Re Malouf, A.J. v Ex parte Interchase Corporation Ltd

[1991] FCA 863

IN THE FEDERAL COURT OF AUSTRALIA	)JUDGMENT NO. 8.k.3..	1 . 3 ~
GENERAL DIVISION	1

)	No. QB609 of 1991
1

ANDREW JOHN MALOUF

Debtor/Applicant

EX PARTE:  INTERCHASE CORPORATION LTD
Creditor/Respondent

CORAM :	HILL J
PLACE :	SYDNEY
DATED :	15 OCTOBER 1991

EX TEMPORE REASONS FOR JUDGMENT

The applicant, Mr Andrew John Malouf, applies to the court pursuant to s.l54(l)(a) of the Bankru~tcv Act 1966 (Cth) ("the Act") to annul the bankruptcy arising from the making of a sequestration order on 19 March 1991 in Brisbane, on the ground that that order ought not to have been made.

Evidence has been adduced by the applicant which makes it clear that, notwithstanding an affidavit of service apparently filed and read in the petition proceedings, the applicant was not served with a petition or supporting documents, and indeed was not at the premises where such personal service was supposed to have taken place. No evidence was called on the part of the petitioning creditor from the process server. It follows without more that the

sequestration order ought not to have been made.

It appears from the evidence that the applicant first became aware of the petition when solicitors for the petitioning creditor contacted him on or about 15 March 1991 and asked him whether he proposed to appear in court on 19 March in Brisbane. He was further contacted on 17 March and advised the person who contacted him that he had not been able to talk to his solicitor. On 18 March he spoke to his solicitor who told him he should let the court in Queensland know that he had not been served with documents and that he would not be there on 19 March.

Accordingly, a facsimile was sent to the Registry in Queensland stating that the applicant had no knowledge of the matter in court on 19 March and had not been served with bankruptcy documents. Notwithstanding this facsimile, which appears on the court file, a sequestration order was made on 19 March. It is not known whether the order was made notwithstanding the information communicated in the facsimile

or whether it was made without reference to it.

Notwithstanding the fact that I am satisfied that a sequestration order ought not to have been made, it is clear that S. 154(1) provides a residual discretion so that I should take into account other matters if they be relevant in determining whether or not to make an order annulling the bankruptcy.

A report has been prepared by Mr Caddy, the Official Receiver on behalf of the Official Trustee in Bankruptcy. Mr Caddy, who appears this morning, does not oppose the application for annulment. That report discloses that in his statement of affairs the bankrupt disclosed an unsecured liability to the petitioning creditor of $16,000 and no assets, although an amount of $3947.72 has been realised being moneys apparently held by solicitors in trust account.

There is a dispute as to the ownership of this money and also the ownership of some coins which were also received by the Official Trustee and are valued at some $5950.

Mr Caddy, in his report, indicates that in the

meantime a proof of debt has been received from the petitioning creditor which shows its claim to be one in the amount of $1,699,128. The claim has not, at this stage, been admitted to rank for dividend and apparently relates to rent payable throughout the term of a lease where the lessee was

presumably in default.

Solicitors for the petitioning creditor urge that I should not exercise the discretion in favour of the applicant. Attention was drawn to the fact that the applicant had been notified by the solicitors for the petitioning creditor of the hearing of the petition but had chosen not to attend.

Reference was also made to a decision of Lockhart J

in Re Florance: Ex Darte Turimetta Pro~erties Ptv Ltd (1979)

36 FLR 256 as well as to an decision of Einfeld J in Re Paul

paris Ran and Sarwan Sinah: Ex Darte Continental Seaaram Pty Limited (unreported, 23 September 1988). In both cases it is suggested that failure to serve a bankruptcy petition can be treated, for the purposes of r.195 of the Bankru~tcv Rules, or perhaps 8.306 of the Act, as a defect, relief from proof of which may be excused. In Re Florance, the debtor in fact appeared at the hearing which was before Lockhart J and argued all matters on that hearing. To that extent what his Honour there says demonstrates that, on the facts of that particular case, at least there could be no prejudice to the debtor in relieving the petitioning creditor from non-compliance with the rules. In the case of Re Paul Paris Ran, there was non- service not only of the petition but also of the bankruptcy notice and the case really proceeds on the basis that non service of the bankruptcy notice is of course a fatal defect

which cannot be cured. The other comments made are dictum.

I accept, however, that on the authority of what Lockhart J says in Re Florance, the court would have power to relieve a petitioning creditor from the consequences of service of a petition in an appropriate case. However, it seems to me that where the factual circumstances are such that the debtor has been advised by his solicitor effectively that he need not attend and does not attend, he is being deprived of the opportunity of putting to the court such matters as he may wish to put in opposition to the petition. I should say that it is not clear that there is anything that the applicant does want to put in opposition to the petition and in response to a question of mine as to whether it was intended, if the bankruptcy was annulled, to oppose the further hearing of the petition, the suggestion was that it was not.

Nevertheless, it does seem to me that if one weighs, on the one hand, the fact that the applicant has not been afforded the opportunity of putting any matter ultimately he may wish to put in opposition to the petition, against the fact that if the bankruptcy be annulled the petition may still proceed and ultimately a sequestration order be made against the estate of the applicant, so that if there is a matter of public interest in the applicant being examined the opportunity for that to happen has not been destroyed, merely deferred. For these reasons I propose to exercise the	discretion in favour of the applicant in making an order that	his bankruptcy be annulled. A consequential order will be
that the sum of $146 in disbursements of the Official Trustee be paid out of the money held in the estate prior to it being accounted for to the applicant before me.
There remains the question of costs. The problem has arisen because of the non-service of the petition on the applicant. Prima facie, the affidavit of service read in the petition proceedings was incorrect, the reasons for that incorrectness, of course, are not evident. While it is certainly not unreasonable that the petitioning creditor seek to oppose the annulment on discretionary grounds, that discretion has been ultimately exercised in favour of the applicant and I can see no reason why costs should not follow the event as in the ordinary way. Obviously, had the petitioning creditor opposed the application on the basis that there had been real service, the matter would have been clearer, but no such opposition was made. In these circumstances I would order the petitioning creditor to pay the costs of the application.

I exclude from the costs order the costs of the

first mention.

I certify that this and the
preceding five (5) pages

are a true copy of the Reasons

for Judament herein of his Honour
Mr ~istice	Hill

Asociate:&@

Date: 15 tober 1991

Counsel and Solicitors	M.R. Aldridge instructed by
for Applicant/Debtor:	Price Brent
Counsel and Solicltors	F. Kunc of Allen Allen & Hemsley
for Respondent/Creditor:
G.L. Caddy appeared for the Official Receiver
Date of Hearing:	15 October 1991
Date Judgment Delivered:	15 October 1991