Re Lauriston, G.J.

[1993] FCA 1016

1016    93

JUDGMENT No. ........ ........ .. I ..,........ .

C A T C H W O R D S

BANKRUPTCY - Bankruptcy Notice - form and contents - public interest in bankruptcy proceedings - adequacy of "address" of the creditor contained in the bankruptcy notice - effect of closure of the office nominated as creditor's address over the Christmas period on the validity of the bankruptcy notice - relevance of indication by debtor that he had no capacity to pay - nature of onus on debtor in setting aside a bankruptcy notice.

Bankru~tcv	Act 1966 ss. 31A, 52 and 306(1)
Bankru~tcv	Rules rr. 20, 102 and 103
Beaucham~.	Re: Ex Darte Beaucham~ [l9041 K.B. 572

Debtor, Re a: Ex Darte a Debtor [l9351 Ch. 353
James v. The Federal Commisioner of Taxation (1955) 93 C.L.R.
631

Kleinwort Benson Australia Ltd. Re v. Crow1 (1988) 165 C.L.R.

7 1	. -
Nuaent. Re (1985) 5 F.C.R. 168 Pualise, Re: Ex Darte The Chase Manattan Bank Australia Limited (Unreportered, 15 September 1993, Melbourne)
RE: GEOFFERY JAMES LAURISTON EX PARTE PLANVEST PTY LTD fFORMERLY KNOWN AS HEWHAVEN PTY LTDL No. QP 206 of 1993
SPENDER J BRISBANE 21 DECEMBER 1993

RE :  GEOFFREY JAMES LAURISTON

EX PARTE: PLANVEST PTY LTD formerlv known as

HEWHAVEN PTY LTD

MINUTES OF ORDER

JUDGE MAKING ORDER:	SPENDER J
DATE OF ORDER:	21 DECEMBER 1993
WHERE MADE:	BRISBANE
THE COURT ORDERS THAT:

1.The order of the District Registrar made on the 13th August

1993 be set aside.

2.A sequestration order be made against the estate of Geoffrey
James Lauriston.

3.The costs of and incidental to this application and the petition, including all reserved costs, be taxed and paid in accordance with the Act.

NOTE:	Settlement and entry of orders is dealt with in r. 124
of the Bankruotcv Rules.
IN THE FEDERAL COURT OF AUSTRALIA	1
GENERAL DIVISION	)  No. QP 206 of 1993
BANKRUPTCY DISTRICT OF THE STATE OF OUEENSLAND

RE :  GEOFFREY JAMES LAURISTON

EX PARTE: PLANVEST PTY LTD formerlv known as

HEWHAVEN PTY LTD

CORAM: SPENDER J

PLACE :	BRISBANE
DATE :	21 December 1993

REASONS FOR JUDGMENT

This is a matter which very much turns on a factual assessment of certain material concerning the circumstances that existed at the time of the issue and during the currency of a bankruptcy notice that was issued against Geoffrey James Lauriston ('the debtor'). The matter presently before the court is an application filed on 26 August 1993 seeking a review of the exercise by a District Registrar on 13 August 1993 of the powers

delegated to the District Registrar pursuant to the provisions	of S. 31A of the Bankruptcy Act 1966 ('the Act'). The review is
of the exercise of the power under S. 31A(l) (n) to dismiss a creditor's petition.
The application seeks an order that the order dismissing the petition be set aside and in lieu thereof a sequestration order be made against the estate of the debtor, and that the costs of the creditor of this application and of the petition,
including reserved costs, be taxed and paid in accordance with the Act.
I t is clear that on such a review I am in no sense sitting in judgment on appeal. In this particular case reasonable minds approaching the same factual question might reach different conclusions.

Section 31A(l)(n) of the Act provides that:

" Subject to subsection (Z), the following powers of the Court under this Act may, if a Judge of the Court, in writing, directs, be exercised by a Registrar of the Court in relation to a proceeding:

. . .

