Yin v Do
[2016] FCCA 697
•9 March 2016
FEDERAL CIRCUIT COURT OF AUSTRALIA
| YIN v DO | [2016] FCCA 697 |
| Catchwords: BANKRUPTCY LAW – Bankruptcy Notice – disputes receiving Bankruptcy Notice or Judgment founding the Act of Bankruptcy. |
| Legislation: Evidence Act1995 (Cth), s.140 Federal Circuit Court (Bankruptcy) Rules2006 (Cth), r. 4.02(1) |
| R v Brown & Dunn (1893) 6 R 67 Briginshaw v Briginshaw(1938) 60 CLR 336, at 362. Neat Holdings Pty Ltd v Karajan Holdings Pty Ltd and Ors[1992] HCA 66; Tov-Lev v Lowbeer (No 2) [2014] |
| Applicant: | SODALY YIN |
| Respondent: | NGOC TIEN DO |
| File Number: | SYG 2458 of 2015 |
| Judgment of: | Registrar Chuan Ng |
| Hearing date: | 27, 29 January 2016 |
| Date of Last Submission: | 29 January 2016 |
| Delivered at: | Sydney |
| Delivered on: | 9 March 2016 |
REPRESENTATION
| For the Applicant: | Mr Argy, Solicitor |
| For the Respondent: | In person |
ORDERS
The Creditors’ Petitions, variously filed on 7 September 2015, 2 November 2015, and 18 January 2016 by the Applicant be dismissed.
No order as to costs.
| FEDERAL CIRCUIT COURT OF AUSTRALIA AT SYDNEY |
SYG 2458 of 2015
| SODALY YIN |
Applicant
And
| NGOC TIEN DO |
Respondent
REASONS FOR DECISION
This is a Creditor’s Petition which was last before me as the Presiding Registrar on 29 January 2016.
For the reasons identified below, I am not satisfied on the balance of probabilities that an essential requirement, namely that the Judgment founding the Bankruptcy Notice has been served on the Respondent under Regulation 16.01 of the Bankruptcy Regulations 1996, has been complied with.
Accordingly, I dismiss the various versions of the Creditor’s Petitions filed by the Applicant against the Respondent. I also make no order as to costs.
Court history
The matter has been in the Bankruptcy List on several occasions: twice before Registrar Morgan for an application for substituted service of the Creditor’s Petition on 21 and 28 October 2015; and before me as the Presiding Registrar on 25 November 2015; 27 January 2016; and 29 January 2016. On the last two occasions, the Respondent gave sworn evidence and was cross-examined. I will return to these events in due course.
Background
On 2 February 2016, the Applicant obtained a Judgment against the Respondent at Fairfield Local Court for the amount of $99,532.19.
On 19 May 2016, the Applicant’s solicitor, Anthony Romeo, obtained a Bankruptcy Notice (BN 181033/2015) from AFSA based on the Judgment.
On 20 May 2015, the Applicant’s solicitor purported to serve the Bankruptcy Notice attaching a copy of the Judgment by post, pursuant to Regulation 16.01 of the Bankruptcy Regulations. In his Affidavit sworn approximately 4 months later on 7 September 2015, the Applicant’s solicitor deposed:
“1. On Wednesday the 20th of May, 2015, I served Ngoc Tien Do with a copy of Bankruptcy Notice No. 181033 signed by an Officer authorised by an Official Receiver, together with a copy of the judgment dated 2 February 2015 obtained by the applicant against the respondent debtor in the Local Court of New South Wales by mailing a copy of the documents to Unit 4, 22 – 44 Park Street, Merrylands, New South Wales 2160 by registered post.
2. Annexed to this affidavit and marked with the letter “A” is a copy of the letter served to the respondent debtor.
3. Annexed to this affidavit and marked with the letter “B” is a copy of the Registered Post Lodgment & Delivery Confirmation – Advice Receipt evidencing successful service.”
In his Affidavit filed with the Registry on 7 September 2015 (hereafter “the First Affidavit of service of the Bankruptcy Notice”), the Applicant’s solicitor annexed a copy of a covering letter addressed to the Respondent debtor on d’agostino letterhead dated 20 May 2015 (Annexure A) and a copy of an “Australia Post Registered Post Lodgement and Delivery Confirmation – Advice Receipt” which bears a signature acknowledging receipt on 26 May 2015 (as Annexure B). For reasons only known to the Applicant’s solicitor, he elected not to annex a copy of the Bankruptcy Notice or the supporting Judgment to the First Affidavit of service of the Bankruptcy Notice.
On 26 May 2015, the Respondent attended Merrylands Post Office. There he signs for the Registered Post envelope sent by the Applicant’s solicitor. In his sworn oral evidence on 27 January 2016, the Respondent identified his signature on the Australia Post Registered Post Lodgement and Delivery Confirmation – Advice Receipt. Contrary to the Applicant’s case, the Respondent denies the contents of the envelope contained either a Bankruptcy Notice or Judgment. But more on this later.
Assuming for the moment that the Bankruptcy Notice was validly served on the Respondent on 26 May 2016, the date of the Act of Bankruptcy (21 days later) occurs on 16 June 2016.
On 7 September 2016, the Applicant’s solicitor presented (by e-filing) the Creditor’s Petition in the Sydney Registry. This Creditor’s Petition is filed within the prescribed 6 month’s timeframe: s 44(1)(c) of the Bankruptcy Act 1966 (Cth), and commences these proceedings. In the first of several anomalies to come, the Affidavit verifying the Creditor’s Petition (Part 2) is sworn by the Applicant’s solicitor, when in fact it should have been the Applicant herself. For convenience I will refer to this as the First Creditor’s Petition.
The First Creditor’s Petition is set down for the first court date of 15 October 2015.
On 14 October 2015, the Applicant’s solicitor e-filed an Application for substituted service of the Creditor’s Petition, and listed before Registrar Morgan on 21 October 2015.
On 21 October 2015, the substituted service application was adjourned to 28 October 2015.
On 28 October 2015, Registrar Morgan saw fit to make orders for substituted service against the Respondent, requiring the Creditor’s Petition and related documents to be served by 2 modes of sub-service: (a) delivering to a residential address at Unit 4, 22 - 44 Park Street, Merrylands, New South Wales 2160; and (b) sending by ordinary post to Unit 4, 22 – 44 Park Street, Merrylands, New South Wales 2160. The Creditor’s Petition was relisted to 25 November 2016.
On 2 November 2015, the Applicant’s solicitor e-filed a second version of the Creditor’s Petition with the Registry. For convenience I refer to this as the Second Creditor’s Petition. For reasons which remain unclear, the Applicant’s solicitor elected not to adopt the usual practice of re-filing the first Creditor’s Petition which had been filed on 7 September 2015 and simply asking the Registry to electronically endorse a new court date of 25 November 2015 on the cover page. Instead, the Applicant’s solicitor prepared a new Creditor’s Petition where he inserted a new court date on 25 November 2015 and signed it. As with the one forming part 2 of the First Creditor’s Petition presented on 7 September 2015, the Applicant’s solicitor swears an entirely new Affidavit verifying the Creditor’s Petition on 2 November 2015, in circumstances where he is not himself the Applicant.
There is nothing on the Court file evinces that leave was ever granted by Registrar Morgan for a new Creditor’s Petition and verifying Affidavit to be re-filed.
On 9 November 2015, a process server John Vitanza serves the Second Creditor’s Petition (dated 2 November 2015) and accompanying documents by delivering to the Respondent’s address in compliance with Registrar Morgan’s first order for substituted service. In the Affidavit of service deposed by Mr Vitanza, he annexes the First Affidavit of service of the Bankruptcy Notice deposed by the Applicant’s solicitor on 7 September 2015 (which in turn annexes the covering letter and Australia Post). Mr Vitanza’s Affidavit of Service of the Second Creditor’s Petition does not annex a copy of the Bankruptcy Notice or Judgment.
At this point I pause to observe another deficiency in the Applicant’s case. Notwithstanding the fact that Registrar Morgan ordered a second mode of substituted service (by post), to this date no evidence has ever been filed by the Applicant’s solicitor to evince that this order has ever been complied with. While to some extent this is militated by the fact that the Respondent has appeared before the Court and he is aware of these proceedings, it is but another demonstration of the Applicant’s solicitor’s lack of proper diligence in prosecuting this Creditor’s Petition.
The matter returned before me as the Presiding Registrar on 25 November 2015 in the Bankruptcy List. On that date, the Respondent appeared in person and sought an adjournment to obtain legal and financial advice. I alerted Mr Argy (appearing as Agent for the Applicant) of the absence of any Bankruptcy Notice or Judgment ever being e-filed with the Registry as part of the Affidavit of Service of the Bankruptcy Notice. Mr Argy indicated he would get instructions before the next court date. By consent, the Creditor’s Petition was adjourned to 27 January 2016.
The next relevant event occurs on 18 January 2016. On that date, the Applicant’s solicitor e-files with the Registry a new Affidavit of Service of the Bankruptcy Notice now sworn on 14 January 2015 (hereafter “the Second Affidavit of service of the Bankruptcy Notice”), where he deposes the following:
“1. On Wednesday the 20th of May ,2015, I served Ngoc Tien Do with a copy of Bankruptcy Notice No. 181033 signed by an Officer authorised by an Official Receiver, together with a copy of the judgment dated 2 February 2015 obtained by the applicant against the respondent debtor in the Local Court of New South Wales by mailing a copy of the documents to Unit 4, 22 – 24 Park Street, Merrylands, New South Wales 2160 by registered post. Annexed to the affidavit and marked with the letter “A” is a copy of the Bankruptcy Notice No. 181033.
2. Annexed to this affidavit and marked with the letter “B” is a copy of letter served to the respondent debtor.
3. Annexed to this affidavit and marked with the letter “C” is a copy of the Registered Post Lodgment & Delivery Confirmation – Advice Receipt evidencing successful service.”
I observed three deficiencies in this Second Affidavit of service of the Bankruptcy Notice:
a)the Applicant’s solicitor has now erroneously referred to the address for service as “Unit 4, 22 – 24 Park Street Merrylands NSW”, when the correct numerical address is “Unit 4, 22 – 44”.
b)While this Affidavit now annexes a copy of the Bankruptcy Notice, no copy of the judgment is annexed to this Affidavit.
c)The Applicant’s solicitor witnesses his own annexures “A”, “B”, and “C”.
On 18 January 2016, the Applicant’s solicitor e-files another new version of the Creditor’s Petition. Headed “Creditor’s Petition – Further Amended”, this third version is dated 14 January 2016. A new Part 2 Affidavit verifying the Creditor’s Petition is also sworn, although this time the verifying Affidavit is deposed by the Applicant herself and now witnessed by the Applicant’s solicitor. This would be indicative of the fact that the Applicant’s solicitor now realised his previous error of swearing this Affidavit himself, and that the Applicant herself was the most appropriate deponent. For convenience, I refer to this is the Third Creditor’s Petition.
