Thompson v Mission Enterprises (Vic) Ltd
[2017] FCCA 1136
•30 May 2017
FEDERAL CIRCUIT COURT OF AUSTRALIA
| THOMPSON v MISSION ENTERPRISES (VIC) LTD | [2017] FCCA 1136 |
| Catchwords: BANKRUPTCY – Service of bankruptcy notice – service allegedly effected by leaving an envelope under the wiper blade of a car parked on the debtor’s address – service invalid – petition defective – sequestration order set aside. |
| Legislation: Bankruptcy Act 1966 (Cth) Bankruptcy Regulations 1996 (Cth), reg.16 |
| Cases cited: Ainsworth v Redd (1990) 19 NSWLR 78 |
| Applicant: | AMANDA JANE THOMPSON |
| Respondent: | MISSION ENTERPRISES (VIC) LTD (ACN 005 064 666) |
| File Number: | MLG 1190 of 2016 |
| Judgment of: | Judge Wilson |
| Hearing date: | 11 May 2017 |
| Date of Last Submission: | 11 May 2017 |
| Delivered at: | Melbourne |
| Delivered on: | 30 May 2017 |
REPRESENTATION
| Counsel for the Applicant: | Mr C. Moller |
| Solicitors for the Applicant: | Darrer Muir Fleiter Lawyers |
| Counsel for the Respondent: | Mr J. Kohn |
| Solicitors for the Respondent: | Harding Stenning & Co Lawyers |
THE COURT DECLARES THAT:
The bankruptcy notice allegedly served on 8 March 2016 was invalidly served.
THE COURT ORDERS THAT:
The creditor’s petition filed in this proceeding is set aside.
The sequestration order made against the estate of Amanda Jane Thompson on 3 November 2016 is set aside.
The respondent pay the costs of the applicant.
| FEDERAL CIRCUIT COURT OF AUSTRALIA AT MELBOURNE |
MLG 1190 of 2016
| AMANDA JANE THOMPSON |
Applicant
And
| MISSION ENTERPRISES (VIC) LTD (ACN 005 064 666) |
Respondent
REASONS FOR JUDGMENT
Introduction
This case raised the very serious consequence of the making of a sequestration order against a person’s estate in circumstances where evidence of service of the relevant bankruptcy notice was defective.
In making the sequestration order in this case, the registrar relied on a deeming provision of the rules under which bankruptcy litigation is conducted in circumstances where direct, first-hand evidence existed, wholly displacing the operation of the deeming provision. The question in this case is whether the sequestration order can stand.
Synopsis
For the reasons that follow, in my judgment service of the bankruptcy notice was not valid. It follows that the sequestration order should not have been made. I make an order setting aside the sequestration order.
Short factual narrative
On 3 November 2016 a registrar of this court made a sequestration order against the estate of the applicant Amanda Jane Thompson.
The date of the act of bankruptcy on which the respondent
Mission Enterprises (Vic) Ltd (“Mission”) relied was 29 March 2016. The act of bankruptcy on which Mission relied was Mrs Thompson’s failure to comply with a bankruptcy notice said to have been served on her at 8.04 a.m. on 8 March 2016 by Paul Michael Harding, a solicitor in the legal practice called Harding Stenning & Co.
The circumstances of the events at service assumed pivotal importance in this case. In the paragraphs below I have addressed them. But at this early juncture, at least chronologically, let me record some further factual matters.
On 14 February 2014 Mission entered consent judgment against
Mrs Thompson for $311,913.31 (“the judgment debt”) plus interest at the daily rate of $145.73 from 14 February 2014 until payment.
It seemed that there was no debate that Mrs Thompson did not pay the judgment debt and so on 28 January 2016, when interest on the judgment debt stood at $103,905.49, Mission prepared a bankruptcy notice for service. The amounts specified in it were the judgment debt plus post-judgment interest of $103,905.49. Those sums were considerable.
In his evidence before me, Mr Harding (who purported to serve the bankruptcy notice) said he knew Mrs Thompson by sight having met her in a legal context at a meeting some years earlier. Mrs Thompson did not acquire the same impression of Mr Harding as she told me when giving evidence that she did not recognise Mr Harding, whether on the date of service or otherwise.
Be that as it may, the judgment debt allegedly arose out of a lending transaction involving Mrs Thompson’s husband, whose liability to Mission she guaranteed. At all relevant times Mrs Thompson was a qualified psychologist. But according to Mr Moller of counsel who appeared for Mrs Thompson before me, Mrs Thompson entrusted the totality of her financial affairs to her husband, reminiscent of the way Mrs Garcia did in the celebrated decision of the High Court in Garcia v National Australia Bank Ltd.[1]
[1] (1998) 194 CLR 395.
Mission filed a creditor’s petition on 7 June 2016. In paragraph 4 of that petition, Mission asserted that Mrs Thompson failed to comply on or before 30 March 2016 with the requirements of the bankruptcy notice served on her on 8 March 2016 or to satisfy the court that she had a cross-claim, set-off or cross-demand that equalled or exceeded the sum claimed by Mission.
Martin Telley swore in his affidavit made 19 July 2016 that he personally served Mrs Thompson with the creditor’s petition on
18 July 2016. Before me, Mrs Thompson did not dispute proper service of the creditor’s petition. Her grievance pre-dated that. She said the bankruptcy notice had not been properly served. Mr Moller said that by reason of that defective service, everything thereafter in the advancement of the creditor’s petition was on an unstable legal footing. He said the sequestration order should be set aside.
The registrar heard and determined the petition, adversely to
Mrs Thompson. In essence, the registrar took the view, so I was told by counsel who appeared before the registrar, that the registrar said –
a)regulation 16 of the Bankruptcy Regulations 1996
(“the regulations”) did not mandate personal service of the bankruptcy notice;b)service was sufficient if the bankruptcy notice was left at the debtor’s last known address;
c)in the circumstances of this case, Mr Harding’s method of service was sufficient compliance with bankruptcy regulation 16.02;
d)quod erat demonstrandum
, Mrs Thompson had been validly served with the bankruptcy notice and that thereafter,
the creditor’s petition was valid; and
e)it was appropriate to make a sequestration order.
This review is a hearing de novo. It requires a complete revisiting of the facts as if I were deciding afresh whether to make a sequestration order. When hearing a review of the decision of the registrar of this court pursuant to which the sequestration order was made, the proceeding is de novo. The Honourable Justice Gordon said as much in Moran v Lydiard Financial Services Pty Ltd.[2]
[2] [2007] FCA 872.
In a de novo hearing all issues must be retried, as was pointed out by Glass JA in Turnbull v New South Wales Medical Board.[3] The party that was successful when the case was first heard enjoys no advantage and must, if possible, win for a second time, as was held in Sweeney v Fitzhardinge.[4] Other authorities have made holdings along similar lines. Those other authorities include Pattison v Hadjimouratis[5] (Jacobson J) and O’Meara v Hitwise Pty Ltd[6] (Kiefel, Sundberg and Gyles JJ).
[3] [1976] 2 NSWLR 281, 296.
[4] (1906) 4 CLR 716.
[5] (2006) 155 FCA 226, 235.
[6] (2007) 160 FCR 518, 521.
The evidence
Mr Harding gave three versions of the events on 8 March 2016 –
a)those narrated in his affidavit of service on 8 March 2016;
b)those narrated in his affidavit of service sworn 17 October 2016 (that became exhibit B before me); and
c)those narrated during the hearing of the review of the registrar’s order before me on 11 May 2017.
While certain aspects of those three versions were consistent, a number of discrepancies were elicited by Mr Moller during Mr Harding’s cross-examination.
It is as well to set out the version given by Mr Harding in his affidavit made on the day of service. He admitted in cross-examination that he gave that version while events were fresh in his mind. He said –
At 8.04 am on 8 March 2016 I attended the home of the person at 27 Finch Street Malvern East Vic 3145 (property). There was a white Mercedes station wagon parked in the driveway on the property. A girl of school age came out of the house and got into the car. Then the person who I recognised as Amanda Jane Thompson, having met her on a previous occasion, came out of the house and got into the car. As the person got into the car I knocked on the driver’s side window of the car and said “Amanda I have a Bankruptcy Notice for you.” The person looked at me and started the car and I placed the Documents contained within a yellow envelope marked “Amanda Jane Thompson” under the driver’s side window wiper directly in front of her. The person then drove out of the driveway and off the property along
Finch Street. I then left the property.[7]
[7] Affidavit of Service (General) of Paul Michael Harding sworn 8 March 2016.
Unsurprisingly, Mr Moller went to the detail when challenging
Mr Harding about those events.
Mr Harding said he was a solicitor who had practised for many years although litigation was not his practice area. Securities were. He said he had met Mrs Thompson some years ago when she attended his office to execute financial documentation. He said he had served process on one occasion only prior to March 2016. When asked why he did not use the services of a professional process server, he said identification of Mrs Thompson was an issue and as he had previously met her he was able to identify her so as to effect service upon her.
Returning to the narrative, Mr Harding said he arrived at around
7.30 a.m. on 8 March 2016 and parked near the address given to him as Mrs Thomson’s residential address, 27 Finch Street, East Malvern.
It seemed that Mrs Thompson and her family resided at that address temporarily as she gave her address in other affidavits filed in this application as Albany Road Toorak. In any event, Mr Harding said that very shortly after 8.00 a.m., he saw a female of school girl age exit the front door of the house at 27 Finch Street, then open a white Mercedes station wagon and assume a position in the front passenger seat.
He said very shortly thereafter he saw a mature female leave the front door of the house at 27 Finch Street, open the driver’s door of the white station wagon and sit in the driver’s seat. All the while, Mr Harding said the engine of the station wagon was not running and the car was in a parked, stationary position in the driveway within the boundary line of 27 Finch Street.
Mr Harding gave viva voce evidence that he walked to the station wagon and when he reached a point on the driveway directly adjacent to the driver’s window he stopped and knocked on the window of the driver’s car door. He said he knocked three times using the knuckles of his right hand that he gestured from the witness box was clenched into a fist.
As so many of the details of this incident were disputed, it is desirable to set out the contradictory version, step-by-step. In that way, the points of difference are better illuminated.
Chronologically, Mrs Thompson’s daughter Chloe Susan Thompson exited the house first and got into the car. She swore an affidavit in this case that became exhibit 2. She did not give viva voce evidence and, obviously, was not cross-examined on her affidavit. Her affidavit was short so, rather than paraphrasing it, the precise wording is set out immediately below –
1. Amanda Jane Thompson is my mother and I make this affidavit in support of her opposition to the creditor’s petition filed in this proceeding.
2. I am in year 11 at St Catherine’s.
3. Most mornings my mother drives me to school.
4. At about 8.00am on 8 March 2016 I walked out the front door of the house at 27 Finch Street, Malvern East which is where I lived with my family at that time. The car that mum drives was in the driveway. I had taken the car keys with me as I do most school mornings. When I got to the car I unlocked it, got into the passenger seat and closed the car door. I switched on the car radio and waited for mum to come out of the house. I put the keys down in the car’s inbuilt cup holder as usual.
5. Around 3 – 5 minutes later I saw Mum walk out of the front door of the house, walk to the car, open the front driver’s side door and step into the car. Mum then shut the door.
