Schmidt v Pandja
[2015] FCCA 111
•20 January 2015
FEDERAL CIRCUIT COURT OF AUSTRALIA
| SCHMIDT v PANDJA & ORS | [2015] FCCA 111 |
| Catchwords: BANKRUPTCY – Creditor’s petition – application for a sequestration order – whether bankruptcy notice was served – whether debtors can pay their debts – whether debtors have arguable case for going behind the judgment on which the creditor’s petition is based – sequestration orders made. |
| Legislation: Bankruptcy Act 1966 (Cth), ss.5(2), 40(1)(g), 52(1), 52(1)(c) 52(2), 52(2)(a), 52(2)(b) Bankruptcy Regulations 1996 (Cth), reg.16.01(1) |
| Armagas Ltd v Mundogas SA (The Ocean Frost) [1985] 1 Lloyd’s Rep 1 Australian and New Zealand Banking Group v Daher [2014] FCCA 365 Carbo v United States 314 F.2d 718 (1963) (Ninth Circuit) Corney v Brien (1951) 84 CLR 343 Deputy Commissioner Of Taxation v Caporale [2013] FMCA 5 EPI Environmental Technologies Inc v Symphony Plastic Technologies [2004] EWHC 2945 (Ch) Haebe v Department of Justice 288 F.3d. 1288 (2002) Hope v Hope (1854) 4 De GM & G 328 Howship Holdings Pty Ltd v Leslie & Anor (1996) 41 NSWLR 542 Indiana Metal Products v National Labor Relations Board 442 F.2d 46 (1971) (Seventh Circuit) Kuhadas v Gomez [2014] FCCA 1130 Onassis and Calogeropoulos v Vergottis [1968] Ll. L.R. 403 Rhesa Shipping Co SA v Edmunds [1985] 1 WLR 948 Rigg v Baker [2006] FCAFC 179 Sandell v Porter [1966] HCA 28; (1966) 115 CLR 666 Wren v Mahony (1972) 126 CLR 212 |
| Applicant: | KEN SCHMIDT |
| First Respondent: | MICHAEL PANDJA |
| Second Respondent: | ELIZABETH PANDJA |
| Third Respondent: | THOMAS PANDJA |
| File Number: | SYG 327 of 2014 |
| Judgment of: | Judge Manousaridis |
| Hearing dates: | 2 June, 30 June and 11 July 2014 |
| Date of Last Submission: | 24 July 2014 |
| Delivered at: | Sydney |
| Delivered on: | 20 January 2015 |
REPRESENTATION
| Counsel for the Applicant: | Mr D C Price |
| Solicitors for the Applicant: | Horton Rhodes Lawyers |
| First respondent in person and on behalf of all other respondents |
ORDERS
A sequestration order is made against the estate of Michael Pandja.
The applicant creditor’s costs be paid from the estate of Michael Pandja in accordance with the Bankruptcy Act 1966 (Cth).
Under the Bankruptcy Regulations 1996 (Cth) a copy of this sequestration order be given to the Official Receiver in Sydney within 2 days.
THE COURT NOTES
The date of the act of bankruptcy is 24 December 2013.
A consent to act as trustee has been signed by Robert William Whitton.
ORDERS
A sequestration order is made against the estate of Elizabeth Pandja.
The applicant creditor’s costs be paid from the estate of Elizabeth Pandja in accordance with the Bankruptcy Act 1966 (Cth).
Under the Bankruptcy Regulations 1996 (Cth) a copy of this sequestration order be given to the Official Receiver in Sydney within 2 days.
THE COURT NOTES
The date of the act of bankruptcy is 24 December 2013.
A consent to act as trustee has been signed by Robert William Whitton.
ORDERS
A sequestration order is made against the estate of Thomas Pandja.
The applicant creditor’s costs be paid from the estate of Thomas Pandja in accordance with the Bankruptcy Act 1966 (Cth).
Under the Bankruptcy Regulations 1996 (Cth) a copy of this sequestration order be given to the Official Receiver in Sydney within 2 days.
THE COURT NOTES
The date of the act of bankruptcy is 5 February 2014.
A consent to act as trustee has been signed by Robert William Whitton.
| FEDERAL CIRCUIT COURT OF AUSTRALIA AT SYDNEY |
SYG 327 of 2014
| KEN SCHMIDT |
Applicant
And
| MICHAEL PANDJA |
First Respondent
| ELIZABETH PANDJA |
Second Respondent
THOMAS PANDJA
Third Respondent
REASONS FOR JUDGMENT
Introduction
The applicant, Dr Schmidt, claims a sequestration order against the estates of each of the three respondents.
The act of bankruptcy on which Dr Schmidt relies for the making of each sequestration order is the failure by each respondent to comply with the requirements of a bankruptcy notice issued on 2 December 2013. The bankruptcy notice demands payment of $90,790.81. That is the amount of a judgment Dr Schmidt recovered on a cross-claim against the respondents in the District Court of New South Wales after a hearing that occupied twenty-six days.
The respondents oppose the making of sequestration orders on a number of grounds. They claim the bankruptcy notice was not properly served on the second respondent, Mrs Pandja, or on the third respondent, Thomas Pandja, each of them is able to pay his or her debts, and they do not owe the amount demanded in the bankruptcy notice.
The last ground is not stated in the respondent’s notice stating grounds of opposition. At the hearing, however, I allowed the respondents to adduce evidence and make submissions about whether they have an arguable case for going behind the judgment of the District Court, and for that reason, do not owe the debt demanded by the bankruptcy notice. I indicated that if the respondents do not raise any arguable case, they will be unable to rely on that ground. If, on the other hand, the respondents were to satisfy me they do have an arguable case for going behind the judgment, and that they do not owe the debt, I would provide Dr Schmidt the opportunity to file evidence in reply.
In addition, in their notice stating grounds of opposition, the respondents state they have applied for Legal Aid to enable them to obtain legal representation, and request an adjournment pursuant to s.57 of the Legal Aid Commission Act 1979 (NSW).
Service of the bankruptcy notice - evidence
I first consider whether the bankruptcy notice was served on the second respondent, Mrs Pandja and the third respondent, Thomas Pandja. Before I do that, it will be necessary to identify the relevant evidence.
The evidence of Mr Davies
The evidence on which Dr Schmidt relies for proving the bankruptcy notice was served on each respondent is that of Mr Davies.
Mr Davies is a process server. He has sworn four affidavits relating to the service of the bankruptcy notice. The first is an affidavit made on 13 December 2013 in which Mr Davies deposes that he served the bankruptcy notice on the first respondent, Mr Pandja. Mr Davies deposes that he personally delivered the bankruptcy notice to Mr Pandja at 7.15 o’clock on 3 December 2013 at 11 Childs Close, Green Point and that, at the time he did that, Mr Davies asked whether the person whom he served was Michael Pandja, and whether he was the Michael Pandja referred to in the bankruptcy notice as the judgment debtor. Mr Pandja answered both questions in the affirmative.
The second affidavit was made on 17 December 2013. It relates to the service of the bankruptcy notice on Mrs Pandja. Mr Davies deposes that he served the bankruptcy notice on Mrs Pandja on 3 December 2013 at 7.00 o’clock; that he served the bankruptcy notice on Mrs Pandja personally at 11 Childs Close, Green Point; and that, at the time he served the bankruptcy notice on Mrs Pandja, he asked the person he served whether she was Elizabeth Pandja and whether Mrs Pandja was the Elizabeth Pandja referred to as the judgment debtor in the bankruptcy notice. Mrs Pandja answered both questions in the affirmative.
