Rawling v SUNCORP-METWAY

[2013] FCCA 2277

FEDERAL CIRCUIT COURT OF AUSTRALIA

RAWLING v SUNCORP-METWAY [2013] FCCA 2277

Catchwords:
BANKRUPTCY – Application for extension of time to comply with bankruptcy notice – relevance of actual notice of service of bankruptcy notice when bankruptcy notice served pursuant to order for substituted service – whether intention to bring cross claim a ground for setting aside a bankruptcy notice.

Legislation:

Bankruptcy Act 1966 (Cth), ss.33(1)(c), 41(6A), 41(7)

Ellis v Wallsend District Hospital (1989) 17 NSWLR 553
Maxwell-Smith v S & E Hall Pty Limited [2006] FCA 825
Re Riordan; Ex parte Riordan v Direct Acceptance Corp Ltd (1995) 63 FCR 147
Re Sterling; Ex parte Esanda Ltd (1980) 44 FLR 125
Shaddock v Commonwealth Bank of Australia [1998] FCA 355

Applicant: LYNDSEY RAWLING

Respondent: SUNCORP-METWAY (ACN 010 831 722)

File Number: SYG 2602 of 2013

Judgment of: Judge Manousaridis

Hearing date: 23 December 2013

Date of Last Submission: 23 December 2013

Delivered at: Sydney

Delivered on: 24 December 2013

REPRESENTATION

Applicant appeared in person.

Solicitor for the Respondent: Mr Annis-Brown

ORDERS

1. The application for review filed on 26 November 2013 is dismissed.

2. The application filed on 24 October 2013 is dismissed.

3. The applicant pay the respondent’s costs of both applications.

FEDERAL CIRCUIT COURT
OF AUSTRALIA
AT SYDNEY

SYG 2602 of 2013

LYNDSEY RAWLING

Applicant

And

SUNCORP-METWAY (ACN 010 831 722)

Respondent

REASONS FOR JUDGMENT

Introduction

1. On 23 April 2013, a bankruptcy notice was issued against the applicant, Ms Lindsey Jean Rawling, on the application of Suncorp Metway Limited (Suncorp). The bankruptcy notice demands payment of $696,169.21. That is the sum of a default judgment of $680,398.87 Suncorp obtained against Ms Rawling in the District Court of New South Wales on 14 January 2013, and interest that accrued on the judgment.

2. Suncorp had difficulty personally serving the bankruptcy notice on Ms Rawling. That led to Suncorp applying to this Court for an order for substituted service. On 12 June 2013, a registrar of this Court made orders which required service on Ms Rawling of the bankruptcy notice by, among other things, handing it to a person apparently over the age of sixteen years or, if this were not possible, by leaving it in a sealed envelope, at the offices of Sydney Accounting Pty Limited at Unit 5, 193 Darling Street, Balmain, together with a request that Sydney Accounting Pty Limited forward that envelope to Ms Rawling or otherwise bring the receipt of it to her attention.

3. On 25 June 2013, the solicitor for Suncorp, Mr Annis-Brown, attended the entrance to the premises of Sydney Accounting Pty Limited at Unit 5, 193 Darling Street, Balmain and handed to a person who appeared to have been an employee or officer of Sydney Accounting Pty Limited a letter addressed to that company together with a sealed envelope. The sealed envelope contained the bankruptcy notice, the orders of the registrar of 12 June 2013 and a letter addressed to Ms Rawling.

4. Another mode of service of the bankruptcy notice that was required by the orders for substituted service made on 12 June 2013 was by handing it to any person apparently over the age of sixteen years, but if this were not possible, by leaving it in a sealed envelope addressed to Ms Rawling at the offices of LJ Hooker Limited at 56 Woodpark Street, Lismore together with a request that LJ Hooker forward the envelope to Ms Rawling or otherwise bring the receipt of it to Ms Rawling’s attention. That was done at approximately 3.40 pm on 25 June 2013.

5. Yet another mode of service required by the orders for substituted service was by sending a text (sms) message to a specified mobile number “that the bankruptcy notice has been left at the offices of Sydney Accounting Pty Limited at Unit 5, 193 Darling Street, Balmain and at LJ Hooker Limited at 56 Woodlark Street, Lismore”. The mobile number referred to in the order was one that the solicitor for Suncorp, Mr Annis-Brown, dialed to speak with Ms Rawling on 11 September 2012. It was also the number given by an employee of LJ Hooker in Lismore to an employee of Suncorp in a conversation on 17 April 2013 to the following effect:

   Lyndsey Rawling is the contact person in relation to any inquiries for the sale of the properties at Ruthven. I have some contact details here for her. We have a mobile telephone number which is [the mobile number referred to in the order for substituted service] and an email address of [email address]. We also have a contact address of PO Box 420 Sydney 2001.

6. Mr Annis-Brown deposed that on 26 June 2013 at approximately 9.56 am, he forwarded a text message to the mobile number specified in the order for substituted service as follows:

   Pls be advised that on the application of Suncorp Metway, a Bankruptcy Notice addressed to you has been delivered to the offices of Sydney Accounting P/L at unit 5, 193 Darling St Balmain and to LJ Hooker at 56 Woodpark ST Lismore.

7. On 24 October 2013, Ms Rawling filed an application in this Court seeking the following orders:

   a)the bankruptcy notice be set aside;

   b)all enforcement of the bankruptcy notice be stayed until after 1 November 2013, being “the first date an application for setting aside a default judgment between the respondent [Suncorp] and the applicant [Ms Rawling] is to be heard before the District Court of NSW or such further date as the Court may order”; and

   c)the time for compliance with the bankruptcy notice be extended up to and including 1 November 2013 or such later date as the Court may order.

8. On 5 November 2013 the application came before a registrar of this Court. The registrar directed that Ms Rawling file and serve any further evidence on which she intends to rely by 28 November 2013, that Suncorp file evidence on which it intends to rely by 12 December 2013, and that the matter be listed on 16 December 2013 with a view to its being referred to a judge of this Court.

9. Ms Rawling did not file any further evidence. She did, however, on 26 November 2013, file an application for review of the registrar’s decision of 5 November 2013. The ground of the application for review is that the registrar erred in failing to exercise her discretion to extend the time for compliance with the bankruptcy notice until after a notice of motion to set aside the default judgment is heard by the District Court on 4 February 2014.

10. On 16 December 2013, the matter came before me. Ms Rawling applied for an adjournment of her application until after 4 February 2014. I adjourned the matter to 23 December 2013 and noted that on that day I would hear Ms Rawling’s applications including any application for an adjournment.

The hearing on 23 December 2013

1. When the matter came before me on 23 December 2013, Ms Rawling renewed her application for an adjournment. The grounds on which Ms Rawling sought the adjournment were contained in two affidavits made by Ms Rawling, one on 16 December 2013 and one on 20 December 2013. In those affidavits, Ms Rawling says:

   a)Ms Rawling did not receive actual notice that the bankruptcy notice had been served until after the time for its compliance had passed;

   b)after 5 November 2013, when a registrar of this court informed Ms Rawling that Ms Rawling had committed a “deemed act of bankruptcy”, Ms Rawling made efforts to obtain pro bono assistance from the Law Society of New South Wales, but has failed to obtain such assistance;

   c)Ms Rawling made repeated requests to Suncorp that it consent to today’s hearing being adjourned to enable Ms Rawling to obtain legal advice;

   d)Ms Rawling has offered to pay the costs of the issue of a fresh bankruptcy notice and to make herself available to be served with the fresh bankruptcy notice, the effect of which would be  “to allow the substantive issues under consideration by the District Court to be determined without any cost or prejudice to [Suncorp] and for me to have opportunity to obtain legal advice and representation”;

   e)Suncorp, through its solicitor, undertook to the District Court not to commence enforcement proceedings in the District Court until Ms Rawling’s notice of motion to set aside default judgment is heard; and

   f)Ms Rawling suffers from various medical conditions as a result of which she is not in a mental state to conduct her application.

2. Mr Rawling also relied on other evidence. In particular, she relied on her affidavit of 24 October 2013 which set out facts and assertions relating to claims which she believes she has against Suncorp.

