Re Collins, M. Ex Parte Beneficial Finance Corporation Ltd

[1992] FCA 361

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JUDGMENT NO. 36..!. .a I ........ .... 92 i

IN THE FEDERAL COURT OF AUSTFSLIA ) I

GENERAL DIVISION ) I

1 No. NP 1277 of 1991 i

BANKRUPTCY DISTRICT OF THE STATE j

OF NEW SOUTH WALES 1

RE:	MICHAEL COLLINS
Debtor  i . I -

EX PARTE:	BENEFICIAL	FINANCE	t
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CORPORATION LIMITED 1

-0ning Creditor

com:	WILCOX J
PLACE :	SYDNEY
DATE:	19 M&Y 1992

EXTEMPORE REASONS FOR JUDGMENT K

WILCOX J: This is the hearing of a creditor's petition whereby the petitioning creditor, Beneficial Finance Corporation Limited, seeks a sequestration order against the respondent, Michael Collins. The petitioning creditor claims that the debtor and his wife, Michelle Collins, are indebted to it in the sum of $23,448.97 being the balance of the amount due under a final judgment recovered in the District Court of New South Wales at Albury on 4 October 1989. The consideration for the debt was said to be moneys due under a deed of guarantee and indemnity. It appears that the judgment debt was obtained in default of a defence being filed to a statement of liquidated claim. Mr Collins contested the

statement of claim, but he indicated that he became aware of

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creditor's claim to have personally served him with the g I

the existence of the statement of claim shortly after the date of service. He says that it was left with his secretary at his office and that he saw the document amongst papers on his desk shortly thereafter.

Following the recovery of judgment a bankruptcy notice was issued. According to the evidence which has been given, it was served upon both debtors on 9 December 1990. The bankruptcy notice required compliance within twenty-one days and it is common ground that there was not, in fact, any compliance. Mr Collins contested the personal service of the bankruptcy notice upon him but that issue is not now pressed as a ground of opposition.

Six grounds were raised prior to the hearing; one of them, a claim that there were defects in the bankruptcy notice, has been abandoned. Two other claims are agreed to come down to the same proposition: they relate to the service of the petition. Consequently, there are four matters falling

respect of them.	I have not called on counsel for the petitioning creditor in for consideration. Two of those matters have no substance and
The first of these matters is M r Collins' claim that he is solvent. In support of that claim, he swore and read an affidavit of himself dated 11 May 1992 wherein he set out a computation showing a surplus of assets over liabilities of $40,706. However, this surplus is arrived at only if one

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treats as an asset of his estate the sum of $203,500, being moneys due to him by debtors. Mr Collins recently prepared a statement of affairs for presentation to a meeting of creditors called to consider a possible arrangement under part 10 of the Bankruptcy Act. That statement of affairs shows the computation of the sum of $203,500. It includes $150,000 owing to Mr Collins, or said to be owing to Mr Collins, by a company with which he has been closely associated, Michael Collins & Associates Administration Pty Limited. This company has been deregistered for failure to file annual returns. This occurred on 27 February last. It may be possible for the company to be restored to the register, but M r Collins has given evidence that the company has no assets. Its only chance of making any payment to him would be if it is successful in certain claims which it makes against creditors. It seems to me that this is highly problematic. It is interesting to note that, in the statement of affairs, Mr Collins inserted as the amount likely to be received by him from Michael Collins & Associates Administration Pty Limited

the sum of $50,000, rather than $150,000. adjustment to his affidavit, the surplus becomes a deficiency If one makes this	of about $60,000. This is assuming that all of the other
items are accepted as correct; and that assumption seems a bold one in the light of some of the evidence given in response to cross-examination today. When I asked Mr Collins whether he was in a position to pay the petitioning creditor's debt within the foreseeable future, he quite frankly said that he was not; whilst at the same time maintaining that he did not owe any money in any event. I have no hesitation in holding that Mr Collins is not solvent and that this ground of opposition should be rejected.
The next ground falling for consideration is that there is a defect in the petition. In particular, it is said that there is no proof of the authority of the signatory to the petition. Reference is made in that regard to the decision of Lockhart J in re S~itzer; ex Darte Weltrans Aaency Establishment (1979) 25 ALR 447. However, it seems to me that that is a very different case from the present one. 1n S~itzer the petitioning creditor was a Liechtenstein corporation and the petition was executed on its behalf by an agent. The question was whether the agent's authority had been proved. In the present case, the petition has been executed under the common seal of the petitioning creditor, the common seal being countersigned by a gentleman identified as "associate director" and another person identified as "secretary". The petition is verified by an affidavit, dated
petitioning creditor, who deposes that the seal is the common 25 March 1991, of Ray Zoch, the collection officer of the seal of the company.
The third matter to which I should make reference is Mr Collins' claim that he does not owe the money alleged to be owing in the petition; or, indeed, as I understand his position, any money to the petitioning creditor. He asks the court to go behind the judgment and allow this matter to be litigated. He offers to take action to have the default judgment set aside so that this question can be resolved in the District Court.
The course urged by Mr Collins is one which is taken from time to time by this Court in the exercise of its bankruptcy jurisdiction. I have myself gone behind a judgment debt and investigated whether there is any money owing, in a case of a genuine dispute and where I have felt some doubt as to the correctness of the petitioning creditor's claim. In the present case there is nothing before me to cause any doubt. It is true that there is no evidence as to the composition of the claim which resulted in judgment, still less is there any material before the Court to establish the facts upon which that claim was based. But there are certain matters which make it unlikely that the money is not owing.

M r Collins is by profession an accountant.	He at	:
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one time occupied a senior position in Price Waterhouse and he

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behalf or in partnership, for a number of years. He therefore	has carried on practice as an accountant in Albury, on his own
starts with the advantage of understanding financial matters. He has also had commercial experience. He concedes that he became aware of the statement of liquidated claim at about the time the statement of claim was filed and served; yet he took no action to defend the action. He signed a deed on 13 February 1990 in which he acknowledged the judgment debt of $24,806.79 and that interest had subsequently accrued in the sum of $1826.56. He agreed to pay $4000 forthwith and to make further payments by instalments. Cross-examined on this matter today, he said that he cannot recall what payments he made. It was put to him that he paid $4,000, together with three subsequent instalments of $500 each. He replied that he could neither confirm nor deny this allegation. Certainly, he has not taken the attitude that there were no payments made. When asked to account for his execution of the deed, he said that this was to avoid bankruptcy proceedings and that he was under commercial duress.
More recently, after the bankruptcy proceedings were commenced, Mr Collins retained Melbourne solicitors, Messrs Cornwall Stodart. On 20 December 1991, they wrote to the petitioning creditor, referring to the judgment and saying that Mr: Collins instructs them that, while he reserves his right to seek leave to set aside the judgment and to oppose the claim, "he has always recognised the complexity of the situation, and on that basis approached you in July this year to put a proposal for payment of the amount claimed, by instalments." Reference was then made to various problems sustained by Mr Collins. The letter concluded by putting a
proposition for payment of the debt by instalments. It is difficult to see that Mr Collins would have made this offer if he had felt that no money was owing. At the time he was aware that bankruptcy proceedings were pending, whether or not he had actually seen the bankruptcy petition. His answer today, that he only offered to pay by instalments to avoid the local notoriety of having bankruptcy proceedings taken against him, is difficult to reconcile with the fact that the bankruptcy proceedings had already commenced when the offer was made. One would have thought that, if no money had been owing and Mr Collins had been aware of that fact, he would have taken urgent action to have the judgment set aside. In that regard,
I should say that Mr Collins stated from the bar table that he
had approached a number of solicitors in Albury with a request that they act on his behalf to have the judgment set aside, but that they all had declined to do so. The only reason he was able to give me for this was that they did not understand the procedure in having a District Court judgment set aside. I do not accept that statement. No litigious procedure would be better known to solicitors, particularly those practising in a country town or a provincial city such as Albury, than that for having a District Court default judgment set aside.
Mr Collins also said that he approached Blake Dawson Waldron
in regard to the matter. In support of what he says, I note that the accountant who prepared the statement of affairs to
put before the creditors meeting referred to $500 being held on account of costs by Blake Dawson Waldron in respect of a possible application to set aside the judgment. So I accept
that he did in fact approach that firm. Why they have not acted, does not appear. In any event there has been ample opportunity to set aside the judgment.
Ordinarily, I would not grant a further opportunity to Mr Collins to re-agitate the question whether he owes the debt. However, that position may be affected by the final matter to which reference has to be made. Mr Collins denies that he was served with the petition. An affidavit of service was filed, the deponent being Andrew Wise, a process server. It being known that there would be an issue about this matter, Mr Wise was brought to court today. He gave oral evidence setting out in detail the circumstances of service. He was cross-examined by Mr Collins.
I prefer not to express any final view about Mr Wise's evidence. It is sufficient to say that it is not presently obvious to me that I should not accept his evidence. However, Mr Collins filed an affidavit by one Janet Williams. In that affidavit MS Williams deposed that Mr Collins was with her, in her apartment, for a period of some hours coinciding with the time when the petition was supposed to have been served. Apparently the place of alleged service and MS Williams' apartment are some 4 kilometres apart. Quite clearly, if MS Williams is right, service could not have been
affidavit, Mr Pryde, on behalf of the petitioning creditor, effected under the circumstances deposed to by Mr Wise. When Mr Collins sought to read MS Williams'