The third affidavit was made on 23 January 2014. It relates to service of the bankruptcy notice on Thomas Pandja. Mr Davies deposes he served the bankruptcy notice on Thomas Pandja at 7.10 o’clock on 15 January 2014 at the same location and in the same manner as he deposed he served the bankruptcy notice on each of Mr and Mrs Pandja. In addition to the affidavit, there was tendered a document completed by Mr Davies and titled “Process Serving Worksheet” which records that a bankruptcy notice was served on Thomas Pandja at 7.10 pm on 15 January 2014.[1]
[1] Exhibit A
In an affidavit made on 28 March 2014, Mr Davies corrected one aspect of his affidavit of 17 December 2013, and added further details about the circumstances in which he says he served Mrs Pandja. In that affidavit Mr Davies deposes that he did not serve Mrs Pandja at 7.00 o’clock as he deposed in his affidavit of 17 December 2013. He says that he attended the premises at 11 Childs Close, Green Point for the purpose of serving the bankruptcy notice on each of the respondents. Mr Davies spoke to a person who had since identified himself as Mr Pandja, and had the conversation with Mr Pandja as Mr Davies deposed in his affidavit of 17 December 2013. Mr Pandja said he would be calling his solicitor. Mr Davies then observed Mr Pandja make a telephone call, but did not hear what Mr Pandja said. The following then occurred:[2]
After Mr Pandja completed the above telephone call, I then said to him words to the effect, “I also have a bankruptcy notice that I need to personally serve on Elizabeth Pandja.” Mr Pandja then proceeded to go inside the house and a short while later Mr Pandja and a woman, who has since identified herself as Mrs Pandja, returned to the door. I then had the conversation set out in paragraph 2 of my Second Affidavit.
[2] Affidavit of C Davies, 28.03.2014, [7]
There was annexed to Mr Davies’ affidavit of 28 March 2014 a pro forma document titled “Process Serving Worksheet” for each of Mr and Mrs Pandja. These documents record that Mr Pandja was served with a bankruptcy notice at 7.00 pm on 3 December 2013 and Mrs Pandja was served with a bankruptcy notice at 7.15 pm on the same day.
Under cross-examination, Mr Davies said that his having deposed in his affidavit of 17 December 2013 that he had served the bankruptcy notice on Mrs Pandja at 7.00 o’clock, rather than at 7.15 o’clock, was a “typo error”.[3] He remembered having served the bankruptcy notice on Mr Pandja before he served the bankruptcy notice on Mrs Pandja.[4] Mr Davies made his affidavit of 28 March 2014 after Dr Schmidt’s lawyer showed Mr Davies Mr Pandja’s affidavit.[5] Mr Davies said that the wording in the affidavits he made is “the wording I use every time I serve a bankruptcy notice”[6] and, on being asked to explain how three different people can have exactly the same response to the same question, Mr Davies said “it’s the way it’s asked”.[7] Mr Davies did not serve the bankruptcy notice on Thomas Pandja at the time he served Mr and Mrs Pandja because Thomas Pandja was not there, and Mr Davies knew Thomas Pandja was not there because Mr Pandja told him so,[8] and Mr Pandja said Thomas Pandja was in Sydney.[9] Mr Davies did not provide in his first and second affidavits the details he provided in his fourth affidavit because “it wasn’t needed”.[10] Mr Davies observed Mr Pandja holding the bankruptcy notice Mr Davies served on him when Mr Pandja was telephoning his solicitor.[11] Mr Davies observed Mr Pandja speaking on the telephone through a screen door.[12] Mr Davies walked down the steps and walked away while Mr Pandja was on the telephone.[13]
[3] 02.06.14, T14.10
[4] 02.06.14, T14.25; T15.30
[5] 02.06.14, T16.25
[6] 02.06.14, T16.25
[7] 02.06.14, T16.30
[8] 02.06.14, T18.5
[9] 02.06.14, T30.10
[10] 02.06.14, T22.15
[11] 02.06.14, T23.20
[12] 02.06.14, T23.30-35
[13] 02.06.14, T25.1
The evidence of Mr Watt
I have already referred to Mr Davies’ affidavit of 23 January 2014 in which Mr Davies deposes to his having personally served Thomas Pandja on 15 January 2014. In addition, there is evidence that Thomas Pandja was served with the bankruptcy notice by express post. That was arranged by Mr Watt, the solicitor for Dr Schmidt.[14] Mr Watt has deposed that at the time he arranged to send by post the bankruptcy notice, he had not been informed by Rapid Process Service whether the bankruptcy notice had been served on Thomas Pandja.[15]
[14] Affidavit of S D Watt, 12.05.14, [15]
[15] Affidavit of S D Watt, 12.05.14, [16]
The evidence of Mr Pandja
Mr Pandja has made a number of affidavits. It is in only one of those affidavits – that made on 31 March 2014 – that Mr Pandja addresses the service of the bankruptcy notice on Mrs Pandja. He deposes that “Bankruptcy notices and creditors petitions never been served accordingly to us personally”.[16] He further deposes that the following occurred:
a)Mr Pandja opened his “office door” at 7.06 pm when Mr Davies did not advise who he was and “arrogantly” pushed documents into Mr Pandja’s face. [17]
b)Mr Pandja refused to take the documents, after which Mr Davies stated that Mr Pandja had to “accept this bankruptcy from Dr Schmidt”.[18]
c)Mr Pandja advised Mr Davies that Mr Pandja had to talk to his solicitor. While he was doing that, Mr Davies was in his office observing the conversation. That conversation lasted 3 minutes and 41 seconds.[19] Mr Pandja’s solicitor advised Mr Pandja to take the bankruptcy notice and fax it to the solicitor that night.[20] Mr Pandja says he faxed the bankruptcy notice at 19:40 and 19:41,[21] which implies that Mr Pandja accepted the bankruptcy notice.
d)Mr Davies said that he also had a bankruptcy notice that he had to personally serve on Mrs Pandja and on Mr Pandja’s son (Thomas Pandja).[22] Mr Pandja said Mrs Pandja was not at home and that his son was working in Sydney so the only time he could see him was on the weekend.[23]
e)Mr Pandja offered that Mr Davies provide the bankruptcy notice to Mr Pandja and that Mr Pandja would give the bankruptcy notice to them. Mr Davies did not accept the offer.[24]
[16] Affidavit of M Pandja, 31.03.14, [17]
[17] Affidavit of M Pandja, 31.03.14, [26]
[18] Affidavit of M Pandja, 31.03.14, [26]
[19] Affidavit of M Pandja, 31.03.14, [26]
[20] Affidavit of M Pandja, 31.03.14, [28]
[21] Affidavit of M Pandja, 31.03.14, [33]
[22] Affidavit of M Pandja, 31.03.14, [28]
[23] Affidavit of M Pandja, 31.03.14, [29]
[24] Affidavit of M Pandja, 31.03.14, [30]
Mr Pandja has adduced some documents which he claims corroborate his account of what occurred when he was served with the bankruptcy notice. First, there is a telephone bill issued to Mr Pandja by his mobile telephone service provider which records a telephone call to a particular mobile number at 19:07 lasting 3:41 minutes.[25] Second, there is a bill issued to Mr Pandja by another telephone service provider that records two telephone calls, one at 19:40 lasting 1:04 minutes, and the other at 19:41 lasting 1:40 minutes.[26] The number to which these calls were made is the fax number stated in the letterhead of Mr Pandja’s solicitors at the time, William Roberts Lawyers.[27]
[25] Affidavit of M Pandja, 31.03.14, annexure MP-5
[26] Affidavit of M Pandja, 31.03.14, annexure MP-6
[27] Affidavit of M Pandja, 02.05.14, exhibit MP1, before tab 13
There are two other documents that are relevant. One is a tax invoice dated 13 January 2014 issued by William Roberts Lawyers to Mr and Mrs Pandja and Thomas Pandja. The tax invoice records work that includes the following:[28]
[28] Affidavit of M Pandja, 02.05.14, exhibit MP1, before tab 13
Date
Details
Units
Billed By
04/12/2013
Reviewing facsimile from client and telephone attendance on M Pandja
4
Ding Pan
Mr Pandja gave evidence under cross-examination that included the following. Mrs Pandja was not home when Mr Pandja was served with the bankruptcy notice; she arrived probably after 8.30 in the evening, or in any event, late.[29] Mr Pandja did not inform Mrs Pandja that he had been served with a bankruptcy notice,[30] and he did not tell Mrs Pandja because she suffered from depression.[31] Mr Pandja denied he sent to his solicitor the bankruptcy notice on 4 December 2013 rather than on 3 December 2013.[32] Mr Pandja did not accept that the details in the tax invoice from William Roberts Lawyers to which I refer in the previous paragraph were correct.[33]
[29] 30.06.14, T116.20
[30] 30.06.14, T116.25
[31] 30.06.14, T116.30-35
[32] 30.06.14, T118.5
[33] 30.06.14, T120.15-20
The evidence of Mrs Pandja
Mrs Pandja, in her affidavit of 10 April 2014, deposes she was not served with the bankruptcy notice. She deposes that on 3 December 2013 Mrs Pandja was at the house of her daughter, Ms Surdich, looking after her grandchildren, and that Mrs Pandja did not return to her home at 11 Childs Close, Green Point, until around 8.45 pm.
