W.F. Coltman Pty Ltd v Martin
[2007] FMCA 1110
•13 July 2007
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| W.F. COLTMAN PTY LTD v MARTIN | [2007] FMCA 1110 |
| BANKRUPTCY – Creditors petition – going behind judgment – whether deceit or fraud – sequestration order. |
| Bankruptcy Act 1966, s.52 |
| Corney v Brien (1951) 84 CLR 343 Wren v Mahony (1972) 126 CLR 212 Lennox Ex parte, Re Lennox (1885) 16 QBD 315 McDonald v McDonald (1965) 113 CLR 529 |
| Applicant: | W.F. COLTMAN PTY LTD ACN 004 310 123 |
| Respondent: | PETER FRANCIS MARTIN |
| File number: | MLG 312 of 2007 |
| Judgment of: | McInnis FM |
| Hearing date: | 29 June 2007 |
| Delivered at: | Melbourne |
| Delivered on: | 13 July 2007 |
REPRESENTATION
| Counsel for the Applicant: | Mr S.P. Woolley |
| Solicitors for the Applicant: | John R. Buman & Co |
| Respondent: | In person |
ORDERS
A Sequestration Order be made against the estate of Peter Francis Martin.
The Applicant Creditor’s costs including reserved costs, if any, be taxed and paid from the estate of the Respondent Debtor in accordance with the Bankruptcy Act 1966.
The Court notes that the date of the act of bankruptcy is 20 February 2007.
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT MELBOURNE |
MLG 312 of 2007
| W.F. COLTMAN PTY LTD ACN 004 310 123 |
Applicant
And
| PETER FRANCIS MARTIN |
Respondent
REASONS FOR JUDGMENT
This is a Creditor's Petition filed by the Applicant Creditor on 20 March 2007.
In the petition the Applicant Creditor claims that the Respondent Debtor owes the Applicant Creditor the amount of $32,031.06, being an amount for a judgment debt of $28,915.73 plus costs of $1,024.70, interest of $1,954.39 and further interest of $136.24.
The petition relies upon a Bankruptcy Notice issued on 23 October 2006. The Bankruptcy Notice attaches a certified extract of a default judgment entered by the Applicant Creditor against the Respondent Debtor. There is no dispute that the default judgment was entered on the date stated and nor is there any dispute in relation to service of the Bankruptcy Notice. In the present case it is confirmed that the notice was served upon the Respondent Debtor on 30 January 2007.
It is also not in dispute that as at date of hearing the Respondent Debtor, who is self-represented though assisted by a McKenzie friend, has not sought to set aside the default judgment entered in the Ballarat Magistrates Court which is the subject of the Bankruptcy Notice.
The requirements of s.52 of the Bankruptcy Act 1966 (the Bankruptcy Act) have been complied with in relation to the appropriate searches and proof of debt, affidavits being filed by the Applicant Creditor both before the Registrar and at the hearing of this matter.
The Respondent Debtor filed a notice stating grounds of opposition to the petition on 1 June 2007. In that notice the following grounds appear:
“1.THE ORDER OBTAINED IN MAGISTRATES COURT AT BALLARAT (NO U00406962) WAS OBTAINED BY DECEIT. THE RELEVANT PAPERS WERE NEVER SERVED ON PETER FRANCIS MARTIN.
2.PETER FRANCIS MARTIN NEVER GUARANTEED THE DEBTS OF THE FIRST DEFENDANT (MARTINS AND EVANS CONSTRUCTION PTY LTD) IN PROCEEDING U00406962.”
To understand the grounds of opposition it is relevant to note that the Respondent Debtor has also relied upon affidavits sworn by him on 31 May 2007, 12 June 2007 and 25 June 2007. In the 12 June affidavit the Respondent Debtor makes a significant claim in relation to the guarantee relied upon by the Applicant Creditor when obtaining the default judgment in the Ballarat Magistrates Court as follows:-
“9.If no genuine guarantee dated 1st December 2004 can be produced to this Court then there has been a serious miscarriage of justice and I request the Court allow me to examine Stephen G. Beattie, Stephen Owen Coltman, and John R. Buman to determine who was responsible for the order in the Ballarat Court being obtained fraudulently.”
It will be evident that reference has been made, in the notice stating grounds of opposition to the petition and in the extract from the affidavit set out above, to "deceit" and to the orders being obtained "fraudulently". In those circumstances the Court listed the matter for hearing on the basis that the Respondent Debtor should give evidence, and if allegations were made of a kind which supported those assertions, then it would be appropriate for the Court to hear from other deponents to affidavits, including Mr Stephen Owen Coltman who had sworn affidavits in support of the Creditor's Petition.
