Commonwealth Bank of Australia v Jorgensen (No.3) [2012] FMCA 1046 (30 June 2011)

Federal Magistrates Court of Australia

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Commonwealth Bank of Australia v Jorgensen (No.3) [2012] FMCA 1046 (30 June 2011)

Last Updated: 31 January 2012

FEDERAL MAGISTRATES COURT OF AUSTRALIA

COMMONWEALTH BANK OF AUSTRALIA v JORGENSEN (No.3)

[2011] FMCA 1046

BANKRUPTCY – Application to adjourn hearing of creditor’s petition – application to adjourn application to set aside bankruptcy notice – applications refused.

Bankruptcy Act 1966, s.30(1)

Streamer v Tannis [1981] FCA 123; (1981) 54 FLR 253 Re Duckworth; Ex parte Lockett (unrep. Fed Ct of Aust, French J. 12 February 1987) Brookfield v Yevad [2002] FMCA 82

Applicant:

COMMONWEALTH BANK OF AUSTRALIA

Respondent:

ALAN BRADLEY JORGENSEN

File Number:

BRG 82 of 2011

Judgment of:

Jarrett FM

Hearing date:

30 June 2011

Date of Last Submission:

30 June 2011

Delivered at:

Brisbane

Delivered on:

30 June 2011

REPRESENTATION

Counsel for the Applicant:

Mr P.D. Hay

Solicitors for the Applicant:

Matthew J Farmer

Counsel for the Respondent:

Mr P.J. Metzdorf

Solicitors for the Respondent:

Frank Sanna

ORDERS

(1) The application for adjournment is refused.
(2) Mr Metzdorf has leave to withdraw his further appearance for the respondent.
(3) The application to set aside a bankruptcy notice be adjourned to 1 July 2011 at 11.00 a.m. in the Federal Magistrates Court of Australia sitting at Brisbane.

FEDERAL MAGISTRATES COURT OF AUSTRALIA AT BRISBANE

BRG 82 of 2011

COMMONWEALTH BANK OF AUSTRALIA

Applicant

And

ALAN BRADLEY JORGENSEN

Respondent

REASONS FOR JUDGMENT

(Ex tempore)

1. There are two applications before me. The first is a creditor's petition set for hearing today. The creditor's petition was filed on 14 February 2011. The second is an application to set aside a bankruptcy notice which was filed on 10 June 2011 and was made returnable at 9.30 today.
2. The respondent to the creditor's petition and the applicant in the application to set aside the bankruptcy notice seeks that both applications be adjourned to a date which is two weeks later than 14 July, 2011. The reason for the adjournment is said to be twofold. First, he needs the benefit of legal advice. These are difficult and complex matters. He has only recently retained legal counsel and his advisor has not had the opportunity to properly prepare his case.
3. The second basis seems to be that there is presently pending in the District Court of Queensland an application to set aside the judgment upon which the bankruptcy notice in this case is based. That judgment was a default judgment entered by a registrar of the District Court. It was suggested, although it is difficult to discern from the material, that there is an outstanding appeal to the Court of Appeal in respect of the registrar’s decision to enter the default judgment. None of that is clear, but none of that matters.
4. At the commencement of my deliberations in this matter I asked both parties if there was any objection to me reading all of the documents that have been filed in this application since the filing of the creditor's petition on 14 February. Neither party objected. I have read them.
5. The filed documents reveal that these proceedings have their genesis in some proceedings that commenced in the District Court of Queensland as long ago as 2009. In those proceedings, commenced by claim and statement of claim in the District Court, the petitioning creditor sought to recover money from the respondent. The first tranche of the funds sought to be recovered, about $65,000, is said to be money paid to the respondent under a mistake of fact. The second tranche, the balance so as to take the claim up to about $85,000, was said to be the balance owing by the respondent to the petitioning creditor pursuant to a home loan.
6. There is reference in the material, although I cannot make any particular findings about the true position, but there is reference in the material to there having been judgments given in favour of the petitioning creditor against the respondent or the respondent and his wife for possession of certain real property. Those judgments for possession were seemingly based upon a mortgage given by the respondent and his wife over that real property. Thus to the extent that the petitioning creditor was a secured creditor of the respondent, the security may have been exhausted.
7. By and by the proceedings in the District Court were served upon the respondent by way of an order for substituted service Ryrie DCJ. There was material before her Honour that indicated that notwithstanding extensive attempts to locate and serve the respondent, personal service was unachievable. Her Honour must have been satisfied that was so because an order for substituted service was made. The documents were served on him in accordance with the order for substituted service and, again, by and by, an application for default judgment was made under the Uniform Civil Procedures Rules 1999 (Qld) to a deputy registrar of the District Court.
8. Before the default judgment was given there was email correspondence between the respondent and the District Court Registry, and the respondent and the petitioning creditor. That of itself must indicate that the proceedings had come to his attention. Notwithstanding his overtures via email to the deputy registrar, a judgment was entered against him by default on 3 September, 2010 for the sum of $86,167.94. The respondent seems to have moved reasonably promptly after that to apply to have that judgment set aside. The application to have the judgment set aside came before Jones DCJ and on 22 October, 2010 his Honour dismissed the application.
9. The reasons for judgment are in the evidence. They make it clear that the respondent failed in the application to set aside the judgment on a number of grounds. First, his Honour was none too persuaded that there was a satisfactory or, indeed, any explanation for the respondent’s failure to respond to the proceedings and file a defence in a timely way. More importantly, his Honour seemed to be of the view that even if what the respondent had deposed to in his affidavit in support of the application to set aside the default judgment, there was nonetheless no defence to the proceedings. His Honour was of the view that the respondent could not make out any arguable defence to the claim made by the applicant, the petitioning creditor.
10. The petitioning creditor then moved to bring bankruptcy proceedings against the respondent. A bankruptcy notice was issued and served on the respondent by way of email. It was not suggested in argument, and it is not suggested in the documents filed by the respondent that the mode of service was impermissible. What is argued is that the mode of service was imprudent, inappropriate and designed not to bring the proceedings to his attention. In my view, however, the material permits a very strong inference that the respondent received the bankruptcy notice when it was sent to him on 12 November, 2010. I will refer to that in some more detail shortly.
11. For present purposes it is suffice to remark that a bankruptcy notice was issued and served on 12 November, 2010. The creditor's petition now before me was issued on 14 February, 2011. There were difficulties with serving the creditor's petition. It has to be served personally. On 11 May, 2011 Registrar Baldwin made an order for substituted service of the petition on the respondent. That seems to have caught his attention because he then became involved in these proceedings. The matter came before Deputy Registrar Belcher on 9 June, 2011 and the Deputy Registrar on that occasion adjourned the application to today. He made some other directions.
12. The gravamen of the first ground for the adjournment, namely, that the respondent has only instructed legal counsel and needs time to prepare his response to these applications, holds no merit. There is real reason to be concerned about the veracity of many of the things the respondent swears. I make no findings about them, but it is sufficient to make these remarks, I think. The respondent says that the bankruptcy notice was served on him at an email address that he rarely uses and only uses when he is overseas. In this case there has been a large tranche of email correspondence between the respondent and the applicant’s lawyers extending over a considerable period of time.
