Battenberg v Restrom [2006] FCAFC 20 (7 March 2006)

Last Updated: 7 March 2006

FEDERAL COURT OF AUSTRALIA

Battenberg v Restrom [2006] FCAFC 20

BANKRUPTCY – Bankruptcy notice – substituted service – substituted service of a bankruptcy notice made whilst the debtor is out of the jurisdiction – whether the Bankruptcy Act 1966 (Cth) permits service of a bankruptcy notice outside Australia – whether leave of the Court is required.





Bankruptcy Act 1966 (Cth) ss 40, 40(1)(a), 40(1)(b), 40(1)(g), 43(1), 43(1)(b), 309(2)


Laurie v Carrol [1958] HCA 4; (1958) 98 CLR 310 approved
Sheahan v Joye (1995) 57 FCR 389 cited
Re Trimbole; Ex parte Deputy Commissioner of Taxation (1984) 4 FCR 586 cited
Re Skase (1991) 32 FCR 212 cited
Re Mendonca; Ex parte Commissioner of Taxation (1969) 15 FLR 256 followed














ANDREW CHARLES ROBERT EDWARD ALBERT BATTENBERG v CONWAY ANTHONY RESTROM, PETER JAMES CALDWELL, ANTHONY JAMES CORDATO, BRIAN STUART OLLIVER, PHILLIP MARK DAY, ALAN WILKIE NICOL (TRADING AS MICHELL SILLAR)

NSD 1682 of 2005




HEEREY, DOWSETT and CONTI JJ
7 MARCH 2006
SYDNEY

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY	NSD 1682 OF 2005

ON APPEAL FROM A SINGLE JUDGE OF THE FEDERAL COURT OF AUSTRALIA

BETWEEN:	ANDREW CHARLES ROBERT EDWARD ALBERT BATTENBERG APPELLANT
AND:	CONWAY ANTHONY RESTROM, PETER JAMES CALDWELL, ANTHONY JAMES CORDATO, BRIAN STUART OLLIVER, PHILLIP MARK DAY, ALAN WILKIE NICOL (TRADING AS MICHELL SILLAR) RESPONDENTS
JUDGES:	HEEREY, DOWSETT & CONTI JJ
DATE OF ORDER:	7 MARCH 2006
WHERE MADE:	SYDNEY

THE COURT ORDERS THAT:

1. The appeal be dismissed.

2. The appellant pay the respondents’ costs of the appeal.












Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY	NSD 1682 OF 2005

ON APPEAL FROM A SINGLE JUDGE OF THE FEDERAL COURT OF AUSTRALIA

BETWEEN:	ANDREW CHARLES ROBERT EDWARD ALBERT BATTENBERG APPELLANT
AND:	CONWAY ANTHONY RESTROM, PETER JAMES CALDWELL, ANTHONY JAMES CORDATO, BRIAN STUART OLLIVER, PHILLIP MARK DAY, ALAN WILKIE NICOL (TRADING AS MICHELL SILLAR) RESPONDENTS

JUDGES:	HEEREY, DOWSETT & CONTI JJ
DATE:	7 MARCH 2006
PLACE:	SYDNEY

REASONS FOR JUDGMENT

THE COURT:

1 This is an appeal from a decision of Gyles J, refusing an application by the appellant for an order extending the time for compliance with a bankruptcy notice or, alternatively, setting aside an order for substituted service of the bankruptcy notice or, alternatively, declaring that there has been no valid service of the bankruptcy notice.

2 On 9 January 2004 in the Supreme Court of New South Wales, the respondents recovered judgment against the appellant in the amount of $203 308.61. On 26 August 2004 the Official Receiver issued a bankruptcy notice pursuant to s 41 of the Bankruptcy Act 1966 (Cth) (the "Act"), addressed to the appellant and based upon that judgment. On 9 March 2005 a registrar in the Federal Magistrates Court ordered that:

‘1. Service of Bankruptcy Notice No NN 2186 of 2004 addressed to Andrew Charles Robert Edward Albert Battenberg may be effected by serving:

(i) the Bankruptcy Notice together with a sealed copy of this order as follows:

(a) by sending on or after 23 March 2005 by pre paid ordinary post addressed to the judgment debtor at Salvatore Russo, Russo & Partners, 12 Smalls Road, Arcadia, NSW, 2159; and
(b) by personal service on or before 23 March 2005 on any person apparently over the age of sixteen years at Russo & Partners, 12 Smalls Road, Arcadia, NSW, 2159.

2. Service in accordance with this order shall be deemed good and sufficient service of the Bankruptcy Notice upon the Debtor.

3. The Bankruptcy Notice shall be deemed to be served on the Debtor on 30 March 2005.

4. A copy of the Bankruptcy Notice to be served pursuant to paragraph 1 of this order is to be annexed to any Affidavit proving that service.

5. The copies of the Bankruptcy Notice for service and proof of service all be amended by deleting the words in paragraph 3 of the notice "after service on you of this Bankruptcy Notice" and substituting "after 30 March 2005".

6. A copy of this order be given to the Official Receiver in Sydney.

7. Costs of this application be served for the purposes of any future Creditor’s Petition based on this Bankruptcy Notice.’

3 On 20 April 2005 the appellant filed the application identified above and, on the same day, a registrar of this Court extended until 3 May 2005 the time for compliance by the appellant with the requirements of the bankruptcy notice. At the hearing before Gyles J, the appellant did not pursue the application to set aside the bankruptcy notice but sought an order setting aside the order for substituted service and a declaration that there had been no valid service of the bankruptcy notice.

4 His Honour found that the appellant was absent from Australia on 30 March 2005, the date of deemed service of the bankruptcy notice pursuant to the order for substituted service, and was probably outside of Australia from 9 March 2005 until that date. Immigration records suggest that he left Australia on 11 February 2005 and returned on 9 May 2005. It was not suggested that the respondents knew that the appellant was, at any material time, absent from Australia.

5 At first instance, counsel for the appellant submitted that a person outside the jurisdiction could not be served within the jurisdiction by means of an order for substituted service, relying upon the decision of the High Court in Laurie v Carrol [1958] HCA 4; (1958) 98 CLR 310 as authority for that proposition. It was also submitted that the decision of Branson J in Sheahan v Joye (1995) 57 FCR 389 established that the Court had jurisdiction to review the registrar’s decision (in the Federal Magistrates Court) to order substituted service in the light of information not before the registrar. Gyles J concluded that the order for substituted service had been properly made on the material before the registrar, and that there was no apparent justification for upsetting it, assuming that there was jurisdiction to do so.

6 On appeal, counsel for the appellant took a somewhat different tack, submitting that the appellant had been served with the bankruptcy notice outside of Australia and without the leave of the court as required by par 40(1)(g) of the Act. This argument assumes that compliance by the respondents with the terms of the order for substituted service constituted service of the bankruptcy notice on the appellant at the place at which the proceedings came to his attention as a result of such compliance.

7 We should outline the scheme of the Act to the extent that it is presently relevant. Subsection 7(1) provides that:

‘This Act extends to debtors being persons who are not Australian citizens and persons who have privilege of Parliament.’

8 Section 40 defines the circumstances in which a debtor commits an act of bankruptcy. Paragraphs 40(1)(a) and 40(1)(b) identify as acts of bankruptcy certain conduct, whether it occurs in Australia or elsewhere. However the presently alleged act of bankruptcy arose out of par 40(1)(g) which provides that a debtor commits an act of bankruptcy:

‘... if a creditor who has obtained against a debtor a final judgment or final order, being a judgment or order the execution of which has not been stayed, has served on the debtor in Australia or, by leave of the Court, elsewhere a bankruptcy notice under this Act and the debtor does not:

(i) where the notice was served in Australia – within the time specified in the notice; or
(ii) where the notice was served elsewhere – within the time fixed for the purpose by the order giving leave to effect the service;
comply with the requirements of the notice or satisfy the Court that he or she has a counter-claim, set off or cross demand equal to or exceeding the amount of the judgment debt or sum payable under the final order, as the case may be, being a counter-claim, set off or cross demand that he or she could not have set up in the action or proceeding in which the judgment or order was obtained ... .’

9 Section 41 provides that the Official Receiver may issue a bankruptcy notice on the application of a judgment creditor. Subsection 43(1) provides:

‘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.’

10 We observe in passing that subs 43(1) contemplates an act of bankruptcy having been committed by a person who did not, at the time, satisfy any of the criteria identified in par 43(1)(b). Of course, a creditor could not rely upon such an act of bankruptcy in seeking a sequestration order. We note also that only the first limb of criterion (b)(i) contemplates the debtor being necessarily in Australia at the time of the act of bankruptcy.

11 Subsection 309(2) provides:

‘Where a notice or other document is required by this Act to be served on or given to a person, the Court may, in a particular case, order that it be given or served in a manner specified by the Court, whether or not any other manner of giving or serving the notice or other document is prescribed.’

12 There has been no suggestion that the Magistrates Court lacks jurisdiction to make an order for substituted service of a bankruptcy notice in appropriate circumstances, exercising the power conferred by subs 309(2). Nor has it been suggested that it lacks jurisdiction to grant leave to serve a bankruptcy notice outside of Australia pursuant to par 40(1)(g). Given that, at the time of the application for substituted service, the respondents were unaware of the appellant’s location or that he was out of Australia in any event, the proper course was to seek substituted service. Upon compliance with the terms of that order, service was effected in accordance with its terms, that is on 30 March 2005. That order was authorized by, and took effect pursuant to, subs 309(2) of the Act. There has been no appeal against it. The jurisdiction to grant the relief sought at first instance in this Court is unclear. The decision in Sheahan v Joye has no present relevance. That case involved an application to review a decision of a registrar of this Court. We are inclined to think that any challenge to the order for substituted service should have been by way of appeal. No doubt that is why his Honour "assumed" that there was jurisdiction to intervene. We will take the same course.

