MIL eUusric)|e) FRAN | BANKRUPTCY ACT 1966-1973 2b [1997 IN THE FEDERAL COURT OP BANKRUPTCY BANKRUPTCY DISTRICT OP THE S'CzTE OF NEW SOUTH WALES AND THE AUSTRALIAN CAPITAL TERRITORY ) ) No. N.S.W. 573 or 1976 ) ) RE: KEVIN ROY CALNMROY & JUNE W17,LNE "CLDERCN Trading as © ' BRATT SCHCOL OF DAC I Rankrunts EX PARTE: THE BANKRUPTS APPLICATION FOR ANNULMENT REASONS FOR JUDGMENT On 24 November 1976 a sequestraticn order was medv cdaainw! the estates of Kevin Roy Calderon and his wite Jure Fleine Calderon. On 9 December 1976 they filed this application dated 8 December 1976, which as amended pursuant to leave grantcd on 11 March 1977 seeks an order rescinding the sequestraticn order or alternatively an order under s. 154(1) (a) of the Bankruptcy Act 1966 annulling the bankruptcy on the ground that the creditors' petition was not served on the applicants and the sequestration order thevefore ought not to have been made. The application was oppose' by the petitioning creditors. Section 154(1) (a), so far as it is material to this case, provides that "Where the Court is satisfied that a sequestration order ought noc to have been m2 «+. the Court may make an ocder annulling che Lankruptcy". In fr re Dunn, (1949) Co. vio, C46 Lyershed NLR. said "IT think Mr. Aronson as ridht sn sreing that ain judgiry wacther whe ordgor ov be co nive the Court is entatjx. to nive ractard to State of affaires at treet agie, oP tiat, oy canwse, -2- May appear from evidence subseauently fiJed, and certainly would not appear from the bare statement on the formal petition, which alone was before the Court when the order was made". In that case the question was whether an adjudication ought to be annulled. It had been made on the debtor's own petition, and the "bare statement" to which his Lordship referred was not a sworn statement but the debtor's allegation, required by s. 6 of the Bankruptcy Act 1914, in his petition that he was unable to pay his debts. In Re Williams (1968), 13 F.L.R. 10, 23, Gibbs J., speaking of s. 154(1) (a), said "Under this section there are two matters which the Court has to consider, first, whether the scquestration order ought not to have been made, and then, if the Court is satisfied of that, whether in the exercise of the Court's discretion the order should be discharged (see Delph Sing v. Wood (1918), 25 C.L.R. 497, 498 per Street J., whose decision was affirmed by the Hugh Court). In determining the question whether the sequestration order ought not to have becn made, the Court is entitled to consider not only the case as disclosed at the time the order was made, but as it would have been disclosed had all the true facts been before the Court on the making of the order (Re Cool. (1946), 13 A.B.C. 245, 259). If the Court is satisTtied that the order ought not to have been made, it 1s not bound as a matter of course to annul the order, but must consider in the light of all the circumstances of the case whether the order ought to be annulled (Delph Sing v. Wood, 498-499; Re Lawson (1939), 11 A.B.C. 137, 139)". Thirdly I quote from the judgment of Lucas J. in Re Scott (1975), 6 A.L.R. 558, 559: "The first question for my decision in these circumstances is whether the bankrupt brings himself within the words of s. 154(1) (a) in the sense that he can show that the sequestration order ought not to have been made. And it has been remarked that these are words of wide inport and one test which has bcen applied from time to tiwe is that the matter should be considered as 1f all the true facts as shown in the application for the annulment had been before the court when the sequestration order was made. These words however, in my opinion, have to be read in the light of the words of the section and they are that the sequestration order 'ought not to have been made'. It seems to me that the facts - the true facts - which this principle must refer to are the facts as they existed upon the date when the scquestration order was made and that facts which have come into existence -3- since that date cannot be considered for the purpose of seeing whether it ought to have becn made". I think those authorities warrant the statement of the following propositions: 1. It is the applicant for annulment who alleces, and it is therefore for him to bring himself within the section and satisfy the Court, that the sequestration order ought not to have been made. 2. The Court to whom the application is made sears to ascertain the actual state of affairs at the time when the sequestration order is made. [In the present case, it must seek to ascertain whether or not the petition had been duly served on each of the applicants. 3. In order to ascertain that actual state of affairs the Court hearing the application for annulment looks at the facts that were before the Court which made the sequestration order and at any other facts that were not before that Court but are shown on the hearing of the application for annulment to have been in existence when the sequestration order was made, 4. Having considered all the facts so looked at, the Court determines whether on those facts the applicant has satisfied it that the sequestraLlion order ought not to have been made. 5. If it is so satisfied, the Court is not bound to annul the sequestration order but must consider in all the circumstances of the case whether 1t ought to be annulled. In the present case the petition, which alleged a debt of $609.12 for accountancy work, came on for hearing on its return date 24 November 1976. The debtors were called but did not appear. The evidence of service of the petition consisted of an affidavit sworn on 29 September 1976 by Anthony Ronald Barrett, who described himself as a commercial sub-agent and deposed to having served an official copy of the petition and copies of the affidavits verifying it on each of the debtors on Friday 24 September 1976 at 5.30 p.m. at 121 Wattle Street, Punchbowl. He deposed that he identified the persons he served as Kevin Roy Calderon and June Elaine Calderon "by asking at the time of service: 'Are you Kevin Roy Calderon and June Flaine Calderon, the persons referred to in this Bankruptcy Petition?' They each replied: 'Yes'." The same deponent swore in a similarly phrased affidavit of 19 August 1976 to having served each of the debtors with a copy of the bankruptcy notice at 9.40 a.m. on 17 August 1976 at the same address. A sequestration order was made on 24 November 1976. This application was first listed before me on 17 December 1976. It was not reached until the end of the day. It is agceed that Mr. Barrett the process server was then in attendance at the Court. The hearing was then adjourned, and eventually was held on four days in April. No evidence was given by Mr. Barrett. Mr. Pearce, manager of the process-serving company by which Mr. Barrett had been employed for about 2% years, gave evidence that he did not know the present whereabouts of Mr. Barrett, who had left that employment suddenly and without notice at about the end of January 1977. Mr. Calderon swore an affidavit in support of the application for annulment on 7 December 1976 in which he admitted service of the bankruptcy notice on 17 August 1976 but, referring to the allegation that he had been served with the petition at 5.30 p.m. on Friday 24 September 1976 at 121 Wattle Street, Punchbowl, said "9. I say that I was not served with any such Bankruptcy Petition at the time and date so alleged in the affidavit, nor was I served with any Bankrupi-y Petition at any other time and date. 10. I do not believe that I was present at my prenaises at 121 Wattle Street, Punchbowl on (sic) or about 5.30 p.m. on Friday 24 S~ntember 1976 but I an not in a position to swear positively that I was not so present. ll. I do know that I attended upon the Manager of the National Bank of Australasia Lirited, Kingsyrove branch, at 3.30 p.m. for a period of approximately ten minutes. I further say that it has been my practice to attend to delivery of goods to various customers late Friday afternoons and that I believe -5- that I was so occupied on 24th Septcmber 1976". On 1 April 1977 Mr. Calderon was only formally examtned orally, but on that day and on 5 April he was cross-examined at length. By 1 April the belief expressed in paragraph 10 of his affidavit had on consideration hardened into some recollection of his activities on 24 September 1976. He had three customers to whom as a rule he made deliveries on Friday and to each of whom he did make a delivery on 24 Scptember. They were Summit Souvenirs at Ultimo, Lisa Group Sales at Camperdown and Hawton's Sports Store at Seven Hills, and on that day he visited them in that order, with a visit to his bank at Kingsgrove in between his visits to Lisa Group Sales and Hawton's. He said on 1 April that he then had at home a receipt for goods delivered to Hawton's on 24 September: he had not brought it to court because he had not been asked to bring it, but he knew that it had on it "Received goods. Seven Hills Sports Store" and the date, and was signed by Mr. Hawton. He also had at home a signed delivery docket of 24 September from Lisa Group Sales. He had never had such a document from Summit Souvenirs. He had been in touch with all three firms but none had been able to say at what time he had delivered on 24 September. He was at the bank for about ten minutes on that date, and was positive he had arrived there at about 3.10 p.m. (not 3.30 p.m. as he had said in his affidavit). It normally takes about 40 minutes to drive from the bank to Seven Hills. His last delivery was to Hawton's, and though 1l.o could not remember its exact time, 1t was near the store's closing time of 5.30 p.m., and could have been between 4.30 and 5 p.m. On 5 April Mr. Calderon, being further questioned about his visit on 24 September to the bank, said it could have been 3.40 p.m. when he left the bank but not much later, because ~6- having left he made a fifteen minute journey (which he had not previously mentioned) back to 121 Wattle Street where he paid his staff, who stop work at 4 p.m., before going to Hawton's at Seven Hills. His wife was at the Punchbowl premises