Troy & Company v Cameron
[2002] FMCA 42
•13 March 2002
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| TROY & COMPANY v CAMERON | [2002] FMCA 42 |
| BANKRUPTCY – Creditor’s petition – application for adjournment of hearing of petition to allow creditors meeting to proceed – application refused – service of bankruptcy notice and Bankruptcy Act 1966 s306(1). |
| Applicant: | TROY & COMPANY (A FIRM) |
| Respondent: | RICHARD LOCHIEL CAMERON |
| File No: | WZ 15 of 2002 |
| Delivered on: | 13 March 2002 |
| Delivered at: | Melbourne |
| Hearing Date: | 12th March 2002 |
| Judgment of: | Bryant CFM |
REPRESENTATION
| Counsel for the Applicant: | Mr Thompson |
| Solicitors for the Applicant: | Phillips Fox GPO Box F338 PERTH WA 6841 |
| Counsel for the Respondent: | Mr De Silva |
| Solicitors for the Respondent: | Murfett & Co 21 Hay Street SUBIACO WA 6008 |
ORDERS
THAT leave is granted to the Creditor to file the Affidavit of Maxwell Leonard Troy sworn on the 11th day of March 2002 and David William Thompson sworn on the 12th day of March 2002.
THAT a Sequestration Order be made against the Estate of RICHARD LOCHIEL CAMERON.
THAT the petitioning Creditors costs of and incidental to the petition, including any reserved costs be paid in accordance with Order 62 of the Federal Court Rules.
THAT pursuant to Section 208 of the Bankruptcy Act 1966, such of the Debtors property which is in the hands of the controlling Trustee be forthwith released to the Trustee in Bankruptcy.
THE COURT NOTES:
That the date of Bankruptcy is the 5th day of January 2000.
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT MELBOURNE |
WZ 15 of 2002
| TROY & COMPANY |
Applicant
And
| RICHARD LOCHIEL CAMERON |
Respondent
REASONS FOR JUDGMENT
Introduction
This is a judgment in a matter which was before me yesterday morning. It was adjourned by Federal Magistrate McInnis in his last sittings at Perth and was conducted by way of video link between Melbourne and Perth.
The applicant Creditor, Troy & Company (a firm) applies to the Court for a sequestration order pursuant to Section 43 of the Bankruptcy Act 1966 (“The Act”) against the Estate of the Respondent Debtor Richard Lochial Cameron (“The Debtor”). The Debtor seeks an adjournment of the Application to enable a meeting of Creditors to be held.
On the 20th day of February 2002, Christopher Michael Williamson, registered trustee in bankruptcy consented to act as the controlling trustee of the estate of the Respondent by signing the controlling trustee authority and in late February 2002 received a statement of affairs of the Respondent. The first meeting of Creditors of the Respondent has been scheduled for the 25th day of March 2002.
In this application the Creditor relies upon non compliance with a bankruptcy notice dated the 13th day of December 1999. The bankruptcy notice was based upon a judgment obtained by the Creditor against the Debtor in the District Court of Western Australia on the 18th day of November 1999 after a seven day hearing. The debt claimed in the bankruptcy notice is $30,084.40, although it is common ground there is interest and costs owing to the Creditor. The judgment in the District Court was the subject of an appeal to the Supreme Court of Western Australia which unanimously dismissed the Appeal on the 11th day of December 2001.
A Creditors petition was filed on the 4th day of July 2000 in the Western Australia District Registry. On the 17th day of August 2000 the Creditor filed a notice of motion seeking orders for substituted service of the Creditors petition. The matter was mentioned on a number of times, and on the 20th day of October 2000 an order was made allowing for substituted service of the Creditors petition. Ultimately the Debtor was represented by Mr Thorpe from AC Thorpe and in December 2000 the petition was adjourned to the 12th day of February 2001. On that date the petition was adjourned to the 23rd day of April 2001 on condition that the Respondent proceed expeditiously with his Appeal in the Supreme Court of Western Australia. The proceedings were adjourned on the 23rd day of April 2001 to the 7th day of May 2001 and again on that date to the 2nd day of July 2001. On the 2nd day of July 2001 the Court ordered that pursuant to Section 52(5) of the Act, the period at which the expiration of the Creditors petition should elapse be extended to the 3rd day July 2002 and the hearing of the petition be adjourned to the 17th day of December 2001, again on condition that the Respondent proceed expeditiously with his Appeal in the Supreme Court. On the 17th day of December 2001 the petition was again adjourned to the 4th day of February 2002. By the time the matter came on before Federal Magistrate McInnis on the 4th day of February 2002, the Appeal had been dealt with and judgment given, and the Debtor sought an adjournment to a date after the 25th day of March 2002 when the Creditor’s meeting could be held. Prior to the last appearance, the Debtor had changed solicitors and in order to allow his solicitors to properly present arguments in support of the application, an adjournment to the 12th day of March 2002 was granted.
The Debtor applicant relied upon an Affidavit of Christopher Michael Williamson sworn on the 22nd day of February 2002. Richard Lochiel Cameron sworn on the 7th day of March 2002 and a further Affidavit by the Debtor sworn on the 11th day of March 2002. The Creditor relied upon an Affidavit sworn by him on the 11th day of March 2002 and upon material previously filed in support of the petition.
Background facts
As to the facts relied upon as leading up to the signing of the Section 188 authority in favour of the trustee, the Debtor deposes to a chronology of events. The matter proceeded by way of submission only and there was no cross examination. Accordingly, I accept the Debtors version of what occurred.
The Debtor asserts at all material times he was represented by Andrew Thorpe a solicitor, in relation to the District Court proceedings upon which the bankruptcy notice and Creditors petition is based and the subsequent Appeal to the Full Court of the Supreme Court of Western Australia. He asserts that immediately after the judgment was handed down in the District Court, on or about the 18th day of November 1999, he was advised by his solicitor that the judgment was wrong and that an Appeal had excellent prospects of success. He instituted the appeal and sought to adjourn the Creditors petition until the determination of the Appeal, based upon the advice of his solicitor.
On the 11th day of December 2001 the Full Court of Western Australia gave judgment in which the Appeal was dismissed. The debtor was advised on the 23rd day of December 2001. He deposed to the fact that Max Troy, the principal of the Creditor firm, had telephoned his Wife’s son to advise that bankruptcy was imminent and that caused him to contact his solicitor and consequently learn of the status of the appeal. He asserted that Mr Thorpe informed him that he needed time to consider the prospects of an application for special leave to the High Court and wanted to examine the transcripts. He was informed that the bankruptcy hearing was listed for hearing on the 22nd day of February 2002 and he had strong grounds for having the petition dismissed.
He further asserted that in January he was informed by Mr Thorpe that discussions had been held with Phillips Fox, the Applicants solicitors, in an effort to settle the proceedings, the costs had not yet been taxed and would add to the claim and that he was told that he could not arrange a meeting of his Creditors before the bankruptcy hearing because Creditor meetings only applied to corporate insolvencies. He deposed that he was unaware of the existence of Parts ix of x of the Act and the options available to him.
On the 4th day of February 2002 he telephoned Mr Thorpe to discuss the options available and was dissatisfied with the advice that he was getting. On the 6th day of February 2002, he contacted his current solicitors to assist him in investigating other options, including Part x of the Act. On the 11th day of February 2002 he received a phone call from Mr Thorpe indicating that advice had been received from Counsel that an appeal to the High Court would not be successful, although Mr Thorpe wanted to seek further advice from Counsel. He required further funds for this purpose. The Debtor then telephoned Mr Thorpe and advised him that he did not wish to proceed with any further appeal and upon being dissatisfied with further advice, he telephoned Mr Abbott with whom he had been having discussions and requested that he retain a registered trustee in bankruptcy on his behalf so that he could sign the necessary authority under Section 188 in favour of a trustee. On the 12th day of February 2002 Mr Thorpe informed him that if he was proceeding under Part x of the Act then he could no longer act for him, and on the same day he advised the applicants solicitors that he intended to have his affairs administered under Part x of the Act and subsequently confirmed that in writing.
It was submitted on his behalf that in view of this chronology, there was nothing adverse to the Debtor to be inferred from the fact that the Section 188 authority had only been signed shortly prior to the adjourned hearing date in February 2002 and was a bone-fide appointment in all respects.
Background to the judgment debt
Maxwell Leonard Troy who swore an Affidavit in support of the judgment Creditor is a partner in the firm of Troy & Partners (formerly known as Troy & Company), the Applicant. Mr Troy in an accountant. Mr Troy’s firm provided accounting advice to the Debtor in relation to a business project which involved the organisation of surfing trips to Indonesia. Mr Troy assisted in preparing projected cash flow for the business which he intended to discuss with potential investors. This business involved the formation or acquisition of a British Virgin Island Company to be called Great Breaks International (‘GBI’) to act as a vehicle for the business. Another business associate of the Debtor, Peter Bevan Advertising, was engaged by the Debtor to prepare a brochure in the nature of a prospectus of the business. The District Court proceedings instituted by Troy & Co related to services rendered, being advice on taxation and other matters to do with the organisation and structure of the business from February or March 1996 to March 1997. In addition investors contributed money to the business venture. Mr Troy asserts that in about March 1997 he became concerned that no share script in GBI had been issued to any of the investors and the Indonesian company which was to be a joint venture had not been incorporated. He prepared a report dealing with these concerns and other matters and presented it to a meeting of investors. In the course of the meeting or shortly after, the Debtor dispensed with his services. Being unable to obtain payment he issued proceedings in the District Court of Western Australia.
In the course of those proceedings, the Debtor both denied all liability for the debt and also asserted that if any contract did exist it was not a contract with him personally, but rather as agent for a principal. This argument was not pleaded and the Debtor was not permitted by the trial Judge to rely upon it. The Full Court of the Supreme Court upheld the trial Judge’s decision.
Evidence relied upon by the debtor to support the adjournment
Christopher Michael Williamson who had given consent to act as controlling trustee indicated that the Applicant’s total debt represented 16.02 percent of the total debt. The statement of affairs of the Debtor indicated total debts of $625,399.79. He annexed a list of his unsecured Creditors to his Affidavit sworn on the 7th day of March 2002. That schedule showed the Creditors to be as follows:
Troy & Co (the Creditor) $142,146.80 (being the judgment debt, 1997
interest and untaxed costs)
AC Thorpe $ 19,600.00 (Claimed – this amount 2001
represents unclaimed legal
fees and the attitude of this
Credit was unknown)
Wilcox & Associates $ 86,324.00 (friendly- Architect fees) 1995
Harler Consulting Pty Ltd $ 287,000.00 (friendly -Project finance) 1993
Jane Liddon (Debtors Wife) $ 40,000.00 (friendly – personal loan) 1996
Steve Jacobs $191,842.31 (friendly - portion of 1993
unsecured debt, being
secured by boat)
Mr & Mrs Cameron (parents $ 10,000.00 (friendly – personal loan) 2001-02
of debtor)
Peter Bevan $ 2,752.00 (graphics material - disputed)
GMAC $ NIL (not a delinquent debt)
The Debtor asserted that all Creditors with the exception of Peter Bevan, Troy & Co and AC Thorpe have been supportive and none of the “friendly” Creditors have actively sought to recover their debts “having been content with my efforts to resurrect my financial position”.
Each of those referred to as the friendly creditors signed a letter, such letter being annexed to the affidavit of the Debtor.
The letters are pro forma in nature indicating the debt, a brief statement as to how the debt arose, that the Creditor intends to vote in favour of the Part x administration, is aware that the letter will be provided to the Court, and asserts that in each case, the Creditor is prepared to provide any further documentation which the Debtor might require.
