Official Receiver v Whent
[2010] FMCA 896
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| OFFICIAL RECEIVER v WHENT | [2010] FMCA 896 |
| BANKRUPTCY – Failure by bankrupt to file a Statement of Affairs – distribution of dividends to creditors – duty of bankrupt to advise trustee of address. |
| BANKRUPTCY – Trustee in bankruptcy – duties – ensuring bankrupt discharges duties – whether bankrupt has committed an offence – referral to enforcement authorities. |
| PRACTICE AND PROCEDURE – Service – requirements for service – dispensing with service – relevant factors. |
| Bankruptcy Act 1966 (Cth), ss.19, 54, 80(1) and (1A), 146, 309(2) Bankruptcy Regulations 1996 (Cth), reg.16.01(1) and (2) Criminal Code Act 1995 (Cth), Schedule cl.6.1 Federal Magistrates Court (Bankruptcy) Rules 2006 (Cth), rr.1.03, 2.01(1) and (4), 2.06 Federal Magistrates Court Rules 2001 (Cth), rr.6.14, 6.15 |
| Morley v The Queen (1999) 152 FLR 13; [1999] WASCA 161 Official Receiver for the Bankruptcy District of WA v Amaro (2009) 7 ABC(NS) 244; [2009] FMCA 567 |
| Applicant: | OFFICIAL RECEIVER FOR AND ON BEHALF OF THE OFFICIAL TRUSTEE IN BANKRUPTCY, THE TRUSTEE OF THE PROPERTY OF SHARON NATALIE WHENT, A BANKRUPT |
| Respondent: | SHARON NATALIE WHENT |
| File Number: | PEG 177 of 2010 |
| Judgment of: | Lucev FM |
| Hearing date: | 15 November 2010 |
| Date of Last Submission: | 15 November 2010 |
| Delivered at: | Perth |
| Delivered on: | 18 November 2010 |
REPRESENTATION
| Counsel for the Applicant: | Mr F Carles |
| Solicitors for the Applicant: | Carles Solicitors |
| For the Respondent: | No appearance |
ORDERS
That the applicant’s interim application for service of the application to be dispensed with, be dismissed.
That copies of:
(a)the application;
(b)the Court’s orders of 18 November 2010; and
(c)the Court’s Reasons for Judgment of 18 November 2010,
be personally served on the respondent by 29 November 2010, and that an affidavit of service be filed by 3 December 2010.
That the application be adjourned to 9.30am on 10 December 2010.
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT PERTH |
PEG 177 of 2010
| OFFICIAL RECEIVER FOR AND ON BEHALF OF THE OFFICIAL TRUSTEE IN BANKRUPTCY, THE TRUSTEE OF THE PROPERTY OF SHARON NATALIE WHENT, A BANKRUPT |
Applicant
And
| SHARON NATALIE WHENT |
Respondent
REASONS FOR JUDGMENT
Applications
There are two applications before the Court:
a)a substantive application under s.146 of the Bankruptcy Act 1966 (Cth)[1] for the distribution of funds in the bankrupt estate of the respondent, despite her failure to file a Statement of Affairs;[2] and
b)an interim, ex parte application, that any requirement for personal service of the substantive application be dispensed with.[3]
[1] “Bankruptcy Act”.
[2] “s.146 Application”.
[3] “Service Application”.
Evidence
There are three affidavits relied upon by the applicant:
a)the affidavit of Simon Peter Bird sworn 23 September 2010;[4]
b)the affidavit of Vicki Leanne Graham sworn 23 September 2010;[5] and
c)the affidavit of Simon Peter Bird sworn 11 November 2010.[6]
[4] “First Bird Affidavit”.
[5] “Graham Affidavit”.
[6] “Second Bird Affidavit”.
The Graham Affidavit essentially confirms the correctness of points in the First Bird Affidavit that relate to the conduct of Ms Graham in relation to certain matters.
Relevant provisions of the Bankruptcy Act
Section 54 of the Bankruptcy Act provides that where a sequestration order is made, the person against whose estate it is made must file a Statement of Affairs within 14 days of being notified of the bankruptcy.
