Burke v Chesterfield Australia Pty Ltd (ACN 001 654 762) [2012] FMCA 10 (13 January 2012)

Federal Magistrates Court of Australia

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Burke v Chesterfield Australia Pty Ltd (ACN 001 654 762) [2012] FMCA 10 (13 January 2012)

Last Updated: 16 January 2012

FEDERAL MAGISTRATES COURT OF AUSTRALIA

BURKE v CHESTERFIELD AUSTRALIA PTY LTD (ACN 001 654 762)

[2012] FMCA 10

BANKRUPTCY – Annulment – whether bankruptcy notice was properly served. BANKRUPTCY – Annulment – whether bankruptcy notice was misleading – bankruptcy notice not asserted to be defective – accompanying letter claiming more than debt stated in bankruptcy notice – whether letter made bankruptcy notice misleading and invalid.

Acts Interpretation Act 1901, s.29(1) Bankruptcy Act 1966, ss.52(1), 153B Bankruptcy Regulations 1996, reg.16.01(1), 16.01(1)(a), 16.01(2), 16.02(2) Evidence Act 1995, s.160(1)

Fancourt v Mercantile Credits Ltd [1983] HCA 25; (1983) 154 CLR 87 Perpetual Nominees Ltd v Masri Apartments Pty Ltd [2004] NSWSC 500; (2004) 49 ACSR 714 Re Frank; Ex parte Piliszky (1987) 77 ALR 511 Re Wimborne, Ex parte The Debtor (1979) 24 ALR 494 Rigg v Baker [2006] FCAFC 179; (2006) 236 ALR 629 Skalkos v TNS Recoveries Pty Ltd [2004] FCAFC 321; (2004) 141 FCR 107 St George Wholesale Finance Pty Ltd v Spalla [2000] FCA 1094; (2000) 181 ALR 682 Thorpe v Bristile Ltd (1996) 16 WAR 500

Applicant:

BRUCE PATRICK BURKE

Respondent:

CHESTERFIELD AUSTRALIA PTY LTD (ACN 001 654 762)

File Number:

BRG 868 of 2011

Judgment of:

Jarrett FM

Hearing date:

17 November 2011

Date of Last Submission:

17 November 2011

Delivered at:

Brisbane

Delivered on:

13 January 2012

REPRESENTATION

Counsel for the Applicant:

Mr Hay

Solicitors for the Applicant:

Bennett & Philp

Counsel for the Respondent:

Mr Upton

Solicitors for the Respondent:

MSB Lawyers

ORDERS

(1) The application filed on 5 October 2011 is dismissed.
(2) The applicant pay the respondent’s cost of and incidental to the application to be assessed in accordance with the Federal Magistrates Court (Bankruptcy) Rules 2001.

FEDERAL MAGISTRATES COURT OF AUSTRALIA AT BRISBANE

BRG 868 of 2011

BRUCE PATRICK BURKE

Applicant

And

CHESTERFIELD AUSTRALIA PTY LTD (ACN 001 654 762)

Respondent

REASONS FOR JUDGMENT

1. This is an application for the annulment of a sequestration order made on 21 July, 2011 in respect of the estate of Bruce Patrick Burke. The sequestration order was made on the basis of an act of bankruptcy constituted by Mr Burke’s failure to comply with a bankruptcy notice served upon him in December, 2010.
2. The ultimate issue for determination is whether the circumstances in which the bankruptcy notice was served upon Mr Burke means that the sequestration order ought not to have been made.

Background

3. On 28 October, 2010 the Local Court of New South Wales entered judgment against Mr Burke in favour of Chesterfield in the amount of $5,330.65 inclusive of costs. On 29 November, 2010 the Official Receiver issued a bankruptcy notice against Mr Burke upon the application of Chesterfield. On 7 December, 2010 Chesterfield served the bankruptcy notice by prepaid ordinary post addressed to Mr Burke at his last known place of address in Mudgee, New South Wales. The bankruptcy notice demanded payment of $5,373.00 calculated as set out in the bankruptcy notice.
4. Mr Burke failed to comply with the bankruptcy notice within the time specified for compliance. On 21 January, 2011 Chesterfield filed a creditor’s petition alleging that the failure to comply with the bankruptcy notice was an act of bankruptcy.
5. On 21 July, 2011 a sequestration order was made against Mr Burke’s estate. Mr Burke did not appear at the hearing of the creditor’s petition.