Under cross-examination, Mrs Pandja gave evidence that included the following. Mrs Pandja knew Ms Surdich was doing a course at the Wyong campus of the Hunter TAFE,[34] and that she supposed that Ms Surdich attended the course on some Tuesdays.[35] Mrs Pandja did not know whether it sounded right that Ms Surdich finished her classes at about 3 pm.[36] She said it was not necessarily the case that Ms Surdich would come home after her class had finished because sometimes she would do her shopping.[37] Mrs Pandja could not recall when Ms Surdich arrived home on 3 December 2013; she just knew Ms Surdich “was home and then we just talked about the day”.[38] Mrs Pandja did not know when on 3 December 2013 she left Ms Surdich’s house, but she knew “it was late”, that “it was quite a few hours after she came home”.[39] Mrs Pandja thought she stopped on her way home from Ms Surdich’s home to do some shopping, but she was not sure.[40] Although she was not sure whether she stopped on her way home, Mrs Pandja knew she “left way after she came home”.[41]
[34] 30.06.14, T146.1
[35] 30.06.14, T146.5
[36] 30.06.14, T146.10
[37] 30.06.14, T146.10-15
[38] 30.06.14, T146.20
[39] 30.06.14, T146.20
[40] 30.06.14, T146.35
[41] 30.06.14, T146.40
Mrs Pandja also said in cross-examination that Mr Pandja informed her he had been served with a bankruptcy notice,[42] although she does not know when Mr Pandja told her;[43] and that Mr Pandja said to Mrs Pandja “[t]his is another thing we have to deal with”.[44] Mr Pandja showed the document to her,[45] and, as she was reading it she was thinking “[w]hat is this?”[46] Mr Pandja did not tell Mrs Pandja that he was going to get legal advice.[47] She said: “But, to tell you the truth, I just left them – drop on the floor. My husband was dealing with it”.[48]
[42] 30.06.14, T147.25-30
[43] 30.06.14, T147.30
[44] 30.06.14, T147.30-35
[45] 30.06.14, T147.35
[46] 30.06.14, T147.40
[47] 30.06.14, T149.1-5
[48] 30.06.14, T149.10
The evidence of Thomas Pandja
Thomas Pandja has sworn three affidavits for the purpose of the proceedings, one on 13 March 2014, one on 8 April 2014, and one on 14 May 2014. In the second of those three affidavits, Thomas Pandja deposed:[49]
I have seen copies of an Affidavit of Clinton Davies of 7 Stewart Avenue Hamilton East dated 13 December 2013 and 28 March 2014 which states that on 3 December 2013 at 7.00 pm I was personally served with a sealed copy of a Bankruptcy Notice at my home at 11 Childs Close Green Point.
[49] Affidavit of Thomas Pandja, 08.04.14, [2]
Thomas Pandja further deposed that he was not personally served with the bankruptcy notice, and he did not have any conversation with Mr Davies.[50] Thomas Pandja annexed to his affidavit of 14 May 2014 what Thomas Pandja deposed was a copy of a calendar for January 2014 with handwriting. The box for 15 January 2014 has a diagonal line through it and the handwriting “m/c super 8hrs Andrew”.
[50] Affidavit of Thomas Pandja, 08.04.14, [3]
Thomas Pandja was cross-examined about a number of matters. First, he was cross-examined about whether he had been served with the creditor’s petition in February 2014 and whether, when he was served, he was also served with the affidavit of Mr Davies made on 23 January 2014 (that is, the third Davies affidavit). Thomas Pandja did not deny he was served with the creditor’s petition on 18 February 2014.[51] He accepted it was a possibility that he was also served with the third Davies affidavit, but he could not “remember exactly what was in that bundle”.[52]
[51] 30.06.14, T159.20
[52] 30.06.14, T159.20-25
Second, Thomas Pandja was asked whether at the time he made his affidavit of 13 March 2014 he was aware that an issue in the proceedings was whether he had been served with the bankruptcy notice.[53] He said he was, but he said there was “no reason” for not saying anything in that affidavit about his not having been served with the bankruptcy notice; he was not a solicitor.[54]
[53] 30.06.14, T161.1-5
[54] 30.06.14, T161.10
Third, Thomas Pandja was cross-examined about his having deposed in his affidavit of 8 April 2014 that Mr Davies had deposed that he had served Thomas Pandja on 3 December 2013. Thomas Pandja did not agree that Mr Davies never asserted that he served Thomas Pandja on 3 December 2013.[55] Thomas Pandja said that he had been in Sydney all week (that is, not at his home at 11 Childs Close, Green Point), Mr Davies had been trying to track him down, and Mr Pandja told Thomas Pandja to come home for the weekend, which he did, and “nobody showed up”.[56] In response to it being put to Thomas Pandja that Mr Davies never asserted he had served Thomas Pandja on 3 December 2013, Thomas Pandja said: “I don’t know what you’re getting at. It doesn’t make sense”.[57] Thomas Pandja said a family friend had typed up his second affidavit after Thomas Pandja told “our family friend what had happened”.[58] When he was asked whether Thomas Pandja told the family friend that Mr Davies claimed he served Thomas Pandja with the bankruptcy notice on 3 December 2013, Thomas Pandja responded: “It’s just all gone over my head”.[59] After he was shown Mr Davies’ affidavit, Thomas Pandja initially said, after he read it, “I think it does state that he did serve me on 3 December, I think. I just read it”.[60] Thomas Pandja, however, later accepted that in the affidavit of Mr Davies to which Thomas Pandja refers in his affidavit of 8 April 2014, Mr Davies did not assert he had served Thomas Pandja with the bankruptcy notice.[61]
[55] 30.06.14, T162.20
[56] 30.06.14, T162.25
[57] 30.06.14, T162.30
[58] 30.06.14, T163.25
[59] 30.06.14, T163.40
[60] 30.06.14, T164.35
[61] 30.06.14, T164.45
Also under cross-examination, Thomas Pandja said he had been working in Oatley from 6 to 24 January 2014 helping out a friend of his named Andrew.[62] He initially said he worked every day from 6 to 24 January 2014,[63] but then he said he did not work on Sunday.[64] Thomas Pandja agreed that nothing in the calendar indicated that Thomas Pandja worked in Oatley.[65] Thomas Pandja said, however, that he stayed with his mother in law.[66]
[62] 30.06.14, T166.1-5
[63] 30.06.14, T166.1-5
[64] 30.06.14, T166.20
[65] 30.06.14, T167.10-15
[66] 30.06.14, T167.40
The evidence of Ms Surdich
Ms Surdich deposed in an affidavit that Mrs Pandja “was at my place of an afternoon and well into the evening from 2nd December to 17th December to take care of my children and cooked meals for them due to my work and study commitments”.
