Re Kosovich, T.S. trading as Kosovich Bros Ex parte Norvill Nominees P/L trading as Level Diesel Service
[1992] FCA 858
•11 NOVEMBER 1992
Re: T.S. KOSOVICH trading as KOSOVICH BROS
Ex Parte: NORVILL NOMINEES PTY LTD trading as LEVEL DIESEL SERVICE
No. S B481 of 1991
FED No. 858
Number of pages - 14
Bankruptcy
COURT
IN THE FEDERAL COURT OF AUSTRALIA
GENERAL DIVISION
BANKRUPTCY DISTRICT OF THE STATE OF WESTERN AUSTRALIA
French J.(1)
CATCHWORDS
Bankruptcy - sequestration order - application for annulment - whether sequestration order ought to have been made - whether service of bankruptcy notice effected - whether service of creditor's petition effected - conflict of evidence between process server and bankrupt - service not effected - no creditor opposing application - sequestration order annulled.
Bankruptcy Act 1966 s.54, s.153B
HEARING
PERTH
#DATE 11:11:1992
Counsel for the Bankrupt: Mr S.G. Scott
Solicitors for the Bankrupt: Stables Scott
Mr F. Carles for the Official Trustee.
ORDER
The Court orders that:
1. The sequestration order made on 3 April 1991 is annulled.
2. Liberty to apply within 14 days on the question of the appropriate costs order (if any).
Note: Settlement and entry of Orders is dealt with in Rule 124 of the Bankruptcy Rules.
JUDGE1
Factual Background
FRENCH J. On 3 April 1991 Thomas Stanley Kosovich was made bankrupt by a sequestration order made by the Registrar in Bankruptcy for the Bankruptcy District of South Australia. The sequestration order was made on the petition of Norvill Nominees Pty Ltd trading as Levels Diesel Service. The petition was grounded upon non-compliance with a bankruptcy notice issued in the Bankruptcy District of South Australia on 30 October 1990. That notice made demand for payment of a judgment for $1,914.54 obtained in the Local Court of Para Districts on 29 March 1990. At all material times Mr Kosovich resided at 149 Salisbury Road, Swan View in Western Australia. Proof of the service upon him of the notice and of the petition was provided by way of affidavits sworn by Stuart Bailey, a process server on 15 January 1991 and 5 March 1991 respectively.
In respect of the service of the bankruptcy notice, Mr Bailey's affidavit was in the following terms:
"1. On Tuesday the 6th day of November 1990 at about the hour of 7.00 o'clock in the evening I served Mr T.S. Kosovich the abovenamed Judgment Debtor with a copy of the Bankruptcy Notice signed and sealed by the Deputy Registrar in Bankruptcy by delivering it to him personally at 149 Salisbury Road Swan View in the State of Western Australia.
2. I identified the said Mr T.S. Kosovich as the person named in the said Bankruptcy Notice as the Judgment Debtor by reason of the following conversation which took place at about the time of service. I said "Are you Mr T.S. Kosovich?" He said "Yes".
I then handed the said Bankruptcy Notice to him and said "Are you the T.S. Kosovich trading as Kosovich Brothers named in that Bankruptcy Notice as the Judgment Debtor?" He said "Yes".
3. Annexed to this affidavit and marked with the letter "A" is a copy of the said Bankruptcy Notice signed and sealed by the Deputy Registrar in Bankruptcy.
4. I have attained the age of sixteen years.
5. I know the facts deposed to herein of my own knowledge except where otherwise appears."
In respect of the service of the creditor's petition, his affidavit was as follows:
"1. On Monday the 11th day of March 1991 at about the hour of 4.00 o'clock in the afternoon I served Mr T.S. Kosovich the abovenamed Judgment Debtor with an official copy of the petition of Norvill Nominees Pty Ltd together with a copy of the affidavit of Barry Henry Norvill verifying Paragraphs One (1), Two (2) and Three (3) of the said petition and a copy of the affidavit of Venetta Georgakakos verifying Paragraph Four (4) of the said petition by delivering the aforementioned documents to him personally at 149 Salisbury Road, Swan View in the State of Western Australia.
2. I identified the said T.S. Kosovich as the Judgment Debtor named in the aforesaid documents by reason that I had earlier served upon him the Bankruptcy Notice herein and by reason of the following conversation which took place at about the time of service:-
I said "Mr Kosovich?" He said "Yes".
I then handed the aforesaid documents to him and said "Are you the same Mr T.S. Kosovich as that named in that Bankruptcy Petition?"
He said "Yes".
3. Annexed to this affidavit and marked "SB 1" is an official copy of the said petition.
4. Also annexed to this affidavit and marked "SB 2" is a copy of the said affidavit of Barry Henry Norvill and a copy marked "SB 3" of the said affidavit of Venetta Georgakakos.
5. I have attained the age of sixteen years.
6. I know the facts deposed to herein of my own knowledge except where otherwise appears."
On 11 November 1991 an order was made by O'Loughlin J. for the issue of a warrant for the arrest of Mr Kosovich for failing to comply with the requirement of s.54 of the Bankruptcy Act 1966 by not filing a statement of affairs. A statement was filed on 20 November 1991. On 21 February 1992 Mr Kosovich made an application to this Court through the South Australian Registry for an order transferring "the file" to the Perth Registry and for an order that the sequestration order of 3 April 1991 be annulled. The application was transferred to the Registry by an order of O'Loughlin J. on 30 March 1992. Following some preliminary appearances before the Registrar, a notice of opposition was filed by a creditor, Town and Country Bank Ltd, on 3 July 1992. On 3 August 1992 the application came on for hearing. Town and Country Bank Ltd was given leave to withdraw, the application was adjourned to 7 August 1992 and an order made that the process server, Stuart Bailey, attend before the Court to give evidence in relation to the service by him of the bankruptcy notice and the creditor's petition.
The application came on again for hearing on 7 August 1992. Mr Bailey attended and gave evidence that day, as did Mr Kosovich. It was then further adjourned to 11 September 1992 in order to enable counsel for Mr Kosovich to adduce further evidence in relation to his client's whereabouts at the times that service is said to have been effected. Further affidavit evidence was adduced on that day and judgment reserved subject to the provision of a complete version of an affidavit sworn by John Wayne Needham of which only a partial copy was available at the resumed hearing. That affidavit in proper form, sworn on 14 October 1992, and a further affidavit sworn by Mr Needham on the same day were sent to the Court on 22 October. A covering letter from the solicitor for Mr Kosovich indicated that counsel for the trustee had no objection to the further affidavit being taken into account. Both affidavits are thereby treated as filed in Court and read for the purposes of this application.
Mr Kosovich relies upon his own affidavits sworn 3 February, 10 July and 25 September 1992. He also relies upon the affidavits of his wife, Carolyn Norma Kosovich sworn 3 February 1992, Nicholas James Timony, sworn 18 February 1992, Phillip Barry Woods of 31 July 1992, Ian Wells King of 25 September 1992, Christopher Ernest Marsh of 25 September 1992 and the two affidavits of John Wayne Neenan, sworn 14 October 1992. Mr Kosovich and his wife both gave oral evidence, as did Mr Bailey the process server.
In his evidence-in-chief, which was given in answer to questions put by the Court, Mr Bailey said that in November 1990 and March 1991 he worked for a business called Debtor Ledger Services. He identified his affidavits of service and reiterated their truth. He also identified his handwriting on photocopies of the reverse sides of copies of the notice and petition retained at his former employer's office. These handwritten notes were respectively in the following terms:
1. "Served personally on 6.11.90 - 7.00pm" and
2. "Served personally on 11.3.91 - 4.00pm. Send inv. and Report Assoc Merc..."
He said that each endorsement would have been made on the evening of the day when service was effected or first thing on the following morning. The affidavits of service were prepared by the creditor's solicitors in South Australia.
Cross-examined on his evidence, Mr Bailey said he used to attempt to serve an average of 40 processes daily. He recognised Mr Kosovich and had served him several times. He could not recall whether he had served him with any process prior to 6 November 1990. He vaguely recollected serving him with the bankruptcy notice on that day. Initially he said he could not remember the circumstances of the service. Asked what he could recall about Mr Kosovich, he said he remembered the house, the place where trucks were kept and the fact that the Kosovichs had a vicious dog. He knew, he said, that Mr Kosovich "sets the dogs on to you". He then said he remembered that he had approached the door of the Kosovich house on 6 November and knocked and that Mr Kosovich had come to the door and received the documents. He remembered Mr Kosovich was wearing "overalls or sort of work clothes". His apparent recollection progressed in cross-examination to enable him to specify the colour of the overalls as dark blue. He remembered the Kosovichs' dog as a German Shepherd or German Shepherd cross and that it had been barking at him. When he knocked on the door of the house, Mr Kosovich brought the dog inside. Mr Bailey said he remembered asking Mr Kosovich if his name was "Thomas S. Kosovich". To this Mr Kosovich had replied "Yes". In this connection it is to be noted that the bankruptcy notice referred only to "T.S. Kosovich trading as Kosovich Bros." and did not at any point set out either of Mr Kosovich's given names. The affidavit of service sworn by Mr Bailey in relation to the bankruptcy notice referred in both its title and text to "Mr T.S. Kosovich". Mr Bailey said he handed Kosovich the papers, asked if he were the person referred to in them and received the answer "Yes".
Mr Bailey said he had a clear recollection of serving the petition on Monday, 11 March 1991. He said he had served Mr Kosovich on about ten occasions in his time as a process server. On the occasion of serving the petition he had knocked on the door of the Kosovich home, received no answer and had then spoken to two men working on a truck at the side of the house. He said he told them he was looking for Thomas Kosovich and was informed that Mr Kosovich was in a shed on the property. He found him in the shed, asked if he were Thomas Kosovich and handed him the petition. Mr Kosovich was working on something that looked like it might be the engine of the truck and had greasy, dirty hands. He did not take the documents. Mr Bailey put them down in the shed for him. He was wearing blue overalls "with grease and shit all over them". On other occasions when he had served Mr Kosovich, he was wearing either overalls or shorts and a singlet. The notes on the process server's office copy of the documents served were not supplemented by any report as to conversations between Mr Bailey and the debtor. The conversations which appeared in the affidavits of service were, according to Mr Bailey, drafted by the creditor's solicitors.
Mr Kosovich gave oral evidence as well as evidence on affidavit. In relation to the alleged service of the petition on 6 November 1990, he said that on that day he was driving his truck to Onslow under sub-contract from Energy Trucking Pty Ltd carrying drilling equipment for West Australian Petroleum Ltd ("Wapet"). He had loaded the truck on 5 November, completing loading by 8pm. He drove out of the Energy Trucking premises at Welshpool at 10pm on that day and arrived at Wapet's premises in Onslow on 7 November at about 2am. Exhibited to the affidavit was a Sub-Contractor's Payment Advice dated 5 November 1990. This was a document issued by Energy Trucking. His affidavit of 29 September exhibited a consignment note number 42465 from Energy Trucking also dated 5 November 1990. This indicated a consignment comprising 108 packages of "JOINTS 7" CASING" and "ONE 8" JAR" to Wapet at Onslow. Both the Sub-Contractor's Payment Advice and the consignment note, he said, were completed by an employee of Energy Trucking on 5 November. Mr Kosovich explained that a number of copies of the consignment note were given to him by Energy Trucking and that he arranged for a copy to be signed by the party receiving the load at Onslow. When he returned to Energy, the signed consignment note would have been given to the appropriate employee of that company. Mr Kosovich said in his oral evidence that it would take him 18 to 20 hours to get to Onslow from Perth depending on the temperature. Eighteen hours was the bare minimum. His wife, Mrs Carolyn Kosovich, also gave evidence both on affidavit and orally. She said that during the period including 6 November 1990 and 11 March 1991 she was working as a nurse on night duty at the Mount Saint Camillus Nursing Home at Forrestfield. Her shifts commenced at 11pm and finished at 7am. She said that at the time of the alleged service she would have been at home. The effect of her evidence was that she had not seen Bailey come to her home on the days in question and that he had not been referred to her by any of their children. Her husband had not told her anything of being served with any papers and she did not become aware of his bankruptcy until 22 April 1991 when she took a telephone call from a Mr Pilcher, an officer of the Official Receiver Insolvency and Trustee Service Australia (Adelaide office). She said she told Mr Kosovich of the telephone call from Pilcher and that when she did tell him he was very angry. They both understood that a person could not be made bankrupt unless he or she had been served with papers. Asked by the Court what was the basis for that knowledge on her part, she said:
"..we have got quite a few friends - as you well know, that in the trucking industry it's a bit notorious for people going bankrupt and we've got a few friends that've gone bankrupt, not only in the trucking industry but other industries as well because of the recession."
Ian Wells King, the Managing Director of Energy Trucking Pty Ltd, also swore an affidavit in which he referred to the Sub-Contractor's Payment Advice and the consignment note for 5 November 1990. He described his company's system for loading materials to be delivered to Wapet in Onslow. Items to be transported to Wapet at Onslow would be loaded on to trailers at the Fremantle Wharf and the load would be checked by Wapet which would issue a Materials Movement Report. The trailer or trailers would then be hitched to the prime mover which was to tow them to Onslow and on the date of departure the driver would receive a consignment note and a Sub-Contractor Payment Advice. He would be required to sign the consignment note and would be handed a number of copies which, when the load was delivered, would also need to be signed for and on behalf of the receiver. He confirmed Mr Kosovich's evidence that on his return to Energy Trucking, the driver would be required to hand over the copy consignment note signed on behalf of the receiver. Upon examination of the consignment note to which Mr Kosovich had made reference, Mr King said it was clear:
1. He had signed it on behalf of the sender.
2. It related to the Sub-Contractor Payment Advice as the number of the consignment note appeared on that document.
3. As Mr Kosovich's signature, which he recognised, was on the consignment note he was the driver of the truck towing the load.
4. The date of departure of Mr Kosovich for Onslow was 5 November 1990.
This latter comment is a matter of inference as the consignment note does not, in terms, specify a date of departure. It simply bears as its date "5/11/90".
Christopher Marsh, a former employee of Kosovich Bros., said that in November 1990 he and Mr Kosovich were the only persons who drove trucks for Kosovich Bros. outside the metropolitan area. He had taken a load from Perth to Onslow on 2 November 1990 and would have arrived in Onslow sometime on 4 November 1990, the trip usually taking about 18 hours. It being his practice to sleep over at Onslow before returning to Perth, he was confident that he would not have left for Perth until the morning of 5 November 1990 and would not have arrived back in Perth until sometime on 6 November 1990. It would not have been possible therefore for him to have been the driver of the load referred to in the consignment note and Sub-Contractor's Payment Advice mentioned earlier.
John Wayne Neenan, a company representative of Wapet in Onslow, exhibited to an affidavit sworn on 14 October 1990 a copy of the consignment note 4265 and identified his signature on it acknowledging receipt of the goods. He also exhibited a copy of a Materials Movement Report from Wapet bearing number 15261. This report referred to the same goods as appear in the consignment note. The Materials Movement Report was dated 5 November 1990 and showed an estimated time of arrival of the goods as the morning of 7 November 1990. Mr Neenan did not have a record of the date upon which the goods were actually received in Onslow but it would have been most unusual had they not been delivered on the date estimated on the Materials Movement Report. In his experience, the goods would have been received by no later than 7 November 1990 and he would have signed the consignment note on that date. In a second affidavit sworn the same day, he referred to a Barge Manifest dated 8 November 1990. This manifest details goods which left Onslow on that date. They included one 8" drilling jar. That drilling jar, he said, was the jar referred to in consignment note 42465 from Energy Trucking Pty Ltd dated 5 November 1990. The load which included the jar would need to have been delivered to Wapet in Onslow no later than 7 November 1990 in order for that item to be included in the items leaving Onslow on 8 November 1990.
In relation to the events of 11 March 1991, Mr Kosovich said in his affidavit that he was not at home on that day as alleged in Mr Bailey's affidavit. On 8 March, he said, he was in Darwin in his truck waiting to be loaded for a return trip to Perth. He had secured one load for the first trailer but had to wait a few more days to secure loads for the other two trailers. The trip from Darwin to Perth would normally take five to six days in the absence of stops to deliver or pick up freight. On this occasion, however, he had to make stops to deliver freight and as a result was not in Perth on 11 March. Mr Kosovich exhibited a consignment note dated 8 March 1991 for goods to be sent from Berrimah near Darwin to Kewdale.
The evidence from Mr Kosovich relating to his whereabouts on 6 November 1990 and 11 March 1991 is, in a sense, secondary evidence. It has however support from other witnesses in parts. There is no diary or log which shows directly that Mr Kosovich was in Onslow and Darwin when he claimed to be. But to a degree, the absence of a claimed direct record of that kind tends to militate against any suggestion of fabrication in relation to the indirect evidence that has been presented.
Mr Bailey's evidence was given with a blunt and prima facie credible delivery. Under cross-examination however he did appear to develop a detailed recollection of events in the two days on which service was said to have been effected. That claimed recollection is, I think, unconvincing when its substance is examined. So too is his claim to have asked Mr Kosovich whether his name was "Thomas Kosovich" when nothing in the documents he had to serve indicated the first given name. There are hand written notes in the photocopies of the relevant processes retained at the office of Mr Bailey's employer, but these in my opinion do not provide any independent support for his claim that he served Mr Kosovich when he said he did. The one common point in his evidence and that of the Kosovichs' is his reference to a dog. Mrs Kosovich said that they have an efficient guard dog. It is possible of course that Mr Bailey could have been aware of the existence of the dog in attending at the premises to attempt service. Such possibilities are open, but necessarily speculative. The question of fact I have to determine is whether on the balance of probabilities service was effected on Mr Kosovich of both the bankruptcy notice and the creditor's petition. In so doing I have regard to the potential seriousness of any finding that service was not effected as claimed. The assessment of the evidence and the two seriously conflicting claims made by Mr Kosovich and Mr Bailey is not easy in the absence of any party wishing to maintain the bankruptcy order. In the end however, Mr Kosovich has provided an array of apparently independent evidence which tends to support his account of his whereabouts on the days service was effected. Mr Bailey's evidence on the other hand, while necessarily unsupported by independent testimony, was also less than convincing. His readiness to swear affidavits of service which contained reconstructions of conversations with Mr Kosovich prepared by the judgment creditor's solicitors is also a matter of concern. On the balance of probability I am satisfied that Mr Kosovich was not served with the bankruptcy notice nor with the creditor's petition as claimed.
CONCLUSION
17. The present application is brought under s.153B of the Bankruptcy Act 1966 which provides:
"153B. If the Court is satisfied that a sequestration order ought not to have been made or, in the case of a debtor's petition, that the petition ought not to have been presented or ought not to have been accepted by the Registrar, the Court may make an order annulling the bankruptcy."
It is a condition of the exercise of the power to make a sequestration order on a creditor's petition, that the debtor has committed an act of bankruptcy (see s.43(1)). In the present case the act of bankruptcy relied upon in the petition was that Mr Kosovich had "...failed to comply on or before 20 November with the requirements of a Bankruptcy Notice duly served upon him on Tuesday the 6th day of November 1990...". No such notice has been served and there was therefore no act of bankruptcy. It follows that the sequestration order ought not to have been made. Creditors have been notified of this application and none appears to oppose it. In my opinion therefore the sequestration order should now be annulled and I propose so to order.
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