JUDGMENT No. 282.2 SS CATCHWORDS RUPTCY - Application for declaration as to personal service of bankruptcy notice - Costs and interest as components of judgment - Circumstances in which omission or understatement affect validity of bankruptcy notice - Service of bankruptcy notice on debtor - What constitutes a "copy" - Requirements of affidavit of due service of bankruptcy notice - Onus of proof in determining validity of service of bankruptcy notice - What constitutes "personal service". Bankruptcy Act 1966 ss.30, 41(6A), 41(4) Bankruptcy Rules rr.195(2)(a), 7(2)(b), 15, 16, 122 Re: RONALD THORPE also known as PETER THORPE EX PARTE: RONALD THORPE v. NOEL PERRY NO. B275 OF 1987 LEE J. PERTH 1 JUNE 1988 mo tang PF Vesatis \ FCDERAL COURT OF AUSTRALIA PP ANC PAL REGIS'hr ? . IN THE FEDERAL COURT OF AUSTRALIA GENERAL DIVISION BANKRUPTCY DISTRICT OF THE STATE OF WESTERN AUSTRALIA No. -B275 of 1987 RE: RONALD THORPE also known as PETER THORPE EX PARTE: RONALD THORPE Applicant and NOEL PERRY Respondent MINUTE OF DECLARATION AND ORDER JUDGE MAKING ORDER 2 LEE J. DATE _OF ORDER 1 JUNE 1988 WHERE MADE PERTH THE COURT DECLARES THAT: The bankruptcy notice addressed to the applicant dated 24 November 1987 was not personally served the applicant on 28 November 1987. AND THE COURT ORDERS THAT: The respondent pay the applicant's costs of application to be tared. Note: Settlement and entry of orders is dealt with in Rule 124 of the Bankruptcy Rules. and upon this IN THE FEDERAL COURT OF AUSTRALIA GENERAL DIVISION BANKRUPTCY DISTRICT OF THE STATE OF WESTERN AUSTRALIA wee wer No. B275 of 1987 RE: RONALD THORPE also known as PETER THORPE EX PARTE: RONALD THORPE Applicant and NOEL PERRY Respondent CORAM: LEE J. 1 JUNE 1988 REASONS FOR JUDGMENT This is an application by Ronald Clement Thorpe, the applicant, pursuant to s.30 of the Bankruptcy Act 1966 ("the Act") seeking a declaration that a bankruptcy notice ("the notice") addressed to the applicant and dated 24 November 1987 was not served personally upon hin. There is no application to set the notice aside as a "proceeding" pursuant to sub-rule 195(2)(a) of the Bankruptcy Rules ("the Rules") - see Re Florance; Ex parte Turimetta Properties Pty. Ltd. (1979) 36 F.L.R. 256 at 263, or pursuant to the Court's implied power to set aside a bankruptcy notice which is a necessary consequence of the enactment of sub-s.41(6A) of the Act - see Re Sterling; Ex parte Esanda Ltd. (1980) 44 F.L.R. 125 at pp.129-131. The notice was issued by the Registrar at the request of the zrespondent, Noel Perry. By that notice the Registrar required the applicant to pay to the rdspondent a sum of $42,203.53, described in the notice as the amount due to the respordent under a final judgment obtained by him against the applicant in the Supreme Court of the Northern Territory on 5 August 1987. The certificate of judgment filed with the Court in support of the request for the issue of the notice indicated that the respondent had obtained judgment against the applicant for a sum of $42,203.53 and costs and interest on the sum of $42,203.53 up to the date of judgment. There was no indication of the amount of interest nor of the period over which it was to be computed. It would appear that interest was ordered to be paid as part of the respondent's claim in the action and was not included in the judgment as part -f a statutory entitlement. Costs awarded as part of a judgment may be omitted from a bankruptcy notice as long as they remain untaxed (see In re G.J. £19051] 2KB 678 and Re David; Ex parte Lahood (1979) 36 F.L.R. 433; Re Jack; Ex parte C.V. Holland (Holdings) Ltd. (1959) 19 A.B.C. 268. It is assumed that the costs awarded in the judgment were not fixed at the time of issue of the bankruptcy notice. Similarly, a judgment creditor is not obliged to include in a bankruptcy notice a claim for interest on a judgment debt accruing by statutory provision, (see Re Bankruptcy Act 1966; Ex parte Commercial Banking Co. of Sydney Ltd. (1979) 23 A.L.R. 522 at 526 per Lockhart J.; Re Wong; Ex + parte Kitson (1979) 27 A.L.R. 405) but it 1s permissible to calculate statutory interest that has accrued on a judgment debt and vo include it in a bankruptcy notice which seeks payment of the judgment debt. There may be some divergence of view as to the effect on the notice of understating the amount of statutory interest that attaches to the judgment debt. (See Crowl v Kleinwort Benson Australia Ltd. (1987) 74 A.L.R. 148 per Beaumont and Burchett JJ., Wilcox J. dissenting and the authorities referred to therein, a decision which is presently the subject of an appeal to the High Court of Australia and Re Francis; Ex parte Premier Plasterboard Suppliers Pty. Ltd., Unreported (Federal Court of Australia, Sheppard J., 24 November 1987)). Where interest has been awarded on the sum claimed in the action, to be computed on that sum up to the date of entry of judgment, such interest is part of the judgment debt unless made the subject of a separate interlocutory judgment in which event it would be treated in the same way as untaxed costs. The interest should, therefore, be calculated and included in the amount claimed in the bankruptcy notice as the amount