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Deputy Commissioner of Taxation v Constantinidis [2011] FMCA 109 (1 March 2011)

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Deputy Commissioner of Taxation v Constantinidis [2011] FMCA 109 (1 March 2011)

Last Updated: 2 March 2011

FEDERAL MAGISTRATES COURT OF AUSTRALIA

DEPUTY COMMISSIONER OF TAXATION v CONSTANTINIDIS

BANKRUPTCY – Creditors petition – notice of opposition – whether bankruptcy notice was served on the debtor – where process server able to affirmatively identify debtor in Court – whether copy of judgment relied upon was attached to the bankruptcy notice – meaning of “attached” where relevant documents joined together by a bulldog clip – ability of debtor to make payment at the address stated in the notice – where that address was a building in the sole occupancy of the ATO to which public access was restricted to a reception desk manned by security personnel – whether security officer would be able to locate member of staff who could receive payment and issue a receipt or whether officer would direct tax payer to a different building.


MNM Developments Pty Ltd v Gerard [2005] QCA 230
M P Management (Aust) Pty Ltd v Churven [2002] QSC 320; [2003] Q ConvR 54-581
John Antony Scerri v Rodney Vincent Carhill in the matter of John Antony Scerri [1998] FCA 403
Nugent v Brialkim (1985) 61 ALR 713

Applicant:
DEPUTY COMMISSIONER OF TAXATION

Respondent:
ACHILLES CONSTANTINIDIS

File Number:
SYG 2019 of 2010

Judgment of:
Raphael FM

Hearing date:
15 February 2011

Date of Last Submission:
18 February 2011

Delivered at:
Sydney

Delivered on:
1 March 2011

REPRESENTATION

Solicitors for the Applicant:
Hunt & Hunt Solicitors

Counsel for the Respondent:
Mr J Johnson

Solicitors for the Respondent:
Beazley Singleton

ORDERS

(1) A sequestration order be made against the estate of Achilles Constantinidis.
(2) The Applicant Creditor’s costs (including any reserved costs) be taxed (in accordance with the Federal Magistrates Court (Bankruptcy) Rules 2006) and paid from the estate of the Respondent Debtor in accordance with the Act.
(3) Under the Bankruptcy Regulations a copy of this sequestration order be given to the Official Receiver in Sydney within 2 days

THE COURT NOTES:

(i) That the date of the act of bankruptcy is 25 May 2010.
(ii) A consent to act as trustee has been signed by Antony de Vries and David Solomons and has been lodged with the Official Receiver in Sydney.
FEDERAL MAGISTRATES
COURT OF AUSTRALIA
AT SYDNEY

