Re: Mills, M.L. v Ex parte: Bondor Pty Ltd

[1991] FCA 364

Re: MAUREEN LOUISE MILLS
Ex Parte: BONDOR PTY LIMITED
No. W 1683 of 1990
FED No. 364
Bankruptcy - Practice and Procedure

COURT

IN THE FEDERAL COURT OF AUSTRALIA

BANKRUPTCY DISTRICT OF THE STATE OF NEW SOUTH WALES
GENERAL DIVISION
Burchett J.(1)

CATCHWORDS

Bankruptcy - application for annulment on the ground that none of the statement of claim in the District Court, the bankruptcy notice, and the bankruptcy petition had been duly served.

Practice and Procedure - service of District Court proceedings under the Business Names Act 1962 (NSW) - certified mail not in fact delivered - whether deemed good service - whether District Court judgment a nullity - swearing of affidavit of service and duties of process server.

Bankruptcy Act 1966 s. 154

Business Names Act 1962 (NSW) s. 31

Interpretation Act 1987 (NSW) s. 76

HEARING

SYDNEY

#DATE 18:6:1991

Counsel for the Applicant: Mr N.A. Confos

Solicitors for the Applicant: Messrs Otto Stichter and Associates

Counsel for the Petitioning
Creditor: Mr C.R. Newlinds

Solicitors for the Petitioning
Creditor: Messrs Kemp Strang and Chippindall

ORDER

The bankruptcy of the applicant, Maureen Louise Mills, be annulled.

The petitioning creditor pay the applicant's costs.

Note: Settlement and entry of Orders is dealt with in Rule 124 of the Bankruptcy Rules.

JUDGE1

Maureen Louise Mills ("Mrs Mills") was made bankrupt by an order of the court pronounced on 10 September 1990. By an application which was filed on 12 December 1990, she now seeks an annulment under s. 154 of the Bankruptcy Act 1966 on the ground that the sequestration order ought not to have been made. The case is remarkable because the evidence called in support of the application suggests that none of the three separate documents required to be served upon her, in the progress of the creditor's claim against her towards her ultimate bankruptcy, ever reached Mrs Mills. The documents in question were the initiating process in the District Court of New South Wales where, Mrs Mills not having appeared, judgment was entered against her; the bankruptcy notice based on the District Court judgment; and the creditor's petition upon which the sequestration order was made.

1. To go back to the beginning, the District Court process was sent by certified mail addressed to Mrs Mills at her place of business, which was also her home. This was done in reliance on s. 31 of the Business Names Act 1962, Mrs Mills having registered the name "Ashbury Builders and Renovations" under the provisions of that Act as a business name. Both the legislation constituting the District Court and the legislation providing for business names have undergone considerable changes since the decisions in Varvaressoss v. Carroll (1936) 53 WN (NSW) 222 and Kent Remoulds Pty Ltd v. Collibee (1948) 65 WN (NSW) 174 which are referred to in Watson and Bartley on Criminal Law in New South Wales vol. 2 at 548/3, and no argument was addressed to me suggesting that service in accordance with the Business Names Act was, in itself, unsuitable for process otherwise governed by the rules of the District Court. However, evidence was tendered, which I accept, to demonstrate that the certified mail in question was never in fact delivered to Mrs Mills or to the relevant address, but was returned by the post office to the agent of Bondor Pty Limited. It was then submitted that, although the Business Names Act authorised service by certified mail, if in fact a document was shown never to have been delivered, it could not be deemed to have been served. The circumstances proved were that the envelope containing the District Court process was posted by certified mail on 19 September 1988, was held for some time at the Canterbury post office without being claimed by Mrs Mills, and was received back by the petitioning creditor's agent, Fosters Mercantile Agency, on 3 November 1988. Whether because it was entirely overlooked or for some other reason, the fact that it had been returned undelivered was not disclosed to any court until after the commencement of the proceeding for annulment. Assuming correct procedure was followed by the post office, cards should have been left at Mrs Mills's address requesting her to call for a certified letter at the post office, and endorsements on the envelope are consistent with this procedure; however the leaving of such a card is, of course, not equivalent to delivery of the letter, and would not have conveyed any information about the document within the envelope. There is evidence suggesting that Mrs Mills may have been overseas during the relevant period.