For reasons which will become apparent, I did not consider it necessary for Mr Coltman or any other witness to give evidence other than the Respondent Debtor. I permitted the Respondent Debtor to give evidence on oath on the basis that he had made assertions of fact from the bar table not supported in the affidavit material and, in particular, made assertions concerning his failure to make any attempt whatsoever to set aside the default judgment in the Ballarat Magistrates Court. Further, he made statements from the bar table, which he later verified in evidence, concerning his lack of knowledge of the complaint which was the subject of the proceedings in the Ballarat Magistrates Court and further explained that, having had the opportunity to view the original exhibit to the affidavit of Stephen Owen Coltman sworn 14 June 2007 namely, the document referred to as a "commercial 30 day credit application for company or business" together with the accompanying director's guarantee (annexure "SOC1" to the affidavit of Mr Coltman). That opportunity was provided to the Respondent Debtor at the hearing of this matter and the original of the exhibit became a formal exhibit in this Court (exhibit A1).
In his evidence the Respondent Debtor conceded that his signature appeared on the customer guarantee and was witnessed by his wife, with the document being dated 1 December 2004. Hence a number of arguments advanced for and on behalf of the Respondent Debtor concerning an undated customer guarantee and that it was unsigned did not appear to be pursued even though the Respondent Debtor himself sought to exhibit another document entitled "Customer Guarantee" to his affidavit sworn 12 June 2007.
The Court gave the Respondent Debtor an opportunity to explain how the other "Customer Guarantee" came into existence. During the course of his evidence he suggested that that document had been obtained by the Respondent Debtor after he had received the Bankruptcy Notice, and as I understand it, he received that other document in or about March 2007. In any event, the Respondent Debtor in his affidavit of 12 June 2007 refers to the "Customer Guarantee" as being the one which he presumed to be the guarantee which the Applicant Creditor relies upon.
It should be noted that that document had been referred to by the Respondent Debtor in his affidavit sworn 31 May 2007 though apparently was not annexed to that affidavit and hence was subsequently annexed to the further affidavit to which I have referred, sworn 12 June 2007. Nothing turns on the omission from the first affidavit of that annexure. It is important to note, however, that when provided with the original of the guarantee actually relied upon by the Applicant Creditor, the Respondent Debtor did not deny that his signature and a date appeared on that document. He did seek to pursue an argument that the customer guarantee was deficient to the extent that it did not refer to the goods to be supplied pursuant to the "commercial 30 day credit" arrangement.
During the course of his evidence, the Respondent Debtor explained that his inactivity in relation to setting aside the default judgment of the Ballarat Magistrates Court arose in part as a result of his dissatisfaction with the legal process and inability to afford the legal costs of pursuing an application of that kind. He indicated that he simply did not have the resources to fund the legal expenses required for an application to set aside the default judgment in the Ballarat Magistrates Court.
It was evident to me that the real complaint of the Respondent Debtor was that he had not been served with the complaint which had been relied upon when the default judgment in the Ballarat Magistrates Court had been entered. Whilst he made reference in the documents to judgments being entered "fraudulently" or by "deceit", there was simply no evidence to support those assertions. Ultimately, this is a clear case where the Court is invited to consider whether it should go behind the judgment obtained by default in the Ballarat Magistrates Court based upon assertions by the Respondent Debtor that he was not indebted as he, at least initially claimed, had not executed a guarantee or, after being confronted with the original guarantee, that it was somehow defective and could not be relied upon in support of the default judgment.
It is appropriate to at least consider whether there is any evidence before this Court of fraud when the judgment was obtained.
The affidavit of Stephen Owen Coltman referred to earlier in this judgment and sworn 14 June 2007 relevantly sets out in my view the background in brief terms to the claim:
“2.THAT the judgment obtained in the Ballarat Magistrates’ Court on 3 October 2006 against the Respondent was pursuant to a Commercial 30 day Credit Application for Company or Business made by Martin & Evans Construction Pty. Ltd., hereafter known as the business, (the application) and Directors Guarantee signed by the Respondent and dated 1 December 2004 (the guarantee).
3.Annexed hereto and marked with the letter “SOC1” is a true copy of the application and the guarantee.
4.The monthly credit limit contained in the application was $5,000.00. This is the usual limit applied to new customers. The monthly credit limit was exceeded by mutual agreement. The amount of credit extended to the business, as guaranteed by the Respondent, at the time of issuing proceedings in the Magistrates’ Court of Victoria in or about February 2006 was $38,415.73.
5.The guarantee signed by the Respondent on 1 December 2004 was attached to and formed part of the application bearing the business name (Martin & Evans Constructions Pty. Ltd.).
6.The affidavit of the Respondent sworn 31 May 2007 refers to an undated guarantee which is known as exhibit “A” (the earlier guarantee). The earlier guarantee was on behalf of the business and executed by the two directors, Peter Martin and Andrew Evans and undated which ceased on or about September 2004 when Andrew Evans ceased to be a director of the business.”
In my view the evidence in the present case does not support any assertion of fraud or deceit. Rather, the Court is left with the mere assertion by the Respondent Debtor that he was not served with the complaint in the Ballarat Magistrates Court and/or that the guarantee relied upon by the Applicant Creditor was somehow deficient as it did not refer to the goods to be supplied. Both those matters, however, could have been properly raised in an application to set aside the judgment.
In my view there is simply insufficient evidence before this court to persuade me that the Respondent Debtor has taken any or any reasonable steps to set aside the default judgment. It is not sufficient for the Respondent Debtor to simply complain that he did not want to become involved in expensive litigation. An application to set aside a default judgment entered in circumstances where service has not been effected is a matter which could be undertaken by a self-represented litigant. It does not require, in my view, a great deal of expense and indeed would only require the applicant completing the appropriate application and attending Court on an application to set aside the default judgment and seek a rehearing.
The applicant has simply made no attempt whatsoever to undertake that task. The only attempt he has made on his evidence appeared to be arranging for his wife to visit the Ballarat Magistrates Court on 10 May 2007 to obtain a certified extract of the default judgment and a copy of the complaint and statement of claim. He also obtained a copy of an affidavit of service from the process server, Mr Beattie, referred to earlier in this judgment, apparently sworn 30 August 2006. Thereafter, he has taken no action whatsoever to set aside the default judgment.
It should be noted that the judgment in this matter was entered in the Ballarat Magistrates Court on 3 October 2006. The Bankruptcy Notice was served upon the Respondent Debtor on 30 January 2007. Hence it took the Respondent Debtor until May 2007, after service of the Bankruptcy Notice which had annexed to it the certified extract of the default judgment, to obtain or seek to obtain the documents which were relevant in the Ballarat Magistrates Court to that default judgment. There is simply no satisfactory explanation available to the Court to explain the considerable delay.
Having found that there is no evidence of fraud or deceit and no reasonable explanation as to any or any reasonable attempt to set aside the default judgment, it remains for the Court to consider whether on the material before it there are any grounds upon which this Court can, according to law, go behind the default judgment relied upon by the Applicant Creditor.
It is acknowledged that the Court does have a power to go behind a judgment but the Court has a discretion as to whether it will go behind a judgment. However, it is accepted that the Court, before going behind the judgment, should be satisfied that there are substantial reasons for doubting whether there is in reality a debt owed by the debtor to the creditor (see Corney v Brien (1951) 84 CLR 343 and Wren v Mahony (1972) 126 CLR 212).
Counsel for the Applicant Creditor submitted that in order to go behind the judgment in circumstances of the present kind, the court would need to consider whether the judgment was obtained by fraud, collusion or a miscarriage of justice, without serving the debtor with the originating process or by an unfair compromise (see Lennox Ex parte, Re Lennox (1885) 16 QBD 315).
I have already dealt with the allegations of fraud in the present case and found that there is simply no evidence to support any allegation of that kind. It is clearly a matter for the Respondent Debtor to adduce evidence of fraud which may persuade the court that it would be in the interests of justice to go behind the judgment. The fraud alleged needs to be both specifically alleged and proved (see McDonald v McDonald (1965) 113 CLR 529).
I should also add that in relation to the allegation that the complaint was not served, I am not satisfied on the evidence before me that the Respondent Debtor has established non-service. In any event, that matter, along with any other technical attacks upon the default judgment, could and should have been made in an application to set aside the judgment and seek a rehearing, which the Respondent Debtor has failed to do. His failure to do that without adequate reason in my view strengthens the conclusion that there is no proper basis upon which this court can accept that he was not served with the complaint, or even if he was not served, there is no proper basis upon which, in the circumstances, in the absence of proved fraud, it would be appropriate for this Court, applying the authorities to which I have referred, to go behind the judgment.
It follows that where the court is reluctant to go behind the judgment and where on the affidavit material it is otherwise satisfied that the requirements of s.52 of the Bankruptcy Act have been established, it is appropriate that a Sequestration Order be made in the usual form together with an order that the Respondent Debtor pay costs including reserved costs.
It is noted that on the material before me, that the date of act of bankruptcy is 20 February 2007.
I certify that the preceding twenty-seven (27) paragraphs are a true copy of the reasons for judgment of McInnis FM
Associate:
Date: 13 July 2007
0
4
1