Under cross-examination, Ms Surdich said she was studying a course at the Wyong campus of the Hunter Institute of TAFE, and the course was taught on certain Tuesdays, including Tuesday, 3 December 2013, and that those classes were held from 9 am to 3 pm.[67] Ms Surdich did not always go straight home after lessons had been completed; many times she went shopping.[68] Ms Surdich accepted it was possible that on 3 December 2013 she was home not long after her class had finished, but she could not remember what time she got home.[69]
[67] 30.06.14, T139.10-25
[68] 30.06.14, T139.30
[69] 30.06.14, T139.30-35
Service of bankruptcy notice on Mrs Pandja
I now consider whether the bankruptcy notice was served on Mrs Pandja.
Parties’ submissions
Dr Schmidt submits the Court cannot be satisfied that Mrs Pandja was not present at her house at 7.15 pm when Mr Davies deposes he served her with the bankruptcy notice because Mrs Pandja accepted in cross-examination she could not recall when she left Ms Surdich’s house and Ms Surdich in cross-examination accepted that her class at TAFE concluded at 3 pm on 3 December 2013, she did not know what time she arrived home on that day, and she did not know what time Mrs Pandja left her house.
Dr Schmidt further submits that the Court should prefer the evidence of Mr Davies to that of Mrs Pandja. Mr Davies has no interest in the proceedings; he did not serve Thomas Pandja, so it was inevitable he had to return to the premises to serve him, so there is no reason for Mr Davies to lie about having served Mrs Pandja, and there is a contemporaneous document recording the time and date on which Mr Davies served Mrs Pandja, namely, the “Process Serving Worksheet”.
Dr Schmidt also relies on two other items of evidence. The first is a fax dated 10 December 2013 from William Roberts Lawyers to Mr and Mrs Pandja, and to Thomas Pandja.[70] In that letter, William Roberts Lawyers advised:
In respect of the bankruptcy notice served upon you on 3 December 2013, we confirm that the best way to defend against the process is to seek a stay of the enforcement of the judgment from the District Court.
[70] Affidavit of M Pandja, 02.05.14, exhibit MP1, before tab 13
The second item of evidence on which Dr Schmidt relies is the work described in the tax invoice William Roberts Lawyers issued to Mr and Mrs Pandja, and to Thomas Pandja.[71] The work is consideration of “methods by which to answer the bankruptcy notice served on the clients” and consideration of “potential bases for setting aside/extending time for BN further to previous considerations and options”.
[71] Affidavit of M Pandja, 02.05.14, exhibit MP1, before tab 13
Dr Schmidt submits that these documents indicate that Mrs Pandja (and Thomas Pandja) did not consider service of the bankruptcy notice to have been an issue, and that Mrs Pandja first raised the issue after the creditor’s petition had been served on Mr Pandja.
Finally, Dr Schmidt submits that, even if the Court does not accept Mrs Pandja was personally served with the bankruptcy notice, the evidence is clear that she was made aware that a bankruptcy notice had been issued against her and, for that reason alone, was served with the bankruptcy notice.
Mr Pandja submits I should not accept the evidence of Mr Davies.
a)That Mr Davies did not include in his affidavit of 17 December 2013 the matters he subsequently included in his affidavit of 28 March 2014 indicates that what he said in both affidavits is incorrect. As I understand Mr Pandja, the submission is that if what Mr Davies included in his 28 March 2014 affidavit had in fact occurred, Mr Davies would have included those matters in his 17 December 2013 affidavit.[72]
b)Second, that Mr Davies’ affidavit of 17 December 2013 does not correctly reflect the information contained in the “Process Serving Worksheet” that was prepared in relation to the service of the bankruptcy notice indicates that Mr Davies’ affidavits of 17 December 2013 and 28 March 2014 and the “Process Serving Worksheet” in relation to the service of the bankruptcy notice on Mrs Pandja cannot be relied on.[73] Mr Pandja submits the “Process Serving Worksheet” is fraudulent.[74]
c)Third, Mr Pandja relies on answers Mr Davies gave to questions under cross-examination about Mr Davies’ recollection of what Mr Davies observed of the house at which he says he served the bankruptcy notice, and of the movements of Mr Pandja.[75]
[72] Submissions on behalf of Michael Pandja filed 9 July 2014, [21.A.]
[73] Submissions on behalf of Michael Pandja filed 9 July 2014, [21.B.]
[74] Submissions on behalf of Michael Pandja filed 9 July 2014, [21.F.]
[75] Submissions on behalf of Michael Pandja filed 9 July 2014, [22.A.-F.]
Issues for determination
Both Mr Pandja and Mr Davies agree on three matters. First, Mr Davies attended the home of Mr and Mrs Pandja on 3 December 2013 at a time that included 7.06 pm. Second, Mr Davies handed Mr Pandja the bankruptcy notice. Third, Mr Davies stated he had a bankruptcy notice that he had to serve on Mrs Pandja and on Thomas Pandja, and that Mr Pandja telephoned his solicitor. They disagree, however, on two matters.
First, Mr Pandja says that he telephoned his solicitor before he accepted the bankruptcy notice from Mr Davies. Mr Davies, on the other hand, deposes that he served the bankruptcy notice on Mr Pandja, and then Mr Pandja telephoned his solicitor. Under cross-examination, Mr Davies also said that he walked down the steps and walked away while Mr Pandja was on the telephone.[76]
[76] 02.06.14, T25.1
The second matter about which Mr Pandja and Mr Davies disagree concerns what Mr Pandja said and did in response to Mr Davies’ statement that he had a bankruptcy notice to serve on Mrs Pandja and Thomas Pandja. According to Mr Pandja, he informed Mr Davies that Mrs Pandja was not at home, and that Thomas Pandja was in Sydney, so that he could only be served on the weekend. On the other hand, Mr Davies, at least in his affidavit of 28 March 2014, says that, Mr Pandja “then proceeded to go inside the house and a short while later Mr Pandja and a woman, who has since identified herself as Mrs Pandja, returned to the door”.[77]
[77] Affidavit of C Davies, 28.03.2014, [7]
In addition to the conflicting accounts of Mr Pandja and Mr Davies, there is the conflicting evidence of Mr Davies and Mrs Pandja. Mr Davies deposes that he served Mrs Pandja with the bankruptcy notice, while Mrs Pandja deposes she was not served with the bankruptcy notice, and she could not have been served because she was at her daughter’s house at the time Mr Davies deposes he served her.
What I am faced with, therefore, are two sets of competing accounts of an alleged event, namely, the serving of the bankruptcy notice on Mrs Pandja. The first set of competing accounts is between Mr Pandja and Mr Davies; and the second is between Mrs Pandja and Mr Davies. To prove the bankruptcy notice was served on Mrs Pandja, I must be satisfied on a balance of probabilities that Mr Davies’ account is true. On the other hand, if I am satisfied that either or both of the accounts of Mr and Mrs Pandja is or are true, that necessarily would mean I would not accept Mr Davies’ account, and that Dr Schmidt will not have discharged the burden of proving the bankruptcy notice was served on Mrs Pandja. Another possibility is that discussed by Lord Brandon of Oakbrook in Rhesa Shipping Co SA v Edmunds:[78]
[T]he judge is not bound always to make a finding one way or the other with regard to the facts averred by the parties. He has open to him the third alternative of saying that the party on whom the burden of proof lies in relation to any averment made by him has failed to discharge that burden. No judge likes to decide cases on burden of proof if he can legitimately avoid having to do so. There are cases, however, in which, owing to the unsatisfactory state of the evidence or otherwise, deciding on the burden of proof is the only just course for him to take.
