Weller v REID - [2003] FMCA 592

FEDERAL MAGISTRATES COURT OF AUSTRALIA

WELLER v REID

[2003] FMCA 592

BANKRUPTCY – Bankruptcy notice – application to set aside – where notice served in accordance with Regulations but did not come to attention of debtor – whether debtor had a set off or cross demand not capable of being raised in original proceedings – whether cross demand was equal to or exceeded the amount claimed in the bankruptcy notice.

Bankruptcy Act 1966 (Cth), ss.40(1)(g), 41(7)
Bankruptcy Regulations 1996, Reg 16.01(1)(c)
Industrial Relations Act (1996) (NSW), s.106

Satchitanantham v Multilink Investments Pty Limited [2002] FCA 1277
Wilkinson v Downton [1897] 2 QB 57
Batshon v Migliorino & Associates [2003] FMCA 32
Premier Sports Australia Pty Limited v Dodds [2001] NSWSC 707
Re Noel Ling: ex parte Noel Ling v The Commonwealth of Australia (1995) 130 ALR 576
Guss v Johnstone (2000) 171 ALR 598
Glew, Re Glew; Glew v Harrowell of Hunt & Hunt Lawyers [2003] FCA 373
Re Brink; Ex parte Commercial Banking Co of Sydney Ltd (1980) 30 ALR 433

Applicant:

HERBERT WELLER

Respondent:

YVONNE REID

File No:

SZ 2010 of 2003

Delivered on:

9 December 2003

Delivered at:

Sydney

Hearing date:

9 December 2003

Judgment of:

Raphael FM

REPRESENTATION

For the Applicant:

Applicant in person

Counsel for the Respondent:

P R Whitford

Solicitors for the Respondent:

Clayton Utz

ORDERS

Application dismissed.
Applicant to pay respondent’s costs to be taxed if not agreed pursuant to Federal Court Act and Rules.

FEDERAL MAGISTRATES
COURT OF AUSTRALIA AT
SYDNEY

SZ 2010 of 2003

HERBERT WELLER

Applicant

And

YVONNE REID

Respondent

REASONS FOR JUDGMENT

These proceedings are brought by the debtor to set aside a bankruptcy notice number NN1464/03 issued on behalf of the creditor on the 19 June 2003. The grounds upon which the applicant seeks this relief are contained in his application, which is an application under s.41(7) of the Bankruptcy Act 1966 (Cth) alleging that he has a counter claim set off or cross claim that could not be set up in the original action and is equal to or exceeding the amount claimed in the Bankruptcy Notice. The respondent resists the application on a number of grounds.
The first ground upon which the respondent resists the application is that she argues:
“The Bankruptcy Notice was served upon the applicant on the

