CATCHWORDS BANKRUPTCY - proceedings in connection with sequestration - petition and sequestration order - creditor's petition - whether sequestration order appropriate - whether petition and bankruptcy notice duly served - whether any "substantial injustice" as a consequence of late service of trustee's consent. Bankruptcy Act 1966 s.52 Bankruptcy Rules r15(b)(iv) RE: LOUISE POLETTI EX PARTE: AUSTRALIAN AIRLINES LIMITED ACN 008 642 886 NO VP 808 OF 1994 R D NICHOLSON J MELBOURNE 9 JUNE 1995 IN THE FEDERAL COURT OF AUSTRALIA ) VICTORIA DISTRICT REGISTRY ) GENERAL DIVISION ) NO VP 808 OF 1994 RE: LOUISE POLETTI Judgment Debtor EX PARTE: AUSTRALIAN AIRLINES LIMITED Judgment Creditor MINUTE OF ORDER JUDGE MAKING ORDER: R D NICHOLSON J DATE OF ORDER: 9 JUNE 1995 WHERE MADE: MELBOURNE THE COURT ORDERS AND DECLARES THAT: 1. A sequestration order be made against the estate of Louise Poletti otherwise known as Luigina Foster. 2. The date of commission of act of bankruptcy is 26 April 1994. 3. The trustee in bankruptcy of the estate of Louise Poletti otherwise known as Luigina Foster is Ross Duus. 4. The petitioner's costs of and incidental to the petition including reserved costs be taxed and paid in accordance with the statute. Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules. IN THE FEDERAL COURT OF AUSTRALIA ) VICTORIA DISTRICT REGISTRY ) GENERAL DIVISION ) NO VP 808 OF 1994 RE: LOUISE POLETTI Judgment Debtor EX PARTE: AUSTRALIAN AIRLINES LIMITED Judgment Creditor CORAM: R D NICHOLSON J DATE: 9 JUNE 1995 PLACE: MELBOURNE REASONS FOR JUDGMENT R D NICHOLSON J This is the hearing of a creditor's petition in which a sequestration order is sought against the estate of the debtor. The petition relies upon the commission of an act of bankruptcy described as follows:- "[the debtor] failed either to comply on or before 25 April 1994 with the requirements of a bankruptcy notice duly served on her on 11 April 1994 or to satisfy the court that she had a counter-claim, set off or cross demand equal to or exceeding the sum specified in paragraph (a) of the bankruptcy notice." The sum so specified in the notice is the sum of $38,206.15 which, as the notice discloses, comprises the sum of $38,137.20 with interest of $68.95 calculated on that sum at the rate applicable pursuant to the Penalty Interest Rates Act 1983 (Vic) from 17 March 1994 to 22 March 1994 and described as the amount due by the debtor to the creditor under a final judgment obtained by the creditor against the debtor in the County Court of Victoria at Melbourne on 17 March 1994. In the creditor's petition, however, it is stated that the amount of the debt since the judgment has been reduced by $17,000 paid by the debtor to the petitioner so that, in the case of the petition, the statement is that the debtor is justly and truly indebted to the petitioner in the sum of $21,206.15 comprised of the amounts previously referred to less the amount received by way of credit. The first matter of which the court must be satisfied to make a sequestration order at this hearing is that the matters stated in the petition are proven. For that purpose, in accordance with s52(1)(a) of the Bankruptcy Act ("the Act") the Court may accept the affidavit verifying the petition as sufficient. Paragraphs 1, 2 and 3 of the creditor's petition are duly verified by an affidavit of Maria Pia Forgione, sworn on 8 August 1994. Paragraph 4 of the petition is duly verified by the affidavit of Mr T H Richards, sworn on 17 August 1994. The Court must also be satisfied as to the service of the petition. In light of the way this matter has developed, I turn also to the evidence of the service of the bankruptcy notice upon which the petition is founded. Before me is an affidavit of service sworn by Mr S Spidalieri on 27 April 1994 that he had personally served the bankruptcy notice upon the debtor. There is a further affidavit from the same deponent sworn on 4 November 1994 in which he testifies to having served her with a sealed copy of the creditor's petition and the related affidavits of Ms Forgione and Mr Richards by delivering those documents to her personally at her residential address. In response to the second mentioned service, the debtor caused to be lodged by solicitors in Melbourne on the record notice of her intention to appear at the hearing of the petition. In that notice she stated that the grounds of opposition to the petition were threefold, namely:- 1.No act of bankruptcy had been committed by her. 2.She was solvent. 3.There is other sufficient cause why an order ought not to be made. In an accompanying affidavit, sworn on 2 December 1994, the debtor testified that she lived at an address with her son, her daughter and her grand-daughter. She further testified she had never been served with a bankruptcy notice and that, on the date when service of the notice was alleged to have occurred, she had left home at about 10.30 to 10.40 am and gone to the hairdresser for an appointment. She identified the name of the hairdresser's salon, the time of the appointment and the time she returned, which she said was about 1.30 to 2 pm. There was also filed in connection with the issue of service an affidavit sworn by the debtor's son on 5 December 1994 in which he testified that on 11 April 1994, that is the date upon which Mr Spidalieri swore he had personally effected service of the bankruptcy notice upon the debtor, he, the son, had met Mr Spidalieri at about 11.30 am at the debtor's house. He knew Mr Spidalieri. A conversation had taken place between them, the effect of which was that the son had told the process server that the debtor was at the hairdressers and the process server had said that he would leave the document for service with the son. The son had taken the document and put it on his desk, and he deposed that he had not given the notice to the debtor nor told her that the process server had come to the house to see her. In a further affidavit, sworn on 12 December 1994, Mr Spidalieri swore as to the circumstances in which he had served the bankruptcy notice dated 24 March on the debtor, saying that at 8.30 am on that date he had attended the relevant premises at the front of which there was an iron grille with the front door being set back from it. The front door had been opened by the son of the debtor, who had approached the grille and offered to take the notice on behalf of the debtor. He was told by Mr Spidalieri that the debtor needed to be served personally. Further, the debtor then came to the front door and told him to hand the notice to the son. As a consequence of this evidence, the solicitors for the judgment creditor lodged in respect of both the debtor and her son notice of intention to cross-examine the deponents on their affidavit. There is before me an affidavit of a law clerk in the firm of solicitors acting for the creditor that on 6 January 1995 the solicitors on the record in Melbourne for the debtor were served with a copy of each of those notices of intention to cross-examine. Although that service has been thus effected, there have been before me no appearances on behalf of the debtor, nor are the debtor and her son present for cross-examination. The consequence is that the evidence which is before me in the form of affidavits by them is subject to the inference that it cannot be supported. In my opinion, so far as concerns the evidence of the service of the bankruptcy notice I must accept the evidence of Mr Spidalieri that the notice itself was duly served. The evidence of the service of the creditors petition itself, as to which I must be satisfied in accordance with s52(1)(b) of the Act, appears in the affidavit of Mr Spidalieri, to which I have referred and which was sworn on 4 November 1994. The third matter on which I must be satisfied in accordance with s52(1)(c) of the Act is the fact that the debts on which the petitioning creditor relies is or are still owing. There is affidavit evidence to support that. Further, the contention in the proposed ground of objection raised on behalf of the debtor to which I have referred that she was solvent is unsupported by any evidence. I therefore find as a fact that the debt referred to in the petition is still owing. In relation to the appointment of a trustee there have been some recent developments. On 1 June 1995 the solicitors for the creditor received final instructions to appoint Ross Duus of Ernst and Young, Brisbane as trustee in bankruptcy should a sequestration order be made. A consent to act from Mr Duus has been obtained and sealed on 6 June 1995. A copy of that consent was served on the afternoon of that date on the solicitors on the record in Melbourne. In addition, a further copy was sent by facsimile to solicitors in Sydney who are not on the record but who had advised the solicitors for the creditor on the record that they were acting on the instructions of the debtor. In addition, arrangements were made for personal service of the debtor with the copy of the consent. The affidavit of Mr B J Delaney sworn on 8 June 1995 establishes to my satisfaction that the form 30B consent to act as trustee was left at the usual and normal residence of the debtor, inside the security gate at the front door, after attempts had been made by the process server to personally locate and serve the debtor. I therefore consider that r15(b)(iii) has been duly complied with in that service has occurred. There is, however, the further question whether it has occurred within the time limit provided in r15(b)(iv) of not less than eight days before the hearing date for the petition. There is provision in s306 of the Act to the effect that proceedings are not invalidated by a formal defect or an irregularity unless the court before which the objection on that ground is made is of opinion that "substantial injustice" has been caused by the defect or irregularity, and that the injustice cannot be remedied by an order of that court. There is, of course, no appearance for the debtor and therefore no objection in those terms. Nevertheless, in the absence of the debtor it falls to the Court to have regard to whether the service in accordance with the provision to which I have referred at a time which was less than the time provided for in r15(b)(iv) wreaks any "substantial injustice". In my view that cannot be the case in this instance because both the debtor, the debtor's son and the solicitors on the record for the debtor were served with process requiring them to respond to the notice of intention to cross-examine which required them to be present today. I am cognisant of the fact that that notice was not itself served until 6 June and that this hearing is taking place on 9 June. However, service was effected in particular upon the solicitors on the record. They are not present and the inevitable inference arises that that is because they are not instructed to be present. In those circumstances, the service of the form 30B relating to the consent short of the time referred to cannot be causative of any "substantial injustice". The fact was that the debtor was on timely notice that there were proceedings to respond to and there has been no appropriate response. In the r22 certificate the Registrar before whom the matter came on 10 November 1994 raised the question in relation to the bankruptcy notice as to whether interest was calculated exclusive from the date of judgment. In my opinion, no difficulty arises in the making of a sequestration order in relation to that aspect given the provisions of s41(6) of the Act which are to the effect that, where the amount specified in a bankruptcy notice exceeds the amount in fact due and the debtor does not give notice to the creditor in accordance with subs(5), there is a deemed compliance with the notice if, within the time allowed for payment, action is taken which would have constituted compliance with the notice if the amount due had been correctly specified in it. In the r22 certificate it was also stated by the Registrar that the act of bankruptcy which was described in the notice and the in the petition as having occurred on 25 April 1994, in fact occurred on 26 April 1994. The description there appearing is "on or before" 25 April and that constitutes a correct description so that no difficulty arises from that description and the act of bankruptcy is therefore correctly described as having occurred on 26 April 1994. I am therefore satisfied as to the matters upon which findings are required in accordance with s52 of the Act. I am further of the opinion that there is no evidence to support the grounds of opposition which the debtor gave notice of intention to argue. In those circumstances, I consider it is a correct exercise of the discretion of the Court if a sequestration order is made against the estate of the debtor in response to the creditor's petition. I so conclude and will make an order in those terms. I certify that this and the preceding 6 pages are a true copy of the Reasons for Judgment of his Honour Justice R D Nicholson. Associate: Date: APPEARANCES No appearance was made by or on behalf of the judgment debtor. Counsel for the Judgment Creditor: Mr Randall Solicitors for the Judgment Creditor: Minter Ellison Date of Hearing: 9 JUNE 1995 Date of Judgment: 9 JUNE 1995