3. I permitted the solicitor for Suncorp, Mr Annis-Brown, to cross-examine Ms Rawling. That did not proceed very far because, in the course of it, Ms Rawling’s baby, who was in Court in the arms of Ms Rawling’s husband, Mr McMahon, became distressed. I excused Ms Rawling from answering further questions after Mr Annis-Brown indicated that it was not necessary to his case to persuade the Court that Ms Rawling had received actual notice of the service of the bankruptcy notice on 25 June 2013.

Issues

1. In my opinion, although the affidavit material filed by Ms Rawling and Suncorp is extensive and covers a number of topics, the principal question I need to consider is whether Ms Rawling has any, or any reasonable grounds for obtaining an order extending the time for complying with the bankruptcy notice, or whether she has any, or any reasonable grounds for contending that her asserted cross-claim is a ground for setting aside the bankruptcy notice. If Ms Rawling has no such grounds, it would be futile to grant Ms Rawling an adjournment of her applications, and her application should be dismissed.

Power to extend time for complying with bankruptcy notice

1. The Bankruptcy Act 1966 (Cth) (Act) provides for three circumstances in which the time for complying with a bankruptcy notice will or may be extended. The first, being that provided by s.41(6A)(a) of the Act, is where, before the time fixed for compliance with the requirements of the bankruptcy notice, proceedings to set aside the judgment or order in respect of which the bankruptcy notice was issued have been instituted by the debtor. The second circumstance, that provided for by s.41(6A)(b) of the Act, is where, before the time fixed for compliance with the requirements of the bankruptcy notice, an application has been made to the Court to set aside the bankruptcy notice.

2. In both these circumstances, the Court may extend the time with the requirements of the bankruptcy notice. In the case of an application to extend the time for complying with a bankruptcy notice based on the debtor’s commencing proceedings to set aside the judgment or order in respect of which the bankruptcy notice was issued, the Court cannot extend the time for complying with the bankruptcy notice if it is of the opinion that the proceedings have not been instituted bona fide or are not being prosecuted diligently.

3. The third circumstance in which the Act provides for an extension of time for compliance with a bankruptcy notice is that provided for by s.41(7) of the Act:

   Where, before the expiration of the time fixed for compliance with the requirements of a bankruptcy notice, the debtor has applied to the Court for an order setting aside the bankruptcy notice on the ground that the debtor has such a counter-claim, set-off or cross demand as is referred to in paragraph 40(1)(g), and the Court has not, before the expiration of that time, determined whether it is satisfied that the debtor has such a counter-claim, set-off or cross demand, that time shall be deemed to have been extended, immediately before its expiration, until and including the day on which the Court determines whether it is so satisfied.

4. In these three circumstances, the time for complying with a bankruptcy notice is or may be extended only if the person to whom the bankruptcy notice is addressed makes an application, either to set aside the judgment or order on which the bankruptcy notice is based, or to set aside the bankruptcy notice, before the time for complying with the requirements of the bankruptcy notice expires.[1] The necessity for making such applications before the time for complying with the bankruptcy notice expires, have been referred to as jurisdictional.[2] That is, unless such applications are made, the Court will have no power under s.41(6A) or s.41(7) to extend the time for compliance with the requirements of the bankruptcy notice.

   [1] Re Sterling; Ex parte Esanda Ltd (1980) 44 FLR 125 at 128: “The Court's power under sub-s.41(6A) to extend time for compliance with a bankruptcy notice may be exercised only where the proceedings to set aside the judgment or order in respect of which a notice was issued have been instituted, or the application to set aside the bankruptcy notice has been filed with the Registrar, in each case before the expiration of the time fixed by the Court or the Registrar for compliance with the requirements of the notice: see the introductory words of sub-s.(6A).” (Lockhart J)

   [2] See, for example, Re Riordan; Ex parte Riordan v Direct Acceptance Corp Ltd (1995) 63 FCR 147 at 148G (Foster J); Shaddock v Commonwealth Bank of Australia [1998] FCA 355 (Goldberg J)

5. Apart from s.41(6A) and s.41(7) of the Act, there is no other source of power to permit the Court to extend the time for complying with a bankruptcy notice. This conclusion is reinforced by the fact that s.33(1)(c) of the Act confers power on the Court to extend time limited by the Act, but excludes from this the “time fixed for compliance with the requirements of a bankruptcy notice”.

Whether power to extend time for compliance engaged

1. As I say above, the bankruptcy notice was served on Ms Rawling on 25 June 2013 in accordance with the order for substituted service made by this Court on 12 June 2013. Ms Rawling has not applied or, at least, she has not put on any evidence to show that she applied, to set aside the judgment in respect of which the bankruptcy notice was issued before the expiration of time for complying with the bankruptcy notice.[3] Nor did Ms Rawling make the application to set aside the bankruptcy notice before the expiration of that time. Accordingly, the Court does not have jurisdiction to extend the time for Ms Rawling complying with the bankruptcy notice. It would therefore serve no purpose to adjourn her application to extend the time for complying with the bankruptcy notice.

   [3] Ms Rawling in her affidavits says she became aware of the bankruptcy notice after the time for its compliance had expired.

2. Before I leave this part of Ms Rawling’s application, I should say something about Ms Rawling’s claim not to have received actual notice of the bankruptcy notice. In my opinion, whether or not she received actual notice is irrelevant. Ms Rawling did not submit that the bankruptcy notice was not served in accordance with the orders for substituted service made by the Court on 12 June 2013. And I am satisfied on the evidence filed on behalf of Suncorp that the bankruptcy notice was served in accordance with that order.

3. In any event, I do not accept Ms Rawling’s evidence that she was unaware that the bankruptcy notice had been issued to her on or shortly after 25 June 2013. I am entitled to not accept her evidence, even though, due to the distress of her baby, Ms Rawling was not fully cross-examined on her affidavits.[4] I am not satisfied for at least two reasons.

   [4] Ellis v Wallsend District Hospital (1989) 17 NSWLR 553 at 587-588.

4. First, Ms Rawling did not in any of her affidavits address that part of Suncorp’s evidence that dealt with the sending of a text message to a particular mobile number. Ms Rawling did not say whether the mobile number was or was not her mobile number; she did not say whether she had a conversation with Mr Annis-Brown on a mobile telephone which answered the number Mr Annis-Brown deposed he used to call and speak with Ms Rawling; and she did not say whether or not she had given her contact details to LJ Hooker in Lismore. Further, Ms Rawling, in paragraph 17 of her affidavit of 24 October 2013, does say that in mid-September 2010 she “received a mobile telephone call from solicitors (Lincoln Smith) purporting to act for Suncorp advising me that they intended commencing legal proceedings in this matter and that they enquired as to my whereabouts”, and that she now believes that the solicitor who contacted her was Mr Annis-Brown. From this I infer that the mobile number referred to in the order for substituted service is the number of Ms Rawling’s mobile telephone.

5. Secondly, Ms Rawling did not address that part of Suncorp’s evidence which deals with the service of the bankruptcy notice on LJ Hooker in Lismore. The probabilities are that after LJ Hooker received the sealed envelope containing the bankruptcy notice and the covering letter requesting that the sealed envelope be forwarded to Ms Rawling, LJ Hooker Lismore passed on the sealed envelope to Ms Rawling’s address as recorded in LJ Hooker Lismore’s records.

6. Ms Rawling, through her husband, Mr McMahon, submitted that, to permit a bankruptcy notice to be served without the person to whom it is addressed having actual notice of it gives rise to the potential of abuse. Whether that may be so or not, it cannot be said that in the circumstances of this case there is the remotest hint of abuse. If, contrary to what I have not accepted, Ms Rawling did not gain actual notice of the service of the bankruptcy notice, that would have been the result of a conscious choice that she and her husband, Mr McMahon, made.

7. That is confirmed in a letter dated 29 November 2013 that an employee or officer of Sydney Accounting wrote to Mr Annis-Brown in response to a subpoena that Mr Annis-Brown caused to be served on Sydney Accounting Pty Limited. The employee or officer is Christopher Matthews who Ms Rawling, in her evidence, said was her accountant. In the letter, Mr Matthews said:

   I did not receive any directive in writing or electronic form concerning the acceptance of any documents on us [sic] Rawling’s behalf. I did receive oral advice that my office should not receive any documents at our address for Ms Rawling from her husband on one occasion that I spoke with him. (emphasis in original)

8. It is true that Mr Matthews says he received these instructions from Mr McMahon. I find it impossible to conclude, however, that Mr McMahon did this without consulting Ms Rawling or, at least, without Ms Rawling in effect appointing Mr McMahon to represent her interests as Mr McMahon saw fit. The decision to instruct Mr Matthews to not accept any documents on behalf of Ms Rawling is one that was made either by Ms Rawling or on her behalf by her authorised agent, Mr McMahon.

Setting aside bankruptcy notice

1. The next issue I must consider is whether Ms Rawling’s intention to make a cross claim against Suncorp is a ground for setting aside a bankruptcy notice or whether there is any other basis disclosed on the evidence for setting aside the bankruptcy notice.

2. The circumstances in which the court may set aside a bankruptcy notice were helpfully summarized by Jacobson J in Maxwell-Smith v S & E Hall Pty Limited as follows:[5]

   The Court’s power to set aside a bankruptcy notice arises from s 30 of the Act. But the Act confers no general discretion to set aside a bankruptcy notice that is valid in form and not an abuse of process; Re Briggs; Ex Parte Briggs v Deputy Commissioner of Taxation(1986) 12 FCR 310 at 311 - 312; Re Athans; Ex Parte Athans (1991) 29 FCR 302 at 310; Australian Securities and Investments Commission v Forge; (2004) 48 ACSR 474 at [27]

   It follows from this that the Court does have power to set aside a bankruptcy notice which can be characterised as an abuse of process; Amos v Brisbane TV Limited(2000) 100 FCR 82 at [21].

   If it is apparent to the Court that the purpose of a bankruptcy notice is to put pressure on a debtor to pay a debt, rather than to invoke the Court’s insolvency jurisdiction, the issuing of the bankruptcy notice will be an abuse of process; Brunninghausen v Glavanics[1998] FCA 230; see also Re Sarina; Ex parte Wollondilly Shire Council [1980] FCA 66; (1980) 43 FLR 163 at 166.

   However, it is not an abuse of process if a creditor genuinely intends to pursue the matter if there is default in complying with the notice and there is no evidence of collateral purpose or undue pressure; Slack v Bottoms English Solicitors[2002] FCA 1445 at [15] – [21].

   [5] [2006] FCA 825 at [41]-[44]

1. No challenge has been made to the validity of the bankruptcy notice. There is nothing in the material before me that suggests Suncorp has issued the bankruptcy notice for any purpose other than to invoke the Court’s insolvency jurisdiction. The fact that Ms Rawling believes she has a viable cross claim is not by itself a ground for setting aside a bankruptcy notice. The assertion of such a claim may be relevant to a bankruptcy notice, but only in the circumstances provided for in s.41(7) of the Act. The existence of such claim may also be relevant to whether a sequestration order should be made;[6] but Suncorp has not filed a creditor’s petition against Ms Rawling.

   [6] See McDonald, Henry & Meek Australian Bankruptcy Law & Practice Thomson Reuters, current edition (Update 167), at [52.2.22]

Conclusion and disposition

1. In my opinion, Ms Rawling does not have any grounds for an order extending the time for complying with the bankruptcy notice issued on the application of Suncorp. Nor does Ms Rawling have any grounds for setting aside the bankruptcy notice. In these circumstances, it would be futile to adjourn the application to extend the time for complying with the bankruptcy notice or for setting aside the bankruptcy notice.

2. Accordingly, I propose to order that the applications filed on 24 October and 26 November 2013 be dismissed, and that Ms Rawling pay Suncorp’s costs of both applications.

I certify that the preceding thirty-two (32) paragraphs are a true copy of the reasons for judgment of Judge Manousaridis

Associate: 

Date:  24 December 2013