Hilton v Capital Finance Australia Ltd [2011] FMCA 65 (1 February 2011)

Last Updated: 11 February 2011

FEDERAL MAGISTRATES COURT OF AUSTRALIA

HILTON v CAPITAL FINANCE AUSTRALIA LTD

[2011] FMCA 65

BANKRUPTCY – Application to set aside sequestration order and petition on the basis that petition had not been served personally on the applicant – where documents were said to have been dropped at applicant’s feet and later emailed to applicant’s work email – where applicant denied receipt of documents and did not appear before the Court in response to the process – where it may be appropriate to set aside the order but not petition – where it is appropriate to deem a document to have been served on a particular date.

Federal Magistrates Court Rules 2001

Kang & Ors v Richmond [2007] FMCA 946 Carver v de Robillard [2006] FCA 1041

Applicant:

GRANT HILTON

Respondent:

CAPITAL FINANCE AUSTRALIA LTD

File Number:

SYG 13 of 2011

Judgment of:

Raphael FM

Hearing date:

1 February 2011

Date of Last Submission:

1 February 2011

Delivered at:

Sydney

Delivered on:

1 February 2011

REPRESENTATION

For the Applicant:

In person

Counsel for the Respondent:

Mr A Smith

Solicitors for the Respondent:

Kemp Strang

ORDERS

(1) Sequestration order set aside.
(2) Petition deemed to have been served on 10 January 2011.
(3) Hearing of petition set down for 15 February 2011 before the Registrar.
(4) Applicant to file and serve any notice of opposition on or before 7 February 2011.
(5) Respondent to pay Applicant’s filing fee of $890.00.

FEDERAL MAGISTRATES COURT OF AUSTRALIA AT SYDNEY

SYG 13 of 2011

GRANT HILTON

Applicant

And

CAPITAL FINANCE AUSTRALIA LTD

Respondent

REASONS FOR JUDGMENT

1. There comes before me today an application by a debtor against whom a sequestration order was made on 20 December 2010 for review of the decision of the Registrar who made that order on the grounds that the applicant was not served personally with the bankruptcy petition and associated papers.
2. It is common ground that on 24 November 2010 Mr Hilton, the debtor, and Mr Gittany, the process server, were both in the Supreme Court of New South Wales where a case that Mr Hilton was bringing was being heard. They apparently met outside the lifts going to the upstairs court rooms. Mr Gittany told Mr Hilton that he had some papers which he wished to serve him with but did not propose to do so within the confines of the Court. They went upstairs and sat down outside a court room although it is not entirely clear whether this was on the 7th or 9th floor.
3. After a discussion lasting between 7 and 10 minutes, Mr Hilton got up and told Mr Gittany that he intended to go into Court. Mr Hilton says that he did do that, leaving Mr Gittany outside in the corridor, that he then left the court room and went down the fire stairs from where he exited the Supreme Court building, turned to the right, crossed the road and entered Martin Place. At no time after he left the court house did he come into contact or communication with Mr Gittany.
4. Mr Gittany further deposes that Mr Hilton did not go into the court room, but that he walked towards it and then turned around and went down the fire stairs. Mr Gittany immediately went to the lift and went down to the ground floor where he asked the security people if they had seen anyone come out of the fire stairs. On receiving an affirmative indication, he left the building, saw Mr Hilton ahead of him, went up to Mr Hilton, had a conversation with him telling him that he had a creditors petition for Mr Hilton. Mr Hilton said words to the effect, “You look dodgy. I don’t want them. You look like a process server.” Mr Gittany then placed the documents at Mr Hilton’s feet at Phillip Street. Mr Hilton said, “I have not been served” and then turned and walked away. Mr Gittany told me that he then picked the papers up and returned them to his office.
5. Mr Worth, a solicitor in the employ of the solicitors for the creditor, swore an affidavit on 20 December 2010 indicating that he received a telephone call at 3 o’clock on 2 December 2010. It appears that on that day Mr Worth had organised for an email to be sent to Mr Hilton’s email address which contained, as an attachment, copies of the petition and other documents. Mr Worth deposes that Mr Hilton rang him and told him that he, Mr Hilton, had been told that an email had been sent, but he has not got the documents. There was then a conversation concerning the alleged service on Mr Hilton on 24 November 2010 outside the Supreme Court. Mr Hilton made it clear that he did not believe he had been served and that he could not attend any court case because he had not received any papers. It is clear, however, that Mr Hilton did know that the hearing of the petition would take place on 20 December 2010.
6. The first matter with which this Court is concerned is whether or not it can be satisfied that Mr Hilton was served, as indicated in the affidavit of Mr Gittany. If the Court is so satisfied, then it would follow that the grounds of application to review cannot be sustained. I have seen both witnesses in the box responding to cross-examination. I note that Mr Hilton’s evidence about what occurred appears to be corroborated insofar as it could be said that Mr Hilton was being consistent as to his story by the affidavit of Mr Worth. I am not prepared to say that Mr Gittany was deliberately lying to this Court but I tend to a view that his evidence does not satisfy me that service took place as indicated.
7. Having made this finding, I am now obliged to consider the submissions made by Mr Smith for the respondent that I should exercise my discretion pursuant to rule 6.04 of the Federal Magistrates Court Rules 2001 to find that the document had been served, at least upon the day of the email, which was within the time limit encompassed in the rules for service of a bankruptcy petition. There have been a number of cases in which courts have considered this question. Perhaps the one whose facts are nearest to this would be Kang & Ors v Richmond [2007] FMCA 946 (“Kang”). But in that case, the petition was served upon a firm of solicitors who the debtor knew had been acting for him but whose instructions had been withdrawn after service. In that case, after considering the authorities, I determined to find that the bankruptcy petition was served on the debtor on the date upon which it was served on his solicitors.
8. In Carver v de Robillard [2006] FCA 1041, Lindgren J considered the question of personal service where the debtor had appeared before the Court in response to the process. But that is not the case in this instance.
9. In Kang, I came to my decision following consideration of the objects of the Federal Magistrates Court Rules contained in rule 1.03:
   • “(1) The object of these Rules is to assist the just, efficient and economical resolution of proceedings.
   • (2) In accordance with the objects of the Act, the Rules aim to help the Federal Magistrates Court:
     • * to operate as informally as possible
     • * to use streamlined processes
     • * to encourage the use of appropriate dispute resolution procedures.

