Da Vesi Construction Group Pty Ltd v De Andrade

The evidence 10 The evidence relied on by Ms De Andrade is as follows: a. the affidavit of Roubi De Andrade sworn 8 February 2019; b. the affidavit of Roubi De Andrade sworn 11 March 2019; c. the affidavit of Roubi De Andrade sworn 20 March 2019; and d. the affidavit of Benjamin Wicks sworn 28 September 2018. 11 The trustee in bankruptcy, Mr Combis, notified certain objections to paragraphs of those affidavits and I ruled on those objections in the course of the hearing. 12 The evidence relied on by the trustee in bankruptcy is as follows: a. the affidavit of Anthony Graeme Lane sworn 28 February 2019; b. the affidavit of Anthony Graeme Lane sworn 8 March 2019; c. the affidavit of Geoff Robert Grimshaw affirmed 21 March 2019; and d. the affidavit of Anthony Graeme Lane sworn 1 April 2019. 13 Ms De Andrade objected to [22]-[24] of the affidavit of Mr Lane sworn 28 February 2019 on the basis that those paragraphs contained records of negotiations regarding settlement of a dispute and were inadmissible under s 131 of the Evidence Act 1995 (Cth). I admitted those paragraphs as I was not persuaded that the communications were in connection with an attempt to negotiate a settlement of the dispute. 14 The evidence relied on by Da Vesi is as follows: a. the affidavit of Tom Häkkinen affirmed 28 February 2019; b. the affidavit of Benjamin Wicks sworn 26 March 2019; c. the affidavit of Anthony Steve affirmed 27 March 2019; d. the affidavit of Tom Häkkinen affirmed 28 March 2019; and e. the affidavit of Rory Markham sworn 28 March 2019. 15 Ms De Andrade gave oral evidence and was cross-examined. Mr Häkkinen and Mr Lane were also cross-examined.

The parties' submissions 16 Ms De Andrade submitted that she did not learn of her bankruptcy until around 14 January 2019 and that her application for review was filed on 8 February 2019. There was no prejudice to the parties caused by the late application. Additionally, it was submitted she had an arguable case for the Registrar's decision to be reviewed. 17 The ground of review was that Ms De Andrade was not properly notified of the bankruptcy proceedings. While she conceded that efforts were made to serve her with a bankruptcy notice, her submission was that she never received notification of any court dates and, in particular, was not effectively served with the creditor's petition. She made enquiries to establish whether a bankruptcy was proceeding, but this was made difficult by Da Vesi changing lawyers, she submitted. 18 As to service of the creditor's petition, Ms De Andrade submitted that the email address in the orders for substituted service was an old email address that she was no longer using. She submitted the two addresses for prepaid post were in Narrabundah and Griffith, but she was living in Farrer at that time. The phone number for the SMS was not her phone number, Ms De Andrade submitted, but was for a phone that belonged to her estranged husband's business. 19 Ms De Andrade did not seek to review the decision to make the substituted service order but challenged whether that substituted service did in fact bring the matter to her attention. 20 Ms De Andrade submitted that a process server attempted service on 13 September 2018 by attempting to leave the creditor's petition at Hello Café in Campbell, ACT. That Café was operated by Ms De Andrade's estranged husband. The process server handed an unidentified female, then an unidentified male, a sealed envelope stating only that they were "documents for Roubi", not what the documents were. The unidentified male threw the envelope in an outside rubbish bin. 21 A question arose, Ms De Andre submitted, whether there was compliance with the order for substituted service in that the affidavit of service did not indicate that the documents were handed to a person "apparently over the age of 16 years". 22 Additionally, there was said to be a question whether the creditor's petition was brought to the attention of Ms De Andrade in circumstances where the process server did not indicate what was contained in the documents in the envelope, the envelope was not opened and the same envelope containing the documents was thrown in a rubbish bin outside Hello Café. 23 Ms De Andrade also submitted that at the time the sequestration order was made she was solvent. In particular, she had around $100,000 sitting in the ACT Courts trust account, being the proceeds of an unrelated court case, and could easily have met the $5,521.30 costs order payable to Da Vesi. She submitted she did not pay the costs order because it was an interim order in the case in the Magistrates Court between Da Vesi and herself which had not been finalised. 24 Da Vesi opposed the applications. In its written submissions filed 28 March 2019, Da Vesi submitted it was common ground "that there was no compliance issue with the substituted service." Whether Ms De Andrade first became aware of her position on 13 January 2019 was a contested fact and would need to be the subject of a finding of credit, as there was contested evidence in this matter. 25 Da Vesi submitted that if the Court was satisfied that Ms De Andrade was aware of her bankruptcy before the date 13 January 2019, there was no genuine excuse for delay. Further, she had reasonable notice of the creditor's petition and the likelihood of the imminence of the sequestration order in the period of 2018. Da Vesi submitted that there was not a genuine explanation for the delay that should cause an extension of time to be granted. 26 As to prejudice, Da Vesi submitted that there had been a delay of five months since the sequestration order was made. Ms De Andrade had shown herself to be a recalcitrant debtor and further delay would not be in the public interest for the orderly administration of the bankrupt's affairs. Da Vesi submitted that it was accepted that Ms De Andrade had debts which had remained outstanding for a period of time, which were: a. Da Vesi's petition debt; and b. the debt ordered in favour of McInnes Wilson in the ACT Civil and Administrative Tribunal. 27 Da Vesi submitted it had a genuine concern that Ms De Andrade was using these applications as a procedure to avoid paying any debt as she had taken no genuine step to meet her obligations, which were said to be unarguable. 28 Da Vesi submitted it was also concerned with the level of fees the trustee had incurred in seeking to administer the estate of Ms De Andrade and to bring finality to the debts that were due and payable. 29 As to whether there was an arguable case to have the sequestration order set aside, Da Vesi submitted that Ms De Andrade was, at the time the sequestration order was made, insolvent. She had provided a statement of affairs that suggested she remained insolvent. She had known debts of $478,349.05 to unsecured creditors. From her statement of affairs, Ms De Andrade's position was: she had not been employed since around June 2016; she had not operated a business in the past 5 years; her income over the last 12 months totalled $4,000 in connection with a disability benefit; she held an expectation of receiving $15,000 in connection with disability benefits over the next 12 months; she believed that she held approximately $100,000 in cash; and her only material asset was the property at 26 Lefroy Street, Griffith ACT valued at $1.8 million, with a secured mortgagee in the value of $1.3 million in favour of RAMS. 30 Da Vesi submitted that on the basis of this financial position the Court could not be satisfied that Ms De Andrade has the capacity to pay the known debts of $478,349.05. For the Court to sensibly consider setting aside the sequestration order, it must be satisfied that Ms De Andrade was able to pay these debts within a period of time from the liquidation of the Griffith property. 31 Da Vesi submitted that setting aside the sequestration order appeared to be no different from an annulment of the bankruptcy as proposed by the trustee, and that Da Vesi's approach would be a sensible course to take considering the limited income that Ms De Andrade claimed to have. 32 Da Vesi disputed Ms De Andrade's suggestion that she was not insolvent at the time that the sequestration order was made because she could have used $100,000 to pay that debt. Da Vesi submitted that it was Ms De Andrade's stated intention that this money belonged to her mother, and that if Ms De Andrade was to be believed that she could have used this $100,000, the question arose why she did not use this money to pay the debt. 33 In relation to Ms De Andrade's statement that she believed the creditor's debt was only to be paid at the end of proceedings, Da Vesi submitted that the orders of the Court stated that the debt was immediately payable. 34 The trustee in bankruptcy, in his written submissions filed 27 March 2019, neither consented to nor opposed Ms De Andrade's application for an extension of time. Nevertheless he submitted that this Court, when considering whether to grant an extension of time, will consider: any explanation for the delay; whether there is an arguable case that the sequestration order should not have been made; and the prejudice to other parties. 35 He submitted that if this Court was minded to set aside the sequestration order it should also make an order that the bankruptcy be annulled in accordance with s 153B of the Bankruptcy Act. 36 He submitted that trustees in proceedings generally remain silent in relation to the Court's determination as to the "validity" of the sequestration order but have sought to be heard in relation to any determination as to costs. The balance of the submissions of the trustee in bankruptcy concerned costs.

Findings and consideration 37 The first issue is the service of the creditor's petition. 38 The affidavits of Benjamin Wicks, licensed process server, show that on 13 September 2018 the creditor's petition was delivered to Hello Café by placing it on a table near the counter and that Mr Wicks spoke to a male employee at the Café. The male said he was going to throw out the envelope with the creditor's petition in it and did so by putting the envelope in the rubbish bin outside the Café. 39 The affidavit of Rory Markham shows that prior to Adero Law being retained as solicitors for Da Vesi, Da Vesi had retained the law firm John Nicholl & Co Pty Ltd trading as Canberra Legal Group. Mr Markham deposes that since Canberra Legal Group went into liquidation on 10 May 2018, all emails and phone numbers of former Canberra Legal Group staff have remained the same as they were. All such emails are redirected to a "catch-all" inbox which is reviewed by a current director of Canberra Legal Group, Peter Romano. Where appropriate, such emails may be forwarded to staff at Adero Law for actioning. Similarly, Mr Markham deposed, to the best of his knowledge, phone numbers associated with Canberra Legal Group and its former staff are subject to the same "catch all" policy. 40 Mr Markham said he had caused a search to be conducted of all emails and calls made to Canberra Legal Group and found no contact made by Ms De Andrade, or any person claiming to act for Ms De Andrade, to any of the normal emails and phone numbers of Canberra Legal Group. 41 In the affidavit of Ms De Andrade dated 13 March 2019 she alleged that she called the ACT Law Society and was told that Canberra Legal Group had gone out of business. In "May of 2010 (sic)", Mr Markham deposed, he notified the Law Society that Canberra Legal Group had taken over a number of the files of John Nicholl & Co and that they could refer any queries regarding Canberra Legal Group matters to Kim Quade who assists with the administration of both Canberra Legal Group and Adero Law. Mr Markham deposed that "[s]ince May 2010 (sic)" he had received a number of referrals from the Law Society for people enquiring about matters formerly in the carriage of John Nicholl & Co. 42 Mr Steve deposed that Ms De Andrade resides in and frequently attends the residence at 28 Lefroy Street Griffith. He is a co-owner of a property neighbouring 28 Lefroy Street Griffith. He said he had known of Ms De Andrade for a period of nearly two years and had known of her husband dating back approximately 20 years. He deposed that since 22 March 2018 he had been able to recognise Ms De Andrade by sight. While he was unable to remember exact dates when he had seen Ms De Andrade, he deposed that in the period since 22 March 2018 he had seen her on the property at 28 Lefroy Street Griffith, including looking out from one of the windows in the building at that address. He had also seen her around the neighbourhood, including walking to and from the Griffith shops. He had also seen her entering or exiting a dark van at the property at 28 Lefroy Street Griffith. 43 Mr Häkkinen deposed that on 30 August 2018 Ms De Andrade was personally served with a copy of the creditor's petition. He deposed that on 13 September 2018 substituted service was effected at the Hello Café. This was the service by Mr Wicks. Mr Häkkinen deposed that on 14 September 2018 substituted service in accordance with paragraphs 5(b) and 5(c) of the Registrar's orders was effected. 44 I have no doubt that Ms De Andrade was served with the creditor's petition. I find that she was personally served on 30 August 2018 as deposed to by Mr Häkkinen. As set out below, I also find that she was served in accordance with the orders for substituted service made by the Registrar on 31 August 2018. 45 On the basis of the affidavit evidence filed by the trustee, in particular Mr Lane's affidavit sworn 28 February 2019, I find that Ms De Andrade was served with the sequestration order on or about 31 October 2018 and again on or about 14 November 2018 when the relevant documents were sent to the address at 28 Lefroy Street Griffith. 46 As to the affidavit of Mr Grimshaw, I find that this shows attempts to serve documents but its present relevance is that it tends to show, first, that the 28 Lefroy Street Griffith address is commonly visited by Ms De Andrade and, second, that Ms De Andrade has worked at the Hello Café since she served coffee to Mr Grimshaw on 14 March 2019. It also tends to confirm her email address to be the address to which one limb of the substituted service orders were directed. 47 I do not accept Ms De Andrade's evidence that she was not effectively served with the creditor's petition or that she found out that she was bankrupt only when her accountant contacted her on about 14 January 2019. 48 I find that Ms De Andrade was served with the bankruptcy notice on 17 November 2017. I accept the evidence of Mr Häkkinen, in particular at [6] of his affidavit affirmed 28 March 2019. 49 I find that Ms De Andrade was served personally on 30 August 2018 with the creditor's petition, as I have said, and with: an affidavit verifying the creditor's petition, the trustee's consent to act declaration, and District Registrar Wall's orders of 27 July 2018. I refer in this respect to the affidavit of Mr Häkkinen affirmed 30 August 2018, annexed to his later affidavit of 28 March 2019. Those orders showed that the matter was adjourned until 11am on 31 August 2018. 50 There were then the orders for substituted service. I place no weight on the service on 13 September 2018 by Mr Wicks at the Hello Café as it seems to me to be clear that that service did not bring the matter to Ms De Andrade's attention. In so saying, I am assuming in Ms De Andrade's favour, contrary to the observation of Lehane J in Bright v Femcare Ltd [1999] FCA 1377; 166 ALR 743 at [21], that although it is inherent in substituted service that the purpose may not be achieved; a party served in accordance with an order for substituted service nevertheless will not always be bound by a subsequent judgment or order. 51 Similarly, on the same assumption, I find that the substituted service by text message to a number ending in 060, by email to the email address set out in Registrar Lackenby's orders, and by post to the address in Narrabundah did not bring the matter to Ms De Andrade's attention. 52 However I find on the balance of probabilities that a copy of the orders of Registrar Lackenby made on 28 September 2018, notifying of the time, date and place of the adjourned hearing at 11am on 26 October 2018 came to Ms De Andrade's attention by means of the substituted service at 28 Lefroy Street, Griffith. I do not accept such evidence she gave to the contrary. I note that [5] of her affidavit dated 8 February 2019 was not read. I note that the rates and land tax notices were sent to Ms De Andrade at the same address. Her affidavit evidence goes no higher than saying that any correspondence sent to the Griffith address "would not necessarily reach me or be passed onto me". 53 As to Ms De Andrade's ability to pay her debts as at 26 October 2018, the date of the sequestration order made by the Registrar, it was common ground that her income was negligible, her entire income from March 2018 to March 2019 being $4,000. However, Ms De Andrade deposes that she owns property at 28 Lefroy Street, Griffith with an estimated resale value of $1.8 million, in respect of which she owes $1.3 million to a secured creditor, being RAMS. On Ms De Andrade's evidence her unsecured creditors total $204,661.86. However, Ms De Andrade's evidence was to the effect that any equity in the 28 Lefroy Street property could not be realised in the short term. Her evidence was that she was not in a position to sell the Griffith property if she needed to. This was because she had nothing to do with it anymore. Furthermore, Ms De Andrade's evidence was that at least from the time she was unemployed her estranged husband has made all contributions to the repayments and that the value of his interest in that property is likely to be "a lot". She later added in her evidence that "His interest would be everything", adding that she did not know. I am not persuaded, on the evidence before me, that Ms De Andrade had any equity of substance in the Griffith property or that any equity she did have was available to her in the short term. 54 Ms Andrade also deposes that she has cash of approximately $100,000. I am not persuaded that she was the beneficial owner of this amount so as to be able to have access to it in the short term. I take into account two matters. First, there is evidence which I accept that Ms De Andrade's mother has an interest in that amount. I do not accept Ms De Andrade's evidence to the effect that her mother's interest would only arise if she were given some of that amount. Second, there is evidence that those funds belong to Ms De Andrade's mother rather than to her. It may be that some amount of that sum is Ms De Andrade's but the present evidence in that respect is vague, undocumented and insufficient to persuade me that that amount was available to her as at 26 October 2018. 55 As at that date, Ms De Andrade owed the amount of $5,521.30. This was due and payable. It was not put on her behalf that that amount was not due and payable but it was submitted that she thought it was not due and payable. I reject that evidence. It is inconsistent with what Ms De Andrade was told and with Ms De Andrade's actions. 56 I also find that there was an amount owing of $4,704.99 by Ms Andrade to McInnes Wilson Lawyers under an order of the Australian Capital Territory Civil and Administrative Tribunal dated 17 August 2018. Ms De Andrade gave evidence which may suggest that that amount was not due and payable by reason that: "They know that that money would be paid". If that is what is intended by that answer then I do not accept that evidence, as it is vague, uncertain and undocumented. I find that the debt to McInnes Wilson Lawyers was due and payable as at 26 October 2018. 57 Also in evidence is a rates arrears notice addressed to Ms De Andrade in respect of the 28 Lefroy Street, Griffith property in the amount of $26,568.15 as at 27 September 2018 and a land tax arrears notice addressed to Ms De Andrade in respect of the same property in the amount of $39,648.14 as at 27 September 2018. 58 I find that Ms De Andrade was not able to pay her debts as at 26 October 2018. I am not persuaded, therefore, that the sequestration order ought not to have been made. 59 More significantly in terms of the utility of setting aside the sequestration order, I also take into account whether, as at the date of the hearing of these applications on 1 April 2019, Ms De Andrade was able to pay her debts. 60 Without factoring into the calculation the cost orders of some $114,530.66 to which Mr Häkkinen deposes, but which I find are not yet due and payable, I find that Ms De Andrade was not able to pay her debts as at 1 April 2019. There is now as well a judgment debt in the sum of $194,435.57 owing to Da Vesi. Although Ms De Andrade gave evidence as to her intention to appeal, as 1 April 2019 and on the evidence before me no steps had been taken in that respect and she had not written to, or asked her solicitors to write to, the ACT Magistrates Court. There is no stay of those orders. The judgment turned on adverse findings of credit. I was not asked to go behind the judgment. 61 On the basis of these findings, I conclude that Ms De Andrade has provided no reasonable explanation for the delay. I note the delay is a period of some two and a half months, from 21 days after 26 October 2018 to 8 February 2019. I am also not persuaded that there is an arguable case for the Court to review the exercise of power by the Registrar, taking into account that such a review is a hearing de novo. I find that Ms De Andrade committed an act of bankruptcy and at that time was personally present or ordinary resident in Australia. I am not satisfied on the evidence that Ms De Andrade was or is able to pay her debts or that there is other sufficient cause why a sequestration order ought not to have been made or otherwise should now be set aside. 62 I also take into account the prejudice to Ms De Andrade's creditors, including Da Vesi.

Conclusion and orders 63 For these reasons I refuse the application for an extension of time. The application for review of the Registrar's sequestration order also fails. Ms De Andrade's applications are dismissed. 64 In relation to costs, in my opinion Ms De Andrade's applications are without merit and she has not acted reasonably. The trustee acted reasonably. 65 I will hear the parties as to the precise form of orders, and as to costs. I certify that the preceding sixty-five (65) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Robertson.