University of New South Wales v Sheikholeslami
[2008] FMCA 1323
•24 September 2008
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| UNIVERSITY OF NEW SOUTH WALES v SHEIKHOLESLAMI | [2008] FMCA 1323 |
| BANKRUPTCY – Creditor’s petition – respondent debtor’s opposition to creditor’s petition – claim that Bankruptcy Notice not served while debtor temporarily out of Australia – cross claim against creditor in excess of Bankruptcy Notice – application dismissed. |
| Bankruptcy Act 1966 (Cth), ss.30(1), 40(1)(g), 309, 315 Bankruptcy Legislation Amendment Act 1996 (Cth) Bankruptcy Regulations 1996 (Cth), reg.16.01 |
| Battenberg v Restrom [2006] FCAFC 20 Carver v de Robilliard [2006] FCA 1041 Corney v Brien (1951) 84 CLR 343 de Robilliard v Carver [2007] FCAFC 73 Deputy Commissioner of Taxation v Gadaleta [1999] FCA 923 Drake v Stanton [1999] FCA 1635 Lazar v Seccombe [2005] FCA 1652 Mathai v Kwee [2005] FCA 932 Olivieri v Stafford (1989) 24 FCR 413 Re Silvas; Ex parte Official Trustee in Bankruptcy v Silvas [1997] FCA 206 Restrom v Battenberg [2007] FCA 46 Satchithanantham v Multilink Investments Pty Ltd [2003] HCATrans 402 Satchithanantham v Multilink Investments Pty Ltd [2002] FCA 1277 Sheikholeslami v University of New South Wales [2008] FMCA 35 Skalkos v T&S Recoveries Pty Ltd [2004] FCAFC 321 Sogelease Australia Ltd v Griffin [2003] FCA 453 T & S Recoveries Pty Ltd v Skalkos [2004] FCA 816 Totev v Sfar [2008] FCAFC 35 Victims Compensation Fund Corp v Brown (2003) 201 ALR 260 Wolff v Donovan [1991] FCA 222 Wren v Mahony (1972) 126 CLR 212 Yougarla v Western Australia (1998) 146 FLR 128 |
D.C. Pearce and R.S. Geddes, Statutory Interpretation in Australia (6th edition, 2006)
McDonald, Henry & Meek’s Australian Bankruptcy Law and Practice, Thomson Lawbook Co., Volume 2 (Fifth edition)
| Applicant: | UNIVERSITY OF NEW SOUTH WALES |
| Respondent: | ROYA SHEIKHOLESLAMI |
| File number: | SYG 3327 of 2007 |
| Judgment of: | Lloyd-Jones FM |
| Hearing date: | 8 April 2008 |
| Date of last submission: | 9 May 2008 |
| Delivered at: | Sydney |
| Delivered on: | 24 September 2008 |
REPRESENTATION
| Counsel for the Applicant: | Mr J. White |
| Solicitors for the Applicant: | Bartier Perry |
| The Respondent: | The respondent debtor appeared in person via videolink from Aberdeen, Scotland. |
ORDERS
The Notice Stating Grounds of Opposition to Petition filed on 7 January 2008 is dismissed.
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT SYDNEY |
SYG 3327 of 2007
| UNIVERSITY OF NEW SOUTH WALES |
Applicant
And
| ROYA SHEIKHOLESLAMI |
Respondent
REASONS FOR JUDGMENT
The proceedings
By creditor’s petition, the creditor, the University of New South Wales, seeks a sequestration order against the estate of the debtor, Dr Roya Sheikholeslami. Dr Sheikholeslami opposed the making of the sequestration order on the basis that the Bankruptcy Notice (NN 3697/07) was not served and that she has a cross claim against the applicant in excess of the amount in the Bankruptcy Notice.
There has already been an application filed by the respondent to set aside the Bankruptcy Notice. That application was heard before Hedge R on 18 December 2007 and was unsuccessful. However, the question of service of a Bankruptcy Notice was left alive by Hedge R. On the authorities, Dr Sheikholeslami is permitted to have the Court take into account the existence of an off-setting claim in certain circumstances.
Mr White, for the applicant, moved on the creditor’s petition presented by the University of New South Wales on 26 October 2007 which was served on Dr Sheikholeslami on 29 November 2007. In support of the petition, Mr White relied upon the following:
a)The creditor’s petition.
b)Affidavit of service of Bankruptcy Notice affirmed by John Elias on 25 October 2007 (first affidavit of Mr Elias).
c)Affidavit verifying paragraph 4 of the creditor’s petition sworn by Szezana Roskov on 25 October 2007.
d)Affidavit of service of creditor’s petition of John Elias, affirmed on 11 December 2007 (second affidavit of Mr Elias).
e)Affidavit of John Elias, affirmed on 12 December 2007 (third affidavit of Mr Elias).
f)Affidavit of John Elias affirmed on 19 February 2008 (fourth affidavit of Mr Elias).
g)Affidavit of search of John Elias affirmed on 7 April 2008 (fifth affidavit of Mr Elias).
h)Final affidavit of debt of Melinda Toomey sworn on 7 April 2008.
i)Affidavit of John Elias sworn on 31 January 2008 (this affidavit was not read) (sixth affidavit of Mr Elias).
j)Affidavit verifying creditor’s petition sworn by Melinda Toomey on 25 October 2007.
The applicant tendered the following exhibits during the hearing:
a)Exhibit “A1” – procedures to be followed by concierges at the Observatory Tower.
b)Exhibit “A2” – two time scheduled documents of attendance.
c)Exhibit “A3” – a map showing the distance between Observatory Tower and Bartier Perry’s office.
Dr Sheikholeslami informed the Court that she relied upon the following affidavits:
a)Affidavit of Roya Sheikholeslami sworn on 6 January 2008 (first affidavit of Dr Sheikholeslami).
b)Affidavit of Roya Sheikholeslami sworn on 3 October 2007 (second affidavit of Dr Sheikholeslami).
c)Affidavit of Roya Sheikholeslami sworn on 16 December 2007 (third affidavit of Dr Sheikholeslami).
d)Affidavit of Roya Sheikholeslami sworn on 29 November 2007 (fourth affidavit of Dr Sheikholeslami).