6. Barely had mum’s door closed when I suddenly heard a very loud bang on the front driver’s side window. I was startled by the bang and jumped. I saw Mum jump in her seat as well.
7. When I looked over towards the driver’s side window I saw a man. I had never seen the man before and I hadn’t seen him approach the car. He looked angry and frustrated and he was saying something. I couldn’t hear what he was saying because the car radio was on and the windows were up, so nothing was audible. He then placed some type of envelope under the windscreen wipers on the driver’s side of the car.
8. Mum appeared very frightened. She took the keys and then started the car. I distinctly recall her starting the car engine after the events referred to in paragraph 7 above. Mum then reversed out of the driveway into Finch Street, and drove off from home.
9. As we drove down Finch Street the envelope was on the windscreen. After travelling a short distance I saw the envelope fall off the windshield. Mum didn’t stop to collect the envelope. Having driven on a few streets further Mum stopped the car to gather herself because she was shaking. She then restarted the car and drove me to school.[8]
[8] Affidavit of Chloe Susan Thompson sworn 29 October 2016.
Having read paragraph 2 of that affidavit I made the disclosure recorded on page 52 of the transcript that was in the following form –
HIS HONOUR: All right. Well, let’s just make sure that we’re all on the exact same page, but before doing that I’ve just read ahead to Chloe Susan Thompson’s affidavit, and she says she is currently a year 11 student at St Catherine’s. I need to declare that for 25 years my three daughters went to that school, one of whom was the school captain, and if anyone takes the point that that disqualifies me in any way, speak up now.[9]
[9] Transcript of proceeding, 11 May 2017 at p.52.
Neither party said I should recuse myself. Nor could they in view of cases in the High Court such as Ebner v Official Trustee in Bankruptcy,[10] Re Refugee Review Tribunal; Ex parte H,[11] Minister for Immigration and Multicultural Affairs v Jia[12] and Isbester v Knox City Council.[13]
[10] (2000) 205 CLR 135.
[11] [2001] HCA 28.
[12] (2001) 205 CLR 507.
[13] (2015) 255 CLR 135.
Chronologically, the events unfolded on 8 March 2016 in a manner that involved Mrs Thompson. Her version of the events was set out in her affidavit sworn 15 September 2016. As with other witnesses, the details of her version are best set out verbatim as follows –
2.At about 8.00am on 8 March 2016 I walked out the front door of my house at 27 Finch Street, Malvern East (“house”) to the car, which was parked in the driveway.
My daughter had left the house a few minutes earlier, and was already sitting in the front passenger seat with the car radio on. I was going to drive her to school.
3.As I came out the front door and approached the car I did not see any other person.
4.I opened the front driver’s side door, stepped into the car and shut the door.
5.Almost immediately there was a very loud bang on the front driver’s side window. It startled me and I looked up. I saw a man’s face at the window. I did not recognise him.
He looked very angry and aggressive and I could see he was trying to yell something. But I could not hear what was being said, as the window was up and the radio was on.
6.I was very frightened. I looked down and tried to engage the door lock. I was able to lock the car doors. As I then looked up, I saw the man grab the right windscreen wiper and slam what looked like a yellow envelope or paper under it.
7.I was still very frightened and wanted to get me and my daughter away from the aggressive man. I turned the keys in the ignition and started the engine. I then looked back and reversed quickly out of the driveway. I then drove down Finch Street. I was very shaken and frightened by the whole incident. I was shaking as I drove away. Because the windscreen was wet, the windscreen wipers came on automatically. They dislodged the envelope or paper, which then fell onto the road somewhere along Finch Street.
8.When I got to the end of Finch Street, I turned left into Coppin Street. That is the ordinary route I travel each morning when driving my daughter to school. Because I was still shaking with fear, about halfway along Coppin Street,
I stopped to compose myself. I then continued on driving my daughter to school and, after that, I drove home.
9.I did not go back and retrieve the paper which fell onto the road.
10.Later that day, I told my husband Warren Thompson about what had occurred.
11.Until I received a copy of the creditor’s petition I had no idea that the man was trying to serve a bankruptcy notice.[14]
[14] Affidavit of Amanda Jane Thompson sworn 15 September 2016.
Chronologically next, Roy James Stenning, a legal practitioner who made an affidavit on 1 September 2016 on which Mission relied without calling him, referred to the events of 8 March 2016. He said he sat in Mr Harding’s car immediately prior to 8.00 a.m. when
Mr Harding’s car was parked at the corner of Manning Road and
Finch Street East Malvern. He said he could see the house at
27 Finch Street. Mr Stenning said at 8.02 a.m. a girl came out of the house followed by a woman. Mr Stenning said that, while both he and Mr Harding were seated in Mr Harding’s car, Mr Harding said
“[t]hat’s Amanda”[15] then he got out of the car carrying a manila folder that Mr Stenning said he had given Mr Harding and that Mr Harding ran across Finch Street to the driver’s side window of a white Mercedes station wagon parked in the driveway.
[15] Paragraph 3 of the affidavit of Roy James Stenning sworn 1 September 2016.
Pausing there, several things must be said to that point in the narrative.
First, Mr Stenning in his affidavit clarified the point at which
Mr Harding was parked prior to Mr Harding’s approach of the parked station wagon. Mr Harding’s viva voce evidence on that point was difficult to follow. Finch Street runs in a north-south axis. Number
27 Finch Street is nearer Dandenong Road than it is to Wattletree Road and 27 Finch Street is on the western side of Finch Street. In order for Mr Harding to run across Finch Street as he said he did, he had been parked on the eastern side of Finch Street facing south. Mr Harding candidly admitted to having no real familiarity with that area.