of the judgment or clearly abandoned in the notice if it is not included in the sum claimed under that notice. In these circumstances the issue of a bankruptcy notice claiming only a sum of $42,203.53 may have been an understatement of the true amount of the judgment debt and a notice to pay such a sum may have contained the capacity to mislead the judgment debtor as to his true obligation under the notice unless the judgment creditor, the respondent, made it clear that he abandoned his entitlement to any further payment under the Judgment. The bankruptcy notice issued at the request of the respondent does not abandon a claim for any additional sum and perhaps it may be argued that the notice is of no effect. (See Re Thomson; Ex parte Associated Midland Corporation Ltd. (1981) 53 F.L.R. 97; Re Preston; Ex parte Commercial Bank of Australia Ltd. (1982) 45 A.L.R. 105 per Sheppard J. at p.109; Re Schierholter; Ex parte Geis (1978) 32 F.L.R. 22.) There has been no application for a declaration to that effect or for an order to set the notice aside and it is unnecessary for me to decide the matter. To obtain a bankruptcy notice for service on a judgment debtor, a judgment creditor is required to comply with the provisions of r.7. In particular, pursuant to r.7(2)(b) the judgment creditor is required to produce to the Registrar as many copies of the bankruptcy notice as are required: (a) to effect service; (b) to exhibit a copy to the affidavit of due service; and (c) to file a copy with the Registry. In the normal course of events three copies of a bankruptcy notice would be produced to the Registrar to sign and stamp. Although the Rules speak of copies of bankruptcy notices, in fact each copy referred to is a separate document bearing the hand of the Registrar and the seal of the Registry. (See Re DeIeso (1978) 24 A.L.R. 701.) " The Rules were amended after the decision in Re _Deleso (supra) which noted that the Rules at that time did not require such notices to be either sealed or stamped when issued. The amendment of the Rules in 1981 required the notice to bear the stamp of the Registry in addition to the signature of the Registrar thereby providing double authentication of a Court document which required a debtor to comply with the Registrar's direction or, in default, commit an act of bankruptcy. The Act and Rules make it clear that such an authenticated notice and not a copy or its equivalent, must be served personally upon the debtor. The notices must be accurate and they must be properly served. The commission of an act of bankruptcy is a serious matter and involves consequences that have been described as quasi-penal in nature - Re Long; Ex parte Fraser Confirming Pty. Ltd. (1975) 24 F.L.R. 392. Pursuant to sub-s.41(4) and r.15 service of a bankruptcy notice must be effected personally upon the party to whom it is directed unless the Court makes an order for some other form of service under s.309 of the Act. Rule 16 provides that one of the authenticated notices is to be exhibited to the affidavit which attests to due service of the notice. The effect sought to be achieved by r.16 is to provide that an affidavit deposing to service of the notice will not be sufficient proof of service unless the affidavit deposes to the fact that a signed and stamped copy of the notice was. served on the person to whom the notice was directed and a further authenticated copy of the notice in the same form as the served copy is annexed to the affidavit. In addition r.122 requires such an affidavit to state the date on which and place at which the notice was delivered and the means by which the deponent established that the person to whom the notice was delivered was the person required to be served. In this matter an affidavit of service was sworn by Anthony Christou on 9 December 1987. Christou deposed that service of the notice was effected upon the applicant personally on 28 November 1987. The document described by Christou as having been served by him was "a copy of the bankruptcy notice signed by the Registrar". In that affidavit Christou did not depose that that copy of the bankruptcy notice also carried the stamp of the Registry nor did he depose that the copy notice annexed to the affidavit was in the same authenticated form as the notice he had served. I do not think it would be appropriate for a Court to draw an inference from such an affidavit that the document did carry such a stamp when the Ruies make express provision for service of such a document and provide by implication for such service to be deposed to in the affidavit of service. Accordingly if the matter of service were to be determined by consideration of that affidavit alone the Court may not be satisfied that service had been duly effected. However, on the hearing of this application the evidence relevant to service extended well bheyond the affidavit of Christou. The applicant gave evidence denying that he had been personally served and adduced evidence from other witnesses to corroborate his account of his movements. The respondent called Christou to give further oral testimony on the manner in which service was effected. That testimony did not include a_ statement that