The Applicant’s contentions

6. Mr Burke contends that:
   1. He was never properly served with the bankruptcy notice; and
   2. The bankruptcy notice was misleading, and therefore a nullity.

Service

7. I am satisfied that Mr Burke was properly served with the bankruptcy notice. A bankruptcy notice may be served by means prescribed under the Bankruptcy Regulations 1996. Personal service is not required: Skalkos v TNS Recoveries Pty Ltd [2004] FCAFC 321; (2004) 141 FCR 107.
8. Regulation 16.01(1) provides that, subject to contrary intention, where a document is required or permitted by the Act or the Regulations to be given or sent to a person, the document may be given or sent to the person in one of the five methods set out in the Regulations. One of those five methods is the sending of the bankruptcy notice by post to the person at his or her last known place of address (reg. 16.01(1)(a)).
9. The evidence satisfies me that the bankruptcy notice, accompanied by a letter authored by Chesterfield’s solicitors, was sent to Mr Burke’s last known place of address by pre-paid ordinary mail. The address to which the correspondence enclosing the bankruptcy notice was sent is the same address which Mr Burke, and his wife Robyn Leonie Burke, give as their address in the preamble to each of the affidavits that they have filed in these proceedings. Mr Burke does not suggest in his submissions that the bankruptcy notice ought to have been sent to any other address.
10. Regulation 16.01(2) provides that a document given or sent to or served upon a person in accordance with reg. 16.01(1) is taken, in the absence of proof to the contrary, to have been received by or served on the person when the document would, in the due course of post or business practice, as the case requires, be delivered to that person’s address.
11. Section 29 of the Acts Interpretation Act 1901 (Cth) provides:
    • “(1) Where an Act authorizes or requires any document to be served by post, whether the expression "serve" or the expression "give" or "send" or any other expression is used, then unless the contrary intention appears the service shall be deemed to be effected by properly addressing prepaying and posting the document as a letter, and unless the contrary is proved to have been effected at the time at which the letter would be delivered in the ordinary course of post.”
12. Section 160 of the Evidence Act 1995 (Cth) provides:
    • “(1) It is presumed (unless evidence sufficient to raise doubt about the presumption is adduced) that a postal article sent by prepaid post addressed to a person at a specified address in Australia or in an external Territory was received at that address on the fourth working day after having been posted.”
13. The authorities make it clear that having regard to reg. 16.01(1) and 16.02(2) it is not to the point for a person seeking to avoid the operation of reg 16.01(2) to prove non-receipt of the relevant document. What is required is evidence of non-delivery: Fancourt v Mercantile Credits Ltd [1983] HCA 25; (1983) 154 CLR 87.
14. Just as in Perpetual Nominees Ltd v Masri Apartments Pty Ltd [2004] NSWSC 500; (2004) 49 ACSR 714 the evidence before me only establishes non-receipt. Both Mr Burke and his wife depose to no recollection of seeing the bankruptcy notice or the letter accompanying it. Both depose to not having received it. However, the evidence does not go so far as to prove non-delivery. Regulation 16.01(2) operates in the circumstances of this case and Mr Burke is deemed to have been served with the bankruptcy notice four working days after its date of posting, that is to say, on Monday 13 December, 2010.

Validity of the bankruptcy notice

15. Mr Burke argues that the relevant principles in relation to the bankruptcy notice may be summarised as follows:
    1. A bankruptcy notice is a nullity if it could reasonably mislead a debtor as to what is necessary to comply with the notice;
    2. Such a notice is not apt to found an act of bankruptcy upon which a sequestration order could flow;
    100. In considering whether the debtor served with a bankruptcy notice could be mislead, the Court may look at facts extraneous to the notice itself; and
    4. The test is whether the debtor could be misled not whether in fact he or she was misled.
16. Mr Burke submits that the purpose of the bankruptcy notice is to unequivocally inform the debtor as to what must be done in order to avoid committing an act of bankruptcy. He argues that in this case the sequestration order ought not to have been made (thereby enlivening the discretion to make an order annulling it pursuant to s.153B of the Act) because there was no act of bankruptcy. He argues that there was no act of bankruptcy because when read in light of the covering letter, the notice was capable of misleading him as to what was required to be done to avoid committing an act of bankruptcy. Thus, the bankruptcy notice and the circumstances of its service are misleading and the notice is invalid.
17. The letter which accompanied the bankruptcy notice when it was served upon Mr Burke was in the following terms:
    • “Enclosed by way of service pursuant to regulation 16.01 of the Bankruptcy Regulations 1996 are a bankruptcy notice and judgment issued from Magistrates Court at Dowling Centre on 28 October 2010.
    • In addition to the sum of $5373.00 which is noted as the total debt owing in the bankruptcy notice, our client claims a further sum of $1385.00 which are their costs of issuing this bankruptcy notice.
    • Therefore the total amount outstanding to completely satisfy this debt is $6758.00.”
18. Mr Burke argues that having regard to the contents of the letter, there is plainly the capacity for a debtor to be misled as to what is required to comply with the requirements of the bankruptcy notice.
19. However, Mr Burke does not argue that the bankruptcy notice on its face is invalid because of some defect or irregularity within it. His argument is confined to the proposition that the circumstances which accompany the delivery of the notice, i.e. the covering letter, means that the bankruptcy notice is misleading and therefore invalid and that no act of bankruptcy has been committed by his failure to comply with its terms.
20. Mr Burke argues that it is appropriate to consider very closely the terms of the letter and to have regard to that “external” fact when determining the validity of the Notice. In support of that proposition I was taken to a number of authorities which were said to demonstrate that in the circumstances of this case it would be appropriate to have regard to the covering correspondence and then to conclude that the bankruptcy notice itself was invalid.
21. The first of those authorities was Re Wimborne, Ex parte The Debtor (1979) 24 ALR 494. In that case, a bankruptcy notice was issued which claimed a judgment debt and interest thereon pursuant to an order of the High Court of Australia which had varied an order of the Supreme Court of New South Wales. The debtors claimed that the bankruptcy notice was misleading because the wrong judgment was referred to. Lockhart J took the view that it was well established that to determine whether a debtor served with a bankruptcy notice could be mislead the Court may look at facts extraneous to the notice itself. His Honour went on to consider whether the judgment debtors in that case could be mislead, confused or perplexed by the bankruptcy notice because of the description of the final orders being that of the High Court and not of the Supreme Court of New South Wales as varied by the order of the High Court. His Honour did not think that they could having regard to all of the facts.
22. The next case to which I was taken was Thorpe v Bristile Ltd (1996) 16 WAR 500. In that case the debt relied upon to support the bankruptcy notice arose from a costs order and although the order for costs was attached to the bankruptcy notice, the certificate of taxation which quantified the costs was not. Despite that, the Court accepted the respondent’s submission that in deciding whether the defect in the bankruptcy notice was one which could mislead the debtor in that case the Court might have regard to facts extraneous to the notice itself. The Court had regard to the circumstances in which the costs had been taxed and the fact that the debtor had attended the taxation. The Court concluded that the debtor could not have been misled.