Next, Mr Stenning spoke of Mrs Thompson shortly following the girl, now identified as Chloe. A plain reading of Mr Stenning’s affidavit suggested that Mrs Thompson exited her house almost immediately after Chloe. At all events, Mr Stenning did not describe the interval between Chloe and Mrs Thompson as being minutes in duration. Conversely, Chloe said in her affidavit that she waited in the station wagon for up to five minutes before Mrs Thompson got into the car and Mrs Thompson spoke of Chloe having left the house a few minutes earlier than her.
Chloe Thompson and Mrs Thompson swore that the interval between their departures from the front door of 27 Finch Street was between three and five minutes. Conversely, Mr Harding gave no specific interval between them (he used only the word “then” to describe the time between the two) and Mr Stenning also did not swear to a specific time of the interval, preferring instead to say that a girl came out of the house “shortly followed” by a woman.[16]
[16] Paragraph 3 of the affidavit of Roy James Stenning sworn 1 September 2016.
My point in addressing this issue is to highlight the precision used in the evidence of Chloe and of Mrs Thompson on the one hand compared to the lesser precision used in the evidence of Mr Harding and Mr Stenning on the other hand. In this case, I am required to state whose evidence about the events on 8 March 2016 I prefer. Some of the factors that assist in resolving the conflict of evidence include the precision of the evidence as given by one person when compared to the contradictory evidence as given on the same point by another witness. So far as the sequence of events of exiting 27 Finch Street was concerned, Chloe and Mrs Thompson gave a very precise version of events on which I have relied in preferring their version of events on the same issue as was given by Mr Harding and Mr Stenning.
Next, the evidence about the manila envelope and its contents was imprecise. Mr Stenning said in his affidavit that around 8.02 a.m. on
8 March 2016 he saw Mr Harding get out of Mr Harding’s car “with a manila foolscap envelop that I had given him and which contained the Bankruptcy Notice”.[17] Mr Stenning did not say on what information he based his words “which contained the Bankruptcy Notice”. He did not exhibit a bankruptcy notice to his affidavit by way of identification nor did Mr Stenning give evidence that he physically placed a specific bankruptcy notice in the envelope that he said Mr Harding carried as Mr Harding ran across Finch Street. I accept that Mr Stenning probably physically handed Mr Harding a manila envelope when Mr Harding got out of Mr Harding’s car. But I do not accept that in a disputed factual contest about the contents of an envelope, Mr Stenning’s evidence in paragraph 3 of his affidavit proved that –
a)he was able to say exactly what was contained in the manila envelope that Mr Harding carried; and
b)
he (Mr Stenning) personally inserted the bankruptcy notice into that envelope or watched someone else insert the bankruptcy notice into that envelope in such manner that it was proved on the balance of probabilities that the manila envelope carried by
Mr Harding as Mr Harding ran across Finch Street contained, as a matter of fact, the bankruptcy notice in issue in this case.
[17] Ibid.
Further, Mr Stenning did not swear that he saw Mr Harding place the manila folder under the wiper blade of the station wagon. In paragraph 4 of his affidavit Mr Stenning did swear that he saw the manila folder in that position as the station wagon drove off. But if Mr Stenning had been close enough to the station wagon to have heard the words allegedly said by Mr Harding, it seemed most peculiar that he did not also see Mr Harding engaged in the activity of reaching across the bonnet of the station wagon, lifting the wiper blade, placing the manila envelope against the station wagon’s windshield then replacing the wiper blade. Mr Stenning gave no such evidence. Instead, his narration went straight to the station wagon departing from 27 Finch Street and proceeding north along Finch Street, presumably to St Catherine’s School in Toorak, with the manila folder under the wiper blade.
It may be thought that I am able to infer that the bankruptcy notice in this case was in the envelope that Mr Harding placed under the wiper blade. But it is only legitimate for a court to drawn inferences if certain circumstances exist. Otherwise, the assertion is little more than conjecture.
That phrase came from the speech to the House of Lords of
Lord Robson in Richard Evans & Co Ltd v Astley[18] (“Richard Evans”). His Lordship’s speech was embraced by the High Court of Australia in Bradshaw v McEwans Pty Ltd[19] (“Bradshaw”). There, the High Court famously held as follows –
Of course as far as logical consistency goes many hypotheses may be put which the evidence does not exclude positively. But this is a civil and not a criminal case. We are concerned with probabilities, not with possibilities. The difference between the criminal standard of proof in its application to circumstantial evidence and the civil is that in the former the facts must be such as to exclude reasonable hypotheses consistent with innocence while the latter you need only circumstances raising a more probable inference in favour of what is alleged. In questions of this sort where direct proof is not available it is enough if the circumstances appearing in the evidence give rise to a reasonable and definite inference: they must do more than give rise to conflicting inferences of equal degrees of probability so that the choice between them is mere matter of conjecture (see per Lord Robson, Richard Evans & Co Ltd v Astley [1911] AC 674 at 687). But if circumstances are proved in which it is reasonable to find a balance of probabilities in favour of the conclusion sought then though the conclusion may fall short of certainty it is not to be regarded as a mere conjecture or surmise.[20]
[18] [1911] AC 674, 687.
[19] (1951) 217 ALR 1.
[20] (1951) 217 ALR 1 at 5.
That passage was later adopted by the High Court in Luxton v Vines[21] (“Luxton”). In that case, the High Court pointed out that the evidence gave rise to no more than conflicting conjecture of equal degrees of probability where no affirmative inference of fault could reasonably be drawn.
[21] (1952) 85 CLR 352.
Inferences from actual facts that are proved are just as much part of the evidence as are those facts themselves. Citing Lord Robson’s speech in Richard Evans, the High Court so held in Holloway v McFeeters[22] (“Holloway”), a case concerning a claim to damages arising from personal injuries the plaintiff sustained in a motor vehicle collision. In that case, the High Court held that it was reasonably open to the jury to find that the death of the deceased was caused wholly or in part by the negligence of the driver of an unidentified vehicle.
[22] (1956) 94 CLR 470.
The 1982 decision of the High Court in Girlock (Sales) Pty Ltd vHurrell[23] (“Girlock”) applied earlier High Court authority in Bradshaw, Holloway and Jones v Dunkel.[24] In Girlock, the High Court held that in civil cases (as is this case) where direct proof is not available, it is enough if the circumstances appearing in evidence give rise to a reasonable and definite inference and the circumstances must do more than give rise to conflicting inferences of equal degrees of probability so that the choice between them is not a mere matter of conjecture.
[23] (1982) 149 CLR 155.
[24] (1959) 101 CLR 298.
The notion of “circumstances appearing in the evidence give rise to a reasonable and definite inference: they must do more than give rise to conflicting inferences of equal degrees of probability”[25] was stated about 10 years ago by the High Court in Trustees of the Property of Cummins (a bankrupt) v Cummins.[26] There, the High Court approved of the statements about inferences in Bradshaw, Luxton, Jones
v Dunkel and Girlock. Those authorities were drawn together by Collier J in the context of a takeover in Tinkerbell Enterprises Pty Ltdv Takeovers Panel and Ors.[27][25] (1951) 217 ALR 1 at 5.
[26] (2006) 227 CLR 278.
[27] [2012] FCA 1272.
In slightly more strident terms but in a manner nevertheless impeccably reasoned, Justice Pagone more recently put the matter in the following terms in J & A Vaughan Super Pty Ltd (Trustee) v Becton Property Group Ltd[28] –
Inferences require facts from which an inference is capable of being drawn. That requires that the facts relied upon bear probatively upon those inferences which are sought to be drawn.[29]
[28] [2014] FCA 581.
[29] [2014] FCA 581 at [19].
A court must not draw an inference where it is but a choice among rival conjectures. Justice Wigney of the Federal Court of Australia so held in in Re Petrolink Pty Ltd; Smith v Bone.[30] A court must not rely on circumstances that do no more than give rise to conflicting inferences of equal degrees of probability. The Federal Court of Australia has said as much in Communications, Electrical, Electronic, Energy, Information, Postal, Plumbing & Allied Services Union of Australia v Australian Competition and Consumer Commission (ACCC).[31]
[30] [2014] FCA 1024 at [17].
[31] (2007) 162 FCR 466.
In Lithgow City Council v Jackson,[32] Crennan J of the High Court held that the inferential process may fall short of certainty but a court is not authorised to choose between guesses, even on the ground that one guess seems more likely than another. A similar proposition was upheld by the Full Court of the Federal Court of Australia in Australian Competition and Consumer Commission v Metcash Trading Ltd.[33] Those authorities and others were surveyed by the Full Court of the Federal Court of Australia in Ashby v Slipper.[34]
[32] (2011) 244 CLR 352 at [94].
[33] (2011) 198 FCR 297 at [31].
[34] [2014] FCAFC 15 at [71]–[78].
Among the more important matters arising from that review of the authorities bearing upon inferences are –
a)inferences from actual facts that are proved are just as much part of the evidence as are those facts themselves (Holloway);
b)
if circumstances are proved on which it is reasonable to find a balance of probabilities in favour of the conclusion sought,
then though the conclusion may fall short of certainty, it is not to be regarded as mere conjecture or surmise (Richard Evans);
c)it is enough if the circumstances appearing in evidence give rise to a reasonable and direct inference (Girlock); and
d)
a court is not authorised to choose between guesses, even on the ground that one guess seems more likely than another
(Lithgow City Council).
Applying those principles to the facts of this case, I must first examine the evidence on which any inferences are to be drawn.
It seemed to me that it may be fairly said that it was little more than conjecture for Mr Stenning or Mr Harding to positively assert that the envelope that was placed under the driver-side wiper blade actually contained the bankruptcy notice that was in issue in this case. It was not possible therefore to conclude on the balance of probabilities that when Mr Harding swore that he “placed the [d]ocuments contained within a yellow envelope”[35] under the driver’s side wiper blade, such yellow envelope actually contained the bankruptcy notice in this case.
[35] Affidavit of Service (General) of Paul Michael Harding sworn 8 March 2016.
As mentioned above, Mr Stenning did not give viva voce evidence in this case.
Without proceeding any further in the factual narration of this case,
I formed the view that I was unable to be satisfied on the balance of probabilities that whatever may have been placed (once in the envelope) under the wiper blade of Mrs Thompson’s car,
the bankruptcy notice in issue in this case was so placed.
Returning to the events in the car in the driveway of Mrs Thompson’s home at 27 Finch Street, she said she was frightened when, to her way of thinking, a complete stranger knocked on a car window as she was attempting to drive her daughter to school. Mrs Thompson said the car radio was on at the precise moment the person later revealed to her as Mr Harding knocked on the window. She said the knocking took the form of a “very loud bang” that startled her and caused her to look up. She said she saw a man’s face at the car window and that she did not recognise him. Mrs Thompson said the man looked very angry and aggressive. She said she could see he was trying to yell something
(her words) but that she could not hear what he was saying because the car window was up and the radio was on. She said she was very frightened so she locked the car doors. Mrs Thompson said she saw the man “grab the right windscreen wiper and slam what looked like a yellow envelope or paper under it”.
Chloe’s version of events closely corresponded to her mother’s version of events. Chloe said she had taken her mother’s car keys with her when she left her home and unlocked the car, then got into the passenger seat then closed the door and turned on the car radio.
She said she put the car keys, as usual, in the inbuilt cup-holder.
Chloe said that between three and five minutes later, her mother entered the car, took her seat behind the wheel and shut the door.
Chloe said that barely had her mother’s door closed when she heard a very loud bang on the driver’s side window. Chloe said she was startled by the bang and jumped as did her mother. Chloe said she saw a man at the driver’s window. She said he looked angry and he was saying something. Chloe said she was unable to hear what he was saying because the car radio was on and the windows were up. She said he then placed some type of envelope under the windscreen wiper of the driver’s side of the car. Chloe said she distinctly recalled that her mother started the station wagon’s engine after that event. She said
Mrs Thompson then reversed out of the driveway, into Finch Street and drove off when, during the drive, the envelope fell off the windshield.
Mrs Thompson stated that she started the ignition of her car after the yellow envelope had been put under the wiper blade. She then reversed out of the driveway. She said she was shaken by the incident.
Mrs Thompson said that as she drove away the windscreen became wet (from sprinklers, she said) that automatically activated the wipers dislodging the envelope causing it to fall onto Finch Street somewhere. She did not stop to retrieve it.
Mrs Thompson said that it was only when she was served with the creditor’s petition in this case that she realised the man at the car window was trying to serve a bankruptcy notice.
In cross-examination by Mr Kohn of counsel for Mission, it was put to Mrs Thompson that the window of the driver’s side was partially down after the man at the car window knocked on it. She denied the proposition. Mrs Thompson insisted that the keys to her car were not then in the ignition so she was unable to lower or raise the car window. She said she heard nothing that the man at the window said, although she believed he must have said something as his lips were moving.
That was to be contrasted with Mr Harding’s evidence when he said in answer to questions put to him in cross-examination that once he knocked on the car window, the driver lowered the window then raised the window when Mr Harding told the driver he had a bankruptcy notice for her. He said much the same thing in his affidavit sworn
17 October 2016. In that affidavit he asserted he was not angry or aggressive.
Conversely, Mr Harding said in his 17 October 2016 affidavit that
Mrs Thompson wound-up her driver-side window when she heard him say he had a bankruptcy notice for her. He said he “placed the [d]ocuments contained within a yellow envelope” under the wiper blade as she was winding up the window and that she changed gears. No other witness spoke of gears being changed. Chloe and
Mrs Thompson said that the car was not started until after the envelope had been placed under the wiper blade. In answer to a question from me, Mr Harding said that the car had not been started when he reached across to lift the wiper blade. Had the car engine been running at that point in time, he may well have had his foot run over. Mr Harding agreed that the car was not running when he placed the envelope under the wiper blade.
In the face of that rehearsal of the evidence, it seemed to me that the areas of dispute were as follows –
a)whether the driver’s side window was open, partially open or fully closed when Mr Harding said the words to Mrs Thompson; and
b)whether Mrs Thompson heard whatever Mr Harding said to her.
On the balance of probabilities, I have found –
a)Mrs Thompson’s car window was fully closed when Mr Harding said words to Mrs Thompson; and
b)whatever words Mr Harding said to Mrs Thompson she did not actually hear by reason of the fact that the window was fully closed and the car radio was operating.
In making those findings, I accept the evidence of Chloe and of
Mrs Thompson in that regard. I take the view that Mr Harding was mistaken when he said that Mrs Thompson partially rolled down her window then rolled it up again immediately after he said he had a bankruptcy notice for her. It seemed to me to accord with common sense that a mother intending to take her child to school was most unlikely to roll down her car window at the invitation of a complete stranger who, at she said, appeared angry. On his own admission,
Mr Harding said he had run to Mrs Thompson’s car and if as a result he was red-faced, that probably explained why Mrs Thompson said he looked angry and frustrated, a red-faced complexion being a common manifestation of anger or frustration. In addition, I accept unreservedly the evidence of Chloe who emphatically maintained that the car ignition was off when the man now known as Mr Harding knocked on the window, that the car keys were still in the in-built cup-holder, that the windows were fully up and the car radio was on.
I also accept that even if Mr Harding said the words he said he said, Mrs Thompson did not hear them nor did she detect what he was trying to convey in the spoken word because the window was closed and the car radio was on. Mr Harding may well have said the words he said he said. He and Mr Stenning may both have heard Mr Harding say the words uttered by Mr Harding. But I find that Mrs Thompson and Chloe did not hear those words. I also find as a fact that after the envelope had been placed on the windshield Mrs Thompson started her car engine. She did not change gears, as Mr Harding said, except to put the car in reverse. She then drove off. It was common cause that the envelope fell off the car while it was in transit travelling north along Finch Street.
Consequently, I find as a fact that Mrs Thompson did not hear
Mr Harding say to her that he had bankruptcy notice for her. That was relevant to the question of service.
Applicable legal principles
Having made those findings of fact, it is next necessary to apply the law to those facts as found.
First, as was held by Collier J in Mulhern v Pearce (No 2),[36]
a sequestration order resulting in bankruptcy and likewise, an order setting aside a sequestration order, are very serious matters as they mean that the sequestration order, the bankruptcy and the heavy financial and legal constraints placed on a bankrupt should never have occurred.
[36] [2014] FCA 805 at [73].
In this case Mr Moller submitted that Mrs Thompson has laboured under the consequences of a bankruptcy that was procured by defective service in circumstances where the sequestration order should not have been made in the first place.
I agree.
No longer is personal service of the bankruptcy notice required.
Under regulation 16.02, a bankruptcy notice can be validly served if left at the premises of the person to be served. If I had been persuaded that the evidence revealed that the bankruptcy notice in issue in this case had in fact been placed in the envelope that was placed under the wiper blade and if I had been persuaded that the evidence revealed that Mr Harding told Mrs Thompson that a bankruptcy notice was under the wiper blade, it would have been necessary for me to consider in detail different aspects of this case. But as I have found that on the balance of probabilities the bankruptcy notice in issue in this case was not placed under the wiper blade and, as I have found that Mr Harding did not tell Mrs Thompson in a manner audible to her that the bankruptcy notice was in fact under the wiper blade, in many respects any further consideration of this issue is unnecessary. But out of deference to the excellent submissions of both Mr Kohn and Mr Moller, I shall address the propositions of law that each raised.
The starting point is the significance of valid service. Strict proof is called for in relation to service of the bankruptcy notice. Salutary consequences to a creditor follow for failure to comply with the law about requirements for service. In the South Australian decision of Walters J in In re Long, Ex parte Fraser Confirming Pty Ltd,[37]
his Honour reviewed the authorities that indicated the need for strictness of proof when discharging the requirements for service of bankruptcy notices. In that case, by reason of deficiencies in the service of the bankruptcy notice his Honour ordered that the bankruptcy notice be set aside and that the petition be dismissed. A careful examination of his Honour’s reasons reveal that the want of proper service of the bankruptcy notice rendered defective the petition founded on it.
His Honour took the view that the petition was defective in those circumstances despite the fact that the debtor later learned of the existence of the bankruptcy notice and even though there was no formal proof of substantial injustice having been done to the debtor by the defect in service.
[37] (1975) 12 SASR 130.
Similar views were expressed about the need for compliance with the rules in Re Williams; Ex parte Alberton Electrical Service Pty Ltd[38] (Fisher J). In 1988 Gummow J, then of the Federal Court of Australia but later of the High Court of Australia, made observations approving of the holdings of Walters J and Fisher J above in Re Ditford; Ex parte Deputy Commissioner of Taxation (NSW).[39]
[38] (1982) 43 ALR 552.
[39] (1988) 83 ALR 265.
In the bankruptcy jurisdiction, for almost 200 years the doctrinal theory underpinning service has been the need to bring the relevant process to the notice of the person to be served. That much was the practice of the Court of King’s Bench, according to Paterson J in Thomson v Pheney.[40]
[40] (1832) 1 DowPR 441.
[41] [1854] Ch 328.
The learning can be traced much further back than 1832. Time and again courts have stressed that the object of service – in whatever form – is to give notice of the process to the person intended to be served. The reasoning behind that has always been the court’s concern that with notice of the process, the person on whom service is made is aware of the process and he or she can resist it. One of the earliest statements to that effect was Lord Cranworth LC’s comments in
Hope v Hope[41]where his Lordship said the following –
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.[42]
[42] [1854] Ch 328, 342.
Citing that passage from Hope v Hope in Davidson v McCarten,[43] Sholl J of the Supreme Court of Victoria held at the person served must be aware of the nature and effect of the writ. His Honour placed reliance for that proposition on Banque Russe et Francaise v Clark.[44]
[43] [1953] VLR 697, 701.
[44] [1894] WN 203.
While true, the practice in the United Kingdom and that in various jurisdictions in Australia has diverged over recent decades, but the intrinsic rationale for valid and effective service has remained constant. It was stated by Mummery J in Re Busytoday Ltd: Popely v Lewis[45] where his Lordship held as follows –
In interpreting those provisions I recognise that, although points on service may sometimes seem tediously technical, time-wasting and downright unmeritorious, the requirement of service of legal proceedings in accordance with the relevant rules is so fundamental in English law that it is not to be laid flat by considerations of that kind. Service is an essential procedural step in the constitution of legal proceedings, so as to ensure that the person against whom a claim is made is aware of the proceedings instituted to establish and enforce that claim and is able to take appropriate steps to defend himself.[46]
[45] [1992] 4 All ER 61.
[46] [1992] 4 All ER 61, 65.
Before me a good deal of debate emerged about the significance of the words that Mr Harding said he said at the window of Mrs Thompson’s car – “I have a Bankruptcy Notice for you”. Mission contended that those words conveyed to Mrs Thompson a description of the process Mr Harding was attempting to serve. Mr Kohn submitted that the “nature of the document” was thus told to Mrs Thompson. While
Mr Kohn did not rely on the authority of the Court of Appeal of the Supreme Court of New South Wales in Ainsworth v Redd,[47] considerable attention was given by the court in that case to circumstances where a document was set down in front of the person to be served and where that person walked away, refusing to pick up the document. Kirby ACJ held that in those circumstances, to fix a person with all the consequences that may follow, the law understandably requires that the “nature of the document” should be described.
[47] (1990) 19 NSWLR 78.
The need for a prospective defendant or respondent to have
notice of the claim before being answerable for it was described as
“a cardinal rule of procedure”by Lord Bingham of Cornhill, then
Sir Thomas Bingham MR of the Court of Appeal in Forward v
West Sussex County Council.[48] His Lordship said as follows –It was a cardinal rule of procedure that a party should not in ordinary circumstances be answerable for a claim of which he had had no notice. If he could show that the proceedings, although sent to and delivered to the last of his addresses known to the plaintiff, had not in fact come to his notice then good service had not been effected. The real test was one of notice not delivery.[49]
[48] [1995] 4 All ER 207, 212.
[49] [1995] 4 All ER 207, 212.
One could hardly say that the doctrine underpinning the need for notice of the process to come to the attention of the proposed respondent is anything but deeply ingrained in Anglo-Australian jurisprudence.
Personal service of the bankruptcy notice is not necessary and the regulations say as much.
Mr Kohn pressed firmly the concept that Mission discharged its service obligations when Mr Harding “left” the bankruptcy notice at
Mrs Thompson’s address. In the passages above I have already recorded that I am not satisfied that the bankruptcy notice in issue in this case was in fact “left” when the envelope was placed on the windscreen wiper and therefore I am not satisfied that the bankruptcy notice was left at Mrs Thompson’s address.
