Southcott Pty Ltd v Golding
[2018] FCCA 1844
•17 July 2018
FEDERAL CIRCUIT COURT OF AUSTRALIA
| SOUTHCOTT PTY LTD v GOLDING | [2018] FCCA 1844 |
| Catchwords: BANKRUPTCY – Application for review of sequestration order made by Registrar – sequestration order sought on the basis of unsatisfied judgment debt and costs order – was the bankruptcy notice properly serve on debtor – was creditor’s petition properly served on debtor – act of bankruptcy – nature of review – no basis for bankruptcy petition as debt satisfied – establish sufficient cause that sequestration order ought not be made – initial petition dismissed by the court with award of costs in favour of petitioner – no irregularity in calculation of costs by registrar - hearing de novo – whether grounds for going behind the judgment debt – deed of guarantee – discrepancy not to invalidate bankruptcy notice – discretion to extend time to file review application – failure to establish solvency – application dismissed. |
| Legislation: Bankruptcy Act 1966, ss.40, 40(1)(g), 41(1)(a), 41(1)(b), 41(3), 41(5), 41(6), 43(1), 43(1)(b), 52(1), 52(2), 306, 309 Federal Circuit Court of Australia Act 1999, ss.103, 104(2), 104(3) Federal Court Rules 2011, Part 40; Schedule 3 Federal Circuit Court Rules, r.6:04, 6.05, 6.06, 6.15, 20.01(2) 20.02, 20.03 Federal Circuit Court (Bankruptcy) Rules 2016, Division 13 Bankruptcy Regulations 1996, s.16.01(1) |
| Cases cited: Adams v Lambert [2006] HCA 10 |
| Applicant: | SOUTHCOTT PTY LTD |
| Respondent: | ROGER GOLDING |
| File Number: | ADG 531 of 2017 |
| Judgment of: | Judge Brown |
| Hearing date: | 13 June 2018 |
| Date of Last Submission: | 13 June 2018 |
| Delivered at: | Adelaide |
| Delivered on: | 17 July 2018 |
REPRESENTATION
| Counsel for the Applicant: | Mr Stewart-Rattray |
| Solicitors for the Applicant: | Stewart Rattray Lawyers |
| Counsel for the Respondent: | In person |
| Solicitors for the Respondent: | Not applicable |
ORDERS
The application for review, filed on 10 May 2018 is dismissed.
The petitioner’s costs be taxed and paid for from the estate of Roger Golding.
| FEDERAL CIRCUIT COURT OF AUSTRALIA AT ADELAIDE |
ADG 531 of 2017
| SOUTHCOTT PTY LTD |
Applicant
And
| ROGER GOLDING |
Respondent
REASONS FOR JUDGMENT
Introduction
The applicant, in these review proceedings, is Roger Golding. The respondent is Southcott Pty Ltd.[1] The proceedings arise under the provisions of the Bankruptcy Act 1966 (Cth) “the Act”.
[1] Hereinafter referred to as “Southcott”
Essentially, it is Mr Golding’s position that he has paid the monies owed by him, to Southcott, and therefore there is no basis for the bankruptcy petition filed by Southcott. Mr Golding asserts that this discharge of debt was established by him in the context of earlier proceedings, under the Act, which were finalised in July of 2017.
In these circumstances, he seeks that the court go behind the relevant bankruptcy notice served upon him and complete various calculations, arising from bank statements provided by him, to reach the conclusion advocated by him, namely that he is not indebted to Southcott.
Mr Golding has represented himself in these proceedings and made brief submissions to the court to the effect that a perusal of the bank statements provided by him will establish his case. Although he does not put it as such, it would also appear to be his position that there are defects in the relevant bankruptcy notice, which render it ineffective and, as a consequence, he has established sufficient cause that a sequestration order ought not be made, pursuant to section 52(2) of the Act.
Southcott concedes that there were earlier bankruptcy proceedings, between the parties, which resulted in an initial petition against Mr Golding being discharged by the court. Southcott also accepts that Mr Golding has made intermittent payments to it, which have reduced his liability, but is critical of these payments on the basis that they have proved to be intermittent and unreliable.
However, it is Southcott’s position that, notwithstanding the dismissal of the petition in question, Mr Southcott remains indebted to it. More significantly, the resolution of the first petition resulted in it being awarded costs, formalised by unchallenged court order, which order remains unsatisfied and which it is therefore entitled to utilise to found, in part, a second petition.
As such, Southcott contends that it is a judgment creditor of Mr Golding, in the sense envisaged by section 40(1)(g) of the Act and, with the lack of payment of that debt, together with the lack of complete satisfaction of the residual debt from the first petition, Mr Golding has committed an act of bankruptcy, under the Act, which justifies the sequestration of his estate.
The first petition
Southcott sued Mr Golding, in the Magistrates’ Court of South Australia, obtaining a default judgment against him in an amount of $7,156.71. The claim was lodged on 2 December 2006 and the date of judgment recorded was 9 January 2017.
The judgment has not been set aside. There are no proceedings on foot, in the Magistrates’ Court, to challenge the debt or in another court by way of appeal. As a consequence of it, on 11 January 2017, Southcott applied to the Official Receiver for a bankruptcy notice to issue against Mr Southcott in this amount.
In order to satisfy the bankruptcy notice, Mr Golding was required to pay the sum of $7,156.71, within twenty-one days of having received the notice. He did not apply to set aside the notice or for an extension of time to comply with it.
On 9 February 2017, Mr Vitanza, a process server based in Parramatta, New South Wales deposed that he personally served Mr Golding with the bankruptcy notice and a copy of the judgment debt of the Magistrates’ Court of South Australia dated 9 January 2017, at an address in Smeaton Grange, New South Wales, on 27 January 2017.[2]
[2] See affidavit of John Vicenza filed 24 March 2017
Attached to the bankruptcy notice was a copy of the judgment debt, in an amount of $7,156.71, from the Magistrates’ Court of South Australia. The notice specified payment of this sum was required within 21 days from its service on Mr Golding.
