Re Capel, E.J. v Ex parte Capel, E.J.

[1989] FCA 244

C A T C H W O R D S

BAUKRUPTCY - annulment - order for substituted service of petition

- in fact the petition did not come to debtor's notice - no
attack on order for substituted service - whether

sequestration order should have been made.

Bankruptcy Act 1966, s.l54(l)(a)

Re: Elwyn John Capel
Ex parte: El n John Capel & Anor

Qld E1256 o d 8 8

PINCUS J .

EKLSBANE

'19 M Y 1989

IN THE FEDERAL COURT OF AUSTRALIA 1

DIVISION 1 QLD E1256 of 1988

BANKRUPTCY DISTRICT OF THE SOUTHERN

~ R I C T OF THE STATE OF QUEENSLAND )

RE: ELWYN JOHN CAPEL

EX PARTE:  ELWYN JOHN CAPEL

Applicant

MARAC FINANCE AUSTRALIA LIMITED

Respondent

MINUTES OF ORDER

J U N E HARING ORDER:	PINCUS J .
DATE OF ORDER:	19 MAY 1989
WHERE MADE:	BRISBANE
THE COURT ORDERS THAT:

1.    the application for annulment be dismissed;

2. the petitioning creditor's costs of and incidental to the application be taxed and paid out of the estate and have the priority which s.l09(l)(a) of the Bankruptcy Act 1966 gives to the taxed costs of the m o n i n g creditor therein mentioned.

NOTE :	Settlement and entry of orders is dealt with in Rule 124 of the Bankruptcy Rules.
IN THE FEDERAL COURT OF AUSTRALIA	1
GENERAL DIVISION	1  QLD E1256 of 1988
BANKRUPTCY DISTRICT OF THE SOUTHERN	)
DISTRICT OF THE STATE OF QUEENSLAND	)

RE: ELWYN JOHN CAPEL

EX PARTE:  ELWYN JOHN CAPEL

Applicant

MARAC FINANCE AUSTRALIA LIMITED

Respondent

PINCUS J.

REASONS FOR JUDGMENT

This is an application for an annulment of a bankruptcy,
the sequestration order having been made on 15 November 1988. The

ground on which the annulment is sought is that the petition was

neither served on the bankrupt nor came to his notice; s.154(1) of the Bankruptcy Act 1966 is relied on.

On 29 November 1985, on an appeal from a Master who had refused summary judgment, de Jersey J. entered judgment in the Supreme Court against the applicant (now bankrupt). There was an appeal to the Full Court of the Supreme Court and while that was pending a bankruptcy notice was issued, but the bankruptcy proceedings were held up pending the disposition of the appeal which took place on 22 May 1987; the judgment of d e Jersey J. was upheld. On 10 September 1987, a creditor's petition was presented based on the bankruptcy notice, which was in turn based on the judgment of de Jersey J. A process server, who was engaged in January, was unable to locate the applicant and the petition remained unserved. The solicitors who had acted for the applicant in past proceedings, Messrs Harold Crawford and Co., would not accept service of the petition. On 8 September 1988, an order was made that "the period during which service of the petition may be effected be extended to the tenth day of September 1989". That was done, presumably, under s.52(5) of the Bankruptcy Act 1966, which empowers the Court to order "that the period at the expiration of which the petition will lapse" be extended. Although the form of order was erroneous, its intention was clear

enough - to extend the life of the petition - and no point is

taken in that regard. By the same order, provision was made for substituted service by delivery of the papers to the solicitors I have mentioned and advertisement in the Courier-Mail. That was done and (the debtor not appearing), a sequestration order was made on 11 November 1988.

The material is strongly suggestive of attempts to evade service. When the process server attended at the bankrupt's then residence in January 1988 on a number of occasions, he was unable to deliver the petition because, as I infer, the bankrupt managed to evade him. Subsequent attempts to serve him were also unsuccessful and, as I have said, his solicitors refused to accept service.

The applicant contacted his solicitors on 30 August 1988 and told them he was leaving for the United Kingdom for a stay uncertain in length. His affidavit says he did not become aware of the petition having been served until 28 November 1988. There is no reason to disbelieve that but, on the other hand, the solicitors knew in August that the petition had been issued and no doubt discussed that with the applicant. They wrote to the creditor's solicitors on 26 September 1988, saying that the applicant had seen them, that he proposed to go to England and hoped to obtain funds there "to make a further offer of settlement to your clientn.

Putting the application within a general proposition, it is based on the idea that if, knowing that a petition is out against him and that the petitioner has been unable to find him, the debtor simply departs without leaving any address at which he may be found, then a sequestration order subsequently made is subject to annulment. In Re Bond (1978) 36 F.L.R. 131, the debtor had left Australia and the annulment was on the basis that the bankruptcy notice had not been served, although an affidavit of

personal service was made. In Re Cook (1946) 13 A.B.C. 245, on	the other hand, the facts were rather close to the present case in
that the petition was served by the means prescribed in an order for substituted service and the contention was that it did not come to the notice of the debtor. Clyne J. held that the order for substituted service should not have been made because it was not one which "would, with reasonable probability, have brought notice of the petition" to the debtor. Here, however, the applicant's solicitor disclaimed any intention to attack that order and based his case simply on the ground that in fact the petition did not come to the debtor's notice.
The basis of the contention must, I think, be that on such an application as this, the Court is entitled to consider not merely "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 (supra) at
p.259, Re Williams (1968) 13 F.L.R. 10 at p.23. The expression "ought not to have been made" in s.l54(l)(a) should be interpreted in this sense.
In my opinion, the applicant has not established the ground relied on. I have made the inference that, through his solicitors, the applicant was aware of the existence of the petition (although neither the solicitors nor the applicant expressly say whether he was or not) and the real complaint is merely that the method of substituted service chosen did not result in his receiving a copy of the petition. He could, of course, easily have done so by simply telling his solicitors what
his address would be. It is my opinion that, had the Court been
aware of the true circumstances as set out in the material before me, it could properly have made a sequestration order. The words "ought not to have been maden apply "only if the Court was in the circumstances bound" not to make the order: Re Ditfort (unreported, Gummow J., 3 June 1988, p.36). The order for substituted service not being attacked, it appears to me that the Court had power to make a sequestration order and would not have been precluded from doing so on its being shown that, although the debtor knew of the issue of the petition, he had not received a copy because he had left the country without leaving a forwarding address.
Further, there is a discretion whether or not to annul, on the statutory ground being made out. Here, the point taken, although one of importance, is a procedural one; the applicant does not adduce evidence challenging the judgment debt or suggesting that he is able or willing to pay it.
It should be added that the application as filed sought recission of the sequestration order. That was amended during the course of the hearing to ask for annulment. The application must be dismissed and the petitioning creditor's costs of and incidental to the application will have the priority which s.l09(l)(a) of the Bankruptcy Act 1966 gives to the taxed costs of the petitioning creditor therein mentioned.

I certify that this and the preceding

pages are a true copy of th? reasons for

judgment hcrein of His Honour

Dated 17 fla

Mr. Justice Pincus

IY