SYG 2019 of 2010

DEPUTY COMMISSIONER OF TAXATION

Applicant


And


ACHILLES CONSTANTINIDIS

Respondent


REASONS FOR JUDGMENT

  1. Achilles Constantinidis owes the Australian Taxation Office (the “ATO”) some $304,176.51. The ATO obtained a judgment against Mr Constantinidis in the sum of $240,500.22 on 11 December 2006. The Court has been told it was a consent judgment, although Mr Constantinidis does not recall that. The debt has not been paid. On 28 August 2009 the Official Receiver in Sydney issued bankruptcy notice NN3974/2009 at the request of the ATO. On 1 March 2010 the Official Receiver extended the time for service of the notice until 28 August 2010. It is alleged by the ATO that, on 6 May 2010, Mr Constantinidis was served with a copy of the bankruptcy notice. He did not respond to it and, on 14 September 2010, a creditor’s petition was issued. The petition was served on 3 December 2010 together with an affidavit of service of the bankruptcy notice. On 7 December 2010 Mr Constantinidis filed a notice of opposition, indicating that he had not been served with the bankruptcy notice and that the bankruptcy notice was in any event invalid as the judgment or order was not attached to it. On 15 February 2011 at the hearing of the petition there was filed in Court an amended notice of opposition which added an additional ground that:
  2. At the commencement of the hearing, Mr Johnson, who appeared for Mr Constantinidis, informed the Court that his client had no issue with the formal parts of the petition or of service. There were filed without objections, the affidavit of final search and of debt. The applicant creditor, the ATO, then proceeded to deal with the matters raised in the notice of objection commencing with service of the bankruptcy notice.
  3. The original affidavit of service was sworn by Clark Frank Shaw on 6 May 2010. Mr Shaw deposed that he was a licensed commercial agent of some 12 years experience. His affidavit of service is in the following form:
4. I have attained the age of 16 years.”
  1. On 19 January 2011 Mr Shaw swore a further affidavit. Much of the affidavit, which is in answer to one sworn by Mr Constantinidis on 23 December 2010 deals with previous instructions that Mr Shaw had to effect service on Mr Constantinidis and on one of his companies, Windsor Turf Supplies Pty Ltd. Although it is said to be in response to para.3 of Mr Constantinidis’ affidavit which states that during the last 12 months he had been moving between hospital and his mother’s residence at Strathfield and he had not been regularly residing at 27 Wilberforce Rd, Windsor, the address at which he was allegedly served, it does not seem to me to be responsive to that paragraph. However, in para.6 of Mr Shaw’s affidavit he states:
  2. Mr Shaw was cross-examined and told that he had received the papers for service from Statewide Mercantile Services, a company which subcontracts him to carry out the actual service of documents. He says that he received four documents clipped together, these being the bankruptcy notice itself, the calculation of interest, the judgment of the Supreme Court of NSW and the extension of time notice from the Official Receiver. He says that he served the documents clipped together by bulldog clip. He agreed that the documents were not stapled the one to another. He said that he handed Mr Constantinidis the documents clipped together as one. Mr Shaw told that he parked his car on the verge directly in front of the house and went to the doorway where he found Mr Constantinidis. He said that at the time there was a person there hanging a new door. He believes that the only words that were spoken were those that were contained in his affidavit of service. After Mr Constantinidis had given his evidence, Mr Shaw was recalled and identified Mr Constantinidis as the person who he served. Mr Constantinidis is a large gentleman who, as he says in his affidavit, has serious problems with his legs. He walks, with the aid of sticks, very slowly and breathlessly. He has a striking appearance with a full head of hair. He is, to my mind, not a person whose visage one would likely forget.
  3. Mr Constantinidis, when he gave evidence, said at first that he hadn’t been at the Wilberforce Rd property for approximately 12 months but then said that he had been there on and off with his sisters and, finally, that he was in the Wilberforce Rd property for approximately one third of the year. He did not recall being there in November and did not recall being served with the bankruptcy petition. He was asked whether he had ever told someone that he was Adrian Blundell. He said that he had not and he did not know of Mr Adrian Blundell. Mr Constantinidis said that he did not recall if he was at the property in August 2010. Mr Constantinidis told the Court that there had been a break in at his property in early 2010 at which the front door had been smashed in. Temporary repairs were made and he sought to obtain a new door because the property is a heritage one. He said that he could not obtain a suitable heritage door and then replaced the door with a standard wooden door with no glass front. It was installed by Mr Darren John Blundell. He said that the installation took approximately a day, he wasn’t sure how long because he wasn’t there when the door was being fixed. He did not recall the process server attending or identifying himself and he was not sitting in a chair watching the tradesman work. He said that he did not see the bankruptcy notice so he did not know whether the judgment was attached to it.
  4. The applicant then called Mr James Biggs, a process server, who swore an affidavit on 15 November 2010 relating to service of the bankruptcy petition. In para.3 of his affidavit he states:
  5. Mr Johnson objected to Mr Biggs giving evidence and being asked additional questions by Ms Fox. The additional questions related to the identification of Mr Constantinidis. I ordered that Mr Biggs not give evidence at this stage but, like Mr Shaw, give his evidence about identification in reply, after Mr Constantinidis had given his evidence. Mr Biggs did this, was called into Court and identified Mr Constantinidis as the person who he had served. He told the Court that he saw Mr Constantinidis sitting in a wheel chair and confirmed that Mr Constantinidis had identified himself as Adrian Blundell. Mr Biggs says that he is certain that it was Mr Constantinidis that he saw because the person he saw was wearing shorts that showed he had had trouble with his legs. Mr Biggs was also an experienced mercantile agent, having been one since 1969. Mr Constantinidis was recalled and questioned by Mr Johnson. He told the Court that he denied that he had ever told Mr Biggs that he was Mr Blundell and he also denied that he had ever owned or sat in a wheel chair. He told the Court that, although he had considerable difficulty walking, (which was clear from the manner in which he came into Court and into the witness box) he had never sought to utilise a wheel chair and was very proud of that fact. Mr Constantinidis denied ever seeing Mr Shaw or Mr Biggs.
  6. It is not uncommon for persons to come into this and other courts claiming that they were not served with originating process. The Court is then required to find, on the balance of probabilities, whether service was effected in the face of contradictory evidence from a process server and a defendant. The Court takes many matters into account when deciding whether it can be satisfied that service occurred. These include the manner in which the evidence is given, the experience of the process server, any peculiarities or unusual occurrences at the time of service, corroborative notes made at the time of service and the witnesses responses under cross-examination. In this case, I note that Mr Constantinidis does not deny receiving the bankruptcy petition. He says he knows no Adrian Blundell. Mr Biggs swore his affidavit long before the current issue as to service was aired by Mr Constantinidis. It is inherently unlikely that he would make up the conversation contained in para.3 of his affidavit extracted at [7] of these reasons. His identification of Mr Constantinidis was firm, although it is possible that he may have mistook Mr Constantinidis’ chair for a wheel chair. I think that Mr Constantinidis was served by Mr Biggs and that he told Mr Biggs he was someone other than who he was. This finding redounds on Mr Constantinidis’ credit generally and, given the advantage which would enure to him if he could establish that he was not served with the bankruptcy notice, I prefer the evidence of Mr Shaw and would find that he satisfies me to the standard required that service was effected on Mr Constantinidis as deposed to.
  7. Mr Constantinidis argues that, even if he was served, it cannot be established that a copy of the judgment or order relied upon by the creditor was attached to the bankruptcy notice. He argues that Mr Shaw’s affidavit of service separately exhibits the bankruptcy notice and the true copy of the judgment in para.3. This allows an interpretation of the statement made in para.1 that the three documents were served separately and not in an attached manner. Mr Shaw’s evidence was that they were all attached in a bull dog clip. The Macquarie Dictionary definition of attach is:

The Shorter Oxford defines the word as:

“Fasten or join (a thing to another), to appoint”

In Shrouds Judicial Dictionary of Words and Phrases (7th ed) it is said of the word “attached”:

“This word does not always mean physically fastened; it may also mean super incumbent upon. Thus in citing from the judgment of Coburns CJ in Lang v Bishops Wearmouth (3 QBD 299) that whatever is “attached” to premises has to be estimated for the purpose of ascertaining its rating value, Esher MR said “Now does the “attached” there mean attached by some physical fastening such as screws or bolts? If it does, a thing weighing tonnes which cannot be and never was intended to be lifted could not be taken into account if not fastened to some part of the building; whereas, if it were fastened, it would. That as it seems to my mind would be a monstrous consequence. I do not think the word “attach” does there mean physically fastened so as to determine whether a thing is to be taken into account or not. (Tine Boiler Works v Long Benton 56 LJMC 12)”
  1. In MNM Developments Pty Ltd v Gerard [2005] QCA 230, the Full Bench of the Supreme Court of Queensland, de Jersey CJ, Williams JA and McMurdo J, considered the definition of attachment as required by s.366 of the Property Agents and Motor Dealers Act 2000 (Qld). The relevant subsection is as follows:

In that case, a contract was sent by facsimile. The warning was the first part of a continuous facsimile transmission. It immediately preceded the contract. At first instance, the learned District Court Judge noted some observations of Muir J in M P Management (Aust) Pty Ltd v Churven [2002] QSC 320; [2003] Q ConvR 54-581 at p 60,877 where his Honour said at [22]:

“Subsection (1), by requiring a contract to "have attached" the warning statement "as its first or top sheet", suggests that more than the mere placing of the warning statement on the contract or providing it in a folder together with the contract is required and that some form of physical joinder or incorporation is necessary.”
[23] It may be that the requirements of s 366(1) could be complied with without the warning statement being stapled, pinned to or bound up with a contract. For example, if the warning statement was the first of a number of loose sheets placed together in a folder and numbered or otherwise identified as the first sheet of the bundle, it may be arguable that the warning statement was "attached" to the other documents ...”
  1. De Jersey CJ turned to the statutory construction of s.366(1) and stated:

A careful reading of this decision would seem to indicate that his Honour was particularly concerned that the warning be the first document that a purchaser received and that requirement of the subsection seems to have dominated the thinking of Williams JA and McMurdo J, although the former did say at [44]:

“For the reasons given by the Chief Justice I agree that if the relevant documentation is the continuous fax forwarded to the appellant on 26 May then s 366 of the Act was breached; given the nature of the continuous fax it cannot be said that the warning statement was attached to the contractual document as the first or top sheet thereof. To that extent the reasoning of the learned District Court judge at first instance must be rejected.”
  1. In the instant case, I have accepted the evidence of Mr Shaw that the documents which he handed to Mr Constantinidis included the judgment and were held together with a bulldog clip. As serious as a bankruptcy notice is, and as clear as it is that non-compliance with the requirements of the form constitutes more than a formal defect rectifiable under s.306 of the Bankrupty Act 1966; John Antony Scerri v Rodney Vincent Carhill in the matter of John Antony Scerri [1998] FCA 403 per Beaumont J, I would be reluctant to hold that, in this context, attachment cannot include being held together with the notice itself within the jaws of a bulldog clip. Mr Constantinidis, because he denied receiving the documents at all, can hardly be heard to say that one of the constituent documents was not present and I have, in any event, found that it was. The form does not require the judgment to be attached in any particular place, only that it be available for the debtor to peruse when he receives the notice. This is what occurred. I would not set the notice aside for the reasons posited by Mr Constantinidis in his second ground.
  2. The third ground in the amended notice of opposition is:

Mr Johnson submits that this would follow should I make a finding in his client’s favour in respect of grounds 1 or 2. As I have not done so, ground 3 fails.

  1. Ground 4 is in the following form:

As the evidence unfolded, the emphasis fell on the inability of a debtor to make payment at the address stated in the notice.

  1. The creditor called evidence from Ms La Guardia, the respondent’s case officer at the ATO, to rebut this allegation. Ms La Guardia affirmed an affidavit on 10 February 2011 in which she stated under the heading “Accessibility of the Australian Taxation Office in Sydney” the following:
  2. In cross-examination Ms La Guardia told the Court that, if a person attended at the front desk, they would be met by a security officer who was not an employee of the ATO and that person had no authority to take cheques or to issue receipts. But the address could only be one at which payment of the debt could be made if there could be communication with a person who was empowered to receive the cheque and issue a receipt.[1]
  3. On further questioning, Ms La Quardia put forward some rather confusing scenarios. Firstly, she responded to questions from her counsel as follows.

Under cross-examination from Mr Johnson, she agreed that a person’s name was not identified in the reference contained on the bankruptcy notice and confirmed that the reception desk did not have a list of initials that would have been contained on references to ring.[3] However, in re-examination, she said in response to a question from Ms Fox:

“Ms Fox: If a person attending the tax office did not know the initials or had the wrong or incorrect initials would they still be able to the debt?
Witness: Yes, I believe they can refer them to the operation which is on level 20 and they can also refer them to our office at Lang Street which has the computer system and they should be able to assist the taxpayer.”[4]
  1. I asked if that meant that the tax payer would be sent to Lang Street and the witness responded:

I then questioned Ms La Guardia about that scenario. She confirmed that there were people at Goulburn Street who could take the payment.[5] I then said to Ms La Guardia:

“HH: Let’s assume that Mr Constantinidis actually came into 52 Goulburn Street with a cheque in his hand and the bankruptcy notice with the reference number on it which has those initials and you have told us that the security people don’t have a list of initials so they can’t say “that’s Mr Jones, I’ll ring Mr Jones up” or “it’s Ms La Guardia, I’ll ring Ms La Guardia up”. They don’t have that, you have told us that, is that right?”
Witness: Yes.
HH: So what do they do? ...

20. In an endeavour to clarify the matter, I asked Ms La Guardia some further questions:

“HH: I asked you what happens when a person comes into the building, right, at 52 Goulburn Street with a bankruptcy notice that has only those references on it and a cheque and says I want to pay my tax. Now I posited three possibilities and they sounded a bit extreme but, you know, there were three possibilities and I suggested to you, asked you whether it was one of those three possibilities that happened or was there some other possibility that happened. The three possibilities I’ll remind you (1) that some person somewhere who always comes down with a receipt book and takes cheques because that’s his job. He may not be a case officer but he issues receipts and takes cheques because he’s a cashier, right. (2) they actually can identify the case officer and they ring up and the case officer comes down. I assume the case officer is the person whose reference, right?

Witness: Yes

HH: (3), they say to them we cannot identify who you have come to speak to. There is no cashier. You must go to Lang Street, that was the third possibility, okay. This is all coming out of your own, what you told us. Now there may be a fourth possibility that I haven’t thought about but you know about, so can you tell us whether it’s either one of those three or some fourth thing and if it is some fourth thing, what it is?
Witness: Well, I can come down if someone call me from downstairs I can come down and get the cheque.
HH: Ms La Guardia, you see you have told us that they can’t identify you, haven’t you? Isn’t that what you told us, they can’t identify you from that document because they don’t have anything on their computers, is that?
Witness: That’s right, yes.
HH: And there’s no other way, is there, that the tax person, I mean the person who owes the tax, knows who it is that they’ve got to call, is there?
Witness: Yes
HH: There is or there isn’t?
Witness: There is a number that they can call on the bankruptcy notice...
HH: So the notional Mr Constantinidis doesn’t know that Mr Yong is on his case, does he? ... He doesn’t, does he? Or does he?
Witness: He probably doesn’t.”[7]

21. The questioning continued:

HH: So what really happens when you get to 52 Goulburn Street?
Witness: Well I believe that the security personnel will refer them to Lang Street.
HH: So they go, where is Lang Street, somewhere else?
Witness: It’s somewhere in Circular Quay I believe.
HH: So they go to Goulburn Street and then they have to be sent to Lang Street, is that right?
Witness: Yes.
HH: You cannot pay your tax at 52 Goulburn Street unless you happen to know the name of the person who is your case officer, is that right?
Witness: Well, the security officer can ring debt and someone can come down.”[8]

22. There was then a discussion, including Ms Fox and Mr Johnson, about whether the reference on the bankruptcy notice could assist and Ms Fox asked:

“Ms Fox: Would that reference, be it number or anything else assist security in directing them to the appropriate people to pay the debt within 52 Goulburn Street?
Witness: I believe they can if they ring someone from Debt.
Ms Fox: From those areas?
Witness: From those areas.
Ms Fox: And that’s within 52 Goulburn St?
Witness: That’s right.”[9]

23. Finally, I said to Ms La Guardia:

HH: Well, Ms La Guardia you told me earlier that there was no central place where a person could come down from and issue receipts, you told me that, didn’t you?
Witness: Well, your Honour...
HH: Is the answer really, Ms La Guardia, that you have absolutely, and with the greatest of respect, this is not in any way intended to upset you, no idea about what happens and it’s not really your job and you didn’t find out what happened before you came along and swore that affidavit?
Witness: Can I say something, your Honour?
HH: Is that right? No, I’m asking you, is that the situation? Before you swore that affidavit, did you go along and talk to the people at the security and find out what happened or are you just giving us the best answers you possibly can?
Witness: Yes, your Honour.
HH: The second? You didn’t go and look and find out, is that right? Did you go and ask anybody what happens, did you do that? Did you do that?
Witness: No, your Honour.
HH: You didn’t. Okay, does anyone want to ask any more questions?
Ms Fox: No, your Honour.”[10]

24. It is only fair to say with regard to the evidence of Ms La Guardia that it was given openly and honestly. It should also be noted that the manner in which the notice of objection was originally drawn could be construed as focussing on the physical difficulties that Mr Constantinidis, a person who can hardly walk might have had, and that this is what her affidavit responded to. It was only after questioning from Mr Johnson that the difficulties set out above began to appear. It should not be forgotten that the onus lies upon the applicant debtor to satisfy me that the address stated on the notice is not one at which the debtor may during the currency of the notice make payment of the amount claimed. In Nugent v Brialkim (1985) 61 ALR 713 Lockhart J said at 727:

