FEDERAL COURT OF AUSTRALIA

Mudge v Hudson Timber & Hardware Limited [2004] FCA 722

BANKRUPTCY – judgement debt undisputed – whether bankruptcy notice served on debtor personally – whether creditor’s petition served on debtor personally – conflict of evidence – process server cross-examined – affidavit of debtor’s interstate solicitor belatedly filed and sought to be read despite absence of deponent for cross-examination – objection of creditor to that course – application for telephone facility for solicitor’s evidence to be received rejected – sequestration order made – no basis for setting aside sequestration order of Federal Magistrate

Bankruptcy Act 1966 (Cth) ss 306 and 309(2)

Bankruptcy Regulation 16.01(1)

Federal Magistrates Act 1999 (Cth) ss 42 and 64

Federal Court Rules Order 1 rule 8 and Order 7 rules 1 and 2

re Long; ex parte Fraser Confirming Pty Ltd (1975) 6 ALR 338

re Ditfort ex parte Deputy Commissioner of Taxation (NSW) (1988) 83 ALR 265

re Stec; ex parte Scragg (1998) 155 ALR 173

Deputy Commissioner of Taxation v Gadaleta [1999] 42 ATR 414

Dubbo Base Hospital v Jones [1979] 1 NSWLR 225

Re Stec : ex parte Scragg (1998) 155 ALR 173

Soglease Australia Ltd v Griffin [2003] FCA 453

Gauci v Federal Commissioner of Taxation (1975) 135 CLR 81

RONALD ANTHONY MUDGE v HUDSON TIMBER AND HARDWARE LIMITED

N 869 OF 2003

CONTI J

7 JUNE 2004

SYDNEY

THE COURT ORDERS THAT:

1.         Appeal dismissed.

2.         Appellant to pay the respondent’s costs of the appeal.

Note:    Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

REASONS FOR JUDGMENT

Background circumstances to sequestration order of Federal Magistrate

1                     On 17 June 2003, Federal Magistrate Driver made a sequestration order against the estate of the appellant Ronald Anthony Mudge (‘Mr Mudge’), upon the application of the respondent Hudson Timber & Hardware Limited (‘the Company’).  That order was based upon an act of bankruptcy committed by Mr Mudge on 24 October 2002, consisting of non-compliance by Mr Mudge with a bankruptcy notice found by his Honour to have been served on Mr Mudge on 3 October 2002.  The Company’s creditor’s petition subsequently filed more than five moths later, that is on 6 March 2003, asserted that Mr Mudge owed the Company the sum of $53,451.35, pursuant to a final judgment obtained in the District Court of New South Wales on 30 August 2002, that sum being identical to the amount the subject of the bankruptcy notice.  The creditor’s petition was found by his Honour to have been served on 3 April 2003.  The judgment debt related to the supply of timber and hardware. 

2                     The affidavit as to service of the bankruptcy notice was sworn on 3 October 2002 by Robert Joseph Donnelly (‘Mr Donnelly’), a licensed commercial agent, which deposed as to the following:

‘1.        On Thursday the 3 day of October 2002 at 7.30 o’clock in the fore noon I served Ronald Mudge with the Bankruptcy Notice herein by delivering a true copy thereof duly signed by the Official Receiver to him personally at 48 Tradewinds Avenue Paradise Point Q 4216.

2.         I identified the person I served as the said Ronald Mudge by saying “Are you Ronald Mudge the person named in this Bankruptcy Notice” and he replied “Yes”.

3.         Annexed to this Affidavit and marked with the letter “A” is a true copy of the said Bankruptcy Notice signed by the Official Receiver.

4.         I have attained the age of 16 years.’

The attached Bankruptcy Notice had been issued by the Official Receiver on 20 September 2002.  It will be observed that the affidavit of service was made on the same day as the recorded date of service. 

3                     The affidavit of service of the Company’s creditor’s petition was sworn on 9 April 2003, also by Mr Donnelly, which, omitting formal parts, reads as follows:

‘1.        On the 3 day of April 2003, I served Ronald Mudge the debtor herein with an official copy of the Creditor’s Petition by delivering the same to him personally at 48 Tradewinds Avenue Paradise Point in the State of Queensland.  The said copy of the Creditor’s Petition being duly sealed with the seal of the Court.

2.         I identified the person I served as the said Ronald Mudge by asking him:

                        “Hi Ron.  I have the Creditors Petition from Hudson Timber”.

3.         Annexed to the Affidavit and marked with the letter “A” is an Official copy of the said Petition sealed by the Court.

…’

It may thus be observed that the affidavit of service was made on the sixth day next following the date of service of the creditor’s petition.

4                     It can be seen that Mr Donnelly deposed as to personal service upon Mr Mudge, both as to the bankruptcy notice and as to the bankruptcy petition.  No application was made to set aside the judgment nor the bankruptcy notice.  No moneys have ever been tendered in payment or part payment of the judgment debt.  However Mr Mudge caused to be filed by his Toowoomba solicitors Alroe & O’Sullivans, on 9 April 2003, notice of intention to oppose the petition on the following grounds:

‘1.        That the judgment debtor has not been served with a copy of the Bankruptcy Notice.

