Superior Alignments Pty Ltd v Gounder
[2019] FCCA 1607
•12 April 2019
FEDERAL CIRCUIT COURT OF AUSTRALIA
| SUPERIOR ALIGNMENTS PTY LTD v GOUNDER | [2019] FCCA 1607 |
| Catchwords: BANKRUPTCY – Review of registrar’s decision – application dismissed. |
| Legislation: Bankruptcy Act 1966, ss.44(1)(a), 52(2)(b) |
| Cases cited: Fancourt v Mercantile Credits Ltd [1983] HCA 25 Jensen v Queensland Law Society Inc [2004] FCA 655 T & S Recoveries Pty Ltd v Skalkos [2004] FCA 816 |
| Applicant: | SUPERIOR ALIGNMENTS PTY LTD |
| Respondent: | SHOBNA KUMARI GOUNDER |
| File Number: | BRG 810 of 2018 |
| Judgment of: | Judge Jarrett |
| Hearing date: | 10 April 2019 |
| Date of Last Submission: | 10 April 2019 |
| Delivered at: | Brisbane |
| Delivered on: | 12 April 2019 |
REPRESENTATION
| Solicitors for the Applicant: | Celtic Legal |
| The Respondent appeared in person |
ORDERS
The application filed 25 October, 2018 be dismissed.
The applicant’s costs of the application be its costs in the respondent’s bankruptcy.
| FEDERAL CIRCUIT COURT OF AUSTRALIA AT BRISBANE |
BRG 810 of 2018
| SUPERIOR ALIGNMENTS PTY LTD |
Applicant
And
| SHOBNA KUMARI GOUNDER |
Respondent
REASONS FOR JUDGMENT
This is an application for review of a decision of a registrar to grant a sequestration order against the estate of the respondent. The petition for her bankruptcy was filed some time ago now. In it the creditor alleged that a bankruptcy notice had been served on the respondent.
The bankruptcy notice relied upon a total judgment debt of $11,464.89. That was the sum of two judgments: a judgment given on 15 January, 2018 for $11,081.89 in action M55360 of 2017; and a second order that the debtor pay the petitioning creditor’s costs fixed in the sum of $383 in the same action. That order was made on 20 April, 2018. The latter order was made in connection with a failed attempt by the judgment debtor to have the judgment by default set aside.
The evidence reveals that the bankruptcy notice was served on the debtor. She was served by the document being sent to her in the post as permitted by reg.16.01(1)(a) of the Bankruptcy Regulations 1996. Service under that provision is taken to have occurred on the day when, in the due course of post, the posted article is taken to have been delivered at the address to which it was sent.
Section 160(1) of the Evidence Act 1995 provides that an article sent in the ordinary course of the post is taken to be received on the seventh working day after posting. Here, that was 7 May, 2018 and, so absent evidence to the contrary, the debtor is taken to have been served with the bankruptcy notice on 7 May, 2018. There is evidence of the posting, as I have said. The affidavit of service of the bankruptcy notice sworn by Eliza Puller and filed on 9 August, 2018 attests to that. There is no evidence of non-delivery.
One of the grounds for opposing the sequestration of her estate advanced by the debtor is that she did not receive the bankruptcy notice, i.e., she was, she says, not served with it. But as the authorities make clear, non-receipt is different to non-delivery, and if a debtor wishes to succeed on the proposition that they have not been served with the bankruptcy notice when it was posted to them, they need to adduce evidence of non-delivery. Here, the only evidence, if there is any at all, is of non-receipt. The difference is critical: see cases like Fancourt v Mercantile Credits Ltd [1983] HCA 25 in the High Court. There is also a more recent decision of the Full Court of the Federal Court of Australia that considers the matter in detail as well as all of the relevant authorities: see T & S Recoveries Pty Ltd v Skalkos [2004] FCA 816.
I find that the debtor was served with the bankruptcy notice on 7 May, 2018.
The bankruptcy notice was a 21-day notice and so it needed to be complied with by 28 May, 2018. The evidence shows that it was not.
On 9 August, 2018 the petitioning creditor filed the petition. On 18 September, 2018 the respondent debtor filed a notice of appearance, an affidavit and a notice stating her grounds of opposition to the application. Her affidavit is a little more extensive than her notice stating the grounds of opposition.
The first ground of opposition is that there is no debt. The second ground of opposition is that the bankruptcy notice was not served. In her first affidavit she also complains that the creditor’s petition was late in that it was served two days before the date fixed for its hearing. She points out that she was entitled to more notice of the hearing than she was provided. But the answer to that complaint was simply to adjourn the petition to give her an adequate time to respond to it. As matters turned out, the petition was adjourned and not dealt with until 11 October and so she had that time. The second complaint in the first affidavit filed by the respondent debtor was that the original case in which the judgment by default was given was the subject of another application by her to set aside the judgment by default, and that was listed to be heard on 5 October, and so presumably the hearing of the creditor’s petition ought to happen after that application was complete. Thirdly, she said that she had a cross-claim against the petitioning creditor for loss of income. That cross-claim is advanced as a claim (the debtor is the plaintiff) in proceedings in the Brisbane Magistrates Court number M4299 of 2018. The relief sought in her cross-claim, as evidenced by a copy of the application that appears as an annexure to the first affidavit of the respondent debtor is for $7,500 “plus any additional costs in collecting this debt.” The debtor’s other complaint relates to what she described as the bankruptcy notice being “stale”.
