Miao v Owners Corporation SP 31235U

Ground 1 - The Registrar's orders and his Honour's judgment "are not in compliance with section 40(1)(g), section 41(7) and section 306 of the Bankruptcy Act 1966 and rule 4.05 of the Federal Circuit Court (Bankruptcy) Rules 2006".

Old Ground 2 - "Judgment failed to admit the facts that the applicant is overseas when the respondent serves the bankruptcy notice and services on bankruptcy notice and creditor's petition have errors."

New Ground 2 - The Registrar and his Honour "erred in accepting that bankruptcy notice is not based on the final judgment in case number S CI 2012 04767 on 30 July 2013 and the bankruptcy notice has an overstatement". 18 I have grouped these grounds of appeal, as they are related and encompass a number of complaints made by the appellant, including: (a) the lack of personal service of the bankruptcy notice and the petition and the appellant's assertions of invalid service; (b) an alleged deficiency in the bankruptcy notice concerning the respondent's address; (c) alleged deficiencies in the bankruptcy notice concerning what was asserted to be an overstatement in the interest calculation and in relation to costs; and (d) whether the judgment debt identified in the bankruptcy notice was a final judgment. 19 I will deal with the lack of authority point under a separate ground of appeal as it has broader dimensions.

(a) Invalid service? 20 The appellant has contended that the bankruptcy notice and the petition required personal service and that this was not affected; she pointed to some evidence of the fact that she had been overseas, although the evidence did not go so far as to establishing this when the petition was being served. The assertion as to the requirement for personal service, in terms of the appellant's concept of personal delivery, does not sit with reg 16.01 of the Bankruptcy Regulations 1996 (Cth) (Bankruptcy Regulations). 21 But in any event, there is little doubting that orders for substituted service can be made for both the bankruptcy notice and the petition (see s 309(2) of the Act, r 3.01 of the Federal Circuit Court (Bankruptcy) Rules 2006 (Cth) and r 6.14 of the Federal Circuit Court Rules 2001 (Cth) (FCC Rules)). 22 Further, orders were made in each case. There is no basis for suggesting that those orders were not validly made on the basis of proper material. Further, it is not disputed that they were complied with. 23 The respondent relied on the affidavit of Stella Mascoulis (Ms Mascoulis), solicitor for the respondent, sworn 21 January 2014 in support of the application for substituted service of the bankruptcy notice. 24 In that affidavit it was stated that on 10 September 2012 the appellant had appeared before Associate Justice Mukhtar in the Supreme Court of Victoria and stated that the address to which documents could be sent to her was at an identified address in Footscray (the Footscray address). On 13 December 2013, Ms Mascoulis engaged a process server to serve the bankruptcy notice at the Footscray address. The process server told her that the business operating from the Footscray address was closed and the shop was listed with an agent for lease. 25 On 16 January 2014, Ms Mascoulis telephoned the agency and spoke with an individual. She was told the appellant's email address and her mobile telephone number. Ms Mascoulis telephoned on 16 and 21 January 2014. On each occasion she left a voicemail message. On 16 January 2014, the bankruptcy notice was forwarded to an email address that had been used by the appellant in May 2012 and to another email address that Ms Mascoulis had been advised. Ms Mascoulis also telephoned the Maribyrnong City Council and was given a post office box address. 26 An order for substituted service of the bankruptcy notice was sought by the respondent seeking substituted service at or using the Footscray address, the relevant post office box and two email addresses. An order for substituted service was made for the bankruptcy notice by Registrar Caporale on 10 February 2014. That order was complied with. 27 In relation to the evidence dealing with the application for substituted service of the creditor's petition, the respondent relied on an affidavit of Ms Mascoulis sworn 26 May 2014. 28 In that affidavit it was stated that on 5 May 2014, the same process server was engaged, but was unable to effect service at the Footscray address. Further enquiries and attempts were again fruitless. 29 An order for substituted service was again sought by delivering the petition and associated documents to various addresses. An order for substituted service was made in relation to the creditor's petition and associated material and was complied with. It is accepted that the creditor's petition was served pursuant to an order for substituted service made on 13 June 2014 by Registrar Pringle. 30 Further, the appellant appeared at the hearing of the creditor's petition on 3 July 2014 before Registrar Allaway. 31 At the hearing before his Honour on the application for review, the appellant cross-examined Ms Mascoulis. His Honour found that Ms Mascoulis was an excellent witness and his Honour had no hesitation in accepting her evidence. 32 His Honour dealt with the question of service in relation to the bankruptcy notice and the creditor's petition at [7] to [10] of his reasons, which I have set out earlier. There is no substance to the appellant's suggestion that the bankruptcy notice and the petition were not properly served. Further, as I say, the appellant attended on the hearing of the petition and opposed it. Finally, I should also say for completeness that no issue arises as to the territorial connection required for the act of bankruptcy (see s 43(1)(b)).

(b) Section 41(7) 33 The appellant has referred to s 41(7) of the Act. But the reference is misplaced. No application to set aside the bankruptcy notice was made during its currency and prior to the time for its compliance. As I have said, the appellant did seek to file an interlocutory application within the petition proceedings itself, but this appears to have been rejected as being misconceived. Of course, the appellant could still argue on the petition that the notice was invalid and that there was no available act of bankruptcy, and she did so argue, although that argument was rejected.

(c) Address for payment in the notice 34 The appellant has argued that there was no valid address for payment. She asserts that the creditor's address stipulated in the notice was incorrect. I should say at the outset that it is not clear at all to me that this matter was raised before his Honour. The affidavit material filed by the appellant below is silent on the point. Further, from my perusal of the Federal Circuit Court file, there is nothing on that file indicating that the point was raised before his Honour. Further, his Honour does not address this point in his reasons. Further, I do not have the benefit of any transcript of the proceedings before his Honour. Nevertheless, I have permitted the point to be raised before me. 35 It appears to have been accepted by the respondent before me that the creditor's stipulated address on p 1 of the notice was not the actual address; it correctly identified the creditor but then referred to "c/- Burnham Real Estate, 49 Irving Street Footscray"; the respondent's managing agent was a director of this firm. 36 Nevertheless, in my view, the bankruptcy notice (p 2) did stipulate a proper address for payment. 37 Section 41(2) of the Act provides that a bankruptcy notice must be in accordance with the form prescribed by the Bankruptcy Regulations. Regulation 4.02(1) provides for the form that a bankruptcy notice is required to follow (Form 1). One part of Form 1 refers to the insertion of an address where "[p]ayment of the debt can be made". In relation to the bankruptcy notice that was issued and served, albeit by substituted service on the appellant, there was stipulated in the bankruptcy notice (p 2) for such an address the name, address and telephone number of the respondent's solicitors, Mills Oakley Lawyers, and an email address of the solicitor at that firm who had the carriage of the matter. This was the only address stipulated to be the address for payment. 38 The appellant relied on the fact that the respondent's address on p 1 of the bankruptcy notice was noted as "c/- Burnham Real Estate 49 Irving Street Footscray VIC Australia" which was not the respondent's address and that by reason thereof the bankruptcy notice was invalid; a further assertion was made by the appellant before me concerning the nature of this address, but it was unsubstantiated and not accepted by the respondent; moreover it was an assertion as to the nature of that address now rather than at the time of the service and currency of the bankruptcy notice. In support of the invalidity assertion the appellant referred to De Robillard v Owners of Strata Plan Number 49259 (2002) 194 ALR 145; [2001] FMCA 130 at [38] to [46]. In this context, reference should also be made to In re Stogdon; Ex parte Leigh [1895] 2 QB 534 at 535, In re Beauchamp; Ex parte Beauchamp [1904] 1 KB 572 at 582 to 584, Re Nugent; Ex parte Nugent (1985) 5 FCR 161 at 163, Re St Leon; Ex parte National Australia Bank Ltd (1994) 54 FCR 371 at 377 to 378, Re Lynch; Ex parte Depela Pty Ltd (in liq) (1998) 81 FCR 444 at 447 to 448 and more generally James v Federal Commissioner of Taxation (1955) 93 CLR 631 (although it deals with a point of different emphasis). 39 Let me accept for the moment that the stipulation of the agent's address rather than the creditor's address on the first page was a defect, although this might be debated (indeed, on one view and for some purposes, a creditor's address may be an agent's address). Nevertheless, there was no defect in relation to the stipulation of the address for payment. Moreover, only one address was stipulated as the place for payment. Further, there was no material to suggest that the appellant could reasonably have been confused as to where payment could be made, that is, at the only address that had been stipulated for that purpose. The cases above deal with situations where an incorrect (or inappropriate) address was stipulated for payment (or implicitly taken to be the address for payment) or where two addresses had been so stipulated for payment but where one address was wrong or where no address had been stipulated at all. In such circumstances, the bankruptcy notice may be invalid. But in the present case, the one address stipulated on p 2 for payment was correct (being the address of an authorised agent). In my view, even if a defect arose (in relation to the stipulation of the creditor's address on p 1) by reason of non-compliance with s 41(2) of the Act, reg 4.02(1) and Form 1, nevertheless s 306 applied. The relevant principles have been set out in Adams v Lambert (2006) 228 CLR 409 at [26] to [29], Kleinwort Benson Australia Ltd v Crowl (1988) 165 CLR 71 at 79 and 80, and recently by this Court in Curtis v Singtel Optus Pty Ltd (2014) 225 FCR 458 at [61], [62] and [65]. Those principles justify in my view a conclusion that any such defect was "cured" by operation of s 306. The essential requirement was stipulation of the correct address for payment (which had been done) and the proper identification of the creditor (which had been done). Moreover, there was nothing about the notice that could have reasonably misled the appellant as to what was necessary to comply with the notice. The present case has some analogy with Bank of Melbourne Ltd v Hannan (1997) 78 FCR 249 at 252 to 253. 40 In summary, there was an (and "the") appropriate address for payment stipulated in the notice (p 2). The address for payment was stipulated to be the respondent's solicitors' office at which it was reasonably practicable for the appellant to pay the respondent. And even if there was considered to be a defect in the form of the bankruptcy notice, I consider that s 306 of the Act would operate to cure any such defect.

(d) Post-judgment interest and costs claimed in bankruptcy notice 41 The appellant has asserted that there was an error in the interest claimed on the judgment debt in the bankruptcy notice and that the post-judgment interest had been overstated. 42 The judgment debt identified and claimed in the notice arose from various orders made against the appellant in favour of the respondent at the Sunshine Magistrates' Court in proceeding U00919045. 43 Those orders were: (a) on 21 July 2011, an order made by Fitzgerald M for costs of $1068; (b) on 4 August 2011, an order made by Lesser M for costs of $650; and (c) on 18 June 2012, an order made by Grinberg M for the sum of $53,763.89 and costs of $1292.30. 44 It is true that a Supreme Court of Victoria proceeding was subsequently instituted whereby the appellant sought leave to file a notice of appeal out of time against such orders. That application was subsequently refused. 45 During the course of the hearing before me, the respondent's counsel put to me various figures and calculations seeking to justify the interest claimed in the bankruptcy notice. I have no reason to doubt the accuracy of such calculations. The interest claimed in the bankruptcy notice is $2,720.98, which is calculated as follows (see also the Schedule attached to the notice): Period Days Principal Interest Interest (daily) Amount (%) 22.07.11 to 06.10.13 807 1068 10.5% 0.30723288 247.936934 ($247.94) 07.10.13 to 13.12.13 68 1068 10.00% 0.29260274 19.8969863 ($19.90) 05.08.11 to 06.10.13 793 650 10.5% 0.18698630 148.280136 ($148.28) 07.10.13 to 13.12.13 68 650 10.00% 0.17880219 12.109589 ($12.11) 19.07.13 to 06.10.13 80 55056.19 10.5% 15.8380821 1267.04656 ($1267.05) 07.10.13 to 13.12.13 68 55056.19 10.00% 15.0838877 1025.70436 ($1025.70)

46 The interest calculations were correct. The appellant's calculations set out in a table handed to me appeared to be erroneous, including being incomplete. 47 In any event, even if there was an error made in the interest calculations as claimed in the bankruptcy notice, in my view, such a defect would not invalidate the bankruptcy notice. Section 41(5) makes this clear (there was no notice at the relevant time), as does s 306 of the Act. 48 Finally, the appellant repeated before me a misconceived argument asserting that no costs order had been made by Fitzgerald M. This was incorrect (see his Honour's reasons at [59]).

(e) Other matters 49 At the time of the bankruptcy notice and the filing of the petition, indeed, on the hearing of the petition, there had been no stay of the relevant Magistrates' Court orders. Moreover, such orders constituted a final judgment. 50 The appellant asserted before me that there was no final judgment. But this was based upon a misplaced reference to and a misconception as to the effect and context of various orders made by the Supreme Court of Victoria in proceeding SCI 2012 04767. The stay orders made in that proceeding expired in any event no later than 30 days after 30 July 2013 (see the order made by Associate Justice Derham on 30 July 2013) and well before the issue of the bankruptcy notice (see the reasons below at [57]). 51 Generally, based upon the foregoing matters that I have discussed earlier, including the lack of authority argument that I will address shortly, the appellant asserted that she did not commit an act of bankruptcy. But, in my view, the appellant has not established this, nor that any error was made on the part of his Honour on this aspect. 52 It is appropriate to next deal with the grounds of appeal concerning the asserted lack of authority (Grounds 5 and 6).

Ground 5 - His Honour erred "in accepting Frank Gerace's oral statement about authorisations to represent the respondent and to institute bankruptcy proceedings without written appointment of manager and a certificate of authority" 53 His Honour accepted Mr Gerace's evidence that the necessary resolution had been passed to bankrupt the appellant and that there was a necessary resolution to pursue the appellant and the arrears that she owed. His Honour found that Mr Gerace was an excellent witness, whose evidence was clearly truthful and evidence which he accepted. His Honour also had the benefit of observing Mr Gerace in giving his evidence. In my view, there is simply nothing advanced by the appellant which in any way undermines his Honour's factual conclusion. 54 His Honour, at [51] and [52] of his reasons, stated the following: 51. When challenged as to his authority to act, he said he was appointed to manage the property. He said this is recorded in the minutes of the meeting appointing him. Annual general meetings of the body corporate repeat this authority. He said it was his obligation to pursue arrears. He confirmed that a resolution had been passed to bankrupt the applicant and he was present at that meeting. There was also resolution to pursue the applicant and the arrears that she owed. 52. I should interpolate and say that Mr Gerace was an excellent witness whose evidence was clearly truthful and which I accept. 55 As I say, his Honour found that Mr Gerace was appointed managing agent and was authorised by the respondent to institute the various bankruptcy proceedings. 56 The appellant has challenged two aspects concerning the authority question, namely: (a) first, whether Mr Gerace was the managing agent; and (b) second, whether he was authorised on behalf of the respondent to pursue the relevant proceedings against the appellant. 57 As I say, his Honour had oral evidence before him on both matters, which he was entitled to and did accept. True it is that apparently there was no confirmatory documentation, but there was otherwise no evidence to the contrary. Accordingly, no error has been demonstrated in his Honour's approach or findings. 58 The appellant has also asserted that the proceedings brought by Mills Oakley were without the respondent's authority. But, as I say, in my view, his Honour was entitled to make the findings that he did at [51] and [52] of his reasons (see also ss 9, 18 and 30 of the Owners Corporation Act 2006 (Vic) (Owners Corporation Act)). 59 Section 9 of the Owners Corporation Act provides that "An owners corporation may appoint or employ persons to assist the owners corporation in carrying out its functions" (see also s 11(2)(b)). Those functions include the power to bring legal proceedings under s 18(1) and to recover fees under s 30. 60 It is apparent that the appointment of Mills Oakley as the respondent's lawyers was to assist the Owners Corporation in carrying its functions and there is no basis for any assertion that Mills Oakley otherwise had no authority on behalf of the respondent to act in the manner that it has acted in the present context. Further, his Honour accepted Mr Gerace's evidence that a resolution had been passed to bankrupt the appellant and that a resolution had been passed to pursue the appellant for the arrears that she owed. This necessitated solicitors being instructed to undertake the necessary steps.

Ground 6 - His Honour "shouldn't award costs [to the respondent] who didn't institute the bankruptcy proceeding" 61 This ground seems to relate to ground 5. 62 This ground seems to be based upon the appellant's assertion that no proper authority had been given by the respondent for the bankruptcy notice to be issued or for the creditor's petition to be filed. As I say, in my view, his Honour dealt with the question of authority appropriately and no error has been established.

Ground 3 - His Honour "failed to admit the facts that Frank Gerace (and presumably the respondent) did not comply with sections 20, 21 and 151 of Owners Corporation Act; doesn't obey VCAT orders and is in contempt of the Supreme Court of Victoria and VCAT"

Ground 4 - His Honour erred in "accepting Frank Gerace's (and apparently the respondent's) wrongdoings in providing a void paper"

Ground 7 - "The evidence accepted by (his Honour) from Frank Gerace [presumably also the respondent] didn't support conclusions of final decisions"

Ground 8 - His Honour "made wrong decisions without considering the appellant's counter-claim before VCAT" 63 In addition to the lack of authority point that I have dealt with, these grounds raise a miscellany of complaints concerning s 52(2)(b) of the Act relating to the existence of an alleged cross-claim/counterclaim that the appellant asserts that she had against the respondent based upon the failure to provide an Owners Corporation certificate which it said prevented the appellant from selling her property. 64 By way of background, the following may be noted: (a) On 22 February 2013, the Victorian Civil and Administrative Tribunal (VCAT) made an order that on payment of the prescribed fee of $150 the respondent should supply the appellant with an Owners Corporation certificate in compliance with s 151 of the Owners Corporation Act. (b) The evidence of Mr Gerace before his Honour was that he was always ready and able to supply the certificate to the appellant on payment of the prescribed fee. (c) On 28 August 2014, the appellant paid the prescribed fee. On 5 September 2014, the certificate was available to be collected. On 16 September 2014, at a hearing before Associate Justice Mukhtar, the Owners Corporation certificate was provided to the appellant. 65 Section 11 of the Owners Corporation Act provides that the obligations of the Owners Corporation can be delegated to, amongst other persons, the manager of the corporation. 66 The wording of the certificate provides for it to be signed by the manager or by the application of the Owners Corporation's common seal. 67 His Honour accepted Mr Gerace's evidence that his signature appeared on the certificate (see at [50]). 68 There is no substance to the appellant's complaints. 69 His Honour's consideration of the counterclaim was in two parts (see his Honour's reasons at [60] to [65]). First, it was said that loss and damage arose due to the failure of the respondent to provide the Owners Corporation certificate. Second, there was an allegation of fraud and misconduct by Mr Gerace and his lawyers. 70 As to the first matter, being damage said to arise due to the failure of the respondent, allegedly, to provide the Owners Corporation certificate, the evidence was that on the appellant complying with the condition precedent of the VCAT order to pay the required fee, Mr Gerace, on behalf of the respondent, provided the requested certificate. The evidence established that any loss and damage did not arise due to the failure of the respondent to provide the Owners Corporation certificate. Rather it arose, if at all, because of the appellant's failure to pay the fee. In any event, there was no evidence of loss of any probative value even if it be otherwise said that the respondent was at fault in not providing a certificate earlier. The evidence provided in support of the quantum of the appellant's claim was a copy of a letter dated 3 June 2014 from VCAT to the appellant and an order made on 26 June 2014. His Honour below reached the conclusion that "[i]t is wholly impossible to evaluate the force of any claim from the affidavit material that the applicant has filed" (at [63]). In my view, nothing that the appellant has advanced before me demonstrates any error made by his Honour on this aspect. Further, as to the second part of the counterclaim, being the allegation of fraud or misconduct, which appeared in an unspecified way to relate to conduct that may have affected the tenancy of the property, there was simply no evidence of such fraud or misconduct before his Honour. Moreover, and indeed, his Honour accepted the truthfulness of the evidence given by Mr Gerace and also by Ms Mascoulis. 71 The appellant has not demonstrated that his Honour's judgment was affected by any error on this aspect in relation to his consideration of s 52(2)(b). His Honour appears to have applied the correct principles (see the summary in Stratton v Bowles (No 2) [2015] FCA 43 at [38] to [42] and Clapham v Commonwealth Bank of Australia [2013] FCAFC 84 at [54]). 72 One residual issue left to be dealt with is s 52(2)(a) of the Act, although it is not clear whether this is embraced by the appellant's appeal grounds. 73 His Honour concluded that the appellant had not satisfied him that she was solvent ([55], [56] and [67] of his reasons). 74 In determining whether a debtor is able to pay his debts, the capacity of the debtor to pay the relevant debts based upon available cash resources or moneys that can be realised by sale or by mortgage or pledge of his assets within a relatively short time is what the Court is required to consider (see Sandell v Porter (1966) 115 CLR 666 at 670). 75 According to the evidence before his Honour, the appellant owned the Footscray property but little else. Apparently, the appellant has had that property for sale since 2011, but the property still has not been sold. The appellant asserted before his Honour that an offer had been made to purchase the property for $700,000, but it does not appear that that offer was ever accepted. Indeed, the respondent goes so far as to assert that the appellant did not intend to accept such an offer and it made various submissions in support of that assertion. I do not need to resolve that issue. 76 There was no evidence before his Honour that the appellant had readily realisable resources including cash resources immediately available or money which could be procured by realisation, sale or mortgage of assets within a relatively short timeframe. 77 The appellant has not demonstrated any error in his Honour's findings that she failed to discharge the onus under s 52(2)(a).

Ground 9 - His Honour erred in affirming the Registrar's order in that it was "based on an invalid bankruptcy notice, and creditors petition personal service didn't occur" 78 This ground merely repeats some of the grounds discussed earlier. It has no substance.

Other matters 79 Finally, the appellant made a misconceived argument asserting somehow that Mr Gerace should bear the costs of the creditor's petition, the review before his Honour and this appeal. 80 Given that I propose to dismiss the appellant's appeal, the occasion for considering whether the respondent or Mr Gerace should bear such costs does not arise.

Conclusion 81 The appeal will be dismissed. 82 The costs of the respondent of and incidental to this appeal will be treated as its costs and expenses of the administration of the appellant's estate. I certify that the preceding eighty-two (82) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Beach.