Re Taylor, K.D. v Natwest Australia Bank Ltd

[1992] FCA 291

Q 1 / 42

JUDGMENT NO. 2 ........ ... ........ ..- -

LIMITED DISTRIBUTION

IN THE FEDERAL COURT OF AUSTRALIA )

1

NEW SOUTH WALES DISTRICT REGISTRY ) No. NP 2568 of 1991

)

GENERAL DIVISION )

BETWEEN:  KENNETH DUDLEY TAYLOR

Debtor

AND:  NATWEST AUSTRALIA BANK LTD

27 ~pril 1992

REASONS FOR JUDGMENT

LOCKHART J.

This is the hearing of a petition for seq

estate of Kenneth Dudley Taylor. The petition alleges two acts of bankruptcy in the alternative. The first is that the debtor within six months before the presentation of the petition falled either to comply with the requirements of the bankruptcy notice served on him or to satisfy the Court that he had a counter claim set off or cross-demand of the requisite kind. The alternative act of bankruptcy is that the debtor within six months of the presentation of the petition left Australia and remained outslde Australia with the intention of defeating or delaying his creditors.	The petition has been read, and counsel for the petltloning affidavit verifying the petition of Kenneth Henderson Lalng,	creditor, Natwest Australia Bank Limited, seeks to read the
sworn 12 July 1991. Objection is taken by counsel for the debtor to certain of the contents of paragraph 2 of that affidavit, namely, the statement in these terms:

"The s e v e r a l s t a t e m e n t s c o n t a i n e d i n

paragraphs 1 , 2 and 3 o f the first c l a i m i n

the s a i d Peti t ion a r e w i t h i n m y own

knowledge t r u e . "

Objection is not otherwise taken to the contents of that

paragraph. I go then to paragraph 1 which is described in the petition as the first claim and it asserts:

" 1 . The d e b t o r was a t the d a t e o f the

commiss ion	o f	the	a c t	o f	b a n k r u p t c y
s p e c i f i e d	i n	paragraph	4	o f	th is

p e t i t i o n ,	o r d i n a r i l y	r e s i d e n t	i n
A u s t r a l i a .

4 . The d e b t o r , w i t h i n s ix mon ths b e f o r e

the	p r e s e n t a t i o n	o f	this	p e t i t i o n ,
commi t t ed	the	f o l l o w i n g	a c t	o f
b a n k r u p t c y	n a m e l y	t h a t	the	d e b t o r

f a i l e d o n o r before 14 June 1991,

either	t o comply w i t h	the r e q u i r e m e n t s
o f a	B a n k r u p t c y N o t i c e deemed	s e r v e d on

h i m o n 2 4 May 1991, or t o s a t i s f y the

C o u r t t h a t the d e b t o r had a c o u n t e r -

c l a i m , s e t - o f f or cross demand equa l t o

or e x c e e d i n g the sum s p e c i f i e d i n

paragraph ( a ) o f the B a n k r u p t c y

Notice. "

Then I turn to what is called in the petition "In the alternative, the second claim", under which paragraphs 1 and 4 read as follows:

" ( l ) The d e b t o r was a t t h e d a t e o f t h e

commission o f the a c t o f bankrup t cy

s p e c i f i e d i n paragraph 4 o f this

p e t i t i o n	o r d i n a r i l y	r e s i d e n t	i n
A u s t r a l i a .

( 4 ) The d e b t o r , w i t h i n s i x months o f t h i s

p r e s e n t a t i o n p e t i t i o n , committed t h e f o l l o w i n g a c t o f bankrup t cy namely t h a t the d e b t o r l e f t A u s t r a l i a on 19 March

1991 and remains o u t s i d e A u s t r a l i a w i t h

t h e i n t e n t i o n t o d e f e a t or d e l a y h i s

c r e d i t o r s . "

S e c t i o n 47(l)(b) of t h e Bankruptcy Ac t 1 9 6 6 ( " t h e A c t " )

provides :

" A c r e d i t o r ' s p e t i t i o n s h a l l be v e r i f i e d by

t h e a f f i d a v i t o f a person	who h a s knowledge
o f	t h e f a c t s . ''

S e c t i o n 52 of t h e A c t s t a t e s :