Section 146 of the Bankruptcy Act provides that where a bankrupt fails to file a Statement of Affairs the court may order a distribution of dividends among creditors who have proved their debts as if the bankrupt had filed a statement of affairs and those creditors have been named in it.
Section 80(1) of the Bankruptcy Act provides that if during a bankruptcy a change occurs in the address of the principal place of residence of the bankrupt, then “the bankrupt must immediately tell the trustee in writing of the change.” Failure to do so is an offence of strict liability,[7] for which a penalty of imprisonment for six months is provided.[8]
[7] Bankruptcy Act, s.80(1A); Criminal Code Act 1995 (Cth), Schedule cl.6.1.
[8] Bankruptcy Act, s.80(1).
Section 19(1) of the Bankruptcy Act provides for the duties of a trustee to include the following:
Duties etc. of trustee
(1) The duties of the trustee of the estate of a bankrupt include the following:
…
(g) taking whatever action is practicable to try to ensure that the bankrupt discharges all of the bankrupt's duties under this Act;
(h) considering whether the bankrupt has committed an offence against this Act;
(i) referring to the Inspector‑General or to relevant law enforcement authorities any evidence of an offence by the bankrupt against this Act;
…
The bankruptcy
The respondent became bankrupt on 7 August 2007 on the making of a sequestration order.
At the time of the bankruptcy the respondent’s recorded address, according to the National Personal Insolvency Index, was 102 Stirling Terrace, Toodyay, WA 6566.[9]
[9] First Bird Affidavit, Annexure A.
Service of documents
The evidence details issues with respect to service of documents associated with the respondent’s bankruptcy and Statement of Affairs, as set out hereunder.
16 August 2007
The First Bird Affidavit says that the applicant wrote to the respondent “at her last known residential address at that time being 102 Stirling Terrace, York, Western Australia”,[10] but the actual letter annexed to the First Bird Affidavit indicates that it was addressed to the respondent at “102 Stirling Terrace, Toodyay, WA 6566”.[11]
[10] First Bird Affidavit, para.5.
[11] First Bird Affidavit, Annexure C.
The purpose of the 16 August 2007 letter was to advise the respondent of her bankruptcy and her obligation to file a Statement of Affairs within 14 days. The letter was returned to Mr Bird, undelivered, with a notification that the addressee had left the address referred to in the letter.[12]
[12] First Bird Affidavit, para.5.
5 October 2007
On 5 October 2007 the applicant again wrote to the respondent, and there was an exact repeat of what occurred on 16 August 2007.[13]
[13] First Bird Affidavit, para.5 and Annexure D; Second Bird Affidavit, Annexure C.
10 October 2007
On 10 October 2007 there was a discussion between the respondent and Ms Graham from the applicant’s Perth office, in which it is said that:
a)the respondent was advised of her bankruptcy;
b)the respondent was told that she would be sent a Statement of Affairs form for completion; and
c)the respondent confirmed that she was living with her husband at 129 Coondle Drive, Coondle.[14]
[14] First Bird Affidavit, para.6.
The respondent’s husband had also been made bankrupt on the same day as the respondent.[15]
[15] First Bird Affidavit, para.9.
A letter advising of the bankruptcy and the requirement to complete the Statement of Affairs was sent to the respondent by the applicant by registered mail addressed to the respondent at 129 Coondle Drive, Coondle, WA 6566 on 10 October 2007.[16]
[16] First Bird Affidavit, para.7 and Annexure F.
17 October 2007
Although not deposed to by either Mr Bird or Ms Graham there is, on a typewritten note of the 10 October 2007 telephone attendance by Ms Graham on the respondent, a further note as follows:
“ACTION: Send notification of bankruptcy forms to bankrupts at 129 Coondle Drive, Coondle.”
The above note is typewritten onto the file note of the 10 October 2007 telephone attendance. There then follows a handwritten note in the following terms:
“LETTER’S [SIC] RETURNED UNDELIVERABLE 17/10/07
* RESENT TO PO BOX 348, NORTHAM, WA…”
There is no explanation anywhere in the affidavit material from the applicant as to why the forms were sent to the Northam address.
8 February 2008
On 8 February 2008 Mr Bird had a conversation with the respondent’s husband in which he asked that the husband advise the respondent to complete her Statement of Affairs as soon as possible.[17]
[17] First Bird Affidavit, para.8.
6 August 2008
On 6 August 2008 the applicant sent a letter to the respondent requesting completion and return of a statement of income by 4 September 2008. This letter was addressed to the respondent at 129 Coondle Drive, Coondle, WA 6566. It was returned marked “left address/unknown”.[18]
[18] Second Bird Affidavit, Annexure G.
There is no explanation as to why this letter was sent to an address from which registered mail addressed to the respondent 10 months previously had been returned to the applicant marked as undeliverable. Further, there is no explanation as to why the letter was sent to this address rather than the Northam address to which the 10 October 2007 letter was re-sent.
The respondent’s current whereabouts
Bird’s Second Affidavit contains the following concerning the respondent’s current whereabouts:
“5. The Applicant does not have a current address for the Respondent and has no knowledge of her current whereabouts (subject to paragraph 7 below)
6.…
7.Annexed as “H” (pages 30-35) are copies of the relevant pages from the Statement of Affairs dated 19 August 2010 for the Respondent’s husband Tony Whent for his latest bankruptcy which occurred in August 2010. This shows a residential address of [number and street name] Street, Northam[19] and a home telephone number of [number]. I telephoned that telephone number several times on 29 October 2010 and on each occasion heard a recorded message to the effect that “the number you have called has been disconnected”. This annexure also shows that Tony Whent was living with his spouse/partner Sharon Natalie Whent (being the Respondent) as a 19 August 2010.”[20]
[19] “Northam Street Address”.
[20] Second Bird Affidavit, paras.5 and 7.
Annexure H to Bird’s Second Affidavit reveals that the respondent’s husband’s five dependent children aged from four to 13 years, also reside with the respondent and her husband.[21]
[21] It is not apparent whether all five children, or any of them, are dependent upon the respondent as well as the respondent’s husband.
Service of the applications currently before the Court
There is no evidence that either of the applications presently before the Court have been served on the respondent. Counsel for the applicant did not contend to the contrary at hearing.
Requirements for filing and serving applications in this Court
Rules 2.01(1) and (4) of the Federal Magistrates Court (Bankruptcy) Rules 2006 (Cth)[22] provide as follows:
[22] “FMC (Bankruptcy) Rules”.
(1) Unless these Rules otherwise provide, a person must make an application required or permitted by the Bankruptcy Act to be made to the Court:
(a) if the application is not made in a proceeding already commenced in the Court -- by filing an application in accordance with Form 2; and
(b) in any other case -- by filing an interim application in accordance with Form 3.
(4) An interim application must state:
(a) if appropriate, each section of the Bankruptcy Act, or each regulation of the Bankruptcy Regulations, or each rule of Court under which the application is made; and
(b) the relief sought.
In this case r.2.01(4)(a) has not been complied with in relation to the Service Application.
The normal requirements for service of documents in bankruptcy proceedings are set out in reg.16.01(1) and (2) of the Bankruptcy Regulations 1996 (Cth)[23] which provide as follows:
[23] “Bankruptcy Regulations”.
Service of documents
(1) Unless the contrary intention appears, where a document is required or permitted by the Act or these Regulations to be given or sent to, or served on, a person (other than a person mentioned in regulation 16.02) , the document may be:
(a) sent by post, or by a courier service, to the person at his or her last‑known address; or
(b) left, in an envelope or similar packaging marked with the person’s name and any relevant document exchange number, at a document exchange where the person maintains a document exchange facility; or
(c) left, in an envelope or similar packaging marked with the person’s name, at the last‑known address of the person; or
(d) personally delivered to the person; or
(e) sent by facsimile transmission or another mode of electronic transmission:
(i) to a facility maintained by the person for receipt of electronically transmitted documents; or
(ii) in such a manner (for example, by electronic mail) that the document should, in the ordinary course of events, be received by the person.
(2) A document given or sent to, or served on, a person in accordance with subregulation (1) is taken, in the absence of proof to the contrary, to have been received by, or served on, the person:
(a) in the case of service in accordance with paragraph (1) (a) or (b) — when the document would, in the due course of post or business practice, as the case requires, be delivered to the person’s address or document exchange facility; and
(b) in the case of service in accordance with paragraph (1) (c), (d) or (e) — when the document is left, delivered or transmitted, as the case requires.[24]
[24] As to the requirements for service under reg.16.01 of the Bankruptcy Act, see Official Receiver for the Bankruptcy District of WA v Amaro (2009) 7 ABC(NS) 244; [2009] FMCA 567.
Once service has been effected r.2.06(2) of the FMC (Bankruptcy) Rules requires that:
(2) A person who intends to oppose an application or petition must, at least 3 days before the date fixed for the hearing of the application or petition or, with the leave of the Court, at the hearing:
(a) file a notice of appearance in accordance with Form 4; and
(b) file a notice in accordance with Form 5 stating the grounds of opposition; and
(c) file an affidavit in support of the grounds of opposition; and
(d) serve the notices and supporting affidavit on the applicant.
An application in r.2.06(2) of the FMC (Bankruptcy) Rules includes an interim application.[25]
[25] FMC (Bankruptcy) Rules, r.2.06(1).
It is implicit in r.2.06(2) of the FMC (Bankruptcy) Rules that there has been service of the application or interim application.
Other non-bankruptcy rules of this Court apply in bankruptcy proceedings to the extent that they are not inconsistent with the FMC (Bankruptcy) Rules.[26]
[26] FMC (Bankruptcy) Rules, r.1.03.
With respect to dispensing with service or providing for substituted service the Federal Magistrates Court Rules 2001 (Cth)[27] provide as follows:
Substituted service
(1) If, for any reason, it is impracticable to serve a document in a way required under this Part, the Court may make an order dispensing with service or substituting another way of serving the document.
(2) The Court may specify the steps to be taken for bringing the document to the attention of the person to be served.
(3) The Court may specify that the document is to be taken to have been served on the happening of a specified event or at the end of a specified time.[28]
[27] “FMC Rules”.
[28] FMC Rules, r.6.14.
Matters to be taken into account
When making an order for dispensing with service or for substituted service, the Court may have regard to:
(a) whether reasonable steps have been taken to attempt to serve the document; and
(aa) whether it is likely that the steps that have been taken have brought the existence and nature of the document to the attention of the person to be served; and
(b) whether the person to be served could become aware of the existence and nature of the document by means of advertising or another means of communication that is reasonably available; and
(c) the likely cost to the party serving the document, the means of that party and the nature of the proceedings; and
(d) any other relevant matter.[29]
[29] FMC Rules, r.6.15.
The above regulations and rules need to be read in conjunction with s.309(2) of the Bankruptcy Act which provides as follows:
Service of notices etc.
…
(2) Where a notice or other document is required by this Act to be served on or given to a person, the Court may, in a particular case, order that it be given or served in a manner specified by the Court, whether or not any other manner of giving or serving the notice or other document is prescribed.
Service in this case
For more than two years prior to the filing of this application there had been no contact between anyone acting for the applicant and the respondent.
As indicated above, there is no evidence, and it is conceded, that service of the Service Application and the s.146 Application has not been effected on the respondent, nor sought to be effected upon her.
Why this is so is not explained by any evidence on behalf of the applicant. There is, so far as the Court can ascertain, no requirement that the s.146 Application be excluded from the normal requirements for service in bankruptcy matters.
In this case, the orders sought in the s.146 Application include an order directly referring to and impacting upon the respondent, namely, that:
“The Respondent not be entitled to any surplus funds remaining after payment of the dividends to creditors until she has lodged her duly completed Statement of Affairs in the required form in the office of the Official Receiver and the Applicant has dealt with the claims of any further creditors disclosed in the Statement of Affairs.”