13 The appellant relies upon the decision of the High Court in Laurie v Carroll. That case concerned the service of a writ of summons issued in the Supreme Court of Victoria upon a defendant who was outside of the state at the time of issue of the writ. The Chief Justice had made an order for substituted service of the writ. At 322-324, the High Court (Dixon CJ, Williams and Webb JJ) observed:

‘The action is in personam and it is transitory; and in such an action the jurisdiction of the Supreme Court of Victoria depends not in the least on subject matter but upon the amenability of the defendant to the writ expressing the Sovereign’s command in right of the State of Victoria. The common law doctrine is that the writ does not run beyond the limits of the State. By the federal Service and Execution of Process Act 1901-1953, however, it may, if endorsed under that statute, be served elsewhere within the Commonwealth and its Territories, the conditions in which this may be done and the consequences being defined by the provisions of the Act. Further, by rules made under section 139 of the Supreme Court Act 1928 ... it is provided that in cases answering any of the descriptions in Rule 1, service of the writ or of notice of the writ in any place outside Victoria, may be allowed by the court or a judge. It may be that the cause of action which the plaintiffs seek to set up will fall neither within any of the paragraphs of Rule 1 of Order 1 nor within any of those of section 11 of the Service and Execution of Process Act 1901-1953. If so that may explain the importance apparently attached by the parties to this appeal. For except for these extensions of the principle of the common law, it remains true that a writ issued out of the Supreme Court of Victoria does not run outside that State. And in actions in personam this must determine the jurisdiction of the court over the defendant. "The root principle of the English law about jurisdiction is that the judges stand in the place of the Sovereign in whose name they administer justice, and that therefore whoever is served with the King’s writ and can be compelled consequently to submit to the decree made, is a person over whom the courts have jurisdiction", ... . It must be remembered that the rule of the common law was non potest quis sine brevi agere and that the original writ thus necessitated issued out of Chancery under the Great Seal in the name of the King. It was directed to the sheriff and, if a writ of summons, it required him to command the defendant to satisfy the plaintiff’s claim and in default of his doing so to summon him to appear before the Justices of, for example, the Common Pleas at Westminster to show why he had not done so. It is in this that the source is to be found of our conception of the foundation of the jurisdiction of our own courts in actions in personam ... . The defendant must be amenable or answerable to the command of the writ. His amenability depended and still primarily depends upon nothing but presence within the jurisdiction. "The service of the writ, or something equivalent thereto, is absolutely essential as the foundation of the court’s jurisdiction. Where a writ cannot legally be served upon a defendant the court can exercise no jurisdiction over him. In an action in personam the converse of this statement holds good, and wherever a defendant can be legally served with a writ, there the court, on service being effected has jurisdiction to entertain an action against him. Hence, in an action in personam, the rules as to the legal service of a writ define the limits of the court’s jurisdiction. Now, a defendant who is in England can always, on the plaintiff’s taking proper steps, be legally served with a writ. The service should be personal, but if personal service cannot be effected, the court may allow substituted or other service. In other words, the court has jurisdiction to entertain an action in personam against any defendant who is in England at the time for the service of the writ": ... . It will be noticed that in this passage presence within the jurisdiction at the time of service is regarded as essential. The statutory qualification or exception as to service out of the jurisdiction was of course not under the author’s consideration in the foregoing passage. But what is of great importance for the purposes of the case in hand is that to insist on the presence of the defendant within the jurisdiction at the time of service is to exclude the possibility of substituted service where he is no longer within the jurisdiction. In some measure the view that the defendant must be within the jurisdiction at the time of service may depend upon what is conceived to amount to the exercise of the sovereign authority, the issue of the command or the communication of the command.’

14 Their Honours then considered those two alternative propositions, concluding at 332:

‘The hypothesis is that before the issue of an ordinary writ of summons for service within the jurisdiction the defendant has left the jurisdiction definitely, that is to say that he has left it in such a sense that leave to issue a writ for service out of the jurisdiction might be properly given under Order XI, in a case falling within that order, or resort might properly be made to the Service and Execution of Process Act, in a case appropriate to that legislation. The better view appears clearly enough to be that on that hypothesis the defendant is no longer amenable to the territorial jurisdiction exercised by an ordinary writ for service within the jurisdiction and the want of jurisdiction cannot be overcome by an order for substituted service.’

15 The decision concerns the jurisdiction of the court. We see no reason to apply well-settled rules concerning jurisdiction to the administrative issue and service of a bankruptcy notice. The bankruptcy notice contains a command in the sense that it indicates that the debtor is required, within a specified period, to pay the amount of the debt or make appropriate arrangements with the creditor. The consequence of non-compliance is that bankruptcy proceedings may be taken. It is, in effect, a notice of intention to commence such proceedings in the event that payment is not made. Even if such a notice were analogous to a writ of summons, we doubt whether it would be appropriate to apply to a modern commercial document the learning relating to what is now little more than a legal fiction. There is another basis for rejecting the appellant’s argument. Again assuming that the considerations addressed in Laurie v Carroll can be applied by analogy to the issue and service of a bankruptcy notice, that case demonstrates that parliament may confer extra-territorial jurisdiction upon a court. Thus, in Laurie v Carroll, rules of court made under the relevant legislation provided for service out of the jurisdiction in certain identified cases. By analogy the only questions in this case would be whether the Act permits service of a bankruptcy notice out of Australia and as to relevant formalities. They are, we think, in any case, the only relevant questions.

16 Before turning to those questions we should discuss one other aspect of practice in connection with extra-territorial service. In Laurie v Carroll at 332, the High Court referred to ‘the service of the writ or of notice of the writ in any place outside Victoria ...’. Rules of court have often provided for service out of the jurisdiction of notice of the writ rather than the writ itself. Perhaps this was thought to be less likely to offend foreign governments than would service of the royal command embodied in the writ. This practice was recognized and applied by Sheppard J in Re Trimbole; Ex parte Deputy Commissioner of Taxation (1984) 4 FCR 586 and by Pincus J in Re Skase (1991) 32 FCR 212.

17 We turn to the proper construction of the Act. There can be no doubt that it applies to debtors who are not Australian citizens (s 7(1)), that par 43(1)(b) contemplates commission by a debtor of an act of bankruptcy whilst out of Australia, and that he or she may be bankrupted upon that basis, subject only to par 43(1)(b). It must therefore have been intended that such a person be amenable to service of a bankruptcy notice, notwithstanding the fact that he or she was out of Australia.

18 In Re Mendonca; Ex parte Commissioner of Taxation (1969) 15 FLR 256 at 261, Gibbs J , sitting as a Judge of the Federal Court of Bankruptcy, observed that subs 309(2) and rule 113(1) (which authorized the Court to give directions as to practice and procedure) conferred ‘... ample power to order service outside the jurisdiction ... .’ of a bankruptcy petition. In that case the petition was issued after the debtor had left Australia. It seems that his Honour did not consider that fact to be a bar to such an order. In other words, exercise of the power conferred by subs 309(2) is not conditional upon a debtor’s presence in Australia. It is true that Gibbs J considered that an order for such service would be made only if one of the criteria identified in par 43(1)(b) were present. In this case the evidence does not presently establish, or deny the existence of, any of those criteria. That is no doubt because issue and service of the bankruptcy notice (as opposed to making a sequestration order) are not conditional upon the existence of one of those criteria.

19 It is clear that a bankruptcy notice may be served out of Australia, subject to leave being granted by the Court. The only question is as to the mechanics of service. We accept that the notice, itself, can only be served by leave, but as we have pointed out, there is a history of serving notice of proceedings rather than the initiating writ. There is also a history of making orders for substituted service which do not involve actual service. Re Mendonca establishes that subs 309(2) authorizes service out of Australia even when the relevant process was issued after the debtor left Australia. The only jurisdictional requirement is that contained in par 43(1)(b) which has no present application. There is no reason why s 309(2) should not also authorize an order for substituted service of a bankruptcy notice made whilst the debtor is out of Australia. If, as in this case, that order does not involve service of the bankruptcy notice itself outside of Australia, par 40(1)(g) does not dictate that leave be obtained.

20 Finally, we should say something about the inter-relationship between par 40(1)(g) and subs 309(2). The appellant’s case assumed that an order made for service of a bankruptcy notice out of Australia pursuant to the latter provision would also require leave pursuant to the former provision. For reasons which we have given, it is not necessary for us to consider the correctness of that assumption.

21 In those circumstances the appeal should be dismissed with costs.

I certify that the preceding twenty-one (21) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justices Heerey, Dowsett and Conti.

Associate:


Dated: 7 March 2006

Counsel for the Appellant:	Mr M Aldridge SC Mr J Dupree
Solicitor for the Appellant:	Russo & Partners
Counsel for the Respondents:	Mr P Walsh
Solicitor for the Respondents:	Sally Nash & Co
Date of Hearing:	14 February 2006
Date of Judgment:	7 March 2006