[78] Rhesa Shipping Co SA v Edmunds [1985] 1 WLR 948 at 955-6
What principles should guide me to resolve the conflicting evidence of Mr and Mrs Pandja on the one hand, and Mr Davies on the other?
Deciding between conflicting testimony
The starting point is the proposition that the evidence of a witness is weighed according to its credibility. Credibility is “the quality or power of inspiring belief”;[79] and the weight a fact-finder accords testimony is just the degree of belief or satisfaction that the testimony induces in the fact-finder’s mind. The belief or satisfaction that a witness’s testimony is capable of inducing is belief or satisfaction in the existence or non-existence of a fact the witness asserts exists or does not exist.
[79] Indiana Metal Products v National Labor Relations Board 442 F.2d 46 at 51 (1971) (Seventh Circuit), quoting Webster’s Third New International Dictionary 1966
Whether or not any given testimony will inspire belief in the existence or non-existence of the fact the witness asserts exists or does not exist will depend on the fact-finder’s assessment of the witness’s “powers of perception, memory and narration . . . and of his [or her] opportunity and desire to exercise them honestly and efficiently in the situation under examination”.[80] This means that assessing the credibility of testimony “involves wider problems than mere ‘demeanour’ which is mostly concerned with whether the witness appears to be telling the truth as he now believes it to be”.[81] Assessing evidence “apprehends the over-all evaluation of testimony in the light of its rationality or internal consistency and the manner in which it hangs together with other evidence”.[82]
[80] Edmund M. Morgan, “The Relation Between Hearsay and Preserved Memory” 40 Harv. L. Rev. 712 (1926-1927)
[81] Onassis and Calogeropoulos v Vergottis [1968] Ll. L.R. 403 at 431 (Lord Pearce)
[82] Carbo v United States 314 F.2d 718 at 749 (1963) (Ninth Circuit)
There have been a number of statements about how a court should assess testimony. In Haebe v Department of Justice the United States Court of Appeals for the Federal Circuit said:[83]
Numerous factors . . . must be considered in making and explaining a credibility determination. These include: (1) [t]he witness’s opportunity and capacity to observe the event or act in question; (2) the witness’s character; (3) any prior inconsistent statement by the witness; (4) a witness’s bias, or lack of bias; (5) the contradiction of the witness’s version of events by other evidence or its consistency with other evidence; (6) the inherent improbability of the witness’s version of events; and (7) the witness’s demeanor.
[83] 288 F.3d. 1288 at 1320 fn 30 (2002)
In The Ocean Frost, Robert Goff LJ said:[84]
It is frequently very difficult to tell whether a witness is telling the truth or not; and where there is a conflict of evidence such as there was in the present case, reference to the objective facts and documents, to the witnesses’ motives, and to the overall probabilities, can be of very great assistance to a judge in ascertaining the truth.
[84] Armagas Ltd v Mundogas SA (The Ocean Frost) [1985] 1 Lloyd’s Rep 1 at page 57
And the following observations of Peter Smith J in EPI Environmental Technologies Inc v Symphony Plastic Technologies are worth bearing in mind:[85]
i) First, it is essential to evaluate a witness’s performance in the light of the entirety of his evidence. Witnesses can make mistakes, but those mistakes do not necessarily affect other parts of their evidence.
ii) Second, witnesses can regularly lie. However, . . . [that] does not mean necessarily that the entirety of that witnesses [sic] evidence is rejected. A witness may lie in a stupid attempt to bolster a case, but the actual case nevertheless remains good irrespective of the lie. A witness may lie because the case is a lie.
Whether Mrs Pandja was served with the bankruptcy notice - the competing accounts of Mr Davies and Mr Pandja
[85] EPI Environmental Technologies Inc v Symphony Plastic Technologies[2004] EWHC 2945 (Ch) at [74]
I first consider the inherent probability or plausibility of each of the competing accounts of Mr Pandja and Mr Davies as set out in their affidavits, standing alone.
On Mr Davies’ account, he served Mr Pandja with the bankruptcy notice at the door, Mr Pandja told Mr Davies that he was calling his solicitor, Mr Pandja made a telephone call, after his telephone conversation Mr Pandja returned to Mr Davies, and it is at that point that Mr Davies informed Mr Pandja that he had a bankruptcy notice that he had to serve on Mrs Pandja, and, after a short time, Mr Pandja arranged for Mrs Pandja to come to the door at which point she was served with the bankruptcy notice.
In my opinion, Mr Pandja’s account is inherently more probable than Mr Davies’ account. There is no apparent reason why, as Mr Davies deposes, Mr Pandja would telephone his solicitor after he accepted the bankruptcy notice and have Mr Davies wait at the door. It is more likely that, as Mr Pandja has deposed, he telephoned his solicitor after he was informed that Mr Davies intended to serve him with a bankruptcy notice, but before he accepted the bankruptcy notice. That is so because Mr Pandja was confronted with having to decide whether to accept service of the bankruptcy notice, and it is likely that he would have telephoned his solicitor to obtain advice about whether he should accept service of the bankruptcy notice.
I next consider what Mr Davies and Mr Pandja deposed in light of other evidence. I first consider Mr Davies’ account against a number of items of evidence. The first is the evidence Mr Davies gave under cross-examination that he walked down the steps and walked away while Mr Pandja was on the telephone.[86] Also relevant is the following evidence Mr Davies gave in cross-examination:[87]
[86] 02.06.14, T25.1: “Well, how you can see me through a screen door? ---No, I observed you through the screen door make the phone call. I walked down the steps and walked away while you were . . .
[87] 02.06.14, T33.5-15
MR PANDJA: Now, you observe me on – that I have telephone call with my solicitor but you say that you didn’t hear what was saying? --- I observed you make the telephone call.
Pardon? --- I observed you make the telephone call.
But you didn’t hear nothing? --- No, I wandered up the drive way. It’s not my business.
Mr Davies did not say in his affidavit of 28 March 2014 that he walked down any steps, or that he wandered up any driveway while Mr Pandja made his telephone call to his solicitor. What he says in his affidavit is that he “observed Mr Pandja make a telephone call, but did not hear what was said”.[88] That implies that Mr Davies remained at the door after (on his account) he had served Mr Pandja with the bankruptcy notice and observed Mr Pandja make a telephone call for the entirety of the call. If that is the correct interpretation of what Mr Davies intended to convey in his affidavit, then his evidence that he went down some stairs or he wandered up a driveway is inconsistent with his affidavit, unless it is possible to infer that Mr Davies could have observed, and chose to observe, Mr Pandja making his telephone call as or after he descended the stairs or wandered up a driveway. On the evidence that is before me, it is impossible to draw any such inference.
[88] Affidavit of C Davies, 28.03.14, [6]
There are other difficulties with Mr Davies’ evidence that he descended some stairs or wandered up the driveway while Mr Pandja made his telephone call to his solicitor. If that did occur, how did Mr Pandja and Mr Davies come to have a conversation about service of the bankruptcy notice on Mrs Pandja? Did Mr Davies walk down the driveway or up the stairs to see if Mr Pandja had completed his telephone call? Or did Mr Pandja invite Mr Davies to return? The evidence does not provide any basis for answering those questions.
That Mr Davies has given evidence which is inconsistent with what he deposed in his affidavit undermines the credibility of the account Mr Davies has given in his affidavit of 28 March 2014.
The second item of evidence against which I need to assess Mr Davies’ account as set out in his affidavit of 28 March 2014 is the affidavit he made on 17 December 2013. In that affidavit, he says he served Mrs Pandja at 7.00 o’clock, whereas in his affidavit of 28 March 2014 Mr Davies says he served Mrs Pandja at 7.15 o’clock. He says he made an error in his affidavit of 17 December 2013. Mr Davies does not say in his affidavit what the nature of the error was. That must be inferred from two documents he annexed to his affidavit of 28 March 2014, those being two documents each titled “Process Serving Worksheet – Last Date” (PSW) which Mr Davies said he completed on 3 December 2013 “upon returning to my car following service of the bankruptcy notices on Mr and Mrs Pandja”.[89]
[89] Affidavit of C Davies, 28.03.14, [8]
The claimed error is that Mr Davies incorrectly recorded in his affidavit of 17 December 2013 as the time he served Mrs Pandja the time he (correctly) recorded in the PSW in relation to Mr Pandja (the Mr Pandja PSW) as having served Mr Pandja; and that, in his affidavit of 13 December 2013 Mr Davies incorrectly recorded as the time he served Mr Pandja the time he (correctly) recorded in the PSW in relation to Mrs Pandja (the Mrs Pandja PSW) as having served Mrs Pandja. The question I must address is whether the inconsistency is explained to my satisfaction.
Mr Davies does not state in his affidavit of 28 March 2014 how the claimed error occurred. Under cross-examination, Mr Davies said the error was a “typo error”.[90] I do not understand from that evidence what type of error Mr Davies intended to convey was made. There is no evidence about who typed the affidavits of service of 13 and 17 December 2013. Nor is there any evidence that the affidavits of service were typed by reference to the PSWs.
[90] 02.06.14, T14.10
It is conceivable that one person typed both affidavits and at the time the person typed the affidavits he or she had before him or her both PSWs and, when typing the affidavit in relation to service on Mr Pandja, the typist referred to the Mrs Pandja PSW and, when typing the affidavit in relation to service on Mrs Pandja, the typist referred to the Mr Pandja PSW. It is also conceivable that both affidavits were typed on the same day but sworn on different days. None of these possibilities, however, seem to me to be likely.
For these reasons, I do not accept that Mr Davies’ deposing in his 17 December 2013 affidavit that he had served Mrs Pandja at 7 o’clock was a “typo error”. The position, therefore, is that there is a discrepancy between the evidence Mr Davies has given, on the one hand, in his affidavit of 28 March 2014 and, on the other, in his affidavits of 13 and 17 December 2013, about the times on which he says he served each of Mr and Mrs Pandja with the bankruptcy notice. Given I have not accepted the explanation for the discrepancy offered by Mr Davies, there is no explanation for the discrepancy. That is a matter which adversely affects the credibility of Mr Davies’ account.
The third item of evidence against which I need to assess Mr Davies’ account as set out in his affidavit of 28 March 2014 are the PSWs. On their face, they support Mr Davies’ account, at least to the extent they confirm the bankruptcy notice was served on Mrs Pandja at 7.15 pm. There is nothing in the PSWs, however, that explains away the inconsistency I have identified above between what Mr Davies deposed in his affidavit and what he said under cross-examination. That inconsistency casts doubt on Mr Davies’ evidence that he completed the PSWs when he returned to his car after he says he served the bankruptcy notice on each of Mr and Mrs Pandja.
My doubts about Mr Davies’ evidence are heightened by some unexplained differences between the PSWs that were created in relation to Mr and Mrs Pandja, and to the PSW that was created in relation to Thomas Pandja (the Thomas Pandja PSW). These differences are as follows:
a)Next to the word “MATTER” in the Mr Pandja PSW, there are added the words “SCHMIDT -V- PANDJA” whereas in the Mrs Pandja PSW next to the word “MATTER” there are added the words “BANKRUPTCY NOTICE”.
b)In the Thomas Pandja PSW there is added next to the word “MATTER” the word “BANKRUPTCY”. That contrasts with the words “SCHMIDT -V- PANDJA” and “BANKRUPTCY NOTICE” that appear next to the word “MATTER” in the Mr Pandja and Mrs Pandja PSWs respectively.
c)In each of the Mr Pandja PSW and the Mrs Pandja PSW, there is present the words and numbers “CONDUCT MONEY: $0.00”, whereas these words and numbers do not appear in the Thomas Pandja PSW.
d)In each of the Mr and the Mrs Pandja PSWs the words and numbers “LAST DATE FOR SERVICE: 06/12/13” appear, whereas the Thomas Pandja PSW does not contain these words or numbers.
It may very well be that these differences do not affect the accuracy of the PSWs. I am not prepared to assume, however, that they do not affect the accuracy of the PSWs without evidence about whether the PSWs were prepared from a template used by Mr Davies, and if so, what type of information was required to be included in each PSW, who prepares each PSW, and on the basis of what information is each PSW prepared.
The fourth item of evidence that I need to consider is Mr Davies’ having sworn an affidavit of service of the bankruptcy notice on Mr Pandja on 13 December 2013 and an affidavit of service on Mrs Pandja on 17 December 2013. Mr Davies has deposed that he completed a PSW for each of Mr Pandja and Mrs Pandja at the same time. One would reasonably expect that, if Mr Davies did serve the bankruptcy notice on each of Mr and Mrs Pandja between 7 pm and 7.15 pm on 3 December 2013, and he had completed two PSWs, one for each of Mr and Mrs Pandja, at the same time, when it came to Mr Davies swearing the affidavits of service he would have done so on the same day. Again, there may well be a very good explanation why the affidavits were sworn four days apart, but none has been given.
I next consider Mr Pandja’s account; and here, there are a number of matters to note:
a)I have already said that I am of the opinion that Mr Pandja’s account, to the extent he says he telephoned his solicitor before he accepted the bankruptcy notice, is more probable than Mr Davies’ evidence that Mr Pandja telephoned his solicitor after he served the bankruptcy notice on Mr Pandja. That by itself lends greater credibility to Mr Pandja’s account than Mr Davies’ account.
b)Mr Pandja’s account refers to a conversation about service on Thomas Pandja, whereas Mr Davies’ account does not. That, too, lends Mr Pandja’s account greater credibility than Mr Davies’ account because Mr Pandja’s account is more complete than Mr Davies’ account.
c)There is nothing inherently improbable in Mrs Pandja not being at home at the time Mr Davies served Mr Pandja. Thus, there is nothing that is inherently improbable in Mr Pandja deposing that he informed Mr Davies that Mrs Pandja was not at home.
d)The telephone and fax records on which Mr Pandja relies are neutral. That is, they are equally consistent with Mr Davies’ and Mr Pandja’s account. It is true that the telephone record shows that Mr Pandja telephoned his solicitor at 19:07 which means that Mr Pandja was not served until immediately before that time and that, to that extent, Mr Davies cannot have been correct in stating he had served Mr Pandja at 7.00 pm. However, I do not place any weight in what amounts to a five-minute difference.
What of the fax dated 10 December 2013 from William Roberts Lawyers to Mr and Mrs Pandja and to Thomas Pandja that refers to the “bankruptcy notice served upon you on 3 December 2013”? That cannot be taken as evidence that all three of the persons to whom the fax was addressed were served with the bankruptcy notice. There is no doubt that Thomas Pandja was not served on 3 December 2013. Nor can it be taken as evidence that Mrs Pandja was served.
And what of the entry for 4 December 2013 made in the tax invoice issued by William Roberts Lawyers? It does not refer to any telephone attendance on Mr Pandja on 3 December 2013, but it does refer to a telephone attendance on him on 4 December 2013. The absence from the tax invoice of a telephone attendance on Mr Pandja on 3 December 2013 is some evidence there was no such attendance. However, Mr Davies agrees that when he attended Mr Pandja’s house, Mr Pandja did telephone his solicitor. The failure of Mr Pandja’s solicitor to include the telephone conversation on 3 December 2013 in the tax invoice may, therefore be an error; and the reference in the tax invoice of a telephone attendance on Mr Pandja could be an incorrect reference to the telephone conversation Mr Pandja says he had on 3 December 2013, or it could be a reference to a telephone attendance on Mr Pandja on 4 December 2013.
Finally, I consider the demeanour of Mr Davies and Mr Pandja when giving evidence. There is nothing in the demeanour of either of these gentlemen that by itself causes me to doubt what they each said on oath. Mr Davies gave his evidence calmly, and made an apparent attempt to give truthful evidence. Mr Pandja, on the other hand, presented a very different character. He was adamant that his account of what occurred at the time he was served with a bankruptcy notice was true, and that Mr Davies’ account was false. And while cross-examining Mr Davies, Mr Pandja made the very serious allegation that Mr Davies and Dr Schmidt’s solicitor fabricated evidence. Mr Pandja’s behaviour, however, passionate and at times extreme as it was, did not indicate to me that he did not believe the truth of the evidence he gave.
Whether Mrs Pandja was served with the bankruptcy notice - the competing accounts of Mr Davies and Mrs Pandja
The conflict between Mr Davies and Mrs Pandja is a simple one. Mr Davies deposes he served Mrs Pandja with a bankruptcy notice, and Mrs Pandja denies she was served. But Mrs Pandja does not simply deny; she has given evidence which, if accepted, necessarily means she could not have been served as Mr Davies deposes she had been. Whether or not Mrs Pandja’s evidence is accepted, therefore, has a large bearing not only on whether I accept Mr Davies’ account over that of Mrs Pandja, but also on whether I accept his account over that of Mr Pandja as well.
I first consider whether, standing alone, Mrs Pandja’s account of where she was on the evening of 3 December 2013 is inherently improbable. In my opinion, it is not. On Mrs Pandja’s account, she was at her daughter’s house, but, although she says she left her daughter’s house late, she could not remember when she left. In my opinion, there is nothing improbable about this account. It is well within common experience that people do not usually note in their minds the time they end a social visit, at least not where there is no other scheduled event on the day in question, such as a work commitment or some social event that has a definite scheduled start.
I next consider other evidence. First, there is the evidence Mrs Pandja gave in cross-examination. As I set out in paragraph 21 of these reasons, Mrs Pandja said that Mr Pandja informed her he had been served with a bankruptcy notice,[91] and that Mr Pandja showed the document to her.[92] If that evidence is accepted, and there is no reason in my mind, including Mrs Pandja’s demeanour, why I should not accept it, it supports Mrs Pandja’s denial that she was served with the bankruptcy notice. Second, there is the evidence of Ms Surdich which supported Mrs Pandja’s evidence. The worst thing that can be said about the evidence Ms Surdich gave is that she did not recall when she arrived home on 3 December 2013. In my opinion, that does not adversely affect the credibility of her evidence. Third, there are the matters I have already noted about Mr Davies’ evidence, which I do not need to repeat here.
[91] 30.06.14, T147.30-35
[92] 30.06.14, T147.35
Lastly, I turn to demeanour. Mrs Pandja was highly emotional when giving evidence; and when she was not giving evidence but was in Court, Mrs Pandja had difficulty controlling herself from asserting to Mr Davies that he was not telling the truth. There is nothing in Mrs Pandja’s demeanour, however, that by itself would cause me to doubt her evidence.
Whether Mrs Pandja was personally served with the bankruptcy notice - conclusion
Based on the matters I have discussed above, I prefer Mr Pandja’s account of what occurred at the time he was served with the bankruptcy notice to the account Mr Davies has given. I also accept Mrs Pandja’s evidence. Both Mr Pandja and Mrs Pandja’s accounts are not inherently improbable, and Mr Pandja’s evidence is more plausible than that of Mr Davies; and Mr Davies has given inconsistent accounts about the circumstances in which he served the bankruptcy notice on Mr and Mrs Pandja for which I have found no adequate explanation has been provided.
I should make it clear, however, that my preferring the evidence of Mr and Mrs Pandja over that of Mr Davies does not amount to any finding that Mr Davies has given any false evidence, or that the documents that have been attached to his affidavit have been fabricated. My decision is based on my assessment of the probabilities based on the evidence that was before the Court. It may well be that there are other explanations for the matters I have identified above which, if evidence of them had been given before me, may have led to my arriving at a different conclusion.
It therefore follows that Mrs Pandja was not personally served with the bankruptcy notice. Can it be said, as submitted by Dr Schmidt, that Mrs Pandja was nevertheless served with the bankruptcy because Mr Pandja made her aware of it?
Whether Mrs Pandja was nevertheless personally served with the bankruptcy notice
Dr Schmidt submits that even if I do not accept that Mrs Pandja was personally served with the bankruptcy notice, she was served with the bankruptcy notice because, on her own evidence, she was shown the bankruptcy notice, and she read it.[93] Although Dr Schmidt relies on a number of authorities, I need only refer in detail to the decision of Young J in Howship Holdings Pty Ltd v Leslie & Anor.[94]
[93] 30.06.14, T147.35-40
[94] Howship Holdings Pty Ltd v Leslie & Anor (1996) 41 NSWLR 542
In Howship the issue was whether a summons to set aside a statutory demand, together with a supporting affidavit, issued under s.459G of the Corporations Law was properly served on the person making the demand within twenty-one days. The summons was delivered to a document exchange box. That was not a method of service permitted under s.109X of the Corporations Law. Young J nevertheless held the summons had been served because it had come to the notice of the person to whom the summons was addressed.
His Honour’s conclusion was based on three premises. First, the Corporations Law did not define the word “service”. That meant that where the word “service” was used in the Corporations Law, it bore its ordinary meaning. Second, the ordinary meaning of “service”, when used in relation to a document, is that the document has come to the actual notice of the person who is said to have been served.[95] Third, s.109X of the Corporations Law, which described a number of methods of service of documents, was not a code. Does this reasoning apply to the service of bankruptcy notices under the Bankruptcy Act 1966 (Cth) (Bankruptcy Act)?
[95] Young J referred to Hope v Hope (1854) 4 De GM & G 328 at 342; (1854) 43 ER 534 at 539-540 where Lord Chancellor Cranworth said: “The object of all service is of course only to give notice to the party on whom it is made, so that he may be made aware of and may be able to resist that which is sought against him; and when that has been substantially done, so that the Court may feel perfectly confident that service has reached him, everything has been done that is required.”
The starting point is s.40(1)(g) of the Bankruptcy Act which describes the act of bankruptcy that occurs in relation to bankruptcy notices. The act of bankruptcy occurs only if a bankruptcy notice is “served” either in Australia or elsewhere. As was the case with the Corporations Law, the expression “service” is not defined in the Bankruptcy Act.
As was also the case with the Corporations Law, there is a provision that deals with service of documents for the purposes of the Bankruptcy Act, but that provision is to be found in reg.16.01(1) of the Bankruptcy Regulations 1996 (Cth) (Bankruptcy Regulations). That sub-regulation provides that “[u]nless the contrary intention appears, where a document is required or permitted by the Act or these Regulations to be given or sent to, or served on, a person”, the document may be served by one of the methods described in the subparagraphs. In my opinion, reg.16.01 of the Bankruptcy Regulations is not a code for the serving of documents for the purposes of the Bankruptcy Act. Accordingly, if a person has received actual notice of a bankruptcy notice, that person will have been served with the bankruptcy notice for the purposes of s.40(1)(g) of the Bankruptcy Act.