(n) the power to make a sequestration order against the estate of a debtor under subsection 52(l) and the power under subsection 52(2) to dismiss a creditor's petition; "

Section 31A(6) provides:

" A party to a proceedings in which a Registrar has

exercised any of the powers of the Court under subsection (l) may, within the time prescribed by

accordance with the rules, apply to the Court to	the rules, or within any further time allowed in
review that exercise of power. "

and subsection (7) provides:

" The Court may, on application under subsection (6) or of its own motion, review an exercise of power by a Registrar pursuant to this section and may make such order or orders as it thinks fit with respect to the matter with respect to which the power was exercised. "

The facts of this matter are set out in the reasons of 13 August 1993 of the District Registrar. As to the District Registrar's conclusions, I am in full agreement with each of them save the last. There were a number of matters which called for attention. They included a change of name and a question of the address of the creditor in the bankruptcy notice. These were the two basic questions on which written submissions had been supplied to the District Registrar and for the reasons which are set out in the District Registrar's descision, I agree that both questions were correctly resolved in favour of the petitioning creditor.

The difficulty with which this review is concerned does not appear on the face of the bankruptcy notice. The bankruptcy notice was addressed to the debtor and recites:

" Whereas

Hewhaven Proprietary Limited, a company
duly incorporated and having its registered
office at Suite 446 Racecourse Road, Ascot,
Brisbane in the State of Queensland,

(hereinafter referred to as the "judgment creditor") has claimed the sum of $24,048.60 is due by you to the judgment creditor under a final order obtained by the judgement creditor against you in the District Court of Queensland (held at Brisbane) on the 5th day of August 1992 being an order the execution of which has not

been stayed.

THEREFORE TAKE NOTICE that within 28 days after service of this Notice on you, excluding the day on which this Notice is served on you, you are required:

by the judgment creditor to the judgment	(a) to pay the sum of $24,048.60 so claimed
creditor . . .

and then at the conclusion the notice says:

" This Notice was issued on the application of

HEWHAVEN PTY LTD

whose address for service is c/ Messrs Dillons, Solicitors, 13th Level, National Bank House, 255 Adelaide Street, Brisbane. "

The notice was served on the debtor on 8 December 1992. It was a 28 day notice and therefore required the debtor to comply with it or to take the other steps referred to in the bankruptcy notice on or before 5 January 1993.

Heatly and Associates, solicitors, had acted in the District Court proceedings in respect of which the debt arose. The bankruptcy notice was filed adopting the name and address of the creditor company stated in the judgment. Af ter the bankruptcy notice was servedthere were discussions by telephone, fax, and letters between the solicitors for the creditor and James Cremin & CO who then acted as solicitors for the debtor. Those negotiations and discussions, have a significance in the factual conclusion that I reach.

Section 306(1) provides that:

" P r o c e e d i n g s u n d e r t h i s A c t a r e not i n v a l i d a t e d

by	a	formal	d e f e c t	or	a n	i r r e g u l a r i t y ,	u n l e s s
the	c o u r t	before	wh ich	the	o b j e c t i o n	on	t h a t
ground	i s	made	i s	o f	the	o p i n i o n	t h a t

s u b s t a n t i a l	i n j u s t i c e	h a s	been	c a u s e d	by	the
d e f e c t	or	i r r e g u l a r i t y and	t h a t	the	i n j u s t i c e

c a n n o t	be	remed ied	by a n o r d e r o f	t h a t
c o u r t .

In Re Walsh 42 ALR 727 at 736, Lockhart J. said

" A ' f o r m a l d e f e c t o r a n i r r e g u l a r i t y ' i s one t h a t

c o u l d not r e a s o n a b l y m i s l e a d the d e b t o r : see

P i l l a i v. C o m ~ t r o l l e r o f Income T a x [l9701 AC

1124 a t 1135; R e Wimborne: Ex P a r t e The Debtor

(1979) 24 ALR 494 and Re F l o r a n c e : Ex P a r t e

T u r i m e t t a P r o p e r t i e s P t v L t d (1979) 28 ALR 403.

The test is whether the particular debtor, not some hypothetical debtor, could, while acting reasonably, have been mislead or confused: It is irrelevant whether the debtor was in fact

confused:	Re Kleinwort Benson Australia Ltd v Crow1 (1988) 165
CLR 71.