The respondent tendered the following exhibits:
a)Exhibit “R1” – map of part of Sydney city streets.
b)Exhibit “R2” - copy of email to John Elias dated 10 October 2007 and an attached letter dated 9 October 2007.
c)Exhibit “R3” - two page email dated 5 October 2007.
The following witnesses gave evidence:
a)The respondent debtor, Roya Sheikholeslami (Transcript pp.25-29, 64-66).
b)Melinda Toomey, a solicitor employed by the University of New South Wales (Transcript pp.29-40).
c)John Elias, a solicitor employed by Bartier Perry, solicitors for the University of New South Wales (Transcript pp.41-64).
Respondent’s case
Dr Sheikholeslami raised two bases of opposition to the creditor’s petition which are set out in the Notice Stating Grounds of Opposition to Petition filed on 7 January 2008:
1. I was not served with a bankruptcy notice associated with this petition. I was overseas the whole month of September and in fact I did not return to Australia until late November 2007.
2. I have a cross claim (see attached letter of 30 June 2007 to Corrs Chambers Westgarth (applicant’s solicitors) against the applicant at the Federal Magistrates Court: a cross claim against the applicant is well in excess of the amount of the bankruptcy notice associated with the petition.
Dr Sheikholeslami then relied on s.40(1)(g) of the Bankruptcy Act 1966 (Cth) (“the Act”) and reg.16.01(2) of the Bankruptcy Regulations 1996 (Cth) (“the Regulations”) to establish that the Bankruptcy Notice was not served. She submits that:
a)Section 40(1)(g) of the Act provides for service “on the debtor in Australia or, by leave of the Court elsewhere”, and that therefore, leave of the Court is required for service outside of Australia. The Court has power arising from s.309(2) of the Act to order substituted service in a manner specified by the Court. Dr Sheikholeslami claims that she requested the creditor to provide her with a copy of any orders for substituted service which did not occur. She was not able to obtain a record of any application filed by the applicant for substituted service (first affidavit of Dr Sheikholeslami, paras. 8-11).
b)Regulation 16.01(2) enables the debtor to adduce evidence to contradict the service under reg.16.01(1).
Dr Sheikholeslami challenges the creditor’s claim that service of a Bankruptcy Notice pursuant to reg.16.01(1) is a rebuttable presumption of service. In support of this argument, she referred to Re Silvas; Ex parte Official Trustee in Bankruptcy v Silvas [1997] FCA 206 where Tamberlin J states:
However, prima facie, it does seem to me that the effect of Regulation 16.01 of the Bankruptcy Regulations enables non-personal service of a bankruptcy notice to be effected. However, this is prima facie evidence of service, it is open to the debtor, in due course, to adduce evidence to the contrary (Regulation 16.01(2)).
Dr Sheikholeslami submits that she is able to adduce evidence to the contrary that the Bankruptcy Notice was not served ( reg.16.01(2)).
Dr Sheikholeslami also referred to Totev v Sfar [2008] FCAFC 35 at [2] per Emmett, Bennett and Cowdroy JJ which referred to the statutory framework in which to made a sequestration order:
[2] Section 52(1) of the Bankruptcy Act 1966 (Cth) (the Bankruptcy Act) provides that, at the hearing of a creditor’s petition, the Court must require proof of:
• the matters stated in the petition;
• service of the petition; and
• the fact that the debt on which the petitioning creditor relies is still owing.
If it is satisfied with the proof of those matters, the Court may make a sequestration order against the estate of the debtor. However, under s 52(2), if the Court is not satisfied with the proof of any of those matters, it may dismiss the petition. In addition, the Court may dismiss the petition if it is satisfied by the debtor that:
(a) he or she is able to pay his or her debts; or
(b) for any other sufficient cause a sequestration order ought not to be made.
Dr Sheikholeslami submits that in this case, in addition to an absence of proof of all the three required elements, she has shown sufficient cause for a sequestration order not be made as there is a question about the debt. She further submits that the Court is obliged to go behind the judgments, all of which are “default judgments”, to see whether there is a really debt.
Dr Sheikholeslami contends that the Court has jurisdiction to hear a creditor’s petition only after the “act of bankruptcy is committed”. However, she submits that in this matter, the act of bankruptcy was not committed because:
a)Section 40(1)(g) of the Act was not complied with. The section requires compliance with the requirements of the Bankruptcy Notice after it “has been served on a debtor in Australia or, by leave of the Court, elsewhere”. “Service elsewhere” is governed by s.40(1)(g)(ii) of the Act which notes “where the notice was served elsewhere – within the time fixed for the purpose by the order giving leave to affect service”.
b)Leave of the Court is required by the Act for service outside of Australia and when the debtor is not represented: Battenberg v Restrom [2006] FCAFC 20. Dr Sheikholeslami submits that as she was out of Australia and unrepresented, the service did not comply with s.40(1)(g).
c)The Court has the power to order substituted service arising from s.30(1) and s.309(2) of the Act.
d)The act of bankruptcy was not committed in this case as s.40(1)(g) was not complied with. From August 2007 to November 2007, Dr Sheikholeslami states that she was not present in Australia on 13 September 2007 (first affidavit of Dr Sheikholeslami).
e)At the hearing of 8 April 2008, the applicant did not contest the fact that the respondent was overseas during the relevant periods. Consequently Dr Sheikholeslami submits that the act of bankruptcy was not committed and the Court has no jurisdiction to decide on the creditor’s petition.
Dr Sheikholeslami argues that her absence from Australia (first affidavit of Dr Sheikholeslami, paras.3-4) was not contested by the applicant at the hearing. She claims that due to this absence she did not receive mail sent by post, or facsimiles transmitted to 02 9252 6129 by Mr Elias of Bartier Perry (first affidavit of Dr Sheikholeslami, para.25). Dr Sheikholeslami contends that even if the Bankruptcy Notice was placed in her mailbox by Mr Elias, she could not have received it. She submits that she has shown pursuant to reg.16.01(2) that service of the Bankruptcy Notice was not affected.