The evidence is clear that Mrs Pandja read the contents of the bankruptcy notice. I find that she read it after she arrived home in the evening of 3 December 2013 and that, therefore, Mrs Pandja was served with the bankruptcy notice on 3 December 2013. I so find even though Mrs Pandja said in cross-examination she did not remember when she first read the bankruptcy notice. It is more likely that Mr Pandja would have informed Mrs Pandja of the bankruptcy notice at the time she arrived, being the first occasion on which he saw her after he had been served with the bankruptcy notice, rather than at some later time. I find that Mrs Pandja read the contents of the bankruptcy notice on 3 December 2013 even though Mr Pandja said in cross-examination that he did not inform Mrs Pandja that he had been served with the bankruptcy notice because she suffered from depression.[96] I do not accept Mr Pandja’s evidence. In his affidavit of 31 March 2014 Mr Pandja deposed that he offered that Mr Davies provide the bankruptcy notice to Mr Pandja and that Mr Pandja would give the bankruptcy notice to Mrs Pandja and to Thomas Pandja. If he made that offer, which I find he did, it is likely that he would have informed her, as Mrs Pandja said Mr Pandja did inform her, of the contents of the bankruptcy notice, and it is likely that Mr Pandja would have informed Mrs Pandja on 3 December 2013 when she arrived home.
[96] 30.06.14, T116.25-T116.35
Service of bankruptcy notice on Thomas Pandja
I will now consider whether Thomas Pandja was served with the bankruptcy notice.
I do not accept the evidence of Thomas Pandja as set out in his affidavit of 8 April 2014 to the extent he denies he was personally served with the bankruptcy notice. Thomas Pandja incorrectly asserts that in the affidavits made by Mr Davies on 13 December 2013 and 28 March 2014 Mr Davies stated that he had personally served Thomas Pandja with the bankruptcy notice on 3 December 2013. Mr Davies did not, however, depose in either of those affidavits that he personally served Thomas Pandja with the bankruptcy notice. Mr Davies deposed in an affidavit made on 23 January 2014 that he personally served Thomas Pandja on 15 January 2014.
There is nothing that raises any doubt that Mr Davies did in fact personally serve Thomas Pandja on 15 January 2014, and I find that Thomas Pandja was personally served with the bankruptcy notice. Even if there were to be any doubt about it, there is no doubt that Thomas Pandja was served with the bankruptcy notice by post. Mr Watt, the solicitor for Dr Schmidt, has deposed that on 17 January 2014 he arranged for a copy of the bankruptcy notice to be sent to Thomas Pandja by express post to 11 Childs Close, Green Point.[97] There is nothing in the Bankruptcy Act that indicates that a bankruptcy notice may not be served in that way. Accordingly, I find that the bankruptcy notice was also served on Thomas Pandja by post.
[97] Affidavit of S D Watt, 12.05.14, [15]; annexure “C”
Solvency of respondents
I now consider the respondents’ claims that they are able to pay their debts. Before I consider those claims, it would be useful if I repeat here the relevant principles concerning this defence to the making of a sequestration order that I have set out elsewhere.[98]
[98] Australian and New Zealand Banking Group v Daher [2014] FCCA 365 at [29]-[35]
Sub-section 52(2) – legal principles
Even if the Court is satisfied the matters specified in s.52(1) of the Bankruptcy Act are proved, the Court may dismiss the petition if it “is satisfied by the debtor” that, the debtor “is able to pay his or her debts” (s.52(2)(a) of the Bankruptcy Act) or if there is some “other sufficient cause” that a sequestration order ought not to be made (s.52(2)(b) of the Bankruptcy Act).
Subsection 52(2)(a) of the Bankruptcy Act does not use the word “solvent”;[99] nor does it use the words “as and when they become due and payable”.[100] Nevertheless, s.52(2)(a) has been construed as requiring the Court to be satisfied the debtor is “solvent” in the sense of not being “insolvent” as that term was explained in Sandell v Porter:[101]
Insolvency is expressed in s. 95 [of the Bankruptcy Act 1924] as an inability to pay debts as they fall due out of the debtor’s own money. But the debtor’s own moneys are not limited to his cash resources immediately available. They extend to moneys which he can procure by realization by sale or by mortgage or pledge of his assets within a relatively short time – relative to the nature and amount of the debts and to the circumstances, including the nature of the business, of the debtor. The conclusion of insolvency ought to be clear from a consideration of the debtor’s financial position in its entirety and generally speaking ought not to be drawn simply from evidence of a temporary lack of liquidity. It is the debtor’s inability, utilizing such cash resources as he has or can command through the use of his assets, to meet his debts as they fall due which indicates insolvency. Whether that state of his affairs has arrived is a question for the Court and not one as to which expert evidence may be given in terms though no doubt experts may speak as to the likelihood of any of the debtor’s assets or capacities yielding ready cash in sufficient time to meet the debts as they fall due.
[99] Being a term which is defined in s.5(2) of the Bankruptcy Act.
[100] Which is part of the definition of “solvent” in s.5(2) of the Bankruptcy Act.
[101] [1966] HCA 28 at [15]; (1966) 115 CLR 666 at 670-671. The cases which so construed s.52(2)(a) were identified by Cowdroy J in Rigg v Baker [2006] FCAFC 179 at [104]. His Honour referred to Lawman v Queensland Building Services Authority [1999] FCA 1781 (Full Court at [21]); Stankiewicz v Plata[2000] FCA 1185 (Full Court at [30]); St George Bank Ltd v Helfenbaum [1999] FCA 1337 at [22]; Re Eather; Ex parte Palada (unreported 30 May 1996 FCA, Cooper J); McVey, re Ex Parte Carswell & Company (unreported 22 May 1996 FCA, Cooper J) and International Alpaca Management Pty Ltd v Ensor[1999] FCA 72.
Fourth, the creditor’s petition was accompanied by an affidavit stating that on 13 February 2014 the computer records of the Federal Court and of this Court had been searched and no application had been made in relation to the bankruptcy notices issued to the respondents.[214]
[214] R.4.04(1)(a); affidavit of S D Watt, 13.02.14
Fifth:
a)On 18 February 2014, being more than five days before the date fixed for the hearing of the creditor’s petition filed by Dr Schmidt, Mr Pandja was served with, among other things, a sealed copy of the creditor’s petition, an affidavit of service of the bankruptcy notice on Mr Pandja sworn by Mr Davies on 13 December 2013, and a copy of the affidavit to which I refer in paragraph 196.[215]
b)On 18 February 2014, being more than five days before the date fixed for the hearing of the creditor’s petition filed by Dr Schmidt, Thomas Pandja was served with, among other things, a sealed copy of the creditor’s petition, an affidavit of service of the bankruptcy notice on Thomas Pandja sworn by Mr Davies on 23 January 2014, and a copy of the affidavit to which I refer in paragraph 196.[216]
c)On 20 February 2014, being more than five days before the date fixed for the hearing of the creditor’s petition filed by Dr Schmidt, Mrs Pandja was served with, among other things, a sealed copy of the creditor’s petition, an affidavit of service of the bankruptcy notice on Mrs Pandja sworn by Mr Davies on 17 December 2013, and a copy of the affidavit to which I refer in paragraph 196.[217]
[215] R.4.06(2); affidavit of C Davies, 25.02.14
[216] R.4.06(2); affidavit of C Davies, 25.02.14
[217] R.4.06(2); affidavit of C Davies, 03.03.14
Finally, on 2 June 2014 there was filed in Court an affidavit of debt, and on 21 October 2014, I granted leave to Dr Schmidt to file an affidavit as required by r.4.06(3) of the Bankruptcy Rules.
In my opinion, therefore, Dr Schmidt has proved the matters required under s.52(1) of the Act in relation to each of the respondents, and is, therefore, entitled to a sequestration order against the estates of each of them.
Conclusions and disposition
I am satisfied Dr Schmidt has proved against each respondent the matters specified in s.52(1) of the Bankruptcy Act. The respondents have not established any of the grounds stated in their notice stating grounds of opposition. Nor have they demonstrated any arguable case that the Court should go behind the judgment of the District Court.
I propose, therefore, to make a sequestration order against the estates of each of the respondents, and an order that Dr Schmidt’s costs be paid out of each of the respondent’s estates.
I certify that the preceding two hundred and one (201) paragraphs are a true copy of the reasons for judgment of Judge Manousaridis
Associate:
Date: 20 January 2015
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