23. The final case was St George Wholesale Finance Pty Ltd v Spalla [2000] FCA 1094; (2000) 181 ALR 682. In that case, a bankruptcy notice misstated the amount owed by the debtor to the creditor. The bankruptcy notice failed to state payments made by and/or credits allowed to the debtor since the date of the judgment. The defect was determined not to be a formal defect as there was a failure to meet a requirement made essential by the Act and that failure was in respect to a substantial matter. In considering whether the notice could mislead the debtor Heerey J determined that he could have regard to facts extraneous to the notice itself. His Honour determined that the surrounding circumstances known to both the debtor and the creditor included the fact that certain payments had been made and credits allowed but had not been accounted for in the bankruptcy notice. In the circumstances his Honour concluded that the bankruptcy notice was misleading.
24. In each of the above cases there was a defect in the bankruptcy notice. Counsel for Mr Burke frankly conceded that there seemed to be no authority which dealt with the situation that exists in this case – namely where the bankruptcy notice is perfectly valid, but other matters are said to lead to its invalidity. There is no defect or error in any aspect of the bankruptcy notice served upon Mr Burke. The extraneous facts which give the bankruptcy notice its misleading character are said to arise from the accompanying correspondence.
25. Respectfully, however, I reject that argument. The bankruptcy notice is either capable of misleading the debtor or it is not. In this case there being no defects, substantive or otherwise, in the bankruptcy notice, it is not capable of misleading the debtor. The circumstances created by the accompanying letter do not serve to invalidate the otherwise valid bankruptcy notice. In my opinion, those circumstances may be relevant to the exercise of the discretion vested in the Court by s.52(1) of the Bankruptcy Act 1966. Although a creditor is prima facie entitled to the making of a sequestration order upon the proof of an act of bankruptcy, the making of a sequestration order always remains discretionary. That the accompanying letter may have caused some confusion for the debtor is something which may have been taken into account by the Court when determining whether to exercise its discretion in favour of making the sequestration order.
26. Be that as it may the terms of the letter are not inconsistent with the bankruptcy notice. Although the letter asserts an entitlement to a sum greater than that in the bankruptcy notice, it does not assert that failure to pay the higher sum will result in an act of bankruptcy. There is no assertion, in my view, that failure to pay the higher amount claimed is a failure to comply with the bankruptcy notice. Indeed the terms of the letter make it clear that the amount owed for costs is in addition to the amount claimed in the bankruptcy notice.
27. I accept at once that the relevant enquiry is not whether Mr Burke was in fact misled by the circumstances surrounding the delivery of the bankruptcy notice, but rather whether he could have been misled. But having regard to the terms of the letter and that its terms are not inconsistent with the bankruptcy notice, in my view Mr Burke could not have been misled as to what was required to comply with the notice.
28. The relevant facts were all before the Court when the sequestration order was made. The bankruptcy notice and the letter under cover of which it was served upon the debtor were before the Court. No reasons for judgment are available for the making of the sequestration order, but it is appropriate to infer in my view that the Court had regard to all of the relevant facts when it decided to exercise its discretion to make the sequestration order.
29. Section 153B of the Bankruptcy Act 1966 permits the Court to make an order annulling the sequestration order in circumstances where it concludes that the sequestration order “ought not to have been made.” It is clear from the authorities (Re Frank; Ex parte Piliszky (1987) 77 ALR 511 and Rigg v Baker [2006] FCAFC 179; (2006) 236 ALR 629) that the phrase “ought not to have been made” should be construed so that the Court should only come to a conclusion that a sequestration order ought not to have been made if it concludes that the Court that made the order was “bound” not to make the order. Where it is open to the Court to make the order in the exercise of its discretion it can only be said that the Court “ought not to have made the order” if none of the circumstances could have justified the making of it. (See Rigg v Baker at [59] – [64]).

Conclusion

30. The bankruptcy notice was properly served upon Mr Burke. He did not comply with its terms. Notwithstanding the fact it was delivered under cover of a letter which claimed more than the debt set out in the bankruptcy notice, the bankruptcy notice was not defective and the circumstances in which it was served upon Mr Burke could not have misled him as to what was required to comply with its terms.
31. I am not satisfied in the circumstances that the sequestration order ought not to have been made. The application for annulment is dismissed with costs to be assessed according to the Federal Magistrates Court (Bankruptcy) Rules 2001.

I certify that the preceding thirty-one (31) paragraphs are a true copy of the reasons for judgment of Jarrett FM

Date: 13 January 2012