2. The pertinent provisions of s. 31 of the Business Names Act are to be found in subs. 2, as follows:
   

"Service of any communication or notice or process on any person or persons carrying on business under a business name: . . .

(b) by sending it by registered post, or certified mail service, addressed to such person or persons at the place where business is carried on by such person or persons, shall be deemed to be personal service on such person or persons."

Section 31(2) should be read with s. 76 of the Interpretation Act 1987 (NSW), which provides:

"If an Act or instrument authorises or requires any document to be served by post (whether the word `serve', `give' or `send' or any other word is used), service of the document -

(a) may be effected by properly addressing, prepaying and posting a letter containing the document; and

(b) shall, until the contrary is proved, be taken to have been effected at the time when the letter would have been delivered in the ordinary course of post."

Reference may also be made to Part 8 r. 5 of the District Court Rules, sub-r. 1 of which reads:

"Where service of any document has not been personal, and the Court is satisfied on the evidence before it that the service did not come to the knowledge of the party within a reasonable time, or on that evidence is in doubt, the Court shall not allow any fresh step in the proceedings to be taken against the party, but shall adjourn or strike out the proceedings, or order fresh process to issue, as to it may seem just."

If the bankruptcy is annulled, Mrs Mills, through her counsel, has indicated that she would seek to have the District Court judgment set aside in reliance on this rule. She is, of course, unable to institute proceedings to that end whilst the sequestration order stands.

1. I was referred to a number of authorities in support of the proposition that service by certified mail, in reliance upon provisions expressed in terms such as those of s. 31 of the Business Names Act as amplified by s. 76 of the Interpretation Act, will not be good service if the document in question is proved not to have been delivered. See Re Ocean Distributors Pty Ltd (1990) 2 ACSR 486; Re Rustic Homes Pty Ltd (1988) 13 ACLR 105; Deputy Commissioner of Taxation v. Abberwood Pty Ltd (1990) 19 NSWLR 530; and see Fancourt v. Mercantile Credits Ltd (1983) 154 CLR 87 at 96, where the joint judgment of the High Court referred to a line of English cases the effect of which
   

"appears to be that proof of non-delivery means that service cannot be deemed to have taken place ... at the time of delivery in the ordinary course of the post and cannot be established as having taken place at any other time. The consequence is that where it is necessary to establish service at a particular time, proof of non-delivery is as effective as proof of non-service, notwithstanding that service by post is in the circumstances permitted and the requirements of the Interpretation Act (this is a reference to the United Kingdom Act from which the provision presently in question was derived) are observed ... ."

As a consequence, the judgment in the District Court was at all times liable to be set aside. See, in addition to the abovementioned cases, Re Anasis; Ex parte Total Australia Ltd (1985) 63 ALR 493 at 495 et seq.; India Videogramme Association Ltd v. Patel (1991) 1 WLR 173.

1. Although there is authority to support the proposition that a decision of an inferior court, as the District Court is, given against a party who has not been served with notice of the proceeding, may have been given "entirely without jurisdiction" and may thus be a nullity (see per Latham C.J. in Cameron v. Cole (1944) 68 CLR 571 at 584, and see too the comments of Rich J. in the same case at 590-591), there is also authority tending to the contrary. In Cameron v. Cole at 599, McTiernan J. said:
   

"The subject matter of the first sequestration order is so plainly within the jurisdiction of the Court that I think it is not possible to treat the order as being a nullity until the order of annulment was made by the Court. Although it was shown upon the application for this order of annulment that the appellant did not receive notice of the hearing of the petition, the Court did not go beyond its jurisdiction in making the sequestration order. It was within its jurisdiction to determine conclusively (subject only to appeal) whether the conditions precedent to the exercise of its power to make the sequestration order were fulfilled."

It is true that McTiernan J., unlike Latham C.J., considered the Federal Court of Bankruptcy to be a superior court (as did the majority of the High Court). However, the point of the passage I have cited is that the court had power to determine conclusively whether conditions which limited its jurisdiction in bankruptcy were fulfilled. In The Queen v. Gray; Ex parte Marsh (1985) 157 CLR 351 at 394, Dawson J., discussing the remedy of prohibition for excess of jurisdiction, stated:

"As Dixon J. so clearly pointed out in Parisienne Basket Shoes Pty Ltd v. Whyte (1938) 59 CLR 369 at 391, even an inferior court may be empowered to determine the facts upon the existence of which its jurisdiction depends. Prohibition will not then lie and ordinarily appeal will be the means to correct a wrong determination. Of course, if the legislature does make the jurisdiction of a court contingent upon the actual existence, as opposed to the court's determination, of a state of facts, then the proceedings of the court will remain susceptible to collateral attack by way of prohibition. But, as Dixon J. observed, such a situation is so inconvenient that legislation will be construed so as to avoid it unless it is clearly intended."

Nevertheless, in Taylor v. Taylor (1979) 143 CLR 1 at 7-8 Gibbs J. (with whom Stephen J. agreed) cast no doubt upon the distinction, as to the effect of an order of an inferior court made in the absence of a party not duly served, which had been taken by Latham C.J. and Rich J. in Cameron v. Cole.

1. But, for the applicant, it was not argued that the bankruptcy notice was founded on a judgment which was a nullity, so that the sequestration order ought for that reason not to have been made, and should now be annulled. Cf. Re Zagoridis; Ex parte Q'plas Group Pty Ltd (1990) 27 FCR 108. The ineffectiveness of the attempt to serve the proceedings in the District Court was relied on rather for the inferences which could be drawn from it in relation to what ensued. The next step was the issue and alleged service of the bankruptcy notice. This was then followed by the presentation and alleged service of the creditor's petition. Both these documents were sent to a process server for service on Mrs Mills. In the proceedings upon the petition, the petitioner relied on affidavits of service which were sworn by one Bernard McGuire. With regard to the bankruptcy notice, Mr McGuire deposed:
   

"1. On Friday the 16th day of February 1990 at 1.45 o'clock in the afternoon I served Maureen Louise Mills ... with the Bankruptcy Notice herein by delivering a true copy thereof ... to her Personally at 43 Melville Rd Ashbury ... .

2. I identified the person I served as the said Maureen Louise Mills by asking `Are you Maureen Louise Mills named as debtor?' she (sic) replied `Yes I am thanks'".

As regards the creditor's petition, Mr McGuire deposed:

"1. On Sunday the 12th day of August 1990 at 9.45 o'clock in the forenoon I served Maureen Louise Mills ... with the ... petition by delivering to her personally at 43 Melville Rd Ashbury an official copy thereof ... .

2. I identified the person I served as the said Maureen Louise Mills by asking `Are you Maureen Louise Mills named as debtor in this notice?' she (sic) replied `Yes I am thanks'".

1. Mrs Mills having denied in this application that she ever received either document, Mr McGuire swore a further affidavit. In that affidavit, he confirmed his earlier assertion of service of each of the documents, but provided a different version of the conversation at the time of each service. In his last affidavit, he gave the following account of the service of the bankruptcy notice:
   

"At the time of service, she (i.e. Mrs Mills) was attending to a vehicle in the driveway to the side of the front of the premises. ... At the time of service, I approached Mrs Mills and said to her:

`Are you Maureen Louise Mills?'

She replied:

`Yes.'

I then said:

`I have a Bankruptcy Notice for you.' I then handed the Bankruptcy Notice to her which she accepted without response. She accepted the document but did not respond any further."

As regards the service of the creditor's petition, Mr McGuire related:

"On 12th August 1990 at approximately 9.45 a.m. I attended the Debtor's premises at 43 Melville Road, Ashbury. On parking my vehicle in the street outside the premises, I noticed a Mercedes-Benz vehicle parked kerbside out the front of the house with personalised number plates with the initials `LM'. I do not recall the other numbers on the licence plate but I do remember that the initials `LM' stood out. ... I then proceeded to the premises and I knocked on the front door of the house and a female appeared at the door. That female then opened the door. I approached her and asked:

`Are you Maureen Louise Mills?'

She replied:

`Yes I am.'

I then made the following statement:

`I have a Creditor's Petition for you.' I then handed her the Creditor's Petition which she accepted without comment. She then accepted the document without making any further comment. ... To the best of my memory, the Debtor's home was a freestanding cottage with a driveway to the side of the front of the premises and I may have seen a carport and garage to the rear of the premises. ... On the occasion I served the Debtor with the Bankruptcy Petition, I identified her as being the same person I had served previously with a Bankruptcy Notice."

When Mr McGuire was cross-examined, the curious differences in the accounts of the conversations were explained somewhat startlingly. According to Mr McGuire, it was his practice, after serving process, to make notations on a document which was headed "COMMISSION SHEET", and to leave the commission sheet at his office where a typist would prepare an affidavit of service. Since the commission sheet did not record any conversation, unless exceptionally, and at any rate not in the present case, but only the name and address of the party served, the date and time of service, and whether service was personal at the place of abode or business of the subject, any accuracy in respect of the conversation alleged to have occurred could only have been accidental. That conversation was the original work of the typist. Process servers should understand that the entire structure of justice, in any particular case, may depend upon what was said and done when an initiating document was purportedly served. Problems of identity do arise, and statements made may be vitally important. Courts rely on affidavits of service, and are entitled to expect the completion of them to be treated with seriousness.

1. I think it is fair to say that Mr McGuire's demeanour, when he was cross-examined, did not suggest that he was deliberately attempting to mislead the court. However, in this case there is credible evidence (to which I shall refer) suggesting that Mrs Mills was not at home on either of the occasions in question. It is therefore necessary to ask oneself, the affidavits of service being virtually useless for the purpose of refreshing Mr McGuire's memory, whether his present recollection is at all reliable. The events happened some time ago, and he served, it appears, many documents. There was nothing memorable about this bankruptcy notice or this petition. A diary was produced by Mr McGuire, containing bare details of name, address, and dates, relevant to service of each document, but even this raised a question. The address shown for service of the creditor's petition, written in his own handwriting, was 53, not 43, Melville Rd Ashbury. There was no evidence concerning the nature of the premises at 53 Melville Road, nor as to any persons who might be thought likely to have been present if service had been attempted at that address. On the evidence, the diary would have been with Mr McGuire at the time in his car and, if he served the creditor's petition at the right address, it is curious that he did not correct the error then and there. Several conflicts of detail concerning the circumstances of service also emerged in the course of Mr McGuire's oral evidence. Perhaps more significantly, he gave evidence of attending again quite recently at Mrs Mills's home to serve a subpoena in connection with the present proceedings. His evidence was that, on that occasion, she was out at the front of the premises, and he asked her: "Are you Maureen Louise Mills?" to which she replied "Yes." He gave evidence that he recognised her as the person he had served on the two previous occasions. If so, it seems to me a little curious that, knowing the question whether he had served her was in issue, he behaved, on this occasion, as if he was not in fact confident of her identity. I would have expected that a person who was certain of the truth of his previous affidavits, and actually had a recollection of the lady, would have been more likely to challenge her directly by some such question as: "Do you remember me?".