On 19 January 2016, process server Ian Hewer serves the Third Creditor’s Petition on the Respondent by leaving it and the accompanying documents at the Respondent’s last known address. Accompanying this Third Creditor’s Petition is now the Applicant solicitor’s second Affidavit of service of the Bankruptcy Notice, which was sworn 18 January 2016. For reasons which continue to be elusive, no Judgment from the Fairfield Local Court is annexed to Mr Hewer’s affidavit as part of this bundle of documents. Other than being presented as part of the new verifying Affidavit now sworn by the Applicant herself, I cannot fathom the reason why a Third Creditor’s Petition was presented and re-served on the Respondent at such a late date.
The Third Creditor’s Petition raises more anomalies. First, no leave was granted by a Registrar for this Third Creditor’s Petition to be filed. Secondly, if the service of the Creditor’s Petition was relying on the substituted service orders made by Registrar Morgan, there was no compliance of the second mode. Thirdly, the filing of the Third Creditor’s Petition is 7 months and 3 days after the date of the act of Bankruptcy occurred on 16 June 2015. In circumstances where leave was not granted to file it, arguably it could be said that the Third Creditor’s Petition is now filed out of time.
THE PROCEEDINGS ON 27 JANUARY 2016
On 27 January 2016, the matter returned before me in the Bankruptcy List. Mr Argy again appeared as agent for the Applicant while the Respondent appeared in person. Again I alerted Mr Argy to the fact that there was still no evidence before the Court of a Judgment ever being filed as part of any Bankruptcy Notice relating to these proceedings.
The Respondent’s sworn oral testimony on 27 January 2015
From the bar table, the Respondent disputed ever being served with the Bankruptcy Notice or the Judgment.
In circumstances where I considered it more expedient to deal with a fundamental dispute which – if accepted – would invalidate the Creditor’s Petition, I dispensed with the requirement for the Respondent to file a Notice of Opposition and accompanying affidavit, and proceeded to hear the matter instanter.
As the Respondent started to make a number of factual assertions at the Bar table, I considered it appropriate that he give sworn evidence. Relevantly, he gave the following evidence and was subject to cross-examination by Mr Argy:
·He was a former solicitor for 15 years but had not renewed his practising certificate because it was suspended, and he was presently unemployed (Transcript 27.1.16 pages 24.40 – 25.25);
·He had attended the Merrylands Post Office on 26 May 2015 where he signed the Registered Post receipt, acknowledging his signature (Transcript 27.1.16 pages 25.25);
·He did not open the Registered Post envelope until “one day later” (Transcript 27.1.16 pages 26.5).
·When he opened the envelope, he did not see a Bankruptcy Notice (Transcript 27.1.16 pages 26.10; 26.25; 27.25; 27.32).
·In November 2015 he sought legal advice from Justice Connect and told them he had not received the Bankruptcy Notice (Transcript 27.1.16 pages 27.25)
·In cross-examination, the Respondent maintained he never received the Bankruptcy Notice (Transcript 27.1.16 pages 29.35; 36.4; 36.30; 38.26);
·Having been shown the Judgment, he couldn’t recall if he had ever seen this before (Transcript 27.1.16 pages 30.22). In further cross-examination, he maintained he could not recall having seen the Judgment, but couldn’t swear to the Court without looking at the documents he received (Transcript 27.1.16 pages 34.19 – 35.30; 38.25);
·In answer to a question posed by me, the Respondent did not think to bring the contents of this Registered Post envelope to Court today, and only thought of bringing the most recent documents he received around 19 January 2016 (Transcript 27.1.16 pages 27.45);
·He did not attend the Fairfield Local Court hearing (Transcript 27.1.16 pages 33.25), and never filed a Defence to the Statement of Claim (Transcript 27.1.16 pages 38.5);
·In cross-examination, he denied seeing the covering letter dated 20 May 2015 from the Applicant’s solicitor when he opened the Registered Post envelope (Transcript 27.1.16 pages 37.25);
·When pressed as to what was contained in the Registered Post envelope he received on 26 May 2015, based on his memory he recalled receiving a Statement of Claim and related documents, but not seeing a copy of the Judgment amongst these contents (Transcript 27.1.16 pages 38).
At the conclusion of the Respondent’s sworn evidence, I adjourned the proceedings to 29 January 2016 at 4 pm in order for him to see if he could find the contents of the Registered Post envelope which he signed for on 26 May 2015, and to see whether he had in fact provided a copy to Justice Connect when he saw them for legal advice in November 2015.
Before the proceedings concluded on 27 January 2016, Mr Argy tendered a further affidavit from the Applicant’s solicitor sworn on the same date and had been emailed to my Registrar’s Assistant. In what may be described as a Third Affidavit of service of the Bankruptcy Notice, the Applicant’s solicitor finally annexed both the Bankruptcy Notice and Judgment, but this time as an attachment to an email received from AFSA on 19 May 2015, deposing:
“1. On 19 May 2015 our firm received an email from the Australian Financial Security Authority (AFSA), enclosing a letter addressed to our office, together with Bankruptcy Notice 181033 and the Judgement/Order of the Local Court of New South Wales. Annexed and marked with the letter “A” is a copy of the email from AFSA, as well as the attachments.
2. On 20 May 2015 I caused a letter to be sent by registered post, to the debtor, Mr NT Do of Unit 4, 22 – 24 Park Street, Merrylands NSW 2160, enclosing Bankruptcy Notice 181033. To the best of my knowledge, the sealed copy of the Judgement/Order of the Local Court of New South Wales was enclosed as it was stated as being enclosed in my covering letter to the debtor (emphasis added). Annexed and marked with the letter “B” is a copy of the covering letter to the debtor, together with the registered post receipt confirming delivery.”
In this latest Affidavit, the Applicant’s solicitor again repeated his error of referring to the wrong address of the premises, instead of the correct address of “Unit 4, 22 – 44 Park Street Merrylands NSW 2160”.
THE PROCEEDINGS ON 29 JANUARY 2016
On 29 January 2016, the matter returned before me. Mr Argy again appeared as Agent for the Applicant, and the Respondent appeared in person.
Armed with a number of documents, the Respondent returned to the witness box and gave the following sworn evidence:
·In the intervening period since 27 January 2016, he returned home and found the documents which he received in the Registered Post envelope on 26 May 2015, which he now produced. These documents comprised of the Notice of Motion for Default Judgment for Liquidated Claim filed at Fairfield Local Court; an Affidavit of Anthony Romeo dated 2 February 2015; and Affidavit of Service by John Vittanza deposed on 3 January 2015 (2 copies); the Statement of Claim filed on 22 December 2014 (2 copies). This was tendered as Exhibit 1 (Transcript 29 January 2016 pages 4.32 – 5.15).
·In response to questions posed by me, the Respondent was adamant that Exhibit 1 comprised of the documents he received in the Registered Post envelope which he collected and signed for at Merrylands Post Office (Transcript 29 January 2016 pages 7.18 – 9.1).
·The Respondent produced the documents he had received in November 2015: including: a d’agostino covering letter dated 3 November 2015; the First Affidavit of Service of the Bankruptcy Notice dated 7 September 2015 (which did not annex the Bankruptcy Notice or Judgment); an Affidavit of Search verifying Paragraph 4 of the Creditor’s Petition; the Trustee’s Consent; and Second Creditor’s Petition filed on 2 November 2015 (including the Part 2 Affidavit verifying the Creditor’s Petition incorrectly deposed by the Applicant’s solicitor). This was tendered as Exhibit 2 (Transcript 29 January 2016 pages 6.15 – 6.40).
·He recalled receiving Exhibit 2 sometime around November 2014 when he found it in the front of his house, after someone told him it was there (Transcript 29 January 2016 page 9.20).
·He now recollects only ever taking Exhibit 2 to Justice Connect when he saw them in November 2015 for legal advice (Transcript 29 January 2016 pages 11.40).
·The Respondent then produced the documents he received sometime on 19 January 2015, being: a d’agostino covering letter dated 19 January 2016; the Third Creditor’s Petition filed on 18 January 2015 (this time including the correctly deposed Affidavit verifying the Creditor’s Petition sworn by the Applicant Sodalyn Yin); the Second Affidavit of service of the Bankruptcy Notice” dated 14 January 2016 (with the erroneous address of “Unit 4, 22 – 24 Park Street Merrylands NSW”) annexing only the Bankruptcy Notice and not the Judgment from Fairfield Local Court; an new Affidavit verifying Paragraph 4 of the Petition dated 14 January 2016; and the Trustee’s Consent. This was tendered as Exhibit 3 (Transcript 29 January 2016 page 6.45).
In cross-examination by Mr Argy:
·The Respondent reaffirmed his previous evidence that he only ever received the Statement of Claim and related documents (now Exhibit 1) when he signed for and collected the Registered Post envelope from Merrylands Post Office (Transcript 29 January 2016 pages 16.1 – 16.40).
·After being shown the Affidavit of Anthony Romeo (now tendered as Exhibit 4), the Respondent denied ever receiving the covering letter dated 20 May 2015, the Bankruptcy Notice or Judgment, and refuted the suggestion and stated that it was “impossible” that the Registered Post envelope contained these documents (Transcript 29 January 2016 pages 20.20 – 21.45).
·The Respondent was then taken through a chronology shown to him by Mr Argy, which was marked MF1 1:
a)He agreed that in September 2014, he entered into 3 loan agreements with the Applicant, Sodalyn Yin, totalling $75,000 (Transcript 29.1.16, page 22.35).
b)On 17 October 2014 he gave the Applicant a cheque for $3500. He agreed that this cheque was dishonoured but explained that he asked her not to bank it for another two weeks (Transcript 29.1.16, page 23.5).
c)He agreed that his estranged wife currently resides at Unit 4, 22 – 44 Park Street Merrylands (Transcript 29.1.16, page 23.21).
d)He was shown a Land & Property Information search obtained on 14 November 2014. Tendered as Exhibit 5, he agreed that at that time he was still the co-owner of Lot 4/SP 64289 with his wife, Thi Bich Ngoc Nguyen, being the residence at unit 4, 22 – 44 Park Street Merrylands, and that they had both owned it since 2002 (Transcript 29.1.16, page 25.5 – 25.40).
e)He agreed that on 19 November 2014, he received a letter of demand from d’agostino for payment of the outstanding debt that he owed to the Applicant. This was marked Exhibit 6 (Transcript 29.1.16, page 26.40);
f)He was then shown a LPI search for the same property as at 24 April 2015 (tendered as Exhibit 6), and agreed that as of this date his wife was now the only registered owner. He reiterated that when he borrowed money from the Applicant, he had a financial agreement with his wife to transfer the property to her in exchange for his share of the equity to pay for his business debts (Transcript 29.1.16, page 27.40).
g)He refuted the suggestion by Mr Argy that (in the 4 to 5 month period between November 2014 and when he was served with the Statement of Claim in April 2015) the reason he had transferred the property to his wife was because he realised the possibility that had he not repaid the debt after being served with the Statement of Claim, he would be facing bankruptcy proceedings and risk losing the property (Transcript 29.1.16, page 28.5 – 28.40).
h)The reason he had transferred the property to his wife was because he entered into a binding financial agreement with her in order to get money or funds to run his business and “pay people” (Transcript 29.1.16, page 25.36 – 25.40; page 28.25).
i)Had he wanted to, he could have transferred the property and declare himself bankrupt, but he did not (Transcript 29.1.16, pages 28.35 – 29.5).
j)He was finally shown a published “Notice Inviting Claims Against Legal Practitioners Fidelity Fund”, inviting persons who had suffered pecuniary loss because of default of the Respondent’s law practice issued by the Council of the Law Society of NSW to lodge a claim form by 23 December 2015 (tendered as Exhibit 8). The Respondent denied any knowledge of ever seeing the Notice. I should indicate that when I pointed out that there was nothing contained within the Notice which specifically related to these bankruptcy proceedings, Mr Argy conceded that no adverse inference could be drawn against the Respondent.
·In answers proffered during his own re-examination, the Respondent explained that the purpose for him to transfer his property to his wife was to obtain $200,000 to run his business and repay debts; that this transfer occurred in December 2014; and was a binding financial agreement he entered into with his wife under s 90C of the Family Law Act (Transcript 29.1.16, page 49.20 - 49).
CLOSING SUBMISSIONS
The Applicant’s submissions
On behalf of the Applicant, Mr Argy submitted that I would prefer the Affidavit evidence of the Applicant’s solicitor regarding the service of the Bankruptcy Notice and Judgment by Registered Post, over the sworn evidence of the Respondent. He submitted that unlike the Respondent who had a vested interest in disputing the evidence, the Applicant’s solicitor held a current practising certificate, had given sworn evidence by way of affidavit, and had not been required for cross-examination by the Respondent.
Mr Argy also submitted that I would accept the Applicant’s solicitor’s affidavit evidence that he did in fact enclose the Bankruptcy Notice and Judgment as part of the service by registered post, and his omission to annex these as part of his affidavits of service was deliberate. He also submitted that any errors made by the Applicant’s solicitor in prosecuting these bankruptcy proceedings, such as his failure to file the Bankruptcy Notice and Judgment were all curable defects pursuant to s 306 of the Bankruptcy Act, and which had now been remedied.
Based on his cross-examination of the Respondent, Mr Argy further submitted that the chronology of events (as evinced by MFI 1) suggested that in the four month period where the Respondent was served with a Statement of Claim, he had deliberately transferred the property to avoid any possibility and defeat the possible consequences of bankruptcy proceedings being commenced against him. Although Mr Argy could not say when the transfer specifically occurred, he relied on the two LPI searches which demonstrated that this transfer must have happened sometime between 14 November 2014 and 24 April 2015. He also submitted that as a former solicitor with 15 years’ experience in conveyancing and family law, the Respondent was aware that bankruptcy proceedings could be commenced against a debtor who does not pay his debts.
Mr Argy finally submitted that the Respondent was “trying to deliberately mislead the Court”, and for this reason his evidence could not be relied upon and the affidavit evidence of Anthony Romeo should be preferred. It was at this point that I alerted Mr Argy to the fact (and he conceded) that at no time during his cross-examination of the Respondent did he put this specific suggestion to him, as required in the long established rule in R v Brown & Dunn (1893) 6 R 67, so as to allow the Respondent an opportunity to respond to the allegations and “show his mettle under attack”: Allied Pastoral Holdings Pty Ltd v Commissioner v Taxation [1983] 1 NSWLR 1.
The Respondent’s submission
In oral submissions, the Respondent adamantly denied that he ever received the Bankruptcy Notice or a Judgment when he collected the Registered Post envelope on 26 May 2015. Despite vigorous cross-examination by Mr Argy, he continued to maintain that he only receive the documents which have now been tendered as Exhibit 1. Although the Respondent had some English language difficulties and was confused by some of Mr Argy’s attempts at cross-examination, I am satisfied that he was unwavering in his denial of ever receiving the Bankruptcy Notice and Judgment.
The Respondent also refuted Mr Argy’s submission that he had deliberately transferred the property to his wife to defeat any future bankruptcy proceedings. He maintained that the purpose of the transfer was part of a binding financial agreement with his wife which they executed in December 2014 where he received $200,000 from his wife, which he then used to repay his creditors and support his business. Although I invited the Respondent to file and serve further evidence of the financial agreement, none has been received by the Registry to date.
THE RELEVANT LAW
The act constituting the act of bankruptcy
In the present case, the Applicant relies on service of a Bankruptcy Notice and accompanying judgment to ground the Act of Bankruptcy against the Respondent.
Section 40(1)(g) of the Bankruptcy Act 1966 (Cth) relevantly reads:
Acts of bankruptcy
(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 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…In the present case, the Respondent relied on service of the Bankruptcy Notice and Judgment pursuant to Regulation 16.01(1) of the Bankruptcy Regulations:
(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
…
(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…
In order to comply with s 40(1)(g) of the Bankruptcy Act 1966 (Cth) and to advance the Creditor’s Petition against the Respondent, a fundamental requirement is for both the Bankruptcy Notice and Judgment to be served on the Respondent. Attaching the judgment to a Bankruptcy Notice, as required by s 41(2) of the Bankruptcy Act and Regulation 4.02(1) of the Bankruptcy Regulations, is an essential requirement: Curtis v Singtel Optus Pty Ltd [2014] FCAFC 144. Failing to do so cannot be cured by invoking s 306 of the Bankruptcy Act: Commonwealth Bank of Australia v Horvath (Junior) [1999] 143 per Finklestein J.
In Curtis v Singtel Optus Pty Ltd (supra), the Full Court reaffirmed this fundamental requirement and went onto to outline the following reasons (at pars [29] – [34]):
29.In our view, attaching a copy of the final judgment or order to the bankruptcy notice at the time of issue was a requirement of s 41(2) and reg 4.02(2).
30.It is appropriate to begin with some general observations relating to the significance of the final judgment or order in this context.
31.First, the final judgment or order on which the bankruptcy notice is based is a foundational element. So much is made plain by ss 41(1) and 41(3) which stipulate it as a necessary condition to the issue of the bankruptcy notice by the Official Receiver. Paragraph 40(1)(g) also reinforces the point in describing the relevant act of bankruptcy. The statutory language requires identification of the judgment as a condition of issue. The act of bankruptcy has the judgment as its fundamental substratum. Moreover, the steps that a debtor might take to extend the time for compliance with the bankruptcy notice or to set it aside first requires identification of the final judgment or order.
32.Second, and relatedly, the Official Receiver’s administrative act in issuing a notice requires an identified final judgment or order. In the absence of attaching the final judgment or order, the identification of the foundation of the administrative act by the Official Receiver in issuing the bankruptcy notice would not be able to be adequately ascertained.
33.Third, Form 1 is not comprehensible without a copy of the final judgment or order being attached. On its face, and without the final judgment or order being attached, it would not provide to the reader, including the debtor, details of the principal debt. A reader of the notice at the time of issue, including the debtor, could not make sense of the notice without such an attachment to work out the debt relied upon. One purpose that a bankruptcy notice must serve is to convey to the debtor how the debt that is alleged to be owing is said to have arisen (see Kyriackou v Shield Mercantile Pty Ltd [2004] FCA 490; (2004) 138 FCR 324 at [38] per Weinberg J). Further, the bankruptcy notice would not enable the reader, including the debtor, to take the steps referred to in paras 4 and 5 on the second page of Form 1, if the information set out in the notice was the only available information.
34.Generally, in our view, the features referred to at [7]-[8] above demonstrate the significance of identifying the final judgment or order and the necessity to attach it to the notice at the time of issue.
35.There are many authorities that refer to the importance of attaching a copy of the final judgment or order at the time of service (see for example Thompson v Metham [1999] FCA 935 at[26] per Katz J; Commonwealth Bank of Australia v Horvath (1999) 161 ALR 441; [1999] FCA 143 at [12]- [14] per Finkelstein J; Re Scerri [1999] FCA 321; (1998) 82 FCR 146 at 149 per Beaumont J and American Express International Inc v Held [1999] FCA 321 at [14] per Kenny J). The parties did not contest that such was an essential requirement at the time of service, and that it had been satisfied in the present case. Rather, the respondents to the appeal submitted that it was not a requirement at all (let alone essential) at the time of issue, a submission which may on one view have been accepted by the primary judge (see at [72]-[84]) although the matter is unclear. We disagree with the respondents’ contention.
In the present case, the Respondent has acknowledged receiving the Registered Post envelope sent by the Applicant.
However, I am faced with two competing versions advanced by the parties.
The Applicant maintains in his three versions of his affidavits of service of the Bankruptcy Notice that the bankruptcy notice and Judgment were served on the Respondent in the registered post envelope which was received by the Respondent on 26 May 2015.
In his sworn oral evidence (where he was cross-examined by Mr Argy and subject to questions from the Bench), the Respondent strenuously denied ever receiving the Bankruptcy Notice or Judgment as part of these papers, and produced documents which he asserts he received as Exhibit 1, being documents associated with the Statement of Claim.
So the primary question I need to be satisfied of is: was the Bankruptcy Notice and a Judgment served on the Respondent as part of the papers he collected when he signed for the Registered Post envelope at Merrylands Post Office on 26 May 2015?
The onus lies on the Applicant to satisfy the Court that this essential requirement has been complied with on the balance of probabilities: s 140(1) Evidence Act 1995 (Cth); McNally v Fazio (No. 3) [2016] FCCA 215 (at par [41]); Neat Holdings Pty Ltd v Karajan Holdings Pty Ltd and Ors [1992] HCA 66; Briginshaw v Briginshaw (1938) 60 CLR 336, at 362.
In a recent bankruptcy decision of Tov-Lev v Lowbeer (No 2) [2014] FCA 379, Rares J made the following pertinent remarks (emphasis added in bold):
68.…Bankruptcy has serious consequences, not only for the debtor but also for the general body of his or her creditors. If the debtor is made bankrupt, the creditors lose their right to proceed against him or her for the full value of their debts and, in exchange, acquire rights to prove in the administration of the debtor’s estate.
69.While the civil onus of proof is applicable in these proceedings, s 140(2) of the Evidence Act 1995 (Cth) requires the Court, in determining whether it is satisfied on the balance of probabilities, to take into account the nature of the cause of action, the subject matter of the proceedings and the gravity of the matters alleged. That reflects the view of Dixon J in Briginshaw v Briginshaw (1938) 60 CLR 336 at 361-362 that a tribunal of fact must feel an actual persuasion of the occurrence or existence of the fact before it can be found. And Dixon J made the well-known statement that, in such matters, reasonable satisfaction is not to be produced by inexact proofs, indefinite testimony or any indirect inferences: see too: Communications, Electrical, Electronic, Energy, Information, Postal, Plumbing and Allied Services Union of Australia v Australian Competition and Consumer Commission [2007] FCAFC 132; (2007) 162 FCR 466 at 479-482 [29]- [38] per Weinberg, Bennett and Rares JJ.
In considering the evidence relied upon by the Applicant in commencing the bankruptcy proceedings against the Respondent, I have already identified a number of “deficiencies” in the documents filed by the Applicant’s solicitor. These can be conveniently re-summarised in the following table:
Document filed Anomaly The First Affidavit of Service of the Bankruptcy Notice (deposed by Antony Romeo on 7 September 2015) e-filed in the Registry on 7 September 2015. · No Bankruptcy Notice or Judgment annexed to the copy of the Affidavit which is e-filed in the Registry. The First Creditor’s Petition (dated 7 September 2015) e-filed in the Registry on 7 September 2015.
This First Creditor’s Petition is never served on the Respondent.· The Affidavit verifying Part 1 of the Creditor’s Petition is sworn by the Applicant’s solicitor, instead of the Creditor herself. The Second Creditor’s Petition (dated 2 November 2015) e-filed in the Registry on 2 November 2015.
· No explanation is given why a new Second Creditor’s Petition is e-filed.
· If the purpose was to file an amended document so that the new Court date can be obtained, this would be achieved by simply re-filing the First Creditor’s Petition and requesting the Registry allocate a new hearing date (by amending the covering page).
· Leave is never granted by any Registrar for another version of the Creditor’s Petition to be re-filed.
· The Affidavit verifying Part 1 of the Second Creditor’s Petition is again sworn by the Applicant’s solicitor, instead of by the Applicant Creditor herself.
The second Affidavit of service of the Bankruptcy Notice (deposed by Anthony Romeo on 14 January 2016) e-filed in the Registry on 18 January 2016. · Paragraph 1 of this Affidavit erroneously refers to the service address as “Unit 4, 22 – 24 Park Street Merrylands NSW”, instead of the correct address is “Unit 4, 22 – 44 Park Street Merrylands NSW”.
· While this affidavit now annexes the Bankruptcy Notice, no Judgment is annexed.
· The Annexures to the Applicant’s solicitor’s Affidavit are witnessed by the Applicant’s solicitor.
The Third Creditor’s Petition (dated 14 January 2016) e-filed in the Registry on 18 January 2016. · Instead of re-filing the First Creditor’s Petition or even the Second Creditor’s Petition and obtaining a new hearing date (by amending the covering page), a new and Third Creditor’s Petition dated 14 January 2016 is prepared by the Applicant’s solicitor and filed.
· Leave is never granted by any Registrar for another version of the Creditor’s Petition to be re-filed.
· The Affidavit verifying Part 1 of the Third Creditor’s Petition is now correctly sworn by the Applicant, Sodalyn Yin.. This would suggest that the Applicant’s solicitor realised his previous error in personally swearing two Affidavits in support of the First Creditor’s Petition and Second Creditor’s Petition.
Although the Second Creditor’s Petition and Third Creditor’s Petition (and accompanying papers) are served, respectively on 9 November 2015 and 19 January 2016, pursuant to Order 2(a) of the substituted service orders made by Registrar Morgan on 28 October 2015, there is never any compliance with Order 2(b), being to serve the Creditor’s Petition and associated documents by ordinary post. · No evidence has been filed to date to evince that the second mode of substituted service directed by Registrar Morgan has ever been complied with. The Third Affidavit of service of the Bankruptcy Notice (deposed by Anthony Romeo on 14 January 2016) is filed in Court on 27 January 2016.
This Third Affidavit of service of the Bankruptcy Notice is handed to the Respondent at the Bar Table on 27 January 2016.· Paragraph 1 erroneously refers to the service address as “Unit 4, 22 – 24 Park Street Merrylands NSW”, instead of the correct address is “Unit 4, 22 – 44 Park Street Merrylands NSW”.
· This Affidavit finally annexes both the Bankruptcy Notice and Judgment from Fairfield Local Court.
· Unlike the Second Affidavit of service of the Bankruptcy Notice, the annexures to the Third Affidavit of service are now correctly witnessed by a third party, instead of by the Applicant’s solicitor personally.
The aforementioned deficiencies cause me considerable concern. In repeated attempts to comply with the requirements under the Bankruptcy Act and Federal Circuit Court (Bankruptcy) Rules and to what appears to be an attempt to ‘get it right’, the Applicant’s solicitor repeatedly e-files new versions of the Affidavits of Service of the Bankruptcy Notice (3 versions) with varying annexures; inexplicably e-files new versions of the Creditor’s Petition (3 versions) without leave; arranges substituted service of two different versions of the Creditor’s Petitions (version 2 – on 9 November 2015 - and version 3 – on 19 January 2016) on the Respondent; personally swears Affidavits verifying the Creditor’s Petition in lieu of the Applicant herself (two versions); witnesses his own annexures to one of his Affidavits; mis-types the address where substituted service was effected in two versions of his Affidavits of Service of the Bankruptcy Notice (versions 2 and 3); and repeatedly fails to comply with the second substituted service order made by Registrar Morgan on 28 October 2015 when arranging substituted service of the versions 2 and 3 of the Creditor’s Petitions. The Third Creditor’s Petition is also filed without leave approximately 7 months and 3 days after the date of the Act of Bankruptcy occurs. Moreover, the first time the Court ever receives a copy of the Judgment is on 27 January 2016, when Mr Argy files in Court the Applicant’s solicitor Third (and final version of) Affidavit of Service of the Bankruptcy Notice on 27 January 2015.
When I identified several of these deficiencies, Mr Argy submitted that these errors are administrative in nature and may be cured by invoking section 306 of the Bankruptcy Act 1966 (Cth):
Formal defect not to invalidate proceedings
(1) Proceedings under thisAct are not invalidated by a formal defect or an irregularity, unless the court before which the objection on that ground is made is of opinion that substantial injustice has been caused by the defect or irregularity and that the injustice cannot be remedied by an order of that court.
(2) A defect or irregularity in the appointment of any person exercising, or purporting to exercise, a power or function under this Act or under a personal insolvency agreement entered into under this Act does not invalidate an act done by him or her in good faith.Subject to an assessment of whether substantial injustice cannot be remedied, s 306 would normally be available for the Court to invoke in order to cure irregularities of a formal nature and irregularity, and permit the Creditor’s Petition to proceed: Adams v Lambert (2006) 228 CLR 409.
Under any other circumstances I would normally entertain an application for s 306 to be invoked to cure any formal defects or irregularities. Often the deficiency is sufficiently minimal that it can be cured by ensuring that the Applicant serves a revised copy of a document, as what was repeatedly attempted in the present case by the Applicant’s solicitor.
But I am not minded to do so in the present case. There are so many deficiencies (identified in paragraphs 54 and 55) which would need to be remedied before the Creditor’s Petition can properly proceed. Although I have identified the litany of errors in my Reasons, I am not persuaded that my analysis in clarifying the confusion of documents filed by the Applicant’s solicitor has somehow remedied the situation. Rather, they only serve to highlight the confusing set of circumstances faced by the Respondent in meeting the Applicant’s case. Therefore I am not persuaded that there would not be substantial injustice impacting on the Respondent. For instance, which version of the Creditor’s Petition is he to respond to: the first, the second, or the third?
But even if I were minded to invoke s 306 so as to excuse or rectify the numerous errors deficiencies, when they are coupled with the limited evidence of the Applicant’s solicitor and the sworn oral evidence of the Respondent, the combination of these factors cause me to have little confidence that the Bankruptcy Notice and Judgment were in fact served as part of the registered post envelope on 20 March 2015.
It would be convenient at this point to address some the submissions made by Mr Argy following the sworn evidence of the Respondent:
b)Although Mr Argy submits that the Applicant’s solicitor was never required for cross-examination by the Respondent and that his version of events should be accepted, I still need to be satisfied that this essential requirement has been complied with in before the Creditor’s Petition can proceed.
In circumstances where the Applicant’s solicitor only deposed his first affidavit of service of the Bankruptcy Notice approximately 4 months after the purported service under Regulation 16.01 and did not have the foresight to annex the Bankruptcy Notice or Judgment, I have reservations as to his memory of the actual event. Coupled with the litany of errors in filing the documents in support of these bankruptcy proceedings, I would have expected the Applicant’s solicitor to have attended Court and made himself available to give sworn oral evidence and be cross-examined, so as to supplement his various affidavits claiming he had properly served both the Bankruptcy Notice and founding Judgment.
c)I am not satisfied on the evidence that the timing of the Respondent’s transfer of the residential property to his wife (in the four months period between November 2014 to April 2015) was premised on an attempt to defeat future bankruptcy proceedings being commenced against him.
In my view, Mr Argy’s submission (articulated above in paragraph 38 of these Reasons) is met with an equally plausible counter-argument: assuming the Bankruptcy Notice and Judgment was in fact served by Registered Post and collected by the Respondent on 26 May 2015 (which remains disputed), this is the first occasion that the Respondent would be aware that Bankruptcy proceedings had been commenced against him. If indeed the property had in fact been transferred some time before this date (and the Respondent asserts this occurred in December 2014 as part of a binding Financial Agreement he had executed with his wife), in my view it becomes less plausible to argue that the Respondent transferred this property so far in advance because he knew he would be facing Bankruptcy proceedings.
As the Applicant bore the onus of proof on the civil standard, it was incumbent on Mr Argy to evince proof of the actual date of the transfer of the property if he wished to better advance this submission. This should have been relatively easy to do, as he had already obtained LPI searches. Had the transfer date been established as being close to the date of the Bankruptcy Notice being served, his submission would have been more persuasive.
d)I am not prepared to draw negative inferences from the tender of the Law Society Notice tendered as Exhibit 8 against the Respondent. Apart from a reference in that Notice to the Respondent’s law firm, there is no relevant connection with that Notice to the history of these bankruptcy proceedings.
e)I also reject the submission made by Mr Argy that the Respondent “deliberately misled the Court” when giving sworn evidence, on the basis that no such proposition was put to him in cross-examination in accordance with the rule R v Brown & Dunn (1893) 6 R 67 (see paragraph 39) above.
The Applicant bears the civil standard of proof that this essential requirement has been complied with.
As I am not satisfied on the balance of the probabilities that the Judgment was in fact served on the Respondent as part of the contents of the registered post envelope collected by the Respondent from Merrylands Post Office on 26 May 2015, the Creditor’s Petitions (whether it was version 1, 2 or 3) cannot proceed.
In arriving at this final view, I have taken into account a number of considerations, not least of all the serious consequences that flow from the making of a Sequestration Order and the bankrupting of a Debtor: Tov-Lev v Lowbeer (No 2) [2014] FCA 379 at [68].
In order to prosecute a Creditor’s Petition, this Court would expect the Applicant to not only properly comply with the essential requirements under the relevant provisions of the Bankruptcy Act 1966 and the relevant rules under the Federal Circuit Court (Bankruptcy) Rules, but also to competently e-file the correct supporting documents and avoid the litany of errors identified in the present case.
Accordingly, I dismiss the Creditor’s Petition(s) with no order as to costs.
I certify that the preceding sixty-six (66) paragraphs are a true copy of the reasons for judgment of Registrar Chuan Ng.
Date: 9 March 2016
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