Van der Munnik v Stewart
[2010] FMCA 116
•24 February 2010
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| VAN DER MUNNIK v STEWART (CORRIGENDUM) | [2010] FMCA 116 |
| BANKRUPTCY – Creditor’s petition – whether bankruptcy notice based on a final judgment or order – whether to go behind judgment – whether the notice of an extension of time to serve the bankruptcy notice was served on the debtor – effect of reference to non-existent regulation in ITSA Form – whether service effected when bankruptcy notice left in letterbox for home unit at the last-known address for service. |
| Bankruptcy Act 1966 (Cth), ss.40, 41, 44, 52, 84, 306 Bankruptcy Regulations 1996 (Cth), regs.4.02, 4.02A, 16.01 |
| Adams v Lambert (2006) 228 CLR 409; [2006] HCA 10 Cain v Whyte (1933) 48 CLR 639; [1932] HCA 6 Carver v de Robillard (2006) 5 ABC(NS) 21http://legalonline.thomson.com.au/director?sid=f2f382f20ade6d037b26c88574278070&&ref=LAWREP-005-ABC(NS)-0021.pdf, [2006] FCA 1041 Clancy v Robinson [2002] FMCA 47 Commonwealth Bank of Australia v Casella [2000] FCA 1518 D.C.T. v Moss (No.2) [2006] FMCA 225 de Robillard v Carver (2007) 159 FCR 38; [2007] FCAFC 73 Ex parte Moore; In re Faithfull (1885) 14 QBD 627 Klinger v Nicholl (2005) 4 ABC(NS) 16; [2005] FCAFC 153 Re Cartwright; Ex parte Cartwright v Barker [1975] 1 WLR 573; 2 All ER 970 Re Ditford; Ex parte Deputy Commissioner of Taxation (1988) 19 FCR 347; 83 ALR 265 Re Sanders; Knudsen and Yates (t/a The Hargreaves Practice) v Sanders (2003) 1 ABC(NS) 408; [2003] FCA 1079 Skalkos v T & S Recoveries Pty Ltd (2004) 141 FCR 107; [2004] FCAFC 321 St George Bank Ltd v Klintworth and Another (1998) 86 FCR 240; 157 ALR 286 Stec v Orfanos [1999] FCA 457 Wren v Mahony (1972) 126 CLR 212; [1972] HCA 5 |
| Applicant: | YVONNE VAN DER MUNNIK |
| Respondent: | MICHAEL STEWART |
| File Number: | SYG 1772 of 2009 |
| Judgment of: | Barnes FM |
| Hearing dates: | 24 November, 25 November, 10 December 2009 |
| Delivered at: | Sydney |
| Delivered on: | 24 February 2010 |
REPRESENTATION
| Counsel for the Applicant: | Mr L Gor |
| Solicitors for the Applicant: | Watkins Tapsell |
| Respondent: | In person |
ORDERS
A sequestration order be made against the estate of Michael Stewart.
The applicant creditor’s costs (including reserved costs, if any) be taxed in accordance with the Federal Court Rules and paid from the estate of the respondent debtor in accordance with the Bankruptcy Act 1966 (Cth).
A copy of this order is to be provided to the Official Receiver in Sydney within two (2) days.
The Court notes that the date of the act of bankruptcy is 9 June 2009.
CORRIGENDUM
Judgment delivered by Barnes FM 24 February 2010 as [2010] FMCA 116
In paragraph [62] of the Reasons for Judgment the following “[Street Address],” should read “at the address specified in Mr Thurston’s affidavit in”.
_____________________________________________________________________I certify that the preceding one (1) paragraphs are a true copy of the Corrigendum to the Judgment [2010] FMCA 116 of Barnes FM.
Associate:
Date: 4 March 2010
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT SYDNEY |
SYG 1772 of 2009
| YVONNE VAN DER MUNNIK |
Applicant
And
| MICHAEL STEWART |
Respondent
REASONS FOR JUDGMENT
On 24 July 2009 the applicant, Ms van der Munnik, filed and presented a creditor’s petition seeking that a sequestration order be made against the estate of the respondent debtor, Mr Stewart. The creditor’s petition claimed that Mr Stewart owed Ms van der Munnik the sum of $2,315 due under a final judgment of the Local Court of New South Wales of 26 June 2008 together with interest in the amount of $163 for the period from 27 June 2008 to 9 July 2009. It relied on a failure by the debtor to comply with Bankruptcy Notice NN3898/08 on or before 9 June 2009 which was allegedly served on him on 19 May 2009.
On 28 September 2009 a registrar of this court made orders for substituted service of the creditor’s petition.
On 27 October 2009 Mr Stewart filed an affidavit (much of which is in the form of submissions) taking issue with a number of matters in the creditor’s petition. On 2 November 2009 he was ordered to file and serve a notice of intention to oppose the creditor’s petition by 9 November 2009. Mr Stewart filed a notice stating grounds of opposition in the form of an affidavit on 9 November 2009 but did not file any further evidence in support.
In the course of the hearing issues were raised by Mr Stewart in relation to which the applicant was given the opportunity to reopen her case and file further evidence. Mr Stewart was also given the opportunity to give oral evidence in relation to matters on which he wished to rely.
As discussed below, none of the grounds relied on by Mr Stewart are such as to satisfy me that the Bankruptcy Notice was invalid, that the requirements of s.52(1) of the Bankruptcy Act1966 (Cth) were not met or that for other sufficient cause a sequestration order should not be made.
Whether the order of the Local Court was a final judgment or final order
In the notice of opposition and in his affidavit Mr Stewart contended that given that “the alleged debt …[was] based solely on a photocopy” of a Local Court order, the court should “examine” Local Court order (case number 5695/08) of 26 June 2008 in the amount of $2,315 “and determine whether” it was a “final judgment or final order of the kind described in paragraph 40(1)(g) of the Bankruptcy Act 1966 (Cth)”. Mr Stewart also took issue with the amount of and his liability for the debt.
Section 40(1)(g) of the Act is as follows:
(1) A debtor commits an act of bankruptcy in each of the following cases:
…
(g) if a creditor who has obtained against the debtor a final judgment or final order, being a judgment or order the execution of which has not been stayed, has served on the debtor in Australia or, by leave of the Court, elsewhere, a bankruptcy notice under this Act and the debtor does not:
(i) where the notice was served in Australia--within the time specified in the notice; or
(ii) where the notice was served elsewhere--within the time fixed for the purpose by the order giving leave to effect the service;
comply with the requirements of the notice or satisfy the Court that he or she has a counter‑claim, set‑off or cross demand equal to or exceeding the amount of the judgment debt or sum payable under the final order, as the case may be, being a counter‑claim, set‑off or cross demand that he or she could not have set up in the action or proceeding in which the judgment or order was obtained;
The issue of whether the order in question was a final order or judgment was addressed in the affidavit of Leanne Walker sworn on 8 December 2009 and the annexures thereto. I am satisfied on the basis of this evidence that on 23 May 2008 the Local Court dismissed an application for an apprehended personal violence order sought by Mr Stewart against Ms van der Munnik. Relevantly, the court also ordered that Mr Stewart pay Ms van der Munnik costs in the sum of $2,200. This order was entered on 26 June 2008 and a sealed certificate of order was issued by the Local Court in relation to the costs order of $2,200. Ms van der Munnik paid Local Court fees of $46 to obtain the certificate of order and $69 to file the certificate.
The order for costs was then registered for enforcement at Sydney in the Civil Division of the Local Court of New South Wales (see the Civil Procedure Act 2005 (NSW), s.133 and Uniform Civil Procedure Rules 2005 (NSW) (the UCPR) r.36.11). On 3 October 2008 a sealed “order” was issued by the Downing Centre Local Court which recorded that the order was entered on 26 June 2008 (see r.36.11(2) and (3) of the UCPR and s.133(2) of the Civil Procedure Act). The fees for the certificate and filing were included in the amount of $2,315 provided for in the order dated 3 October 2008. A copy of the order registered for enforcement dated 3 October 2008 was annexed to the Bankruptcy Notice.
Insofar as Mr Stewart took issue with the difference between the amount of the costs order of 23 May 2008 and the amount in the order of 3 October 2008, I am satisfied that this has been explained and does not affect the validity of the Bankruptcy Notice.
There is no evidence before the court to establish that the order of the Local Court dismissing the application for an apprehended violence order was not a final judgment or order. An order for payment of money, including an order for costs, is a final order, if it forms part of a judgment which is in itself final (see Ex parte Moore; In re Faithfull (1885) 14 QBD 627 at 633). I note in any event that an order for costs in interlocutory proceedings is also a final order within s.40(1)(g) of the Bankruptcy Act, provided it is enforceable as a final judgment or order under s.40(3). In this case the order was registered for enforcement.
Under the Bankruptcy Regulations 1996 (Cth) reg.4.02 and Form 1 the copy of the judgment or order relied upon is to be attached to the bankruptcy notice. While Note 1 to Form 1 states: “If legal costs are being claimed in this Bankruptcy Notice, a certificate of taxed or assessed costs in support of the amount claimed must be attached to this Bankruptcy Notice” (and this may have prompted Mr Stewart’s concern), in this case the costs were ordered in a specific amount and the order was registered for enforcement pursuant to r.36.11 of the UCPR. This is not a case in which there was an order for an indeterminate amount of costs, such that an assessment or taxation was necessary as Mr Stewart submitted.
A copy of the order registered for enforcement was annexed to the Bankruptcy Notice. It is the judgment or order relied upon by the creditor. Insofar as Mr Stewart intended to contend that the costs order made on 23 May 2008 should have been annexed to the Bankruptcy Notice, the copy of the certificate of order registered for enforcement satisfies reg.4.02 and Form 1 of the Bankruptcy Regulations, and s.41(1) of the Bankruptcy Act (see Clancy v Robinson [2002] FMCA 47 and St George Bank Ltd v Klintworth and Another (1998) 86 FCR 240; 157 ALR 286). His other contention that the “copy” is said to be a “photocopy” does not render the Bankruptcy Notice invalid. As set out above, the sum of $2,315 properly included the costs of obtaining the certificate of order and the filing fee.
The order registered for enforcement annexed to the Bankruptcy Notice was the source of the obligation to pay the judgment debt (see Stec v Orfanos [1999] FCA 457). It has not been established that the order that formed the basis for the Bankruptcy Notice was not a final order of the kind described in s.40(1)(g) of the Bankruptcy Act, or that there was any inaccuracy in or issue about the amount in question that was such as to render the Bankruptcy Notice invalid or warrant the exercise of discretion to not make a sequestration order.
Moreover, there was no obligation on the solicitor for the creditor to provide “further and better particulars to support the alleged debt” as Mr Stewart contended in paragraphs three and four of his notice of opposition, given that it was based on a certificate of order of the Local Court and in light of the evidence before the court as to the order made by the Local Court on 23 May 2008 that Mr Stewart pay Ms van der Munnik costs of $2,200. In her affidavit of 8 December 2009, Leanne Walker, the solicitor for the creditor, provided full details of the manner in which the debt was calculated, which I accept.
Mr Stewart also seemed to take issue (particularly in his cross-examination of Ms van der Munnik) with whether or not he had been given a copy of a taxation invoice prepared by the barrister who had appeared for Ms van der Munnik in the Local Court proceedings. Ms van der Munnik’s evidence is that a copy of the invoice was provided to the Local Court on 23 May 2008 and also to Mr Stewart in her presence. Ms van der Munnik was cross-examined. I found her to be a clear and confident witness and accept her evidence in this respect. In any event, whether or not Mr Stewart was handed a copy of the barrister’s taxation invoice, it is not in dispute that the Local Court made an order that Mr Stewart pay Ms van der Munnik’s costs in the sum of $2,200. It is that court order that formed the basis for the certificate of order relied on in the Bankruptcy Notice (not the barrister’s taxation invoice). I also accept Ms van der Munnik’s evidence that her understanding was that as her barrister did not have a trust account in which to receive money, Mr Stewart was ordered to pay the money to the Registrar of the Local Court for payment out to her and that on 23 May 2008 she had paid the sum of $2,200 by electronic funds transfer to the barrister.
Contrary to Mr Stewart’s contention, there was no requirement that the creditor provide further “supporting documents” (as submitted in paragraph two of the notice of opposition) to “substantiate the alleged debt”, given that the debt relied on by the creditor was based on an order of the Local Court that was registered for enforcement.
The issues that Mr Stewart raised in relation to whether the costs order was a final order or final judgment within s.40(1)(g) of the Act are not made out.
Whether the debt is still owing
Somewhat confusingly in an affidavit sworn on 23 November 2009 and filed in court on 24 November 2009 Kerri Lea Murdoch-Moore had attested that she had that day “telephoned the Downing Centre Local Court, Criminal Registry and [had] been advised that Michael Stewart was paid (sic) to the Local Court the sum of $2,200.00 on 15 August 2009”.
While this part of the affidavit was not read, Mr Gor, counsel for the applicant, explained that he would seek leave to call evidence from the solicitor for the applicant as to what had transpired, particularly in light of the fact that Mr Stewart was self-represented and as there was other evidence that the debt had not been paid.
I accept Ms Fitzpatrick’s evidence that she attended the Local Court on 24 November 2009 and obtained confirmation that an error in the Court’s computerised system, (after a change of file numbers), meant that a credit in the Stewart matter was incorrectly shown but that no payment had in fact been received. In addition, the applicant tendered a copy of a letter from the Registrar of the Local Court Downing Centre dated 24 November 2009 confirming that in the proceedings in question the amount of $2,200 was ordered to be paid into Court by 20 June 2008 and that to date the amount was outstanding. Ms van der Munnik affirmed an affidavit of final debt on 24 November 2009 in which she confirmed that the debt had not been paid.
Mr Stewart did not claim that he had paid the debt or any part thereof to the Local Court registry or otherwise and did not produce any documentary evidence to establish any such claim of payment. However, in his evidence in chief on 25 November 2009, Mr Stewart claimed that he had been to the Local Court registry on 23 November 2009 (although his reasons for doing so changed in cross-examination) and that he had been told that “there was no money owing”. He was not able to explain satisfactorily why he had gone to the Local Court on 23 November 2009 to check the amount owing (and there is no suggestion that Ms Murdoch-Moore’s affidavit had been served on him at that time) and why it might have been paid. When cross-examined about his evidence in this respect Mr Stewart was at times evasive. Mr Stewart did not claim that he had paid his debt. He suggested that someone else could or might have met his debt to the creditor. In particular, he suggested that the solicitor acting for his wife may have paid the debt as part of a property settlement or that there may have been a computer error. However the evidence of Ms Katrina Meredith Hodgkisson, the solicitor for Mr Stewart’s wife in family law proceedings, is that while she asked Mr Stewart to provide financial documentation to enable the parties to the marriage to negotiate a property settlement in connection with divorce proceedings, she had at no stage communicated with Mr Stewart either verbally or in writing that his wife would satisfy his debts, including the debt owed to Ms van der Munnik.
Hence, even if Mr Stewart was told by the Local Court on 23 November 2009 that the debt was paid, I accept that (as he appeared to concede in cross-examination) this reflected a computer error and was not the case. In particular, I am satisfied that Mr Stewart has not paid the debt and I am not satisfied that anyone else paid it for him.
Insofar as Mr Stewart’s concerns addressed the requirement that an affidavit of final debt be filed (see r.4.06 of the Federal Magistrates Court (Bankruptcy) Rules 2006 (Cth)), such an affidavit was sworn and filed by Ms van der Munnik on 24 November 2009 (the first day of the hearing of the creditor’s petition). Given the circumstances, the need for subsequent adjournments and the fact that judgment was to be reserved, counsel for the creditor proposed that the solicitor for the creditor file further affidavits of final debt and final search shortly before judgment was to be delivered. This was done. On the evidence before the court I am satisfied that the debt on which the petitioning creditor relies is still owing.
Hence on the evidence before the court, I am satisfied that there was owing by the debtor to the petitioning creditor a debt that amounted to $2,000 at the time of presentation of the creditor’s petition that met the requirements of s.44(1) of the Bankruptcy Act (see Klinger v Nicholl [2005] FCAFC 153 at [15]).
Whether to go behind the judgment
In his notice of opposition Mr Stewart contended that in the absence of “supporting documents” on file at the Local Court this court should “go behind the judgment and act in accordance with Section 84 (sic) of the Bankruptcy Act 1966 (Cth) to determine whether there is ‘in truth and reality’ a debt of $2,315.00 owing” and whether it was a debt of more than $2,000.
On the hearing of the creditor’s petition the court has a discretion as to whether to accept a judgment on which a bankruptcy notice is based as proof of the debt relied on to found the creditor’s petition. As Barwick CJ, with whom Windeyer and Owen JJ agreed, stated in Wren v Mahony (1972) 126 CLR 212 at 224 – 225; [1972] HCA 5:
The Court's discretion in my opinion is a discretion to accept the judgment as satisfactory proof of that debt. That discretion is not well exercised where substantial reasons are given for questioning whether behind that judgment there was in truth and reality a debt due to the petitioner.
Section 84 of the Bankruptcy Act relates to the manner of proving debts and has no relevance to the present proceedings. The absence of “supporting documents” is not a substantial reason for questioning whether there was in truth a debt due to the creditor. The concerns Mr Stewart expressed in relation to the barrister’s taxation invoice are discussed above. Such concerns do not establish a basis on which to go behind the judgment or order.
In his submissions Mr Stewart for the first time sought to raise an issue about the validity of the certificate of order issued by a registrar of the Downing Centre Local Court under s.178 of the Evidence Act 1995 (NSW) on 26 June 2008 on the basis that under the heading “Particulars of Proceedings” and the words “Application for Apprehended Personal Violence Order” the certificate referred to “Crimes Act 1900(NSW) – Part 15A – Personal.”
Mr Stewart submitted that Part 15A of the Crimes Act was repealed in 1999 (although this is not apparent on the material he relied on and in fact it seems that this may be intended to be a reference to the effect of the Crimes (Domestic and Personal Violence) Act 2007 (NSW) which commenced on 10 March 2008). Mr Stewart submitted that this demonstrated that there was a “hoax” and that the order of the Local Court had been made on the basis of a Part of the Crimes Act that did not exist. This was said to support the contention that the court should go behind the judgment.
The certificate of order issued by the Deputy Registrar was annexed to Ms Walker’s affidavit of 8 December 2009 to explain the manner in which the debt relied on in the Bankruptcy Notice and creditor’s petition was calculated. The certificate was a certification by the Deputy Registrar of the Local Court that the particulars of the order of 23 May 2008, “Costs to Defendant in the amount of $2200 payable direct to Registrar of the Local Court Downing Centre within 28 days for payment out to Defendant, [address]” was a true record of that Court. It is not in dispute that the Local Court ordered Mr Stewart to pay Ms van der Munnik’s costs in the amount of $2,200 on 23 May 2008.
There is nothing in the circumstances of this case to establish that there are substantial reasons for doubting whether there is in truth and reality a debt due to the creditor. Insofar as Mr Stewart might be taken to intend to suggest that in some way the Local Court costs order was obtained by fraud, collusion or a miscarriage of justice, any allegation of fraud should be made with specificity and particularity (see Commonwealth Bank of Australia v Casella [2000] FCA 1518 at [38]). That has not been done and there is nothing in the evidence to support any such contention. Nor has he established (if this is what was intended) any substantial reason for questioning the jurisdiction of the Local Court or the validity of the costs order.
There is no evidence before the court to establish that the Local Court proceedings were brought before Part 15A of the Crimes Act was repealed or to suggest that the reference to Part 15A on the Certificate of Order is reason for questioning whether there was in truth and reality a debt due based on the costs order of the Local Court as registered for enforcement.
The underlying order in this case was a costs order made by the Local Court against Mr Stewart as an unsuccessful applicant for an apprehended violence order. It was determined by the Local Court in the presence of the debtor. The order was registered for enforcement. The general contention that the court should “go behind the judgment” and the issues raised in submissions are not such as to satisfy me that there are substantial reasons for questioning whether there was in truth and reality a debt due behind the order or judgment. This ground of opposition to the creditor’s petition is not made out. I am of the view that the sealed order attached to the Bankruptcy Notice should be accepted as satisfactory proof of the petitioning creditor’s debt.
Service of a copy of the extension of time for service of the bankruptcy notice
Bankruptcy Notice NN3898 of 2008 was issued by the Official Receiver on 15 October 2008. Under reg.4.02A a bankruptcy notice must be served within six months of the date of issue of the bankruptcy notice (reg.4.02A(a)) or (under reg.4.02A(b)) within “any further period that the Official Receiver allows (whether within or outside that period of 6 months)”. On 4 May 2009 the Official Receiver allowed the time within which Bankruptcy Notice NN3898 of 2008 could be served to be extended to 15 October 2009.
In his notice of opposition Mr Stewart took issue with the extension of time for service of the Bankruptcy Notice as follows:
5. Regulation 4.02A of the Bankruptcy Regulations (1996) states that:
“A bankruptcy notice must be served within:
(a) the period of 6 months commencing on the date of issue of the bankruptcy notice;”
Therefore, as the Date of Issue of the Bankruptcy Notice (NN 3898 / 08) …was 15 October 2008, then the Bankruptcy Notice (NN 3898 / 08) expired on 15 April 2009. It is important to note that there was no extension of time for service accompanying the original Bankruptcy Notice (NN 3898 / 08) when it was allegedly “served” by Cale Thurston on 19 May 2009. The 19 May 2009 is over one month after the Bankruptcy Notice (NN 3898 / 08) expired on 15 April 2009.
6. The failure by the Applicant-Creditor to include “The Extension of Time for the Service of a Bankruptcy Notice” with the original Bankruptcy Notice (NN 3898 / 08) created a substantial injustice to the Respondent-Debtor. The failure mislead the Respondent-Debtor into believing that the alleged service of the expired Bankruptcy Notice (NN 3898 / 08) was yet another hoax / prank perpetrated by the Applicant-Creditor.
