Re Marsh; Ex Parte Marsh v Paramount Leisure Products Pty Ltd

IRREGULARITY OF AFFIDAVITS - PRELIMINARY ISSUE When the hearing commenced, the affidavit evidence of the applicant survived a challenge from counsel for the respondent. The applicant, in his third and most recent affidavit sworn 6 October 1998, had deposed that he "had a difficulty with literacy". In oral evidence he conceded that he could recognise certain words but could not read or write in any effective sense. He also conceded that he could not definitively recognise his affidavits or documents annexed to such affidavits but could and did recognise his signature. He gave evidence as to how his affidavit material was prepared and explained and read out to him. He acknowledged his signature on the affidavits and, pursuant to Order 14 rule 2(5) of the Federal Court Rules, I was satisfied that his affidavits were read to him before he swore them and that he understood the contents. "SERVICE" OF ORIGINATING PROCESS Rules 55(1) and (2) of the Magistrates Courts Rules (Queensland) relevantly provide: "(1) Unless otherwise prescribed, a summons shall be served personally upon the person to whom it is directed or, if he cannot reasonably be found, by leaving it for him with some person, appearing to be over the age of seventeen years, at his place of residence...... (2) The term "cannot reasonably be found" in this rule includes (a) the case of a person to whom a summons is directed who is temporarily absent from his place of residence at the time the person intending to serve the summons calls at such residence in order to effect service; ....." The process server, Mr Hughes, deposed some ten weeks after purported service in an affidavit of service sworn on 4 March 1994 that: "On 21 December 1993 at 12.25 p.m. I served Alan Randle Hill with a Summons of which the within Summons is a true copy together with the Plaint and Statement of Particulars, true copies of which are hereto annexed marked "B", together with Schedule 1 Form 1 hereto annexed marked "A" - by leaving a copy thereof for the Defendant at his place of residence at 31 Elizabeth Street, Rooty Hill with a person who at the time of service identified himself as the son of Alan Randle Hill and who was a person apparently over the age of 17 years. This person undertook to hand same to the Defendant as the Defendant could not reasonably be found." The applicant's evidence included the following: · he only became aware of the Magistrates' Court proceeding against him, and of the subsequent default judgement, upon service on him on 15 May 1998 of the bankruptcy notice · the address of 31 Elizabeth Street Rooty Hill has never been his residential address · he and his former defacto wife, Leonie Hill, leased the premises but only Mrs Hill and his children resided there · he had separated from Mrs Hill in 1991 but continued to support her and the children financially · the applicant had resided "in shared premises" at 27 Hooley Street, Midland, Western Australia, "from 1991 to May 1996" and driver's licence records held by the Licensing Division, Department of Transport, Western Australia record 27 Hooley Street as the "current address" with a change of address recorded from "C/- Gattan Caravan Park, Gattan, Queensland" on 2 October 1990. The applicant's daughter and son, Mechelle and Clinton Hill, both confirmed that their father did not reside at any time at 31 Elizabeth Street Rooty Hill. Clinton Hill also deposed that: · as a former police officer, he was aware of the importance of legal process · he had moved from 31 Elizabeth Street Rooty Hill on or about 27 November 1993 (before the purported service of the Plaint and Summons) · he did not ever receive the Court process referred to by Mr Hughes in his affidavit of service · he did not give any undertaking to Mr Hughes to hand any Court process to the applicant · his relationship with his father is not a very close relationship · he does not put himself in the position of accepting documents on behalf of his father and giving any undertakings to convey documents to him, nor would he have done so during December 1993. The evidence of Serena Paramananthan included the following: · she was responsible for the respondent's claims against the applicant from June to November 1993 and she had carriage of the debt action · on 5 October 1993 the applicant advised her by telephone that he wanted to be put on a payment plan to pay off the debt to the respondent · on 5 October 1993 the applicant also advised her that he was no longer with his wife and was "no longer in Queensland but in Western Australia as a driver/truckie" · on 14 October 1993 the applicant telephoned her and advised her that the letter setting out the payment plan should be forwarded to him at 31 Elizabeth Street Rooty Hill · on 15 October 1993 a letter setting out the payment plan was sent to the applicant addressed "Mr