2. For their part, Mrs Mills and her husband gave evidence, supported by two independent witnesses, that they were enthusiastic devotees of the sport of go-cart racing, Mr Mills being the secretary of the body which organised it, and that on both occasions she had been absent from home at go-cart meetings. It is, of course, in the nature of evidence of that kind that any independent confirmation may be criticised on the footing the witness could easily be confused about dates, having no particular reason for vivid recall of the day in question. As against that, the evidence made it clear that both Mr and Mrs Mills were in the habit of attending on almost every occasion when go-cart events were organized, so that there is an inherent probability that she was not at home on these particular days. Also, one of the days was not a normal racing day, but a special day, and on that day tests were carried out on a new Italian go-cart which Mrs Mills had purchased for her son. I was favourably impressed by Mrs Mills's demeanour, and also by that of the independent witness Mr Voskuilen.

1. It is true that there were errors in the evidence called for Mrs Mills, as well as in that called on behalf of the petitioning creditor. Evidence concerning Mrs Mills's assets was not very satisfactory, particularly evidence given by her husband. It is clear that he was the real decision maker in her affairs, and that he had treated the petitioning creditor cavalierly. However, there is no reason at all to doubt that there was a genuine dispute concerning the amount of the debt alleged by the petitioning creditor and that, if process had actually been served, both the proceedings in the District Court and those in this court would have been defended. Mr and Mrs Mills had a solicitor who was, at relevant times, handling other matters on their behalf in connection with their business. They were not the kind of people who might have been expected to receive a bankruptcy notice, and then a petition, and be unable to make up their minds what to do about the alleged debt.

2. There are various side issues raised by the evidence, which I have considered but do not think it necessary to detail here. I should mention there was evidence from a former employee of the petitioning creditor to the effect that Mr Mills, shortly after the alleged service of the bankruptcy notice and again shortly after the alleged service of the creditor's petition, had made statements consistent with the bankruptcy notice and petition having been received. However, I did not find the witness convincing, and I am not persuaded that the statements were in fact made.

3. In the end, there are several considerations which I find compelling. I think it is very unlikely that if Mrs Mills had been served with the bankruptcy notice, clearly referring, as it did, to a District Court proceeding of which she had undoubtedly never heard, she would have done nothing about it. Neither Mr nor Mrs Mills struck me as a person who would have stood idle in those circumstances. There was the plainest reason to repudiate any liability to make a payment in respect of the District Court judgment referred to in that notice. They were conducting a fairly substantial building business, a notoriously litigious activity, and they had a solicitor readily available to them. The same considerations apply to the creditor's petition. They were not, at that stage, debtors with no money to pay for legal assistance, since the evidence is that their counsel in the present application had been briefed at that very time in another matter on their behalf. When there are added, to the consideration I have been explaining, the inevitable doubts thrown up by the evidence of the process server, and the weight of the case made by Mr and Mrs Mills concerning the activities at a considerable distance from her home on which, according to that evidence, she was engaged on the days in question, I think the probabilities favour acceptance of her account of the matter. I have not overlooked that she failed to call evidence from her son to support her own evidence, but she did call independent witnesses; bearing in mind the principle stated in Jones v. Dunkel (1959) 101 CLR 298, I am still prepared to accept, on the balance of probabilities, that Mrs Mills was not served with either the bankruptcy notice or the creditor's petition.

4. For these reasons, the bankruptcy must be annulled. I was asked to make an order, such as was made in Cameron v. Cole (supra), setting the petition down for further hearing. However, my conclusion that the bankruptcy notice was not served makes this quite inappropriate. Furthermore, there remains the problem with regard to service of the District Court process. Plainly, the appropriate course is now for Mrs Mills's application to set aside the default judgment to be brought on for hearing, so that the true extent of any liability incurred by Mrs Mills to the petitioning creditor can be determined. The petitioning creditor must pay the costs of the application. It may perhaps have a claim against the process server, but as between the petitioning creditor and the applicant, the applicant is entitled to her costs.