The power granted to the Official Receiver, to issue bankruptcy notices, arises pursuant to section 41(1)(a) of the Act, which reads as follows:
“(1)An Official Receiver may issue a bankruptcy notice on the application of a creditor who has obtained against a debtor:
(a) a final judgment or final order that:
(i) is of the kind described in paragraph 40(1)(g); and
(ii) is for an amount of at least $5,000; or”
Pursuant to section 41(1)(b) a bankruptcy notice can issue in respect of two or more final judgments, which together total more than $5,000.00. This provision is relevant, when the circumstances surrounding the filing of the second petition are considered.
Part IV of the Act deals with proceedings against individuals on the basis of their alleged insolvency. In general terms, a creditor of such a person can institute proceedings against him or her, in bankruptcy, if able to establish an act of bankruptcy on the part of that person.
In this particular case, the act of bankruptcy relied upon by Southcott is provided by section 40(1)(g) of the Act, which reads as follows:
“(g)if a creditor who has obtained against the debtor a final judgment or final order, being a judgment or order the execution of which has not been stayed, has served on the debtor in Australia or, by leave of the Court, elsewhere, a bankruptcy notice under this Act and the debtor does not:
(i)where the notice was served in Australia--within the time specified in the notice; or
(ii)where the notice was served elsewhere--within the time fixed for the purpose by the order giving leave to effect the service;
comply with the requirements of the notice or satisfy the Court that he or she has a counter-claim, set-off or cross demand equal to or exceeding the amount of the judgment debt or sum payable under the final order, as the case may be, being a counter-claim, set-off or cross demand that he or she could not have set up in the action or proceeding in which the judgment or order was obtained;”
Section 41(3) places restrictions on the issue of bankruptcy notices by the Official Receiver. Firstly, a bankruptcy notice is not to be issued, in respect of a debtor to anyone other than a judgment creditor, within the meaning of section 40(1)(g); secondly, the execution of the judgment in question has not been stayed; and thirdly, the judgment itself is not more than six years old.
It was Southcott’s position that Mr Golding did not comply with the bankruptcy notice obtained by it on 11 January 2017 and that therefore he had committed an act of bankruptcy, within the terms specified by section 40(1)(g) of the Act.
As a consequence, on 24 March 2017, Southcott issued a petition, “the first petition”, against Mr Golding, seeking to sequestrate his estate, on the basis of the act of bankruptcy, arising from non-compliance with the bankruptcy notice dated 11 January 2017.
The first petition was set down for hearing on 9 May 2017, before a registrar of the court. The petition had not been served. On this basis, on 10 March 2017, Southcott applied for an order for substituted service of the petition. The application for substituted service was supported by an affidavit of Southcott’s solicitor, Mr Stewart-Rattray.
On 19 May 2017, Registrar Colbran made an application dispensing with the need for personal service of the petition on Mr Golding. In lieu thereof, the Registrar ordered as follows:
“A sealed copy of the Creditor’s Petition and this order, a copy of each affidavit verifying the Creditor’s Petition, a copy of any affidavit of service of the bankruptcy notice and a copy of any consent of a registered trustee be served:
a. by placing them in a sealed envelope addressed to the respondent and marked “private and confidential”, and
b. handing them to any employee of Tiltip Technology NSW Pty Ltd over the age of 16 years at the premises situated at 54 Topham Road, Smeaton Green, NSW 2567.
The Creditor’s Petition and other documents shall be deemed to be served on the respondent 3 business days after service in accordance with order 4.”
In addition, on that date, Registrar Colbran also ordered that Southcott E-lodge an amended creditor’s petition, bearing the amended hearing date of 20 June 2017, at 9:30am. Necessarily, it was this amended petition, which was to be served in the manner specified by the Registrar.
The amended petition indicates that the amount of the judgment debt, arising from the bankruptcy notice served upon Mr Golding on 27 January 2017, was $6,756.71.
On 19 June 2017, Mr Golding filed a notice of opposition to the petition, which was supported by an affidavit sworn by him on 31 May 2017. In this affidavit, he deposed as follows:
“That the amount outstanding is less than $5000 as Australian Financial Security Authority Bankruptcy Act and Regulations s41
…
The Debt outstanding to Southcott Pty Limited was $2400 as at 1st June 2017 as per there [sic] accounts department and a further $2500 has been paid on the 15th June 2017, reducing the debt to $0 plus costs and fees.
Tiltip Technology NSW Pty Ltd has made all effort to reduce the debt. And have been paying $100 per week not on a regular basis to date, total amount since October 2016 is $3608. Southcott Pty Limited is accepting these payments.”[3]
[3] See affidavit of Roger Golding filed 19 June 2017
On 26 June 2017, solicitors for Southcott filed an affidavit of Sarah Columbus, who is described as being the credit controller of Southcott and, as such, the person in control of its books and records. She deposed that Southcott had received $3,000.00, from Mr Golding, since the issue of the petition (24 March 2017) leaving a balance, which she calculated to be $3,756.71.
I pause to note that this was not the amount originally claimed in the bankruptcy notice issued on 11 January 2017, which was $7,156.71. On my calculation, the difference between the two sums is $400.00.
On 27 June 2017, Registrar Parkyn dismissed the first petition. I have not been provided with reasons in respect of this decision but apprehend it was because the amount of the debt, on which the bankruptcy notice initially relied, had fallen beneath the threshold amount of $5,000.00.
Controversy remained, between the parties, regarding the petitioning creditor’s application for costs. No doubt, the controversy turned on the issue of when, vis-à-vis the issue of the petition, the amount owed had fallen below $5,000.00 and the bankruptcy jurisdiction ostensibly displaced.
This controversy is apparent from the other orders made by Registrar Parkyn, on 27 June 2017, which were as follows:
“On the question of the costs of the Petition:
a. the applicant file an affidavit setting out the quantum and timing of each of the part-payments referred to in paragraph 2 of Ms Columbus’s affidavit sworn on 26 June 2017, together with any other affidavits upon which it wishes to rely by 11 July 2017; and
b. the respondent file any affidavit material upon which he wishes to rely by 18 July 2017;
c. the applicant and the respondent file any written submissions upon which they wish to rely by 21 July 2017, such submissions to be limited to 5 pages in length
The question of the costs of the Petition be adjourned to 25 July 2017 at 9.30 am.”