Having regard to the provisions of the Bankruptcy Regulations, the FMC (Bankruptcy) Rules and the FMC Rules, it is necessary for the s.146 Application and the Service Application to be served upon the respondent unless the applicant can persuade the Court to dispense with service (or make an order for substituted service, which has not been sought in this case).
Consideration – dispensing with service
In determining whether to make an order dispensing with service the Court will consider the matters set out in r.6.15 of the FMC Rules.
Reasonable steps to attempt to serve the document
There have been no attempts to serve the s.146 Application (or the Service Application) at all. Therefore no reasonable steps have been taken to attempt service.
There is no explanation from the applicant as to why no attempt at service has been made. On the latest available information, namely the respondent’s husband’s Statement of Affairs, the respondent was, less than three months ago:
a)resident in Northam at the Northam Street Address (and judicial notice can be taken of the fact that Northam is about 100km from Perth);
b)living with her husband;
c)living with five children dependent upon her husband; and
d)in receipt of an annual income of $21,000 gross, from which it might be implied that the respondent either has employment or is in receipt of benefits from Centrelink.
Because of attempted phone calls made on 29 October 2010 by Mr Bird which indicated that the telephone number given in the respondent’s husband’s Statement of Affairs had been disconnected, no attempts were made to effect service on the respondent at the Northam Street Address. Counsel for the applicant quite rightly quickly abandoned an attempt to argue that disconnection of the telephone meant that the respondent was no longer resident at the Northam Street Address. There is no evidence that an officer of the applicant has travelled to Northam in an attempt to effect service. Nor is there any evidence that any other public official, such as a State or Federal police officer, or any privately engaged process server, has endeavoured to effect service. Beyond the evidence of the telephone disconnection, there is no evidence from the applicant as to why it has failed to undertake such rudimentary steps in an attempt to effect service, or as to why it has simply not bothered to effect service at all.
Likelihood of document being brought to the attention of the person to be served
As no steps have been taken to attempt to serve the Applications there is no likelihood that the existence and nature of the Applications would have been brought to the attention of the respondent.
Alternative means
It may be that the respondent might become aware of the existence and nature of the Applications by means of advertising, or another means of communication reasonably available. However, the Court would not order that to be done until the usual means of service have been attempted, and practically or properly exhausted.
Cost
The cost of serving or attempting to serve the respondent in Northam is not likely to be significant. Obviously such costs will have to come out of the bankrupt’s estate, such as it is, but given that the cost of service in Northam is not likely to be significant, that is not an impediment to the usual and proper means of service being attempted by the applicant.
Other relevant matters
The Court considers it relevant that it might be inferred that the respondent has taken little or no interest in her bankruptcy to date, but there is not a lot of evidence in that regard, and, in the absence of service, there is no reason to assume that the respondent might not wish to be heard. Had service been effected, and the bankrupt respondent not filed and served a notice of appearance,[30] or notice of grounds of objection,[31] that inference might more easily have been drawn. However, in the total, and completely unexplained, absence of any attempt whatsoever by the applicant to effect service on the respondent the Court is not prepared to assume the respondent might not wish to file a notice of grounds of objection, or be heard.
[30] FMC (Bankruptcy) Rules, r.2.06(2)(a).
[31] FMC (Bankruptcy) Rules, r.2.06(2)(b).
Sections 80 and 19 of the Bankruptcy Act are relevant matters for consideration.
It does appear that the respondent has changed address without notifying the trustee of the change of address, either immediately or at all. That is an offence, and a strict liability offence, under the Bankruptcy Act.[32]
[32] Bankruptcy Act, s.80(1) and (1A).
The purpose of s.80(1) of the Bankruptcy Act containing the requirement to advise of a change of address has been described as follows:
“… to ensure that the bankrupt’s trustee at all times is kept advised of the necessary particulars (including the bankrupt’s residential address) so that he or she can readily communicate with the bankrupt when administering the estate.”[33]
“…[as] obviously designed to ensure that a trustee in bankruptcy does not lose contact with the bankrupt, for all the purposes of the law in respect of the proper administration of the bankruptcy …”[34]
[33] Morley v The Queen (1999) 152 FLR 13 at 19 per Ipp J; [1999] WASCA 161 at para.22 per Ipp J (“Morley”).