Dr Sheikholeslami claims that there are no court decisions or authorities which state that service of a Bankruptcy Notice by email is deemed to be sufficient. In support of this contention, she relied on an email sent to her from Segal R which stated:
…service by email is usually not sufficient unless the Court has specifically made orders to the effect that is sufficient…(first affidavit of Dr Sheikholeslami, para.6)
Although she acknowledges that she received and read the email while overseas, as she was outside Australia leave of the Court is required for that service.
Annexure “J” to Dr Sheikholeslami’s first affidavit is an affidavit of Mr Nick Makno, a concierge employed at Observatory Tower, sworn on 20 January 2007. Dr Sheikholeslami stated during the hearing that Mr Makno was employed by Francis Management, an independent entity which provides management services to Observatory Tower. In September 2007, Mr Makno was in attendance at Observatory Tower according to the roster records.
However, in March/April 2008 when Dr Sheikholeslami tried to locate Mr Makno, she was advised by other residents that he had recently become ill and was not working. Dr Sheikholeslami’s written submissions indicate that Mr Makno was in early 2008 with prostate cancer, that he was having an operation and was not expected to return to work in the foreseeable future. She did not wish to inconvenience and possibly aggravate Mr Makno’s condition by issuing him with a subpoeana. Mr Makno did not appear at the hearing for cross-examination and consequently his affidavit was not accepted into evidence.
In Mr Elias’ cross-examination, the respondent went to considerable length to challenge the evidence that he placed an envelope in the mailbox of Unit 608 Observatory Tower, 168 Kent St, Sydney. Dr Sheikholeslami referred to discrepancies raised by:
a)The concierge manual;
b)Rosters for the concierge and in particular of Mr Makno;
c)Time of delivery at the mailroom of 168 Kent St and the subsequent return of Mr Elias to his office at 133 Castlereagh St; and
d)Information supplied to Dr Sheikholeslami by Mr Makno.
Applicant’s case
In respect of the alleged failure to serve the Bankruptcy Notice, Mr White in his written submissions contends that the Bankruptcy Notice was served in the following ways:
a)Leaving it at the respondent’s last known address, being 609 Observatory Tower 168 Kent St, Sydney (first affidavit of Mr Elias, para.2(a); second affidavit of Mr Elias; third affidavit of Mr Elias; fourth affidavit of Mr Elias);
b)Electronic mail to the address:
[email protected] (first affidavit of Mr Elias para.2(b); second affidavit of Mr Elias, p.8; fourth affidavit of Mr Elias, Annexure “H”).
c)Facsimile transmission to Dr Sheikholeslami’s nominated number (first affidavit of Mr Elias, para.2(c); second affidavit of Mr Elias, Annexure “A”; fourth affidavit of Mr Elias); and
d)Posted to Dr Sheikholeslami’s last known address (first affidavit of Mr Elias, para.2(d); fourth affidavit of Mr Elias, para.3).
Mr White submits that service was effected on the respondent on 13 September 2007 by delivery, electronic mail and facsimile transmission. In the case of service by post, Mr White contends that the notice was posted on 13 September 2007, and that service was thereafter effected when the Notice would, “in the due course of post”, have been delivered to Dr Sheikholeslami’s address. In this case the Express Post service was used and Australia Post purported to guarantee next day delivery.
Mr White also relied upon reg.16.01 of the Regulations which states:
Service of documents
(1) Unless the contrary intention appears, where a document is required or permitted by the Act or these Regulations to be given or sent to, or served on, a person (other than a person mentioned in regulation 16.02) , the document may be:
(a) sent by post, or by a courier service, to the person at his or her last‑known address; or
(b) left, in an envelope or similar packaging marked with the person's name and any relevant document exchange number, at a document exchange where the person maintains a document exchange facility; or
(c) left, in an envelope or similar packaging marked with the person's name, at the last‑known address of the person; or
(d) personally delivered to the person; or
(e) sent by facsimile transmission or another mode of electronic transmission:
(i) to a facility maintained by the person for receipt of electronically transmitted documents; or
(ii) in such a manner (for example, by electronic mail) that the document should, in the ordinary course of events, be received by the person.
(2) A document given or sent to, or served on, a person in accordance with subregulation (1) is taken, in the absence of proof to the contrary, to have been received by, or served on, the person:
(a) in the case of service in accordance with paragraph (1) (a) or (b) -- when the document would, in the due course of post or business practice, as the case requires, be delivered to the person's address or document exchange facility; and
(b) in the case of service in accordance with paragraph (1) (c), (d) or (e) -- when the document is left, delivered or transmitted, as the case requires.
Mr White referred to Skalkos v T&S Recoveries Pty Ltd [2004] FCAFC 321 per Sundberg, Finkelstein and Hely JJ which held that reg.16.01 permits the service of Bankruptcy Notices in accordance with the regulation. Their Honours stated at [25]:
[25]… If, on the proper construction of reg 16.01(2), the words “proof to the contrary” permit proof that the document was not delivered, there is no such proof in the present case. It is clear from Fancourt that proof of non-receipt as opposed to non-delivery is not permitted. If on the other hand those words only permit proof that the document was delivered on a date other than that on which it would have been delivered in the due course of post, there is no such proof.
See also De Robillard v Carver [2007] FCAFC 73 and Carver v De Robillard [2006] FCA 1041.
Mr White submits that non-receipt of a Bankruptcy Notice, where the debtor does not in fact take possession of the Notice, is to be contrasted with non-delivery of a Notice where the creditor fails to effect delivery of the Notice in accordance with the requirements of the Act and Regulations. He submits that reg.16.01 affords no basis for the debtor to deny service of the Notice on the basis of non-receipt of it. Nor is it clear even that evidence of non-delivery of the Notice is admissible, although the law is not finally settled on this point: Skalkos v T & S Recoveries Pty Ltd at [25] (see [20] above).
De Robillard v Carver at [46] states:
[46] I think the appellant is entitled to argue the issue that the date of service at Sydney was not proved. Regulation 16.01(2) permits proof of a different date of delivery (or perhaps non-delivery) although it does not permit reliance simply on alleged non-receipt (Skalkos v T & S Recoveries Pty Ltd (2004) 141 FCR 107 at [16] and [25]). However, before the onus shifts to the appellant to prove a different time of delivery (or non-delivery) it must first be established what would happen in the due course of business practice. Although it is true, as the primary judge said, that the respondent had no chance to deal further with this matter in response to the appellant’s written arguments, this was in my view an issue where the evidentiary onus always lay on the respondent and was not discharged.