2.         The judgment debtor has not been served with a copy of the Bankruptcy Petition.’

Thus the hearing before Driver FM took place almost ninety days following service of the creditor’s petition, being ample time for Mr Mudge to prepare for opposition to any sequestration order being made

5                     Accompanying the notice of intention to oppose the bankruptcy petition were two affidavits, one by Mr Mudge and the other by Michele Therese Courtney (‘Ms Courtney’), both sworn on 8 April 2003.  Each affidavit disclosed as the respective deponent’s address No 48 Tradewinds Avenue Runaway Bay.  Runaway Bay is adjacent to Paradise Point, the town referred to in the bankruptcy notice and creditor’s petition, and Tradewinds Avenue apparently bordered the two towns.  It appears that Mr Mudge and Ms Courtney resided together at that address at all material times. 

6                     That affidavit sworn by Mr Mudge, omitting formal part, read as follows:

‘1.        On Wednesday evening the 2^nd of April 2003 Michele Therese Courtney handed to me documents which she said she had found under the front door of her home at 48 Tradewinds Avenue Paradise Point.  The documents handed to me included a copy of the Bankruptcy Petition, an Affidavit of Service of a Bankruptcy Notice sworn by Robert Joseph Donnelly and a Bankruptcy Notice.  I noticed that the copy of the Affidavit of Service of the Bankruptcy Notice alleged that on Thursday the 3^rd of October 2002 at 7.30 am I had been personally served with the Notice at 48 Tradewinds Avenue Paradise Point and deny that I was served with a copy of the notice.

2.         I was either on the 3^rd of October 2002 or at a time subsequent to that date given a copy of the bankruptcy notice by my de-facto partner Michele Therese Courtney and I have subsequently had a number of discussions with representatives of Hudson’s Timber and Hardware Limited regarding a debt incurred with them by my company Melbourne Construction & Management Co Pty Ltd which is now in liquidation.  I continue to trade with the petitioning creditor and deal with their representatives on an almost daily basis.

3.         After receiving the documents which my de-facto partner had found at her home last week I on forwarded the documents to my solicitor in Toowoomba for his attention.’

7                     That affidavit sworn by Ms Courtney, omitting formal part, reads as follows:

‘1.        I am the sole registered proprietor of the property situated at 48 Tradewinds Avenue Runaway Bay in the State of Queensland which property I occupy with my de-facto partner Ronald Anthony Mudge and our two children.

2.         At approximately 4 pm on the afternoon of Wednesday, 2^nd April I returned to my home and found slipped under the front door some papers held together with a glide on clip.  On inspecting the papers I found them to include a Creditors’ Petition directed to my partner Ronald Mudge and an Affidavit of Service of a Bankruptcy Notice sworn by Robert Joseph Donnelly to which was attached a copy of the Bankruptcy Notice.

3.         Having read the Affidavit of Robert Joseph Donnelly dated the 3^rd of October which I have not seen until last Wednesday I say that the Affidavit is not correct.  I was at home at 48 Tradewinds Avenue on the 3^rd of October 2002 at approximately 7.30 am when a gentleman whom I now believe to be Robert Joseph Donnelly came to my front door.  When I opened the front door the person whom I now believe to be Robert Joseph Donnelly asked me if Ronald Mudge lived at this address as he had some papers to serve on him.  I told this person that Ronald Mudge lived at this address and that I would take the papers for him and the papers were then handed to me.  At no time did this person speak to Ronald Anthony Mudge.  I have a clear recollection of this incident because I remember looking at the Bankruptcy Notice and being surprised that the Notice was being given on behalf of Hudson Timer (sic) and Hardware Limited, a company with whom my de-facto partner dealt with in his building business on an almost daily basis and with which he to my knowledge continues to deal.

4.         Any papers which I did receive or collect I subsequently handed to my de-facto partner thought (sic) I am not able to say with certainty when I gave those papers to him.  At his request I did speak to his solicitor by telephone on Friday, 4^th April 2002 and gave him an account of the circumstances under which I had received the Bankruptcy Notice and Petition.’

8                     Ms Courtney gave additional evidence by further affidavit, also sworn on 16 June 2003, to the effect that on 7 October 2002, she faxed a copy of the bankruptcy notice to a Toowoomba lawyer Mr Alroe, containing her handwritten note endorsed on the document to the effect that she received the same on 3 October 2002 at 7.35 am.

9                     Mr Mudge made a further affidavit on 16 June 2003 to the effect that he was not at home on 2 April 2003 when the creditor’s petition was said to have been found there by Ms Courtney; he exhibited to that affidavit certain diary entries purportedly relating to certain movements of his on 2-3 April 2003 (as above recorded, Mr Donnelly’s evidence was that he served the creditor’s petition on 3 April 2003).

10                  Mr Alroe (of Alroe & O’Sullivans abovementioned) made an affidavit on 16 June 2003, being the day preceding the hearing of the proceedings below, as follows:

‘1.        I am the Solicitor for Ronald Anthony Mudge.

2.         On the 2^nd April 2003 I received a telephone call from Michele Therese Courtney, my client’s partner who told me that she had returned home to her address at 48 Tradewinds Avenue, Runaway Bay and had found bankruptcy papers stuck under her front door.  I asked her to fax to me those papers.

3.         Exhibited hereto and marked “DJA 1” is a copy of the Affidavit of Robert Hough verifying the Petition faxed to me at 4.44 pm on the 2^nd of April 2003 as is noted on the top of the facsimile transmission which I received on that day.’

Mr Alroe’s affidavit thus addressed the service of the creditor’s petition alone.  It did not attach any diary note concerning his above telephone call said to have been made on 2 April 2003.  The date 2 April 2003 was of course one day prior to what appeared in the affidavit of service of the petition made by Mr Donnelly (see [3] above).  Mr Alroe did not provide any reason for the late provision of that affidavit, the content thereof having been obviously known to him for more than three months.  Counsel for the Company objected to the reading of Mr Alroe’s affidavit ‘on the basis of late service and prejudice’, indicating that if the material was to be read, he would have wanted to cross-examine Mr Alroe, and submitting to his Honour in any event as follows:

‘That causes prejudice.  It’s a [section] 135 objection to that affidavit going in, if that is the case.  He is not available.  It is unacceptable in these circumstances.  Then also, there is no application, I should say, for his evidence to be taken by telephone link.’

11                  The following ruling of Driver FM appears from the transcript, following upon the objection:

‘HIS HONOUR:       Yes and I don’t have the physical arrangements before me at the moment.  I’m not sure how long it would take to get them, but that’s another factor.  Ms Simons, did you want to be heard?

MS SIMONS:           Just briefly.  In relation to Mr Alroe’s affidavit, we did accept that that may – is the most likely outcome but it was something that he chose to fax to us last night and…

HIS HONOUR:        All right.  I’m not going to receive the affidavit of Mr Alroe and I accept the objections’.

It is that ruling on his Honour’s part which is the focus of the appeal.

12                  The process server Mr Donnelly provided oral evidence in the proceedings below by way of confirmation of the contents of both of his affidavits of service.  He spoke of having been a licensed commercial agent for six years.  In the course of cross-examination upon his affidavit of service of the bankruptcy notice in particular, he said he had ‘… known Mr Mudge from previous matters’, and that he had been to the home of Mr Mudge ‘previously’.  He further said that he had ‘dealt with [Ms Courtney] on previous occasions’.  He could not say ‘categorically’ whether he saw Ms Courtney on the occasion of service of the bankruptcy notice, in relation to which occasion he gave a description as to what then physically occurred.  Nothing emerged in the cross-examination of Mr Donnelly provided any basis for casting doubt upon the truthfulness or accuracy of his affidavit of service of the bankruptcy notice.  Mr Mudge subsequently entered the witness box and repeated his denial as to personal service of the bankruptcy notice upon him on 3 October 2002, asserting that he found the bankruptcy notice on the kitchen table or bench when he returned home from work on that day, being evidence, I would observe in passing, which did not at least entirely dovetail with par 1 of his affidavit of 8 April 2003, nor with par 3 of the affidavit of Ms Courtney of 8 April 2003, both of which spoke of Ms Courtney giving the bankruptcy notice to Mr Mudge on his return home on the day in question. 

13                  Mr Donnelly similarly confirmed in his evidence in chief the content of his affidavit of service of the creditor’s petition, such service having been deposed in that affidavit to have occurred on 3 April 2003.  Under cross-examination on behalf of Mr Mudge by his then legal representative, he purportedly explained the reason for the delay of six days in making that affidavit of service.  He said moreover that it was not his practice to make contemporaneous notes as to the circumstances attending his service of court documents, and that instead he usually relied on his memory for the purpose of compiling his affidavits of service, and upon his six years of experience as a process server. 

The critical findings of the reasons for judgment below

14                  The reasons for judgment of Driver FM, furnished ex tempore for making the sequestration order, were essentially as follows:

‘3.        The contest between the parties on the issue of service is a simple factual dispute.  The petitioning creditor, relying upon two affidavits by Robert Joseph Donnelly, asserts that the debtor was personally served with the bankruptcy notice on 3 October 2002 and with the creditor’s petition on 3 April 2003.  Mr Mudge, relying upon his own affidavits and affidavits by his partner, Michelle Terese Courtney, asserts that he was not at home on either of these occasions and that the bankruptcy notice and creditor’s petition only came to his attention subsequently when brought to his attention by Ms Courtney.

4.         Both Mr Donnelly and Mr Mudge and Ms Courtney were cross examined today on their affidavits.  Both held firm to the accounts they gave of the relevant facts.  Obviously the evidence of either Mr Donnelly or Mr Mudge and Ms Courtney must be incorrect.  Having read the relevant affidavits and having observed the deponents and heard their evidence in cross-examination, I prefer the evidence of Mr Donnelly to that of Mr Mudge and Ms Courtney.

5.         Mr Donnelly knows Mr Mudge personally, as was confirmed by Mr Mudge, and he has been to Mr Mudge’s home on a number of occasions.  He has had dealings with Mr Mudge prior to the present bankruptcy matter.  I am satisfied and I accept that Mr Donnelly was well aware of where Mr Mudge could be found, where his home was located and what Mr Mudge looked like.  I accept Mr Donnelly’s evidence of personal service of the bankruptcy notice on 3 October 2002 and of the creditor’s petition on 3 April 2003.  It follows that I reject the evidence of Mr Mudge and Ms Courtney on that issue.

6.         During the course of argument, Mr Johnson, for the petitioning creditor, made a number of submissions relating to the issue of service.  Mr Johnson submitted, and I accept, that even if there had been no service of the creditor’s petition as alleged, it would not matter because Mr Mudge filed a notice of appearance in the present proceedings on 9 April 2003 and also filed a notice of intention to oppose the creditor’s petition on the same day.

7.         Although a creditor’s petition is required to be served personally, and it is an originating process in this Court, where a party files a notice of appearance and participates in the proceedings of the Court, I accept that no issue of personal service of the originating process remains.  Mr Johnson also submitted to me that even if there had been no personal service on Mr Mudge of the bankruptcy notice on 3 October 2002, the evidence of Mr Mudge and Ms Courtney would establish that the bankruptcy notice came to Mr Mudge’s attention on 3 October 2002 and the act of bankruptcy would remain upon the expiry of the bankruptcy notice. 

8.         There is authority in the Federal Court that where a bankruptcy notice is served upon a relative of the debtor and promptly comes to the attention of the debtor that sufficient service has been proved.  There is also contrary authority specifically that service on a spouse of the debtor is not sufficient.  That authority predates the Bankruptcy Regulations (“the Bankruptcy Regulations”) which provide in regulation 16.1 for alternative methods of service of a bankruptcy notice.  Personal service is now one of a range of methods by which service of a bankruptcy notice can be effected.

9.         In this matter, however, personal service pursuant to regulation 16.01(d) is the form of service relied upon by the petitioning creditor.  The affidavit of Mr Donnelly specifically asserts that personal service was effected.  While, in my view, there is much to be said for the view that sufficient service of a bankruptcy notice could be provided on the evidence of Mr Mudge and Ms Courtney, in the circumstances of this matter, if I had been persuaded that Mr Donnelly’s affidavit was false, I would not have permitted a sequestration order to be made on the basis of that false evidence.

10.       However, I have accepted Mr Donnelley’s affidavit.  Accordingly, I find that service of the bankruptcy notice was effected in accordance with regulation 16.01(d) of the Bankruptcy Regulations, as asserted by the petitioning creditor.  As I have already noted, there is no other opposition to the creditor’s petition.  I am satisfied that the petitioning creditor is entitled to a sequestration order.  I am satisfied that the debtor committed the act of bankruptcy alleged in the petition and I am satisfied with the proof of the other matters of which s 52(1) of the Bankruptcy Act 1966 (Cth) (“the Bankruptcy Act”) requires proof.’

15                  Regulation 16.01(1) of the Bankruptcy Regulations read as follows:

’16.01(1)         Unless the contrary intention appears, where a document is required or permitted by the Act or these Regulations to be given or sent to, or served on, a person (other than a person mentioned in regulation 16-02), the document may be:

(a)       sent by post, or by a courier service, to the person at his or her last-known address; or

(b)       left, in an envelope or similar packaging marked with the person’s name and any relevant document exchange number, at a document exchange where the person maintains a document exchange facility; or

(c)        left, in an envelope or similar packaging marked with the person’s name, at the last-known address of the person; or

(d)       personally delivered to the person; or

(e)        sent by facsimile transmission or another mode of electronic transmission:

            (i)         to a facility maintained by the person for receipt of electronically transmitted documents; or

            (ii)        in such a manner (for example, by electronic mail) that the document should, in the ordinary course of events, be received by the person.’

It may be noticed that in the case of (b) and (c) above, it is not enough merely to leave a court document in its bare form at the places referred to; it must be appropriately enclosed or packaged.  It was Ms Courtney’s evidence that the service of the bankruptcy notice was not personally handed to her, but ‘slipped under the front door’, implicitly without in any event being enclosed in an envelope or being packaged, as envisaged by pars (b) and (c) of Regulation 16.01(1). 

The extension of time granted to file the appeal

16                  In order to prosecute the present appeal, the appellant was required to seek an order for an extension of time, the statutory time limit having been exceeded by three days.  In granting an extension order on 14 November 2003, Tamberlin J recorded that ‘[t]he extension is sought on the ground that the Magistrate rejected important evidence in the form of a solicitor’s affidavit, which is said to corroborate his case that the bankruptcy [notice] had not been properly served’.  His Honour further observed that ‘[i]t is apparent from the reasons for decision of the Magistrate on making the Sequestration Order that service of the Bankruptcy Notice was central to his decision, and that the comparative credit of the process server and the witnesses for the applicant was a deciding factor’.  His Honour cited in full pars 9 and 10 of the reasons for judgment of Driver FM, which are included in which I have extracted in [14] above. 

17                  In granting the extension of time sought, Tamberlin J further said as follows:

‘12.      It is also important, in my view, that the affidavit of Mr Alroe could reasonably be regarded as significant for the Magistrate to take into account, when forming a view as to whether the service of the Bankruptcy Notice had been effected.

13.              The preference for the evidence of Mr Donnelly as to the service of the Bankruptcy Notice was of critical importance to the decision of the Magistrate.  So much is expressly indicated in his decision.

14.              The claimed prejudice to the respondent was that the affidavit was served at a very late stage, and that it would be essential for the applicant to carry out investigations in order to challenge in cross-examination, or by counter evidence, the matters testified to by Mr Alroe.  Mr Alroe was available for cross-examination by telephone on that date.  However, in my view, it would have been quite unsatisfactory to force on the judgment creditor a requirement to cross-examine on that date.  The appropriate available course would have been to accept the affidavit and to adjourn the hearing of the Petition for a reasonable time, in order to enable the judgment creditor to properly test and meet the statements in Mr Alroe’s affidavit.  Any prejudice could have been remedied by an appropriate order as to costs thrown away as a result of the late filing of the affidavit.

15.       In my opinion, this is a case where an extension of time for leave to file the Notice of Appeal should be granted.  I am persuaded that the case sought to be made by the applicant is sufficiently substantial to warrant the grant of the extension.’

The appellant sought to draw assistance from the foregoing reasons in the context of the present appeal.

The appellant’s submissions on appeal and my responses

18                  The issues raised by Counsel for Mr Mudge on appeal were framed in her written submissions as follows:

‘•    Whether Driver FM should have admitted the affidavit of Mr Alroe sworn 16 June 2003;

•     Whether Driver FM should have made the sequestration order in circumstances where he acknowledged “While, in my view, there is much to be said for the view that sufficient service of a bankruptcy notice could be proved on the evidence of Mr Mudge and Ms Courtney, in the circumstances of this matter, if I had been persuaded that Mr Donnelly’s affidavit was false, I would not have permitted a sequestration order to be made on the basis of that false evidence”; and

•     Whether, in light of the incompetence of the solicitor representing the appellant, the appeal should be allowed.’

The third issue above was not however pursued on the appeal.  The convenient approach is to first address the bankruptcy notice service issue, and thereafter to address what I would describe as the Alroe issue, which relates of course to the bankruptcy petition service issue.

19                  Counsel for Mr Mudge referred to authority, by way of background to the bankruptcy petition service issue, to the effect that prior to the introduction of Bankruptcy Regulation 16.01, personal service of a bankruptcy notice had been mandated, being a requirement said to be not merely of historical interest, but also tending to emphasise the historically established recognition of at least the continuing importance of service of a bankruptcy notice in a manner likely to bring the subject matter thereof promptly to the debtor’s attention.  In deference to the quality of Counsel’s submissions (whilst equally acknowledging the quality of the submissions of counsel for the respondent as well), I will summarise those authorities below:

(i)         re Long; ex parte Fraser Confirming Pty Ltd (1975) 6 ALR 338 at 343, where Walters J, in the context of review of a number of authorities, said as follows:

‘I have come to the conclusion that the failure of the petitioner to prove personal service of the bankruptcy notice on the debtor is not a formal defect, or an irregularity, which can be corrected by bringing it “within the umbrella” of s 306 of the Act.’

(ii)        re Ditfort ex parte Deputy Commissioner of Taxation (NSW) (1988) 83 ALR 265 at 275, where after referring to the above dictum of Walters J in re Long, Gummow J said as follows:

‘While not necessarily being of the view that s 306 can never apply in such a case in any circumstances, I respectfully agree with what was said by [Walters J] as to the importance of proper proof in these cases, and as to the salutary consequences for creditors for failure to comply with the rules.’

(iii)       re Stec; ex parte Scragg (1998) 155 ALR 173, where Von Doussa J said at 179-180 as follows:

‘The first matter concerns a submission… that the bankruptcy notice was validly served, notwithstanding the events already discussed, because Mr Stec admitted that his wife in about early May 1997 had shown, or given, him the document which was served on her by Mr Bowering on 1 December 1996… The Bankruptcy Act and Rules… contemplate that there will be a formal act of service by the petitioner creditor or by someone acting on behalf of the petitioner creditor.  The formality of the act of service is important as the date when service occurs is critical in determining if and when an act of bankruptcy has occurred.  It is for this reason that it is essential that due service in accordance with the statutory rules is insisted upon… It is essential to the proper working of the procedure initiated by the service of a bankruptcy notice that the date and manner of service be capable of reliable proof by the petitioning creditor…’

20                  Counsel for Mr Mudge thereafter drew attention to the later authority of Deputy Commissioner of Taxation v Gadaleta [1999] 42 ATR 414, where Einfeld J addressed what was by then the newly operating Regulation 16.01(1), in relation to a bankruptcy notice, where personal service has not been effected.  His Honour emphasised the continuing need for close attention to the circumstances of any purported service of a bankruptcy notice, implicitly by the following findings which he made in that case:

‘[5]     There is other evidence that strongly supports a conclusion that he lives at that address or at least has extensive connections with it…

[6]      I am satisfied that Mr Gadaleta lives at or has a close connection with the address at Avalon at which, on 23 July 1998, the bankruptcy notice was left with a female person, and that form of service complies with reg 16.01(1)(c) of the Bankruptcy Regulations…’

Similar observations could well have been made in the present case, even if the Court had been confined to the affidavit evidence of Mr Mudge and Ms Courtney which I have extracted.  However, there was no suggestion in Mr Donnelly’s affidavit that the bankruptcy notice was ‘left, in an envelope or similar packaging marked with [Mudge’s] name…’, as stipulated by par (c) of Regulation 16.01(1)

21                  Counsel for Mr Mudge however confessed but avoided the implications of the new Regulation 16.01(1)(c), upon the footing that in the present proceedings, the Company relied upon personal service of the bankruptcy notice alone having been effected (see again Mr Donnelly’s affidavit of service of the bankruptcy notice extracted in [2] above), and not upon any of the alternatives to personal service authorised by Regulation 16.01(1).  Hence it was said by Mr Mudge to be not to the point that ‘[t]here is authority in the Federal Court that where a bankruptcy notice is served upon a relative of the debtor and promptly comes to the attention of the debtor that sufficient service has been proved’.  The basis upon which Driver FM thus resolved the service of the bankruptcy notice issue (as well as service of the creditor’s petition) is to be deduced from the following passages in his Honour’s ex tempore reasons for judgment:

‘Both Mr Donnelly and Mr Mudge and Ms Courtney were cross-examined today on their affidavits.  Both held firm to the accounts they gave of the relevant facts.  Obviously the evidence of either Mr Donnelly or Mr Mudge and Ms Courtney must be incorrect.  Having read the relevant affidavits and having observed the deponents and heard their evidence in cross-examination, I prefer the evidence of Mr Donnelly to that of Mr Mudge and Ms Courtney.

Mr Donnelly knows Mr Mudge personally, as was confirmed by Mr Mudge, and he has been to Mr Mudge’s home on a number of occasions.  He has had dealings with Mr Mudge prior to the present bankruptcy matter.  I am satisfied and I accept that Mr Donnelly was well aware of where Mr Mudge could be found, where his home was located and what Mr Mudge looked like. I accept Mr Donnelly’s evidence of personal service of the bankruptcy notice on 3 October 2002 and of the creditor’s petition on 3 April 2003.  It follows that I rejected the evidence of Mr Mudge and Ms Courtney on that issue.’

22                  The nature and extent of those findings, involving as they did issues as to the credibility of not just affidavit but also viva voce testimony, are such that they should not in my opinion be dislodged or overruled on the present appeal, at least for the purpose of my conclusions in relation to service of the bankruptcy notice.  Driver FM had the advantage of hearing the cross-examination of each of Mr Mudge and Ms Courtney, on the one hand, and Mr Donnelly on the other hand, upon their respective affidavits, being an advantage which of course I do not have on the hearing of the present appeal.  Since Mr Donnelly’s evidence was preferred by his Honour as a matter of credibility, in contrast implicitly to the evidence of Mr Mudge and Ms Courtney, that must I think be the end of the controversy as to service of the bankruptcy notice.  Moreover even if I was to reject Mr Donnelly’s testimony in elation to the manner of service of the bankruptcy notice on 3 October 2002, I do not think that any ex hypothesi consequential viability of the affidavit versions of Mr Mudge and Ms Courtney would be thereby deprived of significance for the purposes of an assessment of the operation of Regulation 16.01(1).  In regard, it would seem that the language and structure thereof is such that test or approval adopted in Gadaleta is open for adoption.  The challenge to the effectiveness of the service of the bankruptcy notice should fail.  Driver FM had the advantage of observing first hand the cross-examination of all three affidavit deponents, at he implicitly emphasised in pars 4 and 5 of his reasons for judgment extracted in [14] above, quite apart from exercise of the function of weighing the likely probabilities in the light of all the evidence bearing upon the issue of service of the bankruptcy notice. 

23                  The challenge to the effectiveness of the service of the petition involves somewhat different considerations.  Service of a bankruptcy petition must be served in accordance with the Federal Court Rules, unless of course substituted service is open and available : see Soglease Australia Ltd v Griffin [2003] FCA 453 (Emmett J), and thus personally (in the absence of an order for substituted service).  I have already extracted those paragraphs of the reasons for judgment of Driver FM relating to the time and manner of service by Mr Donnelly of both the bankruptcy notice and the creditor’s petition.  Specifically as to service of the creditor’s petition, his Honour did not in those reasons refer to what I would describe as the Alroe evidentiary controversy, for the reason of course that he disallowed the same upon the footing I have recorded. 

24                  The controversy as to service of the creditor’s petition, which next falls for consideration, arose in the context of the following affidavit evidence filed in the proceedings below:

(i)         par 1 of Mr Mudge’s affidavit extracted in [6] above; and

(ii)        pars 2 and 3 of Ms Courtney’s affidavit extracted in [7] above.

That material is of course to be compared with what I have extracted in [3] above from Mr Donnelly’s affidavit evidence.  I have also referred, in [12] above, to Mr Donnelly’s uncontradicted viva voce testimony as to his previous encounters with both Mr Mudge and Ms Courtney in person. 

25                  The solicitor appearing for Mr Mudge in the proceedings below (Ms Simons) had sought to read an affidavit of the earlier mentioned Toowoomba solicitor Mr Alroe, sworn on 16 June 2003, that being only one day preceding the hearing of the proceedings below before Driver FM; the affidavit is of course already extracted in [10] above.  The reason for the very late production of that controversial affidavit evidence was not explained by or on behalf of Mr Mudge.

26                  What added to the dilemma confronting Driver FM, as to the admissibility of that very recently produced affidavit, was that Mr Alroe was not available to be cross-examined on his affidavit, and no advance request had been alternatively made by Mr Mudge’s legal representatives for the making of arrangements for a Court telephone link to his office situate in Toowoomba.  Yet Mr Mudge was of course the party having the carriage of the appeal in his capacity as appellant.  Moreover that affidavit evidence from Mr Alroe had not apparently been foreshadowed any earlier to the company’s legal representatives. Counsel for the Company claimed to be prejudiced by reason of that very late attempted tender of Mr Alroe’s affidavit, a fortiori on account of Mr Alroe’s unavailability for cross-examination in person.  The transcript relating to the attempted tender of that affidavit evidence of Mr Alroe reads as follows:

‘MS SIMONS:        … I also will be relying on Mr Mudge’s affidavit filed on 8 April  and the further affidavit sworn yesterday and handed up in Court this morning.  My instructing solicitor, Mr Alroe, in Toowoomba has also – he faxed down last night a further affidavit.  I understand he is not here for cross-examination.

MR JOHNSON:     I haven’t seen that affidavit.

MS SIMONS:         Which really goes to the date that he received instructions in this matter.

HIS HONOUR:      I see.  How will that assist me?

MS SIMONS:         Only in terms of in relation to the service of the Creditor’s Petition where it said it was served personally on the debtor on 3 October, there is a fax from my client to their solicitor in Queensland, which clearly shows – sorry, this is the April matter.  The affidavit – sorry, the affidavit of service of the Creditor’s Petition states it was served on 3 April.  This annexure to Mr Alroe’s affidavit clearly shows that it was faxed by my client to Mr Alroe on 2 April.

MR JOHNSON:     I would be objecting to the filing or reading of that affidavit for a number of reasons but I can deal with that when and if it’s sought to be read.

HIS HONOUR:      Yes.  Are you seeking to read that affidavit?

MS SIMONS:         Well, that’s the difficulty.  Well, we don’t have Mr Alroe here.  He has indicated that he is available by telephone and I realise that it’s short – very, very short notice.

…

MR JOHNSON:     … The affidavit of Damien John Alroe, sworn 16 June 2003, firstly, that is objected to on the basis of late service and prejudice.  As I understand the position, it only goes to the question of service of the Creditor’s Petition.  If served at an appropriate time, it would have been possible, in relation to my friend making reference to a facsimile date, to obtain evidence as to the correct date appearing on a transmitting party, Ramcorp and Associates Pty Limited, whoever they might be.

HIS HONOUR:      Yes.’

The remainder of the discussion between the bar and the bench has been extracted at [10] - [11] above.

27                  Exhibit ‘DJA 1’ to Mr Alroe’s affidavit comprised faxed copies of the Creditor’s Petition and the Affidavit Verifying Petition, the name of the sender of the fax appearing as ‘Ramcorp & Assoc Pty Ltd’, and the faxed time appearing as ‘2 Apr 2003 16.44’, that date being the day preceding the service of the creditor’s petition asserted in Mr Donnelly’s affidavit of service (see again [3] above).  Given the content of par 2 of the affidavit, and the unexplained delay in providing that evidence until the day before the hearing, Mr Alroe and his counsel would be likely to have anticipated that the very late tender of Mr Alroe’s affidavit evidence would be opposed, at least in the absence of Mr Alroe’s availability for cross-examination, and perhaps additionally his production of whatever file notes and other relevant documentary material which may have been in his possession.  No arrangements had been made by Mr Mudge’s legal representatives in advance for at least a telephone link, or preferably a video link, to be available. 

28                  Counsel for Mr Mudge submitted to the Court on the appeal that whether any prejudice to the Company, by the admission of Mr Alroe’s affidavit, was real, or merely perceived, was not tested below, and should have been demonstrated then and there to Driver FM.  Counsel for the appellant further pointed out that both Mr Mudge and Ms Courtney were present in Court in any event, and could have been asked, for instance, what was their relationship with or connection to Ramcorp & Associates, the apparent sender of the faxed material.  In response, counsel for the Company submitted that I would be presently unable to conclude that such matters would have comprised the only subject for cross-examination of Mr Alroe which would have been necessary or appropriate, had Mr Alroe’s affidavit evidence been admitted into evidence.  In any event, it may be observed that it was certainly most unfortunate that Mr Alroe’s affidavit material was tendered so late, and without explanation for the delay. 

29                  Counsel for the appellant submitted in any event that Mr Alroe’s affidavit contained crucial information bearing upon the credibility of Mr Donnelly in relation to the service by him of the creditor’s petition generally, and thereby conceivably as to his credibility in relation to service of the bankruptcy notice as well.  Moreover it was submitted by counsel for the appellant that Driver FM was obliged by s 42 of the Federal Magistrates Act 1999 (Cth) to proceed without undue formality, and pursuant to s 64 thereof, he could and should have admitted the affidavit and given it such weight as he saw fit.  Had Mr Alroe’s affidavit been read, so the submission continued, there would have been evidence placed before his Honour going directly to the critical evidentiary issue as to whether Mr Donnelly’s evidence was false, at least as to service of the creditor’s petition. 

30                  Counsel for the appellant next submitted that although Driver FM did not have the physical arrangements immediately in place for a telephone link, and his Honour was unsure how long it would take to put any such arrangements in place, he should have, at the very least, investigated the possibility of procuring the equipment necessary for telephone testimony to be adduced from Mr Alroe, particularly since, so the submission proceeded, the evidence sought to be proffered was most likely to be determinative of the ultimate issue before his Honour as to personal service of creditor’s petition upon Mr Mudge.  Reliance was placed in that regard upon the following passage in Dubbo Base Hospital v Jones [1979] 1 NSWLR 225 at 227, where Moffitt P said as follows:

‘In rejecting the tender of certain evidence, the learned trial judge determined, wrongly, as it now appears, the very question of substance which was at issue between the parties.  Ordinarily, error in rejecting evidence leads to a new trial, so as to afford an opportunity to the respondent to challenge evidence, ruled on appeal to be admissible, by cross-examination, or by leading evidence in reply… I would add, with respect that, in a trial without a jury, the interests of finality and judicial economy usually will be best served by not deciding the question at issue upon an objection to evidence.  The evidence can be admitted, so that the Court can determine the question at issue.’

The Court’s conclusions on the appeal

31                  Whether service of the creditor’s petition occurred on 3 April 2003 or earlier for instance on 2 April 2003, constituted ‘the very question of substance’, within the dictum extracted immediately above, is by no means clear.  The service of process is more in the nature of an adjectival requirement, even in the context of the present litigation.  The affidavit evidence of Mr Alroe would have indicated that service occurred prior to 3 April 2003, given that ‘Ramcorp’s’ fax machine was correctly programmed to the current date (at that time).  The determination of the correct date of facsimile transmission would not however have established the manner of service.  It may be accepted that the unsatisfactory recording practice of Mr Donnelly (see [13] above) does not lend assistance to Mr Donnelly’s viva vice and affidavit testimony to the effect that service occurred in any event on 3 April 2003.  However it would not necessarily follow that if service of the creditor’s petition had been effected on 2 April 2003, the respective testimonies of Mr Mudge and Ms Courtney would be preferred to that of Mr Donnelly.  Disbelief of Mr Donnelly’s evidence that service took place on 3 April 2003, in the light of the facsimile evidence, would not establish that personal service of the creditor’s petition upon Mr Mudge did not occur (cf Gauci v Federal Commissioner of Taxation (1975) 135 CLR 81 at 87 per Barwick CJ), and I reject the submission of counsel for the appellant seemingly advanced to such effect. 

32                  It follows in my opinion that if Driver FM had allowed into evidence the Alroe affidavit, it not being suggested that Mr Alroe could have added anything further of relevance to what appears therein, Driver FM would still have been left with the essence of Mr Donnelly’s evidence, tested as it was by cross-examination before his Honour, that personal service did in fact occur, even if Mr Donnelly might have got the actual date of service wrong.  It may be readily inferred from his Honour’s conclusions, which I have earlier extracted, that having seen and heard from Mr Donnelly in person on the one hand, and Mr Mudge and Ms Courtney on the other, he preferred the veracity of the testimony of Mr Donnelly.

33                  The appellant’s case at first instance clearly had little attraction to Driver FM in terms of the merits, as may be inferred from his Honour’s reasons which I have earlier extracted.  I put aside the circumstance that the appellant has never sought to tender payment of the subject undisputed judgement debt, or any part thereof.  Had his Honour adopted the course contended by the appellant, namely, of admitting the affidavit of Mr Alroe into evidence, and of giving it such weight as he saw fit, his Honour may well have adopted the course discussed by Emmett J in Soglease Australia Ltd v Griffin [2003] FCA 453, that is, of making an order, pursuant to Order 1 rule 8 of the Federal Court Rules, as to dispensing with compliance with the requirement of Order 7 rule 1 thereof concerning personal service of the creditor’s petition, or possibly even an Order under s 309(2) of the Bankruptcy Act 1966 (Cth) that the petition be served instanter in accordance with Order 7 rule 2 of the Federal Court Rules.  That however is of course merely a hypothesis on my part unnecessary for my decision on the appeal. 

34                  The appeal should be dismissed with costs.

Associate:

Dated:              7 June 2004