"52 ( 1 ) A t t h e h e a r i n g o f a c r e d i t o r ' s

p e t i t i o n , t h e Court s h a l l r e q u i r e proof o f -

( a ) t h e m a t t e r s s t a t e d i n t h e p e t i t i o n ( f o r

which purpose t h e Court may accep t t h e

a f f i d a v i t v e r i f y i n g t h e p e t i t i o n a s

s u f f i c i e n t ) ;

(b) service o f the p e t i t i o n ; and

( c ) t h e f a c t t h a t t h e deb t or d e b t s on

which t h e p e t i t i o n i n g c r e d i t o r relies

i s o r a r e s t i l l owing,

and, i f i t i s s a t i s f i e d w i t h t h e proof o f

t h o s e m a t t e r s , may make a s e q u e s t r a t i o n

o r d e r a g a i n s t t h e e s t a t e o f t h e deb to r .

Rule 12(3)(b) provides:

" A t the	t i m e when	a p e t i t i o n	i s f i l e d ,	t h e
p e t i t i o n i n g	c r e d i t o r	s h a l l	f i l e	the

a f f i d a v i t v e r i f y i n g t h e p e t i t i o n	required by
paragraph	4 7(l) (b) o f t h e A c t . "

There is no prescribed form for the affidavit verifying the petition; but as has been observed more than once, the number of forms prescribed in schedule 1 to the bankruptcy rules are inadequate, at least, in number. Accordingly, the Inspector General approved and recommended for use by registrars, offlcial receivers and trustees, and no doubt for the benef~t of practitioners, forms that are contained in, what is called, Llst A.

The forms in List B were essentially recommended to members

of the legal profession as well as bankruptcy officials. Ne~ther
of those classes of forms has any legislative force, but they are
a useful guide to the profession and to registrars, offlcial

receivers and trustees, of forms to be employed where appropriate	and in the absence of a prescr~bed form. Two forms appear to be
relevant for present purposes and they appear in List B. One is form B4 which is styled "Affidavit Verifying the Pet~tion" and the other is fonn 5, appearing at page 24,145 of McDonald Henry
and Meek, Austra l ian Bankruptcy Law and P r a c t i c e , 5th edltion.
In R e Will iams (1968) 13 FLR 10 Gibbs J, then a Judge of the Federal Court of Bankruptcy, cons~dered a question substantially
the same as the question I am considering today, though it arose under the Bankruptcy Act 1924. His Honour said (at 22, 23):

"However, a1 though the e v i d e n c e i n s u p p o r t

o f a s e q u e s t r a t i o n o r d e r may be g i v e n by

a f f i d a v i t , t h a t d o e s not mean t h a t the o r d i n a r y r u l e s o f a d m i s s i b i l i t y a r e r e l a x e d o r t h a t a f f i d a v i t s c o n t a i n i n g h e a r s a y

s t a t e m e n t s may be u s e d . The p e t i t i o n m u s t

be s tr ict ly proved , by a d m i s s i b l e e v i d e n c e ,

and the a f f i d a v i t s i n s u p p o r t o f the

p e t i t i o n m u s t be the a f f i d a v i t s o f p e r s o n s

who c a n swear t o the s t a t e m e n t s c o n t a i n e d therein o f their own knowledge e x c e p t t h a t where there i s a l a r g e b u s i n e s s or company

p r o o f o f non-payment o f the d e b t may be

g i v e n i n f e r e n t i a l l y a s the r e s u l t o f the

genera l e v i d e n c e o f a per son who h a s

i n q u i r e d and b a s e s h i s n e g a t i v e e v i d e n c e on

the r e g u l a r c o u r s e o f r e c o r d i n g payments and

w h a t e v e r other r o u t i n e i n f o r m a t i o n i s

r e l e v a n t	( E b e r t	v	The	Union	T r u s t e e C o .	o f
A u s t r a l i a	L t d .	( 1 9 6 1 )	105	CLR	327	a t p .

332). In the p r e s e n t c a s e the a f f i d a v i t s

were founded on h e a r s a y , a l t h o u g h some o f

them were e x p r e s s e d	i n a	form	t h a t d i d not
r e v e a l	th is f a c t .	The e v i d e n c e on	which the

s e q u e s t r a t i o n o r d e r was founded was

i n a d m i s s i b l e . The q u e s t i o n i s w h e t h e r th i s

i s s u f f i c i e n t r e a s o n t o annul the

s e q u e s t r a t i o n o r d e r . "

One of the cases to which Gibbs J. referred in his judgment was Re Cohen E x P a r t e The Bankrupt v I n l a n d Revenue Commiss ioners

& Anor . [l9501 2 All ER 36, in particular per Sir Raymond

Evershed M.R. at 37, who said much the same as Gibbs J said in

Re W i l l i a m s .

The core of the first alleged act of bankruptcy is that the debtor was ordinarily resident in Australia at the date o f its commission. Central to the alternative act of bankruptcy is the

assertion that the debtor was at the date of the commission of the act of bankruptcy ordinarily resident in Australia (paragraph

1) and the assertion that the debtor within six months of the

presentation of petition remained outside Australia with the

intention to defeat or delay his creditors (paragraph 4 ) .

The facts which underpin those assertions and which establish them must be proved in the manner described by the authorities. Clearly, the statements made in Mr Laing's affidavit fall far short of that. Accordingly, the Court rejects so much of paragraph 2 of Mr Laing's affidavit as purports to verify paragraphs 1 of the first claim in the petition and paragraphs 1 and 4 of the second claim in the petition.

Objection is taken by counsel for the debtor to paragraph

2 and portion of paragraph 3 of the affidavit of Janet Lynne

Ackland, sworn on 23 July 1991. The portion in paragraph 3 to which objection is taken is the words:

the sum referred to in the Bankruptcy Notice	"nor has the debtor secured the payment of
to the satisfaction of the Court."

The deponent described herself as a clerk, and she records in paragraph 1 that on 23 July 1991 she searched the file of the registrar in respect of these proceedings, and in paragraph 2 she says that it appeared that a copy of the bankruptcy notice signed by the Deputy Registrar was deemed served on the debtor on 24 May

1991, pursuant to orders made by the Court on 5 April 1991. Those were - and it is common ground that they were - orders for substituted service of the bankruptcy notice upon the debtor.

I read paragraph 2 simply as a sworn statement by the deponent

of what her search of the file revealed to her. It does not follow that her statement proves effective deemed service of the bankruptcy notice; it simply means that a file, according to her search, recorded that the bankruptcy notice was deemed served on the debtor on 2 4 May 1991. In those circumstances the paragraph is admissible.

The latter part of paragraph 3 to which objection is taken must also be read as the deponent's conclusion from what she saw when searching the file, namely, there was nothing on the file to indicate that the debtor had secured the payment referred to in the bankruptcy notice to the satisfaction of the Court. Read that way, as I think it must, it and paragraph 2 are admissible.

Counsel for the petitioning creditor seeks to read two affidavits of Scott Stuart Chapman sworn on 4 September and 26 September 1991 to prove the allegations in the petition that at the date of the commission of the act of bankruptcy specified
under the first claim of the pet~tion,	the debtor was ordinar~ly

resident in Australia. The affidavits make a similar assertion in paragraph 1 of the second claim in the alternative. The affidavit of 4 September by Mr Chapman purports to relate a telephone discussion conducted with Mr Peter Biber, solicitor, on 14 August 1991, and the affidavit of 26 September purports to relate a conversation between Mr Chapman and Shane Tanner, a person who identified herself as Mr Biber's secretary. The dates of the discussions are later than the date of the commission of each relevant act of bankruptcy which, of course must be so, because the conversations followed the presentation of the petition in the matter, indeed, by six weeks to two months. There is no evidence of the authority of either of the persons to whom Mr Chapman says he spoke. In my view, the evidence is objectionable and is rejected.

The first ground of objection made by the debtor to the petltlon in the Notice of Intention to Appear at the Hearing of the Petition, dated 4 March 1992 is that the petition and other documents were not served in accordance with order number 2 of the orders for substituted service of the petition made by a Registrar of the Court on 27 September 1991. That order was that the petition and relevant documents be served by pre-paid

ordinary post addressed to the debtor, care of Messrs Biber and CO, solicitors, at their current address kept in the records of the Law Society of New South Wales.

An affidavit of Darren Simpson dated 10 December 1991, and

Mr Chapman's aff~davit of the same date, proves that the relevant

documents were not sent by pre-pa~d ordinary post but were served by personal delivery by Mr Simpson to Messrs Biber and CO, solicitors, at level 6, 155 Castlereagh Street, Sydney. It is

not suggested that that address is other than the correct and current address of Messrs Biber & Co. kept in the records of the Law Society of New South Wales.

It is true that the order for substituted service was not strictly complied with. But it was a method of service which was the best method of service, namely, service at the place itself rather than by post.

In R e McCormac; Ex P a r t e T a y l o r (1985) 10 FCR 162, Burchett

J. held that failure to comply precisely with an order for

substituted service of a bankruptcy notice (substituted service was effected one day after the time stipulated) was a defect that amounted to an irregularity and was curable under S. 306 ( 1) of the Act. Similarly, I am of the view that there was a technical non-compliance with the order but not such non-compliance as would vitiate the service of the petition. The first ground of the notice of opposition is not established.

Counsel for the petitioning creditor tendered a letter of

23 September 1991 from the Department of Immigration Local

Government and Ethnic Affairs to the Deputy Registrar of this Court to which there are certain attachments including a copy of a summons to a wltness and what purports to be a statement by an officer of the Department. Annexed thereto are three International Movement Records certified as true copies. Counsel for the debtor objects to them and they are plainly not

admissible in their present form. They have been marked for
identification, but I reject the tender at this stage.

Counsel for the petitioning creditor seeks an adjournment of the petition so that relevant evidence in proper form may be presented to cure the defects that have become apparent. In particular, evidence will need to be produced regardingthe proof of residence or non-residence of the debtor as the case may be and the circumstances in which he left Australia or remained outside Australia, both of these matters being relevant to the acts of bankruptcy alleged.

Counsel for the debtor opposes any adjournment. Counsel contends that as the matter was specially fixed for final hearing today and as the debtor's Notice of Intention to Appear makes it clear that he disputes the assertions of the petitioning creditor as to residence and the debtor's movements, the petition should be dismissed not adjourned. The interest of justice will best

bankruptcy petition and it affects not only the debtor's status	be served by adjourning this petition. It is after all a
but also has other ramifications so far as the law of insolvency is concerned especially if a sequestration order is ultimately made. I propose therefore to adjourn the petition so that the petitroning creditor can put its case in order.
Counsel fox the debtor submits that the petrtioning creditor should be put to its election between the first and alternatrve second claims in the petition as the residence assertions do appear to be inconsistent with each other. In some circumstances I would see force in that submission; but there is no evidence on behalf of the debtor of any particular prejudice that he would sustain by reason of the petition remaining in its present form. The interests of justice are served by allowing the petitioning creditor the right to proceed on the petition as it presently is, namely, in the alternative.

The Court orders that:

1.    the period at the expiration of which the petition will lapse shall be 22 July 1993;

2.    the petitioning creditor pay the costs of the debtor of today including counsel's fees on a refresher basis;

3. the petitioning creditor file and serve all remaining affidavits or statements, preferably affidavits, of

witnesses by 11 May 1992;

4.   the debtor flle and serve all affidavits upon whlch he proposes to rely by 25 May 1992;

5.    the applicant file and serve all affidavits or statements in reply by 1 June 1992;

6.   the matter be adjourned until 2 June next for final hearing, part-heard; and

7.   if either party fails to comply with any of these directions it must be restored by that party to the list by arrangement with my associate, such arrangement to be made not later than 2 days after the non-compliance.

I certify that this and the

preceding eleven ( 1 1 ) pages are a true copy of the reasons for judgment herein of the Honourable

Mr. Justice Lockhart.

Associate

I

Dated:  27 April 1 9 9 2 ~

Counsel for the Debtor	M.R. Aldridge
Solicitors for the Debtor	Biber & CO
Counsel for the Petitioning
Creditor	J.K. Chippindall
Solicitors for the Petitioning
Creditor	Tress Cocks & Maddox
Date of Hearing	27 April 1992
Date of Judgment	27 April 1992