27 August 2003, but the application to set aside was not brought until the 29 September 2003 and therefore in the meantime the applicant had committed an act of bankruptcy by non compliance with the notice 21 days following the 27 August.”
There is filed in support of this contention, an affidavit of Leslie Thomas Field, a licensed commercial agent in the standard form of an affidavit of service. He deposes as follows:
“1. I did, on Wednesday the 27th day of August 2003 at 10.10 o’clock in the forenoon, duly serve Herbert Weller, with a true copy of a Bankruptcy Notice signed and dated by the Official Receiver on 19 June 2003, by delivering the document to his place of business in a sealed envelope addressed to Herbert Weller and marked ‘Private and Confidential’ and leaving the same with a female employee (Jo Tisdale), apparently over the age of sixteen and apparently employed at Herbert Weller, Solicitor, 6 Bridge Street, Windsor, in the said State.”
The ability to serve a bankruptcy notice in this form is granted to a creditor by Regulation 16.01(1)(c) of the Bankruptcy Regulations 1996. They state:
“(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) ... ;
(b) ... ;
(c) left in an envelope or similar packaging, or similar packaging marked with the person's name, at the last known address of the person.”
Mr Weller's position in regard to this affidavit was that the bankruptcy notice did not come to his attention until the 8 September 2003. On that date the creditor's solicitors faxed to him the bankruptcy notice. It was exhibited in these proceedings as Exhibit 1, a copy of the letter sent by Messrs Clayton Utz and the bankruptcy notice was attached. That letter contains the words:
“We attach by way of service the Bankruptcy Notice.”
Mr Weller asserts that that is evidence that no service took place on the date deposed to by the process server.
I think it is important to note that Mr Weller does not dispute that Mr Field attended at his premises and handed someone a document. What he says is that no one gave him that document or brought its existence to his attention. That may well be the case, but it does not avoid the fact of service. The failure of a bankruptcy notice to come to the attention of a party was considered above the Federal Court in Satchitanantham v Multilink Investments Pty Limited [2002] FCA 1277. On appeal from a decision of Federal Magistrate Driver, Conti J made it clear that the fact that a properly served document did not come to the attention of the person who was purported to have been served by it, it will not suffice to make the service irregular.
I am satisfied that in this case the applicant was properly served pursuant to the Regulations and that therefore the filing of the application to set aside the bankruptcy notice was an application that was made more than 21 days after the service of the bankruptcy notice and therefore after the act of bankruptcy had been committed. In those circumstances there is really little need to consider further the matters raised by Mr Weller. But in fairness to him I heard those points and I will give my views upon them.
The factual matrix in respect of which these proceedings arose is that Mr Weller was the employer of the creditor. In late 2001 Mr Weller was suffering from a depressive illness. At the same time the creditor was undergoing significant traumatic events in her own personal life. Mr Weller determined that he would close his solicitor's practice which would have had the effect of putting the creditor and a number of other people out of work. The creditor wrote on about the 21 December 2001 what has been described by the Industrial Commission of New South Wales as an ill advised email.
Thereafter a relationship of employer and employee was found to have continued between the parties. Eventually Mr Weller dismissed the creditor in a manner which the Industrial Commission found to be harsh unreasonable and unjust. The commission awarded the creditor $8,500 damages against Mr Weller.
On or about 4 December 2003 Mr Weller commenced certain proceedings in the District Court of New South Wales against the creditor. Those proceedings sought damages for negligence or alternatively conduct calculated to cause physical or emotional harm which he claimed was actionable under the rule in Wilkinson v Downton [1897] 2 QB 57. That was the cross claim, set off, or cross demand that he alleges could not be set up in the original action and was equal to or exceeded the amount claimed in the Bankruptcy Notice.
The first problem that Mr Weller faces is satisfying the court this cross claim could not be set up in the original action. Mr Weller is quite right in informing the court that the Industrial Relations Commission does not have jurisdiction to hear this type of case, but that is not an end to the matter. In Batshon v Migliorino & Associates [2003] FMCA 32, I considered a situation where a claim founding a Bankruptcy Notice had been brought under s 106 of the Industrial Relations Act 1996 (NSW) and an argument by the debtor that his cross claim could not have been asserted in those proceedings.
I explained why that submission was untenable. Cases such as Premier Sports Australia Pty Limited v Dodds [2001] NSWSC 707 at [19] and Re Noel Ling: ex parte Noel Ling v The Commonwealth of Australia (1995) 130 ALR 576 had established that such a case could be cross-vested into the Supreme Court of New South Wales and there heard together with the cross claim. I found in Batshon that this was fatal to the allegation under ss.41(7) and 40(1)(g) of the Bankruptcy Act. In that case, as in this, I went on to consider the further point of whether, even if that was an incorrect understanding of the law I could reach the degree of satisfaction required. I express that state of satisfaction as the one found in Guss v Johnstone (2000) 171 ALR 598 where the High Court put it as follows:
“ The state of satisfaction referred to in sections 40(1)(g) and 41(7) involves weighing up considerations as to the legal and factual merit of the claim relied on by the debtor, and the justice of allowing the bankruptcy proceedings to go ahead or requiring them to await determination of the claim.”
I have considered the statement of claim filed by the applicant. I note with some interest that it was filed by him in his professional capacity as a solicitor and thus the certificate now required under The Legal Practitioners Act as to the claim's reasonable prospects of success was signed by him and not by any independent person. I leave for others a consideration of whether that is a valid certificate. The creditor has referred me to a number of authorities including a decision of Lindgren J in Glew, Re Glew; Glew v Harrowell of Hunt & Hunt Lawyers [2003] FCA 373 where His Honour, in considering a similar matter traversed in his usual thorough manner the relevant authorities. At [12] his Honour said:
“ Perhaps little more can usefully be said than that a debtor must satisfy the court that there is sufficient substance to the counter- claim, set-off or cross-demand asserted to make it one which the debtor should, in justice, be permitted to have heard and determined in the usual way, rather than be forced to comply with the bankruptcy notice by payment or to commit an act of bankruptcy.”
The creditor argues that Mr Weller has made a fatal error in not providing me with any evidence which would assist me to calculate the amount of the damages claimed. In the absence of such evidence, I would not be satisfied that the cross demand might exceed the value of the claim. I think there is much force in this argument. It would not have been difficult for the applicant to have provided such information rather than ask me to take judicial notice that damages would exceed the claim based upon the medical evidence alone. The difficulty is that (a) I have not seen the medical evidence and (b) in a lengthy affidavit which the applicant filed in these proceedings, he seems to be admitting that his condition did not seriously worsen after the e-mail which was said to be the cause of this problem and is the centre point of the claim.
On reflection I am unable to be satisfied that this claim is one which has a fair chance of success such as considered in Re Brink; Ex parte Commercial Banking Co of Sydney Ltd (1980) 30 ALR 433. Or that any damages that might be rewarded would necessarily exceed the value of the cross claim. I do not think that it is just that the creditor be asked to await the decision of the District Court on this particular claim before these proceedings are finalised.
For all those reasons I will therefore dismiss the application and order that the applicant pay the respondent's costs to be taxed if not agreed in accordance with the Federal Court Act and Rules.

I certify that the preceding seventeen (17) paragraphs are a true copy of the reasons for judgment of Raphael FM

Associate:

Date: