Richmond v Bay Bon Investments Pty Limited [2007] FCA 1060

FEDERAL COURT OF AUSTRALIA

Richmond v Bay Bon Investments Pty Limited [2007] FCA 1060 ROSS RICHMOND v BAY BON INVESTMENTS PTY LIMITED (ACN 002 162 889) AND PETER CHARLES LANGLEY AND CAROL JEAN BURLING AS TRUSTEES FOR BAY BON SUPERANNUATION FUND NSD 1231 OF 2007

GRAHAM J

13 JULY 2007

SYDNEY IN THE FEDERAL COURT OF AUSTRALIA

NEW SOUTH WALES DISTRICT REGISTRY NSD 1231 OF 2007

BETWEEN: ROSS RICHMOND

Applicant

AND: BAY BON INVESTMENTS PTY LIMITED (ACN 002 162 889)

First Respondent

PETER CHARLES LANGLEY AND CAROL JEAN BURLING AS TRUSTEES FOR BAY BON SUPERANNUATION FUND

Second Respondent

JUDGE: GRAHAM J DATE OF ORDER: 13 JULY 2007

WHERE MADE: SYDNEY

THE COURT ORDERS THAT:

1. The applicant is granted leave to file in court the affidavit of Stacey Louise Nadel sworn 11 July 2007. 2. The application be dismissed. 3. The applicant pay the respondents' costs. Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

IN THE FEDERAL COURT OF AUSTRALIA

NEW SOUTH WALES DISTRICT REGISTRY NSD 1231 OF 2007

BETWEEN: ROSS RICHMOND

Applicant

AND: BAY BON INVESTMENTS PTY LIMITED (ACN 002 162 889)

First Respondent

PETER CHARLES LANGLEY AND CAROL JEAN BURLING AS TRUSTEES FOR BAY BON SUPERANNUATION FUND

Second Respondent

JUDGE: GRAHAM J

DATE: 13 JULY 2007

PLACE: SYDNEY

REASONS FOR JUDGMENT 1 This is an application for leave to appeal from a judgment of Federal Magistrate Raphael given on 22 June 2007. By virtue of ss 24(1) and 24(1A) of the Federal Court of Australia Act 1976 (Cth) leave to appeal is required. 2 Under s 43(1) of the Bankruptcy Act 1966 (Cth) ('the Bankruptcy Act') the Court may, on a petition presented by a creditor, make a sequestration order against the estate of the debtor where, amongst other things, the debtor has committed an act of bankruptcy. On the hearing of a creditor's petition the Court hearing the petition shall by virtue of s 52(1) of the Bankruptcy Act require proof of: '(a) the matters stated in the petition (for which purpose the Court may accept the affidavit verifying the petition as sufficient); (b) service of the petition; and (c) the fact that the debt or debts on which the petitioning creditor relies is or are still owing.' 3 If the Court is satisfied with the proof of those matters it may make a sequestration order against the estate of the debtor. 4 It would appear that the applicant Ross Richmond was a client of the law firm formerly known as Dibbs Barker Gosling. On 25 September 2006 the partners in that firm filed a Creditor's Petition in the Sydney Registry of the Federal Magistrates Court of Australia seeking the making of a sequestration order against the estate of Ross Richmond. It would appear that the act of bankruptcy relied upon in accordance with s 40 of the Bankruptcy Act was non-compliance with a bankruptcy notice served upon Mr Richmond. 5 The creditor's petition came before the Federal Magistrates Court constituted by Registrar Segal on 19 January 2007. There was no dispute as to the power of the Registrar to deal with the matter on that day. The record of the orders made by Registrar Segal was expressed as follows: 'Upon the Court being satisfied that service of the petition on the respondent was effected by service of the petition on Miss Catherine Gooley, solicitor in the employ of Deacons it is ordered: '(1) proceedings shall be stood over to 9 February 2007 at 10.15 am; (2) usual order as to notification; (3) costs reserved.' 6 When the matter was before Registrar Segal again on 9 February 2007 he made orders as follows: '1. The Respondent to file and serve an affidavit giving full financial details in support of his application for an adjournment by no later than 16 February 2007. 2. Proceedings stood over to 20 February 2007 @ 10.15 am. 3. Cost reserved.' 7 It is common ground that Mr Richmond did not comply with the order that he file and serve an affidavit as to his means by no later than 16 February 2007. 8 On 19 February 2007, that is to say the day before the date on which the matter was to again come before the Court, Mr Richmond filed an Application for Review of Registrar Segal's orders of 19 January 2007 and 9 February 2007. On 21 February 2007 an Amended Application for Review was filed in the Federal Magistrates Court of Australia. The orders sought in the Amended Application for Review were: '1A An order extending the time for the Applicant to file the Application for Review to 5pm on 21 February 2007. 1. An order that the hearing of the Respondents' Creditors Petition be stayed pending the determination of this review. 2A. An order setting aside the orders made by Registrar Segal on 19 Janaury [sic] 2007. 2. An order setting aside the orders made by Registrar Segal on 9 February 2007. 3. A declaration that the Respondents' Creditors Petition has not been served on the Applicant. 4. An order that the Respondents pay the Applicant's costs of this review. 5. Such further or other orders as the Court thinks fit.' 9 That Application for Review was heard by Federal Magistrate Raphael on 13 June 2007 and decided by him on 22 June 2007. The orders made by him were: '(1) Application dismissed. (2) Applicant to pay respondent's costs to be taxed if not agreed in accordance with the Federal Magistrates Court (Bankruptcy) Rules 2006.' 10 It is from that decision of Federal Magistrate Raphael that leave to appeal is presently sought. If the Court is to grant leave to appeal it must be satisfied that the decision of Federal Magistrate Raphael was attended with sufficient doubt to warrant its reconsideration and that substantial injustice would result if leave to appeal were refused. 11 It would appear that Mr Richmond has attended before the Federal Magistrates Court in relation to the petition filed on 25 September 2006 on a number of occasions. One such occasion was when Mr Richmond opposed the making of an order pursuant to s 49 of the Bankruptcy Act for the substitution of the respondents to the present application as petitioners in the place of the partners of Dibbs Barker Gosling. 12 The Federal Magistrates Court Rules 2001 (the 'Federal Magistrates Court Rules') make no provision for conditional appearances. It is common ground that on those occasions on which Mr Richmond appeared prior to the judgment of Federal Magistrate Raphael of 22 June 2007 the appearance was on a conditional basis. The reason for the conditional appearance was that Mr Richmond wished to contend that he had not been properly served with the petition. 13 Rule 1.03 of the Federal Magistrates Court (Bankruptcy) Rules 2006 directs one to the general rules of the Federal Magistrates Court in circumstances where there is no relevant bankruptcy rule, so far as the general rules are not inconsistent with the bankruptcy rules. 14 In relation to service the Federal Magistrates Court Rules contain a series of divisions within Part 6 of Chapter 1 dealing with 'Service' which are headed 'Division 6.1 General', 'Division 6.2 Service by hand in particular cases', 'Division 6.3 Ordinary service', 'Division 6.4 Substituted service and dispensing with service' and 'Division 6.5 Time for service'. 15 The rules which are of particular importance for present purposes are rules 6.06 and 6.07 within Division 6.2 and rule 6.04 within Division 6.1. These rules relevantly provided as follows: 6.04 Nothing in this Part affects the power of the Court: (a) to authorise service of a document in a way that is not provided for in this Part; or (b) to find that a document has been served; or (c) to find that a document has been served on a particular day. … 6.06(1) Service by hand is required for an application starting a proceeding or a subpoena requiring attendance of a person. (2) However, service by hand is not required if: (a) there are current proceedings for which there is a notice of address for service for the person to be served; or (b) the Court directs that an application may be served in another way; or (c) a lawyer accepts service for a party and subsequently files an address of service; or (d) a lawyer accepts service for a person other than a party. 6.07(1) A person serving a document by hand on an individual must give a copy of the document to the person to be served. (2) However, if the person to be served does not take the copy of the document, the person serving it may put it down in the presence of the person to be served and tell the person what it is. …' 16 It is common ground that the petition was not served upon Mr Richmond by hand as required by rule 6.06(1) (see the relevant definitions relating to service by hand in rule 6.07). The closest to compliance with rule 6.06 that this case came to was the service of the petition on an employed solicitor within the law firm known as 'Deacons' who had previously represented Mr Richmond. That firm did not subsequently file an address for service. The learned Federal Magistrate was not satisfied that service had been proved in accordance with rule 6.06 of the Federal Magistrates Court Rules. There was, however, an application before him to determine the question of service in accordance with rule 6.04. In his reasons for judgment he said: '4. The question before me as posed by counsel for the debtor was: "Has the requirement for personal service been waived in the circumstances notwithstanding that there has been no compliance with rule 6.06 of the Federal Magistrates Court Rules?" But there is an additional matter raised by the creditor which is whether the Court should exercise its discretion under rule 6.04 of the Federal Magistrates Court Rules 2001 to find that the petition has been served.' 17 Later in his reasons the learned Federal Magistrate said that he was left with the application that he should exercise his discretion to make a finding that service had occurred pursuant to rule 6.04(b) of the Federal Magistrates Court Rules. 18 He ultimately concluded that the bankruptcy petition filed on 25 September 2006 had been served upon Mr Richmond on 19 December 2006. 19 The applicant before this Court, Mr Richmond, contends that the decision of the Federal Magistrate in respect of service of the petition was attended with sufficient doubt to warrant its reconsideration. 20 There may well be room for argument that in the case of initiating process such as a petition service in accordance with rule 6.06 is required and that rules 6.04(b) and (c) have no application. However that issue may be decided, it is necessary for the applicant to establish that substantial injustice would result if leave to appeal were refused. This in my opinion provides a stumbling block for the applicant's case that cannot be overcome. 21 I am informed that when the matter was last before the Federal Magistrates Court on 3 July 2007 the petition was stood over for hearing before the Federal Magistrates Court on 31 July 2007. It was faintly suggested by counsel for the applicant that service of the existing petition at this stage would be out of time. That would not appear to accord with the provisions of the Act. Section 44(1)(c) of the Bankruptcy Act requires that a petition be presented within six months of the act of bankruptcy occurring upon which it was founded. The petition has already been filed and presumably the relevant six months time limit has been satisfied. 22 Under s 52(4) of the Bankruptcy Act there is a 12-month period allowed for the making of a sequestration order on a petition, subject to s 52(5), which allows for an extension of that period. Given that the petition was itself filed on 25 September 2006 there is still some time to run before ss 52(4) or 52(5) would have any relevant application. 23 I am unable to see how the applicant would suffer a substantial injustice if he were required to address the petition, of which he is well aware, on the appointed hearing date of 31 July 2007 rather than await further service of it and a hearing at a later date thereafter. 24 In my opinion no proper case has been established for a grant of leave to appeal. I certify that the preceding twenty-four (24) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Graham.