Mr White indicates that he relies upon two forms of service, one by delivery and the other by facsimile. In respect of evidence of delivery, Mr White referred to the fourth affidavit of Mr Elias, a solicitor employed at Bartier Perry for the applicant. The affidavit sets out the basis for Mr Elias’ understanding of the last known address of Dr Sheikholeslami:
4. On 13 September 2007 I understood that:
(a) the last known address for Roya Sheikholeslami was/is 609 Observatory Tower, 168 Kent Street Sydney NSW 2000;
(b) Roya Sheikholeslami maintained, maintains a facility for the receipt of the facsimile transmissions to telephone number (02) 9252 6120; and
(c) Roya Sheikholeslami maintained/maintains an email address “[email protected]”, and that documents sent to that address should, in the ordinary course of events, be received by her.
5. I held these understandings because:
(i) of Bartier Perry’s receipt of the following documents, copies of which are annexed and bear the following respective letters;
“B” Application made by Roya Sheikholeslami in the Federal Court of Australia on 17 May 2005;
“C” notice of motion filed by Roya Sheikholeslami in the Federal Court of Australia on 4 August 2006;
“D” letter dated 5 August 2007;
“E” letter dated 9 August 2007;
“F” letter dated 16 August 2007; and
“G” letter dated 6 September 2007;
(ii) on 29 November 2007 I personally served Roya Sheikholeslami with the creditors petition filed in this proceeding and other documents, at Observatory Tower, 168 Kent Street Sydney NSW 2000.
The last document “G” is a letter dated 6 September 2007, which was one week before Mr Elias stated that he went to the Observatory Tower to deliver the Notice to the post box of Unit 609 which belongs to Dr Sheikholeslami.
In respect of transmission by post the creditor bears the onus of establishing what would happen “in the due course of post or business practice” (reg.16.01(2)(a)).
Service by facsimile this is permitted by reg.16.01(1)(e), see Satchithanantham v Multilink Investments Pty Ltd [2002] FCA 1277 at [14] per Conti J:
[14] Following the initial submissions of the appellant of obviously impermissible width and generality extracted in [12] above, there follows certain submissions which warrant consideration by the Court. The first of these raise an issue as to valid service of the bankruptcy notice, additionally to those submissions of the appellant ventilated before Driver FM to which I have earlier referred. The appellant advanced, apparently for the first time in the proceedings, the assertion that the bankruptcy notice served upon him was merely in the form of a photocopy, and that service of the bankruptcy notice was ineffective for that reason, and he referred to an unreported decision of Von Doussa J delivered on 30 May 1997 in Re Tadeusz Stec; Ex parte Peter Scragg [1997] 462 FCA. No such photostat copy of the bankruptcy notice was produced by the appellant to substantiate the submission. On the contrary, what was placed before his Honour below by the respondent was an affidavit evidencing service of the bankruptcy notice by facsimile transmission, as reg16.01(1)(e) duly permits. No attempt appears to have been made by the appellant, in the course of the hearing before his Honour, to rebut the presumption of effective service of the bankruptcy notice arising pursuant to that Regulation. Instead the appellant sought to establish below that the document did not come to his attention at all prior to the filing by the respondent of the creditor's petition, in relation to which contention there was made by Driver FM findings included within those set out in para11 to para14 of his reasons for judgment (extracted in full in [5] above). There is plainly no substance in these submissions of the appellant as raised on the appeal conducted before me.
Special leave to appeal this decision to the High Court was refused: Satchithanantham v Multilink Investments Pty Ltd [2003] HCATrans 402 per McHugh and Heydon JJ.
Mr White indicated that he was unaware of any decision in which the service of a Bankruptcy Notice by email under reg.16.01 has been considered. The provision expressly contemplates service by way of electronic transmission (other than facsimile generally) and by “electronic mail” in particular. If there was any doubt by parity of reasoning with Satchithanantham v Multilink Investments Pty Ltd, the same regulation “duly permits” service of a Bankruptcy Notice by email. Mr White then referred to McDonald, Henry & Meek’s Australian Bankruptcy Law and Practice, Thomson Lawbook Co., Volume 2 (Fifth edition), which states at para.RE16.01.10:
Service by facsimile or electronic transmission.
It has been accepted that a bankruptcy notice can be served by facsimile under regulation 16.01(1)(e): Satchithanantham v Multilink Investments Pty Ltd [2002] FCA 1277 at [14] Conti J. If so, bankruptcy notices can presumably also be served by email or other modes of transmission of electronic documents under reg.16.01(1)(e)(ii).
Mr White drew the Court’s attention to the facsimile transmission report retained by Mr Elias when he transmitted the Bankruptcy Notice (third affidavit of Mr Elias, Annexure “A”). That report confirms that an 18 page document (otherwise deposed by Mr Elias to have been a Bankruptcy Notice and the letter which covered it) was sent on 13 September 2007 at 4.40pm to (02) 9252 6120. The various items of correspondence and court processes from the respondent which include this number are attached to the fourth affidavit of Mr Elias: Annexures “B”-“G”. Mr White submits that there is a very clear basis for the conclusion that the respondent maintained a facility for receipt of documents transmitted to that telephone number.
Mr White submits that Dr Sheikholeslami does not deny receipt of the Bankruptcy Notice sent to her by facsimile. She immediately indicated that she was not in Australia on 13 September 2007 and did not receive the facsimile transmitted on that date. Mr White submits that there is no evidence or basis upon which it might be inferred that the Bankruptcy Notice was not sent by facsimile to the number maintained by Dr Sheikholeslami. He further submits that on the basis of the authorities referred to at [27] above, there is no occasion to consider the question of non-receipt of a Bankruptcy Notice by facsimile, nor is evidence supporting such an allegation admissible. Service has been affected as prescribed by the Regulations.
Mr White submits that Dr Sheikholeslami’s sworn evidence is that she actually received the Notice by email. However, she simply opines that no order for substituted service was obtained by the applicant before service. Mr White submits that the regulation does not prescribe any such order before the effecting service of the Notice merely because a debtor is overseas at the time the Notice is viewed.
Mr White submits that Mr Elias placed a Bankruptcy Notice and accompanying letter into an express post envelope addressed to Dr Sheikholeslami at her last known address, being Unit 609 Observatory Tower, 168 Kent St Sydney, on 13 September 2007. The fourth affidavit of Mr Elias (paras.4-5) indicates that this was Dr Sheikholeslami’s “last known address” for the purposes of reg.16.01. It is submitted that the various items of correspondence and court process from Dr Sheikholeslami annexed to the fourth affidavit of Mr Elias all nominate this street address. Bartier Perry continued to receive correspondence nominating this postal address after the date of delivery of the Bankruptcy Notice.
Mr White submits that Dr Sheikholeslami was also served with the creditor’s petition at this address (fourth affidavit of Mr Elias, para.5). As of 6 January 2008, Dr Sheikholeslami’s principle affidavit in these proceedings deposed of the fact that she had been “a resident of the Observatory Tower located at 168 Kent St, Sydney since 1997”. During evidence at the hearing of 8 April 2008, Dr Sheikholeslami gave evidence that she was a registered proprietor of Unit 609 Observatory Tower since 1997 (Transcript p.64.35-64.45).
The sixth affidavit of Mr Elias gives detailed evidence of the conversation he had with a concierge, the directions he received from him for delivery of the Notice to the respondent’s mailbox and the placing of an envelope containing the Notice in the respondent’s mailbox.
Existence of cross claim in excess of the amount claimed in the Bankruptcy Notice
Ground 2 of the respondent’s Notice Stating Grounds of Opposition to Petition indicates that she has a cross claim against the applicant in excess of the amount of the Bankruptcy Notice (see [8] above). The claim is set out in a letter dated 30 June 2007 addressed to Corrs Chambers Westgarth, the then solicitors for the applicant (attached to Notice Stating Grounds of Opposition to Petition).
Dr Sheikholeslami states in her written submissions filed on 2 May 2008 that a sequestration order protects the rights of all creditors (including non-petitioning) of the debtor where there is a question of whether there is a debt due to the petitioning creditor “in truth and reality”. The Court does not have to accept the judgment debt as satisfactory proof and can exercise its discretion to go behind the judgment: Wren v Mahony (1972) 126 CLR 212 at 234.
The respondent submits that this Court can go behind a judgment if it was obtained in circumstances involving fraud, collusion or a miscarriage of justice: Olivieri v Stafford (1989) 24 FCR 413. In the case of a default judgment the burden is upon the debtor to show that there is a bona fide question for a Court to go behind the judgment and decide whether or not to accept it as proof of debt: Wolff v Donovan [1991] FCA 222; Corney v Brien (1951) 84 CLR 343 at 359; Wren v Mahoney at 224; Oliveri v Stafford.
Dr Sheikholeslami contends that all of the debts set out in Part I of the Creditor’s Petition relate to default judgments. Further that none of the cases on which the current debt is based were determined on their merits. This is demonstrated by the following summary from the Creditor’s Petition and the respondent’s submissions:
a)An amount of $55,199.87, under final judgment recovered by the applicant creditor against the respondent debtor in the Federal Court on 30 April 2007. The respondent submits the case was not tried on its merits.
b)The amount of $6,000 under final judgment recovered by the applicant creditor against the respondent debtor in the Federal Court on 26 July 2007. The respondent submits the case was not tried because it was of out of time.
c)The amount of $2,500 under final judgment recovered by the applicant creditor against the respondent debtor in the Local Court on 22 March 2007. The respondent submits that the Administrative Decisions Tribunal (ADT), which this related to, did not have jurisdiction to hear the matter and that the case was not tried on its merits.
d)The amount of $4,000 under final judgment recovered by the applicant creditor against the respondent debtor in the Local Court on 19 April 2007. The respondent submits that the ADT case was not tried on its merits.
These judgments, including interest, make a total of $70,632.21 being the amount of the Creditor’s Petition.
Dr Sheikholeslami claims to have two cross-claims against the University of New South Wales:
a)The third affidavit of Dr Sheikholeslami states at paragraph 8:
I have other claims against the creditor currently active at the Federal Magistrates Court (SYG1404 of 2006) and at the Administrative Decisions Tribunal (063064) and (063193) (“other matters”). The amount of compensation claims that the debtor has against the creditor in other matters far exceeds the sum specified in the notice.
b)Her submissions filed on 28 February 2008 state at paragraph 9:
Respondent has two current claims against the applicant at the Administrative Decisions Tribunal (see paragraph 8 of Dr Sheikholeslami’s affidavit of 16 December 2007) only one of which the judgment was rendered on 10 December 2007 in favour of the respondent however the applicant has filed for an appeal.
The applicant’s written submissions of 2 May 2008 contends:
In each of these cases ADT has discretion to award $40,000 compensation (see paragraph 2 of creditor’s submission of 29 February 2008) for loss and/or damages suffered due to the conduct. The award of compensation in these two cases can be as high as $80,000 which is higher than the debt under this petition. Further the ADT has discretion to award costs. In these two cases the Debtor was represented by a barrister and had incurred significant costs over $10,000. Once these claims are decided the full compensation of costs awarded, the total amount should be in the order of $90,000 and well in excess of $70,632.21 in the Creditor’s petition.
Consideration
The Bankruptcy Legislation Amendment Act 1996 (Cth) introduced the Regulations which deals with administrative measures under the Act. Section 315 of the Act permits the making of Regulations which are consistent with and give effect to the Act. The Regulations prescribe in detail the procedures which are to be followed in the administration of bankruptcies. The service of a Bankruptcy Notice is an administrative issue as opposed to an initiating process such as a Creditor’s Petition. The distinction is relevant here as an administrative procedure is subject to the Regulations whereas an initiating process is subject to the Act. Prior to the 1996 amendments, the Bankruptcy Rules required a Bankruptcy Notice to be served personally, however, this requirement no longer exists under the Regulations.