(3) The Court will apply the Rules in accordance with their objects.
(4) To assist the Court, the parties must:

• * avoid undue delay, expense and technicality
• * consider options for primary dispute resolution as early as possible.

(5) If appropriate, the Court will help to implement primary dispute resolution.”

And I stated at [6]:

“The court appreciates that questions of service are of considerable importance, not just for the efficient and proper running of the court, but to the parties. A party is entitled to the benefit of the rule that requires service of an originating process to be made upon him by hand. If there were no alternatives to service by hand contained in the rules but merely a discretion to find that service by some other method constituted proper service, then the court would be reluctant to exercise that discretion (particularly in bankruptcy cases given their quasi-criminal effect) absent the most pressing submissions. But there are rules relating to service other than by hand and there is now a body of authority indicating that in the Federal Court the pendulum is moving against technical arguments in regard to service.”

But I do not put this case in the same category as Kang because there was no concession by Mr Hilton that he would accept service in some other way, as there was in Kang. Mr Hilton appears to have taken advantage of his right to be served personally and I believe he is entitled, at least in some part, to retain that advantage. However, it is quite clear that he now knows that a bankruptcy petition has been presented and that he must answer it. He has had considerable time in which to prepare himself for that. The orders that I would, therefore, propose to make are to grant the review and to set aside the sequestration order but I do not propose to set aside the petition. I propose to make an order that the petition be heard again in 14 days time and, for that purpose, I will exercise my discretion, pursuant to rule 6.04(c), to find that the document was served upon Mr Hilton on 10 January 2011. There is no magic in this date. It is just a date which would avoid any suggestion that Mr Hilton has not had sufficient time to prepare for the hearing.

10. Mr Hilton asks for his costs. Of course, as a self-represented litigant, he is not entitled to costs but he would be entitled to a reimbursement of the filing fees for the application in respect of which he has been successful in part. He also asks for the cost of his flights down from the Gold Coast and his accommodation. Because I believe that Mr Hilton has sought to take the benefit of a technicality, I am reluctant to award him those expenses.

I certify that the preceding ten (10) paragraphs are a true copy of the reasons for judgment of Raphael FM

Date: 10 February 2011