Various decisions of the Federal Court of Australia have considered service at the last known address of the person for the purposes of regulation 16.01(1)(c). In one, Drake v Stanton,[50] Tamberlin J held that it did not matter whether the debtor resided at that address.
That decision was approved by the Full Court of the Federal Court of Australia in Skalkos v T & S Recoveries Pty Ltd.[51] Foster J also agreed with the decision of Tamberlin J in Napiat Pty Ltd v Salfinger (No 7).[52]
[50] [1999] FCA 1635.
[51] (2004) 141 FCR 107.
[52] (2011) 202 FCR 264.
But those decisions did not address the point raised in this case.
The point was no better illuminated by the decision of Jacobson J in Civic Video Pty Ltd v Warburton.[53]
[53] [2013] FCA 934.
In days when personal service of the bankruptcy notice was required, unlike the current service requirements, it was sufficient if the person who had to be served was not physically handed the document.
For example, if the debtor refused to take actual corporeal possession of the process but the process server told the debtor of the nature of the process and left the process in front of or near the debtor so that the debtor had what the law called “unimpeded and immediate access to the document”, that was sufficient. Of importance was the need to state the nature of the process. To that I add, the need to state the nature of the process must be in a manner heard by the debtor.
On behalf of Mission, Mr Kohn submitted that the bankruptcy notice was served in complete conformity with regulation 16 that required no more than the bankruptcy notice to be left at the debtor’s premises in accordance with regulation 16.01(1)(c). In debate with Mr Kohn I postulated the scenario where the document was “left” at the debtor’s last known address but the place at which it was left was hardly likely to come to the attention of the debtor, for example if the process server pitched the bankruptcy notice so it landed on the roof of the debtor’s house. While “left” at the last known address, the bankruptcy notice having been placed on the roof was scarcely likely to come to the attention of the debtor. Similarly, if the process server threw the bankruptcy notice into a garden bed obscured from view,
the bankruptcy notice so served was hardly likely to come to the attention of the debtor. Conversely, leaving a bankruptcy notice on a debtor’s front door mat, in the debtor’s letterbox or after it was pinned to the debtor’s front door was, in point of contradistinction, likely to come to the debtor’s attention.
In this case, the evidence told an uncontroverted version of events why Mr Harding placed an envelope under the wiper blade on the driver’s side of Mrs Thompson’s car. For the reasons set out above, I am unable to find that the bankruptcy notice in this case was in the envelope so placed. On Mr Kohn’s argument, it was not necessary for anything more to be done than leaving the bankruptcy notice at the last known address. It must not be forgotten that the envelope was placed against the windscreen of a vehicle then standing on the property being the last known address of the debtor. Was the bankruptcy notice therefore “left” at Mrs Thompson’s last known address? To my mind, it strains the construction of regulation 16.01(1)(c) to breaking point to say the bankruptcy notice (if indeed one was proved to have been in the envelope) was left at the debtor’s last known address. Could the same be said if an envelope with the bankruptcy notice in it was simply placed on the lid of a wheelie bin in the driveway? Does it matter where on the premises the bankruptcy notice was left? Will service be sufficient if the bankruptcy notice is left in the rain in a driveway if the bankruptcy notice is washed away before anyone knows it is gone? What if the bankruptcy notice is left in the driveway yet an intermeddler takes it and destroys the bankruptcy notice before the debtor learns of it? On Mr Kohn’s argument, all are valid methods of service yet on none of those methods was notice of the intended process brought to the attention of the intended recipient.
To my mind, the debtor must learn of the existence the bankruptcy notice so served. Otherwise, no useful purpose is had in effecting service. While true, the need for personal service has been done away with. Substituted service has been authorised by the rules for some considerable time. But even substituted service is premised on the likelihood that knowledge of the process will be brought to the attention the person intended to be served.
In Crichton v Shaw,[54] Branson J considered a case involving service of the creditor’s petition by the documents being placed under the windscreen wiper of the driver’s car while he was in it. Her Honour held that personal service had been effected but if that view was wrong, substantial injustice was not caused as her Honour regarded any such default as a mere formal defect. From the reported decision,
her Honour did not appear to have been referred to the observations of Fisher J or Walters J in the cases mentioned above. It is not possible to tell whether her Honour’s decision was delivered ex tempore. However, it seemed to me that in the circumstances of deficiencies in the method of service of the bankruptcy notice, that was no mere formal defect. The whole basis of the act of bankruptcy – failure to pay a certain sum by a specified date as recorded in a bankruptcy notice – was in doubt because service of the bankruptcy notice was in doubt.
[54] [1997] FCA 1231.
In my view, the better course is to follow Gummow J, Fisher J and Walters J in insisting on strict proofs of valid service of the bankruptcy notice. No such evidence was given in this case.
The debate before the registrar
At one level, given the exquisite volume of work under which registrars in the bankruptcy jurisdiction operate, it was very understandable that the registrar declined to devote the time required to hear and determine the opposition to Mission’s petition. For me the issue was complicated and called for a day’s hearing then a huge amount of time considering the conflicting factual and legal concepts in issue.
But as has been said in any number of decisions, the consequences of a sequestration order are enormous. Such an order should only be made in appropriate cases. Where such a huge factual conflict existed in relation to service of the bankruptcy notice and with it the consequences of non-compliance, it seemed to me this case ought to be listed for hearing before a judge. It should not have been heard by a registrar who determined it according to what was little more than a deeming provision (regulation 16.01(1)(c)) in the face of direct and compelling evidence that called for investigation.
Conclusion
Service of the bankruptcy notice was not proved. I set aside the sequestration order.
I certify that the preceding eighty-seven (87) paragraphs are a true copy of the reasons for judgment of Judge Wilson
Associate:
Date: 30 May 2017
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