The relevant principle has been expressed in this way:

" T h e c o u r t c a n n o t i n q u i r e whe ther the d e b t o r h a s ,

i n f a c t , been m i s l e d or not. In t h i s c a s e it i s

p r o b a b l e t h a t he was not m i s l e d and it i s

s u f f i c i e n t	t h a t he	c o u l d	be	m i s l e d ,	b u t	s tr ic t
c o m p l i a n c e	w i t h	the	r e q u i s i t e s	o f	a	b a n k r u p t c y

notice i s e s s e n t i a l t o i t s v a l i d i t y . . . " : Jame s

v. The Federal Commissioner of Taxation (1955) 93

CLR 631 at 644.

Under the Bankruutcv Rules ('the Rules'), r. 102(1)

provides that:

" . . . [A]n a p p l i c a t i o n t o the Cour t t h a t i s not

r e q u i r e d t o be made by a p e t i t i o n s h a l l be

i n s t i t u t e d by f i l i n g an a p p l i c a t i o n , i n

accordance w i t h form 4 5 . "

And r. 102(2)(c) provides that an application:

" ... s h a l l s p e c i f y the o r d e r t h a t the c o u r t w i l l ,

on a h e a r i n g o f the a p p l i c a t i o n , be asked t o

make...	"
Rule 103(1) provides that:

"	The grounds	on	wh ich the C o u r t w i l l be a s k e d t o
make	the	o r d e r s p e c i f i e d i n an a p p l i c a t i o n ,	and

the f a c t s on wh ich the a p p l i c a n t p roposes t o

rely i n s u p p o r t o f the a p p l i c a t i o n for t h a t

o r d e r , s h a l l be s t a t e d i n the a f f i d a v i t f i l e d i n

s u p p o r t o f the a p p l i c a t i o n . "

At no stage of these proceedings has there been any notice of application to set aside the bankruptcy notice, nor has there been any notice pursuant to r. 20 of the Rules which provides :

" A d e b t o r who i n t e n d s

( a ) t o oppose a p e t i t i o n	;
...

must, n o t less than 3 days b e f o r e t h e d a t e f i x e d

f o r t h e hear ing o f t h e p e t i t i o n o r w i t h the

consent o f t h e Cour t , a t tha t hear ing

( c ) f i l e a n o t i c e i n accordance w i th Form

8;and

( d ) serve a c o p y on the p e t i t i o n e r . "

I note in particular the use in this rule of the word

"must", which is a stronger imperative than the word " s h a l l " .

There was no point taken by the debtor alleging invalidity of the bankruptcy notice or in respect of any other matter concerning the petition.

Matters in bankruptcy are matters which have a significance extending beyond the parties to those proceedings, and nothing I say in respect of this matter should be interpreted in any way as discounting the public interest connected with bankruptcy proceedings.

In Re a debtor: Ex parte a debtor [l9351 1 Ch. 353, a receiving order was made by a registrar, and on an appeal being called on, counsel for the debtor sought leave to withdraw the appeal because the debtor proposed to apply to rescind the receiving order on payment in full of all his debts.

Lord Hanworth MR commenced his reasons for judgment by

saying:

"

In connection with this matter it is by no means bankruptcy court have been duly observed. " clear that certain important principles of the

Referring to the facts in that case, which essentially involved money-lending transactions where there was a payment of interest at a sum exceeding 48 per cent and therefore requiring the duty of the court to be exercised in accordance with S. 10 of the Monevlenders Act 1927, his Lordship said at 356:

" That is a duty which belongs to the Court and

cannot be evaded by any admission or consent
which is given by any one of the parties. "

There is no question in this case of any agreement between the parties having the effect of avoiding the requirements of the Act. Rather, it is a case of the circumstances in which the Court should raise and consider points which the debtor has not sought to raise.

The District Registrar dealt wlth the question of the address of a creditor as required by Form 4, and I have indicated

that I am in agreement with his reasons in respect of that aspect

of the matter. The address of a creditor in a bankruptcy notice

must be either the location where the creditor can be found:
Stocrden: Ex parte Leicrh [l8951 2 Q.B. 534; or a place where
someone can be found who possesses the creditor's authority to
give a good discharge to the debtor: Re Nuuent (1985) 5 FCR 168.
I will have need to refer in some detail to the judgment of
Pincus J in Re Nuaent later in these reasons.