7. On 11 June 2009, Leanne Walker, a solicitor acting for the Applicant-Creditor, confirmed to Respondent-Debtor that the Bankruptcy Notice (NN 3898 / 08) had expired on 15 April 2009. The Respondent- Debtor interpreted the fact that the Bankruptcy Notice (NN 3898 / 08) had expired was a clear indication to the Respondent-Debtor that the Applicant-Creditor was no longer seeking to pursue the alleged debt of $2315.00.
8. However, “The Extension of Time for the Service of a Bankruptcy Notice” dated 4 May 2009 was included in the Creditor’s Petition (SYG 1772 / 2009). Annexure C is a photocopy of “The Extension of Time for the Service of a Bankruptcy Notice” dated 4 May 2009. The Official Receiver states that “The Extension of Time for the Service of a Bankruptcy Notice” was issued pursuant to sub-regulation 4.02A(2)(b) of the Bankruptcy Regulations in accordance with the Bankruptcy Act 1966 (Cth). A check of the of the (sic) Bankruptcy Regulations clearly shows that sub-regulation 4.02A(2)(b) does not exist.
9. In addition, within the Creditor’s Petition (SYG 1772 / 2009), the Applicant-Creditor has not attached evidence of a receipt to support the fee that is payable under the 2006 Fees Determination “The Extension of Time for the Service of a Bankruptcy Notice” dated 4 May 2009.
Mr Stewart contended first that service of the Bankruptcy Notice on 19 May 2009 was outside the time provided for in reg.4.02A(a) of the Bankruptcy Regulations. However the time for service was extended to 15 October 2009 as provided for in reg.4.02A(b). Hence it has not been established on this basis that service was outside the time provided for in the Bankruptcy Regulations.
Mr Stewart claimed that no copy of the Extension of Time for the Service of the Bankruptcy Notice issued by the Official Receiver accompanied the Bankruptcy Notice when it was “allegedly “served”” on him on 19 May 2009. He submitted that this created a substantial injustice as it misled him into believing that the alleged service was “yet another hoax / prank perpetrated by the Applicant-Creditor”.
According to the unchallenged affidavit evidence of Cale Thurston a true copy of the Bankruptcy Notice (to which was annexed details of the interest claimed, a true copy of the judgment obtained in the Local Court of New South Wales, “together with a true copy of the Extension of Time for the Service of a Bankruptcy Notice”) was served on Mr Stewart on 19 May 2009 at 2.52 pm by leaving the documents in a sealed envelope addressed to Mr Stewart marked private and confidential in the letterbox at a specified street address in Cronulla (which, it is not disputed, was the last-known address for Mr Stewart). Copies of all of these documents are annexed to Mr Thurston’s affidavit sworn on 27 May 2009.
Notwithstanding that the solicitor for the creditor obtained an extension of time for service of the Bankruptcy Notice from the Official Receiver, Mr Stewart claimed in his notice of opposition that on 11 June 2009 Leanne Walker, the solicitor for the creditor, had confirmed to him that the Bankruptcy Notice had expired on 15 April 2009 and that he took this as a clear indication that the creditor was no longer seeking to pursue the alleged debt of $2,315. This claim was not otherwise addressed in Mr Stewart’s affidavit evidence, but he elaborated on this claim in oral evidence.
This issue was also addressed in three affidavits sworn by Ms Walker on 11 September 2009, 19 November 2009 and 9 December 2009. Mr Stewart was given the opportunity to give oral evidence on (inter alia) the conversation he had with Ms Walker when he attended the premises of the solicitors for the creditor on 11 June 2009. He was able to give his evidence in a narrative form. He stated that when he went into a conference room with Ms Walker:
I opened the Bankruptcy Notice and showed her the statement where it was issued in October 2008 and that it expired after six months and that the date that I’d gone there in June it was quite clear the matter had expired and I asked her what was going on – to explain to me why I was sent a Bankruptcy Notice that had clearly expired. She couldn’t offer an explanation why.
Insofar as Mr Stewart was suggesting that there was a statement in the Bankruptcy Notice that it “expired” after six months, that is not the case, although it may be that he meant that he told Ms Walker that to his knowledge the Bankruptcy Notice expired after six months (and Mr Stewart tendered a fact sheet on bankruptcy notices issued by ITSA). He claimed that he questioned Ms Walker on the fact that the Bankruptcy Notice had expired and that she could not answer him. He claimed that Ms Walker “went through her documents – the documents she had – and at no stage in her documents did she show me any form of extension of time. As far as I was concerned the only document she had was the same as what I had, like a photocopy of the Bankruptcy Notice”, but in cross-examination Mr Stewart conceded that he could not read what was in the file Ms Walker had with her.
Mr Stewart denied having a copy of the Extension of Time for Service of the Bankruptcy Notice when he attended Ms Walker’s office on 11 June 2008 and claimed that he went to the office to find out whether the Bankruptcy Notice was genuine or whether it was a “hoax” and why he was sent this document that had expired.
However, despite being given the opportunity to do so, Mr Stewart did not seek to cross-examine Ms Walker. Her evidence, which I accept, is that she did not have any discussion with Mr Stewart about the validity of the Bankruptcy Notice; that he did not raise any issue as to whether the time to serve the Bankruptcy Notice had expired or whether the Extension of Time was attached to the Bankruptcy Notice; and that she did not look through the documents held by the firm for the Extension of Time for Service of the Bankruptcy Notice in the meeting with Mr Stewart.
Ms Walker’s affidavit evidence is consistent with her contemporaneous file notes of the conversation in which she recorded that she “explained bankruptcy notice requires payment w/in 21 days. has now expired”, to which Mr Stewart claimed he “received in mail box last Monday – 1 June”. Ms Walker also recorded that Mr Stewart volunteered a willingness to pay by instalments of $60 per month, that she told him she would respond to his offer in writing and that if he did not respond she would be proceeding with bankruptcy and that the 21 days was running notwithstanding his offer. I am satisfied that the reference to 21 days “running” was made on the basis that service was effected on 1 June 2009 as Mr Stewart claimed to Ms Walker. He stated that he was told by Ms Walker “that if I received [the Bankruptcy Notice] on 1 June it would expire on 22 June”.
On the evidence before the court I am satisfied that insofar as Ms Walker referred to the concept of “expiration” of the Bankruptcy Notice in the conversation with Mr Stewart of 11 June 2009, she was explaining to him her understanding that the time for compliance with the Bankruptcy Notice had expired and was not “confirming” to him that the time for service of the Bankruptcy Notice had expired. This is consistent with Ms Walker’s contemporaneous file note that she “explained bankruptcy notice requests payment within 21 days. has now expired”.
Further, I do not accept Mr Stewart’s claim that there was a clear indication to him by Ms Walker that the creditor was no longer seeking to pursue the alleged debt. I am satisfied that Mr Stewart offered to pay the debt by instalments during that meeting. Such an offer is contrary to his present claim that there was an indication that the creditor was not seeking to pursue the debt or that he believed the Bankruptcy Notice had expired. After Mr Stewart claimed that he was served with the Bankruptcy Notice on 1 June 2009, Ms Walker told him that the 21 days (for compliance) was running notwithstanding his offer (which would not be the case if the Bankruptcy Notice had expired before it was served).
I accept that Ms Walker told Mr Stewart that she would speak to her client about his proposal to pay by instalments and advised that she would sent him a letter in the next week with a response to his offer (as she did on 18 June 2009) and that she also told him that if he did not respond she would be proceeding with the bankruptcy. In that letter Ms Walker confirmed that the Bankruptcy Notice would expire on 22 June 2009 as Mr Stewart was said to be aware, (on the basis of service on 1 June 2009), and outlined conditions on which his request to pay by instalments would be accepted.
Insofar as there is a conflict in the evidence between Mr Stewart and Ms Walker, I accept Ms Walker’s evidence that Mr Stewart did not on 11 June 2009 raise an issue as to whether the time for service of the Bankruptcy Notice had expired or as to whether the Extension of Time Form was attached to or accompanied the Bankruptcy Notice.
Mr Thurston, who swore the affidavit of service of the Bankruptcy Notice, was not required for cross-examination. His unchallenged evidence is that Mr Stewart was served with a copy of the Extension of Time for the Service of the Bankruptcy Notice issued on 4 May 2009. Hence insofar as Mr Stewart’s evidence is in conflict with that of Mr Thurston, I prefer the evidence of Mr Thurston. It may be that service of an Extension of Time Form on a debtor is necessary to notify the debtor that a bankruptcy notice that would otherwise appear to have expired still has effect (see D.C.T. v Moss (No.2) [2006] FMCA 225). However it is not necessary to determine this issue, as I am satisfied that a copy of the Extension of Time Form was served on Mr Stewart with the Bankruptcy Notice. Grounds five and six in the notice of opposition are not made out.
As I am satisfied that a copy of the Extension of Time Form for service of the Bankruptcy Notice was served on Mr Stewart with the Bankruptcy Notice, the issues raised by him in this respect do not establish that the requirements of s.52 of the Bankruptcy Act are not met or that a sequestration order should not be made. In particular, there is nothing in the evidence before the court to establish that the debtor was led to believe that the creditor was not pursuing the debt or that there is otherwise a substantial injustice.
Error on ITSA Form
Mr Stewart also relied on the fact that the Form used by the Insolvency and Trustee Service of Australia for the Extension of Time for the Service of a Bankruptcy Notice stated that the extension was “pursuant to sub-regulation 4.02A(2)(b)” (ground eight).
It is not in dispute that there is no subsection (2) in sub-reg.4.02A of the Bankruptcy Regulations and that there was no such provision in force at the time the extension of time was allowed (although there was a reg.4.02A(2) in an earlier version of the Regulations). The power of the Official Receiver to allow a further period for service of a bankruptcy notice is to be found in sub-reg.4.02A(b). Mr Stewart’s contention appears to be that the reference to a non-existent sub-regulation on the ITSA Form is such as to either invalidate the Bankruptcy Notice so that no act of bankruptcy would occur on non-compliance or such that the court should exercise its discretion not to make a sequestration order.
As the relevance of this issue was clarified during the course of the hearing, the creditor was given the opportunity to file further evidence. In an affidavit sworn on 25 November 2009 Amy Fitzpatrick attested to enquiries she had made on the ITSA website and also with the acting business manager of ITSA. I am satisfied on the basis of this evidence that the Form used by ITSA at the relevant time was the Form attached to the Bankruptcy Notice served on Mr Stewart. That Form refers to sub-reg.4.02A(2)(b), notwithstanding that there is no sub-reg.4.02A(2)(b) in the current version of the Bankruptcy Regulations. However the Form used by the Official Receiver is not a Form prescribed under the Bankruptcy Act, Rules or Regulations.
What is in issue under reg.4.02A is whether the Official Receiver has allowed a further period of time beyond the period of six months commencing on the date of the issue of the Bankruptcy Notice. In this case I am satisfied that this occurred. There is no evidence from Mr Stewart that he was caused any injustice by the fact that the Form referred to a sub-regulation which did not exist.
The fact that the Form used by ITSA referred to a sub-regulation which did not exist is not such as to satisfy me that the Bankruptcy Notice is invalid. Even if this error is to be regarded as akin to a defect in the Bankruptcy Notice (on the basis that it was served on the debtor with the Bankruptcy Notice), I am satisfied that the reference to reg.4.02A(2)(b) is a mere formal defect or irregularity able to be cured within s.306 of the Bankruptcy Act. There is no evidence that substantial injustice has been caused by such defect or irregularity (see generally Adams v Lambert (2006) 228 CLR 409; [2006] HCA 10).
Moreover I am not satisfied that the reference to a non-existent sub-regulation on the Form is such as to warrant the exercise of the discretion not to make a sequestration order. No authority was cited to me in support of such a proposition. There is no suggestion that the Official Receiver did not in fact extend the time for service of the Bankruptcy Notice (albeit that the Form referred to a non-existent sub-regulation). Such a technical deficiency is not of itself such as to establish other sufficient cause not to make a sequestration order (see Klinger v Nicholl (2005) 4 ABC(NS) 16; [2005] FCAFC 153).
Finally, contrary to Mr Stewart’s contention in ground nine in the notice of opposition, it was not necessary for the creditor to attach to the creditor’s petition (or elsewhere) evidence of a receipt to support payment of the fee under the 2006 Fees Determination in respect of the application for an extension of time within which to serve the Bankruptcy Notice.
The concerns raised by Mr Stewart in relation to the Extension of Time for Service Form of the Bankruptcy Notice do not establish invalidity of the Bankruptcy Notice, that any of the requirements of s.52(1) of the Bankruptcy Act were not met or (whether considered alone or in conjunction with any of the other matters raised by Mr Stewart) that for other sufficient cause a sequestration order ought not be made.
Time of service of the Bankruptcy Notice
The final ground in the notice of opposition is as follows:
The Respondent-Debtor disputes the “Affidavit of Personal Service” of the Bankruptcy Notice (NN 3898 / 08) sworn by Cale Thurston on 27 May 2009 (Annexure D). In this Affidavit, Cale Thurston claims that he left the Bankruptcy Notice (NN 3898 / 08) and other documents in an envelope in accordance with Regulation 16. However, upon investigation, it has now become apparent that Cale Thurston did not personally serve the Bankruptcy Notice and other documents in accordance with Regulation 16. Cale Thurston simply left unannounced the Bankruptcy Notice and other documents in a disused common property letter box which, under the Strata Schemes Management Act 1996 (NSW) does not form part of the lot of the Debtor-Respondent. The Bankruptcy Notice (NN 3898 / 08) and other documents were accidentally discovered many days after the Bankruptcy Notice (NN 3898 /08) and other documents had been allegedly personally served by Cale Thurston. The discovery mislead (sic) the Respondent-Debtor into believing that the alleged service of the expired Bankruptcy Notice (NN 3898 / 08) was part of an elaborate hoax / prank perpetuated by the Applicant-Creditor. As a consequence, the 21 day minimum period between the alleged date of personal service of the Bankruptcy Notice (19 May 2009) and the alleged date of the act of bankruptcy (9 June 2009) has not been satisfied.
Regulation 16.01 of the Bankruptcy Regulations is as follows:
(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.
As set out above, in his affidavit of 27 May 2009 Cale Thurston attested to the fact that he served Mr Stewart with the Bankruptcy Notice and other documents on 19 May 2009 by leaving them in a sealed envelope addressed to Mr Stewart in the letterbox at Unit 9, at the address specified in Mr Thurston’s affidavit in Cronulla. Personal service is not relied upon by the creditor, notwithstanding that the form of affidavit sworn by Mr Thurston is headed “Affidavit of Personal Service”. There is no suggestion by the creditor that Mr Stewart was served personally with the Bankruptcy Notice or that reg.16.01(1)(d) of the Regulations is applicable. Rather, it is clear from the content of Mr Thurston’s affidavit of service that the creditor relies on service in accordance with reg.16.01(1)(c), on the basis that the documents were left in a sealed envelope marked with Mr Stewart’s name at his last-known address.
Insofar as Mr Stewart seemed to contend that leaving the documents in the letterbox for the unit he lived in was insufficient (apparently on the basis that the letterbox was not part of the “lot” which formed his unit), I am satisfied that leaving documents in the letterbox for the last-known address of the debtor (and it is not disputed that his last-known address was Unit 9 of the specified street address in Cronulla) met the requirements of reg.16.01(1)(c). Mr Stewart did not cite any authority in support of the proposition that service in this manner did not constitute service at his last-known address. Regulation 16.01(1)(c) requires that the document be left at the last-known address and not in the house or unit as Mr Stewart seemed to suggest. I note that reg.16.01(1)(a) refers to service by a document by being “sent by post, or by a courier service, to the person at his or her last-known address”. It is clear that if a document is sent by post it will, in the normal course of events, make its way to a letterbox at the person’s address. This would constitute service within reg.16.01(1)(a). Similarly, I am satisfied that leaving documents in an envelope marked with Mr Stewart’s name in the letterbox for Mr Stewart’s unit, whether or not the letterbox was on common property, met the requirements of reg.16.01(1)(c). That is so whether or not Mr Stewart chose to check that letterbox on a regular basis.
On the evidence before the court I am satisfied under reg.16.01(2) that the Bankruptcy Notice was taken to have been served on Mr Stewart when it was left in the letterbox, that is on 19 May 2009. As the Full Court of the Federal Court held in Skalkos v T & S Recoveries Pty Ltd (2004) 141 FCR 107; [2004] FCAFC 321, evidence on behalf of the debtor to the effect that he did not receive a bankruptcy notice does not negate service in the absence of the documents being returned undelivered or other evidence of non-delivery. Mr Stewart’s generally expressed evidence that “the documents” were “accidentally discovered many days after the Bankruptcy Notice (NN 3898/08) and other documents had been allegedly personally served” is not such as to displace the presumption of service in accordance with sub-reg.16.01(1).
