Re McDonald, N. Ex parte Allen, J.B

Re: NEIL MCDONALD
And: JOHN BRUCE ALLEN
No. V P829 of 1992
FED No. 820
Bankruptcy

COURT

IN THE FEDERAL COURT OF AUSTRALIA

BANKRUPTCY DIVISION OF THE STATE OF VICTORIA
GENERAL DIVISION
Gray J.(1)

CATCHWORDS

Bankruptcy - Bankruptcy notice - service - whether personal service effected.

Bankruptcy Rules rule 15.

Re Ditford; Ex Parte The Commissioner of Taxation (1988) 19 FCR 347.

Re Hudson; Ex Parte G.E. Crane and Sons Limited (1990) 25 FCR 318.

HEARING

MELBOURNE

#DATE 23:9:1992

Counsel for the Debtor: Mr R. Lancey

Solicitors for the Debtor: Privitelli

Counsel for the Petitioning Creditor: Ms J. Davies

Solicitors for the Petitioning Creditor: John Matthies and Co.

ORDER

Petition dismissed.

Petitioning creditor pay the debtor's costs of the proceeding.

JUDGE1

GRAY J. The issue in this proceeding is whether service of a bankruptcy notice was effected. That service was attempted on Monday, 22nd July 1991 when the judgment creditor, John Bruce Allen, attempted to effect service of the bankruptcy notice on the debtor, Francis Neil McDonald. Rule 15 of the Bankruptcy Rules requires, unless otherwise ordered, that service of a bankruptcy notice be effected on the debtor by delivering to the debtor personally a copy of that notice, signed and stamped by the registrar.

Personal service for this purpose is a broader concept than handing a document to a person who accepts that document. It is inevitably broader, because it would be an irrational system which favoured the person who refused to accept the document. I follow the observations of Gummow J. in Re Ditford; Ex Parte The Commissioner of Taxation (1988) 19 FCR 347, at p 360, where his Honour said:

"I accept the submission by the respondent to the present

application that there may be delivery personally to the debtor of process within the meaning of r.15 of the Bankruptcy Rules even though the process has not been left in what Patteson J. described as the "actual corporal possession of the defendant". If the debtor were refusing to take such actual corporal possession of the process, but the process server informed the debtor of the nature of the process and left it before or near the debtor so that the debtor had unimpeded and immediate access to the

documents, that, in my view, should, in general, be sufficient to comply with r.15".

I note that that passage was cited with approval by Pincus J. in Re Hudson; Ex Parte G E Crane and Sons Limited (1990) 25 FCR 318, at pp 319-320, where his Honour followed it with some instances of what might constitute the delivery personally to the debtor of a bankruptcy notice. It is important to note that for service to be effective when the debtor refuses to accept the document, the debtor must be informed by the person attempting to effect service that there is an attempt to effect service of a bankruptcy notice and must be refusing to take actual possession of the document. In other words, the mere knowledge that there is a desire on the part of someone to serve a bankruptcy notice and a determination to make oneself unavailable for service might constitute grounds for an order for a substituted service, but will not convert what is not personal service into personal service.

In the present case, some background to the attempted service is necessary. It appears that the petitioning creditor obtained judgment in the County Court against the debtor for a substantial sum. An earlier bankruptcy notice was served and set aside because of an error in the calculation of the debt alleged to have been owing. The current bankruptcy notice was then issued. It was sent to solicitors acting on behalf of the judgment debtor. There is some allegation by Mr Allen that the solicitors for the debtor agreed to accept service, but a letter dated 28th May 1991, which those solicitors wrote returning the bankruptcy notice, indicates that they were under the impression that there had been an order for substituted service already made. Some attempts were made by Mr Allen to effect service on Mr McDonald and it is clear that Mr McDonald was aware that Mr Allen was trying to effect service of a bankruptcy notice on him. Mr McDonald does say that the attempts had ceased, that there was some gap in time and that he was under the impression that Mr Allen was awaiting the outcome of an appeal which had been lodged from the County Court judgment. That appeal has so far not been pursued to its conclusion, although it appears from what I have been told at the bar table that it has not been abandoned either.
In July 1991, there was a sheep show in progress at the Royal Melbourne Showgrounds. Mr Allen believed that Mr McDonald would be in attendance at that show at some time. There were visits to the showgrounds on Friday 19th and Saturday 20th July, looking for Mr McDonald. On the latter day, Mr Allen saw some sheep pens bearing the name under which Mr McDonald traded and also obtained a copy of a programme, which gave him some idea of a time when Mr McDonald would be likely to be in attendance.
Accordingly, on Monday 22nd July, Mr Allen and his secretary, Mrs Heaney, attended at the Meaklin Pavilion for the purpose of effecting service. There is some dispute on the material about the time at which that occurred but I do not know that it is altogether necessary for me to make a finding about that. There is conflict on the evidence on many points as to what occurred. In large part, I think, that conflict is explicable on the basis that what occurred took but an instant and it is easy with the passage of time for the recollections of people to become blurred. There is undoubtedly a considerable antagonism between Mr Allen and Mr McDonald but I doubt that that has induced either of them to lie deliberately as to what occurred. Rather I think that there has been some inevitable reconstruction with the passage of time and that to some extent each may have reconstructed the incident in the way in which he would have liked it to have occurred.
There is some common ground. Mr McDonald was talking to Mr Gary Armstrong and Dr Jim Watts in the pavilion. There were many other people and there were sheep in the pavilion at the time, so that there was some noise and activity. Mr Allen approached from behind Mr McDonald and to Mr McDonald's right. Mr Allen said something, the exact nature of which is in dispute. Mr McDonald hurried away. The bankruptcy notice or a copy thereof fell to the ground. Beyond those areas of common ground, all is in conflict.
Mr Allen's account is that Mr Mcdonald was standing still, that Mr Allen touched him on the shoulder and used the words, "Hi, Neil, I have a bankruptcy notice for you". According to Mr Allen, Mr McDonald then turned around. Mr Allen attempted to insert the bankruptcy notice into the top of Mr McDonald's sports Jacket. Mr McDonald ran away and the document fell to the ground. As the document fell to the ground, Mr Allen shouted after him, "That's good service".
Mr McDonald's version is that, before Mr Allen reached him, he was already walking away, having concluded his conversation with Mr Armstrong and Dr Watts. According to Mr McDonald's version, Mr Allen said from behind him, "Neil, I've got something for you". Mr McDonald then half turned, saw that it was Mr Allen and made his way quickly into the crowd by a brisk walk. He was not offered the document, according to him.
Mrs Heaney, who is an employee of Mr Allen, supports his evidence to some degree. An exception is that she did not hear what Mr Allen said as he approached Mr McDonald, a matter which is somewhat crucial to the case. What occurred in relation to the document is not described by Mrs Heaney as an attempt to insert the document into Mr McDonald's sports coat, but rather a touching on the chest with the bankruptcy notice.
Mr Armstrong, a former employee of Mr McDonald and now an employee of the receiver who took over a property formerly run by Mr McDonald, supports Mr McDonald's version. He adds that as Mr McDonald was walking briskly away, Mr Allen threw the document after him and it then landed on the ground. Dr Watts was not called to give evidence and did not swear an affidavit. His absence is explained in part by his working in Western Australia until early this month.
In the result, it seems to me that the probabilities are partially in accordance with the evidence of each side. I accept the evidence of Mrs Heaney, and therefore of Mr Allen, as to the position of Mr McDonald and the touch of the shoulder. That is to say I accept that Mr McDonald was standing and still with Mr Armstrong and Mr Watts, even if he had completed his conversation. I accept that Mr Allen touched him on his right shoulder with Mr Allen's left hand and that Mr McDonald half turned towards Mr Allen. I do not accept that he turned fully. I also accept Mrs Heaney's description that Mr McDonald placed his arms rigidly by his sides. Whether he did that consciously or not does not seem to me to matter, but it had the effect of robbing Mr Allen of any opportunity to place the document in or on Mr McDonald's hands or arms.
As to what was said, which is really crucial because in order to establish good service the petitioning creditor must establish that the debtor understood that an attempt was being made to serve a bankruptcy notice, I accept the evidence of Mr McDonald and Mr Armstrong. That is to say that Mr Allen did not say the words "bankruptcy notice" but said the word "something". I accept this because I am persuaded of the truth of Mr Armstrong's observation that if the word "bankruptcy" had been used he, as an employee of Mr McDonald, would have been most concerned. I accept that Mr Allen did touch Mr McDonald on the chest with the document and did not throw it at his retreating figure, as Mr Armstrong said. I am impressed on that aspect of it by the vividness of Mrs Heaney's recollection as to what occurred.
Mr McDonald then quickly lost himself in the crowd. It may well be that there was a shout of "That's good service" from Mr Allen. No objection was taken to that as a self-serving statement; perhaps if objection had been taken, the evidence would have been admissible as part of the res gestae, but no great weight should be attributed to it, given that Mr Allen, although a solicitor of some years of practice, seems to have little experience or understanding of the requirements of effecting service. In other words, it may be that, having touched Mr McDonald on the chest with the document, Mr Allen believed that he had in some way effected good service. I am of the contrary view. I do not think that touching Mr McDonald on the chest with the document in circumstances where it had not been made clear to Mr McDonald that what was being given to him, or attempted to be given to him, was a bankruptcy notice constituted delivering that notice to him personally. I find that there was no delivery personally to him of that document within the meaning of bankruptcy rule 15, or within the extended meaning of that concept referred to in the passage from the judgment of Gummow J., to which I have referred.
The bankruptcy notice not having been served, there is no foundation for the creditor's petition based on it. The petition must therefore be dismissed.
The order I make is as follows:

1. The petition is dismissed.

2. The petitioning creditor pay the debtor's costs of the proceeding.

[1992] FCA 820

23 SEPTEMBER 1992