when he paid the staff. Reminded that he had on 1 April spoken of a receipt for delivery given him by Hawton's he said he had again "omitted" to bring it, and repeated that it was signed by Mr. Hawton. He now said that, having left 121 Wattle Street just after 4 p.m., he drove to Seven Hills - a trip of about 40 minutes - and returned from there to 121 Wattle Street where he arrived at 5.40 p.m. He was now able to fix that time because be recalled that when he arrived he found that his wife and children were not there, nor was his wife's car. He had assumed they had gone for the children's swimming practice. "I looked at the clock and thought they must have left early". As the clock showed 5.40 p.m., it is not clear why he shouid have thought so, because he knew that the children were due at the swimming pool at 5.30. Two casual employees who worked in the evening were there when he looked at the clock. He sees them three or feur times a week, but had not attempted to seek their recollections of that day, for the rather odd reason that "There was no need to »«- because I did not consider it was any of their business". No document signed by Mr, Hawton was ever tendercd, but on 14 April 1977 counsel for the petitioning creditor tendered without objection a carbon copy of an invoice addressed to Hawton's Sports Store and bearing in carbon notations of two dates 24/9/76 and 25/9/76, and a signature "K. R. Calderon". The signature was not identified, but bears a close resemblance to a signature, identified by Mr. Calderon as being his, on another document in evidence, However, the carbon document is of little importance because, if the whole of Mr. Calderon's evidence be ~« wht = ay accepted, it comes in the end to an admission that the belief expressed in his affidavit that he was not present at 121 Wattle Street "on or about 5.30 p.m." on Friday 24 September was erroneous to the extent that he was there at 5.40 p.m. on that date - ten minutes after the time of service sworn to by the process server. Mrs. Calderon was, in her affidavit sworn on 7 December 1976 in support of the application, more positive than her husband had been in his. She admitted that she was served with a bankruptcy notice on or about 17 August 1976, but denied having been served with the petition at 5.30 p.m. on Friday 24 September at 121 Wattle Street, and added "10. I further say that on the 24th Septembcr 1976 during the time pericd of approximately 5.00 p.m. to 5.15 p.m. I was travelling in my motor vehicle from 121 Wattle Street, Punchbowl to the Bankstown Indoor Swimming Pool at West Street, Bankstown, a distance of approximately two (2) miles. At approximately 5.15 p.m. I arrived at the said swimming pool and remained there for a period of time whilst my children underwent swimming tuition until approximately 6.30 p.m. I arrived home at approximately 6.50 p.m." On 5 April 1977 Mrs. Calderon was orally examined orly formally, but on that day and on 7 April she was cross-examined at length. It is necessary to understand the background of Mrs. Calderon's evidence as to her movements on the afternoon of 24 September 1976. It was described by the swimming instructor, Mr. Grinham, who impressed me as a witness of honesty and accuracy. He explained that the daily routine of his swimming lessons and practice had two stages. What was variously called training or preparation or tuition began at 5.30 p.m. Then races wore heid which began not earlier than 6.30 p.m. and not later than 7 p.m.: Mr. Grinham was rather insistent on the children being punctual. The results achieved by children in races were recorded on cards. In her oral evidence Mrs. Calderon considerably qualified -8- the positiveness of the statement she had made in her affidavit about her activities on 24 Septembor. She admitted that she had no recollection of that day "specifically, as a specific day" and made it clear that she was reconstructing what happened on that day from her "habit" of taking her children to swimming lessons on five days a week. So reconstructing, she said she left her home at about 5.15 p.m. in order to get the children to the pool by 5.30 p.m., remained at the pool while they were training, filled in and handed in their entry cards for the races, left the pool about 6.20 or 6.25 p.m., got back home about 6.45 p.m. to prepare the evening meal, and returned to the pool by about 7.30 p.m. or 7.40 p.m. to collect the children after their races and bring them home, If that account is correct, Mrs. Calderon was away from her home from about 5.15 p.m. to 6.45 p.m. But I am not satisfied that it is correct. Mrs. Calderon said that she never left the pool before the children's tuition (which ended at 6.30 p.m.) finished: she always watched their tuition. Mr. Grinham, however, whose evidence I prefer, said "She brings the children to the pool on normal swimming days and quite often leaves them and picks them up again. At other times she does stay and watch the training take place. ... Most evenings, Mrs. Calderon is there between quarter-past and half-past five"; and that he "could not say she was always there" when the children started their tuition preparation. Further, Mrs. Calderon said she took the children to the pool every day, five days a week, save for some extrenely cold days in mid-winter or when the weatherwac bad; but Mr. Grinham said that her children were "very regular attenders ... . 'They train a minimum of three times a weck ... every woek; they are quite regular throughout the year, twelve months of the year ... I think they do one more session a week in summer time than winter time". Mrs. Calderon said that the result cards are held hv the swimming club. Mr. Grinham produced four cards which on their faces indicate that two Calderon children swam in races on 24 September. It is unnecessary to debate whether 1t was Mrs. Calderon who was right when she said she fillcd the cards in or Mr. Grinham when he said they were in his handwriting; and it may well be that each filled in part of each card. At the most, the cards show where the children were after about 6.30 p.m. on 24 September: they do not show where Mrs. Calderon was at or about 5.30 p.m. Neither of the Calderons favourably 1mpressed me as a witness. The petitioning creditor's debt has been owed since about 1969, and arrangements to pay it were agreed upon but lot carried out by the debtors, though Mr. Calderon said he "most certainly" did not dispute it. It was apparent that, in their own counsel's apt words, the Calderons "are certainly no strangers to court process" issued by the petitioning creditor and other ereditors. So far as Mrs, Calderon is concerned, I do not overlook, and regard as quite likely true, her assertion that if she were served with a legal document she would at once hand it to her husband; though I doubt she would have done so as incuriously as she alleged. She was able to say - "just generalizing" - what "usually" was said by someone who served her with a legal document; but generally she and her husband professed (and 1 think it not unfair to say resolutely professed) almost total inebility to recall what documents had been served on them, approximately when any document had been served on them and how often they had been served with documents, as well as a profound ignorance of the nature and effect of any legal document, except possibly a creditor's petition. -10- Neither was a reliable witness. The account of their evidence I have given above shows how and by what staqes Mr. Calderon advanced to the point where he established after all only that he was at 121 Wattle Street at 5.40 p.m. on 24 September 1976, and the uncertainties attending Mrs. Calderon's original but later heavily qualified assertion that at 5.30 p.m. on that day she was at the swimming pool. I should say something about Mr. Barrett's affidavit of 29 September 1976, as submissions were made as to the weight I should now give it. It was suggested on behalf of the applicants that from the circumstances, described by Mr. Pearce, of Mr. Barrett's leaving his employment an inference unfavourable to him should be drawn. I do not agree with that suggestion: I see no reason at all to draw such an inference. On the other hand the petitioning creditors relied on other evidence given by Mr. Pearce, which was to the effect that the practice of his company's office was that when a document arrived to be served it was put in an envelope on which were noted the nature of the document and directions for its service, the document in the envelope being then given to a process-server. When service was effected the process-server noted details of the service on the envelope and handed it in to the company. Mr. Pearce identified as being in Mr. Barrett's handwriting notations on two envelopes which indicated that Mr. Barrett had noted on one that a bankruptcy notice had been served, for the solicitors for the petitioning creditor, on the Calderons at 9.40 a.m. on (as they both admittcd) 17 August 1976, and on the other that a creditors' petition had been served, for those solicitors, on the Calderons at 5.30 p.m. on 24 September 1976. That evidence of course does not prove that the petition was in fact so served, but it also does not adversely affect the evidence in Mr. Barrett's affidavit. J Lthink or . that that affidavit should be 1tegarded as simply what it is ~- an affidavit untested by cross-cxamination - and should not, as was suggested on behalf of the zpplicants, be regarded as haying no weight at all. Going back notionally to 24 November 1976 when the petition was heard, and regarding the Court es having before 1t then the facts relating to service of the petition sworn to by Mr. Barrett and by the applicants and the other witnesses who gave evidence on the hearing of this application, 1 am unable to say the Court is now satisfied that the petition was not served on both applicants and that therefore the sequestration order ovght not to have been made. I therefore dismiss the application, and order the applicants to pay the petitioning creditor's taxed costs, including reserved costs, of and incidental to the application.