Nor is the fact that Ms Walker referred to service of the Bankruptcy Notice on 1 June 2009 in her letter to Mr Stewart of 18 June 2009. As set out above, this reflected what Mr Stewart told Ms Walker on 11 June 2009 about the time of service. Mr Stewart’s oral evidence was that on 11 June 2009 he told Ms Walker he discovered the Bankruptcy Notice in his letter box and “was then told by Ms Walker that if I received it on 1 June it would expire on 22 June”. Moreover, according to Ms Walker’s notes of the conversation it was after she told Mr Stewart that the Bankruptcy Notice had expired that he claimed he received it on 1 June 2009.
This ground is not made out. I am satisfied that the Bankruptcy Notice was served on Mr Stewart on 19 May 2009, that the time for compliance ran from that date and hence that the reference in the creditor’s petition to 9 June 2009 as the date of the act of bankruptcy is correct.
“Hoax”
More generally, it has not been established that there was any “elaborate hoax/prank” perpetrated by the creditor. I am not satisfied that the method of service (or, indeed, any other matter) was such as to misled a debtor or did mislead Mr Stewart into a belief that he was the subject of such a hoax or prank. While not expressed in those terms, insofar as Mr Stewart’s contentions might be seen as alleging any improper purpose or abuse of process in relation to the issue of the Bankruptcy Notice or in relation to the creditor’s petition, the heavy onus of establishing abuse of process has not been met by Mr Stewart.
Section 52 requirements
I am satisfied on the evidence before me as to service of the Bankruptcy Notice on Mr Stewart on 19 May 2009 and that he committed the act of bankruptcy alleged in the creditor’s petition by failing to comply with the requirements of Bankruptcy Notice NN3898/08 within the time specified. I am satisfied that, as stated in the creditor’s petition, the date of the act of bankruptcy was 9 June 2009, which is within six months of presentation of the petition.
In submissions Mr Stewart for the first time raised an issue about service of the creditor’s petition. He contended that it had not been served at least five days before the date fixed for hearing (see rule 4.05 of the Bankruptcy Rules).
On 28 September 2009 a Registrar of this Court made an order for two methods of substituted service of the creditor’s petition and ordered that the creditor’s petition should be deemed to be served on the respondent five days after service in accordance with these methods “whichever is the later”. The hearing date was amended to 2 November 2009.
According to the affidavits of service of Terrence Edmond Brightman sworn on 15 October 2009 and Amy Maria Fitzpatrick sworn on 21 October 2009 service was effected on 10 October 2009 and 20 October 2009. On this basis service would be deemed to have occurred five days after 20 October 2009. This would mean that service occurred before the requisite five days prior to the hearing.
In any event, even if this were not the case, I would dispense with this requirement. Mr Stewart appeared on 2 November 2009 and obtained an adjournment to 24 November 2009. I am satisfied he had adequate notice and opportunity to prepare his case.
In that respect, (although this was not a matter raised by Mr Stewart), if service by placing the documents “under” the door rather than “affixing them to the front door” was, strictly speaking, a failure to serve the creditor’s petition in accordance with the order for substituted service, such a technical defect can and should be cured under s.306 of the Bankruptcy Act as I am satisfied that the petition and supporting affidavits actually came to Mr Stewart’s attention and were received by him. He has not suggested that he suffered any prejudice by any such deficiency in one of the methods specified for substituted service and nor is any such prejudice apparent (see Re Ditford; Ex parte Deputy Commissioner of Taxation (1988) 19 FCR 347; 83 ALR 265 and see Carver v de Robillard (2006) 5 ABC(NS) 21http://legalonline.thomson.com.au/director?sid=f2f382f20ade6d037b26c88574278070&&ref=LAWREP-005-ABC(NS)-0021.pdf, [2006] FCA 1041 at [32] – [42] per Lindgren J and note that on appeal the Full Court of the Federal Court agreed with this aspect of the decision although the appeal was allowed on other grounds, see de Robillard v Carver (2007) 159 FCR 38; [2007] FCAFC 73 at [81] – [86]).
On the evidence before the court I am satisfied with proof of the matters required by s.52(1) of the Bankruptcy Act, including the matters stated in the petition; that the petition was presented in correct form for a debt of more than $2,000; with service of the petition; and with the fact that the debt on which the petitioning creditor relies is still owing.
Mr Stewart did not satisfy the court of his ability to pay his debts within s.52(2) of the Act. The debtor bears the onus of proving that his assets are sufficient to pay his debts within s.52(2)(a) (see Re Sanders; Knudsen and Yates (t/a The Hargreaves Practice) v Sanders (2003) 1 ABC(NS) 408; [2003] FCA 1079). Mr Stewart did not put evidence of his assets and liabilities before the court. Nor has he satisfied the court, whether for any of the reasons raised in the notice of opposition or otherwise, that for other sufficient cause a sequestration order ought not to be made (see Cain v Whyte (1933) 48 CLR 639; [1932] HCA 6). As set out above, the suggestion that the creditor was engaged in an elaborate hoax or prank is not made out on the evidence before the court. Neither improper motive on the part of the creditor nor abuse of process has been established and, as discussed above, the grounds relied on by the debtor are not such as to establish that for other sufficient cause a sequestration order ought not to be made.
Accordingly, a sequestration order should be made against the estate of Michael Stewart with the usual order as to costs.
I certify that the preceding seventy-six (76) paragraphs are a true copy of the reasons for judgment of Barnes FM
Associate:
Date: 24 February 2010
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