Alan Hill, c/- 31 Elizabeth Street, Rooty Hill" · on 11 November 1993, the respondent having not received the first payment under the plan, sent a letter of demand, again addressed "Mr A Hill, C/- 31 Elizabeth Street Rooty Hill" · on 19 November 1993 the applicant telephoned her, acknowledged receipt of the letter of demand, but indicated that he had not paid the first payment under the payment plan because he had not received the letter of 15 October 1993 setting out the payment plan conditions. Giovanni Porta's evidence included the following: · he was responsible for the day to day management of the respondent's claims against the applicant from November 1993 to March 1994 · on 10 December 1993 he directed a process server in writing to serve a Plaint and Summons "on Mr Hill personally at the address noted on the front of the plaint" · the address on the front of the plaint was 31 Elizabeth Street, Rooty Hill. Paragraph 5 of Mr Porta's affidavit of 8 July 1998 reads as follows: "I asked the process server to serve the applicant at this address as the applicant requested that we forward correspondence relating to the debt owing to the respondent to this address, and had acknowledged receipt of such correspondence." It is clear that this is a statement by the deponent as to why he put the address of 31 Elizabeth Street Rooty Hill as the address for service on the plaint. It is not a statement, acknowledgment or assertion by the witness that 31 Elizabeth Street was the applicant's place of residence. Indeed, Ms Paramanantham, in her note of her discussion with the applicant, on 5 October 1993, recorded that the applicant had advised that he was no longer living in Queensland but in Western Australia. CONCLUSION AND FINDINGS There is no evidence of the applicant receiving a copy of the Plaint and Summons. There is no evidence of the service of a copy of the Plaint and Summons at the applicant's place of residence, there being no evidence that 31 Elizabeth Street was ever the applicant's place of residence. Even if all evidence given for the respondent is accepted and all conflicting relevant evidence given by and on behalf of the applicant is rejected, there is no evidence that 31 Elizabeth Street was ever the applicant's place of residence. There is evidence from Ms Paramanantham, that: · the applicant asked her by telephone on 14 October 1993 to send conditions for a payment plan to 31 Elizabeth Street (exhibit SP2) · the applicant informed her on 19 November 1993 that he had not received the first copy of the payment plan addressed to him at that address (exhibit SP5) · the applicant informed her on 19 November 1993 that he did receive a letter of demand posted to him at that address (exhibit SP5) · the applicant informed her on 5 October 1997 that he was "no longer with (his) wife" (ie Leonie Hill) ..... was "with friend" .... and was "no longer in Queensland .... in W.A. as driver/truckie" (exhibit SP1). There is no evidence from Ms Paramanantham that she considered 31 Elizabeth Street as the applicant's place of residence. Indeed her written record (exhibit SP1) that the applicant had told her on 5 October 1993 that he was "no longer" with Leonie Hill, was "with friend" and "in W.A. as a driver/truckie", suggests that 31 Elizabeth Street was not his place of residence, and Ms Paramanantham made a written note which was to that effect. Her practice of addressing correspondence to the applicant "c/- 31 Elizabeth Street" can also be taken as a possible, even a likely, acknowledgment to that effect. There is no evidence that Mr Porta turned his mind to whether or not 31 Elizabeth Street was the applicant's place of residence. He simply states: "I asked the process server to serve the applicant at this address as the applicant requested that we forward correspondence relating to the debt owing to the respondent to this address, and had acknowledged receipt of such correspondence." Recent authorities addressing the failure to serve originating process in default judgments founding bankruptcy proceedings include Re Marsh; Ex Parte Marsh v Paramount Leisure Products Pty Ltd (1991) 32 FCR 482 and Re Willshire-Smith; Ex parte Randle & Taylor Services Pty Ltd (1994) 48 FCR 371. In Re Willshire-Smith (above) at 374 and 375, von Doussa J said: "It is a fundamental precept of adjectival law that the process which initiates a claim be brought to the attention of the defendant thereby giving the opportunity to make answer to the claim. This principle is met by a requirement that the originating process be served. The fulfilment of this requirement is one of critical importance where it is sought to enforce a judgment obtained by default by the processes of the Bankruptcy Act 1966 (Cth): Re Marsh; Ex parte Marsh v Paramount Leisure Products Pty Ltd (1991) 32 FCR 482. In that case Pincus J reviewed a sequestration order based on an act of bankruptcy consisting