified by Mr Sharples as his residence early in 2008. I accept that there was an alternative address in Tweed Heads where Mr Sharples now resides and where he apparently resided at an earlier time that was known to the creditor. A further attempt at personal service might have been made at the Tweed Heads address but, in the circumstances, at the time the substituted service order was made, it was not in my view a precondition to obtaining the order for substituted service, that personal service be shown to be unavailable at the address at Tweed Heads. Further, the substituted service order was effective in that the documents served in accordance with the order did come to the attention of Mr Sharples.
That said, I accept from Mr Sharples' evidence and his statements by way of submission, that he had limited time to deal with the creditor's petition before it came before the Registrar. I also accept that he has suffered mental health issues which have adversely affected his ability to deal coherently or competently with his affairs at various times.
I think it likely that if the circumstances had been drawn to the attention of the Registrar on 3 July 2008, an adjournment would have been granted to give Mr Sharples further time to deal with the petition. I have concluded that the appropriate course is to set aside the sequestration and cost orders made by the Registrar on 3 July 2008 on the basis of procedural unfairness and I make that order.
However, the matter does not end there. A review application is a hearing de novo. That came as a surprise to Mr Sharples, who attended today by telephone, but I am satisfied that he has had sufficient time to prepare and deal with the issues arising in relation to the creditor's petition and he has taken some trouble to detail those issues in his affidavit and his notice of opposition.
I conducted a de novo hearing on the petition today. The petition is challenged on the basis that it is defective because it incorrectly gives Mr Sharples' address as an address at Southport, Queensland where he was understood to reside earlier this year, whereas he is now residing at an address in Tweed Heads.
I reject that contention. Mr Sharples has at various times used both addresses and the petition is not defective by reason of the fact that he was identified as residing at an address where he has resided earlier this year.
Mr Sharples also takes issue with the service of the petition. There is no continuing issue of service. I have already found that the substituted service order was properly made by the Registrar. Further, the creditor's petition did in fact come to the attention of Mr Sharples by reason of the substituted service order being complied with and he has now had sufficient time to deal with the issues arising. He filed a notice of appearance on 24 July 2008 and has attended today's hearing, albeit by telephone.
A further and more substantial issue raised on the review is whether the bankruptcy notice supporting the petition is defective by reason of it being served in circumstances that may constitute a contempt of court. In paragraph 9 of his affidavit Mr Sharples deposes that he was served while he was leaving the Local Court at Tweed Heads on 31 October 2007 by a female who had been sitting in the public gallery and stood up and handed a document to him as he reached the Court door on his way out. Mr Sharples maintained that evidence under cross‑examination.
On the other hand, Mr Sheehy, in his affidavit of 11 December 2007 at paragraph 18, deposes that he saw the process server personally serve Mr Sharples with the bankruptcy notice outside the Local Court at Tweed Heads on that day. Under cross-examination, Mr Sheehy modified that evidence somewhat to state that service had taken place in the foyer of the Local Court, outside the courtroom itself but within the Court building. Mr Sheehy was unshaken in that evidence in cross‑examination. His evidence is supported by a contemporaneous file note which he made to detail what occurred at Court on that day. In the last paragraph of the file note Mr Sheehy states:
Both Mr Sharples and I then left the court room. When I was in the foyer of the court building I observed the female process server personally serve the bankruptcy notice on Mr Sharples. He took the document, but seemed a bit surprised and asked what it was and where she was from. She explained that it was a bankruptcy notice and she was a process server. She then left, and I saw Mr Sharples go to the court registry.
In cross-examination, Mr Sheehy conceded that he only saw Mr Sharples go in the direction of the Court Registry. Mr Sheehy conceded that he had seen the process server sitting in the public gallery of the Court during the hearing that occurred at the Court at that time and did not see her leave. The process server's affidavit is unhelpful in that it simply identifies the address at which the service was effected, without more. On his own account Mr Sharples was at the Court door on his way out. It is possible that Mr Sharples' account is the accurate one. On the other hand, the file note prepared by Mr Sheehy supports his version of the events. The file note was prepared only a short time after the events occurred, when they would still have been fresh in Mr Sheehy’s mind. It is possible that the process server was sitting in the Court as Mr Sharples and Mr Sheehy were leaving and that she followed them out.
On the balance of probabilities I find that Mr Sharples had passed through the door of the Court into the foyer of the Court at the time he was spoken to by the process server and that service was effected within the Court foyer. Even if that were not the case, it would not necessarily follow that service effected within the Court in the circumstances constituted a contempt of Court which should invalidate service of the bankruptcy notice. I agree in that connection with the decision of this Court in Mitzev v Foxman (No 2) [2008] FMCA 405, in particular at [10], quoting a decision of Lindgren J in Re O’Sullivan; Ex parte O’Sullivan v Commonwealth Bank of Australia (1995) 57 FCR 145 at page 149. There His Honour said:
… it is not the law that service of any process within the precincts of a court constitutes a contempt of that court, and even if it were, it would not follow that service would be set aside. Whether conduct constitutes contempt of court by reason of its being calculated to interfere with the administration of justice by a court is to be determined by reference to matters of greater substance than the general proposition contended for by the Debtor would allow. No doubt the physical proximity of conduct to a court may be a factor sometimes to be taken into account when a contempt of court of a relevant kind is alleged. It cannot be said that service of process within the precincts of a court can never with other circumstances, constitute a contempt. But this is hardly a useful statement: analysis shows that it signifies only that service within the precincts of a court is not precluded from being part of contemptuous conduct.
In the present case, even if service was effected at the Court door as Mr Sharples was leaving the Court, there was no interference with the administration of justice. The proceedings in the Court were not disrupted, Mr Sharples had concluded his business at the Court and was on his way out.
In my view, on either view of the evidence, insufficient reason has been shown why the bankruptcy notice should be set aside on the basis of the facts relating to the service of it. Mr Sharples unsuccessfully challenged the bankruptcy notice in his application filed on 26 November 2007. That application was unsuccessful because he did not attend Court for the hearing of it. The application is silent on the issue of service.
There is no basis also to go behind the judgment debt obtained in the Local Court. Mr Sharples made an unsuccessful attempt to have the Supreme Court deal with the proceedings from the Local Court in February of this year but on Mr Sharples' account the Supreme Court declined to accept that summons. There has been no attempt since to challenge the decision of the Local Court in the State jurisdiction, although there was an inappropriate attempt to do so in the earlier proceedings in this Court challenging the bankruptcy notice.
There is no other basis on the material before me on which a creditor's petition is or could be opposed. On the material, the petitioning creditor is entitled to the orders sought on the petition. The formal requirements of the bankruptcy rules have been met as have the requirements of s.52 of the Bankruptcy Act 1966 (Cth) (“the Bankruptcy Act”).
I am satisfied that the debtor committed the act of bankruptcy alleged in the petition. I am satisfied with the proof of the other matters of which s.52(1) of the Bankruptcy Act requires proof.
I will order that a sequestration order be made against the estate of Terry Patrick Sharples. The applicant creditor’s costs, including reserved costs if any, are to be taxed and paid in accordance with the Bankruptcy Act, subject to the stipulation that those costs are not to include the costs of the hearing before the Registrar on 3 July 2008.
The Court notes that the date of the act of bankruptcy is 21 November 2007.
I certify that the preceding twenty-one (21) paragraphs are a true copy of the reasons for judgment of Driver FM
Associate:
Date: 24 November 2008
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