13. As best as I might tell from reading the documents, every single email sent by the respondent was sent from the address at which he was served with the bankruptcy notice. There is no other email address in evidence apart from some email addresses to which the respondent most recently deposes. But the email correspondence between him and the lawyers for the petitioning creditor all emanates from the one address, the hotmail address. The correspondence that has been had with the lawyers for the petitioning creditor has all been sent by those lawyers to the respondent at the hotmail address according to the evidence before me. The correspondence between the respondent and the Deputy Registrar of the District Court in the first instance requesting that judgment by default not be entered against him, and then secondly, asking for advice as to how to have it set aside, emanates from the same hotmail address - no other address.
14. The respondent in the affidavit that he has filed in these proceedings on 10 June, 2011 and in the affidavits that he filed in the District Court in support of his application to set aside the judgment by default, which affidavit is an exhibit to an affidavit of Ms Griffin, both contain the assertion that his hotmail email address is “rarely used” and used only when he is away from his home office when overseas. That is the first affidavit. In a second affidavit of 10 June, 2011 in this court, the respondent says that he uses that hotmail address when he is “away from his home office overseas or interstate”, something quite different to what he had originally deposed - that is, using that address only when he was overseas.
15. The exhibits to both affidavits are printouts from his hotmail email account which are said to demonstrate the infrequency with which it is used, but the printouts demonstrate the opposite. The printouts demonstrate that it is used not quite, but almost on a daily basis.
16. The respondent also deposes that most recently – and it is part of his submissions – that he has only just become aware of the creditor's petition and the bankruptcy notice in this matter. In his affidavit filed on 9 June in these proceedings he swears that in paragraph 10 - although the 10 is crossed out on the court copy of the affidavit at page 5 “the defendant only last week became aware of these bankruptcy proceedings after he contacted the CBA solicitors concerning the ADR matter.”
17. The affidavit was sworn and filed on 9 June, 2011. Last week was the week of 28 March to 3 June. His own material demonstrates that he had in fact received the creditor's petition as early as 13 May, 2011 not “last week” as he suggests in his most recent affidavit. As counsel for the petitioning creditor points out, there is in fact a deposition by the respondent in his second affidavit to set aside the judgment by default filed in March of this year that there had been a bankruptcy notice issued against him. Those inconsistencies do his argument no good.
18. The evidence also demonstrates that for years, to use the respondent’s terms, he has retained a solicitor in Victoria, Mr Frank Sarna, to assist him in various matters. There is correspondence attached to the affidavit of Ms Griffin to the effect that Mr Sarna was aware of these proceedings, although he did not act formally on the record for the respondent and would not be doing so until such time as Queensland counsel was briefed by him. At that stage he would go onto the record. But it is clear enough that the respondent had access to a lawyer - had access to legal advice if he chose to take it up.
19. Not content with Jones DCJ’s decision in the District Court in October last year to refuse to set aside the default judgment, Mr Jorgensen has applied again the District Court to have the same default judgment set aside. That application was made on or about 23 or 25 March this year and it is yet to be decided. It is that application which I am now told is set for hearing on 14 July, 2011.
20. The conclusion I have come to is that that application is likely to be unsuccessful. It is likely to be unsuccessful because the affidavit filed in support of it is the same as the affidavit that was before Jones DCJ in 2010. The same criticisms made by Jones DCJ of the affidavit and the evidence before him can be made in respect of the second affidavit. It is no better, and there is therefore very little prospect of that second application succeeding. But more than that - and I am now dealing with the second limb of the application to adjourn – more than that there is no utility in adjourning these proceedings pending the outcome of those proceedings.
21. It was said that once the judgment by default has been set aside these bankruptcy proceedings will fall. The respondent says that in his affidavit of 9 June, 2011. But the submission and the argument is misconceived. One cannot set aside a bankruptcy notice after time for compliance with it has expired. Time for compliance can be extended after the original time or the extended time has expired provided the relevant application was first made before the expiry of the bankruptcy notice or time for compliance with it or the time was not extended before the expiry due to an oversight by the court. So much has been the case for some time. Streamer v Tannis [1981] FCA 123; (1981) 54 FLR 253 is an example. That decision has been applied since.
22. Re Duckworth; Ex parte Lockett (unrep. Fed Ct of Aust, French J. 12 February 1987) stands as authority for the proposition that one cannot set aside a bankruptcy notice after time for compliance with it has expired. That decision has been applied, and in the context of an application such as this where there is an outstanding application to set aside a judgment by default, the principle has particular application. Even if the judgment by default is set aside, the act of bankruptcy has been committed, and so the creditor's petition still has a foundation upon which it can proceed.
23. However, in Brookfield v Yevad [2002] FMCA 82 at [7] - [13] Raphael FM examined the authorities and determined that in certain circumstances the Court can set aside a bankruptcy notice under s.30(1) of the Bankruptcy Act after time for compliance has expired even in the absence of an extension of time within which to comply with its terms. The circumstances identified by his Honour were those where it was found that the bankruptcy notice is invalid. If the bankruptcy notice is invalid, no act of bankruptcy can be committed by failing to comply with its terms.
24. Absent invalidity of the bankruptcy notice, however, setting aside the bankruptcy notice will be futile because if the notice was valid – and it is not suggested here the bankruptcy notice is invalid – the act of bankruptcy constituted by non-compliance with the notice will have occurred in any event, and that will be sufficient to found the proceedings on the creditor's petition.
25. In this case, therefore, even if there are prospects of the application to set aside the default judgment succeeding, it seems to me, at least for the purposes of this adjournment application, that it is unlikely that the outcome of those proceedings will have any bearing on this matter. There has already been the commission of an act of bankruptcy sufficient to ground the petition.
26. Whether or not the court should proceed to make a sequestration order is, of course, another matter.
27. For those reasons, the application for the adjournment is refused.

I certify that the preceding twenty-seven (27) paragraphs are a true copy of the reasons for judgment of Jarrett FM

Date: