Re Vincent; Ex parte State Bank of New South Wales Ltd
[1996] FCA 795
•27 NOVEMBER 1996
CATCHWORDS
BANKRUPTCY - order for substituted service of bankruptcy notice directing three modes of service - notice service in accordance with two but not three of the stipulated modes of service - whether formal defect - whether the Court may vary order for substituted service after date when bankruptcy notice deemed to have been served.
Bankruptcy Act 1966 (Cth): ss2, 14, 37, 40(1)(g), 306, 309.
Re A Debtor; Ex parte The Debtor v Bowmaker Ltd (No 1) [1951] Ch 313 at 318; discussed.
Re Long; Ex parte Fraser Confirming Pty Ltd (1975) 24 FLR 392; discussed.
Re McCormac; Ex parte Taylor (1985) 10 FCR 162; followed.
Re Brindle; Ex parte FB & FA McMahon Pty Limited (1992) 35 FCR 506; followed.
RE CLIFTON GEORGE VINCENT; EX PARTE STATE BANK OF NEW SOUTH WALES LIMITED
NP 1950 of 1995
HILL J
SYDNEY
27 NOVEMBER 1996
IN THE FEDERAL COURT OF AUSTRALIA )
GENERAL DIVISION )
BANKRUPTCY DISTRICT OF THE ) No. NP 1950 of 1995
STATE OF NEW SOUTH WALES )
RE:CLIFTON GEORGE VINCENT
Debtor
EX PARTE:STATE BANK OF NEW SOUTH WALES LIMITED
Petitioning Creditor
CORAM: HILL J
PLACE: SYDNEY
DATED: 27 NOVEMBER 1996
MINUTES OF ORDER
THE COURT ORDERS THAT:
A sequestration order be made against the estate of the debtor.
Costs including reserved costs be taxed and paid in accordance with the Bankruptcy Act 1966.
A draft of this order be delivered to the Registrar within seven (7) days in accordance with r21(2) of the Bankruptcy Rules.
THE COURT NOTES THAT:
Geoffrey Ralph James of 321 Kent Street, Sydney, New South Wales, a registered trustee, has consented to act as the trustee of the estate of the debtor.
Note:Settlement and entry of orders is dealt with in Rule 124 of the Bankruptcy Rules.
IN THE FEDERAL COURT OF AUSTRALIA )
GENERAL DIVISION )
BANKRUPTCY DISTRICT OF THE ) No. NP 1950 of 1995
STATE OF NEW SOUTH WALES )
RE:CLIFTON GEORGE VINCENT
Debtor
EX PARTE:STATE BANK OF NEW SOUTH WALES LIMITED
Petitioning Creditor
CORAM: HILL J
PLACE: SYDNEY
DATED: 27 NOVEMBER 1996
REASONS FOR JUDGMENT
On 8 November 1995 the State Bank of New South Wales ("the petitioning creditor") filed with the Court a creditor's petition against Clifton George Vincent ("the debtor"). The petition is founded upon the alleged failure of the debtor to comply with a bankruptcy notice which the petition states was "deemed to have been served on the Debtor on 3 August 1995".
After a number of adjournments the petition came on for hearing. The petitioning creditor read without objection affidavit evidence which, but for one matter, satisfies me that the petitioning creditor has proved those matters of which s52 of the Bankruptcy Act 1966 ("the Act") requires proof. Indeed no submission was put to me to the contrary, despite a direction by me that any submission to the effect that the requirements of s52 of the Act had not been met be detailed. The one matter which is the subject of dispute before me concerns the question of service of the bankruptcy notice, the non-compliance with which is the act of bankruptcy upon which the bankruptcy petition is founded.
The question whether service of the bankruptcy notice was validly effected turns, or so it is said by the solicitor for the debtor, upon the consequence flowing from an order made by Foster J on 28 July 1995. If the service was valid then there is nothing put in opposition to the course that I should proceed to make a sequestration order against the estate of Mr Vincent.
