Evans v Duff

' 10 Note 1 to that bankruptcy notice is in the following terms: 'Note 1: Legal costs (item 2 of the Schedule) If legal costs are being claimed in this Bankruptcy Notice, a certificate of taxed or assessed costs in support of the amount claimed must be attached to this Bankruptcy Notice.' 11 What judgment was exhibited to that bankruptcy notice does not appear from the material. 12 On 26 February 2003 Mr Evans filed an application to set aside the bankruptcy notice numbered 40/03 in the Federal Magistrates Court. Those proceedings were numbered BZ 99/03. 13 On 15 July 2003 Federal Magistrate Rimmer ordered that the application by Mr Evans filed 26 February 2003 be dismissed, and Mr Evans pay Mr Duff's costs of and incidental to the application as agreed or as taxed in accordance with the Federal and Magistrates Court Rules. In the reasons for judgment of Federal Magistrate Rimmer, her Honour noted: 'The history of this matter should be set out in some detail. The bankruptcy notice was served on the applicant on 6 February 2003. The application for setting aside the bankruptcy notice was filed in this Court on 26 February 2003 and therefore the application was filed within time.' After noting that there had been a number of adjournments, Federal Magistrate Rimmer then said: 'The matter then came before me on 10 June 2003. … On the basis of his incapacity to deal with these matters in the Court system, the Court appointed a litigation guardian for Mr Evans. Mr Heathcote on 2 July 2003 filed the necessary affidavit consenting to act as Mr Evans' litigation guardian in the proceedings.' As to one of the grounds of opposition, Federal Magistrate Rimmer said: 'The bankruptcy notice attaches a copy of the order of Acting Senior Registrar Mitchell dated 24 December 2002. And the issue has arisen as to whether there is a final order for the purpose of founding a bankruptcy notice. It is clear in my view that the order which is effectively the taxation - outcome of the taxation, which took place before Senior Registrar Mitchell in the Supreme Court of Queensland and quantified the amount of costs, may be used and relied upon by the respondent to found the bankruptcy notice.' Her Honour said: 'I'm satisfied that … the order for costs in this matter, once those costs were quantified by taxation, were able to be enforced by execution in the same manner as a final judgment obtained in the action and that pursuant to section 43(b) of the Bankruptcy Act is deemed to be a final judgment obtained in the action and an order upon which a bankruptcy notice could issue.' Her Honour proceeded to 'dismiss the application filed by the applicant on 26 February 2003', and ordered that Mr Evans pay the costs of the application. 14 On 16 July 2003, Mr Duff presented a creditor's petition. That petition alleged: '1. The Respondent Debtor owes the applicant the amount of $30,975.93 being the amount of a Judgment or Order of the Supreme Court of Queensland at Brisbane on the 24th December, 2002 pursuant to an Order of the Supreme Court at Brisbane made on the 25th September, 2001.' The petition further alleges: '4. The following act of bankruptcy was committed by the Respondent Debtor within 6 months before the presentation of this petition: The Respondent Debtor failed to comply on or before the 21st day of April, 2003 with the requirements of a bankruptcy notice served on him on the 30th day of March, 2003 or to satisfy the Court that he had a counter-claim, set-off or cross-demand equal to or exceeding the sum specified in paragraph 1 of the bankruptcy notice, being a counter-claim, set-off or cross-demand that he could not have set up in the action in which the Judgment referred to in the bankruptcy notice was obtained. Details of the Judgment upon which the bankruptcy notice was founded are as follows: Judgment issued from the Supreme Court of Queensland, Brisbane Registry on the 24th day of December, 2002 for Claim: $30,975.93 TOTAL $30,975.93' 15 It is important to note that the act of bankruptcy relied upon is failure to comply with a bankruptcy notice served on him on 30 March 2003. 16 The bankruptcy notice the subject of the application to the Federal Magistrates Court, and the application to set aside that bankruptcy notice which was dismissed by Federal Magistrate Rimmer with costs on 15 July 2003, related to a bankruptcy notice that was served on Mr Evans on 6 February 2003. 17 The "AFFIDAVIT VERIFYING PARAGRAPH 4 OF PETITION" is a deposition by Toby David McEachern that: 'On the 17th day of July, 2003 I did duly search both the Computer Records of the Federal Court of Australia and the Federal Magistrates Court of Australia and did find that the Respondent Debtor filed Application No. B299/2003 in the Federal Magistrates Court of Australia in respect to having Bankruptcy Notice 40/03 set aside and that such Application was dismissed by Order of the Federal Magistrates Court of Australia on the 15th day of July, 2003.' 18 This affidavit, it has to be noted, comprehensively fails to verify paragraph 4 of the creditor's petition, which is set out in par 14 above. 19 The affidavit of service in relation to the bankruptcy notice is by Peter Dobson, a process server, as follows: 1. On Sunday, 30 March 2003 at 11.15 am, I served the Respondent, John David Evans, with a copy of Bankruptcy Notice No 40/03, signed by an Officer authorised by an Official Receiver, together with a copy of the judgement dated 24 December 2002 obtained by the Applicant against the Respondent Debtor in the Supreme Court of Queensland by delivering them to him personally at 39 Ballybunion Drive, Parkwood, Queensland. 2. I identified the person I served as the Debtor by asking him: "Are you John Evans?" and by him responding: "Yes". 3. Annexed to this Affidavit and marked with the letter "A" is a true copy of the said Bankruptcy Notice signed by an Officer authorised by an Official Receiver and annexed hereto marked with the letter "B" is a true copy of the said judgement.' (Emphasis in the original) This deposes to the fact that Bankruptcy Notice 40/03 was served on 30 March 2003, when that bankruptcy notice was in fact served on 6 February 2003. 20 The affidavit of Mr Duff in support of his petition deposes to the following: 'JOHN EVANS, the Respondent, is indebted to me in the sum of $30,975.93 as referred to in the Bankruptcy Notice filed on the 14th January, 2003 as referred to in the Bankruptcy Petition filed on the 17th July, 2003.' 21 Mr Evans filed a notice of opposition to the creditor's petition filed by Mr Duff, which alleged as the grounds: '1. The irregularity present in the bankruptcy notice upon which the Petitioner also relies upon in the Petition. 2. The Respondent's claim that, on the balance of probabilities the costs of the Petitioner have been paid by the Sub-Branch which has accepted responsibility to pay those costs. 3. The unusual circumstances including actual fraud, or serious negligence amounting to fraud, or deceptive conduct on the part of the Petitioner which, on the balance of probabilities, led to the award of costs against the respondent, and which challenge the evidentiary value upon which the judgments of Mackenzie J on 25 September and 31 October 2001 were based, and further, which would lead the Court to go behind those judgments to determine whether or not the final order should be accepted, having regard to those circumstances, the conduct of the Petitioner in pursuing the claim to the debt, and inter alia, the majority decision of the High Court in Corney v Brien (1951) 84 CLR 343.' 22 Federal Magistrate Baumann, on 18 November 2003, heard the creditor's petition. His Honour noted in his reasons for judgment that Mr Evans was a solicitor admitted in the 1940s and was now aged in his 80s. The Federal Magistrate accepted that '… he had a distinguished military career and is now the recipient, as his sole income, of a military pension with a disability benefit.' His Honour noted that: 'The debt which founded the bankruptcy notice and therefore the Act of Bankruptcy which founds the creditor's petition, arises from litigation in the Supreme Court of Queensland.' He referred to the reasons of Mackenzie J delivered on 25 September 2001 and to the order for costs ordered by Mackenzie J on 31 October 2001, and noted: '8. Those costs were ultimately assessed by Acting Senior Registrar Mitchell who on 24 December 2002 issued an order which founds the bankruptcy notice relied upon in the petition …' 23 As to the basis of the creditor's petition, his Honour said: '9. As a result of that judgment, which I am satisfied, on all the evidence, is a final judgment capable of supporting a bankruptcy notice, a bankruptcy notice was issued. After service, an application was brought by Mr Evans in this Court to set aside the bankruptcy notice, such application having been filed on or about 26 February 2003. The matter was heard by Federal Magistrate Rimmer on 15 July 2003. A transcript of those proceedings and copies of the submissions made at that time were before me by consent between the parties. What I do not have is a copy of the reasons for judgment, which although referred to in the transcript before me, do not appear to have been prepared in a written form, although delivered extempore on that day. The result of the application, however, was that application to set aside the bankruptcy notice was dismissed. 10. As a result, the petitioning creditor filed a creditor's petition which has, I am satisfied, been properly served upon the debtor. …' 24 The written submissions by Mr Evans speak of two bankruptcy notices. In an affidavit filed by him on 6 August 2004, Mr Evans says that: '2. … two bankruptcy notices were issued on the several applications of the Respondent in respect of the same claim of debt allegedly unpaid therein.' Mr Evans refers to the "First Bankruptcy Notice" as being Bankruptcy Notice 395/03 which he says was served on him at 4.55 pm on 6 February 2003. He says: '7. The Second Bankruptcy Notice No. 40/03 was served upon me at 4.15 pm on 30 March 2003.' 25 Mr Evans says that when he attended before Federal Magistrate Rimmer in Brisbane on 22 April 2003: '11. Upon the matter of the First Bankruptcy Notice being called I advised the Court that I had received two bankruptcy notices and sought advice as to which one was I to answer to. 12. FM Rimmer then sought the Respondent Counsel's to advise me which bankruptcy notice the respondent (Applicant) wished to proceed. 13. After a brief adjournment Counsel for the Respondent (Applicant) informed the Court that the Respondent (Applicant) would proceed with the First Bankruptcy Notice (No. BZ395 of 2003).' 26 Notwithstanding those claims, it appears that the bankruptcy notice served on Mr Evans on 6 February 2003 at 4.55 pm was Bankruptcy Notice 40/03. That bankruptcy notice was the bankruptcy notice the subject of Mr Evans' application before Federal Magistrate Rimmer on 15 July 2003. 27 Section 52 of the Bankruptcy Act 1966 (Cth) ('the Act') relevantly provides: '(1) At the hearing of a creditor's petition, the Court shall require proof of: (a) the matters stated in the petition (for which purpose the Court may accept the affidavit verifying the petition as sufficient); (b) service of the petition; and (c) the fact that the debt or debts on which the petitioning creditor relies is or are still owing; and, if it is satisfied with the proof of those matters, may make a sequestration order against the estate of the debtor.' 28 Section 43 is concerned with the jurisdiction of the Court to make a sequestration order. Section 43(1) provides: '(1) Subject to this Act, where: (a) a debtor has committed an act of bankruptcy; and (b) at the time when the act of bankruptcy was committed, the debtor: (i) was personally present or ordinarily resident in Australia; (ii) had a dwelling-house or place of business in Australia; (iii) was carrying on business in Australia, either personally or by means of an agent or manager; or (iv) was a member of a firm or partnership carrying on business in Australia by means of a partner or partners or of an agent or manager; the Court may, on a petition presented by a creditor, make a sequestration order against the estate of the debtor.' 29 The requirement that, at the hearing of a creditor's petition the Court 'shall require proof of the matters stated in the petition' is a necessary pre-condition to the making of a sequestration order against the estate of a debtor. The creditor's petition states that the respondent debtor committed an act of bankruptcy within six months before the presentation of the petition constituted by his failure 'to comply on or before the 21st day of April, 2003 with the requirements of a bankruptcy notice served on him on the 30th day of March, 2003 …'. 30 The petitioning creditor contends on this appeal that the description of the act of bankruptcy in the petition is wrong, and that the affidavit of service by Peter Dobson is wrong. It was submitted by counsel on behalf of the petitioning creditor that the Court should permit an amendment of the creditor's petition on this appeal. Even if the Court were to grant that, there would be no proper evidence of service of the Bankruptcy Notice 40/03. The submission of counsel was that the Court could allow amendment of the creditor's petition because the matter was not raised in objection at the first instance, and Mr Evans, by not opposing the submission, conceded that there was an act of bankruptcy. I decline to accede to the request to amend the petition. 31 The command of s 52 of the Act is mandatory. It is plain that the matters referred to in the creditor's petition were wrong. The act of bankruptcy on which the petitioner sought to rely was in fact an act of bankruptcy that occurred on 17 July 2003 on the dismissal of the application to set aside the bankruptcy notice that was served on 6 February 2003. That act of bankruptcy is not the act of bankruptcy alleged in the petition, and the sequestration order ought not to have been made. 32 The amendments suggested by the petitioning creditor amount to alleging an entirely different case, and the interests of justice do not require, or even suggest, that the failure to comply with the requirements of s 52 of the Act by the petitioning creditor ought to be remedied by the proposed amendments. 33 I have a degree of sympathy with the position of the present solicitors for the petitioning creditor, given the history of this matter. 34 I am quite satisfied that the order of Acting Senior Registrar Mitchell of 24 December 2002 is a final order of the Supreme Court, and is capable of founding a bankruptcy notice, but the fact is that the petition is not supported by the act of bankruptcy alleged in the petition. 35 The affidavit by the present solicitor for the petitioning creditor explains how that came about: '3. My said firm did not have the initial conduct of the proceedings in relation to the Bankruptcy Notice and I did not recall or was not aware at the time that there had been two (2) Bankruptcy Notices issued. From the time that my firm became involved in the proceedings, each hearing before Federal Magistrate Rimmer involved Bankruptcy Notice 40/2003. 4. When I was preparing the Affidavit of Service of the Bankruptcy Notice I found a notation on the file that gave details of service of a Bankruptcy Notice. I inadvertently prepared an Affidavit of Service which stated that Bankruptcy Notice 40/2003 was served by one Peter Dobson on the 30th March, 2003. I have subsequently ascertained that this was the date of service of a second Bankruptcy Notice which had been abandoned in court proceedings before Federal Magistrate Rimmer. I verily believe that Bankruptcy Notice 40/2003 was served on the Appellant on the 6th February, 2003, and not on the date as referred to in the Affidavit of Service of Peter Dobson. 5. Now produced and shown to me and marked with the letter "A" is a certified copy of Bankruptcy Notice 40/2003 which was issued on the 14th January, 2003. Exhibit "B" to this my Affidavit is a certified copy of Bankruptcy Notice 277 of 2003 issued on the 25th March, 2003.' 36 In all the circumstances, the sequestration order made on 18 November 2003 is set aside. 37 Mr Evans has been a solicitor for many years and was admitted as a barrister. He appeared on his own behalf on this appeal. Whether there are any costs properly claimable by him may be conjectural, but in all the circumstances, the proper order as to costs is that the appellant have his costs of and incidental to the appeal, to be taxed if not agreed. I certify that the preceding thirty-seven (37) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Spender.

Counsel for the Respondent: Mr P. McQuade

Solicitor for the Respondent: Cranston McEachern Lawyers

Date of Hearing: 18 August 2004

Date of Judgment: 15 December 2004