The matter was adjourned for hearing on 11 October, 2018. The respondent debtor filed another affidavit the day before that date. She reiterated that she had a counter-claim in the proceedings of M4299 of 2018. Her application to set aside the judgment by default in M55360 of 2017 that was heard on 5 October, 2017 was unsuccessful. She was making complaints (presumably to the Chief Magistrate) about the dismissal of that application and she made complaints about the way in which that application was handled. On 11 October, 2018 the debtor opposed the making of the sequestration order, but it was nonetheless made.
A couple of matters ought to be noted at this point. The debtor has made, on my count, four applications to set aside the judgment by default upon which the petitioning creditor relies, in part, to support its bankruptcy notice. Each of those applications was unsuccessful and on each occasion the petitioning creditor has been awarded its costs against the debtor.
The debtor says that she has a counter-claim against the petitioning creditor pursued by her in proceedings M4299 of 2018. The establishment of a cross-claim, a counter-claim or a set-off will often be sufficient cause to cause the Court to exercise its discretion pursuant to s.52(2)(b) of the Bankruptcy Act 1966 against the making of a sequestration order. But the court needs to be persuaded that the set-off, cross-demand or counter-claim is “legitimate” and that it enjoys some reasonable prospects of success. The authorities use various formulations such as that it is a “real claim”, that it is “likely to succeed”, or that it has “sufficient validity to justify dismissal or an adjournment of the petition.” The authorities are collected in the practice work Gronow, Australian Bankruptcy Law and Practice at 8-1233 and onwards.
Here, the applicant’s claim is supported by material – see her affidavits that she has filed – which presumably, if accepted, might lead to an order against the petitioning creditor. Nonetheless, there are still two difficulties associated with the debtor’s cross-claim. One is critical; the other not so.
The issue that is not so critical is that this cross-claim, counter-claim or demand could have been set up in the proceedings in which the judgment by default was obtained. That argument would be an answer to an application by the debtor to set aside the bankruptcy notice on the basis of her now counter-claim: see Jensen v Queensland Law Society Inc [2004] FCA 655. But that is not a particularly critical consideration now that the matter has reached the petition stage.
The second matter, however, is critical. It is only where the set-off, cross-demand or counter-claim leads to the conclusion that on a balance of the account between the petitioning creditor and the debtor the amount owed to the petitioning creditor is less than the amount prescribed by s.44(1)(a) of the Act that there will be sufficient cause for dismissal of the petition. Here, as Mr Long explains in his affidavit most recently filed, and as explained in the written submissions filed by the petitioning creditor in support of the application – that even if the debtor was to succeed in her present proceedings in the Magistrates Court, there would nonetheless be left owing to the petitioning creditor an amount in excess of the amount prescribed by s.44(1)(a) of the Act.
It is also worth pointing out that the status of the proceedings in the Magistrates Court at Brisbane are entirely unclear. There is evidence that the petitioning creditor bought an application for summary dismissal of those proceedings and that it succeeded, yet there is also evidence that those proceedings have been set down for a hearing. There have been attempts by the parties and the petitioning creditor’s solicitors in particular to regularise that anomaly, but they have not been successful in doing so. The proceedings, or whatever remains of them, are set for hearing shortly on 22 May this year. It remains to be seen what occurs on that date. Nonetheless, even if those proceedings are still on foot and the respondent debtor has a claim as she asserts in those proceedings, on a balance of account between the petitioning creditor and the debtor she would still owe to the petitioning creditor more than the prescribed amount.
Having regard to the affidavits of Carly Mackie filed on 10 April 2019, the affidavit of Brendan Long filed on 9 April 2019, and the affidavit of debt filed by Christine Lanane filed on 9 April 2019 I am satisfied that the debt on which the petitioning creditor relies is still owing. I am satisfied with service of the petition. I am satisfied of the matters stated in the petition and I am satisfied, as I have already indicated, that the bankruptcy notice was served on the respondent in accordance with the Bankruptcy Regulations.
There is demonstrated in the material no sufficient cause that a sequestration order not be made, and in those circumstances it is appropriate for the making of a sequestration order.
I should also record that there have been statements in the affidavits by the respondent that she has offered to pay the debt on more than one occasion, but there is no evidence that the debt has been paid or any part of it has been paid, and there is otherwise no evidence of solvency.
In those circumstances, the order of the registrar made on 11 October, 2018 should remain, and the application for review of the registrar’s decision filed on 25 October, 2018 must be dismissed.
I certify that the preceding twenty (20) paragraphs are a true copy of the reasons for judgment of Judge Jarrett delivered on 12 April, 2019.
Date: 12 June, 2019
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