he had served a stamped copy of the bankruptcy notice. Before dealing with the evidence adduced on this application and the submissions of counsel, it is necessary to determine upon whom the onus of proof lay in the course of the hearing of this application. It was submitted that the onus was on the applicant to Prove on the balance of probabilities that service had not been effected in the matter required by the Act. It was suggested that that onus would shift to the petitioner upon the hearing of the petition founded upon the act of bankruptcy resulting from non-compliance with the bankruptcy notice. At that stage, it was argued, the onus would be upon the petitioner to show that the notice had been duly served, if that matter were put in issue on the hearing of the petition. I am unable to agree with this submission. The provisions of the Act in relation to the service of bankruptcy notices are to be strictly complied with and that is an obligation that rests throughout upon a judgment creditor and potential petitioning creditor. When, in an application suchas this, the judgment a@ebtor and person to whom a bankruptcy notice is directed seeks a declaration that service has not been duly effected in accordance with the Act, the applicant will bear an evidentiary burden to raise his case above the standard of a mere assertion, but' the onus of proof of due service will rest throughout upon the judgment creditor who contends that the judgment debtor received the notice and thereafter committed an act of bankruptcy. (See Purkess v Crittenden (1965) 114 C.L.R. 164.) T now turn to the evidence that was placed before the Court on the hearing of this application. The applicant informed the Court that he was the operator of a mining venture in the Northern Territory and spent much time away from his place of residence at 26 First Street, Bickley on the outskirts of the metropolitan area of Perth. He denied that he had been served with the writ of summons in the action in which the respondent obtained judgment and denied that he had been served with the bankruptcy notice issued at the request of the respondent. The applicant gave evidence that on 2 February 1987, the day on which the writ of summons was allegedly served upon him at 26 First Street, Bickley, he was working on his mining claim at Halls Creek in the Northern Territory. He said he did not return to Perth until late February when he and his wife left the mine site and returned to Perth for approximately four to five months. Mrs. Thorpe gave evidence corroborating the evidence of her luusband. She was permitted to refer to a diary she had maintained in that year to confirm her recollection that she and her husband had not travelled to Perth until late February 1987. The applicant stated that after he and his wife had returned to the mine site in approximately June 1987, he had returned to Perth for a week in November 1987 when he was required to give evidence in the Warden's Court sitting at Perth. He left Perth to return to Halls Creek on 28 November 1987. The applicant adduced evidence from his brother, Kenneth Arnold Thorpe, who apparently, from time to time, also resides at 26 First Street, Bickley. It may be noted that Kenneth Thorpe is of similar size and appearance to the applicant. Kenneth Thorpe stated that he was residing at 26 First Street, Bickley early in February 1987 when a person attended at that address and attempted to serve some papers on his brother, Ronald, who was not present. He stated that the process server left the papers on a vehicle and departed. He gave evidence of a number of ancillary matters relating to the process server's visit including the process server's attendance upon the next door neighbour seeking directions, the colour and size of his car and details of his passenger. All of these particulars were substantially confirmed by the later evidence of the process server Anthony Christou. 10. Kenneth Thorpe gave evidence in corroboration of his brother's account of his movements on 28 November 1987. Both men deniea that they had been present at 26 First Street, Bickley on the afternoon of 28 November 1987 and stated that they did not return to that address until some time at or after 6 p.m. They stated that they had attended a Mr. Russell at a fabrication plant at Naval Base to discuss the installation of mining machinery at Halls Creek. Mr. Russell gave short evidence to the effect that he had been visited at his factory by the applicant on a Saturday in about November 1987. Kenneth Thorpe confirmed that he took the applicant to the airport to catcha flight to return to Halls Creek on the evening of 28 November 1987. He said there were no dogs in the house at that time. He stated that on 30 November 1987 he found a copy of the bankruptcy notice in the letter box of 26 First Street, Bickley and took it to solicitors acting for the applicant. The applicant also called Daryl Graham Archer, who was residing at 26 First Avenue, Bickley on 28 November 1987 to say that he had been present at the premises for the whole of that day and no person had called at that address attempting to effect service on Ronald Thorpe. He also said that there were no dogs at the house at that time. He said that the only dogs he had seen at the property were two bull terriers owned by the applicant but when the applicant had come down to Perth in November 1987 by aeroplane he had not brought his dogs with him. a? - ll. In his evidence, Christou told the Court that he had attended at the applicant's premises on 28 November 1987 and had effected personal service of the bankruptcy notice. He was in Court to hear the evidence of the applicant and his brother and other witnesses and identified the applicant as the person he had served with the notice. He said that he had effected service at some time between 4 and 6 p.m. on the late afternoon of Saturday 28 November 1987. In the affidavit of service sworn by Christou, previously filed with the Registry to prove due service of the bankruptcy notice, Christou had deposed that he had effected service at 3.30 p.m. on that day. In that affidavit Christou also deposed that the premises he attended were patrolled by guard dogs and he was unable to leave his car. In his oral testimony, Christou agreed that the premises were not fenced other than by a low wall and the driveway on which he obtained access to the premises had an open gate. He said the dogs were large and black and were either on top of, or standing against, his car scratching paint from it causing him to decide not to leave his vehicle. In his affidavit, Christou said that the applicant came out of the house after Christou had blown the car horn for some time and ordered Christou off the property. He deposed that he had told the applicant that he had a bankruptcy notice to serve and further deposed as follows: "I attempted to hand the notice to him but it was refused and it fell to the ground." (emphasis added) In his oral testimony, Christou stated that, after he had sounded the car horn several times, "a gentleman fitting the description of Ronald Thorpe came out". Christou explained "fitting the description" as 12. Meaning "a gentleman about 5'7" or 5'8", large frame, in his fifties". He said that the person did not go past the porch of the premises, but Christou recognised that person as the person he had served with legal documents earlier in the year. That person was some forty to £ifty yards from Christou's car. Christou said that through a partly open car window he shouted to this person that he had some more documents for him, bankruptcy documents, and if he did not come and take them from his hand he would throw then on the driveway. The window was only partly open because the dogs were jumping up against it. He said that he was told to get off the property and that he had then thrown the papers through the gap provided by the partly open window and had driven off. In answer to questions from the Court he stated that the person in question did not leave the porch and remained forty or fifty yards from the car. He said he had no doubt that the person who was standing on the porch on 28 November 1987 was the same person he had served with the writ of summons on 2 February 1987. It can be seen that the manner of service deposed to by Christou in his affidavit is substantially and materially different from the account given by him in his oral evidence. Kenneth Thorpe gave his evidence in Christou's presence and stated that the person who served documents directed to his brother in early February 1987 was driving a small brown vehicle such as a Honda or a Mazda. When giving evidence, Christou was asked what vehicie he drove and he replied that the vehicle was a red Laser. In answer to further questions, he revealed that the 13. vehicle he was driving in November 1987 was a red Laser but the vehicle he drove in February 1987 was a fawn Laser. It was my impression that Christou was not prepared to volunteer the relevant answer he knew was being sought and was prepared to leave the Court with a misleading impression if the right question had not been asked. Christou said that he was accompanied by his wife on each occasion he attended to effect service of process on Ronald Thorpe. Kenneth Thorpe had given evidence that Christou was accompanied by a woman when he attempted to serve documents in early February 1987. [I did not hear from Mrs. Christou. The applicant contended that he had not seen Christou at any time and could not identify him in Court. Christou maintained that he was well known to the applicant in that Christou had not only attended to effect service on the two specified occasions but had also attended on the applicant's property on another occasion in 1987 to take photographs of the applicant and was ordered from the property by the applicant. If Christou succeeded in photographing the applicant, the result of that work was not produced in evidence before me. In regard to my assessment of the respective witnesses, I formed no unfavourable impressions of the applicant or his brother and reached the conclusion that the evidence of Mrs. Thorpe was material on which the Court could rely. On the other 14. hand, I found Christou unconvincing, uncertain, confused and inclined to exaggeration. It was significant that he was prepared to use the opportunity of his oral testimony to alter the alleged time of service of the bankruptcy notice deposed to as being 3.30 p.m. in the affidavit to make it more coincident with the evidence he had heard from the applicant and his brother to the effect that they had returned to the residence at about 6 p.m. on 28 November 1987. When challenged about the discrepancy between his affidavit of service and his oral testimony he responded by saying he could not explain it. In his words "....I cannot explain why 3.30 is mentioned in the affidavit....All I can say is that it has been a very confusing issue from the start in service and the swearing of affidavits." When the significant inconsistency between his oral testimony and the evidence contained in his affidavit deposing to an attempt to hand documents to the applicant was pointed out, he replied: "Well, once again, I do (sic) not prepare the affidavit. I have signed an affidavit that fits what happened - similar to what happened." In view of the corresponding accounts of Kenneth Thorpe and Christou as to the events of 2 February 1987, it is clear that Kenneth Thorpe was present on that day. Christou maintained that the applicant and his wife were also present. Christou said that the person he served on that day said he was Ronald, Peter and Kenneth Thorpe but he was sure that the person he served was' the Same person he served on 28 November 1987 and was the person who gave evidence as Ronald Thorpe in Court. If Mrs. Thorpe's 15, evidence is accepted, Christou's account must be wrong. It is my view that it is possible that Christou, relying on a description of the person to be served supplied by the solicitors who engaged his services and being unaware that two brothers resided at the address he had been given, became confused as to the separate identity of the two brothers. Christou in answer to several questions did indicate that he had found the matter somewhat confusing. However that hypothesis would not explain the gulf between the accounts provided by Christou and the applicant and his brother as to the events of 28 November 1987. It is not necessary for me to speculate as to what did occur on that day but I am quite unsatisfied that service of the bankruptcy notice was effected as contended for the respondent, namely, by personal service upon the applicant. I do not know what happened on the afternoon of 28 November 1987, but I have considerable doubt that the events described by Christou occurred. Accordingly, the respondent has failed to discharge the onus upon it to prove that service was duly effected as required by the Act and Rules. Furthermore, if I were satisfied that the facts ~elating to service were as described by Christou in his evidence, I would find that such facts are incapable of supporting a conclusion that personal service of a bankruptcy notice had been duly effected upon the applicant. 16. The obligation upon a server of a process when such service is to be effected personally is to deliver possession of the documents from the process server to the person the object of . service. (See Re DeIeso (supra) p.703.) There was an obligation on Christou to endeavour to hand the documents to the applicant personally. on v. Pheney (1832) 1 OD.P.C. 441 at 443, 'noted that delivery of possession can be effected in es 8 where the person to be served refuses to accept 4 the document by informing him of the nature of the throwing it down in his presence. The limits of this mM perceived from the case of Heath v. White (1844) 2D. mere it was held that service of a writ had not been ind properly effected on the defendant in circumstances process server saw the defendant in the upstairs window and, having been informed by the defendant's wife i endant was not at home, called out to him to inform >the window. To throw a document on to a driveway some ty yards from the object of service would be totally ; vice irrespective of whether Christou had called out cant to inform him what he (Christou) was doing and what th cument was. a4 's 17. Christou appears to contend that he was unable to leave his car and approach the applicant because of the presence of "quard dogs". If this were so he should have sought further instructions from the respondent's solicitors. They may have considered that an application for a substituted method of service was appropriate in the circumstances. I, therefore, declare that the bankruptcy notice addressed to Ronald Thorpe and dated 24 November 1987 has not been served personally upon the applicant. If an application had been made for such an order it may have been appropriate to make a further order declaring the proceedings commenced by the issue of the bankruptcy notice to be void under r.195(2) and to order that the bankruptcy notice be set aside. (See Re Deleso (supra) p. 704.) I certify that this and the preceding sixteen (16) pages are a true copy of the Reasons for Judgment of his Honour Justice Lee. Associate: foimuo Caudcke Date: Ist Jue, (786 ° 'Gy "eo Counsel for the Applicant: 0. Goodman Solicitors for the Applicant: Phillips Fox Counsel for the Respondent: E. Hollingworth Solicitors for the Respondent: Mallesons Stephen Jaques Date of Hearing: 29 March 1988 Date of Judgment: 1 June 1988