In response to this order, Ms Columbus deposed a further affidavit, which was filed on 19 July 2017. She deposed that Mr Golding owed Southcott the sum of $6,756.71, as at 24 March 2017. On this basis, she had instructed Southcott’s solicitors to issue the first petition. Thereafter, she deposes that five instalments of $100.00 each were received between 18 April and 12 May 2017, which, of course, totalled $500.00. On my calculations, this would have reduced the debt to $6,256.71.
As indicated earlier, the first petition was filed on 22 May 2017. The order for substituted service was made on 19 May 2017 and its provisions satisfied on 31 May 2017.[4] Thereafter Ms Columbus deposes that a further payment of $100.00 was received on 26 May 2017, bringing the amount of the debt down to $6,156.71.
[4] See affidavit of John Vitanza filed 19 June 2017
Thereafter, Ms Columbus deposes that a further sum of $2,500.00 was received by Southcott on 15 June 2017. Obviously, this payment was made less than a fortnight prior to the date fixed for the hearing of the relevant creditor’s petition and a significant period after the bankruptcy notice had been served; the petition then lodged; and it having been served on Mr Golding.
It brought the balance of the debt to $3,656.71, as at 15 June 2017, which was below the threshold for the issue of a bankruptcy notice. In her affidavit, Ms Columbus complains that these various payments were received “sporadically at intermittent intervals with no notice to the applicant creditor”.[5]
[5] See Ms Colombus’ affidavit filed 19 July 2017 at [9]
However, it should be noted, pursuant to section 40(1)(g), an act of bankruptcy occurs, if a bankruptcy notice remains unsatisfied 21 days after service upon the debtor concerned. As indicated above, the relevant bankruptcy notice was served on Mr Golding, by Mr Vicenza, on 27 January 2017. Accordingly, the act of bankruptcy, sufficient to justify the issue of the petition, occurred some 21 days later, which was prior to the debt in question falling below $5,000.00.
On 18 July 2017, Mr Golding filed an affidavit, which he had deposed on 13 July 2017, annexed to which were copies of bank statements, which he asserted established the debt in question had been extinguished. He deposed as follows:
“The Creditors Demand notice states that the respondent debtor owes the applicant creditor the amount of $6756.71, as at the 24th March 2017.
Annexure "A" shows that by the 24th March 2017 $3108.37 had already been paid by instalments directly to the Creditor, Southcott Pty Limited. The amount owing at the time of the Creditors Demand Notice on the 24th March 2017 was $3634.34. This is less than the $5000.00 required by s41 of the Australian Financial Security Authority Bankruptcy Act and Regulations.
Annexure "A" and Annexure "C" from the date of the Creditors Demand Notice a further $3200.00 has been paid up to the 15th June 2017, Total paid to date to Southcott Pty Limited is $6308.37
The Total amount outstanding as per the Creditors Petition notice and Annexure "C" is now $448.37
I request a list of all Solicitors charges and expenses, times and dates they occurred, up to and prior to issuing the Creditors Demand Notice, on the 24th March 2017
I request that all charges and fees associated with the Creditors petition be dropped.
I would like to claim costs and damages due to the fact that the Creditors Petition was issued without first consulting with the Solicitors client Southcott Pty Limited as to how much of the debt had been paid prior to issuing the Creditors Demand Notice and court appearances.[6]
[6] See affidavit of Mr Golding filed 18 July 2017 at [2] – [8]
I have attempted to collate the bank statements referred to as best I can. The holder of the account is indicated as The Manager Tech Manufacturing Pty Ltd. The designated address is that provided by Mr Golding. Not all of the statements bear complete dates and they are not provided sequentially.
Nonetheless, it appears more likely than not they cover a period from 31 August 2016 to 15 June 2017. They do, however, indicate that payments were made to Southcott. In tabular form they can be represented as follows:
Date Paid Amount $ 31 August 2016 1,000.00 23 September 2016 100.00 7 October 2016 100.00 14 October 2016 100.00 21 October 2016 100.00 28 October 2016 100.00 9 November 2016 58.37 11 November 2016 100.00 2 December 2016 100.00 9 December 2016 100.00 16 December 2016 100.00 23 December 2016 100.00 30 December 2016 100.00 6 January 2017 100.00 13 January 2017 100.00 20 January 2017 100.00 27 January 2017 100.00 3 February 2017 100.00 5 February 2017 250.00 3 March 2017 100.00 17 March 2017 100.00 18 April 2017 100.00 21 April 2017 100.00 28 April 2017 100.00 5 May 2017 100.00 12 May 2017 100.00 26 May 2017 100.00 15 June 2017 2,500.00 Total 6,208.37
Accordingly, as at 15 June 2017, an amount of $6,208.37 had been paid, which is the basis for Mr Golding’s assertion made above in his affidavit of 18 July 2017.
On 24 July 2017 Mr Stewart-Rattray provided a schedule of the costs and disbursements sought by Southcott in these proceedings. The amount sought by him totalled $8,268.50. Ultimately, Registrar Parkyn ordered that Mr Golding pay Southcott’s costs, which he calculated to amount to $7,553.50.
Pursuant to Division 13.1 of the Federal Circuit Court (Bankruptcy) Rules 2016, a person who is entitled to costs in a bankruptcy proceedings, is entitled to costs calculated in accordance with Part 40 of the Federal Court Rules 2011, unless the court otherwise orders.
A significant proportion of Southcott’s costs related to disbursements incurred by it, the major of which was the fee to issue the creditor’s petition in question, which amounted to $3,475.00.
Pursuant to Schedule 3 of the Federal Court Rules the short form amount, which may be claimed on the dismissal of a petition is $2,088.00. In addition, the schedule allows for additional costs relating to other appearances, which have been reserved by the court. In all these circumstances, I can see no irregularity in the calculation of the costs awarded by Registrar Parkyn.
In addition, I am satisfied that it was appropriate for the Registrar to award costs, given the date on which the relevant act of bankruptcy, which founded the petition, occurred and the fact that the amount of the debt outstanding fell below $5,000.00 only after the petition had been filed.
In any event, Mr Golding has not sought to appeal this order, which from Southcott’s perspective remains unsatisfied. I am satisfied that it can be regarded as a final order or judgment debt for the purposes of by section 40(1)(g).
In addition, prior to the making of the order for costs, Registrar Parkyn had available to him some written submission, prepared by Mr Stewart-Rattray. I appreciate that these submissions are not on oath.[7] However, in my view, they provide a useful background to the case. In addition, it is implicit from the Registrar’s order, that he took these submissions into account in making the costs order, which he did.
[7] It should be noted that they have subsequently been confirmed by an affidavit of Ms Columbus filed in these review proceedings, to which reference will be made in due course.
As indicated above, Mr Golding concedes that he has a relationship with a firm known as Tiltip Technology NSW Pty Ltd.[8] Mr Stewart-Rattray indicated that a default judgment had been entered against the company, in Southcott’s favour, on 26 April 2016, in an amount of $9,277.58.
[8] Hereinafter referred to as Tiltip
On 13 July 2016, Southcott issued a statutory demand, to Tiltip, demanding payment of this sum. Thereafter, Mr Golding entered into a Deed of Guarantee, with Southcott, whereby he personally guaranteed the payment of this judgment debt. Pursuant to the guarantee, Mr Golding agreed to pay this sum, via weekly instalments of $500.00, commencing on 15 August 2016 and further that the outstanding balance would be paid in full by 16 October 2016.
Thereafter, Mr Stewart-Rattray indicated that Southcott received payments totalling $2,800.00, from Mr Golding, between 13 July 2016 and 2 December 2016. Mr Golding has not provided me with relevant bank statements from 13 July. However, the statements provided by him (see paragraph 37 hereof) indicate payment of the sum of $1,758.37 between 31 August 2016 and 2 December 2016.
Accordingly, it is Mr Stewart-Rattray’s submission that the basis of the Magistrates’ Court proceedings against Mr Golding, commenced on 2 December 2016, was on the ground that an amount of $7,856.71 was due to Southcott. This included interest in an amount of $414.88 and costs in an amount of $527.00.
The judgment debt entered in Southcott’s favour, on 9 January 2017, which was $7,156.71, reflected payments received by Southcott after the institution of the proceedings, which are confirmed by the bank records provided by Mr Golding.
The bankruptcy notice of 11 January 2017 was issued on the basis of the judgment debt, in an amount of $7,156.71. However, again as confirmed by the records provided by Mr Golding, some instalments of $100.00 were forwarded, by him, to Southcott. This is the explanation as to why the amount endorsed on the petition was $6,756.71. It represented the moneys received in the intervening period.
In all these circumstances, it is Mr Stewart-Rattray’s position, that as at 21 July 2017, Mr Golding still owed Southcott the amount of $3,756.71. I accept this calculation. In my view, it is clear that Mr Golding’s calculations are based on a misconception, as he has calculated the amount paid by him from the period prior to the filing of the bankruptcy notice. As a consequence, his calculations do not take into account the fact that when these payments started, the principle debt was in fact $9,277.58, arising from the guarantee he had entered in relation to Tiltip.
The second petition
On 21 August 2017, Southcott applied for a second bankruptcy notice to issue against Mr Golding. Annexed to the bankruptcy notice were the Magistrates’ Court judgment debt of 9 January 2017, in an amount of $7,156.71 and the order of Registrar Parkyn, made on 25 July 2017, in respect of the costs awarded against Mr Golding in an amount of $7,553.50.
As previously indicated, pursuant to the provisions of section 41(1)(b), a bankruptcy notice can issue in respect of more than one final judgment. The total of the two judgment debts annexed was $14,710.21. However, the notice made allowance for payments made since judgment, in an amount of $3,700.00, leaving the total amount owed at $11,010.21.
As previously indicated, it is Mr Stewart-Rattray’s position that, as at 21 July 2017, Mr Golding owed Southcott the sum of $3,756.71. When this sum is added to the amount indicated as having been paid since judgment ($3,700.00), the total is $7,456.71.
When this sum is added to the costs order ($7,553.50), the total debt amounts to $15,010.21, which ostensibly is $300.00 greater than the amount claimed to be owed by Southcott ($14,710.21.), in the bankruptcy notice. This discrepancy almost certainly arises because of three of Mr Golding’s intermittent repayments, in the sum of $100.00 each, not being included or overlooked.
In these circumstances, the question arises as to whether there is an incurable defect, in the bankruptcy notice, which renders it void. This was not an issue raised by Mr Golding during the proceedings before me. As previously indicated, other than asserting the relevant debt had been paid, Mr Golding did not take me through the somewhat convoluted calculations, which I have made on my own initiative.
Section 306 of the Act provides as follows:
“Formal defect not to invalidate proceedings
(1) Proceedings under this Act are not invalidated by a formal defect or an irregularity, unless the court before which the objection on that ground is made is of opinion that substantial injustice has been caused by the defect or irregularity and that the injustice cannot be remedied by an order of that court.
(2) A defect or irregularity in the appointment of any person exercising, or purporting to exercise, a power or function under this Act or under a personal insolvency agreement entered into under this Act does not invalidate an act done by him or her in good faith.”
Given the fact that debtors frequently try to pay down their debt, both before and after the issue of bankruptcy notices and given the fact that moneys can now be transferred instantly, from one account to another, in electronic form, there will always be the potential for error in bankruptcy notices, particularly in respect of the arithmetical bottom line. Section 41(5) & (6) recognise this reality. They read as follows:
“(5) A bankruptcy notice is not invalidated by reason only that the sum specified in the notice as the amount due to the creditor exceeds the amount in fact due, unless the debtor, within the time allowed for payment, gives notice to the creditor that he or she disputes the validity of the notice on the ground of the misstatement.
(6) Where the amount specified in a bankruptcy notice exceeds the amount in fact due and the debtor does not give notice to the creditor in accordance with subsection (5), he or she shall be deemed to have complied with the notice if, within the time allowed for payment, he or she takes such action as would have constituted compliance with the notice if the amount due had been correctly specified in it.”
In Adams v Lambert[9] the High Court said as follows:
[9] Adams v Lambert [2006] HCA 10
“[18]…The questions whether the defect or irregularity is a formal defect or irregularity, and whether substantial injustice has been caused and cannot be remedied, are separate and distinct, the latter question arising only if the former is answered in the affirmative. It may be accepted that, if a defect could cause substantial injustice, it may not easily be classified as a formal defect or irregularity. But the absence of claimed injustice does not conclude the separate question that arises under s.306 about whether the defect of irregularity is a formal defect or irregularity.
…
[26] The question of construction raised by the words ‘a formal defect or an irregularity’ is one to be decided by reading s.306 in the context of the whole Act, informed by the general purpose of the legislation, and the particular purpose of the provisions relating to bankruptcy notices.
…
[27] If as in the present case, what is in question is an error in the form of a misdescription of a statutory provision, then a consideration of the general purpose of the Act, and the particular purpose of the legislative scheme relating to bankruptcy notices, leads readily to a conclusion that if the error could reasonably mislead a debtor as to what is necessary to comply with the notice it is not merely a formal defect of irregularity. Any error is capable of misleading somebody about something.”
In my view, the issue of the erroneous $300.00, if it was an error, which is debatable, cannot be regarded as being a defect, which could have reasonably mislead Mr Golding. The obligation, incumbent upon Mr Golding, if he wished to expiate the bankruptcy notice, was that he was to pay the sum of $11,010.21, to Southcott, within 21 days of having been served with the notice.
Mr Stewart-Rattray indicated that $3,756.71 remained outstanding as at 21 July 2017, when added to the costs awarded ($7,553.50) this amount totals $11,310.21, which is $300.00 less than the amount claimed by Southcott. For the reasons outlined above, I am not of the view that this discrepancy invalidates the bankruptcy notice in question.
The bankruptcy notice dated 21 August 2017, to which was attached the Magistrates’ Court judgment debt and the order of Registrar Parkyn of 25 July 2017 was personally served on Mr Golding, by Mr Vitanza, at an address in Glen Alpine in the State of New South Wales. As previously indicated, Mr Vitanza had been involved with the service of the first petition on Mr Golding.
In an affidavit of service filed on 21 December 2017, Mr Vitanza deposes as follows:
“At the time of service I identified the person subsequently served as the Judgment Debtor by reason that I have served him in previous matters. At the time of service, the following conversation took place:-
I said "Roger Golding I have a Bankruptcy Notice to serve on you?" He said "That's not me, he does not live here anymore".
I said "I know you are Roger Golding, the person mentioned in this Bankruptcy Notice, as I have served you previously". He said "No you haven't".
I then placed the documents at his feet.[10]
[10] See affidavit of Mr John Vitanza filed 17 December 2017 at [2]
As a consequence of Mr Golding failing to satisfy the bankruptcy notice, Southcott filed a further petition, in this court, on 21 December 2017 “the second petition”. The second petition was verified by an affidavit of Ms Columbus, who verified the amount owed by Mr Golding as being the amount claimed in the bankruptcy notice, being $11,010.21. She further indicated that Mr Golding had forwarded further electronic payments to Southcott, in an amount of $400.00, but these amounts had been returned to him.
Perhaps unsurprisingly, given the content of the earlier conversation between him and Mr Golding, recorded by Mr Vitanza, difficulties arose in the personal service of the second petition on Mr Golding, which was originally made returnable on 13 February 2018. On this basis, it was adjourned in anticipation of there being a further application for substituted service.
This application was made, by Mr Stewart-Rattray, on 15 March 2018 and involved the deposit of the documents, in sealed envelopes, at Mr Golding’s residential address, in Glen Alpine and his business premises, in Smeaton Grange. An order for substituted service was made by Registrar Colbran on 22 March 2018.
Following the order for substituted service, the petition was relisted on 24 April 2018. Mr Vitanza has further deposed that he further served a copy of the order, refixing the petition, on Mr Golding on 27 March 2018.[11]
[11] See affidavit of John Vitanza filed 12 April 2018
Mr Stewart-Rattray also deposed that he served all relevant documents, including advice of the adjourned date, to Mr Golding, via his email address. The documents provided to Mr Golding, included the consent of Mr Maris Rudaks and Mr Alan Scott to act as trustees, in the event Mr Golding’s estate was subject to sequestration.[12]
[12] See affidavit of Justin Simon Stewart-Rattray filed 12 April 2018
As at 23 April 2018, Ms Columbus filed a further affidavit, in which she indicated that the debt owing by Mr Golding to Southcott remained outstanding.[13] In addition, Kate Robinson, a legal assistant employed by Mr Stewart-Rattray indicated that she had searched the National Insolvency Index, on 23 April 2018 and could find no record of any bankruptcy proceedings pending against Mr Golding.
[13] See affidavit of Sarah Columbus filed 23 April 2018
In addition, she confirmed that no moneys had been paid to either the Magistrates’ Court of South Australia or the Federal Circuit Court of Australia in respect of either of the two debts, which are subject to these proceedings.
Legal Provisions relevant to service
Part 6 of the FCC Rules deals with service. Pursuant to rule 6.06 service by hand is required in respect of any application starting a proceeding. However, pursuant to rule 6.04, the court has a discretion in relation to service and may authorise the service of a document in a way which is not specifically provided for by the rules and empower it to find that a document has, in effect, been served.
Pursuant to rule 6.05, evidence of service is provided by affidavit. Rule 6.04 deals with mechanisms for substituted service and circumstances in which service may be dispensed with. In particular, rule 6.15 provides a list of matters to be considered by the court in respect of the exercise of its discretion in regards to service. The court is directed to have regard to the following matters:
·Whether reasonable steps have been taken to attempt to serve the document in question;
·Whether it is likely that the steps, which have been taken, have in fact brought the existence and nature of the document in question to the attention of the person required to be served;
·Whether it is appropriate to alert the attention of the person required to be served through some form of advertising;
·Cost implications arising in respect of issues of service;
·Any other relevant matter.
The Bankruptcy Act, itself provides the court with a discretion in respect of service. Section 309(2) reads as follows:
“(2) 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.”
In this context, regulation 16.01(1) of the Bankruptcy Regulations 1996 provides as follows:
“16.01 Service of documents
(1)Unless 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 (other than a person mentioned in regulation 16.02), the document may be:
(a) sent by post, or by a courier service, to the person at his or her last‑known address; or
(b) left, in an envelope or similar packaging marked with the person’s name and any relevant document exchange number, at a document exchange where the person maintains a document exchange facility; or
(c) left, in an envelope or similar packaging marked with the person’s name, at the last‑known address of the person; or
(d) personally delivered to the person; or
(e) sent by facsimile transmission or another mode of electronic transmission:
(i) to a facility maintained by the person for receipt of electronically transmitted documents; or
(ii)in such a manner (for example, by electronic mail) that the document should, in the ordinary course of events, be received by the person.”
I am satisfied that the second petition has been property served on Mr Golding in accordance with both the orders of Registrar Colbran and the Rules. In these circumstances, on 24 April 2018, Registrar Parkyn made the following orders:
“1. The estate of Roger Golding be sequestrated under the Bankruptcy Act 1966.
2. The Applicant Creditor's costs fixed in the sum of $8,131.00 be paid from the estate of the Respondent Debtor in accordance with the Bankruptcy Act 1966.
The Court notes that the date of the act of Bankruptcy is 11 October 2017.
The Court also notes that a consent to act as trustee signed by Maris Andris Rudaks and Alan Geoffrey Scott has been served.
Date entry stamped: 24 April 2018”
It is this order that is the subject of the review application by Mr Golding.
The application for review
Mr Golding filed the application for review on 10 May 2018, which was over a fortnight after the original sequestration order. His application was supported by an affidavit, in which he deposed as follows:
The amount of $11010.21 on the Creditors Petition ADG 531 / 2017 is incorrect.
The Amount of $7156.71 of the $11010.21 amount in the amended Creditors Petition ADG 531/2017 has been paid in full as per Bank statements presented to the Federal Court on the 20th June 2017 under the previous Creditors Petition File Number ADG 110 of 2017 , this Creditors Petition was dismissed by Register Parkyn on the 27'h June 2017
The Applicant has added the amount $7156.71 from the previous dismissed Creditors Petition to the creditors petition File Number ADG 531 / 2017, $7156.71 has been paid in full.
I claim Res Judicata, a decision to raise another claim amount from a previous Creditors Petition File Number ADG 110/2017 which was dismissed and the subject matter can not be raised again in a latter case between the same parties. The previous debt of $7156.71 on creditors petition ADG 11O of 2017 has been raised again in the amended creditors petition ADG 531 of 2017, the amount of $7156.71 was added to Applicants previous costs.
I was unable to attend the hearing on the 24th April 2018 at 9.30 as I live in Sydney , I posted all documents on the 19th April 2018 by expressed mail next day's delivery and I was informed the court did not receive the documents until the day of the hearing 24th April 2018, ( Postal Receipt attached).
I am a retired pensioner and act as a Volunteer Director Pension Number 206384229S.
On the 21st December 2017 the Petition presented along with court documents to the Respondent state the wrong file No ADG110/2017 which had been dismissed and wrong amount. $11010.21
All fees and charges have been paid in the previous dismissed Creditors Petition ADG 11O of 2017 and are being claimed on the ammendeed [sic] creditors petition.”[14]
[14] See affidavit of Roger Golding filed 10 May 2018 [1]-[8]
The court’s rules require the fixing of an application for review, as soon as possible and, unless impractical to do so, within fourteen days of the date of filing [see rule 20.02 of the Federal Circuit Court Rules 2001].[15]
[15] Hereinafter referred to as the “FCC Rules”
Mr Golding’s application was initially listed on 20 May 2018. Arrangements were made, at his request, for Mr Golding to attend court by telephone.
Rule 20.01 prescribes a period of seven days as being applicable to the filing of an application to review the power of a Registrar. However, pursuant to rule 20.01(2), the court has a discretion to extend time, if it thinks fit.
Initially, Mr Stewart-Rattray objected to any extension of time. As I recall, Mr Golding indicated that he had some difficulties filing his review application with the court’s registry and it would be unfair to him if it was not able to proceed.
In addition he vociferously protested that he was not indebted to Southcott, in the sum specified, a state of affairs, which he stated he had previously demonstrated to the court, which had resulted in the dismissal of the first petition. The implication being that an examination of the bank statements previously provided by him would axiomatically demonstrate the truth of this assertion.
In these circumstances, I made the following orders:
“The respondent Mr Golding file and serve an application pursuant to rule 20.01(2) of the Federal Circuit Court Rules 2001 to extend time in which to file his application for review of the exercise of the power by the registrar made on 24 April 2018 together with an affidavit setting out any relevant evidence in support of such application within seven (7) days of today’s date.
2. The applicant file any responding material in respect of the application to proceed within a further seven (7) days.
3. Further consideration of the matter is adjourned to 13 June 2018 at 10:00am NOTING the respondent has leave to attend by telephone.”
Mr Golding filed a further affidavit, deposed on 25 May 2018, which was filed on 7 June 2018. He restated his complaint that the amount endorsed on the petition ($11,010.21) was incorrect and, on this basis, the petition should be set aside. In addition, he reiterated that an amount of $7,156.71 had been paid by him, which represented payment in full of the debt owed. On this basis, he repeated his submission that the petition should be dismissed.
On 8 June 2018, Ms Columbus also filed a further affidavit. In this affidavit, she presented a more extensive history of her dealings with Mr Golding, both personally and as a consequence of the Tiltip judgment. In particular, she confirmed Mr Stewart-Rattray’s earlier submissions that Mr Golding had provided a personal guarantee in respect of a judgement debt, entered against Tiltip, in the sum of $9,277.58.
Ms Columbus deposed as follows:
On 19 August 2016 the Respondent agreed to enter into a Deed of Guarantee and Indemnity ("Guarantee") with the Applicant, whereby the Respondent personally guaranteed payment of the Tiltip judgment debt in the sum of $9,277.58.
Pursuant to the Guarantee, the Respondent agreed inter alia to pay the sum of $9,277.58 via weekly instalments of $500.00 per week commencing 15 August 2016 and agreed to pay any balance remaining due in full by 16 October 2016.
Between 13 July 2016 and 2 December 2016, the Applicant received intermittent EFT payments totalling $2,800.00 only from the Respondent.
At 2 December 2016, the amount due and payable to the Applicant by the Respondent was $6,914.83, being the Tiltip judgment debt together with costs pursuant to the Guarantee, less EFT payments totalling $2,800.00.”[16]
[16] See affidavit of Ms Sarah Columbus filed 8 June 2018 at [5]-[8]
I am satisfied that Ms Columbus has provided evidence sufficient to justify my earlier conclusion that Mr Golding’s assertion that he has paid off the debt due by him to Southcott is based on a misconception of the circumstances prevailing. Whether that misconception is innocent or more calculated is something which I am unable to determine in the context of the current proceedings.
Ms Columbus further deposed as to payments received by Southcott, following the issue of the first petition and prior to its dismissal. Significantly, I accept the following evidence provided by Ms Columbus.
“The Applicant has received payment in the amount of $3,700.00 only since entering default judgment against the Respondent on 9 January 2017.
The Respondent remains indebted to the Applicant in the sum of $11,010.21 which was the amount for which a sequestration order was made on 24 April 2018.”
Legal principles applicable
The court’s jurisdiction to make a sequestration order, which was delegated to the Registrar, is contained in section 52(1) of the Act, which reads as follows:
“(1) At the hearing of a creditor’s petition, the Court shall require proof of:
(a) the matters stated in the petition (for which purpose the Court may accept the affidavit verifying the petition as sufficient);
(b) service of the petition; and
(c) the fact that the debt or debts on which the petitioning creditor relies is or are still owing;
and, if it is satisfied with the proof of those matters, may make a sequestration order against the estate of the debtor.”
The jurisdiction for these review proceedings is found in the provisions of the Federal Circuit Court of Australia Act 1999 (Cth).[18] Pursuant to section 103 of the FCC Act the court, through its Rules, is authorised to delegate designated powers to a Registrar of the court. One such power is the power to make a second sequestration order pursuant to the Bankruptcy Act.
[18] Hereinafter referred to as “the FCC Act”
Section 104(2) of the FCC Act authorises the court to review any delegated exercise of power to a registrar pursuant to section 103. In particular, section 104(3) provides as follows:
“(3) The Federal Circuit Court of Australia may, on application under subsection (2) or on its own initiative, review an exercise of power by a Registrar under subsection 102(2) or under a delegation under subsection 103(1), and may make any order or orders it thinks fit in relation to the matter in respect of which the power was exercised.”
On an application for review of a registrar’s decision, the court:
·is engaged in a fresh proceedings;
·does not scrutinise the original reasons to ascertain error;
·makes its own decision on the merits of the case; and
·in an application for review of a sequestration order, where a sequestration order is still sought, the petitioning creditor is required to prove all necessary matters, including those specified in section 52(1) of the Act.
The review hearing arising is a hearing de novo. This is specified by rule 20.03 of the FCC Rules, which also authorises the court to receive additional evidence.
Section 43(1) of the Act establishes the jurisdiction of the court to make a sequestration order. It provides as follows:
“(1) Subject to this Act, where:
(a) a debtor has committed an act of bankruptcy; and
(b)at the time when the act of bankruptcy was committed, the debtor:
(i) was personally present or ordinarily resident in Australia;
(ii) had a dwelling‑house or place of business in Australia;
(iii) was carrying on business in Australia, either personally or by means of an agent or manager; or
(iv) was a member of a firm or partnership carrying on business in Australia by means of a partner or partners or of an agent or manager;
the Court may, on a petition presented by a creditor, make a sequestration order against the estate of the debtor.”
Accordingly, before the court can make an order rendering Mr Golding bankrupt, Southcott, the petitioning creditor, must establish that he has committed an act of bankruptcy, under section 52(1). In addition, the court must also be satisfied in respect of the other matters specified in the section, namely the service of the petition and that the debt or debts in question remain owing.
Section 40 provides an exhaustive list of circumstances, which constitute an act of bankruptcy. As previously indicated, this includes those set out in section 40(1)(g), as set out above, which in summary allow bankruptcy proceedings based on unsatisfied judgment debts, which are not subject to further court challenge, and which are subject to an unsatisfied formal notice requiring payment.
There is no dispute that Mr Golding was, at relevant times, ordinarily resident in Australia and satisfies the jurisdictional conditions specified in section 43(1)(b). In addition, for the reasons set out above, I am satisfied that there is no defect, in the applicable bankruptcy notice, which Mr Golding has not satisfied, within the period of 21 days of the service of the notice on him. Accordingly, I find Mr Golding has committed an act of bankruptcy.
In all the circumstances of this case, I am also satisfied that the second petition was served upon Mr Golding, in accordance with the orders for substituted service made by Registrar Colbran. I am satisfied that the relevant documents, particularly the petition, were provided to him in both physical form, via the agency of Mr Vitanza and in electronic form, via the documents sent by Mr Stewart-Rattray. Both such forms of service are authorised under the applicable Rules, as set out above.
In addition, I accept the evidence of Ms Columbus regarding her calculation of the level of debt remaining outstanding by Mr Golding to Southcott. I also accept her evidence that the debts relating to the vestigial amount owing from the Magistrates’ Court judgment debt of January 2017 and the totality of the costs order made by Registrar Parkyn in July 2017 remain outstanding.
On a prima facie basis, the time for the filing of the application for review, by Mr Golding, has expired. The court has a discretion to extend time. Mr Stewart-Rattray withdrew his opposition to such an extension. In those circumstances, I will grant any necessary extension required to enable the court to determine the review application.
In all these circumstances, I am satisfied that the petitioner has provided the proof required of an act of bankruptcy, on Mr Goldings part and the other matters stipulated in section 52(1) of the Act.
The court is also required to be satisfied of the matters set out in section 52(2) of the Act, which reads as follows:
“If the Court is not satisfied with the proof of any of those matters, or is satisfied by the debtor:
(a) that he or she is able to pay his or her debts; or
(b) that for other sufficient cause a sequestration order ought not to be made;
it may dismiss the petition.”
The onus is on Mr Golding to be able to prove that he is able to pay his debts; or there is other sufficient cause that a sequestration order not be made. If he is able to establish either of these matters, the court has a discretion to dismiss the petition in question.
In his affidavit material, Mr Golding has described himself as a “pensioner” who discharged directorial duties for Tiltip on an “honorary” basis. He has provided no further details of what he means by this and what was the nature of Tiltip’s business. As such, I do not know if it was a commercial enterprise or one directed towards the common good.
In addition, the tenor of Mr Golding’s submissions to the court, is that it is in some way an abusive process or otherwise unfair that Southcott were able to obtain costs against him, in the first proceedings and so bring the second petition, when he had essentially paid the debt due.
I reject these implied submissions. At the time of the dismissal of the first petition, a significant sum remained outstanding to Southcott. This debt did not dematerialise, with the discharge of the petition. Nor did Mr Golding take any steps to reduce it. Pursuant to section 52(2), the onus is on Mr Golding to establish his solvency. I do not consider that he has been able to do so.
I accept that it is a significant thing for a person to be made bankrupt. In Culleton v Balwyn Nominees Pty Ltd[19] the Full Court reminds courts, such as this one, exercising jurisdiction under the Act, not to forget the “human reality of bankruptcy”. The Full Court endorsed the comments of Deane J, provided in Kleinwort Benson Australia Ltd v Crowl[20] that, for most individuals, the pronouncement of bankruptcy represents a profound and personal admission of failure and the beginning of a journey into uncertainty for them. Such individuals do not see bankruptcy as a game to be played with their creditors.
[19] See Culleton v Balwyn Nominees Pty Ltd [2017] FCAFC 8 at [55]
[20] Kleinwort Benson Australia Ltd v Crowl [1998] HCA 34
However, the Full Court also recognised that it was “legitimate” for a creditor to proceed in bankruptcy for the purpose of recovering a debt.[21] Southcott has been attempting to recover its debt, from Mr Golding, for a reasonably significant period of time. In so doing, it has been awarded further costs, to which it remains entitled. Significantly, Southcott has a judgment debt in its favour, which has not been set aside.
[21] Ibid at [44]
In Kuhadas v Gomez Judge Manousaridis said as follows, regarding the nature of a judgment debt, vis-à-vis an act of bankruptcy:
“The reason section 40(1)(g) of the Act requires that it be a judgment debt rather than some other debt which the debtor must fail to pay before the court can be satisfied a person has committed an act of bankruptcy is the nature of a judgment debt: a judgment debt “creates an obligation of its own force” and “for most purposes as between the parties, it is conclusive evidence of the existence of the obligation which it creates”.[22] In other words, a judgment debt constitutes the highest proof of a debt that can be obtained, and thus provides the surest grounds for inferring a judgment debtor’s inability to pay his or her debts when the judgment debtor does not pay the judgment debt in response to a bankruptcy notice issued under the Act.”[23]
[22] Corney v Brien (1951) 84 CLR 343 at 353 per Fullagar J
[23] Kuhadas v Gomez [2014] FCCA 1130 at [21]
I respectfully accept this formulation. Mr Golding has not attempted to go behind the Magistrates’ Court debt entered against him. He has not asserted that it has been entered as a consequence of any species of fraud, collusion or serious impropriety, which the High Court has indicated justify a court, with bankruptcy jurisdiction, looking behind a judgment debt said to found an act of bankruptcy.[24]
[24] Wren v Mahony (1972) 126 CLR 212 at 223
In Goodman Law Pty Ltd v Laloma (No 2) Judge Manousaridis said as follows, after summarising a number of authorities applicable to circumstances, which justify a court looking behind the judgment debt, on which an act of bankruptcy lies:
“A court of bankruptcy has power to go behind a judgment to determine for itself whether the debt is in truth owed by the judgment debtor. It will not do so, however, as a matter of course. It will only do so where “substantial reasons are given for questioning whether behind that judgment there was in truth and reality a debt due to the petitioner”.[25]
[25] Wren v Mahony (supra) at 225
Apart from asserting that he has paid the debt in full, which for the reasons set out above I do not accept, Mr Golding has provided no reasons which would justify me looking behind the judgment debt against him in the Magistrates’ Court.
In addition, again for reasons provided above, I am satisfied that the order for costs, made by Registrar Parkyn was appropriate and similarly there can be no justification for this court, on review, to question its legitimacy.
Finally, Mr Golding has provided no evidence regarding his overall solvency. In my view, in all the circumstances of this case, particularly that the amount claimed, in the most recent bankruptcy notice, remains outstanding, Mr Golding has not discharged the onus resting upon him pursuant to section 52(2) of the Act, sufficient to justify the court exercising the permissive discretion provided by the section to it.
For all these reasons the application for review must be dismissed. It is implicit in this decision that the further costs of the review application should be paid out of Mr Golding’s estate, once they have been taxed, in accordance with the provisions of the Act and the Regulations made under it.
For all these reasons, the orders of the court will be as set out at the commencement of these reasons for judgment.
I certify that the preceding one hundred and sixteen (116) paragraphs are a true copy of the reasons for judgment of Judge Brown
Date: 17 July 2018
[17] Ibid at [23]-[24]
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