objected; the ground being that she was not available for cross-examination. It turned out that a letter had been sent on 8 May to Mr Collins informing him that MS Williams would be required for cross-examination. He says that he did not get the letter. I accept that the letter was posted, because there has been produced a certified mail posting receipt; that is, the receipt issued by the post office clerk at the place of posting, the general post office in Sydney. The receipt provides for the sender to request a return receipt; but unfortunately the appropriate box was not ticked, so this was not procured.
The difficulty I have is that, whilst I accept that the letter was sent by certified mail, there is no proof that it was received by Mr Collins. I am reluctant to shut out the evidence on which he seeks to rely, namely Ms Williams' affidavit, under circumstances where he says that he did not appreciate that she would be required to attend for cross- examination. If Mr Collins had been legally represented, I do not know that I would take the same view. I would expect that a solicitor in Mr Collins' position would expect the deponent to be required for cross-examination and would check with the other side that she was not required, before so arranging matters that she was not in attendance. However, Mr Collins is not a solicitor and I have no reason to doubt his statement
the course of argument, that, when MS Williams gives evidence, that he did not appreciate that the onus would be on him to have her present in court. It may well be, as I said during
she will not take the matter any further and will not cause me to doubt Mr Wise's evidence. But I am reluctant to proceed to a sequestration order where there is a deponent to an affidavit, giving evidence inconsistent with service of the petition, who has not been heard because of the circumstances I have mentioned.
I should say that Mr Pryde submitted that, in any event, the Court could exercise its discretion under s.306 of the Bankru~tcv Act and make a sequestration order notwithstanding the lack of proper service, He says, and I think rightly, that Mr Collins has known for some time of the existence of the petition. He has certainly known that proceedings were pending for about two months, because he appeared before Registrar Lane on 16 March. He asserts that he did not then see a copy of the petition. If this is so, he nonetheless had the opportunity of seeing a copy of the petition. So he has had an opportunity to prepare. On the other hand, it seems to me a large step to regard failure to serve a bankruptcy petition as being a mere formal defect within the meaning of s.306. I do not think that I would be prepared to take that step.
Accordingly, I think that I should accede to M r Collins' request for an adjournment of the hearing to a date sufficient to allow him to have MS Williams present. If M r
made, this short adjournment will give to him the opportunity
Collins desires to pursue his claim that he does not in fact owe the debt, and notwithstanding the comments that I have
of producing some evidence on the next occasion to create a doubt in my mind about the justification for the judgment which has been obtained. It seems to me that this is simply an accounting matter and ought to be able to be dealt with, one way or the other, with little potentiality for dispute.
In the ordinary course, I would simply sa'y that the matter is stood over to a particular day and give Mr Collins the opportunity of issuing any necessary summonses for production of documents; for example, against the petitioning creditor or against the solicitors who acted on its behalf in the transaction which gave rise to the alleged indebtedness. However, I would prefer to avoid a situation in which Mr Collins sees the documents for the first time when they are produced in court on the next occasion. I think it would be desirable for the petitioning creditor to provide him with a complete statement of account in writing, within say seven days from today, and for arrangements to then be made to produce the original documents, if Mr Collins so wishes.
It may well be that, once the figures are set out, he will realise that the petitioning creditor's claim is justified. Conversely, though I think that this is less likely, he may notice some error and point this out to the petitioning creditor. Either way, I would expect the party
who is shown to be incorrect to acknowledge that fact without taking up Court time in regard to the matter. The question arises as to the date to which the matter should be adjourned.

[Discussion ensued.]

I adjourn the further hearing of the petition until

3.00 pm on Tuesday, 2 June. I direct that, on Tuesday 26

May, the petitioning creditor's solicitors provide to the debtor, at their Macquarie Street offices, a complete statement of his account, showing all items of credit and debit in respect of the transaction giving rise to the judgment debt. By Friday 29 May, the debtor is to provide to the solicitors for the petitioning creditor a document identifying any items in that account which are disputed by him.

Leave is granted to issue any summons for production of documents returnable at 9.30 am on Tuesday, 2 June. Any such summons to be served not later than Friday 29 May. Costs reserved.

I certify that this and the preceding eleven (11) pages
are a true copy of the Reasons for Judgment

of the Honourable Justice Wilcox.

Associate: P & %

Dated:  19 May 1992

APPEARANCES

Counsel for the Applicant:	Appeared for self.
Solicitors for the Applicant:	Appeared for self.

Counsel for the Respondent:	K Pryde
Solicitors for the Respondent:	Mills Oakley McKay
Date(s) of hearing:	19 May 1992