in non-compliance with a bankruptcy notice founded on a District Court judgment. The facts as found were that the plaint which initiated the District Court proceedings was never served on the debtors. Pincus J considered authorities which drew a distinction between situations where there has been an irregularity in some aspect of the service of the originating process, and cases where there has been no service at all. His Honour applied the decision of the English Court of Appeal in Craig v Kanssen [1943] KB 256 where Lord Greene MR said (at 262): "In my opinion, it is beyond question that failure to serve process where service of process is required goes to the root of our conceptions of the proper procedure of litigation. Apart from proper ex parte proceedings, the idea that an order can validly be made against a man who has had no notification of any intention to apply for it has never been adopted in this country." Pincus J concluded (at 484-485): "I am of opinion that if a bankruptcy notice is founded on a judgment in default and it is proved or admitted that the originating proceedings were simply not served (I leave aside the case of defective service), the judgment must generally be treated as a nullity; I say 'generally' because of the possibility that a statute or rule might provide otherwise. If the view just expressed is not correct, still in my opinion, on its being shown that a default judgment (founding the bankruptcy motion) was entered although the proceedings were not served, the court should not, in the exercise of its discretion, make a sequestration order. I think proof or admission of non-service of the originating proceedings would be 'sufficient cause' not to make an order within the meaning of s 52(2)(b) of the Act. it may be that, in practice, if the judgment debtor claims not to have been served, the Registrar might choose to adjourn the petition to allow the question to be tested by an application to the court in which judgment was entered; but where the Federal Court has found that there was simply no service of originating process, that would appear to be a sufficient cause for declining to make a sequestration order." In the result, Pincus J set aside the sequestration order, even though he expressed the view that the result was not necessarily satisfactory because he was not convinced of the correctness of the applicant's case on the substantial question of whether money was due. In that case, like the present one, the debtor denied the existence of the debt." At 377 von Doussa J continued: "It is fundamental that the mode of service employed, to be effectual, must bring the proceedings to the notice of the defendant. .......... In my opinion I should apply Re Marsh (supra). I find that the claim was not served on the debtor, who remained unaware of the action against him until the bankruptcy notice was served. The judgment by default should be treated as a nullity." I propose to follow Re Marsh (above) and Re Willshire-Smith (above). On the basis of the affidavit material before the Court, even assuming that all such material submitted by the respondent is accepted, I am not satisfied that the applicant was ever served with a true copy of the Plaint, the Summons, the Statement of Particulars, or an attached Schedule. I am not satisfied that the originating process was or could have been served or was in compliance with Rule 55 of the Magistrates Courts Rules (Queensland). Counsel for the respondent has suggested that the default judgment in this case is not a nullity because of Rule 8 which reads: "Noncompliance with any of these rules shall not render void the proceedings in which the noncompliance has occurred, unless it is expressly so provided in these rules: but the proceedings may be set aside, either wholly or in part, as irregular or amended or otherwise dealt with on such terms as to costs and otherwise as a Court thinks fit." Firstly, I observe Rule 8 deals with irregularity, not with nullity. In Re Marsh, endorsed in Re Willshire-Smith, Pincus J held that in general, a default judgment obtained without service of the originating process should be treated as a nullity, and not merely irregular. Accordingly, such a judgment is incapable of supporting a valid bankruptcy notice. Secondly, there is obiter in both cases, that, in any event, upon it being shown that a default judgment (founding a bankruptcy petition) was entered although the proceedings were not served, the Court should not, in the exercise of its discretion, make a sequestration order. I propose to grant the application and order that the bankruptcy notice be set aside. ORDERS

1. Bankruptcy Notice QN 272 of 1998 be set aside.
2. The respondent pay the applicant's costs of and incidental to the application. I certify that this and the preceding seven (7) pages are a true copy of the Reasons for Judgment herein of the Judicial Registrar Ryan