Also of relevance is the judgment of the Court of Appeal in Re Beaucham~: Ex Darte Beauchamp [l9041 1 K.B. 572. In that case, a bankruptcy notice gave the address of the creditor as an hotel in London where the creditor was temporarily residing. The creditor was in the habit of stopping at that hotel but did not permanently retain a room there. On the last day of the seven days limit of compliance with the notice, the creditor, at about 10.15 on that morning, went away from the hotel leaving no address behind her. The point was taken by the debtor that that absence of the creditor made the bankruptcy notice bad. It was held by the Court of Appeal that the address given by the creditor in the bankruptcy notice was sufficient compliance with Form 6 and that the creditor could not be taken to have abandoned her temporary address when she left the hotel. The appeal from the making of a receiving order by the registrar was dismissed.

At p. 583, Vaughan Williams LJ referred to the facts and

he concluded:

" I t i s p l a i n t h a t i t i s not s u f f i c i e n t f o r the

c r e d i t o r m e r e l y t o g i v e an a d d r e s s where he c a n

be h e a r d o f ; it m u s t be an a d d r e s s where he c a n

be p a i d ,	or where by agreement	the d e b t can be
s e c u r e d	or	compounded.

Now what d o e s th i s mean? Suppose a c r e d i t o r

g i v e s a s h is a d d r e s s h i s home where he

p e r m a n e n t l y lives. I s he bound to remain at

home a l l d a y , or never t o go o u t w i t h o u t l e a v i n g

word where he p r o p o s e s to go, b u t , f o r the

m a t t e r o f t h a t , m i g h t not succeed i n going? Tha t

i s i m p o s s i b l e . What then a r e the n e c e s s a r y

c o n d i t i o n s o f the a d d r e s s ? W e think t h a t the

a d d r e s s m u s t be o f a p l a c e where the c r e d i t o r i s

t o be found d u r i n g the seven d a y s , and th i s i s

so w h e t h e r t h a t a d d r e s s i s o f the r e s i d e n c e , or

the o f p l a c e o f b u s i n e s s o f the c r e d i t o r ; and we

think t h a t , i f the a d d r e s s g i v e n i n the

b a n k r u p t c y notice i s s u c h an a d d r e s s a t the d a t e

o f the service o f the notice, occasional absence o f the creditor from that address, even for a whole day, w i l l not render the bankruptcy notice i ne f f i c i en t unless the absence i s such a s t o deprive the debtor o f a reasonable opportunity o f paying the debt, or securing i t or compounding for it according t o the terms o f that notice. "

He later said at p. 584:

" On the other hand, we think that , i f the creditor, a f t e r the service o f the notice, abandoned h i s place o f address so that it ceased t o be a place where a t reasonable times the creditor could be found (or some authorised agent on h i s behalf) to receive payment o f the judgment debt, or t o deal with the question o f security, the bankruptcy notice would cease t o

be e f f i c i e n t .

and concluded that having regard to the practice of the creditor of living at the particular hotel and to the fact that her letters would be likely to be delivered there after her departure, the contention on behalf of the debtor failed in fact.

In a recent judgment of Heerey J, Re Pualise: Ex ~arte

The Chase Manhattan Bank Australia Limited (unreported, 15 September 1993, Melbourne) his Honour, after referring to the

provisions of S. 41 of the Act, r. 8 of the Rules and Form 4,

said of a bankruptcy notice which gave as the address of the

creditor the address of the creditor's solicitors that:

" In my opinion, the bankruptcy notice d i d comply with the Act. The term 'address' means, amongst other things, ' a place where a person l i ve s or may be reached' (Macquarie Dictionary). The purpose o f a bankruptcy notice i s t o convey t o the debtor the amount which the judgment creditor claims and t o give the debtor the opportunity o f paying or securing the amount. For that purpose the judgment creditor must be told what the amount i s and where the creditor can be reached t o accept payment or security. "

In my opinion, the District Registrar was right, for the reasons which he gives, to conclude that the address in the bankruptcy notice was such an address.

Notwithstanding the failure to lodge a notice of intention to oppose and the absence of an application to set aside the bankruptcy notice, the District Registrar had regard to an affidavit filed on behalf of the creditor of the solicitor who carried on practice at the address specified in the bankruptcy notice. The bankruptcy notice was served on 8 December 1992 and called for compliance on or before 5 January

1993.

The solicitor carried on practice during ordinary working hours up until Christmas Eve, and then his affidavit deposed that his office was unattended by personnel but that mail could be delivered by pushing it under the door or by lodging in a letter box at that address and in addition, telephone

that there was no attempt to contact him or any person at that	communications were received by an answering machine. He swears
address while the office was personally attended, nor was there any attempt by mail, by facsimile or by telephone to make contact in a period which included the period of the currency of the bankruptcy notice.
The District Registrar found that the address in the bankruptcy notice was an address where it was reasonably practical to make payment or to offer or to secure or compound

L L

the debt. However, the District Registrar had regard to the lack of attendance of personnel at the office during the Christmas break. He noted that:

" O f the per iod o f 28 days f i x e d f o r compliance

w i t h the bankrup t cy notice,	the o f f i c e was	n o t
a t t ended f o r the l a s t 12%	days .	"

As a matter of mathematical computation, this statement is correct. However the office was in fact unattended for only five working days out of that total of 12%; the remaining days being weekends or public holidays. I have already noted that there were means of communication with the creditor (via its solicitors) available during that period.

The District Registrar concluded that the 124 days was more than an occasional absence from the address. It was a substantial period of time relative to the period of time fixed for compliance and was such as to deprive the debtor of a reasonable opportunity of paying the debt or securing it or compounding for it according to the terms of the notice.

In Nuaent's case, Pincus J made some observations which

seem to me to be relevant where he said at p. 162:

"

I t may seem odd t h a t the v a l i d i t y o f the n o t i c e

can depend upon e v e n t s subsequen t t o i t s i s s u e .

I am i n n o doubt t h a t I have j u r i s d i c t i o n to

de termine	the p o i n t	a t this s t a g e ,	p r i o r	t o the
h e a r i n g o f the p e t i t i o n ,	b u t	it	appears	t o me,

nevertheless, t o be impor tan t t o k e e p i n mind

t h a t the n o t i c e on i t s f a c e i s p e r f e c t l y good

and there i s n o t h i n g i n t r i n s i c a l l y wrong w i t h

the address g iven .	"
I	interpolate t o say that i s the position i n the present

case. Pincus J continued:

"

I t was argued for the debtor that i n considering the val idi ty o f a bankruptcy notice the question i s not whether the debtor has i n fact been misled, b u t whether the defect i s such a s could reasonably mislead a hypothetical debtor; reliance was placed on James v Federal Commissioner o f Taxation (1955) 93 CLR 631 a t

6 4 4 . I do not think that principle i s o f any

assistance where the complaint i s one o f the absence o f a person authorised t o receive payment on behalf o f creditors, rather than a complaint as t o misleading wording. "

Unlike Nuoent, i n t h i s case the debtor d i d not seek t o

be heard i n respect o f the val id i ty o f the bankruptcy notice. There was no assertion on behalf o f the debtor, that the bankruptcy notice was misleading or bad, having regard t o the absence o f personal attendance at the o f f i c e duringthe Christmas holiday break.

In Re Nuuent, Pincus J , importantly for present

purposes, said:

"	The onus, i n my opinion, i s on the applicant t o prove facts showing the notice should be set aside. Although no one a t the address given had prior authority t o accept payment, i t i s not proved that i f the debtor had rea l l y desired t o pay, i t would have been impossible or even d i f f i c u l t , for him t o do so. The question i s whether i n these circumstances there i s any invalidi ty i n the proceedings.
Nothing i n the present act or rules expressly requires that the address shall be one which someone with authority t o receive payment i s present. The form simply requires the name and address o f the judgment creditor ( i n th i s case creditors), must be given i n the reci tal . However, under old bankruptcy statutes, i t had come to be accepted that some implication i n
favour of the debtor had to be made wjth respect to the availability of that address given of a person authorised to receive payment. That was so, despite the absence in those statutes of any express statement as to what conditions had to prevail at that address. It seems to me that a similar implication should be made under the
1966 Act, see Re Mullavev Ex Darte Australian
and New Zealand Banking GrouD Ltd (1977) 32 FLR
1 at 7 to 8.

He then went on to consider the submissions on behalf of the debtor, whether in the circumstances it was reasonably practicable to make payment or to offer or secure or compound. His Honour referred to Re Beauchamp and the requirement that the notice would be "inefficient" if "the absence is such as to deprive the debtor of a reasonable opportunity of paying the debt or securing for it or compounding for it according to the terns of the notice." Pincus J continued at p.164

" The debtor did not prove that there was any substantial practical difficulty about paying or offering to give security, at the address given. He did not establish the situation was any worse for him, in a practical sense, than that of a debtor who receives a bankruptcy notice giving an address of the creditor which is left unattended for significant periods of time. That on the authority of Re Beaucham~ (supra)

does not necessarilymake the notice bad.	' l
The certificate of the District Registrar under r. 22

which was filed on 22 February 1993 took no point concerning a

possible question of invalidity of the bankruptcy notice, merely reinforcing that the bankruptcy notice was one which on its face did not indicate that there was anything intrinsically wrong with the address given.

I have earlier referred to the communications after the service of the bankruptcy notice and before the time fixed for

i t s compliance between sol ici tors f o r t h e creditor and solicitors

for the debtor.

There i s a l e t t e r o f 2 2 December 1992 written by Messrs

Dillons t o Messrs James Cremin & CO a t an address a t Albany

Creek, Queensland. The f i r s t four paragraphs o f that l e t t e r are important.

"	We re f e r t o our telephone conversation o f the 17th instant when you advised you acted on behalf o f m Lauriston and requested our c l ient ' S instructions not to proceed with the Bankruptcy Notice unti l Law Claims had settled
a claim made b y your cl ient that h i s former
Solicitor had been negligent.
We note i n t h i s regard your advices that M r Suthers had issued a W r i t for h i s professional costs and M r Lauriston had counter- claimed for the sum for $200,000.00 for negligence. We also note your verbal advices that Messrs Gilshenan & Luton act for Law Claims and it i s not known when t h i s action may be finalised.
We also note your advices M r Lauriston i s unable t o pay the judgement and that the matrimonial property had recently been the subject o f a Family Court Consent Order.
We note your advices that Mr Lauriston does not
have any other property t o s a t i s f y the debt and further he has recently undergone a t r ip le by-
pass operation and i s not working.
The importance o f t h i s l e t t e r i s the admission

recorded on behalf o f the debtor that he was insolvent; that he does not have any other property t o s a t i s f y the debt; and that he was unlikely t o receive funds either by way o f income or from any other source. That l e t t e r , which essentially records the content o f a telephone conversation, has t o be read i n the

context of the reply by James Cremin & CO which acknowledges receipt of that facsimile transmission and attached a copy of a "consent order" as requested.

~t is clear from the correspondence that this is not in any way a case where the debtor has been misled by the wording in a bankruptcy notice nor is it a case where he has been denied an opportunity to pay or secure or compound the debt referred to in the bankruptcy notice of which he otherwise might have availed himself by the absence of attendance at the solicitor's office for the periods indicated by Mr Heatley in his affidavit. I am not satisfied that had the debtor sought to avail himself of any of those avenues, he would have been unable to.

The factual position from my viewpoint is that the debtor has not discharged the onus which lies on him to show that the notice should be set aside. I am not satisfied that the notice is bad. That being the only matter on which the exercise by the District Registrar of the powers under s. 31A was adverse

to the petitioning creditor I, exercising a fresh approach to the	factual questions, am satisfiedthat the petitioning creditor has
established all of the matters of which the Act requires proof. I am satisfied of the act of bankruptcy alleged in the petition and of the other matters of which the act requires proof.
I set aside the order of the District Registrar made on the 13 August 1993 and, in lieu thereof, I order that a sequestration order be made against the estate of Geof frey James Cauriston. I order that the costs of and incidental to this
application and of the petition, including all reserved costs, be taxed and paid in accordance with the Act.

I certify that this and the preceding fifteen (15) pages are a true copy of the reasons for judgment herein of the Honourable Mr Justice Spender.

~Gw~C-L ssocia te

Date: 21 December 1993.

Counsel for the applicant:  M Y J. A. Logan

Solicitors for the applicant: Dillons

Dates of Hearing: 20 October 1993

4 November 1993