St George Bank Limited v Hobbs - [2006] FMCA 1113

FEDERAL MAGISTRATES COURT OF AUSTRALIA

ST GEORGE BANK LIMITED v HOBBS

[2006] FMCA 1113

BANKRUPTCY – Whether petition should be dismissed because of non service of bankruptcy notice.

Bankruptcy Regulations1996, s.16.01

Brown v Dunn (1829) 3 Sim 23; (1829) 57 ER 909

Applicant:

ST GEORGE BANK LIMITED
ACN 055 513 070

Respondent:

STEPHEN JOHN HOBBS

File Number:

SYG872 of 2006

Judgment of:

Raphael FM

Hearing date:

25 July 2006

Date of Last Submission:

25 July 2006

Delivered at:

Sydney

Delivered on:

25 July 2006

REPRESENTATION

Solicitors for the Applicant:

Kemp Strang

Solicitors for the Respondent:

Hancock Alldis & Roskov

ORDERS

Application dismissed.
Creditor applicant to pay the respondent debtor's costs to be taxed and agreed in accordance with the Bankruptcy Rules.

FEDERAL MAGISTRATES
COURT OF AUSTRALIA AT
SYDNEY

SYG872 of 2006

ST GEORGE BANK LIMITED
ACN 055 513 070

Applicant

And

STEPHEN JOHN HOBBS

Respondent

REASONS FOR JUDGMENT

I have today heard a notice of objection to a bankruptcy petition filed by the debtor on 10 July 2006. The debtor says he intends to oppose the petition on the following grounds:
“(1)the bankruptcy notice dated 2 February 2006 has not been served personally on the debtor as alleged in the affidavit of service of Mark Smith dated
21 February 2006;
(2) the creditor's petition alleges in clause 4 that an act of bankruptcy was committed by the debtor. This is denied as the bankruptcy notice has not been served personally on the debtor.”
The debtor is a licensed commercial agent. In an affidavit dated 6 July 2006 he deposes to the fact that on 22 February 2006 at approximately 8 pm his next-door neighbour approached him when he was parking his car on the street and they had a conversation to the effect that the neighbour had something to give him which he had received a few days ago. The neighbour then went into his home and returned with an envelope. The neighbour handed Mr Hobbs the envelope and Mr Hobbs said:
“It's a bankruptcy notice. Where did you get this from?”
The neighbour responded:
“Last Saturday I saw this guy knocking on your front door. I walked over to him and asked if I could help him. He wanted to know if you lived at this address. He further mentioned that he had something to give you. I said to him that I would be able to pass it on to you. He said, "Okay, thank you." He then gave me the envelope and left.”
Mr Hobbs then said to his neighbour:
“You must be joking. This is a bankruptcy notice. This must be served on me personally.”
I interpose here to say that if Mr Hobbs had been aware of the provisions of s.16.01 of the Bankruptcy Regulations he would not be so definitive about the requirement of personal service. But if the document was provided to him in the manner in which he said, then unless it might be alleged that he was personally served by his neighbour, which it has not been, the service of the document upon him did not comply with any other of the regulations.
Mr Hobbs was cross-examined. He maintained his story. He explained that he lived in a town house next to Mr Hardy, the neighbour, and had done so for some months before February 2006. He told the court that he did not know the neighbour particularly well and did not visit him.
He described the envelope that he had received the document in as being light brown and was adamant that it was a bankruptcy notice and not a creditor's petition. He told the court that after he had received the document he saw that it had on the back of the envelope the name and the mobile telephone number of the licensed sub-agent who had attempted to serve it. Mr Hobbs said that he telephoned this gentleman whose name is Mr Smith. He had a conversation with Mr Smith in which he told Mr Smith that he was himself a mercantile agent and that he did not believe that the bankruptcy notice had been properly served upon him.
Mr Hobbs did not take the matter up with the solicitors acting for the creditor. He decided, possibly on the advice of his lawyers, to wait until the petition was served and then to make the notice of opposition which is before me today. Given my experience of debtors of some 30 years in practice and six years sitting on the bench dealing with bankruptcy matters, I have no difficulty in accepting that a person in the position of Mr Hobbs may well have done exactly that.
Mr Hobbs' evidence was corroborated by that of Mr Hardy, the neighbour. He swore an affidavit on 7 July 2006. The affidavit confirmed that on 18 February in the afternoon he saw a person knocking on the front door of Mr Hobbs' house. He asked that person if he could help him. The person asked if Mr Hobbs lived there because he had something to give him. Mr Hardy offered to give it to Mr Hobbs for that person. The affidavit continues that at about 8 pm on 22 February he saw Mr Hobbs drive up and came out of his house and told him that he had something to give him and gave him the envelope. He records that Mr Hobbs said to him words to the effect:
“It's a bankruptcy notice. Who gave you this?”
Mr Hardy responded:
“A guy came here last Saturday and I saw him knocking on your door. I went up to him and asked if I could help him.”
Mr Hardy was also cross-examined. He confirmed that Mr Hobbs had lived next door for some months before February and that he did not visit him. Mr Taylor, who appears for the creditor, tried to make much of the way in which Mr Hardy had calculated that what had occurred had occurred on 18 February which was a Saturday. I was impressed by Mr Hardy's response that he had worked backwards but that the date was fairly clear to him because he knew that his wife had been out with him and that this only happened at the weekend.
Mr Hardy also corroborated the colour of the envelope and more importantly, that the name and the mobile telephone number of Mr Smith was on the back of the envelope. The story he gave under cross-examination was very similar to that given in his affidavit but more colloquial. Mr Taylor says there were inconsistencies in his evidence. For example, he said that Mr Hobbs said that Mr Hardy had a friend with him when he, Mr Hobbs, was given the bankruptcy notice in the envelope by Mr Hardy but Mr Hardy did not mention this. I cannot recall him being asked but I do not think that his failure to tell the court about the friend really indicates that I should not accept the evidence that he has given. Mr Hardy, of all the people giving evidence in this case, has the least connection with or concern about the outcome.
There was some suggestion that Mr Hardy was confused and that the document he was talking about was the bankruptcy petition. This was served some months later. Mr Hardy made it quite clear that his recollection related to an event in February.
On the part of the respondent creditor, the applicant in the bankruptcy petition, Mr Smith was called. Mr Smith had sworn two affidavits, the standard affidavit of service and a further affidavit in which he gave a little more detail about what occurred. In the first affidavit of service filed on 24 March but sworn on 21 February, he says that he personally served Mr Hobbs. He had a conversation with Mr Hobbs to the following effect:
“I said, "Are you Stephen John Hobbs, the person referred to in this bankruptcy notice?" He said, "Yes, that's me."”
Mr Smith then handed Mr Hobbs the bankruptcy notice. In the second affidavit dated 24 July 2006 he expands the conversation so that it now appears as follows:
“I said, “Are you Stephen John Hobbs, the person referred to in this bankruptcy notice?” He said, “Yes, that's me. Are you a subby agent?” I said, “Yes.” He said, "I have a master licence.”
He then handed Mr Hobbs the bankruptcy notice. Mr Hobbs had given evidence that he telephoned Mr Smith and that a conversation to the effect that he was a licensed commercial agent had taken place. Mr Smith was cross-examined by Mr Roskov. He told the court that he had a work sheet but that this had not been asked for by the solicitors for the creditor and he agreed that the first affidavit was in somewhat of a standard form. He said he used his memory to recall the conversation with Mr Hobbs.
It is always difficult to have to make a decision where conflicting evidence about certain events is given. As Mr Taylor pointed out, some of the story given by Mr Hobbs and Mr Hardy was not put to Mr Smith, but it has not been suggested that the rule in Brown v Dunn (1829) 3 Sim 23; (1829) 57 ER 909 should apply. After all, the issues are clear. Mr Taylor says that the requirements of Regulation 16.01(2) are that the respondent must show me proof that the document was not served. The regulation actually says:
“16.01(2) A document given or sent to or served on a person in accordance with subregulation (1) is taken in the absence of proof to the contrary to have been received by or served on the person;
(a) ...
(b) in the case of service in accordance with paragraph (1) (c), (d) or (e) when the document is left, delivered or transmitted as the case requires.”
With respect to Mr Taylor I think that this subsection refers to the date of service rather than whether service has or has not been effected. But I also accept that the debtor has the onus of establishing that he was not served in order to succeed on his notice of opposition.
Having considered the evidence and in particular the evidence of Mr Hardy, I have to say that I prefer the evidence provided by the debtor to that provided by the creditor. The likelihood of Mr Hardy coming into this court and presenting himself for cross-examination upon a totally untrue affidavit is not high. On the other hand, it is possible that Mr Smith, not having found Mr Hobbs in and being fairly sure from the demeanour of his neighbour that the document would reach him, assumed service and swore the affidavit accordingly.
I do not have to make a firm finding but merely to say that on the balance of probabilities the evidence of Mr Hobbs and Mr Hardy is more likely to be true than that of Mr Smith. In those circumstances, the notice of opposition is successful. The act of service relied upon by the creditor was not an act of service and therefore the debtor has not failed to comply with the provision of the bankruptcy notice.
I dismiss the petition. I order that the creditor applicant pay the respondent debtor's costs to be taxed if not agreed in accordance with the Bankruptcy Rules.

I certify that the preceding sixteen (16) paragraphs are a true copy of the reasons for judgment of Raphael FM

Associate:

Date: