Esanda Finance Corp Ltd v Velissaris

REASONS FOR JUDGMENT 1 There is before the Court a creditor's petition brought by the applicant, Esanda Finance Corporation Limited, seeking the sequestration of the estate of the respondent, Constantinos Velissaris. The application is based upon an act of bankruptcy said to have been committed by the respondent when he failed, within the requisite period of twenty-one days, to comply with the terms of a bankruptcy notice. That bankruptcy notice had issued on 25 June 1998. It was in the sum of $101,846.41, this being the amount of a judgment obtained by the applicant against the respondent in the County Court in the sum of $101,063.28 plus costs together with $783.13 interest. 2 In opposition to the petition, the respondent has filed a motion seeking review of a decision taken by a Registrar of the Court on 30 October 1998 whereby the Registrar ordered that substituted service of the bankruptcy notice might be effected at premises at 19 Clarence Street, Brunswick, this being the last known residential address of the respondent. The respondent contends that the orders for substituted service should not have been made. The respondent also contends that the act of substituted service did not succeed in bringing to his attention the existence of the bankruptcy notice. His case is that he did not learn of the existence of that notice until approximately mid-July 1999. The respondent also contends that, contrary to the evidence of the applicant, he was not served personally with the creditor's petition on 10 July 1999 as alleged, but only came into possession of that petition, together with the bankruptcy notice, several days later. 3 A review of a power delegated to a Registrar of the Court under the Bankruptcy Act 1966 (Cth) ("the Act") is by way of a hearing de novo based on the evidence before the Registrar supplemented by any other evidence presented to the Court on the hearing of the application: see Re Kwiatek; ex parte Big J Ltd v Pattison (1989) 21 FCR 374; Re Brindle: ex parte FB & FA McMahon Pty Ltd (1992) 35 FCR 506 at 511-2; and Ginnane v Diners Club Limited (1993) 42 FCR 90 at 92. It follows that I am not constrained in carrying out the review by the evidence that was led before the Registrar. Additional evidence has been placed before me in support of the decision to grant substituted service. The effect of that evidence is to support the conclusion that the applicant was experiencing abnormal difficulties in effecting personal service of the bankruptcy notice upon the respondent, and that there was a reasonable probability that the respondent would be informed of the notice as the result of the form of service identified. This is in accordance with the principles enunciated by the Full Court in Ginnane v Diners Club limited (supra) in the context of substituted service of a creditor's petition, but clearly applicable also to substituted service of a bankruptcy notice. Their Honours Northrop, Sheppard and Einfeld JJ observed at 92: "The discretion conferred by s 309(2) [of the Bankruptcy Act] is unfettered but the authorities show that in relation to a creditor's petition, the discretion is not to be exercised lightly. Normally, before exercising the discretion in relation to a petition, the court must be satisfied that abnormal difficulties exist in effecting personal service of the petition on the debtor and that there is a reasonable probability that the debtor will be informed of the petition as a result of the form of service identified. With respect to the second principle, Gibbs J said in Re Mendonca; Ex parte Commissioner of Taxation (1969) 15 FLR 256 at 261: "It is a fundamental rule that a method of substituted service will not be allowed which will not in all reasonable probability be effective to bring knowledge of the proceedings to the debtor …" 4 It is unnecessary for me to set out in any detail the evidence relied upon by the applicant in support of its contention that an order for substituted service, pursuant to s 309(2) of the Act, was appropriate. In my view, that evidence overwhelmingly supports the applicant's contention that the applicant was experiencing abnormal difficulties in effecting personal service upon the respondent prior to the order for substituted service being made. 5 There had been some fifteen separate attempts to serve the respondent at his last known residential address, 19 Clarence Street, Brunswick, prior to the application being made to the Registrar for substituted service. Each of these attempts was said to have been unsuccessful, although there is cogent evidence before me that on 5 July 1998 the respondent was indeed present at that address when an attempt was made to serve him in circumstances where he falsely claimed to be merely a boarder at the residence and not the respondent, Constantinos Velissaris. 6 There is also a substantial body of evidence which links the respondent to the address at 19 Clarence Street, Brunswick, throughout the period of attempted service immediately preceding the application for substituted service. I will not set out the body of this evidence, but it includes a statement by the respondent in a court document filed in October 1998 in which the respondent gave 19 Clarence Street, Brunswick, as his place of residence. It includes also various other documents emanating from his former legal advisers ascribing that address to him. 7 There was direct evidence given by two process servers, Allan Maxwell Tanner and Dominic Crupi, that they had confronted the respondent personally at 19 Clarence Street, Brunswick. Mr Tanner stated that he had attempted to serve the bankruptcy notice upon the respondent on 5 July 1998 at that address, but that the respondent had evaded service by denying his true identify and claiming to be merely a boarder. Mr Crupi stated that he served the creditor's petition (which had annexed to it the bankruptcy notice) upon the respondent on 10 July 1999, though the respondent had, once again, falsely denied his true identity. Both witnesses identified the respondent in Court, as well as having identified him previously from photographs. Each was adamant that he had served, or had attempted to serve, the respondent, who had denied being Constantinos Velissaris. 8 The respondent gave evidence and denied having been present at 19 Clarence Street, Brunswick, on either occasion. He claimed that he had no knowledge at all of the bankruptcy notice until mid-July 1999 when its existence was, in some way, drawn to his attention by a person whom the respondent did not call to give evidence. 9 Having seen and heard each of these witnesses give his evidence, and be cross-examined, I prefer the evidence of Messrs Tanner and Crupi to that of the respondent. Their testimony is supported by a body of circumstantial evidence linking the respondent throughout the whole of 1998 and 1999 to the premises at 19 Clarence Street, Brunswick. 10 I am satisfied on the balance of probabilities that the respondent was relevantly associated with 19 Clarence Street, Brunswick, throughout the whole of the period leading up to the application for substituted service, and thereafter. I am satisfied that, notwithstanding his claims to the contrary, he was indeed present when Mr Tanner sought to serve him with the bankruptcy notice on 5 July 1998. I am also satisfied that he was served personally by Mr Crupi with the creditor's petition and accompanying bankruptcy notice on 10 July 1999. He was, in any event, made aware of the creditor's petition within a few days of that date. Had anything turned upon it, I would unhesitatingly have invoked s 306(1) of the Act to excuse non service of the creditor's petition in those circumstance - Re Florance: Ex parte Turimetta Properties Pty Ltd (1979) 28 ALR 403 at 412. 11 I am satisfied that the applicant was experiencing abnormal difficulties in effecting personal service upon the respondent prior to seeking substituted service. Indeed, in my view, the respondent has sought to avoid personal service throughout by falsely denying, when confronted by a process server, that he was Constantinos Velissaris, and otherwise making himself unavailable to be served. 12 I am further satisfied that there was a reasonable probability that the respondent would be informed of the bankruptcy notice by substituted service being effected at his last known residential address, the property with which he and other members of his family have maintained, and continue to maintain, the closest links. 13 It follows that I would dismiss the respondent's motion seeking to set aside the Registrar's decision to permit substituted service of the bankruptcy notice. 14 It was not disputed before me that the amount said to be owing to the applicant remains due and payable. The respondent conceded that he could not pay that sum at present, and that he would be unable to pay that sum at any stage in the immediate future. 15 The respondent submitted, however, that I should not order that his estate be sequestrated because he had various claims available to him against the applicant, and against other entities including Westpac Banking Corporation ("Westpac"). These claims were said to be related, in various ways, to the proceeding which gave rise to the judgment debt obtained by the applicant against the respondent. 16 There are, indeed, proceedings on foot between Westpac and the respondent. In those proceedings the respondent is being sued by Westpac for a very considerable sum. He claims to have a counterclaim against Westpac which exceeds by a substantial margin the amount of Westpac's claim against him. It is not clear when the trial of those proceedings will take place, but it is most unlikely to be in the very near future. 17 If the respondent wishes to rely upon material of this nature to demonstrate that he is, within the meaning of s 52(2)(a) of the Act, able to pay his debts, it is incumbent upon him to place before the Court evidence which is far stronger, and more tangible, than that which he has advanced before me. While it is clear that the Court has a discretion, pursuant to s 52 of the Act, to dismiss a petition if satisfied by the debtor that he is able to pay his debts, or that for other sufficient cause a sequestration order ought not to be made, the onus rests upon the debtor to satisfy the Court of one or other of those matters. I am not satisfied that the respondent is able to pay the debts which he owes within a reasonable time. I do not regard the vagaries arising out of the litigation involving Westpac as discharging that onus. 18 The respondent has not satisfied me that there is any other sufficient cause as to why a sequestration order ought not to be made. I am satisfied that a sequestration order against the estate of the debtor should be made, and I propose to so order.