The factual background is not in dispute. On 6 July 1995 application was made to the Court by the petitioning creditor for orders that personal service of the bankruptcy notice numbered 1821 (on which the petitioning creditor now relies) be dispensed with and that service be effected by prepaid post addressed to the debtor at an address at Vaucluse which was the debtor's home, by personal service on any person apparently over the age of 16 years at that address, and personal service on the debtor's solicitors. There was evidence in support of the application for substituted service of attempts to serve the debtor personally, which sufficed to permit the conclusion to be drawn that the debtor had attempted to avoid personal service of the bankruptcy notice.
The application came before a registrar of the Court who made orders as requested on 12 July 1995. There is no suggestion that the orders made by the registrar were other than properly made, although there was some suggestion that such orders should not have been made ex parte, particularly where the solicitors of the debtor had requested that they be advised in the event that an application were to be made for substituted service.
The orders made by the registrar included an order that service, in the three ways referred to above, be effected on or before 20 July 1995. It was further ordered that service of the bankruptcy notice be deemed to take place on 3 August 1995, and that the bankruptcy notice be varied so that the 14 day period referred to in it was to run from 3 August 1995 and not from the date of service.
Service by post to the address at Vaucluse and service upon the debtor's solicitor were both effected by the date ordered. However, service upon a person at the premises was not effected by 20 July 1995 because, it seems, that there was no one home. Whether this was in fact the case or whether, as had earlier been shown to be the case, the debtor's wife was at home but deliberately declined to answer the door, is not a matter that falls for decision. On the last occasion upon which the process server attended at the
Vaucluse home he slipped the documents to be served through the gap at the top of the front door.
The petitioning creditor then applied to the Court to "vary" the registrar's order, in essence by deleting the requirement that the notice be served upon a person over the age of 16 years at the Vaucluse premises. The matter came initially before the registrar on 28 July 1995 who declined to make the order but referred the matter to Foster J. His Honour dealt with the matter on the same day in a short proceeding lasting, so the transcript reveals, about ten minutes.
Counsel for the petitioning creditor said to Foster J that the application to his Honour was to vary the registrar's order. He described it as an application under s14(5) of the Act but, as the transcript reveals, the reference to that section which authorises applications to the Court to review decisions made by registrars was in the context of the fact that the registrar had declined to vary the original order.
His Honour acceded to the request and made the following orders:
"1.The order of Registrar Quinn made on 12 July 1995 be varied by deleting the requirements set
forth in paragraph 2(c) of that order.
2.Compliance with paragraphs 2(a) and 2(b) of the order of Registrar Quinn dated 12 July 1995 be sufficient service of the bankruptcy notice upon the debtor.
3.The bankruptcy notice shall be deemed to be served on the debtor on 3 August 1995.
4.Service of this order be made in accordance with paragraphs 2(a) and 2(b) of Registrar Quinn's order dated 12 July 1995 substituting Tuesday 1 August 1995 for 20 July 1995."
Paragraphs 2(a) and 2(b) of Registrar Quinn's orders related to service by post of the notice to the debtor's home and personal service of the debtor's solicitors. The proceedings before Foster J were also ex parte.
The order of Foster J was duly served in the manner provided, that is to say, by post to the debtor's home and by personal service upon the debtor's solicitors. Shortly after service of that order was effected, application was made to the Full Court of this Court for leave to appeal the order of Foster J. The Full Court declined leave, expressing the view that the matter was not "an appropriate vehicle at this stage at least, for the grant of special leave".
At the heart of the debtor's case is the submission that Foster J had no power to make a retrospective order relating to the service of the bankruptcy notice. At its simplest, the case is put that the order of the registrar required the fulfilment of three conditions by 20 July 1995. As at that date only two of those conditions had been fulfilled. Hence the bankruptcy notice was not served in accordance with the registrar's orders. That being the case his Honour could not, it is said, by an order made after 20 July, make an order which had the retrospective effect that the non-compliance with the conditions ordered by the registrar could be treated as compliance. As a subsidiary matter, it is submitted that his Honour was acting to review the decision of the registrar and that he erred in law in treating the matter before him as an appeal rather than as a hearing de novo.
By force of s40(1)(g), a debtor commits an act of bankruptcy if, inter alia, the debtor fails to comply with the requirements of a bankruptcy notice. The subsection requires that the bankruptcy notice be served upon a debtor. It does not, however, specify the method of service. Section 41(4) of the Act, however, then provides that service of a bankruptcy notice is to be effected "as prescribed". Rule 15 of the Bankruptcy Rules then provides relevantly:
"Unless otherwise ordered by the Court under sub-section 309(2) of the Act:
(a)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;..."
Section 309(2) then provides:
"Where a notice or other document is required by this Act to be served on or given to a person, the Court may, in a particular case, order that it be given or served in a manner specified by the Court, whether or not any other manner of giving or serving the notice or other document is prescribed."
Section 309(2) thus provides the source and the only source of power to order substituted service upon a debtor of a bankruptcy notice. Section 309(2), it is said, by the use of the words "be given or served on" can, only operate prospectively, and could not be used to authorise retrospectively a method of service.
It is submitted that the consequence of the order made by Foster J was that "time was running retrospectively". So it is said in written submissions:
"Even though the bankruptcy notice was expressed to deem time to run from 3 August 1995, a debtor who had received service (as is presumed in the process of substituted service) by 20 July 1995 would have eight days longer than a debtor against whom service is deemed to have been complete on 28 July 1995."
In support of this principal submission, reference is made to the significance which service of a valid bankruptcy notice has in bankruptcy law. In cases where the act of bankruptcy sought to be relied upon is non-compliance with a bankruptcy notice, it will be the bankruptcy notice which sets in train the whole process leading to the pronouncing of a sequestration order and the change in status of the debtor to a bankrupt. It is for this reason that there is a need for strict compliance, both with the requirement of the Act as to the essentials of a bankruptcy notice and, so it is submitted, the requirements for valid service of the bankruptcy notice: In re A Debtor; Ex parte The Debtor v Bowmaker Ltd (No 1) [1951] Ch 313 at 318; Re Long; Ex parte Fraser Confirming Pty Ltd (1975) 24 FLR 392 at 394; Re O'Sullivan; Ex parte Bank of New Zealand (1991) 30 FCR 112 at 114-5. So, it is submitted, just as failure to comply strictly with the requirements of the Act as to the form of a bankruptcy notice will lead to the invalidity of the notice (see, eg Kleinwwort Benson Australia Limited v Crowl (1988) 165 CLR 71). So, too, it is said that failure to comply strictly with the requirements of service renders that service a nullity, with the consequence that the debtor can not have committed an act of bankruptcy.
To the extent that the petitioning creditor seeks to rely upon s306 of the Act which states that proceedings under the Act are not to be invalidated by a "formal defect" or "an irregularity", it is submitted for the debtor that that section could not cure so fundamental a matter as a defect in service. The debtor relies, by way of analogy, upon Pillai v Comptroller of Income Tax [1970] AC 1124, a case concerning the application of a comparable section to s306 to a defect in a bankruptcy notice, where the Privy Council analysed what was a "formal defect". Their Lordships, after referring to the decision in Bowmaker to which reference has already been made, said in a classic passage:
"The test there laid down was whether the defect in the notice was of such a kind as could reasonably mislead a debtor upon whom it was served. If it was, the notice was not invalidated by the section notwithstanding that the particular debtor upon whom it was served was not in fact misled. If, on the other hand, it could not reasonably mislead the debtor it was a formal defect and validated by the section."
Pillai has been followed on many occasions in Australia, see, for example Re Wimborne; Ex parte The Debtor (1979) 24 ALR 494 at 499 and Crowl (supra) at 80. The case, however, was not concerned with the question of service and the analogy can certainly not be complete. Where the argument is about non-compliance with the requirements of the law as to the content of a bankruptcy notice, the test, as Crowl indicates, rests upon whether a person in the position of the debtor might be misled as to compliance with the notice. That issue can clearly not arise in the context of a dispute as to service. However, emphasis is placed upon the need for strict compliance with an essential matter, rather than the capacity to confuse which is the focus in Crowl.
Clearly, having regard to the terms of s40(1)(g) of the Act, failure to serve a bankruptcy notice at all could not give rise to an act of bankruptcy. Nor might it be thought would failure to effect personal service where no order of substituted service had been made. As a matter of principle this would seem clearly to be the case where the bankruptcy notice required payment etc within a period of time calculated from the time of service and in default of any order for substituted service the Act required that service to be personal. Since service of the bankruptcy notice is so fundamental to the proof of the Act of bankruptcy referred to in s40(1)(g) of the Act, it is hard to see that the Court could treat non-service in accordance with the method required by the Act as a mere formal defect. I shall return to cases where this matter has been discussed later.
It may here be mentioned that r195 of the Bankruptcy Rules provides that failure to comply with those rules will not render a proceeding void unless the Court so directs. Further, if the case be one which can be cured under s306 or for that matter r195, a question will arise as to whether the failure to serve will cause "substantial injustice".
It is necessary now to discuss the decision in Re McCormac; Ex parte Taylor (1985) 10 FCR 162 where Burchett J held that a defect consisting of a failure precisely to comply with an order for substituted service of a bankruptcy notice could fall within s306. In that case the defect consisted of the failure to effect one limb of a substituted service order. The order in fact was virtually identical in form to the order made in the present case. Further, what had happened was that there had been, as here, service by post and service upon a solicitor, but there had not been strict compliance with the order that there be service by a particular time upon a person at the home of the debtor. The facts differ in one respect in that there was service upon a person at the home of the debtor (not being the debtor himself) but that service was effected one day late. It is difficult to see that there is any significant difference between a failure to comply with one of three modes of service at all, and a failure to comply with one of the three modes of service in time.
Burchett J in the course of his Honour's judgment drew (at 165) a distinction between a defect in the information contained in a bankruptcy notice which might mislead the debtor as to what might need to be done to comply with the notice and a defect in the procedure followed, where no question could arise as to whether the debtor might be misled. Both the case before his Honour and the present case fall into the latter category.
His Honour (at 164-5) also drew a distinction between a failure to effect personal service (where no substituted service had been ordered) and a failure to comply precisely with the requirements of an order for substituted service. The latter was, his Honour said:
"made upon the basis that personal service cannot and will not be effected. It substitutes a procedure which, while not amounting to service upon the judgment debtor, will probably bring the document to his notice. If a defect in the following of that procedure is of a kind which still leaves it probable that the document did come to the judgment debtor's notice, and a fortiori if he probably received notice within the same period that was originally contemplated, I do not think the case will necessarily fall on that side of the line drawn by the Privy Council on which are proceedings so defective as to be rendered a nullity."
As the passage just quoted makes clear, it was relevant to his Honour's conclusion that it was probable that the bankruptcy notice came to the debtor's attention and that it did so within the time specified in the original notice. The solicitor for the debtor sought thus to distinguish McCormac on the basis that in the present case the petitioning creditor had not proven that it was more probable than not that the notice had in the relevant time come to the debtor's notice.
The evidence on this question can be quite shortly summarised. It is that the bankruptcy notice was sent by post to the home address of the debtor. There is no evidence that it was returned unclaimed. Opposed to this evidence the solicitor for the debtor relies upon correspondence passing between the him (the solicitor for the debtor) and the solicitors for the petitioning creditor. Prior to the making of the order by the registrar, there is correspondence concerning service of the bankruptcy notice and the possibility of an order for substituted service. On the day the order for substituted service was made, although before notice of it, the solicitor for the debtor claims to have been unable to obtain instructions from the debtor and asserts that he had been unable to speak with Mr Vincent by telephone, that his correspondence was unanswered, and that Mr Vincent's son had advised that Mr Vincent was not at home and that he did not know where his father was.
On 13 July (and still before any service of the bankruptcy notice or the registrar's orders had taken place), the solicitor for the debtor wrote to the solicitors for the petitioning creditor indicating that "by the merest of coincidences" Mr Vincent had telephoned the solicitor. According to the letter, Mr Vincent was ill and trying to recover and was not in touch with his family. It is said that Mr Vincent would not provide his address or telephone number or a mechanism whereby he could be contacted.
On 20 July the debtor's solicitors, upon whom by this time service had been effected in accordance with the registrar's order for substituted service, wrote saying that they had no method whereby they could contact the debtor. On the following day the debtor's solicitors wrote that Mrs Vincent had found documents squashed near the front door. The letter says that an application would be made to the Court to set aside the bankruptcy notice on the grounds of invalid service. As no solicitor of repute would have made such a threat without instructions, it would ordinarily be assumed that by that date, that is to say before 2 August 1995, the service of the bankruptcy notice had come to Mr Vincent's attention. However, on 25 July 1995 the solicitor wrote saying that he did not know whether Mrs Vincent had spoken with her husband and that he had had "no contact with Mr Vincent for some time". The letter again threatens an application to the Court to set aside the bankruptcy notice on the grounds of non-service. To this extent the correspondence may be seen to be ambiguous. The correspondence in evidence concludes with service of a copy of the order of Foster J. If it matters, proceedings were commenced to set aside the bankruptcy notice by an application made on 16 August 1995. The application was unsuccessful.
The correspondence is, as I have said, ambiguous. Unless I were to conclude that the solicitor acted to make threats without instructions, a conclusion I would not lightly
reach, it is open to the conclusion that the bankruptcy notice did come to the attention of the debtor. However, it is said on behalf of the debtor that on the totality of the evidence I should find that on the balance of probability it has not been shown that the bankruptcy notice has been brought to the attention of the debtor at least before 2 August 1995.
For the petitioning creditor it is argued that I can infer (and I do) from the fact that there was sent by mail addressed to the debtor's home a copy of the documents in due time, which copy was not returned to the sender, that the bankruptcy notice did come to the attention of the debtor in due time. The ambiguity of the correspondence does not distract from this inference and may indeed support it. Then it is said for the petitioning creditor, and I accept that the failure of both the debtor and his solicitor to give evidence on the point permits that inference to be more confidently drawn: Jones v Dunkel (1959) 101 CLR 298. I would therefore conclude on the balance of probability that the bankruptcy notice was drawn to Mr Vincent's attention and within the time which the registrar ordered, notwithstanding the failure of the petitioning creditor to serve it upon a person over the age of 16 at the debtor's house. It might be added that such service, even if effected in time in accordance with the registrar's order, would not have, in the circumstances, increased the chances of the notice coming to Mr Vincent's attention.
It follows that I do not think the present case is distinguishable from McCormac. There is no suggestion of substantial injustice.
Then it is said that McCormac was wrongly decided and that I should decline to follow it. The submission proceeds upon the basis that no distinction can be drawn between failure to effect personal service on the one hand and failure to serve in accordance with an order for substituted service on the other: cf Re Long and Re Fairlie; Ex parte Armco Australia Pty Ltd (1969) 14 FLR 65 at 67. In the last two mentioned cases obiter dicta of Philp J in Re Goldberger [1958] QWN 41 to the effect that failure to serve a bankruptcy notice personally was a mere technical defect, was not followed and it was held that an act of bankruptcy had not been proven.
The argument is not without substance. A difference can, however, be seen on the basis that in the present case there has been substantial compliance with the order for substituted service whereas in a case where no order for substituted service has been made there can be no question of substantial compliance. There is either personal service or there is not. In any event, as a single judge I think that I should follow the decision of another single judge of this Court on facts virtually indistinguishable, unless of the view that it was clearly wrong: Byrne v Australian Airlines Ltd (1994) 47 FCR 300 at 305; Air Pacific Ltd v Transport Workers Union of Australia (1993) 40 FCR 1; and Magman International Pty Ltd v Westpac Banking Corporation (1991) 32 FCR 1. I am not of that view.
But for one matter, that part of the orders of Foster J which directed that compliance with the first two alternative methods of service ordered by the registrar would be sufficient service of the bankruptcy notice, might be supportable under s306 of the Act as involving a decision by his Honour that the failure to comply strictly with the substituted service order of the registrar was but a mere a formal defect cured by s306 of the Act. The difficulty, however, is that a decision on whether s306 necessarily applied, involving as it did questions of whether there was injustice, could only be given in proceedings in which the debtor was a party. To determine that issue in ex parte proceedings would involve a breach of procedural fairness. Thus s306 can not be called upon in aid of the validity of his Honour's second and third orders. Those orders were merely interlocutory and could not bind me.
According to the solicitor of the debtor, it is important to determine the nature of the application which was brought before Foster J. Prima facie the application was one to vary the order previously made by the registrar. However, it was said to be made in the course of proceedings to review the decision of the registrar. But what decision? Was it the original decision of Registrar Quinn to order substituted service, as the solicitor for the debtor assumes, or her later decision to refuse to vary her original order? In my view it was the latter. The view that the application was for review of the original order for substituted service has some difficulty, if only because it came initially before the Registrar herself. That, of itself, is not necessarily determinative in that as a matter of convenience bankruptcy matters generally commence before a registrar who will in an appropriate case refer them to a judge. However, it would not seem likely that the petitioning creditor would seek to have an application for review of the registrar's decision determined by the very registrar who made the original decision. Yet it is clear that the registrar was asked to make the order for variation and that she declined to do so.
It seems more likely that the petitioning creditor applied to the registrar to vary her original order relying upon s37 of the Act. That section authorises the Court to rescind, vary or discharge an order made under the Act, not being an order of the kind referred to in s37(2).
Section 37 confers upon the Court wide powers to vary orders. As was said by the Full Court in Balhorn v Colby (1982) 45 ALR 174 the Court has a wide discretion, although that discretion must be exercised judicially. Clearly the
registrar had power to vary her own order (subject to any constraints imposed by s309 to which reference will later be made). Under s14(5) of the Act on an application to the Court for review the judge hearing the application would decide for himself or herself whether to amend the initial order. If an application to vary the registrar's order for substituted service were made directly to a judge, a question could arise whether a judge of the Court acting under s37 could vary an order made by the registrar, or whether the section only authorises a judge to vary an order which he or she has made or perhaps some other judge, but not an order made by the registrar.
On its face, all that s37 requires is that the order to be varied be one made by the Court. That expression is defined in s5(1) to mean a court having jurisdiction in bankruptcy under the Act. There would no doubt be difficulty in the Federal Court acting under s37 to vary, for example, an order of the Supreme Court of Queensland sitting in bankruptcy since s37 requires the Court ordering the variation to be the same as the Court making the initial order. That this is so emerges from the unreported judgment of Toohey J in Re Mercovich (27 May 1985). But that would not on its face seem to present any difficulty here. After all the registrar when acting in accordance with delegated authority under s14 is acting as "the Court".
In In Re Maugham; Ex parte Maugham (1888) 21 QBD 21 it was held that an order of a county court judge under a comparable provision was not validly made where it purported to vary the order of a registrar. This was because the statute gave to the judge no power to review the decision of the registrar. That power is here conferred by s14. But if Maugham is to be accepted, it must follow that the only power conferred upon a judge to vary the order of a registrar can be as an adjunct to the power to review.
It may be noticed that the order of the registrar in Maugham was an order dismissing a bankruptcy petition. That was not an interlocutory order so that it was undoubtedly correct that unless the Court was exercising a right of review (and in the absence of a right to appeal) there was no power to act. But in the present case the registrar's order for substituted service was interlocutory and it is commonplace for one judge of the Court to vary interlocutory orders of another judge. If that could not be done, orders varying timetables for directions could only be made by the judge hearing the matter and not by another judge. In my view a judge acting under s37 could vary an interlocutory order of a registrar without those proceedings being proceedings for review of the registrar's decision under s14(5). If that is what Foster J did, then (and subject to the constraints of s309 of the Act) his Honour was entitled so to do.
However, as I have already indicated, his Honour was engaged upon a process of reviewing the decision of the registrar not to vary the order for substituted service. Having regard to s14(5), Foster J had clear power to determine ab initio whether or not to vary the order for substituted service.
If the proceeding in which his Honour as engaged were, as the solicitor for the debtor suggests, proceedings under s14(5) for review of the registrar's initial decision under s309, then it is clear that Foster J would have been obliged to exercise the power under s309(2) de novo. So much follows from cases such as Re Brindle; Ex parte FB & FA McMahon Pty Limited (1992) 35 FCR 506, Re Kwiatek and Kwiatek; Ex parte Big J Limited v Pattison (1989) 21 FCR 374 and Ginnane v Diners Club Ltd (1993) 42 FCR 90. Thus if acting to review the registrar's decision Foster J would himself have been called upon to exercise the discretion to order substituted service contained in s309. If this were the power which his Honour was exercising there could in the present case be difficulty with such an exercise. It could be argued that his Honour would have been required to review the evidence as to whether substituted service should have been effected as well as the form of the order. That may well have been a matter which would require more than the ten minutes which his Honour had to devote to the application.
In addition there is a question whether notice of the application should have been given to the debtor. There is much to be said for the view that his Honour should have been appraised of the desire of the debtor's solicitor to attend and argue why substituted service should not be granted. It is quite probable that his Honour would have required the application to be reduced to writing and be served upon the debtor and have given the debtor a chance to be heard. In so saying I do not wish it to be suggested that I am deciding that orders for substituted service should not generally be made ex parte, or that in the present case the order made by Foster J is invalid. It is, after all, an order of the Court and it must be accepted as valid, save in so far as it is set aside by a Court on appeal. The present application is not an application made to me to set aside his Honour's order and as presently advised I do not think I would have that power.
The greatest difficult with his Honour's order is the problem of whether it is possible to vary an order under s309 of the Act in a way which would authorise a mode of service which at the time of the order had already been effected. As presently advised I am of the view that s309 would not authorise such an order.
There is no direct authority on the question whether s309 may only be used prospectively, that is to say to specify
a mode of service that has not yet been carried out. It may, however, follow inferentially from the decisions of Re Long and Re Fairlie referred to earlier. In each of these cases a sequestration order was denied on the ground that no act of bankruptcy had been proved. Had there been power to order retrospectively a form of service other than personal service, an order could have been made under the equivalent of s309 that the method of service actually adopted (eg on the wife of the debtor) was an appropriate form of service in place of personal service. No such order appears to have been requested or made.
These difficulties need not be explored in detail for two reasons. If the order of Foster J is effective, and until set aside it is, it follows that there has been service of the bankruptcy notice. However, even if it were not effective there is still the question to be determined during the hearing of the petition why the defect in complying with the registrar's order might not now be ignored as being a mere formal defect. The possibility of such an issue arising at the hearing of the petition was, it may be assumed, the prime reason why the Full Court refused leave to appeal.
The case is not one in which it may be said that the debtor was in any way misled. As I have held, it is probable that the bankruptcy notice came to his attention as a result of service by post and upon his solicitor. That, and if they
be relevant, the orders of Foster J had all reached the debtor before the date of deemed service of 3 August 1995. It is not suggested that there has been any question of substantial injustice as would justify the Court refusing the order. In these circumstances it seem to me not inappropriate to treat the failure to serve in the third alternative way, that is to say personally upon a person present at the house of the debtor, as a formal defect not invalidating the proceeding.
In the circumstances, therefore, I would make a sequestration order against the debtor and order that the debtor pay the costs of the petitioning creditor, such costs to be paid out of the estate of the debtor.
I certify that this and the
preceding twenty-three (23) pages
are a true copy of the Reasons
for Judgment herein of his Honour
Justice Hill.
Associate:
Date: 27 November 1996
Solicitors for Debtor: P Conway of Tribe Conway & Co
Counsel and Solicitors J Thomson instructed by
for Petitioning Creditor: Minter Ellison
Date of Hearing: 21 November 1996
Date Judgment Delivered: 27 November 1996
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