Unless a contrary intention appears, a Bankruptcy Notice may be served in accordance with reg.16.01(1) which permits the document to be served in six ways. Four methods of service which are relevant in this matter include:
i)Sending by post to a person’s last known address (reg.16.01(a));
ii)Leaving it in an envelope marked with the person’s name and at their last known address (reg.16.01(c));
iii)Sending by facsimile to a facility maintained by the person to be served (reg 16.01(e)(i));.and
iv)Sending by electronic mail to a facility maintained by the person to be served (reg.16.01(e)(ii)).
Regulation 16.01 of the Regulations provides for only prima facie evidence of service to which the debtor can adduce evidence to the contrary under reg.16.01(2). A creditor may apply for an order of substituted service under s.309 of the Act, which dispenses with personal service and substitutes another form of service in its place. This is generally considered to be appropriate where the debtor is itinerate or evasive. There are numerous cases which support the use of reg.16.01 for serving a Bankruptcy Notice: T & S Recoveries Pty Ltd v Skalkos [2004] FCA 816 at [20]-[28] per Wilcox J; Skalkos v T & S Recoveries Pty Ltd at [31] per Sundberg, Finkelstein and Hely JJ; Lazar v Seccombe [2005] FCA 1652 at [15]-[27] per Jacobson J; Sogelease Australia Ltd v Griffin [2003] FCA 453 at [43] per Emmett J; Carver v de Robilliard at [23]-[27] per Lindgren J; de Robilliard v Carver at [9] per Moore, Conti and Buchanan JJ (overturned the first instance decision on other grounds).
In normal statutory interpretation the word “or” is used disjunctively unless there is a strong argument to suggest that it should be treated as being cumulative. The six methods of service in reg.16.01 are separated by the term “or”. It is difficult to accept an argument that a printing or drafting error has occurred and the linking word between the six methods should be “and”, requiring a cumulative effect to comply with the regulation.
As pointed out in D.C. Pearce and R.S. Geddes Statutory Interpretation in Australia (6th edition, 2006) the ordinary meaning of “and” and “or” are usually reinforced as a consequence of taking into account context or underlying purpose or object: Yougarla v Western Australia (1998) 146 FLR 128 at [142]-[144]; Victims Compensation Fund Corp v Brown (2003) 201 ALR 260. The structure and the practical intention of reg.16.01 is to provide six alternatives of service as opposed to a requirement that the six methods are to be taken cumulatively in order to affect service.
In this matter, the applicant’s solicitors elected to use four methods of service to ensure that Dr Sheikholeslami was served with the Bankruptcy Notice. I am satisfied that service was effective and complied with the requirement in reg.16.01.
In respect of reg.16.01(1)(a):
(a) sent by post to the person at his or her last‑known address; or
The “last known address of a person” in this regulation “is to that address which has been known by the [person being served] as at the time closest to the date in question”, see Drake v Stanton [1999] FCA 1635 per Tamberlin J at [5] and [8]:
[5] …The relevant expression is "the last-known address of the person" and it does not matter whether the debtor currently lives or resides there or not. The expression is difficult on one view in the sense that it does not indicate to whom the address must be known in order to satisfy the requirements of the person. On one view of it, it could be taken to be the knowledge of the creditor. Alternatively, as advanced by Mr Skinner, the words could mean the last-known address of the person in an objective sense, namely that address at which the debtor could be said to be located.
[8] In my view, on the language of reg16.01(1)(c), the reference to "last-known address of the person" is to that address which has been made known by the applicant as at the time closest to the date in question. In the present case the evidence indicates clearly that the address which was last asserted by the applicant was the address at 396 Grey Street. The applicant has not been called to give any evidence to the contrary.
This issue was also considered in Deputy Commissioner of Taxation v Gadaleta [1999] FCA 923 per Einfeld J, T & S Recoveries Pty Ltd v Skalkos at [29]-[35] and Skalkos v T & S Recoveries Pty Ltd at [35]-[37]. Paragraphs 4 and 5 of the fourth affidavit of Mr Elias set out the details that establish the last known address of Dr Roya Sheikholeslami. McDonald, Henry & Meek’s Australian Bankruptcy Law and Practice states at RE16.01.10:
It is a subjective knowledge of the person serving the document, not an objective knowledge, so service can still be effective even if the person to be served does not actually reside at the address at the relevant time: Drake v Stanton [1999] FCA 1635 at [5], [8]; see also Deputy Commissioner of Taxation v Gadaleta (1999) 42 ATR 414; [1999] FCA 923; T & S Recoveries v Skalkos [2004] FCA 816 at [28]-[35].
Significantly paragraph 5(ii) in the fourth affidavit of John Elias shows that he personally served Dr Sheikholeslami with the Creditor’s Petition on 29 November 2007 at her address. The New South Wales title search attached as Annexure “I” to that affidavit indicates that as at 18 February 2008, Dr Sheikholeslami was still the registered proprietor of Unit 609, Observatory Tower. In cross-examination she confirmed that she was the registered proprietor of the property and that she had resided at that address from late 1996 (Transcript p.64.30-64.45).
Regulation 16.01(c) states:
(c) left, in an envelope or similar packaging marked with the person's name, at the last‑known address of the person; or
The first affidavit of Mr Elias (Affidavit of Service of Bankruptcy Notice) states:
On 13 September 2007, I served the respondent, Roya Sheikholeslami with an official copy of the Bankruptcy Notice No NN3697/07 signed and dated 13 September 2007 by the official receiver (the bankruptcy notice) under cover of a letter from Bartier Perry (“the covering letter”) as follows:
(a) By delivering the Bankruptcy Notice and the covering letter in an envelope marked with the respondent’s name, to the respondent’s last known address at 609 Observatory Tower, 168 Kent St Sydney NSW and placed the document in the mailbox so marked at approximately 4.20pm.
This evidence was challenged by Dr Sheikholeslami during cross-examination of Mr Elias (Transcript, pp.41-64). Mr Elias was questioned at length about his attendance at Observatory Tower and the circumstances of him placing the envelope in the mailbox belonging Unit 609. Dr Sheikholeslami relied on the contents of the concierge manual and the procedure set out in respect of the receipt of deliveries to Observatory Tower. Although some of the evidence given by Mr Elias was contrary to the concierge manual, no evidence was placed before the Court to contradict his sworn testimony. The concierge on duty on the afternoon of 13 September 2007 was not called as a witness. The evidence in respect of the presentation of an envelope correctly addressed to the respondent was not challenged.
The focus of the cross-examination centred on the times recorded by Mr Elias in respect of delivery of the envelope to Observatory Tower and his subsequent return to his office at 133 Castlereagh Street. Mr Elias’ first affidavit qualified each time as “approximate”. The time that can be independently verified is the dispatch of the Notice by email. Annexure “H” to the fourth affidavit of Mr Elias records the dispatch time as 13 September 2007 at 4.33pm. I am willing to accept that there may be some discrepancy in the time recorded in the first affidavit of Mr Elias. However each of those times has been qualified as being approximate and, in the absence of any evidence to the contrary, I am willing to accept that the Bankruptcy Notices delivered or dispatched by Mr Elias on the afternoon of 13 September 2007 occurred as he deposed.
Regulation 16.01(e)(i) states:
(e) sent by facsimile transmission…
(i) to a facility maintained by the person for receipt of electronically transmitted documents; or
Paragraph 2(c) of the first affidavit of Mr Elias states:
By faxing the Bankruptcy Notice and the covering letter to the respondent under cover of a letter from Bartier Perry to fax number (02) 9252 6120 being at approximately 4.40pm; and
Paragraph 4(b) of the fourth affidavit of Mr Elias indicates that Dr Sheikholeslami maintained the facility for the receipt of facsimile transmission on that number. There has been no evidence of submissions before the Court which challenge this mode of service.
In respect to the compliance with reg.16.01(e)(ii) states:
(e) sent … or another mode of electronic transmission:
(ii) in such a manner (for example, by electronic mail) that the document should, in the ordinary course of events, be received by the person.
Paragraph 2(b) of the first affidavit, page 2 of the second affidavit and Annexure “H” to the fourth affidavit of Mr Elias all show the electronic mail address of the respondent as [email protected].
Paragraph 2(b) of the first affidavit of Mr Elias states:
By emailing the Bankruptcy Notice and accompanying letter to the respondent at [email protected] being at approximately 4.53pm; and
The receipt of this email transmission is not denied. The letter forwarded to Bartier Perry by the respondent on 5 October 2007 confirms that the email was received on 13 September 2007 (first affidavit of Mr Elias, Annexure “B”).
On the authorities of Skalkos v T & S Recoveries and de Robilliard v Carver, I am satisfied that Bartier Perry for the applicant complied with the regulation for service of the Bankruptcy Notice on Dr Sheikholeslami effective 13 September 2007. The evidence before the Court supports the contention that the Bankruptcy Notice was effectively delivered as on that date and satisfies the requirements of service.
I find that Dr Sheikholeslami’s major contention that the act of bankruptcy was not committed because of a failure to comply with s.40(1)(g) of the Act is misconceived.
Section 40(1)(g) states:
…has served on the debtor in Australia or, by leave of the Court, elsewhere, a bankruptcy notice under this Act… (emphasis added)
Service elsewhere is governed by s.40(1)(g)(ii) which notes:
…where the notice was served elsewhere – within the time fixed for the purpose by the order giving leave to effect service. (emphasis added)
The Creditor’s Petition relies on the following act of bankruptcy committed by the respondent within six months before the presentation of the Petition:
The respondent debtor has failed to comply on or before 4 October 2007 with the requirements of the Bankruptcy Notice served on her on 30 September 2007 or to satisfy the Court that she had a counter-claim, set off or cross demand equal to or more than the sum claimed in the Bankruptcy Notice, being a counter-claim set off or cross demand that she could not have set up in an action in which the judgment referred to in Bankruptcy Notice was obtained.
Dr Sheikholeslami argues that she was outside the Commonwealth of Australia on 13 September 2007 and, as no order for substituted service was applied for or granted, the Bankruptcy Notice was not served and no act of bankruptcy occurred.
The expression “ordinarily resident” is not a technical term and has its ordinary English meaning. Whether Dr Sheikholeslami is ordinarily resident in Australia is a question of fact and degree depending on whether Australia is her “settled and usual place of abode”: Mathai v Kwee [2005] FCA 932 at [120] per Graham J; Restrom v Battenberg [2000] FCA 46 at [5]-[12] per Stone J. There is no evidence before the Court that at the time of the issue of the Bankruptcy Notice, Bartier Perry were aware that Dr Sheikholeslami had either ceased to be a resident or was not ordinarily resident of Australia.
Annexure “B” to the first affidavit of Mr Elias is a letter from Dr Sheikholeslami dated 5 October 2007 and addressed to Bartier Perry. That letter is headed:
Roya Sheikholeslami
609 Observatory Tower
168 Kent Street, Sydney, 2000
Tel: (02) 9252 6100
Fax: (02) 9252 6120
email: [email protected]
The letter continues:
Re 13 September 2007 email of Bankruptcy Notice from Bartier Perry.
I refer to the above matter and the Bankruptcy Notice (the “Notice”) a copy of which you emailed me. Your email did not accompany a court order for substituted service of the notice.
I request that you provide me by close of business on 8 October 2007 a copy of the court order that you have obtained for substituted service of the notice prior to emailing me the notice.
Please direct your correspondence by email to [email protected]
The above letter contains does not refer to the respondent being outside of Australia as at 13 September 2007 or on 5 October 2007 – the date the letter was sent.
Dr Sheikholeslami relies on Battenberg v Restrom [2006] FCAFC 20 to establish that leave of the Court is required for service outside of Australia where the debtor is overseas and unrepresented. The Court stated:
19 It is clear that a bankruptcy notice may be served out of Australia, subject to leave being granted by the Court. The only question is as to the mechanics of service. We accept that the notice, itself, can only be served by leave, but as we have pointed out, there is a history of serving notice of proceedings rather than the initiating writ. There is also a history of making orders for substituted service which do not involve actual service. Re Mendonca establishes that subs 309(2) authorizes service out of Australia even when the relevant process was issued after the debtor left Australia. The only jurisdictional requirement is that contained in par 43(1)(b) which has no present application. There is no reason why s 309(2) should not also authorize an order for substituted service of a bankruptcy notice made whilst the debtor is out of Australia. If, as in this case, that order does not involve service of the bankruptcy notice itself outside of Australia, par 40(1)(g) does not dictate that leave be obtained.
The decision in Battenberg v Restrom can be distinguished on its facts. Mr Battenberg was involved in a number of decisions which concerned whether he was ordinarily resident in Australia at the time of the act of bankruptcy. Mr Battenberg was born in Australia in 1962 with the given names Andrew Charles Robert Lee. He practiced as an accountant and registered liquidator between 1991 and 1997. Between 1998 and 2003, he lived with his mother, Ailsa Lee, in Sutton Forest, New South Wales. In April 2004, he left Australia for Scotland where he had purchased a lease of Dunfallandy House. From sometime in 2000, he began using the name Andrew Charles Robert Edward Albert Battenberg, Lord Battenberg of Ellis Leitrim. He claimed that he had the hereditary right to call himself Lord Battenberg, Lord Leitrim and Earl of Leitrim.
In January 2001, he was issued with an Australian passport in the name of Battenberg. At about this time, he also acquired a British passport in the name of Lord Battenberg. From 2004, he was resident in either Dunfalllandy House, Scotland or in London with his partner who he claimed supported him. Since that time he had returned to Australia on a number of occasions for short visits to see his mother lasting three or four days: Restrom v Battenberg [2007] FCA 46.
His mother gave evidence that her son did not have any clothes or personal belongings left in Australia as these had all been moved to the United Kingdom: Restrom v Battenberg. In bankruptcy proceedings against Mr Battenberg, the issue of service of the Bankruptcy Notice resulted in the creditor obtaining a substituted service order. The determination of where Mr Battenberg was “ordinarily a resident” was a question of fact and it was clear from a number of decisions involving him that he had ceased to be an “ordinarily a resident” in Australia from sometime in 2004. The issue in Battenberg v Restrom [2006] FCAFC 20 was an application by Mr Battenberg for an order extending the time for compliance with the Bankruptcy Notice or, alternatively, setting aside an order for substituted service of the Notice or, alternatively, declaring that there had been no valid service of the Notice. The appeal was dismissed.
Dr Sheikholeslami’s position is very different from that of Mr Battenberg in that the facts clearly indicate that she is ordinarily a resident in Australia. There is no evidence at the time the Bankruptcy Notice was issued to indicate that she was other than ordinarily a resident in Australia.
In the cross examination of Mr Elias, the following exchange took place concerning his attendance at Observatory Tower on 13 September 2007:
Mr Elias: I went to the concierge desk and asked if you were available?
Dr Sheikholeslami: What do you mean by were you available? What did you say?
Mr Elias: I asked the concierge if I Roya – if I can – I said to him I have got documents to give to Roya Sheikholeslami. Is she available?
Dr Sheikholeslami: And what did she – what did happen – what did he say – what happened?
Mr Elias: Well he proceeded to call a number. I assumed he was calling you. A few moments later he said she doesn’t appear to be in.
Dr Sheikholeslami: What else?
Mr Elias: I said, ok, I’ve got some important documents to give her. How do you propose I do that? He said…
Dr Sheikholeslami: You had…?
Mr Elias: Sorry?
Dr Sheikholeslami: You had any other communication with him?
Mr Elias: Yes.
Dr Sheikholeslami: What were they?
Mr Elias: I said to him, I said I’ve got some important documents to serve – rather to give to Ms Sheikholeslami. How do you propose I do that? And he said, you can either leave them with me or put them in her mailbox. (Transcript, p.45)
The cross examination then addressed the contents of the concierge manual which had been subpoenaed (Exhibit “A1”). The evidence given in cross-examination did not refer to Dr Sheikholeslami no longer being a resident of Australia. The only information conveyed was that she was not present in the building at that time.
Battenberg v Restrom makes no reference to unrepresented litigants and the relevance of Dr Sheikholeslami’s submission in respect of this issue is not clear.
Mr Elias gave the following evidence in cross examination:
Dr Sheikholeslami: When you answered 13 September, did you know that Roya Sheikholeslami was overseas or not?
Mr Elias: I didn’t know that you were overseas.
Dr Sheikholeslami: When did you do find out that she was overseas?
Mr Elias: I believe I found out, I believe you told me that some time after 13 September.
Dr Sheikholeslami: When was that, do you remember?
Mr Elias: I can’t remember exactly.
Dr Sheikholeslami: Approximately?
Mr Elias: A couple of weeks after or the 13th, maybe between a week and two weeks, something along those lines, maybe more. (Transcript p.50)
The Court notes that the time for compliance with the Bankruptcy Notice expired on 4 October 2007. The letter referred to was dated 5 October 2007, the day after the time to comply had expired.
I am satisfied that the respondent’s claim that the creditor was obliged to seek substituted service in respect of the Bankruptcy Notice is a misunderstanding of the applicable law. Up to, including and after the issue of the Bankruptcy Notice, the respondent continued to correspond with Bartier Perry using stationary containing her Sydney address, telephone and facsimile number and an electronic mail address supplied by an Australian internet service provider. This is very different from the facts in Battenberg v Restrom.
The second ground of opposition to the Petition appears to have two elements. First, that the judgments relied upon for the Bankruptcy Notice are default judgments and this Court has been invited to go behind those judgments. The second limb is that the applicant has a matter in the Federal Magistrates Court (SYG1404 of 2006) and two matters in the ADT (063064 and 063193) which will result in judgments in her favour and far exceed the sum specified in the Bankruptcy Notice.
Dr Sheikholeslami’s claim for damages for unlawful termination in the Federal Magistrates Court was dismissed by Smith FM on 25 January 2008: Sheikholeslami v University of New South Wales [2008] FMCA 35.
The claim in respect of the ADT matters appears to be that the Tribunal is able to award compensation up to a maximum amount of $40,000. On the assumption that Dr Sheikholeslami is successful in both matters, she will receive an award of $80,000 which is in excess of the amount claimed in the Bankruptcy Notice. No evidence in support of that contention is before this Court.
For the above reasons I consider that Dr Sheikholeslami’s Notice Stating Grounds of Opposition to Petition filed on 7 January 2008 should be refused.
I certify that the preceding eighty-one (81) paragraphs are a true copy of the reasons for judgment of Lloyd-Jones FM.
Associate:
Date: 24 September 2008
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