Re Nath; Ex Parte Ghysels
[1996] FCA 173
•20 Feb 1996
C A T C H W O R D S
BANKRUPTCY - proceedings in connection with sequestration - creditor's petition - service of petition.
BANKRUPTCY - proceedings in connection with sequestration - acts of bankruptcy - failure to comply with bankruptcy notice - bankruptcy notice - whether installment order a final judgment or final order.
Magistrates Courts Rules 1960 (Queensland) r 198(9)
Bankruptcy Act 1966 - ss 40(1), 44, 52
Re Seckold (1933) 5 ABC 195
Re Agrillo (1977) 29 FLR 484
Re Padagas; ex parte Carrier Air Conditioning Pty Ltd (1977)
30 FLR 170
Re Florance; ex parte Turimetta Properties Pty Ltd (1979)
36 FLR 256
RE: ATISH PREM NATH (a.k.a. Atish Premnath Rathore) (Debtor); EX PARTE: CARLA GHYSELS (Petitioning Creditor)
No. QP 160 of 1995
SPENDER J
BRISBANE
20 FEBRUARY 1996
IN THE FEDERAL COURT OF AUSTRALIA )
GENERAL DIVISION )
No. QP 160 of 1995
BANKRUPTCY DISTRICT OF THE )
STATE OF QUEENSLAND )
RE:ATISH PREM NATH (a.k.a. Atish Premnath Rathore)
Debtor
EX PARTE:CARLA GHYSELS
Petitioning Creditor
MINUTES OF ORDER
JUDGE MAKING ORDER: Spender J
DATE OF ORDER: 20 February 1996
WHERE MADE: Brisbane
THE COURT ORDERS THAT:
The name of the debtor in the petition is to be amended by the addition of the words "also known as Atish Premnath Rathore".
A sequestration order be made against the estate of the debtor.
The petitioning creditor's costs of and incidental to the petition, including reserved costs, be taxed and paid in accordance with the Bankruptcy Act 1966.
NOTE: Settlement and entry of orders is dealt with in Rule 124 of the Bankruptcy Rules.
IN THE FEDERAL COURT OF AUSTRALIA )
GENERAL DIVISION )
No. QP 160 of 1995
BANKRUPTCY DISTRICT OF THE )
STATE OF QUEENSLAND )
RE:ATISH PREM NATH (a.k.a. Atish Premnath Rathore)
Debtor
EX PARTE:CARLA GHYSELS
Petitioning Creditor
CORAM: Spender J
DATE: 20 February 1996
PLACE: Brisbane
REASONS FOR JUDGMENT
This is a contested creditor's petition. It is unusual in one respect, in that the debtor, Atish Prem Nath, has indicated that yesterday he was minded to present his own debtor's petition, but today opposes the making of a sequestration order on the petition of the petitioning creditor. He does so on three grounds.
In a notice of intention to oppose the making of a sequestration order filed 23 May 1995, Mr Nath advanced two grounds: first, that he was undertaking steps to have the judgment debt on which the petition is based set aside on appeal, and secondly, the petition was not duly served in accordance with the requirements of the Bankruptcy Act 1966 ('the Act'). So far as the first round was concerned, it seems that Mr Nath applied for leave to appeal in respect of
the judgment debt on which the petition is based, but that that application for leave was unsuccessful.
Three bases are now put forward by Mr Nath in connection with his opposition to the making of a sequestration order. The first is based on an extract of his entry of birth which shows his name as Atish Prem Nath Rathore, showing his place of birth as Nasori, Fiji, and his date of birth as 7 December 1950. The disconformity between the name which appears on his entry of birth and in the petition really has little significance when regard is had to the fact that the name by which Mr Nath filed his intention to oppose is Atish Prem Nath, and an affidavit filed on 7 June 1995, by Mr Nath, uses that same name as appears in the creditor's petition. In addition, it is the same name which appears in the judgment on which the petition is founded and in the bankruptcy notice. It is plain therefore that whatever may be the name recorded in his entry of birth, Mr Nath is known as and has used himself the name Atish Prem Nath. There is nothing in this aspect of the matter.
The two further grounds on which Mr Nath relies are the claim which was advanced in May of last year that the petition was not duly served; and secondly, that as a result of an instalment order made yesterday, 19 February, the sequestration order ought not to be made.
If I could deal first with the question that arises out of the making of the instalment order. Rule 198 of the Magistrates Courts Rules 1960, Queensland, provides that a Court or a Registrar, on the application of a judgment debtor, may order that the judgment debt be paid by such instalments payable at such times as may be specified in the application. The rule provides that such an application by a judgment debtor may be made ex parte. The Registrar shall, as soon as practicable thereafter, give or send by post to the judgment creditor and the judgment debtor, notice of the order. The rule provides that where an application has been made by a judgment debtor, the judgment creditor can file a notice of objection and the court after hearing both the judgment debtor and the judgment creditor can then hear and determine the application by the judgment debtor for an order for instalment payments.
Rule 198(9) provides:
"Where the Court or the registrar makes an order under this section, the order of the Court or of the registrar shall, while it remains in force, operate as a stay of enforcement of the judgment in respect of which the order was made, except enforcement by way of a garnishee order made before the order under this section was made. "
If an instalment order had been made before the time for compliance with a bankruptcy notice had expired, the position would be that the judgment debt on which the bankruptcy notice was founded would not satisfy the description required by s 40(1)(g), namely, "a judgment or order the execution of which has not been stayed."
However, at the time of the issue and at the time for expiry of the time for compliance with the bankruptcy notice, the judgment debt was not a judgment which had been stayed. It follows then that noncompliance with the terms of the bankruptcy notice by Mr Nath constituted an act of bankruptcy and, in that respect, could properly found the creditor's petition.
Section 44 of the Act provides:
"(1) A creditor's petition shall not be presented against a debtor unless -
(a)there is owing by the debtor to the petitioning creditor a debt that amounts to $1,500 or 2 or more debts that amount in the aggregate to $1,500, or, where 2 or more creditors join in the petition, there is owing by the debtor to the several petitioning creditors debts that amount in the aggregate to $1,500;
(b)that debt, or each of those debts, as the case may be -
(i)is a liquidated sum due at law or in equity or partly at law and partly in equity; and
(ii)is payable either immediately or at a certain future time; and
(c)the act of bankruptcy on which the petition is founded was committed within 6 months before the presentation of the petition. "
Section 52 of the Act provides:
"(1) At the hearing of a creditor's petition, the Court shall require proof of -
(a)the matters stated in the petition (for which purpose the Court may accept the affidavit verifying the petition as sufficient);
(b)service of the petition; and
(c)the fact that the debt or debts on which the petitioning creditor relies is or are still owing,
and, if it is satisfied with the proof of those matters, may make a sequestration order against the estate of the debtor.
(2) If the Court is not satisfied with the proof of any of those matters, or is satisfied by the debtor -
(a)that he is able to pay his debts; or
(b)that for other sufficient cause a sequestration order ought not to be made,
it may dismiss the petition. "
The question that arises as a result of the making of the instalment order is whether the judgment debt satisfies the description in s 44(1), namely, whether it is a debt that is payable "either immediately or at a certain future time."
In Re Seckold (1933) 5 ABC 195 an order had been made by the Supreme Court of New South Wales under the Moratorium Act (NSW) 1930. That order was made after the debtor had committed an act of bankruptcy by failing to comply with a bankruptcy notice. The order of the Supreme Court was that payment of the judgment debt on which the bankruptcy notice was based was to be deferred so long as the debtor paid
£3 10s 0d per month in reduction of the debt on the first day of every month commencing from 1 February 1933.
There was a proviso that if a particular event happened, the whole of the debt should be payable forthwith. Lukin J, sitting in the Federal Court of Bankruptcy, said at 197:
"In this case, the Court has deferred the payment of the judgment debt to equal payments of a part of the debt on the first of every month commencing on the 1st February, 1933. Such deferment to pay converts, in my opinion, 'the immediately payable' into one payable 'at some certain future time'...The failure to pay on any particular month [or the happening of the specified event]...may,...in either case, accelerate the date of payment, but does not, it seems to me, make the judgment debt any the less payable at some certain future time. "
Similarly, in Re Agrillo (1977) 29 FLR 484, after the service and non-compliance with a bankruptcy notice, but before the return date of the petition, the applicant obtained from the assistant registrar of the District Court in New South Wales an order that the unpaid amount of the judgment debt be pid by instalments. A sequestration order was made against the estate of the applicant after the order was obtained from the assistant registrar. Subsequently, the applicant, who had not attended the bankruptcy proceedings, applied for annulment of his bankruptcy, one ground of that application being that when the sequestration order was made, the debt on which the petitioning creditor relied was not within the meaning of s44(1)(b)(ii), that is "payable either immediately or t a certain future time".
It was held by Riley J, sitting in the Federal Court of Bankruptcy, that the petitioning creditor's debt must not only be owing as at the date of the bankruptcy hearing but must also answer the description of being "payable either immediately or at a certain future time" as at the date of the bankruptcy hearing. He held that the order of the assistant registrar deferring payment converted the immediately payable debt into one payable "at a certain future time". And it was such a debt as at the date of the bankruptcy hearing. His Honour said at 489:
"In my opinion, the order is in substance and effect similar to that in Re Seckold and I should follow the decision in that case. "
Similarly, in Re Padagas; ex parte Carrier Air Conditioning Pty Ltd (1977) 30 FLR 170, Riley J held that an instalment order by reason of s 88(8) of the District Court Act 1973 New South Wales operates "as a stay of enforcement of the judgment" and had the order been operative at the time or issue or service of the bankruptcy notice (which was not the case in Re Padagas) the notice would have been bad.
Although both at the date of the presentation of the petition and at the date of its hearing, the creditor's debt must, in accordance with s 44, be payable either immediately or at a certain future time, s 44 does not require that the debt shall be one the execution of which has not been stayed. The stay did not defeat the petition. His Honour held that the making of an instalment order did not have the consequence that the debt was not a debt payable "at a certain future time" and that the petitioning creditor was entitled to a sequestration order.
In this particular case, the judgment debt is for the sum of $45,222.10. The order of the Magistrates Court made on 19 February 1996 is in the following terms:
"Pursuant to rule 198(4) of 'The Magistrates Court Rules, 1960,' I DO ORDER that the judgment debt in this action be paid to the abovenamed Judgment Creditor by instalments of $1000 per month, first payment to be made on or before 23rd February, 1996. "
The instalment order is in my view on all fours with the orders considered in the three cases to which I have earlier referred. The debt, in my opinion, answers the description of s 44(1)(b)(ii), namely, that is a debt payable at a certain future time.
The final matter relates to the claim that the petition was not duly served in accordance with the requirements of the Bankruptcy Act 1966.
Section 52(1)(b) requires that at the hearing of a creditor's petition, the Court shall require proof of service of the petition. Section 52(2) provides that if the Court is
not satisfied of proof of any of the matters referred to in s 52(1), it may dismiss the petition. Rule 15 of the Bankruptcy Rules, in the absence of an order otherwise by the Court, requires that service of a bankruptcy notice shall be effected on the debtor by delivering to the debtor personally a copy of the bankruptcy notice signed and stamped by the Registrar and that service of a creditor's petition shall be effected on a debtor by delivering an official copy of the petition, a copy of the affidavit verifying the petition and, where a registered trustee has consented to act as the trustee, as is the case here, a copy of that consent to the debtor personally.
There is a factual dispute between David Clarence Holder, who, at the times material to the purported service, was a licensed commercial agent, and Mr Nath, as to the circumstances which occurred on the morning of Saturday, 25 March 1995.
Mr Holder swears, in his affidavits and in his oral evidence, that he delivered the documents personally to Mr Nath and asked him, "Are you Atish Prem Nath, the debtor referred to in this petition" to which he replied, "Yes". His account is that on that morning he made a trip from his home at Manly to the Sunshine Coast. On this morning he went to a gate in the fence, which is approximately 1.5 metres high, and which was locked. He says that he pressed a button on an intercom system outside the gate and spoke to someone, and told that person that he had some documents to serve on Atish Nath, and the speaker replied that he would come to the gate. His account was that a small child and a person whom he recognised as Mr Nath came to the gate.
He formally asked him "Are you Atish Prem Nath, the debtor referred to in this petition?" although he knew him, and that Mr Nath replied "Yes", and that he handed the documents to Mr Nath, and he then said he had a discussion with Mr Nath in relation to an inground swimming pool situated on the property. And he says that he recalls specifically the service because he had then only a small process serving business and served all the documents himself. He made a special effort to arrive early on the Saturday morning on the Sunshine Coast, and that that was a particular trip which he recalls, and that he remembers vividly the details of the service on 25 March 1995.
Mr Nath, on the other hand, says that on this particular morning, while the intercom buzzer had sounded in his house, the service was not operating so as to be able to speak to the person who had pressed the button. He says that when he emerged from his house, documents had been given by Mr Holder to Mr Nath's 6 year old son, that the son had said to Mr Nath, "This man has a letter for you" and he received the document, which was in fact the petition and supporting material, from his son. He says that he was never asked whether he was the person referred to in those papers, but he does say that he had a conversation with Mr Holder concerning the swimming pool, and in particular, the pump of it, and at that time he had the documents in his hand.
It is invidious to make a conclusion as to these markedly different accounts. On the one hand, there was nothing in the way Mr Holder gave his evidence before me which cast any doubt on his account. On the other hand, there is Mr Nath's insistence that the documents were given by Mr Holder to his son and then by his son to him. There is a factor which should be noted. In cross-examination Mr Nath said that he did not see the documents being given by Mr Holder to his son. In his affidavit, however, filed on 7 June 1995, he says, in paragraph 17:
"I refer to paragraphs 5 and 6 of Mr Holder's affidavit and say that after hearing the intercom system buzz, indicating that there was someone at the front gate, I went out through the front door of the house and I observed documents passing from the possession of Mr Holder to my six (6) year old son, Sanjay. "
That inconsistency causes me to doubt the correctness of Mr Nath's account. However, in the circumstances here, particularly where Mr Nath knows and acknowledges that he knew Mr Holder and knew that he was a process server, it is unnecessary for me to make any definite finding as to which account I should prefer to follow. Even if the facts be as Mr Nath has sworn, the position, in my opinion, is such that, pursuant to r 195 of the Bankruptcy Rules, I should regard the petition as having been effectively served.
In Re Florance; ex parte Turimetta Properties Pty Ltd (1979) 36 FLR 256, it appeared that the process server had not personally served the debtor but had left the petition and supporting material with the debtor's secretary. She gave the petition and the supporting material to Mr Florance three days later. Lockhart J rejected the contention that those circumstances satisfied the requirements of the rules as to service. He said, at 263:
"The requirements of the rules as to service of bankruptcy petitions must be strictly complied with. The fact that the debtor's secretary handed him the petition some three days after she had received it from the process server engaged by the petitioning creditor does not constitute personal service of the petition upon the debtor. The fact that the petition came to his notice and into his hands does not mean that he was served personally with the petition. "
However, in that case, Lockhart J considered that it was an appropriate case to relieve the petitioning creditor from the consequences of non-compliance with the rules as to service of the petition. He said, at 264:
"The petition did come to the attention of the debtor on 26th March. He has appeared in these proceedings and was represented by counsel. There is no evidence of prejudice or injustice suffered by him because of the defective service. In my opinion this is an appropriate case to relieve the petitioning creditor from the consequences of non-compliance with the rules as to service of the petition: see r 195. If s 306 were applicable, and in my opinion r 195 is the more appropriate vehicle for granting relief, the section would operate to prevent any relevant invalidity."
His Honour held that any defect in service of the petition did not vitiate the proceedings.
Even if it be the case that the service occurred in the circumstances indicated by Mr Nath, there can be no argument that any prejudice was occasioned to him or any injustice suffered by him as a result of that manner of giving the documents into his possession. In those circumstances it is unnecessary to make any final and determinative view as to which account would be accepted. I am quite satisfied that in this case the petition came to the attention of Mr Nath on the morning of Saturday, 25 March 1995, that he received the documents on that morning and was aware that the person who had brought them to his home on the Sunshine Coast was a process server.
Even if I were to conclude in favour of the account of Mr Nath, this is clearly a case where the Court ought to relieve the petitioning creditor from any consequences of non-compliance with the rules as to service of the petition.
In those circumstances, I ought to make a sequestration order against the estate of Mr Nath. Mr Nath said quite candidly from the bar table that had it not been for making of the instalment order yesterday, it was his intention to have declared himself bankrupt if that were possible. There would have been difficulties in the way of that course, having regard to s 55(3A), which provides that:
"Where, at the time when a debtor's petition is presented under this section, a creditor's petition is pending against the debtor ... the Registrar must refer the debtor's petition to the Court for a direction to accept or reject it. "
There is no dispute as to the existence of the debt which underlies the petition. I am satisfied of the other matters of which the Act requires proof. On the entirety of the material before me I make a sequestration order against the estate of Atish Prem Nath. I note that Paul Sweeney, a registered trustee, has consented to act as trustee of the estate of Mr Nath in the event of a sequestration order being made against him. I order that the costs of and incidental to the petition, including any reserved costs, be taxed and paid in accordance with the Act.
The name of the debtor in the petition ought to be amended by the addition of the words "also known as Atish Premnath Rathore". I make an order in terms of the draft, which I initial, date, and place with the papers.
I certify that this and the preceding 13 (thirteen) pages are a true copy of the reasons for judgment herein of the Honourable Justice Spender.
Associate
Date: 20 February 1996
The debtor appeared in person.
Solicitor for the petitioning
creditor: Mr G Rodgers of
Gadens Ridgeway
Date of Hearing : 20 February 1996
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