The Debtor asserted that he did not enter into a Part x arrangement with his creditors earlier than the 18th day of February 2002 because none of the creditors were actively seeking repayment of their respective debts and he relied upon the advice of his solicitor at the time that he had a good defence to the applicants debt and that he should pursue his legal rights in relation to it. He finally relied upon the fact that he was unaware of his options under Parts ix and x of the Act.
The Debtor waived prejudice to indicate that he had been involved in “without prejudice” settlement discussions with the applicant in an effort to settle the proceedings. The applicant also waived prejudice to concede that there were negotiations, but it is conceded that those negotiations have not resulted in a resolution of the dispute between the Creditor and the Debtor.
The Debtor indicated that under the Part x arrangement, the creditors who are admitted to proof would receive a dividend of 30 cents in the dollar over 18 months. This would be achieved by a payment of $10,000.00 within 7 days, a further payment of 12 cents within 6 months and a further payment of 6 cents 12 months after acceptance and a final payment. The Debtor asserted that this would be a substantial dividend and in excess of what any of the creditors could expect to receive in a bankruptcy.
The creditor’s evidence
The Creditor deposed to his understanding that the Debtor had approached a number of people to obtain investment funding for his business and that a number of people did in fact invest various sums of money in the business. It was his belief that the Debtor had agreed with the investors that they would obtain shares in GBI in consideration of the funds they had invested, and some of them at least would become directors of GBI.
He understood on the basis of his attendance at meetings of investors that the investors gave permission from time to time for the funds that they had contributed to be used to finance various phases of the organisation of the business. It was his recollection that they became concerned in March 1997 that no share script in GBI had been issued to any of the investors and that the joint venture company in Indonesia had not been incorporated. In relation to the listed Creditors, he deposed to the following:
a)Wilcox & Associates – it is the Creditors belief that the debt owed to Wilcox & Associates was owed in respect of architectural work performed in relation to the business. He expressed uncertainty to whether the debt is in fact owed by the Debtor personally or by the company. It was his understanding that the original arrangement between Mr Wilcox and the Debtor was that he would receive shares in GBI in lieu of his normal professional fees;
b)Steve Jacobs – the Creditor deposed to his belief that Mr Jacobs is a long time associate of the Debtor, and an associate in his plans for the business, and a shareholder of GBI and deposed to the fact that it is possible that the debt is in fact owed by another company involved in the business and not by the Debtor personally;
c)Harler Consulting Pty Ltd – the Creditor had no information as to the circumstances in which this debt arose; and
d)AC Thorpe – The Creditor referred to Page (19) of the Full Court of Western Australia’s reasons for decision in the Debtors appeal to the Full Court in which one of the three Appeal Judges at least, commented that this would be an appropriate case for an Application to the Court for Orders that AC Thorpe pay costs made against the Debtor themselves on account of their conduct of the litigation on his behalf.
The Creditor further went on to depose that none of the persons who agreed to invest monies in GBI did in fact invest money are listed as Creditors. Due to the late date upon which the Affidavit was served, he as able to contact only one investor, Ray Stocker, a Real Estate Agent trading in Margaret River. A letter was written by Mr Stocker which was annexed to the Creditor’s Affidavit. It is apparent that Mr Stocker invested $25,000.00 in the project which the Debtor as promoter asked him to invest. He was supposed to have 20,000 shares in GBI which had never been issued. He indicated that he not received any correspondence, communication or financial reports from GBI or the Debtor for at least 2 years, possibly 3.
Submissions
It was submitted on behalf of the Debtor that there were 7 points which mitigated in favour of the adjournment sought by the Debtor. These points follow the factors to which the Court should pay regard in considering an application for an adjournment of a Creditors petition as identified in the judgment of Sweeney J in Field v Commercial Banking Company of Sydney Ltd, a decision of the Full Court of the Federal Court (1978) 22 ALR 403, and also reported (1978) 37 FLR 343. At pages 349 and 350 of the Federal Law Reports Sweeny J said:
“It would be unwise to attempt to draw up an exhaustive catalogue in the circumstances to which the Court should pay regard in considering an Application for an adjournment of the Creditors petition. However to illustrate the point, the circumstances of the execution of an authority should be looked at in the general context of each individual case. One may usefully refer to some other relevant circumstances in such a case as for example (1) the course of dealings between the parties from the time when the obligation to the petitioning Creditor is said to have arisen to the date of the hearing; (2)the attitude to the application of a petitioning Creditor is prime facie proof of the matters mentioned in Section 52(1) of the Bankruptcy Act 1966. The Court will proceed to make an order for sequestration. (See Rosens v Kronhill (1956) 95 CLR 407); (3) the general financial position of the Debtor; (4) the relation between the debt of the petitioning creditor and the total liabilities of the Debtor as it may be seen, for example, that the petitioning creditors opposition would be sufficient to defeat any special resolution proposed at a creditors meeting; (5) any attitude to the application disclosed by other creditors; (65) any evidence bearing upon the question, whether it be for the advantage of the creditors that the Debtor’s affairs he administered under Part x of the Act; (7) the likelihood that the Debtor would be able to place before a meeting of creditors a particular proposal or evidence of his general circumstances calculated to persuade them to vote for the administration of his affairs under Part x. It will at once be obvious that many of these circumstances will be in the knowledge of the Debtor rather than of the petitioning creditor and it will be for the former to give evidence of them, such evidence should where practicable be in affidavit form. .”
Another case dealing with an application for an adjournment based upon the fact that the Debtor had executed an authority under Section 188 of the Act is Re: David Bendel ex-parte Lowe Lippman (A firm) delivered 19th day of April 1996 number 262 of 96. In that case Merkel J considered a Creditors petition in circumstances similar to the present case. His Honour there said:
“(8) Absent special circumstances one may accept that the adjournment of a hearing of a bankruptcy petition to enable to Creditors to consider a fair and bone fide Part x proposal may enjoy reasonable prospects of success.”
At paragraph (20) in relation to the petitioning Creditor he said:
“It has a prime facie entitlement to proceed with its petition”
He then said at paragraph (12):
“The Debtors list of unsecured Creditors also raises questions. Apart from three Creditors, all the other listed Creditors are either the Debtors family, family entities or entities closely related to a long standing friend and business associate”
In relation to his conclusion, that the adjournment should not be granted, he said:
“(21)……the petitioning Creditor may be prejudiced by the adjournment. It’s debt is a small one. If it wishes to raise issues as to the assets or Creditors of the Debtor to challenge the Part x arrangement, the onus and expense fell entirely upon it. If it does not take such steps he receives little or nothing.
(22) A sequestration order rather than the vagaries and uncertainties of the Part x arrangement proposed in the present case constitutes a more appropriate vehicle in the present circumstances.”
He went on to say in paragraph (23):
“…given the serious questions raised about assets and Creditors including, quantum, of the debtor, it is my view that such matters are best determined by a trustee after s sequestration order (if one is to be made) rather than in an arrangement voted on previously, mainly be interested or friendly parties whose entitlement to do is properly or seriously beyond question.”
Counsel for the Debtor submitted that Part x in itself mitigates towards an adjournment, a satisfactory arrangement can be made with creditors. He pointed to the likelihood of obtaining 30 cents in the dollar which would be a substantial dividend in excess of what would be received if there was a sequestration order made. Given that the statement of affairs indicates that the Debtor has no assets and no evidence was proffered by the Debtor as to how the proposed arrangements with his Creditors would be met and it is difficult to have any real confidence that the Part x arrangement could be more advantageous.
It was further argued that the majority of creditors are supportive and that the Creditors debt represents a small proportion of the overall debt. Allowing for the costs which are claimed but untaxed, the Creditors debt amounts to 16 percent of the overall debt. Without the costs it is 5 percent. However, having regard to the overall nature of the business arrangements and the debts themselves, again there must be real doubts as to the other Creditors and whether they are genuine. Given the nature of the business enterprise there must be doubts as to whether the Creditors are Creditors of the debt or personally or simply investors of the company. More importantly there must be some doubt as to whether as a result of their relationship with the Debtor, the Creditors are genuine in seeking repayment of the debts.
Steve Jacobs alleges he is owed $191,342.31 (US). Being a debt arising under a Deed of Acknowledgment dated the 28th day of July 1993. He apparently holds some security over a yacht owned by the Debtor. The yacht was not mentioned in the Debtors list of assets. A copy of the Acknowledgment of Debt was not annexed by the Debtor.
The debt owed to Harler Consulting asserted to be $287,000.00 arises from professional fees and loans for the period from November 1993 to December 1996. Other than indicating that the debtor is indebted to the company no detail is given and notwithstanding that the letter from Harler Consulting offers to provide further documentation, none was exhibited or tendered.
The debt to Wilcox & Associates was said to be incurred between January 1996 and November 1998. Although documentation to substantiate the debt was allegedly sent to the controlling trustee, it was not tendered or annexed to the Affidavit.
Jane Liddon is the current wife of the Debtor and asserts that she is owed $40,000.00 as a result of personal loans dating from 1995.
The debt to Robert Cranston Cameron, the Father of the Debtor is asserted to be $10,000.00 and allegedly arises from personal loans made in September 2000 and February 2002.
Despite the fact that some of these are, longstanding liabilities, the Debtor asserts that the friendly Creditors have not actively sought to recover their debts, having been content with his efforts to resurrect his financial position. No evidence of how he has or intends to resurrect his financial position was contained in his Affidavits.
The Creditor argues that the size of the debt is such that it was a relatively small amount when compared to the overall size of the debt and not sufficient to put down the proposal. The response of Counsel for the Creditor to this argument was that although it was a small debt, there was a prime facie right to have the petition heard and the debt size is really irrelevant. The onus is on the Respondent to satisfy the Court as to why the petition should not proceed.
Counsel for the Creditor then submitted that there was no benefit to the Creditors in a bankruptcy. I agree with the submissions by Counsel for the Creditor that this is not necessarily the case. Whilst the controlling trustee obviously has powers, greater powers are vested in the trustee in bankruptcy who has more extensive powers to investigate the Debtor’s affairs and can investigate the potential for voidable transactions, particularly as the act of bankruptcy was committed in January 2000.
Counsel for the Debtor submitted that the adjournment should be granted as the majority of the Creditors would want to have a say in relation to repayment of debts. If a sequestration order is made, then all of the Creditors would be able to prove, in the bankruptcy, and this might include others who are not presently listed as Creditors.
The Debtor sought to rely upon settlement negotiations between himself and the Creditor as another reason for an adjournment on the basis that he was bone fide in trying to reach an agreement with the Creditor. Other than going into the bona fide of the Creditor, it is difficult to see how it is relevant to the right of the petitioning Creditor to proceed with his petition if agreement cannot be reached as it appears to be the case.
Finally, Counsel for the Debtor relied upon the Debtors explanation of why the Section 188 authority was signed so soon before the proceedings were due to return to Court. Given that the evidence of the Debtor was not challenged on this point, his explanation for relying upon the advice of his solicitor that he had good grounds for succeeding in his Appeal provided a reasonable explanation for his delay.
In this case it is my conclusion that having regard to the factors raised in Field’s case, it is appropriate to decline the Application for adjournment. I adopt and accept what His Honour Merkel J said in Bendal’s case that:
“Given the serious questions raised about assets of Creditors…it is my view that such matters are determined by a trustee after a sequestration order, if one is to be made, rather than arrangement voted on previously, mainly by interested or friendly parties. His entitlement to do so is properly and seriously raised as an issue by a petitioning Creditor.”
Validity of the bankruptcy notice
An argument was raised by the Debtor that the bankruptcy notice was not properly served and this defect could not be caused by s306 of the Act. Two Affidavits were relied upon by the Debtor. One was from a solicitor, but not the principal of the firm who has been acting for him, and another was from a secretary in the firm.
The Creditor relied upon an Affidavit of Shaun Michael Tembey sworn on the 22nd day of January 2001. Mr Tembey, an employee Solicitor with the firm of Phillips Fox, the solicitors for the Creditor, deposed to the fact that he had the conduct of the matter and that during the trial he appeared as Counsel for the Plaintiff. During the trial the Judge was informed that if the plaintiff succeeded in the trial, it would give thought to issuing a proceeding against the Defendant pursuant to the Restraint of Debtors Act 1984 (W.A). Mr Tembey’s Affidavit annexed a letter dated the 6th day of December 1999 from the Debtor’s solicitor which said inter alia:
“in the circumstances, any attempt by your client to issue proceedings under the Restraint of Debtors Act would be an abuse of process. We are instructed to accept service of any such proceedings, or proceedings of any nature to be instituted by your client against Mr Cameron”
On the basis of this letter, a process server served the bankruptcy notice by delivering it to an employee at the office of Mr Thorpe’s firm. It is common ground that the bankruptcy notice was left at the offices of the Debtors solicitors, but not in an envelope marked with his name. I am satisfied that having regard to the letter from the Debtors solicitor that he had instructions to accept service of any process, and that included a bankruptcy notice.
Pursuant to Bankruptcy Regulation 16.01(1)(c) the bankruptcy notice may be served by leaving it “in an envelope of similar packaging marked with the persons name, at the last known address of the person”. The Creditor relied upon Drake v Stanton (1999) FCA 1635 and Deputy Commission of Taxation v Gadaletto (1999) FCA 923 to establish a persons last known address is “that address which has been made known ……… as at the time closest to the date in question” and that it is not necessary that a person live at an address for it to be possible to affect delivery of documents to that address. I accept that the Debtors solicitors, having stated that they acted on instructions form him an would accept service of documents. their address constitutes the last known address of the Respondent for the purposes of Regulation 16.01(1)(c).
Equally, I agree with the submissions of the Creditor that the fact that the bankruptcy notice was not delivered in an envelope marked with the Respondent Debtors name is merely a formal defect or irregularity. Section 306(1) of the Act provides that
“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 can’t be remedied by an order of the Court”
In the context of service of bankruptcy notices
“a formal defect or irregularity is a defect or irregularity in procedure that might reasonably mislead the Debtor as to what he or she must do to comply with the notice, or that might reasonably have adversely affected the Debtor in some other way” re McCormack; ex parte Taylor (1985) 10 FCR 162.
In this case, the fact that the bankruptcy notice was not served in an envelope marked with the respondent Debtors name could not have mislead the Debtor or adversely affected him in any other way. The notice was delivered in such a way that was immediately brought to the attention of his solicitors and I am satisfied that the defect is not such that substantial injustice has been caused and is akin to the distinction noted in re McCormack; ex parte Taylor (1985) 10 FCR 162 at 165. The distinction made there is between a defect which “may mislead a Debtor” and a defect that
“if a Debtor were to observe it, might possibly lead him to think that a technical legal point could be taken, to avoid the necessity of compliance, but would not mislead him as to what he is required to do – required that is, unless he is prepared to take the risk of assuming that no compliance at all is necessary”
The defect in this case is a defect of the type described therein.
Statutory requirements
All other statutory requirements that must be met before the Court can make a sequestration order against the Respondent have been met. The Applicant Creditor is entitled to a sequestration order.
I certify that the preceding fifty-one (51) paragraphs are a true copy of the reasons for judgment of Bryant CFM
Associate:
Date:
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