“It may be that in certain circumstances, although [the debtor] may make arrangements to secure or compound the debt by calling at the address stated in the notice, [the debtor] will do so by speaking to persons who are themselves not physically at that address but are, for example, available on the telephone. The examples of the possibilities are manifold and need no elaboration.
The test must satisfy the demands of common sense in the highly ordered and busy world in which we live, tempered by a consideration of the implications of a bankruptcy notice and the serious consequences that can flow from non-compliance with its requirements. I respectfully agree with the primary judge that the basic principle is that the address given should be one at which during the relevant period it is reasonably practicable for the debtor to make payment or to offer to secure or compound.”

25. I am quite satisfied from the evidence of Ms La Guardia that 52 Goulburn Street is such an address. Mr Constantinidis has not satisfied me to the necessary standard that the relevant case officer at the time, Mr Yong, was not at that address and Ms La Guardia’s evidence is that the case officer can accept payment and provide a receipt. The problem is the hurdle which a visitor has to jump before seeing the case officer, namely, the security guards who have no authority and did not have sufficient information to identify the case officer from the reference on the bankruptcy notice so that they would not know who to telephone. The purpose of my questioning of Ms La Guardia was to discover whether or not, irrespective of the reference, the security officers were aware of a place at which a person (be it the case officer or otherwise) had an office from where he could be called down to deal with a debtor in the position of Mr Constantinidis. This was the point of Ms Fox’s re-examination of Ms La Guardia who confirmed that the constituents of the reference on the notice referred to departments within 52 Goulburn Street and that the reference would assist security in directing an enquirer to the appropriate people to pay the debt within that building; to which Ms La Guardia responded that she believed they could if they rang someone from “Debt”. Balancing this statement against her later statement to me that she had really made no enquiries about how the system operated, has Mr Constantinidis established his contention? The question is finely balanced but I think not. I think I can infer from the evidence of Ms La Guardia that, on the balance of probabilities, if Mr Constantinidis had attended at 52 Goulburn Street and shown the bankruptcy notice to the security people, they would have made contact with someone in the “Debt” department and that would have triggered the arrival of someone who could accept payment. It is not an easy inference for a debtor to overcome that a multi-storey building in the sole occupancy of the ATO at which it is said that payment can be made is not such a place and, although he has got very near, Mr Constantinidis has not crossed that threshold.

  1. As all the objections that Mr Constantinidis has raised to the validity of the bankruptcy notice have now been disposed of against him, the notice of objection fails and the applicant is entitled to its sequestration order. I am satisfied that the respondent committed the act of bankruptcy alleged in the petition. I am satisfied with the proof of the other matters required by s.52 of the Bankruptcy Act 1966. I make a sequestration order against the estate of Achilles Constantinidis. I order the Applicant’s costs (including any reserved costs) be taxed (in accordance with the Federal Magistrates Court (Bankruptcy) Rules 2006) and paid from the estate of the respondent debtor in accordance with the Act. Under the Bankruptcy Regulations a copy of this sequestration order be given to the Official Receiver in Sydney within 2 days. The Court notes the date of the act of bankruptcy is 25 May 2010. I note that a consent to act as a trustee has been signed by Antony de Vries and David Solomons and has been lodged with the Official Receiver in Sydney.

I certify that the preceding twenty-six (26) paragraphs are a true copy of the reasons for judgment of Raphael FM


Date: 1 March 2011

[1] “However, I agree with the primary Judge that where the creditor is a company, it is desirable that there be somebody present at the address given in the notice during ordinary business hours with authority to receive payment immediately and without having to get in touch with the board or any other person capable of conferring authority” per Lockhart J, Nugent v Brialkim (1985) 61 ALR 713 at 727.
[2] T4
[3] T7
[4] T8
[5] T8
[6] T9 and 10
[7] T11 and 12
[8] T12
[9] T14
[10] T14 and 15

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