[34] Morley FLR at 24 per Murray J; WASCA at para.56 per Murray J.
In this case, the respondent has failed to comply with the requirements of s.80(1) of the Bankruptcy Act. There is, however, no evidence that any steps had been taken against the respondent by the trustee with respect to the apparently complete and prolonged failure to advise the trustee of any change of address. The respondent’s failure to comply with s.80(1) of the Bankruptcy Act makes service upon the respondent more difficult than it should be as the trustee does not know the respondent’s address. But it does not make personal service impossible. Indeed, in the circumstances set out above, where the applicant is in possession of a recent address for the respondent’s husband in a regional town not far from the capital city office of the applicant, and where the respondent’s husband is said to be living with the respondent and five dependent children, it is difficult to imagine what the problem with effecting personal service in the manner prescribed by reg.16.01(1) of the Bankruptcy Regulations might be. Non-compliance with s.80 of the Bankruptcy Act by the respondent is not a reason, without more, to dispense with personal service, which is normal in bankruptcy proceedings.
It is also relevant to note the trustee’s duties under s.19 of the Bankruptcy Act as set out above. Having regard to the fact that there is evidence that the respondent is living at an address in Northam with her husband, and dependent children, there is no evidence that the trustee has taken whatever action is practicable to ensure that the bankrupt discharges her duties under the Bankruptcy Act to advise the trustee of the change of address. There is no evidence of any contact, either in person, by ordinary mail, or by electronic means, with the respondent for the purpose of ensuring that she discharges her duty under s.80(1) of the Bankruptcy Act. There is also no evidence as to whether or not the trustee has:
a)considered whether the bankrupt has committed an offence under s.80(1) of the Bankruptcy Act; or
b)referred to any relevant authorities, any evidence of an offence under s.80(1) of the Bankruptcy Act.
Therefore, whilst on the face of it, it does appear that the respondent has not complied with s.80(1) of the Bankruptcy Act, it is equally apparent that, on the face of it, the trustee has seemingly not been fulfilling the trustee’s duties under s.19 of the Bankruptcy Act.
Conclusion – service
There is nothing in the applicant’s conduct in this matter which warrants the Court exercising any discretion in favour of the applicant so as to dispense with service on the respondent of either the s.146 Application or the Service Application. Indeed, the applicant’s conduct, in not making any attempt whatsoever to effect service in circumstances where there is evidence of the whereabouts of the respondent which is less than three months old (and which was one month old at the time the s.146 Application was made), and the seeming failure of the trustee to fulfil its duties as trustee under s.19 of the Bankruptcy Act, militate against any exercise of discretion in the applicant’s favour.
Adjournment of the Service Application
At hearing, but only after the Court had raised several of the issues set out above, Counsel sought to have the Service Application adjourned whilst the applicant attempted to effect service of the s.146 Application on the respondent.
The Court simply does not consider it appropriate to adjourn an interim, and ex parte, application made in circumstances where the applicant has failed to make any attempts previously to effect service on the respondent. The applicant should have attempted to serve the respondent in the ordinary and proper way prior to bringing the Service Application. It is inappropriate to adjourn the Service Application to allow the applicant to do what it ought to have done in the first instance, but has not done, and seemingly would not have considered doing but for the intervention of the Court.
The Court will therefore not grant an adjournment of the Service Application. It follows that the Service Application ought therefore be dismissed.
Conclusion and orders
The Court has concluded, for reasons set out above, that the Service Application ought to be dismissed.
The s.146 Application can be adjourned to a further directions hearing at a time and date which allows for the applicant to endeavour to personally serve the respondent with:
a)the application;
b)the Court’s orders of 18 November 2010; and
c)the Court’s Reasons for Judgment of 18 November 2010,
and for an affidavit of service to be filed. There will be an order that the s.146 Application be adjourned to a directions hearing at 9.30am on 10 December 2010.
There will be no order as to the costs of these proceedings.
I certify that the preceding fifty-nine (59) paragraphs are a true copy of the reasons for judgment of Lucev FM
Associate:
Date: 18 November 2010
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